Indian investigators said they are probing what they believe could be the country's biggest-ever lending fraud with 17 banks allegedly cheated out of around $4.4 billion.

The Central Bureau of Investigation (CBI) said it carried out raids at 12 locations in Mumbai on Wednesday and recovered "incriminating documents".

The target was Dewan Housing Finance Limited (DHFL) and two brothers, Kapil and Dheeraj Wadhawan, who are already in custody and being investigated in several other cases of alleged fraud involving billions of dollars, reports said.

Without naming the firm, the CBI said it believes the company and its executives "cheated a consortium of banks... to the tune of 346.15 billion rupees" ($4.4 billion).

The so-called non-bank lender did so by "siphoning off" large business loans from banks into "shell companies and fictitious entities," the CBI said in a statement.

The CBI said separate audits found "multiple instances of diversion of funds by the accused for personal benefits and falsification of books of accounts to camouflage and conceal dubious transactions".

Neither the Wadhawan brothers nor DHFL's parent company Piramal -- which acquired the firm following insolvency proceedings last year -- have commented.

If confirmed it would surpass the $3 billion case registered against ABG Shipyard in February, India's biggest fraud to date.

That alleged theft by the Gujarat-based shipbuilder beats the $2 billion fugitive celebrity jeweller Nirav Modi was accused of cheating Indian banks out of in 2018.