c) Summary of material accounting policies
The financial statements have been prepared using the
material accounting policies and measurement bases
summarised as below.
i. Property, plant and equipment
Recognition and initial measurement
Property, plant and equipment are stated at their
cost of acquisition. The cost comprises purchase
price, borrowing cost if capitalisation criteria are met
and directly attributable cost of bringing the asset to
its working condition for the intended use. Any trade
discount and rebates are deducted in arriving at the
purchase price.
Subsequent costs are included in the asset's
carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future
economic benefits associated with the item will flow
to the Company and the cost of the item can be
measured reliably. All other repair and maintenance
costs are recognised in statement of profit and loss.
Subsequent measurement (depreciation
method, useful lives and residual value)
Property, plant and equipment are subsequently
measured at cost less accumulated depreciation
and impairment losses. Depreciation on property,
plant and equipment is provided on the straight¬
line method over the useful life of the assets as
prescribed under Part ‘C' of Schedule II of the
Companies Act, 2013.
Depreciation is calculated on pro rata basis from the
date on which the asset is ready for use or till the
date the asset is sold or disposed.
The residual values, useful lives and method of
depreciation are reviewed at the end of each
financial year.
De-recognition
An item of property, plant and equipment and any
significant part initially recognised is derecognised
upon disposal or when no future economic benefits
are expected from its use or disposal. Any gain or
loss arising on de-recognition of the asset (calculated
as the difference between the net disposal proceeds
and the carrying amount of the asset) is recognised
in the statement of profit and loss, when the asset is
derecognised.
ii. Intangible assets
Recognition and initial measurement
Intangible assets are stated at their cost of
acquisition. The cost comprises purchase price
including any import duties and other taxes (other
than those subsequently recoverable from taxation
authorities), borrowing cost if capitalisation criteria
are met and directly attributable cost of bringing the
asset to its working condition for the intended use.
Subsequent measurement (amortisation
method, useful lives and residual value)
I ntangible assets are amortised on a straight line
basis from the date when the assets are available for
use. Intangible assets are amortised on a straight¬
line basis over their estimated useful economic lives
as prescribed under Part ‘C' of Schedule II of the
Companies Act, 2013.
iii. Revenue recognition
Interest and processing fee income on loans
Interest and processing fee income is recorded
on accrual basis using the effective interest rate
(EIR) method. Additional interest/overdue interest/
penal charges, if any, are recognised only when it is
reasonably certain that the ultimate collection will be
made.
Income from assignment transactions
I ncome from assignment transactions i.e., present
value of excess interest spread is recognised when
the related loan assets are de-recognised. Interest
income is also recognised on carrying value of
assets over the remaining period of such assets.
Commission income
Income from business correspondent services is
recognised as and when the services are rendered
as per agreed terms and conditions of the contract.
A receivable is recognised when the services
are delivered as this is the case of point in time
recognition where consideration is unconditional
because only the passage of time is required.
Miscellaneous income
All other income is recognised on an accrual
basis, when there is no uncertainty in the ultimate
realisation/collection.
iv. Borrowing costs
All borrowing costs are charged to the Statement
of Profit and Loss as incurred basis the effective
interest rate method. Borrowing costs consists of
interest and other cost that the Company incurred
in connection with the borrowing of funds.
v. Taxation
Tax expense recognised in Statement of Profit and
Loss comprises the sum of deferred tax and current
tax except to the extent it recognised in other
comprehensive income or directly in equity.
Current tax comprises the tax payable or receivable
on taxable income or loss for the year and any
adjustment to the tax payable or receivable in
respect of previous years. Current tax is computed
in accordance with relevant tax regulations. The
amount of current tax payable or receivable is the
best estimate of the tax amount expected to be paid
or received after considering uncertainty related to
income taxes, if any. Current tax relating to items
recognised outside profit or loss is recognised
outside profit or loss (either in other comprehensive
income or in equity).
Deferred tax is recognised in respect of temporary
differences between carrying amount of assets
and liabilities for financial reporting purposes and
corresponding amount used for taxation purposes.
Deferred tax assets are recognised on deductible
temporary differences to the extent it is probable
that the future taxable profits will be available against
which they can be used. This is assessed based
on the Company's forecast of future operating
results, adjusted for significant non-taxable income
and expenses and specific limits on the use of
any unused tax loss. Unrecognised deferred tax
assets are re-assessed at each reporting date and
are recognised to the extent that it has become
probable that future taxable profits will allow the
deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at
the tax rates that are expected to apply in the year
when the asset is realised or the liability is settled,
based on tax rates (and tax laws) that have been
enacted or substantively enacted at the reporting
date. The measurement of deferred tax reflects
the tax consequences that would follow from the
manner in which the Company expects, at the
reporting date to recover or settle the carrying
amount of its assets and liabilities. Deferred tax
assets and liabilities are offset only if there is a legally
enforceable right to set off the recognised amounts,
and it is intended to realise the asset and settle the
liability on a net basis or simultaneously. Deferred
tax relating to items recognised outside statement
of profit and loss is recognised outside statement of
profit or loss (either in other comprehensive income
or in equity).
vi. Employee benefitsShort-term employee benefits
Short-term employee benefits including salaries,
short term compensated absences (such as a paid
annual leave) where the absences are expected
to occur within twelve months after the end of the
period in which the employees render the related
service, profit sharing and bonuses payable within
twelve months after the end of the period in which
the employees render the related services and
non-monetary benefits for current employees are
estimated and measured on an undiscounted basis.
Post-employment benefit plans are classified
into defined benefits plans and defined
contribution plans as under:
Defined Contribution plans
The Company has a defined contribution plans
namely provident fund, pension fund and employees
state insurance scheme. The contribution made by
the Company in respect of these plans are charged
to the Statement of Profit and Loss.
Defined benefit plans
The Company has an obligation towards gratuity,
a defined benefit retirement plan covering eligible
employees, where in the benefit employee will
receive on retirement is defined by reference to
employee's length of service and last drawn salary.
Under the defined benefit plan, the amount that an
employee will receive on retirement is defined by
reference to the employee's length of service and
final salary. The legal obligation for any benefits
remains with the Company, even if plan assets for
funding the defined benefit plan have been set aside.
The liability recognised in the statement of financial
position for defined benefit plans is the present
value of the Defined Benefit Obligation (DBO) at
the reporting date less the fair value of plan assets.
Management estimates the DBO quarterly with
the assistance of independent actuaries. Actuarial
gains/losses resulting from re-measurements of the
liability/asset are included in other comprehensive
income.
Other long-term employee benefits
The Company also provides the benefit of
compensated absences to its employees which
are in the nature of long-term employee benefit
plan. Liability in respect of compensated absences
becoming due and expected to availed after one
year from the Balance Sheet date is estimated on
the basis of an actuarial valuation performed by an
independent actuary using the projected unit credit
method as on the reporting date. Actuarial gains and
losses arising from past experience and changes in
actuarial assumptions are charged to Statement of
Profit and Loss in the year in which such gains or
losses are determined.
vii. Share based payments
The Company has formulated an Employees Stock
Option Schemes to be administered through a Trust.
The fair value of options granted under Employee
Stock Option Plan is recognised as an employee
benefits expense with a corresponding increase
in other equity. The total amount to be expensed
is determined by reference to the fair value of the
options. The total expense is recognised over the
vesting period, which is the period over which all of
the specified vesting conditions are to be satisfied.
At the end of each period, the entity revises
its estimates of the number of options that are
expected to vest based on the non-market vesting
and service conditions. It recognises the impact of
the revision to original estimates, if any, in Statement
of Profit and Loss, with a corresponding adjustment
to equity.
viii Impairment of financial assets
Loan assets
The Company follows a ‘three-stage' model for
impairment based on changes in credit quality since
initial recognition as summarised as below:
a) Stage 1: All exposures where there has not
been a significant increase in credit risk since
initial recognition or that has low credit risk
at the reporting date and that are not credit
impaired upon origination are classified under
this stage. The Company classifies all standard
advances and advances up to 0-30 days
default under this category. Stage 1 loans also
include loan assets where the credit risk has
improved and the loan has been reclassified
from Stage 2 or Stage 3.
b) 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 31-90 days are classified under
this stage.
c) 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 been classified
in this stage. Stage 3 (more than 90 days)
includes loan assets that have credit-impaired
financial assets at reporting date. Stage 3 is
considered where “Contractual payments of
principal and/or interest are past due for more
than 90 days”.
The Expected Credit Loss (ECL) is measured
at 12-month ECL for Stage 1 loan assets and at
lifetime ECL for Stage 2 and Stage 3 loan assets.
ECL is the product of the Probability of Default,
Exposure at Default and Loss Given Default, defined
as follows:
Probability of Default (PD) - The PD represents
the likelihood of a borrower defaulting on its financial
obligation (as per “Definition of default and credit-
impaired” above), either over the next 12 months (12
months PD), or over the remaining lifetime (Lifetime
PD) of the obligation.
Loss Given Default (LGD) - LGD represents
the Company's expectation of the extent of loss
on a defaulted exposure. LGD varies by type of
counterparty, type and preference of claim and
availability of collateral or other credit support.
Exposure at Default (EAD) - EAD is based on
the amounts the Company expects to be owed at
the time of default. For a revolving commitment, the
Company includes the current drawn balance plus
any further amount that is expected to be drawn up
to the current contractual limit by the time of default,
should it occur.
During the financial year ended March 31,2026, the
Company revised its methodology for estimating
Expected Credit Losses (ECL) on financial assets
measured at amortised cost and at fair value
through other comprehensive income. This change
aligns the Company's credit risk assessment
framework with evolving macroeconomic conditions
and industry best practices.
Previously, the Company applied a simplified
approach using historical loss rates adjusted for a
single forward-looking information, ie, GDP. Effective
April 01, 2025, the Company has transitioned to
a more granular probability-of-default (PD), loss-
given-default (LGD), and exposure-at-default (EAD)
based model incorporating multiple forward-looking
macroeconomic scenarios like, GDP growth,
Percapita income, Inflation rate and Unemployment
and updated segmentation of customer portfolios.
Write-offs
Financial assets are written off either partially or in
their entirety to the extent that there is no realistic
prospect of recovery. Any subsequent recoveries
are credited to other income in statement of profit
and loss.
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