National Housing Bank red-flags exposure to SRB’s fictitious housing loans worth ₹400 crore

National Housing Bank (NHB) has reportedly red-flagged its exposure to Rajasthan-based SRG Housing Finance after an investigation uncovered suspected fictitious loan accounts worth about ₹300-400 crore.

According to a report that cited sources familiar with the matter, these phantom accounts and other irregularities amount to roughly a third of SRG Housing Finance's reported loan book.

The company reported assets under management of ₹1,076 crore as of June, marking a 35% year-on-year increase, according to its latest investor disclosures. NHB found loans that were recorded as disbursed but where the underlying customers could not be verified, the report said. Several such accounts lacked corresponding assets.

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The investigation also revealed alleged evergreening and manipulation of non-performing assets (NPAs). Funds disbursed against some suspect accounts were reportedly routed back to promoter-linked entities. Following these findings, NHB classified the account as a Red Flagged Account (RFA) and reported the status to the Reserve Bank of India's Central Repository of Information on Large Credits (CRILC).

An RFA designation does not amount to a declaration of fraud. Under RBI's fraud-risk-management framework, an account is red-flagged when early-warning signals raise suspicion of fraudulent activity, prompting further investigation. Accounts meeting the CRILC reporting threshold must be reported within seven days of classification, with the process of declaring fraud or removing the red flag typically completed within 180 days.

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SRG Housing Finance is promoted and managed by Vinod Kumar Jain, its managing director. The promoter group held 59.02% of the lender at the end of June, with Jain individually holding about 20.5%. Chief Executive Archis Jain and Seema Jain are also major promoter shareholders.