Mumbai: The National Housing Bank (NHB) has launched a forensic investigation into SRG Housing Finance to establish whether fictitious loans were created in its books, repayment entries were manipulated and the same loan assets were offered to more than one lender, people familiar with the matter said.
NHB issued a request for proposal (RFP) on October 3 to audit a non-deposit-taking housing finance company based in Udaipur. The tender does not name SRG, which is headquartered in the city, but people familiar with the matter identified it as the lender under scrutiny. NHB has yet to appoint an audit firm.
NHB wants the auditor to "identify and investigate fictitious, dummy, non-genuine or unsupported loan accounts appearing in the books" and establish whether the named borrowers exist. This will require checking customer identification records, sanctions, disbursements, bank accounts, loan documents, repayment trails and the use of funds.
The shortlisted audit firm will investigate the company's loan origination and accounting systems. Auditors have been asked to inspect access controls and electronic logs for the creation, deletion, alteration or backdating of loan accounts, customer records, EMI payments and non-performing asset classifications. They will also examine unusual user activity and system overrides. NHB and SRG Housing Finance did not respond to ET's queries.
"The audit will establish whether the borrowers and loans are genuine, how the accounts and repayment entries were created or changed, and whether the same loans were offered as security to multiple lenders. It will also quantify the financial impact of any irregularities found," said a person familiar with the matter. ET reported on September 10 that NHB had red-flagged its exposure to SRG after an earlier inquiry identified suspected fictitious loans worth ₹300-400 crore. The suspected accounts amounted to roughly a third of its reported loan book. SRG had assets under management of ₹1,076 crore as of June, up 35% from a year earlier, according to its investor disclosures. The forensic audit will test the earlier findings.
The investigation will also examine whether the same borrower, security or receivable was pledged or otherwise represented to multiple lenders, and identify any fictitious accounts offered as security for NHB refinance. Auditors must check whether stressed loans were shown as standard assets to lenders and verify files for accounts in which earlier observations had flagged false EMI collection postings.
NHB has sought an independent, loan-by-loan assessment of non-performing assets as of March 31, 2025, and March 31, 2026, including a review of overdue amounts, reversals, restructuring and subsequent recoveries. The auditor must quantify the financial impact of any irregularities identified. Bids close on October 13. The selected firm will have 10 working days to conduct the audit in Udaipur and another 10 working days to submit its report. In a September 10 stock exchange filing, SRG Housing Finance said an NHB inspection was underway as part of the regulator's routine oversight. It denied the allegations, saying, "There has been no creation or maintenance of fictitious accounts by the company, nor has any amount been diverted for any purpose".
