17. Significant accounting policies and notes forming part of the accounts for the year ended March 31,2025

17.1 Background¹

YES BANK Limited (the 'Bank') is a publicly held bank engaged in providing a wide range of banking and financial services. YES BANK Limited is a banking company governed by the Banking Regulation Act, 1949. The Bank was incorporated as a limited company under the Companies Act, 1956 on November 21, 2003. The Bank received the licence to commence banking operations from the Reserve Bank of India ('RBI') on May 24, 2004. Further, the Ba was included to the Second Schedule of the Reserve Bank of India Act, 1934 with effect from August 21, 2004. Also, the Bank has a branch at International Financial Services Centre ('IFSC') at GIFT City, Gujarat ('IBU'). The Bank classifies transactions undertaken by IBU as overseas operation. The financial accounting system of the Bank is centralized and, therefore, accounting returns are not required to be submitted by branches of the Bank.

17.2 Basis of preparation

The standalone financial statements have been prepared in accordance with requirements prescribed under the Third Schedule (Form A and Form B) of the Banking Regulation Act, 1949. The accounting and reporting policies of the Bank used in the preparation of these financial statements conform to Generally Accepted Accounting Principles in India (Indian GAAP), the guidelines and clarifications issued by the Reserve Bank of India (RBI) from time to time, the accounting standards notified under section 133 of the Companies Act 2013 read together with the Companies (Accounts) Rules, 2014 and the Companies (Accounting Standards) Rules, 2021 to the extent applicable and practices generally prevalent in the banking industry in India. The Bank follows the accrual method of accounting and the historical cost convention, unless otherwise stated by RBI guidelines.

17.3 Use of estimates

The preparation of financial statements requires the management to make estimates and assumptions that are considered while reporting amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and income and expenses during the reporting period. Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Actual results could differ from these estimates. The impact of any revision in these estimates is recognised prospectively from the period of change.

Significant accounting policies

17.4.1 Revenue recognition

Revenue is recognised to the extent it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured.

• Interest income is recognised in the profit and loss account on accrual basis, except in the case of non-performing assets. Interest on non-performing assets is recognised as per the prudential norms of the RBI. Penal Charges for covenant breach is recognised upon certainty of its realisation.

• Dividend income is recognised when the right to receive payment is established.

• Commission on Guarantees and Letters of Credit ('LC') issued by the Bank is recognised as income over the period of the Guarantee and LC respectively.

• Income on non-coupon bearing discounted instruments is recognised over the tenure of the instrument on a straight line basis. In case of coupon bearing discounted instruments, discount income is recognised over the tenor of the instrument on a straight line basis.

• In case of Bonds and Pass Through Certificates (PTC), premium on redemption, if any, is amortised over the tenure of the instrument on a straight line basis.

• Revenue from financial advisory services is recognised in line with milestones achieved as per terms of agreement with clients which is reflective of services rendered.

• Facility fees and loan processing fees are recognised when due and realisable.

• Other fees and commission are accounted for as and when they became due and realisable.

• Gain / loss on sell down of loans is recognised in line with the extant RBI guidelines.

• Appropriations of recoveries in standard advances (except for credit cards, which is based on agreement) are made in below order:

a) Penal charges (on financial overdue)

b) Interest

c) Principal

d) Charges, Costs, Commission etc.

• Appropriations of recoveries in NPAs (except for credit cards, which is based on agreement) are made in below order:

a) Principal

b) Interest

c) Penal charges (on financial charges)

d) Penal charges (on non-financial overdue), Costs, Commission etc.

17.4.2 Investments

Classification and valuation of the Bank's investments are carried out in accordance with RBI Circular DOR. MRG.36/21.04.141/2023-24 dated September 12, 2023, as amended.

Accounting and Classification

The Bank follows settlement date accounting for Investments. In compliance with RBI guidelines, all investments, are categorised as "Fair Value Through Profit & Loss" ('FVTPL'), "Available for Sale" ('AFS') or "Held to Maturity" ('HTM') and under sub-category of FVTPL as "Held for Trading" ('HFT') at the time of its purchase. All investments in subsidiaries, associates and joint ventures are categorised under a separate category as "Investments in Subsidiaries, Associates and Joint Ventures" ('Subsidiaries and/ or joint ventures'). For the purpose of disclosure in the balance sheet, investments are classified as disclosed in Schedule 8 ('Investments') under six groups (a) government securities (b) other approved securities (c) shares (d) debentures and bonds (e) subsidiaries and/or joint ventures and (f) others.

Purchase and sale transactions in securities are accounted on settlement date.

a) Initial Recognition (Cost of acquisition)

All investments are measured at fair value on initial recognition, unless facts and circumstances suggest that the fair value is materially different from the acquisition cost, the acquisition cost is the fair value of the assets. In case the fair value of investment is different from cost of acquisition, Day 1 Gain/Loss is recognised in Profit and Loss Account.

Day 1 Loss arising from Level 3 investments is recognised immediately. Any Day 1 gains arising from Level 3 investments is deferred. In case of debt instruments, the Day 1 gain is amortised on a straight-line basis up to the maturity date (or earliest call date for perpetual instruments), while for unquoted equity instruments, the gain is set aside as a liability until the security is listed or derecognised.

Cost such as brokerage pertaining to investments, paid at the time of acquisition and broken period interest are charged to the profit and loss account as per the RBI guidelines.

b) Basis of classification

Investments are classified as per guidance provided in the RBI Master Direction - Classification, Valuation and Operation of Investment Portfolio of Commercial Banks Directions, 2023 Circular DOR.MRG.36/21.04.141/2023-24 dated September 12, 2023. Securities that meets SPPI criterion and the Bank intends to hold them till maturity are classified under the HTM category. Securities meets SPPI criterion and the Bank intends to held for sale are classified under AFS category. All other investments excluding investments in subsidiaries, Associates and Joint Ventures, which are not classified in the above categories are classified under the FVTPL (non-HFT) residual category. Held for Trading (HFT) is a separate investment subcategory within FVTPL. Investment in Subsidiaries, Associates and Joint Ventures are classified under a separate category as "Investments in Subsidiaries, Associates and Joint Ventures."

c) Reclassification between categories

Reclassification of investments from one category to the other, if done, is in accordance with RBI guidelines. As per RBI guidelines, reclassification between category requires Board of Directors prior approval. Further, reclassification shall also require the prior approval of the Department of Supervision (DoS), RBI.

When investments reclassified between categories, the accounting treatment shall be in accordance with chapter - VI of RBI Circular DOR.MRG.36/21.04.141/2023-24 dated September 12, 2023.

d) Valuation (Subsequent Measurement)

Investments categorised under AFS and FVTPL categories is fair valued on periodical basis as per relevant RBI guidelines. The valuation gains and losses across all performing investments irrespective of classification held under AFS or FVTPL is aggregated. The net appreciation or depreciation is directly credited or debited to AFS reserve or Profit & Loss Account of investments under AFS or FVTPL category respectively.

Investments received in lieu of restructured advances scheme are valued in accordance with RBI guidelines. Any diminution in value on these investments is provided for and is not used to set off against appreciation in respect of other performing securities in that category. Depreciation on equity shares acquired and held by the Bank under restructuring scheme is provided as per RBI guidelines.

Investments classified under the HTM category are carried at cost and any premium or discount over the face value, paid on acquisition, is amortised on a straight-line basis over the remaining period to maturity. Where in the opinion of management, a diminution, other than temporary in the value of investments classified under HTM has taken place, suitable provisions are made. Profit/loss on sale of investments in the 'Held to Maturity' category is recognised in the profit and loss account and profit is thereafter appropriated (net of applicable taxes and statutory reserve requirements) to Capital Reserve.

I nvestments in subsidiaries, Associates and Joint Ventures as classified under a separate category "Investments in Subsidiaries, Associates and Joint Ventures" is held at acquisition cost. The Bank assesses these investments for impairment on intervals as mentioned in RBI circular.

Treasury Bills, Commercial Paper and Certificates of deposit being discounted instruments, are valued at carrying cost.

PTCs purchased for priority sector lending requirements are valued in accordance with RBI guidelines.

The market/ fair value applied for the purpose of periodical valuation of quoted investments included in the AFS and FVTPL (including HFT) categories is the market price of the scrip as available from the trades/ quotes on the recognised stock exchanges and for Subsidiary General Ledger ('SGL') account transactions, the prices as periodically declared by Financial Benchmarks India Pvt. Ltd. (FBIL).

The market/ fair value of unquoted government securities included in the AFS and FVTPL (including HFT) category is determined as per the prices published by FBIL. Further, in the case of unquoted bonds, debentures, PTCs (other than priority sector) and preference shares, valuation is carried out by applying an appropriate mark-up (reflecting associated credit risk) over the Yield to Maturity ('YTM') rates of government securities. Such mark up and YTM rates applied are as per the relevant rates published by FIMMDA/FBIL.

The Bank undertakes short sale transactions in Central Government dated securities in accordance with RBI guidelines. The short position is reflected as the amount received on sale which is categorised under HFT category and is netted in the Investment schedule. The short position is marked to market and loss, if any, is charged to the Profit and Loss account while gain, if any, is ignored. Profit / Loss on settlement of the short position is recognised in the Profit and Loss account.

I nvestments in unquoted Alternative Investment Funds (AIF)/Venture Capital Funds (VCF) are valued at Net Asset Value (NAV) disclosed by the AIF/VCF. Where AIF/VCF fails to carry out and disclose the valuation of an independent valuer as per the frequency mandated by SEBI, the value of its units shall be treated as ' 1 per VCF/AIF.

In case AIF/VCF is not registered under SEBI (Alternative Investment Fund) Regulations, 2012 (SEBI AIF regulations) and the latest disclosed valuation of its investment precedes the date of valuation by more than 18 months the value of units shall be treated as ' 1 per VCF/AIF. In case AIF is registered under SEBI AIF regulations, Category I and Category II Alternative Investment Funds, undertakes valuation at least once in every six months, by an independent valuer appointed by the Alternative Investment Fund:

Quoted equity shares are valued at their closing price on a recognised stock exchange. Unquoted equity shares are valued at the break-up value if the latest balance sheet is available, else, at ' 1 per company, as per relevant RBI guidelines.

For stressed loans transferred to Asset Reconstruction Company (ARC) where the consideration is lower than the net book value (NBV) at the time of transfer, the shortfall is debited to the Profit and Loss Account and spread equally over the financial year. The realised profit, where the cash recovery exceeds the NBV of the stressed loans, the same is credited to Profit and Loss Account. For stressed loans where the consideration received was higher than the NBV at the time of transfer but the cash recovery is lower than the NBV, such excess amount is not reversed in the Profit and Loss Account and the Bank continues to carry forward the same as provision against the Security Receipts (SRs). In effect, the value of SRs is reflected in a manner that the value of SRs is not higher than the NBV of the loans transferred to ARC. The provisioning requirements is as per the extant RBI guidelines applied on each reporting date, taking into account the principle that there should be no provisioning arbitrage between the provisioning on security receipts vis-a-vis the provisioning requirements on the underlying stressed loans, had it stayed in the books. SRs/ PTCs which are not redeemed as at the end of resolution period are fully provided in books of accounts.

I nvestments in quoted Mutual Fund (MF) Units are valued at the latest repurchase price/NAV declared by the MF. Investments in un-quoted MF Units are valued on the basis of the latest re-purchase price declared by the MF in respect of each particular Scheme.

Investment in listed instruments of Real Estate Investment Trust (REIT)/Infrastructure Investment Trust (INVIT) is valued at closing price on a recognised stock exchange with the higher volumes. In case the instruments were not traded on any stock exchange within 15 days prior to date of valuation, valuation is done based on the latest NAV (not older than 1 year) submitted by the valuer.

Sovereign foreign currency bonds are valued using Composite Bloomberg Bond Trader (CBBT) price or Bloomberg Valuation Service (BVAL) price or on Treasury curve in the chronological order based on availability.

Non-Sovereign foreign currency Bonds are valued using either CBBT price, BVAL price, Bloomberg Generic price (BGN), Last available CBBT pricing for the instrument or Proxy Bond Pricing from Bloomberg in the chronological order based on availability.

Masala bonds are valued using either CBBT price, BVAL price or as per FIMMDA guided valuation methodology for unquoted bonds in the chronological order based on availability.

Special bonds such as oil bonds, fertilizer bonds, UDAY bonds etc. which are directly issued by Government of India ('GOI') is valued based on FBIL valuation.

Equity shares in the Bank's demat account, acquired through exercise of pledge, is not accounted as investments. Upon sale of the pledged shares, the proceeds are utilised to offset the borrower's liability.

Non-performing investments are identified and depreciation / provision are made thereon as per the RBI guidelines. The criterion used to classify an asset as Non-Performing Asset (NPA) as per the extant Prudential Norms on Income Recognition, Asset Classification and Provisioning (IRACP) pertaining to Advances is used to classify an investment as a Non-Performing Investment (NPI). Similarly, an NPI shall only be upgraded to standard when it meets the criteria specified in the IRACP norms. Based on management assessment of impairment, the Bank additionally creates provision over and above the RBI guidelines. The depreciation / provision on such non-performing investments are not set off against the appreciation in respect of other performing securities. Interest on non-performing investments is not recognised in the Profit and Loss account until received in cash.

e) Profit/Loss on sale of Investments

Cost of investments is computed based on the First-In-First-Out (FIFO) method. Profit/Loss on sale of Investments in the HTM category is recognised in the profit and loss account and profit thereafter is appropriated (net of applicable taxes and statutory reserve requirements) to Capital Reserve. Profit/Loss on sale of investments in FVTPL and non-equity investment under AFS categories is recognised in the Profit and Loss account. Profit/Loss on sale of investments in equity investment under AFS category is transferred from AFS-reserve to the Capital Reserve.

f) Accounting for repos / reverse repos/Targeted Long-Term Repo Operations (TLTRO)

Securities sold under agreements to repurchase (Repos) and securities purchased under agreements to resell (Reverse Repos) including liquidity adjustment facility (LAF) with RBI are treated as collateralized borrowing and lending transactions respectively in accordance with RBI Circular DOR.MRG.42/21.04.141/2021-22 dated August 25, 2021. The first leg of the repo transaction is contracted at the prevailing market rates. The difference between consideration amounts of first and second (reversal of first) leg reflects interest and is recognised as interest income/expense over the period of transaction.

I n compliance with RBI circular RBI/2022-23/55 DOR.ACC.REC.No.37/21.04.018/2022-23 dated May 19, 2022, reverse repos with banks and other institutions having original tenors more than 14 days classified under Schedule 9 - Advances.

g) Investment fluctuation reserve (IFR)

Transfer to IFR will be lower of the following (i) net profit on sale of investments during the year or (ii) net profit for the year less mandatory appropriations; until the amount of IFR is at least 2 percent of the FVTPL (including HFT) and AFS portfolio, on a continuing basis.

17.4.3 Advances

Accounting and classification

Advances are classified as performing and non-performing based on the relevant RBI guidelines. Advances are stated net of specific provisions, interest in suspense, inter-bank participation certificates issued, direct assignment and bills rediscounted.

Assets transferred through direct assignment of cash flows are de-recognised in the Balance Sheet when they are sold (true sale criteria being fully met with) and consideration is received by the Bank. For assets acquired under direct assignment / co-lending arrangements, the appropriation of recoveries and levy of penal interest / charges is in accordance with the contractual terms that have been agreed with the borrower.

Provisioning

Provisions in respect of non-performing advances are made based on management's assessment of the degree of impairment of the advances, subject to the minimum provisioning level prescribed in relevant RBI guidelines. The specific provision levels for retail non-performing advances are also based on the nature of product and delinquency levels. Specific provisions in respect of non-performing advances are charged to the Profit and Loss account and included under Provisions and Contingencies. In relation to non-performing derivative contracts, as per the extant RBI guidelines, the Bank makes provision for the entire amount of overdue and future receivables relating to positive marked to market value of the said derivative contracts.

The Bank considers an account as restructured, where for economic or legal reasons relating to the borrower's financial difficulty, the Bank grants concessions to the borrower, that the Bank would not otherwise consider. The moratorium granted to the borrowers based on RBI guidelines is not accounted as restructuring of loan. The RBI guidelines on 'Resolution Framework for COVID-19-related Stress' provide a prudential framework for resolution plan of certain loans. The borrowers where resolution plan was implemented under these guidelines are classified as standard restructured.

In respect of loans reported as fraud to RBI the entire amount is provided for over a period not exceeding four quarters starting from the quarter in which fraud has been detected. In respect of loans where there has been delay in reporting the fraud to the RBI, the entire amount is provided immediately.

The Bank makes additional provisions as per RBI guidelines for the cases where viable resolution plan has not been implemented within timelines prescribed by RBI, from the date of default. These additional provisions are written back on satisfying the conditions for reversal as per RBI guidelines.

As per the RBI guidelines a general provision is made on all standard advances, including provision for borrowers having unhedged foreign currency exposure and for credit exposures computed as per the current marked to market values of interest rate and foreign exchange derivative contracts. The general provision also includes provision for stressed sector exposures and provision for incremental exposure of the banking system to a specified borrower beyond Normally Permitted Lending Limit (NPLL) in proportion to the Bank's funded exposure to specified borrower. Further, provision requirement under various Restructure scheme of RBI also forms part of general provision. Such provisions are included in Schedule 5 - 'Other liabilities & provisions - Others'.

In respect of restructured standard and non performing advances/investments, provision is made for the present value of principal and interest component sacrificed at the time of restructuring the assets, based on the RBI guidelines.

As per requirement of RBI guideline, any interest accrued and due if converted into a loan (i.e. Funded Interest Term Loan) then such income will be reversed and will be recognised on cash basis.

Accounts are written-off in accordance with the Bank's policies. Recoveries from bad debts written-off are recognised in the Profit and Loss account and included under Provisions and Contingencies.

The Bank has in place a Country Risk management policy as part of its Board approved Credit policy, which is based on extant regulatory guidelines and addresses the identification, measurement, monitoring and reporting of country risk. Countries are categorised into seven risk categories, viz. Insignificant, Low Risk, Moderately Low Risk, Moderate Risk, Moderately High Risk, High Risk and Very High Risk. The Bank calculates direct and indirect country risk in line with the Credit policy requirements. Indirect exposure is reckoned at 50% of the exposure in case of countries where the net funded exposure exceeds 1% of the Bank's total assets. Further, if the net funded exposure of the Bank in respect of each country exceeds 1% of the Bank's total assets, provisioning is required to be made on exposure to such countries. Depending on the risk category of the country, provisioning is done on a graded scale ranging from 0.25% to 100%.

The Bank has a Board approved policy for creation, utilization and accounting of contingency provisions. The contingency provision refers to specific provision recognized on the Bank's standard advances / investments and NFB exposures over and above regulatory provision. The contingency provision will be utilized against creation of specific regulatory provision or provision as per Bank's Policy. Contingency provisions shall not be reversed by credit to the profit and loss account unless the specific exposures have been fully or partially settled/paid off / written off. Until utilization, the contingency provisions shall not be netted from gross advances but shown separately as 'Contingent Provisions against Standard Assets' under 'Other Liabilities and Provisions Others' in Schedule 5 of the balance sheet.

The Bank has a Board approved policy for making floating provision, which is in addition to the specific and general provisions made by the Bank. The floating provision is utilised, with the approval of Board and RBI, in case of contingencies which do not arise in the normal course of business and are exceptional and non-recurring in nature and for making specific provision for impaired loans as per the requirement if extant RBI guidelines or any regulatory guidance/instructions. The floating provision is netted-off from advances.

17.4.4 Transactions involving foreign exchange

Foreign currency income and expenditure items of domestic operations are translated at the exchange rates prevailing on the date of the transaction. Income and expenditure items of integral foreign operations are translated at the daily average closing rates and of non-integral foreign operations (foreign branches) at the monthly average closing rates.

Premia/discounts on foreign exchange swaps that are used to hedge risks arising from foreign currency assets and liabilities are amortised over the life of the swap.

Monetary foreign currency assets and liabilities are translated at the balance sheet date at rates notified by the Foreign Exchange Dealers' Association of India ('FEDAI'). Foreign exchange contracts are stated at net present value using risk-free rates ('RFRs')/ SWAP curves of the respective currencies with the resulting unrealised gain or loss being recognised in the Profit and Loss Account and correspondingly in other assets (representing positive Mark-to-Market) and in other liabilities (representing negative Mark-to-Market ('MTM')) on a gross basis.

Financial conduct authority ('FCA') of the United Kingdom has phased out London interbank offered rate ('LIBOR') on December 2021, replacing it by Alternate Reference Rate ('ARR'). Libor was used by the Bank as benchmark for funded as well as Non-funded exposure. Accordingly, Mumbai interbank forward offered rate ('MIFOR') (derived with LIBOR and forward premium in forex markets) has also been replaced by Modified MIFOR.

RBI vide the press release CO.FMRD.DIRD.S39/14.02.001/2021-22 on July 08, 2021 has encouraged the Banks to cease entering into new financial contracts that has reference LIBOR/MIFOR as a benchmark and instead use widely accepted ARR. The Bank has started offering new transaction based on ARR curve w.e.f January 1, 2022 except existing underlying transactions linked to LIBOR/MIFOR as permissible by the regulations.

In accordance with Accounting Standard 11 'The Effects of changes in Foreign Exchange Rates', contingent liabilities in respect of outstanding foreign exchange forward contracts, derivatives, guarantees, endorsements and other obligations are stated at the exchange rates notified by FEDAI corresponding to the balance sheet date.

Both monetary and non-monetary foreign currency assets and liabilities of non-integral foreign operations are translated at closing exchange rates notified by FEDAI at the Balance Sheet date and the resulting profit / loss arising from exchange differences are accumulated in the Foreign Currency Translation Reserve until the disposal of the net investment in the non-integral foreign operations.

In accordance with the RBI clarification, the Bank does not recognise in the profit and loss account the proportionate exchange gains or losses held in the foreign currency translation reserve on repatriation of profits from overseas operations.

Currency future contracts are marked to market daily using settlement price on a trading day, which is the closing price of the respective future contracts on that day. While the daily settlement prices are computed on the basis of weighted average price of such contract, the final settlement price is taken as the RBI reference rate on the last trading day of the future contract or as may be specified by the relevant authority from time to time. All open positions are marked to market based on the settlement price and the resultant marked to market profit / loss is daily settled.

17.4.5 Earnings per share

The Bank reports basic and diluted earnings per equity share in accordance with AS-20, "Earnings per Share." Basic earnings per equity share have been computed by dividing net profit after tax for the year by the weighted average number of equity shares outstanding for the period.

Diluted earnings per equity share have been computed using the weighted average number of equity shares and dilutive potential equity shares outstanding during the period except where the results are anti-dilutive.

17.4.6 Accounting for derivative transactions

Derivative transactions comprise foreign exchange contracts, forward rate agreements, swaps and option contracts (Including Exchange Traded Currency Option (ETCO)). The Bank undertakes derivative transactions for market making/trading and hedging on-balance sheet assets and liabilities. All market making/trading transactions are marked to market on a regular basis and the resultant unrealised gains/losses are recognised in the profit and loss account.

Derivative transactions that are undertaken for hedging are accounted for on accrual basis except for the transaction designated with an asset or liability that is carried at market value or lower of cost or market value in the financial statements, which are accounted similar to the underlying asset or liability.

Cross currency interest rate swaps which are used by the Bank to hedge its foreign currency borrowings are designated as cash flow hedges (effective hedges) and are measured at fair value. The corresponding gain or loss is recognised as cash flow hedge reserve. Further to match profit/ loss on account of revaluation of foreign currency borrowing, the corresponding amount is recycled from cash flow hedge reserve to Profit and Loss account.

The Bank follows the option premium accounting framework prescribed by FEDAI SPL- circular dated December 14, 2007. Premium on option transaction is recognised as income/expense on expiry or early termination of the transaction. Mark to market (MTM) gain/loss (adjusted for premium received/paid on option contracts) is recorded under 'Other Income'.

The amounts received/paid on cancellation of option contracts are recognised as realised gains/losses on options. Charges receivable/payable on cancellation/ termination of foreign exchange forward contracts and swaps are recognised as income/ expense on the date of cancellation/ termination under 'Other Income'.

Valuation of Interest Rate Futures (IRF) is carried out on the basis of the daily settlement price of each contract provided by the exchange.

The requirement for collateral and credit risk mitigation on derivative contracts is assessed based on internal credit policy. Overdue if any, on account of derivative transactions are accounted in accordance with extant RBI guidelines.

As per the RBI guidelines on 'Prudential Norms for Off-balance Sheet Exposures of Banks' a general provision is made on the current gross MTM gain of the contract for all outstanding interest rate and foreign exchange derivative transactions.

The Bilateral Netting of Qualified Financial Contracts Act, 2020 (the Act), has been notified by the Government of India and subsequent to this the RBI through circular dated March 30, 2021 allowed netting of the Qualified Financial Contracts (QFC). In respect of derivative contracts, the Bank has computed the exposure under the Current Exposure Method for counterparty credit risk capital computation based on the guidelines issued by RBI on "Bilateral Netting of Qualified Financial Contracts -Amendments to Prudential Guidelines" dated March 30, 2021 and subsequent amendments dated March 31, 2022 and August 11, 2022 for eligible counterparties.

17.4.7 Fixed assets

Fixed assets are stated at cost less accumulated depreciation, amortization and accumulated impairment losses. Cost comprises the purchase price including import duties and non -refundable purchase taxes, after deducting trade discounts and rebates and any cost attributable for bringing the asset to its working condition for its intended use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefit /functioning capability from / of such assets.

Capital work-in-progress includes cost of fixed assets that are not ready for their intended use and also includes advances paid to acquire fixed assets.

17.4.8 Non-banking assets

Non-banking assets (NBAs) acquired in satisfaction of claims are carried at lower of net book value and net realisable value, whichever is lower. Further, the Bank creates provision on these assets as per the extant RBI guidelines or specific RBI directions.

17.4.9 Depreciation

Depreciation on fixed assets is provided on straight-line method for the complete month of the purchase, over estimated useful lives, as determined by the management, as mentioned below:

¹ Based on technical evaluation, the management believes that the useful lives as given above best represent the period over which management expects to use these assets. Hence, the useful lives for these assets are different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013.

²Based on internal technical evaluation and past experience, the management has decided to change in useful lives of Computer Hardware which primarily includes servers/ networks/ data center assets to 6 years (excluding end user technology assets like laptops and desktops) and Computer software to 5 years w.e.f. April 01, 2024 as against 3 years and 4 years respectively.

• Asset costing up to ' 5,000 are fully depreciated in the year of purchase.

• For assets purchased/ sold during the year, depreciation is being provided on pro rata basis by the Bank.

• Profit on sale of premises by the Bank is appropriated to capital reserve, net of transfer to Statutory Reserve taxes, in

accordance with RBI guidelines.

• Subsequent improvements to leasehold assets are depreciated over the remaining period of lease.

• Reimbursement, if any, is recognised on receipt and is adjusted to the book value of asset and depreciated over the balance life of the asset.

• Whenever there is a revision in the estimated useful life of the asset, the unamortised depreciable amount is charged over the revised remaining useful life of the said asset.

• The useful life of assets is based on historical experience of the Bank, which is different from the useful life as prescribed in Schedule II to the Companies Act, 2013.

17.4.10 Impairment of assets

The Bank assesses at each Balance Sheet date whether there is any indication that an asset may be impaired. Impairment loss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceeds their estimated recoverable amount.

17.4.11 Employee benefits¹

Employee Stock Option Scheme ('ESOS')

The Employee Stock Option Scheme ('the Scheme') provides for the grant of options to acquire equity shares of the Bank to its employees. The options granted to employees vest in a graded manner and these may be exercised by the employees within specified periods.

Measurement of the employee share-based payment plans is done in accordance with the Guidance Note on Accounting for Employee Share-based Payments issued by Institute of Chartered Accountants of India (ICAI) and Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. RBI, vide its clarification dated August 30, 2021 on Guidelines on Compensation of Whole Time Directors / Chief Executive Officers / Material Risk Takers and Control Function Staff, advised banks that the fair value of share-linked instruments on the date of grant should be recognised as an expense for all instruments granted after the accounting period ending March 31, 2021. Accordingly, the Bank changed its accounting policy from the intrinsic value method to the fair value method for all share-linked instruments granted after March 31, 2021. The fair value of the stock-based compensation is estimated on the date of grant using Black-Scholes model is recognised as compensation expense over the vesting period.

Options granted till March 31, 2021, the Bank measures compensation cost relating to employee stock options using the intrinsic value method. Compensation cost is measured by the excess, if any, of the fair market price of the underlying stock (i.e. the last closing price on the stock exchange on the day preceding the date of grant of stock options) over the exercise price. The exercise price of the Bank's stock option is the last closing price on the stock exchange on the day preceding the date of grant of stock options.

Compensated absences

The employees of the Bank are entitled to carry forward a part of their unavailed/unutilised privilege leave subject to a maximum limit. The employees cannot encash unavailed/unutilised leave except employees based out of Abu Dhabi Representative Office ("ADRO") and employees superannuating from the Bank. Employees based at ADRO are allowed to encash remaining annual leave only at the time resignation/termination/transfer to another country. Employees superannuating are allowed to encash a maximum of 30 days privilege leave balance at time of superannuation. The Bank provides for leave encashment / compensated absences based on an independent actuarial valuation at the Balance Sheet date, which includes assumptions about demographics, early retirement, salary increases, interest rates and leave utilisation.

Gratuity

The Bank provides for gratuity, for all employees. The Gratuity is payable to an employee as per Payment of Gratuity Act. The Bank accounts for the liability for future gratuity benefits using the projected unit credit method based on independent actuarial valuation.

The defined gratuity benefit plans are valued by an independent actuary as at the Balance Sheet date using the projected unit credit method as per the requirement of AS-15, Employee Benefits, to determine the present value of the defined benefit obligation and the related service costs. Under this method, the determination is based on actuarial calculations, which include assumptions about demographics, early retirement, salary increases and interest rates. Actuarial gain or loss is recognised in the Profit and Loss account.

Provident fund

All employees of the Bank are covered under the Employees Provident Fund, a defined contribution plan in which both the employee and the Bank contribute monthly. Contribution to provident fund is recognised as expense as and when the services are rendered. The Bank has no liability for future provident fund benefits other than its monthly contribution.

National Pension Scheme (NPS)

The NPS is a defined contribution retirement plan. The primary objective is enabling systematic savings and to provide retirees with an option to achieve financial stability. Pension contributions are invested in the pension fund schemes. The Bank has no liability for future fund benefits other than the voluntary contribution made by employees who agree to contribute to the scheme.

17.4.12 Leases

Leases where the lessor effectively retains substantially all risks and benefits of ownership are classified as operating leases. Operating lease payments are recognised as an expense in the profit and loss account on a straight-line basis over the lease term in accordance with AS-19, Leases.

17.4.13 Income taxes

Tax expense comprises of current and deferred tax. Current tax comprises of the amount of tax for the period determined in accordance with the Income-tax Act, 1961 and the rules framed there under. Deferred taxes reflect the impact of timing differences between taxable income and accounting income for the current year and reversal of timing differences of earlier years and carry forward losses. Deferred tax assets and liabilities are recognised for the future tax consequences of timing differences between the carrying values of assets and liabilities and their respective tax bases, and operating loss carry forwards. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates at the balance sheet date. The impact of changes in deferred tax assets and liabilities is recognised in the profit and loss account.

Deferred tax assets are recognised only to the extent there is reasonable certainty that the assets can be realised in future. Deferred tax assets in case of unabsorbed depreciation/ losses are recognised only if there is virtual certainty that such deferred tax asset can be realised against future taxable profits. Deferred tax assets are recognised and reassessed at each balance sheet date based upon management's judgement and appropriately adjusted to reflect the amount that is reasonably certain to be realised.

17.4.14 Provisions and contingent assets/liabilities

In accordance with AS-29, Provisions, Contingent Liabilities and Contingent Assets, the Bank creates a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation.

Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources would be required to settle the obligation, the provision is reversed.

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Bank or a present obligation that arises from past events that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made. The Bank does not recognise a contingent liability but discloses its existence in the financial statements.

Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.

17.4.15 Cash and Cash equivalents

Cash and cash equivalents include cash in hand, including foreign currency notes, balances with RBI, balances with other banks and money at call and short notice.

17.4.16 Corporate social responsibility

Expenditure towards corporate social responsibility, in accordance with Companies Act, 2013, are recognised in the Profit and Loss account.

17.4.17 Debit and credit cards reward points

The Bank estimates the probable redemption of debit and credit card reward points and cost per point using actuarial valuation method by employing an independent actuary, which includes assumptions such as mortality, redemption and spends.

Provisions for liabilities on said reward points are made based on the actuarial valuation report as furnished by the said independent actuary and included in other liabilities.

17.4.18 Bullion

The Bank imports bullion (gold and silver bars) on a consignment basis for selling to its customers. The imports are typically based on a request of the client and are settled based on a back to back price fixing with supplier and client. The Bank earns a fee on such bullion transactions. The fee is classified in other income. The Bank also deals in gold borrowing and lending and the interest paid/ received thereon is classified as interest expense / income respectively.

17.4.19 Share issue expenses

Share issue expenses are adjusted from Share Premium Account in terms of Section 52 of the Companies Act, 2013.

17.4.20 Segment information

The disclosure relating to segment information is in accordance with AS-17, Segment Reporting and as per guidelines issued by RBI from time to time.

17.4.21 Priority Sector Lending Certificates (PSLCs)

The Bank, in accordance with RBI circular FIDD.CO.Plan.BC.23/ 04.09.01/2015-16 dated April 7, 2016, trades in priority sector portfolio by selling or buying PSLCs. There is no transfer of risks or loan assets in these transactions. The fees paid/received for purchase/sale of PSLCs is amortised in the complete quarter of purchase/sale of PSLC on a straight line basis over the life of the certificate.

17.5 Capital 17.5.1 Equity Issue

During the year ended March 31, 2025 the Bank has allotted:

A. 2,559,761,818 equity shares of ' 2/- each pursuant to exercise of share warrants, and

B. 26,471,398 equity shares (Previous year: 13,106,772 equity shares) of face value of ' 2 each pursuant to the exercise of stock options by employees under the approved stock option schemes.

The Bank has accreted ' 33,198.83 million during the year ended March 31, 2025 (Previous year: ' 173.58 million) towards share premium.

17.5.2 Share Warrants Subscription Money

Share warrants at March 31, 2024 represents 2,559,761,818 share warrants convertible into equity shares of face value ' 2 each paid up to the extent of 25% of the issue price of ' 14.82 per share warrant on a preferential basis in an equal ratio to two marquee investors totaling to ' 9,483.92 million allotted by the Bank during FY2023. Each Share Warrant was convertible to one fully paid equity share of the Bank, upon exercise of the option by paying the remaining 75% within 18 months of allotment.

During the year ended March 31, 2025 the Bank has allotted 2,559,761,818 equity shares of ' 2/- each pursuant to exercise of share warrants by both the allottees for 1,279,880,909 equity shares to each allotee upon receipt of ' 28,451.75 million that represents 75% of the issue price of ' 14.82 per share warrant. Resultantly, the share capital and share premium had increased by ' 5,119.52 million and ' 32,816.15 million respectively.

17.5.3 Proposed Dividend

During the year ended March 31, 2025 and year ended March 31, 2024 the Bank has not declared any dividend on equity shares.

17.5.4 Capital Reserve

Profit on sale of investments in the Held to Maturity (HTM) category is credited to the Profit and Loss Account and thereafter appropriated to capital reserve (net of applicable taxes and transfer to statutory reserve requirements). During the year ended March 31, 2025'421.00 million (Previous year: ' 262.64 million) was transferred to Capital Reserve.

17.5.5 Investment Reserve

The balance in Investment Reserve Account as on March 31, 2024, ' 1,016.84 million was transferred to General reserve account in compliance with RBI's Master Direction on Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions), 2023 dated September 12, 2023.

17.5.6 Cash Flow Hedge Reserve

The Bank has not created or utilised any Cash Flow Hedge Reserve during the year ended March 31, 2025 (Previous year: Nil).

17.5.7 Investment Fluctuation Reserve (IFR)

During the year ended March 31, 2025, the Bank has transferred ' 2,557.27 million (net of applicable taxes and transfer to statutory reserve requirements) to Investment Fluctuation Reserve (Previous year: ' 472.30 million).

17.5.8 Employee Stock Option Reserve

During the year ended March 31, 2025, the Bank has recognised ' 675.76 million (Previous year: ' 312.56 million) to Employee Stock Options Reserve on account of fair valuation of share-linked instruments. During the year ended March 31, 2025, on exercise of share-linked instruments, an amount of ' 70.84 million (Previous year: ' 27.84 million) is transferred from Employees Stock Options Reserve to share premium and on account of lapsed/cancelled vested options, an amount of ' 13.36 million (Previous year: Nil) is transferred from Employees Stock Options Reserve to General Reserve.

17.5.9 Other Reserves:

A. Revenue and Other reserves

With respect to six accounts classified as fraud the Bank has debited ' 6.45 million from Revenue and other Reserves on account of unamortised fraud provision in terms of RBI circular DOR.No.STR.REC.55/21.04.048/2021-22 dated October 1, 2021 (Previous year: for five borrower accounts, unamortised fraud provision amounting to ' 25.83 million debited).

B. AFS reserves

Pursuant to RBI circular reference number RBI/DOR/2023-24/104 Ref.No. DOR.MRG.36/21.04.141/2023-24 dated September 12, 2023 "Master Direction - Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions), 2023"as amended from time to time, the Bank has transferred ' 1,664.63 million (net of tax) (Previous year: Nil) during the year ended March 31, 2025.

C. General Reserves

During the year ended March 31, 2025 the Bank has transferred ' 2,278.09 million (Previous year: Nil) to General reserve. This comprises of ' 1,247.89 million (net of tax) on account of transition gain, ' 1,016.84 million (net of tax) on account of transfer from Investment Reserve Account to General Reserve in compliance with the RBI circular dated September 12, 2023. Further, an amount of ' 13.36 million (Previous year: Nil) is transferred from Employees Stock Options Reserve to General Reserve, in respect of vested employee stock options/units that have lapsed.

17.5.11 Tier I and Tier II Capital

During the year ended March 31, 2025 and year ended March 31, 2024, the Bank has not issued any Tier I or Tier II instruments. During the year ended March 31, 2025, the Bank has not repaid any Additional Tier-I capital (Previous year repaid Additional Tier-I capital of ' 2,800.00 million).

Write Down of AT1 Bonds

On March 5, 2020, Central Government in terms of Section 45 of the Banking Regulation Act, 1949 ("BR Act") imposed moratorium on the Bank. Reserve Bank of India ('RBI') in exercise of its powers conferred under Section 36ACA of the BR Act superseded the then Board of Directors and appointed an Administrator to manage the affairs of the Bank w.e.f. March 5, 2020. Subsequently on March 13, 2020, through the 'YES Bank Limited Reconstruction Scheme, 2020' ("the Yes Bank Reconstruction Scheme"), the relevant authorities (i.e., Central Government in consultation with RBI) decided to "reconstitute" the Bank. Further, in terms of the

Yes Bank Reconstruction Scheme, the Administrator was to continue in office until the Board of Directors mentioned in the Yes Bank Reconstruction Scheme assumed office, i.e., on March 26, 2020.

In light of the above, the Administrator, on behalf of the Bank, consequent to the invocation of Section 45 of the BR Act, and to protect the interest of the Bank and its depositors, was constrained to write down (' 84,150 million) two tranches of the Additional Tier 1 Bonds ("AT-1 Bonds") issued in 2016 and 2017, in compliance with the contractual covenants and applicable RBI guidelines, on March 14, 2020.

Aggrieved by the said write down of AT-1 Bonds, AT-1 Bondholders filed various writ petition(s), civil suit(s), criminal and consumer complaint(s) across India challenging the decision of the Bank to write down the AT-1 Bonds since 2020. The same are pending adjudication, save and except the batch of writ petition(s) filed before the Hon'ble Bombay High Court and one writ petition before the Hon'ble Madras High Court (as mentioned below).

Judgment dated September 30, 2020 of the Hon'ble Madras High Court ("MHC"):

The RBI Master Circular on Basel III Capital Regulations, in so far as it relates to issuance and write down of AT-1 Bonds, was challenged before the Division Bench of the Hon'ble MHC in the Writ Petition titled Piyush Bokaria Vs. Reserve Bank of India and Ors., (being W.P. (Civil) 12586 of 2020). The Hon'ble MHC vide its judgment dated September 30, 2020 upheld the validity of the RBI Master Circular in relation to the AT-1 Bonds. Additionally, with respect to the aspect of writing down of AT-1 Bonds, the Hon'ble MHC observed that one of the features of AT-1 Bonds is that they can be written-down before the equity shares bear losses and considering that the Petitioners purchased the AT -1 Bonds in the secondary market, they cannot claim to be ignorant of the terms and conditions thereof. The Hon'ble MHC also noted the loss absorbency feature of the AT-1 Bonds and dismissed the Writ Petition.

Judgment dated January 20, 2023 of the Hon'ble Bombay High Court ("BHC"):

Multiple writ petition(s) were filed before the Hon'ble BHC challenging the write down of AT-1 Bonds and the stock exchange intimation dated March 14, 2020 made in relation to the write down. The Hon'ble BHC vide its judgment dated January 20, 2023 set aside the stock exchange intimation and decision of the Bank to write down the AT-1 Bonds ("Judgment"). At the request of the Bank, the Hon'ble BHC stayed the order for a period of 6 (six) weeks.

Proceedings before the Hon'ble Supreme Court of India ("Supreme Court"):

Aggrieved by the Judgment of the Hon'ble BHC, the Bank, the RBI and the Central Government have filed separate Special Leave Petition(s) ("SLPs") before the Hon'ble Supreme Court challenging the Judgement of the Hon'ble BHC. On March 3, 2023, the Hon'ble Supreme Court issued notice and extended the stay granted by the Hon'ble BHC, subject to the final orders of the Hon'ble Supreme Court. The SLPs are pending hearing.

Given that the write down of the AT-1 Bonds was in accordance with the relevant regulations and as RBI and Central Government ("relevant authorities" in terms of the RBI Master Circular) have also filed SLPs challenging the Judgement of Hon'ble BHC, the Bank has estimated that there should not be any material financial impact of the matter under litigation. Upon final verdict of the Hon'ble Supreme Court, financial impact, if any, on the results and/or other financial information shall be accounted for in future reporting periods. The matter was last listed on February 19, 2025 wherein the Hon'ble Supreme Court was pleased to grant leave and is now tentatively scheduled for hearing on July 24, 2025.

Separately, Securities and Exchange Board of India ("SEBI") issued a Show Cause Notice dated October 28, 2020 to the Bank and other noticee(s) (ex-employees of the Bank) alleging violation of provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. Thereafter, SEBI vide its order dated April 12, 2021 imposed penalty of ' 250 million on the Bank under Section 15 HA of Securities and Exchange Board of India Act, 1992 for the alleged mis-selling of AT-1 Bonds in the secondary market. SEBI also imposed penalties on other noticee(s). Aggrieved by the above-mentioned

SEBI order, the Bank and other noticee(s) preferred separate Appeal(s) before the Hon'ble Securities Appellate Tribunal, Mumbai ("SAT"). SAT heard the Appeal(s) and the effect and operation of the SEBI order dated April 12, 2021 has been stayed. The said Appeal(s) are pending final hearing.

17.5.12 Provisions and Contingencies

The breakup of provisions of the Bank for the year ended March 31, 2025 and year ended March 31, 2024 are given below:

FY2025

During the year ended March 31, 2025, the Bank has transferred 67,765 stressed loans of gross value ' 5,062.71 million to Asset Reconstruction Companies (ARCs). The net book value ('NBV') of these exposures in the Bank's books as on the date off assignment was Nil and the final consideration received was ' 278.20 million under "100% upfront cash basis" The realised profit amounting ' 278.20 million due to cash recovery exceeding the net book value of stressed loans was credited to Profit and Loss Account during the year ended March 31, 2025.

FY2024

During the year ended March 31, 2024, the Bank has transferred two stressed loans of gross value ' 6,903.20 million to ARCs. The net book value ('NBV') of these exposures in the Bank's books as on the date of assignment was ' 1,420.84 million and the final consideration received was ' 3,364.00 million under "100% upfront cash basis." The realised profit amounting ' 1,943.16 million due to cash recovery exceeding the net book value of stressed loans was credited to Profit and Loss Account during the year ended March 31, 2024.