SRG housing loans worth Rs 400 crore may be fictitious: National Housing Bank

The National Housing Bank (NHB) has flagged potential fraudulent activity involving loans of approximately ₹300-400 crore held by SRG Housing Finance, a Rajasthan-based housing finance company. This finding, uncovered during an investigation, constitutes roughly one-third of the firm's reported loan book, which stood at ₹1,076 crore as of June. The company's assets under management grew by 35% year-on-year during the same period.

NHB identified loans that were recorded as disbursed but lacked corresponding customers, and several of these accounts showed no associated assets. The investigation also indicated instances of alleged "evergreening" and manipulation of non-performing assets, with funds from some suspect accounts reportedly rerouted to entities linked to the promoters.

While SRG Housing Finance has not commented on the allegations, red-flagging an account does not automatically mean fraud has been confirmed. According to the RBI's fraud-risk-management framework, a Red Flagged Account (RFA) requires a deeper investigation, and the status must be reported to the Reserve Bank of India's Central Repository of Information on Large Credits (CRILC) within seven days of classification.

The process to declare the account fraudulent or clear the red flag typically concludes within 180 days. SRG Housing Finance, promoted by Vinod Kumar Jain, owns 59.02% of the company, with other major shareholders including its managing director and CEO. Established in 1999, the Udaipur-based lender focuses on rural and semi-urban affordable housing, operating 96 branches and serving over 25,000 customers.

The irregularities discovered by NHB stand in contrast to the lender's reported asset quality metrics, with gross non-performing assets (NPAs) of 1.73% and net NPAs of 0.63% for the June quarter. Profit after tax for the period rose by 25% to ₹8.47 crore, and the capital adequacy ratio was 39.21%. Despite these concerns, the company had reached the ₹1,000-crore assets under management mark in 2025-26, reflecting a 37% increase in its loan book and a 33% profit rise to ₹32.49 crore.

The situation highlights the ongoing regulatory focus on smaller housing finance companies following similar irregularities at other lenders like Aviom India Housing Finance and Star Housing Finance, which led to NHB taking over the latter's board and initiating insolvency proceedings.