Harshad Mehta's $1.4B securities scam — the Big Bull who crashed India's market

Harshad Mehta was an Indian stockbroker who rose from a small-time salesperson to become known as 'The Big Bull' of the Bombay Stock Exchange. He was a media celebrity in the late 1980s and early 1990s, living a flashy lifestyle and cultivating an image of market genius. At his peak, he was one of the most powerful figures in Indian finance, with his trades capable of moving the entire market.

The scam worked through two mechanisms. First, Mehta exploited the 'ready forward' system where banks issued Bank Receipts as collateral. He got small banks to issue fake BRs not backed by government securities, then passed them to other banks who gave him money. Second, he promised banks higher interest rates to transfer money to his accounts under the guise of buying securities. He used the money to buy shares — ACC, Sterlite, Videocon — driving prices up by 4,400%, then sold at a profit.

The scam was exposed on April 23, 1992, by journalist Sucheta Dalal in The Times of India. The market crashed, and the banking system was revealed to have been systematically exploited. Mehta faced 27 criminal charges and was convicted on 4 counts. SEBI banned him for life from stock market activities. He was sentenced to 5 years in prison and died on December 31, 2001, at age 47, of a heart attack in Thane prison, with many litigations still pending.

Exploited the ready forward system: fake Bank Receipts and promised higher interest rates to siphon ₹40B, pump stock prices 4,400%, then sold at a profit.

The ready forward system relied on paper Bank Receipts that were never verified — banks trusted documents with no securities backing them, making the system vulnerable to a single fraudster.

Mehta was a media celebrity whose success made him untouchable — nobody questioned how one stockbroker could move the entire market because his profits looked like genius.

The banks were willing participants — they needed to show profits and hold government bonds, and Mehta promised them better returns than the market could offer. They looked the other way.

The regulator was too slow — SEBI had been established only in 1988 and did not have the authority or systems to detect the scam until it was exposed by a journalist.

When a stockbroker is too big to question, the market is vulnerable. Mehta's scam worked because banks trusted paper they never checked — and nobody asked how one man was moving an entire index.

The Harshad Mehta scam was a landmark in Indian finance. It exposed weaknesses in the banking system, particularly the ready forward and Bank Receipt mechanisms that had no verification. SEBI introduced new rules, including mandatory delivery of securities and a central depository. The scam led to the computerization of the BSE and the creation of the National Stock Exchange. Mehta's conviction on 4 of 27 charges showed that market manipulation would be prosecuted. His death in prison left many questions unanswered, and the 'Big Bull' remains a cautionary figure.