Bank of Maharashtra Declares RCOM Loan as Fraud Amid Round-Tripping Allegations

Bank of Maharashtra has become the fourth public sector lender to categorise Reliance Communications’ (RCOM) account as fraudulent. This move intensifies scrutiny over the company’s financial practices and ongoing insolvency process under IBC.

Fourth Lender Labels RCOM Account Fraudulent

On October 26, 2025, Bank of Maharashtra announced that its loan exposure of ₹488 crore to RCOM had been classified as fraud. The bank joins State Bank of India, Bank of Baroda, and Bank of India in this classification. The decision stems from irregularities involving RCOM’s subsidiary, Reliance Infratel Ltd., where Letters of Credit worth ₹2,779.38 crore were allegedly misused.

Round-Tripping Observed in Financial Dealings

The bank explained that the discounted Letters of Credit were round-tripped, and money was rotated through various channels to mimic repayments. This gave the impression of account health, while the actual outstanding amounts remained unaffected. Such practices fall under ‘evergreening’, where prior dues are covered up using fresh credit, thereby avoiding the declaration of non-performing assets.

Legal Protection Under the IBC Framework

Even as these allegations surface, RCOM is undergoing the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016. As per IBC provisions, the initiation of CIRP restricts ongoing or new legal actions against the company. Additionally, RCOM may not be held liable for offences committed before CIRP initiation, pending NCLT approval on its resolution plan.

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Conclusion

The Bank of Maharashtra’s fraud declaration adds another blow to RCOM’s weakened standing. With legal protections under insolvency laws and an active resolution plan, the final outcome rests with the National Company Law Tribunal, which could decide the future of this once-prominent telecom firm.

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