Financial scams occurs when someone takes money or other assets through deception or conducting criminal activity. Understanding the various types of financial scams can be helpful in protecting yourself. Typically, investors and shareholders are the victims of financial scams.
Recent Updates
RBI recorded bank frauds totalling more than 302.5 billion rupees, or INR 30,000 crore, in the year 2023.
The current figure is detrimental, and the public should be cautioned. This represents a reversal in the trend of rising bank frauds in India over the past ten years, both in terms of the total number of frauds and their monetary value.
Biggest Financial Scams in India
1. Financial Scams are not new to the people; they have been ongoing in various cities and towns, causing India to hit economies across the globe. The scams stain the reputation of the country. The scams are considered criminal activity conducted by an individual or gang.
2. These frauds frequently involve well-planned initiatives that are later revealed to be fake, severely hurting investors. An important part of India’s financial environment, the stock market has fostered deception, which has damaged many people’s trust.
3. Numerous incidents have surfaced that expose Ponzi schemes, in which investors are lured in by promises of profits, only to have their money disappear.
4. These financial blunders highlight how crucial it is to carefully examine projects, comprehend the stock market, and exercise caution while handling money to guard against situations like these.
5. There are multiple financial scams that have taken place in the history of India, mainly the stock investors who made these blundered scams.
The Satyam Computers Scam
The Satyam Computers Scam is considered as one of the biggest financial scams in India between the years 2006-2008. The scam is reported to have taken place on January 7, 2009 when the founder and chairman of Satyam Computers Ramalinga Raju disclosed and confessed to fraud in the accounting balance sheets of worth rupees 7000 crores.
Following the discovery of the scam, the government held an auction to sell the business in the best interests of investors and more than 50,000 Satyam Computers workers. After being purchased by Tech Mahindra, it went by the moniker Mahindra Satyam before merging with Tech Mahindra. According to Sebi’s investigation at the time, the Satyam scandal ultimately proved to be a case of financial misstatements totalling about Rs 12,320 crore.
Ketan Parekh and the Stock Market Scam of 2001
Ketan Parekh, a chartered accountant by profession, purchased the stakes from not-so-known market capitalization companies and lifted the prices through circular trading with other traders. He applied the concept of pump and dump scheme. To raise share prices, he oversaw money from banks, institutional investors, and promoters.
He took loans and lay orders. Ketan was bankrupt when the market crashed; as he faced losses, he failed to return the loans that he took from the banks. Bank of India filed a case against Ketan Parekh for issuing pay orders of 137 crores. He was arrested and tried in court for performing insider trading, share price manipulation, and duping institutional investors.
Ketan Parekh was immediately arrested and tried in court. He has been prohibited from trading in the Bombay Stock Exchange for 15 years, i.e. till 2017. Also, he was sentenced to one year of rigorous imprisonment for his economic crimes.
Harshad Mehta and the Stock Market Scam
Harshad Mehta, a Gujarati stock broker, committed the biggest ever money market scam in India at that point in time, amounting to nearly 5000 crore rupees in 1992. He played the scam by taking advantage of loopholes in the banking system; Mehta took loans from various banks and put them in the stock market. He would then use RFD ready-forward agreements to increase the price of company shares. Thousands of investors were impacted by the crash of the Indian stock market, which was triggered by a systematic stock scam.
He began serving as an intermediary to facilitate ready-forward trade transactions between Indian banks in the early 1990s. To artificially inflate the stock prices, he would raise money from the banks and then unlawfully invest it in stocks that were listed on the Bombay Stock Exchange.
On June 16, 1993, Mehta stirred up controversy once more when he declared in public that he had given Rupees One Crore as a party gift to the then-prime minister and president of the Congress, Mr. P.V. Narasimha Rao in exchange for getting him off the hook.
Mehta used the banking system to embezzle about Rs 1,000 crore so that he could purchase stocks on the Bombay Stock Exchange. His money-pushing caused the markets to keep rising to all-time highs. Retail investors emulated the “Big Bull” by buying similar things to what Mehta was. The Sensex flew into a frenzy between April 1991 and April 1992, returning 274 percent and rising from 1,194 points to 4,467.
For the index, that is the highest annual return. When the State Bank of India revealed a deficiency in government securities, the scheme was exposed. This prompted an inquiry, which subsequently revealed that Mehta had tampered with the system to the tune of about Rs 3,500 crore. On August 6, 1992, following the scam was exposed, the markets crashed by 72 percent, leading to one of the biggest falls and a bearish phase that lasted for two years.
Nirav Modi, The Punjab National Bank Fraud
Born and brought up in Antwerp, the diamond capital of the world, Nirav Modi is a third-generation diamantaire who ranked 57th on the Forbes Billionaire List in 2017. He is accused of committing fraud worth rupees 14000 crores with his uncle Mehul Choksi.
In 2018, a PNB officer filed a complaint against three people for submitting fraudulent papers and taking advantage of the neglect of responsibilities. After the conduct of his first fraudulent guarantee papers in 2011, he managed to receive more such guarantees over the next 6.5 years.
Once the ED took over the situation, many other details came forward, prompting Nirav Modi to flee from the UK after the government labelled him a fugitive economic offender in December 2019.
Saradha Scam
The Saradha Scam was held in the year between 2003 and 2011. The scam impacted both upper- and middle-class investors. The chairman of Saradha Company issued bonds and debentures to raise funds for the company.
Although Saradha had disguised itself initially as a chit fund, it began by issuing debentures and redeemable preference bonds to the public. This was done in violation of the SEBI rules that companies raise capital from more than 50 people without issuing a prospectus and Balance Sheet.
And he makes Rs. 4,000 crores from this. After learning about some irregularities at Saradha Company, SEBI informed the West Bengal government. Sarah created a web of businesses inside of it to mislead SEBI. Following the collapse of the Ponzi scheme, numerous individuals, including politicians, were implicated. Arrested was Sudipta Sen.
Sahara Scam & Digital Arrest Scam
The Sahara Scam and the Digital Arrest Scam are two significant financial scams that highlight the risks faced by investors and digital users. The Sahara Scam involved the Sahara Group, led by Subrata Roy, raising over ₹24,000 crore from millions of small investors through Sahara India Real Estate Corporation Ltd. (SIRECL) and Sahara Housing Investment Corporation Ltd. (SHICL), promising high returns but violating SEBI regulations by failing to issue a prospectus. In 2011, SEBI ordered Sahara to refund investors, leading to a prolonged legal battle, and in 2014, Subrata Roy was arrested for non-compliance. Despite efforts, many investors are yet to recover their money. On the other hand, the Digital Arrest Scam is a rising cyber fraud where scammers impersonate law enforcement officials via phone calls, WhatsApp, or emails, claiming that a victim’s bank account, Aadhar number, or PAN card is under investigation. By creating a sense of urgency, they coerce victims into making payments or revealing sensitive banking details, sometimes using deepfake technology to appear credible. Both scams emphasize the need for financial vigilance—whether in traditional investments or digital transactions—and reinforce the importance of regulatory enforcement and public awareness to prevent financial scams.
Curious About Financial Scams in India
Reporting a Financial Scams if in Case
It is essential to report any kind of financial scams that has happened to you. There are certain steps that can be taken to report a complaint against a financial scams, such as:
- Reporting to the local police crime branch.
- Your bank should report the crime and explore any possible resources the bank has available.
- Visiting a local district attorney.
- Reaching out to a national fraud helpline is also to be considered.
So, while there have been many instances of fraud over the years, none have matched the magnitude of those on this list. Not only did they have a huge impact on India’s economy, but they also forced the government to come up with stringent laws for the future.
Step-by-Step Guide to Reporting Fraud
If you suspect that you have been a victim of financial scams, taking immediate action can help you recover your money and prevent further losses. Here’s a step-by-step guide on how to report financial scams in India:
1. Gather Evidence
- Collect all emails, call records, bank statements, messages, and receipts related to the fraud.
- Take screenshots of any suspicious transactions or communications.
2. Contact Your Bank
- Call your bank’s fraud department or customer support to report unauthorized transactions.
- Request the bank to block your account/cards if needed.
- Some banks have a 24/7 fraud helpline to assist in emergency cases.
3. File a Complaint with Cybercrime Authorities
- If the fraud happened online (e.g., phishing, UPI fraud, credit card scam), report it on the National Cyber Crime Portal (https://cybercrime.gov.in/).
- You can also call 1930, the National Cybercrime Helpline, to report fraud cases.
4. File a Police Report (FIR)
- Visit your nearest police station and lodge an FIR under Sections 406, 420, or 468 of IPC, depending on the fraud type.
- If the local police refuse to file an FIR, approach the Economic Offenses Wing (EOW) in your city.
5. Report to SEBI or RBI (for Investment & Banking Frauds)
- If the fraud involves stocks, mutual funds, or Ponzi schemes, file a complaint on SEBI’s SCORES Portal (https://scores.gov.in/).
- For banking fraud, contact RBI’s Banking Ombudsman at (https://cms.rbi.org.in/).
6. Seek Legal Help
- If large sums are involved, consider hiring a financial fraud lawyer to file a case in a consumer court or civil court for financial recovery.
By reporting financial scams promptly, you increase your chances of getting justice and prevent others from falling victim.
Legal Resources & Consumer Protection
India has several legal resources and regulatory bodies dedicated to protecting consumers against financial scams. Here are some key institutions and laws that can help safeguard your rights:
1. Regulatory Bodies for Financial Protection
- Reserve Bank of India (RBI) – Monitors bank fraud and financial security.
- Securities and Exchange Board of India (SEBI) – Regulates stock market frauds and investment scams.
- Insurance Regulatory and Development Authority of India (IRDAI) – Protects policyholders against insurance fraud.
- National Consumer Disputes Redressal Commission (NCDRC) – Handles consumer fraud complaints.
- Cybercrime Division – Investigates online fraud cases.
2. Key Laws for Financial Fraud Prevention
- Indian Penal Code (IPC) Sections 406, 420, and 468 – Punish financial fraud, breach of trust, and forgery.
- Prevention of Money Laundering Act (PMLA), 2002 – Tackles financial crimes related to money laundering.
- Information Technology (IT) Act, 2000 – Covers cyber fraud, hacking, and phishing scams.
- Consumer Protection Act, 2019 – Provides consumer rights and dispute resolution mechanisms.
If you fall victim to a financial scam, you can file complaints under these legal frameworks to seek redress.
Future Trends in Financial Fraud Prevention
With the rise of digital transactions, financial fraud is evolving, making it crucial to stay ahead with new fraud prevention strategies. Here are some emerging trends in fraud prevention:
- Artificial Intelligence (AI) & Machine Learning
AI-driven fraud detection systems analyze patterns to identify suspicious transactions in real-time. Machine learning helps detect anomalies in spending behavior, reducing fraud risks. - Blockchain Technology
Decentralized financial records ensure transparency and reduce fraudulent transactions. Smart contracts can automate and verify transactions, eliminating fraud risks. - Biometric Authentication
Banks and financial institutions are implementing fingerprint, facial recognition, and voice authentication for secure transactions. - Stronger Cybersecurity Regulations
The government is enforcing stricter Know Your Customer (KYC) norms and Anti-Money Laundering (AML) policies to reduce fraud. Data protection laws will strengthen consumer rights against identity theft and data breaches. - Consumer Awareness Programs
Initiatives like RBI’s “RBI Kehta Hai” campaign educate consumers about fraud prevention. Banks send alerts about phishing scams and security tips to customers regularly.
Expert Tips for Safeguarding Your Finances
Protecting yourself from financial scams requires awareness and proactive steps. Follow these expert-recommended tips to keep your money safe:
- Use Multi-Factor Authentication (MFA) – Enable MFA for banking apps, UPI payments, and online transactions.
- Verify Before Investing – Research any investment scheme thoroughly before committing funds. Check SEBI or RBI approvals.
- Avoid Sharing Sensitive Information – Never disclose OTPs, passwords, or CVV numbers over calls or messages.
- Regularly Monitor Bank Statements – Review your bank and credit card statements for unauthorized transactions.
- Beware of Phishing Scams – Do not click on suspicious email links or messages that claim to be from banks or financial institutions.
- Set Transaction Alerts – Enable SMS/email alerts for every financial transaction to detect fraud early.
- Report Suspicious Activity Immediately – If you notice fraudulent transactions, report them to your bank and cybercrime authorities.
By staying informed and taking precautions, you can reduce your risk of falling victim to financial scams.
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Conclusion
The need of the hour is to equip our businesses against fraud risks to have a steady awareness and raise public awareness of the increasing number of financial scams. To better stand on the safe side, it is beneficial to have transparency in organizations for better management. Making sure to conduct proper financial balance sheet maintenance of your business is needed.
FAQs on India’s Biggest Financial Scams
What is the biggest corruption in India?
The Harshad Mehta Scam (1992) is considered as one of the biggest financial corruption scams considered to have taken place in India.
Are financial frauds on the rise in India?
According to the study conducted by Forrester Consulting, there has been a significant upswing in fraudulent activities in India in recent times. The findings reveal that year-on-year fraud losses are increasing for nearly two-thirds 64% of respondents, with financial services organizations reporting the biggest increase in losses.
Why are bank frauds increasing?
The poor level of checks and balances in the banking system is one of the reasons for increasing banking fraud in India. The data showed that banks, both private and public sector, reported a total of 4,62,733 frauds between 2013-2023.
What are financial frauds in India?
There are various forms of financial fraud and scams in India, such as bank fraud, investment fraud, insurance fraud, mortgage fraud, lending fraud, Ponzi schemes, etc.
