After SBI, Bank of India has labelled the loan account of insolvent Reliance Communications (RCom) as fraudulent.  

Alleging diversion of loans and non-compliance with sanction terms, the state-owned bank has also named Anil Ambani, the company’s promoter and former director.

In a regulatory filing, RCom said it received a letter dated 8 August from Bank of India on 22 August stating that the loan accounts of the company, Anil Dhirgjlal Ambani, and Manjari Ashik Kacker (erstwhile director) have been tagged as 'fraud' for an outstanding loan of Rs 724.78 crore.

Bank of India alleged that half of the sanctioned amount disbursed on 20 October 2016 was invested in a fixed deposit, which was not permitted as per the sanction letter. 

"The account of borrower (RCom) turned NPA (non-performing asset) on 30.06.2017 with outstanding of Rs 724.78 crore. The bank has been following up with the borrowers and guarantors for repayment of dues. However, they have failed and neglected to make repayment of the dues," BOI said in its letter, as shared by RCom in its filing.

RCom in the filing said its subsidiary Reliance Telecom also received a letter from Bank of India tagged the company's account as 'fraud' along with the accounts of its directors Grace Thomas and Satheesh Seth, for a loan default of Rs 51.77 crore. Others involved in the case include Gautam Bhailal Doshi, Dagdulal Kastruchand Jain and Prakash Shenoy.

RCom and its subsidiaries had taken loans totalling Rs 31,580 crore from banks.

Earlier, State Bank of India (SBI) had classified the loan account of RCom as fraud, alleging diversion of bank funds to pay connected parties, inter-company loan transactions and investments and misutilisation of sales invoices.

Following SBI’s complaint, the Central Bureau of Investigation (CBI) Saturday searched premises linked to RCom’s and Ambani's residence.

CBI said it registered a complaint after SBI claimed a loss of Rs 2,929.05 crore, resulting from the alleged misappropriation by RCom and Ambani.

Responding to Bank of India’s move, Anil Ambani's spokesperson denied all the charges and alleged that he is being selectively singled out.

The matter dates back more than 10 years, as per disclosures and records available in the public domain, the spokesperson stated.

Ambani served as a non-executive director on the board of RCom and resigned from this position in 2019, over six years ago. He had no role whatsoever in the day-to-day operations or decision-making of the company and is being selectively singled out, the statement added.

The statement also said that Bank of India classified RCom’s account without following the principles of natural justice. "While a show cause notice was issued to Ambani, the requisite documents were not furnished to him. Bank of India further deprived him of the opportunity of a personal hearing in the matter," it stated, adding that this was contrary to the Reserve Bank of India regulations issued in July 2024.

After issuing a show cause notice to 13 directors and key managerial personnel (KMPs) of RCom, Bank of India  unilaterally withdrew the same against all others. However, it selectively continued the proceedings against Anil Ambani without following the principles of natural justice, the statement said.

Further, the statement said RCom had a lender consortium comprising 14 banks but select lenders have chosen to initiate proceedings in a staggered and selective manner after an inordinate lapse of more than 10 years.

"Anil Ambani categorically denies all allegations and charges and shall pursue remedies available to him in accordance with legal advice," it said.

After an account is declared fraudulent, as per banking laws it has to be referred to enforcement agencies for criminal action and the borrower is barred from accessing fresh finance from banks and regulated institutions for five years.

RCom had disclosed that its total debt stood at Rs 40,400 crore in March.

Following unpaid loans, the company was admitted for insolvency and bankruptcy proceedings.

RCom is currently being managed under the supervision of a committee of creditors, led by SBI and overseen by a resolution professional. The matter remains sub judice, pending before the NCLT and other judicial forums, including the Supreme Court, for the past six years.