‘You know us bankers. Our hands are tied. We do all the social work and then govt asks us profits. Where can we squeeze out from? Too much pressure.’ The Chairman of the PSU bank was cribbing with the Star Broker.
‘Sir, I have a plan. I can solve your problem’. When he laid out his plan, the banker could not find a fault. It was perfect.
1991-92 reforms were just setting in. Stock markets were just getting active. But not many people dealt into shares directly. The banks, those days were allowed to invest through brokers who ruled the markets. The brokers knew the loopholes and made a killing.
This Star Broker was called the ‘Raging Bull’ by Business Today magazine.
His plan was simple. He would sell the ‘official papers’ of one bank for short term cash. The bankers trusted him so much, they never verified the papers. They also issued personal cheques into his account. This money he invested into select company stocks heavily.
One of his favourites, ACC Cements moved from Rs 200 to Rs 9000 within a year. As the prices kept rising, he sold and bought. Paid the banks regularly and kept the rest. Bankers were happy. Everyone was happy.
When the story of the scam broke through Suchetha Dalal’s TOI column on April 23rd 1992, Harshad Mehta became India’s biggest villain. All the ‘official papers’ he sold to banks were junk. Banking system collapsed.
The chairman of the PSU bank who had given him personal cheques, committed suicide.
Strangely, 1992 was not the end of Harshad Mehta. He came back in 1998 as a stock market guru and laid the base for another scam.
A cat has 9 lives, maybe. But a fraudster who can inspire greed has many more.