Aavas Financiers Faces NHB Probe Over Loan Classification Irregularities

The National Housing Bank (NHB) has begun an investigation into mortgage lender Aavas Financiers due to loan classification irregularities, including the misclassification of loans under ineligible refinancing schemes and properties not located in hilly areas. The regulator has recalled Rs 500 crore in refinancing support and triggered a leadership overhaul at the company, with the CEO and CFO resigning.

The National Housing Bank (NHB) has initiated an investigation into Aavas Financiers, a housing finance company, concerning potential misclassification of loans worth ₹400–500 crore. The regulator is examining whether these loans were improperly categorized to access concessional refinancing rates, which are typically reserved for lower-income borrowers. If the NHB determines that the loans did not meet the required criteria, Aavas Financiers may be required to repay the benefits received, which could impact its financial position and profitability.

This regulatory scrutiny has coincided with significant leadership changes at the company. The CFO and Chief Risk Officer have resigned and are currently on gardening leave until September 2026, while the new CEO, Manu Singh, has taken charge. The departures have raised concerns among investors about internal stability and governance during a period of regulatory uncertainty.

Aavas Financiers has stated it is cooperating with the NHB audit and is prepared to implement any necessary changes. The company, which operates in 15 states and has crossed ₹20,000 crore in assets under management, has previously received accolades for its housing initiatives. However, the current investigation highlights the importance of compliance with regulatory conditions for refinancing support. Investors are advised to monitor the NHB’s findings and any potential financial or operational implications for the company.