Top 10 Biggest Financial Scams In India – Biggest Frauds of All Times
India is the largest democratic country globally, so the ruling political parties always have some political advantages over others; that’s why corruption is one of India’s major problems.
In 1985, the formal prime minister of India, Rajiv Gandhi, said, “If I send 1 rupee, only 15 Paisa reach to the needy.”
The news of frauds or scams is very common in India’s newspaper, but some frauds are so big that they shocked everyone. Here we listed such top 10 biggest financial scams in India.
10. Bofors Scam
In 1986, India made a contract with Swedish arms manufacturer company Bofors AB for howitzer guns for the army for Rs.1437 crores.
This scam was one of India’s biggest political scandals between India and Sweden in the 1980s and 1990s, which was the biggest arms deal even for Sweden at that time. The major politicians are involved from the Congress party, primarily implicating the prime minister, Rajiv Gandhi, and several people from the Swedish government.
This scam is directly led to the defeat of the Congress party in the 1989 general elections. Bofors paid Rs.640 million in the form of kickbacks to top Indian politicians and important defense officials.
9. Harshad Mehta Scam
In 1992, Harshad Mehta, famous as a “Big Bull,” who is the broker or middleman between two banks, take advantage of some loopholes of the system and lies drive prices of the stocks up to 40 times higher than their original price.
With some bank officers’ help, Harshad Mehta obtains insecure loans from the bank and uses those funds to manipulate stock prices and earn great returns. This scam was around 5000 crores at that time. This scam unfolds the faulty financial system of India and some RBI policies too. When the scam unfolds, the Indian stock market collapsed.
8. Hawala Scam
Before, we jump into the hawala scam, let’s see what is hawala and how the system works.
Hawala means money transfer without money movement, giving money to another person without any written agreement or proof. Before banking system development, the western world used the bargaining system, but the eastern world used this hawala system to transfer money.
The system is like this – If person “A” living in Dubai, and he wants to send money to his family living in Mumbai. Now person “A” contact any hawala broker and give him money with one secret code when broker comes Mumbai person “A” family member tell that secret code to the broker and collect the money sent by person “A“, and the broker cuts its commission amount.
What is Hawala scam?
Hawala scam is not only the biggest scam in India, but it was one of the biggest scams in the world at that time, which involved some of India’s leading politicians, which involved payments allegedly received by politicians through four hawala brokers, the Jain brothers. It was an US$18 million (RS 650 million) bribery scandal.
In 1991, the two Kashmiri militants arrested named Shahbuddin Ghauri and Ashfaq Hussain Lone, had, in turn, led the CBI to high-profile hawala operators Shambhu Dayal Sharma and Moolchand Shah. The hawala operators’ testimony led to the unfolding of the case, which led to the Jain brothers’ immediate arrest. In their 1995 confession, released several politician’s names.
Vineet Narain, the prominent Indian journalist, was responsible for bringing the hawala scam in public. The major politicians involved in the hawala scam are LK Advani, Governor MP Balram Jakhar, Former Delhi CM Madan Lal Khurana, Sharad Yadav, Senior politician and former Union Minister, V.C. Shukla, and many more. At a time, 7 union ministers of the ruling party Congress gave their resignation.
7. Fodder Scam
In the year 1996, a raid on the Animal Husbandry department’s offices in Chaibasa unfolded the Rs.950 crore fodder scam, in which the Bihar chief minister Lalu Prasad Yadav catch up in a lifelong tussle with the CBI.
The scam was started with small-scale embezzling, which was done by the lower-level government, but after that, some of the biggest politicians and business people came into the picture.
On a large scale, fodder scam is that scam in which the government transfers treasury funds to non-existent companies for the purchase and supply of cattle fodder in Bihar in the 1990s.
6. Telgi Scam
You may hear stories of fake currency notes or the printing of currency notes, but this scan is all about printing fake stamp paper.
Abdul Kareem Telgi was the mastermind behind the stamp paper or Telgi scam, the son of a railway employee. Earlier, he was selling fruits and vegetables on the trains. Later, he shifted to Saudi Arabia and returned seven years later to Mumbai, where he allegedly developed links with the underworld.
In 1994, he acquired the license for selling stamp paper and opened an office in Mumbai. After that, he started printing stamp paper in Nashik. With some agents’ help, he starts selling stamp paper in bulk to banks, insurance companies, stock brokerage firms, and corporates.
In 2003 the Telgi scam was unfolded; the figure in the mind of security and intelligence agencies was up to Rs.20,000 crore. Abdul Kareem Telgi was in touch with some of the higher politicians of the country.
5. 2G Scam
The spectrum scam has put ‘all other scams to shame.‘The Supreme Court of India
2G Scam or 2G Spectrum Scam spoiled the UPA 2 government’s image and one of the reasons to lose the election with big margins in the 2014 Lok Sabha Elections. The former Telecom minister of the UPA 2 government, A. raja, and 14 others are the prime accuses of this scam. The three companies as well name Swan Telecom, Uninor, and Reliance Telecommunication.
As per the report of the Comptroller and Auditor General (CAG), The licenses of 2G ( second generation) mobile networks were given at throwaway prices instead of carrying free and fair auctions and found a difference of Rs 1,76,645 crores between the money collected and the money which should have been collected according to the law.
The famous Time magazine gave 2nd rank as the world’s second-biggest abuse of executive power.
4. Satyam Scam
The company named Satyam Computer Services Ltd was started in 1987 by two brothers, Rama Raju and Ramalinga. The company was listed on the Bombay stock exchange in 1991. At a time, the Satyam Computer Services Ltd shares oversubscribed by 17 times by the end of 2008, the revenue of the company crossed 2 billion, and the company was established in 20+ countries.
The company manipulating its accounts to its board, stock exchanges, regulators, investors, and all other stakeholders of over Rs.7000 crores. The companies use of ERP system for accounting, this company used their strength and developed their ERP system for accounting purposes. An increase in revenue projected a tremendous increase in profits, which attracted a lot of investors and the price of shares reach new heights.
The founder, brothers, and promoters of Satyam Computers used this situation as an opportunity and sold their holdings at a very higher price. They took a profit of 1200 crores through the sale.
In 2008, Rama Raju was arrested and charged with criminal conspiracy, breach of trust, and forgery. The shares fell from Rs.544 to Rs.11.50; this is the biggest accounting and corporate fraud so far.
3. Commonwealth Games Scam
In 2010, one of the major sports events “Commonwealth” games held by India. But the money spends on sportspersons is double the estimated amount where the scam is founded. The scam is nearby 70,000 crores.
According to CVC (Central Vigilance Commission), Suresh Kalmadi, the Chairman of the organizing committee of the Games, offered a contract of Rs 141 crore to Swiss Timings for its timing equipment, which was unnecessarily high by Rs 95 crore.
According to an NDTV report, the Government paid 4 times more money than the actual price to some health equipment manufacturer.
2. Coalgate Scam OR Coal Allocation Scam
The Coalgate scam is about the illegal allocation of the nation’s coal deposits to public sector entities (PSEs) and private companies by formal Prime Minister Manmohan Singh.
According to the CAG (Comptroller and Auditor General of India) report, from 2004 to 2009, the UPA 2 government didn’t auction 194 coal blocks meant, and the country lost Rs.1.86 lakh crore. Initially, the figure was more than 10 lakh crore, but the CAG chose to keep PSUs out of its final report, bringing the figure down to Rs 1.86 lakh crore.
On 23rd April 2013, the Standing Committee on Coal and Steel tabled in Parliament that all coal blocks distributed between 1993 and 2008 were done in an unauthorized manner. Former Prime Minister Manmohan Singh, along with Kumar Mangalam Birla and P.C. Parakh, were accused and summoned by a special court.
The allocation was done without any advertisement or public announcement, In which it accused both the UPA and NDA of perpetrating massive corruption.
1. Saradha Scam
The Saradha scam was one of the major financial scams in Indian history, done by the Saradha group.
In West Bengal, in the early 2000s, Sudipto Sen founded the Saradha Group. Saradha Group targets small and medium investor to raise money by promising them high returns, company used great marketing techniques like celebrity brand endorsement and emotional advertisement to fool people.
Not only this, but the company hires some politicians for handing media and all. The company offered a very high commission to their agents, with the help this company collected Rs.2500 crore within a short period. The same scheme also expands to nearer states like Odisha, Assam, and Tripura.
The scam revealed in 2012 when SEBI stop the group to raise money and tell to obtain permission to run its scheme. In 2013, Saradha Group outflow increase and inflow decease, and in April 2014 the scheme collapsed.
You just read-only the top 10 biggest financial scams in history. The majority of them are done by politicians of India, who took advantage of power to make money. Fortunately, somehow these scams or frauds are exposed publicly, but many scams are not exposed because of the powerful peoples behind the scams.