10 financial scams that shook India: A dive into deception

Counted as it is among the world’s fastest growing economies, an unfathomable amount of money flows in and out of the Indian economic system. But there are cracks in said system, and ever so often, a fraudulent mastermind uses them to slip some cash out for their advantage.

From Ponzi schemes to bank frauds, the Indian government and investors have fallen victim to many financial scandals — some of which were so sordid that they can be recounted like they happened yesterday. Here’s a rundown of the most infamous scams in Indian financial history:

Harshad Mehta Scam (1992) – ₹4,000 Crore

Perhaps the most iconic of all Indian financial scams, Harshad Mehta was known as the "Big Bull" of the stock market. He manipulated stock prices using illegal loopholes in the banking system. By obtaining unsecured loans from banks and investing them in the stock market, Mehta artificially inflated stock prices. His bubble burst when banks demanded their money back, revealing the massive fraud. This scandal led to a major reform in India's financial markets.

Mehta died in jail before full legal accountability was reached, but the scam caused a significant loss to investors and led to tighter regulation in the Indian stock market.

Satyam Scam (2009) – ₹14,000 Crore

Dubbed as India’s Enron, the Satyam scandal involved its founder, Ramalinga Raju, admitting to falsifying the company's accounts to the tune of ₹14,000 crore. Satyam Computer Services, once considered a blue-chip company, was found guilty of inflating profits and revenues. Raju admitted to the scam after a failed attempt to buy two Maytas firms owned by his family. This case brought corporate governance issues in India to the forefront.

Raju was convicted, but the legal processes have allowed him temporary freedom through bail. But this incident called for improved transparency and stricter corporate governance norms.

Punjab National Bank Scam (2018) – ₹13,700 Crore

Diamond merchant Nirav Modi and his uncle Mehul Choksi orchestrated one of the largest frauds in Indian banking history by obtaining fraudulent Letters of Undertaking (LoUs) from Punjab National Bank (PNB). These LoUs allowed them to obtain loans from foreign branches of Indian banks without providing any collateral. The scam involved over ₹13,700 crore, and Modi fled the country, causing significant reputational damage to India’s banking sector.

Nirav Modi’s extradition is still pending, and Mehul Choksi remains out of India’s legal jurisdiction. The scam, however, resulted in strengthened banking regulations regarding LoUs and SWIFT transactions.

Vijay Mallya Scam (2016) – ₹9,000 Crore

The "King of Good Times" was living large while his airline, Kingfisher, was drowning in debt. Vijay Mallya allegedly defaulted on loans amounting to ₹9,000 crore from various banks. He fled to the UK in 2016, leaving creditors, employees, and stakeholders in financial distress. His lavish lifestyle amidst the collapse of his airline made this scandal a high-profile case.

Mallya’s extradition process is ongoing, but he remains out of reach of Indian authorities. The main impact was enhanced scrutiny of loan defaults and triggered legal reforms on extradition.

Saradha Chit Fund Scam (2013) – ₹2,500 Crore

The Saradha Group, operating a ponzi scheme disguised as a chit fund, promised unrealistically high returns to its investors, mostly in West Bengal and Odisha. The scam collapsed, leaving over 1.7 million people, many of whom were low-income investors, without their life savings. Politicians and celebrities were also implicated in the case.

While Sudipta Sen is behind bars, not all the accomplices have been held accountable. But this Ponzi scheme resulted in reform of chit funds and greater regulatory oversight on such investment schemes.

2G Spectrum Scam (2008) – ₹1,76,000 Crore

The 2G spectrum allocation scandal involved the underpricing of telecom licences to select companies in exchange for bribes. Telecom minister A. Raja was at the centre of this controversy, which allegedly caused a loss of ₹1.76 lakh crore to the exchequer. The case was seen as a massive blow to public trust in India’s telecom sector and led to significant political fallout.

Sadly, all key figures involved were acquitted despite the Supreme Court’s intervention and cancellation of 122 telecom licences.

Coal Allocation Scam (Coalgate) (2012) – ₹1,86,000 Crore

The coal allocation scam, or "Coalgate," involved the illegal allocation of coal blocks to private companies between 2004 and 2009. The CAG of India estimated a loss of ₹1.86 lakh crore to the exchequer due to non-competitive bidding. Many high-profile politicians and industrialists were implicated, making this one of the largest political scandals in India.

While some officials faced legal consequences, many key players were not prosecuted. But it did trigger policy reforms in the allocation of natural resources.

DHFL Scam (2019) – ₹34,615 Crore

Dewan Housing Finance Corporation Limited (DHFL) was accused of syphoning off over ₹34,000 crore through a series of shell companies and fraudulent loans. Investigations revealed that the promoters used these funds for personal enrichment and illegal political donations. The case came to light after an investigation by investigative journalists and was later confirmed by a report from KPMG.

The case is ongoing, and the main accused are in custody. For now, regulations governing non-banking financial companies (NBFCs) have been strengthened.

Yes Bank Crisis (2020) – ₹3,788 Crore

Yes Bank, under its founder Rana Kapoor, was involved in questionable lending practices. The bank made high-risk loans to companies already in financial trouble, which eventually turned into non-performing assets (NPAs). Kapoor was arrested, and the Reserve Bank of India had to step in to stabilise the bank. The case highlighted serious lapses in corporate governance and risk management.

As of now, Rana Kapoor is facing trial, and legal proceedings are active. The RBI has also introduced new measures to monitor the health of banks more rigorously.

Commonwealth Games Scam (2010) – ₹70,000 Crore

The 2010 Commonwealth Games held in New Delhi were overshadowed by corruption allegations involving inflated contracts and kickbacks. Suresh Kalmadi, the head of the organising committee, was arrested for awarding contracts at exorbitant rates. The estimated loss to the exchequer was around ₹70,000 crore. This scam tarnished India’s image on the global stage.

Kalmadi was arrested but the case has not resulted in major convictions or recoveries, except for stricter oversight on large public projects and international event planning.

These scams not only caused financial damage but also eroded public trust in India’s institutions. In response, India has tightened regulatory frameworks, improved corporate governance, and adopted stricter banking standards, although challenges persist in tackling large-scale fraud.