3. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

3.1 Recognition of interest income

A. EIR method

Under Ind AS 109, interest income is recorded using the
effective interest rate method for all financial instruments
measured at amortised cost and financial instrument
measured at Fair Value through other comprehensive income
('FVOCI'). 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 (and therefore, the amortised cost of the asset) is
calculated by taking into account any discount or premium
on acquisition, fees and costs that are an integral part of the
EIR. The Company recognises interest income using a rate of
return that represents the best estimate of a constant rate of
return over the expected life of the financial instrument.

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.

B. Interest income

The Company calculates interest income by applying 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 calculates
interest income on the net basis. If the financial asset cures
and is no longer credit impaired, the Company reverts to
calculating interest income on a gross basis.

3.2 Financial instrument - initial recognition

A. Date of recognition

Debt securities issued are initially recognised when they are
originated. All other financial assets and financial liabilities are
initially recognised when the Company becomes a party to
the contractual provisions of the instrument.

B. 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 (Refer note 3.3(A)). Financial
instruments are initially measured at their fair value (as defined
in Note 3.8). Transaction costs are added to, or subtracted
from this amount at initial recognition except in the case of
financial assets and financial liabilities recorded at FVTPL.

Transaction costs directly attributable to the acquisition of
financial assets or financial liabilities at FVTPL are recognised
immediately in Statement of profit and loss.

C. Measurement categories of financial assets and
liabilities

The Company classifies all of its financial assets based on
the business model for managing the assets and the asset's
contractual terms, measured at either:

i) Amortised cost

ii) FVOCI

iii) FVTPL

3.3 Financial assets and liabilities
A. 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 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:

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

b) The risks that affect the performance of the business
model (and the financial assets held within that 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. 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.

Solely payments of principal and interest (SPPI) test

As a second step of its classification process, the Company
assesses the contractual terms of financial to identify whether
they meet 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 financial asset (for example, if there are repayments
of principal or amortisation of the premium/discount).

The most significant elements of interest within a lending
arrangement are typically the consideration for the time value
of money and credit risk. To make the SPPI assessment, the
Company applies judgement and considers relevant factors
such as the period for which the interest rate is set.

In contrast, contractual terms that introduce a more than de
minimis exposure to risks or volatility in the contractual cash
flows that are unrelated to a basic lending arrangement do
not give rise to contractual cash flows that are solely payments
of principal and interest on the amount outstanding. In such
cases, the financial asset is required to be measured at FVTPL.

Accordingly, financial assets are measured as follows:

i) Financial assets carried at amortised cost ('AC')

A financial asset is measured at amortised cost if it is held
within a business model whose objective is to hold the asset
in order to collect contractual cash flows and the contractual
terms of the financial asset give rise on specified dates to
cash flows that are solely payments of principal and interest
on the principal amount outstanding.

ii) Financial assets measured at FVOCI

A financial asset is measured at FVOCI if it is held within a
business model whose objective is achieved by both collecting
contractual cash flows and selling financial assets and the
contractual terms of the financial asset give rise on specified
dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.

iii) Financial assets measured at FVTPL

A financial asset which is not classified in any of the above
categories are measured at FVTPL.

iv) Investment in subsidiaries

The Company has accounted for its investments in subsidiaries
at cost less impairment, if any.

B. Financial liabilities

i) Subsequent measurement

Financial liabilities are carried at amortized cost using the
effective interest method.

3.4 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. Financial liabilities
are never reclassified. The Company did not reclassify any of
its financial assets or liabilities in the year ended 31 March 2025
and 31 March 2024.

3.5 Derecognition of financial assets and liabilities

i) Financial assets

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.

B. Derecognition of financial assets other than due to
substantial modification

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 contractual rights to the cash flows
from the financial asset expires or it transfers the rights to
receive the contractual cash flows in a transaction in which
substantially all of the risks and rewards of ownership of
the financial asset are transferred or in which the Company
neither transfers nor retains substantially all of the risks and
rewards of ownership and it does not retain control of the
financial asset.

On derecognition of a financial asset in its entirety, the
difference between the carrying amount (measured at
the date of derecognition) and the consideration received
(including any new asset obtained less any new liability
assumed) is recognised in the statement of profit and loss.

ii) 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
and loss.

3.6 Impairment of financial assets
A. Overview of ECL principles

In accordance with Ind AS 109, the Company uses ECL model,
for evaluating impairment of financial assets other than those
measured at FVTPL.

Expected credit losses are measured through a loss allowance
at an amount equal to:

i. ) The 12-months expected credit losses (expected credit

losses that result from those default events on the
financial instrument that are possible within 12 months
after the reporting date); or

ii. ) Full lifetime expected credit losses ('LTECL') (expected

credit losses that result from all possible default events
over the life of the financial instrument).

Both LTECLs and 12 months ECLs are calculated on collective
basis.

Based on the above, the Company categorizes its loans into
Stage 1, Stage 2 and Stage 3, as described below:

Stage 1: When loans are first recognised, the Company
recognises an allowance based on 12 months ECL.
Stage 1 loans includes those loans where there is
no significant credit risk observed and also includes
facilities where the credit risk has been improved
and the loan has been reclassified from stage 2 or
stage 3.

Stage 2: When a loan has shown a significant increase in
credit risk since origination, the Company records
an allowance for the life time ECL. Stage 2 loans
also includes facilities where the credit risk has
improved and the loan has been reclassified from
stage 3.

Stage 3: Loans considered credit impaired are the loans
which are past due for more than 90 days. The
Company records an allowance for life time ECL.

Based on the above, the Company categorizes its investments
and balances with banks into Stage 1, Stage 2 and Stage 3, as
described below:

Stage 1: When investments and balances with banks are
first recognised, it is categorised as Stage 1. Stage
1 would include all investments and balances
with bank, not impaired or, have not experienced
a significant increase in credit risk since initial
recognition.

Stage 2:

• For facilities with rating grade AAA to B, three notch
downgrades (without modifiers) shall be taken as stage 2.

• Any financial instrument with rating grade CCC or below
classified as Stage 2 at origination.

Stage 3: All the investments and balances with banks will be
considered as credit impaired which are past due
for more than 90 days.

B. Calculation of ECLs

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

PD Probability of Default ('PD') is an estimate of the likelihood

of default 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. For investments and balances
with banks, the Company uses external ratings for
determining the PD of respective instruments.

EAD Exposure at Default ('EAD') is an estimate of the amount
outstanding when the borrower defaults.It is the total
amount of an asset the entity is exposed to at the time
of default. It is defined based on characteristics of the
asset.

LGD Loss Given Default ('LGD') 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. It is usually expressed as a percentage
of the EAD.

The Company has calculated PD, EAD and LGD to determine
impairment loss on the portfolio of loans. At every reporting
date, the above calculated PDs, EAD and LGDs are reviewed
and changes in the forward looking estimates are analysed.

The mechanics of the ECL method are summarised below:

Stage 1: The 12 months ECL is calculated as the portion of
LTECLs that represent the ECLs that result from
default events on a financial instrument that are
possible within the 12 months after the reporting
date. The Company calculates the 12 months
ECL allowance based on the expectation of a
default occurring in the 12 months following the
reporting date. These expected 12-months default
probabilities are applied to a EAD and multiplied by
the expected LGD.

Stage 2: When a loan has shown a significant increase in
credit risk since origination, the Company records
an allowance for the LTECLs. The mechanics are
similar to those explained above, but PDs and LGDs
are estimated over the lifetime of the instrument.

Stage 3: For loans considered credit-impaired, the Company
recognises the lifetime expected credit losses for
these loans. The method is similar to that for stage
2 assets, with the PD set at 100%.

Simplified approach for trade/other receivables and
contract assets

The Company follows 'simplified approach' for recognition of
impairment loss allowance on trade/other receivables that do
not contain a significant financing component. The application

of simplified approach does not require the Company to
track changes in credit risk. It recognises impairment loss
allowance based on lifetime ECL s at each reporting date,
right from its initial recognition. At every reporting date, the
historical observed default rates are updated for changes
in the forward-looking estimates. For trade receivables that
contain a significant financing component a general approach
is followed.

C. Forward looking information

In its ECL models, the Company relies on a broad range of
forward looking macro parameters and estimated the impact
on the default at a given point of time.

D. Restructured loans

The Company is permitted to restructure customer accounts.
Restructuring would normally involve modification of terms
of the advances/securities, which would generally include,
among others, alteration of payment period/payable
amount/the amount of instalments/rate of interest, sanction
of additional credit facility/release of additional funds for a
customer account. The Company considers the modification
of the loan only before the loans gets credit impaired. In case
of restructuring, the accounts classified as 'standard' shall be
immediately downgraded as non-performing assets/Stage
3 unless and other wise explicitly stated in the Circulars and
Directions issued by Reserve Bank of India from time to time.
Once an asset has been classified as restructured, it will remain
restructured for a period of year from the date on which it has
been restructured until the customer account demonstrates
satisfactory performance during the specified period.

For upgradation of accounts classified as Non-Performing
Assets due to restructuring, the instructions as specified for
such cases as per the said RBI guidelines shall continue to be
applicable.

One time restructuring (OTR) of loan accounts allowed by RBI
vide circular resolution framework for COVID-19 related stress,
all borrowers, wherein resolution plan has been invoked and
completed within 90 days shall be continued to be classified
as Stage 1.

3.7 Write-offs

Financial assets are written off when there are no prospects
of recovery which are subject to management decision. If the
amount to be written off is greater than the accumulated
loss allowance, the difference is first treated as an addition to
the allowance that is then applied against the gross carrying
amount. Any subsequent recoveries are credited to other
income in the statement of profit and loss.

3.8 Determination of fair value

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, regardless of
whether that price is directly observable or estimated using
another valuation technique. In estimating the fair value of an
asset or a liability, the Company has taken into account the
characteristics of the asset or liability if market participants
would take those characteristics into account when pricing
the asset or liability at the measurement date.

In addition, for financial reporting purposes, fair value
measurements are categorised into Level 1, 2, or 3 based on
the degree to which the inputs to the fair value measurements
are observable and the significance of the inputs to the fair
value measurement in its entirety, which are described as
follows:

• 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 and are significant, 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; and
market-corroborated inputs.

• Level 3 financial instruments: Those that include one
or more unobservable input that is signifcant to the
measurement as whole.

3.9

(I) Recognition of other income

Revenue (other than for those items to which Ind AS 109 -
Financial Instruments are applicable) is measured at fair
value of the consideration received or receivable. Ind AS 115
- Revenue from contracts with customers outlines a single
comprehensive model of accounting for revenue arising from
contracts with customers and supersedes current revenue
recognition guidance found within Ind ASs.

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.

Other interest income

Interest income on security deposits and FD is recognised on a
time proportionate basis.

Fees and other income

Processing fees not considered in EIR, service income, bounce
charges, penal charges and foreclosure charges etc. are
recognised on point in time basis.

(II) Recognition of other expense

Borrowing costs

Borrowing costs are the interest and other costs that the
Company incurs in connection with the borrowing of funds.
Borrowing costs that are directly attributable to the acquisition
or construction of qualifying assets are capitalised as part of
the cost of such assets. A qualifying asset is an asset that
necessarily takes a substantial period of time to get ready for
its intended use or sale.

Interest expense on borrowed funds is calculated using the
effective interest rate (EIR) on respective financial instruments
measured at amortised cost. The EIR is the rate that exactly
discounts estimated future cash flows through the expected
life of the financial instrument to the gross carrying amount of
the financial liability.

Calculation of the EIR includes all fees paid that are incremental
and directly attributable to the issue of the financial liability.

3.10 Cash and cash equivalents

Cash comprises cash on hand and demand deposits with
banks. Cash equivalents are short-term balances (with
an original maturity of three months or less from the date
of acquisition), highly liquid investments that are readily
convertible into known amounts of cash and which are subject
to insignificant risk of changes in value.

3.11 Property, plant and equipment

Property, plant and equipment ('PPE') are carried at cost, less
accumulated depreciation and impairment losses, if any. The
cost of PPE comprises its purchase price net of any trade
discounts and rebates, any import duties and other taxes
(other than those subsequently recoverable from the tax
authorities), any directly attributable expenditure on making
the asset ready for its intended use and other incidental
expenses. Subsequent expenditure on PPE after its purchase
is capitalized only if it is probable that the future economic

benefits will flow to the enterprise and the cost of the item
can be measured reliably.

Depreciation is calculated using the straight line method
to write down the cost of property and equipment to their
residual values over their estimated useful lives as specified
under schedule II of the Act. Land is not depreciated.

The estimated useful lives are, as follows:

i) Computer Equipments: 3 years

ii) Office equipment: 5 years

iii) Furniture and fixtures: 10 years

Depreciation is provided on a pro-rata basis from the date
on which such asset is ready for its intended use and residual
value is considered as Nil.

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.

PPE 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.

3.12 Intangible assets

The Company's intangible assets include the value of
software. 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 any accumulated amortisation
and any accumulated impairment losses.

Amortisation is calculated to write off the cost of intangible
assets less their estimated residual values (Nil) over their
estimated useful lives (three years) using the straight-line
method, and is included in depreciation and amortisation in
the statement of profit and loss.

3.13 Impairment of non financial assets - property,
plant and equipments and intangible assets

The carrying values of assets/cash generating units at the
each balance sheet date are reviewed for impairment. If any
indication of impairment exists, the recoverable amount of
such assets is estimated and if the carrying amount of these
assets exceeds their recoverable amount, impairment loss is
recognised in the statement of profit and loss as an expense,
for such excess amount. The recoverable amount is the
greater of the net selling price and value in use. Value in use is
arrived at by discounting the future cash flows to their present
value based on an appropriate discount factor. When there
is indication that an impairment loss recognised for an asset
in earlier accounting periods no longer exists or may have
decreased, such reversal of impairment loss is recognised in
the statement of profit and loss.

3.14 Leases

Ind AS 116 - Leases sets out the principles for the recognition,
measurement, presentation and disclosure of leases and
requires lessees to account for all leases under a single on-
balance sheet model similar to the accounting for finance
leases under Ind AS 17. The Company has opted for two
recognition exemptions for lessees:

- leases of ’low-value' assets (e.g., personal computers)

- and short-term leases (i.e., leases with a lease term of 12
months or less).

At the commencement date of a lease, a lessee will recognise
a liability to make lease payments (i.e. the lease liability) and
an asset representing the right to use the underlying asset
during the lease term (i.e. the right-of-use asset). Lessees will
be required to separately recognise the interest expense on
the lease liability and the depreciation expense on the right-
of-use asset (cost model).

The Company has Lease agreements for taking office
premises along with furniture and fixtures as applicable and
premises on rental basis range of 36 months to 60 months
wherein the Company is a lessee.

3.15 Retirement and other employee benefits
Defined contribution plans

The Company's contribution to provident fund and employee
state insurance scheme are considered as defined contribution
plans and are charged as an expense based on the amount
of contribution required to be made and when services are
rendered by the employees.

Defined benefit plans

The Company pays gratuity to the employees whoever has
completed five years of service with the Company at the time
of resignation/retirement. The gratuity is paid @15 days salary
for every completed year of service as per the Payment of
Gratuity Act, 1972.

The liability in respect of gratuity and other post-employment
benefits is calculated using the Projected Unit Credit Method
and spread over the period during which the benefit is
expected to be derived from employee's services.

As per Ind AS 19, the service cost and the net interest cost are
charged to the statement of profit and loss. Remeasurement
of the net defined benefit liability, which comprise actuarial
gains and losses, the return on plan assets (excluding interest)
and the effect of the asset ceiling (if any, excluding interest),
are recognised in OCI.

Short-term employee benefits

All employee benefits payable wholly within twelve months of
rendering the service are classified as short-term employee
benefits. Benefits such as salaries, wages etc. and the
expected cost of ex-gratia are recognised in the period in
which the employee renders the related service. A liability is
recognised for the amount expected to be paid when there is
a present legal or constructive obligation to pay this amount
as a result of past service provided by the employee and the
obligation can be estimated reliably.

Employee Stock Option Plans

Employee stock options have time and performance based
vesting conditions. The fair value determined at the grant
date of the options is expensed over the vesting period, based
on the Company's estimate of equity instruments that will
eventually vest, with a corresponding increase in equity. At the
end of each reporting period, the Company revises its estimate
of the number of options expected to vest. The impact of the
revision of the original estimates, if any, is recognised in profit
or loss such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to the employee
stock options plan reserve.

The Company grants equity-settled stock options to
employees of the subsidiary Company. In accordance with
Ind AS 102, the Company recognizes the fair value of the
options granted as investment over the vesting period,
with a corresponding credit to other equity. The fair value is
determined at the grant date and is adjusted for expected
and actual forfeitures.