The State Bank of India, following a forensic audit, has classified the loan account of Reliance Communications as fraudulent due to widespread misutilisation of funds.
| Photo Credit:
SHAILESH ANDRADE/REUTERS
Some of the triggers that led the State Bank of India to conduct a forensic audit and classify the Reliance Communications loan account as ‘fraud’.
Misutilisation of bank loans
1. Reliance Communications (Rcom) and its two subsidiaries, Reliance Infrastructure Telecommunications (RITL) and Reliance Telecom (RTL), received ₹31,580 crore from banks. Of these, ₹13,667.7 crore was used to repay loans and other dues to lenders, and ₹12,692.3 crore was used to pay connected parties. SBI’s probe into funds obtained and used showed that it was not utilised as per the terms mentioned in the sanction letter. Around ₹6,266 crore was utilised to repay other bank loans, and over ₹550 crore was allocated to pay related and connected parties. Another ₹1,883 crore worth of loans was used for investments. “Most of these investments were liquidated immediately and utilised for payments to related and non-related parties.”
2. A loan amount of ₹250 crore sanctioned by Dena Bank to RCom for ‘short-term cash flow mismatch and for payment of statutory dues and sundry creditors’ was paid to Reliance Communications Infrastructure (RCIL) as inter-corporate deposits. While management claimed that this amount was used to repay external commercial borrowings from BNP Paribas, it was found that the company routed this amount through a subsidiary to conceal the source of funds and avoid regulatory approval in the event of ECB loans.
3. RCom took a loan of ₹248 crore from IIFCL for capital expenditure (capex), but transferred this amount to its subsidiaries to repay loans. Instead of paying them directly, it routed the funds through RCIL. SBI’s Fraud Identification Committee (FIC) flagged this as misappropriation of funds and breach of trust
Routing of Bank Loans
Loans worth ₹1,976 crore were taken by RITL and then transferred through RCIL to RCom, which used it to pay its liabilities or transfer it to related parties.
Inter-company loan transactions
Bank loans were transferred internally between RCom, RITL and RTL. SBI found in its forensic audit that the management did not transfer funds directly to the company, as required, but routed them through associates and subsidiaries. The FIC noted that these transactions were done through the manipulation of the books of accounts to misappropriate the funds.
Discounting of Bills
RITL discounted bills of RCom worth ₹8,514.7 crore and that of RTL worth ₹1,041 crore, and the funds were used to pay connected parties. The funds from discounting RCom’s bills were transferred to RCom and RCIL. SBI’s FIC said that it meant that RCom’s liabilities were financed by banks. “It appears that the company has done these transactions to raise excess finance from the banking system by concealing the facts from lenders.”
Movement of funds through ICDs
RCom, RITL, and RTL had both given and taken loans in the form of ICDs, totalling ₹41,683.3 crore, of which ₹28,421.6 crore was traced. A significant portion of this was paid to connected parties, and the remainder was used to repay bank loans. A forensic audit revealed that intra-day limits were utilised to transfer funds between RCom and its subsidiaries, associates, and back to RCom. This cycle was repeated multiple times throughout the day.
“These transactions do not appear genuine or conducted in normal course of business,” said SBI’s FIC, which also flagged the possibility of a fictitious debtor. “Transaction can be termed as manipulation of books of accounts through fictitious accounts.”
Transactions with Netizen Engineering
In 2015-16, RCom made a capital advance of ₹5,525 crore to Netizen Engineering, which acquired two assets from MNPL. One of these assets was subsequently transferred to RCIL. Following this, RCom wrote off the capital advance against receivables from RCIL. Multiple other accounts were assigned to Netizen to reduce its receivables by RCom and RTL. Money transferred to RJio on the sale of spectrum to RCom was also transferred to Netizen, which was further transferred to entities with weak financials.
According to SBI, the account of Netizen may have been used to siphon out money, and the FIC noted the transactions appear to be an attempt to divert funds.
Published on July 2, 2025
