Harshad Mehta Scam

Between 1990 and 1992, stockbroker Harshad Mehta exploited a loophole in India's inter-bank securities system to divert funds from bank-to-bank transactions — so-called 'ready forward' deals — and pump them into the Bombay Stock Exchange. Using these diverted funds, he orchestrated a massive bull run that took the Sensex from around 1,000 points in 1990 to over 4,500 by April 1992.

Mehta became a celebrity — 'the Big Bull' who inspired a generation of first-time investors. He openly predicted which stocks would rise, drawing thousands of small investors who poured in their life savings. Banks, flush with apparent profits from the ready forward market, were themselves complicit or negligent.

The scam was exposed in April 1992 by journalist Sucheta Dalal. The market crashed immediately, eventually bottoming near 2,600 — wiping out roughly ₹1,000 crore of investor wealth. Banks discovered massive holes in their balance sheets. Mehta was arrested and faced 27 criminal charges. He died in custody in 2001 with cases still pending.

The aftermath reshaped Indian financial regulation. SEBI received statutory teeth and enforcement powers. The badla system of leveraged speculative trading was eventually abolished. The scam illustrated, in the starkest terms, how vulnerable India's newly opened capital markets were — and how quickly retail investors could be destroyed when financial governance failed.