Cygwin SSH not reading config file

Here is my answer based on the q&a we had in the comments.

By default, Cygwin will create a user home directory in /home/User, on a windows system, out home directory is somewhere else -

To fix this, open /etc/nsswitch.conf and edit in this line

db_home: windows

Close all Cygwin terminal sessions and relaunch. Now again echo $HOME and you should see that it should now be set to the windows %HOME%, and no longer use the one located in /home

edit

You may also need to remove

/etc/passwd
/etc/group

As this should now be deferred to windows.