Top 5 financial frauds in India


Financial frauds are not just numbers on a balance sheet; they represent shattered dreams, lost savings, and broken trust. In India, a country bustling with economic activity, several incidents have left a lasting mark on the nation’s financial landscape. Let’s delve into the top 5 financial frauds in India that shook the Indian economy.

  1. ABG Shipyard Scam
  2. Harshad Mehta Scam
  3. Satyam Scandal
  4. Ketan Parekh Scam
  5. NSEL Scam

1. ABG Shipyard Scam

The ABG Shipyard scam is a big deal in India because it’s the country’s largest bank fraud, totaling over Rs 22,842 crore. Here’s what happened:

ABG Shipyard Ltd, a shipping company, tricked a bunch of banks, mainly State Bank of India. Between 2012 and 2017, ABG Shipyard borrowed a ton of money from these banks. But instead of using the money to build ships like they were supposed to, ABG Shipyard did some shady stuff with it:

  • Sent it to their companies overseas
  • Gave it to other companies in their group
  • Used it to pay off loans they already had Then in 2019, a company called EY (Ernst and Young) started looking into things and found out about all these complicated money moves. Now, the Central Bureau of Investigation (CBI) is digging deeper into the case to find out what really happened.

2. Harshad Mehta Scam

The Harshad Mehta Scam, also known as the 1992 Indian stock market scam, was a big deal. Here’s what went down:

Harshad Mehta, a stockbroker, found a way to manipulate stock prices. He took advantage of flaws in the banking system to fund his buying frenzy. Using a trick called ready forward (RF) deals, he basically made up money out of thin air. This caused certain stock prices to shoot up, making it look like there was a big demand for them and attracting more investors. But when people caught on to what he was doing in 1992, it all came crashing down.

The stock market took a nosedive, and a lot of people lost a ton of money. The scam was worth about ₹5,000 crore back then (which was a huge amount), and it showed that there were some serious problems in the Indian financial system. Afterwards, they made some big changes and put stricter rules in place to try and prevent this kind of thing from happening again.

financial frauds in India

3. Satyam Scandal

The Satyam Scandal, often termed India’s Enron, erupted in 2009, shaking the very core of the nation’s corporate landscape. Ramalinga Raju, the founder of Satyam Computer Services, admitted to orchestrating a scheme that involved manipulating the company’s financial records. His confession uncovered a web of deceit spanning several years, revealing inflated revenues and assets, with the actual financial health of the company significantly worse than portrayed. The revelation sent shockwaves across investors, employees, and regulatory bodies, severely denting trust in India’s corporate integrity.

Subsequently, Raju’s admission led to his arrest, while Tech Mahindra took over Satyam. The fallout from the scandal resulted in substantial legal and financial ramifications for those involved. Moreover, it catalyzed a pressing need for stricter corporate governance and accounting standards in India. The government initiated reforms aimed at preventing similar fraudulent practices in the future, underscoring the significance of transparency and accountability in the corporate sector.

4. Ketan Parekh Scam

Ketan Parekh was a stockbroker in India who pulled off a big trick in the late 1990s and early 2000s. Here’s what happened:

He came up with a plan: Parekh borrowed a bunch of money from banks, even from one where he had some control. Then, he used that money to buy up lots of certain stocks. This made their prices go up artificially, like blowing up a balloon and then letting the air out (which they call ‘pump and dump’).

He mainly targeted IT stocks because they were really popular during the dot-com boom, which attracted even more people to invest because the prices seemed so high.

But then, the truth came out. Media reports and investigations exposed what Parekh was up to, and the stocks he manipulated crashed hard.

Parekh got in big trouble for what he did. He was found guilty of financial crimes, banned from trading for a long time, and even had to go to jail. Authorities also found out he was trying to keep doing shady stuff through other people.

This whole mess showed that the Indian stock market needed stricter rules to stop this kind of thing from happening again.

5. NSEL Scam

The NSEL scam was a big problem that happened in India back in 2013. Here’s what went down:

There was this place called the National Spot Exchange Limited (NSEL), where people could trade agricultural stuff like crops and their products.

But then, things went wrong. The exchange got told to stop making any new deals, and it turned out they couldn’t pay back a ton of money they owed.

At first, they blamed the people who ran NSEL and the folks in charge. But as they looked into it more, they found out it was a bigger mess:

  • Brokers: These guys were accused of tricking their clients by promising them guaranteed profits and making up fake investment plans.
  • Defaulters: Other people involved were said to be using fake papers and stealing money, even though they were supposed to be trading fair and square.

There’s also a problem figuring out who got hurt for real. The brokers might have made up names of people who lost money, so it’s hard to know who actually suffered.

Since then, lots of different groups have been trying to figure out what happened. They’re looking into the brokers, the people who didn’t pay back what they owed, and the big decisions that were made. But NSEL is still shut down.

This whole mess showed that there were some weak spots in the rules for trading agricultural stuff, and it made it clear that we need to do more to make sure investors are safe.

Other financial frauds in India are

  • PNB-Nirav Modi Scam
  • IL&FS Financial Crisis
  • Saradha Group Financial Scam
  • Vijay Mallya and Kingfisher Airlines
  • The Telgi Stamp Paper Scam
  • Winsome Diamonds and Forever Precious Diamonds Scam
  • The Rose Trading Company (RTC) Scam
  • The UCO Bank Loan Scam
  • The Rana Kapoor Money Laundering Case

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