RELIANCE
HOME FINANCE LTD : ECONOMY
NEWS
:
RHFL fraud: Why has Sebi fined Anil Ambani and banned him from the market?
WHAT’S
IN THE NEWS ?
SEBI has also slapped a Rs 25 crore fine on Ambani for
orchestrating a fraudulent scheme that adversely affected RHFL’s stakeholders,
as well as confidence in the integrity of governance structures in regulated
financial sector entities.
SEBI's
Ban on Anil Ambani and Others
SEBI Ban:
·
SEBI has
banned Anil Ambani, Chairman of ADAG, and 24 other entities, including former
key managerial personnel of Reliance Home Finance Ltd (RHFL), from the securities
market for five years.
·
The ban
is due to the diversion of funds from RHFL.
RHFL Case
Overview:
·
RHFL is a
non-banking finance company (NBFC) focused on housing loans, loans against
property, and construction finance.
·
SEBI
investigated RHFL following multiple complaints about fund diversion.
·
RHFL’s
major promoter was Reliance Capital Ltd (RCL), with a 47.91% shareholding.
·
Anil
Ambani was a promoter and non-executive director of RCL during FY2018-19.
SEBI’s
Findings:
·
Loans by
RHFL to corporates increased from Rs 3,742.60 crore in 2017-18 to Rs 8,670.80
crore in 2018-19.
·
RHFL
disbursed large General Purpose Working Capital (GPC) loans to entities with
weak financials, often without collateral or proper due diligence.
·
97 GPC
loans totaling Rs 8,470.65 crore were disbursed to 45 borrower entities in
FY2018-19, many of which were approved on the same day of application.
Ambani’s
Involvement:
·
Despite a
board directive on 11 February 2019 to stop GPC loans, RHFL continued
disbursing loans with Ambani's approval.
·
Ambani
approved 14 loan applications worth Rs 1,472.16 crore between February and
March 2019.
Penalties:
·
SEBI
imposed a Rs 25 crore fine on Ambani for orchestrating a fraudulent scheme.
·
The total
penalty on Ambani and the other 24 entities exceeds Rs 625 crore.
SEBI’s
Observations:
·
RHFL’s
FY2018-19 financials projected a low Expected Credit Loss (ECL) despite half of
its assets being GPC loans to dubious entities.
·
SEBI
concluded that the loans were part of a fraudulent scheme, benefitting entities
related to the Reliance ADA Group.
Anil
Ambani’s Response:
·
Ambani is
exploring legal options and has been in compliance with SEBI’s interim order
since February 2022.
·
He is
reviewing SEBI’s final order from 22 August 2024 and will take appropriate
action.