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CASE STUDY ON: CRB

SCAM
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
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 Bhansalis
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 groups
global outlook and timely foreign
collaborations were responsible for its
success.
CRBs 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 caps 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.
Bhansali Was 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 corporations income more than
doubled between 1994-1996.
The Financial Wizardy was made possible
with the help of Bhansalis trusted firms
of auditors D P Bhaiya & co and Jain &
Swaika-both old friends from Calcutta.
Defrauding the SBI
In May96 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 March97 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
Bhansalis 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
Actions 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 Dec94 SEBI conducted a routine
investigation
Chitale Report presented in Jan95
9 months ban on CRBMF
Continued.
Oct96 TFCI lodged complaint against
CRB Caps
In Nov96 first interim show-cause notice
issued by RBI
2 months inspection took place
In Feb97 final show-cause notice issued
April97 ban on CRB on collection of
further funds
The Aftermath
Far reaching impacts on the economy
Declining investor confidence in banks
Poor performance of NBFCs
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.