CBI arrests former RCFL and RHFL CEOs in connection with Rs 7,623 crore fraud at 23 public sector banks. Loans allegedly routed to Reliance ADA group firms through conduit companies. What it means for lenders and group stocks.
The CBI arrested two former chief executives of Reliance group lending firms on Monday, alleging they approved loans to shell companies that funneled money to group entities and caused over Rs 7,600 crore in losses to public sector banks.
Devang Mody, former CEO of Reliance Commercial Finance Limited (RCFL), and Ravindra Sudhalkar, former CEO of Reliance Home Finance Limited (RHFL), were taken into custody in separate cases. The CBI spokesperson said the RCFL case involved Rs 4,097 crore in losses spread across 13 PSBs. The RHFL case added another Rs 3,526 crore across 10 banks.
According to the CBI, Mody was a key decision-maker at RCFL from April 2017 to December 2018. The agency's statement said he "approved loans to intermediary and conduit companies despite being aware that such lending was contrary to RBI guidelines and the sanction conditions governing borrowings from Public Sector Banks."
Sudhalkar served as RHFL's CEO from October 2016 to March 2022. The CBI said he did the same thing: he signed off on loans to conduit companies even though the lending violated the company's own policies, NHB and RBI rules, and the terms of the bank borrowings.
The CBI alleged that the funds borrowed by RCFL and RHFL were diverted to Reliance ADA Group companies, including Reliance Capital Limited, Reliance Infrastructure Limited and Reliance Power Limited. The total wrongful loss to the lending banks was Rs 7,623 crore, the agency said, with corresponding wrongful gain to the accused and related entities.
The arrests are part of a wider CBI investigation into the Reliance ADA Group. The agency has registered seven FIRs against Reliance Communications Limited (RCom), RHFL, RCFL and Reliance Telecom Limited (RTL) based on complaints from PSBs and Life Insurance Corporation of India. It has arrested five people in Reliance ADA Group-related cases so far. The first chargesheet in the RCom case was filed on May 29 against 16 accused, including the company, five senior executives and 10 bank officials.
The case raises questions about how group lending structures can be used to shift debt between related entities, bypassing lending norms. The CBI's focus on "conduit companies" points to a familiar mechanism: loans are made to entities that have no real business purpose, then routed to group firms that may already be over-leveraged. For the banks, recovery from the group's stressed assets is uncertain. The group's listed firms have been under financial pressure for years.
For traders and investors, the arrests add another layer of governance risk to the Reliance ADA group stocks. The CBI's chargesheet details may lead to further scrutiny from regulators and lenders. The key question is whether the banks will be able to recover any portion of the claimed losses. The CBI itself says the probe is ongoing, and more chargesheets are expected.
A previous AlphaScala article on Ex-Reliance Executives Remanded to 5-Day ED Custody covered related enforcement action against group officials. The pattern of regulatory and investigative actions against the group's leadership suggests that lenders and counterparties should factor in ongoing legal risk when assessing exposure to any Reliance ADA entity.
The CBI has not yet disclosed whether it will seek custody of the two former CEOs for further questioning. The next court hearing is expected later this week.
Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.