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Rural Electrification

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Submitted By sidd1990
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1. types of frauds in capital market ( basic classification) http://www.google.co.in/url?sa=t&rct=j&q=indian%20capital%20market%20faruds&source=web&cd=1&cad=rja&ved=0CDgQFjAA&url=http%3A%2F%2Fwww.indiaforensic.com%2Fcorporatemaster.htm&ei=3CTnUInpD8XXkAXy8YGIAg&usg=AFQjCNGa4sSOYe-mM9SHLOBcZLMhgR_uOA&bvm=bv.1355325884,d.dGI 2. What Harshad Mehta did? – The Stock Scam 3. In the early 1990s, the banks in India had to maintain a particular amount of their deposits in government bonds. This ratio was called SLR ( Statutory Liquidity Ratio). Each bank had to submit a detailed sheet of its balance at the end of the day and also show that there was a sufficient amount invested in government bonds. Now, the government decided that the banks need not show their details on each day, they need to do it only on Fridays. Also, there was an extra clause that said that the average %age of bond holdings over the week needs to be above the SLR but the daily %age need not be so. That meant that banks would sell bonds in the earlier part of the week and then buy bonds back at the end of the week. The capital freed in the starting of the week could then be invested. Now, at the end of the week many banks would be desperate to buy bonds back. This is where the broker comes in. The broker knew which bank had more bonds (called ‘plus’) and which has less than the required amount (called ‘short’). He then acts as the middleman between the two banks. Harshad Mehta was one such broker. He worked as a middle man between many banks for a long time and gained the trust of the banks’ senior management. Lets say that there are two banks A (short) and B (plus). Now what Harshad Mehta did was that he told the banker at A that he was dealing with many banks and hence did not know who would he deal in the end with. So he said that the bank should write

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