Page 207 - A Banker Down the Rabbit Hole

accounts of Harshad Mehta instead of his investment companies intended
for buying bonds on behalf of banks. Harshad Mehta invested the funds
in buying stocks from the stock market instead of investing in Bond
Market. He did so with funds of other banks and financial institutions
also. The CBI probe started for involvement of everyone in the systemic
risk created by banks. Our bank was also involved though the amount
was only around Rs. 10 Crore. Our Chairman got into CBI enquiry for
technically violating the rules in these transactions though with good
intentions that ultimately resulted in profits for the bank at a later date.

He was punished for undesirable means for achieving the desirable ends.
He was considered by CBI officials as an economic offender and meted out
similar treatment. It was a very tough time of his life destined this way.

This scam was a great shock to the banking community.
It came across as a lesson for banks not to write cheque(s) in name of
the broker no matter how trusted they may be.

Mehta was jailed. A decade later, Mehta died in a hospital with 27 cases
still pending against him in 2002. The SEBI Act was enacted in the
aftermath, but that still did not prevent the occurrence of market
manipulations like the MS Shoes scam (1994), CRB scam (1997), Vanishing
Companies scam (1998), Plantation Companies scam (1999), and the
Ketan Parekh scam (2001).

Some more bank officers got trapped
After my transfer from Hong Kong, I learnt that there were three persons
involved in those transactions at the branch where I joined.
X A Head Cashier who deposited the cheques in name of Mehta
companies into personal accounts of Mehta, his boss who instructed
him to do so and the Chief of the branch who is always responsible
for any loss due to violation of prudent rules of the bank.
X They were kept under suspension for one and a half decade. They

204 | A Banker down the Rabbit Hole