New Delhi, Jul 2 (PTI) State Bank of India (SBI) has decided to classify the loan account of beleaguered telecom firm Reliance Communications as "fraud" and report the name of its erstwhile director Anil Ambani to the Reserve Bank of India (RBI).

The move is expected to be followed by other lenders who have given loans to Reliance Communications Ltd (RCom).

Reliance Communications, in a regulatory filing, said it has received a letter dated June 23, 2025, from State Bank of India (SBI) to this effect.

SBI has decided to report the loan account of the company as 'fraud' and report the name of Anil Ambani (erstwhile director of the company) to the RBI, as per the extant RBI guidelines, it said.

As per RBI guidelines, after a bank classifies an account as 'fraud', the lender should then report it to the RBI within 21 days of detection and also report the case to the CBI/Police.

Meanwhile, industrialist Anil Ambani's lawyers have written to SBI, protesting against the classification of loan accounts of bankrupt Reliance Communications as fraudulent, saying the move violated RBI guidelines as well as court directions.

In the July 2 letter, the counsel said the SBI's order was shocking and had been passed ex parte, and in violation of the principles of natural justice.

It is to be noted that Reliance Communications and its subsidiaries received a total loan of Rs 31,580 crore from banks.

SBI, in the letter sent to RCom, said it has found deviation in the utilisation of loans, involving a complex web of fund movements across multiple group entities.

"We have taken cognizance of the responses to our Show Cause Notice and after due examination of the same, it is concluded that sufficient reasons have not been provided by the respondent, to explain the non-adherence to the agreed terms and conditions of the loan documents or the irregularities observed in the conduct of the account of RCL to the satisfaction of the bank," it said.

Accordingly, the letter said the Fraud Identification Committee of the bank has decided to classify the loan account of RCL as fraud.

As per the RBI guidelines, the penal provisions are applicable to the fraudulent borrower, including the promoter director and other whole-time directors of the company.

In particular, borrowers who have defaulted and have also committed fraud in the account would be debarred from availing finance from banks, Development Financial Institutions, government-owned NBFCs, etc, for a period of five years from the date of full payment of the defrauded amount.

After this period, it is for individual institutions to take a call on whether to lend to such a borrower, and no restructuring or grant of additional facilities may be made in the case of fraud accounts.

As per the report of the Fraud Identification Committee, out of the total loan, Rs 13,667.73 crore, about 44 per cent, was utilised for the repayment of loans and other obligations.

An amount of Rs 12,692.31 crore, 41 per cent of the total loan, was used to pay connected parties.

According to the filing, Rs 6,265.85 crore was used for repaying other bank loans and Rs 5,501.56 crore was paid to related or connected parties, which were not aligned with sanctioned purposes.

Further, a Rs 250-crore loan from Dena Bank (meant for statutory dues) was not utilised as per the sanctioned use. The loan was diverted to RCom Group company Reliance Communications Infrastructure Ltd (RCIL) as an Inter-Corporate Deposit (ICD) and was later claimed to repay an external commercial borrowing (ECB) loan.

The committee found that a loan of Rs 248 crore was sanctioned by IIFCL for meeting capital expenditure, but RCom paid Rs 63 crore to Reliance Infratel Ltd (RITL) and Rs 77 crore to RIEL for repayment of loans.

"But instead of transferring the fund directly to these companies, it was routed through RCIL, the reason for that has not been given by management or by Anil Ambani. These (Dena Bank and IIFCL loan use) appear to be misappropriation of funds and breach of trust," the report said.

The committee observed potential routing of bank loans by RCom Group, including mobile tower firm Reliance Infratel Ltd (RITL), telecom service company Reliance Telecom Ltd (RTL), Reliance Communications Infrastructure Ltd (RCIL), Netizen, and Reliance Webstore (RWSL), among others.

The report said RCom, RITL, and RTL engaged in ICD (inter-corporate deposit) transactions totalling Rs 41,863.32 crore, of which only Rs 28,421.61 crore was traceable.

RCom used a Rs 100-crore intraday limit to cycle funds through group entities, including RWSL, RTL, and RCIL, multiple times in a single day.

"These transactions do not appear to be genuine or conducted in a normal course of business. It appears that RCom has utilised intra-day limits to finance RWSL to pay collection proceeds worth Rs 1,110 crore.

"As a result, debtors of RTL got reduced by that extent... transactions can be termed as manipulation of books of accounts through fictitious accounts," the report said.

The committee raised a question on fund transactions involving Netizens as "an attempt at diversion of funds by manipulation of books of accounts through fictitious accounts/fictitious entries".

It is to be noted that RCom is under the corporate insolvency resolution process (CIRP) pursuant to the provisions of the Insolvency and Bankruptcy Code, 2016.

With effect from June 28, 2019, its affairs, business and assets are being managed by and the powers of the board of directors are vested in the Resolution Professional Anish Niranjan Nanavaty, appointed by the National Company Law Tribunal, Mumbai Bench, order dated June 21, 2019.

The credit facilities or loans referred to in the letter from SBI dated June 23, 2025, pertain to the period prior to the CIRP of the company and are required in terms of the IBC to be necessarily resolved as a part of a resolution plan or in liquidation, as the case may be. PTI PRS DP DP BAL BAL

Fraud classification of loan account triggers RBI reporting and debarment risks under regulatory guidelines and insolvency rules. SBI classified the pre CIRP loan account of Reliance Communications as fraud, naming the erstwhile director and reporting to the RBI after its Fraud Identification Committee found unexplained diversion of funds, related party transfers, inter corporate deposits and intraday cycling of funds; RBI guidelines require prompt reporting, law enforcement referral, and impose debarment and restrictions on restructuring for fraud accounts, while the loans must be addressed in any IBC resolution plan or liquidation.