The National Housing Bank (NHB) has red-flagged its exposure to Rajasthan-based SRG Housing Finance after an investigation identified suspected fictitious loan accounts worth around ₹300-400 crore, according to people familiar with the development. The suspected accounts represent roughly one-third of the company’s reported loan book and have raised concerns over the quality of its reported assets and lending practices.
The investigation reportedly found loans that had been shown as disbursed even though the underlying customers could not be established. In several cases, investigators also found no corresponding assets linked to the accounts. The findings have prompted closer scrutiny of the books of the affordable housing lender, which operates primarily in rural and semi-urban markets.
Suspected Fictitious Accounts Under Investigation
SRG Housing Finance had assets under management of ₹1,076 crore as of June, representing a 35% year-on-year increase, according to its latest investor disclosures. The suspected loan accounts of about ₹300-400 crore therefore account for a significant portion of the lender’s reported loan portfolio.
The investigation also identified alleged instances of evergreening and manipulation of non-performing assets (NPAs). Funds purportedly disbursed against some of the suspected accounts were allegedly routed back to entities linked to the promoters, according to the people cited in the report.
NHB has 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). The classification brings the lender’s reported loan portfolio under additional regulatory scrutiny while the allegations are examined further.
What the Red Flagged Account Status Means
An RFA classification does not by itself amount to a declaration of fraud. Under the RBI’s fraud-risk-management framework, an account is classified as an RFA when one or more early-warning signals create suspicion of fraudulent activity and warrant a deeper investigation.
For accounts meeting the applicable CRILC reporting threshold, the RFA status is required to be reported within seven days of classification. The process of either declaring the account as fraud or removing the red flag is ordinarily required to be completed within 180 days.
SRG Housing Finance has not responded to queries regarding the allegations, according to the report. The findings therefore remain allegations and the regulatory process will determine the eventual status of the suspected accounts.
Reported Financial Performance
The developments come despite relatively strong financial numbers reported by SRG Housing Finance. The lender reported gross NPAs of 1.73% and net NPAs of 0.63% for the June quarter. Its profit after tax increased 25% to ₹8.47 crore, while its capital adequacy ratio stood at 39.21%.
The company had crossed ₹1,000 crore in assets under management during 2025-26. Its loan book grew 37% during the year, while profit increased 33% to ₹32.49 crore. The lender is backed by a diversified group of lenders, including banks, financial institutions and NHB.
SRG Housing Finance was established in 1999 and is headquartered in Udaipur. The company says it was the first housing finance company in Rajasthan to be registered with NHB, receiving its registration in 2002. Its lending business is focused largely on affordable housing in rural and semi-urban areas. As of June, it had 96 branches and more than 25,000 customers.
Increased Scrutiny of Smaller Housing Finance Companies
The action against SRG Housing Finance comes at a time of heightened supervisory scrutiny of smaller housing finance companies following irregularities reported at other lenders, including Aviom India Housing Finance and Star Housing Finance.
In the case of Aviom India Housing Finance, whistleblower complaints had alleged manipulation of accounts, window-dressing of NPAs, fake disbursements, fictitious collections and bogus investments. NHB subsequently conducted a snap audit followed by a forensic audit. The Reserve Bank of India superseded Aviom’s board in January 2025, citing governance concerns and payment defaults, after which the company entered insolvency proceedings.
The developments involving SRG Housing Finance are therefore being viewed in the wider context of regulatory monitoring of housing finance companies and the quality of their loan books. For the lender, the key issue will be the outcome of the investigation into the suspected accounts and the allegations concerning fund utilisation, evergreening and NPA reporting.
The RFA classification allows the regulatory process to examine these concerns without treating the classification itself as a final finding of fraud. The next steps will depend on the investigation and assessment of the accounts identified during the review.
