Canara Bank Removes Fraud Tag from Anil Ambani's Reliance Communications Loan Account

Canara Bank has withdrawn its decision to classify the loan account of Anil Ambani's bankrupt telecom company, Reliance Communications (RCom), as fraudulent, as per an ET Online report. This step comes after legal proceedings in the Bombay High Court and relates to the alleged misuse of ₹1,050 crore sanctioned in 2017.

Canara Bank Retracts 'Fraud' Classification 

On July 10, 2025, Canara Bank informed the Bombay High Court that it has officially withdrawn the classification of Reliance Communications' loan account as "fraudulent." 

The bank had initially alleged misappropriation of ₹1,050 crore extended in 2017 for capital expenditure and settling prior debt. Issues raised included diversion of funds into mutual funds, inter-group transactions, and non-compliance with sanctioned usage. 

The classification was based on the RBI's Master Circular on fraudulent accounts. However, the court had earlier stayed the fraud declaration and questioned the absence of a pre-hearing for the borrower, which is mandated by the Supreme Court.

RCom’s Insolvency Proceedings 

Reliance Communications had entered into insolvency resolution proceedings in 2018, which provided legal protection under the Insolvency and Bankruptcy Code. The company argued that since the loans were granted before its insolvency filing, actions such as fraud tagging were not viable under current law. This defence contributed to the court’s decision to keep the earlier fraud ruling on hold.

SBI Also Classified RCom Loan as Fraudulent

In a related development, the State Bank of India also flagged Reliance Communications’ loans as fraudulent due to transactions involving related parties and misuse of sanctioned amounts. Nevertheless, Canara Bank's reversal indicates a shift in stance amid judicial oversight.

Read More: Reliance Power Clarifies No Impact from SBI's Action on Reliance Communications!

Implications for Lenders and Borrowers

This case highlights the increased scrutiny on banks when invoking RBI guidelines to label accounts as fraudulent. Borrowers now have stronger legal recourse, and financial institutions are being held accountable for procedural compliance. Canara Bank's move to reverse the label may impact similar actions by other lenders under similar insolvency contexts.

Conclusion

Canara Bank's decision to remove the fraud label on Anil Ambani’s Reliance Communications loan reflects the evolving legal landscape around insolvency protections and fair hearing mandates. It serves as a precedent on how fraud declarations must align with lending regulations and judicial norms.

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