Synopsis: Reliance Communications (RCOM) has received a show-cause notice from the Central Bank of India over alleged Rs. 400 crore loan fraud, amid ongoing insolvency proceedings and scrutiny of fund misappropriation.
An Indian telecom company is in the spotlight as it faces a potential fraud classification by a central bank over Rs. 400 crore in loans, following a forensic audit that flagged fund diversion and misuse. The company has 21 days to respond, while its assets remain under insolvency proceedings.
With the market capitalization of Rs. 367.82 crore, the shares of Reliance Communications Ltd is trading at Rs. 1.33, down by 0.75 percent from its previous day’s close price of Rs. 1.34 per equity share.
What’s the News?
Reliance Communications Ltd disclosed that it had received a show-cause notice from the Central Bank of India proposing to classify its loan accounts as “fraud” and report the matter to the RBI.
The notice, dated September 2 and received on September 5, pertains to borrowal accounts worth Rs. 400 crore, including a term loan of Rs. 280 crore, a co-obligor term loan of Rs. 20 crore for Reliance Telecom, and a performance bank guarantee of Rs. 100 crore. The account was declared NPA in June 2017, prompting the bank to commission a forensic audit by BDO India LLP, which reported serious irregularities in October 2020.
The audit highlighted diversion of funds, misuse of loan proceeds, and payments to connected parties. Of the Rs. 31,580 crore received by RCOM and group entities from various banks, about 44 percent went to loan repayments, while 41 percent was routed to related parties.
Funds were also parked in fixed deposits and mutual funds, routed through group entities, and used to repay liabilities, with several questionable transactions involving financially weak entities. The bank concluded these anomalies may amount to fraud under the Bhartiya Nyaya Sanhita, 2023.
RCOM has been given 21 days to respond or request a hearing, failing which the bank may proceed with reporting the accounts as fraud. The company, already under the corporate insolvency resolution process since June 2019, has its assets and business managed by a resolution professional under the Insolvency and Bankruptcy Code, 2016.
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Other Updates
India’s largest state-run lender, State Bank of India (SBI), on June 23, 2025, classified Reliance Communications’ (RCOM) loan account as “fraud”, citing serious deviations in fund utilization.
The bank’s Fraud Identification Committee (FIC) flagged two major irregularities, including misusing a Rs. 250 crore loan from Dena Bank meant for statutory dues and creditors, which was instead routed as an inter-corporate deposit to RailTel Corporation before being claimed as repayment of an external commercial borrowing. Similarly, a Rs. 248 crore loan from IIFCL for capital expenditure was partly diverted to repay other loans via group entities, highlighting what the bank described as misappropriation of funds and breach of trust.
Further scrutiny revealed that Rs. 6,266 crore of loans were redirected for inter-bank repayments and Rs. 5,502 crore was funneled to related parties, with another Rs. 1,883 crore invested in instruments that were quickly liquidated and used for further payments. These patterns suggested loan diversion, fund routing through subsidiaries, and concealment of sources to bypass regulatory approval.
Following these revelations, the Enforcement Directorate (ED) stepped in, registering a fresh case against RCOM for an alleged Rs. 2,929 crore loan fraud involving SBI, broadening its ongoing money-laundering probe into companies owned by Anil Ambani.
The ED filed an Enforcement Case Information Report (ECIR) based on a CBI complaint lodged on August 21, 2025, after which the CBI conducted searches at RCOM-linked premises and Ambani’s residence in Mumbai.
The ED is probing not only RCOM but also other Ambani group firms, looking into suspected loan diversions of more than Rs. 17,000 crore, including Rs. 3,000 crore in loans from Yes Bank between 2017 and 2019.
As part of the investigation, the ED has already questioned current and former executives of Ambani’s group companies and recorded Ambani’s statement in early August. The probe is expected to widen further, examining inter-company fund flows and the possible siphoning of bank loans. These developments add to RCOM’s ongoing insolvency proceedings since 2019, where its assets remain under the control of a resolution professional.
Reliance Infrastructure and Reliance Power said the criminal case against Anil Ambani and Reliance Communications will not affect their businesses. He hasn’t been involved in these companies for over three years, and the companies confirmed the case doesn’t impact their operations. The Enforcement Directorate also recently investigated alleged money laundering, which the group has denied.
About the Company
Reliance Communications Limited (RCOM), incorporated in 2004, is a telecom service provider offering national and international long-distance services to around 1,960 Indian corporations, including carriers. It owns and operates IP-enabled fiber optic infrastructure and is currently under insolvency, with management focused on sustaining and growing its operations.
Written By Akshay Sanghavi
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