Anil Ambani’s RCom Under SBI’s Fraud Scanner Again: Is RBI’s 2024 Policy the Trigger?

Bankrupt telecom firm Reliance Communications on July 1 said that the State Bank of India (SBI) has decided to report its loan account as “fraud” to the RBI and name former director Anil Ambani to the regulator. The move, contested by Ambani's side, appears to be a direct result of the new Fraud Risk Management framework the RBI came out with last July, legal experts told Outlook Business.

"SBI's recent classification of Reliance Communications' loan account as 'fraud' and the reporting of its erstwhile director to the RBI, while stemming from alleged fund diversion identified in a 2020 forensic audit relating to 2016 transactions, appears to be a direct consequence of the invigorated framework established by the RBI's Master Directions dated July 15, 2024," said Kunal Sharma, founder and managing partner, Taraksh Lawyers and Consultants.

Sonal Alagh, partner at Alagh and Kapoor Law Offices, agrees with Sharma. She adds that the public sector lender reclassified Reliance Communications' loan account as ‘fraud’ after complying with procedural safeguards outlined in the RBI’s 2024 Master Directions on Fraud Risk Management.

Both experts agree that the new directions are designed to significantly strengthen banks' fraud risk management, emphasising early detection, time-bound internal processes and stringent reporting.

How Reliance Communications Collapsed

Reliance Communications (RCom) and its subsidiary companies, Reliance Telecom and Reliance Infratel, filed for insolvency in 2019. At the time, it was reported that the Anil Ambani-promoted firm had roughly ₹49,000 crore in debt and wasn't able to sell its assets to settle liabilities. The company, which had become India's leading telecom operator, collapsed under the burden of debt it had taken to expand overseas and buy 3G spectrums in 2016.

How much the company owes these creditors as of now was revealed on July 3 in a regulatory filing. The company said it has a total outstanding loan of ₹28,826 crore from banks and financial institutions, all of which are in default. The company's total financial indebtedness, including both short-term and long-term debt, stands at ₹40,413 crore. Additionally, it has unpaid interest amounts of ₹31,175 crore on bank loans and ₹3,465 crore on non-convertible debentures, which have not been accounted for in the financial statements.

News portal TelecomLead on June 18, 2019, reported that Reliance Communications revealed the name of 53 financial creditors. Of this, SBI’s dues stand at ₹4,825.82 crore, LIC at ₹4,758 crore, Bank of Baroda at ₹2,531.87 crore and Madison Pacific Trust at ₹2,351.53 crore. Other admitted claims include Syndicate Bank (₹1,225.19 crore), Punjab National Bank (₹1,126.87 crore), IDBI Bank (₹1,410.95 crore), Union Bank of India (₹1,009.34 crore) and Bank of India (₹979.17 crore).

The company also faces total claims of over ₹15,000 crore from Chinese lenders. China Development Bank has sought ₹9,863.89 crore, Exim Bank of China ₹3,356.44 crore, Industrial and Commercial Bank of China (head office) ₹1,554.42 crore and its Mumbai branch ₹278.48 crore.

According to reports from 2021, Reliance Communications’ loan account was first flagged as ‘fraud’ by SBI and two other state-owned lenders—Union Bank of India and Indian Overseas Bank—in late December 2020, based on a forensic audit that uncovered questionable fund diversions amounting to approximately ₹5,500 crore.

However, SBI withdrew the fraud tag against Reliance Infratel (RCom’s subsidiary) following petitions by Mukesh Ambani's Reliance Jio, which had proposed to buy the assets of his brother’s troubled firm. Reports noted that SBI had withdrawn the tag over fears that Jio might back out of its plan to buy Reliance Infratel due to the label.

In a later classification, SBI says its earlier fraud classification was legally challenged by the company through a writ petition in 2020 in the Delhi High Court. Following the Supreme Court’s ruling on March 27, 2023, in SBI & Others vs Rajesh Agarwal & Others, the earlier fraud classification was reversed.

What Led to the ‘Fraud’ Tag

However, SBI's Fraud Identification Committee (FIC) reviewed the case of Reliance Communications Ltd, based on the earlier forensic audit in June 2025. The bank, in its communication to Reliance, said that it re-initiated the fraud identification process by issuing show-cause notices to the borrower and its promoters/directors, providing them an opportunity to respond in line with principles of natural justice.

Further notices, including the forensic audit report, were sent on March 5, 2024, and evidence was shared again on September 26, 2024, offering another opportunity for submission before finalising the fraud classification.

The bank looked into Reliance Communications (RCom) and its group companies—Reliance Telecom and Reliance Infratel—borrowings of over ₹31,500 crore. It found that ₹13,667 crore of these loans were used to repay other borrowings, ₹12,692 crore was transferred to related or connected companies and ₹6,265 crore was used for purposes not approved of by the bank, violating the loan terms. Reports suggest that 44% of the funds were used to repay existing financial obligations, while 41% went to connected parties.

SBI’s committee also flagged serious concerns about how Reliance Communications utilised its loans, citing "deviations" and a "complex web of fund movements" across multiple group entities. It noted that RCom failed to justify non-compliance with loan terms or explain the irregularities.

In one instance, SBI noted that a ₹248 crore loan sanctioned by India Infrastructure Finance Company (IIFCL) for capital expenditure was instead used—via Reliance Communications Infrastructure (RCIL)—for loan repayments to Reliance Infratel (RITL) and Reliance Internet Exchange (RIEL), without valid justification for the route. The forensic audit deemed these transactions as misappropriation of funds and breach of trust. While the management claimed all group companies operate as a single borrower group under a Master Security Trustee Agreement (MSTA) signed in 2011, auditors noted that funds were frequently routed through various subsidiaries without clear reasoning and no proper explanation was provided by the management or by Anil Ambani.

In another example provided by SBI, RITL borrowed ₹1,976 crore, out of which ₹1,783.65 crore was routed to RCom via RCIL and used to repay other bank loans or transferred to group entities. Additionally, RCom transferred ₹783.77 crore to RTL and ₹1,435.24 crore to RITL—again using bank funds—demonstrating a pattern of internal fund routing among RCom, RITL, RTL and RCIL.

How RBI's New Rule Changed the Game

The RBI revised its Master Directions on Fraud Risk Management on July 15, 2024, superseding its 2016 framework. The guidelines include a six-month window for banks to upgrade their Early Warning Systems (EWS) and account red-flagging processes, and a mandatory review of fraud-risk policies by the board at least once every three years. Under these rules, before classifying any account as fraud, banks must issue a show-cause notice and allow 21 days for a response, in line with the Supreme Court’s 2023 ruling.

"This framework aims to strike a balance between prompt action and adherence to the principles of natural justice," says Alagh, adding that the directions represent a clear shift from informal, discretionary practices to structured, rule-based enforcement in handling financial misconduct.

"Borrowers now face a well-defined but tough path: comply fully and transparently, or face reputational ruin, criminal prosecution and financial blacklisting," she adds.

Sharma from Taraksh Lawyers and Consultants points out that the directions place an exceptionally stringent onus on borrowers to meticulously defend their position, regardless of the complexity or veracity of the allegations.

Lawyers Ask for Notice Withdrawal

According to Saurabh Sharma, partner, Juris Corp, SBI's first show-cause notice was given under the earlier master direction of 2016, which has now been superseded by the latest Master Directions on fraud risk management.

RBI has applied a fresh fraud classification based on its 2024 Master Directions, says Sonam Chandwani, managing partner, KS Legal & Associates. "This classification is distinct from any prior default or wilful default tags under older frameworks, driven by the new guidelines’ emphasis on early warning signals and procedural compliance," she adds.

Anil Ambani's legal representatives have taken note of this.

"Vide our letter dated 21 October 2024, we had submitted that as the Bank's Show Cause Notice dated 20 December 2023 (SCN) had been issued prior to the revised RBI Master Directions dated 15 July 2024 which completely superseded the directions under which the SCN had been issued (and which are no longer in existence), the Bank would need to withdraw the said SCN," says Agarwal Law Associates, adding that the extended silence of almost a year on behalf of the Bank meant that they have accepted Anil Ambani's position.

But according to the firm, Ambani was "shocked" to receive an ex-parte order from the bank’s Fraud Identification Committee without being heard. The firm notes that the bank did not reply to his previous letter and argued that Ambani was a non-executive director, not involved in RCom’s daily operations during the period in question. The firm also claims he had no opportunity to defend himself and urged the bank to withdraw the fraud classification.

What Happens Now?

Under the revised RBI rules, borrowers face exclusion from banking relationships with RBI-regulated entities for at least five years, extending to associated entities sharing directors or promoters, says Chandwani.

"Their details are recorded in the Central Fraud Registry, triggering system-wide restrictions. For promoters, personal liability remains a significant risk, with potential criminal action under laws such as the Indian Penal Code and the Prevention of Money Laundering Act, alongside enforcement by agencies like the Enforcement Directorate," she notes and adds that even following resolution under the Insolvency and Bankruptcy Code, promoters are not shielded from accountability for fund misuse.

But before this, banks are also mandated to report the fraud to law enforcement agencies, says Juris Corp’s Sharma.

On the flip side, Taraksh Lawyers and Consultants' Kunal Sharma notes that the intensified focus on Early Warning Signals (EWS) and data analytics under the new rules, coupled with the broad definition of what constitutes 'fraud', creates a heightened risk of genuine business failures being misconstrued or prematurely classified as fraudulent activity.

"This places an immense burden on promoters to not only manage their businesses effectively but also to ensure absolute transparency and meticulous documentation, as minor discrepancies or adverse business conditions could trigger investigations with severe, career-altering repercussions, potentially blurring the lines between legitimate financial distress and wilful misconduct," he notes.