Union Bank of India Launches Examination Into RCom Loan Citing Irregularities

The lender has begun the examination of the loan from a fraudulent practice angle and sought a response from the company for the same.

The Union Bank of India has started investigating the loan it sanctioned to Reliance Communications (RCom), the company revealed in it’s regulatory filing on Sunday. The lender has begun the examination of the loan from a fraudulent practice angle and sought a response from the company for the same.

According to a PTI report, RCom received communication from the Union Bank of India via a letter dated August 7 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’. 

RCom is currently going through an insolvency resolution process since it was unable to clear vendor dues and other debt, the report noted.

The bank has asked the company to provide a response or reply about the irregularities mentioned by the forensic auditor. The letter further detailed that the bank provided various credit facilities repeatedly for the company’s two loan accounts at their request. 

The bank noted in the letter that RCom ‘failed to maintain the loan accounts according to the sanctioned terms, and consequent to the default committed’, the loans became irregular or non-performing assets (NPA). Due to the irregularities observed in the loan accounts, the bank decided to appoint a forensic/internal auditor to investigate the matter as per the policy. 

BDO India LLP, the forensic auditor, submitted it’s report to the bank on October 15, 2020, and pointed out certain irregularities or anomalies which further need to be investigated by ‘competent authority to ascertain the incidence of fraudulent practices,’ the letter stated. 

The lender urged RCom to provide a response for the irregularities raised by the auditor within a time period of 15 days. But, the bank noted in the letter that if the company fails to give a response within the stipulated time, it will be considered that it has nothing to say in the matter. As such, the concern will be taken ahead to an appropriate committee to decide ‘further action including identification of the loan account of M/s Reliance Communication Limited under fraud or otherwise, as per the extant guidelines as contained in the Master Directions of RBI on bank frauds,’ the letter added.