The National Australia Bank board was made aware of an alleged fraud ring operating within the bank in western Sydney months before the bank reported it to the corporate watchdog, the banking royal commission has heard.

The commission heard on Wednesday that nearly 40 staff members were involved in the scheme to organise mortgages for people who would not otherwise have qualified for the loans, to pump up their sales figures.

Of the 2000-plus suspect loans drawn up by the group, more than $50 million were deemed to be potentially unserviceable by the bank, the commission heard.

NAB's "introducer" referral program used members of the public, including a gymnasium owner and a tailor, to help push its loan products, the commission heard. The gym owner, the tailor and two other "introducers" were together responsible for $139 million in loans.