Union Bank Of India Investigates RCom Loan, Seeks Response
Union Bank of India has commenced an investigation into a loan provided to Reliance Communications (RCom) on suspicion of fraudulent practices. The bank has requested a response from RCom regarding these concerns, as disclosed in a regulatory filing.
RCom is currently undergoing insolvency resolution proceedings due to its inability to settle debts, including those owed to vendors.
In an official filing, RCom stated, "The company has received a letter from Union Bank of India, with the subject 'Examination of irregularities observed in the Loan Accounts 495806390002088 and 495806390002240 from the fraud angle, as per the guidelines of Reserve Bank of India', asking to submit the company's response or reply on the said irregularities as pointed out by Forensic Auditor."
Union Bank of India's letter, dated 7 August, notified RCom that the bank had provided various credit facilities over time for RCom's two loan accounts, based on the company's requests. However, the bank highlighted that Reliance Communications had not adhered to the terms of the sanctioned loans, leading to account irregularities and their classification as non-performing assets (NPAs).
In response to identified irregularities, Union Bank of India had engaged BDO India LLP as a forensic auditor to investigate the matter. The forensic audit report, submitted on 15 October 2020, highlighted significant irregularities that required examination by a "competent authority to ascertain the incidence of fraudulent practices."
The bank has given RCom a 15-day window to provide its response to the issues highlighted by the auditors. If RCom fails to reply within this timeframe, the bank will interpret it as the company having no input on the matter.
The bank's letter stated, "Accordingly, the same will be placed before the appropriate committee for their decision on further action including identification of the loan account of M/s Reliance Communication under fraud or otherwise, as per the extant guidelines as contained in the Master Directions of RBI on bank frauds."
