(Image source from: Deccanherald.com)

Canara Bank told the Bombay High Court on Thursday that it decided to reverse its prior choice to call Anil Ambani’s struggling phone company, Reliance Communications, ‘fraudulent.’ The bank had called Ambani’s RCom and its branch fraudulent for supposedly misusing a loan of Rs 1,050 crore given in 2017 for business costs and paying off the company’s current debts. This decision followed rules in the RBI’s main instructions about fraud accounts. Earlier in February, the High Court stopped the decision while looking at the case. At that time, the court wondered if the RBI would punish banks that did not follow its main instructions and the Supreme Court’s ruling, which says borrowers should have a fair chance to speak before their accounts are labeled "fraudulent."

“Your business failed to pay and broke agreed rules after getting and using these loans and credit options. The loan accounts became Non-Performing Assets (NPA) on March 9, 2017,” Canara Bank said in a letter to Reliance Communications dated November 5, 2024. The bank said that the reason for calling the accounts fraudulent was because funds were used wrongly as per the agreed rules and the deals between companies for paying other debts. “The borrowed money was also put into mutual funds and assets that don't move, which were then sold to pay related and unrelated people,” the bank explained. However, Reliance Communications, which failed in 2018, said it was working to fix its money problems. Because the loans were taken before the company went broke, it was protected from any legal steps by lenders.

Also, the bank said that calling the loan accounts fraudulent would not change the current process of dealing with the failure. Earlier this month, the State Bank of India (SBI) also called RCom&039;s loan account fraudulent because loan funds were moved to pay connected people, loan deals within the company, and wrong use of sales papers.