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CRB Scam

The document provides details about the CRB scam perpetrated by Chain Roop Bhansali and his CRB group of companies in India. It describes how the CRB group defrauded investors and regulatory authorities through various schemes and companies. It examines the modus operandi used, including using dummy companies and rigging share prices. It also discusses the role of regulatory authorities like RBI and SBI and the aftermath of the scam.

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83 views

CRB Scam

The document provides details about the CRB scam perpetrated by Chain Roop Bhansali and his CRB group of companies in India. It describes how the CRB group defrauded investors and regulatory authorities through various schemes and companies. It examines the modus operandi used, including using dummy companies and rigging share prices. It also discusses the role of regulatory authorities like RBI and SBI and the aftermath of the scam.

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Copyright
© © All Rights Reserved
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CRB SCAM

PRESENTED BY:
Rupinder Kaur
Roll No. 2659
B.Com (Professional)
What does the case study cover?

 The scams in the Indian Financial Sector and the


modus operandi of the CRB group of companies.
 The role of the regulatory authorities in the CSB
scam.
The case is intended to give a detailed
insight into the frauds committed by
the CRB group of companies. The case
examines how the CRB group was
able to defraud the investors and the
regulatory authorities with ease. The
role of RBI and SBI is also explored.
“Every single drop of my blood is
for the depositors”.
-Chain Roop Bhansali in 1997
About Bhansali……………….
Schemes and Achievements:

CRB consultants-New Delhi 1985.


CRB Capital Markets (a public ltd
co.)-1992.
Schemes:

 The company 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.
 CRB caps was also very active in stock-
broking having a card both on the BSE and
the NSE.
Success Story:

 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 in
hordes to Bhansali’s schemes.
 CRB Corporation Ltd raised another Rs.84
crores through three public issues between
May 1993 and December 1995.
 CRB share custodial services raised another
Rs.100 crores in January 1995.
 In August 1994 , Bhansali launched CRB
mutual funds (CRBMF) which raised Rs.230
crores from the market through Arihant
Mangal Growth Scheme.
 Media analysts pointed out that the group’s
global outlook and timely foreign
collaborations were responsible for it’s
success.
 CRB’s joint ventures with Daewoo Securities
and Keystone Group met with reasonable
success.
 In mid 1990s , Bhansali came out with the book
extolling his virtues and achievements titled
“Dr. C R Bhansali-Making the Difference”.
The Man and the Mess!!!!!!!!!!

 Suspicions arose when CRB cap’s networth


grew from Rs.2 crores in 1992 to Es.430
crores in 1996
 It was in mid 1996 that reports regarding
frauds being committed by the RBI group
began appearing in the media.
 An FIR was filed against CRB as per section
120B read with section 420 of the Indian
Penal Code and section 13(2) read with
section 13(1)D of the corruption Act.
BhansaliWas Charged With
Fraud, Cheating , And
Siphoning Off Of Funds From
SBI.
The Modus Operandi:

Dummy Companies.

Rigging Share prices through own


money.
 CRB Share Custodian invested Rs.15 Crores
in CRB Mutual Funds. The latter held 24
lakh shares of CRB Corporation which again
had a Rs.16 crores investment in CRB capital
markets.
 As a result CRB caps reported that the
market value of its investments rose from
Rs.76 crores to Rs.109 crores in 1995-96.
 CRB corporation’s income more than
doubled between 1994-1996.
 The Financial Wizardy was made possible
with the help of Bhansali’s trusted firms of
auditors D P Bhaiya & co and Jain & Swaika-
both old friends from Calcutta.
Defrauding the SBI

 In May’96 current account opened in SBI ‘s


Mumbai branch
 Only current account facility granted
 No overdraft allowed
 Dividend warrants treated as demand drafts
 For about nine months all went well
SBI ‘s findings

 However in March’97 SBI discovered the


fraud
 Bhansali was investigated immediately
 SBI accused Bhansali of printing 1800 fake
dividend warrants
 Bhansali used fake accounts in Chennai,
Calcutta and Rajasthan to withdraw these
dividends
 CRB Caps had an outstanding liability on 50
crores
Bhansali’s Justification

 Overdrawn money was used to repay principal to


the fixed deposit holders
 Bhansali claimed he had no fraudulent intentions
 Lawyer insisted that the account was an ordinary
one
Action’s taken by SBI

 SBI officials met with Bhansali in April 1997


 SBI demanded immediate repayment of the
over drafted amount
 All property to be submitted as collateral
security
The Systemic Rot

 Lack of communication between the banks,


RBI and the government officials
 Blame game between RBI and SEBI
 RBI claimed that it had no power to examine
the asset quality
 In Dec’94 SEBI conducted a routine
investigation
 Chitale Report presented in Jan’95
 9 months ban on CRBMF
Continued….

 Oct’96 TFCI lodged complaint against CRB


Caps
 In Nov’96 first interim show-cause notice
issued by RBI
 2 months inspection took place
 In Feb’97 final show-cause notice issued
 April’97 ban on CRB on collection of further
funds
The Aftermath

 Far reaching impacts on the economy


 Declining investor confidence in banks
 Poor performance of NBFC’s
 Making investors more aware
 Creation of smart investors
Actions taken by SEBI

 Over 120 merchant bankers were issued


show-cause notices
 Over half a dozen mutual funds were
prevented from floating mutual fund schemes
 Morgan Stanley Mutual Fund was slapped a
fine of Rs.1lakh for various irregularities
Actions taken by SBI

 June 11,1997 SBI suspends 3 officials in


Mumbai Branch
 R.L.Walker-Chief Manager(Mumbai Branch)
 V.N.Patil-Scale II officers
 M.M.Narang-Scale II officers
 Raids at the officers residence
CRB Capital Markets-Key Financials
THANK YOU….

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