Lenders give clean chit to Reliance Commercial Finance as GT audit finds no fraud

NEW DELHI: A group of lenders, including the National Bank for Agriculture and Rural Development (Nabard), has given clean chit to Reliance Commercial Finance Ltd (RCFL), the NBFC arm of Reliance Capital, after an independent forensic audit report from Grant Thornton did not detect any fraud in the RCFL account.
As per the report, of the total consolidated debt owed to banks, RCFL accounted for Rs 11,620 crore, Reliance Home Finance Ltd (RHFL) Rs 7,430 crore and Reliance Capital (standalone) Rs 6,750 crore of debt. The consolidated debt includes term loans, cash credit and non-convertible debentures.
Last year, lenders had given a go-ahead to appoint Grant Thornton to conduct a forensic audit of two Reliance Capital arms, the listed-RHFL and RCFL.
According to banking sources, the consortium of lenders led by Bank of Baroda has accepted the forensic audit report submitted by Grant Thornton, which indicates that no fraud has taken place.
It is to be noted that appointment of auditor is part of the standard operating procedure for all companies going through the ICA (inter-creditor agreement) process, and is a mandatory requirement under the guidelines laid down by the Reserve Bank of India.
Sources further said that clean chit has been given to RCFL as the lenders have accepted the audit report.
At a meeting of the consortium of lenders led by Bank of Baroda, held on September 25, Nabard informed the consortium that having examined the forensic audit report, it found no element of fraud and has therefore removed the ‘Red Flag’, banking sources said.
Nabard is the second largest lender to RCFL with over Rs 1,100 crore of secured loan exposure, sources said.
Nabard had classified the account of RCFL as ‘Red Flag’ on February 25, 2020 and subsequently, lenders conducted a detailed forensic audit by Grant Thornton, they said.
Most of the lenders of the consortium, including Punjab National Bank, Nabard, are signatory to an Inter Creditor Agreement (ICA) under June 7, 2019 circular of the RBI on Prudential Framework for Resolution of Stressed Assets, they added.
The Delhi High Court on August 18 stayed a move by Bank of Baroda to classify the accounts as fraud, restraining from taking any other coercive action till the next hearing.
The court ordered that no step pre-judicial to the interest of the companies shall be taken till the next date of hearing, September 29, 2020.
The RBI has also rejected lenders request to refer RCFL to NCLT, considering the satisfactory progress made towards resolution under its June 7 circular.
In the resolution process initiated by the lenders, more than 15 investors have evinced interest and submitted their Expression of Interests (EOIs).

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