Introduction: Reliance Home

A forensic investigation of Reliance Home Finance
Ltd revealed outstanding loans worth Rs 8,884.5
crore to indirectly related companies.

Various deficiencies were

identified in the company’s
lending practices. Some of these are inconsistencies
in credit approval processes and the reclassification

of loans to related parties shortly before disbursement.
The auditors also found that the repayment pattern
of borrowing firms indicated certain trends,

such as cyclical transactions and multi-deal lending.
The Securities and Exchange Board of India on Friday
banned Anil Ambani and 24 other companies from

the stock market for five years for using funds from
Reliance Home Finance Ltd.
redirected The market regulator banned RHFL for just six months.

SEBI examined two reports by PWC, RHFL’s auditor,
and two reports by Grant Thornton,
a forensic expert appointed by Bank of Baroda,

the lead bank of the bank’s lender syndicate.
With evergreening, a bank tries to compensate
for an impending loan default by granting further

loans to the same borrower. Circular transactions
are artificial transactions between companies within
a group in order to increase the sales

figures of one or more companies.
Grant Thornton reports for Bank of Baroda

According to two reports by Grant Thornton,
a forensic auditor employed by Bank of Baroda,
RHFL extended loans to indirectly related

companies between April 1, 2016 and June 30, 2019.
The reports are dated January 2, 2020 and May 6, 2020.
The first report showed that the company extended

corporate loans worth a total of Rs 14,577.7 crore
to several companies during the period under review.
Of this, 12,487.6 billion was allocated to 47 cases.

They also found cases where Reliance Power Ltd
and Reliance Infrastructure Ltd had previously
listed eight borrowers as related parties. However,

shortly before the loans were repaid,
these companies were reclassified as “independent parties”.
A total of 1,323.4 billion was paid to these reclassified companies.

The initial report pointed to 15 potential evergreen
loans worth Rs 785.8 million and three
potential circulars worth Rs 412.9 million.