4 Significant Accounting Policies

4.1 Revenue Recognition

Revenue is recognised to the extent that it is probable

that the economic benefits will flow to the Bank and

the revenue can be reliably measured.

i. Interest Income is recognised in the Profit and
Loss Account on accrualbasis, except in the
case of Non-Performing Assets (NPAs). Interest
on Non-Performing Assets (NPAs) is recognised
on realisation basis as per the prudential norms
issued by the RBI. Interest is not charged on the
delayed remittances for the overdue period on
microloans.

ii. Profit or Loss on sale of investments is
recognised in the Profit and Loss Account.
However, the profit on sale of investments in
the 'Held to Maturity' category is appropriated
(net of applicable taxes and amount required to
be transferred to statutory reserve) to 'Capital
Reserve'.

iii Income on non-coupon bearing discounted
instruments is recognised over the tenure of
the instrument on a straight line basis. In case
of coupon bearing discounted instruments,
discount income is recognised over the tenure of
the instrument on yield basis.

iv Dividend on investments in shares and units of
mutual funds are accounted when the Bank's
right to receive the dividend is established.

v Processing fee/ upfront fee, handling charges
and similar charges collected at the time of
sanctioning or renewalof loan/ facility is
recognised at the inception/ renewal of loan on
upfront basis.

vi Other fees and commission income (including
commission income on third-party products) are
recognised when due, except in cases where the
Bank is uncertain of ultimate collection and in
case of Non-Performing Assets.

vii Interest income on deposits with banks and other
financial institutions are recognised on a time
proportion accrual basis taking into account the
amounts outstanding and the rates applicable.

viii Guarantee commission is recognised on a
straight line basis over the period of contract.

ix Locker rent is recognised on realisation
basis.

x. For a securitisation or direct assignment
transaction, the Bank recognises profit upon
receipt of the funds and loss at the time of sale.
The unrealised gains, associated with expected
future margin income is recognised in Profit and
Loss account on receipt of cash, after absorbing
losses, if any.

xi. Fees received on sale of priority sector lending
certificates is considered as Miscellaneous
Income, while fees paid for purchase is expended
as other expenditure in accordance with the
guidelines issued by RBI on the date of purchase/
sale on upfront basis.

4.2 Investments

Effective April 1, 2024, investments, are accounted
in accordance with RBI guidelines: Master Direction -
Classification, Valuation and Operation of Investment
Portfolio of CommercialBanks (Directions) 2023
("Master Directions"), which are briefly as follows:

i. Categorisation of Investments:

The Bank classifies its investment portfolio under
the following three categories:

Held to Maturity (HTM)- The securities that are
acquired with the intention and objective of
holding it to maturity and the contractual terms
of the security give rise to cashflows that are
Solely Payments of Principal and Interest (SPPI
criteria) on principal outstanding on specified
dates.

Available for Sale (AFS) - The securities that are
acquired with the objective of both collecting
contractual cash flows and selling securities and
the contractual terms of the securities meet the
SPPI criteria. In case of equity instruments, the
Bank may make an irrevocable election to classify
an equity instrument that is not held with the
objective of trading under AFS.

Debt Securities that are held for Asset Liability
Management (ALM) purposes that meet the SPPI
criterion are also classified under AFS.

Fair Value through Profit and Loss (FVTPL)- The
securities that do not qualify for inclusion in HTM
or AFS shall be classified under FVTPL.

Held for Trading (HFT), which is a sub-category
of FVTPL, consists of all instruments meeting
the specifications prescribed by Master
Directions.

ii. Presentation of Investments in the Balance
Sheet

Investments are presented in the Balance Sheet
under six groups vis., (i) Government Securities,
(ii) Other Approved Securities, (iii) Shares, (iv)
Debentures and Bonds, (v) Investments in
Subsidiaries, Associates and Joint Ventures and
(vi) Other Investments

iii. Recognition and Measurement

a) Initial Recognition and Measurement

All investments are measured at fair value
on initialrecognition. Unless facts and
circumstances suggest that the fair value
is materially different from the acquisition,
cost is presumed to be fair value. Broken
period interest in debt instruments and
government securities is treated as revenue
item.

Where the securities are quoted or the
fair value can be determined based on
market observable inputs (such as yield
curve, credit spread, etc.) any Day 1 gain/
loss is recognised in the Profit and Loss
Account, under Schedule 14: 'Other Income'
within the subhead 'Profit on revaluation
of investments' or 'Loss on revaluation of
investments', as the case may be.

Any Day 1 loss arising from Level3
investments is recognised immediately.

Any Day 1 gains arising from Level3
investments is deferred. In the case of debt
instruments, the Day 1 gains are amortised
on a straight-line basis up to the maturity
date (or earliest calldate for perpetual
instruments), while for unquoted equity
instruments, the gain is set aside as a liability
until the security is listed or derecognised.

b) Subsequent Measurement

HTM - Securities held in HTM are carried
at cost. Any discount or premium on the
securities under HTM are amortised over

the remaining life of the instrument. Any
profit or loss on the sale of investments in
HTM is recognised in the Profit and Loss
Account and is appropriated to the 'Capital
Reserve Account' after adjustments of taxes
and transfer to Statutory Reserve.

AFS - The securities held in AFS are
fair-valued at least on a quarterly basis. Any
discount or premium on the acquisition of
debt securities under AFS are amortised
over the remaining life of the instrument.
The net appreciation or depreciation are
directly credited or debited to AFS-Reserve.
Upon sale or maturity of a debt instrument
in AFS category, the accumulated gain/
loss for that security in the AFS-Reserve
is transferred from the AFS-Reserve and
recognised in the Profit and Loss Account.
In the case of equity instruments designated
under AFS at the time of initial recognition,
any gain or loss on sale of such investments
is not transferred from AFS-Reserve to the
Profit and Loss Account. Instead, such gain
or loss is transferred from AFS-Reserve to
the Capital Reserve.

FVTPL- The securities held in FVTPL are
fair-valued and the net gain or loss arising
on such valuation are directly credited or
debited to the Profit and Loss Account.
Securities that are classified under the HFT
sub-category within FVTPL are fair-valued on
a daily basis, whereas securities in FVTPL are
fair-valued on quarterly basis. Any discount
or premium on the acquisition of debt
securities under FVTPL are amortised over
the remaining life of the instrument.

iv. Investment Fluctuation Reserve (IFR)

RBI advised the Bank to create IFR with effect from
2018-19. As per RBI guidelines, transfer to IFR will
be lower of the following (i) net profit on sale of
investments during the year or (ii) net profit for
the year less mandatory appropriations, until the
amount of IFR is at least 2 % of the AFS and FVTPL
(including HFT) portfolio, on a continuing basis.

v. Reclassifications Between Categories

Reclassification of investments between
categories is carried out with approval of Board
of Directors and prior approval of Department
of Supervision (DoS), RBI. Any reclassification is

applied prospectively from reclassification date
and the accounting treatment is in accordance
with the RBI guidelines.

vi. Valuation of Investments

The fair value for the purpose of initial recognition
and periodical valuation of investments shall be
determined as per the valuation norms laid down
in accordance with RBI guidelines.

1. Quoted Securities - The fair value for
the quoted securities shall be the prices
declared by the Financial Benchmarks India
Private Ltd. (FBIL) in accordance with RBI
circular FMRD.DIRD.7/14.03.025/2017-18
dated March 31, 2018, as amended from
time to time. For securities whose prices are
not published by FBIL, the fair value of the
quoted security shall be based upon quoted
price as available from the trades/ quotes
on recognised stock exchanges, reporting
platforms or trading platforms authorised
by RBI/SEBI or prices declared by the Fixed
Income Money Market and Derivatives
Association of India (FIMMDA).

2. Unquoted SLR Securities

• Treasury Bills shall be valued at carrying
cost.

• Unquoted Central / State Government
securities shall be valued on the basis
of the prices/ YTM rates published by
the FBIL.

• Other approved securities shallbe

valued applying the YTM method

by marking them up by 25 basis
points above the yields of the Central
Government Securities of equivalent
maturity put out by FBIL.

3. Unquoted Non-SLR Securities

• Equity shares for which current

quotations are not available i.e., which
are classified as illiquid or which are
not listed on a recognised exchange,
the fair value for the purposes of
these directions shallbe the break¬
up value (without considering
'revaluation reserves', if any) which is
to be ascertained from the company's
latest audited balance sheet. In case
the latest audited balance sheet is not
available or is more than 18 months

old, the shares shall be valued at ' 1
per company.

• For other unquoted Non-SLR
securities, fair valuation shall be
based on the RBI Master Direction-
Classification, Valuation and Operation
of Investment Portfolio of Commercial
Bank (Directions), 2023.

4. In accordance with the RBI guidelines,
repurchase and reverse repurchase
transactions in government securities and
corporate debt securities are reflected
as borrowing and lending transactions
respectively.

5. Borrowing cost on repo transactions is
accounted for as interest expense and
revenue on reverse repo transactions are
accounted for as interest income.

vii. Fair Value Measurement

"Fair value" means the price that would be
received to sell an asset or paid to transfer
a liability in an orderly transaction between
market participants on the measurement
date. The Bank classifies its investment portfolio
into three fair value hierarchies vis. Level 1, Level
2, and Level 3 to signify the context of inputs
used for valuation of a financial instrument.,
described as follows:

"Level 1 investments" are fair-valued based on
quoted prices (unadjusted) in active markets for
identical instruments that the Bank can access at
the measurement date.

"Level 2 investments" are fair-valued based on are
those inputs, other than quoted prices included
within Level 1, that are observable for the asset
or liability, either directly or indirectly.

"Level3 investments" are fair-valued at
unobservable inputs such as valuation of equity
shares in an unlisted company where break-up
value has to be ascertained from the company's
latest audited balance sheet. However,
net revaluation gain in Level 3 instruments
recognised in the Profit and Loss Account or
in the AFS Reserve will be deducted from CET1
Capital.

viii. Provision for Non-Performing Investments

The criteria for classification and recognition
of Non-Performing Investments are as per
the guidelines used to classify an asset as

Non-Performing Asset (NPA) as per the extant
Prudential Norms on Income Recognition, Asset
Classification and Provisioning (IRACP) pertaining
to Advances.

ix. Short Sales

The short sale transactions in Central
Government dated securities undertaken by
the Bank shall be accounted in accordance with
RBI guidelines. The short position is categorised
under HFT- FVTPL category and netted off from
investments in the Balance Sheet.

4.3 Advances

i. Advances are classified into Performing Assets
("Standard") and Non-Performing Assets ("NPA")
as per the RBI guidelines and are stated net of
unrealised interest/charges in suspense for
Non-Performing Advances and provisions made
towards NPAs and principal portion of advance
prepaid by customer, if any. Interest/ other
charges on Non-Performing Advances is not
recognised in Profit and Loss Account and is
transferred to an unrealised interest suspense
account till the actual realisation. Interest portion
of advance prepaid by the customer is disclosed
as other liability and recognised to Profit and
Loss account on due basis. Further, NPAs are
classified into sub-standard, doubtful and loss
assets based on the criteria stipulated by the
RBI. Provisions for NPAs are made at /or above
the minimum required level in accordance with
the provisioning policy adopted by the Bank and
as per the guidelines and circulars of the RBI on
matters relating to prudential norms.

ii. Provision for standard advances is made as per
the extant RBI guidelines. Additional provision
on standard assets is made as per the policy
decided by the Board.

iii. The Bank transfers advances through
interbank participation with and without risk.
In accordance with the RBI guidelines, in the
case of participation with risk, the aggregate
amount of the participation issued by the
Bank is reduced from advances and where the
Bank is participating; the aggregate amount of
participation is classified under advances. In the
case of participation without risk, the aggregate
amount of participation issued by the Bank
is classified under borrowings and where the
Bank is participating, the aggregate amount of
participation is shown as due from banks under
advances.

iv Non-Performing Advances are written-off as per
the Bank's policy. Amounts recovered against
debts written-off/ technically written-off are
recognised in the Profit and Loss account and
included under "Other Income".

v. The Bank considers a restructured account as one
where the Bank, for economic or legal reasons
relating to the borrower's financialdifficulty,
grants to the borrower concessions that the Bank
would not otherwise consider. Restructuring
would normally involve modification of terms of
the advances/ securities, which would generally
include, among others, alteration of repayment
period/ repayable amount/ the amount of
instalments/ rate of interest (due to reasons
other than competitive reasons). Restructured
accounts are classified as such by the Bank
only upon approval and implementation of the
restructuring package. Necessary provision for
diminution in the fair value of a restructured
account is made and classification thereof is as
per the extant RBI guidelines, as amended from
time to time. In accordance with RBI guidelines
on the prudential framework for restructuring of
stressed assets and the resolution framework for
Covid 19 related stress, the Bank, in accordance
with its Board-approved policy, carried out
one-time restructuring of eligible borrowers.
The asset classification and necessary provisions
thereon are done in accordance with the said RBI
guidelines.

vi. Priority Sector Lending Certificate (PSLC): The
Bank enters into transactions for the sale and/ or
Purchase of Priority Sector Lending Certificates
(PSLC). In case of a sale transaction, the Bank
sells the fulfillment of priority sector obligations
and in the case of a purchase transaction, the
Bank buys the fulfillment of priority sector
obligations through the RBI trading platform.
There is no transfer of loan assets or risks. The
fees received for the sale of PSLC is recorded as
other income and fees paid for purchase of PSLC
is recorded as other expenditure in Profit and
Loss account.

vii. Securitisation Transaction and Direct
Assignments:

The Bank transfers its loan receivables through
Direct Assignment route as well as transfer to
Special Purpose Vehicle (SPV).

The transferred loans and such securitised receivables
are de-recognised as and when these are sold (true
sale criteria being fully met) and the consideration
has been received by the Bank. Sales/ transfer that
do not meet true sale criteria are accounted for as
borrowings. For a Securitisation or Direct Assignment
Transaction, the Bank recognises profit upon receipt
of that funds and loss is recognised at the time of sale.
The unrealised gains, associated with expected future
margin income is recognised in Profit and Loss
account on receipt of cash, after absorbing losses, if
any.

On sale of stressed assets, if the sale is at a price
below the net book value (i.e., funded outstanding
less specific provisions held), the shortfall is charged
to the Profit and Loss Account and if the sale is for
a value higher than the net book value, the excess
provision is credited to the Profit and Loss Account
in the year when the sum of cash received by way of
initial consideration and / or redemption or transfer
of security receipts issued by SC / RC exceeds the net
book value of the loan at the time of transfer.

In respect of stressed assets sold under an asset
securitisation, where the investment by the Bank in
Security Receipts (SRs) backed by the assets sold by
it is more than 10 % of such SRs, provisions held are
higher of the provisions required in terms of net asset
value declared by the Securitisation Company ('SC') /
Reconstruction Company ('RC') and provisions as per
the extant norms applicable to the underlying loans,
notionally treating the book value of these SRs as the
corresponding stressed loans assuming the loans
remained in the books of the Bank.

Investments in Pass Through Certificates (PTCs)
issued by other SpecialPurpose Vehicles (SPVs),
are accounted at acquisition cost and are classified
as investments. Loans bought through the Direct
Assignment route which are classified as advances
and are carried at acquisition cost unless it is more
than the face value, in which case the premium is
amortised based on effective interest rate method.

4.4 Fixed Assets (Property Plant & Equipment
and Intangible Assets) and Depreciation /
Amortisation

Fixed Assets have been stated at cost less accumulated
depreciation and amortisation, and adjusted for
impairment, if any.

Cost includes cost of purchase inclusive of freight,
duties, incidental expenses and all expenditure like

site preparation, installation costs and professional
fees incurred on the asset before it is ready to put to
use.

Gains or losses arising from the retirement or disposal
of Fixed Assets are determined as the difference
between the net disposal proceeds and the carrying
amount of assets and recognised as income or
expense in the Profit and Loss Account.

Depreciation is charged over the estimated useful
life of the Fxed Asset on a straight-line basis. The
management believes that the useful life of assets
assessed by the Bank, pursuant to the Companies Act,
2013, taking into account changes in environment,
changes in technology, the utility and efficacy of the
asset in use, fairly reflects its estimate of useful lives
of the Fixed Assets. The estimated useful lives of key
Fixed Assets, based on technical evaluation done by
the management are given below:

An 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 Bank.

Intangible Assets acquired separately are measured on
initial recognition at cost. The cost of an Intangible Asset
comprises its purchase price including after deducting
trade discounts and rebates, any directly attributable
cost of bringing the item to its working condition for its
intended use following initial recognition. Intangible
Assets are carried at cost less any accumulated
amortisation and any accumulated impairment losses.
Intangible assets comprising of software is amortised
on straight-line basis over a period of 4 years, unless
it has a shorter useful life.

For assets purchased/ sold during the year,
depreciation is being provided on pro rata basis by
the Bank.

Capitalwork-in-progress includes costs incurred
towards creation of Fixed Assets that are not ready for
their intended use and also includes advances paid to
acquire Fixed Assets.

4.5 Impairment of Assets

The carrying amounts of assets are reviewed at
each Balance Sheet date to determine if there is any
indication of impairment based on internal/external
factors. An impairment loss is recognised wherever the
carrying amount of an asset exceeds its recoverable
amount, which is the greater of the asset's net selling
price and value in use. In assessing the value in use,
the estimated future cash flows are discounted to
their present value using pre-tax discount rate that
reflects current market assessment of the time value
of money and risks specific to the asset.

After impairment, depreciation is provided on the
revised carrying amount of the asset over its remaining
useful life.

4.6 Retirement and Employee Benefits

i. Short-Term Employee Benefit

The undiscounted amount of short-term
employee benefits, which are expected to be
paid in exchange for the services rendered by
employees, are recognised during the year when
the employee renders the service.

ii. Long-Term Employee Benefit

a. Defined Contribution Plan:

Provident Fund: In accordance with law,
all employees of the Bank are entitled to
receive benefits under the provident fund, a
defined contribution plan in which both the
employee and the Bank contribute monthly
at a pre-determined rate. Contribution to
provident fund is recognised as expense as
and when the services are rendered. The
Bank has no liability for future provident fund
benefits other than its fixed contribution.

b. Defined Benefit Plan:

Gratuity: The Bank provides for Gratuity,
covering employees in accordance with the
Payment of Gratuity Act, 1972. The Bank's
liability is actuarially determined (using
Projected Unit Credit Method) as at the
Balance Sheet date. The actuarial gain or
loss arising during the year is recognised in
the Profit and Loss Account.

Compensated Absences: The Bank accrues
the liability for compensated absences
based on the actuarialvaluation as at
the Balance Sheet date conducted by
an independent actuary which includes
assumptions about demographics, early
retirement, salary increases, interest rates
and leave utilisation. The net present
value of the Bank's obligation is actuarially
determined using the Projected Unit Credit
Method as at the Balance Sheet date.
Actuarial gains / losses are recognised in the
Profit and Loss Account in the year in which
they arise.

4.7 Share Issue Expenses

Share issue expenses are adjusted from Share
Premium Account as permitted by Section 52 of the
Companies Act, 2013 on issue of underlying securities
pending which is recognised as "other assets" in
Balance sheet.

4.8 Income Taxes

Tax expense comprises current and deferred tax.
Current income tax is measured at the amount
expected to be paid to the tax authorities in
accordance with the Income Tax Act, 1961. Deferred
tax assets and liabilities are recognised for the
future tax consequences of timing differences being
the difference between the taxable income and the
accounting income that originate in one year and
are capable of reversal in one or more subsequent
year(s).

Deferred tax assets on account of timing differences
are recognised only to the extent there is reasonable
certainty that sufficient future taxable income will
be available against which such deferred tax assets
can be realised. In case of carry forward losses
and unabsorbed depreciation, under tax laws, the
deferred tax assets are recognised only to the extent
there is virtualcertainty supported by convincing
evidence that sufficient future taxable income will be
available against which such deferred tax assets can
be realised.

At each reporting date, the Bank re-assesses
unrecognised deferred tax assets. It recognises
unrecognised deferred tax assets to the extent that
it has become reasonably certain or virtually certain,
as the case may be, that sufficient future taxable
income will be available against which such deferred
tax assets can be realised.

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 tax assets and deferred tax liabilities relate
to the same taxable entity and the same taxation
authority.

The carrying amount of deferred tax assets is
reviewed at each reporting date. The Bank writes
down the carrying amount of deferred tax assets to
the extent that it is no longer reasonably certain or
virtually certain, as the case may be, that sufficient
future taxable income will be available against which
deferred tax asset can be realised. Any such write¬
down is reversed to the extent that it becomes
reasonably certain or virtually certain, as the case
may be, that sufficient future taxable income will be
available.

Deferred tax assets and liabilities are measured
using tax rates and tax laws that have been enacted
or substantively enacted at the Balance Sheet date.
Changes in deferred tax assets / liabilities on account
of changes in enacted tax rates are given effect to in
the Profit and Loss Account in the year of change.

4.9 Cash and Cash Equivalent

Cash and cash equivalents include cash in hand,
balances with RBI, balances with other banks and
money at call and short notice with an original
maturity of three months or less (including the effect
of changes in exchange rates on cash and cash
equivalents in foreign currency).

4.10 Segment Information

In accordance with guidelines issued by RBI and
Accounting Standard 17 (AS-17) on "Segment
Reporting", the Bank's business has been segregated
into Treasury, Wholesale Banking, RetailBanking
Segments and Other Banking Operations:

a) Treasury: The Treasury segment revenue
primarily consists of interest earnings on
investments portfolio of the Bank, gains or
losses on investment operations and earnings
from foreign exchange business. The principal
expenses of the segment consist of interest
expense allocated on funds borrowed/ deposits
received and other expenses. Treasury segment
liability includes allocation on deposits received
from customers.

b) Wholesale Banking: The Wholesale Banking
segment provides loans to corporate segment
identified on the basis of RBI guidelines.

Revenues of this segment consist of interest
earned on loans made to corporate customers
and the charges/fees earned from other banking
services. The principal expenses of the segment
consist of interest expense allocated on funds
borrowed/deposits received and other expenses.

c) RetailBanking: The RetailBanking segment
provides loans to non-corporate customers
identified on the basis of RBI guidelines and also
includes deposits from customers. Revenues
of this segment consist of interest earned on
loans made to non-corporate customers and the
charges/fees earned from other banking services.
The principal expenses of the segment consist of
interest expense allocated on funds borrowed/
deposits received and other expenses.

d) Other Banking Operations: This segment includes
income from parabanking activities such as
debit cards, third-party product distribution and
associated costs.

Segment revenues consist of earnings from external
customers and other allocated revenues. Segment
expenses consist of allocated interest expenses,
operating expenses and provisions. Segment results
are net of segment revenues and segment expenses.
Segment assets include assets related to segments
and exclude tax-related assets. Segment liabilities
include liabilities related to the segment excluding net
worth.

Unallocated: All items which are reckoned at an
enterprise level are classified under this segment.
This includes capital, reserves and other unallocable
assets and liabilities such as fixed assets, deferred tax,
tax paid in advance and income tax provision, etc.

The RBI vide its Circular dated April 7, 2022 on
establishments of Digital Banking Units (DBUs) has
prescribed reporting of Digital Banking Segments as
a sub segment of Retail Banking Segment (RBS). The
Bank has not set up any DBU so far and hence DBU
has not been disclosed as a seperate segment as per
Accounting Standard 17 (Segment Reporting).

Geographical Segment

Since the business operations of the Bank are
primarily concentrated in India, the Bank is considered
to operate only in the domestic segment.

1.11 Earnings Per Share

Basic earnings per share are calculated by dividing the
net profit or loss for the year attributable to equity
shareholders (after deducting attributable taxes)

by the weighted average number of equity shares
outstanding during the year. The weighted average
number of equity shares outstanding during the year
is adjusted for events of bonus issue, bonus element
in a rights issue to existing shareholders and share
split.

For the purpose of calculating diluted earnings per
share, the net profit or loss for the year attributable
to equity shareholders and the weighted average
number of shares outstanding during the year
are adjusted for the effects of all dilutive potential
equity shares. Diluted earnings per share reflect the
potentialdilution that could occur if securities or
other contracts to issue equity shares were exercised
or converted during the year.