Financial services firm Religare Enterprises said on Tuesday it had challenged lenders' tagging its debt-ridden subsidiary Religare Finvest Ltd (RFL) as a fraud account.

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RFL, a non-banking financial company of Religare Enterprises Ltd (REL), has been barred from undertaking fresh business as it is under the corrective action plan of the Reserve Bank of India (RBI) since January 2018 due to its weak financial health.

RBI in a communication dated February 11 advised that "restructuring of RFL cannot be implemented with REL continuing as a promoter, as RFL has been declared fraud exposure by lenders," REL said in a statement. However, REL Chairperson Rashmi Saluja said RFL has itself been a victim of fraud perpetrated by its erstwhile promoters and management.

"We have challenged the whole process of RFL being classified as 'fraud' account and legal and corrective actions with respect to the same have already been initiated. Therefore, we are hopeful that we would be able to get this fraud tagging by lenders removed at the soonest for successful implementation of the debt restructuring plan with REL continuing as its promoter," she said. State Bank of India (SBI) is the lead banker to the 18-lender consortium.

The company has been in financial distress due to alleged misappropriation of funds by erstwhile promoters Shivinder Singh and his brother Malvinder Singh. Multiple investigative agencies are probing the case of financial bungling of about Rs 4,000 crore.