The scam caused significant disruption to the stock market of India, defrauding investors of over fifteen million USD.
Stock traders making good returns as a result of the scam were able to fraudulently obtain unsecured loans from banks.
[2] The 1992 scam was a systematic fraud committed by Mehta in the Indian stock market which led to the complete collapse of security systems.
The scope of the scam was so large that the net value of the stocks was higher than the combined health and education budget of India.
[4] The impact of the scam had many consequences, which included the losses incurred by lakhs of families and the immediate crash of the stock market.
An interview with Montek Singh Ahluwalia (Secretary, economic affairs at the Ministry of Finance) revealed that many top bank officials were involved.
However, they were expected to post profits and to retain a certain ratio (threshold) of their assets in government fixed interest bonds.
The BR serves as a receipt from the selling bank, and also promises that the buyer will receive the securities they have paid for at the end of the term.
[11] Mehta used forged BR's to gain unsecured loans, and used several small banks to issue BRs on demand.
Subsequently, it transpired that Citibank brokers like Pallav Sheth and Ajay Kayan, industrialists like Aditya Birla, Hemendra Kothari, a number of politicians, and the RBI Governor S.Venkitaramanan all had played a role in allowing or facilitating Mehta's rigging of the share market.
[12] The scam first became apparent in late April 1992, when it became clear that Mehta was a disproportionately large investor in government securities.
The combination of the selling frenzy and the fact that numerous banks been defrauded crashed the Indian stock market, with prices dropping 40% immediately.
[11] Exploiting several loopholes in the banking system, Mehta and his associates siphoned off funds from inter-bank transactions and bought shares at a premium across many segments, triggering a rise in the BSE SENSEX.
Mehta made a brief comeback as a stock market guru, giving tips on his own website as well as a weekly newspaper column.
[19][20] The immediate impact was a drastic fall in share prices and market index, causing a breakdown of the securities control system operation with the commercial banks and the RBI.
The CII Code commanded the formation of two major committees headed by Kumar Mangalam Birla and N. R. Narayana Murthy, and overseen by the Securities and Exchange Board of India (SEBI).
For the equity market, the government introduced ten acts of parliament and one constitutional amendment based upon the principles of economic reform and legislative changes.
The first structural change was to record payments made for purchasing investments in reconciled bank receipts and subsidiary general ledgers to prevent fraudulent transactions.
[11] Gafla is a 2006 Indian Hindi-language crime drama film directed by Sameer Hanchate inspired by this incident.
The Big Bull is a 2021 Indian Hindi-language film directed by Kookie Gulati, starring Abhishek Bachchan as Harshad Mehta loosely based on his life and the 1992 scam.
[29] In movie Lucky Baskhar, a character named Harsha Mehra was based on Harshad Mehta and related to the securities scam, 1992