The classification depends on the
contractual terms of the financial
assets’ cash flows and the Company’s
business model for managing financial
assets.

The Company classifies its financial
liabilities at amortised cost 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 (FVTPL)
such as derivative liabilities. Financial
liabilities, other than loan commitments
and financial guarantees, are measured
at FVTPL when they are derivative
instruments or the fair value designation
is applied.

Transaction costs directly pertaining
to the acquisition or issue of financial
instruments are added to or deducted
from the initial measurement amount
of the instrument except where the
instrument is initially measured as fair
value through profit or loss.

(ii) Assessment of business model and
contractual cash flow characteristics
for financial assets
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 determines
whether the cash flows will be generated
by collecting contractual cash flows,
selling financial assets or by both.
The Company’s business model is
assessed at portfolio level and not
at instrument level, and is based on
observable factors such as:

(a) 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;

(b) The risks that affect the
performance of the business model
and, in particular, the way those
risks are managed;

(c) 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.

Solely payment of principal and
interest (SPPI) test

Subsequent to the assessment to the
relevant business model of the financial
assets, the Company assesses the
contractual terms of financial assets to
identify whether the cash flow realised
are towards solely payment of principal
and interest.

' 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. The most significant elements of
interest within a lending arrangement
are typically the consideration for the
time value of money and credit risk.

(iii) Initial measurement of financial
instruments

The classification of financial
instruments at initial recognition
depends on their contractual terms and
the business model for managing the
instruments. Financial instruments are
initially measured at their fair value.

(iv) Classification of Financial Instruments
as per business model and SPPI test(a) Loans and Debt instruments at

amortised cost

A 'loan or debt instrument’ is
measured at the amortised cost if
both the following conditions are
met:

i) The asset is held within
a business model whose
objective is to hold assets for
collecting contractual cash
flows, and

ii) The contractual terms of the
asset give rise on specified

dates to cash flows that are
solely payments of principal
and interest (SPPI) on the
principal amount outstanding.

After initial measurement, such
financial assets are subsequently
measured at amortised cost
using the effective interest rate
(EIR) method. Amortised cost is
calculated by taking into account
any discount or premium on
acquisition and fees or costs that
are an integral part of the EIR. The
EIR amortisation is included in
interest income in the statement
of profit or loss. The losses arising
from impairment are recognised in
the statement of profit or loss.

(b) Financial assets at fair value
through other comprehensive
income (FVTOCI)

Financial assets are measured at fair
value through other comprehensive
income if these financial assets are
held within a business model whose
objective is achieved by both
collecting contractual cash flows
that give rise on specified dates
to sole payments of principal and
interest on the principal amount
outstanding and by selling financial
assets.

(c) Financial assets at fair value

through profit or loss (FVTPL)

Financial assets at fair value

through profit or loss are those
that are either held for trading
and have been either designated
by management upon initial
recognition or are mandatorily
required to be measured at

fair value under Ind AS 109.
Management only designates an
instrument at FVTPL upon initial
recognition when one of the
following criteria are met (such

designation is determined on an
instrument-by-instrument basis):

The designation eliminates,
or significantly reduces, the

(v) Reclassification of financial assets and
liabilities

The Company does not reclassify its
financial assets subsequent to their
initial recognition, apart from the
exceptional circumstances in which
the Company acquires, disposes of, or
terminates a business line.

(vi) Derecognition of financial assets in the
following circumstances

(a) 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 credit-
impaired at the origination date.

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.

(b) Derecognition of financial assets
other than due to substantial
modification

Financial assets

A financial asset or a part of
financial asset is derecognised
when the rights to receive cash
flows from the financial asset
have expired. The Company also
derecognises the financial asset

Write off

The Company writes off financial
assets when there is evidence of severe
financial difficulty of the borrower and
no reasonable expectation of recovery.
In line with internal policy, write-offs
are generally initiated at 365 days past
due (DPD) for vehicle loans and SME
exposures, and at 455 days past due
for specified Loan against property
(Micro LAP) loan categories, unless
warranted earlier based on recovery
assessment. Notwithstanding write-off,
such accounts continue to be pursued
under the Company’s recovery and
enforcement processes, including
legal recourse where appropriate. Any
subsequent recoveries are recognised
in the Statement of Profit and Loss.

(vii) Derecognition of 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 profit or loss.

b) Fair Value Measurement

On initial recognition, all the financial
instruments are measured at fair value. For
subsequent measurement, the Company
measures certain categories of financial
instruments 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.

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:

Fair values are categorised into different
levels in a fair value hierarchy based on the
inputs used in the valuation techniques as
follows:

Level 1: quoted prices in active markets for
identical assets or liabilities;

Level 2: inputs other than quoted prices
included in Level 1 that are observable
for the asset or liability, either directly or
indirectly;

Level 3: inputs for the asset or liability that
are not based on observable market data.

If the inputs used to measure the fair value of
an asset or a liability fall into different levels
of the fair value hierarchy, then the fair value
measurement is categorised in its entirety in
the same level of the fair value hierarchy as
the lowest level input that is significant to
the entire measurement.

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

c) Property plant and equipment
Recognition and measurement

Property, pl a nt a nd equipm ent (PPE) i s
recognised when it is probable that the
future economic benefits associated with it
will flow to the Company and the cost can
be measured reliably.

Property, pl ant and equi pm ent (PPE)
are stated at cost less accumulated
depreciation and impairment losses, if any.
Cost comprises the purchase price and any
attributable cost of bringing the asset to
its working condition for its intended use.
Borrowing costs relating to acquisition of
assets which takes substantial period of
time to get ready for its intended use are
also included to the extent they relate to the
year till such assets are ready to be put to
use. Any trade discounts and rebates are
deducted in arriving at the purchase price.

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

Subsequent expenditure

Subsequent costs are included in the
asset’s carrying amount or recognised
as a separate asset, as appropriate only
if it is probable that the future economic
benefits associated with the item will flow
to the Company and that the cost of the
item can be reliably measured. The carrying
amount of any component accounted for
as a separate asset is derecognised when
replaced. All other repair and maintenance
expenses are charged to the Statement of
Profit and Loss during the reporting period
in which they are incurred.

Depreciation

Depreciation is provided on Straight
Line Method ('SLM’), which reflects the
management’s estimate of the useful life of
the respective assets. The estimated useful

life used to provide depreciation are as
follows:

Property, plant and equipment items
individually costing less than ' 5,000 are
depreciated fully in the year of purchase.

Leasehold improvement is amortised on
Straight Line Method over the lease term,
subject to a maximum of 60 months.

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

Useful life of assets different from prescribed
in Schedule II of the Act has been estimated
by management and supported by technical
assessment. Depreciation on assets
acquired/sold during the year is recognised
on a pro-rata basis to the Statement of
Profit and Loss till the date of sale.

The useful lives and the method of
depreciation of property, plant and
equipment are reviewed at each financial
year end and adjusted prospectively, if
appropriate. 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.

f) Intangible assetsRecognition and measurement

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 Company. Intangible
assets acquired separately are measured on
initial recognition at cost. Following initial
recognition, intangible assets are carried
at cost less accumulated amortisation.
The cost of intangible assets acquired in a
business combination is their fair value as at
the date of acquisition.

Amortisation

Intangible assets are amortised using the
straight line method over a period of 3 years,
which is the management’s estimate of its
useful life. The amortisation period and the
amortisation method are reviewed at least
as at each financial year end. If the expected
useful life of the asset is significantly different
from previous estimates, the amortisation
period is changed accordingly.

Gains or losses arising from the retirement
or disposal of an intangible asset are
determined as the difference between the
net disposal proceeds and the carrying
amount of the asset and recognised as
income or expense in the Statement of
Profit and Loss.

e) Business Combination and goodwill
thereon

Business combinations other than under
common control are accounted for using
the acquisition method. The cost of an
acquisition is measured at the value which is
aggregate of the consideration transferred,
measured at acquisition date fair value and
the amount of any non-controlling interests
in the acquiree. The identifiable assets
acquired and the liabilities assumed are
recognised at their fair values, as on date of
acquisition.

Measurement

Goodwill is initially measured at cost,
being the excess of the aggregate of the
consideration transferred and the amount
recognised for non-controlling interests,
and any previous interest held, over the net
identifiable assets acquired and liabilities
assumed. In case the excess is on account
of bargain purchase, the gain is recognised

directly in equity as capital reserve. When the
transaction is of nature other than bargain
purchase, then the gain is recognised in OCI
and accumulated in equity as capital reserve.

f) Impairment(i) Financial Assets

(a) Expected Credit Loss (ECL)
principles

The Company records allowance
for expected credit losses for all
loans, debt financial assets not
held at FVTPL, undrawn loan
commitments (referred to as
'financial instruments’).

For the computation of ECL on the
financial instruments, the Company
categories its financial instruments
as mentioned 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 advances
upto 30 days overdue under this
category.

Stage 2: Exposures are classified
as Stage 2 when the amount is due
for more than 30 days but less than
90 days. 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.

Stage 3: All exposures are
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. Exposures
where the amount remains due for
90 days or more are considered as
to be stage 3 assets.

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 undertakes the
classification of exposures within
the aforesaid stages at borrower
level.

(b) Definition of default

A default on a financial asset is
when the counterparty fails to
make the contractual payments
within 90 days of when they fall
due. Accordingly, the financial
assets shall be classified as Stage
3, if on the reporting date, it has
been 90 days and above past
due. Non-payment on another
obligation of the same customer
is also considered as a Stage 3.
In addition, Company shall also
classify those accounts as default
which meets the criteria as per the
RBI circulars as amended.

(c) Calculation of ECL:

ECL is a probability weighted credit
losses (i.e. present value of all cash
shortfalls) over the expected life of
the financial instruments.

Cash shortfalls are the difference
between the cash flows that the
entity is entitled to receive on
account of contract and the cash
flows that the entity expects to
receive.

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

Exposure-At-Default (EAD) : The

Exposure at Default is the amount
the Company is entitled to receive
as on reporting date including
repayments due for principal and
interest, whether scheduled by
contract or otherwise, expected
drawdowns on committed facilities.

Probability of Default (PD) :

The Probability of Default is an
estimate of the likelihood of default
of the exposure over a given time
horizon. A default may only happen
at a certain time over the assessed
period, if the facility has not been
previously derecognised and is still
in the portfolio.

Loss Given Default (LGD) : The

Loss Given Default is an estimate of
the loss arising in the case where
a default occurs at a given time. It
is based on the difference between
the contractual cash flows due
and those that the lender would
expect to receive, including from
the realisation of any collateral.

The ECL allowance is applied
on the financial instruments
depending upon the classification
of the financial instruments as
per the credit risk involved. ECL
allowance is computed on the
below mentioned basis:

12-month ECL: 12-month ECL is
the portion of Lifetime ECL that
represents the ECL that results
from default events on a financial
instrument that are possible within
the 12 months after the reporting
date. 12-month ECL is applied on
stage 1 assets.

Lifetime ECL: Lifetime ECL for
credit losses expected to arise
over the life of the asset in cases
of credit impaired loans and in
case of financial instruments where
there has been significant increase
in credit risk since origination.
Lifetime ECL is the expected credit
loss resulting from all possible
default events over the expected
life of a financial instrument.
Lifetime ECL is applied on stage 2
and stage 3 assets.

The Company computes the ECL
allowance either on individual basis
or on collective basis, depending
on the nature of the underlying

portfolio of financial instruments.
The Company has grouped its loan
portfolio into Corporate loans, SME
loans, Vehicle finance -Commercial
Vehicles, Construction Equipment,
Farm Equipment, Passenger
Vehicles (Cars) and Micro LAP.

ECL on Trade Receivables:

The Company applies the simplified
approach for computation of ECL
on trade receivables as allowed as
per Ind AS 109. Thus, the Company
is recognising lifetime ECL for
trade receivables.

Significant increase in Credit Risk

The Company monitors all financial
assets and financial guarantee
contracts that are subject to
the impairment requirements to
assess whether there has been a
significant increase in credit risk
since initial recognition. If there has
been a significant increase in credit
risk, the Company will measure the
loss allowance based on lifetime
rather than 12-month ECL.

In assessing whether the credit
risk on a financial instrument
has increased significantly since
initial recognition, the Company
compares the risk of a default
occurring on the financial
instrument at the reporting date
based on the remaining maturity
of the instrument with the risk
of a default occurring that was
anticipated for the remaining
maturity at the current reporting
date when the financial instrument
was first recognised. In making
this assessment, the Company
considers both quantitative and
qualitative information that is
reasonable and supportable,
including historical experience and
forward-looking information that
is available without undue cost or
effort, based on the Company’s
historical experience and expert
credit assessment.

Given that a significant increase in
credit risk since initial recognition is
a relative measure, a given change
in absolute terms in the PD will
be more significant for a financial
instrument with a lower initial
PD than compared to a financial
instrument with a higher PD.

As a back-stop when loan asset
not being a loan becomes 30 days
past due, the Company considers
that a significant increase in credit
risk has occurred and the asset is in
stage 2 of the impairment model,
i.e. the loss allowance is measured
as the lifetime ECL in respect of all
retail assets.

For the purpose of counting of
days past due for the assessment
of significant increase in credit
risk, the special dispensations to
any class of assets in accordance
with COVID-19 Regulatory Package
notified by the Reserve Bank of
India (RBI) has been applied by the
Company.

Modification and derecognition of
financial assets

A modification of a financial asset
occurs when the contractual terms
governing the cash flows of a
financial asset are renegotiated
or otherwise modified between
initial recognition and maturity of
the financial asset. A modification
affects the amount and/or timing
of the contractual cash flows either
immediately or at a future date.
In addition, the introduction of
new covenants or adjustment of
existing covenants of an existing
loan may constitute a modification
even if these new or adjusted
covenants do not yet affect the
cash flows immediately but may
affect the cash flows depending on
whether the covenant is or is not
met (e.g. a change to the increase
in the interest rate that arises when
covenants are breached).

The Company renegotiates
loans to customers in financial
difficulty to maximise collection
and minimise the risk of default.
A loan forbearance is granted in
cases where although the borrower
made all reasonable efforts to pay
under the original contractual
terms, there is a high risk of default
or default has already happened
and the borrower is expected to
be able to meet the revised terms.
The revised terms in most of the
cases include an extension of the
maturity of the loan, changes to the
timing of the cash flows of the loan
(principal and interest repayment),
reduction in the amount of cash
flows due (principal and interest
forgiveness) and amendments to
covenants.

When a financial asset is modified
the Company assesses whether

this modification results in
derecognition. In accordance with
the Company’s policy a modification
results in derecognition when it
gives rise to substantially different
terms. To determine if the modified
terms are substantially different
from the original contractual
terms the Company considers the
following:

• Qualitative factors, such as

contractual cash flows after
modification are no longer
SPPI,

• Change in currency or change
of counterparty,

• The extent of change in interest
rates, maturity, covenants.

If this does not clearly indicate a
substantial modification, then:

(a) I n the case where the financial
asset is derecognised the
loss allowance for ECL is

remeasured at the date of

derecognition to determine
the net carrying amount of

the asset at that date. The
difference between this
revised carrying amount
and the fair value of the new
financial asset with the new
terms will lead to a gain or loss
on derecognition. The new
financial asset will have a loss
allowance measured based
on 12-month ECL except in
the rare occasions where the
new loan is considered to be
originated-credit impaired.
This applies only in the case
where the fair value of the
new loan is recognised at
a significant discount to its
revised par amount because
there remains a high risk of
default which has not been
reduced by the modification.
The Company monitors credit
risk of modified financial assets
by evaluating qualitative and
quantitative information, such
as if the borrower is in past due
status under the new terms.

(b) When the contractual terms of
a financial asset are modified
and the modification does
not result in derecognition,
the Company determines if
the financial asset’s credit risk
has increased significantly
since initial recognition by
comparing:

• the remaining lifetime PD
estimated based on data
at initial recognition and
the original contractual
terms; with

• the remaining lifetime
PD at the reporting date
based on the modified
terms.

For financial assets modified,
where modification did not result
in derecognition, the estimate of
PD reflects the Company’s ability
to collect the modified cash flows

taking into account the Company’s
previous experience of similar
forbearance action, as well as
various behavioural indicators,
including the borrower’s payment
performance against the modified
contractual terms. If the credit
risk remains significantly higher
than what was expected at initial
recognition the loss allowance will
continue to be measured at an
amount equal to lifetime ECL. The
loss allowance on forborne loans
will generally only be measured
based on 12-month ECL when
there is evidence of the borrower’s
improved repayment behaviour
following modification leading to a
reversal of the previous significant
increase in credit risk.

Where a modification does not lead
to derecognition, the Company
calculates the modification gain/
loss comparing the gross carrying
amount before and after the
modification (excluding the ECL
allowance). Then the Company
measures ECL for the modified
asset, where the expected cash
flows arising from the modified
financial asset are included in
calculating the expected cash
shortfalls from the original asset.

Presentation of ECL allowance in
the Balance Sheet

Loss allowances for ECL are
presented in the statement of
financial position as follows:

• for financial assets measured
at amortised cost: as a
deduction from the gross
carrying amount of the assets;

• for debt instruments measured
at FVTOCI: no loss allowance
is recognised in Balance Sheet
as the carrying amount is at
fair value.

(ii) Financial Liabilities(a) Loan commitments

Undrawn loan commitments are
commitments under which, over
the duration of the commitment,
the Company is required to provide
a loan with pre-specified terms
to the customer. Undrawn loan
commitments are in the scope of
the ECL requirements.

(b) Financial guarantee contracts

The Company’s liability under
financial guarantee is measured
at the higher of the amount
initially recognised less cumulative
amortisation recognised in the
statement of profit and loss,
and the ECL provision. For this
purpose, the Company estimates
ECLs by applying a credit
conversion factor. The ECLs related
to financial guarantee contracts
are recognised within Provisions.
Currently, the Company has not
recognised any ECL in respect
of financial guarantee based on
estimate of expected cash flows.

(iii) Non-financial assets

(a) Intangible assets

The carrying amount of assets is
reviewed at each balance sheet
date if there is any indication of
impairment based on internal/
external factors. An impairment
loss is recognised when the
carrying amount of an individual
asset exceeds its recoverable
amount. The recoverable amount is
the higher of fair value of the asset
less cost of its disposal and value in
use.

(b) Goodwill

Goodwill is recorded at the cost less
any accumulated impairment losses
in the previous years. Goodwill on
acquisition is tested for impairment
where the same allocated to each
of the Group’s cash-generating

units that are expected to benefit
from the combination, irrespective
of whether other assets or liabilities
of the acquiree are assigned to
those units.

A cash generating unit (CGU) to
which goodwill has been allocated
is tested for impairment on annual
basis or whenever required in
case where the Company is of
the opinion that goodwill may
be impaired. If the recoverable
amount of the cash generating unit
is less than its carrying amount,
the impairment loss is allocated
first to reduce the carrying amount
of any goodwill allocated to the
unit and then to the other assets
of the unit pro rata based on the
carrying amount of each asset in
the unit. Any impairment loss for
goodwill is recognised in profit or
loss. Such impairment loss already
recognised for goodwill is not
reversed in subsequent periods.

g) Recognition of income

Revenue generated from the business
transactions (other than for those items to
which Ind AS 109 Financial Instruments are
applicable) is measured at fair value of the
consideration to be received or receivable
by the Company. Ind AS 115 Revenue from
contracts with customers outlines a single
comprehensive model of accounting
for revenue arising from contracts with
customers.

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;

Step 2: Identify performance obligations in
the contract(s);

Step 3: Determine the transaction price;

Step 4: Allocate the transaction price to the
performance obligations in the contract(s);

Step 5: Recognise revenue when (or as) the
Company satisfies a performance obligation.

(a) Recognition of interest income

Interest income is recorded using the
effective interest rate (EIR) method
for all financial instruments measured
at amortised cost. The EIR is the rate
that exactly discounts estimated future
cash receipts through the expected
life of the financial instrument or, when
appropriate, a shorter period, to the net
carrying amount of the financial asset.

The EIR for the amortised cost asset is
calculated by taking into account any
discount or premium on acquisition,
origination fees and transaction costs
that are an integral part of the EIR.

If expectations regarding the cash
flows on the financial asset are revised
for reasons other than credit risk, the
adjustment is booked as a positive or
negative adjustment to the carrying
amount of the asset in the balance sheet
with an increase or reduction in interest
income. The adjustment is subsequently
amortised through Interest income in
the statement of profit and loss.

The Company calculates interest
income by applying the EIR to the gross
carrying amount of financial assets
other than credit-impaired assets.
When a financial asset becomes credit-
impaired and is, therefore, regarded
as 'Stage 3’, the Company recognised
the interest income by applying the
effective interest rate to the net
amortised cost of the financial asset. If
the financial status of the financial asset
improves and it no longer remains to be
a credit-impaired, the Company revises
the application of interest income
on such financial asset to calculating
interest income on a gross basis.

Interest income on all trading assets and
financial assets mandatorily required to
be measured at FVTPL is recognised
as interest income in the statement of
profit or loss.

(b) Dividend income

Dividend income is recognised when the
Company’s right to receive the payment

is established, it is probable that the
economic benefits associated with
the dividend will flow to the Company
and the amount of the dividend can be
measured reliably.

(c) Fees and commission income

Fees and commission income are
recognised as income when the
performance obligation as per the
contract with customer is fulfilled
and when the right to receive the
payment against the services has been
established.

(d) Origination fees

Origination fees, which the Company
has received/recovered at time of
granting of a loan, is considered as a
component for computation of the
effective rate of interest (EIR) for the
purpose of computing interest income.

(e) Management Fees:

Management fees and other fees
are recognised as income when the
performance obligation as per the
contract with customer is fulfilled
and when the right to receive the
payment against the services has been
established.

(f) Assignment income

In accordance with Ind AS 109, in case of
assignment transactions with complete
transfer of risks and rewards, gain
arising on such assignment transactions
is recorded upfront in the Statement of
Profit and Loss and the corresponding
asset is derecognised from the Balance
Sheet immediately upon execution
of such transactions. Further the
transfer of financial assets qualifies for
derecognition in its entirety, the whole
of the interest spread at its present
value (discounted over the expected
life of the asset) is recognised on the
date of derecognition itself as excess
interest spread and correspondingly
recognised as profit on derecognition
of financial asset.

The residual expected life of the pool of
asset is assessed annually.

(g) Securitisation transactions :

In accordance with Ind AS 109, in case of
securitisation transactions, the Company
retains substantially all the risks and
rewards of ownership of a transferred
financial asset, the Company continues
to recognise the financial asset and also
recognises a collateralised borrowing
for the proceeds received.

(h) Net gain/(loss) on Fair value changes

Any differences between the fair values
of financial assets classified as fair value
through the profit or loss, held by the
Company on the balance sheet date is
recognised as an unrealised gain or loss
as a gain or expense respectively.

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.

(i) Sourcing and servicing fee

The revenue from the contract as
a service provider (sourcing and
collection agent) on behalf of customer,
is recognised upfront for services
rendered as sourcing agent and on
straight line basis over the loan tenure
for services in the nature of collection
and performance agent. The financial
guarantee provided under the service
contract is recognised at fair value on
sourcing and is amortised over the
period of contract with subsequent
measurement at higher of the
unamortised value as per Ind AS 115 or
expected credit losses as per Ind AS
109.

h) Finance Costs

The Company recognises interest expense
on the borrowings as per EIR methodology
which is calculated by considering any
ancillary costs incurred and any premium
payable on its maturity.

i) Retirement and other employee benefits(i) Defined Contribution Plan
Provident Fund

All the employees of the Company are
entitled to receive benefits under the
Provident Fund, a defined contribution
plan in which both the employee and
the Company contribute monthly
at a stipulated rate. The Company
has no liability for future Provident
Fund benefits other than its annual
contribution and recognises such
contributions as an expense, when an
employee renders the related service.

Employees State Insurance scheme

The Company contributes to Employees
State Insurance scheme and recognises
such contribution as an expense in the
Statement of Profit and Loss in the
period when services are rendered by
the employees.

(ii) Defined Benefit schemes
(a) Gratuity

The Company provides for
the gratuity, a defined benefit
retirement plan 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 year.
The Company accounts for liability
of future gratuity benefits based
on an external actuarial valuation
on projected unit credit method
carried out for assessing liability as
at the reporting date.

Net interest recognised 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
plan assets above or below the
discount rate is recognised as
part of re-measurement of net
defined liability or asset through
other comprehensive income.
Remeasurements, comprising of

actuarial gains and losses, the
effect of the asset ceiling, excluding
amounts included in net interest on
the net defined benefit liability and
the return on plan assets (excluding
amounts included in net interest on
the net defined benefit liability),
are recognised 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. Remeasurements
are not reclassified to profit or loss
in subsequent periods.

(b) Compensated absences

Compensated absences which are
expected to occur within twelve
months after the end of the period
in which the employee renders the
related services are provided for
based on estimates. Compensated
absences which are not expected
to occur within twelve months
after the end of the period in
which the employee renders the
related services are provided for
based on actuarial valuation. The
actuarial valuation is done as per
projected unit credit method as
at the reporting date. Actuarial
gains/losses are immediately taken
to Statement of profit and loss
account and are not deferred.

(iii) Short term employee benefits:

Employee benefits falling due wholly
within twelve months of rendering the
service are classified as short term
employee benefits and are expensed
in the period in which the employee
renders the related service. Liabilities
recognised in respect of short-term
employee benefits are measured at the
undiscounted amount of the benefits
expected to be paid in exchange for the
related service.

j) Share based employee payments
Equity settled share based payments

The stock options granted to employees are
measured at the fair value of the options at

the grant date. The fair value of the options
is treated as discount and accounted as
employee compensation cost over the
vesting period on a straight line basis. The
amount recognised as expense in each year
is arrived at based on the number of grants
expected to vest. If a grant lapses after the
vesting period, the cumulative discount
recognised as expense in respect of such
grant is transferred to the general reserve
within equity.

k) Ind AS 116 Leases

The determination of whether an
arrangement is a lease, or contains a lease, is
based on the substance of the arrangement
and requires an assessment of whether the
fulfilment of the arrangement is dependent
on the use of a specific asset or assets or
whether the arrangement conveys a right to
use the asset.

Company as a lessee

Leases that do not transfer to the Company
substantially all of the risks and benefits
incidental to ownership of the leased
items are treated as operating leases.
Operating lease payments are recognised
as an expense in the statement of profit
and loss on a straight-line basis over the
lease term, unless the increase is in line
with expected general inflation, in which
case lease payments are recognised based
on contractual terms. Contingent rental
payable is recognised as an expense in the
period in which they it is incurred.

Critical accounting estimate and judgement
1. Determination of lease term

Ind AS 116 Leases requires lessee to
determine the lease term as the non¬
cancellable period of a lease adjusted
with any option to extend or terminate
the lease, if the use of such option
is reasonably certain. The Company
makes assessment on the expected
lease term on lease by lease basis
and thereby assesses whether it is
reasonably certain that any options to
extend or terminate the contract will be
exercised. In evaluating the lease term,
the Company considers factors such as
any significant leasehold improvements

undertaken over the lease term, costs
relating to the termination of lease and
the importance of the underlying to
the Company’s operations taking into
account the location of the underlying
asset and the availability of the suitable
alternatives. The lease term in future
periods is reassessed to ensure that
the lease term reflects the current
economic circumstances.

2. Discount Rate

The discount rate is generally based
on the incremental borrowing rate
specific to the lease being evaluated
or for a portfolio of leases with similar
characteristics.

l) Foreign currency translation

Functional and presentational currency

The financial statements are presented
in Indian Rupees which is also functional
currency of the Company and the currency
of the primary economic environment in
which the Company operates.

Transactions and balances

At initial recognition, foreign currency
transactions are translated into the
functional currency using the exchange rates
prevailing at the dates of the transactions.

Subsquently, Monetary assets and liabilities
denominated in foreign currency, which
are outstanding as at the reporting date,
are translated at the reporting date at the
closing exchange rate and the resultant
exchange differences are recognised in the
statement of profit and loss. Non-monetary
items that are measured at historical cost
in a foreign currency are translated using
the spot exchange rates as at the date of
recognition.