Canara Bank withdraws ‘fraud’ tag on Reliance Communications' loan account

Canara Bank on Thursday informed the Bombay High Court that it has decided to withdraw its decision of classifying Anil Ambani’s bankrupt telecom venture Reliance Communications' loan account as 'fraudulent', as per a White Paper seen by ET Online.

Canara Bank had classified Ambani’s RCom and its unit as fraudulent for allegedly misappropriating Rs 1,050 crore loaned from the bank in 2017, which were originally sanctioned for capital expenditure and paying off the company’s existing debt.

The order was based on the RBI’s master circular related to fraud accounts that laid guidelines for such declarations.


In February this year, the HC stayed the order pending hearing of the plea.

At the time, the HC had questioned whether the RBI would take action against banks that have repeatedly defied its master circular and the Supreme Court’s ruling, which mandates that borrowers must be given a hearing before their accounts are declared "fraudulent".

“After availing and enjoying the said loans, credit facilities, your company had committed default and breached of the sanctioned terms and conditions. The loan accounts slipped into Non-Performance Asset ("NPA") on 09.03.2017,” Canara Bank had said in its letter to Reliance Communications dated November 5, 2024.

Canara Bank had claimed that reasons for classifying the accounts as fraud were non-utilization of funds as per sanctioned terms and inter-company transactions to pay other debts. “Loans availed were also invested in mutual funds and fixed assets and the same were liquidated to make payments to related and non-related parties,” the bank had said.

However, Reliance Communications which went bust in 2018, had said that the company was undergoing an insolvency resolution process. Since the loans were availed before the company moved to insolvency, it was protected from any kind of lawsuits made by any debtor.

Further, the classification of loan accounts as fraud would not have any bearing on the ongoing insolvency procedure, it had said.

Earlier this month, State Bank of India (SBI) also classified RCom's loan account as fraud diversion of sanctioned loan amounts to pay connected parties, inter-company loan transactions and investments and misutilisationon of sales invoices.