Market reforms: The unfinished agenda

It's time to address the root cause of the 1992 stock market scandal - a conflict of interest in RBI's many roles

The release of a recent Sony LIV series on the Harshad Mehta financial markets scandals that rocked India in the early 1990s has triggered chintanam on an event that perhaps led to some of the biggest reforms in the Indian financial sector. The “securities scam” was in essence, a diversion of funds, estimated at between Rs 3,500 crore and Rs 5,000 crore during 1991-92, from the inter-bank government securities (G-Sec) market to stock market manipulators. These diverted funds were used to artificially create a giant rise in stock prices.

The Government of India and the Indian Parliament mounted a capable response