Canara Bank drops fraud charge against Anil Ambani’s Rs. 1,050-Crore loan account.

PSU lender Canara Bank today informed the Bombay High Court that it has withdrawn its classification of industrialist Anil Ambani’s Rs 1,050 crore loan account as “fraudulent”. It may be recalled that in June, the State Bank of India (SBI) also had classified the loan account of the Anil Ambani-led Reliance Communications as “fraudulent”. Canara Bank’s latest move comes after the Anil Ambani-led Reliance Communications, along with its unit, was initially labelled “fraudulent” due to allegations of misappropriating a Rs 1,050 crore loan. It was alleged by Canara Bank that the funds, originally sanctioned in 2017 for capital expenditure and debt repayment, were misused, resulting in the November 2024 “fraudulent” classification.

Canara Bank alleged that the Rs 1,050 crore loan to the Anil Ambani-led Reliance Communications violated the original terms and diverted the loan amount through intercompany transactions, to make investments in mutual funds and fixed assets.

“Loans availed were also invested in mutual funds and fixed assets and the same were liquidated to make payments to related and non-related parties“, Canara Bank had alleged. However, Anil Ambani challenged this move in court, arguing that the bank had bypassed procedures. Reliance Communications refuted all allegations, emphasising that the company was under an insolvency resolution process since 2018, which shields it from such classifications.

The company maintained that such a fraud declaration should not interfere with ongoing insolvency procedures, since it could complicate the restructuring efforts. The contention revolved around the Canara Bank’s compliance with the Reserve Bank of India’s (RBI) master circular on fraudulent accounts, which mandates that borrowers must be given a chance to be heard before any fraud classification is finalised.

In February, the Bombay High Court had stayed the bank’s order pending further hearings, questioning whether banks were abiding by the stipulated procedures and the Supreme Court’s ruling on the matter.

Team Maverick