Reliance Communications has disclosed that Central Bank of India declared the loan accounts of its subsidiary Reliance Telecom Limited (RTL) as fraud, involving ₹18.40 crores. The disclosure was made following receipt of a letter from the bank dated December 17, 2025.

Fraud Declaration Details

The Central Bank of India's Empowered Committee made the fraud declaration based on a forensic audit report submitted by BDO India LLP on October 15, 2020. The bank had extended various credit facilities totaling ₹400.00 crores to the Reliance group entities.

Key Fraud Findings

The forensic audit identified several irregularities that led to the fraud classification:

Fund Diversion

RTL utilized a ₹220.00 crore term loan to repay Inter-Corporate Deposits (ICDs) taken from Reliance Communications Limited, which was not permitted under the sanction terms. The loan was meant for capital expenditure, operational expenditure, and repayment of existing liabilities excluding related party loans.

Complex Transaction Structure

The audit revealed unusual journal entries and transfers of high-value receivables and payables to parties with weak financial backgrounds. During the forensic audit period (April 1, 2013 to March 31, 2017), RTL paid ₹3,742.47 crores to RCOM while receiving only ₹537.83 crores.

Round-Tripping Transactions

Collections worth ₹1,110.50 crores were received by RTL from RCOM through Reliance Webstore Limited via a series of circular transactions using HDFC's intraday limit facility of ₹100.00 crores.

Timeline and Regulatory Actions

Corporate Insolvency Protection

Both Reliance Communications Limited and RTL are currently undergoing Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. Resolution plans for both companies have been approved by their respective committees of creditors and are awaiting approval from the National Company Law Tribunal (NCLT).

The company highlighted that Section 32A of the Code provides protection against liability for offences committed prior to CIRP commencement, once resolution plans are approved by NCLT. Additionally, Section 14(1)(a) of the Code protects both entities from institution or continuation of suits and proceedings during the CIRP period.

Current Status

The credit facilities referenced in the fraud declaration pertain to the period before RTL's CIRP initiation. These liabilities are required to be resolved as part of RTL's resolution plan or through liquidation proceedings. The resolution professional has filed avoidance applications with NCLT, which are currently sub-judice, and their treatment will be determined according to NCLT decisions and applicable resolution plan provisions.

The Central Bank of India cited fund diversion and non-compliance with sanction terms as reasons for declaring the loan accounts as fraud. This declaration affects loan accounts worth ₹18.40 crores, emphasizing the severity of the financial irregularities identified in the forensic audit.

Reliance Communications (RCOM) and its subsidiary Reliance Telecom Limited (RTL) have been classified as fraudulent accounts by multiple banks, including Union Bank of India and Bank of Maharashtra. These decisions come amidst ongoing financial troubles for the telecom company, which has been under corporate insolvency resolution process since June 2019.

Key Findings

The banks' classifications are based on forensic audits that revealed:

• Union Bank of India identified misutilization of Rs. 1,324.86 crores in bank loans for unauthorized payments to connected parties
• Bank of Maharashtra found misuse of Letter of Credit (LC) discounting for round-tripping of loans to related parties
• Utilization of funds for repayment of outstanding LCs, potentially indicating evergreening of loans
• Circular routing of funds between RCOM and its subsidiary Reliance Infratel Limited (RITL) amounting to Rs 2,779.38 crores

Regulatory Actions and Implications

• Union Bank of India has classified the accounts of both RCOM and RTL as fraud
• Bank of Maharashtra has reported the matter to the Reserve Bank of India (RBI)
• Bank of Maharashtra plans to file police/CBI complaints as per RBI directions
• RCOM is currently protected under the Insolvency and Bankruptcy Code (IBC) against liabilities for offenses committed prior to the insolvency process

RCOM's Current Status

• Both RCOM and RTL are currently under corporate insolvency resolution process
• Resolution plans for both companies are awaiting approval from the National Company Law Tribunal (NCLT)
• The company may receive protection under Section 32A of the IBC against prosecution for offenses committed before the insolvency process, once the resolution plan is approved

Company's Response

According to the LODR data, RCOM has acknowledged receipt of the fraud classification letter from Bank of Maharashtra. The company stated:

• The credit facilities in question pertain to the period before the Corporate Insolvency Resolution Process (CIRP)
• These facilities will be resolved as part of the resolution plan or in liquidation, as per the IBC
• RCOM is protected from suits/proceedings during the CIRP under Section 14(1)(a) of the IBC
• The company is seeking legal advice on the way forward regarding this development

These developments add another layer of complexity to RCOM's ongoing financial restructuring and highlight the challenges faced by the Indian telecom sector in recent years.