In a significant move, Bank of Baroda has tagged the loan accounts of Reliance Communications Ltd. (RCom) and its erstwhile director Anil Ambani as "fraud," the bank reported in an exchange filing on Thursday.
The action pertains to loans advanced prior to RCom going into the corporate insolvency resolution process (CIRP). The action adds a new dimension to the long-standing financial woes of the erstwhile telecom behemoth and its past leadership.
RCom, which has been under CIRP since June 2019, clarified that the loans identified by the bank date back to before its insolvency proceedings. The company said these liabilities will be taken care of under a resolution plan or, if required, through liquidation as per the Insolvency and Bankruptcy Code (IBC), 2016. RCom's affairs are now being run by resolution professional Anish Niranjan Nanavaty, and Anil Ambani is no longer holding any directorial role.
A resolution plan for the company has already been approved by its committee of creditors and awaits the approval of the National Company Law Tribunal (NCLT). In the meantime, RCom has stated it is seeking legal advice on Bank of Baroda's move, highlighting that the CIRP mechanism protects it from the initiation or pursuit of legal proceedings, including enforcement of decrees or judgments.
This newest action also coincides with an Enforcement Directorate (ED) investigation into the alleged loan fraud by Anil Ambani-led groups. The ED has summoned information from almost a dozen banks on loans associated with Reliance Housing Finance, RCom, and Reliance Commercial Finance. The estimated exposure in the case stands at approximately ₹17,000 crore.
Bank of Baroda assured that it will report the fraud designation to all the concerned authorities, including the Reserve Bank of India (RBI), in accordance with the regulator's Master Directions on Fraud Risk Management in Commercial Banks and All India Financial Institutions.
The declaration marks the follow-up of past actions by other lenders. In June, the State Bank of India (SBI) had announced RCom's loan accounts to be fraudulent. Bank of India has now followed suit on August 24, alleging diversion of funds and violation of loan covenants, and also identifying Anil Ambani.
As the insolvency process unfolds, the implications of these fraud announcements on RCom's resolution plan—and for India's banking system at large—are yet to be seen.
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