Canara Bank declares loan account of RCom as ‘fraud’ for misuse

Bengaluru: Canara Bank has issued a notice to Anil Ambani-led Reliance Communications (Rcom), declaring its loan account as fraudulent amidst mounting trouble for the company. 

The company, in the midst of an insolvency process, received a letter from the bank dated November 5, which classified the loan account of Rcom, Reliance Infratel Ltd and Reliance Telecom Ltd (RTL) as a “fraud account”. It revealed this in an exchange filing on Friday.

Between the three companies loans to the tune of Rs 31,580 crore was raised from different banks, of which Rs 13667.73 crores (44 per cent) was utilised for repayment of loans and other obligations to banks and Rs 12692.31 crores (41 per cent) were deployed to pay to connected parties. 

In the filing, the company pointed out that these credit facilities pre-dated the ongoing insolvency process and required to be resolved as part of the resolution plan or liquidation, as the case may be. 

Canara Bank’s letter said that the loan utlisation was not as per the terms mentioned in the sanction letter. The loan amount was routed through Rcom to RTL to pay all other liabilities and connected parties. It was also invested in mutual funds and fixed assets.

The bank also faulted the debtor for  writing off money to fictitious debtors and misutilisation of sales invoice funding.

State Bank of India, Indian Overseas Bank and Union Bank of India have also marked RCom’s account as fraud. Presently, Union Bank of India is probing into the loans undertaken by the company.