Money v/s Faith

This is actually a true story of the financial scam on the Indian stock markets in the 90's

The car was coming towards me, at an almost incredible pace, but I was somehow rooted to the spot. My palms were sticky and cold with sweat. I was in a deserted forest-like area. I tried to shout at the driver to stop, but not a single sound escaped my mouth. It was coming, coming, coming…

 

I woke up from the nightmare wheezing for want of air. God, the frequency of these meaningless nightmares was increasing by the day. True, my job as a stockbroker in the Bombay Stock Exchange contained a huge element of risk as well as stress, but nothing warranted for these unsettling dreams.

 

Anyway, it was a perfect April morning, and I had a bit of time before I had to go to my office at BSE, so I decided that I would have a look at the newspapers.  I made some strong coffee and had just started sipping it when I heard the satisfying thud of newspapers outside my home. I got up and opened the door.

I received the shock of my life when I read the main headlines. It read—

THE FRAUDULENT PIED PIPER OF DALAL STREET

My eyesight blurred as I read the headline again and again. This couldn’t be true…

The man behind the incredible  Bull Run in the stock markets, stocks Guru Harshad Mehta has been accused of siphoning funds from various commercial banks/financial institutions…his activities have caused financial damage worth more than Rs. 4000 crores…it may also lead to a severe financial crisis leading to  the collapse of several banks…

I sat down on my overstuffed armchair, dazed. To many recent entrants to the stock broking business like me, who were fighting tooth and nail to secure a footing in a fiercely competitive environment, Harshad Mehta was a messiah in disguise. Whatever he wrote in his columns, or said in various business channels was followed to the T. it seemed impossible that a man so genial, so genuinely nice and correct could end up being a fraudster of epic proportions.Indiahad truly seen the emergence and demise of its own Mike Milken…

…The crucial mechanism through which the scam was put into effect was the ready forward (RF) deal. The RF is a secured short-term loan from one bank to another. The bank lends against government securities...

 Harshad Mehta was my personal role model. He was not more than one of the three sons of a small businessman of a suburb in Mumbai, but his meteoric rise from rags to riches was something truly extraordinary. He was now living in a fifteen thousand square foot house with its private swimming pool and golf patch. His lavish lifestyle and flashy cars were the stuff known only of movie stars.   No wonder he was idolized by hundreds of investors, gullible and otherwise.

 …Another instrument used was the bank receipt (BR). In a ready forward deal, securities were not moved back and forth in actuality, but a BR was handed. A BR confirms the sale of securities. It acts as a receipt for the money received by the selling bank…

 We fellow stockbrokers and many of our customers wanted to be just like him. He was the shining star whom everyone aspired to be. For us to realize that we had put our trust in a fraud, it almost shattered our faith in the industry.

 …Having figured out his scheme, Mehta caught hold of two small, little known banks - the Bank of Karad (BOK) and the Metropolitan Co-operative Bank (MCB). These banks were willing to issue BRs as and when required, for a fee. Once these fake BRs were issued, they were passed on to other banks and the banks in turn gave money to Mehta. This money was used to drive up the prices of stocks in the stock market. When time came to return the money, the shares were sold for a profit and the BR was retired. The money due to the bank was returned…

 All of a sudden, I just couldn’t read anymore. My telephone was already ringing off the hook. When I switched on the television, the news channels were already full of news about the scam. This alarmed me even more. I got dressed as soon as I could, and left for my office.

 When the stock markets opened at half past ten in the morning, the stocks plummeted at an incredible pace. Before the closure at two-thirty in the afternoon, the stock market had already fallen more than fifty percent of the value at which it had opened. In fact, shares of ACC pvt ltd. collapsed the most, falling from a level of Rs. twelve thousand to a mere Rs. two thousand. Actually, ACC was the stock which Mehta had been really pumping money into, and had even strongly encouraged investing in it.

 Thousands, including myself, lost most of our savings. The news channels called in other stock experts, who explained the modalities of the fraudster and condemned Harshad Mehta’s money- tapping scheme. It was a huge setback to the nation’s economy, someone commented. Everyone, and I mean everyone, was talking about the scam.

 But what about me? My role model was reduced to a mere conman, and more than anything, I felt a deep sense of betrayal. And of course, financially, I was a ruined man. I was getting constant calls from my father inDelhi, for I had also invested some of his savings too. My mother was crying inconsolably, and I could somewhat understand that. My career was as good as gone, for no one would be willing to invest in large amounts in the market now. I was suddenly reminded of my nightmare. It seemed like I was actually living it.

 

In the evening, feeling utterly dejected, I watched a news channel which was informing that Harshad Mehta was being charged with 72 cases of the Indian Penal Code. Various managers from multiple banks were being taken in by the police. The CBI would soon be investigating the matter. I sighed and got up. We all knew what would happen now. A couple of confessions, a couple of suicides, and the rest would pay off a large sum of money, and escape the consequences. My so-called role model would be blacklisted from the Indian stock markets for life. This man was no more than a common thief with uncommon greed and avarice.

 That night, however, I did not have a nightmare. As I had expected, my life was translated into a living nightmare over the next few months, trying to cope with my losses—a huge financial loss, and my loss of faith in the myth that there were honest people when it came to the business of making quick money.                                                                                                                                                                                        

                                                         

 

The End

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