How a small-time broker manipulated the Indian stock market using worthless bank receipts
In short: Harshad Mehta rose from a clerical job to become the Big Bull of the Bombay Stock Exchange. By exploiting loopholes in the banking system and issuing fake receipts, he triggered a massive bull run. His eventual downfall exposed systemic vulnerabilities, leaving banks holding billions in worthless paper and changing Indian finance.
Born in 1954, Harshad Mehta began his career in Mumbai with modest roles, including selling hosiery and sorting diamonds. By the early 1980s, he had entered the brokerage world, eventually founding Grow More Research and Asset Management in 1986. His ascent was meteoric; by 1990, media outlets dubbed him the Amitabh Bachchan of the stock market. He became famous for his opulent lifestyle, which included a 15,000-square-foot penthouse in Worli and a collection of luxury cars, symbols of wealth that were rare in India at the time.
Mehta's strategy relied on the ready forward transaction, a method for banks to trade government securities. Banks were prohibited from direct equity investment but needed to maintain specific asset ratios. Mehta acted as an intermediary, convincing banks to transfer funds to his account under the guise of purchasing securities. Instead, he used this capital to aggressively buy shares in companies like Associated Cement Company (ACC). By creating artificial demand, he drove ACC shares from ₹200 to nearly ₹9,000 in just three months, a 4,400% increase he justified through his replacement cost theory.
The scheme collapsed when journalist Sucheta Dalal exposed his illegal methods in April 1992. Mehta had been using forged bank receipts—uncollateralized documents that banks mistakenly accepted as genuine security. Once the fraud was revealed, the market crashed. The scandal, valued at ₹100 billion, left banks with ₹40 billion in worthless receipts. While Mehta faced 27 criminal charges, he was convicted of only four before dying of a heart attack in 2001 at age 47. His legacy persists in popular culture, inspiring numerous films and series that document his role in exposing the loopholes of the Indian financial system.
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- Summary by Intellect · source: Harshad Mehta
- Also: Wikidata — Harshad Mehta · CC0
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