Material Accounting Policies:

1. Statement of Compliance

These standalone financial statements are prepared and presented in accordance with the Indian
Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules,
2015 as amended by the Companies (Indian Accounting Standards) (Amendment) Rules, 2016
notified under section 133 read with sub-section (1) of section 210 A the Companies Act, 2013, the
relevant provisions of the Companies Act, 2013 ("the Act'') and guidelines issued by the Securities
and Exchange Board of India (SEBI), as applicable. In addition, the applicable regulation of the
Reserve Bank of India (RBI) and Guidance Notes/announcement issued by the Institute of Chartered
Accountants of India (ICAI) are also applied.

1.1. Basis of Preparation

The standalone financial statements have been prepared on the historical cost basis except for
certain financial instruments that are measured at fair values at the end of each reporting period.

Fair value measurements under Ind AS 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 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities
that the Company can access at reporting date.

• Level 2 inputs are inputs, other than quoted prices included within level 1, that are observable for
the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the valuation of assets or liabilities.

1.2. Presentation of Financial Statements

The Standalone Balance Sheet and the Standalone Statement of Profit and Loss are prepared and
presented in the format prescribed in the Division III to Schedule III to the Companies Act, 2013 ("the

Act") applicable for Non-Banking Finance Companies ("NBFC"). The Statement of Cash Flows has
been prepared and presented as per the requirements of Ind AS 7 "Statement of Cash Flows".

The disclosure requirements with respect to items in the Standalone Balance Sheet and Standalone
Statement of Profit and Loss, as prescribed in the Schedule III to the Act, are presented by way of notes
forming part of the financial statements along with the other notes required to be disclosed under
the notified accounting Standards and the SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015.

Amounts in the financial statements are presented in Indian Rupees in Lakhs rounded off to two
decimal places as permitted by Schedule III to the Companies Act, 2013. Per share data are presented
in Indian Rupee to two decimal places.

1.3. Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the
Company and the revenue can be reliably measured and there exists reasonable certainty of its
recovery. Revenue is measured at the fair value of the consideration received or receivable as reduced
for estimated customer credits and other similar allowances.

i) Interest and Dividend Income

Interest income is recognised in the Statement of Profit and Loss and for all financial instruments
except for those classified as held for trading or those measured or designated as at fair value
through profit or loss (FVTPL) is measured using the effective interest method (EIR).

The calculation of the EIR includes all fees and points paid or received between parties to the
contract that are incremental and directly attributable to the specific lending arrangement,
transaction costs, and all other premiums or discounts. For financial assets at FVTPL transaction
costs are recognised in profit or loss at initial recognition.

The interest income is calculated by applying the EIR to the gross carrying amount of non-credit
impaired financial assets (i.e. at the amortised cost of the financial asset before adjusting for
any expected credit loss allowance). For credit-impaired financial assets the interest income is
calculated by applying the EIR to the amortised cost of the credit-impaired financial assets (i.e.
the gross carrying amount less the allowance for expected credit losses (ECLs).

For financial assets originated or purchased credit-impaired (POCI) the EIR reflects the ECLs in
determining the future cash flows expected to be received from the financial asset.

Dividend income is recognised when the Company's right to receive dividend is established by
the reporting date and no significant uncertainty as to collectability exists.

ii) Net Gain or Fair Value Changes

Any differences between the fair values of the 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/loss in the statement of profit and loss. In cases there is a net gain in aggregate, the same
is recognised in "Net gains or fair value changes" under revenue from operations and if there is a
net loss the same is disclosed "Expenses') in the statement of profit and loss.

iii) Rental income

Rental income arising from operating leases is accounted for on a straight-line basis over the
lease terms and is included in rental income in the statement of profit and loss, unless the
increase is in line with expected general inflation, in which case lease income is recognised based
on contractual terms.

iv) Other Operational Revenue

Other operational revenue represents income earned from the activities incidental to the
business and is recognised when the right to receive the income is established as per the terms
of the contract.

1.4. Properties, Plant and Equipment (PPE)

PPE is recognised 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. PPE is stated at original cost
net of tax/duty credits availed, if any, less accumulated depreciation and cumulative impairment, if
any. Cost includes all direct cost related to the acquisition of PPE and, for qualifying assets, borrowing
costs capitalised in accordance with the Company's accounting policy.

Land and buildings held for use are stated in the balance sheet at cost less accumulated depreciation
and accumulated impairment losses. Freehold land is not depreciated.

PPE not ready for the intended use on the date of the Balance Sheet are disclosed as "capital work in
progress".

Depreciation is recognised using reducing balance method so as to write off the cost of the
assets(other than freehold land) less their residual values over their useful lives specified in Schedule
II to the Companies Act, 2013, or in case of assets where the useful life was determined by technical
evaluation, over the useful life so determined. Depreciation method is reviewed at each financial year
end to reflect expected pattern of consumption of the future economic benefits embodied in the
asset. The estimated useful life and residual values are also reviewed at each financial year end with
the effect of any change in the estimates of useful life/ residual value is accounted on prospective
basis.

Depreciation for additions to/deductions from, owned assets is calculated pro rata to the period of
use. Depreciation charge for impaired assets is adjusted in future periods in such a manner that the
revised carrying amount of the asset is allocated over its remaining useful life.

Assets held under finance leases are depreciated over the shorter of lease term and their useful life on
the same basis as owned assets. However, when there is no reasonable certainty that the Company
shall obtain ownership of the assets at the end of the lease term, such assets are depreciated based
on the useful life prescribed under Schedule II to the Companies Act, 2013 or based on the useful life
adopted by the Company for similar assets.

An item of property, plant and equipment is derecognised upon disposal or when no future economic
benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the
disposal or retirement of an item of property, plant and equipment is recognised in profit or loss.

1.5. Investment Property

Investment properties are properties (including those under construction) held to earn rentals and /
or capital appreciation are classified as investment property and are measured and reported at cost
including transaction costs.

Depreciation is recognised using reducing balance method so as to write off the cost of the investment
property less their residual values over their useful lives specified in Schedule II to the Companies Act,
2013, or in the case of assets where the useful life was determined by technical evaluation, over the
useful life so determined.

Depreciation method is reviewed at each financial year end to reflect the expected pattern of
consumption of the future benefits embodied in the investment property. The estimated useful
life and residual values are also reviewed at each financial year end and the effect of any change
in the estimates of useful life / residual value is accounted on prospective basis. Freehold land and
properties under construction are not depreciated.

As investment property is derecognised upon disposal or when the investment property is
permanently withdrawn from use and no future economic benefits are expected from the disposal.

Any gain or loss arising on de-recognition of property is recognised in the Statement of Profit and
Loss in the same period.

1.6. Intangible Assets

Intangible assets are recognised when it is probable that the future economic benefits that are
attributable to the asset will flow to the enterprise and the cost of the asset can be measured reliably.
Intangible assets are stated at original cost net of tax/duty credits availed, if any, less accumulated
amortisation and cumulative impairment. Direct expenses and administrative and other general
overhead expenses that are specifically attributable to acquisition of intangible assets are allocated
and capitalised as a part of the cost of the intangible assets.

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

Intangible assets are amortised on straight line basis over the estimated useful life. The method of
amortisation and useful life are reviewed at the end of each accounting year with the effect of any
changes in the estimate being accounted for on a prospective basis.

An intangible asset is derecognised on disposal, or when no future economic benefits are expected
from use or disposal. Gains or losses arising from derecognition of an intangible asset are recognised
in profit or loss when the asset is derecognised.

1.7. Impairment of Tangible and Intangible Assets other than Goodwill

As at the end of each accounting year, the Company reviews the carrying amounts of its PPE and
intangible assets to determine whether there is any indication that those assets have suffered an
impairment loss. If such indication exists, the PPE, investment property and intangible assets are
tested for impairment so as to determine the impairment loss, if any. Goodwill and the intangible
assets with indefinite life are tested for impairment each year.

Impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount.
Recoverable amount is determined:

i) in the case of an individual asset, at the higher of the net selling price and the value in use;
and

ii) in the case of a cash generating unit (the smallest identifiable Company of assets that generates
independent cash flows), at the higher of the cash generating unit's net selling price and the
value in use.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset for which the estimates of future cash flows have not been adjusted.

If recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying
amount, such deficit is recognised immediately in the Statement of Profit and Loss as impairment
loss and the carrying amount of the asset (or cash generating unit) is reduced to its recoverable
amount. For this purpose, the impairment loss recognised in respect of a cash generating unit is
allocated first to reduce the carrying amount of any goodwill allocated to such cash generating
unit and then to reduce the carrying amount of the other assets of the cash generating unit on a
pro-rata basis.

When an impairment loss subsequently reverses, the carrying amount of the asset (or cash
generating unit), except for allocated goodwill, is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss is recognised for the asset (or
cash generating unit) in prior years. A reversal of an impairment loss (other than impairment loss
allocated to goodwill) is recognised immediately in the Statement of Profit and Loss.

1.8. Employee Benefits

i) 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.

ii) Post-employment benefits:

a) Defined contribution plans: The Company's superannuation scheme, recognised provident
fund scheme, employee state insurance scheme and employee pension scheme are defined
contribution plans. The contribution paid/payable under the schemes is recognised during
the period in which the employee renders the related service.

b) Defined benefit plans: The obligation in respect of defined benefit plans, which cover Gratuity
are provided for on the basis of an actuarial valuation at the end of each financial year using
project unit credit method. The Company's liability is actuarially determined (using the

Projected Unit Credit Method) at the end of the year. Actuarial losses/gains are recognised in
the Other Comprehensive Income in the year in which they arise.

Re-measurement, comprising actuarial gains and losses, is reflected immediately in the
Balance Sheet with a charge or credit recognised in the Other Comprehensive Income in the
period in which they occur. Re-measurement recognised in other comprehensive income is
reflected immediately in retained earnings, and will not be reclassified to profit or loss.

Defined benefit costs are categorised as follows:

i) Service cost (including current service cost, past service cost, as well as gain and losses
on curtailments and settlements);

ii) Net interest expense or income; and

iii) Re-measurement.

The Company presents the first two components of defined benefit costs in Statement of Profit
and Loss in the line item 'Employee Benefits Expense.

The present value of the defined benefit plan liability is calculated using a discount rate, which
is determined by reference to market yields at the end of the reporting period on government
bonds.

The retirement benefit obligation, recognized in the Balance Sheet, represents the Company's
liability based on actuarial valuation.

iii) Long term employee benefits:

The obligation recognised in respect of long term benefits such as long term compensated
absences is measured at present value of estimated future cash flows expected to be made by
the Company and is recognised in a similar manner as in the case of defined benefit plans vide
(ii) (b) above.

iv) Termination benefits:

Termination benefits such as compensation under employee separation schemes are recognised
as expense when the Company's offer of the termination benefit is accepted or when the
Company recognises the related restructuring costs whichever is earlier.

1.9. Leases

The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind
AS 116. Identification of a lease requires significant judgement. The Company uses significant
judgement in assessing the lease term (including anticipated renewals) and the applicable discount
rate.

The Company determines the lease term as the non-cancellable period of a lease, together with
both periods covered by an option to extend the lease if the Company is reasonably certain to
exercise that option; and periods covered by an option to terminate the lease if the Company is
reasonably certain not to exercise that option. In assessing whether the Company is reasonably
certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, it

considers all relevant facts and circumstances that create an economic incentive for the Company
to exercise the option to extend the lease, or not to exercise the option to terminate the lease. The
Company revises the lease term if there is a change in the non-cancellable period of a lease.

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.

Company as a lessee

The Company accounts for each lease component within the contract as a lease separately from
non-lease components of the contract and allocates the consideration in the contract to each lease
component based on the relative stand-alone price of the lease component and the aggregate
stand-alone price of the non-lease components.

The Company recognises right-of-use asset representing its right to use the underlying asset for the
lease term at the lease commencement date. The cost of the right-of-use asset measured at inception
shall comprise of the amount of the initial measurement of the lease liability adjusted for any lease
payments made at or before the commencement date less any lease incentives received, plus any
initial direct costs incurred and an estimate of costs to be incurred by the lessee in dismantling
and removing the underlying asset or restoring the underlying asset or site on which it is located.
The right-of-use assets is subsequently measured at cost less any accumulated depreciation,
accumulated impairment losses, if any and adjusted for any remeasurement of the lease liability.
The right-of-use assets is depreciated using the straight-line method from the commencement date
over the shorter of lease term or useful life of right-of-use asset. The estimated useful lives of right-
of-use assets are determined on the same basis as those of property, plant and equipment. Right-of-
use assets are tested for impairment whenever there is any indication that their carrying amounts
may not be recoverable. Impairment loss, if any, is recognised in the statement of profit and loss.
The Company measures the lease liability at the present value of the lease payments that are not paid
at the commencement date of the lease. The lease payments are discounted using the interest rate
implicit in the lease, if that rate can be readily determined. If that rate cannot be readily determined,
the Company uses incremental borrowing rate. For leases with reasonably similar characteristics,
the Company, on a lease-by-lease basis, may adopt either the incremental borrowing rate specific
to the lease or the incremental borrowing rate for the portfolio as a whole. The lease payments
shall include fixed payments, variable lease payments, residual value guarantees, exercise price of
a purchase option where the Company is reasonably certain to exercise that option and payments
of penalties for terminating the lease, if the lease term reflects the lessee exercising an option
to terminate the lease. The lease liability is subsequently remeasured by increasing the carrying
amount to reflect interest on the lease liability, reducing the carrying amount to reflect the lease
payments made and remeasuring the carrying amount to reflect any reassessment or lease
modifications or to reflect revised in-substance fixed lease payments. The company recognises the
amount of the re-measurement of lease liability due to modification as an adjustment to the right-
of-use asset and statement of profit and loss depending upon the nature of modification. Where
the carrying amount of the right-of-use asset is reduced to zero and there is a further reduction in
the measurement of the lease liability, the Company recognises any remaining amount of the re¬
measurement in statement of profit and loss.

Company as a Lessor

At the inception of the lease the Company classifies each of its leases as either an operating lease or
a finance lease. The Company recognises lease payments received under operating leases as income
on a straight- line basis over the lease term. In case of a finance lease, finance income is recognised
over the lease term based on a pattern reflecting a constant periodic rate of return on the lessor's
net investment in the lease. When the Company is an intermediate lessor it accounts for its interests
in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with
reference to the right-of-use asset arising from the head lease, not with reference to the underlying
asset. If a head lease is a short term lease to which the Company applies the exemption described
above, then it classifies the sub-lease as an operating lease.

The Company has elected not to apply the requirements of Ind AS 116 Leases to short-term leases
of all assets that have a lease term of 12 months or less and leases for which the underlying asset
is of low value. The lease payments associated with these leases are recognized as an expense on a
straight-line basis over the lease term.

1.10. Financial Instruments

Financial assets and financial liabilities are recognised in the Company's balance sheet when the
Company becomes a party to the contractual provisions of the instrument.

Recognised financial assets and financial liabilities are initially measured at fair value. Transaction
costs that are directly attributable to the acquisition or issue of financial assets and financial
liabilities (other than financial assets and financial liabilities at FVTPL) are added to or deducted
from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

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

A financial asset and a financial liability is offset and presented on net basis in the balance sheet
when there is a current legally enforceable right to set-off the recognised amounts and it is intended
to either settle on net basis or to realise the asset and settle the liability simultaneously.

1) Financial Assets

a) Financial assets at amortised cost

Financial assets are subsequently measured at amortised cost using the effective interest rate
(EIR) if these financial assets are held within a business model whose objective is to hold these
assets 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.

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) Equity instruments at FVTOCI

On initial recognition of an equity investment that is not held for trading, the Company may
irrevocably elect to present subsequent changes in the investment's fair value in OCI (designated
as FVOCI - equity investment). This election is made on an investment- by- investment basis.

These assets are subsequently measured at fair value. Dividends are recognised as income in
profit or loss. Other net gains and losses in fair value are recognised in OCI and are not reclassified
to profit or loss.

d) Debt instruments at amortised cost or at FVTOCI

The Company assesses the classification and measurement of a financial asset based on the
contractual cash flow characteristics of the asset and the Company's business model for
managing the asset.

For an asset to be classified and measured at amortised cost, its contractual terms should give
rise to cash flows that are solely payments of principal and interest on the principal outstanding
(SPPI).

For an asset to be classified and measured at FVTOCI, the asset is held within a business model
whose objective is achieved both by collecting contractual cash flows and selling financial assets;
and the contractual terms of instrument give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding. The Company has more
than one business model for managing its financial instruments which reflect how the Company
manages its financial assets in order to generate cash flows. The Company's business models
determine whether cash flows will result from collecting contractual cash flows, selling financial
assets or both.

The Company considers all relevant information available when making the business model
assessment. However, this assessment is not performed on the basis of scenarios that the
Company does not reasonably expect to occur, such as so-called 'worst case' or 'stress case'
scenarios. The Company takes into account all relevant evidence available such as:

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

• the risks that affect the performance of the business model (and the financial assets held
within that business model) and, in particular ,the way in which those risks are managed; and

• how managers of the business are compensated (e.g. whether the compensation is based on
the fair value of the assets managed or on the contractual cash flows collected).

The Company reassess its business models each reporting period to determine whether the
business models have changed since the preceding period. For the current and prior reporting
period the Company has not identified a change in its business models.

When a debt instrument measured at FVTOCI is derecognised, the cumulative gain/loss previously
recognised in OCI is reclassified from equity to profit or loss.

In contrast, for an equity investment designated as measured at FVTOCI, the cumulative gain /
loss previously recognised in OCI is not subsequently reclassified to profit or loss but transferred
within equity.

Debt instruments that are subsequently measured at amortised cost or at FVTOCI are subject to
impairment.

e) Financial assets at fair value through profit or loss (FVTPL)

Financial assets are measured at fair value through profit or loss unless it is measured at amortised
cost or at fair value through other comprehensive income on initial recognition.

The transaction costs directly attributable to the acquisition of financial assets and liabilities at
fair value through profit or loss are immediately recognised in profit or loss.

f) De-recognition

A financial asset (or, where applicable, a part of a financial asset or part of a Company of similar
financial assets) is primarily de-recognised when:

• The rights to receive cash flows from the asset have expired, or

• The Company has transferred its rights to receive cash flows from the asset or has assumed
an obligation to pay the received cash flows in full without material delay to a third party
under a 'pass-through' arrangement; and

• either (a) the Company has transferred substantially all the risks and rewards of the asset, or
(b) the Company has neither transferred nor retained substantially all the risks and rewards
of the asset, but has transferred control of the asset.

The transferred asset and the associated liability are measured on a basis that reflects the rights
and obligations that the Company has retained.

2) Financial liabilities

a) Financial liabilities, including derivatives, which are designated for measurement at FVTPL are
subsequently measured at fair value. Financial guarantee contracts are subsequently measured
at the amount of impairment loss allowance or the amount recognised at inception net of
cumulative amortisation, whichever is higher.

All other financial liabilities including loans and borrowings are measured at amortised cost
using Effective Interest Rate (EIR) method.

b) A financial liability is derecognised when the related obligation expires or is discharged or
cancelled.

1.11. Write Off

Loans and debt securities are written off when the Company has no reasonable expectations of
recovering the financial asset (either in its entirety or a portion of it). This is the case when the
Company determines that the borrower does not have assets or sources of income that could
generate sufficient cash flows to repay the amounts subject to the write-off. A write-off constitutes

a derecognition event. The Company may apply enforcement activities to financial assets written
off. Recoveries resulting from the Company's enforcement activities will result in impairment gains.

1.12. Impairment

The Company recognises loss allowances for ECLs on the following financial instruments that are
not measured at FVTPL:

• Loans and advances to customers;

• Debt investment securities;

• Trade and other receivable;

• Lease receivables;

• Irrevocable loan commitments issued; and

• Financial guarantee contracts issued.

Credit-impaired financial assets

A financial asset is 'credit-impaired' when one or more events that have a detrimental impact on the
estimated future cash flows of the financial asset have occurred. Credit-impaired financial assets
are referred to as Stage 3 assets. Evidence of credit impairment includes observable data about the
following events:

• significant financial difficulty of the borrower or issuer;

• a breach of contract such as a default or past due event;

• the lender of the borrower, for economic or contractual reasons relating to the borrower's

financial difficulty, having granted to the borrower a concession that the lender would not
otherwise consider;

• the disappearance of an active market for a security because of financial difficulties; or

• the purchase of a financial asset at a deep discount that reflects the incurred credit losses.

It may not be possible to identify a single discrete event—instead, the combined effect of several
events may have caused financial assets to become credit-impaired. The Company assesses
whether debt instruments that are financial assets measured at amortised cost or FVTOCI are
credit-impaired at each reporting date. To assess if corporate debt instruments are credit impaired,
the Company considers factors such as bond yields, credit ratings and the ability of the borrower to
raise funding.

A loan is considered credit-impaired when a concession is granted to the borrower due to a
deterioration in the borrower's financial condition, unless there is evidence that as a result of
granting the concession the risk of not receiving the contractual cash flows has reduced significantly
and there are no other indicators of impairment.

For financial assets where concessions are contemplated but not granted the asset is deemed
credit impaired when there is observable evidence of credit-impairment including meeting the
definition of default. The definition of default (see below) includes unlikeliness to pay indicators
and a back-stop if amounts are overdue for 90 days or more.

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 Probability of Default 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 corporate loans 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.
In respect of the corporate loan assets, shifting to Stage 2 has been rebutted using historical evidence
from own portfolio to a threshold of 60 days past due, which is reviewed annually.

Purchased or originated credit-impaired (POCI) financial assets

POCI financial assets are treated differently because the asset is credit-impaired at initial recognition.
For these assets, the Company recognises all changes in lifetime ECL since initial recognition as a loss
allowance with any changes recognised in profit or loss. A favourable change for such assets creates
an impairment gain.

Definition of default

Critical to the determination of ECL is the definition of default. The definition of default is used in
measuring the amount of ECL and in the determination of whether the loss allowance is based on
12-month or lifetime ECL, as default is a component of the probability of default (PD) which affects
both the measurement of ECLs and the identification of a significant increase in credit risk.

The Company considers the following as constituting an event of default:

• the borrower is past due more than 90 days on any material credit obligation to the Company; or

• the borrower is unlikely to pay its credit obligations to the Company in full.

The definition of default is appropriately tailored to reflect different characteristics of different types
of assets.

When assessing if the borrower is unlikely to pay its credit obligation, the Company takes into
account both qualitative and quantitative indicators. The information assessed depends on the

type of the asset, for example in corporate lending a qualitative indicator used is the admittance
of bankruptcy petition by National Company Law Tribunal, which is not relevant for retail lending.
Quantitative indicators, such as overdue status and non-payment on another obligation of the same
counter party are key inputs in this analysis. The Company uses a variety of sources of information to
assess default which are either developed internally or obtained from external sources. The definition
of default is applied consistently to all financial instruments unless information becomes available
that demonstrates that another default definition is more appropriate for a particular financial
instrument. With the exception of POCI financial assets (which are considered separately below),
ECLs are required to be measured through a loss allowance at an amount equal to:

• 12-month ECL, i.e. lifetime ECL that result from those default events on the financial instrument
that are possible within 12 months after the reporting date, (referred to as Stage 1); or

• full lifetime ECL, i.e. lifetime ECL that result from all possible default events over the life of the
financial instrument, (referred to as Stage 2 and Stage 3).

A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on
that financial instrument has increased significantly since initial recognition (and consequently
to credit impaired financial assets). For all other financial instruments, ECLs are measured at an
amount equal to the 12-month ECL.

ECLs are a probability-weighted estimate of the present value of credit losses. These are measured
as the present value of the difference between the cash flows due to the Company under the
contract and the cash flows that the Company expects to receive arising from the weighting of
multiple future economic scenarios, discounted at the asset's EIR.

• for financial guarantee contracts, the ECL is the difference between the expected payments to
reimburse the holder of the guaranteed debt instrument less any amounts that the Company
expects to receive from the holder, the debtor or any other party.

The Company measures ECL on an individual basis, or on a collective basis for portfolios of loans
that share similar economic risk characteristics.

1.13. 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 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 counter party,

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

If these do not clearly indicate a substantial modification, then;

a) In the case where the financial asset is derecognised the loss allowance for ECL is re-measured
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
paramount 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.

The Company derecognises a financial asset only when the contractual rights to the asset's cash
flows expire (including expiry arising from a modification with substantially different terms), or when
the financial asset and substantially all the risks and rewards of ownership of the asset are transferred
to another entity. If the Company neither transfers nor retains substantially all the risks and rewards
of ownership and continues to control the transferred asset, the Company recognises its retained
interest in the asset and an associated liability for amounts it may have to pay.

If 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.

On derecognition of a financial asset in its entirety, the difference between the asset's carrying
amount and the sum of the consideration received and receivable and the cumulative gain/ loss
that had been recognised in OCI and accumulated in equity is recognised in profit or loss, with the
exception of equity investment designated as measured at FVTOCI, where the cumulative gain/loss
previously recognised in OCI is not subsequently re-classified to profit or loss.

On derecognition of a financial asset other than in its entirety (e.g. when the Company retains an
option to repurchase part of a transferred asset), the Company allocates the previous carrying amount
of the financial asset between the part it continues to recognise under continuing involvement, and
the part it no longer recognises on the basis of the relative fair values of those parts on the date
of the transfer. The difference between the carrying amount allocated to the part that is no longer
recognised and the sum of the consideration received for the part no longer recognised and any
cumulative gain/loss allocated to it that had been recognised in OCI is recognised in profit or loss. A
cumulative gain/loss that had been recognised in OCI is allocated between the part that continues
to be recognised and the part that is no longer recognised on the basis of the relative fair values of
those parts. This does not apply for equity investments designated as measured at FVTOCI, as the
cumulative gain/loss previously recognised in OCI is not subsequently reclassified to profit or loss.

1.14. Presentation of allowance for ECL 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.

1.15. Cash and bank balances:

Cash and bank balances also include fixed deposits, margin money deposits, earmarked balances
with banks and other bank balances which have restrictions on repatriation. Short term and liquid
investments being subject to more than insignificant risk of change in value, are not included as
part of cash and cash equivalents.

1.16. Borrowing costs:

Borrowing costs include interest expense calculated using the effective interest method, finance
charges in respect of assets acquired on finance lease and exchange differences arising from
foreign currency borrowings, to the extent they are regarded as an adjustment to interest costs.

Borrowing costs net of any investment income from the temporary investment of related
borrowings, that are attributable to the acquisition, construction or production of a qualifying
asset are capitalised as part of cost of such asset till such time the asset is ready for its intended use
or sale. A qualifying asset is an asset that necessarily requires a substantial period of time to get
ready for its intended use or sale. All other borrowing costs are recognised in profit or loss in the
period in which they are incurred.

1.17. Accounting and reporting of information for Operating Segments:

Operating segments are those components of the business whose operating results are regularly
reviewed by the chief operating decision making body in the Company to make decisions for
performance assessment and resource allocation. The reporting of segment information is the
same as provided to the management for the purpose of the performance assessment and resource
allocation to the segments. Segment accounting policies are in line with the accounting policies of
the Company.

1.18. Foreign currencies:

i) The functional currency and presentation currency of the Company is Indian Rupee. Functional
currency of the Company and foreign operations has been determined based on the primary
economic environment in which the Company and its foreign operations operate considering
the currency in which funds are generated, spent and retained.

ii) Transactions in currencies other than the Company's functional currency are recorded on
initial recognition using the exchange rate at the transaction date. At each Balance Sheet
date, foreign currency monetary items are reported at the prevailing closing spot rate. Non¬
monetary items that are measured in terms of historical cost in foreign currency are not
retranslated.

Exchange differences that arise on settlement of monetary items or on reporting of monetary
items at each Balance Sheet date at the closing spot rate are recognised in the Statement of
Profit and Loss in the period in which they arise.

iii) Financial statements of foreign operations whose functional currency is different than Indian
Rupees are translated into Indian Rupees as follows:

A. assets and liabilities for each Balance Sheet presented are translated at the closing rate at the
date of that Balance Sheet;

B. income and expenses for each income statement are translated at average exchange rates;
and

C. all resulting exchange differences are recognised in other comprehensive income and
accumulated in equity as foreign currency translation reserve for subsequent reclassification
to profit or loss on disposal of such foreign operations.

1.19. Taxation:

Current Tax:

Income tax expense for the year comprises of current tax and deferred tax. It is recognised in the
Statement of Profit and Loss except to the extent it relates to an item which is recognised directly
in equity or in other comprehensive income.

Current tax is the expected tax payable/ receivable on the taxable income/ loss for the year using
applicable tax rates for the relevant period, and any adjustment to taxes in respect of previous
years.

Deferred Tax:

Deferred tax is recognised on temporary differences between the carrying amounts of assets
and liabilities in the Company's financial statements and the corresponding tax bases used in
computation of taxable profit and quantified using the tax rates and laws enacted or substantively
enacted as on the Balance Sheet date.

Deferred tax assets are generally recognised for all taxable temporary differences to the extent
that is probable that taxable profits will be available against which those deductible temporary
differences can be utilised. The carrying amount of deferred tax assets is reviewed at the end of
each reporting period and reduced to the extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets relating to unabsorbed depreciation/business losses/losses under the head
"capital gains" are recognised and carried forward to the extent of available taxable temporary
differences or where there is convincing other evidence that sufficient future taxable income will
be available against which such deferred tax assets can be realised.

The measurement of deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the Company expects, at the end of reporting period, to recover
or settle the carrying amount of its assets and liabilities.

Transaction or event which is recognised outside profit or loss, either in other comprehensive
income or in equity, is recorded along with the tax as applicable.