3 Material accounting policies

3.1 Material accounting Judgements, estimates and
assumptions

The preparation of financial statements in conformity
with Ind AS requires the management to make judgments,

estimates and assumptions that affect the reported
amounts of revenues, expenses, assets and liabilities and
the disclosure of contingent liabilities, at the end of the
reporting period. Although these estimates are based
on the management's best knowledge of current events
and actions, uncertainty about these assumptions and
estimates could result in the outcomes requiring a material
adjustment to the carrying amounts of assets or liabilities
in future periods.

A. Impairment loss on financial assets

The measurement of impairment losses across all
categories of financial assets except assets valued
at FVTPL, enquires judgment, in particular, the
estimation of the amount and timing of future
cash flows and collateral values when determining
impairment losses and the assessment of a significant
increase in credit risk. These estimates are driven by
a number of factors, changes in which can result in
different levels of allowances.

The Company's expected credit loss (ECL) calculations
are outputs of complex models with a number of
underlying assumptions regarding the choice of
variable inputs and their interdependencies. Elements
of the ECL models that are considered accounting
judgments and estimates include:

• The Company's model, which assigns Probability
of Defaults (PDs)

• The Company's criteria for assessing if there
has been a significant increase in credit risk
and so allowances for financial assets should be
measured on a Long Term ECL (LTECL) basis

• The segmentation of financial assets when their
ECL is assessed on a collective basis

• Development of ECL models, including the
various formulas and the choice of inputs

• Determination of associations between
macroeconomic scenarios and, economic inputs,
and the effect on PDs, Exposure at Default (EADs)
and Loss Given Default (LGDs)

• Selection of forward-looking macroeconomic
scenarios and their probability weightings, to
derive the economic inputs into the ECL models

B. Business Model Assumption

Classification and measurement of financial assets
depends on the results of the Solely Payments of
Principal and Interest (SPPI) and the business model
test. The Company determines the business model

at a level that reflects how groups of financial
assets are managed together to achieve a particular
business objective. This assessment includes
judgment reflecting all relevant evidence including
how the performance of the assets is evaluated and
their performance measured, the risks that affect
the performance of the assets and how these are
managed and how the managers of the assets are
compensated. The Company monitors financial
assets measured at amortised cost that are de¬
recognised prior to their maturity to understand the
reason for their disposal and whether the reasons
are consistent with the objective of the business for
which the asset was held. Monitoring is part of the
Company's continuous assessment of whether the
business model for which the remaining financial
assets are held continues to be appropriate and if it
is not appropriate whether there has been a change
in business model and so a prospective change to the
classification of those assets.

C. Defined employee benefit assets and liabilities

The cost of the defined benefit gratuity plan and
other post-employment benefits and the present
value of the gratuity obligation are determined using
actuarial valuations. An actuarial valuation involves
making various assumptions that may differ from
actual developments in the future. These include
the determination of the discount rate, future salary
increases and mortality rates. Due to the complexities
involved in the valuation and its long-term nature,
a defined benefit obligation is highly sensitive to
changes in these assumptions. All assumptions are
reviewed at each reporting date.

D. Share Based Payments

Estimating fair value for share-based payment
transactions requires determination of the most
appropriate valuation model, which is dependent on
the terms and conditions of the grant. This estimate
also requires determination of the most appropriate
inputs to the valuation model including the expected
life of the share option, volatility and dividend yield
and making assumptions about them.

E. Fair value measurement

When the fair values of financial assets and financial
liabilities recorded in the balance sheet cannot be
measured based on quoted prices in active markets,
their fair value is measured using valuation techniques
including the DCF model. The inputs to these models
are taken from observable markets where possible,

but where this is not feasible, a degree of judgment is
required in establishing fair values. Judgments include
considerations of inputs such as liquidity risk, credit
risk and volatility. Changes in assumptions about
these factors could affect the reported fair value of
financial instruments.

F. Effective interest rate method

The Company's EIR methodology, recognises interest
income using a rate of return that represents the
best estimate of a constant rate of return over the
expected behavioural life of loans and recognises the
effect of potentially different interest rates charged
at various stages and other characteristics of the
product life cycle. This estimation, by nature, requires
an element of judgement regarding the expected
behaviour and life-cycle of the instruments, as well
expected changes to the Company's base rate and
other fee income/expense that are integral parts of
the instrument.

G. Useful lives of assets

The Company reviews the useful life of property,
plant and equipment at the end of each reporting
period. This reassessment may result in change in
depreciation expense in future periods.

3.2 Cash and cash equivalents

Cash and cash equivalent comprises cash in hand, demand
deposits and time deposits held with bank, debit balance
in cash credit account.

3.3 Recognition of income and expense

a) Interest income

The Company earns revenue primarily from giving
loans. Revenue is recognized to the extent that it is
probable that the economic benefits will flow to the
Company and the revenue can be reliably measured.
Interest revenue is recognized using the effective
interest method (EIR). The effective interest method
calculates the amortized cost of a financial instrument
and allocates the interest income. The effective interest
rate is the rate that discounts estimated future cash
payments or receipts through the expected life of the
financial instrument or, when appropriate, a shorter
period, to the gross carrying amount of the financial
asset or liability. The calculation takes into account
all contractual terms of the financial instrument (for
example, prepayment options) and includes any fees
or incremental costs that are directly attributable to
the instrument and are an integral part of the EIR, but
not future credit losses.

The Company recognises interest income by applying
the EIR to the gross carrying amount of financial assets
other than credit-impaired assets. When a financial
asset becomes credit-impaired and is, therefore,
regarded as 'Stage 3', the Company recognises the
interest to the extent recoverable. If the financial
assets cures and is no longer credit-impaired, the
Company reverts to recognising interest income.

b) Interest expense

Interest expense includes issue costs that are initially
recognized as part of the carrying value of the
financial liability and amortized over the expected
life using the effective interest method. These include
fees and commissions payable to arrangers and other
expenses such as external legal costs, provided these
are incremental costs that are directly related to the
issue of a financial liability.

c) Other charges and other interest

Additional interest, Overdue interest and Interest on
income tax refund are recognised on realization basis.

d) Commission on Insurance Policies

Commission on insurance policies sold is recognised
when the Company under its agency code sells the
insurance policies and when the same is accepted by
the principal insurance Company.

e) Dividend income

Dividend income is recognized when the Company's
right to receive the payment is established, it is
probable that the economic benefits associated with
the dividend will flow to the entity and the amount
of the dividend can be measured reliably. This is
generally when shareholders approve the dividend.

3.4 Foreign currency

The Company's financial statements are presented in
Indian Rupees (INR) which is also the Company's functional
currency.

Transactions in foreign currencies are initially recorded
by the Company at their respective functional currency
spot rates at the date the transaction first qualifies for
recognition.

Foreign currency denominated monetary assets and
liabilities are translated at the functional currency spot
rates of exchange at the reporting date and exchange
gains and losses arising on settlement and restatement are
recognized in the statement of profit and loss.

Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using
the exchange rates at the dates of the initial transactions.
Non-monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the
date when the fair value is determined. The gain or loss
arising on translation of non-monetary items measured
at fair value is treated in line with the recognition of the
gain or loss on the change in fair value of the item (i.e.,
translation differences on items whose fair value gain or
loss is recognized in OCI or profit or loss are also recognized
in OCI or profit or loss, respectively).

3.5 Leases

The Company assesses at contract inception whether
a contract is, or contains, a lease. That is, if the contract
conveys the right to control the use of an identified asset
for a period of time in exchange for consideration.

Company as a lessee

The Company applies a single recognition and
measurement approach for all leases, except for short¬
term leases. The Company recognises lease liabilities to
make lease payments and right-of-use assets representing
the right to use the underlying assets.

Right-of-use assets

The Company recognises right-of-use assets at the
commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use assets are
measured at cost, less any accumulated depreciation and
impairment losses, and adjusted for any remeasurement
of lease liabilities. The cost of right-of-use assets includes
the amount of lease liabilities recognised, initial direct
costs incurred, and lease payments made at or before the
commencement date less any lease incentives received.
Right-of-use assets are depreciated on a straight-line basis
over the shorter of the lease term and the estimated
useful lives of the assets, as follows:

• Office Premises - 1-12 Years

The right-of-use assets are also subject to impairment.
Refer to the accounting policies in note 3.8 Impairment
of non-financial assets.

Lease Liability

At the commencement date of the lease, the Company
recognises lease liabilities measured at the present value
of lease payments to be made over the lease term. The
lease payments include fixed payments less any lease
incentives receivable. The lease payments also include
payments of penalties for terminating the lease, if the

lease term reflects the Company exercising the option to
terminate. Variable lease payments that do not depend on
an index or a rate are recognised as expenses in the period
in which the event or condition that triggers the payment
occurs.

In calculating the present value of lease payments, the
Company uses its incremental borrowing rate at the
lease commencement date because the interest rate
implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is
increased to reflect the accretion of interest and reduced
for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the
lease payments or a change in the assessment of an option
to purchase the underlying asset.

Short-term leases and leases of low-value assets

The Company applies the short-term lease recognition
exemption to its short-term leases (i.e., those leases
that have a lease term of 12 months or less from the
commencement date and do not contain a purchase
option).

Determining the lease term of contracts with renewal
and termination options - Company as lessee

The Company determines the lease term as the non¬
cancellable term of the lease, together with any periods
covered by an option to extend the lease if it is reasonably
certain to be exercised, or any periods covered by an
option to terminate the lease, if it is reasonably certain not
to be exercised.

Leases - Estimating the incremental borrowing rate

The Company cannot readily determine the interest rate
implicit in the lease, therefore, it uses its incremental
borrowing rate (IBR) to measure lease liabilities. The IBR is
the rate of interest that the Company would have to pay to
borrow over a similar term, and with a similar security, the
funds necessary to obtain an asset of a similar value to the
right-of-use asset in a similar economic environment. The
IBR therefore reflects what the Company 'would have to
pay', which requires estimation when no observable rates
are available or when they need to be adjusted to reflect
the terms and conditions of the lease.

3.6 Property, plant and equipment (PPE) and Intangible
assets

PPE

PPE are stated at cost (including incidental expenses directly
attributable to bringing the asset to its working condition
for its intended use) less accumulated depreciation and

impairment losses, if any. Cost comprises the purchase
price and any attributable cost of bringing the asset to
its working condition for its intended use. Subsequent
expenditure related to PPE is capitalized only when it is
probable that future economic benefits associated with
these will flow to the Company and the cost of item can be
measured reliably. Other repairs and maintenance costs
are expensed off as and when incurred.

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 included in the statement of profit
and loss when the asset is derecognised.

Intangible assets

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 accumulated impairment losses.

3.7 Depreciation and amortization
Depreciation

Depreciation on PPE is provided on straight-line method
as per the useful life prescribed in Schedule II to the
Companies Act, 2013, except for Vehicles and Mobile
phone.

Vehicles are amortised on a straight line basis over a
period of five years from the date when the assets are
available for use and mobile phones are amortised on a
straight line basis over a period of two years from the date
when the assets are available for use . The life has been
assessed based on past usage experience and considering
the change in technology.

Depreciation on additions to PPE is provided on a pro¬
rata basis from the date the asset is put to use. Leasehold
improvements are amortised as per the rates prescribed
in Schedule II to the Companies Act, 2013, however
where the lease period is less than 10 years, the leasehold
improvements are amortised over the period of Lease.
Depreciation on sale / deduction from PPE is provided for
up to the date of sale / deduction, as the case may be.

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

Amortization

Intangible assets consisting of Software are amortised on a
straight line basis over a period of four years from the date
when the assets are available for use. The amortisation
period and the amortisation method for these softwares
with a finite useful life are reviewed at least at each
financial year-end.

3.8 Impairment of non-financial assets

The carrying amount of assets is reviewed at each balance
sheet date if there is any indication of impairment
based on internal/external factors. An impairment loss
is recognised wherever the carrying amount of an asset
exceeds its recoverable amount. The recoverable amount
is the greater of the assets, net selling price 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 risks specific to the asset. In
determining net selling price, recent market transactions
are taken into account, if available. If no such transactions
can be identified, an appropriate valuation model is used.

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