Au Small Finance Bank Ltd. के अकाउंट के लिये नोट

Mar 31, 2025

ii) Qualitative disclosure on Liquidity Coverage Ratio (LCR):

To assess Bank''s resilience in liquidity stress scenario of 30 days with its high-quality liquid assets, Banks is computing Liquidity Coverage Ratio (LCR) as per RBI - Basel III Framework on Liquidity Standards. High Ratio signifies Bank has enough liquid assets which it can use to fulfil its liquidity obligations in acute stress scenario. Ratio to compute as below:

, ^ _ Stock of High Quality Liquid Assets (HQLA)

Net Cash Outflows over a 30 days period

Stock of High Quality Liquid Asset is total funds liquid assets could generate in stress scenario. Net Cash outflows is the difference as derived by multiplying the outstanding balances of various categories or types of liabilities by the outflow run-off rates and cash inflows are calculated by multiplying the outstanding balances of various categories of contractual receivables by the rates at which they are expected to flow in.

The Minimum LCR Requirement for Small Finance Banks (as per operating guidelines for Small Finance Banks RBI/2016-17/81 DBR.NBD.No.26/16.13.218/2016-17 dated Oct 06, 2016 & RBI circular RBI/2019-20/217 DOR.BP.BC.No.65/21.04.098/2019-20 dated Apr 17,2020) is 100%

The Bank has consistently maintained the LCR percentage well above the regulatory threshold limit. The average LCR for the quarter ended March 31, 2025 was 116.03% which is above the regulatory limit of 100%. For the quarter ended March 31, 2025 average HQLA stood at H27,811 Crores.

Asset Liability Committee (ALCO) of the Bank is the primary governing body for Liquidity Risk Management, Treasury is entrusted with the responsibility of liquidity management within the Bank under the guidance of the ALCO. ALM Risk unit independently measures, monitors & report Liquidity Risk as per regulatory & internal guidelines.

I n computing the above information, certain estimates and assumptions have been made by the Bank''s Management which have been relied upon by the auditors.

ii) Qualitative disclosure on Net Stable Funding Ratio (NSFR):

The Bank, as per the RBI guideline on NSFR dated May 17, 2018, is required to maintain the NSFR on an ongoing basis. The minimum NSFR requirement set out in the RBI guideline effective October 1, 2021, is 100%. The Basel Committee on Banking Supervision (BCBS) had introduced the Net Stable Funding Ratio (NSFR) to ensure resilience over a longer-term time horizon by requiring banks to fund their activities with more stable sources of funding. NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. "Available stable funding” (ASF) is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to one year. The amount of stable funding required ("Required stable funding”) (RSF) of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by that institution as well as those of its off-balance sheet (OBS) exposures.

The NSFR as on March 31, 2025 was at 111.25% (at 116.94% as on March 31, 2024).

In accordance with the Reserve Bank of India (RBI) guidelines under the New Capital Adequacy Framework (NCAF) (Basel II framework), Banks are required to make Pillar III disclosures. Further, under relevant instructions of Basel III framework, Banks are required to disclose Leverage Ratio and Net Stable Funding Ratio (NSFR).

These disclosures are / will be available on the Bank''s website at https://www.aubank.in/reports/ regulatory-disclosures under the section titled ''Regulatory Disclosures - Basel Framework''.

These disclosures have not been subjected to audit or review by the Joint Statutory Auditors.

c) Sale and Transfers to / from HTM Category

During the year ended March 31, 2025 and the previous year ended March 31, 2024 the Bank has not sold and transferred securities to or from HTM category exceeding 5% of the book value of investment held in HTM category at the beginning of the year. The 5% threshold referred to above does not include onetime transfer of securities to/from HTM category with the approval of Board of Directors permitted to be undertaken by banks as per extant RBI guidelines, sale of securities under pre-announced Open Market Operation (OMO) auction to the RBI and sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM, Repurchase of Government Securities by Government of India from banks under buyback / switch operations, Repurchase of State Development Loans by respective state governments under buyback / switch operations and Additional shifting of securities explicitly permitted by the Reserve Bank of India as the case may be.

f) Government Security Lending (GSL) transactions

In reference to the RBI Notification No: FMRD.DIRD.No.06/14.03.061/2023-2024 dated December 27, 2023 the disclosure related to Government securities lending and borrowing transactions undertaken Over-the-Counter markets. During the Financial Year 2024-25 and Previous Year 2023-24, the bank has not entered into any such type of transactions.

g) Disclosure for transitional adjustments

Following is the disclosure as per RBI circular on Master Direction- Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions), 2023'' dated September 12, 2023, for transitional adjustments.

In compliance with the RBI Investment Master Directions dated September 12, 2023, the Bank has implemented changes relating to classification, measurement and valuation of investments with effect from April 1, 2024. Consequently, the net fair value gain of H997.71 lakh (net of taxes) has been accounted for in General Reserve as per the transition provision in the aforesaid Directions.

In addition, the Bank has transferred balance in Investment Reserve amounting to H876.74 lakh on the date of the transition to General Reserve in compliance with these Directions.

Subsequent changes in fair value of performing investments under Available for Sale (AFS) and Fair Value Through Profit and Loss (''FVTPL'') (including sub category Held For Trading (''HFT'')) categories have been recognised through AFS reserve and Profit and Loss Account respectively.

c) Overseas assets, NPAs and revenue

The Bank does not have any overseas branches hence the disclosure regarding overseas assets, NPAs and revenue is not applicable (Previous Year : Nil).

d) Resolution of Stressed Assets - Revised Framework

The Bank is having Nil loan account for resolution of Stressed Assets (Revised Framework) as on March 31, 2025 (Previous year : Nil) as per RBI Circular RBI/2017-18/131 DBR. No. BP. BC.101/21.04.048/2017-18 and RBI/2018-19/203 DBR.No.BP.BC.45/21.04.048/2018-19 as amended.

e) Divergence in the asset classification and provisioning

In terms of the RBI circular no. //DOR.ACC.REC.No.74/21.04.018/2022-23 dated October 11, 2022, Banks are directed to make suitable disclosures, if either or both of the following conditions are satisfied:-

(a) the additional provisioning for NPAs assessed by RBI as part of its supervisory process, exceeds 5 per cent of the reported profit before provisions and contingencies for the reference period, and;

(b) the additional Gross NPAs identified by RBI as part of its supervisory process, exceed 5 per cent of the reported incremental Gross NPAs for the reference period.

RBI did not conduct the Annual Financial Inspection for FY-2023-2024 , No divergences reported by RBI.

g) Unhedged foreign currency exposure

The RBI, through its master direction dated October 11, 2022, had advised banks to create incremental provision on standard loans and advances to entities with unhedged foreign currency exposure (UFCE). The Bank assesses the UFCEs of the borrowers through its credit appraisal and internal ratings process. The Bank also undertakes reviews of such exposures through thematic reviews evaluating the impact of exchange rate fluctuations on the Bank''s portfolio on a yearly basis.

Incremental provisioning (over and above provision applicable for standard assets) is made in Bank''s Profit and Loss Account, on borrower counter parties having UFCE, depending on the likely loss / EBID ratio, in line with stipulations by RBI. Incremental capital is maintained in respect of borrower counter parties in the highest risk category, in line with stipulations by RBI. These requirements are given below:

The Bank held provision amounting to H1.42 crore on advances to entities with UFCE on March 31, 2025 (previous year: H2.04 crore). The Bank considered incremental risk weighted assets of H32.45 crore for the purpose of CRAR calculation in respect of borrower with UFCE as on March 31, 2025 (previous year: H 68.07 crore).

8 Derivatives

a) Forward rate agreement/ Interest rate swap

The bank has not entered into any Forward Rate Agreement or Interest rate swaps during the year ended March 31, 2025 and March 31, 2024.

b) Exchange traded interest rate derivatives

The bank has not entered into any exchange traded interest rate derivatives during the year ended March 31, 2025 and March 31, 2024.

c) Disclosures on risk exposure in derivatives Qualitative Disclosure

The Bank deals in foreign exchange Forward contracts which is governed by the board approved Treasury Forex Risk Management policy. Foreign exchange forward contract involves the exchange of currencies at a predetermined price on a future date. These instruments are carried at fair value, determined based on either FEDAI rates or market quotations.The policy lays down various limits to measure and monitors risk of its Forex portfolio using such risk metrics as Value at Risk (VaR), stop loss limits, AGL/IGL/NOOP and other relevant limits. Bank monitors its risk exposures on daily basis and the relevant reporting is done to ALCO on monthly basis and to the RMCB on quarterly basis.

Quantitative Disclosures

The bank has not entered into Exchange traded and OTC options, Cross currency interest rate swaps and Currency futures derivative instruments during the year ended March 31, 2025 and March 31, 2024.

d) Credit default swaps

The bank has not transacted in credit default swaps during the year ended March 31, 2025 and March 31, 2024.

13. Penalties imposed by the RBI

During the year ended March 31, 2025, in terms of the provisions contained in the RBI circular Ref. DCM (RMMT) No.S153/11.01.01/2021-22 dated August 10, 2021 on "Monitoring of Availability of Cash in ATMs” and the subsequent addendum thereto, RBI has imposed penalties of H40,000 (4 instances) on the Bank on account of Cash out in an ATM for more than 10 hours in a month (previous year : H10,000) and RBI has imposed penalty of H5,000 (1 instance) on the Bank on account of deficiencies observed during incognito visit at Bank Branch.

14. Disclosures on remuneration Qualitative Disclosures:

(a) information relating to the composition and mandate of the Nomination and Remuneration Committee:

In compliance of Companies Act 2013, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, Banking Regulation Act 1949 and other guidelines as applicable, the Board of Directors has constituted Nomination and Remuneration Committee (NRC) to oversee the framing, review, and implementation of the Compensation Policy of the Bank. This Committee works in coordination with Risk Management Committee & Audit Committee of the Board, for achieving effective alignment between risk and remuneration.

As on March 31, 2025, the Nomination and Remuneration Committee consist of Non-Executive (Independent) Directors and the said composition is in line with the applicable guidelines.

The Composition of NRC committee is as follows:

• Mr. M S Sriram - Independent Director (Chairman)

• Mr. H.R. Khan - Independent Director

• Mr. Pushpinder Singh - Independent Director

• Ms. Malini Thadani - Independent Director

The roles and responsibilities of the Nomination and Remuneration Committee (NRC) are as under:

(i) Assist the Board in formulation and implementation of compensation policy and lay down the criteria for remuneration of Directors, Key Management Personnel (KMPs) and Senior Management Personnel (SMPs), Material Risk Takers (MRTs), Control Function Staff and other employees.

(ii) Take inputs from the Risk Management Committee of the Board to ensure balance between remuneration and risks as required. The Committee shall ensure that the mix of Fixed and Variable forms of compensation is consistent with risk alignment and objectives of the Bank.

(iii) Lay down the comprehensive criteria for assessment in terms of qualifications, positive attributes, independence, professional experience, track record, integrity and considering other parameters for appointment of Directors, KMPs and SMPs.

(iv) Develop policies and lay down criteria for appointment/removal/reappointment of the Directors on the Board capturing the statutory and regulatory requirements.

(v) Assist in defining the performance evaluation criteria for Directors, KMPs, SMPs, MRTs and Control Functions and ensure that relationship of remuneration to performance is clear and meets appropriate performance benchmarks.

(vi) Ensure that the compensation policy formulated for remuneration of Directors, KMPs and SMPs is reasonable sufficient to attract, retain and motivate quality talent required to run the Bank.

(vii) Ensure that the compensation for Directors, KMPs, SMPs is a mix of fixed and variable pay and such compensation reflects short and long-term performance objectives appropriate to the working and the goals of the Bank.

(viii) Ensure that appropriate procedures are in place to assess Board effectiveness and also provide the suggestions on governance to the Board of Directors.

(ix) Review and oversee the Employee Benefits program of the Bank including deferred benefits and retirement plans.

(b) information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy:

The Bank has formulated a Compensation Policy in alignment with the RBI guidelines, covering all components of compensation including fixed pay, perquisites, performance bonus, guaranteed bonus (joining / sign-on bonus), share-linked instruments such as Employee Stock Option Plan (ESOPs), retirement benefits such as Provident Fund and Gratuity, and below are the key features and objectives of the policy :

• Establish standards on compensation/ remuneration including fixed and variable pay covering share-linked instruments, which are in alignment with the applicable rules and regulations and is based on the trends and practices of remuneration prevailing in the industry.

• Retain, motivate, and promote talent and to ensure long term sustainability of talented Director, KMP, SMP, MRT, Control Function Staff and other employees as applicable.

• Define internal guidelines for payment of other reimbursement to the Directors and KMPs.

• Institutionalize a mechanism for the appointment/ removal/ resignation/evaluation of performance of Directors.

• Perform such functions as are required to be performed by the Nomination and Remuneration committee under the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, including the following:

(a) administering the ESOP plans;

(b) determining the eligibility of employees to participate under the ESOP plans;

(c) granting options to eligible employees and determining the date of grant;

(d) determining the number of options to be granted to an employee;

(e) determining the exercise price under the ESOP plans and

• Ensure compliance with applicable laws, rules, and regulations as well as ''Fit and Proper criteria'' of directors before their appointment.

(c) Description of the ways in which current and future risks are taken into account in the remuneration processes. it should include the nature and type of the key measures used to take account of these risks:

The Key parameters taken into account for the structuring of remuneration covering fixed pay and variable pay are mentioned below:

(i) Risk factors that are significant to the Banking operations of the Bank are taken into consideration in devising the remuneration structure and it is symmetric to the risk outcomes.

(ii) Compensation payout is scheduled in manner where sensitivity to time horizon of risks is taken into consideration in the review process.

(iii) Individual performance is reviewed on the basis of Key Responsibility Areas (KRAs) and the review is carried out under the Annual Performance Review (APR) of the Bank.

(iv) Industry Benchmarking, inflation and increase of cost of living.

I n addition, it includes a ''malus'' and ''clawback'' option to take care of any disciplinary issue or future drop in performance of individual/ business/ Bank.

(d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration:

I ndividual performances are assessed in line with business/ individual delivery of the Key responsibility Areas (KRAs), top priorities of business, budgets, and overall contribution to the organisation etc.

In linking the performance and level of remuneration, the job roles, levels, business budgets, risk factors, achievement of individual KRAs are taken into consideration for taking decision in this regard.

(e) A discussion of the Bank’s policy on deferral and vesting of variable remuneration and a discussion of the Bank’s policy and criteria for adjusting deferred remuneration before vesting and after vesting:

I n compliance of RBI Guidelines on Compensation of Whole Time Directors/ Chief Executive Officers/ Material Risk Takers and Control Function staff dated November 04, 2019, the Bank has formulated Compensation Policy that covers all aspects of the compensation structure such as Fixed pay, Variable Pay and Deferral pay.

The Variable Pay of senior executives, including WTDs, and other employees who are MRTs shall be deferred over the period so that compensation is adjusted for all types of risks that organisation may be exposed to.

The deferral period shall be a minimum of three years. This would be applicable for both the cash and noncash components of the variable pay :

a) A minimum of 60% of the total variable pay must invariably be under deferral arrangements.

b) I f cash component is part of variable pay, at least 50% of the cash bonus shall also be deferred and where the cash component of variable pay is under H25 lakhs in a year, deferral requirements shall not be applicable.

c) Deferred remuneration should either vest fully at the end of the deferral period or be spread out over the course of the deferral period. The first such vesting should be not before one year from the commencement of the deferral period and shall not take place more frequently than on a yearly basis.

d) The vesting should be no faster than on a pro rata basis.

The adjustment of Variable Pay before and after the vesting shall be considered in the event of subdued or negative financial performance of the bank and/or the relevant line of business in any year and the malus/clawback arrangements shall be invoked subject to due assessment.

(f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilizes and the rationale for using these different forms:

The Variable pay consist of Cash, Share linked Instrument and same is decided considering risk factors, job profile, level of performance and industry norms to ensure that employee morale is high and to promote consistency in performance over the time horizon.

The breakup of variable remuneration is the follows:

Variable Pay: Variable pay compensation is paid depending upon the performance of the Employees against set key responsibility areas (KRAs) and it is ensured that there is a proper balance between fixed pay and variable pay while devising the remuneration structure.

(a) A substantial proportion of compensation i.e., at least 50%, should be variable and paid on the basis of individual, business performance & other parameters and this shall not be applicable on risk control function staff.

(b) In case variable pay is:

• Up to 200% of the fixed pay, a minimum of 50% of the variable pay should be via noncash instruments.

• Above 200%, a minimum of 67% of the variable pay should be via non-cash instruments.

• shall be limited to a maximum of 300% of the fixed pay; (for the relative performance measurement period).

(c ) In the event that an executive is barred by statute or regulation from grant of share-linked instruments, his/her variable pay will be capped at 150% of the fixed pay but shall not be less than 50% of the fixed pay.

(d) The deterioration in the financial performance of the Bank shall generally lead to a contraction in the total amount of variable compensation, which can even be reduced to zero and the proportion of variable pay shall be higher depending on the higher responsibility at higher level.

Share-linked Instruments: Share-linked Instruments consisting of ESOPs or other linked instruments which shall be forming part of variable pay.

Definitions of certain items in Business ratios / information:

1. Working funds to be reckoned as monthly average of total assets (excluding accumulated losses, if any) as reported to Reserve Bank of India in Form X under Section 27 of the Banking Regulation Act, 1949.

2. Operating profit = (Interest Income Other Income - Interest expenses - Operating expenses).

3. For the current year ROA is computed based on monthly average of total assets as reported to Reserve Bank of India in Form X. For the previous year ROA is computed based on Average of Total Assets.

4. "Business” is the total of monthly average of net advances and deposits (net of inter-bank deposits).

5. Productivity ratios (Business per employee and Profit per employee) are based on monthly average of employees count.

6. Net Interest Margin is Net Interest Income/ Average Earning Assets. Net Interest Income= Interest Income -Interest Expense and Average Earning Assets is yearly average of total of net advances, invetments, balance with banks and money at call and short notice and Balances with Reserve Bank of India in Other Account.

7. Cost of Deposit is calculated based on weighted average interest rate of deposits.

The Bank has compiled the data for the purpose of this disclosure from its internal MIS system/reports and has been relied upon by the auditors.

f) Implementation of IFRS converged Indian Accounting Standards (Ind AS)

As per the RBI circular RBI/2015-16/315 DBR.BP.BC. No.76/21.07.001/2015-16 dated February 11, 2016 Implementation of Indian Accounting Standards (Ind AS), The banks are advised to follow the Indian Accounting Standards as notified under the Companies (Indian Accounting Standards) Rules, 2015, subject to any guideline or direction issued by the the Reserve Bank in this regard. The Banks in India currently prepare their financial statements as per the guidelines issued by the RBI, the Accounting Standards notified under section 133 of the Companies Act, 2013 and generally accepted accounting principles in India (Indian GAAP). In January 2016, the Ministry of Corporate Affairs issued the roadmap for implementation of new Indian Accounting Standards (Ind AS), which were based on convergence with the

International Financial Reporting Standards (IFRS), for scheduled commercial banks, insurance companies and non-banking financial companies (NBFCs). In March 2019, RBI deferred the implementation of Ind AS for banks till further notice as the recommended legislative amendments were under consideration of Government of India. The Bank had undertaken preliminary diagnostic analysis of the GAAP differences between Indian GAAP vis-a-vis Ind AS and shall proceed for ensuring the compliance as per applicable requirements and directions in this regard.

In FY 2023, Reserve Bank of India, through its discussion paper on "Introduction of Expected Credit Loss framework for provisioning by banks” has proposed to adopt an expected credit loss framework based on the approach as per Indian Accounting Standard (Ind AS) 109, supplemented by regulatory backstops wherever necessary. Further, in FY2024, the Reserve Bank of India (RBI) issued a master direction on classification, valuation and operation of investment portfolio of commercial banks (Directions), 2023, which became effective from April 1, 2024. The revised master direction brings the classification and accounting of investments closer to Ind AS. The Bank has implemented the required changes as per the master direction with effect from April 1, 2024.

3 Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the bank

During the year ended March 31, 2025 and March 31, 2024, the Bank has not exceeded the prudential credit exposure limit as prescribed by the Reserve Bank of India in respect of Single Borrower and Group Borrowers.

7 Small and micro industries

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported case of delays in payments to micro and small enterprises or of interest payments due to delays in such payments during the year ended March 31, 2025 and March 31, 2024. The above is based on the information available with the Bank which has been relied upon by the auditors.

8 Exceptional Items

The expenses amounting to H76.80 Crore, including stamp duty, has been incurred / provided for during the previous year ended March 31, 2024 in relation to the acquisition and merger of Fincare Small Finance Bank Limited. Considering the size, nature or incidence of these expenses, the same has been disclosed as exceptional item.

9 Proposed dividend

The Board of Directors at their meeting held on April 22, 2025, proposed a dividend of H1 per share at 10% of face value for the year ended March 31, 2025 (previous year : H1 per share at 10% of face value) subject to the approval of the shareholders at the ensuing Annual General Meeting. The effect of the proposed dividend has been considered in determination of Capital adequacy ratio (CAR) as at March 31, 2025 and March 31, 2024 respectively.

10 Disclosure under Rule 11 (e) of the Companies (Audit and Auditors) Rules, 2014

As part of the normal banking business, the Bank grants loans and advances to its borrowers with permission to lend/invest or provide guarantee/security in other entities identified by such borrowers or on the basis of the basis of security/guarantee provided by the co-borrower. Similarly, the Bank may accept funds from its customers, who may instruct the Bank to lend/invest/provide guarantee or security or the like against such deposit in other entities identified by such customers. These transactions are part of Bank''s normal banking business, which is conducted after exercising proper due diligence including adherence to "Know Your Customer” guidelines.

Other than the nature of transactions described above:

• No funds have been advanced or loaned or invested by the Bank to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries”) with the understanding that the Intermediary shall lend or invest in party identified by or on behalf of the Bank (Ultimate Beneficiaries).

• The Bank has not received any fund from any party(s), including foreign entities (Funding Party) with the understanding that the Bank shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Bank ("Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

11 Micro, Small and Medium Enterprises (MSME) sector - Restructuring of Advances

The Bank has restructured the account as per RBI Circular DBR.No.BP.BC.100/21.04.048/2017-18 dated February 07, 2018, DBR.No.BP.BC.108/21.04.048/2017-18 dated June 06, 2018, DBR.No.BP. BC.18/21.04.048/2018-19 dated January 01, 2019, DOR.No.BP.BC.34/21.04.048/2019-20 dated February 11, 2020 and DOR.No.BP.BC/4/21.04.048/2020-21 dated August 06, 2020.

12 Disclosures on Change in Ownership of Projects Under Implementation:

The Bank does not have any account which are currently under the scheme of Change in Ownership of Projects Under Implementation as on March 31, 2025 (Previous year: Nil).

13 Inter-bank Participation with risk sharing:

The outstanding amount of participation issued by the Bank is reduced from the advances as per regulatory guidelines. No outstanding participation amount as at March 31, 2025 and March 31, 2024.

14 Investor education and protection fund

There is no amount required to be transferred to Investor Education and Protection Fund by the Bank (Previous year: Nil).

17 The Code on Social Security, 2020

The Code on Social Security, 2020 (''Code'') relating to employee benefits during employment and postemployment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified and the final rules/interpretation have not yet been issued. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.

Part B: Geographic segments

The business of the Bank is in India only. Accordingly, geographical segment is not applicable.

* Digital Banking Segment reported as a sub-segment of Retail Banking Segment is related to Digital Banking Units (DBUs) of the bank. As at March 31, 2025, the Bank has two DBU''s. These DBUs are part of the Bank consequent to the amalgamation of erstwhile Fincare Small Finance Bank Limited from April 1, 2024.

Business Segments have been identified and reported taking into account the target customer profile, the nature of products and services, the differing risks and returns, the organisation structure, the internal business reporting system and guidelines prescribed by the RBI and in compliance with the Accounting Standard 17 - "Segment Reporting”. The RBI vide its circular dated April 7, 2022 on establishment of Digital Banking Units (DBUs), has prescribed reporting of Digital Banking Segment as a sub-segment of Retail Banking Segment. The business operations of the Bank are in India and for the purpose of segment reporting as per Accounting Standard-17 (Segment reporting) the bank is considered to operate only in domestic segment.

(b) Defined contribution plans Provident fund

The Bank makes Provident Fund contributions to a defined contribution retirement benefit plans for qualifying employees. Under the schemes, the bank is required to contribute a specified percentage of the payroll costs to the Provident Fund Commissioner to fund the benefits.

The Bank recognized H121.04 Crore (previous year H75.90 Crore) for provident fund contributions in the Profit and Loss Account. The contributions payable to these plans by the Bank are at rates specified in the rules of the schemes.

(c) Compensated absences

The Bank has provided for compensatory leaves which can be availed and not encashed as per policy of the Bank as present value obligation of the benefit at related current service cost measured using the Projected Unit Credit Method on the basis of an actuarial valuation. The Bank has accordingly booked H0.21 Crore (previous year booked H1.01 Crore) in the books of accounts for the year.

26 Audit Trail

The Bank has used certain accounting software(s) for maintaining its books of account, which has a feature of recording the audit trail (edit log) facility, except that audit trail feature was not enabled throughout the year for certain relevant masters in respect of one accounting software at the application level.

Further, to the extent enabled, the audit trail feature has been operated for the relevant transactions recorded in the accounting software(s). Also, we did not come across any instance of the audit trail feature being tampered with. Additionally, the audit trail feature of prior year(s) has been preserved by the Company as per the statutory requirements for record retention to the extent it was enabled and recorded in respective years. The Bank has established and maintained an adequate internal control framework and based on its assessment, believes that this was effective as of March 31, 2025.

27 Comparative figures

The financial statements for the year ended March 31, 2025 include the operations of erstwhile Fincare Small Finance Bank for the period from April 01, 2024 onwards and hence the figures for the year are not comparable with those of the previous year.

Figures for the previous year have been regrouped and reclassified wherever necessary to conform to the current year''s presentation.

---

Mar 31, 2024

A. Disclosures as Laid Down by RBI Circulars 1 Regulatory Capital

a) Composition of Regulatory Capital

The Capital adequacy ratio (“CAR”) has been computed as per operating guideline for Small Finance Bank in accordance with RBI Circular No. RBI/2016-17/81DBR. NBD.No.26/16.13.218/2016-17 dated October 6, 2016.

The Bank has followed Basel II standardised approach for credit risk in accordance with the Operating Guideline issued by the Reserve Bank of India for Small Finance banks. Further, the RBI vide its circular No. DBR.NBD.No. 4502/16.13.218/2017-18 dated November 8, 2017 has provided an exemption to all small Finance banks whereby no separate capital charge is prescribed for market risk and operational risk.

The total Capital Adequacy ratio of the Bank as at March 31, 2024 is 20.06% (previous year: 23.59%) against the regulatory requirement of 15.00% as prescribed by RBI.

No Capital Conservation Buffer and Counter - Cyclical Capital Buffer is applicable on Small Finance Bank (SFB) as per operating guidelines issued on SFB by RBI.

*During the year ended March 31, 2024, the Bank allotted 24,17,396 equity shares (previous year: 22,69,033 equity shares) aggregating to paid up share capital of H 2.42 Crore (previous year: H 2.27 Crore). Further the reserves of the Bank have increased by H 81.42 Crore (previous year: H 67.10 Crore) in respect of stock options exercised.

During the year ended March 31, 2023, the Bank has issued equity shares 3,44,82,758 equity shares of a face value H 10 each at a price of H 580 per equity share including a premium of H 570 per equity share aggregating to H 2,000 Crore pursuant to Qualified Institutional Placement.

b) Draw down from reserves

There has been no draw down from reserves during the year ended March 31, 2024 and March 31, 2023 other than those disclosed under Schedule 2.

ii) Qualitative disclosure on Liquidity Coverage Ratio (LCR):

To assess Bank''s resilience in liquidity stress scenario of 30 days with its high-quality liquid assets, Banks is computing Liquidity Coverage Ratio (LCR) as per RBI - Basel III Framework on Liquidity Standards. High Ratio signifies Bank has enough liquid assets which it can use to fulfil its liquidity obligations in acute stress scenario. Ratio to compute as below:

LCR = Stock of High Quality Liquid Assets (HQLA)

Net Cash Outflows over a 30 days period

Stock of High Quality Liquid Asset is total funds liquid assets could generate in stress scenario. Net Cash outflows is the difference as derived by multiplying the outstanding balances of various categories or types of liabilities by the outflow run-off rates and cash inflows are calculated by multiplying the outstanding balances of various categories of contractual receivables by the rates at which they are expected to flow in.

The Minimum LCR Requirement for Small Finance Banks (as per operating guidelines for Small Finance Banks RBI/2016-17/81 DBR.NBD.No.26/16.13.218/2016-17 dated Oct 06, 2016 & RBI circular RBI/2019-20/217 DOR.BP.BC.No.65/21.04.098/2019-20 dated Apr 17,2020) is 100%

The Bank has consistently maintained the LCR percentage well above the regulatory threshold limit. The average LCR for the quarter ended March 31, 2024 was 117% which is above the regulatory limit of 100%. For the quarter ended March 31, 2024 average HQLA stood at H 20,311 Crores.

Asset Liability Committee (ALCO) of the Bank is the primary governing body for Liquidity Risk Management, Treasury is entrusted with the responsibility of liquidity management within the Bank under the guidance of the ALCO. ALM Risk unit independently measures, monitors & report Liquidity Risk as per regulatory & internal guidelines.

In computing the above information, certain estimates and assumptions have been made by the Bank''s Management which have been relied upon by the auditors.

ii) Qualitative disclosure on Net Stable Funding Ratio (NSFR):

The Bank, as per the RBI guideline on NSFR dated May 17, 2018, is required to maintain the NSFR on an ongoing basis. The minimum NSFR requirement set out in the RBI guideline effective October 1, 2021, is 100%. The Basel Committee on Banking Supervision (BCBS) had introduced the Net Stable Funding Ratio (NSFR) to ensure resilience over a longer-term time horizon by requiring banks to fund their activities with more stable sources of funding. NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. “Available stable funding” (ASF) is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to one year. The amount of stable funding required (“Required stable funding”) (RSF) of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by that institution as well as those of its off-balance sheet (OBS) exposures.

The NSFR as on March 31, 2024 was at 116.94% (at 125.68% as on March 31, 2023).

In computing the above information, certain estimates and assumptions have been made by the Bank''s Management which have been relied upon by the auditors.

c) Sale and Transfers to/from HTM Category

During the year ended March 31, 2024 and the previous year ended March 31, 2023 the Bank has not sold and transferred securities to or from HTM category exceeding 5% of the book value of investment held in HTM category at the beginning of the year. The 5% threshold referred to above does not include onetime transfer of securities to/from HTM category with the approval of Board of Directors permitted to be undertaken by banks as per extant RBI guidelines, sale of securities under pre-announced Open Market Operation (OMO) auction to the RBI and sale of securities or transfer to AFS/HFT consequent to the reduction of ceiling on SLR securities under HTM, Repurchase of Government Securities by Government of India from banks under buyback/switch operations, Repurchase of State Development Loans by respective state governments under buyback/switch operations and Additional shifting of securities explicitly permitted by the Reserve Bank of India as the case may be.

d) Non-SLR investment portfolio i) Non-performing non-SLR investments

The Bank does not have any Non performing Non-SLR investment as on March 31, 2024 and March 31, 2023.

f) Government Security Lending (GSL) transactions

In reference to the RBI Notification No: FMRD.DIRD.No.06/14.03.061/2023-2024 dated December 27, 2023 the disclosure related to Government securities lending and borrowing transactions undertaken Over-the-Counter markets. During the FY 2023-24, the bank has not entered into any such type of transactions.

c) Overseas assets, NPAs and revenue

The Bank does not have any overseas branches and hence the disclosure regarding overseas assets, NPAs and revenue is not applicable (Previous Year: Nil).

d) Resolution of Stressed Assets - Revised Framework

The Bank is having Nil loan account for resolution of Stressed Assets (Revised Framework) as on March 31, 2024 (Previous year: Nil) as per RBI Circular RBI/2017-18/131DBR.No.BP.BC.101/21.04.048/2017-18 and RBI/2018-19/203 DBR.No.BP.BC.45/21.04.048/2018-19 as amended.

e) Divergence in the asset classification and provisioning

RBI vide its Master Direction Ref. RBI/DOR/2021-22/83 DOR.ACC.REC.No.45/21.04.018/2021-22 dated August 30, 2021 and various amendments thereto (latest updated on February 20, 2023), has directed banks to make suitable disclosures, if either or both of the following conditions are satisfied:-

(a) the additional provisioning for NPAs assessed by RBI as part of its supervisory process, exceeds 5 per cent of the reported profit before provisions and contingencies for the reference period, and

(b) the additional Gross NPAs identified by RBI as part of its supervisory process, exceed 5 per cent of the reported incremental Gross NPAs for the reference period.

The Bank was subjected to Annual Financial Inspection (AFI) by the RBI during the financial year 2023-24 and the Inspection and Risk Assessment Report (IRAR) as of March 31, 2023 was issued by RBI. No divergence in the asset classification and provisioning was identified and reported in IRAR.

c) Details of risk category wise country exposure

The Bank does not have any country risk exposure other than “home country exposures” and accordingly, no provision is maintained with regard to country risk exposure (previous year Nil).

e) Details of factoring exposure:

The factoring exposure of the Bank as at March 31, 2024 is Nil.(Previous year: Nil).

f) Intra-Group exposure

The Bank does not have any exposure (advances/investments) within the group (Previous year: Nil).

g) Unhedged foreign currency exposure

The RBI, through its master direction dated October 11, 2022, had advised banks to create incremental provision on standard loans and advances to entities with unhedged foreign currency exposure (UFCE). The Bank assesses the UFCEs of the borrowers through its credit appraisal and internal ratings process. The Bank also undertakes reviews of such exposures through thematic reviews evaluating the impact of exchange rate fluctuations on the Bank''s portfolio on a yearly basis.

Incremental provisioning (over and above provision applicable for standard assets) is made in Bank''s Profit and Loss Account, on borrower counter parties having UFCE, depending on the likely loss/EBID ratio, in line with stipulations by RBI. Incremental capital is maintained in respect of borrower counter parties in the highest risk category, in line with stipulations by RBI. These requirements are given below:

The Bank held provision amounting to H 2.04 Crore on advances to entities with UFCE on March 31, 2024 (previous year: H 1.97 Crore). The Bank considered incremental risk weighted assets of H 68.07 Crore for the purpose of CRAR calculation in respect of borrower with UFCE as on March 31, 2024 (previous year: H 40.18 Crore).

7 Derivatives

a) Forward rate agreement/Interest rate swap

The bank has not entered into any Forward Rate Agreement or Interest rate swaps during the year ended March 31, 2024 and March 31, 2023.

b) Exchange traded interest rate derivatives

The bank has not entered into any exchange traded interest rate derivatives during the year ended March 31, 2024 and March 31, 2023.

c) Disclosures on risk exposure in derivatives

The bank has not entered into any derivative instruments for trading/speculative purposes either in Foreign Exchange or domestic treasury operations during the year ended March 31, 2024 and March 31, 2023.

d) Credit default swaps

The bank has not transacted in credit default swaps during the year ended March 31, 2024 and March 31, 2023.

12 Penalties imposed by the RBI

During the year ended March 31, 2024 in terms of the provisions contained in the RBI circular Ref. DCM (RMMT) No.S153/11.01.01/2021-22 dated August 10, 2021 on “Monitoring of Availability of Cash in ATMs” and the subsequent addendum thereto, RBI has imposed penalties of H 0.001 Crore on the Bank on account of Cash out in an ATM for more than 10 hours in a month (previous year: H 0.048 Crore).

13 Disclosures on remuneration Qualitative Disclosures:

(a) Information relating to the composition and mandate of the Nomination and Remuneration Committee:

In compliance of Companies Act, 2013, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, Banking Regulation Act, 1949 and other guidelines as applicable, the Board of Directors has constituted Nomination and Remuneration Committee (NRC) to oversee the framing, review, and implementation of the Compensation Policy of the Bank. This Committee works in coordination with Risk Management Committee & Audit Committee of the Board, for achieving effective alignment between risk and remuneration.

As on March 31, 2024, the Nomination and Remuneration Committee consist of Non-Executive (Independent) Directors and the said composition is in line with the applicable guidelines.

The Composition of NRC committee is as follows:

• Mr. M S Sriram - Independent Director (Chairman)

• Mr. H. R. Khan - Independent Director

• Mr. Pushpinder Singh - Independent Director

• Ms. Malini Thadani - Independent Director

The roles and responsibilities of the Nomination and Remuneration Committee (NRC) are as under:

(i) Assist the Board in formulation and implementation of compensation policy and lay down the criteria for remuneration of Directors, Key Management Personnel (KMPs) and Senior Management Personnel (SMPs), Material Risk Takers (MRTs), Control Function Staff and other employees.

(ii) Take inputs from the Risk Management Committee of the Board to ensure balance between remuneration and risks as required. The Committee shall ensure that the mix of Fixed and Variable forms of compensation is consistent with risk alignment and objectives of the Bank.

(iii) Lay down the comprehensive criteria for assessment in terms of qualifications, positive attributes, independence, professional experience, track record, integrity and considering other parameters for appointment of Directors, KMPs and SMPs.

(iv) Develop policies and lay down criteria for appointment/ removal/ reappointment of the Directors on the Board capturing the statutory and regulatory requirements.

(v) Assist in defining the performance evaluation criteria for Directors, KMPs, SMPs, MRTs and Control Functions and ensure that relationship of remuneration to performance is clear and meets appropriate performance benchmarks.

(vi) Ensure that the compensation policy formulated for remuneration of Directors, KMPs and SMPs is reasonable sufficient to attract, retain and motivate quality talent required to run the Bank.

(vii) Ensure that the compensation for Directors, KMPs, SMPs is a mix of fixed and variable pay and such compensation reflects short and long-term performance objectives appropriate to the working and the goals of the Bank.

(viii) Ensure that appropriate procedures are in place to assess Board effectiveness and also provide the suggestions on governance to the Board of Directors.

(ix) Review and oversee the Employee Benefits program of the Bank including deferred benefits and retirement plans.

(b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy:

The Bank has formulated a Compensation Policy in alignment with the RBI guidelines, covering all components of compensation including fixed pay, perquisites, performance bonus, guaranteed bonus (joining/sign-on bonus), share-linked instruments such as Employee Stock Option Plan (ESOPs), retirement benefits such as Provident Fund and Gratuity, and below are the key features and objectives of the policy:

• Establish standards on compensation/remuneration including fixed and variable pay covering share-linked instruments, which are in alignment with the applicable rules and regulations and is based on the trends and practices of remuneration prevailing in the industry.

• Retain, motivate, and promote talent and to ensure long term sustainability of talented Director, KMP, SMP, MRT, Control Function Staff and other employees as applicable.

• Define internal guidelines for payment of other reimbursement to the Directors and KMPs.

• Institutionalise a mechanism for the appointment/ removal/ resignation/ evaluation of performance of Directors.

• Perform such functions as are required to be performed by the Nomination and Remuneration committee under the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, including the following:

(a) administering the ESOP plans;

(b) determining the eligibility of employees to participate under the ESOP plans;

(c) granting options to eligible employees and determining the date of grant;

(d) determining the number of options to be granted to an employee;

(e) determining the exercise price under the ESOP plans and

• Ensure compliance with applicable laws, rules, and regulations as well as ''Fit and Proper criteria'' of directors before their appointment.

(c) Description of the ways in which current and future risks are taken into account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks:

The Key parameters taken into account for the structuring of remuneration covering fixed pay and variable pay are mentioned below:

(i) Risk factors that are significant to the Banking operations of the Bank are taken into consideration in devising the remuneration structure and it is symmetric to the risk outcomes.

(ii) Compensation payout is scheduled in manner where sensitivity to time horizon of risks is taken into consideration in the review process.

(iii) Individual performance is reviewed on the basis of Key Responsibility Areas (KRAs) and the review is carried out under the Annual Performance Review (APR) of the Bank.

(iv) Industry Benchmarking, inflation and increase of cost of living.

In addition, it includes a ''malus'' and ''clawback'' option to take care of any disciplinary issue or future drop in performance of individual/ business/ Bank.

(d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration:

Individual performances are assessed in line with business/individual delivery of the Key responsibility Areas (KRAs), top priorities of business, budgets, and overall contribution to the organisation etc.

In linking the performance and level of remuneration, the job roles, levels, business budgets, risk factors, achievement of individual KRAs are taken into consideration for taking decision in this regard.

(e) A discussion of the Bank’s policy on deferral and vesting of variable remuneration and a discussion of the Bank’s policy and criteria for adjusting deferred remuneration before vesting and after vesting:

In compliance of RBI Guidelines on Compensation of Whole Time Directors/ Chief Executive Officers/ Material Risk Takers and Control Function staff dated November 04, 2019, the Bank has formulated Compensation Policy that covers all aspects of the compensation structure such as Fixed pay, Variable Pay and Deferral pay.

The Variable Pay of senior executives, including WTDs, and other employees who are MRTs shall be deferred over the period so that compensation is adjusted for all types of risks that organisation may be exposed to.

The deferral period shall be a minimum of three years. This would be applicable for both the cash and non-cash components of the variable pay:

a) A minimum of 60% of the total variable pay must invariably be under deferral arrangements.

b) If cash component is part of variable pay, at least 50% of the cash bonus shall also be deferred and where the cash component of variable pay is under H 25 lakhs in a year, deferral requirements shall not be applicable.

c) Deferred remuneration should either vest fully at the end of the deferral period or be spread out over the course of the deferral period. The first such vesting should be not before one year from the commencement of the deferral period and shall not take place more frequently than on a yearly basis.

d) The vesting should be no faster than on a pro rata basis.

The adjustment of Variable Pay before and after the vesting shall be considered in the event of subdued or negative financial performance of the bank and/or the relevant line of business in any year and the malus/clawback arrangements shall be invoked subject to due assessment.

(f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilises and the rationale for using these different forms:

The Variable pay consist of Cash, Share linked Instrument and same is decided considering risk factors, job profile, level of performance and industry norms to ensure that employee morale is high and to promote consistency in performance over the time horizon.

The breakup of variable remuneration is the follows:

Variable Pay: Variable pay compensation is paid depending upon the performance of the Employees against set key responsibility areas (KRAs) and it is ensured that there is a proper balance between fixed pay and variable pay while devising the remuneration structure.

(a) A substantial proportion of compensation i.e., at least 50%, should be variable and paid on the basis of individual, business performance & other parameters and this shall not be applicable on risk control function staff.

(b) In case variable pay is:

• Up to 200% of the fixed pay, a minimum of 50% of the variable pay should be via non-cash instruments.

• Above 200%, a minimum of 67% of the variable pay should be via non-cash instruments.

• shall be limited to a maximum of 300% of the fixed pay; (for the relative performance measurement period).

(c) In the event that an executive is barred by statute or regulation from grant of share-linked instruments, his/her variable pay will be capped at 150% of the fixed pay but shall not be less than 50% of the fixed pay.

(d) The deterioration in the financial performance of the Bank shall generally lead to a contraction in the total amount of variable compensation, which can even be reduced to zero and the proportion of variable pay shall be higher depending on the higher responsibility at higher level.

Share-linked Instruments: Share-linked Instruments consisting of ESOPs or other linked instruments which shall be forming part of variable pay.

Definitions of certain items in Business ratios/information:

1. Working funds to be reckoned as monthly average of total assets (excluding accumulated losses, if any) as reported to Reserve Bank of India in Form X under Section 27 of the Banking Regulation Act, 1949.

2. Operating profit = (Interest Income Other Income - Interest expenses - Operating expenses).

3. Return on Assets has been calculated on yearly average of total assets.

4. “Business” is the total of monthly average of net advances and deposits (net of inter-bank deposits).

5. Productivity ratios (Business per employee and Profit per employee) are based on monthly average of employees count.

6. Net Interest Margin is Net Interest Income/Average Earning Assets. Net Interest Income = Interest Income - Interest Expense and Average Earning Assets is yearly average of total of net advances, invetments, balance with banks and money at call and short notice and Balances with Reserve Bank of India in Other Account.

7. Cost of Deposit is calculated based on weighted average interest rate of deposits.

The Bank has compiled the data for the purpose of this disclosure from its internal MIS system/reports and has been relied upon by the auditors.

c) Marketing and distribution

The Bank does not received any fees/remuneration in respect of Marketing and Distribution function (excluding bancassurance business) during the year ended March 31, 2024 (Previous year: Nil).

f) Implementation of IFRS converged Indian Accounting Standards (Ind AS)

As per the RBI circular RBI/2015-16/315 DBR.BP.BC. No.76/21.07.001/2015-16 dated February 11, 2016 Implementation of Indian Accounting Standards (Ind AS), The banks are advised to follow the Indian

Accounting Standards as notified under the Companies (Indian Accounting Standards) Rules, 2015, subject to any guideline or direction issued by the the Reserve Bank in this regard. The Banks in India currently prepare their financial statements as per the guidelines issued by the RBI, the Accounting Standards notified under section 133 of the Companies Act, 2013 and generally accepted accounting principles in India (Indian GAAP). In January 2016, the Ministry of Corporate Affairs issued the roadmap for implementation of new Indian Accounting Standards (Ind AS), which were based on convergence with the International Financial Reporting Standards (IFRS), for scheduled commercial banks, insurance companies and non-banking financial companies (NBFCs). In March 2019, RBI deferred the implementation of Ind AS for banks till further notice as the recommended legislative amendments were under consideration of Government of India. The Bank had undertaken preliminary diagnostic analysis of the GAAP differences between Indian GAAP vis-a-vis Ind AS and shall proceed for ensuring the compliance as per applicable requirements and directions in this regard.

3 Details of Single Borrower Limit (SGL)/Group Borrower Limit (GBL) exceeded by the bank

During the year ended March 31, 2024 and March 31, 2023, the Bank has not exceeded the prudential credit exposure limit as prescribed by the Reserve Bank of India in respect of Single Borrower and Group Borrowers.

7 Small and micro industries

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments. The above is based on the information available with the Bank which has been relied upon by the auditors.

8 Merger with Fincare Small Finance Bank Limited

The Board of Directors at its meetings held on October 29, 2023, approved the scheme of amalgamation (“Scheme”) for the amalgamation of Fincare Small Finance Bank Limited (“Transferor Company”) with the Bank (“Transferee Company”), in accordance with Section 44A of the Banking Regulation Act, 1949 and the Reserve Bank of India Master Direction - Amalgamation of Private Sector Banks Directions, 2016.

The Scheme has been approved by the shareholders of the Transferor Company and the Transferee Company on November 24, 2023 and November 27, 2023 respectively at their extra ordinary general meeting and by the Competition Commission of India (the “CCI”) and the Reserve Bank of India (the “RBI”) on January 23, 2024 and Mach 4, 2024 respectively.

At the request of the Transferor Company and the Transferee Company, RBI has approved for modification of appointed date as April 1, 2024 as against the appointed date proposed in the Scheme i.e. February 1, 2024.

In terms of the Scheme, the Bank has issued and allotted 7,35,25,352 equity shares to the share holders of the Fincare Small Finance Bank Limited on April 1, 2024 in accordance with share exchange ratio specified in the Scheme i.e. 579 (Five Hundred Seventy Nine) equity shares of face value of H 10/- each of the Transferee Company for every 2,000 (Two Thousand) equity shares of face value of H 10/- each of the Transferor Company. In addition, the Bank is required to issue its shares on exercise of options which have been granted to the employees of the Transferor Company in terms of its ESOP plan.

Accordingly, the paid-up share capital has increased from H 669.16 Crore consisting of 66,91,62,451 equity shares of H 10/- each to H 742.69 Crore consisting of 74,26,87,803 equity shares of H 10/- each on April 1, 2024.

9 Exceptional Items

The expenses amounting to H 76.80 Crore, including stamp duty, has been incurred/provided for during the year in relation to the acquisition and merger of Fincare Small Finance Bank Limited. Considering the size, nature or incidence of these expenses, the same has been disclosed as exceptional item.

10 Proposed dividend

The Board of Directors at their meeting held on April 24, 2024, proposed a dividend of H 1 per share at 10% of face value for the year ended March 31, 2024 (previous year: H 1 per share at 10% of face value (pre-bonus issue) or H 0.50 per share at 5% of face value (post-bonus issue)) subject to the approval of the shareholders at the ensuing Annual General Meeting. The effect of the proposed dividend has been considered in determination of Capital adequacy ratio (CAR) as at March 31, 2024 and March 31, 2023 respectively.

11 Bonus shares

The Bank had allotted 31,50,93,233 fully paid up equity shares of face value H 10/- each, in ratio of one equity share for every equity share held, during the year ended March 31, 2023, pursuant to a bonus issue approved by the shareholders vide Postal Ballot on May 29, 2022, by capitalisation of share premium.

12 As part of the normal banking business, the Bank grants loans and advances to its borrowers with permission to lend/invest or provide guarantee/security in other entities identified by such borrowers or on the basis of security/guarantee provided by the co-borrower. Similarly, the Bank may accept funds from its customers, who may instruct the Bank to lend/invest/provide guarantee or security or the like against such deposit in other entities identified by such customers. These transactions are part of Bank''s normal banking business, which is conducted after exercising proper due diligence including adherence to “Know Your Customer” guidelines.

Other than the nature of transactions described above:

• No funds have been advanced or loaned or invested by the Bank to or in any other person(s) or entity(ies), including foreign entities (“Intermediaries”) with the understanding that the Intermediary shall lend or invest in party identified by or on behalf of the Bank (Ultimate Beneficiaries).

• The Bank has not received any fund from any party(s), including foreign entties (Funding Party) with the understanding that the Bank shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Bank (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

13 Micro, Small and Medium Enterprises (MSME) sector - Restructuring of Advances

The Bank has restructured the account as per RBI Circular DBR.No.BP.BC.100/21.04.048/2017-18

dated February 07, 2018, DBR.No.BP.BC.108/21.04.048/2017-18 dated June 06, 2018, DBR.No.BP.

BC.18/21.04.048/2018-19 dated January 01, 2019, DOR.No.BP.BC.34/21.04.048/2019-20 dated February

11, 2020 and DOR.No.BP.BC/4/21.04.048/2020-21 dated August 06, 2020.

14 Disclosures on Change in Ownership of Projects Under Implementation:

The Bank does not have any account which are currently under the scheme of Change in Ownership of Projects Under Implementation as on March 31, 2024 (Previous year: Nil).

15 Inter-bank Participation with risk sharing:

During the year the Bank has not entered into any inter-bank participation with risk sharing (Previous year: Nil).

16 Investor education and protection fund

There is no amount required to be transferred to Investor Education and Protection Fund by the Bank (Previous year: Nil).

17 Other income includes processing fee, profit/loss on sale of investments (including provision for depreciation), non-fund based income such as commission earned from guarantees, selling of third party products, recovery from loans written off, income from dealing in PSLC, etc.

19 The Code on Social Security, 2020

The Code on Social Security, 2020 (''Code'') relating to employee benefits during employment and postemployment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified and the final rules/interpretation have not yet been issued. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.

Part B: Geographic segments

The business of the Bank is in India only. Accordingly, geographical segment is not applicable.

Business Segments have been identified and reported taking into account the target customer profile, the nature of products and services, the differing risks and returns, the organisation structure, the internal business reporting system and guidelines prescribed by the RBI and in compliance with the Accounting Standard 17 - “Segment Reporting”. The RBI vide its circular dated April 7, 2022 on establishment of Digital Banking Units (DBUs), has prescribed reporting of Digital Banking Segment as a sub-segment of Retail Banking Segment. The Bank is in the process of setting up DBUs and hence no Digital Banking Segment disclosure have been made. The business operations of the Bank are in India and for the purpose of segment reporting as per Accounting Standard-17 (Segment reporting) the bank is considered to operate only in domestic segment.

The Bank has allotted 31,50,93,233 fully paid up equity shares of face value H 10/- each, in ratio of one equity share for every equity share held, during the year ended March 31, 2023, pursuant to a bonus issue approved by the shareholders vide Postal Ballot on May 29, 2022, by capitalisation of share premium. Consequently, the earnings per share have been adjusted for previous periods/year presented in accordance with Accounting Standard 20 - Earnings per share.

26 Accounting for employee share based payments Stock options

The Bank has granted employee stock options to its Director and Employees under various Employee Stock Option Plans/Schemes. The plans in operation are Plan (A) - 2015(A), Plan (B) - 2015(B), Plan (C) - 2016, Plan (D) - 2018, Plan (E) - 2020 and Plan (F) - 2023. The numerical series A1-A3, B1-B13, C1 -C15, D1-D13, E1-E19 and F1-F3 represents grants made on different dates under these plans. During the year ended March 31, 2024, the following series were in operation:

The Bank has allotted 31,50,93,233 fully paid up equity shares of face value H 10/- each, in ratio of one equity share for every equity share held, during the year ended March 31, 2023, pursuant to a bonus issue approved by the shareholders vide Postal Ballot on May 29, 2022, by capitalisation of share premium. Consequently, excercise price and number of options are adjusted.

27 Employee benefits

(a) Defined benefit plans Gratuity

The gratuity plan provides a lumpsum payment to vested employees at retirement or on termination of employment based on respective employee''s salary and years of employment with the Bank considering the ceiling of gratuity amount of '' 0.20 Crore.

(b) Defined contribution plans Provident fund

The Bank makes Provident Fund contributions to a defined contribution retirement benefit plans for qualifying employees. Under the schemes, the bank is required to contribute a specified percentage of the payroll costs to the Provident Fund Commissioner to fund the benefits.

The Bank recognised H 75.90 Crore (previous year H 68.09 Crore) for provident fund contributions in the Profit and Loss Account. The contributions payable to these plans by the Bank are at rates specified in the rules of the schemes.

(c) Compensated absences

The Bank has provided for compensatory leaves which can be availed and not encashed as per policy of the Bank as present value obligation of the benefit at related current service cost measured using the Projected Unit Credit Method on the basis of an actuarial valuation. The Bank has accordingly booked H 1.01 Crore (previous year reversed H 21.71 Crore) in the books of accounts for the year.

28 Comparative figures

Figures for the previous year have been regrouped and reclassified wherever necessary to conform to the current year''s presentation.

---

Mar 31, 2023

A. Disclosures as Laid Down by RBI Circulars 1 Regulatory Capital

a) Composition of Regulatory Capital

The Capital adequacy ratio (“CAR”) has been computed as per operating guideline for Small Finance Bank in accordance with RBI Circular No. RBI/2016-17/81DBR. NBD.No.26/16.13.218/2016-17 dated October 6, 2016. The Bank has followed Basel II standardised approach for credit risk in accordance with the Operating Guideline issued by the Reserve Bank of India for Small Finance banks. Further, the RBI vide its circular No. DBR.NBD.No. 4502/16.13.218/2017-18 dated November 8, 2017 has provided an exemption to all small Finance banks whereby no separate capital charge is prescribed for market risk and operational risk.”

The total Capital Adequacy ratio of the Bank as at March 31, 2023 is 23.59% (previous year: 20.99%) against the regulatory requirement of 15.00% as prescribed by RBI.

No Capital Conservation Buffer and Counter - Cyclical Capital Buffer is applicable on Small Finance Bank (SFB) as per operating guidelines issued on SFB by RBI.

* During the year ended March 31, 2023, the Bank has issued 3,44,82,758 equity shares of a face value C 10 each at a price of C 580 per equity share including a premium of C 570 per equity share aggregating to C 2,000 crore pursuant to Qualified Institutional Placement (QIP).

During the year ended March 31, 2023, the Bank allotted 22,69,033 equity shares (previous year: 26,86,641 equity shares) aggregating to paid up share capital of C 2.27 crore (previous year: C 2.69 crore). Further the reserves of the Bank have increased by C 67.10 crore (previous year: C 87.79 crore) in respect of stock options exercised.

b) Draw down from reserves

There has been no draw down from reserves during the year ended March 31, 2023 and March 31, 2022 other than those disclosed under Schedule 2.

ii) Qualitative disclosure on Liquidity Coverage Ratio (LCR):

To assess Bank''s resilience in liquidity stress scenario of 30 days with its high-quality liquid assets, Banks is computing Liquidity Coverage Ratio (LCR) as per RBI - Basel III Framework on Liquidity Standards. High Ratio signifies Bank has enough liquid assets which it can use to fulfil its liquidity obligations in acute stress scenario. Ratio to compute as below:

Lcr = Stock of High Quality Liquid Assets (HQLA)

Net Cash Outflows over a 30 days period

Stock of High Quality Liquid Asset is total funds liquid assets could generate in stress scenario. Net Cash outflows is the difference as derived by multiplying the outstanding balances of various categories or types of liabilities by the outflow run-off rates and cash inflows are calculated by multiplying the outstanding balances of various categories of contractual receivables by the rates at which they are expected to flow in.

The Minimum LCR Requirement for Small Finance Banks (as per operating guidelines for Small Finance Banks RBI/2016-17/81 DBR.NBD.No.26/16.13.218/2016-17 dated Oct 06, 2016 & RBI circular RBI/2019-20/217 DOR. BP.BC.No.65/21.04.098/2019-20 dated Apr 17,2020) is 100%

The Bank has consistently maintained the LCR percentage well above the regulatory threshold limit. The average LCR for the quarter ended March 31, 2023 was 128% which is above the regulatory limit of 100%. For the quarter ended March 31, 2023 average HQLA stood at C 15,353 Crores.

Asset Liability Committee (ALCO) of the Bank is the primary governing body for Liquidity Risk Management, Treasury is entrusted with the responsibility of liquidity management within the Bank under the guidance of the ALCO. ALM Risk unit independently measures, monitors & report Liquidity Risk as per regulatory & internal guidelines.

I n computing the above information, certain estimates and assumptions have been made by the Bank''s Management which have been relied upon by the auditors.

ii) Qualitative disclosure on Net Stable Funding Ratio (NSFR):

AU Bank, as per the RBI guideline on NSFR dated May 17, 2018, is required to maintain the NSFR on an ongoing basis. The minimum NSFR requirement set out in the RBI guideline effective October 1, 2021, is 100%. The Basel Committee on Banking Supervision (BCBS) had introduced the Net Stable Funding Ratio (NSFR) to ensure resilience over a longer-term time horizon by requiring banks to fund their activities with more stable sources of funding. NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. Available stable funding (ASF) is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to one year. The amount of stable funding required ("Required stable funding") (RSF) of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by that institution as well as those of its off-balance sheet (OBS) exposures. The NSFR as on March 31, 2023 was at 125.68% (at 114.03% as on March 31, 2022).

c) Sale and Transfers to / from HTM Category

During the year ended March 31, 2023 and the previous year ended March 31, 2022 the Bank has not sold and transferred securities to or from HTM category exceeding 5% of the book value of investment held in HTM category at the beginning of the year. The 5% threshold referred to above does not include onetime transfer of securities to/from HTM category with the approval of Board of Directors permitted to be undertaken by banks as per extant RBI guidelines, sale of securities under pre-announced Open Market Operation (OMO) auction to the RBI and sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM, Repurchase of Government Securities by Government of India from banks under buyback / switch operations, Repurchase of State Development Loans by respective state governments under buyback / switch operations and Additional shifting of securities explicitly permitted by the Reserve Bank of India as the case may be.

c) Overseas Assets, NPAs and Revenue

The Bank does not have any overseas branches and hence the disclosure regarding overseas assets, NPAs and revenue is not applicable (Previous Year: Nil).

d) Resolution of Stressed Assets - Revised Framework

The Bank is having Nil loan account for resolution of stressed Assets (Revised framework) as on March 31, 2023 (Previous year: Nil) as per RBI Circular RBI/2017-18/131DBR.No.BP.BC.101/21.04.048/2017-18 and RBI/2018-19/203 DBR.No.BP.BC.45/21.04.048/2018-19 as amended.

e) Divergence in the Asset classification and provisioning

RBI vide its Master Direction Ref. RBI/DOR/2021-22/83 DOR.ACC.REC.No.45/21.04.018/2021-22 dated August 30, 2021 and various amendments thereto (latest updated on February 20, 2023), has directed banks to make suitable disclosures, if either or both of the following conditions are satisfied:-

(a) the additional provisioning for NPAs assessed by RBI as part of its supervisory process, exceeds 10% of the reported profit before provisions and contingencies for the reference period, and

(b) the additional Gross NPAs identified by RBI as part of its supervisory process, exceed 10% of the reported incremental Gross NPAs for the reference period.

The Bank has not been subjected to any Annual Financial Inspection (AFI) by the RBI during the financial year 2021-22 and financial year 2022-23 in respect of financial year 2020-21 & 2021-22.

f) Disclosure of Transfer of Loan Exposures

i) Loans not in default: The bank has not transferred or acquired loans not in deafult during the Current and Previous year.

ii) Stressed loans transferred or acquired: The Bank has not transferred stressed Loans during the Current and Previous year.

The Credit Rating assigned to SR is NR3 - (75% - 100%) which is similar to previous rating.

Details of loans acquired: The Bank has not acquired any stressed loan during the year (Previous year: NIL)

g) Unhedged Foreign Currency Exposure

The RBI, through its master direction dated October 11, 2022, had advised banks to create incremental provision on standard loans and advances to entities with unhedged foreign currency exposure (UFCE). The Bank assesses the UFCEs of the borrowers through its credit appraisal and internal ratings process. The Bank also undertakes reviews of such exposures through thematic reviews evaluating the impact of exchange rate fluctuations on the Bank''s portfolio on a yearly basis.

7 Derivatives

a) Forward Rate Agreement/ Interest Rate Swap

The bank has not entered into any Forward Rate Agreement or Interest rate swaps during the year ended March 31, 2023 and March 31, 2022.

b) Exchange Traded Interest Rate Derivatives

The bank has not entered into any exchange traded interest rate derivatives during the year ended March 31, 2023 and March 31, 2022.

c) Disclosures on Risk Exposure in Derivatives

The bank has not entered into any derivative instruments for trading / speculative purposes either in Foreign Exchange or domestic treasury operations during the year ended March 31, 2023 (Previous year: Nil).

d) Credit Default Swaps

The bank has not transacted in credit default swaps during the year ended March 31, 2023. (Previous year: Nil)

12 Penalties imposed by the RBI

During the year ended March 31, 2023 in terms of the provisions contained in the RBI circular Ref. DCM (RMMT) No.S153/11.01.01/2021-22 dated August 10, 2021 on “Monitoring of Availability of Cash in ATMs” and the subsequent addendum thereto, RBI has imposed penalties of C 0.048 crore on the Bank on account of Cash out in an ATM for more than 10 hours in a month (previous year: C 0.001 crore).

13 Disclosures on remuneration Qualitative Disclosures:

(a) Information relating to the composition and mandate of the Nomination and Remuneration Committee:

I n compliance of Companies Act 2013, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, Banking Regulation Act 1949 and other guidelines as applicable, the Board of Directors has constituted Nomination and Remuneration Committee (NRC) to oversee the framing, review, and implementation of the Compensation Policy of the Bank. This Committee works in coordination with Risk Management Committee & Audit Committee of the Board, for achieving effective alignment between risk and remuneration.

As on March 31, 2023, the Nomination and Remuneration Committee consist of Non-Executive (Independent) Directors and the said composition is in line with the applicable guidelines.

The Composition of NRC committee is as follows:

• Mr. M S Sriram - Independent Director (Chairman)

• Mr. Pushpinder Singh - Independent Director

• Mr. H.R. Khan - Independent Director

• Ms. Malini Thadani - Independent Director

The roles and responsibilities of the Nomination and Remuneration Committee (NRC) are as under:

(i) Assist the Board in formulation and implementation of compensation policy and lay down the criteria for remuneration of Directors, Key Management Personnel (KMPs) and Senior Management Personnel (SMPs), Material Risk Takers (MRTs), Control Function Staff and other employees.

(ii) Take inputs from the Risk Management Committee of the Board to ensure balance between remuneration and risks as required. The Committee shall ensure that the mix of Fixed and Variable forms of compensation is consistent with risk alignment and objectives of the Bank.

(iii) Lay down the comprehensive criteria for assessment in terms of qualifications, positive attributes, independence, professional experience, track record, integrity and considering other parameters for appointment of Directors, KMPs and SMPs.

(iv) Develop policies and lay down criteria for appointment/removal/reappointment of the Directors on the Board capturing the statutory and regulatory requirements.

(v) Assist in defining the performance evaluation criteria for Directors and other KMPs and ensure that relationship of remuneration to performance is clear and meets appropriate performance benchmarks.

(vi) Ensure that the compensation policy formulated for remuneration of Directors, KMPs and SMPs is reasonable and sufficient to attract, retain and motivate quality talent required to run the Bank.

(vii) Ensure that the compensation for Directors, KMPs, SMPs is a mix of fixed and variable pay and such compensation reflects short and long-term performance objectives appropriate to the working and the goals of the Bank.

(viii) Ensure that appropriate procedures are in place to assess Board effectiveness and also provide the suggestions on governance to the Board of Directors.

(ix) Review and oversee the Employee Benefits programme of the Bank including deferred benefits and retirement plans.

(b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy:

The Bank has formulated a Compensation Policy in alignment with the RBI guidelines, covering all components of compensation including fixed pay, perquisites, performance bonus, guaranteed bonus (joining / sign-on bonus), share-linked instruments such as Employee Stock Option Plan (ESOPs), retirement benefits such as Provident Fund and Gratuity, and below are the key features and objectives of the policy:

• Establish standards on compensation/ remuneration including fixed and variable pay covering share-linked instruments, which are in alignment with the applicable rules and regulations and is based on the trends and practices of remuneration prevailing in the industry.

• Retain, motivate, and promote talent and to ensure long term sustainability of talented Director, KMP, SMP, MRT, Control Function Staff and other employees as applicable.

• Define internal guidelines for payment of other reimbursement to the Directors and KMPs.

• Institutionalise a mechanism for the appointment/ removal/ resignation/evaluation of performance of Directors.

• Perform such functions as are required to be performed by the Nomination and Remuneration committee under the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, including the following:

(a) administering the ESOP plans;

(b) determining the eligibility of employees to participate under the ESOP plans;

(c) granting options to eligible employees and determining the date of grant;

(d) determining the number of options to be granted to an employee;

(e) determining the exercise price under the ESOP plans and

• Ensure compliance with applicable laws, rules, and regulations as well as ''Fit and Proper criteria'' of directors before their appointment.

(c) Description of the ways in which current and future risks are taken into account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks:

The Key parameters taken into account for the structuring of remuneration covering fixed pay and variable pay are mentioned below:

(i) Risk factors that are significant to the Banking operations of the Bank are taken into consideration in devising the remuneration structure and it is symmetric to the risk outcomes.

(ii) Compensation payout is scheduled in manner where sensitivity to time horizon of risks is taken into consideration in the review process.

(iii) Individual performance is reviewed on the basis of Key Responsibility Areas (KRAs) and the review is carried out under the Annual Performance Review (APR) of the Bank.

(iv) Industry Benchmarking, inflation and increase of cost of living.

In addition, it includes a ''malus'' and ''clawback'' option to take care of any disciplinary issue or future drop in performance of individual/ business/ Bank.

(d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration:

Individual performances are assessed in line with business/ individual delivery of the Key responsibility Areas (KRAs), top priorities of business, budgets, and overall contribution to the organisation etc. The goal sheet is in place in Human Capital Management (HCM) Software and the evaluation of annual performance is carried out in the same.

In linking the performance and level of remuneration, the job roles, levels, business budgets, risk factors, achievement of individual KRAs are taken into consideration for taking decision in this regard.

(e) A discussion of the Bank’s policy on deferral and vesting of variable remuneration and a discussion of the Bank’s policy and criteria for adjusting deferred remuneration before vesting and after vesting:

In compliance of RBI Guidelines on Compensation of Whole Time Directors/ Chief Executive Officers/ Material Risk Takers and Control Function staff dated November 04, 2019 Bank has formulated Compensation Policy that covers all aspects of the compensation structure such as Fixed pay, Variable Pay and deferral pay.

The Variable Pay of senior executives, including WTDs, and other employees who are MRTs shall be deferred over the period so that compensation is adjusted for all types of risks that organisation may be exposed to.

The deferral period shall be a minimum of three years. This would be applicable for both the cash and non-cash components of the variable pay:

a) A minimum of 60% of the total variable pay must invariably be under deferral arrangements.

b) If cash component is part of variable pay, at least 50% of the cash bonus shall also be deferred and where the cash component of variable pay is under C 25 lakh in a year, deferral requirements shall not be applicable.

c) Deferred remuneration should either vest fully at the end of the deferral period or be spread out over the course of the deferral period. The first such vesting should be not before one year from the commencement of the deferral period and shall not take place more frequently than on a yearly basis.

d) The vesting should be no faster than on a pro rata basis.

The adjustment of Variable Pay before and after the vesting shall be considered in the event of subdued or negative financial performance of the bank and/or the relevant line of business in any year and the malus/clawback arrangements shall be invoked subject to due assessment.

(f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilises and the rationale for using these different forms:

The Variable pay consist of Cash, Share linked Instrument and same is decided considering risk factors, job profile, level of performance and industry norms to ensure that employee morale is high and to promote consistency in performance over the time horizon.

The breakup of variable remuneration is the follows:

Variable Pay: Variable pay compensation is paid depending upon the performance of the Employees against set key responsibility areas (KRAs) and it is ensured that there is a proper balance between fixed pay and variable pay while devising the remuneration structure.

(a) A substantial proportion of compensation i.e., at least 50%, should be variable and paid on the basis of individual, business performance & other parameters and this shall not be applicable on risk control function staff.

(b) In case variable pay is:

• Up to 200% of the fixed pay, a minimum of 50% of the variable pay should be via noncash instruments.

• Above 200%, a minimum of 67% of the variable pay should be via non-cash instruments.

• shall be limited to a maximum of 300% of the fixed pay; (for the relative performance measurement period).

(c) In the event that an executive is barred by statute or regulation from grant of share-linked instruments, his/her variable pay will be capped at 150% of the fixed pay but shall not be less than 50% of the fixed pay.

(d) The deterioration in the financial performance of the Bank shall generally lead to a contraction in the total amount of variable compensation, which can even be reduced to zero and the proportion of variable pay shall be higher depending on the higher responsibility at higher level.

Share-linked Instruments: Share-linked Instruments consisting of ESOPs or other linked instruments which shall be forming part of variable pay.

Definitions of certain items in Business ratios / information:

1. Working funds to be reckoned as monthly average of total assets (excluding accumulated losses, if any) as reported to Reserve Bank of India in Form X under Section 27 of the Banking Regulation Act, 1949.

2. Operating profit = (Interest Income Other Income - Interest expenses - Operating expenses).

3. Return on Assets has been calculated on yearly average of total assets.

4. “Business” is the total of monthly average of net advances and deposits (net of inter-bank deposits).

5. Productivity ratios (Business per employee and Profit per employee) are based on monthly average of employees count.

6. Net Interest Margin is Net Interest Income/ Average Earning Assets. Net Interest Income= Interest Income - Interest Expense and Average Earning Assets is yearly average of total of net advances, invetments, balance with banks and money at call and short notice and Balances with Reserve Bank of India in Other Account.

7. Cost of Deposit is calculated based on weighted average interest rate of deposits.

The Bank has compiled the data for the purpose of this disclosure from its internal MIS system/reports and

has been relied upon by the auditors.

f) Implementation of IFRS converged Indian Accounting Standards (Ind AS)

As per the RBI circular RBI/2015-16/315 DBR.BP.BC. No.76/21.07.001/2015-16 dated February 11, 2016 Implementation of Indian Accounting Standards (Ind AS), The banks are advised to follow the Indian Accounting Standards as notified under the Companies (Indian Accounting Standards) Rules, 2015, subject to any guideline or direction issued by the the Reserve Bank in this regard. The Banks in India currently prepare their financial statements as per the guidelines issued by the RBI, the Accounting Standards notified under section 133 of the Companies Act, 2013 and generally accepted accounting principles in India (Indian GAAP). In January 2016, the Ministry of Corporate Affairs issued the roadmap for implementation of new Indian Accounting Standards (Ind AS), which were based on convergence with the International Financial Reporting Standards (IFRS), for scheduled commercial banks, insurance companies and non-banking financial companies (NBFCs). In March 2019, RBI deferred the implementation of Ind AS for banks till further notice as the recommended legislative amendments were under consideration of Government of India. The Bank had undertaken preliminary diagnostic analysis of the GAAP differences between Indian GAAP vis-a-vis Ind AS and shall proceed for ensuring the compliance as per applicable requirements and directions in this regard.

7 Small and Micro industries

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments. The above is based on the information available with the Bank which has been relied upon by the auditors.

8 Proposed Dividend

The Board of Directors at their meeting held on April 25, 2023, proposed a dividend of C 1 per share at 10% for the year ended March 31, 2023 (previous year: C 1 per share at 10% (pre-bonus issue) or C 0.50 per share at 5% (post-bonus issue)) subject to the approval of the shareholders at the ensuing Annual General Meeting. The effect of the proposed dividend has been considered in determination of capital adequacy ratio.

9 Bonus Shares

The Bank has allotted 31,50,93,233 fully paid up equity shares of face value C 10/- each, in ratio of one equity share for every equity share held, during the year ended March 31, 2023, pursuant to a bonus issue approved by the shareholders vide Postal Ballot on May 29, 2022, by capitalisation of share premium.

10 As part of the normal banking business, the Bank grants loans and advances to its borrowers with permission to lend/invest or provide guarantee/security in other entities identified by such borrowers or on the basis

of the basis of security/guarantee provided by the co-borrower. Similarly, the Bank may accept funds from its customers, who may instruct the Bank to lend/invest/provide guarantee or security or the like against such deposit in other entities identified by such customers. These transactions are part of Bank''s normal banking business, which is conducted after exercising proper due diligence including adherence to “Know Your Customer” guidelines.

Other than the nature of transactions described above:

• No funds have been advanced or loaned or invested by the Bank to or in any other person(s) or entity(ies) (“Intermediaries”) with the understanding that the Intermediary shall lend or invest in party identified by or on behalf of the Bank (Ultimate Beneficiaries).

• The Bank has not received any fund from any party(s) (Funding Party) with the understanding that the Bank shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Bank (“Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

11 The Bank continues to monitor the developments / impact including those arising from COVID-19 pandemic. As at March 31, 2023, the Bank carries a floating provision of C 41.00 crore and additional contingency provision of C 125.73 crore which includes the additional provision for the accounts restructured under RBI COVID Resolution framework. The Bank holds an aggregate provision of C 861.88 crore against advances (Other than standard assets provision of C 270.96 crore).

12 Micro, Small and Medium Enterprises (MSME) sector - Restructuring of Advances

The Bank has restructured the account as per RBI Circular DBR.No.BP.BC.100/21.04.048/2017-18 dated February 07, 2018, DBR.No.BP.BC.108/21.04.048/2017-18 dated June 06, 2018, DBR.No.BP.BC.18/21.04.048/2018-19 dated January 01, 2019, DOR.No.BP.BC.34/21.04.048/2019-20 dated February 11, 2020 and DOR.No.BP. BC/4/21.04.048/2020-21 dated August 06, 2020.

13 Disclosures on Change in Ownership of Projects Under Implementation:

The Bank does not have any account which are currently under the scheme of Change in Ownership of Projects Under Implementation as on March 31, 2023 (Previous year: Nil).

14 Inter-bank Participation with risk sharing:

During the year the Bank has not entered into any inter-bank participation with risk sharing (Previous year: Nil).

15 Investor education and protection fund

There is no amount required to be transferred to Investor Education and Protection Fund by the Bank. (Previous year: Nil)

16 Miscellaneous income comprises recoveries from loans written off, income from dealing in Priority Sector Lending Certificates (PSLC) etc.

18 The Code on Social Security, 2020

The Code on Social Security, 2020 (''Code'') relating to employee benefits during employment and postemployment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified and the final rules/interpretation have not yet been issued. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.

Part B: Geographic segments

The business of the Bank is in India only. Accordingly, geographical segment is not applicable.

Business Segments have been identified and reported taking into account the target customer profile, the nature of products and services, the differing risks and returns, the organisation structure, the internal business reporting system and guidelines prescribed by the RBI and in compliance with the Accounting Standard 17 -“Segment Reporting”. The RBI vide its circular dated April 7, 2022 on establishment of Digital Banking Units (DBUs), has prescribed reporting of Digital Banking Segment as a sub-segment of Retail Banking Segment. The Bank is in the process of setting up DBUs and hence no Digital Banking Segment disclosure have been made. The business operations of the Bank are in India and for the purpose of segment reporting as per Accounting Standard-17 (Segment reporting) the bank is considered to operate only in domestic segment.

The Bank has allotted 31,50,93,233 fully paid up equity shares of face value C 10/- each, in ratio of one equity share for every equity share held, during the year ended March 31, 2023, pursuant to a bonus issue approved by the shareholders vide Postal Ballot on May 29, 2022, by capitalisation of share premium. Consequently, the earnings per share have been adjusted for previous periods / year presented in accordance with Accounting Standard 20 - Earnings per share.

(b) Defined contribution plans Provident fund

The Bank makes Provident Fund contributions to a defined contribution retirement benefit plans for qualifying employees. Under the schemes, the bank is required to contribute a specified percentage of the payroll costs to the Provident Fund Commissioner to fund the benefits.

The Bank recognised C 68.09 Crore (previous year C 51.27 Crore) for provident fund contributions in the Profit and Loss Account. The contributions payable to these plans by the Bank are at rates specified in the rules of the schemes.

(c) Compensated absences

The Bank has provided for compensatory leaves which can be availed and not encashed as per policy of the Bank as present value obligation of the benefit at related current service cost measured using the Projected Unit Credit Method on the basis of an actuarial valuation. The Bank has accordingly reversed C 21.71 Crore (previous year booked C 12.83 Crore) in the books of accounts for the year.

27 Comparative figures

Figures for the previous year have been regrouped and reclassified wherever necessary to conform to the current year''s presentation.

---

Mar 31, 2022

Amounts in notes forming part of the financial statements for the year ended March 31, 2022 are denominated in rupee crore to conform to extant RBI guidelines.

A. Disclosures as Laid Down by RBI Circulars 1 Regulatory Capital

a) Composition of Regulatory Capital

The Capital adequacy ratio ("CAR") has been computed as per operating guideline for Small Finance Bank in accordance with RBI Circular No. RBI/2016-17/81DBR. NBD.No.26/16.13.218/2016-17 dated October 6, 2016.

The Bank has followed Basel II standardized approach for credit risk in accordance with the Operating Guideline issued by the Reserve Bank of India for Small Finance banks. Further, the RBI vide its circular No. DBR. NBD.No. 4502/16.13.218/2017-18 dated November 8, 2017 has provided an exemption to all small Finance banks whereby no separate capital charge is prescribed for market risk and operational risk.

The total Capital Adequacy ratio of the Bank as at March 31, 2022 is 20.99% (previous year: 23.37%) against the regulatory requirement of 15.00% as prescribed by RBI.

No Capital Conservation Buffer and Counter - Cyclical Capital Buffer is applicable on Small Finance Bank (SFB) as per operating guidelines issued on SFB by RBI.

* During the year ended March 31, 2022, the Bank allotted 26,86,641 equity shares (previous year: 30,90,063 equity shares) aggregating to paid up share capital of '' 2.69 crore (previous year: '' 3.09 crore). Further the reserves of the Bank have increased by '' 87.79 crore (previous year: '' 29.39 crore) in respect of stock options exercised.

During the previous year ended March 31, 2021, the Bank has received an amount of '' 625.50 Crore upon allotment of 50,00,000 equity shares of face value '' 10 each, at an issue price of'' 1251 per share pursuant to Qualified Institutional Placement (QIP).

b) Draw down from reserves

There has been no draw down from reserves during the year ended March 31, 2022 and March 31, 2021 other than those disclosed under Schedule 2.

ii) Qualitative disclosure on Liquidity Coverage Ratio (LCR):

To assess Bank''s resilience in liquidity stress scenario of 30 days with its high-quality liquid assets, Banks is computing Liquidity Coverage Ratio (LCR) as per RBI - Basel III Framework on Liquidity Standards. High Ratio signifies Bank has enough liquid assets which it can use to fulfil its liquidity obligations in acute stress scenario. Ratio to compute as below:

, _ Stock of High Quality Liquid Assets (HQLA)

LC R

Net Cash Outflows over a 30 days period

Stock of High Quality Liquid Asset is total funds liquid assets could generate in stress scenario. Net Cash outflows is the difference as derived by multiplying the outstanding balances of various categories or types of liabilities by the outflow run-off rates and cash inflows are calculated by multiplying the outstanding balances of various categories of contractual receivables by the rates at which they are expected to flow in.

The Minimum LCR Requirement for Small Finance Banks (as per operating guidelines for Small Finance Banks RBI/2016-17/81 DBR.NBD.No.26/16.13.218/2016-17 dated Oct 06, 2016 & RBI circular RBI/2019-20/217 DOR.BP.BC. No.65/21.04.098/2019-20 dated Apr 17,2020) is 100%

The Bank has consistently maintained the LCR percentage well above the regulatory threshold limit. The average LCR for the quarter ended March 31, 2022 was 125% which is above the regulatory limit of 100%. For the quarter ended March 31, 2022 average HQLA stood at '' 11,889 Crores.

Asset Liability Committee (ALCO) of the Bank is the primary governing body for Liquidity Risk Management, Treasury is entrusted with the responsibility of liquidity management within the Bank under the guidance of the ALCO. ALM Risk unit independently measures, monitors & report Liquidity Risk as per regulatory & internal guidelines.

I n computing the above information, certain estimates and assumptions have been made by the Bank''s Management which have been relied upon by the auditors.

ii) Qualitative disclosure on Net Stable Funding Ratio (NSFR):

AU Bank, as per the RBI guideline on NSFR dated May 17, 2018, is required to maintain the NSFR on an ongoing basis. The minimum NSFR requirement set out in the RBI guideline effective October 1, 2021, is 100%. The Basel Committee on Banking Supervision (BCBS) had introduced the Net Stable Funding Ratio (NSFR) to ensure resilience over a longer-term time horizon by requiring banks to fund their activities with more stable sources of funding. NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. "Available stable funding" (ASF) is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to one year. The amount of stable funding required ("Required stable funding") (RSF) of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by that institution as well as those of its off-balance sheet (OBS) exposures.

The NSFR as on March 31, 2022 was at 114 % (at 109% as on December 31, 2021).

c) Sale and Transfers to / from HTM Category

During the year ended March 31, 2022 and the previous year ended March 31, 2021 the Bank has not sold and transferred securities to or from HTM category exceeding 5% of the book value of investment held in HTM category at the beginning of the year. The 5% threshold referred to above does not include onetime transfer of securities to/from HTM category with the approval of Board of Directors permitted to be undertaken by banks as per extant RBI guidelines, sale of securities under pre-announced Open Market Operation (OMO) auction to the RBI and sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM, Repurchase of Government Securities by Government of India from banks under buyback / switch operations, Repurchase of State Development Loans by respective state governments under buyback / switch operations and Additional shifting of securities explicitly permitted by the Reserve Bank of India as the case may be.

*Priority sector outstanding total advances includes '' 18,000.00 crore (previous year: '' 14,700.00 crore), in respect of which the Bank has sold Priority Sector Lending Certificates (PSLC).

The Bank has compiled the data for the purpose of this disclosure from its internal MIS system/reports which has been relied upon by the auditors.

c) Overseas assets, NPAs and revenue

The Bank does not have any overseas branches and hence the disclosure regarding overseas assets, NPAs and revenue is not applicable (Previous Year: Nil).

d) Resolution of Stressed Assets - Revised Framework

The Bank is having Nil loan account for resolution of stressed Assets (Revised framework) as on March 31, 2022 (Previous year: '' 0.76 Crore) as per RBI Circular RBI/2017-18/131DBR.No.BP.BC.101/21.04.048/2017-18 and RBI/2018-19/203 DBR.No.BP.BC.45/21.04.048/2018-19 as amended.

e) Divergence in the asset classification and provisioning

RBI vide its Master Direction RBI/DOR/2021-22/83 DOR.ACC.REC.No.45/21.04.018/2021-22 dated August 30, 2021 and updated on November 15, 2021, has directed banks shall make suitable disclosures, if either or both of the following conditions are satisfied:-

(a) the additional provisioning for NPAs assessed by RBI exceeds 10 per cent of the reported profit before provisions and contingencies for the reference period, and

(b) the additional Gross NPAs identified by RBI exceed 15 per cent of the published incremental Gross NPAs for the reference period.

The Bank has not been subjected to any annual financial inspection (AFI) by the RBI during the financial year 2021-22 in respect of Financial year 2020-21.

There has been no material divergence observed by the RBI for the financial year 2019-20 (as per assessment by the RBI during financial year 2020-21) in respect of the Bank''s asset classification and provisioning under the extant prudential norms on income recognition asset classification and provisioning (IRACP) which require such disclosures.

f) Disclosure of transfer of loan exposures

i) Loans not in default: The bank has not transferred or acquired loans not in deafult during the Current and Previous year.

e) Details of factoring exposure:

The factoring exposure of the Bank as at March 31, 2022 is '' 243.73 Cr.(Previous year: Nil)

f) Intra-Group exposure

The Bank does not have any exposure (advances/investments) within the group. (Previous year: Nil)

g) Unhedged foreign currency exposure

The RBI, through its circular dated January 15, 2014 had advised banks to create incremental provision on standard loans and advances to entities with unhedged foreign currency exposure (UFCE). The Bank assesses the UFCEs of the borrowers through its credit appraisal and internal ratings process. The Bank also undertakes reviews of such exposures through thematic reviews evaluating the impact of exchange rate fluctuations on the Bank''s portfolio on an yearly basis.

The Bank made NIL provisionduring the year ended March 31,2022 (previous year: '' 0.02 crore). The Bank held no incremental capital on advances to borrowers with UFCE March 31, 2022, (previous year Nil).

7 Derivatives

a) Forward rate agreement/ Interest rate swap

The bank has not entered into any Forward Rate Agreement or Interest rate swaps during the year ended March 31, 2022 and March 31, 2021.

b) Exchange traded interest rate derivatives

The bank has not entered into any exchange traded interest rate derivatives during the year ended March 31, 2022 and March 31, 2021.

c) Disclosures on risk exposure in derivatives

The bank has not entered into any derivative instruments for trading / speculative purposes either in Foreign Exchange or domestic treasury operations during the year ended March 31, 2022 (Previous year: Nil).

d) Credit default swaps

The bank has not transacted in credit default swaps during the year ended March 31,2022. (Previous year: Nil)

9 Off Balance Sheet SPVs sponsored

There are no Off-Balance Sheet SPVs sponsored by the Bank, which need to be consolidated as per accounting norms.

10 Transfers to Depositor Education and Awareness Fund (DEAF)

During the year ended March 31, 2022 and March 31, 2021 the Bank was not required to transfer any amount to Depositor Education and Awareness Fund.

12 Penalties imposed by the RBI

During the year ended March 31, 2022 in terms of the provisions contained in the RBI circular Ref. DCM (RMMT) No.S153/11.01.01/2021-22 dated August 10, 2021 on “Monitoring of Availability of Cash in ATMs" and the subsequent addendum thereto, RBI has imposed a penalty of '' 0.001 crore on the Bank on account of Cash out in an ATM for more than 10 hours in a month (previous year: Nil).

13 Disclosures on remuneration Qualitative Disclosures:

(a) Information relating to the composition and mandate of the Nomination and Remuneration Committee:

In compliance of Companies Act 2013, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, Banking Regulation Act 1949 and other guidelines as applicable, the Board of Directors has constituted Nomination and Remuneration Committee (NRC) to oversee the framing, review, and implementation of the Compensation Policy of the Bank. This committee works in coordination with Risk Management Committee & Audit Committee of the Board, for achieving effective alignment between risk and remuneration.

As on March 31, 2022, the Nomination and Remuneration Committee consist of Non-Executive (Independent) Directors and the said composition is in line with the applicable guidelines.

The Composition of NRC committee is as follows:

• Mr. M S Sriram - Independent Director (Chairman)

• Mr. Krishan Kant Rathi - Independent Director

• Ms. Jyoti Narang - Independent Director

Note:

• All members of Nomination & Remuneration Committee are also member of Risk Management Committee of the Board.

The roles and responsibilities of the Nomination and Remuneration Committee (NRC) are as under:

(i) Assist the Board in formulation and implementation of compensation policy and lay down the criteria for remuneration of

Directors, Key Management Personnel (KMPs) and Senior Management Personnel (SMPs), Material Risk Takers (MRTs), Control Function Staff and other employees.

(ii) Take inputs from the Risk Management Committee of the Board to ensure balance between remuneration and risks as required. The Committee shall ensure that the mix of Fixed and Variable forms of compensation is consistent with risk alignment and objectives of the Bank.

(iii) Lay down the comprehensive criteria for assessment in terms of qualifications, positive attributes, independence, professional experience, track record, integrity and considering other parameters for appointment of Directors, KMPs and SMPs.

(iv) Develop policies and lay down criteria for appointment/removal/reappointment of the Directors on the Board capturing the statutory and regulatory requirements.

(v) Assist in defining the performance evaluation criteria for Directors and other KMPs and ensure that relationship of remuneration to performance is clear and meets appropriate performance benchmarks.

(vi) Ensure that the compensation policy formulated for remuneration of Directors, KMPs and SMPs is reasonable and sufficient to attract, retain and motivate quality talent required to run the Bank.

(vii) Ensure that the compensation for Directors, KMPs, SMPs is a mix of fixed and variable pay and such compensation reflects short and longterm performance objectives appropriate to the working and the goals of the Bank.

(viii) Ensure that appropriate procedures are in place to assess Board effectiveness and also provide the suggestions on governance to the Board of Directors.

(ix) Review and oversee the Employee Benefits program of the Bank including deferred benefits and retirement plans.

(b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy:

Designing and structuring of Remuneration process is governed by the Compensation Policy of the Bank, and below are the key features and objectives of the policy:

• Establish standards on compensation/ remuneration including fixed and variable pay covering share-linked instruments, which are in alignment with the applicable rules and regulations and is based on the trends and practices of remuneration prevailing in the industry.

• Retain, motivate, and promote talent and to ensure long term sustainability of talented Director, KMP, SMP, MRT, Control Function Staff and other employees as applicable.

• Define internal guidelines for payment of other reimbursement to the Directors and KMPs.

• Institutionalize a mechanism for the appointment/ removal/ resignation/evaluation of performance of Directors

• Perform such functions as are required to be performed by the Nomination and Remuneration committee under the SEBI (Share Based Employee Benefits) Regulations, 2014, including the following:

(a) administering the ESOP plans;

(b) determining the eligibility of employees to participate under the ESOP plans;

(c) granting options to eligible employees and determining the date of grant;

(d) determining the number of options to be granted to an employee;

(e) determining the exercise price under the ESOP plans and

• Ensure compliance with applicable laws, rules, and regulations as well as ‘Fit and Proper criteria'' of directors before their appointment.

(c) Description of the ways in which current and future risks are taken into account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks:

The Key parameters taken into account for the structuring of remuneration covering fixed pay and variable pay are mentioned below:

(i) Risk factors that are significant to the Banking operations of the Bank are taken into consideration in devising the remuneration structure and it is symmetric to the risk outcomes.

(ii) Compensation payout is scheduled in manner where sensitivity to time horizon of risks is taken into consideration in the review process.

(iii) Individual performance is reviewed on the basis of Key Responsibility Areas (KRAs) and the review is carried out under the Annual Performance Review (APR) of the Bank.

(iv) Industry Benchmarking, inflation and increase of cost of living.

In addition, it includes a ‘malus'' and ‘clawback'' option to take care of any disciplinary issue or future drop in performance of individual/ business/ Bank.

(d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration:

I ndividual performances are assessed in line with business/ individual delivery of the Key responsibility Areas (KRAs), top priorities of business, budgets, and overall contribution to the organisation etc. The goal sheet is in place in Human Capital Management (HCM) Software and the evaluation of annual performance is carried out in the same.

In linking the performance and level of remuneration, the job roles, levels, business budgets, risk factors, achievement of individual KRAs are taken into consideration for taking decision in this regard.

(e) A discussion of the Bank''s policy on deferral and vesting of variable remuneration and a discussion of the Bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting:

I n compliance of RBI Guidelines on Compensation of Whole Time Directors/ Chief Executive Officers/

Material Risk Takers and Control Function staff dated November 04, 2019 Bank has formulated Compensation Policy that covers all aspects of the compensation structure such as Fixed pay, Variable Pay and deferral pay.

The Variable Pay of senior executives, including WTDs, and other employees who are MRTs shall be deferred over the period so that compensation is adjusted for all types of risks that organisation may be exposed to.

The deferral period shall be a minimum of three years. This would be applicable for both the cash and non-cash components of the variable pay:

a) A minimum of 60% of the total variable pay must invariably be under deferral arrangements.

b) If cash component is part of variable pay, at least 50% of the cash bonus shall also be deferred and where the cash component of variable pay is under '' 0.25 crore in a year, deferral requirements shall not be applicable.

c) Deferred remuneration should either vest fully at the end of the deferral period or be spread out over the course of the deferral period. The first such vesting should be not before one year from the commencement of the deferral period and shall not take place more frequently than on a yearly basis.

d) The vesting should be no faster than on a pro rata basis.

The adjustment of Variable Pay before and after the vesting shall be considered in the event of subdued or negative financial performance of the bank and/or the relevant line of business in any year and the malus/clawback arrangements shall be invoked subject to due assessment.

(f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilizes and the rationale for using these different forms:

The Variable pay consist of Cash, Share linked Instrument and same is decided considering risk

factors, job profile, level of performance and industry norms to ensure that employee morale is high and to promote consistency in performance over the time horizon.

The breakup of variable remuneration is the follows:

Variable Pay: Variable pay compensation is paid depending upon the performance of the Employees against set key responsibility areas (KRAs) and it is ensured that there is a proper balance between fixed pay and variable pay while devising the remuneration structure.

(a) A substantial proportion of compensation i.e., at least 50%, should be variable and paid on the basis of individual, business performance & other parameters and this shall not be applicable on risk control function staff.

(b) In case variable pay is:

• Up to 200% of the fixed pay, a minimum of 50% of the variable pay should be via noncash instruments.

• Above 200%, a minimum of 67% of the variable pay should be via noncash instruments.

• shall be limited to a maximum of 300% of the fixed pay; (for the relative performance measurement period).

(c) In the event that an executive is barred by statute or regulation from grant of share-linked instruments, his/her variable pay will be capped at 150% of the fixed pay but shall not be less than 50% of the fixed pay.

(d) The deterioration in the financial performance of the Bank shall generally lead to a contraction in the total amount of variable compensation, which can even be reduced to zero and the proportion of variable pay shall be higher depending on the higher responsibility at higher level.

Share-linked Instruments: Share-linked Instruments consisting of ESOPs or other linked instruments which shall be forming part of variable pay.

Definitions of certain items in Business ratios / information:

1. Working funds to be reckoned as monthly average of total assets (excluding accumulated losses, if any) as reported to Reserve Bank of India in Form X under Section 27 of the Banking Regulation Act, 1949.

2. Operating profit = (Interest Income Other Income - Interest expenses - Operating expenses).

3. Return on Assets has been calculated on yearly average of total assets.

4. “Business" is the total of monthly average of net advances and deposits (net of inter-bank deposits).

5. Productivity ratios (Business per employee and Profit per employee) are based on monthly average of employees count.

6. Net Interest Margin is Net Interest Income/ Average Earning Assets. Net Interest Income= Interest Income -Interest Expense and Average Earning Assets is monthly average of total of net advances, invetments and balance with banks and money at call and short notice.

7. Cost of Deposit is calculated based on weighted average interest rate of deposits.

The Bank has compiled the data for the purpose of this disclosure from its internal MIS system/reports and has been

relied upon by the auditors.

c) Marketing and distribution

The Bank does not received any fees/remuneration in respect of Marketing and Distribution function (excluding bancassurance business) during the year ended March 31, 2022 (Previous year: Nil).

f) Implementation of IFRS converged Indian Accounting Standards (Ind AS)

As per the RBI circular RBI/2015-16/315 DBR.BP.BC. No.76/21.07.001/2015-16 dated February 11,2016 Implementation of Indian Accounting Standards (Ind AS), The banks are advised to follow the Indian Accounting Standards as notified under the Companies (Indian Accounting Standards) Rules, 2015, subject to any guideline or direction issued by the the Reserve Bank in this regard. The Banks in India currently prepare their financial statements as per the guidelines issued by the RBI, the Accounting Standards notified under section 133 of the Companies Act, 2013 and generally accepted accounting principles in India (Indian GAAP). In January 2016, the Ministry of Corporate Affairs issued the roadmap for implementation of new Indian Accounting Standards (Ind AS), which were based on convergence with the International Financial Reporting Standards (IFRS), for scheduled commercial banks, insurance companies and non-banking financial companies (NBFCs). In March 2019, RBI deferred the implementation of Ind AS for banks till further notice as the recommended legislative amendments were under consideration of Government of India. The Bank had undertaken preliminary diagnostic analysis of the GAAP differences between Indian GAAP vis-a-vis Ind AS and shall proceed for ensuring the compliance as per applicable requirements and directions in this regard.

*Includes an additional contingency provision of'' 211.17 crores as at March 31, 2022 (previous year: 101.88 crore), of which the additional provision for the accounts restructured under RBI Resolution framework is at'' 53.62 crore as at March 31, 2022 (previous year: 31.88 crore).

3 Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the bank

During the year ended March 31, 2022 and March 31, 2021, the Bank has not exceeded the prudential credit exposure limit as prescribed by the Reserve Bank of India in respect of Single Borrower and Group Borrowers.

* Gross amount required to be spent by the Bank during the year includes unspent for financial year ended March 31, 2021 of '' 3.45 Crores.

** Amount spent/incurred during the year includes '' 3.15 Crores related to financial year ended March 31, 2021 out of the earmarked bank accounts for the said year.

***Pursuant to Section 135 (5) & (6) of Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy} Rules, 2014 (Amended), Bank will transfer '' 8.22 crores in “Unspent CSR Account" within a period of 30 days from the end of financial year for the CSR Ongoing projects for spending over the following 3 years period on ongoing CSR sub Committe projects. With respect to financial year ended March 31, 2021 bank had duly deposited the unspent/incurred amount within 30 days from the close of the year into said years “Unspent CSR Account”, in which '' 0.31 crores remains to be spent on such ongoing approved CSR projects.

7 Small and micro industries

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments. The above is based on the information available with the Bank which has been relied upon by the auditors.

8 Proposed dividend

For the Financial year ended March 31, 2022, the Board of Directors at their meeting proposed a dividend of '' 1 per share at 10% (pre-bonus issue) or '' 0.50 per share at 5% (post-bonus issue) for the year ended March 31, 2022 (previous year: '' NIL Per share) which is subject to shareholders approval in ensuing Annual General Meeting. In terms of revised Accounting Standard (AS) 4 ‘Contingencies and Events occurring after the Balance sheet date'' as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank has not appropriated proposed dividend aggregating '' 31.49 crore from Profit and Loss Account. However, the effect of the proposed dividend has been reckoned in determining Capital funds in the computation of capital adequacy ratio as at March 31, 2022.

9 Bonus shares

The Board of Directors as its meeting held on April 26, 2022 has approved issue of bonus Equity shares, in the proportion of 1:1, i.e. 1 (One) bonus equity share for every 1 (One) fully paid-up equity shares held as on the record date, subject to the approval of Shareholders of the Bank. On completion of bonus issue, the Earnings Per Share for all periods presented will be adjusted retrospectively.

10 As part of the normal banking business, the Bank grants loans and advances to its borrowers with permission to lend/invest or provide guarantee/security in other entities identified by such borrowers or on the basis of the basis of security/guarantee provided by the co-borrower. Similarly, the Bank may accept funds from its customers, who may instruct the Bank to lend/invest/provide guarantee or security or the like against such deposit in other entities identified by such customers. These transactions are part of Bank''s normal banking business, which is conducted after exercising proper due diligence including adherence to "Know Your Customer" guidelines.

Other than the nature of transactions described above:

• No funds have been advanced or loaned or invested by the Bank to or in any other person(s) or entity(ies) (“Intermediaries") with the understanding that the Intermediary shall lend or invest in party identified by or on behalf of the Bank (Ultimate Beneficiaries).

• The Bank has not received any fund from any party(s) (Funding Party) with the understanding that the Bank shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Bank (“Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries."

11 The outbreak of COVID-19 pandemic across the globe and in India has contributed to a significant volatility in the financial markets and slowdown in the economic activities. Consequent to the outbreak of the COVID-19 pandemic, the Indian government announced a lockdown in March 2020. Subsequently, the national lockdown was lifted by the government, but regional restrictions continued to be implemented in areas as India witnessed two more waves of the Covid-19 pandemic during the year ended March 31, 2022. Currently, while the number of new Covid-19 cases have reduced significantly and the Government of India has withdrawn most of the Covid-19 related restrictions, the Bank continues to carry an additional contingency provision of '' 211.17 Crore as at March 31, 2022, which includes the additional provision for the accounts restructured under RBI Resolution framework. Further, during the year, the Bank had created a floating provision of '' 41.00 Crore. As at March 31, 2022, the Bank holds an aggregate provision of '' 904.34 Crore against advances (Other than standard assets provision of '' 277.27 Crore).

13 Disclosures on Change in Ownership of Projects Under Implementation:

The Bank does not have any account which are currently under the scheme of Change in Ownership of Projects Under Implementation as on March 31, 2022 (Previous year: Nil).

14 Inter-bank Participation with risk sharing:

During the year the Bank has not entered into any inter-bank participation with risk sharing (Previous year: '' 142.12 crores).

15 Investor education and protection fund

There is no amount required to be transferred to Investor Education and Protection Fund by the Bank. (Previous year: Nil)

18 The Code on Social Security, 2020

The Code on Social Security, 2020 (‘Code'') relating to employee benefits during employment and postemployment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified and the final rules/interpretation have not yet been issued. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.

FY 2021-22

As on April 08, 2022, '' 0.95 crore and as non-cash variable pay has been approved by RBI for performance of FY 2020-21 for Mr. Uttam Tibrewal, WTD.

FY 2020-21

The Bank has granted 38,702 and 10,18,758 stock options on October 27, 2017 under Plan A3 and Plan B5, respectively, to Whole time Director which were pending for RBI Approval. During the year ended March 31, 2021, RBI pursuant to its letter intimated the Bank that the ESOPs granted to Whole time Director pertains to the period prior to his appointment as the whole-time director of the Bank and thus, the approval of RBI is not required, and the Board of Directors of the Bank may take appropriate decision in this regard subject to adherence to statutory norms, as applicable. Pursuant to this letter, associated cost of '' 58.95 Crore pertaining to these ESOPs has been charged to profit and loss account for the year ended March 31,2021.

The Bank has granted 99,800¹ stock options on September 04, 2020 under ESOP scheme 2018 to Whole time Director for performance of FY 2019-20 which were pending for RBI Approval. Accordingly, these options have not been considered for the purpose of computing the impact of ESOP fair value on profit before tax. The vesting period for these options will be in accordance with the RBI approval received.

26 Employee benefits

(a) Defined benefit plans Gratuity

The gratuity plan provides a lumpsum payment to vested employees at retirement or on termination of employment based on respective employee''s salary and years of employment with the Bank considering the ceiling of gratuity amount of '' 0.20 crore.

(b) Defined contribution plans Provident fund

The Bank makes Provident Fund contributions to a defined contribution retirement benefit plans for qualifying employees. Under the schemes, the bank is required to contribute a specified percentage of the payroll costs to the Provident Fund Commissioner to fund the benefits.

The Bank recognized '' 51.27 Crore (previous year '' 33.63 Crore) for provident fund contributions in the Profit and Loss Account. The contributions payable to these plans by the Bank are at rates specified in the rules of the schemes.

(c) Compensated absences

The Bank has provided for compensatory leaves which can be availed and not encashed as per policy of the Bank as present value obligation of the benefit at related current service cost measured using the Projected Unit Credit Method on the basis of an actuarial valuation. The Bank has accordingly booked '' 12.83 Crore (previous year reversed '' 4.87 Crore) in the books of accounts for the year.

27 The financial statements as at and for the year ended March 31,2021, have been audited by the predecessor auditor - S.R. Batliboi & Associates LLP, Chartered Accountants. The report of the predecessor auditor on the comparative financial statements dated April 29, 2021 expressed an unmodified opinion.

28 Comparative figures

Figures for the previous year have been regrouped and reclassified wherever necessary to conform to the current year''s presentation.

1

In view of communication received from RBI, the revised proposal for grant of 15,000 ESOPs was submitted to RBI in place of earlier submitted proposal for grant of 99,800 ESOPs and post consideration, RBI approved for ESOPs valuing at '' 0.52 crore i.e. 8,585 ESOPs on July 20, 2021.

---

Mar 31, 2021

A. Disclosures as Laid Down by RBI Circulars 1 Capital Adequacy Ratio

The Capital adequacy ratio ("CAR") has been computed as per operating guideline for Small Finance Bank in accordance with RBI Circular No. RBI/2016-17/81DBR. NBD.No.26/16.13.218/2016-17 dated October 6, 2016.

The Bank has followed Basel II standardized approach for credit risk in accordance with the Operating Guideline issued by the Reserve Bank of India for Small Finance banks. Further, the RBI vide its circular No. DBR.NBD.No. 4502/16.13.218/2017-18 dated November 8, 2017 has provided an exemption to all small Finance banks whereby no separate capital charge is prescribed for market risk and operational risk.

The total Capital Adequacy ratio of the Bank as at March 31, 2021 is 23.37% (previous year: 21.99%) against the regulatory requirement of 15.00% as prescribed by RBI.

The Bank has also considered an additional Risk Weight of 25% on assets under lien for its "grandfathered" legacy borrowings as per instructions received from RBI.

No Capital Conservation Buffer and Counter - Cyclical Capital Buffer is applicable on Small Finance Bank (SFB) as per operating guidelines issued on SFB by RBI.

* During the year ended March 31, 2021, the Bank has received an amount of '' 625.50 crore upon allotment of 50,00,000 equity shares of face value '' 10 each, at an issue price of'' 1,251 per share pursuant to Qualified Institutional Placement (QIP).

During the year ended March 31, 2020, the Bank has received an amount of'' 525.00 crore (the “Balance Consideration”) upon allotment of equity shares against 1,01,04,364 convertible warrants pursuant to exercise of option by the warrant holder. These warrants are converted into 1,01,04,364 equity share of the Bank of face value '' 10 each, at an issue price of'' 692.77 per share aggregating to '' 700.00 crore out of which '' 175.00 crore (the “Upfront Consideration”) was received during the year ended March 31, 2019.

Further the Bank allotted 30,90,063 equity shares (previous year: 16,61,477 equity shares) aggregating to paid up share capital of '' 3.09 crore (previous year: '' 1.66 crore) and the reserves of the Bank have increased by '' 29.39 crore (previous year: '' 19.06 crore) in respect of stock options exercised.

2.5 Sale and Transfers to / from HTM Category

During the year ended March 31, 2021 and the previous year ended March 31, 2020 the Bank has not sold and transferred securities to or from HTM category exceeding 5% of the book value of investment held in HTM category at the beginning of the year. The 5% threshold referred to above does not include onetime transfer of securities to/from HTM category with the approval of Board of Directors permitted to be undertaken by banks as per extant RBI guidelines, sale of securities under pre-announced Open Market Operation (OMO) auction to the RBI and sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM.

3 Derivatives / Exchange traded Interest derivatives / Risk exposures in derivatives

The bank has not entered into any derivative instruments for trading / speculative purposes either in Foreign Exchange or domestic treasury operations and Bank does not have any Forward Rate Agreement or Interest rate swaps during the year ended March 31, 2021 and March 31,2020.

Definitions of certain items in Business ratios / information:

1. Working funds to be reckoned as monthly average of total assets (excluding accumulated losses, if any) as reported to Reserve Bank of India in Form X under Section 27 of the Banking Regulation Act, 1949.

2. Operating profit = (Interest Income Other Income - Interest expenses - Operating expenses).

3. Return on Assets has been calculated on yearly average of total assets.

4. “Business" is the total of monthly average of net advances and deposits (net of inter-bank deposits).

5. Productivity ratios (Business per employee and Profit per employee) are based on monthly average of employees count.

The Bank has compiled the data for the purpose of this disclosure from its internal MIS system/reports and has been furnished by the Management which has been relied upon by the auditors.

7.3 Details of risk category wise country exposure

The Bank does not have any country risk exposure other than "home country exposures" and accordingly, no provision is maintained with regard to country risk exposure (Previous year Nil).

7.4 Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the bank

During the year ended March 31, 2021 and March 31, 2020, the Bank has not exceeded the prudential credit exposure limit as prescribed by the Reserve Bank of India in respect of Single Borrower and Group Borrowers.

7.5 Unsecured Advances

The Bank has not extended any advances where the collateral is an intangible asset such as a charge over rights, licenses, authorisations, etc. (Previous year Nil). The unsecured advances of '' 1,540.71 crore (Previous year: '' 806.24 crore) as disclosed in Schedule 9 are without any collateral security.

8 Penalties levied by the RBI

During the year ended March 31, 2021, RBI has not imposed any penalty (Previous year: '' 0.001 crore for not exchanging soiled notes at a branch).

11 Draw down from reserves

There has been no draw down from reserves during the year ended March 31, 2021 and March 31, 2020 other than those disclosed under Schedule 2. Share premium has been utilised for share issue expenses as per RBI approval received before adoption of financial statement.

12 Disclosure for Customer Complaints

(A) Complaints received by the bank from its customers

#Consequent to outbreak of the COVID-19 pandemic, including the current “second wave" that has significantly increased the number of cases in India. Accordingly, the Bank has made accelerated provision amounting to '' 279.07 crore on existing Gross Non-Performing Assets as on March 31, 2021.

*March 31, 2021: Includes contingency provisions of '' 101.88 crore as at March 31, 2021 for the accounts restructured under RBI Resolution framework and against any further potential impact of COVID-19, netted off with general provision of '' 138.38 crore made by Bank as on March 31,2020.

March 31, 2020: Includes general provision of '' 138.38 crore made by Bank in respect of accounts in default but standard against the potential impact of COVID-19.

13 Disclosure of Letters of Comfort (LoC) issued by the Bank

The Bank has not issued any Letter of Comfort during the period ended March 31, 2021 and March 31, 2020.

14 Provisioning Coverage Ratio

The Provision Coverage Ratio (PCR) (excluding standard assets provision and general provision on advances due to COVID-19) of the Bank is 49.81% as at March 31, 2021 (previous year: 52.78%).

19 Overseas assets, NPAs and revenue

The Bank does not have any overseas branches and hence the disclosure regarding overseas assets, NPAs and revenue is not applicable (Previous Year : Nil).

20 Off Balance Sheet SPVs sponsored

There are no Off-Balance Sheet SPVs sponsored by the Bank, which need to be consolidated as per accounting norms.

21 Disclosures on remuneration Qualitative Disclosures:

(a) Information relating to the composition and mandate of the Nomination and Remuneration Committee:

In compliance of Companies Act 2013, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, Banking Regulation Act 1949 and other guidelines as applicable, the Board of Directors has constituted Nomination and Remuneration Committee (NRC) to oversee the framing, review, and implementation of the Compensation Policy of the Bank. This committee works in coordination with Risk Management Committee & Audit Committee of the Board, for achieving effective alignment between risk and remuneration.

As on March 31, 2021, the Nomination and Remuneration Committee consist of NonExecutive (independent) Directors and the said composition is in line with the applicable guidelines.

The Composition of N RC committee is as follows:

• Mr. M S Sriram - Independent Director (Chairman)

• Mr. Krishan Kant Rathi - Independent Director

• Ms. Jyoti Narang - Independent Director

Note:

• The composition of NRC committee was revised on 12^th March 2021, Mr. M S Sriram was designated as Chairman & member of

the NRC committee, Mr. Raj Vikash Verma ceased to be member and Mr. Krishan Kant Rathi was designated as member in place of Chairman of the committee w.e.f. 12^th March 2021.

• All members of Nomination & Remuneration Committee are also member of Risk Management Committee of the Board.

The roles and responsibilities of the Nomination

and Remuneration Committee (NRC) are as

under:

(i) Assist the Board in formulation and implementation of compensation policy and lay down the criteria for remuneration of directors, Key Management Personnel (KMPs) and Senior Management Personnel (SMPs), Material Risk Takers (MRTs), Control Function Staff and other employees.

(ii) Take inputs from the Risk Management Committee of the Board to ensure balance between remuneration and risks as required. The committee shall ensure that the mix of Fixed and Variable forms of compensation is consistent with risk alignment and objectives of the Bank.

(iii) Lay down the comprehensive criteria for assessment in terms of qualifications, positive attributes, independence, professional experience, track record, integrity and considering other parameters for appointment of directors, KMPs and SMPs.

(iv) Develop policies and lay down criteria for appointment/removal/reappointment of the Directors of the Board capturing the statutory and regulatory requirements.

(v) Assist in defining the performance evaluation criteria for Directors and other KMPs and ensure that relationship of remuneration to performance is clear and meets appropriate performance benchmarks.

(vi) Ensure that the compensation policy formulated for remuneration of Directors, KMPs and SMPs is reasonable and sufficient

to attract, retain and motivate quality talent required to run the Bank.

(vii) Ensure Bank''s compensation policy provides a fair and consistent basis for motivating and rewarding employees appropriately according to their performance, job profile, their contribution, skill, and competence and also review compensation levels of the Bank''s employees vis-a-vis other banks and the banking industry in general.

(viii) Ensure that the compensation for directors, KMPs, SMPs is a mix of fixed and variable pay and such compensation that reflects short and long-term performance objectives appropriate to the working and the goals of the Bank.

(ix) Ensure that appropriate procedures are in place to assess Board effectiveness and also provide the suggestions on governance to the Board of directors.

(x) Review and oversee the Employee Benefits program of the Bank including deferred benefits and

(xi) Assessing the integrity and suitability, financial position, cross check of any criminal records, civil actions undertaken, refusal of admission to or expulsion from professional bodies, sanctions applied by regulators or similar bodies and previous questionable business practice are considered for a candidate.

(b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy:

Designing and structuring of Remuneration process is governed by the Compensation Policy of the Bank, and below are the key features and objectives of the policy :

• Establish standards on compensation/ remuneration including fixed and variable pay covering share-linked instruments, which are in alignment with the applicable rules and regulations and is based on the trends and practices of remuneration prevailing in the industry.

• Retain, motivate, and promote talent and to ensure long term sustainability of talented Director, KMP, SMP, MRT, Control Function Staff and other employees as applicable.

• Define internal guidelines for payment of other reimbursement to the Directors and KMPs.

• Institutionalize a mechanism for the appointment/ removal/ resignation/ evaluation of performance of Directors

• Perform such functions as are required to be performed by the Nomination and Remuneration committee under the SEBI (Share Based Employee Benefits) Regulations, 2014, including the following:

(a) administering the ESOP plans;

(b) determining the eligibility of employees to participate under the ESOP plans;

(c) granting options to eligible employees and determining the date of grant;

(d) determining the number of options to be granted to an employee;

(e) determining the exercise price under the ESOP plans and

• Ensure compliance with applicable laws, rules, and regulations as well as ‘Fit and Proper criteria'' of directors before their appointment.

(c) Description of the ways in which current and future risks are taken into account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks:

The Key parameters taken into account for the structuring of remuneration covering fixed pay and variable pay are mentioned below:

(i) Risk factors that are significant to the Banking operations of the Bank are taken into consideration in devising the remuneration structure and it is symmetric to the risk outcomes.

(ii) Compensation payout is scheduled in manner where sensitivity to time horizon of risks is taken into consideration in the review process.

(iii) Individual performance is reviewed on the basis of Key Responsibility Areas (KRAs) and the review is carried out under the Annual Performance Review (APR) of the Bank.

(iv) Industry Benchmarking, inflation and increase of cost of living.

In addition, it includes a ‘malus'' and ‘clawback'' option to take care of any disciplinary issue or future drop in performance of individual/ business/ Bank.

(d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration:

Individual performances are assessed in line with business/ individual delivery of the Key responsibility Areas (KRAs), top priorities of business, budgets, and overall contribution to the organisation etc. The goal sheet is in place in Human Capital Management (HCM) Software and the evaluation of annual performance is carried out in the same.

In linking the performance and level of remuneration, the job roles, levels, business budgets, risk factors, achievement of individual KRAs are taken into consideration for taking decision in this regard.

(e) A discussion of the Bank''s policy on deferral and vesting of variable remuneration and a discussion of the Bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting:

In compliance of RBI Guidelines on Compensation of Whole Time Directors/ Chief Executive Officers/ Material Risk Takers and Control Function staff dated 4^th November 2019 Bank has formulated Compensation Policy that covers all aspects of the compensation structure such as Fixed pay, Variable Pay and deferral pay.

The Variable Pay of senior executives, including WTDs, and other employees who are MRTs shall be deferred over the period so that compensation is adjusted for all types of risks that organisation may be exposed to.

The deferral period shall be a minimum of three years. This would be applicable for both the cash and non-cash components of the variable pay:

a) A minimum of 60% of the total variable pay must invariably be under deferral arrangements.

b) If cash component is part of variable pay, at least 50% of the cash bonus shall also be deferred and where the cash component of variable pay is under '' 0.25 crore in a year, deferral requirements shall not be applicable.

c) Deferred remuneration should either vest fully at the end of the deferral period or be spread out over the course of the deferral period. The first such vesting should be not before one year from the commencement of the deferral period and shall not take place more frequently than on a yearly basis.

d) The vesting should be no faster than on a pro rata basis.

The adjustment of Variable Pay before and after the vesting shall be considered in the event of subdued or negative financial performance of the bank and/or the relevant line of business in any year and the malus/clawback arrangements shall be invoked subject to due assessment.

(f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilizes and the rationale for using these different forms:

The Variable pay consist of Cash, Share linked Instrument and same is decided considering risk factors, job profile, level of performance and industry norms to ensure that employee

morale is high and to promote consistency in performance over the time horizon.

The breakup of variable remuneration is the follows:

Variable Pay: Variable pay compensation is paid depending upon the performance of the Employees against set key responsibility areas (KRAs) and it is ensured that there is a proper balance between fixed pay and variable pay while devising the remuneration structure.

(a) A substantial proportion of compensation i.e., at least 50%, should be variable and paid on the basis of individual, business performance & other parameters and this shall not be applicable on risk control function staff.

(b) In case variable pay is:

• Up to 200% of the fixed pay, a minimum of 50% of the variable pay should be via non-cash instruments.

• Above 200%, a minimum of 67% of the variable pay should be via non-cash instruments.

• shall be limited to a maximum of 300% of the fixed pay; (for the relative performance measurement period).

(c) In the event that an executive is barred by statute or regulation from grant of share-linked instruments, his/her variable pay will be capped at 150% of the fixed pay but shall not be less than 50% of the fixed pay.

(d) The deterioration in the financial performance of the Bank shall generally lead to a contraction in the total amount of variable compensation, which can even be reduced to zero and the proportion of variable pay shall be higher depending on the higher responsibility at higher level.

Share-linked Instruments: Share-linked Instruments consisting of ESOPs or other linked instruments which shall be forming part of variable pay.

22 Credit default swaps

The Bank has not transacted in credit default swaps during the period ended March 31, 2021. (Previous year: Nil)

23 Intra-Group exposure

The Bank does not have any exposure (advances/investments) within the group. (Previous year: Nil)

24 Transfers to Depositor Education and Awareness Fund (DEAF)

During the year ended March 31, 2021 and March 31, 2020 the Bank was not required to transfer any amount to Depositor Education and Awareness Fund.

25 Unhedged foreign currency exposure

RBI, through its circular dated January 15, 2014 had advised banks to create incremental provision on standard loans and advances to entities with unhedged foreign currency exposure (UFCE). The Bank assesses the UFCEs of the borrowers through its credit appraisal and internal ratings process. The Bank also undertakes reviews of such exposures through thematic reviews evaluating the impact of exchange rate fluctuations on the Bank''s portfolio on an yearly basis.

The Bank made provision amounting to '' 0.02 crore during the year ended March 31,2021 (year ended March 31, 2020: Nil). The Bank held no incremental capital on March 31, 2021 on advances to borrowers with UFCE (March 31, 2020: Nil).

ii) Qualitative disclosure on Liquidity Coverage Ratio (LCR):

To assess Bank''s resilience in liquidity stress scenario of 30 days with its high-quality liquid assets, Banks need to compute Liquidity Coverage Ratio (LCR) as per RBI - Basel III Framework on Liquidity Standards. High Ratio signifies Bank has enough liquid assets which it can use to fulfil its liquidity obligations in acute stress scenario. Ratio to compute as below :

_ Stock of High Quality Liquid Assets (HQLA)

LCR “

Net Cash Outflows over a 30 days period

Stock of High Quality Liquid Asset is total funds liquid assets could generate in stress scenario. Net Cash outflows is the difference as derived by multiplying the outstanding balances of various categories or types of liabilities by the outflow run-off rates and cash inflows are calculated by multiplying the outstanding balances of various categories of contractual receivables by the rates at which they are expected to flow in.

Minimum Requirement for Small Finance Banks (as per operating guidelines for Small Finance Banks RBI/2016-17/81 DBR.NBD.No.26/16.13.218/2016-17 dated Oct 06, 2016 & RBI circular RBI/2019-20/217 DOR.BP.BC. No.65/21.04.098/2019-20 dated Apr 17,2020) is as below:

The Bank has implemented LCR framework and has consistently maintained the LCR percentage well above the regulatory threshold limit. The average LCR for the quarter ended March 31,2021 was 116% which is above the regulatory limit of 90%. For the quarter ended March 31, 2021 HQLA stood at '' 8,852 crore.

Asset Liability Committee (ALCO) of the Bank is the primary governing body for Liquidity Risk Management, Treasury is entrusted with the responsibility, under the guidance of the ALCO operationalizing liquidity management within the Bank. ALM Risk unit independently measures, monitors & report Liquidity Risk as per regulatory & internal guidelines.

In computing the above information, certain estimates and assumptions have been made by the Bank''s Management which have been relied upon by the auditors.

28 Divergence in the asset classification and provisioning

RBI vide its circular DBR.BP.BC.No.63/21.04.018/2016-17 dated April 18, 2017 and Notification dated 1^st April 2019, has directed banks shall make suitable disclosures, if either or both of the following conditions are satisfied:-

(a) the additional provisioning for NPAs assessed by RBI exceeds 10 per cent of the reported profit before provisions and contingencies for the reference period, and

(b) the additional Gross NPAs identified by RBI exceed 15 per cent of the published incremental Gross NPAs for the reference period.

There has been no material divergence observed by the RBI for the financial year 2019-20 (as per assessment by the RBI during financial year 2020-21) in respect of the Bank''s asset classification and provisioning under the extant prudential norms on income recognition asset classification and provisioning (IRACP) which require such disclosures.

The Bank has not been subjected to any assessment by the RBI during the financial year 2019-20 in respect of Financial year 2018-19.

34 Small and micro industries

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments. The above is based on the information available with the Bank which has been relied upon by the auditors.

35 Proposed dividend

The Reserve Bank of India (RBI), vide notification dated December 4, 2020, stated that in view of the ongoing stress and heightened uncertainty on account of COVID-19, banks should continue to conserve capital to support the economy and absorb losses. The notification also stated that in order to further strengthen the banks'' balance sheets, while at the same time support lending to the real economy, banks shall not make any dividend payment on equity shares from the profits pertaining to the financial year ended March 31, 2020. The Bank did not declare final dividend for the financial year ended March 31, 2020.

Given that the current "second wave" has significantly increased the number of COVID-19 cases in India and uncertainty remains, the Board of Directors of the Bank, at its meeting held on April 29, 2021, has considered it prudent to currently not propose dividend for the financial year ended March 31,2021.

36 Disclosures on the Scheme for Sustainable Structuring of Stressed Assets (S4A) :

The Bank does not have any account under the Scheme for Sustainable Structuring of Stressed Assets (S4A) as on March 31, 2021.(Previous year: Nil).

37 Disclosures on Flexible Structuring of Existing Loans :

The Bank does not have any account under the Scheme Flexible Structuring of Existing Loans as on March 31, 2021. (Previous year: Nil)

38 Resolution of Stressed Assets - Revised Framework

The Bank is having one loan account for resolution of stressed Assets (Revised framework) amounting to '' 0.76 crore as on March 31,2021 (Previous year : '' 41.67 crore) as per RBI Circular RBI/2017-18/131DBR.No.BP. BC.101 /21.04.048/2017-18 and RBI/2018-19/203 DBR.No.BP.BC.45/21.04.048/2018-19 where resolution plan has been submitted by one of the lead Banker on March 30, 2020.

40 Disclosures on Strategic Debt Restructuring Scheme (SDR):

The Bank does not have any accounts under SDR as on March 31, 2021. (Previous year: Nil)

41 Disclosures on Change in Ownership outside SDR Scheme:

The Bank does not have any account which are currently under the scheme of Change in Ownership Outside SDR as on March 31, 2021. (Previous year: Nil)

42 Disclosures on Change in Ownership of Projects Under Implementation:

The Bank does not have any account which are currently under the scheme of Change in Ownership of Projects Under Implementation as on March 31,2021.(Previous year: Nil)

43 Details of factoring exposure:

The factoring exposure of the Bank as at March 31, 2021 is Nil.(Previous year: Nil)

44 Inter-bank Participation with risk sharing:

During the year the Bank has entered into inter-bank participation with risk sharing amounting to '' 142.12 crore. (Previous year: Nil)

45 Investor education and protection fund

There is no amount required to be transferred to Investor Education and Protection Fund by the Bank. (Previous year: Nil)

The RBI on March 27, 2020, April 17, 2020, and May 23, 2020, announced ‘COVID-19 Regulatory Package'' on asset classification and provisioning. In terms of these RBI guidelines, the Bank has granted a moratorium of six months on payment of all instalments / interest as applicable, falling due between March 1, 2020 and August 31, 2020 (‘moratorium period'') to all eligible borrowers classified as standard, even if overdue, as on February 29, 2020. In respect of such accounts that were granted moratorium, the asset classification remained standstill during the moratorium period.

51 Disclosure related to Refund/adjustment of “Interest on interest”

In accordance with RBI notification dated April 7, 2021, the Bank is required to refund/adjust ‘interest on interest'' to borrowers. As required by the RBI notification, the methodology for calculation of such interest on interest has recently been circulated by the Indian Banks'' Association. The Bank is in the process of suitably implementing this methodology. At March 31,2021, the Bank has created a liability towards estimated interest relief of '' 5 crore and reduced the same from the interest income.

52 The Code on Social Security, 2020

The Code on Social Security, 2020 (‘Code'') relating to employee benefits during employment and post-employment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified and the final rules/interpretation have not yet been issued. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.

FY 2020-21

The Bank has granted 38,702 and 10,18,758 stock options on October 27, 2017 under Plan A3 and Plan B5, respectively, to Whole time Director which were pending for RBI Approval. During the year ended March 31, 2021, RBI pursuant to its letter intimated the Bank that the ESOPs granted to Whole time Director pertains to the period prior to his appointment as the whole-time director of the Bank and thus, the approval of RBI is not required, and the Board of Directors of the Bank may take appropriate decision in this regard subject to adherence to statutory norms, as applicable. Pursuant to this letter, associated cost of '' 58.95 crore pertaining to these ESOPs has been charged to profit and loss account for the year ended March 31, 2021.

The Bank has granted 99,800 stock options on September 04, 2020 under ESOP scheme 2018 to Whole time Director which are pending for RBI Approval. Accordingly, these options have not been considered for the purpose of computing the impact of ESOP fair value on profit before tax. The vesting period for these options will be in accordance with the RBI approval received.

7 Accounting for employee share based payments (contd.)FY 2019-20

The Bank has granted 10,00,000 stock options on August 30, 2018 under Plan D1 to Whole Time Director however the bank has received RBI approval on June 17, 2019. Vesting period for these options commenced from the RBI approval date and accordingly these options have been considered for the purpose of computing the ESOP cost as per Plan D5.

The Bank has granted 38,702 and 10,18,758 stock options on October 27, 2017 under Plan A3 and Plan B5, respectively, to Whole time Director which were pending for RBI Approval. During the year ended March 31, 2020, the bank has submitted the revised proposal to RBI and the approval of the RBI is pending as at March 31,2020. Accordingly, these options have not been considered for the purpose of computing the impact of ESOP fair value on profit before tax. The vesting period for these options will commence only after the RBI approval is received.

8 Employee benefits

(a) Defined benefit plans

Gratuity

The gratuity plan provides a lumpsum payment to vested employees at retirement or on termination of employment based on respective employee''s salary and years of employment with the Bank considering the ceiling of gratuity amount of '' 0.20 crore.

8 Employee benefits (contd.)(b) Defined contribution plans Provident fund

The Bank makes Provident Fund contributions to a defined contribution retirement benefit plans for qualifying employees. Under the schemes, the bank is required to contribute a specified percentage of the payroll costs to the Provident Fund Commissioner to fund the benefits.

The Bank recognized '' 33.63 crore (Previous year '' 24.96 crore) for provident fund contributions in the Profit and Loss Account. The contributions payable to these plans by the Bank are at rates specified in the rules of the schemes.

(c) Compensated absences

The Bank has provided for compensatory leaves which can be availed and not encashed as per policy of the Bank as present value obligation of the benefit at related current service cost measured using the Projected Unit Credit Method on the basis of an actuarial valuation. The Bank has accordingly reversed '' 4.87 crore (Previous year booked '' 5.00 crore) in the books of accounts for the period.

9 Comparative figures

Figures for the previous year have been regrouped and reclassified wherever necessary to conform to the current year''s presentation.

---

Mar 31, 2019

1. Background

AU Small Finance Bank Limited (formerly known as Au Financiers (India) Limited) (“AUSFBL” or “the Company” or “the Bank”) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956.

The Company had originally obtained its license from Reserve Bank of India (‘RBI’) to operate as a non-deposit accepting Non-Banking Financial Company (NBFC-ND) on November 7, 2000 vide certificate of registration no. B-10-00139.

The Company has changed its name to AU Small Finance Bank Limited with effect from April 13, 2017 and commenced its operations as a Small Finance Bank from April 19, 2017 pursuant to the approval received from the Reserve Bank of India dated December 20, 2016.

The Bank is engaged in providing a range of banking and financial services including retail banking, wholesale banking and treasury operations and other services. The Bank operates in India only and does not have presence in any foreign country.

The Bank is governed by the Banking Regulation Act, 1949, banking guidelines issued by RBI on Small Finance Bank 2016, and the Companies Act, 2013.

2. Basis of preparation

The financial statements have been prepared under the historical cost convention and on the accrual basis of accounting, unless otherwise stated and complying with the requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of the Bank which is used in the preparation of financial statements conform to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by RBI from time to time, the accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014, Companies (Accounting Standards) Amendment Rules, 2016 in so far as they apply to banks. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.

3. Use of estimates

The preparation of the financial statements in conformity with Indian GAAP as applicable to Banks requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses for the reporting period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Actual results could differ due to these estimates. Any revision in the accounting estimates is recognized prospectively in the current and future periods.

Amounts in notes forming part of the financial statements for the year ended March 31, 2019 are denominated in rupee crore to conform to extant RBI guidelines.

A. Disclosures as Laid Down by RBI Circulars

1 Capital Adequacy Ratio

The Capital adequacy ratio (“CAR”) has been computed as per operating guideline for Small Finance Bank in accordance with RBI Circular No. RBI/2016-17/81DBR. NBD.No.26/16.13.218/2016-17 dated October 6, 2016.

The Bank has followed Basel II standardized approach for credit risk in accordance with the Operating Guideline issued by the Reserve Bank of India for Small Finance banks. Further, the RBI vide its circular No. DBR.NBD.No. 4502/16.13.218/2017-18 dated November 8, 2017 has provided an exemption to all small Finance banks whereby no separate capital charge is prescribed for market risk and operational risk.

The Bank has considered the Upfront Consideration received during the year for share warrant issued and the funds raised from the issuance of share capital as part of Tier I Capital for the purpose of computation of the Capital Adequacy Ratio as at March 31, 2019.

The total Capital Adequacy ratio of the Bank at March 31, 2019 is 19.31% (previous year: 19.31%) against the regulatory requirement of 15.00% as prescribed by RBI.

The Bank has also considered an additional Risk Weight of 25% on assets under lien for its “grandfathered” legacy borrowings as per instructions received from RBI. The Bank has reduced proposed dividend for computing Capital Adequacy Ratio at March 31, 2019.

No Capital Conservation Buffer and Counter - Cyclical Capital Buffer is applicable on Small Finance Bank (SFB) as per operating guidelines issued on SFB by RBI.

The following table set forth, for the year indicated, computation of Capital adequacy:

*During the year ended March 31, 2019, the Bank has raised additional equity capital through a preferential allotment of 4,330,441 equity shares of Rs. 10 each at an issue price of Rs. 692.77 per share. Accordingly, the paid-up share capital of the Bank has increased by Rs. 4.33 Crore and the reserves of the Bank have increased by Rs. 295.67 Crore. Also the Bank allotted 10,104,364 convertible warrants, each convertible into one equity share of the Bank of face value Rs. 10 each, at an issue price of Rs. 692.77 per share aggregating to Rs. 700.00 Crore out of which Rs. 175.00 Crore (the “Upfront Consideration”) has been received during the current year against allotment of warrant and the balance of Rs. 525.00 Crore (the “Balance Consideration”) shall be received upon allotment of equity shares against such warrants pursuant to exercise of option by the warrant holder. The warrants are exercisable within 18 months from the date of allotment of warrants upon payment of the Balance Consideration. Further the Bank allotted 2,323,425 equity shares (previous year: 1,452,714 equity shares) aggregating to face value Rs. 2.32 crore (previous year: Rs. 1.45 crore) in respect of stock options exercised.

*The Bank has not availed the dispensation provided by RBI circular DBR.No.BP.BC.102/21.04.048/2017-18 dated April 2, 2018 on deferment of mark to market losses on investments classified as AFS/ HFT, and have provided for any depreciation fully as on March 31, 2018.

2.1 Repo Transactions

Details of repo / reverse repo deals (in face value terms) (Including LAF and TREPS) done during the year ended March 31,2019

2.2 Non-SLR investment portfolio

i) Issuer composition of Non SLR Investments

Issuer-wise composition of non-SLR Investments as at March 31, 2019:

Amounts reported under column 4, 5, 6 and 7 above are not mutually exclusive.

* Excludes investments in equity shares in line with extant RBI guidelines.

** Excludes investments in equity shares, Pass Through Certificates (PTC) and Commercial Paper (CP) in line with extant RBI guidelines. $ Others include Investment in PTC.

Amounts reported under column 4, 5, 6 and 7 above are not mutually exclusive.

* Excludes investments in equity shares in line with extant RBI guidelines.

** Excludes investments in equity shares, Pass Through Certificates (PTC) , Commercial Paper (CP) and Certificate of Deposits (CD) in line with extant RBI guidelines.

$ Others include Investment in PTC.

ii) Non performing Non-SLR investments

The Bank does not have any Non performing Non-SLR investment as on March 31, 2019 and March 31, 2018.

2.3 Details of investments category - wise (Net of Provision for Depreciation)

The details of investments held under the three categories viz. Held for Trading (HFT), Available for Sale (AFS) and Held to Maturity (HTM) are as under:

* Others Investment includes Certificate of Deposits amounting of ‘ NIL (previous year: Rs. 149.18 Crore), Commercial Papers of Rs. 1,278.30 Crore (previous year: Rs. 371.58 Crore) and PTC of Rs. 407.29 Crore (previous year: Rs. 135.32 Crore).

Figures Reported above are Net of Provision (Depreciation/NPI)

2.4 Sale and Transfers to / from HTM Category

During the year ended March 31, 2019 and the previous year ended March 31, 2018 the Bank has not sold and transferred securities to or from HTM category exceeding 5% of the book value of investment held in HTM category at the beginning of the year. The 5% threshold referred to above does not include onetime transfer of securities to/ from HTM category with the approval of Board of Directors permitted to be undertaken by banks as per extant RBI guidelines, sale of securities under pre-announced Open Market Operation (OMO) auction to the RBI and sale of securities or transfer to AFS / HFT consequent to the reduction of ceiling on SLR securities under HTM.

3 Derivatives / Exchange traded Interest derivatives / Risk exposures in derivatives

The bank has not entered into any derivative instruments for trading / speculative purposes either in Foreign Exchange or domestic treasury operations and Bank does not have any Forward Rate Agreement or Interest rate swaps during the year ended March 31, 2019 and March 31, 2018.

4.1 Details of Financial Assets sold during the year to Securitisation / Reconstruction Companies (SC/RC)

During the year, there was no sale of non-performing financial assets to Securitisation Company / Reconstruction Company (Previous year Nil).

4.2 Details of book value of investment in security receipts (SRs) backed by NPAs

The Bank has not invested in security receipts during the year and previous year.

4.3 Details of non-performing assets purchased/sold

The Bank did not sell / buy non-performing assets during the year and previous year.

4.4 Provisions on Standard Assets

Definitions of certain items in Business ratios / information:

1. Working funds to be reckoned as average of total assets (excluding accumulated losses, if any) as reported to Reserve Bank of India in Form X under Section 27 of the Banking Regulation Act, 1949 (Previous Year: The Bank has received the schedule commercial bank license in the month of November 2017 and after that started reporting form X. For the period from April 2017 to October 2017 monthly average of total assets have been considered as working funds).

2. Operating profit = (Interest Income Other Income - Interest expenses - Operating expenses).

3. Return on Assets has been calculated on average assets.

4. ”Business” is the total of average of net advances and deposits (net of inter-bank deposits).

5. Productivity ratios are based on average employee numbers.

The Bank has compiled the data for the purpose of this disclosure from its internal MIS system/reports and has been furnished by the Management which has been relied upon by the auditors.

Of the loans given against the mortgage of any real estate, only those loans have been classified as an exposure to commercial real estate, the prospects for repayment in respect of which depend primarily on the cash flows generated by such mortgaged asset.

5.1 Details of risk category wise country exposure

The Bank does not have any country risk exposure other than “home country exposures” and accordingly, no provision is maintained with regard to country risk exposure (previous year Nil).

5.2 Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the bank

During the year ended March 31, 2019 and March 31, 2018, the Bank has not exceeded the prudential credit exposure limit as prescribed by the Reserve Bank of India in respect of Single Borrower and Group Borrowers.

5.3 Unsecured Advances

The Bank has not extended any advances where the collateral is an intangible asset such as a charge over rights, licenses, authorisations, etc. (previous year Nil). The unsecured advances of Rs. 710.07 crore (previous year: Rs. 381.94 crore) as disclosed in Schedule 9 are without any collateral security.

6 Penalties levied by the RBI

No penalty has been levied on the Bank by RBI during the year ended March 31, 2019 and March 31, 2018.

7 Draw down from reserves

There has been no draw down from reserves during the year ended March 31, 2019 and March 31, 2018 other than those disclosed under Schedule 2.

8 Disclosure for Customer Complaints

(A) Status of Customer Complaints

(B) Status of Awards passed by the Banking Ombudsman (BO)

The above details are as furnished by the Management and relied upon by the Auditors.

9 Disclosure of Letters of Comfort (LoC) issued by the Bank

The Bank has not issued any Letter of Comfort during the period ended March 31, 2019 and March 31, 2018.

10 Provisioning Coverage Ratio

The Provision Coverage Ratio (PCR) (excluding Standard Provision) of the Bank is 37.36% as at March 31, 2019 (previous year: 37.22%).

11 Bancassurance Business

Commission, Exchange and Brokerage in Schedule 14 include the following fees earned on Bancassurance business:

12 Concentration of deposits, advances, exposures and NPAs

(i) Concentration of Deposits

(ii) Concentration of Advances

Advances comprise credit exposure (funded and non-funded credit limits).

The Bank has compiled the data for the purpose of this disclosure from its internal MIS system which has been relied upon by the auditors.

(iii) Concentration of Exposures

Exposures comprise credit exposure (funded and non-funded credit limits) including investment exposure.

The Bank has compiled the data for the purpose of this disclosure from its internal MIS system which has been relied upon by the auditors.

(iv) Concentration of NPAs

*Priority sector outstanding total advances includes Rs. 5,331.75 crore (previous year : Rs. 7,806.25 crore), in respect of which the Bank has sold Priority Sector Lending Certificates (PSLC).

During the year ended March 31, 2019, the Bank has bought PSLC amounting Rs. 7,470.00 crore (previous year : ‘ Nil), which is not included in above disclosure.

**Personal loan includes Housing loans.

The Bank has compiled the data for the purpose of this disclosure from its internal MIS system/reports, which has been furnished by the Management and has been relied upon by the auditors.

13 Technical or prudential write-offs

Technical or prudential write-offs refer to the amount of non-performing assets which are outstanding in the books of the branches, but have been written-off (fully or partially) at the head office level. The financial accounting systems of the Bank are integrated and there are no write-offs done by the Bank which remain outstanding in the books of the branches. Movement in the stock of technically or prudentially written-off accounts is given below:

14 Overseas assets, NPAs and revenue

The Bank does not have any overseas branches and hence the disclosure regarding overseas assets, NPAs and revenue is not applicable (previous Year : Nil).

15 Off Balance Sheet SPVs sponsored

There are no Off-Balance Sheet SPVs sponsored by the Bank, which need to be consolidated as per accounting norms.

16 Disclosures on remuneration

A. Qualitative Disclosures:

a) Information relating to the composition and mandate of the Remuneration Committee:

In compliance of Companies Act 2013, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, Banking Regulation Act 1949 and other guidelines as applicable, the Board of Directors through its Nomination and Remuneration Committee (NRC) of the Board oversees the framing, review and implementation of the Compensation policy of the Bank, on behalf of the Board. This committee works in co-ordination with Risk Management Committee of the Bank, in order to achieve effective alignment between risk and remuneration. The Nomination and Remuneration Committee consist of Non-Executive Directors and constitution of the committee is as follows:

Mr. Krishan Kant Rathi - Independent Director (Chairman)

Mr. Mannil Venugopalan - Independent Director

Ms. Jyoti Narang - Independent Director

Mr. Narendra Ostawal - Non- Executive Director

The roles and responsibilities of the Nomination and Remuneration Committee (NRC) are as under:

(i) Assist the Board in formulation and implementation of compensation policy which will lay down the criteria for remuneration of Directors, Key Management Personnel (KMPs) and Senior Management personnel (SMPs) and other employees and take inputs from the Risk Management Committee of the Board to ensure balance between remuneration and risks as required is in place.

It shall ensure that the mix of cash, equity and other forms of compensation must be consistent with risk alignment and objectives of the Bank.

(ii) Lay down the comprehensive criteria for assessment in terms of qualifications, positive attributes, independence, professional experience, track record, integrity and in view of other parameters for appointment of Directors, KMPs and SMPs.

(iii) Develop policies and lay down criteria for appointment/removal/reappointment of the directors of the Board capturing the statutory and regulatory requirements.

(iv) Assist in defining the performance evaluation criteria for Directors and other KMPs and ensure that relationship of remuneration to performance is clear and meets appropriate performance benchmarks.

(v) Ensure that the compensation policy formulated for remuneration of Directors, KMPs and SMPs is reasonable and sufficient to attract, retain and motivate quality talent required to run the Bank.

(vi) Ensure Bank’s compensation policy provides a fair and consistent basis for motivating and rewarding employees appropriately according to their performance, job profile, their contribution, skill and competence and also review compensation levels of the Bank’s employees vis-a-vis other banks and the banking industry in general.

(vii) Ensure that the compensation for directors, KMPs, SMPs is a mix of fixed & variable pay and such compensation that reflects short and long term performance objectives appropriate to the working and the goals of the Bank.

(viii) Ensure that appropriate procedures are in place to assess Board effectiveness and also provide the suggestions on governance to the Board of directors.

(ix) Review and oversee the Employee Benefits program of the Bank including deferred benefits.

(x) Assessing the integrity, suitability, financial position, cross check of any criminal records, civil actions undertaken, refusal of admission to or expulsion from professional bodies, sanctions applied by regulators or similar bodies and previous questionable business practice that are considered for a candidate.

b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy:

Objectives of Compensation Policy:

Ensure compliance with applicable laws, rules and regulations as well as ‘Fit and Proper criteria’ of directors before their appointment.

Establish standards on compensation/ remuneration including fixed and variable, which are in alignment with the applicable rules and regulations and is based on the trends and practices of remuneration prevailing in the industry.

Retain, motivate and promote talent and to ensure long term sustainability of talented KMP, SMP and other employees.

Define internal guidelines for payment of perquisites to the directors and KMP.

Institutionalize a mechanism for the appointment/ removal/ resignation/evaluation of performance of directors.

Perform such functions as are required to be performed by the Nomination and Remuneration committee under the SEBI (Share Based Employee Benefits) regulations, 2014, including the following:

(a) administering the ESOP plans;

(b) determining the eligibility of employees to participate under the ESOP plans;

(c) granting options to eligible employees and determining the date of grant;

(d) determining the number of options to be granted to an employee;

(e) determining the exercise price under the ESOP plans;

(f) Formulation of the criteria for determining qualifications, positive attributes and independence of a Directors and Formulate the criteria for evaluation of performance of all the Directors on the Board, KMPs and SMPs.

The remuneration process is aligned to Bank’s compensation Policy

c) Description of the ways in which current and future risks are taken into account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks:

The Key parameters taken into account for the structuring of remuneration covering fixed pay and variable pay are mentioned below:

(i) Risk factors that are significant to the operations of the Bank are taken into consideration in devising the remuneration structure and it is symmetric to the risk outcomes.

(ii) Compensation pay out is scheduled in manner where sensitivity to time horizon of risks is taken into consideration in the review process.

(iii) Individual performance is reviewed on the basis of Key Responsibility Areas (KRAs) and the same is carried out under the annual performance review (APR) of the Bank.

(iv) Industry Benchmarking, inflation and increase of cost of living.

In addition, remuneration process includes a ‘malus’ and ‘clawback’ option to take care of any disciplinary issue or future drop in performance of individual/ business/ Bank.

d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration:

Individual performances are assessed in line with business/ individual delivery of the Key Result Areas (KRAs), top priorities of business and budgets etc. One of the key factor to be considered for annual performance evaluation is the goal sheet built in Human Capital Management Software (HCMS).

In linking the performance and level of remuneration the job levels, business budgets, risk factors, achievement of individual KRAs are taken into consideration for taking decision in this regard.

e) A discussion of the bank’s policy on deferral and vesting of variable remuneration and a discussion of the bank’s policy and criteria for adjusting deferred remuneration before vesting and after vesting:

Employees are classified into following three categories for the purpose of remuneration:

Category I: Whole Time Directors (WTD)/Chief Executive Officer (CEO)

Category II: Risk Control and Compliance Staff Category III: Other Categories of Staff

Category I

The compensation for all Category 1 employees is approved by the Nomination and Remuneration committee & RBI and the variable pay shall not exceed 70% of the fixed pay.

Category II

The compensation shall be subject to several factors while assessing the remuneration structure of employees with judicious mix of fixed and variable pay in line with industry practices. Key Result Areas (KRAs) of the executives, risk factors, performance vis-a-vis targets will be given suitable weightage for deciding the variable pay and considering principles laid down under compensation policy.

Category III

The employees of the Bank are being appointed by the Human Capital Management team of the Bank. The remuneration structure of employees with judicious mix of fixed and variable pay in line with industry practices.

For adjusting deferred remuneration before and after vesting:

The Bank’s compensation policy provides for following in the event of negative contributions malus arrangement wherein Bank shall withhold vesting of amount of deferred remuneration and clawback arrangement wherein ED’s shall be liable to return previously paid or vested remuneration to the Bank as per the applicable provisions/ guidelines stipulated by RBI.

Malus: Payment of all or part of amount of deferred variable pay can be prevented, this shall be applicable in case of:

(i) Disciplinary Action (at the discretion of the Disciplinary Committee) and/ or

(ii) Significant drop in performance of Individual/ Business (at the discretion of the Nomination & Remuneration Committee).

(iii) Resignation of staff prior to the payment date

Clawback: Previously paid or already vested deferred variable pay may be recovered under this clause. This clause will be applicable in case of Disciplinary Action (at the discretion of the Disciplinary Action Committee and approval of the Nomination & Remuneration Committee).

f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilizes and the rationale for using these different forms:

The Bank remuneration structure is Mix of Fixed Pay, Variable Pay & Deferred compensation methodology, which is reflective of the commitment and philosophy of creating and sharing wealth with the employees. The Variable pay is decided considering risk factors, job profile, level of performance and industry norms to ensure that employee morale is high and to promote consistency in performance over the time horizon. The break up of remuneration is the follows:

Fixed Remuneration: It consists of Basic Salary, House Rent Allowance, conveyance, other allowances and perquisites.

Variable Remuneration: Variable Remuneration is paid as a percentage of Fixed pay, depending upon the performance of the Employees against set key responsibility/results areas (KRAs).

Employee Stock Option: ESOPs are being given to the Executive Directors, KMPs, SMPs and other employees on the basis of their performance against set KRAs, responsibilities, and vintage with the organization.

B. Quantitative Disclosures:

a) Number of meetings held by the Remuneration Committee during the financial year and remuneration paid to its members.

During year ended March 31, 2019, 6 meetings of Nomination and Remuneration committee was held. Each Member of the Nomination and Remuneration committee is paid a sitting fee of Rs. 20,000 per meeting attended.

b) Number of employees having received a variable remuneration award during the financial year.

1 KMP and 5 Senior Management Personnels as risk takers were paid the variable remuneration during the year.

c) Number and total amount of sign-on awards made during the financial year. - Nil (previous year Nil)

d) Details of guaranteed bonus, if any, paid as joining /sign on bonus. - Nil (previous year Nil)

e) Details of severance pay, in addition to accrued benefits, if any. - Nil (previous year Nil)

f) Total amount of outstanding deferred remuneration, split into cash, shares and share-linked instruments and other forms.

Cash - Nil ( previous year Nil)

Outstanding ESOPs as at March 31, 2019 - 27,56,429 equity shares (previous year 35,82,644 equity shares)

g) Total amount of deferred remuneration paid out in the financial year.

Cash - NIL

ESOPs - 1,308,217 Equity Shares exercised (previous year 888,011 Equity Shares exercised).

h) Breakdown of amount of remuneration awards for the financial year to show fixed and variable, deferred and non deferred.

Total fixed salary for the year ended March 31, 2019 - Rs. 7.26 Crores (previous year Rs. 5.58 crore).

Deferred Variable Pay

ESOPs - 5,47,200 equity shares (previous year 30,601 equity shares)

Variable Pay for Mr. Sanjay Agarwal, MD & CEO of Rs. 0.45 Crore for the year FY 2017-18 was approved by Nomination & remuneration committee & Board which is pending with RBI for its approval and no variable pay is proposed for performance of FY 2018-19.

Variable Pay for Mr. Uttam Tibrewal, WTD of Rs. 0.91 Crore, Rs. 0.65 Crore & Rs. 0.75 Crore for the year FY 2016-17, FY 2017-18 and FY 2018-19 was approved by Nomination & remuneration committee & Board, the approval of the same from RBI is awaited.

Non Deferred variable pay

Remuneration award paid during for the year ended March 31, 2019 Rs. 1.50 crore was related to FY 2017-18 and remuneration award for the FY 2018-19 is pending for approval at remuneration committee or RBI (previous Year Rs. 2.30 crore was related to FY 2016-17).

10,00,000 ESOPs under ESOP Scheme 2018 were granted to Mr. Uttam Tibrewal, WTD during the year FY 2018-19 and the same are subject to RBI approval, earlier for FY 2017-18 38,702 ESOPs under ESOP Scheme 2015 - Plan A & 10,18,758 ESOPs Under ESOP Scheme 2015 - Plan B were granted and approval from RBI is pending.

i) Total amount of outstanding deferred remuneration and retained remuneration exposed to ex post explicit and / or implicit adjustments -

Nil

j) Total amount of reductions during the financial year due to ex- post explicit adjustments.-

Nil

k) Total amount of reductions during the financial year due to ex- post implicit adjustments. -Nil

17 Credit default swaps

The Bank has not transacted in credit default swaps during the period ended March 31, 2019, (previous year: Nil).

18 Intra-Group exposure

The Bank does not have any exposure (advances/investments) within the group, (previous year: Nil).

19 Transfers to Depositor Education and Awareness Fund (DEAF)

During the year ended March 31, 2019 and March 31, 2018 the Bank was not required to transfer any amount to Depositor Education and Awareness Fund.

20 Unhedged foreign currency exposure

As of March 31, 2019, there is no unhedged foreign currency exposure, (previous year: Nil).

21 Disclosures relating to Securitisation

(i) Information of assignment/securitisation activity as an originator:

(ii) Information with respect to outstanding credit enhancements and liquidity support:

(iii) Disclosure as per RBI guidelines for securitisation transactions:

ii) Qualitative disclosure on Liquidity Coverage Ratio (LCR):

To assess Bank’s resilience in liquidity stress scenario of 30 days with its high-quality liquid assets, Banks need to compute Liquidity Coverage Ratio (LCR) as per RBI - Basel III Framework on Liquidity Standards. High Ratio signifies Bank has enough liquid assets which it can use to fulfil its liquidity obligations in acute stress scenario. Ratio to compute as below

Lcr = Stock of High Quality Liquid Assets (HQLA)

Net Cash Outflows over a 30 days period

Stock of High Quality Liquid Asset is total funding liquid assets could generate in stress scenario. Net Cash outflows is the difference as derived by multiplying the outstanding balances of various categories or types of liabilities by the outflow run-off rates and cash inflows are calculated by multiplying the outstanding balances of various categories of contractual receivables by the rates at which they are expected to flow in.

Minimum Requirement for Small Finance Banks (as per operating guidelines for Small Finance Banks RBI/2016-17/81 DBR. NBD.No.26/16.13.218/2016-17 dated Oct 06, 2016) is as below:

The Bank has implemented LCR framework and has consistently maintained the LCR percentage well above the regulatory threshold limit. The average LCR for the quarter ended March 31, 2019 was 97% which is above the regulatory limit of 80%. For the quarter ended March 31, 2019 HQLA stood at Rs. 3,812 Crores.

Asset Liability Committee (ALCO) of the Bank is the primary governing body for Liquidity Risk Management, Treasury is entrusted with the responsibility, under the guidance of the ALCO operationalizing liquidity management within the Bank. ALM Risk unit independently measures, monitors & report Liquidity Risk as per regulatory & internal guidelines.

In computing the above information, certain estimates and assumptions have been made by the Bank’s Management which have been relied upon by the auditors.

22 Divergence in the asset classification and provisioning

RBI vide its circular DBR.BP.BC.No.63/21.04.018/2016-17 dated April 18, 2017 and Notification dated 1st April 2019, has directed banks shall make suitable disclosures, if either or both of the following conditions are satisfied:-

(a) the additional provisioning for NPAs assessed by RBI exceeds 10 per cent of the reported profit before provisions and contingencies for the reference period, and

(b) the additional Gross NPAs identified by RBI exceed 15 per cent of the published incremental Gross NPAs for the reference period.

There has been no material divergence observed by RBI for the financial year 2017-18 in respect of the Bank’s asset classification and provisioning under the extant prudential norms on income recognition asset classification and provisioning (IRACP) which require such disclosures.

23 Provision for credit card and debit card reward points

The Bank is not providing any reward points on cards.

24 Small and micro industries

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments. The above is based on the information available with the Bank which has been relied upon by the auditors.

25 Proposed dividend

The Board of Directors at their meeting proposed a dividend of Rs. 0.75 per share (previous year Rs. 0.50 per share), subject to the approval of the members at the ensuing annual General Meeting. In terms of revised Accounting Standard (AS) 4 ‘Contingencies and Events occurring after the Balance sheet date’ as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank has not appropriated proposed dividend (including tax) aggregating Rs. 26.43 crore (previous year Rs. 17.22 crore) from Profit and Loss Account. However, the effect of the proposed dividend has been reckoned in determining Capital funds in the computation of capital adequacy ratio as at March 31, 2019 and March 31, 2018.

26 Disclosures on the Scheme for Sustainable Structuring of Stressed Assets (S4A) :

The Bank does not have any account under the Scheme for Sustainable Structuring of Stressed Assets (S4A) as on March 31, 2019, (previous year: Nil).

27 Disclosures on Flexible Structuring of Existing Loans :

The Bank does not have any account under the Scheme Flexible Structuring of Existing Loans as on March 31, 2019, (previous year: Nil).

28 Resolution of Stressed Assets - Revised Framework

The Bank does not have any account for resolution of stressed Assets (Revised framework) as per RBI Circular RBI/2017-18/131DBR.No.BP.BC.101/21.04.048/2017-18 Loans as on March 31, 2019, (previous year: Nil).

29 Micro, Small and Medium Enterprises (MSME) sector - Restructuring of Advances

The Bank has not restructured any account as per RBI Circular DBR.No.BP.BC.100/21.04.048/2017-18 dated February 07, 2018 and DBR.No.BP.BC.108/21.04.048/2017-18 dated June 6, 2018 as on March 31, 2019, (previous year: Nil).

30 Disclosures on Strategic Debt Restructuring Scheme (SDR):

The Bank does not have any accounts under SDR as on March 31, 2019, (previous year: Nil).

31 Disclosures on Change in Ownership outside SDR Scheme:

The Bank does not have any account which are currently under the scheme of Change in Ownership Outside SDR as on March 31, 2019, (previous year: Nil).

32 Disclosures on Change in Ownership of Projects Under Implementation:

The Bank does not have any account which are currently under the scheme of Change in Ownership of Projects Under Implementation as on March 31, 2019, (previous year: Nil).

33 Details of factoring exposure:

The factoring exposure of the Bank as at March 31, 2019 is Nil, (previous year: Nil).

34 Inter-bank Participation with risk sharing:

During the year the Bank has not entered into inter-bank participation with risk sharing, (previous year: Nil).

35 Investor education and protection fund

There is no amount required to be transferred to Investor Education and Protection Fund by the Bank, (previous year: Nil).

36 Disclosure on remuneration to Non-Executive Directors

37 Miscellaneous income includes profit on sale of units of mutual fund, recoveries from loans written off, income from dealing in Priority Sector Lending Certificates (PSLC), marketing support fees etc.

38 Details of payments of audit fees

Part B: Geographic segments

The business of the Bank is in India only. Accordingly, geographical segment is not applicable.

Segmental information is provided as per the MIS/reports available for internal reporting purposes, which includes certain estimates and assumptions. The methodology adopted in compiling and reporting the above information has been relied upon by the auditors.

1. Remuneration paid excludes value of employee stock options exercised during the year.

2. The remuneration to the key managerial personnel does not include the provisions made for gratuity and leave benefits, as they are determined on an actuarial basis for the Bank as a whole.

3. Loans given and repayment

There is no loan related transaction with the related parties during the year (previous year : Nil).

4 Accounting for employee share based payments (Contd.)

The Bank measures the cost of ESOP using the intrinsic value method. Had the Bank used the fair value model to determine compensation, its profit after tax and earnings per share as reported would have changed to the amounts indicated below:

The Bank has granted 10,00,000 stock options on 30th August 2018 under Plan D1 and 38,702 and 10,18,758 stock options on 27th October 2017 under Plan A3 and Plan B5, respectively, to Whole time Director which are pending for RBI Approval. Accordingly, these options have not been considered for the purpose of computing the impact of ESOP fair value on profit before tax. The vesting period for these options will commence only after the RBI approval is received.

During the year ended March 31, 2018, 360,000 options granted under plan C4 had a different vesting schedule, however, the options granted expired without any vesting to the grantee as the service conditions were not fulfilled. Accordingly these options have not been considered for the purpose of computing the impact of ESOP fair value on profit before tax for the year ended March 31, 2018.

5 Employee benefits

(a) Defined benefit plans Gratuity

The gratuity plan provides a lumpsum payment to vested employees at retirement or on termination of employment based on respective employee’s salary and years of employment with the Bank considering the ceiling of gratuity amount of Rs. 0.20 crore.

Reconciliation of opening and closing balance of present value of defined benefit obligation for gratuity benefits is given below:

(b) Defined contribution plans Providend fund

The Bank makes Provident Fund contributions to a defined contribution retirement benefit plans for qualifying employees. Under the schemes, the bank is required to contribute a specified percentage of the payroll costs to the Provident Fund Commissioner to fund the benefits.

The Bank recognized Rs. 14.36 Crore (previous year Rs. 11.74 Crore) for provident fund contributions in the Profit and Loss Account. The contributions payable to these plans by the Bank are at rates specified in the rules of the schemes.

(c) Compensated absences

The Bank has provided for compensatory leaves which can be availed and not encashed as per policy of the Bank as present value obligation of the benefit at related current service cost measured using the Projected Unit Credit Method on the basis of an actuarial valuation. The Bank has accordingly booked Rs. 4.49 Crore (previous year Rs. 5.11 Crore) in the books of accounts for the period.

6 Comparative figures

Figures for the previous year have been regrouped and reclassified wherever necessary to conform to the current year’s presentation.

---

Mar 31, 2018

1 Background

AU Small Finance Bank Limited (formerly known as Au Financiers (India) Limited) (“AUSFBL” or “the Company” or “the Bank”) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956.

The Company had originally obtained its license from Reserve Bank of India (‘RBI’) to operate as a non deposit accepting Non Banking Financial Company (NBFC-ND) on November 7, 2000 vide certificate of registration no. B-10-00139.

The Company has changed its name to AU Small Finance Bank Limited with effect from April 13, 2017 and commenced its operations as a Small Finance Bank from April 19, 2017 pursuant to the approval received from the Reserve Bank of India dated December 20, 2016.

The Company is engaged in providing a range of banking and financial services including retail banking, wholesale banking and treasury operations and other services. The Bank operates in India only and does not have presence in any foreign country.

The Bank is governed by the Banking Regulation Act, 1949, banking guidelines issued by RBI on Small Finance Bank 2016, and the Companies Act, 2013.

2 (a) Basis of preparation

The financial statements have been prepared under the historical cost convention and on the accrual basis of accounting, unless otherwise stated, and complying with the requirements prescribed under the Third Schedule of the Banking Regulation Act, 1949. The accounting and reporting policies of the Bank which is used in the preparation of financial statements conform to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines issued by RBI from time to time, the accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014, Companies (Accounting Standards) Amendment Rules, 2016 in so far as they apply to banks and guildelines issued by RBI. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year, except for the change in accounting estimates explained below.

(b) Comparatives

The financial statements of AUSFBL for the previous year ended March 31, 2017 were prepared under the relevant requirements of Schedule III to the Companies Act, 2013, since at that time, the entity was not covered by the provisions applicable to banks. As mentioned in Note 17(1), the Company commenced its operations as a Small Finance Bank from April 19, 2017. Accordingly, the current year’s financial statements have been prepared and presented in accordance with the requirements prescribed under Section 29 and Third Schedule of the Banking Regulation Act, 1949. On account of the foregoing, since banking operations were not carried out during the previous year, the figures for the previous year are not strictly comparable with those of the current year. Previous year figures have been reclassified/regrouped by the management, wherever necessary, to conform to the current year presentation. Further, the RBI guidelines on “Disclosure in financial statements - Notes to accounts” were not applicable for the year ended March 31, 2017 and accordingly, comparative disclosures are not provided to that extent.

(c) Use of estimates

The preparation of the financial statements in conformity with Indian GAAP as applicable to Banks requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses for the reporting period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Actual results could differ due to these estimates. Any revision in the accounting estimates is recognised prospectively in the current and future periods.

3 Change in Accounting Policies / Estimates

Change in provisioning for loan portfolio

Consequent to commencement of operations as a SFB, the Bank has revised its estimates related to provisioning and write off of loan portfolio. As a result of such change, the profit for the current period is higher by Rs.21.24 crore. The Bank has adopted a policy for maintaining higher provisioning and write offs as compared to the minimum provision requirements of the RBI Master Circular on Prudential Norms issued vide Notification No. RBI/2015-16/101 DBR. No.BP.BC.2/21.04.048/ 2015-16 dated July 01, 2015 as applicable to banks.

Amounts in notes forming part of the financial statements for the year ended March 31, 2018 are denominated in rupee crore to conform to extant RBI guidelines.

A. Disclosures as Laid Down by RBI Circulars

1 Capital Adequacy Ratio

The Bank is subject to the Basel II Capital Adequacy guidelines (NCAF) stipulated by RBI. The Capital Adequacy Ratio (CRAR) of the Bank is calculated as per the Standardized approach for Credit Risk.

As per RBI circular “DBR.NBD.No. 4502/16.13.218/2017-18” dated November 8, 2017, no separate capital charge is prescribed for market and operational risk. The total Capital Adequacy ratio of the Bank at March 31, 2018 is 19.31% against the regulatory requirement of 15.00% prescribed by RBI.

The Bank has also considered an additional Risk Weight of 25% on assets under lien for its “grandfathered” legacy borrowings as per instructions received from RBI. The Bank has reduced proposed dividend for computing Capital Adequacy Ratio at March 31, 2018.

No Capital Conservation Buffer and Counter - Cyclical Capital Buffer is applicable on Small Finance Bank (SFB) as per operating guidelines issued on SFB by RBI.

The following table set forth, for the period indicated, computation of Capital adequacy:

ii) Non performing Non-SLR investments

The Bank does not have any non performing investments during the year 2017-18.

4.1 Details of investments category - wise (Net of Provision for Depreciation)

The details of investments held under the three categories viz. Held for Trading (HFT), Available for Sale (AFS) and Held to Maturity (HTM) are as under:

4.2 Sale and Transfers to / from HTM Category

During the year, the Bank has not sold or transferred any security to/from HTM category.

5 Derivatives / Exchange traded Interest derivatives / Risk exposures in derivatives

The bank has not entered into any derivative instruments for trading / speculative purposes either in Foreign Exchange or domestic treasury operations. Bank does not have any Forward Rate Agreement or Interest rate swaps.

5.1 Details of Financial Assets sold during the year to Securitisation / Reconstruction Companies (SC/RC) for Asset Reconstruction

During the year, there was no sale of non-performing financial assets to Securitisation Company / Reconstruction Company for asset reconstruction (Previous year Nil).

5.2 Details of book value of investment in security receipts (SRs) backed by NPAs

The Bank has not invested in security receipts during the year and previous year.

5.3 Details of non-performing assets purchased/sold

The Bank did not sell / buy non-performing assets during the year and previous year.

5.4 Provisions on Standard Assets

Provision for the year ended March 31, 2018 is made in accordance with RBI guidelines for Banking Companies as described in Accounting policy of the Bank. The provision towards standard assets in the previous year ended March 31, 2017 is made at the rate of 0.35%, in accordance with the RBI guidelines then applicable to NBFCs (Refer Schedule 17(2b)).

Definitions of certain items in Business ratios / information:

1. Working funds to be reckoned as average of total assets (excluding accumulated losses, if any) as reported to Reserve Bank of India in Form X under Section 27 of the Banking Regulation Act, 1949 (The Bank has received the schedule commercial bank license in the month of November 2017 and after that started reporting form X. For the period from April 2017 to October 2017 monthly average of total assets have been considered as working funds).

2. Operating profit = (Interest Income Other Income - Interest expenses - Operating expenses).

3. Return on Assets has been calculated on average assets.

4. ”Business” is the total of average of net advances and deposits (net of inter-bank deposits).

5. Productivity ratios are based on average employee numbers.

The Bank has compiled the data for the purpose of this disclosure from its internal MIS system/reports and has been furnished by the Management which has been relied upon by the auditors.

The RBI guidelines on “Disclosure in financial statements - Notes to accounts” is not applicable for the year ended March 31, 2017 and accordingly, comparative disclosures are not provided to that extent (Refer Schedule 17(2b)).

6.1 Details of risk category wise country exposure

The Bank does not have any country risk exposure other than “home country exposures” and accordingly, no provision is maintained with regard to country risk exposure.

6.2 Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the bank

During the year ended March 31, 2018 and year ended March 31, 2017, the Bank has not exceeded the prudential credit exposure limit as prescribed by the Reserve Bank of India in respect of Single Borrower and Group Borrowers.

6.3 Unsecured Advances

The Bank has not extended any advances where the collateral is an intangible asset such as a charge over rights, licenses, authorisations, etc. (Previous year Nil). The unsecured advances of Rs.381.94 crore (Previous year: Rs.68.55 crore) as disclosed in Schedule 9 are without any collateral security.

7 Penalties levied by the RBI

During the year, RBI has not imposed any penalty on the Bank.

8 Draw down from reserves

There has been no draw down from reserves during the year ended March 31, 2018 (previous year: Nil) other than those disclosed under Schedule 2.

9 Disclosure of Letters of Comfort (LoC) issued by the Bank

The Bank has not issued any Letter of Comfort during the period ended March 31, 2018, (Previous year Nil).

10 Provisioning Coverage Ratio

The Provision Coverage Ratio (PCR) (excluding Standard Provision) of the Bank is 37.22% as at March 31, 2018 (previous year: 35.38%).

11 Bancassurance Business

Commission, Exchange and Brokerage in Schedule 14 include the following fees earned on Bancassurance business:

12 Technical or prudential write-offs

Technical or prudential write-offs refer to the amount of non-performing assets which are outstanding in the books of the branches, but have been written-off (fully or partially) at the head office level. The financial accounting systems of the Bank are integrated and there are no write-offs done by the Bank which remain outstanding in the books of the branches. Movement in the stock of technically or prudentially written-off accounts is given below:

13 Overseas assets, NPAs and revenue

The Bank does not have any overseas branches and hence the disclosure regarding overseas assets, NPAs and revenue is not applicable (Previous Year : Nil).

14 Off Balance Sheet SPVs

There are no Off-Balance Sheet SPVs sponsored by the Bank, which need to be consolidated as per accounting norms.

15 Disclosures on remuneration

A. Qualitative Disclosures:

a) Information relating to the composition and mandate of the Remuneration Committee:

In compliance of Companies Act 2013, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirments) Regulations, 2015, Banking Regulation Act 1949 and other guidelines as applicable, the Board of Directors through its Nomination and Remuneration Committee (NRC) exercises oversight and effective governance over implemention of the Directors appointment and remuneration policy. The Nomination and Remuneration Committee consist of Non-Executive Directors and constitution of the committee is as follows:

Mr. Krishan Kant Rathi - Independent Director

(Chairman)

Mr. Mannil Venugopalan - Independent

Director

Ms. Jyoti Narang - Independent Director

Mr. Narendra Ostawal - Non-Executive -

Nominee Director

The roles and responsibilities of the Nomination and Remuneration Committee (NRC) are as under:

(i) Assist the Board in formulation and implementation of compensation policy which will lay down the criteria for remuneration of directors, key management personnel ( KMP) and Senior Management personnel (SMP) and other employees and take inputs from the Risk Management Committee of the Board to ensure balance between remuneration and risks as required.

It shall ensure that the mix of cash, equity and other forms of compensation must be consistent with risk alignment and objectives of the Bank.

(ii) Lay down the comprehensive criteria for assessment in terms of qualifications, positive attributes, independence, professional experience, track record, integrity and in view of other parameters for appointment of directors, KMP and SMP.

(iii) Develop policies and lay down criteria for appointment/ removal/ reappointment of the directors of the Board capturing the statutory and regulatory requirements.

(iv) Assist in defining the performance evaluation criteria for directors and other KMP and ensure that relationship of remuneration to performance is clear and meets appropriate performance benchmarks.

(v) Ensure that the compensation policy formulated for remuneration of directors, KMP and SMP is reasonable and sufficient to attract, retain and motivate quality talent required to run the Bank.

(vi) Ensure Bank’s compensation policy provides a fair and consistent basis for motivating and rewarding employees appropriately according to their performance, job profile, their contribution, skill and competence and also review compensation levels of the Bank’s employees vis-a-vis other banks and the banking industry in general.

(vii) Ensure that the compensation for directors, KMPs, SMPs is a mix of fixed and variable pay and such compensation that reflects short and long term performance objectives appropriate to the working and the goals of the Bank.

(viii) Ensure that appropriate procedures are in place to assess Board effectiveness and also provide the suggestions on governance to the Board of directors.

(ix) Review and oversee the Employee Benefits’ program of the Bank including deferred benefits.

(x) Assessing the integrity and suitability, financial position, cross check of any criminal records,civil actions undertaken, refusal of admission to or expulsion from professional bodies, sanctions applied by regulators or similar bodies and previous questionable business practice are considered for a candidate.

b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy:

Objectives of Remuneration Policy:

(i) Institutionalize a mechanism for the appointment/ removal/ dismissal of directors and lay down selection criteria for appointment of directors and to ensure that compliance with applicable laws, rules and regulations as well as ‘Fit and Proper criteria’ of directors is followed before their appointment.

(ii) Establish standards on compensation/ remuneration including fixed and variable pay, which are in alignment with the applicable rules and regulations and is based on the trends and practices of remuneration prevailing in the industry.

(iii) Formulation of the criteria for determining qualifications, positive attributes and independence of a Directors and Formulate the criteria for evaluation of performance of all the Directors on the Board, KMPs and SMPs

The remuneation process is aligned to Bank’s compensation Policy

c) Description of the ways in which current and future risks are taken into account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks:

The Key parameters taken into account for the structuring of remuneration covering fixed pay and variable pay are mentioned below:

(i) Risk factors that are significant to the Banking operations of the Bank are taken into consideration in devising the remuneration structure and it is symmetric to the risk outcomes.

(ii) Compensation pay out is scheduled in manner where sensitivity to time horizon of risks is taken into consideration in the review process.

(iii) Individual performance is reviewed on the basis of key responsibility areas (KRAs) and the same is carried out under the annual performance review (APR) of the Bank.

(iv) Industry Benchmarking, inflation and increase of cost of living

In addition, remuneration process includes a ‘malus’ and ‘clawback’ option to take care of any disciplinary issue or future drop in performance of individual/ business/ Bank.

d) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration:

Individual performances are assessed in line with business/ individual delivery of the Key Result Areas (KRAs), top priorities of business, budgets etc.

One of the key factor to be considered for annual performance evaluation is the goal sheet built in Human Capital Management Software.

In linking the performance and level of remuneration the job levels, business budgets, risk factors, achievement of individual KRAs are taken into consideration for taking decision in this regard.

e) A discussion of the banks’ policy on deferral and vesting of variable remuneration and a discussion of the bank’s policy and criteria for adjusting deferred remuneration before vesting and after vesting:

Employees are classified into following three categories for the purpose of remuneration:

Category I: Whole Time Directors (WTD)/Chief Executive Officer (CEO)

Category II: Risk Control and Compliance Staff Category III: Other Categories of Staff

Category I

The compensation for all Category 1 employees is approved by the Nomination and Remuneration committee and RBI and the variable pay shall not exceed 70% of the fixed pay.

Category II & Category III

The compensation shall be subject to several factors while assessing the remuneration structure of employees with judicious mix of fixed and variable pay in line with industry practices. Key Result Areas (KRAs) of the executives, risk factors, performance vis-a-vis targets will be given suitable weightage for deciding the variable pay and considering principles laid down under remuneration policy.

For adjusting deferred remuneration before and after vesting:

The Bank’s remuneration policy provides for following in the event of negative contributions:

Malus: Payment of all or part of amount of deferred variable pay can be prevented, this shall be applicable in case of:

(i) Disciplinary Action (at the discretion of the Disciplinary Committee) and/ or

(ii) Significant drop in performance of Individual/ Business (at the discretion of the Nomination & Remuneration Committee).

(iii) Resignation of staff prior to the payment date

Clawback: Previously paid or already vested deferred variable pay may be recovered under this clause.

This clause will be applicable in case of Disciplinary Action (at the discretion of the Disciplinary Action Committee and approval of the Nomination & Remuneration Committee)

f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilizes and the rationale for using these different forms:

The Bank remuneation structure is Mix of Fixed Pay, Vaiable Pay & Deferred compensation methodology, which is reflective of the commitment and philosophy of creating and sharing wealth with the employees.

The Variable pay is decided considering risk factors, job profile, level of performance, industry norms to ensure that employee morale is high and to promote consistency in performance over the time horizon.

The break up of remuneration is the follows:

Fixed Remuneration: It consists of of Basic Salary, House Rent Allowance, conveyance, other allowances and perquisites.

Variable Remuneration: Variable Remuneration is paid as a percentage of Fixed pay, depending upon the performance of the Employees against set key responsibility areas (KRAs).

Employee Stock Option: ESOPs are being given to the Executive Directors, KMPs, SMPs and other employees on the basis of their performance against set KRAs, responsibilities, and vintage with the organization.

B. Quantitative Disclosures:

a) Number of meetings held bythe Remuneration Committee during the financial year and remuneration paid to its members.

During year ended 31st March, 2018, 4 meetings of Nomination and Remuneration committee was held. Each Member of the Nomination and Remuneration committee is paid a sitting fee of Rs.20,000 per meeting attended.

b) Number of employees having received a variable remuneration award during the financial year.

MD & CEO, Wholetime Director, 1 KMP and 3 Senior Management Personnel as risk takers were paid the variable remuneration during the year.

c) Number and total amount of sign-on awards made during the financial year. - Nil

d) Details of guaranteed bonus, if any, paid as joining / sign on bonus. - Nil

e) Details of severance pay, in addition to accrued benefits, if any. - Nil

f) Total amount of outstanding deferred remuneration, split into cash, shares and share-linked instruments and other forms. Cash - Nil

Outstanding ESOPs as at 31st March, 2018 -3,582,644 equity shares.

g) Total amount of deferred remuneration paid out in the financial year.

Cash - NIL

ESOPs - 888,011 Equity Shares exercised.

h) Breakdown of amount of remuneration awards for the financial year to show fixed and variable, deferred and non-deferred.

Total fixed salary for the year ended 31st March, 2018 - Rs.5.58 crore.

Deferred Variable Pay

ESOPs - 30,601 equity shares

Non Deferred variable pay

Remuneration award paid during for the year ended 31st March, 2018 Rs.2.30 crore was related to FY 2016-17 and remuneration award for the FY 2017-18 is either pending for approval at remuneration committee or RBI.

The Bank has granted 38,702 and 1,018,758 stock options on October 27, 2017 to whole time director under Plan A3 and Plan B5 resepectively which are pending for apporval from RBI.

i) Total amount of outstanding deferred remuneration and retained remuneration exposed to ex post explicit and / or implicit adjustments - Nil

j) Total amount of reductions during the financial year due to ex- post explicit adjustments. - Nil

k) Total amount of reductions during the financial year due to ex- post implicit adjustments. - Nil

The RBI guidelines on “Disclosure in financial statements - Notes to accounts” is not applicable for the year ended March 31, 2017 and accordingly, comparative disclosures are not provided to that extent (Refer Schedule 17(2b)).

16 Credit default swaps

The Bank has not transacted in credit default swaps during the period ended March 31, 2018, (previous year: Nil).

17 Intra-Group exposure

The Bank does not have any exposure (advances/ investments) within the group.

18 Transfers to Depositor Education and Awareness Fund (DEAF)

There were no amounts that were required to be transferred to Depositor Education and Awareness Fund during the year, (previous year: Nil).

19 Unhedged foreign currency exposure

As of March 31, 2018, there is no unhedged foreign currency exposure, (previous year: Nil).

ii) Qualitative disclosure on Liquidity Coverage Ratio (LCR):

To assess Bank’s resilience in liquidity stress scenario of 30 days with its high-quality liquid assets, Banks need to compute Liquidity Coverage Ratio (LCR) as per RBI - Basel III Framework on Liquidity Standards. High Ratio signifies Bank has enough liquid assets which it can use to fulfil its liquidity obligations in acute stress scenario. Ratio to compute as below

_ Stock of High Quality Liquid Assets (HQLA)

^{LCR _} Net Cash Outflows over a 30 days period

Stock of High Quality Liquid Asset is total funding liquid assets could generate in stress scenario. Net Cash outflows is the difference as derived by multiplying the outstanding balances of various categories or types of liabilities by the outflow run-off rates and cash inflows are calculated by multiplying the outstanding balances of various categories of contractual receivables by the rates at which they are expected to flow in.

Minimum Requirement for Small Finance Banks (as per operating guidelines for Small Finance Banks RBI/2016-17/81 DBR.NBD.No.26/16.13.218/2016-17 dated Oct 06, 2016) is as below:

The Bank has implemented LCR framework and has consistently maintained the LCR percentage well above the regulatory threshold limit. The average LCR for the quarter ended March 31, 2018 was 105% which is above the regulatory limit of 70%. For the quarter ended March 31, 2018 HQLA stood at Rs.1,328 Crores.

Asset Liability Committee (ALCO) of the Bank is the primary governing body for Liquidity Risk Management, Treasury is entrusted with the responsibility, under the guidance of the ALCO operationalizing liquidity management within the Bank. ALM Risk unit independently measures, monitors & report Liquidity Risk as per regulatory & internal guidelines.

In computing the above information, certain estimates and assumptions have been made by the Bank’s Management which have been relied upon by the auditors.

The RBI guidelines on “Disclosure in financial statements - Notes to accounts” is not applicable for the year ended March 31, 2017 and accordingly, comparative disclosures are not provided to that extent (Refer Schedule 17(2b)).

20 Divergence in the asset classified and provisioning

The Bank has not been subject to any assessment by the RBI during the year, in relation to compliance with Prudential norms on income recognition, asset classification and provisioning. Accordingly, the disclosure on divergence in Asset classification and provisioning as per RBI Circular: DBR.BP.BC.No. 63/21.04.018/2016-17 dated April 18, 2017 is not applicable.

21 Provision for credit card and debit card reward points

The Bank is not providing any reward points on cards.

22 Small and micro industries

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2, 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments. The above is based on the information available with the Bank which has been relied upon by the auditors.

23 Proposed dividend

The Board of Directors at their meeting proposed a dividend of Rs.0.50 per share, subject to the approval of the members at the ensuing annual General Meeting. In terms of revised Accounting Standard (AS) 4 ‘Contingencies and Events occurring after the Balance sheet date’ as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank has not appropriated proposed dividend (including tax) aggregating Rs.17.22 crore from Profit and Loss Account for the year ended March 31, 2018. However, the effect of the proposed dividend has been reckoned in determining Capital funds in the computation of capital adequacy ratio as at March 31, 2018.

24 Disclosures on the Scheme for Sustainable Structuring of Stressed Assets (S4A) :

The Bank does not have any account under the Scheme for Sustainable Structuring of Stressed Assets (S4A) as on March 31, 2018.

25 Disclosures on Flexible Structuring of Existing Loans :

The Bank does not have any account under the Scheme Flexible Structuring of Existing Loans as on March 31, 2018.

26 Disclosures on Strategic Debt Restructuring Scheme (SDR):

The Bank does not have any accounts under SDR as on March 31, 2018.

27 Disclosures on Change in Ownership outside SDR Scheme:

The Bank does not have any account which are currently under the scheme of Change in Ownership Outside SDR as on March 31, 2018.

28 Disclosures on Change in Ownership of Projects Under Implementation:

The Bank does not have any account which are currently under the scheme of Change in Ownership of Projects Under Implementation as on March 31, 2018.

29 Details of factoring exposure:

The factoring exposure of the Bank as at March 31, 2018 is Nil (previous year: Nil)

30 Inter-bank Participation with risk sharing:

The Bank has not entered into inter-bank participation with risk sharing.

31 Investor education and protection fund

There is no amount required to be transferred to Investor Education and Protection Fund by the Bank.

32 Miscellaneous income includes profit on sale of units of mutual fund, recoveries from loans written off, income from dealing in Priority Sector Lending Certificates (PSLC), marketing support fees etc.

33 Exceptional Items

Last year, the Company sold its investment in subsidiary companies viz. Aavas Financiers Limited (formerly known as Au Housing Finance Limited) and Index Money Limited and associate companies viz. M Power Micro Finance Private Limited and Au Insurance Broking Services Private Limited. The profit on sale of these investments (net of the expenses incurred in connection with such sale) of Rs.670.35 crore (Rs.516.86 crore, net of tax) has been disclosed as other income in schedule 14 (II) in the financial statements. The profit after tax for the year ended March 31, 2017 excluding the impact of such income is Rs.305.12 crore.

B. Other Disclosures

1 Fixed Assets as per Schedule 10 relating to purchase of software and system development expenditure which are as follows :

2 Segment reporting

Part A: Business segments:

Segment reporting for the year ended March 31, 2018 is given below:

Part B: Geographic segments

The business of the Bank is in India only. Accordingly, geographical segment is not applicable.

Segmental information is provided as per the MIS/reports available for internal reporting purposes, which includes certain estimates and assumptions. The methodology adopted in compiling and reporting the above information has been relied upon by the auditors.

For the year ended March 31, 2017, the Bank operated in a single business segment i.e. lending to borrowers having similar risks and returns for the purpose of AS 17 on ‘Segment Reporting’ specified under section 133 of the Companies act 2013, read with rule 7 of the Companies (Accounts) Rules, 2014 and the Companies (Accounting Standards) Amendment Rules, 2016. Hence comparative figures for March 31, 2017 not provided for.

The Company measures the cost of ESOP using the intrinsic value method. Had the Company used the fair value model to determine compensation, its profit after tax and earnings per share as reported would have changed to the amounts indicated below:

360,000 options granted under plan C4 had a different vesting schedule, however, the options granted expired without any vesting to the grantee as the service conditions were not fulfilled. Accordingly these options have not been considered for the purpose of computing the impact of ESOP fair value on profit before tax.

The Bank has granted 38,702 and 1,018,758 stock options on October 27, 2017 to whole time director under Plan A3 and plan B5 respectively which are pending for approval from RBI. Accordingly these options have not been considered for the purpose of computing the impact of ESOP fair value on profit before tax.

34 Employee benefits

(a) Defined benefit plans Gratuity

The gratuity plan provides a lumpsum payment to vested employees at retirement or on termination of employment based on respective employee’s salary and years of employment with the Bank ignoring the ceiling of gratuity amount of Rs.0.20 crore.

Reconciliation of opening and closing balance of present value of defined benefit obligation for gratuity benefits is given below.

(b) Defined contribution plans Providend fund

The Company makes Provident Fund contributions to a defined contribution retirement benefit plans for qualifying employees. Under the schemes, the Company is required to contribute a specified percentage of the payroll costs to the Provident Fund Commissioner to fund the benefits.

The Company recognized Rs.11.74 Crore (P.Y. Rs.5.16 Crore) for provident fund contributions in the Profit and Loss Account. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.

(c) Compensated absences

The Company has provided for compensatory leaves which can be availed and not encashed as per policy of the Company as present value obligation of the benefit at related current service cost measured using the Projected Unit Credit Method on the basis of an actuarial valuation. The Company has accordingly booked Rs.5.11 Crore (P.Y. of Rs.0.88 Crore) in the books of accounts for the period.

35 Comparative figures

Figures for the previous year have been regrouped and reclassified wherever necessary to conform to the current year’s presentation.

---

Mar 31, 2017

1 Corporate information

AU Small Finance Bank Limited (formerly known as Au Financiers (India) Limited) (‘the Company’) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956.

The Company is engaged in lending activities. The Company had obtained its license from Reserve Bank of India (‘RBI’) to operate as a non deposit accepting Non Banking Financial Company (NBFC-ND) on November 7, 2000 vide certificate of registration no. B-10-00139.

The Company has changed its name to AU Small Finance Bank Limited with effect from April 13, 2017 and commenced its operations as a Small Finance Bank from April 19, 2017 pursuant to the approval received from the Reserve Bank of India dated December 20, 2016. The financial statements for the year ended March 31, 2017 have been prepared using the basis of preparation as applicable to a nonbanking financial company, detailed in note 2 below.

2 Basis of preparation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respects with the Accounting Standards notified under section 133 of the Companies Act, 2013 (‘the Act’), read with Rule 7 of the Companies (Accounts) Rules, 2014; the Companies (Accounting Standards) Amendment Rules, 2016 and the provisions of the RBI as applicable to a Systemically Important Non-Banking Financial Company (‘NBFC-ND-SI’). The financial statements have been prepared on an accrual basis and under the historical cost convention except as detailed in 2.1 (c) below.

The accounting policies adopted in the preparation of the interim financial statements are consistent with those of previous year.

All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Act. The Company has ascertained its operating cycle as 12 months for the above purpose.

3 Share capital

(a) Reconciliation of the shares outstanding at the beginning and at the end of the reporting year

(b) Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of Rs. 10 per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(c) Details of shareholders holding more than 5% shares in the Company

As per records of the Company, including its register of shareholders/ members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.

(d) Aggregate number of bonus shares issued during the period of five years immediately preceding the reporting date

On October 19, 2016, the Company has issued bonus shares to its existing equity shareholders in the ratio of five shares for every one share held by them by capitalising its securities premium account

(e) For details of shares reserved for issue under the employee stock option (ESOP) plan of the Company, refer note 33.

Secured borrowings are secured by hypothecation of loans under financing activity. Personal guarantees by directors and shareholders of the Company have been given for borrowing amount of Rs. 76,843.70 lacs at March 31, 2017 (Rs. 84,948.33 lacs as at March 31, 2016). Borrowings to the extent of Rs. 305,029.15 Lacs at March 31, 2017 (Rs. 109,362.48 lacs as at March 31, 2016) are secured by pledge of property of Company and margin money deposits. Auto loans from banks are secured by hypothecation of Company’s vehicles.

4. Short-term borrowings

All working capital facilities from banks are repayable on demand and are secured by hypothecation of loans under financing activity. Personal guarantees by directors and shareholders of the Company have been given for borrowing amount of Rs. 36,929.12 lacs at March 31, 2017 (Rs. 36,234.18 lacs as at March 31, 2016). Borrowings to the extent of Rs. 36,505.62 lacs (Rs. 17,895.90 lacs as at March 31, 2016) are secured by pledge of property of Company and margin money deposits. Interest rate on short term borrowing ranges between 8% to 12% ( PY: 8% to 12%)

5. Deferred tax assets (net)

Deferred tax assets and deferred tax liabilities have been offset wherever the Company has a legally enforceable right to set off current tax assets against current tax liabilities and where the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority.

6.1 Deposits include Rs. 13,619.48 lacs as at March 31, 2017 (Rs. 7,642.89 lacs as at March 31, 2016) as cash collateral for assignment/securitization, Rs. 2,934.12 lacs as at March 31, 2017 (Rs. 1,070.04 lacs as at March 31, 2016) as cash collateral for bank guarantees under assignment/securitization transactions, Rs. 19.49 lacs as at March 31, 2017 15.14 lacs as at March 31, 2016) as cash collateral for other bank guarantees, Rs. 385.00 lacs as at March 31, 2017 (Rs. 739.00 lacs as at March 31,2016) as cash collateral for working capital/term loan facilities from banks repayable on demand and Nil as at March 31,2017 (Rs. 32.00 lacs as at March 31,2016) as cash collateral for channel financing business.

7.1 Details of employees benefits

a) Defined contribution plan

Provident fund

The Company makes Provident Fund contributions to a defined contribution retirement benefit plans for qualifying employees. Under the schemes, the Company is required to contribute a specified percentage of the payroll costs to the Provident Fund Commissioner to fund the benefits.

The Company recognized Rs. 516.07 Lacs (P.Y. Rs. 328.92 Lacs) for provident fund contributions in the statement of profit and loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.

b) Defined benefit plans

Gratuity

The Company operates defined gratuity plans, for its employees. Under the gratuity plan, every employee who has completed at least five years of service gets a gratuity on departure @ 15 days of last drawn salary for each completed year of service. The Company has not created any fund for payment of gratuity.

The following table sets out the disclosures as required by revised Accounting Standard 15 for Gratuity

c) Other Benefits

The Company has provided for compensatory leaves which can be availed and not encashed as per policy of the Company as present value obligation of the benefit at related current service cost measured using the Projected Unit Credit Method on the basis of an actuarial valuation. The Company has accordingly booked Rs. 88.45 Lacs (P.Y. of Rs. 55.72 Lacs) in the books of accounts for the period.

8.1 The Company’s significant leasing arrangements in terms of Accounting Standard 19 on Leases are in respect of operating leases for premises. These leasing arrangements, which are cancellable, generally range between 11 months and 36 months and are usually renewable by mutual consent on mutually agreeable terms.

9.1 The Reserve Bank of India vide circular No.DBR.No.BP.BC.37/21.04.048/2016-17 dated November 21, 2016 and DBR.No.BP.BC.49/21.04.048/2016-17 dated December 28, 2016 has provided a dispensation whereby a short term deferment of 90 days could be applied to dues payable between November 1, 2016 to December 31, 2016 for the purpose of classification of loan accounts as sub-standard. However, the Company has not applied the said dispensation and has continued to identify loans as sub-standard in accordance with the extant provisioning policy of the Company detailed in note 2.

10 The Company operates in a single business segment i.e. lending to borrowers, which have similar risks and returns for the purpose of AS 17 on ‘Segment Reporting’ specified under section 133 of the Companies act 2013, read with rule 7 of the Companies (Accounts) Rules, 2014, Companies (Accounting Standards) Amendment Rules, 2016. The Company operates in a single geographical segment i.e. domestic.

11 Stock options

The Company has provided various share-based payment schemes to its Directors and Employees. The plans in operation are Plan A, Plan B and Plan C. The numerical A1, A2, B1, B2, B3, B4, C1, C2 and C3 represents different grants made under these plans. During the year ended March 31, 2017, the following series were in operation:

12 During the year, the Company sold its investment in subsidiary companies viz. Aavas Financiers Limited (formerly known as Au Housing Finance Limited) and Index Money Limited and associate companies viz. M Power Micro Finance Private Limited and Au Insurance Broking Services Private Limited. The profit on sale of these investments (net of the expenses incurred in connection with such sale) ofRs. 67,034.89 lacs (Rs. 51,685.83 lacs, net of tax) has been disclosed as an exceptional item in the financial statements.

The profit after tax excluding the impact of such exceptional item is Rs. 30,511.78 lacs (year ended March 31, 2016: Rs. 21,161.95 lacs) and the resultant basic and diluted earnings per share is Rs. 11.20 and Rs. 10.99, respectively.

13 Details of Specified Bank Notes (SBNs) held and transacted by the Company during the period November 8, 2016 to December 30, 2016

Notes:

(a) Under the technology and processes operated by the Company, details of the denomination of notes are not available for all types of cash receipts and payments made by the Company. However, the Company has established a process to monitor the denomination of the notes for the end of day cash balance through daily cash reports submitted by the branches.

(b) Includes amounts collected by the Company from its loan borrowers against receipts issued on November 8, 2016. These amounts have been accounted on November 9, 2016 in the ordinary course of business, based on the field collection data received from collection officers in respect of the previous day.

(c) Permitted receipts in other denomination notes include collections made by the Company from its loan borrowers towards regular loan obligations and withdrawals from bank accounts during the period from November 9, 2016 to December 30, 2016 in the ordinary course of business. The Company had implemented interim measures and controls to ensure no transactions are carried out in SBNs. Accordingly, no instances have been reported of any non-permitted receipts or payments being made by the Company.

(d) Permitted payments in other denomination notes include disbursement of loans to its borrowers and other cash payments in the ordinary course of business.

(e) In addition to the amounts indicated in the above table, the borrowers of the Company have directly deposited amounts aggregating Rs. 1,335 lacs in the Company’s bank accounts through cash and electronic fund transfers.

The identification of cash deposits from such amount and the denomination wise details thereof are not available with the Company except for Rs. 5.49 lacs deposited in SBNs in one bank account of the Company.

14 Disclosure as per RBI guidelines:-

(A) Capital adequacy ratio

(B) Exposures to Real Estate Sector

(C) Asset Liability Management

(D) Instances of fraud for the year ended March 31, 2017

(E) Customer Complaints

(F) Derivatives

(i) The Company has no transactions / open unhedged exposure in derivatives in the current year and previous year.

(ii) The Company has no unhedged foreign currency exposure as on March 31, 2017 (March 31, 2016: Nil).

(G) Details of financial assets sold to securitisation / reconstruction Company for asset reconstruction:

The Company has not sold financial assets to Securitisation / Reconstruction companies for asset reconstruction in the current year and previous year.

(H) Details of non-performing financial assets purchased / sold

The Company has not purchased / sold non-performing financial assets in the current year and previous year.

(I) Exposure to Capital Market

(J) Details of financing of parent Company products

This disclosure is not applicable as the Company is the holding Company.

(K) Unsecured Advances - Refer note 14 (L) Registration obtained from other financial sector regulators:

The Company is registered with following other financial sector regulators (Financial regulators as described by Ministry of Finance):

(i) Financial Intelligence Unit (FIU), MOF, Delhi, India

(M) Disclosure of penalties imposed by RBI and other regulators:

No Penalties were imposed by RBI and other regulators during the year and previous year.

(N) Draw down from Reserves:

There has been no drawdown from reserves during the year ended March 31,2017 (previous year: Nil) other than those disclosed under Note 4.

(O) Concentration of Advances, Exposures and NPAs (P) Ratings assigned by credit rating agencies and migration of ratings during the year:

15 Litigation

The Company has certain litigations pending with the income tax authorities, service tax authorities and other litigations which have arisen in the ordinary course of business. The Company has reviewed all such pending litigations having an impact on the financial position, and has adequately provided for where provision is required and disclosed the contingent liabilities where applicable, in its financial statements. Refer note 30 for items disclosed as contingent liabilities.

16 At the year end, the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

17 Previous year figures have been regrouped / reclassified, where necessary, to conform to this year’s classification.

---

Mar 31, 2016

1 Corporate information

Au FINANCIERS (INDIA) LIMITED (‘the Company’) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956.

The Company is engaged in lending activities. The Company had obtained its license from Reserve Bank of India (‘RBI’) to operate as a non deposit accepting Non Banking Financial Company (NBFC-ND) on November 7, 2000 vide certificate of registration no. B-10-00139.

2 Basis of preparation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respects with the Accounting Standards notified under section 133 of the Companies Act, 2013 (‘the Act’), read with Rule 7 of the Companies (Accounts) Rules, 2014 and the provisions of the RBI as applicable to a Systemically Important Non-Banking Financial Company (‘NBFC-ND-SI’). The financial statements have been prepared on an accrual basis and under the historical cost convention except as detailed in 2.1 (c) below.

The accounting policies adopted in the preparation of financial statements are consistent with those of previous year except for the changes described in 2.1 (a) below.

All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Act. The Company has ascertained its operating cycle as 12 months for the above purpose.

(b) Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of Rs.10 per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(c) For details of shares reserved for issue under the employee stock option (ESOP) plan of the Company, refer note 33.

As per records of the Company, including its register of shareholders/ members and other declarations received from shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.

All working capital facilities from banks are repayable on demand and are secured by hypothecation of loans under financing activity. Personal guarantees by directors and shareholders ofthe Company have been given for borrowing amount of Rs.36,234.18 lacs at March 31, 2016. Borrowings to the extent of Rs.17,895.90 lacs are secured by pledge of the Company’s shares held by the directors and pledge of property of Company and its directors, and margin money deposits. Interest rate on Short borrowing ranges between 8% to 12% ( PY: 8% to 12%)

There are no amounts that need to be disclosed in accordance with the Micro Small and Medium Enterprise Development Act, 2006 (the ‘MSMED’) pertaining to micro or small enterprises. For the year ended March 31, 2016, no supplier has intimated the Company about its status as micro or small enterprises or its registration with the appropriate authority under MSMED.

Deferred tax assets and deferred tax liabilities have been offset wherever the Company has a legally enforceable right to set off current tax assets against current tax liabilities and where the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority.

NOTE 3.1

Deposits include Rs.7,642.89 lacs as cash collateral for assignment/securitization, Rs.1,070.04 lacs as cash collateral for bank guarantees under assignment/securitization transactions, Rs.15.14 lacs as cash collateral for other bank guarantees, Rs.739.00 lacs as cash collateral for working capital/term loan facilities from banks repayable on demand and Rs.32.00 lacs as cash collateral for channel financing business.

NOTE 4.1

Interest from loans includes “overdue interest” on loans charged in case of defaults by borrowers, which has been recorded on realisation basis effective from April 01, 2015.

NOTE 4.2 Income from channel finance business and service charges from borrowers is inclusive of service tax.

NOTE 5.1 DETAILS OF EMPLOYEES BENEFITS

a) Defined contribution plan Provident fund

The Company makes Provident Fund contributions to a defined contribution retirement benefit plans for qualifying employees. Under the schemes, the Company is required to contribute a specified percentage of the payroll costs to the Provident Fund Commissioner to fund the benefits.

The Company recognized Rs.328.92 Lacs (P.Y. Rs.224.01 Lacs) for provident fund contributions in the statement of profit and loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.

b) Defined benefit plans Gratuity

The Company operates defined gratuity plans, for its employees. Under the gratuity plan, every employee who has completed at least five years of service gets a gratuity on departure @ 15 days of last drawn salary for each completed year of service. The Company has not created any fund for payment of gratuity.

The following table sets out the disclosures as required by revised Accounting Standard 15 for Gratuity

Statement of profit and loss

Net employee benefit expense recognized in the employee cost

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

c) Other Benefits

The Company has provided for compensatory leaves which can be availed and not encashed as per policy of the Company as present value obligation of the benefit at related current service cost measured using the Projected Unit Credit Method on the basis of an actuarial valuation. The Company has accordingly booked Rs.55.72 Lacs (P.Y. reversal of Rs.28.07 Lacs) in the books of accounts for the year.

NOTE 6.1

The Company’s significant leasing arrangements in terms of Accounting Standard 19 on Leases are in respect of operating leases for premises. These leasing arrangements, which are cancellable, generally range between 11 months and 36 months and are usually renewable by mutual consent on mutually agreeable terms.

* Claims by borrowers consequent to actions against them by the Company in case of defaults and/or repossession of secured assets totaling Rs.187.61 lacs (P.Y. Rs.225.96 lacs). The Company has been advised by its legal division that liability is possible, but not probable and according no provision for such Hability has been recognised in the financial statements.

# Income tax demand of Rs.9.50 Lacs, Rs.27.35 lacs, Rs.18.65 Lacs and Rs.15.95 Lacs from the Indian tax authorities for payment of tax of financial year 2009-10, 2010-11, 2011-12 and 2012-13 respectively upon completion of their tax review. The tax demands are mainly on account of disallowance of expenses which are being contested in appeal before the commissioner of income tax (Appeals)/ Income Tax Appeals Tribunal (ITAT) and is pending for disposal. The Company has deposited the demand but has not recognized the provision pending disposal of appeal.

$ Service tax demand of Rs.1209.62 lacs (up to September 2013) and show cause notice for Rs.837.92 lacs (for the period from 0ctober2013 to March 2015) received from the Service Tax authorities. Company has appealed to commissioner - Service Tax in this matter and Commissioner has given the decision in favor of department. Now Company has contested to appeal before the Custom Excise and Service Tax Appellate Tribunal (CESTAT) at Delhi for the demand up to September 2013 and contested to appeal before the Commissionerate of central excise Jaipur against the notice for the period from October 2013 to March 2015. Company has deposited Rs.90.72 lacs against appeal to CESTAT. The tax demand is mainly on collection agency service on portfolio assigned/securitized to banks/financial institution/non-banking financial institutions.

NOTE 7. THE COMPANY OPERATES IN A SINGLE REPORTABLE SEGMENT I.E. LENDING TO BORROWERS, WHICH HAVE SIMILAR RISKS AND RETURNS FOR THE PURPOSE OF AS 17 ON ‘SEGMENT REPORTING’ SPECIFIED UNDER SECTION 133 OF THE COMPANIES ACT 2013, READ WITH RULE 7 OF THE COMPANIES (ACCOUNTS) RULES, 2014. THE COMPANY OPERATES IN A SINGLE GEOGRAPHICAL SEGMENT I.E. DOMESTIC.

(F) Derivatives

(i) The Company has no transactions / open unhedged exposure in derivatives in the current and previous year.

(ii) The Company has no unhedged foreign currency exposure as on March 31, 2016 (March 31, 2015: Nil).

(G) Details of financial assets sold to securitisation / reconstruction Company for asset reconstruction:

The Company has not sold financial assets to Securitisation/Reconstruction companies for asset reconstruction in the current and previous year.

(H) Details of non-performing financial assets purchased / sold

The Company has not purchased / sold non-performing financial assets in the current and previous year.

(I) Exposure to Capital Market

The Company has no exposure to capital market directly or indirectly in the current and previous year.

(J) Details of financing of parent Company products

This disclosure is not applicable as the Company is the holding Company.

(K) Unsecured Advances - Refer note 14 (L) Registration obtained from other financial sector regulators:

The Company is registered with following other financial sector regulators (Financial regulators as described by Ministry of Finance):

(i) Financial Intelligence Unit (FIU), MOF, Delhi, India

(ii) Registration obtained under Foreign Assets Tax Compliance Act

(M) Disclosure of penalties imposed by RBI and other regulators:

No Penalties were imposed by RBI and other regulators during current and previous year.

(N) Draw down from Reserves:

There has been no draw down from reserves during the year ended March 31, 2016 (previous year: Nil) other than those disclosed under Note 4.

NOTE 8 LITIGATION

The Company has certain litigations pending with the income tax authorities, service tax authorities and other litigations which have arisen in the ordinary course of business. The Company has reviewed all such pending litigations having an impact on the financial position, and has adequately provided for where provision is required and disclosed the contingent liabilities where applicable, in its financial statements. Refer note 30 for items disclosed as contingent liabilities

NOTE 9.

At the year end, the Company did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses.

NOTE 10.

Previous year figures have been regrouped / reclassified, where necessary, to conform to this year’s classification.

---

Mar 31, 2015

1 Corporate information

Au FINANCIERS (INDIA) LIMITED (‘the Company’) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956.

The Company is engaged in lending activities. The Company had obtained its license from Reserve Bank of India to operate as a Non Banking Financial Company (NBFC-ND) on November 7, 2000 vide certificate of registration no. B-10-00139.

2 Basis of preparation

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in India (Indian GAAP). The Company has prepared these financial statements to comply in all material respects with the Accounting Standards notified under section 133 of the Companies Act, 2013 (‘the Act’), read with Rule 7 of the Companies (Accounts) Rules, 2014 and the provisions of the RBI as applicable to a Systemically Important Non-Banking Financial Company (‘NBFC-ND-SI’). The financial statements have been prepared on an accrual basis and under the historical cost convention except interest on loans which have been classified as non-performing assets and are accounted for on realisation basis.

The accounting policies adopted in the preparation of financial statements are consistent with those of previous year

All assets and liabilities have been classified as current or non-current as per the Company’s normal operating cycle and other criteria set out in the Schedule III to the Act. The Company has ascertained its operating cycle as 12 months for the above purpose.

NOTE 3.1

Deposits include Rs.14,299.31 lacs as cash collateral for assignment/securitization, Rs.2,154.76 lacs as cash collateral for bank guarantees under assignment/securitization transactions, Rs.18.90 lacs as cash collateral for other bank guarantees, Rs.694.02 lacs as cash collateral for working capital/term loan facilities from banks repayable on demand and Rs.269.50 lacs as cash collateral for channel financing business.

NOTE 4.1

Interest from loans includes “overdue interest” on loans (other than NPA) charged in case of defaults by borrowers, which has been recorded on realisation basis.

NOTE 4.2 Income from channel finance business and service charges from borrowers is inclusive of service tax.

NOTE 5.1 DETAILS OF EMPLOYEES BENEFITS

Defined contribution plan

Provident fund

The Company makes Provident Fund contributions to a defined contribution retirement benefit plans for qualifying employees. Under the schemes, the Company is required to contribute a specified percentage of the payroll costs to the Provident Fund Commissioner to fund the benefits.

The Company recognized Rs.224.01 Lacs (P.Y. Rs.155.27 Lacs) for provident fund contributions in the statement of profit and loss. The contributions payable to these plans by the Company are at rates specified in the rules of the schemes.

b) Defined benefit plans Gratuity

The Company operates defined gratuity plans, for its employees. Under the gratuity plan, every employee who has completed at least five years of service gets a gratuity on departure @ 15 days of last drawn salary for each completed year of service. The Company has not created any fund for payment of gratuity.

The following table sets out the disclosures as required by revised Accounting Standard 15 for Gratuity

Statement of profit and loss

Net employee benefit expense recognized in the employee cost

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

c) Other Benefits

The Company has provided for compensatory leaves which can be availed and not encashed as per policy of the Company as present value obligation of the benefit at related current service cost measured using the Projected Unit Credit Method on the basis of an actuarial valuation. The Company has accordingly booked Rs.28.07 Lacs (P.Y. reversal of Rs.13.36 Lacs) in the books of accounts for the year.

NOTE 6.1

The Company’s significant leasing arrangements in terms of Accounting Standard 19 on Leases are in respect of operating leases for premises. These leasing arrangements, which are cancellable, generally range between 11 months and 36 months and are usually renewable by mutual consent on mutually agreeable terms.

* Claims by borrowers consequent to actions against them by the Company in case of defaults and/or repossession of secured assets totaling Rs.225.96 lacs (P.Y. Rs.93.91 lacs). The Company has been advised by its legal division that liability is possible, but not probable and according no provision for such Hability has been recognised in the financial statements.

# Income tax demand of Rs.9.07 Lacs, Rs.27.35 lacs, Rs.18.65 Lacs from the Indian tax authorities for payment of tax of financial year 2008-09, 2009-10, 2010-11 & 2011-12 respectively upon completion of their tax review. The tax demands are mainly on account of disallowance of expenses which are being contested in appeal before the commissioner of income tax (Appeals)/ Income Tax Appeals Tribunal (ITAT) and is pending for disposal. The Company has deposited the demand but has not recognized the provision pending disposal of appeal.

$ Service tax demand of Rs.1209.61 lacs from the Indian tax authorities for payment of additional tax up to September 2013. Company has appealed to commissioner - Service Tax in this matter and Commissioner has given the decision in favor of department. Now Company has contested to appeal before the Custom Excise and Service Tax Appellate Tribunal (CESTAT) at Delhi on 22^nd May 2015. Company has deposited Rs.92 lacs against appeal to CESTAT. The tax demand is mainly on collection agency service valuation amount on portfolio assigned/securitized to banks/financial institution/non-banking financial institutions.

NOTE 7. THE COMPANY OPERATES IN A SINGLE REPORTABLE SEGMENT I.E. LENDING TO BORROWERS, WHICH HAVE SIMILAR RISKS AND RETURNS FOR THE PURPOSE OF AS 17 ON ‘SEGMENT REPORTING’ SPECIFIED UNDER SECTION 133 OF THE COMPANIES ACT 2013, READ WITH RULE 7 OF THE COMPANIES (ACCOUNTS) RULES, 2014. THE COMPANY OPERATES IN A SINGLE GEOGRAPHICAL SEGMENT I.E. DOMESTIC.

(F) Derivatives

(i) The Company has no transactions / open unhedged exposure in derivatives in the current and previous year.

(ii) The Company has no unhedged foreign currency exposure as on March 31, 2016 (March 31, 2015: Nil).

(G) Details of financial assets sold to securitisation / reconstruction Company for asset reconstruction:

The Company has not sold financial assets to Securitisation/Reconstruction companies for asset reconstruction in the current and previous year.

(H) Details of non-performing financial assets purchased / sold

The Company has not purchased / sold non-performing financial assets in the current and previous year.

(I) Exposure to Capital Market

The Company has no exposure to capital market directly or indirectly in the current and previous year.

(J) Details of financing of parent Company products

This disclosure is not applicable as the Company is the holding Company.

(K) Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded

During the year ended March 31, 2015 and March 31, 2014, the Company has complied with the Reserve Bank of India guidelines on single borrower and borrower group limit. During the year ended March 31, 2015 and March 31, 2014, the Company has not exceeded single borrower or group borrower exposure limit.

(L) Unsecured Advances - Refer note 14

(M) Registration obtained from other financial sector regulators:

The Company is registered with following other financial sector regulators (Financial regulators as described by Ministry of Finance):

(i) Financial Intelligence Unit (FIU), MOF, Delhi, India

(ii) Registration obtained under Foreign Assets Tax Compliance Act

(M) Disclosure of penalties imposed by RBI and other regulators:

No Penalties were imposed by RBI and other regulators during current and previous year.

(N) Draw down from Reserves:

There has been no draw down from reserves during the year ended March 31, 2016 (previous year: Nil) other than those disclosed under Note 4.

NOTE 8 LITIGATION

The Company has certain litigations pending with the income tax authorities, service tax authorities and other litigations which have arisen in the ordinary course of business. The Company has reviewed all such pending litigations having an impact on the financial position, and has adequately provided for where provision is required and disclosed the contingent liabilities where applicable, in its financial statements. Refer note 33 for items disclosed as contingent liabilities

NOTE 9.

FIGURES ARE ROUNDED OFF TO THE NEAREST RUPEES IN LACS.

NOTE 10.

Previous year figures have been regrouped / reclassified, where necessary, to conform to this year’s classification.