Five Financial Scams that Rocked India

New Delhi, December 24: Just as banks were witnessing signs of recovery from the crisis of non-performing assets, the Karvy scam has opened another can of worms. The company that caters to investment needs of lakhs of people got mired in controversy for transferring its customers’ securities to another account and then pledging that account to raise money from banks to fund its own businesses. How this unfolds and gets resolved is yet to be seen but it brings back memories of some other scams which have shaken the confidence of people, especially investors, in the system. Here is a look at five scams that India witnessed over the last two decades:

1. Vanishing Companies of 1998: It was an unusual year when over 600 companies vanished from the stock markets after raising money. The scam estimated to be worth Rs 800 crore came to light when Sebi was probing few companies which disappeared after raising money from the stock markets. In May 1998, it named 80 companies that had raised over Rs 330 crore. Later, it was found out that over 600 companies were under scrutiny. A Committee was set up to investigate which officially identified 238 listed companies, out of which 161 could be traced and 77 are still  in the list of vanishing companies.

2. Ketan Parekh Scam: The securities scam of 2001 that was estimated to be worth over Rs 1200 crore involved investor Ketan Parekh siphoning off a huge sum of money from the banks to invest in the market. The money was diverted to Parekh and his friends to either invest in the markets or pay up their dues. A joint-parliamentary committee in 2005 stated that Parekh received large sums of money from the banks and corporates when the Sensex was falling. This led them to believe that there was a nexus between Parekh, banks and corporate. He was arrested.

3. Satyam Scam: A major IT company of that time, Satyam was found to have inflated the revenue of the company through false sales invoices and showed corresponding gains by forging the bank statements. The stock prices of the company soared due to this which helped it raise over Rs2,700 crore. The annual financial statements of the company with inflated revenue were published for several years and this lead to higher price of the stocks in the markets. In the process, innocent investors were lured to invest in the company.

4. 2010 Housing Loan Scam: The scam that was uncovered by the CBI in 2010 alleged that real estate developers had bribed senior officials in Life Insurance Corporation (LIC) and LIC Housing Finance to facilitate loans for them. Over the next few months, CBI filed cases against four other financial institutions including banks. There were reports that the total loan was estimated to be more than Rs 40,000 crore.

5. Punjab National Bank Scam: A major banking fraud was uncovered in the Punjab National Bank in 2018 in which several senior officials were found to be involved. Estimated to be worth over Rs 13,000 crore, the scam has been dubbed as the biggest fraud in India's banking history. PNB officials filed a complaint with the CBI against three companies and four people that included Nirav Modi and Mehul Choksi, claiming they had defrauded the bank and caused a loss of Rs 280 crore, but revised it later to more than  Rs13,000 crore.