The Securities and Exchange Board of India (Sebi) has banned Anil Ambani, chairman of Reliance ADA Group, along with 24 others, including former key personnel of Reliance Home Finance Ltd (RHFL), from the securities market for five years. This ban stems from allegations of fund diversion within RHFL. In addition, Sebi has imposed a fine of Rs 25 crore on Ambani for orchestrating a fraudulent scheme, which undermined stakeholders’ trust in RHFL and affected confidence in governance within the financial sector. Collectively, the total penalty on Ambani and the others amounts to over Rs 625 crore.
Sebi’s investigation into RHFL, a non-banking finance company (NBFC) that primarily dealt with housing loans, loans against property, and construction finance, was triggered by numerous complaints regarding fund diversion. During the 2018-19 fiscal year, RHFL extended large sums as general-purpose working capital (GPC) loans to financially weak and questionable entities without proper collateral. By the end of March 2019, RHFL had disbursed Rs 8,470.65 crore through 97 GPC loans to 45 such borrowers. In several cases, these loans were approved and disbursed on the same day, with little regard for standard due diligence processes.
Sebi’s detailed investigation revealed that half of RHFL’s assets consisted of these dubious loans, yet the company had projected a very low expected credit loss (ECL). These loans were later declared non-performing assets (NPAs). Moreover, the funds, structured as GPC loans, were often transferred to entities associated with the Reliance ADA Group. Sebi accused Ambani of personally approving several of these loan applications, suggesting his involvement in transferring funds for personal or corporate gain.
In response to Sebi’s final order, Ambani’s spokesperson confirmed that he is exploring legal options. The statement noted that Ambani had already resigned from certain board positions following an earlier interim order and that he has been complying with Sebi’s directions for the past two and a half years.
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