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) Income

(i) Interest income

The Company recognizes interest income using Effective Interest Rate (EIR) on all financial assets
subsequently measured at amortized 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 amortized cost of a financial liability.

(ii) Dividend income

Dividend income on equity shares is recognized 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 recognizes income on recoveries of financial assets written off on realization or when the
right to receive the same without any uncertainties of recovery is established.

(v) Taxes

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

4.2) Expenditures

(i) Finance costs

Borrowing costs on financial liabilities are recognized 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 and
fees payable for management of portfolio etc., are recognized in the statement of profit and loss on an
accrual basis.

(iii) Taxes

Expenses are recognized 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; 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 recognized on the date when the Company becomes party to the
contractual provisions of the financial instruments. For tradable securities, the Company recognizes 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 inequity and debt instruments, and cash
and cash equivalents.

a. Initial Measurement

All financial assets are recognized 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.

b. Subsequent Measurement

Equity investments designated under FVOCI

All equity investments are 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 recognized 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 derecognizes 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 derecognized, 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 fair value through P & L, 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 categorizes 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 recognized and interest revenue is calculated by
applying the effective interest rate to the amortized 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 entities own equity
instruments. Few examples of financial liabilities are trade payables, debt securities and other
borrowings and subordinated debts.

Initial measurement

All financial liabilities are recognized 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.

Subsequent measurement

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

4.5 ) Taxes
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 recognized outside profit or loss is recognized in correlation to the under
lying 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.