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MUMBAI: The National Housing Bank (NHB) has initiated a formal investigation into Aavas Financiers, a mortgage lender backed by CVC Capital Partners, after preliminary findings revealed irregularities in loan classifications. Sources familiar with the situation informed RealtyDailyNews that several loans were improperly categorized under ineligible refinancing schemes.
The sector regulator has revoked refinancing support amounting to nearly Rs 500 crore, triggering a significant leadership reshuffle within the company. RealtyDailyNews first reported on April 13 that managing director and CEO Sachinder Bhinder was being asked to resign, with Manu Singh, former head of home loans at Kotak Mahindra Bank, expected to step in. A week later, on April 20, the company confirmed Bhinder’s departure and Singh’s new role as CEO.
The NHB’s investigation uncovered that subsidized refinancing intended for SC/ST borrowers was obtained against loans where recipients did not belong to these categories. Additionally, loans were misclassified as being disbursed in hilly areas when they were not, and non-home loans were improperly labeled as home loans to qualify for favorable funding. Such lapses prompted the regulator’s decisive action.
Aavas Financiers acknowledged the NHB inquiry but did not confirm the specific findings.
“The NHB regularly conducts audits and inspections of housing finance companies, including Aavas Financiers, and one such inspection is currently ongoing and is not yet complete,” the company stated. They also mentioned that no direction had been given by the NHB to repay any funding lines.
However, sources indicated that the scope of the irregularities exceeds what is typically expected in a routine audit.
“The regulator’s concerns extended beyond isolated cases. The inspection identified numerous instances of loans categorized under ineligible refinance schemes, leading to the retraction of refinance support and a broader review of internal controls,” said a source close to the situation.
Executives Ordered to Resign
Following the NHB’s findings, CVC Capital Partners, which holds a majority stake (over 50%) in Aavas Financiers, has dismissed Chief Financial Officer Ghanshyam Rawat and Chief Risk Officer Ashutosh Atre. Both were asked to resign on June 15, but the announcement came only after an emergency board meeting on June 21.
The company later informed the stock exchanges that Ghanshyam Gupta has been appointed as the interim Chief Financial Officer and Punit Purushottam Agarwal as the interim Chief Risk Officer as of June 22.
These departures add to a series of senior management changes, raising concerns over the company’s operational integrity. In just two months, Aavas Financiers replaced its MD and CEO, CFO, and CRO, indicating a significant crisis. The market reacted, with the company’s stock, valued at approximately Rs 11,673 crore, dropping nearly 32% from its 52-week high of Rs 2,152. It is now trading around Rs 1,472, reflecting growing investor apprehension over governance, growth sustainability, and execution amid ongoing management instability.
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