Bank Of Maharashtra Classifies Reliance Communications' Loan Account As 'Fraud' — Check Details

Reliance Communications Ltd.'s loan account has been declared as 'fraud' by Bank of Maharashtra, according to a regulatory filing on Saturday.

With this, Bank of Maharashtra becomes the fourth bank to declare RCOM's loan as fraud after State Bank of India, Bank of Baroda, and Bank of India amid an already on-going CBI probe.

BOM has a Rs 488 crore outstanding loan amount with Reliance Communications. In its letter to the company, the bank delves into the mode of operation of the fraud and how Reliance Infratel Ltd. (an arm of the company) got Letter of Credit or LCs worth Rs 2,779.38 discounted from the bank.

Subsequently, round tripping an amount of Rs 2,393.22 back to the bank's accounts, restoring its overdraft limit by reducing the overdrawn amount from each of them.

Overdraft limit or OD refers to the maximum amount of credit a bank allows a customer to withdraw from their account.

RCOM would then use the new LCs to repay the existing outstanding LCs, resulting in a potential evergreening of the facility provided by the bank.

The filing also informed that the company is undergoing a corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016.

"A resolution plan has been approved by the committee of creditors of the Company in accordance with the Code and is presently awaiting approval of the Hon’ble National Company Law Tribunal, Mumbai Bench", the filing stated.

Further, elaborating on the possible impact of the CIRP on the entity, the filing underlined that Reliance Communications is protected from the institution or continuation of any suits or proceedings, including the execution of any judgment.

The corporate debtor is also protected against any liability of any offence it committed prior to the commencement of the CIRP, as per the filing.