Central Bank of India classifies Reliance Communications Rs 368-cr loan account as fraud

In a significant development, Reliance Communications Limited (RCom) has informed the stock exchanges that the Central Bank of India has classified the company’s loan account as ‘fraud’, effective September 29, 2025. The alleged fraud amount is reported to be Rs. 357.68 crore. The disclosure was made by RCom through a regulatory filing dated October 08, 2025, following the receipt of a letter from the Central Bank of India. The bank’s letter, dated October 04, 2025, states that the decision was based on a forensic audit report which uncovered “grave anomalies” indicating the “perpetration of fraud”. Earlier, SBI and Bank of India have also classified the accounts of Reliance Communications as fraud.

Key allegations from the forensic audit

The forensic audit, conducted by BDO India LLP, pointed to several serious irregularities in the conduct of RCom’s loan accounts prior to its insolvency:

• Diversion of funds: The audit alleged that a significant portion of loans taken by RCom and its group entities (Reliance Telecom Limited and Reliance Telesystems & Technologies India Limited) were used to repay loans to other banks and make payments to “connected parties,” rather than for their intended purposes as per the sanction terms. Potential diversions were flagged amounting to thousands of crores of rupees.
• Suspicious transactions with netizen: The report highlighted a series of transactions involving an entity named ‘Netizen’ (formerly Reliance Infocom Engineering Pvt. Ltd.), raising the possibility of “fictitious assets” or over-valuation of assets.
• Circular transactions: The audit identified circular transactions where funds were routed through group companies like Reliance Webstore Limited (RWSL) to artificially avail and replenish intraday limits.
• Over-charging of assets: It was pointed out that the companies had created charges on assets worth far more than the actual assets they held.
• Non-cooperation: The auditors noted that the company management did not provide crucial documents for their review.

RCom’s response and legal stand

In its filing to the exchanges, RCom, which is currently under the Corporate Insolvency Resolution Process (CIRP) since June 2019, downplayed the immediate impact of this classification.

The company stated that a resolution plan has already been approved by its Committee of Creditors and is awaiting the final nod from the National Company Law Tribunal (NCLT). It emphasized that the credit facilities in question pertain to the period before the start of the insolvency process.

Crucially, RCom invoked the protections offered by the Insolvency and Bankruptcy Code (IBC), 2016:

• Moratorium (Section 14): The company is currently protected from the continuation of any legal suits or proceedings.
• Immunity from Past Offences (Section 32A): Upon approval of the resolution plan by the NCLT, the company (under its new management) will be granted protection from liability for any offences committed prior to the commencement of the CIRP.

RCom also mentioned that its Resolution Professional has already filed applications concerning “avoidance transactions” identified in a separate review, which are pending before the NCLT.

Background and next steps

The Central Bank of India had classified RCom’s account as a Non-Performing Asset (NPA) back on June 30, 2017. The bank reported the fraud classification to the Reserve Bank of India on September 30, 2025.

RCom has stated that it is seeking legal advice on the way forward regarding this development. For now, the company’s fate hinges on the NCLT’s approval of its resolution plan, which it believes will provide a shield against the fallout of this fraud classification.

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