Harshad Mehta Scam in India

The Harshad Mehta scam, also known as the 1992 securities scam, was a financial fraud that occurred in India in the early 1990s. Harshad Mehta, a stockbroker and financial analyst, exploited loopholes in the Indian banking and securities system to commit a massive financial fraud.

Mehta used a technique called "circular trading," in which he purchased shares of various companies and then used those shares as collateral to borrow money from banks. He then used the borrowed funds to purchase more shares, which he would use as collateral for additional loans, and so on. This allowed him to inflate the price of certain stocks, creating a speculative bubble that eventually burst.

The scam came to light in April 1992 when the State Bank of India revealed that several banks had lent large sums of money to Mehta against fake or non-existent securities. Panic set in among investors, and the stock market crashed, causing billions of dollars in losses.

The Indian government launched an investigation into the scam, and Mehta was arrested in November 1992. He was charged with 72 criminal offenses, including cheating, forgery, and criminal conspiracy. Mehta died in custody in December 2001, while his case was still pending.

The Harshad Mehta scam had a significant impact on the Indian financial system, leading to major reforms in banking and securities regulations. It also highlighted the need for better oversight and transparency in the Indian financial sector.