Bandhan Bank Ltd. के अकाउंट के लिये नोट

Mar 31, 2025

4.15 Provisions, Contingent Liabilities
and Contingent Assets

A provision is recognised when the Bank has a present

obligation as a result of past event, it is probable that an
outflow of resources embodying economic benefits will be
required to settle the obligation and a reliable estimate can
be made of the amount of the obligation. Provisions are not
discounted to their present value and are determined based
on the best estimate required to settle the obligation at the
reporting date. These estimates are reviewed at each reporting
date and adjusted to reflect the current best estimates.

A contingent liability is a possible obligation that arises
from past events whose existence will be confirmed
by the occurrence or non-occurrence of one or more
uncertain future events beyond the control of the Bank

or a present obligation that is not recognised because it is
not probable that an outflow of resources will be required
to settle the obligation. A contingent liability also arises in
extremely rare cases where there is a liability that cannot
be recognised because it cannot be measured reliably. The
Bank does not recognise a contingent liability but discloses
its existence in the financial statements.

Contingent Assets are not recognised in the

financial statements.

4.16 Leases

Leases where the lessor effectively retains substantially all
the risks and benefits of ownership of the leased items are
classified as operating leases. Operating lease payments
are recognised as an expense in the profit and loss account
on a straight line basis over the lease term.

4.17 Cash and Cash equivalent

Cash and cash equivalents include cash in hand, balances
with RBI, balances with other banks and money at call and
short notice.

4.18 Share Issue Expenses

Share issue expenses are adjusted against the Securities
Premium Account in terms of Section 52(2) of the

Companies Act, 2013.

4.19 Reward points

Reward points on cards are accounted for based on value
per point after taking into account the probability of
redemption of such reward points

4.20 Derivative Transactions

Derivative transactions comprises of forward contracts,
currency swaps and interest rate swaps. The Bank
undertakes derivative transactions for trading and hedging
balance sheet assets and liabilities.

The Bank recognises all derivative contracts (other than those
designated as hedges) at fair value, on the date on which the
derivative contracts are entered into and are remeasured at
fair value as at the Balance Sheet or reporting dates.

Derivative transactions such as Foreign exchange forward
contracts, Forex swap and Interest rate swaps outstanding
as at the Balance Sheet date and held for trading, are fair
valued at present value basis. The resulting profit or loss
on valuation is recognised in the Profit and Loss Account.

Derivatives which are not intended for trading such as
Foreign exchange forward contracts and Forex swaps and
which are outstanding at balance sheet date are fair valued
at the FEDAI closing SPOT rate. The premium or discount
arising at the inception of such Forward contracts and
Forex swaps is amortised as expense or income over the
life of the contract.

Derivatives are classified as assets when the fair value is
positive (positive marked to market value) or as liabilities
when the fair value is negative (negative marked
to market value).

Pursuant to the RBI guidelines, any receivable under a
derivative contract with a counterparty which remains
overdue for more than 90 days, mark-to-market gains on
any other derivative contract with the same counterparty,
is reversed through Profit and Loss account.

Note: The Bank has assessed its obligations arising in the normal course of business, including pending litigations,
proceedings pending with tax authorities and other contracts including derivative and long term contracts. In
accordance with the provisions of AS 29 on ''Provisions, Contingent Liabilities and Contingent Assets'', the Bank

recognises a provision for material foreseeable losses when it has a present obligation as a result of a past event and it
is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate
can be made. In cases where the available information indicates that the loss on the contingency is reasonably possible
or the amount of loss cannot be reasonably estimated, a disclosure to this effect is made as contingent liabilities in
the financial statements. The Bank does not expect the outcome of these proceedings to have a materially adverse
effect on its financial results.

18.2 Capital

During the year ended March 31, 2025, the Bank has allotted 1,657 Equity Shares (Previous Year: 133,268) of ?10/-
each in respect of stock option exercised aggregating to ?0.0298 crore (Previous Year: ?2.40 crore). Accordingly,

share capital increased by T0.0017 crore (Previous Year: T0.13 crore) and share premium increased by T0.03 crore
(Previous Year: ?2.27 crore) respectively.

18.3 Proposed dividend

The Board of Directors at its meeting held on April 30, 2025, has proposed a dividend of ?1.50 per share

(Previous Year: T1.50 per share) for the year ended March 31, 2025 subject to 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) Rules, 2021, the Bank has not accounted for proposed dividend aggregating to T241.65 crore
(Previous Year: T241.65 crore) as a liability for the year ended March 31, 2025. Effect of the proposed dividend has
been reckoned in determining capital funds in the computation of capital adequacy ratios as at March 31, 2025 and
March 31, 2024.

#An amount of ?0.0298 crore raised pursuant to exercise of employee stock options during the year ended March

31, 2025 (year ended March 31, 2024: T2.40 crore)

*The Bank has not raised (March 31, 2025: Nil) perpetual debt capital instruments qualifying for Additional Tier-1
capital and subordinated debt qualifying for Tier-2 capital (March 31, 2024: Nil).

In accordance with the RBI guidelines, banks are required to make consolidated Pillar 3 and Net Stable Funding
Ratio (NSFR) disclosures under the Basel III Framework. These disclosures are available on the Bank''s website
at the following link:httDs://www.bandhanbank.com/regulatorv-disclosures. The disclosures have not been
subjected to audit by the statutory auditors of the Bank.

"Basis the clarification received, the Bank w.e.f quarter ended June 30, 2024 has assigned risk weight of 125%
to its Emerging Entrepreneurs Business (EEB) Group Loans and Small Business & Agri Loans (SBAL) portfolio as

against 75% risk weight assigned earlier. Accordingly capital adequacy as on March 31, 2024 been recomputed
at 14.69% as against 18.28% disclosed earlier. Subsequently as per RBI Circular on "Review of Risk Weights on

Microfinance Loans" dated February 25, 2025; the Bank has assigned risk weight of 75% to its EEB Group Loans
and SBAL portfolio where such advances meets the criteria to be classified as regulatory retail portfolio (RRP)
for regulatory capital purposes.

B) Draw Down From Reserve

There has been no draw down from reserves during the year ended March 31, 2025 and March 31, 2024.

C) Sale and transfers of Securities 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.

F) Divergence in asset classification and provisioning

In terms of the RBI guidelines banks are required to disclose the divergence in asset classification and provisioning
consequent to RBI''s annual supervisory process i n their notes to accounts to the financial statements, wherever
the additional provisioning assessed / additional gross NPAs identified by RBI exceeds the threshold specified by
RBI. The threshold for provisioning is 5 per cent (Previous year 5 per cent) of the reported profit before provisions
and contingencies for the reference period and that for additional gross NPAs is 5 per cent (Previous year 5 per
cent) of the published incremental Gross NPAs for the reference period.

Based on the above, there was no divergence in asset classification and provisioning for NPAs in current year and
no reportable divergence for the Previous Year.

G) Transfer of Loan Exposures

Details of loans transferred excluding through Inter- Bank Participation Certificate (IBPC) & acquired
during the year ended March 31, 2025 under the RBI Master Direction on Transfer of Loan Exposures dated

September 24, 2021 are given below:

i) Details of Financial Assets sold to Securitisation / Reconstruction company for Reconstruction

There was no stressed loans transferred and Investment made in Security Receipts during the year ended
March 31, 2025 to ARCs for technically written off and NPA accounts. Details for the Previous Years is
given below:

ii) Details of Non Performing Financial Assets Purchased

The Bank did not purchase any Non Performing Financial Assets during the year ended March 31,2025 and
March 31,2024.

iii) Details of Special Mention Account (SMA) or Stressed Financial Assets Purchased

The Bank did not purchase any Special Mention Account (SMA) or Stressed Financial Assets during the year
ended March 31,2025 and March 31,2024.

Note:

Exposure is higher of limits sanctioned or the amounts outstanding as at the year end.

#As per the Master Circular on Exposure norms dates July 01,2014 banks direct investment in shares, convertible bonds, convertible
debentures, units of equity oriented mutual funds and exposures to venture capital funds have been shown at their respective cost price.

C) 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''s credit exposure to single borrower and

group borrowers was within the prudential exposure limits prescribed by RBI.

D) Unsecured Advances against Intangible Collaterals

During the year ended March 31, 2025 and March 31, 2024, there are no unsecured advances for which intangible
securities such as charge over the rights, licenses, authority etc. has been taken as collateral by the Bank.

E) Risk Category wise Country Exposure

As per the extant RBI guidelines, the country exposure of the Bank is categorised into seven risk categories
namely insignificant, low, moderately low, moderate, moderately high, high, very high on the basis of Export
Credit Guarantee Corporation of I ndia Limited (ECGC) guidelines. The net funded exposure of the Bank in respect

of foreign exchange transactions with each country is within 1% of the total assets of the Bank and hence no
provision is required to be made in respect of country risk as per the RBI guidelines.

F) Unhedged Foreign Currency Exposure

During the year ended March 31, 2025, the Bank made provision of ?0.16 crore (Previous Year: ?4.20
crore) towards un-hedged foreign currency exposure. As on March 31, 2025, the Bank held cumulative
provision towards un-hedged foreign currency exposure of ?11.56 crore (Previous Year: ?11.40 crore).
As on March''25, the Bank is required to provide additional Capital of ?90.17 crore (Previous Year: ?124.88 crore)
towards borrowers having un-hedged foreign currency exposures in accordance with RBI guidelines.

G) Intra Group Exposures

The Bank did not have any intra group exposure during the year ended March 31,2025 and March 31,2024.

H) Factoring Exposures

The Bank did not have any factoring exposure during the year ended March 31,2025 and March 31,2024.

D) The Code on Social Security, 2020

The Code on Social Security 2020 (''the Code'') relating to employee benefits, during the employment and
postemployment, has received Presidential assent on September 28, 2020. The Code has been published in

the Gazette of India. Further, the Ministry of Labour and Employment has released draft rules for the Code on
November 13, 2020. The effective date from which the changes are applicable is yet to be notified and rules for
quantifying the financial impact are not yet issued. The Bank will assess the impact of the Code and will give
appropriate impact in the financial statements in the period in which, the Code becomes effective and the related
rules to determine the financial impact are published.

18.11 Segment Reporting

A) Segment Identification

Pursuant to the guidelines issued by RBI on AS 17 - Segment Reporting - Enhancement of Disclosures dated
April 18, 2007, the following business segments have been reported:

i) Treasury :

Treasury operations include investments in sovereign securities and trading operations. The Treasury segment
also includes the central funding unit.

ii) Retail banking :

Includes lending to individuals/small businesses through the branch network and other delivery channels subject

to the orientation, nature of product, granularity of the exposure and low value of individual exposure thereof.
It also includes liability products, card services, internet banking, mobile banking, ATM services and NRI services.

All deposits sourced by branches are classified in retail category.

iii) Corporate/Wholesale Banking:

Includes corporate relationships not included under Retail Banking.

iv) Other Banking Business :

Include para banking activities like third party product distribution and other banking transaction not covered
under any of the above three segments.

Income, expenses, assets and liabilities are either specifically identified with individual segments or are allocated
to segments on a systematic basis.

The liabilities of the Bank are first used by the units generating the same. Any excess liabilities of the units are
pooled to central funding unit (Treasury). Treasury then lends these funds to other units at appropriate rates.

The transfer pricing mechanism of the Bank is periodically reviewed. The segment results are determined based
on the transfer pricing mechanism prevailing for the respective reporting periods.

Revenues of the Treasury segment primarily consist of fees and gains or losses from trading operations and
i nterest income on the investment portfolio. The pri ncipal expenses of the segment consist of interest expense

on funds borrowed from external sources and other internal segments, premises expenses, personnel costs,
other direct overheads and allocated expenses.

Revenues of the Corporate/Wholesale Banking segment consist of interest and fees earned on loans given to
customers falling under this segment and fees arising from these. Revenues of the Retail Banking segment

are derived from interest earned on loans classified under this segment, fees for banking services and ATM
interchange fees. Expenses of the Corporate/Wholesale Banking and Retail Banking segments primarily comprise
interest expense on deposits and funds borrowed from other internal segments, infrastructure and premises
expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads

and allocated expenses.

Segment income includes earnings from external customers and from funds transferred to the other segments.
Segment result includes revenue as reduced by interest expense and operating expenses and provisions, if any,
for that segment. Segment-wise income and expenses include certain allocations. I nter segment interest income

and interest expense represent the transfer price received from and paid as per the transfer pricing mechanism
presently followed by the Bank.

Notes:

The business of the Bank does not extend outside India and it does not have any assets outside India or earnings emanating from
outside India. Accordingly, the Bank has reported operations in the domestic segment only.

''Treasury segment liabilities includes share capital and reserve & surplus

The RBI vide its circular dated April 07, 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 does not have any DBUs, hence Digital Banking Segment
disclosures is not applicable.

Previous year figures are shown in"()".

Segment information is provided as per the MIS available for internal reporting purposes, which include certain estimates/assumptions.
The methodology adopted in compiling and reporting the above information has been relied upon by the auditors.

18.12 Related Party disclosure

The Bank has transactions with its related parties comprising of associates/other related entities, key management
personnel and the relatives of key management personnel.

As per AS 18 "Related Party Disclosures", notified under section 133 of the Companies Act 2013, read together with

paragraph 7 of the Companies (Accounts) Rules 2014, the Bank''s related parties for the year ended March 31, 2025
are disclosed below:

18.15 Liability for Operating Leases

The Banking Units premises are generally rented on cancellable terms for less than twelve months with no escalation
clause and renewable at the option of the Company. The Head office and the Bank Branches office premises are
obtained on non- cancellable lease terms. Lease payment during the year are charged in the statement of profit & loss.

The amount of rent expenses included in the Profit & Loss account towards operating leases aggregate to 7364.80
crore (Previous year ended March 31,2024: 7298.43 crore).

Particulars of future minimum lease payment in respect of Head office & Bank branches are as mentioned below :

18.16 Small and Micro Industries

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from
October 02, 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 during the years 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.

18.17 Description of contingent liabilities

i) Claims against the Bank not acknowledged as debts:

An amount of 7280.77 crore (Previous year: 799.73 crore) is outstanding as at March 31, 2025, as claims against
the Bank not acknowledged as Debts including 7162.90 crore (Previous year: 740.69 crore) being in the nature

of a contingent liability on account of proceedings pending with Tax authorities. The Bank is a party to various
taxation matters in respect of which appeals are pending and various legal proceedings in the normal course of
business. The Bank has reviewed and classified these items as possible obligations based on legal opi nion/judicial
precedents/assessment and does not expect the outcome of these proceedings to have a materially adverse
effect on the Bank''s Financial Statements.

ii) Liability on account of Forward Exchange contracts

The Bank has entered into foreign exchange contracts with interbank Counterparties. Forward exchange contracts
are commitments to buy or sell foreign currency at a future date at the contracted rate. The forward exchange
contracts that are not intended for trading and are entered into to establish the amount of reporting currency
required or available at the settlement date of a transaction are effectively valued at closing spot rate. The premium
or discount arising on inception of such forward exchange contracts is amortised over the life of the contract as
interest Expense / income. The amount in contingent liability represents notional outstanding principal amount.

iii) Guarantees given on behalf of constituents, Acceptances, Endorsements and Others

An amount of 72,008.19 crore (Previous year: 71,716.15 crore) is outstanding as at March 31, 2025. As part of its

commercial banking activity, the Bank issues documentary credit and guarantees on behalf of its customers.
Guarantees generally represent irrevocable assurances that the Bank will make payments in the event of the
customer failing to fulfil its financial or performance obligations.

iv) Currency swaps & interest rate swaps

This item represents the notional principal amount of various derivative instruments which the Bank undertakes

in its normal course of business. The Bank undertakes these contracts to manage its own interest rate and foreign
exchange positions.

18.19 Disclosures on Remuneration
Qualitative Disclosures

A) Information relating to the composition and
mandate of the Remuneration Committee.

The Bank''s Nomination and Remuneration
Committee (NRC) oversees the framing, review
and implementation of the Compensation Policy
on behalf of the Board of Directors. The NRC
reviews the policy at least once a year to ensure
that the reward design is aligned to industry best
practices and is consistent with effective risk
management and long term business interests of
the Bank. The NRC works in close coordination
with the Risk Management Committee of the
Bank, to achieve the effective alignment between
remuneration and risks.

As on March 31,2025 the NRC comprises of the

following directors.

Mr. Suhail Chander - Chairman

Dr. A S Ramasastri
Mr. Philip Mathew

The NRC functions with the following
main objectives:

i) To identify persons who are qualified to

become directors in accordance with the
criteria laid down, recommend to the Board

their appointment, re-appointment or
removal and to carry out evaluation of every
Director''s performance;

ii) To formulate the criteria for determining
qualifications, positive attributes and
independence of a Director and decide their
''fit & proper'' status;

iii) To oversee the framing, review and
implementation of compensation policy of
the Bank and recommend to the Board the
overall remuneration philosophy and policy
including the level and structure of fixed
pay, variable pay, perquisites, bonus pool,
stock based remuneration to employees;

iv) To oversee the framing, implementation and
review of the Remuneration of the Whole
Time Director (WTDs) /Managing Director
(MD)/ Chief Executive Officer (CEOs) as
per the RBI Guidelines and Companies Act,
2013. The Committee shall recommend
to the Board the remuneration package
for the Managing Director & CEO and the
other Whole Time Directors - including the
level of fixed pay, variable pay, stock based
Remuneration and perquisites;

v) To review the HR strategy and policy
i ncluding the conduct and ethics of the Bank

and review any fundamental changes in the
organisation structure which could have
wide ranging and high risk implications;

vi) To review and recommend to the Board, the

succession policy at the level of Managing
Director & CEO, other WTDs, senior
management one level below the Board and
key roles.

B) Information relating to the design and structure of
remuneration processes and the key Features and
objectives of remuneration policy

The Compensation Policy reflects the Bank''s

objectives for good corporate governance as
well as sustained and long-term value creation
for stakeholders. The aims of the Bank''s
remuneration framework are to:

i) Attract, motivate and retain people with
requisite skill, experience and ability to

deliver the Bank''s strategy;

ii) Create an alignment and balance
between the rewards and risk exposure of
shareholders and interests of employees;

iii) Link rewards to creation of long term
sustainable shareholder value consistent
with strategic goals and appropriate risk
management; and

iv) Encourage behaviour consistent with the
Bank''s values and principles.

v) Support appropriate conduct and
meritocratic culture through differentiated

performance rewards

To achieve the above objectives, the philosophy
adopted by the Bank is as follows:

i) Market referenced: offer employees

competitive salary, achieved through
benchmarking with peer groups.

ii) Making fixed salary the main
remuneration component.

iii) Ensure that jobs of similar internal value are
grouped and pegged within a range guided
by market benchmarked jobs.

iv) Risk Adjusted: By integrating non-financial

considerations relating to conduct in
performance assessments, employing
proper mix of compensation elements and
aligning compensation incentives to risk
outcomes and factoring the time horizon
of risks

v) Focus on ''Total rewards'', all aspects of
compensation, rewards and well defined
benefits, including rewarding work
environment and personal development.

vi) The focus will be to ensure that the Bank
is competitive in its overall salary offer to
its employees without being excessively
expensive for the Bank.

The compensation structure for the MD & CEO
also mirrors the Bank''s philosophy of aligning
with the principles of sound compensation
practices to ensure:

i) Effective and independent governance
of compensation.

ii) Effective alignment of compensation with

prudent risk taking.

iii) Effective supervisory oversight and
engagement by stakeholders.

Design & Structure of Remuneration process

The total compensation is a prudent mix of
fixed remuneration and performance-based
variable remuneration

The key remuneration elements are:

1) Fixed Pay

2) Discretionary Performance-based
Variable Remuneration

The Bank ensures that the fixed pay element is
reasonable, taking into account the market rates
and trends. The fixed pay is reviewed annually
using market intelligence provided by a leading
global performance/reward consulting and
benchmarking firm for financial services industry
to ensure that the Bank remains competitive in

marketplace and that the Bank is able to attract
and retain best talent. The level of fixed pay
shall be sufficient enough in order to discourage

inappropriate risk-taking.

Performance-based variable remuneration may
comprise cash bonus, stock linked instruments,

and is awarded by ensuring:

i) an appropriate balance between fixed and
performance-based components;

ii) that the fixed component represents a
higher proportion of the total remuneration;

iii) that the performance-based component
reflects the risk underlying the
achieved result;

iv) that a substantial part of the performance-
based component may be deferred;

v) that no hedging of deferred shares
takes place;

Presently, the bank utilises only two form of

performance based variable remuneration,
viz.,cash bonus, ESOP, as referred in note no 18.32

is linked to continuous service with the Bank.

The compensation policy of the Bank is reviewed

by the NRC and approved by the Board of
Directors. The NRC oversees the implementation

of the policy and reviews the fixed pay increases,
the organisational performance threshold for
bonus to be paid, cash bonus and deferred
variable remuneration.

C) Description of the ways in which current and
future risks are taken into account in the
remuneration process

The MD & CEO, employees in the grades of

SVPs and above and employees engaged in
the functions of Risk Control and Compliance
are included in the policy of risk alignment
of compensation.

The alignment of compensation to prudent risk
taking is ensured through the following:

i) Structure of remuneration is such that
a significant part of performance based
variable remuneration is deferred.

ii) Performance hurdles includes financial
and non-financial parameters, ensuring
compensation is aligned to both.

iii) Fixed Salary is reasonable and sufficient,
thereby discouraging inappropriate
risk taking.

iv) Annual Bonus Plan is managed with an
independent governance framework.

v) Variable remuneration awards are
conditional, discretionary and contingent
upon a sustainable and risk-adjusted
performance. They are therefore
capable of forfeiture or reduction at the
Bank''s discretion.

vi) For employees included in the policy of risk

alignment of compensation, NRC has the
discretion to apply malus and clawback -
ex-post risk adjustment, allowing the Bank

to adjust previously awarded remuneration
to take account of subsequent performance
and potential risk outcomes and thus
enabling to recoup variable pay in the event
of a negative contribution.

Deferral of Variable Pay

To ensure that risk measures are not focused
only on the achievement of short term goals,
variable payout is deferred, if it exceeds 50% of
the fixed pay.

The Bank''s compensation policy aims to ensure
that both ex-ante estimates and ex-post

outcomes of risk affect payoffs; so that one
or the other, can better address the various
situations or risks.

D) Description of ways in which the Bank seeks
to link performance, during a performance
measurement period with levels of remuneration.

The Bank has a performance measurement
framework in place to assess the achievements
of the organisation as a whole, its business lines
and organisational units as well as individual
employees. In order to maximise the incentive to
deliver adequate performance and to take into
account any risks of the business activities, the
Bank seeks to closely link remuneration outcomes
with performance and risk outcomes. Accordingly,
the Bank''s performance management and
compensation philosophy is designed in a manner
to help achieve the Bank''s business objectives.

The performance management system in the
Bank is aligned to the balanced scorecard
approach. The goal setting process helps

individuals to have clarity on their roles and align
their profiles in line with the broad organisation
strategy. Both quantitative / financial and
qualitative / non-financial performance measures
are considered. The qualitative or non-financial
measures include customer service, adherence
to risk and compliance standards, behaviour and
values such as accountability, team work, etc.,
which builds a culture conducive to sustainable
business performance.

The performance appraisal process starts with
the employee conducting self-appraisal followed
by the assessment of the supervisor via appraisal
feedback and discussion.

Individual fixed pay increases and variable
remuneration are based on the final performance
ratings. In addition, the fixed pay increase is
also influenced by an employee''s position in

the salary range and relevant market salaries.
Performance related variable compensation
is linked to corporate performance, business
performance and individual performance. The
performance ratings based bonus distribution
matrix is reviewed by the NRC.

Employees engaged in all control functions
including Compliance and Risk do not carry
business profit targets in their goal sheets
and hence are compensated based on their
achievement of key result areas as per the
balance score card. The aim is to ensure that
the remuneration system and outcomes
relating to such control functions maintain the
independence of the function and Bank''s robust
risk management framework. Accordingly, for the
control functions, the variable pay is conservative
to promote prudent risk management behaviour
and the ''pay mix'' is skewed towards fixed pay.

In the case of performance evaluation of the
Managing Director and Chief Executive Officer of

the Bank, factors such as financial performance
measures, cost management initiatives,
other strategic initiatives, prudential risk and
compliance management, recognition and awards
to the Bank, etc., is taken into account, which may
vary from year to year depending on the Bank''s
strategic priorities. Based on the inputs from
NRC, the Board reviews the performance and

recommends the rate of bonus to be paid, and
the increments for the MD & CEO, for regulatory

approval in terms of Section 35B of the Banking
Regulation Act, 1949 (B.R. Act, 1949).

E) Bank''s policy on deferral and vesting of variable
remuneration and bank''s policy and criteria for
adjusting deferred remuneration before vesting
and after vesting.

In terms of RBI guidelines, the Compensation Policy

specifically addresses the following categories
of employees:

Category I : Managing Director &Chief Executive
Officer / Whole Time Directors / Material Risk Takers

Category II : Risk Control and Compliance Staff

Category III: Other Categories of Staff (employees

receiving share-linked variable pay)

The following principles are applied for grant
and deferral of performance-based variable
remuneration for the above categories
of employees.

Category I

i) Variable pay shall not exceed 3 (three)
times the annual fixed pay for MD & CEO
and WTDs.

ii) Variable pay shall not exceed 2.5 (two and
half) times the annual fixed pay for MRTs.

iii) At minimum, variable pay shall be equal to
the annual fixed pay.

iv) If an executive is barred by regulation/ statute
to receive grant of share-linked i nstruments,

the variable pay shall be capped at 1.5 (one
and half) times the annual fixed pay, but will
be more than 50% of the annual fixed pay

v) I f variable pay is up to 2 (two) times the
annual fixed pay, then at least 50% of the
variable pay shall be in the form of share-
linked instruments (i.e. non-cash).

vi) If variable pay is between 2 (two) to 3 (three)
times the annual fixed pay, then at least two—
thirds of the variable pay shall be in the form
of share-linked instruments (i.e. non-cash).

vii) At least 60% of total variable pay shall be
deferred including at least 50% of cash-
based variable pay. However, in cases where
the cash component of variable pay is under
?25 lakh, the Bank at its discretion, may not
necessarily have deferral requirements.

viii) Deferral of cash based variable pay shall
be for 3 years on pro-rata yearly basis
(annual vesting).

ix) Deferral of share-linked variable pay shall be
for 4 years on pro-rata yearly basis (annual
vesting).

x) In case the employee exits the organisation
before the vesting of all three parts, the
remaining deferred cash based variable pay
will not be paid

Category II

i) The mix of Fixed Pay and Variable
remuneration will be weighed towards
Fixed Pay.

ii) Variable pay shall not exceed the annual
fixed pay.

iii) At least 40% of the variable pay shall be in
the form of share-linked instruments (i.e.

non-cash).

iv) Deferral of share-linked variable pay shall
be for 4 years on pro-rata yearly basis
(annual vesting).

v) The compensation will be commensurate to
their key role in the Bank.

Category III

i) Variable Remuneration will be as per the
NRC approved pay-out levels in terms of
performance, grade and role matrix.

ii) Variable pay shall not exceed the annual
fixed pay.

iii) At least 50% of the variable pay shall be in
the form of share-linked instruments (i.e.

non-cash).

iv) Deferral of share-linked variable pay shall
be for 4 years on pro-rata yearly basis
(annual vesting).

For the three categories of employees mentioned
hereinabove, the awarded performance based
variable pay shall be subject to in-year adjustment,
malus or clawback as decided by the NRC, in the
event of negative contribution of the Bank and /
or relevant line of business and in material cases
of detrimental conduct of individual or business.

Negative contribution of the Bank and / or
relevant line of business is defined as:

Conduct related:

i) If an employee engages in certain
detrimental conduct, including mis-selling
practices, manipulation of interest rate
benchmarks, illegal activity, breach of a
fiduciary duty, etc. that causes material
financial or reputational harm to the Bank.

ii) If the award was based on a material
misrepresentation by the employee.

iii) If there is reasonable evidence of employee

malfeasance and breach of integrity inviting
disciplinary actions.

iv) Violation of Anti Hedging and Anti Pledging
Policy or Code of Conduct for Prevention of

Insider Trading.

Risk related and others:

i) If the awarded performance-based variable
pay was granted on a deliberately erroneous
foundation or an incorrect decision made
due to gross negligence not considered as
errors of judgement.

ii) If the employee who is reasonably expected

to be aware of the failure, misconduct or
weakness in approach that contributed
to the failure, improperly or with gross
negligence failed to identify, assess, report
or escalate in a timely manner.

iii) If the performance, decisions or actions
taken leads to the Bank or the relevant
business unit suffering a significant material
downturn in its financial performance.

iv) If the RBI assessed divergence in the Bank''s
provisioning for Non-Performing Assets

(NPAs) or asset classification exceeds the
prescribed threshold for public disclosure,
the bank shall not pay the unvested

portion of the variable compensation for
the assessment year under malus clause.
Further, in such a situation, there shall
not be any increase in variable pay for

the assessment year. In case the bank''s

post assessment Gross NPAs are less than
2.0%, these restrictions will apply only
if the criteria for public disclosure are
triggered either on account of divergence
in provisioning or both provisioning and
asset classification.

v) In the event of a material restatement,
correction or amendment of the Bank''s
financial results for the relevant period.

18.26 Green Deposits raised by the bank

There has been no green deposits during the year ended March 31, 2025 and March 31, 2024.

18.27 Disclosure on Liquidity Coverage Ratio

(A) Qualitative disclosure

The Bank has adopted the Basel III framework on liquidity standards as prescribed by RBI and has put in place
requisite systems and processes to enable periodical computation and reporting of the Liquidity Coverage

Ratio (LCR). The Risk department computes the LCR and reports the same to the Asset Liability Management
Committee (ALCO) every month for review.

The Bank follows the criteria laid down by RBI for calculation of High Quality Liquid Assets (HQLA),gross outflows
and inflows within the next 30-day period. HQLA predominantly comprises Government securities in excess of
minimum SLR requirement viz. Treasury Bills, Central and State Government securities and excess of minimum

cash reserve ratio (CRR).

The Board of Directors has the overall responsibility for management of liquidity risk. The Board at overall level
decides the strategy, policies and procedures of the bank to manage liquidity risk in accordance with the liquidity
risk tolerance/limits. The Board has constituted Risk Management Committee, which reports to the Board, and
consist of Managing Director and certain other Board members. The Committee is responsible for evaluating
the overall risks faced by the bank including liquidity risk.

18.29 Disclosure on Derivatives

(i) Derivatives

Derivatives are financial instruments whose characteristics are derived from underlying parameters like interest
rates or foreign exchange rates. These include forward contracts, swaps, etc. These transactions may expose
the Bank to risks primarily in the nature of market and credit risk. The following sections outline the nature and

terms of the derivative transactions undertaken by the Bank.

Interest Rate swaps undertaken by the Bank involve the exchange of interest obligations with a counterparty
for a specified period without exchanging the underlying principal i.e., notional amount. The Bank has
undertaken derivative transactions in Rupee Interest Rate Swaps (OIS) only on the Astroid platform of CCIL for
proprietary trading.

Foreign Exchange forward contracts and Foreign Exchange Swaps are agreements to buy /sell/exchange fixed
amounts of currency against another currency at an agreed exchange rate on Spot / forward date. These
instruments are carried at fair value.

The Bank has adopted the following mechanism for managing risks arising out of the derivative transactions.

The derivative transactions are governed by the Investment Policy and Market Risk Management Policy of the
Bank as well as by the extant RBI guidelines. The risk limits are set up and actual exposures are monitored vis-a-vis
the limits allocated. These limits are set up taking into account market volatility, risk appetite, business strategy
and management experience. Risk limits are in place for risk parameters viz. Value at Risk (VaR), Maximum tenor,
deal size and Price Value of a Basis Point (PVBP). Actual positions are monitored against these limits on a daily
basis and breaches if any are reported promptly.

The Treasury has entered into derivative transactions with interbank counterparties. The Bank has an independent
back-office and mid-office as per regulatory guidelines. The MTM position of the derivative portfolio is monitored

on a daily basis. The risk profile of the outstanding portfolio is reviewed by the Board at regular intervals.

Derivative transactions such as foreign exchange forward contracts, foreign exchange swap and Interest rate
swaps outstanding as at the Balance Sheet date and held for trading, are fair valued. The resulting profit or loss
on valuation is recognised in the Profit and Loss Account. Derivatives which are not intended for trading such

as, Foreign Exchange forward contracts and Forex swaps and which are outstanding at balance sheet date, are
fair valued at the FEDAI closing rate. The premium or discount arising at the inception of such Forward contracts
and Foreign Exchange swaps are amortised as expense or income over the life of the contract. Derivatives are
classified as assets when the fair value is positive (positive marked to market value) or as liabilities when the fair
value is negative (negative marked to market value). Bank has placed margin/collateral to Central Counterparty
(CCIL) for various asset classes, wherever applicable.

18.32 Employee Stock Option Scheme (ESOS)

On July 26, 2017 the board of directors approved the Bandhan Bank Employee Stock Option Plan Series 1 for issue
of stock options to eligible employees and directors of the Bank.

The Shareholders of the Bank at the meeting held on November 23, 2017 has approved the Employee Stock Option

Plan Series 1 and the grant of Employee Stock Option to the employees of the Bank. The said approval accords the
Board of Directors of the Bank or any Committee including the Nomination and Remuneration Committee, which
the Board has constituted, to create, offer, and grant at any time to permanent employees of the Bank, including
any Director of the Bank, whether whole-time or otherwise but excluding Promoter(s), Independent Directors and
Directors holding directly or indirectly more than 10% of the outstanding equity shares, employee stock options from
time to time in one or more tranches.

This plan was framed in accordance with the SEBI (Employee Stock Option Scheme & Employee Stock Purchase

Scheme) Guidelines, 1999 as amended from time to time and as applicable at the time of the grant. The accounting
for the stock options has been in accordance with the SEBI (Share Based Employee Benefits) Regulations, 2014 to

the extent applicable.

Employee Stock Option Plan Series 1 provides for the issuance of options at the recommendation of the Nomination
and Remuneration Committee of the Board (''NRC'') at the closing price on the working day immediately preceding

the date when options are granted. The closing price of the Bank''s equity share on an Indian stock exchange with the
highest trading volume as of the working day preceding the date of grant set forth by the NRC at the time of grant.
The period in which the options may be exercised cannot exceed five years from date of expiry of vesting period.
However, if the participant''s employment terminates due to retirement (including pursuant to any early/ voluntary
retirement scheme), the whole of the unvested options shall vest on the first vesting date relating to the said grant,
immediately following the date of superannuation. During the years ended March 31, 2025 and March 31, 2024, few
modifications were made to the terms and conditions of ESOPs as approved by the NRC.

18.34 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)
("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.

18.35 Disclosure of Items that exceeds one
percent under respective categories:

Other expenditure includes IT Operating expenses
amounting to ?277.20 crore (Previous Year: ?305.13
crore) exceeding 1% of the total income of the Bank.

18.36 Other Assets includes Investment in RIDF (Rural
Infrastructure Development Fund) amounting to
?4,499.88 crore (Previous Year ended March 31, 2024

?6,244.61 crore)

18.37 Remuneration by way of sitting fees paid to the
Non-Executive Directors for attending meeting of
the Board and its committees during the year ended
March 31, 2025 amounting to ?4.25 crore (Previous

Year: ?3.38 crore).

18.38 Accounting Software Used for
maintenance of Books of Accounts

As per the requirements of rule 3(1) of the Companies
(Accounts) Rules 2014 the Bank uses only such

accounting software(s) for maintaining its books of
account that have a feature of recording audit trail
of each and every transaction creating an edit log of
each change made in the books of account along with
the date when such changes were made within such
accounting software. This feature of recording audit
trail has operated throughout the year and was not
disabled, tampered with during the year and audit trail
has also been preserved in accordance with statutory
record retention requirements, except

(a) the audit trail configured at database level
logs record only modified values in respect of
two accounting software(s). Further, for one
of these applications, the changes to capture
pre-modified values was implemented from
March 25, 2025.

(b) the audit trail to log any direct data changes
was enabled at database level in case of one
accounting software, from May 25, 2024.

The Bank has preserved the audit trail as per the
statutory requirements for record retention except
in the case of two sunset software discontinued
during the previous financial year and one accounting
software wherein audit trail was enabled at database
level from February 18, 2024.

18.39 Provision for credit card and debit card
reward points

Reward points on cards are accounted for based on
value per point after taking into account the probability
of redemption of such reward points. The Bank made
provision of ?5.85 crore in FY 24-25 (Previous Year: Nil)
in respect of reward points on debit & credit cards.

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

The RBI issued a circular in February, 2016 requiring

banks to implement Indian Accounting Standards
(''Ind AS'') and prepare Ind AS financial statements
with effect from April 01, 2018. In line with the RBI

guidelines on Ind AS implementation, the Bank has
formed a Steering Committee comprising members
from the concerned functional areas. As advised by
the RBI, the Bank has also submitted Proforma Ind AS
financial statements every half year to the RBI.

Further, RBI vide its communication dated
August 08, 2021, had advised the bank to submit

Proforma Ind AS financial statements.

Further on January 16, 2023 RBI released a discussion
paper on the Expected Loss (EL) based approach for
loan loss provisioning by banks to formulate a principle
based guidelines supplemented by regulatory
backstops wherever necessary.

However, the RBI in its press release issued on March
22, 2019 has deferred the applicability of Ind AS till

further notice for Scheduled Commercial Banks.

The Bank has made a diagnostic study to identify the
gaps, process and system changes required to implement
Ind AS and is in the process of implementing necessary
changes in its IT system and other processes. The Bank
is regularly holding workshops and training for its staff.

18.45 The Bank has applied its significant accounting
policies in the preparation of these financial results
consistent with those followed in the annual financial
statements for the year ended March 31, 2024 and
any circular / direction issued by RBI is implemented
prospectively when it becomes applicable. Basis
the RBI circulars/ directions, changes has been
made during the year which are disclosed in Note

18.46 below.

18.46 A) Policies on classification and valuation

of investments:

With effect from April 01, 2024 the Bank adopted the

---

Mar 31, 2024

Schedule 18 -Notes to accounts forming part of the financial statements for the year ended March 31, 2024

The following disclosures have been made taking into account the requirements of Accounting Standards (ASs) and Reserve Bank of India (RBI) guidelines in this regard.

Note -The Bank has assessed its obligations arising in the normal course of business, including pending litigations, proceedings pending with tax authorities and other contracts including derivative and long term contracts. In accordance with the provisions of AS 29 on ''Provisions, Contingent Liabilities and Contingent Assets'', the Bank recognises a provision for material foreseeable losses when it has a present obligation as a result of a past event and it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. In cases where the available information indicates that the loss on the contingency is reasonably possible or the amount of loss cannot be reasonably estimated, a disclosure to this effect is made as contingent liabilities in the financial statements. The Bank does not expect the outcome of these proceedings to have a materially adverse effect on its financial results.

18.2 Capital

During the year ended March 31, 2024, the Bank has allotted 133,268 Equity Shares (Previous Year- 70,613) of '' 10/-each in respect of stock option exercised aggregating to '' 2.40 crore (Previous Year- '' 1.27 crore) . Accordingly, share capital increased by '' 0.13 crore (Previous Year- '' 0.07 crore) and share premium increased by '' 2.27 crore (Previous Year- '' 1.20 crore) respectively.

18.3 Proposed dividend

The Board of Directors at its meeting held on May 17, 2024, has proposed a dividend of '' 1.50 per share (Previous Year- '' 1.50 per share) for the year ended March 31, 2024 subject to 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) Rules, 2021, the Bank has not accounted for proposed dividend aggregating to '' 241.65 crore (previous year: '' 241.63 crore ) as a liability for the year ended March 31, 2024. Effect of the proposed dividend has been reckoned in determining capital funds in the computation of capital adequacy ratios as at March 31, 2024 and March 31, 2023.

18.4 Regulatory Capital

A) Composition of Regulatory Capital

The Bank is subject to the Basel III capital adequacy guidelines stipulated by RBI with effect from the date of incorporation. As per the guidelines, the Tier-1 capital is made up of Common Equity Tier-1 (CET1) and Additional Tier-1.

# An amount of '' 2.40 crore raised pursuant to exercise of employee stock options during the year ended March 31, 2024 (year ended March 31, 2023: '' 1.27 crore)

* The Bank has not raised (March 31, 2023: Nil) perpetual debt capital instruments qualifying for Additional Tier-1 capital and subordinated debt qualifying for Tier-2 capital (March 31, 2022: Nil).

In accordance with the RBI guidelines, banks are required to make consolidated Pillar 3 and Net Stable Funding Ratio (NSFR) disclosures under the Basel III Framework. These disclosures are available on the Bank''s website at the following link:https:// www.bandhanbank.com/regulatory-disclosures. The disclosures have not been subjected to audit by the statutory auditors of the Bank.

B) Draw Down from Reserve

There has been no draw down from reserves during the year ended March 31, 2024 and March 31, 2023.

C) Sale and transfers of Securities 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.

GRUH was merged with and into Bandhan Bank Limited. At the time of merger of GRUH with the Bank, GRUH had a private provident fund trust, viz., Gruh Employees Provident Fund Trust, for its employees. Post-merger, GRUH had to transfer the balance in Gruh Employees Provident Fund Trust to EPFO, since the Bank had its PF managed by EPFO instead of Private Provident Fund Trust, some of the securities of IL&FS Limited and IL&FS Transportation Networks Ltd could not be liquidated and the EPFO was paid by the Bank the face value of the securities as the Non-Performing Investments (''NPI'') bonds could not be liquidated. These securities were Non-Performing Investments, having zero value, with face value of the three securities being '' 2.20 crore, in lieu of which, the amount had been paid to EPFO. The face value of the three securities transferred was '' 2.20 crore, these NPI securities were transferred to the books of the Bank at Re. 1 each, thereby totalling '' 3 only and increasing the NPI by '' 3 only.

Segments contributing in excess of 10% of the Sector as at March 31 of the respective years are individually listed *Priority sectors includes '' 12,750 crore (previous year : '' 15,175 crore), in respect of which the Bank has sold Priority Sector Lending Certificates (PSLC). During the year ended March 31, 2024, the Bank has bought PSLC amounting '' 13,175 crore (previous year : '' 6,330 crore ), which is not included in above.

#The SFMF classification is based on Self certified Land Holding declaration as per approved PSL policy of the Bank and Turnover, Investment in P&M/Equipment is based on Udyam Registration Certificates for MSME classification.

As per Board approved PSL policy of the Bank and in line with RBI Master direction, of Priority Sector Lending as updated by FIDD-RBI from time to time, the portfolio classified as Priority Sector advances for the year ended March 31, 2024 stands at '' 60,123.54 crore (Previous year : '' 54,175.67 crore).

The bank has compiled the data for the purpose of this disclosure from the internal MIS. System/reports which has been furnished by the management and has been relied upon by the auditors.

E) Overseas Assets, NPAs and Revenue

The Bank does not have any overseas loan assets as on March 31,2024 and March 31,2023.

F) Divergence in asset classification and provisioning

In terms of the RBI guidelines banks are required to disclose the divergence in asset classification and provisioning consequent to RBI''s annual supervisory process in their notes to accounts to the financial statements, wherever the additional provisioning assessed / additional gross NPAs identified by RBI exceeds the threshold specified by RBI. The threshold for provisioning is 5 per cent (Previous year 10 per cent) of the reported profit before provisions and contingencies for the reference period and that for additional gross NPAs is 5 per cent (Previous year 10 per cent) of the published incremental Gross NPAs for the reference period.

Based on the above, there was no reportable divergence in asset classification and provisioning for NPAs for the years ended March 31, 2024 and March 31, 2023.

G) Transfer of Loan Exposures

Details of loans transferred excluding through Inter- Bank Participation Certificate (IBPC) & acquired during the year ended March 31, 2024 under the RBI Master Direction on Transfer of Loan Exposures dated September 24, 2021 are given below:

Note:

**The net credit to Other Income is NIL related to transactions during the year (Previous year : '' 433.39 crore after adjusting '' 144.86 crore provision for diminution on value of Investments in Security Receipts)

*** There are no fresh investment in Security Receipts during the current Financial year. The Investment in Security Receipts (SR) were not rated in previous year and current net book value is NIL (Previous year : '' 27.51 crore) as per RBI guidelines.

ii) Details of Non Performing Financial Assets Purchased

The Bank did not purchase any Non Performing Financial Assets during the year ended March 31,2024 and March 31,2023.

iii) Details of Special Mention Account (SMA) or Stressed Financial Assets Purchased

The Bank did not purchase any Special Mention Account (SMA) or Stressed Financial Assets during the year ended March 31, 2024 and March 31, 2023.

Note: The information on frauds as above includes certain accounts which were already reckoned as NPAs in the prior years and these are fully provided for.

RBI vide circular No: DoS.CO.FMG.No. S332/23.04.001/2022-23 dated 13.01.2023, has directed Banks to report all UEBT (Unauthorized Electronic Banking Transactions) incidents on the XBRL platform (which is the same platform used to report frauds through FMR). These UEBT transactions are to be reported irrespective of whether customers have shared OTP/bank account credentials or not.

Accordingly, a total of 3927 UEBT incidents (out of total 4,314 fraud incidents reported during FY 2023-24) amounting to '' 27.61 crore (not classified by the Bank as fraud) for the period- April 01, 2023 to March 31, 2024 pertaining to FY 2023-24 were reported by the Bank to the RBI and are considered as contingent Liability as "Claim against the bank not acknowledge as debts".

*During the previous year a total of 599 UEBT incidents amounting '' 1.92 crore (not classified by the Bank as fraud) for the period- January 30, 2023 till March 31, 2023 pertaining to FY 2022-23 were reported by the Bank to the RBI are not included in the same.

C) 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''s credit exposure to single borrower and group borrowers was within the prudential exposure limits prescribed by RBI.

D) Unsecured Advances against Intangible Collaterals

During the year ended March 31, 2024 and March 31, 2023, there are no unsecured advances for which intangible securities such as charge over the rights, licenses, authority etc. has been taken as collateral by the Bank.

E) Risk Category wise Country Exposure

The Bank does not have any Risk Category wise country exposure for the year ended March 31, 2024 and March 31, 2023.

F) Unhedged Foreign Currency Exposure

During the year ended March 31, 2024, the Bank made provision of '' 4.20 crore (Previous Year '' 6.64 crore) towards unhedged foreign currency exposure. As on March 31, 2024, the Bank held cumulative provision towards un-hedged foreign currency exposure of '' 11.40 crore (Previous Year '' 7.20 crore).

As on March''24, the Bank is required to provide additional Capital of '' 124.88 crore (Previous year '' 8.87 crore) towards borrowers having un-hedged foreign currency exposures in accordance with RBI guidelines.

G) Intra Group Exposures

The Bank did not have any intra group exposure during the year ended March 31,2024 and March 31,2023.

H) Factoring Exposures

The Bank did not have any factoring exposure during the year ended March 31,2024 and March 31,2023.

18.10 Employee Benefits

A) Gratuity

The Bank has a defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for gratuity on departure and it is computed at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of qualifying insurance policy.

The following tables summarize the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the Gratuity plan.

ix) The estimates of future salary increases considered in actuarial valuation, takes account of inflation, seniority and other relevant factors, such as supply and demand in the employment market.

x) The Bank expects to contribute '' 40 crore to gratuity fund in 2024-25 (Previous year ended March 31, 2023: '' 40 crore)

xi) The overall expected rate of return on assets is determined based on market prices prevailing on that date, applicable to the year over which the obligation is to be settled.

B) Provident Fund

Amount incurred as expense for defined contribution to Provident Fund is '' 176.61 crore (Previous year ended March 31, 2023 : '' 141.11 crore)

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 '' 83.52 crore (Previous Year '' 55.55 crore) in the books of accounts for the year.

D) The Code on Social Security, 2020

The Code on Social Security 2020 (''the Code'') relating to employee benefits, during the employment and postemployment, has received Presidential assent on September 28, 2020. The Code has been published in the Gazette of India. Further, the Ministry of Labour and Employment has released draft rules for the Code on November 13, 2020. The effective date from which the changes are applicable is yet to be notified and rules for quantifying the financial impact are not yet issued. The Bank will assess the impact of the Code and will give appropriate impact in the financial statements in the period in which, the Code becomes effective and the related rules to determine the financial impact are published.

18.11 Segment Reporting

A) Segment Identification

Pursuant to the guidelines issued by RBI on AS 17 - Segment Reporting - Enhancement of Disclosures dated April 18, 2007, the following business segments have been reported:

i) Treasury :

Treasury operations include investments in sovereign securities and trading operations. The Treasury segment also includes the central funding unit.

ii) Retail banking :

Includes lending to individuals/small businesses through the branch network and other delivery channels subject to the orientation, nature of product, granularity of the exposure and low value of individual exposure thereof. It also includes liability products, card services, internet banking, mobile banking, ATM services and NRI services. All deposits sourced by branches are classified in retail category.

iii) Corporate/Wholesale Banking:

Includes corporate relationships not included under Retail Banking.

iv) Other Banking Business :

Include para banking activities like third party product distribution and other banking transaction not covered under any of the above three segments.

Income, expenses, assets and liabilities are either specifically identified with individual segments or are allocated to segments on a systematic basis.

The liabilities of the Bank are first used by the units generating the same. Any excess liabilities of the units are pooled to central funding unit (Treasury). Treasury then lends these funds to other units at appropriate rates.

The transfer pricing mechanism of the Bank is periodically reviewed. The segment results are determined based on the transfer pricing mechanism prevailing for the respective reporting periods.

Revenues of the Treasury segment primarily consist of fees and gains or losses from trading operations and interest income on the investment portfolio. The principal expenses of the segment consist of interest expense on funds borrowed from external sources and other internal segments, premises expenses, personnel costs, other direct overheads and allocated expenses.

Revenues of the Corporate/Wholesale Banking segment consist of interest and fees earned on loans given to customers falling under this segment and fees arising from these. Revenues of the Retail Banking segment are derived from interest earned on loans classified under this segment, fees for banking services and ATM interchange fees. Expenses of the Corporate/Wholesale Banking and Retail Banking segments primarily comprise interest expense on deposits and funds borrowed from other internal segments, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses.

Segment income includes earnings from external customers and from funds transferred to the other segments. Segment result includes revenue as reduced by interest expense and operating expenses and provisions, if any, for that segment. Segment-wise income and expenses include certain allocations. Inter segment interest income and interest expense represent the transfer price received from and paid as per the transfer pricing mechanism presently followed by the Bank.

Notes:

The business of the Bank does not extend outside India and it does not have any assets outside India or earnings emanating from outside India. Accordingly, the Bank has reported operations in the domestic segment only.

*Treasury segment liabilities includes share capital and reserve & surplus

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 does not have any DBUs, hence Digital Banking Segment disclosures is not applicable.

Previous year figures are shown in"()".

Segment information is provided as per the MIS available for internal reporting purposes, which include certain estimates/assumptions. The methodology adopted in compiling and reporting the above information has been relied upon by the auditors.

18.12 Related Party disclosure

The Bank has transactions with its related parties comprising of associates/other related entities, key management personnel and the relatives of key management personnel.

Nilima Ghosh, Suchitra Ghosh, Angshuman Ghosh, Vaskar Ghosh, Dibakar Ghosh, Shipra Ghosh, Supriya Ghosh Antara Kesh, Ashalata Kesh, Rajarshi Kesh, Manik Chand Kesh, Sulekha Sam, Sipra Roy (w.e.f. March 31,2023)

Inderpreet Kaur, Nauvtej Singh Babbar, Gourima Singh Babbar, Sarla Grover, Anju Sethi, Shashi Sachdeva (w.e.f. March 08, 2024)

Saswati Banerjee, Arati Banerjee, Ishaan Banerjee, Mousumi Mukherjee.

Rupal Mantri, Vijay Shankar Mantri, Sampat Mantri, Raaghav Mantri, Ria Mantri, Naveen Mantri, Suman Rathi (w.e.f. February 22, 2024)

Sweta Pathak, Pratima Ghosh, Ritam Ghosh (from October 20, 2023 to February 22, 2024)

Nidhi Samdani, Sohan Samdani, Manju Somani, Asha Boheria, Usha Kothari (upto October 20, 2023)

In accordance with paragraph 5 & 6 of AS-18, the Bank has not disclosed certain transactions with entity in which Key management personnel or their relatives are interested as they are in the nature of banker-customer relationship.

18.15 Liability for Operating Leases

The Banking Units premises are generally rented on cancellable terms for less than twelve months with no escalation clause and renewable at the option of the Company . The Head office and the Bank Branches office premises are obtained on non- cancellable lease terms. Lease payment during the year are charged in the statement of profit & loss.

The amount of rent expenses included in the Profit & Loss account towards operating leases aggregate to '' 298.43 crore (Previous year ended March 31,2023: '' 234.03 crore).

18.16 Small and Micro Industries

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 02, 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 during the years ended March 31, 2024 and March 31, 2023. The above is based on the information available with the Bank which has been relied upon by the auditors.

18.17 Description of contingent liabilities

i) Claims against the Bank not acknowledged as debts:

An amount of '' 99.73 crore (Previous year: '' 201.18 crore) is outstanding as at March 31, 2024, as claims against the Bank not acknowledged as Debts including '' 40.69 crore (Previous year: '' 174.20 crore) being in the nature of a contingent liability on account of proceedings pending with Tax authorities. The Bank is a party to various taxation matters in respect of which appeals are pending and various legal proceedings in the normal course of business. The Bank has reviewed and classified these items as possible obligations based on legal opinion/judicial precedents/assessment and does not expect the outcome of these proceedings to have a materially adverse effect on the Bank''s Financial Statements.

ii) Liability on account of Forward Exchange contracts

The Bank has entered into foreign exchange contracts with interbank Counterparties. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted rate. The forward exchange contracts that are not intended for trading and are entered into to establish the amount of reporting currency required or available at the settlement date of a transaction are effectively valued at closing spot rate. The premium or discount arising on inception of such forward exchange contracts is amortised over the life of the contract as interest Expense / income. The amount in contingent liability represents notional outstanding principal amount.

iii) Guarantees given on behalf of constituents, Acceptances, Endorsements and Others

An amount of '' 1,716.15 crore (Previous year: '' 1,199.17 crore) is outstanding as at March 31, 2024. As part of its commercial banking activity, the Bank issues documentary credit and guarantees on behalf of its customers. Guarantees generally represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfil its financial or performance obligations.

iv) Other items:

An amount of '' 283.14 crore (Previous year: '' 264.81 crore) is outstanding as at March 31, 2024. These include:

a) Liability in respect of capital commitments relating to fixed assets.

b) Amount transferred to RBI under Depositor Education and Awareness Fund (DEA Fund).

18.19 Disclosures on Remuneration Qualitative Disclosures

A) Information relating to the composition and mandate of the Remuneration Committee.

The Bank''s Nomination and Remuneration Committee (NRC) oversees the framing, review and implementation of the Compensation Policy on behalf of the Board of Directors. The NRC reviews the policy at least once a year to ensure that the reward design is aligned to industry best practices and is consistent with effective risk management and long term business interests of the Bank. The NRC works in close coordination with the Risk Management Committee of the Bank, to achieve the effective alignment between remuneration and risks.

As on March 31,2024 the NRC comprises of the following directors.

Mr. Suhail Chander- Chairman Dr. A S Ramasastri Mr. Philip Mathew

The NRC functions with the following main objectives:

i) To identify persons who are qualified to become directors in accordance with the criteria laid down, recommend to the Board their appointment, re-appointment or removal and to carry out evaluation of every Director''s performance;

ii) To formulate the criteria for determining qualifications, positive attributes and independence of a Director and decide their ''fit & proper'' status;

iii) To oversee the framing, review and implementation of compensation policy of the Bank and recommend to the Board the overall remuneration philosophy and policy including the level and structure of fixed pay, variable pay, perquisites, bonus pool, stock based remuneration to employees;

iv) To oversee the framing, implementation and review of the Remuneration of the Whole Time Director (WTDs) /Managing Director (MD)/ Chief Executive Officer (CEOs) as per the RBI Guidelines and Companies Act, 2013. The Committee shall recommend to the Board the remuneration package for the Managing Director & CEO and the other Whole Time Directors - including the level of fixed pay, variable pay, stock based Remuneration and perquisites;

v) To review the HR strategy and policy including the conduct and ethics of the Bank and review any fundamental changes in the organization structure which could have wide ranging and high risk implications;

vi) To review and recommend to the Board, the succession policy at the level of Managing Director & CEO, other WTDs, senior management one level below the Board and key roles.

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

Objectives of the Remuneration Policy

The Compensation Policy reflects the Bank''s objectives for good corporate governance as well as sustained and long-term value creation for stakeholders. The aims of the Bank''s remuneration framework are to:

i) Attract, motivate and retain people with requisite skill, experience and ability to deliver the Bank''s strategy;

ii) Create an alignment and balance between the rewards and risk exposure of shareholders and interests of employees;

iii) Link rewards to creation of long term sustainable shareholder value consistent with strategic goals and appropriate risk management; and

iv) Encourage behaviour consistent with the Bank''s values and principles.

v) Support appropriate conduct and meritocratic culture through differentiated performance rewards To achieve the above objectives, the philosophy adopted by the Bank is as follows:

i) Market referenced: offer employees competitive salary, achieved through benchmarking with peer groups.

ii) Making fixed salary the main remuneration component.

iii) Ensure that jobs of similar internal value are grouped and pegged within a range guided by market benchmarked jobs.

iv) Risk Adjusted: By integrating non-financial considerations relating to conduct in performance assessments, employing proper mix of compensation elements and aligning compensation incentives to risk outcomes and factoring the time horizon of risks

v) Focus on ''Total rewards'', all aspects of compensation, rewards and well defined benefits, including rewarding work environment and personal development.

vi) The focus will be to ensure that the Bank is competitive in its overall salary offer to its employees without being excessively expensive for the Bank.

The compensation structure for the MD & CEO also mirrors the Bank''s philosophy of aligning with the principles of sound compensation practices to ensure:

i) Effective and independent governance of compensation.

ii) Effective alignment of compensation with prudent risk taking.

iii) Effective supervisory oversight and engagement by stakeholders.

Design & Structure of Remuneration process

The total compensation is a prudent mix of fixed remuneration and performance-based variable remuneration The key remuneration elements are:

1) Fixed Pay

2) Discretionary Performance-based Variable Remuneration

The Bank ensures that the fixed pay element is reasonable, taking into account the market rates and trends. The fixed pay is reviewed annually using market intelligence provided by a leading global performance/reward consulting and benchmarking firm for financial services industry to ensure that the Bank remains competitive in marketplace and that the Bank is able to attract and retain best talent. The level of fixed pay shall be sufficient enough in order to discourage inappropriate risk-taking. Performance-based variable remuneration may comprise cash bonus, stock linked instruments, and is awarded by ensuring:

i) an appropriate balance between fixed and performance-based components;

ii) that the fixed component represents a higher proportion of the total remuneration;

iii) that the performance-based component reflects the risk underlying the achieved result;

iv) that a substantial part of the performance-based component may be deferred;

v) that no hedging of deferred shares takes place;

Presently, the bank utilises only two form of performance based variable remuneration, viz.,cash bonus, ESOP, as referred in note no 18.29 is linked to continuous service with the Bank.

The compensation policy of the Bank is reviewed by the NRC and approved by the Board of Directors. The NRC oversees the implementation of the policy and reviews the fixed pay increases, the organizational performance threshold for bonus to be paid, cash bonus and deferred variable remuneration.

C) Description of the ways in which current and future risks are taken into account in the remuneration process

The MD & CEO, employees in the grades of SVPs and above and employees engaged in the functions of Risk Control and Compliance are included in the policy of risk alignment of compensation.

The alignment of compensation to prudent risk taking is ensured through the following:

i) Structure of remuneration is such that a significant part of performance based variable remuneration is deferred.

ii) Performance hurdles includes financial and non-financial parameters, ensuring compensation is aligned to both.

iii) Fixed Salary is reasonable and sufficient, thereby discouraging inappropriate risk taking.

iv) Annual Bonus Plan is managed with an independent governance framework.

v) Variable remuneration awards are conditional, discretionary and contingent upon a sustainable and risk-adjusted performance. They are therefore capable of forfeiture or reduction at the Bank''s discretion.

vi) For employees included in the policy of risk alignment of compensation, NRC has the discretion to apply malus and clawback - ex-post risk adjustment, allowing the Bank to adjust previously awarded remuneration to take account of subsequent performance and potential risk outcomes and thus enabling to recoup variable pay in the event of a negative contribution.

Deferral of Variable Pay

To ensure that risk measures are not focused only on the achievement of short term goals, variable payout is deferred, if it exceeds 50% of the fixed pay.

The Bank''s compensation policy aims to ensure that both ex-ante estimates and ex-post outcomes of risk affect payoffs; so that one or the other, can better address the various situations or risks.

D) Description of ways in which the Bank seeks to link performance, during a performance measurement period with levels of remuneration.

The Bank has a performance measurement framework in place to assess the achievements of the organization as a whole, its business lines and organizational units as well as individual employees. In order to maximise the incentive to deliver adequate performance and to take into account any risks of the business activities, the Bank seeks to closely link remuneration outcomes with performance and risk outcomes. Accordingly, the Bank''s performance management and compensation philosophy is designed in a manner to help achieve the Bank''s business objectives.

The performance management system in the Bank is aligned to the balanced scorecard approach. The goal setting process helps individuals to have clarity on their roles and align their profiles in line with the broad organization strategy. Both quantitative / financial and qualitative / non-financial performance measures are considered. The qualitative or non-financial measures include customer service, adherence to risk and compliance standards, behaviour and values such as accountability, team work, etc., which builds a culture conducive to sustainable business performance.

The performance appraisal process starts with the employee conducting self-appraisal followed by the assessment of the supervisor via appraisal feedback and discussion.

Individual fixed pay increases and variable remuneration are based on the final performance ratings. In addition, the fixed pay increase is also influenced by an employee''s position in the salary range and relevant market salaries. Performance related variable compensation is linked to corporate performance, business performance and individual performance. The performance ratings based bonus distribution matrix is reviewed by the NRC.

Employees engaged in all control functions including Compliance and Risk do not carry business profit targets in their goal sheets and hence are compensated based on their achievement of key result areas as per the balance score card. The aim is to ensure that the remuneration system and outcomes relating to such control functions maintain the independence of the function and Bank''s robust risk management framework. Accordingly, for the control functions, the variable pay is conservative to promote prudent risk management behaviour and the ''pay mix'' is skewed towards fixed pay.

In the case of performance evaluation of the Managing Director and Chief Executive Officer of the Bank, factors such as financial performance measures, cost management initiatives, other strategic initiatives, prudential risk and compliance management, recognition and awards to the Bank, etc., is taken into account, which may vary from year to year depending on the Bank''s strategic priorities. Based on the inputs from NRC, the Board reviews the performance and recommends the rate of bonus to be paid, and the increments for the MD & CEO, for regulatory approval in terms of Section 35B of the Banking Regulation Act, 1949 (B.R. Act, 1949).

E) Bank''s policy on deferral and vesting of variable remuneration and bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

In terms of RBI guidelines, the Compensation Policy specifically addresses the following categories of employees:

Category I : Managing Director &Chief Executive Officer / Whole Time Directors / Material Risk Takers Category II : Risk Control and Compliance Staff

Category III: Other Categories of Staff (employees receiving share-linked variable pay)

The following principles are applied for grant and deferral of performance-based variable remuneration for the above categories of employees.

Category I

i) Variable pay shall not exceed 3 (three) times the annual fixed pay for MD & CEO and WTDs.

ii) Variable pay shall not exceed 2.5 (two and half) times the annual fixed pay for MRTs.

iii) At minimum, variable pay shall be equal to the annual fixed pay.

iv) If an executive is barred by regulation/ statute to receive grant of share-linked instruments, the variable pay shall be capped at 1.5 (one and half) times the annual fixed pay, but will be more than 50% of the annual fixed pay

v) If variable pay is up to 2 (two) times the annual fixed pay, then at least 50% of the variable pay shall be in the form of

share-linked instruments (i.e. non-cash).

vi) If variable pay is between 2 (two) to 3 (three) times the annual fixed pay, then at least two-thirds of the variable pay shall be in the form of share-linked instruments (i.e. non-cash).

vii) At least 60% of total variable pay shall be deferred including at least 50% of cash-based variable pay. However, in cases where the cash component of variable pay is under INR 25 lakh, the Bank at its discretion, may not necessarily have deferral requirements.

viii) Deferral of cash based variable pay shall be for 3 years on pro-rata yearly basis (annual vesting).

ix) Deferral of share-linked variable pay shall be for 4 years on pro-rata yearly basis (annual vesting).

x) In case the employee exits the organization before the vesting of all three parts, the remaining deferred cash based

variable pay will not be paid

Category II

i) The mix of Fixed Pay and Variable remuneration will be weighed towards Fixed Pay.

ii) Variable pay shall not exceed the annual fixed pay.

iii) At least 40% of the variable pay shall be in the form of share-linked instruments (i.e. non-cash).

iv) Deferral of share-linked variable pay shall be for 4 years on pro-rata yearly basis (annual vesting).

v) The compensation will be commensurate to their key role in the Bank.

Category III

i) Variable Remuneration will be as per the NRC approved pay-out levels in terms of performance, grade and role matrix.

ii) Variable pay shall not exceed the annual fixed pay.

iii) At least 50% of the variable pay shall be in the form of share-linked instruments (i.e. non-cash).

iv) Deferral of share-linked variable pay shall be for 4 years on pro-rata yearly basis (annual vesting).

For the three categories of employees mentioned hereinabove, the awarded performance based variable pay shall be subject to in-year adjustment, malus or clawback as decided by the NRC, in the event of negative contribution of the Bank and / or relevant line of business and in material cases of detrimental conduct of individual or business.

Negative contribution of the Bank and / or relevant line of business is defined as:

Conduct related:

i) If an employee engages in certain detrimental conduct, including mis-selling practices, manipulation of interest rate benchmarks, illegal activity, breach of a fiduciary duty, etc. that causes material financial or reputational harm to the Bank.

ii) If the award was based on a material misrepresentation by the employee.

iii) If there is reasonable evidence of employee malfeasance and breach of integrity inviting disciplinary actions.

iv) Violation of Anti Hedging and Anti Pledging Policy or Code of Conduct for Prevention of Insider Trading.

Risk related and others:

i) If the awarded performance-based variable pay was granted on a deliberately erroneous foundation or an incorrect decision made due to gross negligence not considered as errors of judgement.

ii) If the employee who is reasonably expected to be aware of the failure, misconduct or weakness in approach that contributed to the failure, improperly or with gross negligence failed to identify, assess, report or escalate in a timely manner.

iii) If the performance, decisions or actions taken leads to the Bank or the relevant business unit suffering a significant material downturn in its financial performance.

iv) If the RBI assessed divergence in the Bank''s provisioning for Non-Performing Assets (NPAs) or asset classification exceeds the prescribed threshold for public disclosure, the bank shall not pay the unvested portion of the variable compensation for the assessment year under malus clause. Further, in such a situation, there shall not be any increase in variable pay for the assessment year. In case the bank''s post assessment Gross NPAs are less than 2.0%, these restrictions will apply only if the criteria for public disclosure are triggered either on account of divergence in provisioning or both provisioning and asset classification.

v) In the event of a material restatement, correction or amendment of the Bank''s financial results for the relevant period.

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 presently utilizes only one form of variable remuneration, viz., cash bonus, which is linked to corporate performance, business performance and individual performance ensuring differential pay based on the performance. ESOP, as referred in Note 18.31 is linked to continuous service with the Bank.

18.20 Disclosure relating to Securitisation

The Bank has not originated any securitisation transactions during the year ended March 31, 2024 and March 31, 2023.

18.21 Disclosure on Derivatives

(i) Derivatives

For the financial year ended March 31,2024 and March 31,2023, the Bank has not entered into any derivative transactions like Exchange Traded Derivatives or Options, other than Foreign Exchange Forward Contracts for the purpose of Trading / Balance Sheet Management. However, at later stage, Bank may place a separate policy on dealing in derivatives before the Board based on extant regulatory guidelines and internal capabilities, on approval of which derivative transactions may be undertaken.

(ii) Credit default swaps

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

18.22 Off-balance Sheet SPVs sponsored

The Bank has not sponsored any special purposes vehicle which is required to be consolidated as per accounting norms.

18.24 Transfer to Investor education and protection fund (IEPF)

There has been no delay in transferring amounts, required to be transferred to the Investor Education and Protection Fund by the Bank during the years ended March 31, 2024 and March 31, 2023.

1. Working funds represent average of total assets as reported to Reserve Bank of India in Form X under Section 27 of the Banking Regulation Act, 1949, during the year ended March 31,2024 and March 31,2023.

2. Operating profit is profit for the year before considering provisions and contingencies.

3. Productivity ratios are based on average number of employees for the year.

4. Business per employee (Deposits plus Gross Advances (on book), inter-bank deposits shall be excluded.

5. Net interest income/Average earning assets. Net interest income is the difference of interest income and interest expense. Average earning assets are average of balance of interest earning assets.

B) Marketing and distribution

During the year ended March 31,2024 and March 31,2023, the Bank has received '' 33.06 crore (Previous Year '' 161.57 crore) in respect of the marketing and distribution function (excluding bancassurance business) undertaken by them.

18.26 Green Deposits raised by the bank

The Bank has not raised green deposits on or after June 1, 2023 based on the Framework for the acceptance of Green deposits issued by RBI.

18.27 Disclosure on Liquidity Coverage Ratio (A) Qualitative disclosure

The Bank has adopted the Basel III framework on liquidity standards as prescribed by RBI and has put in place requisite systems and processes to enable periodical computation and reporting of the Liquidity Coverage Ratio (LCR). The Risk department computes the LCR and reports the same to the Asset Liability Management Committee (ALCO) every month for review.

The Bank follows the criteria laid down by RBI for calculation of High Quality Liquid Assets (HQLA),gross outflows and inflows within the next 30-day period. HQLA predominantly comprises Government securities in excess of minimum SLR requirement viz. Treasury Bills, Central and State Government securities and excess of minimum cash reserve ratio (CRR).

The Board of Directors has the overall responsibility for management of liquidity risk. The Board at overall level decides the strategy, policies and procedures of the bank to manage liquidity risk in accordance with the liquidity risk tolerance/limits. The Board has constituted Risk Management Committee, which reports to the Board, and consist of Managing Director and certain other Board members. The Committee is responsible for evaluating the overall risks faced by the bank including liquidity risk.

On July 26, 2017 the board of directors approved the Bandhan Bank Employee Stock Option Plan Series 1 for issue of stock options to eligible employees and directors of the Bank.

The Shareholders of the Bank at the meeting held on November 23, 2017 has approved the Employee Stock Option Plan Series 1 and the grant of Employee Stock Option to the employees of the Bank. The said approval accords the Board of Directors of the Bank or any Committee including the Nomination and Remuneration Committee, which the Board has constituted, to create, offer, and grant at any time to permanent employees of the Bank, including any Director of the Bank, whether whole-time or otherwise but excluding Promoter(s), Independent Directors and Directors holding directly or indirectly more than 10% of the outstanding equity shares, employee stock options from time to time in one or more tranches.

This plan was framed in accordance with the SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 as amended from time to time and as applicable at the time of the grant. The accounting for the stock options has been in accordance with the SEBI (Share Based Employee Benefits) Regulations, 2014 to the extent applicable.

Employee Stock Option Plan Series 1 provides for the issuance of options at the recommendation of the Nomination and Remuneration Committee of the Board (''NRC'') at the closing price on the working day immediately preceding the date when options are granted. The closing price of the Bank''s equity share on an Indian stock exchange with the highest trading volume as of the working day preceding the date of grant set forth by the NRC at the time of grant. The period in which the options may be exercised cannot exceed five years from date of expiry of vesting period. However, if the participant''s employment terminates due to retirement (including pursuant to any early/ voluntary retirement scheme), the whole of the unvested options shall vest on the first vesting date relating to the said grant, immediately following the date of superannuation. During the years ended March 31, 2024 and March 31, 2023, no modifications were made to the terms and conditions of ESOPs as approved by the NRC.

* In accordance with the RBI circular RBI/2021-22/95 DOR.GOV.REC.44 /29.67.001 /2021-22 "Guidelines on Compensation of Whole Time Directors/ Chief Executive Officers/ Material Risk Takers and Control Function staff - Clarification" dated August 30, 2021, Share-linked instruments granted to Whole Time Directors/ Chief Executive Officers/ Material Risk Takers and Control Function staff after the accounting period ending March 31, 2021, are fair valued on the date of grant, using Black-Scholes model instead of Intrinsic value method. As a result, ''Employees'' cost'' for the year ended March 31, 2024 is higher by '' 35.15 crore and the same is therefore not considered in above table.

18.33 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) ("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.

18.34 Disclosure of Items that exceeds one percent under respective categories:

Other expenditure includes IT Operating expenses amounting to '' 305.13 crore (previous year: '' 218.34 crore) exceeding 1% of the total income of the Bank.

18.35 Other Assets includes Investment in RIDF (Rural Infrastructure Development Fund) amounting to '' 6,244.61 crore (previous year ended March 31, 2023''6,797.36 crore)

18.36 Remuneration by way of sitting fees paid to the Non-Executive Directors for attending meeting of the Board and its committees during the year ended March 31, 2024 amounting to '' 3.38 crore (previous year: '' 3.04 crore).

18.37 Accounting Software Used for maintenance of Books of Accounts

As per the requirements of rule 3(1) of the Companies (Accounts) Rules 2014 the Bank uses only such accounting software for maintaining its books of account that have a feature of recording audit trail of each and every transaction creating an edit log of each change made in the books of account along with the date when such changes were made within such accounting software. This feature of recording audit trail has operated throughout the year and was not disabled, tampered with during the year, except-

a. the audit trail feature was not enabled throughout the year at the database level in respect of two accounting software(s) to log any direct data changes and in case of one accounting software audit trail was enabled at database level from February 18, 2024

b. for two sunset software(s) which were discontinued during the year.

18.38 Provision for credit card and debit card reward points

The Bank is not providing any reward points on debit & credit cards during the year ended March 31, 2024 and March 31, 2023.

During the year ended March 31, 2024 and March 31, 2023, the Bank has not implemented any resolution plan under the prudential framework for stressed assets issued as per RBI/2018-19/ 203 DBR.No.BP.BC.45/21.04.048/2018-19 dated June 7, 2019 on Prudential Framework for Resolution of Stressed Assets

18.43 Accounting policies have been consistently applied by the Bank except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. Any circular / direction issued by the RBI is implemented prospectively when it becomes applicable.

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

The RBI issued a circular in February, 2016 requiring banks to implement Indian Accounting Standards (''Ind AS'') and prepare Ind AS financial statements with effect from April 01, 2018. In line with the RBI guidelines on Ind AS implementation, the Bank has formed a Steering Committee comprising members from the concerned functional areas. As advised by the RBI, the Bank has also submitted Proforma Ind AS financial statements every half year to the RBI.

Further, RBI vide its communication dated August 08, 2021, had advised the bank to submit Proforma Ind AS financial statements every quarter.

Further on January 16, 2023 RBI released a discussion paper on the Expected Loss (EL) based approach for loan loss provisioning by banks to formulate a principle based guidelines supplemented by regulatory backstops wherever necessary.

However, the RBI in its press release issued on March 22, 2019 has deferred the applicability of Ind AS till further notice for Scheduled Commercial Banks.

The Bank has made a diagnostic study to identify the gaps, process and system changes required to implement Ind AS and is in the process of implementing necessary changes in its IT system and other processes. The Bank is regularly holding workshops and training for its staff.

18.45 Master Direction on Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions), 2023 issued by Reserve Bank of India vide their circular RBI/DOR/2023-24/104 DOR.MRG.36/21.04.141/2023-24 dated September 12, 2023 Pursuant to the Master Direction on Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions), 2023 issued by Reserve Bank of India vide their circular RBI/DOR/2023-24/104 DOR.MRG.36/21.04.141/2023-24 dated September 12, 2023, Bank confirms complying to the Master Direction and implementing the relevant changes in the Core Treasury system, Calypso, effective April 01,2024.

The revised Investment Policy was placed before the Board and approved on March 20, 2024.

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Mar 31, 2023

18.2 Capital

During the year ended March 31, 2023, the Bank has allotted 70,613 Equity Shares (Previous Year- 1,66,666) of ? 10/-each in respect of stock option exercised aggregating to ? 1.27 crore (Previous Year- ? 3.00 crore) . Accordingly, share capital increased by ? 0.07 crore (Previous Year- ? 0.17 crore) and share premium increased by ? 1.20 crore (Previous Year- ? 2.83 crore) respectively.

18.3 Proposed dividend

The Board of Directors at its meeting held on May 19, 2023, has proposed a dividend of ? 1.50 per share (Previous Year- ? NIL per share) for the year ended March 31, 2023 subject to 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) Rules, 2021, the Bank has not accounted for proposed dividend aggregating to ? 241.63 crore (previous year: ? NIL ) as a liability for the year ended March 31, 2023. Effect of the proposed dividend has been reckoned in determining capital funds in the computation of capital adequacy ratios as at March 31, 2023 and March 31, 2022.

In accordance with the RBI guidelines, banks are required to make consolidated Pillar 3 and Net Stable Funding Ratio (NSFR) disclosures under the Basel III Framework. These disclosures are available on the Bank''s website at the following link: https://www.bandhanbank.com/regulatory-disclosures. The disclosures have not been subjected to audit by the statutory auditors of the Bank.

B) Draw Down from Reserve

There has been no draw down from reserves during the year ended March 31, 2023 and March 31, 2022.

C) Sale and transfers of Securities 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 preannounced 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.

D) Overseas Assets, NPAs and Revenue

The Bank does not have any overseas assets as on March 31, 2023 and March 31, 2022.

E) Off-balance Sheet SPVs sponsored

The Bank has not sponsored any special purposes vehicle which is required to be consolidated as per accounting norms.

F) Divergence in asset classification and provisioning

In terms of the RBI guidelines, banks are required to disclose the divergence in asset classification and provisioning consequent to RBI''s annual supervisory process in their notes to accounts to the financial statements, wherever the additional provisioning assessed / additional gross NPAs identified by RBI exceeds the threshold specified by RBI. The threshold for provisioning is 10 per cent of the reported profit before provisions and contingencies for the reference period and that for additional gross NPAs is 10 per cent of the published incremental Gross NPAs for the reference period.

There was no divergence in asset classification and provisioning for NPAs for the years ended March 31, 2023 and 2022.

ii) Details of Non Performing Financial Assets Purchased

The Bank did not purchase any Non Performing Financial Assets during the year ended March 31, 2023 and March 31, 2022.

iii) Details of Special Mention Account (SMA) or Stressed Financial Assets Purchased

The Bank did not purchase any Special Mention Account (SMA) or Stressed Financial Assets during the year ended March 31, 2023 and March 31, 2022.

Note: The information on frauds as above includes certain accounts which were already reckoned as NPAs in the prior years and these are fully provided for.

RBI vide circular No: DoS.CO.FMG.No. S332/23.04.001/2022-23 dated 13.01.2023, has directed Banks to report all UEBT (Unauthorized Electronic Banking Transactions) incidents on the XBRL platform (which is the same platform used to report frauds through FMR). These UEBT transactions are to be reported irrespective of whether customers have shared OTP/bank account credentials or not.

Accordingly, a total of 599 UEBT incidents amounting ? 1.92 crores (not classified by the Bank as fraud) for the period- January 30, 2023 till March 31, 2023 pertaining to FY 2022-23 were reported by the Bank to the RBI.

C) Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the Bank

During the year ended March 31, 2023 and March 31, 2022, the Bank''s credit exposure to single borrower and group borrowers was within the prudential exposure limits prescribed by RBI.

D) Unsecured Advances against Intangible Collaterals

During the year ended March 31, 2023 and March 31, 2022, there are no unsecured advances for which intangible securities such as charge over the rights, licenses, authority etc. has been taken as collateral by the Bank.

E) Risk Category wise Country Exposure

The Bank does not have any Risk Category wise country exposure for the year ended March 31, 2023 and March 31, 2022.

F) Unhedged Foreign Currency Exposure

During the year ended March 31, 2023, the Bank made provision of ? 6.64 crores (Previous Year ? 0.50 crores) towards un-hedged foreign currency exposure. As on March 31, 2023, the Bank held cumulative provision towards un-hedged foreign currency exposure of ? 7.20 crores (Previous Year ? 0.56 crores). As on March''23, the Bank is required to provide additional Capital of ? 8.87 crores (Previous year ? 4.58 crores) towards borrowers having un-hedged foreign currency exposures in accordance with RBI guidelines.

G) Intra Group Exposures

The Bank did not have any intra group exposure during the year ended March 31, 2023 and March 31, 2022.

H) Factoring Exposures

The Bank did not have any factoring exposure during the year ended March 31, 2023 and March 31, 2022.

18.9 Employee Benefits

A) Gratuity

The Bank has a defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for gratuity on departure and it is computed at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of qualifying insurance policy.

The following tables summarize the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the Gratuity plan.

ix) The estimates of future salary increases considered in actuarial valuation, takes account of inflation, seniority and other relevant factors, such as supply and demand in the employment market.

x) The Bank expects to contribute ? 40.00 crores to gratuity fund in 2023-24 (Previous year ended March 31, 2022: ? 20.00 crores).

xi) The overall expected rate of return on assets is determined based on market prices prevailing on that date, applicable to the year over which the obligation is to be settled.

B) Provident Fund

Amount incurred as expense for defined contribution to Provident Fund is ? 141.11 Crore (Previous year ended March 31, 2022 : ? 115.50 Crores)

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 ? 55.55 Crore (Previous Year ? 43.42 Crore) in the books of accounts for the year.

D) The Code on Social Security, 2020

The Code on Social Security 2020 (''the Code'') relating to employee benefits, during the employment and postemployment, has received Presidential assent on September 28, 2020. The Code has been published in the Gazette of India. Further, the Ministry of Labour and Employment has released draft rules for the Code on November 13, 2020. The effective date from which the changes are applicable is yet to be notified and rules for quantifying the financial impact are not yet issued. The Bank will assess the impact of the Code and will give appropriate impact in the financial statements in the period in which, the Code becomes effective and the related rules to determine the financial impact are published.

18.10 Segment Reporting A) Segment Identification

Pursuant to the guidelines issued by RBI on AS 17 - Segment Reporting - Enhancement of Disclosures dated April 18, 2007, the following business segments have been reported:

i) Treasury :

Treasury operations include investments in sovereign securities and trading operations. The Treasury segment also includes the central funding unit.

ii) Retail banking :

Includes lending to individuals/small businesses through the branch network and other delivery channels subject to the orientation, nature of product, granularity of the exposure and low value of individual exposure thereof. It also includes liability products, card services, internet banking, mobile banking, ATM services and NRI services. All deposits sourced by branches are classified in retail category.

iii) Corporate/Wholesale Banking:

Includes corporate relationships not included under Retail Banking.

iv) Other Banking Business :

Include para banking activities like third party product distribution and other banking transaction not covered under any of the above three segments.

Income, expenses, assets and liabilities are either specifically identified with individual segments or are allocated to segments on a systematic basis.

The liabilities of the Bank are first used by the units generating the same. Any excess liabilities of the units are pooled to central funding unit (Treasury). Treasury then lends these funds to other units at appropriate rates.

The transfer pricing mechanism of the Bank is periodically reviewed. The segment results are determined based on the transfer pricing mechanism prevailing for the respective reporting periods.

Revenues of the Treasury segment primarily consist of fees and gains or losses from trading operations and interest income on the investment portfolio. The principal expenses of the segment consist of interest expense on funds borrowed from external sources and other internal segments, premises expenses, personnel costs, other direct overheads and allocated expenses.

Revenues of the Corporate/Wholesale Banking segment consist of interest and fees earned on loans given to customers falling under this segment and fees arising from these. Revenues of the Retail Banking segment are derived from interest earned on loans classified under this segment, fees for banking services and ATM interchange fees. Expenses of the Corporate/Wholesale Banking and Retail Banking segments primarily comprise interest expense on deposits and funds borrowed from other internal segments, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses.

Segment income includes earnings from external customers and from funds transferred to the other segments. Segment result includes revenue as reduced by interest expense and operating expenses and provisions, if any, for that segment. Segment-wise income and expenses include certain allocations. Inter segment interest income and interest expense represent the transfer price received from and paid as per the transfer pricing mechanism presently followed by the Bank.

18.15 Small and Micro Industries

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from 2nd October, 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 during the years ended March 31, 2023 and March 31, 2022. The above is based on the information available with the Bank which has been relied upon by the auditors.

18.16 Description of contingent liabilities

a) Claims against the Bank not acknowledged as debts:

These represent claims filed against the Bank in the normal course of business and related to taxation matters which are in dispute and are under appeal.

b) Guarantees given on behalf of constituents:

As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfill its financial or performance obligations.

c) Other items:

Other items represent outstanding amount of estimated amount of contracts remaining to be executed on capital account.

d) Acceptances, endorsements and other obligations:

These includes documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank''s customers that are accepted or endorsed by the Bank.

18.18 Disclosures on Remuneration Qualitative Disclosures

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

The Bank''s Nomination and Remuneration Committee (NRC) oversees the framing, review and implementation of the Compensation Policy on behalf of the Board of Directors. The NRC reviews the policy at least once a year to ensure that the reward design is aligned to industry best practices and is consistent with effective risk management and long term business interests of the Bank. The NRC works in close coordination with the Risk Management Committee of the Bank, to achieve the effective alignment between remuneration and risks.

As on March 31, 2023 the NRC comprises of the following directors.

Mr. Suhail Chander- Chairman Dr. A S Ramasastri Mr. Philip Mathew

The NRC functions with the following main objectives:

(i) To identify persons who are qualified to become directors in accordance with the criteria laid down, recommend to the Board their appointment, re-appointment or removal and to carry out evaluation of every Director''s performance;

(ii) To formulate the criteria for determining qualifications, positive attributes and independence of a Director and decide their ''fit & proper'' status;

(iii) To oversee the framing, review and

implementation of compensation policy of the Bank and recommend to the Board the overall remuneration philosophy and policy including the level and structure of fixed pay, variable pay, perquisites, bonus pool, stock based remuneration to employees;

(iv) To oversee the framing, implementation and review of the Remuneration of the Whole Time Director (WTDs) /Managing Director (MD)/ Chief Executive Officer (CEOs) as per the RBI Guidelines and Companies Act, 2013. The Committee shall recommend to the Board the remuneration package for the Managing Director & CEO and the other Whole Time Directors - including the level of fixed pay, variable pay, stock based Remuneration and perquisites;

(v) To review the HR strategy and policy including the conduct and ethics of the Bank and review any fundamental changes in the organization structure which could have wide ranging and high risk implications;

(vi) To review and recommend to the Board, the succession policy at the level of Managing Director & CEO, other WTDs, senior management one level below the Board and key roles.

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

Objectives of the Remuneration Policy

The Compensation Policy reflects the Bank''s objectives for good corporate governance as well as sustained and long-term value creation for stakeholders. The aims of the Bank''s remuneration framework are to:

i) Attract, motivate and retain people with requisite skill, experience and ability to deliver the Bank''s strategy;

ii) Create an alignment and balance between the rewards and risk exposure of shareholders and interests of employees;

iii) Link rewards to creation of long term sustainable shareholder value consistent with strategic goals and appropriate risk management; and

iv) Encourage behaviour consistent with the Bank''s values and principles.

To achieve the above objectives, the philosophy adopted by the Bank is as follows:

i) Market referenced: offer employees competitive salary, achieved through benchmarking with peer groups.

ii) Making fixed salary the main remuneration component.

iii) Ensure that jobs of similar internal value are grouped and pegged within a range guided by market benchmarked jobs.

iv) Risk factoring: A significant portion of the senior and top management compensation will be variable, of which, for some key roles, part of the variable compensation may be deferred.

v) Focus on ''Total rewards'', all aspects of compensation, rewards and well defined benefits, including rewarding work environment and personal development.

vi) The focus will be to ensure that the Bank is competitive in its overall salary offer to its employees without being excessively expensive for the Bank.

The compensation structure for the MD & CEO also mirrors the Bank''s philosophy of aligning with the principles of sound compensation practices to ensure:

i) Effective and independent governance of

compensation.

ii) Effective alignment of compensation with prudent risk taking.

iii) Effective supervisory oversight and engagement

by stakeholders.

Design & Structure of Remuneration process

The total compensation is a prudent mix of fixed remuneration and performance-based variable

remuneration

The key remuneration elements are:

1) Fixed Pay

2) Discretionary Performance-based Variable

Remuneration

The Bank ensures that the fixed pay element is reasonable, taking into account the market rates and trends. The fixed pay is reviewed annually using market intelligence provided by a leading global performance/reward consulting and benchmarking firm for financial services industry to ensure that the Bank remains competitive in marketplace and that the Bank is able to attract and retain best talent. The level of fixed pay shall be sufficient enough in order to discourage inappropriate risk-taking.

Performance-based variable remuneration may comprise cash bonus, stock linked instruments, and is awarded by ensuring:

i) an appropriate balance between fixed and performance-based components;

ii) that the fixed component represents a higher proportion of the total remuneration;

iii) that the performance-based component reflects the risk underlying the achieved result;

iv) that a part of the performance-based component may be deferred;

v) that no hedging of deferred shares takes place;

Presently, the bank utilises only two form of performance based variable remuneration, viz.,cash bonus, ESOP, as referred in note no 18.29 is linked to continuous service with the Bank.

The compensation policy of the Bank is reviewed by the NRC and approved by the Board of Directors. The NRC oversees the implementation of the policy and reviews the fixed pay increases, the organizational performance threshold for bonus to be paid, cash bonus and deferred variable remuneration.

c) Description of the ways in which current and future risks are taken into account in the remuneration process

The MD & CEO, employees in the grades of SVPs and above and employees engaged in the functions of Risk Control and Compliance are included in the policy of risk alignment of compensation.

The alignment of compensation to prudent risk taking is ensured through the following:

i) Structure of remuneration is such that a significant part of performance based variable remuneration is deferred.

ii) Performance hurdles includes financial and nonfinancial parameters, ensuring compensation is aligned to both.

iii) Fixed Salary is reasonable and sufficient, thereby discouraging inappropriate risk taking.

iv) Annual Bonus Plan is managed with an independent governance framework.

v) Variable remuneration awards are conditional, discretionary and contingent upon a sustainable and risk-adjusted performance. They are therefore capable of forfeiture or reduction at the Bank''s discretion.

vi) For employees included in the policy of risk alignment of compensation, NRC has the discretion to apply malus and clawback - expost risk adjustment, allowing the Bank to adjust previously awarded remuneration to take account of subsequent performance and potential risk outcomes and thus enabling to recoup variable pay in the event of a negative contribution.

Deferral of Variable Pay

To ensure that risk measures are not focused only on the achievement of short term goals, variable payout is deferred, if it exceeds 50% of the fixed pay.

The Bank''s compensation policy aims to ensure that both ex-ante estimates and ex-post outcomes of risk affect payoffs; so that one or the other, can better address the various situations or risks.

d) Description of ways in which the Bank seeks to link performance, during a performance measurement period with levels of remuneration.

The Bank has a performance measurement framework in place to assess the achievements of the organization as a whole, its business lines and organizational units as well as individual employees. In order to maximise the incentive to deliver adequate performance and to take into account any risks of the business activities, the Bank seeks to closely link remuneration outcomes with performance

and risk outcomes. Accordingly, the Bank''s performance management and compensation philosophy is designed in a manner to help achieve the Bank''s business objectives.

The performance management system in the Bank is aligned to the balanced scorecard approach. The goal setting process helps individuals to have clarity on their roles and align their profiles in line with the broad organization strategy. Both quantitative / financial and qualitative / non-financial performance measures are considered. The qualitative or non-financial measures include customer service, adherence to risk and compliance standards, behaviour and values such as accountability, team work, etc., which builds a culture conducive to sustainable business performance.

The performance appraisal process starts with the employee conducting self-appraisal followed by the assessment of the supervisor via appraisal feedback and discussion. For all employees of the Bank, half-yearly appraisal is followed by the annual appraisal. The mid-year feedback process includes feedback on performance and on competencies with an objective of a mid-course review, to help plan and prioritize corrective actions for employees to remain aligned to achievement of their business goals and self-development. The performance appraisal ratings is reviewed/ calibrated by a committee comprising senior leaders.

Individual fixed pay increases and variable remuneration are based on the final performance ratings. In addition, the fixed pay increase is also influenced by an employee''s position in the salary range and relevant market salaries. Performance related variable compensation is linked to corporate performance, business performance and individual performance. The performance ratings based bonus distribution matrix is reviewed by the NRC.

Employees engaged in all control functions including Compliance and Risk do not carry business profit targets in their goal sheets and hence are compensated based on their achievement of key result areas as per the balance score card. The aim is to ensure that the remuneration system and outcomes relating to such control functions maintain the independence of the function and Bank''s robust risk management framework. Accordingly, for the control functions, the variable pay is conservative to promote prudent risk management behavior and the ''pay mix'' is skewed towards fixed pay.

In the case of performance evaluation of the Managing Director and Chief Executive Officer of the Bank, factors such as financial performance measures, cost management initiatives, other strategic initiatives, prudential risk and compliance management, recognition and awards to the Bank, etc., is taken into account, which may vary from

year to year depending on the Bank''s strategic priorities. Based on the inputs from NRC, the Board reviews the performance and recommends the rate of bonus to be paid, and the increments for the MD & CEO, for regulatory approval in terms of Section 35B of the Banking Regulation Act, 1949 (B.R. Act, 1949).

e) Bank''s policy on deferral and vesting of variable remuneration and bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

In terms of RBI guidelines, the Compensation Policy specifically addresses the following categories of employees:

Category I : Managing Director &Chief Executive Officer / Whole Time Directors / Material Risk Takers

Category II : Risk Control and Compliance Staff

Category III: Other Categories of Staff (employees receiving share-linked variable pay)

The following principles are applied for grant and deferral of performance-based variable remuneration for the above categories of employees.

Category I

i) Variable pay shall not exceed 3 (three) times the annual fixed pay for MD & CEO and WTDs.

ii) Variable pay shall not exceed 2.5 (two and half) times the annual fixed pay for MRTs.

iii) At minimum, variable pay shall be equal to the annual fixed pay.

iv) If an executive is barred by regulation/ statute to receive grant of share-linked instruments, the variable pay shall be capped at 1.5 (one and half) times the annual fixed pay, but will be more than 50% of the annual fixed pay

v) If variable pay is up to 2 (two) times the annual fixed pay, then at least 50% of the variable pay shall be in the form of share-linked instruments (i.e. non-cash).

vi) If variable pay is between 2 (two) to 3 (three) times the annual fixed pay, then at least two-thirds of the variable pay shall be in the form of share-linked instruments (i.e. non-cash).

vii) At least 60% of total variable pay shall be deferred including at least 50% of cash-based variable pay. However, in cases where the cash component of variable pay is under '' 25 lakh, the Bank at its discretion, may not necessarily have deferral requirements.

viii) Deferral of cash based variable pay shall be for 3 years on pro-rata yearly basis (annual vesting).

ix) Deferral of share-linked variable pay shall be for 4 years on pro-rata yearly basis (annual vesting).

Category II

a) The mix of Fixed Pay and Variable remuneration will be weighed towards Fixed Pay.

b) Variable pay shall not exceed the annual fixed pay.

c) At least 40% of the variable pay shall be in the

form of share-linked instruments (i.e. non-cash).

d) Deferral of share-linked variable pay shall be for 4 years on pro-rata yearly basis (annual vesting).

e) The compensation will be commensurate to their key role in the Bank.

Category III

a) Variable Remuneration will be as per the NRC approved pay-out levels in terms of grade and role matrix.

b) Variable pay shall not exceed the annual fixed pay.

c) At least 50% of the variable pay shall be in the

form of share-linked instruments (i.e. non-cash).

d) Deferral of share-linked variable pay shall be for 4 years on pro-rata yearly basis (annual vesting).

For the three categories of employees mentioned hereinabove, the awarded performance based variable pay shall be subject to in-year adjustment, malus or clawback as decided by the NRC, in the event of negative contribution of the Bank and / or relevant line of business and in material cases of detrimental conduct of individual or business.

Negative contribution of the Bank and / or relevant line of business is defined as:

Conduct related:

i) If an employee engages in certain detrimental conduct, including mis-selling practices, manipulation of interest rate benchmarks, illegal activity, breach of a fiduciary duty, etc. that causes material financial or reputational harm to the Bank.

ii) If the award was based on a material misrepresentation by the employee.

iii) If there is reasonable evidence of employee malfeasance and breach of integrity inviting disciplinary actions.

iv) Violation of Anti Hedging and Anti Pledging Policy

or Code of Conduct for Prevention of Insider Trading.

Risk related and others:

i) If the awarded performance-based variable pay was granted on a deliberately erroneous foundation or an incorrect decision made due to gross negligence not considered as errors of judgement.

ii) If the employee who is reasonably expected to be aware of the failure, misconduct or weakness in approach that contributed to the failure, improperly or with gross negligence failed to identify, assess, report or escalate in a timely manner.

iii) If the performance, decisions or actions taken leads to the Bank or the relevant business unit suffering a significant material downturn in its financial performance.

iv) If the RBI assessed divergence in the Bank''s provisioning for Non-Performing Assets (NPAs) or asset classification exceeds the prescribed threshold for public disclosure, the bank shall not pay the unvested portion of the variable compensation for the assessment year under malus clause. Further, in such a situation, there shall not be any increase in variable pay for the assessment year. In case the bank''s post assessment Gross NPAs are less than 2.0%, these restrictions will apply only if the criteria for public disclosure are triggered either on account of divergence in provisioning or both provisioning and asset classification.

v) In the event of a material restatement, correction or amendment of the Bank''s financial results for the relevant period.

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 presently utilizes only one form of variable remuneration, viz., cash bonus, which is linked to corporate performance, business performance and individual performance ensuring differential pay based on the performance. ESOP, as referred in Note 18.29 is linked to continuous service with the Bank.

18.20 Disclosure on Derivatives

(i) Derivatives

The Bank has not entered into any derivative transaction during the year ended March 31, 2023 and March 31, 2022. Currently Bank is not entering into derivative transactions like Exchange Traded Derivatives, Forward Rate Agreements or Options and Swaps. However, at later stage, Bank may place a separate policy on dealing in derivatives before the Board based on extant regulatory guidelines and internal capabilities, on approval of which derivative transactions may be undertaken.

(ii) Credit default swaps

The Bank has not transacted in credit default swaps during the year ended March 31, 2023 and March 31, 2022.

b) Marketing and distribution

During the year ended March 31, 2023 and March 31, 2022, the Bank has received ? 161.57 crore (Previous Year ? 133.85 crore) in respect of the marketing and distribution function (excluding bancassurance business) undertaken by them.

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

"The RBI issued a circular in February, 2016 requiring banks to implement Indian Accounting Standards (''Ind AS'') and prepare Ind AS financial statements with effect from April 01, 2018. In line with the RBI guidelines on Ind AS implementation, the Bank has formed a Steering Committee comprising members from the concerned functional areas. As advised by the RBI, the Bank has also submitted Proforma Ind AS financial statements every half year to the RBI.

Further, RBI vide its communication dated August 08, 2021, had advised the bank to submit Proforma Ind AS financial statements every quarter.

Further on January 16, 2023 RBI released a discussion paper on the Expected Loss (EL) based approach for loan loss provisioning by banks to formulate a principle based guidelines supplemented by regulatory backstops wherever necessary.

However, the RBI in its press release issued on March 22, 2019 has deferred the applicability of Ind AS till further notice for Scheduled Commercial Banks.

The Bank has made a diagnostic study to identify the gaps, process and system changes required to implement Ind AS and is in the process of implementing necessary changes in its IT system and other processes. The Bank is regularly holding workshops and training for its staff.

18.24 Disclosure on Liquidity Coverage Ratio (a) Qualitative disclosure

The Bank has adopted the Basel III framework on liquidity standards as prescribed by RBI and has put in place requisite systems and processes to enable periodical computation and reporting of the Liquidity Coverage Ratio (LCR). The Risk department computes the LCR and reports the same to the Asset Liability Management Committee (ALCO) every month for review.

The Bank follows the criteria laid down by RBI for calculation of High Quality Liquid Assets (HQLA),gross outflows and inflows within the next 30-day period. HQLA predominantly comprises Government securities in excess of minimum SLR requirement viz. Treasury Bills, Central and State Government securities and excess of minimum cash reserve ratio (CRR).

The Board of Directors has the overall responsibility for management of liquidity risk. The Board at overall level decides the strategy, policies and procedures of the bank to manage liquidity risk in accordance with the liquidity risk tolerance/ limits. The Board has constituted Risk Management Committee, which reports to the Board, and consist of Managing Director and certain other Board members. The Committee is responsible for evaluating the overall risks faced by the bank including liquidity risk.

18.29 Employee Stock Option Scheme (ESOS)

On July 26, 2017 the board of directors approved the Bandhan Bank Employee Stock Option Plan Series 1 for issue of stock options to eligible employees and directors of the Bank.

The Shareholders of the Bank at the meeting held on 23rd November, 2017 has approved the Employee Stock Option Plan Series 1 and the grant of Employee Stock Option to the employees of the Bank. The said approval accords the Board of Directors of the Bank or any Committee including the Nomination and Remuneration Committee, which the Board has constituted, to create, offer, and grant at any time to permanent employees of the Bank, including any Director of the Bank, whether whole-time or otherwise but excluding Promoter(s), Independent Directors and Directors holding directly or indirectly more than 10% of the outstanding equity shares, employee stock options from time to time in one or more tranches.

This plan was framed in accordance with the SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 as amended from time to time and as applicable at the time of the grant. The accounting for the stock options has been in accordance with the SEBI (Share Based Employee Benefits) Regulations, 2014 to the extent applicable.

Employee Stock Option Plan Series 1 provides for the issuance of options at the recommendation of the Nomination and Remuneration Committee of the Board (''NRC'') at the closing price on the working day immediately preceding the date when options are granted. The closing price of the Bank''s equity share on an Indian stock exchange with the highest trading volume as of the working day preceding the date of grant set forth by the NRC at the time of grant. The period in which the options may be exercised cannot exceed five years from date of expiry of vesting period. However, if the participant''s employment terminates due to retirement (including pursuant to any early/ voluntary retirement scheme), the whole of the unvested options shall vest on the first vesting date relating to the said grant, immediately following the date of superannuation. During the years ended March 31, 2023 and March 31, 2022, no modifications were made to the terms and conditions of ESOPs as approved by the NRC.

18.31 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.

18.36 Accounting policies have been consistently applied by the Bank except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use. Any circular / direction issued by the RBI is implemented prospectively when it becomes applicable. During the year, the Bank has reassessed the estimated useful life of Motor Vehicles from existing 8 years to 4 years resulting in excess depreciation charge of ''1.11 crore to the Profit & Loss Account.

18.37 Previous year figures have been regrouped/reclassified, wherever necessary, to conform to current year classification.

---

Mar 31, 2022

*Based on RBI Master Direction on Financial Statements - Presentation and Disclosures issued on 30th August, 2021 updated on 15th November, 2021 Provision for depreciation in value of investments, which was hitherto classified as part of provisions and contingencies has been reclassified as part of other income. Accordingly, the Bank has reclassified provision for investments of ^ 44.96 crore for the year ended March 31, 2022 and ^ (86.80 crore) for the year ended March 31, 2021 from provisions and contingencies to income from investments. There is no impact of this change on the net profit/loss of the current or previous year.

2 Capital

During the year ended March 31, 2022, the Bank has allotted 1,66,666 Equity Shares (Previous Year- 3,51,358 Equity Shares) of ? 10/- each in respect of stock option exercised aggregating to ? 3.00 crore (Previous Year- ? 7.27 crore). Accordingly, share capital increased by ? 0.17 crore and share premium increased by ? 2.83 crore respectively (Previous Year- ? 0.35 crore and ? 6.92 crore respectively).

Proposed dividend

The Board of Directors at its meeting held on May 13, 2022, has proposed a dividend of NIL per share (Previous Year- ? 1 per share) for the year ended March 31, 2022. 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 accounted for proposed dividend aggregating to ? NIL (Previous Year: ? 161.06 crores) as a liability for the year ended March 31, 2022.

In accordance with the RBI guidelines, banks are required to make consolidated Pillar 3 and Net Stable Funding Ratio (NSFR) disclosures under the Basel III Framework. These disclosures are available on the Bank''s website at the following link:https:// www.bandhanbank.com/regulatory-disclosures. The disclosures have not been subjected to audit by the statutory auditors of the Bank.

Draw Down from Reserve

There has been no draw down from reserves during the year ended March 31, 2022 and March 31, 2021.

Sale and transfers of Securities 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.

i Overseas Assets, NPAs and Revenue

The Bank does not have any overseas assets as on March 31, 2022 and March 31, 2021.

Off-balance Sheet SPVs sponsored

The Bank has not sponsored any special purposes vehicle which is required to be consolidated as per accounting norms.

Transfer of Loan Exposures

Details of loans transferred excluding through Inter- Bank Participation Certificate (IBPC) & acquired during the year ended March 31, 2022 under the RBI Master Direction on Transfer of Loan Exposures dated September 24, 2021 are given below:

Unsecured Advances against Intangible Collaterals

During the year ended March 31, 2022 and March 31, 2021, there are no unsecured advances for which intangible securities such as charge over the rights, licenses, authority etc. has been taken as collateral by the Bank.

Risk Category wise Country Exposure

The Bank does not have any Risk Category wise country exposure for the year ended March 31, 2022 and March 31, 2021. Unhedged Foreign Currency Exposure

During the year ended March 31, 2022, the Bank made provision of ? 0.50 crores (Previous Year ? 0.06 crores) towards un-hedged foreign currency exposure. As on March 31, 2022, the Bank held cumulative provision towards un-hedged foreign currency exposure of ? 0.56 crores (Previous Year ? 0.06 crores).

As on March''22, the Bank is required to provide additional Capital of ? 4.58 crores (Previous year ? NIL) towards borrowers having un-hedged foreign currency exposures in acordance with RBI guidelines.

Intra Group Exposures

The Bank did not have any intra group exposure during the year ended March 31, 2022 and March 31, 2021.

Factoring Exposures

The Bank did not have any factoring exposure during the year ended March 31, 2022 and March 31, 2021.

ix) The estimates of future salary increases considered in actuarial valuation, takes account of inflation, seniority and other relevant factors, such as supply and demand in the employment market.

x) The Bank expects to contribute ? 20 crores to gratuity fund in 2022-23 (Previous year ended March 31, 2021: ? 20 crores)

xi) The overall expected rate of return on assets is determined based on market prices prevailing on that date, applicable to the year

over which the obligation is to be settled.

B) Provident Fund

Amount incurred as expense for defined contribution to Provident Fund is ? 115.50 Crore (Previous year ended March 31, 2021 : ? 92.60 Crores).

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 ? 43.42 Crore (Previous Year ? 38.45 Crore) in the books of accounts for the year.

D) The Code on Social Security, 2020

The Code on Social Security 2020 (''the Code'') relating to employee benefits, during the employment and postemployment, has received Presidential assent on September 28, 2020. The Code has been published in the Gazette of India. Further, the Ministry of Labour and Employment has released draft rules for the Code on November 13, 2020. The effective date from which the changes are applicable is yet to be notified and rules for quantifying the financial impact are not yet issued. The Bank will assess the impact of the Code and will give appropriate impact in the financial statements in the period in which, the Code becomes effective and the related rules to determine the financial impact are published.

18.10 Segment Reporting A) Segment Identification

Pursuant to the guidelines issued by RBI on AS 17 - Segment Reporting - Enhancement of Disclosures dated April 18, 2007, the following business segments have been reported:

i) Treasury:

Treasury operations include investments in sovereign securities and trading operations. The Treasury segment also includes the central funding unit.

ii) Retail banking:

Includes lending to individuals/small businesses through the branch network and other delivery channels subject to the orientation, nature of product, granularity of the exposure and low value of individual exposure thereof. It also includes liability products, card services, internet banking, mobile banking, ATM services and NRI services. All deposits sourced by branches are classified in retail category.

iii) Corporate/Wholesale Banking:

Includes corporate relationships not included under Retail Banking.

iv) Other Banking Business:

Include para banking activities like third party product distribution and other banking transaction not covered under any of the above three segments.

Income, expenses, assets and liabilities are either specifically identified with individual segments or are allocated to segments on a systematic basis.

The liabilities of the Bank are first used by the units generating the same. Any excess liabilities of the units are pooled to central funding unit (Treasury). Treasury then lends these funds to other units at appropriate rates.

The transfer pricing mechanism of the Bank is periodically reviewed. The segment results are determined based on the transfer pricing mechanism prevailing for the respective reporting periods.

Revenues of the Treasury segment primarily consist of fees and gains or losses from trading operations and interest income on the investment portfolio. The principal expenses of the segment consist of interest expense on funds borrowed from external sources and other internal segments, premises expenses, personnel costs, other direct overheads and allocated expenses

Revenues of the Corporate/Wholesale Banking segment consist of interest and fees earned on loans given to customers falling under this segment and fees arising from these. Revenues of the Retail Banking segment are derived from interest earned on loans classified under this segment, fees for banking services and ATM interchange fees. Expenses of the Corporate/Wholesale Banking and Retail Banking segments primarily comprise interest expense on deposits and funds borrowed from other internal segments, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses.

Segment income includes earnings from external customers and from funds transferred to the other segments. Segment result includes revenue as reduced by interest expense and operating expenses and provisions, if any, for that segment. Segment-wise income and expenses include certain allocations. Inter segment interest income and interest expense represent the transfer price received from and paid as per the transfer pricing mechanism presently followed by the Bank.

Segment Information

18.13 Liability for Operating Leases

The Banking Units premises are generally rented on cancellable terms for less than twelve months with no escalation clause and renewable at the option of the Company. The Head office and the Bank Branches office premises are obtained on non-cancellable lease terms. Lease payment during the year are charged in the statement of profit & loss.

The amount of rent expenses included in the Profit & Loss account towards operating leases aggregate to ? 210.33 crore (Previous year ended March 31, 2021: ? 176.25 crore).

18.15 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 during the years ended March 31, 2022 and March 31, 2021. The above is based on the information available with the Bank which has been relied upon by the auditors.

18.16 Description of contingent liabilities

a) Claims against the Bank not acknowledged as debts:

These represent claims filed against the Bank in the normal course of business and related to taxation matters which are in dispute and are under appeal.

b) Guarantees given on behalf of constituents:

As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfill its financial or performance obligations.

c) Other items:

Other items represent outstanding amount of estimated amount of contracts remaining to be executed on capital account.

d) Acceptances, endorsements and other obligations:

These includes documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank''s customers that are accepted or endorsed by the Bank.

18.18 Disclosures on Remuneration Qualitative Disclosures

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

The Bank''s Nomination and Remuneration Committee (NRC) oversees the framing, review and implementation of the Compensation Policy on behalf of the Board of Directors. The NRC reviews the policy at least once a year to ensure that the reward design is aligned to industry best practices and is consistent with effective risk management and long term business interests of the Bank. The NRC works in close coordination with the Risk Management Committee of the Bank, to achieve the effective alignment between remuneration and risks.

As on March 31, 2022 the NRC comprises of the following directors.

Mr. Suhail Chander- Chairman Mr. A. S. Ramasastri Mr. Ranodeb Roy Mr. Snehomoy Bhattachary

The NRC functions with the following main objectives:

(i) To identify persons who are qualified to become directors in accordance with the criteria laid down, recommend to the Board their appointment, reappointment or removal and to carry out evaluation of every Director''s performance;

(ii) To formulate the criteria for determining qualifications, positive attributes and independence of a Director and decide their ''fit & proper'' status;

(iii) To oversee the framing, review and implementation of compensation policy of the Bank and recommend to the Board the overall remuneration philosophy and policy including the level and structure of fixed pay, variable pay, perquisites, bonus pool, stock based remuneration to employees;

(iv) To oversee the framing, implementation and review of the Remuneration of the Whole Time Director (WTDs) /Managing Director (MD)/ Chief Executive Officer (CEOs) as per the RBI Guidelines and Companies Act, 2013. The Committee shall recommend to the Board the remuneration package for the Managing Director & CEO and the other Whole Time Directors - including the level of fixed pay, variable pay, stock based Remuneration and perquisites;

(v) To review the HR strategy and policy including the conduct and ethics of the Bank and review any fundamental changes in the organization structure which could have wide ranging and high risk implications;

(vi) To review and recommend to the Board, the succession policy at the level of Managing Director & CEO, other WTDs, senior management one level below the Board and key roles.

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

Objectives of the Remuneration Policy

The Compensation Policy reflects the Bank''s objectives for good corporate governance as well as sustained and longterm value creation for stakeholders. The aims of the Bank''s remuneration framework are to:

i) Attract, motivate and retain people with requisite skill, experience and ability to deliver the Bank''s strategy;

ii) Create an alignment and balance between the rewards and risk exposure of shareholders and interests of employees;

iii) Link rewards to creation of long term sustainable shareholder value consistent with strategic goals and appropriate risk management; and

iv) Encourage behavior consistent with the Bank''s values and principles.

To achieve the above objectives, the philosophy adopted by the Bank is as follows:

i) Market referenced: offer employees competitive salary, achieved through benchmarking with peer groups.

ii) Making fixed salary the main remuneration component.

iii) Ensure that jobs of similar internal value are grouped and pegged within a range guided by market benchmarked jobs.

iv) Risk factoring: A significant portion of the senior and top management compensation will be variable, of which, for some key roles, part of the variable compensation may be deferred.

v) Focus on ''Total rewards'', all aspects of compensation, rewards and well defined benefits, including rewarding work environment and personal development.

vi) The focus will be to ensure that the Bank is competitive in its overall salary offer to its employees without being excessively expensive for the Bank.

The compensation structure for the MD & CEO also mirrors the Bank''s philosophy of aligning with the principles of sound compensation practices to ensure:

i) Effective and independent governance of compensation.

ii) Effective alignment of compensation with prudent risk taking.

iii) Effective supervisory oversight and engagement by stakeholders.

Design & Structure of Remuneration process

The total compensation is a prudent mix of fixed remuneration and performance-based variable remuneration

The key remuneration elements are:

1) Fixed Pay

2) Discretionary Performance-based Variable Remuneration

The Bank ensures that the fixed pay element is reasonable, taking into account the market rates and trends. The fixed pay is reviewed annually using market intelligence provided by a leading global performance/reward consulting and benchmarking firm for financial services industry to ensure that the Bank remains competitive in marketplace and that the Bank is able to attract and retain best talent. The level of fixed pay shall be sufficient enough in order to discourage inappropriate risk-taking.

Performance-based variable remuneration may comprise cash bonus, stock linked instruments, and is awarded by ensuring:

i) an appropriate balance between fixed and performance-based components;

ii) that the fixed component represents a higher proportion of the total remuneration;

iii) that the performance-based component reflects the risk underlying the achieved result;

iv) that a part of the performance-based component may be deferred;

v) that no hedging of deferred shares takes place;

Presently, the bank utilises only two form of performance based variable remuneration, viz.,cash bonus, ESOP, as referred in note no 18.29 is linked to continuous service with the Bank.

The compensation policy of the Bank is reviewed by the NRC and approved by the Board of Directors. The NRC oversees the implementation of the policy and reviews the fixed pay increases, the organizational performance threshold for bonus to be paid, cash bonus and deferred variable remuneration.

c) Description of the ways in which current and future risks are taken into account in the remuneration process

The MD & CEO, employees in the grades of SVPs and above and employees engaged in the functions of Risk Control and Compliance are included in the policy of risk alignment of compensation.

The alignment of compensation to prudent risk taking is ensured through the following:

i) Structure of remuneration is such that a significant part of performance based variable remuneration is deferred.

ii) Performance hurdles includes financial and nonfinancial parameters, ensuring compensation is aligned to both.

iii) Fixed Salary is reasonable and sufficient, thereby discouraging inappropriate risk taking.

iv) Annual Bonus Plan is managed with an independent governance framework.

v) Variable remuneration awards are conditional, discretionary and contingent upon a sustainable and risk-adjusted performance. They are therefore capable of forfeiture or reduction at the Bank''s discretion.

vi) For employees included in the policy of risk alignment of compensation, NRC has the discretion to apply malus and clawback - ex-post risk adjustment, allowing the Bank to adjust previously awarded remuneration to take account of subsequent performance and potential risk outcomes and thus enabling to recoup variable pay in the event of a negative contribution.

Deferral of Variable Pay

To ensure that risk measures are not focused only on the achievement of short term goals, variable payout is deferred, if it exceeds 50% of the fixed pay.

The Bank''s compensation policy aims to ensure that both ex-ante estimates and ex-post outcomes of risk affect payoffs; so that one or the other, can better address the various situations or risks.

d) Description of ways in which the Bank seeks to link performance, during a performance measurement period with levels of remuneration.

The Bank has a performance measurement framework in place to assess the achievements of the organization as a whole, its business lines and organizational units as well as individual employees. In order to maximise the incentive to deliver adequate performance and to take into account any risks of the business activities, the Bank seeks to closely link remuneration outcomes with performance and risk outcomes. Accordingly, the Bank''s performance management and compensation philosophy is designed in a manner to help achieve the Bank''s business objectives.

The performance management system in the Bank is aligned to the balanced scorecard approach. The goal setting process helps individuals to have clarity on their roles and align their profiles in line with the broad organization strategy. Both quantitative / financial and qualitative / non-financial

performance measures are considered. The qualitative or non-financial measures include customer service, adherence to risk and compliance standards, behavior and values such as accountability, team work, etc., which builds a culture conducive to sustainable business performance.

The performance appraisal process starts with the employee conducting self-appraisal followed by the assessment of the supervisor via appraisal feedback and discussion. For all employees of the Bank, half-yearly appraisal is followed by the annual appraisal. The mid-year feedback process includes feedback on performance and on competencies with an objective of a mid-course review, to help plan and prioritize corrective actions for employees to remain aligned to achievement of their business goals and self-development. The performance appraisal ratings is reviewed/ calibrated by a committee comprising senior leaders.

Individual fixed pay increases and variable remuneration are based on the final performance ratings. In addition, the fixed pay increase is also influenced by an employee''s position in the salary range and relevant market salaries. Performance related variable compensation is linked to corporate performance, business performance and individual performance. The performance ratings based bonus distribution matrix is reviewed by the NRC.

Employees engaged in all control functions including Compliance and Risk do not carry business profit targets in their goal sheets and hence are compensated based on their achievement of key result areas as per the balance score card. The aim is to ensure that the remuneration system and outcomes relating to such control functions maintain the independence of the function and Bank''s robust risk management framework. Accordingly, for the control functions, the variable pay is conservative to promote prudent risk management behavior and the ''pay mix'' is skewed towards fixed pay.

In the case of performance evaluation of the Managing Director and Chief Executive Officer of the Bank, factors such as financial performance measures, cost management initiatives, other strategic initiatives, prudential risk and compliance management, recognition and awards to the Bank, etc., is taken into account, which may vary from year to year depending on the Bank''s strategic priorities. Based on the inputs from NRC, the Board reviews the performance and recommends the rate of bonus to be paid, and the increments for the MD & CEO, for regulatory approval in terms of Section 35B of the Banking Regulation Act, 1949 (B.R. Act, 1949).

e) Bank''s policy on deferral and vesting of variable remuneration and bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

In terms of RBI guidelines, the Compensation Policy specifically addresses the following categories of employees:

Category I : MD&CEO / Whole Time Directors

Category II : Risk Control and Compliance Staff

Category III: Other Categories of Staff

The following principles are applied for grant and deferral of performance-based variable remuneration for the above categories of employees.

Category I

i) Variable Remuneration will not exceed 70% of annual Fixed Pay.

ii) If the Variable Remuneration exceeds 50% of annual Fixed Pay, 40% of the Variable Remuneration will be deferred over a period of 3 years, on a proportionate basis.

iii) In case the variable remuneration is a mix of cash and stock linked instruments (other than ESOP), a proper balance between cash and share / stock linked instruments will be ensured.

iv) In the event of negative contributions of the Bank, the unvested deferred variable remuneration of the reference year will be held back (malus). In such cases, the vested / paid variable remuneration will also be subject to suitable claw back arrangements.

Category II

a) The mix of Fixed Pay and Variable remuneration will be weighed towards Fixed Pay.

b) Variable pay shall not exceed the annual fixed pay.

c) At least 40% of the variable pay shall be in the form of share-linked instruments (i.e. non-cash).

d) Deferral of share-linked variable pay shall be for 4 years on pro-rata yearly basis (annual vesting).

e) The compensation will be commensurate to their key role in the Bank.

Category III

a) Variable Remuneration will be as per the NRC approved pay-out levels in terms of grade and role matrix.

b) Variable pay shall not exceed the annual fixed pay.

c) At least 50% of the variable pay shall be in the form of share-linked instruments (i.e. non-cash).

d) Deferral of share-linked variable pay shall be for 4 years on pro-rata yearly basis (annual vesting).

For the three categories of employees mentioned hereinabove, the awarded performance based variable pay shall be subject to in-year adjustment, malus or clawback as decided by the NRC, in the event of negative contribution of

the Bank and / or relevant line of business and in material

cases of detrimental conduct of individual or business.

Negative contribution of the Bank and / or relevant line of

business is defined as:

Conduct related:

i) If an employee engages in certain detrimental conduct, including mis-selling practices, manipulation of interest rate benchmarks, illegal activity, breach of a fiduciary duty, etc. that causes material financial or reputational harm to the Bank.

ii) If the award was based on a material misrepresentation by the employee.

iii) If there is reasonable evidence of employee malfeasance and breach of integrity inviting disciplinary actions.

iv) Violation of Anti Hedging and Anti Pledging Policy or Code of Conduct for Prevention of Insider Trading.

Risk related and others:

i) If the awarded performance-based variable pay was granted on a deliberately erroneous foundation or an incorrect decision made due to gross negligence not considered as errors of judgement.

ii) If the employee who is reasonably expected to be aware of the failure, misconduct or weakness in approach that contributed to the failure, improperly or with gross negligence failed to identify, assess, report or escalate in a timely manner.

iii) If the performance, decisions or actions taken leads to the Bank or the relevant business unit suffering a significant material downturn in its financial performance.

iv) If the RBI assessed divergence in the Bank''s provisioning for Non-Performing Assets (NPAs) or asset classification exceeds the prescribed threshold for public disclosure, the bank shall not pay the unvested portion of the variable compensation for the assessment year under malus clause. Further, in such a situation, there shall not be any increase in variable pay for the assessment year. In case the bank''s post assessment Gross NPAs are less than 2.0%, these restrictions will apply only if the criteria for public disclosure are triggered either on account of divergence in provisioning or both provisioning and asset classification.

v) In the event of a material restatement, correction or amendment of the Bank''s financial results for the relevant period.

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 presently utilizes only one form of variable remuneration, viz., cash bonus, which is linked to corporate performance, business performance and individual performance ensuring differential pay based on the performance. ESOP, as referred in Note 18.29 is linked to continuous service with the Bank.

18.19 Disclosure relating to Securitisation

The Bank has not orginated any securitisation transactions during the year ended March 31, 2022 and March 31, 2021.

18.20 Disclosure on Derivatives

(i) Derivatives

The Bank has not entered into any derivative transaction during the year ended March 31, 2022 and March 31, 2021. Currently Bank is not entering into derivative transactions like Exchange Traded Derivatives, Options and Swaps. However, at later stage, Bank may place a separate policy on dealing in derivatives before the Board based on extant regulatory guidelines and internal capabilities, on approval of which derivative transactions may be undertaken.

(ii) Credit default swaps

The Bank has not transacted in credit default swaps during the year ended March 31, 2022 and March 31, 2021.

18.21 Transfer 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.

18.22 Transfer to Investor education and protection fund (IEPF)

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

1. Working funds represent average of total assets as reported to Reserve Bank of India in Form X under Section 27 of the Banking Regulation Act, 1949, during the year ended March 31, 2022 and March 31, 2021.

2. Operating profit is profit for the year before considering provisions and contingencies.

3. Productivity ratios are based on average number of employees for the year.

4. Business per employee (deposits plus Gross Advances (on book), inter-bank deposits shall be excluded.

b) Marketing and distribution

During the year ended March 31, 2022 and March 31, 2021, the Bank has received ? 133.85 crore (Previous Year ? 50.58 crore) in respect of the marketing and distribution function (excluding bancassurance business) undertaken by them.

c) Implementation of IFRS converged Indian Accounting Standards (IndAS)

The RBI issued a circular in February, 2016 requiring banks to implement Indian Accounting Standards (''Ind AS'') and prepare Ind AS financial statements with effect from April 01, 2018. In line with the RBI guidelines on Ind AS implementation, the Bank has formed a Steering Committee comprising members from the concerned functional areas. As advised by the RBI, the Bank has also submitted Proforma Ind AS financial statements every quarter starting from quarter ended June 30, 2018 to the RBI.

However, the RBI in its press release issued on March 22, 2019 has deferred the applicability of Ind AS till further notice for Scheduled Commercial Banks.

The Bank has made a diagnostic study to identify the gaps, process and system changes required to implement Ind AS and is in the process of implementing necessary changes in its IT system and other processes. The Bank is regularly holding workshops and training for its staff.

e) Disclosure of facilities granted to directors and their relatives

During the year ended March 31, 2022 and March 31, 2021, The Bank has not extended any fund or non-fund (guarantees, letters of credit, etc.) facilities extended to directors, their relatives, companies or firms in which they are interested.

18.24 Disclosure on Liquidity Coverage Ratio (a) Qualitative disclosure

The Bank has adopted the Basel III framework on liquidity standards as prescribed by RBI and has put in place requisite systems and processes to enable periodical computation and reporting of the Liquidity Coverage Ratio (LCR). The Risk department computes the LCR and reports the same to the Asset Liability Management Committee (ALCO) every month for review.

The Bank follows the criteria laid down by RBI for calculation of High Quality Liquid Assets (HQLA),gross outflows and inflows within the next 30-day period. HQLA predominantly comprises Government securities in excess of minimum SLR requirement viz. Treasury Bills, Central and State Government securities and excess of minimum cash reserve ratio (CRR).

The Board of Directors has the overall responsibility for management of liquidity risk. The Board at overall level decides the strategy, policies and procedures of the bank to manage liquidity risk in accordance with the liquidity risk tolerance/limits. The Board has constituted Risk Management Committee, which reports to the Board, and consist of Managing Director and certain other Board members. The Committee is responsible for evaluating the overall risks faced by the bank including liquidity risk.

18.29 Employee Stock Option Scheme (ESOS)

On July 26, 2017 the board of directors approved the Bandhan Bank Employee Stock Option Plan Series 1 for issue of stock options to eligible employees and directors of the Bank.

The Shareholders of the Bank at the meeting held on 23rd November, 2017 has approved the Employee Stock Option Plan Series 1 and the grant of Employee Stock Option to the employees of the Bank. The said approval accords the Board of Directors of the Bank or any Committee including the Nomination and Remuneration Committee, which the Board has constituted, to create, offer, and grant at any time to permanent employees of the Bank, including any Director of the Bank, whether whole-time or otherwise but excluding Promoter(s), Independent Directors and Directors holding directly or indirectly more than 10% of the outstanding equity shares, employee stock options from time to time in one or more tranches.

This plan was framed in accordance with the SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 as amended from time to time and as applicable at the time of the grant. The accounting for the stock options has been in accordance with the SEBI (Share Based Employee Benefits) Regulations, 2014 to the extent applicable.

Employee Stock Option Plan Series 1 provides for the issuance of options at the recommendation of the Nomination and Remuneration Committee of the Board (''NRC'') at the closing price on the working day immediately preceding the date when options are granted. The closing price of the Bank''s equity share on an Indian stock exchange with the highest trading volume as of the working day preceding the date of grant set forth by the NRC at the time of grant. The period in which the options may be exercised cannot exceed five years from date of expiry of vesting period. However, if the participant''s employment terminates due to retirement (including pursuant to any early/ voluntary retirement scheme), the whole of the unvested options shall vest on the first vesting date relating to the said grant, immediately following the date of superannuation. During the years ended March 31, 2022 and March 31, 2021, no modifications were made to the terms and conditions of ESOPs as approved by the NRC.

18.31 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 provision over and above the RBI requirements by ? 1,846.03 crores on standard assets as at March 31, 2022 (? 387.96 crores as at March 31, 2021).

18.32 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.

18.33 In accordance with the instructions in the paragraph 5 of the RBI circular dated April 07, 2021, the Bank refunded / adjusted ''interest on interest'' of ? 1.77 crore to all eligible borrowers during the year ended March 31, 2022.

18.34 Miscellaneous income includes ? 657.72 crore (Previous Year ended March 31, 2021 ? 731.76 crore) on sale of Priority sector lending certificates.

18.35 Other Expenditure includes IT operating expenses of ? 183.04 crore (Previous Year ended March 31, 2021 ? 109.62 crore).

18.36 Remuneration by way of sitting fees paid to the Non-Executive Directors for attending meeting of the Board and its committees during the year ended March 31, 2022 amounting to ? 2.67 crore (Previous Year: ? 2.42 crore).

18.38 Previous year figures have been regrouped/reclassified, wherever necessary, to conform to current year classification. The previous year figures were audited by Deloitte Haskins & Sells, Chartered Accountants.

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Mar 31, 2021

< Capital

During the year ended March 31, 2021, the Bank has alloted 3,51,358 Equity Shares (Previous Year- 2,16,329 Equity Shares ) of '' 10/- each towards stock option excercised for '' 7.27 crore. Accordingly, share capital increased by '' 0.35 crore and share premium increased by '' 6.92 crore against stock option excercised.

Proposed dividend

The Board of Directors at its meeting held on May 8, 2021, has proposed a dividend of '' 1 per share for the year ended March 31, 2021, 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 accounted for proposed dividend aggregating : '' 161.06 crores (previous year: NIL) as a liability for the year ended March 31, 2021. However, the Bank has reckoned proposed dividend in determining capital funds in computing capital adequacy ratio as at March 31, 2021.

Sale and transfers of Securities 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.

Derivatives

The Bank has not entered into any derivative transaction during the year ended March 31,2021 and March 31,2020. Currently Bank is not entering into derivative transactions like Forward Rate Agreements, Exchange Traded Derivatives, Options and Swaps. However, at later stage, Bank may place a separate policy on dealing in derivatives before the Board based on extant regulatory guidelines and internal capabilities, on approval of which derivative transactions may be undertaken.

Details of accounts restructured under Micro, Small and Medium Enterprises (MSME) sector under RBI guidelines issued in January 2019 and as amended from time to time

The Bank does not have any Micro, Small and Medium Enterprises (MSME) accounts as at and for the year ended March 31,2021 and March 31,2020 which have been restructured under the RBI guidelines on "Micro, Small and Medium Enterprises (MSME) sector - Restructuring of Advances" issued on January 1, 2019 and as amended from time to time.

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''s credit exposure to single borrower and group borrowers was within the prudential exposure limits prescribed by RBI.

Unsecured Advances against Intangible Collaterals

During the year ended March 31,2021 and March 31,2020, there are no unsecured advances for which intangible securities such as charge over the rights, licenses, authority etc. has been taken as collateral by the Bank.

Risk Category wise Country Exposure

The Bank does not have any Risk Category wise country exposure for the year ended March 31,2021 and March 31,2020. i Miscellaneous

Disclosure of penalties imposed by RBI

During the current year no penalty has been levied on the Bank by RBI ('' 1.00 crore for year ended March 31,2020)

Employee Benefits Gratuity

The Bank has a defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for gratuity on departure and it is computed at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of qualifying insurance policy.

The estimates of future salary increases considered in actuarial valuation, takes account of inflation, seniority and other relevant factors, such as supply and demand in the employment market.

The Bank expects to contribute '' 20 crore to gratuity fund in 2021-22 (Previous year ended March 31,2020 : ''30 crore)

The overall expected rate of return on assets is determined based on market prices prevailing on that date, applicable to the year over which the obligation is to be settled.

Provident Fund

Amount incurred as expense for defined contribution to Provident Fund is '' 92.60 crore (Previous year ended March 31,2020 : '' 71.28 crore).

Code on Social Security

The Indian Parliament has approved the Code on Social Security, 2020 (the"Code") which would impact the contributions by the Company towards Provident Fund and Gratuity. The Ministry of Labour and Employment has released draft rules for the Code on Social Security, 2020 on November 13, 2020, and has invited suggestions from stakeholders which are under active consideration by the Ministry. The Company will assess the impact and its evaluation once the subject rules are notified and will give appropriate impact in its financial statements in the period in which, the Code becomes effective and the related rules to determine the financial impactare published.

1 Segment Reporting Segment Identification

Pursuant to the guidelines issued by RBI on AS 17 -Segment Reporting - Enhancement of Disclosures dated

Treasury :

Treasury operations include investments in sovereign securities and trading operations. The Treasury segment also includes the central funding unit.

Retail banking :

Includes lending to individuals/small businesses through the branch network and other delivery channels subject to the orientation, nature of product, granularity of the exposure and low value of individual exposure thereof. It also includes liability products, card services, internet banking, mobile banking, ATM services and NRI services. All deposits sourced by branches are classified in retail category.

Corporate/Wholesale Banking:

Includes corporate relationships not included under Retail Banking.

Other Banking Business :

Include para banking activities like third party product distribution and other banking transaction not covered under any of the above three segments.

Income, expenses, assets and liabilities are either specifically identified with individual segments or are allocated to segments on a systematic basis.

The liabilities of the Bank are first used by the units generating the same. Any excess liabilities of the units are pooled to central funding unit (Treasury). Treasury then lends these funds to other units at appropriate rates.

The transfer pricing mechanism of the Bank is periodically reviewed. The segment results are

determined based on the transfer pricing mechanism prevailing for the respective reporting periods.

Revenues of the Treasury segment primarily consist of fees and gains or losses from trading operations and interest income on the investment portfolio. The principal expenses of the segment consist of interest expense on funds borrowed from external sources and other internal segments, premises expenses, personnel costs, other direct overheads and allocated expenses

Revenues of the Corporate/Wholesale Banking segment consist of interest and fees earned on loans given to customers falling under this segment and fees arising from these. Revenues of the Retail Banking segment are derived from interest earned on loans classified under this segment, fees for banking services and ATM interchange fees. Expenses of the

Corporate/Wholesale Banking and Retail Banking segments primarily comprise interest expense on deposits and funds borrowed from other internal segments, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses.

Segment income includes earnings from external customers and from funds transferred to the other segments. Segment result includes revenue as reduced by interest expense and operating expenses and provisions, if any, for that segment. Segment-wise income and expenses include certain allocations. Inter segment interest income and interest expense represent the transfer price received from and paid as per the transfer pricing mechanism presently followed by the Bank.

Liability for Operating Leases

The Banking Units premises are generally rented on cancellable terms for less than twelve months with no escalation clause and renewable at the option of the Company . The Head office and the Bank Branches office premises are obtained on noncancellable lease terms . Lease payment during the year are charged in the statement of profit & loss.

The amount of rent expenses included in the Profit & Loss account towards operating leases aggregate to '' 176.25 crore (Previous year ended March 31,2020: '' 159.06 crore).

'' Small and Micro Industries

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from 2nd October, 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.

I Description of contingent liabilities Claims against the Bank not acknowledged as debts:

These represent claims filed against the Bank in the normal course of business and related to taxation matters which are in dispute and are under appeal.

Guarantees given on behalf of constituents:

As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfill its financial or performance obligations.

Other items:

Other items represent outstanding amount of estimated amount of contracts remaining to be executed on capital account. Acceptances, endorsements and other obligations:

These includes documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank''s customers that are accepted or endorsed by the Bank.

i Additional Disclosures Floating Provisions

The Bank does not have any floating provision as at March 31,2021 and March 31,2020.

18.21 Disclosures on Remuneration Qualitative Disclosures

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

The Bank''s Nomination and Remuneration Committee (NRC) oversees the framing, review and implementation of the Compensation Policy on behalf of the Board of Directors. The NRC reviews the policy at least once a year to ensure that the reward design is aligned to industry best practices and is consistent with effective risk management and long term business interests of the Bank. The NRC works in close coordination with the Risk Management Committee of the Bank, to achieve the effective alignment between remuneration and risks.

As on March 31,2021 the NRC comprises of the following directors.

Shri Snehomoy Bhattacharya- Chairman Shri. Bhaskar Sen Shri Ranodeb Roy

Shri Harun Rasid Khan (retired w.e.f. March 27, 2021)

The NRC functions with the following main objectives:

(i) To identify persons who are qualified to become directors in accordance with the criteria laid down,

recommend to the Board their appointment, re-appointment or removal and to carry out evaluation of every Director''s performance;

(ii) To formulate the criteria for determining qualifications, positive attributes and independence of a Director and decide their ''fit & proper'' status;

(iii) To oversee the framing, review and

implementation of compensation policy of the Bank and recommend to the Board the overall remuneration philosophy and policy including the level and structure of fixed pay, variable pay, perquisites, bonus pool, stock based remuneration to employees;

(iv) To oversee the framing, implementation and review of the Remuneration of the Whole Time Director (WTDs) /Mamaging Director (MD)/ Chief Executive Officer (CEOs) as per the RBI Guidelines and Companies Act, 2013. The Committee shall recommend to the Board the remuneration package for the Managing Director & CEO and the other Whole Time Directors - including the level of fixed pay, variable pay, stock based Remuneration and perquisites;

(v) To review the HR strategy and policy including the conduct and ethics of the Bank and review

any fundamental changes in the organization structure which could have wide ranging and high risk implications;

(vi) To review and recommend to the Board, the succession policy at the level of Managing Director & CEO, other WTDs, senior management one level below the Board and key roles.

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

The Compensation Policy reflects the Bank''s objectives for good corporate governance as well as sustained and long-term value creation for stakeholders. The aims of the Bank''s remuneration framework are to:

i) Attract, motivate and retain people with requisite skill, experience and ability to deliver the Bank''s strategy;

ii) Create an alignment and balance between the rewards and risk exposure of shareholders and interests of employees;

iii) Link rewards to creation of long term sustainable shareholder value consistent with strategic goals and appropriate risk management; and

iv) Encourage behavior consistent with the Bank''s values and principles.

To achieve the above objectives, the philosophy adopted by the Bank is as follows:

i) Market referenced: offer employees competitive salary, achieved through benchmarking with peer groups.

ii) Making fixed salary the main remuneration component.

iii) Ensure that jobs of similar internal value are grouped and pegged within a range guided by market benchmarked jobs.

iv) Risk factoring: A significant portion of the senior and top management compensation will be variable, of which, for some key roles, part of the variable compensation may be deferred.

v) Focus on ''Total rewards'', all aspects of compensation, rewards and well defined benefits, including rewarding work environment and personal development.

vi) The focus will be to ensure that the Bank is competitive in its overall salary offer to its employees without being excessively expensive for the Bank.

The compensation structure for the MD & CEO also mirrors the Bank''s philosophy of aligning with the principles of sound compensation practices to ensure:

i) Effective and independent governance of compensation.

ii) Effective alignment of compensation with prudent risk taking.

iii) Effective supervisory oversight and engagement by stakeholders.

Design & Structure of Remuneration process

The total compensation is a prudent mix of fixed remuneration and performance-based variable remuneration

The key remuneration elements are:

1) Fixed Pay

2) Discretionary Performance-based Variable Remuneration

The Bank ensures that the fixed pay element is reasonable, taking into account the market rates and trends. The fixed pay is reviewed annually using market intelligence provided by a leading global performance/reward consulting and benchmarking firm for financial services industry to ensure that the Bank remains competitive in marketplace and that the Bank is able to attract and retain best talent. The level of fixed pay shall be sufficient enough in order to discourage inappropriate risk-taking.

Performance-based variable remuneration may comprise cash bonus, stock linked instruments, and is awarded by ensuring:

i) an appropriate balance between fixed and performance-based components;

ii) that the fixed component represents a higher proportion of the total remuneration;

iii) that the performance-based component reflects the risk underlying the achieved result;

iv) that a part of the performance-based component may be deferred;

v) that no hedging of deferred shares takes place;

Presently, the bank utilises only two form of performance based variable remuneration, viz.,cash bonus, ESOP, as referred in note no 18.32 is linked to continuous service with the Bank.

The compensation policy of the Bank is reviewed by the NRC and approved by the Board of Directors. The NRC oversees the implementation of the policy and reviews the fixed pay increases, the organizational performance threshold for bonus to be paid, cash bonus and deferred variable remuneration.

c) Description of the ways in which current and future risks are taken into account in the remuneration process

The MD & CEO, employees in the grades of SVPs and above and employees engaged in the functions of Risk Control and Compliance are included in the policy of risk alignment of compensation.

The alignment of compensation to prudent risk taking is ensured through the following:

i) Structure of remuneration is such that a significant part of performance based variable remuneration is deferred.

ii) Performance hurdles includes financial and nonfinancial parameters, ensuring compensation is aligned to both.

iii) Fixed Salary is reasonable and sufficient, thereby discouraging inappropriate risk taking.

iv) Annual Bonus Plan is managed with an independent governance framework.

v) Variable remuneration awards are conditional, discretionary and contingent upon a sustainable and risk-adjusted performance. They are therefore capable of forfeiture or reduction at the Bank''s discretion.

vi) For employees included in the policy of risk alignment of compensation, NRC has the discretion to apply malus and clawback - expost risk adjustment, allowing the Bank to adjust previously awarded remuneration to take account of subsequent performance and potential risk outcomes and thus enabling to recoup variable pay in the event of a negative contribution.

Deferral of Variable Pay

To ensure that risk measures are not focused only on the achievement of short term goals, variable payout is deferred, if it exceeds 50% of the fixed pay.

The Bank''s compensation policy aims to ensure that both ex-ante estimates and ex-post outcomes of risk affect payoffs; so that one or the other, can better address the various situations or risks.

d) Description of ways in which the Bank seeks to link performance, during a performance measurement period with levels of remuneration.

The Bank has a performance measurement framework in place to assess the achievements of the organization as a whole, its business lines and organizational units as well as individual employees. In order to maximise

the incentive to deliver adequate performance and to take into account any risks of the business activities, the Bank seeks to closely link remuneration outcomes with performance and risk outcomes. Accordingly, the Bank''s performance management and compensation philosophy is designed in a manner to help achieve the Bank''s business objectives.

The performance management system in the Bank is aligned to the balanced scorecard approach. The goal setting process helps individuals to have clarity on their roles and align their profiles in line with the broad organization strategy. Both quantitative / financial and qualitative / non-financial performance measures are considered. The qualitative or non-financial measures include customer service, adherence to risk and compliance standards, behavior and values such as accountability, team work, etc., which builds a culture conducive to sustainable business performance.

The performance appraisal process starts with the employee conducting self-appraisal followed by the assessment of the supervisor via appraisal feedback and discussion. For all employees of the Bank, half-yearly appraisal is followed by the annual appraisal. The mid-year feedback process includes feedback on performance and on competencies with an objective of a mid-course review, to help plan and prioritize corrective actions for employees to remain aligned to achievement of their business goals and self-development. The performance appraisal ratings is reviewed/ calibrated by a committee comprising senior leaders.

Individual fixed pay increases and variable remuneration are based on the final performance ratings. In addition, the fixed pay increase is also influenced by an employee''s position in the salary range and relevant market salaries. Performance related variable compensation is linked to corporate performance, business performance and individual performance. The performance ratings based bonus distribution matrix is reviewed by the NRC.

Employees engaged in all control functions including Compliance and Risk do not carry business profit targets in their goal sheets and hence are compensated based on their achievement of key result areas as per the balance score card. The aim is to ensure that the remuneration system and outcomes relating to such control functions maintain the independence of the function and Bank''s robust risk management framework. Accordingly, for the control functions, the variable pay is conservative to promote prudent risk management behavior and the ''pay mix'' is skewed towards fixed pay.

In the case of performance evaluation of the Managing Director and Chief Executive Officer of the Bank, factors

such as financial performance measures, cost management initiatives, other strategic initiatives, prudential risk and compliance management, recognition and awards to the Bank, etc., is taken into account, which may vary from year to year depending on the Bank''s strategic priorities. Based on the inputs from NRC, the Board reviews the performance and recommends the rate of bonus to be paid, and the increments for the MD & CEO, for regulatory approval in terms of Section 35B of the Banking Regulation Act, 1949 (B.R. Act, 1949).

e) Bank''s policy on deferral and vesting of variable remuneration and bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

In terms of RBI guidelines, the Compensation Policy specifically addresses the following categories of employees:

Category I : MD&CEO / Whole Time Directors

Category II : Risk Control and Compliance Staff

Category III: Other Categories of Staff

The following principles are applied for grant and deferral of performance-based variable remuneration for the above categories of employees.

Category I

i) Variable Remuneration will not exceed 70% of annual Fixed Pay.

ii) If the Variable Remuneration exceeds 50% of annual Fixed Pay, 40% of the Variable Remuneration will be deferred over a period of 3 years, on a proportionate basis.

iii) In case the variable remuneration is a mix of cash and stock linked instruments (other than ESOP), a proper balance between cash and share / stock linked instruments will be ensured.

iv) In the event of negative contributions of the Bank, the unvested deferred variable remuneration of the reference year will be held back (malus). In such cases, the vested / paid variable remuneration will also be subject to suitable claw back arrangements.

Category II

i) The mix of Fixed Pay and Variable remuneration will be weighed towards Fixed Pay.

ii) The parameters of assessment will be independent of the performance of the business areas they oversee.

iii) The compensation will be commensurate to their key role in the Bank.

Category III

i) Variable Remuneration will be as per the NRC approved pay-out levels in terms of grade and role matrix.

ii) In case the variable remuneration is a mix of cash and stock linked instruments (other than ESOP), a proper balance between cash and share / stock linked instruments will be ensured.

iii) If the Variable Remuneration exceeds 50% of annual Fixed Pay, 40% of the Variable Remuneration will be deferred over a period of 3 years, on a proportionate basis.

iv) In the event of negative contributions of the relevant line of business, the unvested deferred variable remuneration of the reference year will be held back (malus). In such cases, the vested / paid variable remuneration will also be subject to suitable claw back arrangements.

Negative contribution of the Bank and / or relevant line of business is defined as:

i) If there is reasonable evidence of employee malfeasance and breach of integrity; or

ii) If the performance, decisions or actions taken leads to the Bank or the relevant business unit suffering a significant material downturn in its financial performance.

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 presently utilizes only one form of variable remuneration, viz., cash bonus, which is linked to corporate performance, business performance and individual performance ensuring differential pay based on the performance. ESOP, as referred in note 18.32 is linked to continuous service with the Bank.

Disclosure relating to Securitisation

There are no securitisation transactions undertaken by the Bank during the year ended March 31,2021 and March 31,2020. Credit default swaps

The Bank has not transacted in credit default swaps during the year ended March 31,2021 and March 31,2020.

Intra Group Exposures

The Bank did not have any intra group exposure during the year ended March 31,2021 and March 31,2020.

Transfer 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.

Unhedged Foreign Currency Exposure

During the year ended March 31, 2021, the Bank made provision of '' 0.06 crores (Previous Year NIL) towards un-hedged foreign currency exposure. As on March 31, 2021, the Bank held cumulative provision towards un-hedged foreign currency exposure of '' 0.06 crores (Previous Year NIL).

As on March 31, 2021 & March 31, 2020, the Bank is not required to have any incremental capital towards borrowers having unhedged foreign currency exposures in acordance with RBI guidelines.

Qualitative disclosure

The Bank has adopted the Basel III framework on liquidity standards as prescribed by RBI and has put in place requisite systems and processes to enable periodical computation and reporting of the Liquidity Coverage Ratio (LCR). The Risk department computes the LCR and reports the same to the Asset Liability Management Committee (ALCO) every month for review.

The Bank follows the criteria laid down by RBI for calculation of High Quality Liquid Assets (HQLA),gross outflows and inflows within the next 30-day period. HQLA predominantly comprises Government securities in excess of minimum SLR requirement viz. Treasury Bills, Central and State Government securities and excess of minimum cash reserve ratio (CRR).

The Board of Directors has the overall responsibility for management of liquidity risk. The Board at overall level decides the strategy, policies and procedures of the bank to manage liquidity risk in accordance with the liquidity risk tolerance/limits. The Board has constituted Risk Management Committee, which reports to the Board, and consist of Managing Director and certain other Board members. The Committee is responsible for evaluating the overall risks faced by the bank including liquidity risk.

All significant outflows and inflows determined in accordance with RBI guidelines are included in the prescribed LCR computation template.

The Shareholders of the Bank at the meeting held on 23rd November, 2017 has approved the Employee Stock Option Plan Series 1 and the grant of Employee Stock Option to the employees of the Bank. The said approval accords the Board of Directors of the Bank or any Committee including the Nomination and Remuneration Committee, which the Board has constituted, to create, offer, and grant at any time to permanent employees of the Bank, including any Director of the Bank, whether whole-time or otherwise but excluding Promoter(s), Independent Directors and Directors holding directly or indirectly more than 10% of the outstanding equity shares, employee stock options from time to time in one or more tranches.

This plan was framed in accordance with the SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines, 1999 as amended from time to time and as applicable at the time of the grant. The accounting for the stock options has been in accordance with the SEBI (Share Based Employee Benefits) Regulations, 2014 to the extent applicable.

Employee Stock Option Plan Series 1 provides for the issuance of options at the recommendation of the Nomination and Remuneration Committee of the Board (''NRC'') at the closing price on the working day immediately preceding the date when options are granted. The closing price of the Bank''s equity share on an Indian stock exchange with the highest trading volume as of the working day preceding the date of grant set forth by the NRC at the time of grant. The period in which the options may be exercised cannot exceed five years from date of expiry of vesting period. However, if the participant''s employment terminates due to retirement (including pursuant to any early/ voluntary retirement scheme), the whole of the unvested options shall vest on the first vesting date relating to the said grant, immediately following the date of superannuation. During the years ended March 31,

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\ Miscellaneous income includes '' 731.76 crore (previous year ended March 31, 2020''453.33 crore) on sale of Priority sector lending certificates.

'' Other Expenditure includes IT operating expenses of '' 109.62 crore (previous year ended March 31, 2020''90.58 crore) and ATM expenses of '' 43.71 crore (previous year ended March 31, 2020''44.85 crore).

i Remuneration by way of sitting fees paid to the Non-Executive Directors for attending meeting of the Board and its committees during the year ended March 31, 2021 amounting to '' 2.42 crore (previous year: '' 1.77 crore).

Business Transfer

During the previous year the ''Scheme of Amalgamation'' of erstwhile GRUH Finance Limited ("GRUH") with Bandhan Bank Limited ("BANK") was approved by the Reserve Bank of India, the Competition Commission of India, Stock Exchanges, the respective Shareholders and Creditors of each entities as applicable and the National Company Law Tribunals (NCLT) Bench at Kolkata and Ahmedabad, with appointed date as January 1, 2019 and effective date as October 17, 2019. In accordance with the Scheme all assets and liabilities pertaining to the GRUH Finance Limited ("GRUH") were transferred to the Bank on amalgamation for a consideration of '' 416.19 crore. The acquired assets and liabilities were recorded at their existing carrying amount in BANK in accordance with ''Pooling of Interest Method'' guidance provided in AS-14, ''Accounting for Amalgamations'' '' 1,101.03 crore being short of consideration settled by the Bank over net assets acquired have been transferred to Capital Reserve in the books of the ("BANK").

COVID-19 virus, a global pandemic has affected the world economy including India. The extent to which the COVID-19 pandemic including the current second wave witnessed in the country, will continue to impact the Bank''s operations and asset quality will depend on the future developments, which are uncertain.

The balance of Capital Reserve included an amount of '' 546.18 Crore in respect of Statutory Reserve created under Section 36(1)(VIII) of Income Tax Act 1961 and additional reserve amounting to '' 27.74 Crore, which was carried forward in accordance with the terms of the Merger scheme.

The Opening Profit & Loss Account balance adjustment on account of amalgamation as stated in face of Profit & Loss Account for the previous year includes

1) Profit of erstwhile Gruh Finance Limited ("GRUH") for the three months ended March 31, 2019 net of adjustments for accounting policy alignments, amounting to '' 116.83 Crore

2) Transfer of '' 105.00 Crore to statutory reserve and transfer of '' 76.16 Crore to General Reserve for the year ended March 31, 2019 made by GRUH after the effective date of Merger and during the three months ended March 31, 2019.

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 granted a moratorium on the repayment of all installments and/or interest, as applicable, due between March 1, 2020 and August 31, 2020 to all eligible borrowers. In respect of such accounts that were granted moratorium, the asset classification remained standstill during the moratorium period.

The Bank holds accelerated provisions of '' 387.96 Crore on standard assets as at March 31, 2021 against the potential impact of COVID-19 (other than provisions held for restructuring under COVID 19 norms).

Also, during the current year, the Bank has made additional provisions on NPA amounting to '' 1,034.00 Crore against the existing NPA accounts resulting from elevated risk observed in certain geographies and potential impact of COVID-19 on certain loan portfolios. These provisions held by the Bank are based on the information available at this point in time and are in excess of the RBI prescribed norms.

. In accordance with the instructions in paragraph 5 of the RBI circular dated April 07, 2021, the Bank shall refund / adjust ''interest on interest'' to all borrowers including those who had availed of working capital facilities during the moratorium period, irrespective of whether moratorium had been fully or partially availed, or not availed. Pursuant to these instructions, the methodology for calculation of the amount of such ''interest on interest'' has been finalised by the Indian Banks Association (IBA) in consultation with other industry participants / bodies as on April 19, 2021. As on March 31 2021, the Bank holds a specific liability of '' 12.88 Crore, which was created by debiting interest income, to meet its aforesaid obligation towards refund of interest on interest to eligible borrowers as prescribed by the RBI.

1 Previous year figures have been regrouped/reclassified, wherever necessary, to conform to current year classification.

---

Mar 31, 2019

1. Background

Bandhan Bank Limited (the ''Bank''), incorporated on December 23, 2014 in India, is a banking company, governed by the Banking Regulation Act, 1949.

Pursuant to the Banking license received from Reserve Bank of India on June 17, 2015, the Bank has commenced its banking operations from August 23, 2015.

2. Basis of preparation

The accompanying financial statements have been prepared under the historical cost convention and on the accrual basis of accounting, unless otherwise stated and comply with the requirements prescribed under the Third Schedule (Form A and Form B) of the Banking Regulation Act, 1949. The accounting and reporting policies of the Bank used in the preparation of these 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 and the Companies (Accounting Standards) Amendment Rules, 2016 to the extent applicable and practices generally prevalent in the banking industry in India.

3. Use of Estimates

The preparation of the financial statements in conformity with the generally accepted accounting principles requires the Management to make estimates and assumptions that affect the reported amounts of assets and liabilities (including contingent liabilities) as at the date of the financial statements and the reported income and expenses during the reporting period. The Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Any revisions to the accounting estimates are recognised prospectively in the current and future periods. Actual results could differ from estimates.

Schedule 4

The following disclosures have been made taking into account the requirements of Accounting Standards (ASs) and Reserve Bank of India (RBI) guidelines in this regard.

5 Capital

During the year ended March 31, 2019, the Bank has alloted 2,77,911 Equity Shares (previous year- NIL) of Rs.10/- each in respect of stock option excercised aggregating to value Rs.5.00 crore. Accordingly, share capital increased by Rs.0.28 crore and share premium increased by Rs.4.72 crore.

5.1 Proposed dividend

The Board of Directors at its meeting held on May 2, 2019, has proposed a dividend of Rs.3 per share for the year ended March 31, 2019, 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 accounted for proposed dividend (including dividend distribution tax) aggregating : Rs.431.50 crore [previous year: Rs.143.80 crore (including dividend distribution tax)] as a liability for the year ended March 31, 2019. However, the Bank has reckoned proposed dividend in determining capital funds in computing capital adequacy ratio as at March 31, 2019.

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.

D) Sale and transfers of Securities 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.

5.2 Derivatives

The Bank has not entered into any derivative transaction during the year ended March 31, 2019 and March 31, 2018. Currently Bank is not entering into derivative transactions like Forward Rate Agreements, Exchange Traded Derivatives, Options and Swaps. However, at later stage, Bank may place a separate policy on dealing in derivatives before the Board based on extant regulatory guidelines and internal capabilities, on approval of which derivative transactions may be undertaken.

B) Particulars of accounts restructured

The Bank does not have any restructured account as at and for the year ended March 31, 2019 and March 31, 2018.

C) Details of Financial Assets sold to Securitisation / Reconstruction company

The Bank did not sell any Financial Assets to Securitisation / Reconstruction company for Reconstruction during the year ended March 31, 2019 and March 31, 2018.

D) Details of Non Performing Financial Assets Purchased / Sold

The Bank did not purchase/sell any Non Performing Financial Assets during the year ended March 31, 2019 and March 31, 2018.

E) Provisions on Standard Assets

1. Working funds represent average of total assets as reported to Reserve Bank of India in Form X under Section 27 of the Banking Regulation Act, 1949, during the year ended March 31, 2019 and March 31, 2018.

2. Operating profit is profit for the year before considering provisions and contingencies.

3. Productivity ratios are based on average number of employees for the year.

C) 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''s credit exposure to single borrower and group borrowers was within the prudential exposure limits prescribed by RBI.

D) Unsecured Advances against Intangible Collaterals

During the year ended March 31, 2019 and March 31, 2018, there are no unsecured advances for which intangible securities such as charge over the rights, licenses, authority etc. has been taken as collateral by the Bank.

E) Risk Category wise Country Exposure

The Bank does not have any Risk Category wise country exposure for the year ended March 31, 2019 and March 31, 2018.

5.3 Miscellaneous

Disclosure of penalties imposed by RBI

No penalty has been levied on the Bank by RBI during the year ended March 31, 2019 and March 31, 2018. However a single instance of SGL bouncing occurred on October 04, 2018 due to security being available in Repo account instead of Primary account with RBI. No monetary penalty was imposed by RBI and appropriate control measures have been taken internally to prevent such recurrence.

5.4 Employee Benefits

A) Gratuity

The Bank has a defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for gratuity on departure and it is computed at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of qualifying insurance policy.

The following tables summarize the components of net benefit expense recognised in the profit and loss account and the funded status and amounts recognised in the balance sheet for the Gratuity plan.

ix) The Bank was incorporated on December 23, 2014 and did not have any employees in the year ended March 31, 2015 hence figures for the year 2015 are not furnished.

x) The estimates of future salary increases considered in actuarial valuation, takes account of inflation, seniority and other relevant factors, such as supply and demand in the employment market.

xi) The Bank expects to contribute Rs.10 crore to gratuity fund in 2019-20 (Previous year ended March 31, 2018 : Rs.10 crore)

xii) The overall expected rate of return on assets is determined based on market prices prevailing on that date, applicable to the year over which the obligation is to be settled.

B) Provident Fund

Amount incurred as expense for defined contribution to Provident Fund is Rs.41.21 crore (Previous year ended March 31, 2018 : Rs.29.70 crore).

5.5 Segment Reporting

A) Segment Identification

Pursuant to the guidelines issued by RBI on AS 17 - Segment Reporting- Enhancement of Disclosures dated April 18, 2007, the following business segments have been reported:

i) Treasury :

Treasury operations include investments in sovereign securities and trading operations. The Treasury segment also includes the central funding unit.

ii) Retail banking :

Includes lending to individuals/small businesses through the branch network and other delivery channels subject to the orientation, nature of product, granularity of the exposure and low value of individual exposure thereof. It also includes liability products, card services, internet banking, mobile banking, ATM services and NRI services. All deposits sourced by branches are classified in retail category.

iii) Corporate/Wholesale Banking:

Includes corporate relationships not included under Retail Banking.

iv) Other Banking Business :

Include para banking activities like third party product distribution and other banking transaction not covered under any of the above three segments.

Income, expenses, assets and liabilities are either specifically identified with individual segments or are allocated to segments on a systematic basis.

The liabilities of the Bank are first used by the units generating the same. Any excess liabilities of the units are pooled to central funding unit (Treasury). Treasury then lends these funds to other units at appropriate rates.

The transfer pricing mechanism of the Bank is periodically reviewed. The segment results are determined based on the transfer pricing mechanism prevailing for the respective reporting periods.

Revenues of the Treasury segment primarily consist of fees and gains or losses from trading operations and interest income on the investment portfolio. The principal expenses of the segment consist of interest expense on funds borrowed from external sources and other internal segments, premises expenses, personnel costs, other direct overheads and allocated expenses.

Revenues of the Corporate/Wholesale Banking segment consist of interest and fees earned on loans given to customers falling under this segment and fees arising from these. Revenues of the Retail Banking segment are derived from interest earned on loans classified under this segment, fees for banking services and ATM interchange fees. Expenses of the Corporate/Wholesale Banking and Retail Banking segments primarily comprise interest expense on deposits and funds borrowed from other internal segments, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses.

Segment income includes earnings from external customers and from funds transferred to the other segments. Segment result includes revenue as reduced by interest expense and operating expenses and provisions, if any, for that segment. Segment-wise income and expenses include certain allocations. Inter segment interest income and interest expense represent the transfer price received from and paid as per the transfer pricing mechanism presently followed by the Bank.

Notes:

The business of the Bank does not extend outside India and it does not have any assets outside India or earnings emanating from outside India. Accordingly, the Bank has reported operations in the domestic segment only.

*Treasury segment liabilities includes share capital and reserve & surplus Previous year figures are shown in"()".

5.6 Liability for Operating Leases

The Door step service center premises are generally rented on cancellable terms for less than twelve months with no escalation clause and renewable at the option of the Company . The Head office and the Bank Branches office premises are obtained on non- cancellable lease terms . Lease payment during the year are charged in the statement of profit & loss.

The amount of rent expenses included in the Profit & Loss account towards operating leases aggregate to Rs.135.12 crore (Previous year ended March 31, 2018: Rs.110.12 crore).

Particulars of future minimum lease payment in respect of Head office & Bank branches are as mentioned below :

5.7 Small and Micro Industries

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 02, 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.

5.8 Description of contingent liabilities

a) Claims against the Bank not acknowledged as debts:

These represent claims filed against the Bank in the normal course of business.

b) Guarantees given on behalf of constituents:

As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfill its financial or performance obligations.

c) Other items:

Other items represent outstanding amount of estimated amount of contracts remaining to be executed on capital account.

5.9 Additional Disclosures

A) Floating Provisions

The Bank does not have any floating provision as at March 31,2019 and March 31, 2018.

B) Draw Down from Reserve

There has been no draw down from reserves during the year ended March 31, 2019 and March 31, 2018.

C) Disclosure of customer complaints

i) Customer Complaints:

D) Letter of Comfort (LOC''s) issued by the Bank

The Bank has not issued any Letter of Comfort (LOC) during the year ended March 31, 2019 and March 31, 2018.

VII) Overseas Assets, NPAs and Revenue

The Bank does not have any overseas assets as on March 31, 2019 and March 31, 2018.

VIII) Off-balance Sheet SPVs sponsored

The Bank has not sponsored any special purposes vehicle which is required to be consolidated as per accounting norms.

H) 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 April 01, 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 divergence observed by RBI for the financial year 17-18 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.

5.10 Disclosures on Remuneration

Qualitative Disclosures

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

The Bank''s Nomination and Remuneration Committee (NRC) oversees the framing, review and implementation of the Compensation Policy on behalf of the Board of Directors. The NRC reviews the policy at least once a year to ensure that the reward design is aligned to industry best practices and is consistent with effective risk management and long term business interests of the Bank. The NRC works in close coordination with the Risk Management Committee of the Bank, to achieve the effective alignment between remuneration and risks.

As on March 31,2019 the NRC comprises of the following directors.

Shri Bhaskar Sen- Chairman

Shri B. Sambamurthy

(Ceased to be member w.e.f. June 05, 2018)

Shri Snehomoy Bhattacharya

Shri Ranodeb Roy

Shri Harun Rasid Khan

(Inducted in the Committee w.e.f. June 05, 2018)

The NRC functions with the following main objectives:

(i) To identify persons who are qualified to become directors in accordance with the criteria laid down, recommend to the Board their appointment, re-appointment or removal and to carry out evaluation of every Director''s performance;

(ii) To formulate the criteria for determining qualifications, positive attributes and independence of a Director and decide their ''fit & proper'' status;

(iii) To oversee the framing, review and implementation of compensation policy of the Bank and recommend to the Board the overall remuneration philosophy and policy including the level and structure of fixed pay, variable pay, perquisites, bonus pool, stock based remuneration to employees;

(iv) To oversee the framing, implementation and review of the Remuneration of the WTDs/MD/CEOs as per the RBI Guidelines and Companies Act, 2013. The Committee shall recommend to the Board the remuneration package for the Managing Director & CEO and the other Whole Time Directors - including the level of fixed pay, variable pay, stock based Remuneration and perquisites;

(v) To review the HR strategy and policy including the conduct and ethics of the Bank and review any fundamental changes in the organization structure which could have wide ranging and high risk implications;

(vi) To review and recommend to the Board, the succession policy at the level of Managing Director & CEO, other WTDs, senior management one level below the Board and key roles.

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

Objectives of the Remuneration Policy

The Compensation Policy reflects the Bank''s objectives for good corporate governance as well as sustained and longterm value creation for stakeholders. The aims of the Bank''s remuneration framework are to:

i) Attract, motivate and retain people with requisite skill, experience and ability to deliver the Bank''s strategy;

ii) Create an alignment and balance between the rewards and risk exposure of shareholders and interests of employees;

iii) Link rewards to creation of long term sustainable shareholder value consistent with strategic goals and appropriate risk management; and

iv) Encourage behavior consistent with the Bank''s values and principles.

To achieve the above objectives, the philosophy adopted by the Bank is as follows:

i) Market referenced: offer employees competitive salary, achieved through benchmarking with peer groups.

ii) Making fixed salary the main remuneration component.

iii) Ensure that jobs of similar internal value are grouped and pegged within a range guided by market benchmarked jobs.

iv) Risk factoring: A significant portion of the senior and top management compensation will be variable, of which, for some key roles, part of the variable compensation may be deferred.

v) Focus on ''Total rewards'', all aspects of compensation, rewards and well defined benefits, including rewarding work environment and personal development.

vi) The focus will be to ensure that the Bank is competitive in its overall salary offer to its employees without being excessively expensive for the Bank.

The compensation structure for the MD & CEO also mirrors the Bank''s philosophy of aligning with the principles of sound compensation practices to ensure:

i) Effective and independent governance of compensation.

ii) Effective alignment of compensation with prudent risk taking.

iii) Effective supervisory oversight and engagement by stakeholders.

Design & Structure of Remuneration process

The total compensation is a prudent mix of fixed remuneration and performance-based variable remuneration

The key remuneration elements are:

1) Fixed Pay

2) Discretionary Performance-based Variable Remuneration

The Bank ensures that the fixed pay element is reasonable, taking into account the market rates and trends. The fixed pay is reviewed annually using market intelligence provided by a leading global performance/reward consulting and benchmarking firm for financial services industry to ensure that the Bank remains competitive in marketplace and that the Bank is able to attract and retain best talent. The level of fixed pay shall be sufficient enough in order to discourage inappropriate risk-taking.

Performance-based variable remuneration may comprise cash bonus, stock linked instruments, and is awarded by ensuring:

i) an appropriate balance between fixed and performance-based components;

ii) that the fixed component represents a higher proportion of the total remuneration;

iii) that the performance-based component reflects the risk underlying the achieved result;

iv) that a part of the performance-based component may be deferred;

v) that no hedging of deferred shares takes place;

Presently, the bank utilises only two form of performance based variable remuneration, viz.,cash bonus, ESOP, as referred in note no 18.32 is linked to continuous service with the Bank.

The compensation policy of the Bank is reviewed by the NRC and approved by the Board of Directors. The NRC oversees the implementation of the policy and reviews the fixed pay increases, the organizational performance threshold for bonus to be paid, cash bonus and deferred variable remuneration.

c) Description of the ways in which current and future risks are taken into account in the remuneration process

The MD & CEO, employees in the grades of SVPs and above and employees engaged in the functions of Risk Control and Compliance are included in the policy of risk alignment of compensation.

The alignment of compensation to prudent risk taking is ensured through the following:

i) Structure of remuneration is such that a significant part of performance based variable remuneration is deferred.

ii) Performance hurdles includes financial and non-financial parameters, ensuring compensation is aligned to both.

iii) Fixed Salary is reasonable and sufficient, thereby discouraging inappropriate risk taking.

iv) Annual Bonus Plan is managed with an independent governance framework.

v) Variable remuneration awards are conditional, discretionary and contingent upon a sustainable and risk-adjusted performance. They are therefore capable of forfeiture or reduction at the Bank''s discretion.

vi) For employees included in the policy of risk alignment of compensation, NRC has the discretion to apply malus and clawback - ex-post risk adjustment, allowing the Bank to adjust previously awarded remuneration to take account of subsequent performance and potential risk outcomes and thus enabling to recoup variable pay in the event of a negative contribution.

Deferral of Variable Pay

To ensure that risk measures are not focused only on the achievement of short term goals, variable payout is deferred, if it exceeds 50% of the fixed pay.

The Bank''s compensation policy aims to ensure that both ex-ante estimates and ex-post outcomes of risk affect payoffs; so that one or the other, can better address the various situations or risks.

d) Description of ways in which the Bank seeks to link performance, during a performance measurement period with levels of remuneration.

The Bank has a performance measurement framework in place to assess the achievements of the organization as a whole, its business lines and organizational units as well as individual employees. In order to maximise the incentive to deliver adequate performance and to take into account any risks of the business activities, the Bank seeks to closely link remuneration outcomes with performance and risk outcomes. Accordingly, the Bank''s performance management and compensation philosophy is designed in a manner to help achieve the Bank''s business objectives.

The performance management system in the Bank is aligned to the balanced scorecard approach. The goal setting process helps individuals to have clarity on their roles and align their profiles in line with the broad organization strategy. Both quantitative / financial and qualitative / non-financial performance measures are considered. The qualitative or non-financial measures include customer service, adherence to risk and compliance standards, behavior and values such as accountability, team work, etc., which builds a culture conducive to sustainable business performance.

The performance appraisal process starts with the employee conducting self-appraisal followed by the assessment of the supervisor via appraisal feedback and discussion. For all employees of the Bank, half-yearly appraisal is followed by the annual appraisal. The mid-year feedback process includes feedback on performance and on competencies with an objective of a mid-course review, to help plan and prioritize corrective actions for employees to remain aligned to achievement of their business goals and self-development. The performance appraisal ratings is reviewed/ calibrated by a committee comprising senior leaders.

Individual fixed pay increases and variable remuneration are based on the final performance ratings. In addition, the fixed pay increase is also influenced by an employee''s position in the salary range and relevant market salaries. Performance related variable compensation is linked to corporate performance, business performance and individual performance. The performance ratings based bonus distribution matrix is reviewed by the NRC.

Employees engaged in all control functions including Compliance and Risk do not carry business profit targets in their goal sheets and hence are compensated based on their achievement of key result areas as per the balance score card. The aim is to ensure that the remuneration system and outcomes relating to such control functions maintain the independence of the function and Bank''s robust risk management framework. Accordingly, for the control functions, the variable pay is conservative to promote prudent risk management behavior and the ''pay mix'' is skewed towards fixed pay.

In the case of performance evaluation of the Managing Director and Chief Executive Officer of the Bank, factors such as financial performance measures, cost management initiatives, other strategic initiatives, prudential risk and compliance management, recognition and awards to the Bank, etc., is taken into account, which may vary from year to year depending on the Bank''s strategic priorities. Based on the inputs from NRC, the Board reviews the performance and recommends the rate of bonus to be paid, and the increments for the MD & CEO, for regulatory approval in terms of Section 35B of the Banking Regulation Act, 1949 (B.R. Act, 1949).

e) Bank''s policy on deferral and vesting of variable remuneration and bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

In terms of RBI guidelines, the Compensation Policy specifically addresses the following categories of employees:

Category I : MD&CEO / Whole Time Directors

Category II : Risk Control and Compliance Staff

Category III: Other Categories of Staff

The following principles are applied for grant and deferral of performance-based variable remuneration for the above categories of employees.

Category I

i) Variable Remuneration will not exceed 70% of annual Fixed Pay.

ii) If the Variable Remuneration exceeds 50% of annual Fixed Pay, 40% of the Variable Remuneration will be deferred over a period of 3 years, on a proportionate basis.

iii) In case the variable remuneration is a mix of cash and stock linked instruments (other than ESOP), a proper balance between cash and share / stock linked instruments will be ensured.

iv) In the event of negative contributions of the Bank, the unvested deferred variable remuneration of the reference year will be held back (malus). In such cases, the vested / paid variable remuneration will also be subject to suitable claw back arrangements.

Category II

i) The mix of Fixed Pay and Variable remuneration will be weighed towards Fixed Pay.

ii) The parameters of assessment will be independent of the performance of the business areas they oversee.

iii) The compensation will be commensurate to their key role in the Bank.

Category III

i) Variable Remuneration will be as per the NRC approved pay-out levels in terms of grade and role matrix.

ii) In case the variable remuneration is a mix of cash and stock linked instruments (other than ESOP), a proper balance between cash and share / stock linked instruments will be ensured.

iii) If the Variable Remuneration exceeds 50% of annual Fixed Pay, 40% of the Variable Remuneration will be deferred over a period of 3 years, on a proportionate basis.

iv) In the event of negative contributions of the relevant line of business, the unvested deferred variable remuneration of the reference year will be held back (malus). In such cases, the vested / paid variable remuneration will also be subject to suitable claw back arrangements.

Negative contribution of the Bank and / or relevant line of business is defined as:

i) If there is reasonable evidence of employee malfeasance and breach of integrity; or

ii) If the performance, decisions or actions taken leads to the Bank or the relevant business unit suffering a significant material downturn in its financial performance.

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 presently utilizes only one form of variable remuneration, viz., cash bonus, which is linked to corporate performance, business performance and individual performance ensuring differential pay based on the performance. ESOP, as referred in note 18.32 is linked to continuous service with the Bank.

5.11 Disclosure relating to Securitisation

There are no securitisation transactions undertaken by the Bank during the year ended March 31, 2019 and March 31, 2018.

5.12 Credit default swaps

The Bank has not transacted in credit default swaps during the year ended March 31, 2019 and March 31, 2018.

5.13 Intra Group Exposures

The Bank did not have any intra group exposure during the year ended March 31, 2019 and March 31, 2018.

5.14 Transfer 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.

5.15 Unhedged Foreign Currency Exposure

The borrowers of the Bank do not have any Unhedged Foreign Currency Exposure as at March 31, 2019 and March 31, 2018.

The above information is as certified by the Management and relied upon by the auditors.

5.16 Disclosure on Liquidity Coverage Ratio (a) Qualitative disclosure

The Bank has adopted the Basel III framework on liquidity standards as prescribed by RBI and has put in place requisite systems and processes to enable periodical computation and reporting of the Liquidity Coverage Ratio (LCR). The Risk department computes the LCR and reports the same to the Asset Liability Management Committee (ALCO) every month for review.

The Bank follows the criteria laid down by RBI for calculation of High Quality Liquid Assets (HQLA),gross outflows and inflows within the next 30-day period. HQLA predominantly comprises Government securities in excess of minimum SLR requirement viz. Treasury Bills, Central and State Government securities and excess of minimum cash reserve ratio (CRR).

The Board of Directors has the overall responsibility for management of liquidity risk. The Board at overall level decides the strategy, policies and procedures of the bank to manage liquidity risk in accordance with the liquidity risk tolerance/limits. The Board has constituted Risk Management Committee, which reports to the Board, and consist of Managing Director and certain other Board members. The Committee is responsible for evaluating the overall risks faced by the bank including liquidity risk.

All significant outflows and inflows determined in accordance with RBI guidelines are included in the prescribed LCR computation template.

* Includes 2,00,000 options granted to MD which was earlier subject to approval from RBI, now granted

** However, if the participant''s employment terminates due to retirement (including pursuant to any early/ voluntary retirement scheme), the whole of the unvested options shall vest on the first vesting date relating to the said grant, immediately following the date of superannuation.

5.17 Corporate Social Responsibility

a) Gross amount required to be spent by the Bank during the year ended is Rs.27.83 crore (Previous year ended March 31, 2018 : Rs.14.14 crore)

b) The following table sets forth, for the periods indicated, the amount spent by the Bank on CSR related activities;

5.18 Miscellaneous income includes Rs.308.58 crore (previous year ended March 31, 2018 Rs.150.78 crore) Income from sale of Priority sector lending certificates.

5.19 Other Expenditure includes IT operating expenses of Rs.71.55 crore (previous year ended March 31, 2018 Rs.70.69 crore) and ATM expenses of Rs.48.88 crore (previous year ended March 31, 2018 Rs.62.35 crore).

5.20 On January 7, 2019, the Board of Directors of the Bank approved a merger of Gruh Finance Limited with the Bank in an all stock transaction through a Composite Scheme of Arrangement. The Scheme has been approved by Reserve Bank of India (RBI), the Competition Commission of India (CCI), the Securities and Exchange Board of India (SEBI) / Stock Exchanges, and is only subject to approval from National Company Law Tribunal (NCLT) and respective shareholders and creditors of each entities. The appointed date for the transaction is proposed to be January 01, 2019 and the effective date shall be based on the receipt of the aforesaid approvals. Pending the same, the proposed transaction does not have any impact on the current financial statements of the Bank as at and for the year ended March 31, 2019.

5.21 As on March 27, 2018 the Bank has raised capital of Rs.3,662.40 crore through Initial Public Offer (IPO) by issuing 97,663,910 Equity shares of Rs.10/- each.

Pursuant to Regulation 32 of the Listing Regulations, we hereby confirm that there has been no deviation in the use of IPO proceeds from the objects stated in the prospectus.

The objects of the IPO was to augment the Bank Tier-1 capital base so as to meet its future capital requirements arising out of growth of the Company''s .

The above statement has been placed before the Audit Committee and they have reviewed that there has been no deviation in the use of IPO proceeds from the objects as mentioned in the prospectus.

5.21 As per RBI notification DBR.BP.BC.No.37/21.04.048/2018-19 Dt: April 24, 2019 all scheduled commercial banks are required to Disclose on Exposure to Infrastructure Leasing & Financial Services Limited (ILFS) and its group entities:

5.22 Details of payments to Auditors

5.23 Previous year figures have been regrouped/reclassified, wherever necessary, to conform to current year classification.

---

Mar 31, 2018

1 Liability for Operating Leases

The Doorstep Service Centre premises are generally rented on cancellable terms for less than twelve months with no escalation clause and renewable at the option of the Company . The Head Office and the Bank Branches office premises are obtained on non- cancellable lease terms . Lease payment during the year are charged in the statement of profit & loss.

The amount of rent expenses included in the Profit & Loss account towards operating leases aggregate to Rs, 110.12 crore (Previous year ended March 31, 2017 : Rs, 75.73 crore).

The dilutive impact is due to stock options granted to employees of the Bank.

2 Small and Micro Industries

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 02, 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.

3. Description of contingent liabilities

a) Claims against the Bank not acknowledged as debts:

These represent claims filed against the Bank in the normal course of business.

b) Guarantees given on behalf of constituents:

As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfill its financial or performance obligations.

c) Other items:

Other items represent outstanding amount of estimated amount of contracts remaining to be executed on capital account.

4. Additional Disclosures

A) Floating Provisions

The Bank does not have any floating provision as at March 31, 2018 and March 31, 2017.

B) Draw Down from Reserve

There has been no draw down from reserves during the year ended March 31, 2018 and March 31, 2017.

VII) Overseas Assets, NPAs and Revenue

The Bank does not have any overseas assets as on March 31, 2018 and March 31, 2017.

VIII) Off-balance Sheet SPVs sponsored

The Bank has not sponsored any special purposes vehicle which is required to be consolidated as per accounting norms.

5.Disclosures on Remuneration

Qualitative Disclosures

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

The Bank''s Nomination and Remuneration Committee (NRC) oversees the framing, review and implementation of the Compensation Policy on behalf of the Board of Directors. The NRC reviews the policy at least once a year to ensure that the reward design is aligned to industry best practices and is consistent with effective risk management and long term business interests of the Bank. The NRC works in close coordination with the Risk Management Committee of the Bank, to achieve the effective alignment between remuneration and risks.

As on March 31, 2018 the NRC comprises of the following directors.

Shri Bhaskar Sen - Chairman

Shri B. Sambamurthy

Shri Snehomoy Bhattacharya

Shri Ranodeb Roy (w.e.f - September 19, 2016)

The NRC functions with the following main objectives:

(i) To identify persons who are qualified to become directors in accordance with the criteria laid down, recommend to the Board their appointment, re-appointment or removal and to carry out evaluation of every Director''s performance;

(ii) To formulate the criteria for determining qualifications, positive attributes and independence of a Director and decide their ''fit & proper'' status;

(iii) To oversee the framing, review and implementation of compensation policy of the Bank and recommend to the Board the overall remuneration philosophy and policy including the level and structure of fixed pay, variable pay, perquisites, bonus pool, stock based remuneration to employees;

(iv) To oversee the framing, implementation and review of the Remuneration of the WTDs/MD/ CEOs as per the RBI Guidelines and Companies Act, 2013. The Committee shall recommend to the Board the remuneration package for the Managing Director & CEO and the other Whole Time Directors - including the level of fixed pay, variable pay, stock based Remuneration and perquisites;

(v) To review the HR strategy and policy including the conduct and ethics of the Bank and review any fundamental changes in the organization structure which could have wide ranging and high risk implications;

(vi) To review and recommend to the Board, the succession policy at the level of Managing Director & CEO, other WTDs, senior management one level below the Board and key roles.

b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy Objectives of the Remuneration Policy The Compensation Policy reflects the Bank''s objectives for good corporate governance as well as sustained and long-term value creation for stakeholders. The aims of the Bank''s remuneration framework are to:

i) Attract, motivate and retain people with requisite skill, experience and ability to deliver the Bank''s strategy;

ii) Create an alignment and balance between the rewards and risk exposure of shareholders and interests of employees;

iii) Link rewards to creation of long term sustainable shareholder value consistent with strategic goals and appropriate risk management; and

iv) Encourage behavior consistent with the Bank''s values and principles.

To achieve the above objectives, the philosophy adopted by the Bank is as follows:

i) Market referenced: offer employees competitive salary, achieved through benchmarking with peer groups.

ii) Making fixed salary the main remuneration component.

iii) Ensure that jobs of similar internal value are grouped and pegged within a range guided by market benchmarked jobs.

iv) Risk factoring: A significant portion of the senior and top management compensation will be variable, of which, for some key roles, part of the variable compensation may be deferred.

v) Focus on ''Total rewards'', all aspects of compensation, rewards and well defined benefits, including rewarding work environment and personal development.

vi) The focus will be to ensure that the Bank is competitive in its overall salary offer to its employees without being excessively expensive for the Bank.

The compensation structure for the MD & CEO also mirrors the Bank''s philosophy of aligning with the principles of sound compensation practices to ensure:

i) Effective and independent governance of compensation.

ii) Effective alignment of compensation with prudent risk taking.

iii) Effective supervisory oversight and engagement by stakeholders.

Design & Structure of Remuneration process

The total compensation is a prudent mix of fixed remuneration and performance-based variable remuneration

The key remuneration elements are:

1) Fixed Pay

2) Discretionary Performance-based Variable Remuneration

The Bank ensures that the fixed pay element is reasonable, taking into account the market rates and trends. The fixed pay is reviewed annually using market intelligence provided by a leading global performance/ reward consulting and benchmarking firm for financial services industry to ensure that the Bank remains competitive in marketplace and that the Bank is able to attract and retain best talent. The level of fixed pay shall be sufficient enough in order to discourage inappropriate risk-taking.

Performance-based variable remuneration may comprise cash bonus, stock linked instruments, and is awarded by ensuring:

i) an appropriate balance between fixed and performance-based components;

ii) that the fixed component represents a higher proportion of the total remuneration;

iii) that the performance-based component reflects the risk underlying the achieved result;

iv) that a part of the performance-based component may be deferred;

v) that no hedging of deferred shares takes place;

Presently, the bank utilizes only two form of performance based variable remuneration, viz.,cash bonus, ESOP, as referred in note no 18.32 is linked to continuous service with the Bank.

The compensation policy of the Bank is reviewed by the NRC and approved by the Board of Directors. The NRC oversees the implementation of the policy and reviews the fixed pay increases, the organizational performance threshold for bonus to be paid, cash bonus and deferred variable remuneration.

c) Description of the ways in which current and future risks are taken into account in the remuneration process

The MD & CEO, employees in the grades of SVPs and above and employees engaged in the functions of Risk Control and Compliance are included in the policy of risk alignment of compensation.

The alignment of compensation to prudent risk taking is ensured through the following:

i) Structure of remuneration is such that a significant part of performance based variable remuneration is deferred.

ii) Performance hurdles includes financial and non-financial parameters, ensuring compensation is aligned to both.

iii) Fixed Salary is reasonable and sufficient, thereby discouraging inappropriate risk taking.

iv) Annual Bonus Plan is managed with and independent governance framework.

v) Variable remuneration awards are conditional, discretionary and contingent upon a sustainable and risk-adjusted performance. They are therefore capable of forfeiture or reduction at the Bank''s discretion.

vi) For employees included in the policy of risk alignment of compensation, NRC has the discretion to apply malus and clawback - ex-post risk adjustment, allowing the Bank to adjust previously awarded remuneration to take account of subsequent performance and potential risk outcomes and thus enabling to recoup variable pay in the event of a negative contribution.

Deferral of Variable Pay

To ensure that risk measures are not focused only on the achievement of short term goals, variable payout is deferred, if it exceeds 50% of the fixed pay.

The Bank''s compensation policy aims to ensure that both ex-ante estimates and ex-post outcomes of risk affect payoffs; so that one or the other, can better address the various situations or risks.

d) Description of ways in which the Bank seeks to link performance, during a performance measurement period with levels of remuneration.

The Bank has a performance measurement framework in place to assess the achievements of the organization as a whole, its business lines and organizational units as well as individual employees. In order to maximize the incentive to deliver adequate performance and to take into account any risks of the business activities, the Bank seeks to closely link remuneration outcomes with performance and risk outcomes. Accordingly, the Bank''s performance management and compensation philosophy is designed in a manner to help achieve the Bank''s business objectives.

The performance management system in the Bank is aligned to the balanced scorecard approach. The goal setting process helps individuals to have clarity on their roles and align their profiles in line with the broad organization strategy. Both quantitative / financial and qualitative / non-financial performance measures are considered. The qualitative or non-financial measures include customer service, adherence to risk and compliance standards, behavior and values such as accountability, team work, etc., which builds a culture conducive to sustainable business performance.

The performance appraisal process starts with the employee conducting self-appraisal followed by the assessment of the supervisor via appraisal feedback and discussion. For all employees of the Bank, half-yearly appraisal is followed by the annual appraisal.

The mid-year feedback process includes feedback on performance and on competencies with an objective of a mid-course review, to help plan and prioritize corrective actions for employees to remain aligned to achievement of their business goals and self-development. The performance appraisal ratings is reviewed/ calibrated by a committee comprising senior leaders.

Individual fixed pay increases and variable remuneration are based on the final performance ratings. In addition, the fixed pay increase is also influenced by an employee''s position in the salary range and relevant market salaries. Performance related variable compensation is linked to corporate performance, business performance and individual performance. The performance ratings based bonus distribution matrix is reviewed by the NRC.

Employees engaged in all control functions including Compliance and Risk do not carry business profit targets in their goal sheets and hence are compensated based on their achievement of key result areas as per the balance score card. The aim is to ensure that the remuneration system and outcomes relating to such control functions maintain the independence of the function and Bank''s robust risk management framework. Accordingly, for the control functions, the variable pay is conservative to promote prudent risk management behavior and the ''pay mix'' is skewed towards fixed pay.

In the case of performance evaluation of the Managing Director and Chief Executive Officer of the Bank, factors such as financial performance measures, cost management initiatives, other strategic initiatives, prudential risk and compliance management, recognition and awards to the Bank, etc., is taken into account, which may vary from year to year depending on the Bank''s strategic priorities. Based on the inputs from NRC, the Board reviews the performance and recommends the rate of bonus to be paid, and the increments for the MD & CEO, for regulatory approval in terms of Section 35B of the Banking Regulation Act, 1949 (B.R. Act, 1949).

e) Bank''s policy on deferral and vesting of variable remuneration and bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting. In terms of RBI guidelines, the Compensation Policy specifically addresses the following categories of employees:

Category I : MD&CEO / Whole Time Directors

Category II : Risk Control and Compliance Staff

Category III: Other Categories of Staff

The following principles are applied for grant and deferral of performance-based variable remuneration for the above categories of employees.

Category I

i) Variable Remuneration will not exceed 70% of annual Fixed Pay.

ii) If the Variable Remuneration exceeds 50% of annual Fixed Pay, 40% of the Variable

Remuneration will be deferred over a period of 3 years, on a proportionate basis.

iii) In case the variable remuneration is a mix of cash and stock linked instruments (other than ESOP),

a proper balance between cash and share / stock linked instruments will be ensured.

iv) In the event of negative contributions of the Bank, the unvested deferred variable remuneration of the reference year will be held back (malus).

In such cases, the vested / paid variable remuneration will also be subject to suitable claw back arrangements.

Category II

i) The mix of Fixed Pay and Variable remuneration will be weighed towards Fixed Pay.

ii) The parameters of assessment will be independent of the performance of the business areas they oversee.

iii) The compensation will be commensurate to their

key role in the Bank.

Category III

i) Variable Remuneration will be as per the NRC approved pay-out levels in terms of grade and role matrix.

ii) In case the variable remuneration is a mix of cash and stock linked instruments (other than ESOP),

a proper balance between cash and share / stock linked instruments will be ensured.

iii) If the Variable Remuneration exceeds 50% of annual Fixed Pay, 40% of the Variable Remuneration will be deferred over a period of 3 years, on a proportionate basis.

iv) In the event of negative contributions of the relevant line of business, the unvested deferred variable remuneration of the reference year will be held back (malus). In such cases, the vested / paid variable remuneration will also be subject to suitable claw back arrangements.

Negative contribution of the Bank and / or relevant line of business is defined as:

i) If there is reasonable evidence of employee malfeasance and breach of integrity; or

ii) If the performance, decisions or actions taken leads to the Bank or the relevant business unit suffering a significant material downturn in its financial performance.

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 presently utilizes only two form of variable remuneration, viz., cash bonus and ESOP. Cash bonus is linked to corporate performance, business performance and individual performance ensuring differential pay based on the performance. ESOP, as referred in note 18.32 is linked to continuous service with the Bank.

6. Disclosure relating to Securitization

There are no securitization transactions undertaken by the Bank during the year ended March 31, 2018 and March 31, 2017.

7. Credit default swaps

The Bank has not transacted in credit default swaps during the year ended March 31, 2018 and March 31, 2017.

8. Intra Group Exposures

The Bank did not have any intra group exposure during the year ended March 31, 2018 and March 31, 2017.

9. Transfer to Depositor education and awareness fund (DEAF)

During the year ended March 31, 2018 and March 31, 2017 the Bank was not required to transfer any amount to Depositor Education and Awareness Fund.

10. Unhedged Foreign Currency Exposure

The borrower of the Bank does not have any Unhedged Foreign Currency Exposure as at March 31, 2018 and March 31, 2017. The above information is as certified by the Management and relied upon by the auditors.

11. Disclosure on Liquidity Coverage Ratio

(a) Qualitative disclosure

The Bank has adopted the Basel III framework on liquidity standards as prescribed by RBI and has put in place requisite systems and processes to enable periodical computation and reporting of the Liquidity Coverage Ratio (LCR). The Risk department computes the LCR and reports the same to the Asset Liability Management Committee (ALCO) every month for review.

The Bank follows the criteria laid down by RBI for calculation of High Quality Liquid Assets (HQLA),gross outflows and inflows within the next 30-day period. HQLA predominantly comprises Government securities in excess of minimum SLR requirement viz. Treasury Bills, Central and State Government securities and excess of minimum cash reserve ratio (CRR).

The Board of Directors has the overall responsibility for management of liquidity risk. The Board at overall level decides the strategy, policies and procedures of the bank to manage liquidity risk in accordance with the liquidity risk tolerance/limits.

The Board has constituted Risk Management Committee, which reports to the Board, and consist of Managing Director and certain other Board members. The Committee is responsible for evaluating the overall risks faced by the bank including liquidity risk.

All significant outflows and inflows determined in accordance with RBI guidelines are included in the prescribed LCR computation template.

---

Mar 31, 2017

1. Derivatives

The Bank has not entered into any derivative transaction during the current and previous year.

* Includes provision ofRs,15.18 crore (Previous Year: Nil) on non-performing micro lending portfolio, where 30 days have elapsed from the date of completion of tenure of loan. The Bank has adopted a policy to make 100% provision on such cases at 31 March 2017.

B) Particulars of accounts restructured

The Bank does not have any restructured account as at and for the year ended 31 March 2017 and 31 March 2016.

C) Details of Financial Assets sold to Securitization / Reconstruction company for Reconstruction

The Bank did not sell any Financial Assets to Securitization / Reconstruction company for Reconstruction during the current and previous year.

D) Details of Non-Performing Financial Assets Purchased / Sold

The Bank did not purchase/sell any Non-Performing Financial Assets during the current and previous year.

1. Working funds represent average of total assets as reported to Reserve Bank of India in Form X under Section 27 of the Banking Regulation Act, 1949, during the year.

2. Operating profit is profit for the year before considering provisions and contingencies.

3. Productivity ratios are based on average number of employees for the year.

C) Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the Bank

During the year ended 31 March 2017 and 31 March 2016, the Bank''s credit exposure to single borrower and group borrowers was within the prudential exposure limits prescribed by RBI.

D) Unsecured Advances against Intangible Collaterals

During the year ended 31 March 2017 and 31 March 2016, there are no unsecured advances for which intangible securities such as charge over the rights, licenses, authority etc. has been taken as collateral by the Bank.

2. Miscellaneous

Disclosure of penalties imposed by RBI

No penalty has been levied on the Bank by RBI during the current and previous year.

3.Employee Benefits

A) Gratuity

The Bank has a defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for gratuity on departure and it is computed at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance company in the form of qualifying insurance policy.

The following tables summaries the components of net benefit expense recognized in the profit and loss account and the funded status and amounts recognized in the balance sheet for the Gratuity plan.

ix) The Bank was incorporated on 23 December

2014 and did not have any employees in the year ended 31 March, 2015, hence figures for the year 2015 are not furnished.

x) The estimates of future salary increases considered in actuarial valuation, takes account of inflation, seniority and other relevant factors, such as supply and demand in the employment market.

xi) The Bank expects to contribute Rs, 10 crores to gratuity fund in 2016-17 (Previous Year:'' 4 crores)

xii) The overall expected rate of return on assets is determined based on market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

B) Provident Fund

Amount incurred as expense for defined contribution to Provident Fund is Rs, 23.34 Crore (Previous Year:Rs,11.48 Crores).

4. Segment Reporting

A) Segment identification

Pursuant to the guidelines issued by RBI onAS17

- Segment Reporting - Enhancement of Disclosures dated April 18, 2007, the following business segments have been reported:

i) Treasury:

Treasury operations include investments in sovereign securities and trading operations. The Treasury segment also includes the central funding unit.

ii) Retail Banking :

Includes lending to individuals/small businesses through the branch network and other delivery channels subject to the orientation, nature of product, granularity of the exposure and low value of individual exposure thereof. It also includes liability products, card services, internet banking, mobile banking, ATM services and NRI services. All deposits sourced by branches are classified in retail category.

iii) Corporate/Wholesale Banking:

Includes corporate relationships not included under Retail Banking.

iv) Other Banking Business:

Include para banking activities like third party product distribution and other banking transaction not covered under any of the above three segments.

The Bank does not have any para banking activities for the year ended 31st March, 2017.

Income, expenses, assets and liabilities are either specifically identified with individual segments or are allocated to segments on a systematic basis.

The liabilities of the Bank are first used by the units generating the same. Any excess liabilities of the units are pooled to central funding unit (Treasury).

Treasury then lends these funds to other units at appropriate rates.

The transfer pricing mechanism of the Bank is periodically reviewed. The segment results are determined based on the transfer pricing mechanism prevailing for the respective reporting periods.

Revenues of the Treasury segment primarily consist of fees and gains or losses from trading operations and interest income on the investment portfolio. The principal expenses of the segment consist of interest expense on funds borrowed from external sources and other internal segments, premises expenses, personnel costs, other direct overheads and allocated expenses.

Revenues of the Corporate/Wholesale Banking segment consist of interest and fees earned on loans given to customers falling under this segment and fees arising from these. Revenues of the Retail Banking segment are derived from interest earned on loans classified under this segment, fees for banking services and ATM interchange fees. Expenses of the Corporate/Wholesale Banking and Retail Banking segments primarily comprise interest expense on deposits and funds borrowed from other internal segments, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses.

Segment income includes earnings from external customers and from funds transferred to the other segments. Segment result includes revenue as reduced by interest expense and operating expenses and provisions, if any, for that segment. Segment-wise income and expenses include certain allocations, inter segment interest income and interest expense represent the transfer price received from and paid as per the transfer pricing mechanism presently followed by the Bank.

Notes:

The business of the Bank does not extend outside India and it does not have any assets outside India or earnings emanating from outside India. Accordingly, the Bank has reported operations in the domestic segment only.

^Treasury segment liabilities includes share capital and reserve & surplus.

Previous year figures are shown in"0".

5. Related Party disclosure

A) Names of related parties and nature of relationship

Entities_Nature of relationship_

Bandhan Financial Services Limited (BFSL) Ultimate Parent Company

Bandhan Financial Holdings Limited Parent Company

Key Management Personnel

Mr. Chandra Shekhar Ghosh Managing Director & Chief Executive Officer

Mr. Indranil Banerjee Company Secretary

Mr. Sunil Samdani Chief Financial Officer

Relatives of Key Management Personnel

Nilima Ghosh, Angshuman Ghosh, Suchitra Ghosh, Vaskar Ghosh, Dibakar Ghosh, Nidhi Samdani, Sohan Samdani, Manju Somani, Asha Baheria.Usha Kothari, Saswati Banerjee, Arati Banerjee, Ishaan Banerjee, Mousumi Mukherjee._

6. Liability for Operating Leases

The Doorstep service centre premises are generally rented on cancellable terms for less than twelve months with no escalation clause and renewable at the option of the Company. The Head office and the Bank Branches office premises are obtained on non-cancellable lease terms. Lease payment during the year are charged in the statement of Profit & Loss.

The amount of rent expenses included in the Profit & Loss account towards operating leases aggregate to Rs, 75.73 crore (Previous year:'' 44.23 crore).

7. Small and Micro Industries

Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 02, 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. Description of Contingent Liabilities

a) Claims against the Bank not acknowledged as debts:

These represent claims Hied against the Bank in the normal course of business.

b) Guarantees given on behalf of constituents:

As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing. Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfill its financial or performance obligations.

c) Other items:

Other items represent outstanding amount of estimated amount of contracts remaining to be executed on capital account.

. Additional Disclosures

A) Floating Provisions

The Bank does not have any floating provision as at 31 March 2017 and 31 March 2016.

B) Draw Down from Reserve

There has been no draw down from reserves during the year ended 31 March 2017 and 31 March 2016.

The above information is as certified by the Management and relied upon by the auditors.

D) Letter of Comfort (LOC) issued by the Bank

The Bank has not issued any Letter of Comfort (LOC) during the year ended 31 March 2017 and 31 March 2016.

VII) Overseas Assets, NPAs and Revenue

The Bank does not have any overseas assets as on 31 March 2017 and 31 March 2016.

VIII) Off-balance Sheet SPVs sponsored

The Bank has not sponsored any special purposes vehicle which is required to be consolidated as per accounting norms.

18.19 Disclosures on Remuneration Qualitative Disclosures

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

The Bank''s Nomination and Remuneration Committee (NRC) oversees the framing, review and implementation of the Compensation Policy on behalf of the Board of Directors. The NRC reviews the policy at least once a year to ensure that the reward design is aligned to industry best practices and is consistent with effective risk management and long term business interests of the Bank. The NRC works in close coordination with the Risk Management Committee of the Bank, to achieve the effective alignment between remuneration and risks.

Ason31 March, 2017, the NRC comprises of the following directors:

Shri BhaskarSen - Chairman

Shri B. Sambamurthy

Shri Snehomoy Bhattacharya

Shri Ranodeb Roy (with effect from 19th

September, 2016)

Shri Chandra Shekhar Ghosh

The NRC functions with the following main objectives:

(i) To identify persons who are qualified to become directors in accordance with the criteria laid down, recommend to the Board their appointment, re-appointment or removal and to carry out evaluation of every Director''s performance.

(ii) To formulate the criteria for determining qualifications, positive attributes and independence of a Director and decide their ''fit & proper'' status.

(iii) To oversee the framing, review and implementation of compensation policy of the Bank and recommend to the Board the overall remuneration philosophy and policy including the level and structure of fixed pay, variable pay, perquisites, bonus pool, stock based remuneration to employees.

(iv) To oversee the framing, implementation and review of the Remuneration of the

WTDs/MD/CEOs as per the RBI Guidelines and Companies Act, 2013. The Committee shall recommend to the Board the remuneration package for the Managing Director & CEO and the other Whole Time Directors - including the level of fixed pay, variable pay, stock based Remuneration and perquisites.

(v) To review the HR strategy and policy including the conduct and ethics of the Bank and review any fundamental changes in the organization structure which could have wide ranging and high risk implications.

(vi) To review and recommend to the Board,

the succession policy at the level of Managing Director & CEO, other WTDs, senior management one level below the Board and key roles.

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

Objectives of the Remuneration Policy

The Compensation Policy reflects the Bank''s objectives for good corporate governance as well as sustained and long-term value creation for stakeholders. The aims of the Bank''s remuneration framework are to:

i) Attract, motivate and retain people with requisite skill, experience and ability to deliver the Bank''s strategy.

ii) Create an alignment and balance between the rewards and risk exposure of shareholders and interests of employees.

iii) Link rewards to creation of long term sustainable shareholder value consistent with strategic goals and appropriate risk management.

iv) Encourage behavior consistent with the Bank''s values and principles.

To achieve the above objectives, the philosophy adopted by the Bank is as follows:

i) Market referenced: offer employees competitive salary, achieved through benchmarking with peer groups.

ii) Making fixed salary the main remuneration component.

iii) Ensure that jobs of similar internal value are grouped and pegged within a range guided by market benchmarked jobs.

iv) Risk factoring: A significant portion of the senior and top management compensation will be variable, of which, for some key roles, part of the variable compensation may be deferred.

v) Focus on ''Total rewards'', all aspects of compensation, rewards and well defined benefits, including rewarding work environment and personal development.

vi) The focus will be to ensure that the Bank is competitive in its overall salary offer to its employees without being excessively expensive for the Bank.

The compensation structure for the MD & CEO also mirrors the Bank''s philosophy of aligning with the principles of sound compensation practices to ensure:

i) Effective and independent governance of compensation.

ii) Effective alignment of compensation with —prudent risk taking.

iii) Effective supervisory oversight and engagement by stakeholders.

Design & Structure of Remuneration process

The total compensation is a prudent mix of fixed remuneration and performance-based variable remuneration

The key remuneration elements are:

1) Fixed Pay

2) Discretionary Performance-based Variable Remuneration

The Bank ensures that the fixed pay element is reasonable, taking into account the market rates and trends. The fixed pay is reviewed annually using market intelligence provided by a leading global performance/reward consulting and benchmarking firm for financial services industry to ensure that the Bank remains competitive in marketplace and that the Bank is able to attract and retain best talent. The level of fixed pay shall be sufficient enough in order to discourage inappropriate risk-taking.

Performance-based variable remuneration may comprise cash bonus, stock linked instruments, and is awarded by ensuring:

i) an appropriate balance between fixed and performance-based components.

ii) that the fixed component represents a higher proportion of the total remuneration.

iii) that the performance-based component reflects the risk underlying the achieved result.

iv) that a part of the performance-based component may be deferred.

v) that no hedging of deferred shares takes place.

Presently, the bank utilizes only one form of performance-based variable remuneration, viz.,cash bonus. Stock linked instruments and ESOPs, as and when implemented, shall be formulated in accordance with relevant statutory provisions and regulatory guidelines.

The compensation policy of the Bank is reviewed by the NRC and approved by the Board of

Directors. The NRC oversees the implementation of the policy and reviews the fixed pay increases, the organizational performance threshold for bonus to be paid, cash bonus and deferred variable remuneration.

c) Description of the ways in which current and future risks are taken into account in the remuneration process

The MD & CEO, employees in the grades of SVPs and above and employees engaged in the functions of Risk Control and Compliance are included in the policy of risk alignment of compensation.

The alignment of compensation to prudent risk taking is ensured through the following:

i) Structure of remuneration is such that a significant part of performance-based variable remuneration is deferred.

ii) Performance hurdles includes financial and non-financial parameters, ensuring compensation is aligned to both.

iii) Fixed Salary is reasonable and sufficient, thereby discouraging inappropriate risk taking.

iv) Annual Bonus Plan is managed with and independentgovernance framework.

v) Variable remuneration awards are conditional, discretionary and contingent upon a sustainable and risk-adjusted performance. They are therefore capable of forfeiture or reduction at the Bank''s discretion.

vi) For employees included in the policy of risk alignment of compensation, NRC has the discretion to apply malus and clawback - expost risk adjustment, allowing the Bank to adjust previously awarded remuneration to take account of subsequent performance and potential risk outcomes and thus enabling to recoup variable pay in the event of a negative contribution.

Deferral of Variable Pay

To ensure that risk measures are not focused only on the achievement of short term goals, variable payout is deferred, if it exceeds 50% of the fixed pay.

The Bank''s compensation policy aims to ensure that both ex-ante estimates and ex-post outcomes of risk affect payoffs; so that one or the other, can better address the various situations or risks.

d) Description of the ways in which the

Bank seeks to link performance, during a performance measurement period with levels of remuneration

The Bank has a performance measurement framework in place to assess the achievements of the organization as a whole, its business lines and organizational units as well as individual employees. In order to maximize the incentive to deliver adequate performance and to take into account any risks of the business activities, the Bank seeks to closely link remuneration outcomes with performance and risk outcomes. Accordingly, the Bank''s performance management and compensation philosophy is designed in a manner to help achieve the Bank''s business objectives.

The performance management system in the Bank is aligned to the balanced scorecard approach. The goal setting process helps individuals to have clarity on their roles and align their profiles in line with the broad organization strategy. Both quantitative / financial and qualitative / non-financial performance measures are considered. The qualitative or non-financial measures include customer service, adherence to risk and compliance standards, behavior and values such as accountability, team work, etc., which builds a culture conducive to sustainable business performance.

The performance appraisal process starts with the employee conducting self-appraisal followed by the assessment of the supervisor via appraisal feedback and discussion. For all employees of the Bank, half-yearly appraisal is followed by the annual appraisal. The mid-year feedback process includes feedback on performance and on competencies with an objective of a mid-course review, to help plan and priorities corrective actions for employees to remain aligned to achievement of their business goals and self-development. The performance appraisal ratings is reviewed/ calibrated by a committee comprising senior leaders.

Individual fixed pay increases and variable remuneration are based on the final performance ratings. In addition, the fixed pay increase is also influenced by an employee''s position in the salary range and relevant market salaries. Performance related variable compensation is linked to corporate performance, business performance and individual performance. The performance ratings based bonus distribution matrix is reviewed by the NRC.

Employees engaged in all control functions including Compliance and Risk do not carry business profit targets in their goal sheets and hence are compensated based on their achievement of key result areas as per the balance score card. The aim is to ensure that the remuneration system and outcomes relating to such control functions maintain the independence of the function and Bank''s robust risk management framework.

In the case of performance evaluation of the Managing Director and Chief Executive Officer of the Bank, factors such as financial performance measures, cost management initiatives, other strategic initiatives, prudential risk and compliance management, recognition and awards to the Bank, etc., is taken into account, which may vary from year to year depending on the Bank''s strategic priorities. Based on the inputs from NRC, the Board reviews the performance and recommends the rate of bonus to be paid, and the increments for the MD & CEO, for regulatory approval in terms of Section 35B of the Banking Regulation Act, 1949 (B.R.Act, 1949).

e) Bank''s policy on deferral and vesting of variable remuneration and bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

In terms of RBI guidelines, the Compensation Policy specifically addresses the following categories of employees:

Categoryl: MD&CEO/Whole-Time Directors Category II: Risk Control and Compliance Staff Category III: Other Categories of Staff

The following principles are applied for grant and deferral of performance-based variable remuneration for the above categories of employees.

Category I

i) Variable Remuneration will not exceed 70% of annual Fixed Pay.

ii) If the Variable Remuneration exceeds 50% of annual Fixed Pay, 40% of the Variable Remuneration will be deferred overa period of 3 years, on a proportionate basis.

iii) In case the variable remuneration is a mix of cash and stock linked instruments (other than ESOP), a proper balance between cash and share / stock linked instruments will be ensured.

iv) In the event of negative contributions of the

Bank, the unvested deferred variable remuneration of the reference year will be held back (malus). In such cases, the vested / paid variable remuneration will also be subject to suitable claw back arrangements.

Category II

i) The mix of Fixed Pay and Variable remuneration will be weighed towards Fixed Pay.

ii) The parameters of assessment will be independent of the performance of the business areas they oversee.

iii) The compensation will be commensurate to their key role in the Bank.

Category III

i) Variable Remuneration will be as per the NRC approved pay-out levels in terms of grade and role matrix.

ii) In case the variable remuneration is a mix of cash and stock linked instruments (other than ESOP), a proper balance between cash and share / stock linked instruments will be ensured.

iii) If the Variable Remuneration exceeds 50% of annual Fixed Pay, 40% of the Variable Remuneration will be deferred over a period of 3 years, on a proportionate basis.

iv) In the event of negative contributions of the

relevant line of business, the unvested deferred variable remuneration of the reference year will be held back (malus). In such cases, the vested / paid variable remuneration will also be subject to suitable claw back arrangements.

Negative contribution of the Bank and / or relevant line of business is defined as:

i) If there is reasonable evidence of employee malfeasance and breach of integrity; or

ii) If the performance, decisions or actions taken leads to the Bank or the relevant business unit suffering a significant material downturn in its financial performance.

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 presently utilizes only one form of variable remuneration, viz., cash bonus, which is linked to corporate performance, business performance and individual performance ensuring differential pay based on the performance. Stock linked instruments and ESOPs, as and when implemented, shall be formulated in accordance with relevant statutory provisions and regulatory guidelines.

10.. Disclosure relating to Securitization

There are no securitization transactions undertaken by the Bank during the year ended 31 March 2017 and 31 March 2016.

11. Credit default swaps

The Bank has not transacted in credit default swaps during theyearended31 March 2017and31 March 2016.

12 Intra Group Exposures

The Bank did not have any intra group exposure as at 31 March 2017and31 March 2016.

13 Transfer to Depositor Education and Awareness Fund (DEAF)

During the current and previous year, the Bank was not required to transfer any amount to Depositor Education and Awareness Fund.

14 Unhedged Foreign Currency Exposure

The borrower of the Bank does not have any Unhedged Foreign Currency Exposure as at 31 March 2017 and 31 March 2016.

The above information is as certified by the Management and relied upon by the auditors.

15 Disclosure on Liquidity Coverage Ratio (a) Qualitative disclosure

The Bank has adopted the Basel III framework on liquidity standards as prescribed by RBI and has

put in place requisite systems and processes to enable periodical computation and reporting of the Liquidity Coverage Ratio (LCR). The Risk department computes the LCR and reports the same to the Asset Liability Management Committee (ALCO) every month for review.

The Bank follows the criteria laid down by RBI for month-end calculation of High Quality Liquid Assets (HQLA),gross outflows and inflows within the next 30-day period. HQLA predominantly comprises Government securities in excess of minimum SLR requirement, viz., Treasury Bills, Central and State Government securities and excess of minimum Cash Reserve Ratio (CRR).

The Board of Directors has the overall responsibility for management of liquidity risk. The Board at overall level decides the strategy, policies and procedures of the bank to manage liquidity risk in accordance with the liquidity risk tolerance/limits. The Board has constituted Risk Management Committee, which reports to the Board, and consisting of Managing Director and certain other Board members. The Committee is responsible for evaluating the overall risks faced by the bank including liquidity risk.

All significant outflows and inflows determined in accordance with RBI guidelines are included in the prescribed LCR computation template.

16 Corporate Social Responsibility

a) Cross amount to be spent by the Company during the year is Rs,13.86 crore (Previous Year: Rs, 4.07 crore)

b) The following table sets forth, for the periods indicated, the amount spent by the Bank on CSR related activities;

17 The financial statements have been prepared in accordance with Third Schedule (Form A & Form B) of the Banking Regulation Act, 1949. The amendment to schedule 111 of the Companies Act, 2013 issued by Ministry of Corporate Affairs, vide notifications dated March 30, 2017, which requires every Company to disclose the detail of Specified Bank Notes (SBN), is not applicable for the Bank. Accordingly, such details have not been furnished.

18 Previous year figures have been regrouped/reclassified, wherever necessary, to conform to current year’s classification.