SEBI's action on Reliance Home Finance; Banned from share market, fine also imposed

It is reported that market regulator SEBI has restricted businessman Anil Ambani and 24 other entities from the securities market for five years. These include former chief officers of Reliance Home Finance. Further, SEBI has levied a penalty of Rs 25 crore on Anil Ambani. He will also not be in a position to join any listed company as a director or otherwise in any key role for the next five years. It has also barred Reliance Home Finance from the securities market for six months and has slapped a fine of Rs 6 lakh. They were accused of fund diversion from its loan arm, Reliance Home.

According to SEBI, Anil Ambani has been found as the brain behind a fraudulent conspiracy hatched for the embezzlement of money with the help of senior officials of Reliance Home Finance. The company's board had given strict instructions not to give loans by ignoring the rules.

However, the management of Reliance Home Finance overlooked all norms and diverted these funds. According to SEBI, in this conspiracy money has been misappropriated from listed companies and given as loans to ineligible borrowers who were promoters of companies associated with Anil Ambani.

It may be noted that the SEBI order has mentioned the careless attitude of management and promoters. The market regulator mentioned that these people have given loans to those companies, that neither have any assets nor cash flow and revenue. According to SEBI, this shows some mischievous motives behind giving such a loan. This matter became still suspicious when we considered that many of these borrowers are closely associated with the promoters of Reliance Home Finance.

Reliance Home Finance had distributed loans notwithstanding disregard for the rules. Therefore, a large portion of the borrowers did not repay the loans. When those turned bad, Reliance Home Finance itself failed to pay its liabilities. Then, according to the rules of RBI, a resolution process has to be carried out and the shareholders get into trouble. In March 2018, the reliance home finance share price was about Rs 60. Later on, in March 2020, when this whole case of fraud came out to the world, the company became financially ruined and its resources were spent. Its share price thus fell back to just Rs 0.75. Even now more than nine lakh people have invested in Reliance Home Finance and they are suffering huge losses.