Union Bank of India launches an inquiry into the RCom loan and requests the firm’s response
According to a regulatory filing, the Union Bank of India has begun investigating a loan approved to Reliance Communications (RCom) from the perspective of fraudulent activity and has requested the company’s answer.
After failing to pay off vendor dues and other creditors, the firm is now going through an insolvency resolution procedure.
“Company has received a letter from Union Bank of India, with the subject ‘Examination of irregularities observed in the Loan Ac 495806390002088 and 495806390002240 from the fraud angle, as per the guidelines of Reserve Bank of India’, asking to submit company’s response or reply on the said irregularities as pointed out by Forensic Auditor,” RCom said in a filing.
In a letter dated August 7 to RCom, the Union Bank of India (UBI) said that at the request of the firm, the bank sometimes approved different credit limits for RCom’s two loan accounts.
According to the bank, Reliance Communications did not manage the loan accounts in accordance with the conditions approved, and as a result of the company’s failure, the accounts became irregular or NPAs (non-performing assets).
After discrepancies were discovered, the UBI hired BDO India LLP as a forensic auditor to look into the situation.
On October 15, 2020, the forensic audit company delivered its report, which noted several significant inconsistencies or anomalies that required investigation by a “competent authority to ascertain the incidence of fraudulent practices.”
The bank has given RCom 15 days to respond to the auditors’ observations of irregularities.
The UBI said that it would assume that RCom has no opinion on the subject if it does not hear back from the firm within the allotted time limit.
Therefore, the letter stated, “the same will be presented to the appropriate committee for their decision on further action, including identification of the loan account of M/s Reliance Communication Limited under fraud or otherwise, as per the existing guidelines as contained in the Master Directions of RBI on bank frauds.”
