ED, CBI Probe Reliance MF’s ₹2,850 Cr Investment in YES Bank AT-1 Bonds

Reliance MF’s ₹2,850 Cr YES Bank AT-1 Bond Deal Under ED, CBI Probe for Fund Diversion

Reliance Mutual Fund, connected to businessman Anil Ambani, is facing serious questions over a ₹2,850 crore investment in YES Bank’s Additional Tier-1 (AT-1) bonds. Authorities believe this move was part of a deeper financial scheme, raising fresh concerns about misuse of public funds and backdoor dealings within India's financial system.

The Enforcement Directorate (ED) is leading the probe, suspecting that the investment was not just poor judgment but part of a quid pro quo arrangement. These AT-1 bonds, which allow banks to write off debt without returning principal to investors, were ultimately written off during YES Bank’s restructuring. Mutual fund investors bore the brunt of this decision.

Alleged Diversion of Funds and Hidden Entities

The ED, with support from the Central Bureau of Investigation (CBI), has found troubling signs of how the money moved. Reliance Infrastructure allegedly routed huge amounts using a lesser-known entity, described as “C Company.” This entity, hidden from regulators, played a central role in concealing related-party transactions and bypassing shareholder and audit approvals.

These funds were marked as inter-corporate deposits but reportedly served as a cover for internal money transfers within the Reliance Group. Only ₹4 crore came back in cash. The remaining ₹6,499 crore was linked to defunct energy firms with no operations, making recovery unlikely. Investigators say the total loan diversion in this case may exceed ₹10,000 crore.

Raids, Loan Fraud, and Market Reaction

More than 35 locations in Mumbai were searched earlier this week, involving 50 companies and 25 individuals. These raids were conducted under the Prevention of Money Laundering Act (PMLA) as officials traced links to financial irregularities that go back several years.

Alongside the bond case, the ED is looking into earlier loan fraud allegations against the Reliance Group. Between 2017 and 2019, YES Bank reportedly approved loans worth ₹3,000 crore to companies under the group without proper checks. Bribery of YES Bank officials is also under the scanner.

Shares dropped sharply on Reliance Power and Reliance Infrastructure in the aftermath of the raids. Both companies stated that their operations and financial performance remain unaffected and said the cases involved older entities such as Reliance Communications and Reliance Home Finance.

However, market watchers remain cautious. Now, the question is how much accountability will ensue and whether investor confidence can be restored. The outcome in this case may form a landmark precedent for corporate governance in the mutual fund sector, given SEBI's prior-issued penalties against Anil Ambani and 24 others in related matters.