When the State Collects: RCOM's ₹802 Crore Guarantee Call and the Creditor Cascade

On August 15, 2026, Reliance Communications disclosed a material creditor event: the Department of Telecommunications has invoked bank guarantees totaling ₹801.91 crore toward RCOM's deferred spectrum payment obligations. This is not a future liability — the guarantees have been called and encashed by four Indian banks acting as guarantors (Yes Bank, Punjab National Bank, Canara Bank, and State Bank of India). For RCOM creditors locked in an ongoing CIRP process, this represents a structural shift in how spectrum-era contingencies are being liquidated.

RCOM acquired spectrum licenses between 2013 and 2016, when telecom operators could defer payments over a multi-year schedule. The Department of Telecommunications permitted the use of bank guarantees as collateral in lieu of upfront cash. The guarantee essentially said: 'If RCOM defaults, we [the banks] will pay the DoT directly.' For the banks, the guarantee carried a fee but was treated as a contingent liability — low probability, but non-zero.

That contingency is now crystallizing. RCOM entered CIRP in 2017 and has remained under resolution since then — over nine years without an approved resolution plan. The company's negative net worth has expanded from ₹(95,385) Cr in Q1 FY26 to ₹(1,04,759) Cr in Q1 FY27, worsening by ₹9,374 Cr in a single year. Revenue from continuing operations has collapsed to ₹74 Cr/quarter (down 11% YoY). When the DoT issued its special audit of spectrum compliance and found RCOM's payment gaps, invoking the guarantees became inevitable.

The guarantee invocation tells creditors that deferred obligations are now being called — a signal that government agencies view RCOM's balance sheet as too weak to honor aging payment terms. Spectrum liabilities that were once buried in 'Assets Held for Sale' (which auditors flagged for potential Ind AS 105 non-compliance) are now materializing as cash outflows to the four guarantor banks.

Under India's Insolvency and Bankruptcy Code, creditors rank in statutory order: secured creditors (collateralized debt) → employees (wages/severance) → unsecured financial creditors (bonds, loans, guarantees) → operational creditors (vendor payables) → equity holders. RCOM's CIRP has upward of 30,000 creditors across all tiers, with total admitted claims exceeding ₹1.5 lakh crore by conservative estimates.

When Yes Bank, PNB, Canara Bank, or SBI pay out on an RCOM guarantee, they become subrogated creditors — they step into RCOM's shoes with respect to that liability and can file claims in the CIRP for the ₹801.91 Cr they disbursed. If the guarantors file as financial creditors, they rank ahead of operational creditors (like vendor payables) but after secured claims. The invocation de facto elevates the priority of ₹802 Cr of spectrum liability in the payout waterfall, potentially squeezing what other creditors eventually recover.

The RCOM resolution plan has been stuck at the NCLT since early 2025, adjourned to August 27, 2026, pending a Supreme Court review. The core sticking point is whether spectrum assets can be excluded from IBC proceedings. RCOM has argued (via Section 29A petitions and Supreme Court review) that spectrum licenses are government-protected assets and should not be liquidated under insolvency. The DoT's guarantee invocation contradicts that logic — it signals the government itself is now treating RCOM's spectrum obligations as unsecured creditor liabilities.

RCOM's Q1 FY27 consolidated net loss narrowed dramatically to ₹809 Cr from ₹2,560 Cr a year ago — but stripping out one-off gains reveals the operational story. A ₹1,630 Cr exceptional gain on settlement of liabilities (from RITL resolution-plan payouts reducing overlapping claims) plus ₹468 Cr from deconsolidating dissolved foreign subsidiaries (UK, Cyprus) drove the headline improvement. Removing those one-offs, the underlying loss was approximately ₹317 Cr, barely changed from ₹319 Cr a year ago and ₹425 Cr last quarter. Operating recovery is not materializing; exceptional-item management is.

The RCOM resolution plan has been awaiting NCLT approval since early 2025. The company filed multiple Section 29A review petitions and Supreme Court review petitions arguing that spectrum assets — the largest component of enterprise value — cannot be liquidated under IBC and should be excluded from creditor claims. The Supreme Court's February 2026 order rejected this argument, ruling that spectrum assets ARE subject to IBC proceedings. The plan was adjourned to August 27, 2026, for further hearing pending any fresh developments.

The DoT's guarantee invocation on August 15 is such a 'fresh development.' It reframes spectrum-related liabilities from contingencies to crystallized creditor claims. If the NCLT interprets the guarantee call as evidence that spectrum-era obligations cannot be deferred or negotiated down (as the resolution plan hoped), it may accelerate approval toward liquidation-based recovery rather than rehabilitation. Creditors would then prioritize maximizing auction proceeds from spectrum licenses and other assets over the extended timeline a going-concern restructuring would require.