Why Did SBI Classify Reliance Telecom Loan as Fraud After a Fresh Review? Understanding the Red Flags Linked to Rs 31,580 Crore of Borrowings
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The forensic audit noted that RCOM, Reliance Infratel Limited (RITL) and RTL cumulatively received Rs 31,580 crore from banks. Of this, Rs 13,667.73 crore was used to repay loans and obligations to banks and financial institutions, while Rs 12,692.31 crore was paid to connected parties.
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State Bank of India (SBI) has classified the loan account of Reliance Telecom Limited (RTL), a subsidiary of Reliance Communications Limited (RCOM), as 'fraud' and will report the company’s name to the Reserve Bank of India (RBI) under applicable Master Directions, according to a disclosure dated March 14, 2026.
The move follows a decision by SBI’s Fraud Identification Committee (FIC) dated February 21, 2026. The committee reviewed responses to show-cause notices and a forensic audit report dated October 15, 2020, and concluded that sufficient explanations had not been provided regarding irregularities in the conduct of RTL’s loan account. SBI, in a letter dated March 11, 2026, said it would take further action to report RTL’s name to the RBI under extant regulatory guidelines.
The account had earlier been declared fraud in November 2020 and reported to the RBI, but the classification was reversed following a Supreme Court judgment dated March 27, 2023 in SBI & Others vs. Rajesh Agarwal & Others. SBI subsequently re-initiated the process, issuing fresh show-cause notices in December 2023 and sending reminders along with the forensic audit report by BDO India LLP in October 2025.
The forensic audit noted that RCOM, Reliance Infratel Limited (RITL) and RTL cumulatively received Rs 31,580 crore from banks. Of this, Rs 13,667.73 crore was used to repay loans and obligations to banks and financial institutions, while Rs 12,692.31 crore was paid to connected parties. It further identified Rs 6,265.85 crore used to repay other bank loans, Rs 5,501.56 crore paid to related and connected parties, and investments of Rs 1,883.08 crore made from bank loans that were largely liquidated immediately for further payments.
RTL had availed aggregate loans of Rs 375 crore, including Rs 125 crore from SBI under a composite sanction dated December 27, 2014. The audit found that Rs 221.94 crore of RTL’s borrowings was paid to connected parties. The committee observed that utilisation of borrowed funds beyond approved sanction terms constituted misutilisation and breach of trust.
The FIC also examined inter-corporate deposits (ICDs), noting that Rs 41,863.32 crore was obtained during the review period, of which Rs 28,421.61 crore was traced. Of the traced amount, Rs 23,128.45 crore was used for payments to connected parties and Rs 3,214.74 crore for repaying bank loans.
The audit recorded that RCOM used an Intraday limit of Rs 100 crore in an HDFC Bank account to route ICD repayments aggregating Rs 660.50 crore, including repetitive same-day fund cycles on January 24, 2017. The committee stated that such repetitive same-day circular transactions did not exhibit characteristics of genuine commercial transactions and were considered misrepresentation and concealment of material facts from lenders.
Both RCOM and RTL are undergoing corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016. Resolution plans approved by their committees of creditors are awaiting approval from the National Company Law Tribunal, Mumbai Bench. RCOM said the credit facilities referred to in SBI’s letter pertain to the period prior to RTL’s CIRP and are required to be resolved under a resolution plan or liquidation framework. It added that avoidance applications linked to certain transactions are already before the NCLT and are sub judice.
With the latest decision, RTL’s loan account stands classified as fraud under the RBI’s Master Directions on Fraud Risk Management in Commercial Banks and All India Financial Institutions dated July 15, 2024.
About Reliance Communications
Reliance Communications Limited (RCOM) and its subsidiary Reliance Telecom Limited (RTL) are undergoing corporate insolvency resolution under the Insolvency and Bankruptcy Code, 2016. Both companies’ resolution plans have been approved by their respective committees of creditors and are pending approval before the National Company Law Tribunal, Mumbai Bench. During CIRP, they are protected from institution or continuation of suits or proceedings under Section 14(1)(a) of the Code. The company has also cited Section 32A, which provides protection to a corporate debtor against liability for offences committed prior to commencement of CIRP upon approval of a resolution plan that results in a change in management or control.
Disclaimer: The article is for informational purposes only and not investment advice.