CRB SCAM

SUBMITTED BY : SUBODH MAYEKAR ROLL NO.97

The Man behind it all

2

Born in a jute trader's house in Rajasthan raised in Kolkata. Commerce graduate , completed Chartered Accountancy in 1980. Also acquired other degrees like ACS, Ph.D., MIIA (US) and a diploma in Journalism. 1980: started a financial consultancy firm, CRB Consultancy in Kolkata.

Moved to New Delhi to join one of the country's leading registrars of companies.
1985: Established 'CRB Consultants,' a private limited company in New Delhi. 1992: The name of the company was changed to CRB Capital Markets (CRB Caps) and it was converted into a public limited company.

Schemes and Policies

CRB Capital market ltd. offered various schemes like merchant banking , leasing and hire purchase , bill discounting and corporate funds management , fixed deposit and resources mobilization , mutual funds and asset management , international finance and forex operations. He floated around 133 subsidiaries and unlisted dummy companies and money was transferred to these dummy companies. CRB Share Custodian invested Rs.15 Crores in CRB Mutual Funds. CRB Corporation invested Rs.16 crores in CRB capital markets. Market value of CRB caps investments rose from Rs.76 crores to Rs.109 crores in 1995-96. Global outlook and timely foreign collaborations were also responsible for its success. Rigged Share prices through own money The Financial Wizard was made possible with the help of Bhansalis trusted firms of auditors D P Bhaiya & co and Jain & Swaika-both old friends from Calcutta

CRB group of companies

First came the finance company (CRB Capital Markets), The company raised over Rs.176 crore from the public by January 1995.

A+ rating given by CARE and upfront cash incentives of 7-10% attracted investors. CRB Mutual Fund In August 1994 , Bhansali launched CRB mutual funds, which raised Rs.230 through Arihant Mangal Scheme. CRB Share Custodial Services followed. CRB share custodial services raised another Rs.100 crores in January 1995. CRB Corporation Ltd raised another Rs.84 crores through 3 public issues. Between 1992 and 1995, in the post-Harshad Mehta scam (bear phase) he managed to raise close to Rs 900 crore. CRB Caps Networth grew from Rs.2 crores in 1992 to Rs.430 crores in 1996 this finally rose suspicion.

How fraud happened?

Dummy Companies. Bhansali move to Delhi for set up of his empire. CRB Capital Markets January 1995, raising a total of 176 crore in three years, compared to Kotak Mahindra Finance, a leading finance company, who over the same period raised less than Rs. 80 crore CRB Mutual funds In August 1994, raised Rs 230 crore from the market through its Arihant Mangal CRB Growth Scheme. Another Rs.180 crore was raised from investors through fixed deposits. CRB Corporation LTD was originally set as a granite manufacturing company by Bhansali, but much of its activities were in finance area. This company raised Rs.84 core through three public issues between May 1993 and December 1995. CRB Share Custodial Services: another of Bhansalis company raised a further Rs.100 crore in January 1995 to set up operations. In the space of five years between 1992 and 1995, Bhansali managed to raise a total of close to Rs. 900 crore from the capital markets

Measures taken by the government

1.

A high level committee comprising the RBI Governor, SEBI Chairman, Finance Secretary was created. A Serious Frauds Office will be set up under the Department of Company Affairs The SEBI first got stronger after the scam. Chairman of the insurance regulator has been included and his role may be enhanced. The (CBI) set up an Advisory Board on Banking, Commercial and Financial Frauds (ABBCFF) that is headed by a retired Deputy Governor of the RBI to help it crack corporate crime more efficiently. RBI set up the Department of Supervision.

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Effects on Indian Financial System

1)

Debt market got affected

2)

This event have impacted the sentiment and trust of investors in the Indian financial market.
Scam leaves the Initial Public Offerings (IPO) market dead

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An investor population stagnant at the official figure of 19 million

One of the senior official says that efforts to revive investor confidence have flopped because government measures have failed to match the investors own perceptions about the main cause of his woes.

Thank You