2 Material accounting policies

2.01 Statement of compliance and basis of preparation
and presentation

The Standalone financial statements have been prepared
in accordance with Indian Accounting Standards (Ind AS)
as per the Companies (Indian Accounting Standards)
Rules, 2015 as amended from time to time and notified
under section 133 of the Companies Act, 2013 (the Act)
along with other relevant provisions of the Act, Master
Direction - Reserve Bank of India (Non-Banking Financial
Company Scale Based Regulation) Directions, 2023 with
the circular No. RBI/DoR/2023-24/105 DoR.FIN.REC.
No.45/03.10.119/2023-24 Dated October 19, 2023 and
notification for Implementation of Indian Accounting
Standard vide circular RBI/2019-20/170 DOR (NBFC).
CC.PD. No.109/22.10.106/2019-20 dated 13 March
2020 ('RBI Notification for Implementation of Ind AS')
issued by RBI. (Previously Master Direction - Non-Banking
Financial Company - Non-Systemically Important Non¬
Deposit taking Company (Reserve Bank) Directions,
2016 as amended ('the RBI Master Directions') and
notification for Implementation of Indian Accounting
Standard vide circular RBI/2019-20/170 DOR (NBFC).
CC.PD. No.109/22.10.106/2019-20 dated 13 March 2020
('RBI Notification for Implementation of Ind AS') issued
by RBI.) The Company uses accrual basis of accounting
except in case of significant uncertainties [Refer note 2.03
(A),(C),(D),(E)]. Accounting policies have been consistently
applied to all periods presented unless otherwise stated.

The standalone financial statement has been prepared in
accordance with and comply in all material aspects with
Indian Accounting Standards ('Ind AS') notified under
section 133 of the Companies Act, 2013 ('the Act') read
with the Companies (Indian Accounting Standards) Rules,
2015 as amended from time to time and other accounting
principles generally accepted in India on the historical
cost basis except for certain financial instruments that

are measured at fair values at the end of each reporting
period as explained in the accounting policies below and
the relevant provisions of the Act.

Accounting policies have been consistently applied except
where a newly-issued accounting standard is initially
adopted or a revision to an existing accounting standard
requires a change in the accounting policy hitherto in use.

The preparation of standalone financial statements requires the
use of certain critical accounting estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues
and expenses and the disclosed amount of contingent
liabilities. Areas involving a higher degree of judgement or
complexity, or areas where assumptions are significant to the
Company are discussed in Note 2.12 Significant accounting
judgements, estimates and assumptions.

2.02 Presentation of financial statement

The Company presents its balance sheet in the
order of liquidity.

The Balance Sheet, Statement of Profit and Loss and
Statement of Changes in Equity are prepared and
presented in the format prescribed in the Division III
of Schedule III of the Companies Act, 2013 (the 'Act').
The Statement of Cash Flows has been prepared and
presented as per the requirements of Ind AS 7.

Financial assets and financial liabilities are generally
reported on a gross basis except when there is an
unconditional legally enforceable right to offset the
recognised amounts without being contingent on a future
event and the parties intend to settle on a net basis in the
following circumstances:

i. The normal course of business

ii. The event of default

iii. The event of insolvency or bankruptcy of the
Company and/or its counterparties

2.03 Revenue from operations

A Interest Income

Interest income is recognised by applying Effective
Interest Rate (EIR) to the gross carrying amount of
financial assets other than credit-impaired assets and
financial assets classified as measured at Fair value
through Profit and loss (FVTPL) taking into account
the amount outstanding and the applicable interest
rate. In case of credit-impaired financial assets (as
set out in note no. 2.05 (G) regarded as 'Stage 3'),
the Company recognises interest income on the
amortised cost net of impairment loss of the financial
asset. If the financial asset is no longer credit

impaired, the Group reverts to calculating interest
income on a gross basis.

The EIR is computed:

a. As the rate that exactly discounts estimated
future cash payments or receipts through
the weighted average behaviorial life of the
financial asset to the gross carrying amount of a
financial asset.

b. By considering all the contractual terms of the
financial instrument (for example prepayment,
extension, call and similar options) in estimating
the cash flows.

c. Including all fees paid or received between
parties to the contract that are an integral part
of the effective interest rate, transaction cost,
and all other premiums or discounts.

Loan processing fees on loans are collected towards
processing of loan. These are amortised on EIR basis
over the weighted average behaviorial life of the
loan for MSME, Gold loan and Unsecured business
loan and over the contractual tenure for Construction
Finanace and Indirect Lending.

B Dividend Income

Dividend income is recognised when the right to
receive the payment is established, it is probable that
the economic benefits associated with the dividend
will flow to the entity and the amount of the dividend
can be measured reliably.

C Fees & Commission Income

The Company recognises the fee and commission
income not integral to EIR under Ind AS 109 in
accordance with the terms of the relevant customer
contracts / agreement and when it is probable that
the Company will collect the consideration for items.

Revenue towards satisfaction of a performance
obligation is measured at the amount of transaction
price (net of variable consideration) allocated to that
performance obligation. The transaction price of
goods sold and services rendered is net of variable
consideration on account of various discounts
and schemes offered by the Company as part
of the contract.

The Company recognises revenue from contracts
with customers based on a five-step model as set
out in Ind AS 115:

Step 1: Identify contract(s) with a customer: A
contract is defined as an agreement between two

or more parties that creates enforceable rights
and obligations and sets out the criteria for every
contract that must be met.

Step 2: Identify performance obligations in the
contract: A performance obligation is a promise in
a contract with a customer to transfer a good or
service to the customer.

Step 3: Determine the transaction price: The
transaction price is the amount of consideration
to which the Company expects to be entitled in
exchange for transferring promised goods or services
to a customer excluding amounts collected on behalf
of third parties.

Step 4: Allocate the transaction price to the
performance obligations in the contract: For a
contract that has more than one performance
obligation, the Company allocates the transaction
price to each performance obligation in an amount
that depicts the amount of consideration to which
the Company expects to be entitled in exchange for
satisfying each performance obligation.

Step 5: Recognise revenue when (or as) the Company
satisfies a performance obligation. Fees for sale of
services are accounted as and when the service is
rendered provided there is reasonable certainty of
its ultimate realisation.

Bounce/ penal charges levied on customers for non-
payment/delayed in payment of instalment on the
contractual date & Foreclosure charges collected
from loan customers for early payment / closure of
loan are recognised on a point in time basis and are
recorded when realised.

Distribution income is earned by selling of services
and products of other entities under distribution
arrangements. The income so earned is recognised on
successful distribution on behalf of other entities subject
to there being no significant uncertainty of its recovery.

Commission on Insurance Policies sold is recognised
on accrual basis when the Company under its agency
code sells the insurance policies.

D Sale of service

Sale of services includes advertising income,
representing income earned from the activities
incidental to the business and is recognised when the
service is performed. Revenue is net of applicable
indirect taxes as per the terms of the contract.

E Net gain on Fair value changes

Any differences between the fair values of financial
assets classified as FVTPL held by the Company on
the balance sheet date is recognised as an unrealised
gain / loss. In case there is a net gain in the
aggregate, the same is recognised in "Net gains on
fair value changes" under Revenue from operations
and if there is a net loss the same is disclosed as "Net
loss on fair value changes" under Expenses in the
Statement of Profit and Loss.

Similarly, any realised gain or loss on sale of financial
instruments measured at FVTPL and debt instruments
measured at FVOCI is recognised in net gain / loss on
fair value changes.

However, Net gain / loss on derecognition of
financial instruments classified as amortised cost is
presented separately under the respective head in
the Statement of Profit and Loss.

F Assignment transactions

In accordance with Ind AS 109, in case of assignment
transactions with significant transfer of risks and
rewards without any retention of residual interest,
gain arising on such assignment transactions is
recorded upfront in the Statement of Profit and Loss
and the corresponding asset is derecognized from
the Balance Sheet immediately upon execution of
such transaction. Further, the transfer of financial
assets qualifies for derecognition to the extent of
portion transferred. The whole of the interest spread
is at its present value (discounted over the life of the
asset) is recognized on the date of derecognition
itself as interest only strip receivable (interest strip
on assignment) and correspondingly recognized as
profit on derecognition of financial asset.

2.04 Expenses

A Finance costs

Finance costs on borrowings paid towards
availing of loan is amortised on EIR basis over the
contractual life of loan.

The EIR in case of a financial liability is computed

a. As the rate that exactly discounts estimated
future cash payments through the expected
life of the financial liability to the gross
carrying amount of the amortised cost of a
financial liability.

b. By considering all the contractual terms of the
financial instrument in estimating the cash flows.

c. Including all fees paid between parties to
the contract that are an integral part of the
effective interest rate, transaction cost, and all
other premiums or discounts.

Any subsequent changes in the estimation of the
future cash flows is recognised in interest expense
with the corresponding adjustment to the carrying
amount of the liability.

Interest expense includes issue costs that are initially
recognized as part of the carrying value of the
financial liability and amortized over the expected life
using the effective interest method. These include
fees and commissions payable to advisers and other
expenses such as external legal costs, rating fee, etc,
provided these are incremental costs that are directly
related to the issue of a financial liability.

B Retirement and other employee benefits
Short term employee benefit

All employee benefits payable wholly within twelve
months of rendering the service are classified as
short-term employee benefits. These benefits
include short term compensated absences such as
paid annual leave. The undiscounted amount of
short-term employee benefits expected to be paid
in exchange for the services rendered by employees
is recognised as an expense during the period.
Benefits such as salaries and wages, etc. and the
expected cost of the bonus/ex-gratia are recognised
in the period in which the employee renders the
related service.

Post-employment employee benefits

a) Defined contribution schemes

The Company provides a defined contribution
plan for all the eligible employees of the
Company who have opted to receive benefits
under the Provident Fund and Employees
State Insurance Scheme, defined contribution
plans in which both the employee and the
Company contribute monthly at a stipulated
rate. The Company has no liability for future
benefits other than its annual contribution and
recognises such contributions as an expense
in the period in which employee renders the
related service. If the contribution payable to
the scheme for service received before the
Balance Sheet date exceeds the contribution
already paid, the deficit payable to the scheme
is recognised as a liability after deducting the
contribution already paid. If the contribution
already paid exceeds the contribution due for

services received before the Balance Sheet
date, then excess is recognised as an asset to
the extent that the pre-payment will lead to,
for example, a reduction in future payment
or a cash refund.

b) Defined Benefit schemes

The Company provides a defined benefit
retirement plan for gratuity covering all
employees. The plan provides for lump sum
payments to employees upon death while in
employment or on separation from employment
after serving for the stipulated years mentioned
under 'The Payment of Gratuity Act, 1972'.
The present value of the obligation under
such defined benefit plan is determined
based on actuarial valuation carried out by an
independent actuary at each Balance Sheet
date using the Projected Unit Credit Method
which recognizes each period of service as
giving rise to an additional unit of employee
benefit entitlement and measures each unit
separately to build up the final obligation.

The obligation is measured at the present value
of the estimated future cash flows. The discount
rates used for determining the present value of
the obligation under defined benefit plan are
based on the market yields on Government
Securities as at the Balance Sheet date.

Net interest recognized in profit or loss is
calculated by applying the discount rate used
to measure the defined benefit obligation to
the net defined benefit liability or asset. The
actual return on the planed assets above or
below the discount rate is recognized as part
of re-measurement of net defined liability or
asset through other comprehensive income.
An actuarial valuation involves making various
assumptions that may differ from actual
developments in the future. These include the
determination of the discount rate, attrition
rate, future salary increases and mortality
rates. Due to the complexities involved in
the valuation and its long-term nature, these
liabilities are highly sensitive to changes in these
assumptions. All assumptions are reviewed at
half yearly intervals.

The Company fully contributes all ascertained
liabilities to The Trustees - CGCL Employees
Group Gratuity Assurance Scheme (Formerly
known as "Money Matters Financial Services
Limited Employee Group Gratuity Assurance

Scheme"). Trustees administer contributions
made to the trust and contributions are invested
in a scheme of insurance with the Insurance
Regulatory and Development Authority (IRDA)
approved Insurance Companies.

Re-measurement, comprising of actuarial
gains and losses and the return on plan assets
(excluding amounts included in net interest on
the net defined benefit liability) are recognized
immediately in the Balance Sheet with a
corresponding debit or credit to retained
earnings through Other Comprehensive
Income (OCI) in the period in which they occur.
Re-measurements are not reclassified to profit
and loss in subsequent periods.

C Leases Rent

The Company leases most of its office facilities under
operating lease agreements that are renewable
on a periodic basis at the option of the lessor and
the lessee. The lease agreements contain rent free
periods and rent escalation clauses.

The Company assesses whether a contract contains a
lease at the inception of the contract. A contract is or
contains a lease if the contract conveys the right to
control the use of an identified asset for a period of
time in exchange for consideration. To assess whether
a contract conveys the right to control the use of an
identified asset, the Company assesses whether (i)
the contract involves the use of an identified asset,
(ii) the Company has substantially all of the economic
benefits from the use of the asset through the period
of the lease and (iii) the Company has the right to
direct the use of the asset.

At the date of commencement of the lease, the
Company recognizes a Right-of-use assets (ROU)
asset and a corresponding lease liability for all lease
arrangements under which it is a lessee, except for
short-term leases and low value leases. ROU assets
represent the Company's right to use an underlying
asset for the lease term and lease liabilities represent
the Company's obligation to make lease payments
arising from the lease. For short-term leases and
low value leases, the Company recognizes the lease
payments as an expense on a straight-line basis over
the term of the lease.

The lease arrangements include options to extend
or terminate the lease before the end of the lease
term. ROU assets and lease liabilities include these
options when it is reasonably certain that they
will be exercised.

The ROU assets are initially recognized at cost, which
comprises the initial amount of the lease liability
adjusted for any lease payments made at or prior
to the commencement date of the lease plus any
initial direct costs less any lease incentives. They are
subsequently measured at cost less accumulated
depreciation and impairment losses.

ROU assets are depreciated from the date of
commencement of the lease on a straight-line basis
over the lease term.

The lease liability is initially measured at amortized
cost at the present value of the future lease payments.
For leases under which the rate implicit in the lease
is not readily determinable, the Company uses its
incremental borrowing rate based on the information
available at the date of commencement of the lease
in determining the present value of lease payments.
Lease liabilities are remeasured with a corresponding
adjustment to the related ROU asset, if the Company
changes its assessment as to whether it will exercise
an extension or a termination option.

The lease liability is subsequently increased by the
interest cost on the lease liability and decreased by
lease payment made. The carrying amount of lease
liability is remeasured to reflect any reassessment or
lease modifications or to reflect revised in-substance
fixed lease payments. A change in the estimate of
the amount expected to be payable under a residual
value guarantee, or as appropriate, changes in the
assessment of whether a purchase or extension option
is reasonably certain to be exercised or a termination
option is reasonably certain not be exercised.

At initial recognition the carrying value of the
refundable deposits is taken at present value of all
expected future principal repayments discounted
using market rates prevailing at the time of
inception. For Interest expenses, the difference
between present market value and deposit made
is recognised as prepayment and amortised in the
Statement of Profit and Loss over the benefit period
on systematic basis. Interest income is recognised at
the prevailing market rates.

Short-term leases and leases of low-value assets

The Company applies the short-term lease
recognition exemption to its short-term leases (i.e.,
those leases that have a lease term of 12 months
or less from the commencement date and do not
contain a purchase option). It also applies the
lease of low-value assets recognition exemption to
leases that are considered to be of low value. Lease
payments on short-term leases and leases of low-
value assets are recognised as expense on a straight¬
line basis over the lease term.

Deferred tax assets and liabilities are offset where
there is a legally enforceable right to offset current
tax assets and liabilities and they relate to income
taxes levied by the same tax authority on the same
taxable entity.

Indirect tax

Goods and Services Tax /Service Tax/Value
Added Taxes paid on acquisition of assets or on
incurring expenses

Expenses and assets are recognised net of the
goods and services tax/service tax/value added
taxes paid, except:

i. When the tax incurred on a purchase of
assets or services is not recoverable from the
taxation authority, in which case, the tax paid
is recognised as part of the cost of acquisition
of the asset or as part of the expense
item, as applicable.

ii. When receivables and payables are stated with
the amount of tax included.

The net amount of tax recoverable from or payable
to the taxation authority is included as part of
receivables or payables in the balance sheet.

2.05 Financial instruments

Financial assets and financial liabilities are recognised in
the Company's Balance Sheet on trade date, i.e. when the
Company becomes a party to the contractual provisions of
the instrument.

Financial assets and financial liabilities are initially
measured at fair value. Transaction costs and revenues
that are directly attributable to the acquisition or issue of
financial assets and financial liabilities (other than financial
assets and financial liabilities measured at fair value
through profit or loss) are added to or deducted from the
fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs and
revenues of financial assets or financial liabilities carried at
fair value through the profit or loss account are recognised
immediately in the Statement of Profit or Loss. Trade
Receivables are measured at transaction price.

A Classification of financial instruments

The Company classifies its financial assets into the
following measurement categories:

1. Financial assets to be measured at
amortised cost.

2. Financial assets to be measured at fair value
through profit or loss account.

3. Financial assets to be measured at fair value
through other comprehensive income

The classification depends on the contractual terms
of the financial assets, cash flows and the Company's
business model for managing financial assets which
are explained below:

Business model assessment

The Company determines its business model at the
level that best reflects how it manages groups of
financial assets to achieve its business objective.

The Company's business model is not assessed on an
instrument-by-instrument basis, but at a higher level
of aggregated portfolios and is based on observable
factors such as:

• How the performance of the business model
and the financial assets held within that
business model are evaluated and reported to
the entity's key management personnel.

• The risks that affect the performance of the
business model (and the financial assets held
within that business model) and the way those
risks are managed.

• How managers of the business are compensated
(for example, whether the compensation is
based on the fair value of the assets managed
or on the contractual cash flows collected).

• The expected frequency, value and timing
of sales are also important aspects of the
Company's assessment. The business model
assessment is based on reasonably expected
scenarios without taking 'worst case' or 'stress
case' scenarios into account. If cash flows
after initial recognition are realised in a way
that is different from the Company's original
expectations, the Company does not change
the classification of the remaining financial
assets held in that business model, but
incorporates such information when assessing
newly originated or newly purchased financial
assets going forward.

The Solely Payments of Principal and Interest
(SPPI) test

As a second step of its classification process, the
Company assesses the contractual terms of financial
assets to identify whether they meet the SPPI test.

'Principal' for the purpose of this test is defined as the
fair value of the financial asset at initial recognition
and may change over the life of the financial asset

(for example, if there are repayments of principal or
amortisation of the premium/discount).

In making this assessment, the Company considers
whether the contractual cash flows are consistent
with a basic lending arrangement i.e. interest
includes only consideration for the time value of
money, credit risk, other basic lending risks and a
profit margin that is consistent with a basic lending
arrangement. Where the contractual terms introduce
exposure to risk or volatility that are inconsistent with
a basic lending arrangement, the related financial
asset is classified and measured at fair value through
profit or loss.

The Company classifies its financial liabilities at
amortised costs unless it has designated liabilities at
fair value through the profit and loss account or is
required to measure liabilities at fair value through
profit or loss such as derivative liabilities.

B Financial assets measured at amortised cost

These financial assets comprises of bank balances,
receivables, investments and other financial assets.

Financial assets

Financial assets are measured at amortised cost
where they have:

a) contractual terms that give rise to cash flows on
specified dates, that represent solely payments
of principal and interest on the principal amount
outstanding; and

b) are held within a business model whose
objective is achieved by holding to collect
contractual cash flows.

These Financial assets are initially recognised at fair
value plus directly attributable transaction costs and
subsequently measured at amortised cost.

C Items at Fair Value Through Profit or Loss (FVTPL)

Items at fair value through profit or loss comprise:

• Investments (including equity shares)

held for trading;

• debt instruments with contractual terms
that do not represent solely payments of
principal and interest.

Financial instruments held at FVTPL are initially
recognised at fair value with transaction costs
recognised in the statement of profit and loss as
incurred. Subsequently, they are measured at fair

value and any gains or losses are recognised in the
statement of profit and loss as they arise.

Financial instruments designated as measured at
FVTPL

Upon initial recognition, financial instruments may
be designated FVTPL. A financial asset may only
be designated at FVTPL if doing so eliminates or
significantly reduces measurement or recognition
inconsistencies (i.e. eliminates an accounting
mismatch) that would otherwise arise from measuring
financial assets or liabilities on a different basis.

A financial liability may be designated at FVTPL
if it eliminates or significantly reduces an
accounting mismatch or:

• if a host contract contains one or more
embedded derivatives; or

• if financial assets and liabilities are both
managed, and their performance evaluated on a
fair value basis in accordance with a documented
risk management or investment strategy.

Where a financial liability is designated at FVTPL,
the movement in fair value attributable to changes
in the Company's own credit quality is calculated by
determining the changes in credit spreads above
observable market interest rates and is presented
separately in other comprehensive income. As at the
reporting date, the Company has not designated
any financial instruments as measured at fair value
through profit or loss.

D Debt securities and other borrowed funds

After initial measurement, debt issued and other
borrowed funds are subsequently measured at
amortised cost. Amortised cost is calculated by
taking into account any discount or premium on
issue funds and costs that are an integral part of the
Effective Interest Rate (EIR).

E Reclassification

If the business model under which the Company holds
financial assets undergoes changes, the financial
assets affected are reclassified. The classification
and measurement requirements related to the new
category apply prospectively from the first day
of the first reporting period following the change
in business model that result in reclassifying the
Company's financial assets. Changes in contractual
cash flows are considered under the accounting
policy on modification and derecognition of financial
assets described in subsequent paragraphs.

F Recognition and Derecognition of financial assets
and liabilities

Recognition:

a) Loans and Advances are initially recognised
when the Financial Instruments are transferred
to the customers.

b) Investments are initially recognised on the
settlement date.

c) Debt securities and borrowings are initially
recognised when funds are received
by the Company.

d) Other Financial assets and liabilities are initially
recognised on the trade date, i.e., the date
that the Company becomes a party to the
contractual provisions of the instrument. This
includes regular purchases or sales of financial
assets that require delivery of assets within the
time frame generally established by regulation
or convention in the market place.

Derecognition of financial assets due to substantial
modification of terms and conditions:

The Company derecognises a financial asset
such as a loan to a customer when the terms and
conditions have been renegotiated to the extent
that, substantially, it becomes a new loan with the
difference recognised as a derecognition gain or loss,
to the extent that an impairment loss has not already
been recorded. The newly recognised loans are
classified as Stage 1 for ECL measurement purposes
unless the new loan is deemed to be Purchased or
Originated as Credit Impaired (POCI). In case of an
existing exposure to the borrower in the Company,
the newly recognised loans are classified as per the
staging of the existing exposure.

If the modification does not result in cash flows that
are substantially different, the modification does not
result in derecognition. Based on the change in cash
flows discounted at the original EIR, the Company
records a modification gain or loss, to the extent that
an impairment loss has not already been recorded.

Derecognition of financial assets and financial
liability other than due to substantial modification

a) Financial assets:

A financial asset (or, where applicable, a part
of a financial asset or part of a group of similar
financial assets) is derecognised when the rights
to receive cash flows from the financial asset
have expired. The Company also derecognises
the financial asset if it has both transferred

the financial asset and the transfer qualifies
for derecognition.

The Company has transferred the financial
asset if the Company has transferred its
contractual rights to receive cash flows from the
financial asset.

A transfer only qualifies for derecognition, if either:

i. The Company has transferred substantially
all the risks and rewards of the asset, or

ii. The Company has neither transferred nor
retained substantially all the risks and
rewards of the asset, but has transferred
control of the asset

The Company considers control to be
transferred if and only if the transferee has the
practical ability to sell the asset in its entirety to
an unrelated third party and is able to exercise
that ability unilaterally and without imposing
additional restrictions on the transfer.

When the Company has neither transferred nor
retained substantially all the risks and rewards
and has retained control of the asset, the asset
continues to be recognised only to the extent
of the Company's continuing involvement, in
which case, the Company also recognises an
associated liability. The transferred asset and
the associated liability are measured on a basis
that reflects the rights and obligations that the
Company has retained.

b) Financial liabilities

A financial liability is derecognised when the
obligation under the liability is discharged,
cancelled or expires. Where an existing
financial liability is replaced by another from
the same lender on substantially different
terms, or the terms of an existing liability are
substantially modified, such an exchange or
modification is treated as a derecognition
of the original liability and the recognition of
a new liability. The difference between the
carrying value of the original financial liability
and the consideration paid is recognised in the
Statement of Profit or Loss.

G Impairment of financial assets
Overview of the ECL principles

The Company records allowance for expected credit
losses for all loans, other debt financial assets not
held at FVTPL, referred to in 'financial instruments'

section. 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 represent 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 grouped
its loan portfolio into Micro, Small and Medium
Enterprises (MSMEs), Construction Finance, Indirect
Lending, Gold Loan and Unsecured business loan

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 (past due for 0 to30 days) under this
category. Stage 1 loans also include facilities where
the credit risk has reduced and the loan has been
reclassified from Stage 2 or Stage 3.

Stage 2

All exposures where there has been a significant
increase in credit risk since initial recognition but
are not credit impaired are classified under this
stage. Financial assets past due for 31 to 90 days
are classified under this stage and lifetime ECL is
recognised on such financial assets. Stage 2 loans also
include facilities where the credit risk has reduced,
and the loan has been reclassified from Stage 3.

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, interest revenue
is calculated by applying the effective interest rate
to the amortised cost (net of provision) rather than
the gross carrying amount. More than 90 days Past
Due is considered as default for classifying a financial
instrument as credit impaired.

Credit-impaired financial assets:

At each reporting date, the Company assesses
whether financial assets carried at amortised cost
and debt financial assets carried at FVTOCI are
credit-impaired. A financial asset is 'credit-impaired'
when one or more events that have a detrimental
impact on the estimated future cash flows of the
financial asset have occurred.

Evidence that a financial asset is credit-impaired
includes the following observable data:

a) Significant financial difficulty of the
borrower or issuer;

b) A breach of contract such as a default or
past due event;

c) It is becoming probable that the borrower
will enter bankruptcy or other financial
reorganisation; or

d) The disappearance of an active market for a
security because of financial difficulties.

The mechanics of ECL:

The assessment of credit risk and estimation of
ECL are unbiased and probability weighted. It
incorporates all information that is relevant including
information about past events, current conditions and
reasonable forecasts of future events and economic
conditions at the reporting date. In addition, the

estimation of ECL takes into account the time value
of money. Forward looking economic scenarios
determined with reference to external forecasts of
economic parameters that have demonstrated a
linkage to the performance of our portfolios over
a period of time have been applied to determine
impact of macro economic factors.

The mechanics of the ECL calculations are outlined
below and the key elements are, as follows:

Probability of Default (PD)

Probability of Default (PD) is defined as the likelihood
of default over a particular time horizon. The PD of
an obligor is a fundamental risk parameter in credit
risk analysis and depends on obligor specific as well
as macroeconomic risk factors.

Loss Given Default (LGD)

Loss Given Default (LGD) is defined as the loss
rate on the exposure, given the borrower has
defaulted. LGD is being calculated for all financial
instruments under risk parameter approach by way
of evaluation of historical data on defaults, recovery
amounts, collateral liquidation, direct expenses, and
opportunity cost for each default.

Exposure at Default (EAD)

The Exposure at Default (EAD) is an estimate of
the exposure at a future default date including the
undrawn commitments. EAD is taken as the gross
exposure under a facility upon default of an obligor.
The principal outstanding, overdue principal, accrued
interest, overdue interest less excess received from
the customers is considered as EAD for the purpose
of ECL computation.

Forward looking information

While estimating the expected credit losses, the
Company reviews macro-economic developments
occurring in the economy and market it operates in.
On a periodic basis, the Company analyses if there
is any relationship between key economic trends
like GDP, unemployment rates, benchmark rates set
by the Reserve Bank of India, inflation etc. with the
estimate of PD determined by the Company based
on its internal data/external data. While the internal
estimates of PD rates by the Company may not be
always reflective of such relationships, temporary
overlays, if any, are embedded in the methodology
to reflect such macro-economic trends reasonably.

Collateral repossessed

In its normal course of business, Company repossess
assets under SARFAESI/ Arbitration Act, but do

not transfer these assets in its book of accounts.
The company continues to show these loans
account as Non-Performing Assets (NPA) in the
books till the liquidation of the secured assets
through public auction and realise actual payment
against these loans.

H Write-offs

The Company reduces the gross carrying amount of a
financial asset when the Company has no reasonable
expectations of recovering a financial asset in its entirety
or a portion thereof. This is generally the case when
the Company determines that the borrower does not
have assets or sources of income that could generate
sufficient cash flows to repay the amounts subjected
to write-offs. Any subsequent recoveries against such
loans are credited to the Statement of Profit and Loss.

I Determination of fair value

On initial recognition, all the financial instruments are
measured at fair value. For subsequent measurement,
the Company measures certain categories of financial
instruments (as explained in note) at fair value on
each Balance Sheet date.

Fair value is the price that would be received to sell
an asset or paid to transfer a liability in an orderly
transaction between market participants at the
measurement date. The fair value measurement is
based on the presumption that the transaction to sell
the asset or transfer the liability takes place either:

i. In the principal market for the asset or liability, or

ii. In the absence of a principal market, in the most
advantageous market for the asset or liability.

The principal or the most advantageous market must
be accessible by the Company.

The fair value of an asset or a liability is measured
using the assumptions that market participants would
use when pricing the asset or liability, assuming that
market participants act in their economic best interest.

A fair value measurement of a non-financial asset
takes into account a market participant's ability to
generate economic benefits by using the asset in
its highest and best use or by selling it to another
market participant that would use the asset in its
highest and best use.

The Company uses valuation techniques that are
appropriate in the circumstances and for which
sufficient data are available to measure fair value,
maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.

In order to show how fair values have been derived,
financial instruments are classified based on a hierarchy
of valuation techniques, as summarised below:

Level 1 financial instruments - Those where the inputs
used in the valuation are unadjusted quoted prices
from active markets for identical assets or liabilities
that the Company has access to at the measurement
date. The Company considers markets as active only
if there are sufficient trading activities with regards
to the volume and liquidity of the identical assets or
liabilities and when there are binding and exercisable
price quotes available on the balance sheet date.

Level 2 financial instruments - Those where the
inputs that are used for valuation are significant and
are derived from directly or indirectly observable
market data available over the entire period of the
instrument's life. Such inputs include quoted prices
for similar assets or liabilities in active markets, quoted
prices for identical instruments in inactive markets
and observable inputs other than quoted prices such
as interest rates and yield curves, implied volatilities,
and credit spreads. In addition, adjustments may be
required for the condition or location of the asset
or the extent to which it relates to items that are
comparable to the valued instrument. However, if
such adjustments are based on unobservable inputs
which are significant to the entire measurement, the
Company will classify the instruments as Level 3.

Level 3 financial instruments - Those that include one
or more unobservable input that is significant to the
measurement as whole.

The Company recognises transfers between levels of
the fair value hierarchy at the end of the reporting
period during which the change has occurred.

Difference between transaction price and fair value
at initial recognition

The best evidence of the fair value of a financial
instrument at initial recognition is the transaction
price (i.e. the fair value of the consideration given
or received) unless the fair value of that instrument
is evidenced by comparison with other observable
current market transactions in the same instrument
(i.e. without modification or repackaging) or based
on a valuation technique whose variables include only
data from observable markets. When such evidence
exists, the Company recognises the difference
between the transaction price and the fair value in
profit or loss on initial recognition (i.e. on day one).

When the transaction price of the instrument differs
from the fair value at origination and the fair value

is based on a valuation technique using only inputs
observable in market transactions, the Company
recognises the difference between the transaction
price and fair value in net gain on fair value changes.
In those cases where fair value is based on models
for which some of the inputs are not observable, the
difference between the transaction price and the fair
value is not recognised at the initial recognition stage.

J Derivative Financial Instruments

The Company holds derivative financial instruments
to hedge its foreign currency and interest rate risk
exposures. Embedded derivatives are separated
from the host contract and accounted for separately
if certain criteria are met.

Derivatives are initially recognised at fair value at
the date a derivative contract is entered into and
are subsequently remeasured to their fair value at
each balance sheet date. The resulting gain/loss
is recognised in the statement of profit and loss
immediately unless the derivative is designated
and is effective as a hedging instrument, in which
event the timing of the recognition in the statement
of profit and loss depends on the nature of the
hedge relationship.

The Company designates certain derivatives as
hedging instruments to hedge the variability
in cash flows associated with its floating rate
borrowings arising from changes in interest rates
and exchange rates at inception of designated
hedging relationships.

The Company documents the risk management
objective and strategy for undertaking the hedge.
The Company also documents the economic
relationship between the hedged item and the
hedging instrument including whether the changes
in cash flows of the hedged item and hedging
instrument are expected to offset each other.

Cash flow hedges

When a derivative is designated as a cash flow
hedging instrument, the effective portion of changes
in the fair value of the derivative is recognised in OCI
and accumulated in the other equity under 'effective
portion of cash flows hedges'. The effective portion
of changes in the fair value of the derivative that
is recognised in OCI is limited to the cumulative
change in fair value of the hedged item determined
on a present value basis from inception of the hedge.
Any ineffective portion of changes in fair value of the
derivative is recognised immediately in profit or loss.

The Company designates only the change in fair
value of the spot element of forward exchange
contracts as the hedging instrument in cash flow
hedge relationships. Change in fair value of the
forward element of the forward exchange contracts
('forward points') is separately accounted for as cost
of hedging and recognised separately within equity.

If a hedge no longer meets the criteria for hedge
accounting or the hedging instrument is sold, expires,
is terminated or is exercised, then hedge accounting
is discontinued prospectively. If the hedged future
cash flows are no longer expected to occur, then the
amounts that have been accumulated in other equity
are immediately reclassified to profit or loss.

2.06 Cash and cash equivalents

Cash and cash equivalents comprise the net amount of short¬
term, highly liquid investments that are readily convertible
to known amounts of cash (short-term deposits with an
original maturity of three months or less) and are subject to
an insignificant risk of change in value. They are held for the
purposes of meeting short-term cash commitments (rather
than for investment or other purposes).

For the purpose of the statement of cash flows, cash and
cash equivalents consist of cash and short- term deposits,
as defined above.

2.07 Property, Plant and Equipment

Property, Plant and Equipment (PPE) are measured at
cost less accumulated depreciation and accumulated
impairment,if any. The total cost of assets comprises
its purchase price, freight, duties, taxes and any other
incidental expenses directly attributable to bringing the
asset to the location and condition necessary for it to
be capable of operating in the manner intended by the
management. Changes in the expected useful life are
accounted for by changing the amortisation period or
methodology, as appropriate and treated as changes in
accounting estimates.

Subsequent expenditure related to an item of tangible
asset are added to its gross value only if it increases the
future benefits of the existing asset beyond its previously
assessed standards of performance and cost can be
measured reliably. Other repairs and maintenance costs
are expensed off as and when incurred.

Property, plant and equipment not ready for the intended
use on the date of Balance Sheet are disclosed as "Capital
work-in-progress.

Depreciation

Depreciation is calculated using the Written Down Value
(WDV) method to write down the cost of property and

equipment to their residual values over their estimated
useful lives which is in line with the estimated useful life
as specified in Schedule II of the Act. 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.

Property plant and equipment is derecognised on disposal
or when no future economic benefits are expected from
its use. Any gain or loss arising on derecognition of
the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset)
is recognised in other income / expense in the statement
of profit and loss in the year the asset is derecognised.
The date of disposal of an item of property, plant and
equipment is the date the recipient obtains control of that
item in accordance with the requirements for determining
when a performance obligation is satisfied in Ind AS 115.

ROU assets are depreciated from the date of
commencement of the lease on a straight-line basis over
the shorter of the lease term and the useful life of the
underlying asset.

2.08 Other intangible assets

An other intangible asset is recognised only when its
cost can be measured reliably and it is probable that the
expected future economic benefits that are attributable to
it will flow to the Company.

Other intangible assets acquired separately are measured
on initial recognition at cost. The cost of an intangible asset
comprises its purchase price and any directly attributable
expenditure on making the asset ready for its intended
use and net of any trade discounts and rebates. Following
initial recognition, intangible assets are carried at cost
less any accumulated amortisation and any accumulated
impairment losses.

The useful lives of intangible assets are assessed to be
either finite or infinite. other intangible assets with finite
lives are amortised over the useful economic life. The
amortisation period and the amortisation method for an
intangible asset with a finite useful life are reviewed at
least at each financial year-end.

Changes in the expected useful life, or the expected
pattern of consumption of future economic benefits
embodied in the asset, are accounted for by changing the
amortisation period or methodology, as appropriate, which
are then treated as changes in accounting estimates. The
amortisation expense on other intangible assets with finite
lives is presented as a separate line item in the statement of
profit and loss. Amortisation on assets acquired/sold during
the year is recognised on a pro-rata basis to the Statement
of Profit and Loss from / upto the date of acquisition/sale.

Amortisation is calculated using the straight-line method
to write down the cost of other intangible assets to their
residual values over their estimated useful lives. Other
intangible assets comprising of software are amortised on
a straight-line basis over a period of 3 years unless it has a
shorter useful life.

Gains or losses from derecognition of other intangible
assets are measured as the difference between the net
disposal proceeds and the carrying amount of the asset
are recognised in the Statement of Profit and Loss when
the asset is derecognised.

Intangible assets not ready for the intended use on
the date of Balance Sheet are disclosed as "Intangible
under development"

Estimated useful life of assets is as below-

(a) Lease hold improvements and Lease Premises- As
per lease period

(b) Computer- 3 years

(c) Furniture & fixtures - 10 years

(d) Vechicles- 10 years (Motor cycles, scooters ) and 8
years (Motor cars)

(e) Electric installations- 10 years

(f) Computer Software- 3 years

(g) Trademarks- 10 years