Canara Bank removes fraud tag on Reliance Communications loan account

In a major reversal, and a setback to the State Bank of India’s efforts to recover dues from Reliance Communications (RCom), state-run Canara Bank has informed the Bombay High Court that it has withdrawn its earlier order classifying the telecom company’s loans as fraudulent.

Following this disclosure, a bench comprising Justices Revati Mohite Dere and Neela Gokhale on Thursday disposed of the petition filed by Anil Ambani challenging the bank’s fraud declaration issued last year, stating that “nothing survives in it now.” The court also directed Canara Bank to notify the Reserve Bank of India (RBI) about the withdrawal, according to a PTI report citing the judges.

Canara Bank had, in September 2024, become the first lender to label RCom’s account—stuck in insolvency proceedings at the NCLT since 2019 without resolution—as fraudulent in its report to the RBI. This fraud tag only became public in November 2024 when the bank informed the stock exchanges.

Reliance Communications, once promoted by Anil Ambani, owes over Rs 40,000 crore to a consortium of lenders led by SBI, with these loans classified as NPAs since March 2017.

Canara Bank had cited multiple reasons for its fraud classification, including the diversion of funds meant for sanctioned purposes, routing of loans from RCom to Reliance Telecom to settle related party liabilities, and investments in mutual funds and fixed assets that were quickly liquidated to make payments to both related and unrelated parties. The bank also alleged that RCom had misappropriated Rs 1,050 crore it lent in 2017, originally meant for capital expenditure and debt repayment.

Reliance Communications challenged Canara Bank’s move in the Bombay High Court in February 2025, arguing that it was not given a personal hearing—a point that led to an interim stay, with the matter scheduled for final hearing on Thursday. At this hearing, Canara Bank informed the court it had decided to withdraw its earlier fraud classification.

Earlier, on November 8, 2024, Canara Bank had classified the loan as fraudulent, citing that Rs 1,050 crore sanctioned in 2017 was routed to a group entity to pay other liabilities. This was based on the RBI’s February 2016 master circular on fraud reporting.

The Supreme Court, in March 2023, had directed the RBI to ensure that banks provide borrowers with a personal hearing before declaring accounts as fraudulent, citing the principles of natural justice.

In his petition, Ambani argued that although Canara Bank’s fraud classification was dated November 8, 2024, it was only communicated to him on December 25, 2024—by which time the High Court had already stayed a similar classification in a related matter. He also claimed that the bank had informed the RBI as early as September 6, 2024, prior to officially issuing the order.

Meanwhile, on July 2, 2025, SBI also classified RCom’s account as fraudulent and said it would name Anil Ambani, the company’s former promoter and director, in its report to the RBI. SBI’s findings revealed that RCom had used Rs 12,692.31 crore—41% of the total loans—to pay connected parties through complex inter-group transactions, while only Rs 6,265.85 crore was used to repay other bank loans.

Responding to SBI’s action, RCom informed the exchanges on July 2 that it had received SBI’s letter dated June 23, 2025, and would explore legal measures to protect its interests, arguing that SBI neither provided a proper hearing as required by the Supreme Court nor followed RBI’s prescribed norms on fraud classification.

Also see: SBI classifies RCom loan account as fraud; reports Anil Ambani to RBI