4) Summary of Significant Accounting Policies

This note provides a list of the significant accounting policies adopted in the preparation of these
financial statements. These policies have been consistently applied to all the years presented, unless
otherwise stated.

4.1) Incomei) Interest Income

The Company recognises interest income using Effective Interest Rate (EIR) on all financial assets
subsequently measured at amortised cost or fair value through other comprehensive income
(FVOCI). EIR is calculated by considering all costs and incomes attributable to acquisition of a
financial asset or an assumption of a financial liability and it represents a rate that exactly discounts
estimated future cash payments / receipts through the expected life of the financial asset / financial
liability to the gross carrying amount of a financial asset or to the amortised cost of a financial
liability.

ii) Dividend Income

Dividend income on equity shares is recognised when the Company's right to receive the payment is
established, which is generally when shareholders approve the dividend.

iii) Other Revenue from Operations

Revenue (other than for those items to which Ind AS 109 - Financial Instruments are applicable) is
measured at the amount of transaction price (net of variable consideration) allocated to that
performance obligation.

iv) Recoveries of Financial Assets Written-Off

The Company recognises income on recoveries of financial assets written off on realisation or when
the right to receive the same without any uncertainties of recovery is established.

v) Taxes

Incomes are recognised net of the Goods and Services Tax / Service Tax, wherever applicable.

4.2) Expendituresi) Finance Costs

Borrowing costs on financial liabilities are recognised using the EIR.

ii) Fees and Commission Expenses

Fees and commission expenses which are not directly linked to the sourcing of financial assets, such
as commission / incentive incurred on value added services and products distribution, recovery
charges, etc., are recognised in the statement of profit and loss on an accrual basis.

iii) Taxes

Expenses are recognised net of the Goods and Services Tax / Service Tax, except where credit for the
input tax is not statutorily permitted.

4.3) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, other short term, highly liquid investments with
original maturities of three months or less that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value.

4.4) Financial Instruments

A financial instrument is defined as any contract that gives rise to a financial asset of one entity and
a financial liability or equity instrument of another entity. Trade receivables and payables, loan
receivables, investments in securities and subsidiaries, debt securities and other borrowings,
preferential and equity capital etc. are some examples of financial instruments.

All the financial instruments are recognised on the date when the Company becomes party to the
contractual provisions of the financial instruments. For tradable securities, the Company recognises
the financial instruments on settlement date.

i) Financial Assets

Financial assets include cash, or an equity instrument of another entity, or a contractual right to
receive cash or another financial asset from another entity. Few examples of financial assets are loan
receivables, investment in equity and debt instruments, and cash and cash equivalents.

1. Initial Measurement

All financial assets are recognised initially at fair value including transaction costs that are
attributable to the acquisition of financial assets. Generally, the transaction price is treated as
fair value unless proved to the contrary. However, trade receivable that do not contain a
significant financing component are measured at transaction price.

2. Subsequent MeasurementEquity investments designated under FVOCI

All equity investments in scope of Ind AS 109 'Financial Instruments' are measured at fair value.
The Company has strategic investments in equity for which it has elected to present subsequent
changes in the fair value in OCI. The classification is made on initial recognition and is
irrevocable.

All fair value changes of the equity instruments, excluding dividends, are recognised in OCI and
not available for reclassification to profit or loss, even on sale of investments. Equity instruments
at FVOCI are not subject to an impairment assessment.

De-recognition of Financial Assets

The Company derecognises a financial asset (or, where applicable, a part of a financial asset)
when:

• The right to receive cash flows from the asset has expired; or

• The Company has transferred its right to receive cash flows from the asset or has assumed

an obligation to pay the received cash flows in full without material delay to a third party
under an assignment arrangement and the Company has transferred substantially all the
risks and rewards of the asset. Once the asset is derecognised, the Company does not
have any continuing involvement in the same.

Impairment of Financial Assets

The Company records allowance for expected credit losses for all loans, other debt financial
assets not held at FVTPL, together with financial guarantee contracts. Equity instruments are not
subject to impairment under Ind AS 109.

The ECL allowance is based on the credit losses expected to arise over the life of the asset (the
lifetime expected credit loss), unless there has been no significant increase in credit risk since
origination, in which case, the allowance is based on the 12 months' expected credit loss.

Lifetime ECL are the expected credit losses resulting from all possible default events over the
expected life of a financial instrument. The 12-month ECL is the portion of Lifetime ECL that
represents the ECLs that result from default events on a financial instrument that are possible
within the 12 months after the reporting date.

Both Lifetime ECLs and 12-month ECLs are calculated on either an individual basis or a collective
basis, depending on the nature of the underlying portfolio of financial instruments.

The Company has established a policy to perform an assessment, at the end of each reporting
period, of whether a financial instrument's credit risk has increased significantly since initial
recognition, by considering the change in the risk of default occurring over the remaining life of
the financial instrument. The Company does the assessment of significant increase in credit risk
at a borrower level. If a borrower has various facilities having different past due status, then the
highest days past due (DPD) is considered to be applicable for all the facilities of that borrower.

Based on the above, the Company categorises its loans into Stage 1, Stage 2 and Stage 3 as
described below:

Stage 1

All exposures where there has not been a significant increase in credit risk since initial
recognition or that has low credit risk at the reporting date and that are not credit impaired
upon origination are classified under this stage. The Company classifies all standard advances
and advances up to 30 days' default under this category. Stage 1 loans also include facilities
where the credit risk has improved and the loan has been reclassified from Stage 2.

Stage 2

All exposures where there has been a significant increase in credit risk since initial recognition
but is not credit impaired are classified under this stage. 30 Days Past Due is considered as
significant increase in credit risk.

Stage 3

All exposures assessed as credit impaired when one or more events that have a detrimental
impact on the estimated future cash flows of that asset have occurred are classified in this stage.
For exposures that have become credit impaired, a lifetime ECL is recognised and interest
revenue is calculated by applying the effective interest rate to the amortised cost (net of
provision) rather than the gross carrying amount. 90 Days Past Due is considered as default for
classifying financial instrument as credit impaired. If an event (for e.g. any natural calamity)
warrants a provision higher than as mandated under ECL methodology, the Company may
classify the financial asset in Stage 3 accordingly.

ii) Financial Liabilities

A financial liability includes liabilities that represent a contractual obligation to deliver cash or
another financial asset to another entity, or a contract that may or will be settled in the entity's own
equity instruments. Few examples of financial liabilities are trade payables, debt securities and other
borrowings and subordinated debts.

1. Initial Measurement

All financial liabilities are recognised initially at fair value and, in the case of borrowings and
payables, net of directly attributable transaction costs. The Company's financial liabilities include
trade payables, other payables, debt securities and other borrowings.

2. Subsequent Measurement

After initial recognition, all financial liabilities are subsequently measured at amortised cost
using the EIR. Any gains or losses arising on de-recognition of liabilities are recognised in the
Statement of Profit and Loss.

4.5) Taxes
1) Current Tax

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid
to the taxation authorities, in accordance with the Income Tax Act, 1961 and the Income
Computation and Disclosure Standards (ICDS) prescribed therein. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively enacted, at the reporting date.

Current tax relating to items recognised outside profit or loss is recognised in correlation to the
underlying transaction either in OCI or directly in other equity. Management periodically evaluates
positions taken in the tax returns with respect to situations in which applicable tax regulations are
subject to interpretation and establishes provisions where appropriate.

2) Deferred Tax

Deferred tax is provided using the Balance Sheet approach on temporary differences between the
tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the
reporting date.

Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets
are recognised for deductible temporary differences to the extent that it is probable that taxable
profits will be available against which the deductible temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part
of the deferred tax asset to be utilised. Unrecognised deferred tax assets, if any, are re-assessed at
each reporting date and are recognised to the extent that it has become probable that future
taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised either in OCI or in other
equity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off
current tax assets against current tax liabilities and the deferred taxes relate to the same taxable
entity and the same taxation authority.

4.6) Property, Plant and Equipment

Property, plant and equipment are carried at historical cost of acquisition less accumulated
depreciation and impairment losses, consistent with the criteria specified in Ind AS 16 'Property,
Plant and Equipment'.

Depreciation on Property, Plant and Equipment

1) Depreciation is provided on a pro rata basis for all tangible assets on a straight-line method
over the useful life of assets.

2) Useful lives of assets are determined as prescribed by Schedule II - Part C of the Companies
Act, 2013.

3) Depreciation in addition to assets and assets sold during the year is being provided for on a
pro rata basis with reference to the month in which such asset is added or sold as the case may
be.

4) An item of property, plant and equipment and any significant part initially recognised is
derecognised upon disposal or when no future economic benefits are expected from its use or
disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the asset) is included under
other income in the Statement of Profit and Loss when the asset is derecognised.

5) The residual values, useful lives and methods of depreciation of property, plant and
equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

4.7) Impairment on Non-Financial Assets

An assessment is done at each Balance Sheet date to ascertain whether there is any indication that
an asset may be impaired. If any such indication exists, an estimate of the recoverable amount of
asset is determined. If the carrying value of the relevant asset is higher than the recoverable
amount, the carrying value is written down accordingly.