Bank of Maharashtra Declares ₹488 Crore Reliance Communications Loan as Fraud: Details and Implications
Bank of Maharashtra has officially classified its ₹488 crore loan exposure to Reliance Communications Limited (RCOM) as fraudulent, adding to the growing list of banks that have tagged RCOM’s loans as fraud amid ongoing investigations. This development underscores serious concerns over financial irregularities, alleged misappropriation, and corporate governance issues in one of India’s most high-profile telecom insolvency cases.
Overview of the Fraud Classification
On October 24, 2025, Bank of Maharashtra informed Reliance Communications through a formal regulatory filing that the loan account maintained by RCOM with the bank’s Fort Branch in Mumbai had been declared fraud. This places Bank of Maharashtra alongside the State Bank of India, Bank of Baroda, and Bank of India as the fourth public sector bank to classify RCOM’s loans as fraudulent.
The amount involved is a significant ₹488.78 crore (excluding interest) outstanding in a current account, coupled with a Letter of Credit (LC) facility limit of ₹500 crore. The fraud allegation centers on the misuse of Letters of Credit and loan round-tripping, a scheme where funds are circulated among related entities to give an illusion of legitimate repayments, masking the true financial health of the account.
The fraud classification has been reported to the Reserve Bank of India (RBI), which governs banking regulations and fraud investigation standards. RBI guidelines compel banks to report fraudulent accounts and may require law enforcement action, including police or Central Bureau of Investigation (CBI) complaints.
Mechanics of the Fraud: Round-Tripping and Evergreening
The bank’s forensic audit uncovered that RCOM’s subsidiary, Reliance Infratel Limited (RITL), obtained Letters of Credit worth approximately ₹2,779.38 crore, which were discounted by the bank. Subsequently, an amount of around ₹2,393.22 crore was round-tripped back to the bank accounts, artificially restoring overdraft limits by concealing the overdrawn balances.
This practice, known as “evergreening,” involves renewing or recycling credit facilities to hide non-performing assets (NPAs), allowing the borrower to avoid prompt classification of loan defaults. By recycling funds from LCs to repay existing dues, the company created a deceptive image of timely repayments, jeopardizing the bank’s risk management and violating lending norms.
Regulatory and Legal Context
RCOM is currently undergoing a Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016, which complicates proceedings. Ongoing legal protections under the CIRP suspend initiation or continuation of suits and proceedings against RCOM to allow for resolution plan approval by the National Company Law Tribunal (NCLT), Mumbai Bench.
Broader Impact on Reliance Group and Telecom Sector
This classification deepens scrutiny on Anil Ambani’s Reliance group, whose telecom ventures have faced multiple financial and legal challenges. Alongside loan fraud accusations, the Enforcement Directorate has conducted raids investigating alleged money laundering and misappropriation related to these financial irregularities.
The fallout reverberated through the stock market, with shares of related companies like Reliance Power and Reliance Infrastructure experiencing downturns following these revelations. The classification by multiple banks signals systemic risks within the company’s financial management impacting creditors, investors, and telecom sector stability.
What This Means for Bank of Maharashtra and Other Lenders
For Bank of Maharashtra, the decision to classify the ₹488 crore loan as fraud triggers regulatory action and provisions mandated by RBI to recover dues and initiate recovery or prosecution where applicable. Such classifications often lead to loan restructuring demands, asset seizures, or insolvency proceedings acceleration.
Other lenders who have similarly declared fraud against RCOM’s accounts risk significant loan recoverability issues, possibly affecting their balance sheets and prompting tighter credit monitoring across the sector.
Ongoing Developments and Outlook
- Reliance Communications has disclosed receiving the fraud classification letters and reiterated that the credit facilities in question predate their insolvency process. Consequently, liabilities and suits related to pre-CIRP matters remain in legal flux until NCLT approval of resolution plans.
- RBI and law enforcement agencies, including the CBI and ED, are actively probing these fraud allegations, with potential for criminal prosecutions pending investigation outcomes.
- Market analysts predict that this case will shape regulatory policies regarding fraud detection, bank accountability, and telecom sector lending norms in India.
Conclusion
The Bank of Maharashtra’s classification of Reliance Communications’ ₹488 crore loan as fraud is a landmark development in one of India’s largest corporate fraud probes within the telecom industry. It highlights critical issues such as loan evergreen schemes, misuse of financial instruments like Letters of Credit, and challenges in insolvency resolution frameworks.
For stakeholders—banks, investors, regulators, and the telecom market—this case serves as a cautionary tale underscoring the necessity of stringent financial oversight and transparent corporate governance. As investigations proceed and legal processes unfold, the outcomes will be pivotal in restoring faith in India’s banking and corporate insolvency systems.
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