Utkarsh Small Finance Bank Ltd. के अकाउंट के लिये नोट

Mar 31, 2025

L Provisions and contingencies

The Bank recognises a provision when there is present obligation as a result of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the amount of the obligation. A disclosure for a contingent liability is made when
there is a possible obligation or a present obligation that may but probably will not, require an outflow of resources. When there
is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or
disclosure is made.

Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that
an outflow of resources would be required to settle the obligation, the provision is reversed.

Contingent assets are not recognized in the financial statements. However, contingent assets are assessed continually and if it is
virtually certain that an inflow of economic benefits will arise, the asset and related income are recognized in the period in which the
change occurs.

M Earnings per share (EPS)

Basic earnings per share is calculated by dividing the net profit or loss after tax for the year attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year.

Diluted earnings per share reflect the potential dilution that could occur if contracts to issue equity shares were exercised or
converted during the year. Diluted earnings per equity share is computed using the weighted average number of equity shares and
dilutive potential equity shares outstanding during the year, except where the results are anti-dilutive.

N Cash and cash equivalents

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

Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash
nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated
with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Bank are segregated.

P Segment reporting

The disclosures relating to segment reporting is done as per guidelines issued by the RBI.

Q Priority Sector Lending Certificates

The Bank vide RBI circular FIDDCO.Plan.BC.23/04.09.01/2015-16 dated April 07, 2016 trades in Priority Sector portfolio by selling or
buying Priority Sector Lending Certificates (PSLCs). There is no transfer of risk on loan assets in these transactions. The fee paid for
purchase of the PSLC is treated as an ''Expense’ and the fee received for the sale of PSLCs is recognised upfront and is treated as
''Miscellaneous Income’.

Notes:

1. The Bank has followed Master Circular No. DBR.No.BP.BC.4/21.06.001/2015-16 (as amended from time to time) on Prudential
Guidelines on Capital Adequacy and Market Discipline - New Capital Adequacy Framework (NCAF) issued by RBI dated July 01,
2015 for the purpose of computing Capital Adequacy Ratio.

2. As per RBI, letter DBR.NBD. No. 4502/16.13.218/2017-18 (as amended from time to time) dated November 08, 2017, it is clarified that
no separate capital charge is being prescribed for market risk and operational risk for the time being.

18.1.2 Tier II Capital

The Bank has acquired Basel II compliant debt capital instruments in the form of NCD of H200 crore on June 28, 2024 and H105 crore on
November 27, 2024 during the year ended March 31, 2025 (March 31, 2024: NIL).

18.1.3 Capital Infusion

During the year ended March 31,2025, the Bank has allotted 21,52,440 equity shares of H10 each under ESOP scheme exercised for cash
aggregating to H5,79,19,323. Accordingly, share capital increased by H2.15 crore and share premium increased by H3.64 crore (Previous
year ended March 31, 2024, the Bank had completed the process of initial public offer (IPO) and raised H500 crore by issue of 20 crore
equity shares which got listed on BSE Limited (“BSE”) and National Stock Exchange of India Limited (“NSE”) on July 21,2023. Further the
Bank has allotted 35,52,797 equity shares of H10 each under ESOP scheme exercised for cash aggregating to H9,62,66,189. Accordingly,
share capital increased by H203.55 crore and share premium increased by H306.07 crore. Expense towards the public issue of equity
shares amounting to H41.92 crore had been adjusted with Securitries Premium Account.)

Schedule 18 (Contd.)

18.2.2 Liquidity Coverage Ratio (LCR)

Qualitative disclosure around LCR

The Liquidity Coverage Ratio (LCR) is one of the Basel Committee’s key reforms to develop a more resilient banking sector. Liquidity
Coverage Ratio (LCR) is a global minimum standard for Bank’s liquidity The ratio aims to ensure that a bank has an adequate stock of
unencumbered High - Quality Liquid Assets (HQLA) that can be converted into cash easily and immediately to meet its liquidity needs for
a 30 calendar days of severe liquidity stress scenario.

The objective of the LCR is to promote the short-term resilience of the liquidity risk profile of banks. It does this by ensuring that banks
have an adequate stock of unencumbered high-quality liquid assets (HQLA) to total estimated net outflows over a stressed period of 30
calendar days.

The net cash outflows are calculated by applying RBI prescribed outflow factors to the various categories of liabilities (deposits,
unsecured and secured wholesale borrowings), as well as to undrawn commitments and derivative-related exposures, partially offset by
inflows from assets maturing within 30 days.

The Board of Directors has the overall responsibility for management of liquidity risk. The Board at overall level decides the liquidity risk
tolerance/limits and accordingly decides the strategy policies and procedures of the Bank for managing liquidity risk.

The Board has constituted Risk Management Committee (RMC), which reports to the Board, and consisting of Chief Executive
Officer (CEO) /Chairman and certain other Board members. The Committee is responsible for evaluating the overall risks faced by
the Bank including liquidity risk. The potential interaction of liquidity risk with other risks is included in the risks addressed by the Risk
Management Committee.

At the executive level, Asset Liability Management Committee (ALCO) ensures adherence to the risk tolerance/limits set by the Board as
well as implementing the liquidity risk management strategy of the Bank in line with Bank’s risk management objectives and risk tolerance.
A dedicated desk within Treasury function of the Bank is responsible for the day-to-day / intra-day liquidity management.

ALCO of the Bank channelizes various business segments of the Bank to target good quality asset and liability profile to meet the Bank’s
profitability as well as Liquidity requirements with the help of robust MIS and Risk Limit architecture of the Bank.

The Bank has been maintaining HQLA (Level 1) primarily in the form of Excess CRR, excess SLR investments over and above mandatory
requirement. LCR is calculated by dividing a Bank’s stock of HQLA by its total net cash outflows over a 30 day period. The present
minimum regulatory requirement, as on March 31, 2025 is 100%.

In order to determine cash outflows, the Bank segregates its deposits into various customer segments, viz., Retail (which include deposits
from individuals), Small Business Customers(those with deposits upto H7.5 crore) and Wholesale (which would cover all residual deposits).
Other contractual funding, including a portion of other liabilities which are expected to run down in a 30 day time frame are included in the
cash outflows. These classifications, based on extant regulatory guidelines, are part of the Bank’s LCR framework, and are also submitted
to the RBI. The LCR is calculated by dividing a Bank’s stock of HQLA by its total net cash outflows over a 30 day stress period. The present
minimum requirement, as on March 31, 2025 is 100%.

In the Indian context, the run-off factors for the stressed scenarios are prescribed by the RBI, for various categories of liabilities (viz.,
deposits, unsecured and secured wholesale borrowings), undrawn commitments, derivative-related exposures, and offset with inflows
emanating from assets maturing within the same time period. Given below is a table of run-off factors and the average LCR maintained
by the Bank quarter-wise over the past two years as below:

18.2.3 Net Stable Funding Ratio (NSFR)

Qualitative disclosure around NSFR

In the backdrop of the global financial crisis that started in 2007, the Basel Committee on Banking Supervision (BCBS) proposed certain
reforms to strengthen global capital and liquidity regulations with the objective of promoting a more resilient banking sector In this regard,
comes into picture - “Basel III: International framework for liquidity risk measurement, standards and monitoring” which presented two
minimum standards, viz., Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) for funding liquidity.

The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. “Available stable funding”
(ASF) is defined as the portion of capital and liabilities expected to be reliable over the time horizon of one year. The amount of stable
funding required (“Required stable funding”) (RSF) of a specific institution is a function of the liquidity characteristics and residual
maturities of the various assets held by that institution as well as those of its off-balance sheet (OBS) exposures.

Minimum Requirement: ASF(Available Stable Funding)/RSF(Require Stable Funding)>=100. The Bank is required to maintain the NSFR
on an ongoing basis on a standalone basis. The minimum NSFR requirement set out in the RBI guideline effective October 1,2021 is 100%.

The Board of Directors has the overall responsibility for management of liquidity risk. The Board at overall level decides the liquidity risk
tolerance/limits and accordingly decides the strategy, policies and procedures of the Bank for managing liquidity risk.

At the executive level, Asset Liability Management Committee (ALCO) ensures adherence to the risk tolerance/limits set by the Board as
well as implementing the liquidity risk management strategy of the Bank in line with Bank’s risk management objectives and risk tolerance.
A dedicated desk within Treasury function of the Bank is responsible for the day-to-day / intra-day liquidity management.

Quantitative Disclosures

Following is the quantitative disclosures relating to NSFR for the year ended March 31, 2025, wherein the amounts are average of daily
positions during the year:

(i) The days on which there were Nil outstanding have been ignored while arriving at the amount of minimum outstanding during
the year.

(ii) Actual number of days of transactions have been considered in computation of daily average outstanding during the year.

(iii) In respect of triparty repo and triparty reverse repo transactions, amount of funds borrowed or lent have been disclosed in the
tables above.

18.3.7 Government Security Lending (GSL) transactions

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

18.4.5 Divergence in asset classification and provisioning:

RBI vide circular no. DOR.ACC.REC.No.74/21.04.018/2022-23 dated October 11, 2022, has directed that banks shall make suitable
disclosures, wherever (a) the additional provisioning requirement assessed by RBI exceeds 5 percent of the reported profit before
provisions and contingencies for the reference period, or (b) the additional Gross NPA identified by RBI exceeds 5 percent of the published
incremental Gross NPA for the reference period, or both. Based on the annual inspection conducted with respect to the Bank’s position
as at March 31, 2024 there are no reportable matters under (a) and (b) of the above-mentioned circular.

18.4.6 Transfer of loans exposures

Details of loans transferred / acquired during the year ended March 31,2025 under the RBI Master Direction on Transfer of Loan Exposure
dated September 24, 2021 is given below:

(i) The Bank has not acquired/transferred any loans not in default to other entities during the year ended March 31, 2025 and March
31, 2024.

(ii) Details of Stressed Loans transfered to Asset Reconstruction Company (ARC) is given below:

Schedule 18 (Contd.)

18.7 Derivatives :

18.7.1 Forward Rate Agreement/ Interest Rate Swap/ Cross currency swap :

There are no forward rate agreement / interest rate swap / cross currency swap enterest into and outstanding during the year ended
March 31, 2025 and March 31, 2024.

18.7.2 Exchange Traded Interest Rate Derivatives

There are no exchange traded interest rate derivative entered into and outstanding during the year ended March 31, 2025 and March
31, 2024.

18.7.3 Risk Exposure in Derivatives:

The Bank has not engaged in any derivatives contracts during the year ended March 31, 2025 and March 31, 2024. However, Bank
acquired a CCS contract pursuant to Business Transfer Agreement from Holding Company in the year ended March 31, 2017 The
disclosure to the extent applicable is given below.

Quantitative disclosure on risk exposure in derivatives

The bank has not entered into any derivative instruments for trading / speculative purposes either in Foreign Exchange or domestic
treasury operations during the year ended March 31, 2025 and March 31, 2024.

18.7.4 Credit Default Swap

The Bank has not entered into Credit Default Swap during the year ended March 31, 2025 and March 31, 2024.

18.12 Penalties imposed by the Reserve Bank of India

No penalty was imposed by RBI on the Bank during the year ended March 31, 2025 and March 31, 2024.

18.13 Disclosure on Remuneration

Qualitative Disclosure

A. Information relating to the bodies that oversee remuneration

a) Name, composition and mandate of the main body overseeing remuneration

The Nomination and Remuneration Committee (NRC) of the Board is the main body overseeing remuneration. As on March 31,
2025, The NRC comprises of two Independent Directors viz Ms Kalpana Prakash Pandey and Mr. Parveen Kumar Gupta, one
non-independent Director viz Mr. Muralidharan Rajamani.

Role and functions of the Committee related to Nomination

A. Appointment criteria and qualifications

i) To identify and approve appointment of persons who are qualified to become directors in the bank and who may be
appointed as KMPs or SMPs in the bank, who possess integrity independence, adequate knowledge, skill, qualification,
experience in the field of his/her specialisation commensurate with the proposed role and responsibility as Director,
KMP or SMP and shall have the ability to manage the responsibility assigned to him/her.

ii) To ensure that the Bank appoints or continues the employment of any person as Managing Director / Whole-time
Director subject to the conditions laid down under Part I of Schedule V of the Companies Act, 2013 and in line with
extant RBI guidelines and relevant provisions of the Banking Regulation Act 1949.

iii) To ensure that the Bank shall appoint or continue the service of any person as Independent Director subject to the
provisions of Section 149 read with Schedule IV and other applicable provisions of the Companies Act, 2013 and
Banking Regulation Act 1949.

iv) Appointment for any Senior Management Personnel (Executives one level below the MD & CEO) shall be approved
by the Committee, subject to the candidate having been interviewed by at least two (2) members of the Committee.
Basis the recommendation of the panel members, the Committee may approve the appointment. Appointment of any
executive whose fixed salary exceeds H0.70 crore p.a. will need to be approved by the NRC.

B. Following are the functions of Nomination and Remuneration Committee:

1. Review the structure, size, composition, diversity of the Board and make necessary recommendations to the Board
with regard to any changes as necessary and formulation of policy thereon.

2. Evaluate the skills that exist, and those that are absent but needed at the Board level, and search for appropriate
candidates who have the profile to provide such skill sets.

3. To evaluate the performance of the members of the Board and provide necessary report to the Board

4. Advise criteria for evaluation of Independent Directors and the Board & its Committees and carry out evaluation of
every directors’ performance.

5. To formulate the criteria for determining qualifications, positive attributes and independence of a director.

6. To recommend to the Board a policy, relating to the remuneration for directors, Key Managerial Personnel, Senior
Management Personnel and other employees.

7. To formulate criteria for payment to Key Managerial Personnel and Senior Management Personnel performance
based incentives / rewards based on Bank’s performance.

8. Examine vacancies that will come up at the Board on account of reti rement or otherwise and suggest course of action.

9. Undertake a process of due diligence to determine the suitability of any person for appointment / continuing to hold
appointment as a director on the Board, based upon qualification, expertise, track record, integrity other ''fit and proper’
criteria, positive attributes and independence (if applicable) and formulate the criteria relating thereto.

10. Review the composition of Committees of the Board, and identify and recommend to the Board the Directors who can
best serve as members of each Board Committee.

11. Review and recommend to the Board for approval the appointment of Managing Director & CEO and other whole¬
time Directors and the overall remuneration framework and associated policy of the Bank (including remuneration
policy for directors and key managerial personnel) the level and structure of fixed pay, variable pay, perquisites, bonus
pool, stock-based compensation and any other form of compensation as may be included from time to time to all the
employees of the Bank including the Managing Director & CEO, other Whole-time Directors and senior managers one
level below the Board.

12. Review and recommend to the Board for approval the total increase in manpower cost budget of the Bank as a whole,
at an aggregate level, for the next year.

13. Recommend to the Board the compensation payable to the Non-Executive Chairman of the Bank.

14. Review the Code of Conduct and HR strategy, policy and performance appraisal process within the Bank, as well as
any material changes in the organization structure which could have wide ranging implications.

15. Review and recommend to the Board for approval of various other HR related policies including the Talent Management
Policy and Succession Policy in the Bank for ensuring business continuity, especially at the level of Board, MD & CEO,
other Whole Time Directors, Senior Management Personnel (one level below the MD & CEO and other key roles).

16. Review and recommend to the Board for approval:

1. the creation of new positions one level below MD & CEO, wherever required

2. appointments, promotions and exits of senior managers one level below the MD & CEO”

b) External consultants whose advice has been sought, the body by which they were commissioned, and in what areas of
the remuneration process

No external consultant has been engaged in the current year.

c) Scope of the Bank’s remuneration policy (e.g. by regions, business lines), including the extent to which it is applicable
to foreign subsidiaries and branches

The Compensation and Remuneration Policy of the Bank has been approved by the Board of Directors in its meeting dated March
08, 2025 pursuant to the guidelines issued by RBI, to cover all employees of the Bank. Further the Board had recommended RBI
the revised remuneration of MD & CEO which has been approved by Reserve Bank of India vide its letter dated September 16,
2024. The Bank also has in place a Policy on Risk Alignment of Compensation applicable for MD & CEO, WTD and employees in
Risk Control and Compliance Department which is approved by the Board of Directors on March 08, 2025.

d) Type of employees covered and number of such employees

All the employees of the Bank are covered. The total number of employees of the Bank as at March 31,2025 were 19,779 (March
31,2024: 16,081)

B. Information relating to the design and structure of remuneration processes.

Key features and objectives of remuneration policy: The Bank has, under the guidance of the Nomination and Remuneration
Committee (“NRC”) and the Board, followed remuneration practices intended to drive meritocracy and performance based on a
prudent risk management framework.

Effective governance of compensation: The NRC has oversight over compensation to senior management personnel and also
provides overall guidance to the compensation paid to other employees.

Alignment of compensation philosophy with prudent risk taking: While the Bank seeks to achieve a mix of fixed and variable
remuneration that is prudent, it currently has predominantly a fixed remuneration structure with no guaranteed bonuses. Further, the
remuneration of employees in financial and risk control functions is not linked to business outcomes and solely depends on their
performance. The Bank seeks to align remuneration with financial and non-financial performance indicators.

Whether the remuneration committee reviewed the Bank’s remuneration policy during the past year, and if so, an
overview of any changes that were made: There has been no change in the Bank’s remuneration policy during the past year.

Discussion of how the Bank ensures that risk and compliance employees are remunerated independently of the
businesses they oversee: The remuneration of employees in control functions such as Risk and Compliance depends solely on
their individual and overall functional performance and is not linked to any business outcomes. The same is also reflected in their
KRAs. The Bank also has in place a Policy on Risk Alignment of Compensation applicable for MD & CEO and Risk and Compliance.

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

Overview of the key risks that the Bank takes into account when implementing remuneration measures: The Board
approves the overall risk management policy including risk framework, limits, etc. The Bank conducts all its business activities within
this framework. The NRC while assessing the performance of the Bank and senior management, shall consider adherence to the
policies and accordingly make its recommendations to the Board.

Overview of the nature and type of key measures used to take account of these risks, including risk difficult to
measure: The evaluation process shall incorporate both qualitative and quantitative aspects including asset quality, provisioning,
increase in stable funding sources, refinement/improvement of the risk management framework, effective management of
stakeholder relationships and mentoring key members of the top and senior management.

Discussion of the ways in which these measures affect remuneration: In order to ensure alignment of remuneration with
prudent practices, the NRC takes into account adherence to the risk framework in addition to business performance.

Discussion of how the nature and type of these measures have changed over the past year and reasons for the
changes, as well as the impact of changes on remuneration: There has been no change in the nature and type of measures
over the past year.

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

Overview of main performance metrics for the Bank, top level business lines and individuals: The main performance
metrics include profitability, business growth, asset quality, compliance, and customer service.

Discussion of how amounts of individual remuneration are linked to the Bank-wide and individual performance:

The assessment of employees shall be based on their performance with respect to their result areas and shall include the metrics
mentioned above.

Discussion of the measures the Bank will in general implement to adjust remuneration in the event that performance
metrics are weak, including the Bank’s criteria for determining ‘weak’ performance metrics: In case such an event should
occur, the Board/NRC shall review and provide overall guidance on the corrective measures to be taken.

E. Description of the ways in which the Bank seeks to link performance during a performance measurement year with levels
of remuneration.

As a part of the performance management process in the bank at the beginning of each financial year , the bank rolls out individual
KRA’s to each and every employee in the bank. These KRAs are broken down based on the strategic objectives and business
budgets set by the Board of the bank. Apart from regular feedback which each manager provides to his / her subordinates a bank
as formal process of Mid-Year Review and Year End Review to assess performance of each role holder in the bank. Based on the
performance review at an organizational / Functional / Individual the bank decided on percentage of salary increments to be given
at various levels of performance.

Discussion of the Bank’s policy on deferral and vesting of variable remuneration and, if the fraction of variable
remuneration that is deferred differs across employees or groups of employees, a description of the factors that
determine the fraction and their relative importance:

The various deferral arrangement of variable remuneration in the bank broadly are as follows -

a) For MD & CEO and WTD - The variable remuneration of the MD & CEO and WTD is approved by the Reserve Bank of India
which includes deferral arrangement for the cash and non cash part of the variable pay which is implemented by the bank as per
the advice of the RBI.

b) All ESOP ''s which are granted across all levels in the organization have deferral arrangement in them

c) Monthly / Quarterly Variable Pay - Based on the nature of the scheme , deferral arrangements are made in the same which differ
from channel to channel.

The fraction of deferral to be considered is dependent upon -

a) Guidelines issued by the Regulator from time to time

b) Approval as per the overall performance framework approved by the NRC and the Board

c) Driving right behaviours via the various incentive schemes.”

Discussion of the Bank’s policy and criteria for adjusting deferred remuneration before vesting and (if permitted by national
law) after vesting through claw back arrangements:

The Bank also has in place a Policy on Risk Alignment of Compensation applicable for MD & CEO and Risk Control and Compliance.
This policy deals with the deferred payment of variable pay and claw back guidelines.

F. Description of the different forms of variable remuneration that the Bank utilizes and the rationale for using these
different forms.

The Bank has variable pay that is paid based on the performance that is applicable to all levels. The ESOP options of the Holding
Company and the Bank are currently given to eligible employees in Chief Manager and above grade subject to performance.
Employees in sales function do have incentives based on monthly business performance.

Overview of the forms of variable remuneration offered. A discussion of the use of different forms of variable
remuneration and if the mix of different forms of variable remuneration differs across employees or group of
employees, a description of the factors that determine the mix and their relative importance.

The variable remuneration is offered in the form of annual performance bonus. The same is determined on the basis of comprehensive
performance appraisal system wherein the performance of each employee is evaluated on the basis of defined Goal Sheet and KRA
at the beginning of year and achievement against them.

Discount rate: The discount rate is based on the prevailing market yields of Indian government securities as at the balance sheet date
for the estimated term of the obligations.

Salary escalation rate: The estimates of future salary increases considered taking into account the inflation, seniority, promotion and
other relevant factors.

Expected rate of return: The overall expected rate of return on assets is determined based on the average long term rate of return
expected on investment of the fund during the estimated term of the obligations.

Attrition Rate: The reduction in staff/employees of a company through normal means, such as retirement and resignation. This is natural
in any business and industry.

18.18 (A) Business Segments:

In terms of AS-17 (Segment Reporting) issued by ICAI and RBI circular Ref. DBOD.No. BPBC.81/21.04.018/2006-07 dated April 18, 2007
read with DBR.BP BC No.23/21.04.018/2015-16 dated July 01, 2015 and amendments thereto, the following business segments have
been disclosed:

Corporate/ Wholesale Banking: Includes lending, deposits and other banking services provided to corporate customers of the Bank.

Retail Banking: Includes lending, deposits and other banking services provided to retail customers of the Bank through branch network.

Treasury: Includes dealings in SLR and Non SLR investments, maintenance of reserve requirements and resource mobilization from
other Banks and financial Institutions.

Other Banking Operations: Includes other activities which are not covered under wholesale, retail or treasury activity.

Geographical segments: The business operations of the Bank are concentrated in India hence the Bank is considered to operate in
domestic segment only.

18.23.1 Contingent liabilities

1. Description of nature of contingent liabilities is set out below:

a. Contractual payments for Capital commitments

b. Pending litigation under Income Tax.

c. Other pending litigation against the Bank.

The Bank’s pending litigations include claims against the Bank by counterparties and proceedings pending with tax authorities. The Bank
has reviewed its pending litigations and proceedings and has adequately provided for where provisions are required, and disclosed as
contingent liabilities where applicable.

Refer Schedule 12 for amounts relating to contingent liabilities.

18.26 The Bank was carrying floating asset provision of H148.62 crore as at year ended March 31, 2024. During the year pursuant to
the approval from Reserve Bank of India (RBI) , the Bank has fully utilized the floating asset provision as per relevant RBI regulations.
Consequently, the provision for NPA (“Provisions and Contingencies”) has been adjusted by H148.62 crore for the year ended March 31,
2025.

18.27 The Board of Directors of the Bank and Utkarsh Core Invest Limited (UCL), the Holding Company, have approved a draft scheme
of amalgamation of the latter with the former in terms of Section 230 to 232 of the Companies Act, 2013 on September 20, 2024. The
appointed date under the said scheme is April 01, 2025 or such other date as may be approved by NCLT or such other competent
authority The amalgamation is subject to the provisions of the said scheme document and receipt of the relevant regulatory and
statutory approvals. The Bank has received no-objection from RBI on January 02, 2025, to proceed with the approval of NCLT and other
relevant statutory authorities, ensuring compliance with certain conditions/procedural matters in this regard. However, other necessary
approvals from relevant competent authority is under process.

18.28 The Bank, as part of its normal banking business, grants loans and advances, makes investments, provides guarantees, to and
accepts deposits and borrowings from its customers and borrowing from entities. These transactions are part of Bank’s normal banking
business, which is conducted ensuring adherence to all regulatory requirements and banks internal policies as applicable.

Other than the transactions described above, no funds have been advanced or loaned or invested (either from borrowed funds or
securities premium or any other sources or kind of funds) by the Bank to or in any other persons or entities, including foreign entities
(“’’Intermediaries””) with the understanding, whether recorded in writing or otherwise, 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 parties (Funding Party) with

Schedule 18 (Contd.)

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 Funding Party (“’’Ultimate Beneficiaries””) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

18.29 During the year SEBI has determined the settlement amount of Rs.1.24 crore which was paid by the bank, pursuant to suo-moto
settlement application filed by the Bank with respect to certain non-compliances in filings with SEBI which were subsequently mitigated
by the Bank. The matter has been fully settled.

18.30A The Bank has changed its accounting policy with effect from April 01,2024 on recognition of loan processing fees collected from
the borrowers and allied expenses for more appropriate presentation of the financial statement and alignment with industry practice.
Hitherto the Bank was recognizing the income/expense over the tenure of the loan which is now recognized as income when it becomes
due.

Increase in Other Income, Other Operating Expenses and the Net Profit (Before Tax) of the Bank due to change in the aforesaid
accounting policy for the year ended March 31, 2025 is H164.66 crore, H70.09 crore and 94.57 crore respectively.

Further, if the Bank would have followed the revised accounting policy in the previous financial year ended March 31, 2024, increase in
Other Income, Other Operating Expenses and the Net Profit (Before Tax) of the Bank for the year ended March 31,2024 would have been
H144.45 crore, H28.33 crore and 116.11 crore respectively.

18.30B The Bank has implemented the Master Direction - Classification, Valuation and Operation of Investment Portfolio of Commercial
Banks (Directions), 2023 dated September 12, 2023 which is applicable to banks from April 01, 2024. Consequent to the transitions
provisions, the Bank’s net worth and investments have increased by Rs.1.32 crore (post tax) and Rs. 1.76 crore (pre-tax) respectively
as on April 01, 2024 on account of revision in the carrying value to the fair value as on such date. Subsequent changes in fair value of
performing investments under Available for Sale (AFS) and Fair Value Through Profit and Loss (''FVTPL’) (including Held For Trading
(''HFT’)) categories have been recognized through AFS reserve and Profit and Loss Account respectively Figures for the previous year/
period are not comparable to that extent.

18.31 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 audit 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 tampered with during the year. The Bank has established and
maintained an adequate internal control framework and based on its assessment, believes that this was effective as of March 31, 2025.

18.32 Figures of the previous year have been regrouped / reclassified, wherever necessary to confirm current year classification.

As per our report of even date attached

for M/s Deloitte Haskins & Sells for M/s Kirtane & Pandit LLP for and on behalf of the Board of Directors of

Chartered Accountants Chartered Accountants Utkarsh Small Finance Bank Limited

ICAI Firm Registration No. 117365W ICAI Firm Registration No. 105215W/W100057 CIN: L65992UP2016PLC082804

G.K. Subramaniam Sandeep D Welling Parveen Kumar Gupta Nagesh Pinge

Partner Partner Chairman Director

Membership No. 109839 Membership No. 044576 DIN : 02895343 DIN: 00062900

Govind Singh Sarju Simaria

Managing Director & CEO Chief Financial Officer

DIN: 02470880 FCA : 046998

Muthiah Ganapathy

Company Secretary
FCS 5674

Place : Mumbai Place : Mumbai

Date : May 03, 2025 Date : May 03, 2025

---

Mar 31, 2024

1. The Bank has followed Basel II Capital Regulations dated July 01,2015 and amended thereafter for the purpose of Capital Adequacy Ratio in accordance with the operating guidelines for small finance banks as issued by RBI on October 08, 2016.

2. The Bank has followed Master Circular No. DBR.No.BP.BC.4/21.06.001/2015-16 on Prudential Guidelines on Capital Adequacy and Market Discipline - New Capital Adequacy Framework (NCAF) issued by RBI dated July 01,2015 for the purpose of computing Capital Adequacy Ratio.

3. As per RBI, letter DBR.NBD. No. 4502/16.13.218/2017-18 dated November 08, 2017, it is clarified that no separate capital charge is being prescribed for market risk and operational risk for the time being.

4. Refer Note 18.29 for proposed dividend.

18.1.2 Tier II Capital

The Bank has not acquired Basel II compliant debt capital instruments during the year ended March 31, 2024 and March 31,2023.

18.1.3 Capital Infusion

During the year ended March 31,2024 the Bank has completed the process of initial public offer (IPO) and raised H500 crore by issue of 20 crore equity shares which got listed on BSE Limited ("BSE") and National Stock Exchange of India Limited ("NSE") on July 21,2023. Further the Bank has allotted 35,52,797 equity shares of H10 each in respect of ESOP scheme exercised for cash aggregating to H9,62,66,189. Accordingly, share capital increased by H203.55 crore and share premium increased by H306.07 crore (Previous year ended March 31,2023, the Bank has allotted 213,025 and 170,116 equity shares to employees and MD & CEO respectively under ESOP scheme having face value of H10 each at a premium of H17.00 and H4.01 respectively for cash aggregating to H81,35,000. Accordingly, share capital increased by H0.38 crore and share premium increased by H0.43 crore). Expense towards the public issue of equity shares amounting to H41.92 crore has been adjusted with Securitries Premium Account.

18.1.4 Draw down from Reserves

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

Liquidity Coverage Ratio (LCR) is a global minimum standard for Bank''s liquidity. The ratio aims to ensure that a bank has an adequate stock of unencumbered High - Quality Liquid Assets (HQLA) that can be converted into cash easily and immediately to meet its liquidity needs for a 30 calendar days of severe liquidity stress scenario.

The LCR is a ratio of High Quality Liquid Unencumbered Assets (HQLA) to total estimated net outflows over a stressed period of 30 calendar days.

The net cash outflows are calculated by applying RBI prescribed outflow factors to the various categories of liabilities (deposits, unsecured and secured wholesale borrowings), as well as to undrawn commitments and derivative-related exposures, partially offset by inflows from assets maturing within 30 days.

The Board of Directors has the overall responsibility for management of liquidity risk. The Board at overall level decides the liquidity risk tolerance/limits and accordingly decides the strategy, policies and procedures of the Bank for managing liquidity risk.

The Board has constituted Risk Management Committee (RMC), which reports to the Board, and consisting of Chief Executive Officer (CEO) /Chairman and certain other Board members. The Committee is responsible for evaluating the overall risks faced by the Bank including liquidity risk. The potential interaction of liquidity risk with other risks is included in the risks addressed by the Risk Management Committee.

At the executive level, Asset Liability Management Committee (ALCO) ensures adherence to the risk tolerance/limits set by the Board as well as implementing the liquidity risk management strategy of the Bank in line with Bank''s risk management objectives and risk tolerance. A dedicated desk within Treasury function of the Bank is responsible for the day-to-day / intra-day liquidity management.

ALCO of the Bank channelizes various business segments of the Bank to target good quality asset and liability profile to meet the Bank''s profitability as well as Liquidity requirements with the help of robust MIS and Risk Limit architecture of the Bank.

The Bank has been maintaining HQLA (Level 1) primarily in the form of Excess CRR, excess SLR investments over and above mandatory requirement.

in the backdrop of the global financial crisis that started In 2007, the Basel Committee on Banking Supervision (BCBS) proposed certain reforms to strengthen global capital and liquidity regulations with the objective of promoting a more resilient banking sector. in this regard, comes into picture - "Basel III: international framework for liquidity risk measurement, standards and monitoring” which presented two minimum standards, viz., Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) for funding liquidity.

The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. "Available stable funding” (ASF) is defined as the portion of capital and liabilities expected to be reliable over the time horizon of one year. The amount of stable funding required ("Required stable funding") (RSF) of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by that institution as well as those of its off-balance sheet (OBS) exposures.

Minimum Requirement: ASF(Available Stable Funding)/RSF(Require Stable Funding)>=100. The Bank is required to maintain the NSFR on an ongoing basis on a standalone basis. The minimum NSFR requirement set out in the RBI guideline effective October 1,2021 is 100%.

The Board of Directors has the overall responsibility for management of liquidity risk. The Board at overall level decides the liquidity risk tolerance/limits and accordingly decides the strategy, policies and procedures of the Bank for managing liquidity risk.

At the executive level, Asset Liability Management Committee (ALCO) ensures adherence to the risk tolerance/limits set by the Board as well as implementing the liquidity risk management strategy of the Bank in line with Bank''s risk management objectives and risk tolerance. A dedicated desk within Treasury function of the Bank is responsible for the day-to-day / intra-day liquidity management.

Quantitative Disclosures

Following is the quantitative disclosures relating to NSFR for the year ended March 31,2024, wherein the amounts are average of daily positions during the year:

18.3.3 Sale and transfers to/from HTM category

During the year ended March 31, 2024 and the previous year ended March 31, 2023 the Bank has not sold and transferred securities to or from HTM category exceeding 5% of the book value of investment held in HTM category at the beginning of the year.

In accordance with the RBI guidelines, Where the value of sales and transfers of securities to/from HTM category exceeds 5 per cent of the book value of investments held in HTM category at the beginning of the year, banks shall disclose the market value of the investments held in the HTM category. The excess of book value over market value for which provision is not made shall also be disclosed. The 5 per cent threshold referred to above shall exclude:

i) The one-time transfer of securities to/from HTM category with the approval of Board of Directors undertaken by banks at the beginning of the accounting year.

ii) Direct sales from HTM for bringing down SLR holdings in HTM category consequent to a downward revision in SLR requirements by RBI.

iii) Sales to the Reserve Bank of India under liquidity management operations of RBI like Open Market Operations (OMO) and the Government Securities Acquisition Programme (GSAP).

iv) Repurchase of Government Securities by Government of India from banks under buyback / switch operations.

v) Repurchase of State Development Loans by respective state governments under buyback / switch operations.

vi) Additional shifting of securities explicitly permitted by the Reserve Bank of India.

18.3.4 Non-SLR investment portfolio

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

(I) The days on which there were Nil outstanding have been ignored while arriving at the amount of minimum outstanding during the year.

(II) Actual number of days of transactions have been considered In computation of daily average outstanding during the year.

(III) In respect of triparty repo and triparty reverse repo transactions, amount of funds borrowed or lent have been disclosed In the tables above.

18.3.7 Government Security Lending (GSL) transactions

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

For loans disbursed prior to July 01, 2020, the existing circular before the below mentioned revised circular was considered for classification of loan under Priority Sector Lending.

The Bank has classified loan under Priority Sector Lending (PSL) across various categories based on Master Directions FIDD.CO.Plan.BC.5M.09.01/2020-21 dated September 04, 2020 with effect from July 01,2020.

* This includes underlying advances of Priority Sector Lending Certificates sold and does not include underlying advances of Priority Sector Lending Certificates purchased during the year. Refer Schedule 18.14.4

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

18.4.3 Overseas Assets, NPAs and Revenue

During the year ended March 31,2024 and March 31,2023, there are no overseas assets, NPAs and revenue.

18.4.4 Particulars of Restructured Accounts:

During the year ended March 31,2024 and March 31,2023, the Bank has not implemented Resolution Plan for any of the borrowers in accordance with the RBI Circular dated June 7, 2019 on Prudential Revised Framework for Resolution of Stressed Assets ("Framework”).

18.4.5 Divergence in asset classification and provisioning:

RBI vide circular no. DOR.ACC.REC.No.74/21.04.018/2022-23 dated October 11,2022, has directed that banks shall make suitable disclosures, wherever (a) the additional provisioning requirement assessed by RBI exceeds 5 percent of the reported profit before provisions and contingencies for the reference period, or (b) the additional Gross NPA identified by RBI exceeds 5 percent of the published incremental Gross NPA for the reference period, or both. Based on the annual inspection conducted with respect to the Bank''s position as at March 31,2022 there are no reportable matters under (a) and (b) of the above-mentioned circular.

18.4.6 Transfer of loans exposures

(a) Details on loans not in default

(i) During the year ended March 31, 2024 and March 31, 2023, the Bank has not acquired loans not in default.

(ii) There is no transfer of loan not in default during the year ended March 31,2024 and March 31,2023.

(b) Details of stressed loans transferred / acquired during the year

There is no transfer or acquisition of stressed loans (NPA / SMA) during the year ended March 31, 2024 and March 31,2023.

18.4.7 Security Receipts (SR)

There is no investments held as security receipts received by sale of NPA to Securitization / Reconstruction Company as at March 31,2024 and March 31,2023.

Amount paid by the borrower during the half year Is net of additions in the borrower amount due to fresh disbursements made.

RBI vide a circular dated January 1, 2019 permitted a one-time restructuring of existing loans to Micro Small and Medium Enterprises (MSME) without a downgrade in the asset classification, and this facility was extended vide circular dated February 11, 2020, circular dated August 6, 2020 and circular dated May 5, 2021 subject to certain conditions. Details of such loans to MSME that are restructured under the extant guidelines and classified as standard are as below:

18.5.3 Risk Category wise Country Exposure:

The Bank''s exposures are concentrated In India, hence country risk exposure as at March 31, 2024 Is HNII (March 31,2023: HNII).

18.5.5 Advances secured by book debts

Advances secured by book debts of H1,285.81 crore (March 31,2023: H1,178.91 crore)

18.5.6 Factoring exposures

The Bank does not have factoring exposure as on March 31,2024 and March 31,2023.

18.5.7 Intra-Group exposures

There are no Intra group exposures as at March 31,2024 and March 31,2023.

18.5.8 Unhedged Foreign Currency Exposure (UFCE) of Bank''s Customer

The Bank has three borrowers having Unhedged Foreign Currency Exposure of H22.65 crore as at March 31, 2024 (March 31,2023 - H34.19 crore). The Bank made NIL provision during the year ended March 31,2024. The Bank held no Incremental capital on advance to borrowers with Unhedged Foreign Currency Exposure (March 31,2023: H0.03 crore).

18.5.9 Details of Single / Group Borrower limit

The Bank has complied with the limits prescribed under extant guidelines with regards to exposure to single borrower and group of the borrower during the year ended March 31,2024 and March 31,2023.

18.7 Derivatives :

18.7.1 Forward Rate Agreement/ Interest Rate Swap/ Cross currency swap :

There are no forward rate agreement / interest rate swap / cross currency swap enterest into and outstanding during the year ended March 31,2024 and March 31,2023.

18.7.2 Exchange Traded Interest Rate Derivatives

There are no exchange traded interest rate derivative entered into and outstanding during the year ended March 31, 2024 and March 31,2023.

18.7.3 Risk Exposure in Derivatives:

The Bank has not engaged in any derivatives contracts during the year ended March 31, 2024 and March 31, 2023. However, Bank acquired a CCS contract pursuant to Business Transfer Agreement from Holding Company in the year ended March 31,2017. The disclosure to the extent applicable is given below.

Quantitative disclosure on risk exposure in derivatives

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

Note: Maintainable complaints refer to complaints on the grounds specifically mentioned in Integrated Ombudsman Scheme, 2021 (Previously Banking Ombudsman Scheme,2006) and covered within the ambit of the Scheme.

* The above information does not include complaints redressed within 1 working day and is as certified by the Management and relied upon by the auditors

“ Out of 172 BO complaints, in 10 complaints decision are not given by RBI yet (March 31,2023: Out of 114 BO complaints, 01 complaint from West zone is in open status at financial year end and 01 complaint''s decision is not given by RBI from North 2 zone).

Note above disclosure Is compiled by management and relied upon by auditors

18.12 Penalties imposed by the Reserve Bank of India

SEBI in exercise of the powers conferred under Section 15HB of SEBI Act, 1992 had vide its adjudication

order dated September 20, 2023 imposed a monetary penalty of H0.01 crore on the Bank for certain noncompliances of public issue norms for Issuance of Non-Convertible Debentures (NCDs) for H25.00 crore.

Further, as per the advice received from SEBI, the Bank has made an early repayment of the aforesaid NCDs on

August 28, 2023.

No penalty was imposed by RBI on the Bank during the year ended March 31,2024 and March 31,2023.

18.13 Disclosure on Remuneration

Qualitative Disclosure

A. Information relating to the bodies that oversee remuneration

a) Name, composition and mandate of the main body overseeing remuneration

The Nomination and Remuneration Committee (NRC) of the Board is the main body overseeing remuneration.

As on March 31,2024, The NRC comprises of two Independent Directors viz Mr. Kajal Ghose and Mr. Parveen

Kumar Gupta, one non-independent Director viz Mr. Muralidharan Rajamani.

Role and functions of the Committee related to Nomination

A. Appointment criteria and qualifications

i) To identify and approve appointment of persons who are qualified to become directors in the bank and who may be appointed as KMPs or SMPs in the bank, who possess integrity, Independence, adequate knowledge, skill, qualification, experience in the field of his/her specialisation commensurate with the proposed role and responsibility as Director, KMP or SMP and shall have the ability to manage the responsibility assigned to him/her.

ii) To ensure that the Bank appoints or continues the employment of any person as Managing Director / Whole-time Director subject to the conditions laid down under Part I of Schedule V of the Companies Act, 2013 and in line with extant RBI guidelines and relevant provisions of the Banking Regulation Act 1949.

ill) To ensure that the Bank shall appoint or continue the service of any person as Independent Director subject to the provisions of Section 149 read with Schedule IV and other applicable provisions of the Companies Act, 2013 and Banking Regulation Act 1949.

Iv) Appointment for any Senior Management Personnel (Executives one level below the MD & CEO) shall be approved by the Committee, subject to the candidate having been interviewed by at least two (2) members of the Committee. Basis the recommendation of the panel members, the Committee may approve the appointment.

Appointment of any executive whose fixed salary exceeds H0.70 crore p.a. will need to be approved by the NRC.

B. Following are the functions of Nomination and Remuneration Committee:

1. Review the structure, size, composition, diversity of the Board and make necessary recommendations to the Board with regard to any changes as necessary and formulation of policy thereon.

2. Evaluate the skills that exist, and those that are absent but needed at the Board level, and search for appropriate candidates who have the profile to provide such skill sets.

3. To evaluate the performance of the members of the Board and provide necessary report to the Board

4. Advise criteria for evaluation of Independent Directors and the Board & its Committees and carry out evaluation of every directors'' performance.

5. To formulate the criteria for determining qualifications, positive attributes and Independence of a director.

6. To recommend to the Board a policy, relating to the remuneration for directors, Key Managerial Personnel, Senior Management Personnel and other employees.

7. To formulate criteria for payment to Key Managerial Personnel and Senior Management Personnel performance based incentives / rewards based on Bank''s performance.

8. Examine vacancies that will come up at the Board on account of retirement or otherwise and suggest course of action.

9. Undertake a process of due diligence to determine the suitability of any person for appointment / continuing to hold appointment as a director on the Board, based upon qualification, expertise, track record, integrity other ''fit and proper'' criteria, positive attributes and Independence (if applicable) and formulate the criteria relating thereto.

10. Review the composition of Committees of the Board, and identify and recommend to the Board the Directors who can best serve as members of each Board Committee.

11. Review and recommend to the Board for approval the appointment of Managing Director & CEO and other whole-time Directors and the overall remuneration framework and associated policy of the Bank (including remuneration policy for directors and key managerial personnel) the level and structure of fixed pay, variable pay, perquisites, bonus pool, stock-based compensation and any other form of compensation as may be Included from time to time to all the employees of the Bank including the Managing Director & CEO, other Whole-time Directors and senior managers one level below the Board.

12. Review and recommend to the Board for approval the total Increase in manpower cost budget of the Bank as a whole, at an aggregate level, for the next year.

13. Recommend to the Board the compensation payable to the Non-Executive Chairman of the Bank.

14. Review the Code of Conduct and HR strategy, policy and performance appraisal process within the Bank, as well as any material changes in the organization structure which could have wide ranging implications.

15. Review and recommend to the Board for approval of various other HR related policies including the Talent Management Policy and Succession Policy in the Bank for ensuring business continuity, especially at the level of Board, MD & CEO, other Whole Time Directors, Senior Management Personnel (one level below the MD & CEO and other key roles).

16 Review and recommend to the Board for approval:

1. the creation of new positions one level below MD & CEO, wherever required

2. appointments, promotions and exits of senior managers one level below the MD & CEO

b} External consultants whose advice has been sought, the body by which they were commissioned, and in what areas of the remuneration process

No external consultant has been engaged in the current year.

c) Scope of the Bank''s remuneration policy (e.g. by regions, business lines}, including the extent to which it is applicable to foreign subsidiaries and branches

The Human Resources Policy of the Bank, approved by the Board of the Bank on January 09, 2017 and the same has been reviewed by the Board of Directors in its meeting in March 22, 2022 pursuant to the guidelines issued by RBI, to cover all employees of the Bank. Further the Board had recommended RBI the revised remuneration of MD & CEO which has been approved by Reserve Bank of India vide its letter dated on December 14, 2022. The Bank also has in place a Policy on Risk Alignment of Compensation applicable for MD & CEO and Risk Control and Compliance. The policy is applicable to MD & CEO, WTD and employees in Risk and Compliance department.

d) Type of employees covered and number of such employees

All the employees of the Bank are covered. The total number of employees of the Bank as at March 31,2024 were 16,081 (31 March 2023: 15,424)

B. Information relating to the design and structure of remuneration processes.

Key features and objectives of remuneration policy: The Bank has, under the guidance of the Nomination and Remuneration Committee ("NRC”) and the Board, followed remuneration practices intended to drive meritocracy and performance based on a prudent risk management framework.

Effective governance of compensation: The NRC has oversight over compensation to senior management personnel and also provides overall guidance to the compensation paid to other employees.

Alignment of compensation philosophy with prudent risk taking: While the Bank seeks to achieve a mix of fixed and variable remuneration that is prudent, it currently has predominantly a fixed remuneration structure with no guaranteed bonuses. Further, the remuneration of employees in financial and risk control functions is not linked to business outcomes and solely depends on their performance. The Bank seeks to align remuneration with financial and non-financial performance indicators.

Whether the remuneration committee reviewed the Bank’s remuneration policy during the past year, and if so, an overview of any changes that were made: There has been no change in the Bank''s remuneration policy during the past year.

Discussion of how the Bank ensures that risk and compliance employees are remunerated independently of the businesses they oversee: The remuneration of employees in control functions such as Risk and Compliance depends solely on their individual and overall functional performance and is not linked to any business outcomes. The same is also reflected in their KRA''s. The Bank also has in place a Policy on Risk Alignment of Compensation applicable for MD & CEO and Risk and Compliance.

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

Overview of the key risks that the Bank takes into account when implementing remuneration measures:

The Board approves the overall risk management policy including risk framework, limits, etc. The Bank conducts all its business activities within this framework. The NRC while assessing the performance of the Bank and senior management, shall consider adherence to the policies and accordingly make its recommendations to the Board.

Overview of the nature and type of key measures used to take account of these risks, including risk difficult to measure: The evaluation process shall incorporate both qualitative and quantitative aspects including asset quality, provisioning, increase in stable funding sources, refinement/improvement of the risk management framework, effective management of stakeholder relationships and mentoring key members of the top and senior management.

Discussion of the ways in which these measures affect remuneration: In order to ensure alignment of remuneration with prudent practices, the NRC takes into account adherence to the risk framework in addition to business performance.

Discussion of how the nature and type of these measures have changed over the past year and reasons for the changes, as well as the impact of changes on remuneration: There has been no change In the nature and type of measures over the past year.

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

Overview of main performance metrics for the Bank, top level business lines and individuals: The main performance metrics Include profitability, business growth, asset quality, compliance, and customer service.

Discussion of how amounts of individual remuneration are linked to the Bank-wide and individual performance: The assessment of employees shall be based on their performance with respect to their result areas and shall include the metrics mentioned above.

Discussion of the measures the Bank will in general implement to adjust remuneration in the event that performance metrics are weak, including the Bank’s criteria for determining ‘weak’ performance metrics:

In case such an event should occur, the Board/NRC shall review and provide overall guidance on the corrective measures to be taken.

E. Description of the ways in which the Bank seeks to link performance during a performance measurement year with levels of remuneration.

As a part of the performance management process in the bank at the beginning of each financial year , the bank rolls out individual KRA''s to each and every employee in the bank. These KRA''s are broken down based on the strategic objectives and business budgets set by the Board of the bank. Apart from regular feedback which each manager provides to his / her subordinates a bank as formal process of Mid-Year Review and Year End Review to assess performance of each role holder in the bank. Based on the performance review at an organizational / Functional / Individual the bank decided on percentage of salary increments to be given at various levels of performance.

Discussion of the Bank''s policy on deferral and vesting of variable remuneration and, if the fraction of variable remuneration that is deferred differs across employees or groups of employees, a description of the factors that determine the fraction and their relative importance:

The various deferral arrangement of variable remuneration in the bank broadly are as follows -

a) For MD & CEO - The variable remuneration of the MD and CEO is approved by the Reserve Bank of India which includes deferral arrangement for the cash and non cash part of the variable pay which is implemented by the bank as per the advice of the RBI.

b) All ESOP ''s which are granted across all levels in the organization have deferral arrangement in them

c) Monthly / Quarterly Variable Pay - Based on the nature of the scheme , deferral arrangements are made in the same which differ from channel to channel.

The fraction of deferral to be considered is dependent upon -

a) Guidelines issued by the Regulator from time to time

b) Approval as per the overall performance framework approved by the NRC and the Board

c) Driving right behaviours via the various incentive schemes.

Discussion of the Bank''s policy and criteria for adjusting deferred remuneration before vesting and (if permitted by national law) after vesting through claw back arrangements:

The Bank also has in place a Policy on Risk Alignment of Compensation applicable for MD & CEO and Risk Control and Compliance. This policy deals with the deferred payment of variable pay and claw back guidelines.

F. Description of the different forms of variable remuneration that the Bank utilizes and the rationale for using these different forms.

The Bank has variable pay that is paid based on the performance that is applicable to all levels. The ESOP options of the Holding Company and the Bank are currently given to eligible employees in Chief Manager and above grade subject to performance. Employees in sales function do have incentives based on monthly business performance.

Overview of the forms of variable remuneration offered. A discussion of the use of different forms of variable remuneration and if the mix of different forms of variable remuneration differs across employees or group of employees, a description of the factors that determine the mix and their relative importance

The variable remuneration is offered in the form of annual performance bonus. The same is determined on the basis of comprehensive performance appraisal system wherein the performance of each employee is evaluated on the basis of defined Goal Sheet and KRA at the beginning of year and achievement against them.

•Remuneration excludes the cost accounted under Employee Stock Option Plan of the Holding Company and Gratuity & Leave encashment related costs which is accounted at entity level based on actuarial valuation.

•• As per RBI Circular No.23/29.67.001/2019-20 dtd November O4, 2019 effective from FY 20-21.

The bonus paid during the year pertains to previous financial years.

Variable pay amounting to HO.62 crore has been approved by RBI for MD & CEO for FY 2020-21. Cash component of HO.21 crore of the same has been paid to MD & CEO during current year, rest H0.10 crore would be paid next year. Non-cash component of H0.31 crore is deferred in the form of USFBL - ESOPs as per RBI approval.

Variable pay amounting to H1.00 crore has been approved by RBI for MD & CEO for FY 2021-22. Cash component of HO.22 crore of the same has been paid to MD & CEO in the month of Dec''22, rest HO.2O crore would be paid next 3 years in deferred manner. Non-cash component of H0.60 crore is deferred in the form of USFBL - ESOPs as per RBI approval.

Variable pay amounting to H1.36 crore has been approved by RBI for MD & CEO for FY 2022-23. Cash component of HO.25 crore of the same has been paid to MD & CEO in the month of Oct''23, rest HO.29.4 crore would be paid next 3 years in deferred manner. Non-cash component of HO.81.6 crore is deferred in the form of USFBL - ESOPs as per RBI approval.

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

The Bank submits Its Proforma ind-AS financials on half yearly basis to RBI based on the GAP assessment carried out by the Bank. The Bank Is currently handling the Impact analysis and reporting offline through excel based financial. The Bank has Implemented system solutions (IndAS 109 and 116).

18.14.8 Investor Education and Protection Fund

There are no amounts which are due to be transferred to the investor Education and Protection Fund during the year ended March 31,2024 and March 31,2023.

18.14.11 Details of item of Others under Other Assets head exceeds one per cent of the total Asset

There are no Item of Others under Other Assets head exceeds one per cent of the total asset during the year ended March 31,2024 and March 31,2023.

18.14.12 Details of item of Others including provisions under Other Liabilities and Provisions head exceeds one per cent of the total Assets

There are no Item of Others Including provisions under Other Liabilities and Provisions head exceeds one per cent of the total assets during the year ended March 31,2024 and March 31,2023.

18.14.13 Portfolio-level information on the use of funds raised from green deposits

in reference to the RBI Notification No: DOR.SFG.REC.10/30.01.021/2023-24 dated April 11, 2023 with respect to the disclosure related to acceptance of green deposits, the bank has not raised any funds from green deposits in the current year.

18.16 Employee Stock Option Plan ("ESOP”)

A. Options granted by Holding Company

The Holding Company has formulated an Employees Stock Option Scheme to be administered through a Trust, The scheme provides that subject to continued employment with the Bank, the employees of Bank are granted an option to acquire equity shares of the Holding Company that may be exercised within a specified year,

The Holding Company formed Utkarsh ESOP Welfare Trust to issue ESOPs to employees of the Bank as per Employee Stock Option Scheme, Total 12,00,000 equity shares have been reserved under ESOP scheme 2016 and pursuant to Shareholder agreement executed in the year 2016-17 additional 59,89,594 equity shares has been reserved by the Holding Company for the purpose of ESOP scheme,

During the year ended March 31,2024, the Holding Company granted Nil options to the Bank''s employees (March 31, 2023: Nil options),

The options vested can be exercised within a period of 24 months from the date of vesting, The plan is administered, supervised and implemented by the Compensation Committee under the policy and frame work laid down by the Board of Directors of the Holding Company in accordance with the authority delegated to the Compensation Committee in this regard from time to time,

The Guidance Note on "Accounting for Employee Share Based Payments” issued by the ICAI establishes financial and reporting principles for employees share based payment plans, The Guidance Note applies to employee share based payment plans, the grant date in respect of which falls on or after April 01, 2005, The Guidance Note also applies to transfers of shares or stock options of the parent of the enterprise, or shares or stock options of another enterprise in the same group as the enterprise, to the employees of the enterprise, The compensation costs of stock options granted to employees of the Bank are accounted using intrinsic value method,

The compensation cost is calculated based on the intrinsic value method, wherein the excess of fair value of underlying equity shares as on the date of the grant over the exercise price of the options given to employees of the Bank under the ESOP scheme, is recognised as compensation cost and amortised over the vesting period, The Holding Company cross charges the compensation cost to the Bank to the extent it pertains to the employees of the Bank,

B. Out of options granted by Bank

During the FY2019-20, the Bank Introduced Utkarsh Small Finance Bank Limited (USFBL) MD & CEO Employee Stock Option Plan 2020 to offer, grant and Issue In one or more tranches, the Stock Options to Mr. Govind Singh, MD & CEO. However, Board of Directors, In their meeting dated 23 September 2023, have cancelled the scheme. No options have been granted out of the scheme so far.

Shares vested to the employees have an exercise period of two years.

* The bank received approval for remuneration to MD & CEO for financial year 2023-24 from RBI on 06 October, 2023 and variable pay for financial year 2022-23 which Included non cash variable pay of H0.82 cr and advised to defer It In 3 equal Instalments. Accordingly, the Bank has granted 423,237 ESOPs to MD & CEO at H44.14 per share during the year.

Note: The above amount Is netted off with amount of HNil received under the scheme "Pradhan Mantri Rojgar Protsahan Yojana” for the year ended March 31,2024 (March 31,2023: Nil).

Defined Benefit Plans:

The Bank has a defined benefit gratuity plan. Every employee who has completed five years or more of service Is eligible for gratuity on cessation of employment and it Is computed at 15 days'' salary (last drawn salary) for each completed year of service subject to limit of H20 lacs as per the Payment of Gratuity Act, 1972 as amended from time to time. The scheme Is funded with an insurance company in the form of a qualifying insurance policy.

The following table sets out the status of the defined benefit gratuity plan as required under Accounting Standard 15.

Discount rate: The discount rate Is based on the prevailing market yields of Indian government securities as at the balance sheet date for the estimated term of the obligations.

Salary escalation rate: The estimates of future salary Increases considered taking into account the inflation, seniority, promotion and other relevant factors.

Expected rate of return: The overall expected rate of return on assets is determined based on the average long term rate of return expected on Investment of the fund during the estimated term of the obligations.

18.18 (A) Business Segments:

In terms of AS-17 (Segment Reporting) issued by ICAI and RBI circular Ref. DBOD.No. BP.BC.81/21.04.018/2006-07 dated April 18, 2007 read with DBR.BP. BC No.23/21.04.018/2015-16 dated July 01,2015 and amendments thereto, the following business segments have been disclosed:

Corporate/ Wholesale Banking: Includes lending, deposits and other banking services provided to corporate customers of the Bank.

Retail Banking: Includes lending, deposits and other banking services provided to retail customers of the Bank through branch network.

Treasury: Includes dealings in SLR and Non SLR Investments, maintenance of reserve requirements and resource mobilization from other Banks and financial Institutions.

Other Banking Operations: Includes other activities which are not covered under wholesale, retail or treasury activity.

Geographical segments: The business operations of the Bank are concentrated in India hence the Bank is considered to operate in domestic segment only.

• Business segments have been identified and reported taking into account the target customer profile, nature of products and services, the differencial risks and returns, the organization structure, internal business reporting system and guidelines prescribed by RBI.

• Income, expenses, assets and liabilities have been either specifically identified to individual segment or allocated to segments on a reasonable basis or are classified as unallocated.

• Unallocated items include Fixed Assets, Capital expenditure, realized gains/losses on their sale, income tax expense, deferred income tax assets/liabilities and advance tax.

• In computing the above information, certain estimates and assumptions have been made by the management and have been relied upon by the auditors.

• 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 has not setup any DBU so far and hence DBU has not been disclosed as a seperate segment as per Accounting Standard 17 (Segment Reporting).

18.18 (B) Geographic Segments

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

18.19 Related Party Transactions

The Bank''s related parties with whom transactions entered during the year ended March 31,2024 are disclosed below:

1. Holding Company

Utkarsh CoreInvest Limited (erstwhile Utkarsh Micro Finance Limited)

2. Related Company

Utkarsh Welfare Foundation

Consequent to the disinvestment by Utkarsh CoreInvest Limited (UCL) on February 26, 2022, UWF is no longer a subsidiary of UCL and consequently fellow subsidiary of the Bank. However, it continue to be the related party of the Bank as relatives of the directors are the members in UWF.

3. Key Management Personnel (‘KMP'')

Mr. Govind Singh- Managing Director and CEO

Mr. Sarjukumar Pravin Simaria - Chief Financial Officer Mr. Muthiah Ganapathy - Company Secretary

4. Enterprise where KMP exercise significant influence

RAAG Family Private Trust

5. Post-employment benefit plan

Utkarsh Small Finance Bank Employees'' Gratuity Trust

18.20 Leases

Operating Lease

Lease payments made under cancellable operating lease amounting to H68.29 crore (March 31, 2023: H58.08 crore) disclosed as rent under Schedule 16 and the same have been recognized as an expense in the Profit and Loss Account. There are one sublease agreement with Utkarsh Coreinvest Limited ("the Holding Company”).

18.23.1 Contingent liabilities

1. Description of nature of contingent liabilities is set out below:

a. Contractual payments for Capital commitments

b. Pending litigation under Income Tax.

c. Other pending litigation against the Bank.

Refer Schedule 12 for amounts relating to contingent liabilities.

18.23.2 Letter of comfort

Bank has not issued any letters of comfort during the year ended March 31,2024 and March 31,2023. Further, there are no outstanding comfort letters as at March 31,2024 and March 31,2023.

18.26 As at March 31,2024, Bank carries additional floating provision of H132.95 crore (H80 crore as at March 31,2023). The Bank was carrying an additional contingency provision of H13 crore as at March 31, 2023 which has been fully utilised in the current year and consequently the provision as at March 31,2024 is Nil.

18.27 The Bank''s pending litigations include claims against the Bank by counterparties and proceedings pending with tax authorities. The Bank has reviewed its pending litigations and proceedings and has adequately provided for where provisions are required, and disclosed as contingent liabilities where applicable.

18.28 The Bank, as part of its normal banking business, grants loans and advances, makes investments, provides guarantees, to and accepts deposits and borrowings from its customers and borrowing from entities. These transactions are part of Bank''s normal banking business, which is conducted ensuring adherence to all regulatory requirements and banks internal policies as applicable.

Other than the transactions described above, no funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any other sources or kind of funds) by the Bank to or in any other persons or entities, including foreign entities (''"’Intermediaries''"'') with the understanding, whether recorded in writing or otherwise, 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 parties (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 Funding Party ("''Ultimate Beneficiaries””) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

18.29 The Board of Directors at their meeting held on April 26, 2024, has proposed a dividend of H0.50 per share (March 31,2023: HNIL per share) for the year ended March 31,2024 subject to approval of the members at the ensuing Annual General Meeting. However the effect of the proposed dividend has been reckoned in determining capital funds in the computation of capital adequacy ratios as at March 31,2024.

18.30 During the quarter SEBI has determined the settlement amount of H 1.24 crore which was paid by the bank, pursuant to suo-moto settlement application filed by the Bank with respect to certain non-compliances in filings with SEBI which were subsequently mitigated by the bank. The matter has been fully settled.

18.31 Figures of the previous year have been regrouped / reclassified, wherever necessary to confirm current year classification.

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Mar 31, 2023

1. The Bank has followed Basel II Capital Regulations dated 01 July 2015 and amended thereafter for the purpose of Capital Adequacy Ratio in accordance with the operating guidelines for small finance banks as issued by RBI on 08 October 2016.

2. The Bank has followed Master Circular No. DBR.No.BP.BC.4/21.06.001/2015-16 on Prudential Guidelines on Capital Adequacy and Market Discipline - New Capital Adequacy Framework (NCAF) issued by RBI dated 01 July 2015 for the purpose of computing Capital Adequacy Ratio.

3. As per RBI, letter DBR.NBD. No. 4502/16.13.218/2017-18 dated 08 November 2017, it is clarified that no separate capital charge is being prescribed for market risk and operational risk for the time being.

18.1.2 Tier II Capital

The Bank has not acquired Basel II compliant debt capital instruments during the year ended 31 March 2023 and 31 March 2022.

18.1.3 Capital Infusion

During the year ended 31 March 2023, the Bank has issued 213,025 and 170,116 equity shares to employees and MD & CEO respectively under ESOP scheme having face value of ''10 each at a premium of ''17.00 and ''4.01 respectively for cash aggregating to ''8,135,000. Accordingly, share capital increased by ''38,31,410 and share premium increased by ''43,03,590.

During the year ended 31 March 2022, the Bank has issued 47,169,809 equity shares as fresh issue and 17,844 equity shares under ESOP scheme having face value of ''10 each at a premium of ''21.80 and ''4.01 respectively for cash aggregating to ''1,500,249,920.

18.2.2 Liquidity Coverage Ratio (LCR)

Qualitative disclosure around LCR

Liquidity Coverage Ratio (LCR) is a global minimum standard for Bank''s liquidity. The ratio aims to ensure that a bank has an adequate stock of unencumbered High - Quality Liquid Assets (HQLA) that can be converted into cash easily and immediately to meet its liquidity needs for a 30 calendar days of severe liquidity stress scenario.

The LCR is a ratio of High Quality Liquid Unencumbered Assets (HQLA) to total estimated net outflows over a stressed period of 30 calendar days.

The net cash outflows are calculated by applying RBI prescribed outflow factors to the various categories of liabilities (deposits, unsecured and secured wholesale borrowings), as well as to undrawn commitments and derivative-related exposures, partially offset by inflows from assets maturing within 30 days.

The Board of Directors has the overall responsibility for management of liquidity risk. The Board at overall level decides the liquidity risk tolerance/limits and accordingly decides the strategy, policies and procedures of the Bank for managing liquidity risk.

The Board has constituted Risk Management Committee (RMC), which reports to the Board, and consisting of Chief Executive Officer (CEO) /Chairman and certain other Board members. The Committee is responsible for evaluating the overall risks faced by the Bank including liquidity risk. The potential interaction of liquidity risk with other risks is included in the risks addressed by the Risk Management Committee.

At the executive level, Asset Liability Management Committee (ALCO) ensures adherence to the risk tolerance/ limits set by the Board as well as implementing the liquidity risk management strategy of the Bank in line with Bank''s risk management objectives and risk tolerance. A dedicated desk within Treasury function of the Bank is responsible for the day-to-day / intra-day liquidity management.

ALCO of the Bank channelizes various business segments of the Bank to target good quality asset and liability profile to meet the Bank''s profitability as well as Liquidity requirements with the help of robust MIS and Risk Limit architecture of the Bank.

The Bank has been maintaining HQLA (Level 1) primarily in the form of Excess CRR, excess SLR investments over and above mandatory requirement.

18.2.3 Net Stable Funding Ratio (NSFR)

Qualitative disclosure around NSFR

In the backdrop of the global financial crisis that started in 2007, the Basel Committee on Banking Supervision (BCBS) proposed certain reforms to strengthen global capital and liquidity regulations with the objective of promoting a more resilient banking sector. In this regard, comes into picture - "Basel III: International framework for liquidity risk measurement, standards and monitoring" which presented two minimum standards, viz., Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) for funding liquidity.

The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. "Available stable funding" (ASF) is defined as the portion of capital and liabilities expected to be reliable over the time horizon of one year. The amount of stable funding required (Required stable funding) (RSF) of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by that institution as well as those of its off-balance sheet (OBS) exposures.

Minimum Requirement: ASF(Available Stable Funding)/RSF(Require Stable Funding)>=100. The Bank is required to maintain the NSFR on an ongoing basis on a standalone basis. The minimum NSFR requirement set out in the RBI guideline effective October 1, 2021 is 100%.

The Board of Directors has the overall responsibility for management of liquidity risk. The Board at overall level decides the liquidity risk tolerance/limits and accordingly decides the strategy, policies and procedures of the Bank for managing liquidity risk.

At the executive level, Asset Liability Management Committee (ALCO) ensures adherence to the risk tolerance/ limits set by the Board as well as implementing the liquidity risk management strategy of the Bank in line with Bank''s risk management objectives and risk tolerance. A dedicated desk within Treasury function of the Bank is responsible for the day-to-day / intra-day liquidity management.

In the backdrop of the global financial crisis that started in 2007, the Basel Committee on Banking Supervision (BCBS) proposed certain reforms to strengthen global capital and liquidity regulations with the objective of promoting a more resilient banking

Quantitative Disclosures

Following is the quantitative disclosures relating to NSFR for the year ended 31 March 2023, wherein the amounts are average of daily positions during the year:

18.3.3 Sale and transfers to/from HTM category

For the year ended 31 March 2023, there has been no sale from and transfer to/ from, the HTM category in excess of 5% of the book value of the investments held in the HTM category at the beginning of the year. For the year ended 31 March 2022, there has been no sale from and transfer to/ from, the HTM category in excess of 5% of the book value of the investments held in the HTM category at the beginning of the year.

In accordance with the RBI guidelines, Where the value of sales and transfers of securities to/from HTM category exceeds 5 per cent of the book value of investments held in HTM category at the beginning of the year, banks shall disclose the market value of the investments held in the HTM category. The excess of book value over market value for which provision is not made shall also be disclosed. The 5 per cent threshold referred to above shall exclude:

i) The one-time transfer of securities to/from HTM category with the approval of Board of Directors undertaken by banks at the beginning of the accounting year.

ii) Direct sales from HTM for bringing down SLR holdings in HTM category consequent to a downward revision in SLR requirements by RBI.

iii) Sales to the Reserve Bank of India under liquidity management operations of RBI like Open Market Operations (OMO) and the Government Securities Acquisition Programme (GSAP).

iv) Repurchase of Government Securities by Government of India from banks under buyback / switch operations.

v) Repurchase of State Development Loans by respective state governments under buyback / switch operations.

vi) Additional shifting of securities explicitly permitted by the Reserve Bank of India.

18.4.4 Particulars of Restructured Accounts:

During the year ended 31 March 2023 and 31 March 2022, the Bank has not implemented Resolution Plan for any of the borrowers in accordance with the RBI Circular dated June 7, 2019 on Prudential Revised Framework for Resolution of Stressed Assets (Framework).

18.4.5 Divergence in asset classification and provisioning:

RBI vide circular no. DOR.ACC.REC.No.74/21.04.018/2 022-23 dated 11 October 2022, has directed that banks shall make suitable disclosures, wherever (a) the additional provisioning requirement assessed by RBI exceeds 5 percent of the reported profit before provisions and contingencies for the reference period, or (b) the additional Gross NPA identified by RBI exceeds 5 percent of the published incremental Gross NPA for the reference period, or both. Based on the annual inspection conducted for the year ended 31 March 2023 with respect to the Bank''s position as at 31 March 2022 there are no reportable matters under (a) and (b) of the above-mentioned circular.

(b) Details of stressed loans transferred / acquired during the year

There is no transfer or acquisition of stressed loans (NPA / SMA) during the year ended 31 March 2023 and 31 March 2022.

18.4.7 Security Receipts (SR)

There is no investments held as security receipts received by sale of NPA to Securitization / Reconstruction Company as at 31 March 2023 and 31 March 2022.

a) The Bank has recovered the amount of ''0.28 crore (31 March 2022 - ''1.15 crore) against amount involved in frauds/robbery cases from accused staff as well as from insurance partner.

b) There are two cases in which involved amount is ''0.34 crore (considered in involved amount) but have no loss to the Bank accordingly no provision is made against this amount.

c) * Total 115 cases have been considered as 1 fraud for reporting purpose in line with FMR reports.

During the year ended 31 March 2023, as per forensic audit report additional 19 cases have been added and 13 cases removed from the initial 115 cases identified. Now the total fraud amount against 121 Surat cases is ''30.73 crores against which the Bank has provided in full. As on 31 March 2023, out of the total 121 cases, 47 cases having exposure of ''10.91 crore are classified as standard.

d) During the earlier year ended 31 March 2022, in accordance with the relevant RBI Circular dated April 18, 2016, the Bank had created provision of ''10.52 crores by debiting Balance in Profit and Loss Account under ''Reserves and Surplus''. The said amount is reversed as per the requirement of the aforementioned RBI circular from the Reserves and Surplus to the Profit and Loss Account in the current year ended 31 March 2023.

18.5.8 Unhedged Foreign Currency Exposure (UFCE) of Bank''s Customer

The Bank has three borrowers having Unhedged Foreign Currency Exposure of ''34.19 crores as at 31 March 2023 (31 March 2022 - Nil). The Bank made ''0.03 crores provision in respect of one of the borrowers during the year ended 31 March 2023. The Bank held no incremental capital on advance to borrowers with Unhedged Foreign Currency Exposure (31 March 2022: Nil).

18.5.9 Details of Single / Group Borrower limit

The Bank has complied with the limits prescribed under extant guidelines with regards to exposure to single borrower and group of the borrower during the year ended 31 March 2023 and 31 March 2022.

18.12 Penalties imposed by the Reserve Bank of India

No penalty was imposed by RBI on the Bank during the year ended 31 March 2023.

For the year ended 31 March 2022, Enforcement Department, RBI Central Office, vide its letter dated July 6, 2021 and Order of date issued by the Adjudicating Committee of Executive Directors of RBI, advised of having imposed a monetary penalty of ''1 crore on the Bank by RBI in exercise of the powers conferred under Section 47A read with Section 46(4) of the Banking Regulation Act, 1949. The penalty has been levied in the matter of contravention of RBI directions by the Bank observed with respect to the advances sanctioned to a NBFC and its Group companies in February 2018. The Bank paid the penalty amount of ''1 crore to RBI on July 17, 2021.

18.13 Disclosure on Remuneration Qualitative Disclosure

A. Information relating to the bodies that oversee remuneration

a) Name, composition and mandate of the main body overseeing remuneration

The Nomination and Remuneration Committee (NRC) of the Board is the main body overseeing remuneration. As on 31 March 2023, The NRC comprises of two Independent Directors viz Mr. Kajal Ghose and Mr. Parveen Kumar Gupta, one non-independent Director viz Mr. Muralidharan Rajamani.

Role and functions of the Committee related to Nomination A. Appointment criteria and qualifications

i) To identify and approve appointment of persons who are qualified to become directors in the bank and

who may be appointed as KMPs or SMPs in the bank, who possess integrity, independence, adequate knowledge, skill, qualification, experience in the field of his/her specialisation commensurate with the proposed role and responsibility as Director, KMP or SMP and shall have the ability to manage the responsibility assigned to him/her.

ii) To ensure that the Bank appoints or continues the employment of any person as Managing Director / Whole-time Director subject to the conditions laid down under Part I of Schedule V of the Companies Act, 2013 and in line with extant RBI guidelines and relevant provisions of the Banking Regulation Act 1949.

iii) To ensure that the Bank shall appoint or continue the service of any person as Independent Director subject to the provisions of Section 149 read with Schedule IV and other applicable provisions of the Companies Act, 2013 and Banking Regulation Act 1949.

iv) Appointment for any Senior Management Personnel (Executives one level below the MD & CEO) shall be approved by the Committee, subject to the candidate having been interviewed by at least two (2) members of the Committee. Basis the recommendation of the panel members, the Committee may approve the appointment. Appointment of any executive whose fixed salary exceeds ''0.70 crores p.a. will need to be approved by the NRC.

3. Following are the functions of Nomination and Remuneration Committee:

1. Review the structure, size, composition, diversity of the Board and make necessary recommendations to the Board with regard to any changes as necessary and formulation of policy thereon.

2. Evaluate the skills that exist, and those that are absent but needed at the Board level, and search for appropriate candidates who have the profile to provide such skill sets.

3. To evaluate the performance of the members of the Board and provide necessary report to the Board

4. Advise criteria for evaluation of Independent Directors and the Board & its Committees and carry out evaluation of every directors'' performance.

5. To formulate the criteria for determining qualifications, positive attributes and independence of a director.

6. To recommend to the Board a policy, relating to the remuneration for directors, Key Managerial Personnel, Senior Management Personnel and other employees.

7. To formulate criteria for payment to Key Managerial Personnel and Senior Management Personnel performance based incentives / rewards based on Bank''s performance.

8. Examine vacancies that will come up at the Board on account of retirement or otherwise and suggest course of action.

9. Undertake a process of due diligence to determine the suitability of any person for appointment / continuing to hold appointment as a director on the Board, based upon qualification, expertise, track record, integrity other ''fit and proper'' criteria, positive attributes and independence (if applicable) and formulate the criteria relating thereto.

10. Review the composition of Committees of the Board, and identify and recommend to the Board the Directors who can best serve as members of each Board Committee.

11. Review and recommend to the Board for approval the appointment of Managing Director & CEO and other whole-time Directors and the overall remuneration framework and associated policy of the Bank (including remuneration policy for directors and key managerial personnel) the level and structure of fixed pay, variable pay, perquisites, bonus pool, stock-based compensation and any other form of compensation as may be included from time to time to all the employees of the Bank including the Managing Director & CEO, other Whole-time Directors and senior managers one level below the Board.

12. Review and recommend to the Board for approval the total increase in manpower cost budget of the Bank as a whole, at an aggregate level, for the next year.

13. Recommend to the Board the compensation payable to the Non-Executive Chairman of the Bank.

14. Review the Code of Conduct and HR strategy, policy and performance appraisal process within the Bank, as well as any material changes in the organization structure which could have wide ranging implications.

15. Review and recommend to the Board for approval of various other HR related policies including the Talent Management Policy and Succession Policy in the Bank for ensuring business continuity, especially at the level of Board, MD & CEO, other Whole Time Directors, Senior Management Personnel (one level below the MD & CEO and other key roles).

16. Review and recommend to the Board for approval:

1. the creation of new positions one level below MD & CEO, wherever required

2. appointments, promotions and exits of senior managers one level below the MD & CEO

b) External consultants whose advice has been sought, the body by which they were commissioned, and in what areas of the remuneration process

No external consultant has been engaged in the current year.

c) Scope of the Bank''s remuneration policy (e.g. by regions, business lines), including the extent to which it is applicable to foreign subsidiaries and branches

The Human Resources Policy of the Bank, approved by the Board of the Bank on 09 January 2017 and the same has been reviewed by the Board of Directors in its meeting in 22 March 2022 pursuant to the guidelines issued by RBI, to cover all employees of the Bank. Further the Board had recommended RBI the revised remuneration of MD & CEO which has been approved by Reserve Bank of India vide its letter dated on 14 December 2022. The Bank also has in place a Policy on Risk Alignment of Compensation applicable for MD & CEO and Risk Control and Compliance. The policy is applicable to MD & CEO, WTD and employees in Risk and Compliance department.

d) Type of employees covered and number of such employees

All the employees of the Bank are covered. The total number of employees of the Bank as at 31 March 2023 were 15,424 (31 March 2022: 12,617)

B. Information relating to the design and structure of remuneration processes.

Key features and objectives of remuneration policy: The Bank has, under the guidance of the Nomination and Remuneration Committee (NRC) and the Board, followed remuneration practices intended to drive meritocracy and performance based on a prudent risk management framework.

Effective governance of compensation: The NRC has oversight over compensation to senior management personnel and also provides overall guidance to the compensation paid to other employees.

Alignment of compensation philosophy with prudent risk taking: While the Bank seeks to achieve a mix of fixed and variable remuneration that is prudent, it currently has predominantly a fixed remuneration structure with no guaranteed bonuses. Further, the remuneration of employees in financial and risk control functions is not linked to business outcomes and solely depends on their performance. The Bank seeks to align remuneration with financial and non-financial performance indicators.

Whether the remuneration committee reviewed the Bank''s remuneration policy during the past year,

and if so, an overview of any changes that were made: There has been no change in the Bank''s remuneration policy during the past year.

Discussion of how the Bank ensures that risk and compliance employees are remunerated independently of the businesses they oversee: The remuneration of employees in control functions such as Risk and Compliance depends solely on their individual and overall functional performance and is not linked to any business outcomes. The same is also reflected in their KRA''s. The Bank also has in place a Policy on Risk Alignment of Compensation applicable for MD & CEO and Risk and Compliance.

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

Overview of the key risks that the Bank takes into account when implementing remuneration measures:

The Board approves the overall risk management policy including risk framework, limits, etc. The Bank conducts all its business activities within this framework. The NRC while assessing the performance of the Bank and senior management, shall consider adherence to the policies and accordingly make its recommendations to the Board.

Overview of the nature and type of key measures used to take account of these risks, including risk difficult to measure: The evaluation process shall incorporate both qualitative and quantitative aspects including asset quality, provisioning, increase in stable funding sources, refinement/improvement of the risk management framework, effective management of stakeholder relationships and mentoring key members of the top and senior management.

Discussion of the ways in which these measures affect remuneration: In order to ensure alignment of remuneration with prudent practices, the NRC takes into account adherence to the risk framework in addition to business performance.

Discussion of how the nature and type of these measures have changed over the past year and reasons for the changes, as well as the impact of changes on remuneration: There has been no change in the nature and type of measures over the past year.

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

Overview of main performance metrics for the Bank, top level business lines and individuals: The main performance metrics include profitability, business growth, asset quality, compliance, and customer service.

Discussion of how amounts of individual remuneration are linked to the Bank-wide and individual performance: The assessment of employees shall be based on their performance with respect to their result areas and shall include the metrics mentioned above.

Discussion of the measures the Bank will in general implement to adjust remuneration in the event that performance metrics are weak, including the Bank''s criteria for determining ''weak'' performance metrics: In case such an event should occur, the Board/NRC shall review and provide overall guidance on the corrective measures to be taken.

E. Description of the ways in which the Bank seeks to link performance during a performance measurement year with levels of remuneration.

As a part of the performance management process in the bank at the beginning of each financial year, the bank rolls out individual KRA''s to each and every employee in the bank. These KRA''s are broken down based on the strategic objectives and business budgets set by the Board of the bank. Apart from regular feedback which each manager provides to his / her subordinates a bank as formal process of Mid-Year Review and Year End Review to assess performance of each role holder in the bank. Based on the performance review at an organizational / Functional / Individual the bank decided on percentage of salary increments to be given at various levels of performance.

Discussion of the Bank''s policy on deferral and vesting of variable remuneration and, if the fraction of variable remuneration that is deferred differs across employees or groups of employees, a description of the factors that determine the fraction and their relative importance:

The various deferral arrangement of variable remuneration in the bank broadly are as follows -

a) For MD & CEO - The variable remuneration of the MD and CEO is approved by the Reserve Bank of India which includes deferral arrangement for the cash and non cash part of the variable pay which is implemented by the bank as per the advice of the RBI.

b) All ESOP ''s which are granted across all levels in the organization have deferral arrangement in them

c) Monthly / Quarterly Variable Pay - Based on the nature of the scheme, deferral arrangements are made in the same which differ from channel to channel.

The fraction of deferral to be considered is dependent upon -

a) Guidelines issued by the Regulator from time to time

b) Approval as per the overall performance framework approved by the NRC and the Board

c) Driving right behaviours via the various incentive schemes.

Discussion of the Bank''s policy and criteria for adjusting deferred remuneration before vesting and (if permitted by national law) after vesting through claw back arrangements:

The Bank also has in place a Policy on Risk Alignment of Compensation applicable for MD & CEO and Risk Control and Compliance. This policy deals with the deferred payment of variable pay and claw back guidelines.

F. Description of the different forms of variable remuneration that the Bank utilizes and the rationale for using these different forms.

The Bank has variable pay that is paid based on the performance that is applicable to all levels. The ESOP options of the Holding Company and the Bank are currently given to eligible employees in Chief Manager and above grade subject to performance. Employees in sales function do have incentives based on monthly business performance.

Overview of the forms of variable remuneration offered. A discussion of the use of different forms of variable remuneration and if the mix of different forms of variable remuneration differs across employees or group of employees, a description of the factors that determine the mix and their relative importance

The variable remuneration is offered in the form of annual performance bonus. The same is determined on the basis of comprehensive performance appraisal system wherein the performance of each employee is evaluated on the basis of defined Goal Sheet and KRA at the beginning of year and achievement against them.

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

The Bank submits its Proforma Ind-AS financials on half yearly basis to RBI based on the GAP assessment carried out by the Bank. The Bank is currently handling the impact analysis and reporting offline by using excel based models. However, the Bank is in the process of implementing system solutions (IndAS 109 and 116) and hiring skilled resources to implement Ind-AS accounting.

18.14.11 Details of item of Others under Other Assets head exceeds one per cent of the total Asset

There are no item of Others under Other Assets head exceeds one per cent of the total asset during the year ended 31 March 2023 and 31 March 2022.

18.14.12 Details of item of Others including provisions under Other Liabilities and Provisions head exceeds one per cent of the total Assets

There are no item of Others including provisions under Other Liabilities and Provisions head exceeds one per cent of the total Assets during the year ended 31 March 2023 and 31 March 2022.

18.16 Employee Stock Option Plan (ESOP)

A. Options granted by Holding Company

The Holding Company has formulated an Employees Stock Option Scheme to be administered through a Trust. The scheme provides that subject to continued employment with the Bank, the employees of Bank are granted an option to acquire equity shares of the Holding Company that may be exercised within a specified year.

The Holding Company formed Utkarsh ESOP Welfare Trust to issue ESOPs to employees of the Bank as per Employee Stock Option Scheme. Total 1,200,000 equity shares have been reserved under ESOP scheme 2016 and pursuant to Shareholder agreement executed in the year 2016-17 additional 5,989,594 equity shares has been reserved by the Holding Company for the purpose of ESOP scheme.

During the year ended 31 March 2023, the Holding Company granted Nil options to the Bank''s employees (31 March 2022 : Nil options).

The options vested can be exercised within a period of 24 months from the date of vesting. The plan is administered, supervised and implemented by the Compensation Committee under the policy and frame work laid down by the Board of Directors of the Holding Company in accordance with the authority delegated to the Compensation Committee in this regard from time to time.

The Guidance Note on "Accounting for Employee Share Based Payments" issued by the ICAI establishes financial and reporting principles for employees share based payment plans. The Guidance Note applies to employee share based payment plans, the grant date in respect of which falls on or after 01 April 2005. The Guidance Note also applies to transfers of shares or stock options of the parent of the enterprise, or shares or stock options of another enterprise in the same group as the enterprise, to the employees of the enterprise. The compensation costs of stock options granted to employees of the Bank are accounted using intrinsic value method.

The compensation cost is calculated based on the intrinsic value method, wherein the excess of fair value of underlying equity shares as on the date of the grant over the exercise price of the options given to employees of the Bank under the ESOP scheme, is recognised as compensation cost and amortised over the vesting period. The Holding Company cross charges the compensation cost to the Bank to the extent it pertains to the employees of the Bank.

Shares vested to the employees have an exercise period of two years.

*The Bank received approval from RBI on 31 August 2021 for remuneration of MD & CEO for FY 2019-20 wherein non cash component of variable pay of ''0.10 crore was approved and was paid by way of grant of 71,377 options out of banks shares with effect from 28 December 2020 being the date of approval of Banks ESOP Scheme.

**The Bank received approval for remuneration to MD & CEO for financial year 2020-21 from RBI on 12 January 2022 advising to defer non-cash component over next 3 years in 3 equal instalments of 33.33% each. Further, 50% of cash component to be paid upfront and remaining 50% to be deferred in next 3 years in equal instalments. Accordingly, the Bank has granted 4,56,817 ESOPs to MD & CEO at ''14.01 per share w.e.f 12 January 2022 with vesting over next three years in equal proportion i.e. 33.33% each year. However, Bank has received another letter from RBI on 28 July 2022 wherein non cash component has been revised. It is also advised to adjust the excess grant of non-cash component in the next tranche itself. Accordingly, the Bank has revised the options granted to MD & CEO w.e.f 12 January 2022 to 221,270 options with vesting over next two year with the proportion of 69% and 31%.

***The bank received approval for remuneration to MD & CEO for financial year 2021-22 from RBI on 14 December, 2022 including non cash variable pay of ''0.60 crore and advised to defer it over next 3 years in 3 equal instalments. Accordingly, Bank has granted 6,26,226 ESOPs to MD & CEO at ''31.80 per share w.e.f 17 September 2022 being the date of Board approval for remuneration to MD & CEO with vesting over next three years in equal proportion i.e. 33.33% each year.

Note: The above amount is netted off with amount of ''Nil received under the scheme "Pradhan Mantri Rojgar Protsahan Yojana" for the year ended 31 March 2023 (31 March 2022 : ''0.47 crores).

Defined Benefit Plans:

The Bank has a defined benefit gratuity plan. Every employee who has completed five years or more of service is eligible for gratuity on cessation of employment and it is computed at 15 days'' salary (last drawn salary) for each completed year of service subject to limit of ''20 Lakh as per the Payment of Gratuity Act, 1972 as amended from time to time. The scheme is funded with an insurance company in the form of a qualifying insurance policy.

The following table sets out the status of the defined benefit gratuity plan as required under Accounting Standard 15.

Discount rate: The discount rate is based on the prevailing market yields of Indian government securities as at the balance sheet date for the estimated term of the obligations.

Salary escalation rate: The estimates of future salary increases considered taking into account the inflation, seniority, promotion and other relevant factors.

Expected rate of return: The overall expected rate of return on assets is determined based on the average long term rate of return expected on investment of the fund during the estimated term of the obligations.

18.18 (A) Business Segments:

Interms of AS-17 (Segment Reporting) issued by ICAI and RBI circular Ref. DBOD.No. BP.BC.81/21.04.018/2006-07 dated 18 April 2007 read with DBR.BP. BC No.23/21.04.018/2015-16 dated 01 July 2015 and amendments thereto, the following business segments have been disclosed:

Corporate/ Wholesale Banking: Includes lending, deposits and other banking services provided to corporate customers of the Bank.

Retail Banking: Includes lending, deposits and other banking services provided to retail customers of the Bank through branch network.

Treasury: Includes dealings in SLR and Non SLR investments, maintenance of reserve requirements and resource mobilization from other Banks and financial Institutions.

Other Banking Operations: Includes other activities which are not covered under wholesale, retail or treasury activity.

Geographical segments: The business operations of the Bank are concentrated in India hence the Bank is considered to operate in domestic segment only.

18.20 Leases Operating Lease

Lease payments made under cancellable operating lease amounting to ''58.08 crores (31 March 2022 : ''46.35 crores) disclosed as rent under Schedule 16 and the same have been recognized as an expense in the Profit and Loss Account. There are one sublease agreement with Utkarsh CoreInvest Limited (the Holding Company).

18.23.1 Contingent liabilities

1. Description of nature of contingent liabilities is set out below:

a. There is a capital commitment towards open purchase orders.

b. Pending litigation against the Bank.

c. Demands against tax assessments.

d. Commitment towards irrevocable Undrawn Fund Based Credit facilities Refer Schedule 12 for amounts relating to contingent liabilities.

18.23.2 Letter of comfort

Bank has not issued any letters of comfort during the year ended 31 March 2023 and 31 March 2022. Further, there are no outstanding comfort letters as at 31 March 2023 and 31 March 2022.

18.26 In the year ended 31 March 2023, the impact of disruptions resulting from COVID -19 has eased substantially, however the Bank continues to monitor the developments/ ongoing impact resulting from COVID-19 Pandemic and any action to contain its spread or mitigate its impact.

As at 31 March 2023, Bank carries additional floating provision of ''80 crores (''60 crores as at 31 December 2022) and additional contingency provision of ''13 crores (''65 crores as at 31 December 2022). Further, the Bank was carrying an additional contingency provision of ''65 crores as at 31 March 2022 which has been utilised to the extent of ''52 crores in the current year and consequently the provision as at 31 March 2023 is ''13 crores.

18.27 The Bank''s pending litigations include claims against the Bank by counterparties and proceedings pending with tax authorities. The Bank has reviewed its pending litigations and proceedings and has adequately provided for where provisions are required, and disclosed as contingent liabilities where applicable.

18.28 The Bank, as part of its normal banking business, grants loans and advances, makes investments, provides guarantees, to and accepts deposits and borrowings from its customers and borrowing from entities. These transactions are part of Bank''s normal banking business, which is conducted ensuring adherence to all regulatory requirements and banks internal policies as applicable. Other than the transactions described above, no funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any other sources or kind of funds) by the Bank to or in any other persons or entities, including foreign entities (Intermediaries) with the understanding, whether recorded in writing or otherwise, 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 parties (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 Funding Party (Ultimate Beneficiaries) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

18.29 Figu res of the previous year have been regrouped / reclassified, wherever necessary to confirm current year classification.