India has witnessed several major financial scams, affecting banks, stock markets and investors. Over the decades, cases such as the Harshad Mehta securities scam, Nirav Modi fraud and IL&FS crisis exposed serious gaps in the financial system.
Billions were lost, investor trust took a hit, and regulators were forced to tighten the rules. These scams also triggered sweeping reforms to plug loopholes and strengthen oversight.
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For investors new to the market, such cases are a strong lesson about the risks associated with the stock investments and why acting cautiously is necessary to protect your portfolio.
Check how these five scams unfolded:
1. Harshad Mehta Securities Scam (1992): Harshad Mehta scam is one of the most infamous financial scams in India, popularised by the web series after it.
- The Rs 4,500 crore scam involved illegal movement of funds between banks and the stock market and widespread manipulation of the stock prices.
- Mehta was able to exploit loopholes in the financial system, using fake bank receipts to procedure considerable sums of money.
- He then used around massive funds to inflate stock prices artificially, resulting in an unprecedented surge in the Sensex before the crash.
2. Ketan Parekh Scam (2001): A decade after the Harshad Mehta controversy, Ketan Parekh, a Mumbai-based stockbroker, shook the financial world through massive price manipulation and bank fraud.
Parekh and his associates manipulated the prices of a select group of stocks (the “K-10” group).
- These cases largely involved technology and media companies, where the accused manipulated stock prices and artificially inflated share values to deceive investors.
- Parekh financed his stock purchases using massive loans obtained from cooperative banks.
- The scheme collapsed during the 2001 stock market downturn and Parekh was imprisoned and also banned from the securities markets for 14 years.
3. Satyam Computer Services Scam (2009): The 2009 Satyam Computer Services scandal was a massive Rs 7,136 crore corporate and accounting fraud in India.
- Founder and chairman of the company, B. Ramalinga Raju, admitted to falsifying records and was convicted of fraud.
- Satyam Computer Services was acquired by Tech Mahindra in April 2009 before being fully merged with the leading IT player in 2013.
- The fraud exposed serious failures in corporate governance, damaging investor confidence in India's IT sector.
4. Punjab National Bank (PNB) - Nirav Modi Fraud (2018): The 2018 Punjab National Bank (PNB) scam involved fraudulent transactions worth around Rs 11,400 crore linked to diamantaire Nirav Modi and his associates.
- It was discovered that the accused obtained fraudulent Letters of Undertaking (LoUs) without proper authorisation or collateral, allowing them to secure overseas credit.
- The case had exposed serious lapses in the banking system. Both Modi and his uncle, Mehul Choksi, fled the country, and extradition efforts to bring them back have continued for years.
5. IL&FS Crisis (2018): The IL&FS crisis of 2018 was one of India's biggest financial setbacks.
- It involved Infrastructure Leasing and Financial Services (IL&FS), a major non-banking financial company (NBFC), which defaulted on multiple debt obligations amid asset-liability mismatches, with liabilities exceeding Rs 90,000 crore.
- The defaults triggered a liquidity crunch across the shadow banking sector.
- Between September 14 and September 28, 2018, the Nifty 50 fell over 5%, from 11,515 to 10,930 points, as concerns over the wider financial system grew.
- Later, the government took control of the company's board.
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