Reliance Communications (Rcom), led by Anil Ambani, has received a notice from Canara Bank stating that its loan account is fraudulent in the face of the company's growing problems.
The bank issued a letter on November 5th, classifying the loan accounts of Rcom, Reliance Infratel Ltd, and Reliance Telecom Ltd (RTL) as 'fraud accounts,' while the company was in the middle of an insolvency process. On Friday, it disclosed this in a stock exchange filing.
Total funds raised by 3 reliance companies
All 3 companies raised a total of Rs 31,580 crore in loans from various banks, of which Rs 12,692.31 crores (41 per cent) were used to pay to connected parties and Rs 13,667.73 crores (44 per cent) were used to repay loans and other obligations to banks.
The company noted in the filing that these credit facilities had to be settled as part of the resolution plan or liquidation, as the case may be, because they existed before the current insolvency process.
Canara bank claiming loan utilisation was not up to conditions
According to Canara Bank's letter, the loan utilisation did not adhere to the conditions outlined in the sanction letter. The loan amount was transferred to RTL via Rcom in order to settle all outstanding debts and related parties. Additionally, it was invested in fixed assets and mutual funds.
The debtor was also criticised by the bank for misusing sales invoice funding and writing off funds to fake debtors.
Other banks who flagged Rcom as fraud
The accounts of RCom have also been flagged as fraudulent by Union Bank of India, Indian Overseas Bank, and State Bank of India. Union Bank of India is currently investigating the company's loan activities.
