K. Accounting for provisions, contingent liabilities and contingent assets
In accordance with Accounting Standard (AS) 29-Provisions, Contingent Liabilities and Contingent Assets a provision
is recognised when the Bank has a present obligation as a result of past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made
of the amount of the obligation.
Provisions are not discounted to their present value and are determined based on the best estimate required to
settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to
reflect the current best estimates.
Provisions for liabilities on the outstanding reward points on credit card are made based on an independent actuarial
valuation as at the Balance Sheet date and included in other liabilities and provisions.
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 beyond the control of the Bank or a present
obligation that is not recognised because it is not probable that an outflow of resources will be required to settle
the obligation.
A contingent liability also arises in cases where there is a liability that cannot be recognised because it cannot be
measured reliably. The Bank does not recognize a contingent liability but discloses its existence in the financial
statements.
Contingent assets are neither recognised nor disclosed in the financial statements.
L. Earnings Per Share (EPS)
Basic and diluted earnings per share is computed in accordance with Accounting Standard-20 - Earnings per share.
Basic earnings per share is calculated by dividing the net profit or loss after tax for the period attributable to equity
shareholders by the weighted average number of equity shares outstanding during the period. Partly paid equity
shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends
relative to a fully paid equity share during the period.
For the purpose of calculating diluted earnings per share, the weighted average number of shares outstanding during
the period are adjusted for the effects of all dilutive potential equity shares.
M. Cash and Cash Equivalents
Cash and Cash equivalents include cash in hand, foreign currency notes, rupee digital currency, balances with RBI,
balances with other banks and institutions, money at call and short notice (including the effect of changes in exchange
rates on cash and cash equivalents in foreign currency).
N. Fixed Assets
i. Property, Plant and Equipment (PPE) and software
Property, Plant and Equipment and software are carried at cost, net of accumulated depreciation and accumulated
impairment losses, if any. The cost comprises purchase price and directly attributable cost of bringing the asset
to its working condition for the 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.
Gains or losses arising from derecognition of Property, Plant and Equipment are measured as the difference
between the net disposal proceeds and the carrying amount of the asset and are recognised in the Profit and
Loss Account when the asset is derecognized.
ii. Depreciation on Property, Plant and Equipment (PPE) and software:
Leasehold land is amortised on a straight-line basis over the period of lease.
Depreciation on Property, Plant, Equipment and software is charged on a straight-line basis over the useful lives
estimated by the management as given below. The useful lives have been estimated by the management based
on technical advice obtained. Determination of useful life of an asset is a matter of judgment and based on various
factors such as type and make of an item, its place and pattern of usage, nature of technology, obsolescence
factors, availability of spares, etc. and makes a significant impact on the useful life of an asset.
Addition to lease hold premises are amortised over the remaining period of lease subject to maximum of 10 years.
Items individually costing up to ? 5,000 /- are fully depreciated in the year of installation/purchase.
Depreciation on assets acquired/sold during the period is recognised on a pro-rata basis to the Profit and Loss
Account from/upto the date of acquisition/sale.
Profit on sale of immovable property net of taxes and transfer to statutory reserve, are transferred to capital
reserve account.
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.
iii. Impairment of 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.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
iv. Capital work-in-progress/ Software under development
Costs incurred towards acquisition of assets, including expenses incurred prior to those assets being put to
use and directly attributable to bringing them to their working condition are included under "Capital Work in
Progress”. Capital Work in Progress including Software under development are stated at the amount incurred
up to the date of Balance Sheet.
O. Segment Reporting
Part A: Business segments
Business segments have been identified and reported taking into account, the target customer profile, the nature
of products and services, the differing risks and returns, the organisation structure, the internal business reporting
system and in accordance with guidelines issued by RBI and in compliance with the Accounting Standard 17 - "Segment
Reporting”. The Bank operates in the following segments:
a. Treasury
The treasury segment primarily consists of net interest earnings from the Bank's investment portfolio, money
market borrowing and lending and gains or losses on investment operations and income / expenses on account
of trading in foreign exchange and derivative contracts.
b. Retail banking
Digital Banking
The digital banking segment represents business by Digital Banking Units (DBUs). The said DBUs serves retail
customers through the Bank's digital network and other online channels. This segment raises deposits from
customers and provides loans and other services to customers. Revenues of the DBUs are derived from interest
earned on retail loans, fees from services rendered, etc. Expenses of this segment primarily comprise of interest
expense on deposits, infrastructure and premises expenses for operating the DBUs, other direct overheads and
allocated expenses of specialist product groups.
Other Retail Banking
The retail banking segment serves retail customers through a branch network and other delivery channels. This
segment raises deposits from customers and provides loans and other services to customers with the help of
specialist product groups. Exposures are classified under retail banking taking into account the status of the
borrower (orientation criterion), the nature of product, granularity of the exposure and the quantum thereof.
Revenues of the retail banking segment are derived from interest earned on retail loans, fees from services
rendered and income from credit card operation etc. expenses of this segment primarily comprise interest
expense on fund borrowed from external sources, interest on deposits, personnel costs, infrastructure and
premises expenses for operating the branch network and other delivery channels, other direct overheads and
allocated expenses of specialist product groups, processing units and support groups.
c. Wholesale banking
The wholesale banking segment provides loans and transaction services to large corporates, emerging
corporates, public sector undertakings, government bodies, financial institutions and medium scale
enterprises. Revenues of the wholesale banking segment consist of interest earned on loans made
to customers, fees and other income etc. The principal expenses of the segment consist of interest
expense on funds borrowed from external sources, interest on deposits, personnel costs, other
direct overheads and allocated expenses of delivery channels, specialist product groups, processing units and
support groups.
d. Other banking business
This segment includes income from para banking activities such as third party product distribution and the
associated costs.
e. Unallocated
All items which are reckoned at an enterprise level are classified under this segment. This includes unallocable
assets and liabilities such as deferred tax, prepaid expenses, etc.
Segment revenue includes earnings from customers. Segment result includes revenue less interest expense
less operating expense and provisions, if any, for that segment. Segment-wise income and expenses include
certain allocations based on reasonable assumptions. Segment capital employed represents the net assets in
that segment.
Part B: Geographic segments
The Bank operates in a single geographic segment i.e. domestic.
P. Share Issue Expenses
Share issue expenses are adjusted from Share Premium Account as permitted by Section 52 of the Companies Act,
2013.
Q. Accounting for Proposed Dividend
Dividend proposed/ declared after the balance sheet date is accrued in the books of the Bank in the year in which
the dividend is approved by the shareholders as per revised Accounting Standard (AS) 4 'Contingencies and Events
occurring after the Balance sheet date' as notified by the Ministry of Corporate Affairs.
R. Corporate social responsibility
Expenditure towards corporate social responsibility, in accordance with Companies Act, 2013, is recognised in the
Profit and Loss Account.
Schedule 18: Notes forming part of the financial statements for the year ended
March 31, 2026
Amounts in notes forming part of the financial statements for the year ended March 31, 2026 are denominated in rupee crore
to conform to extant RBI guidelines, except where stated otherwise.
A. Disclosures as Laid Down by RBI Circulars
1. Amalgamation of Fincare Small Finance Bank
The Board of Directors at its respective meetings held on October 29, 2023, approved the scheme of amalgamation
("Scheme") for the amalgamation of Fincare Small Finance Bank Limited ("T ransferor Company") with AU Small Finance
Bank Limited ("Transferee Company”), in accordance with Section 44A of the Banking Regulation Act, 1949 and the
Reserve Bank of India Master Direction-Amalgamation of Private Sector Banks Directions, 2016.
The Scheme was approved by the shareholders of Transferor Company and Transferee Company on November 24,
2023 and November 27, 2023 respectively at their extra ordinary general meeting and by the Competition Commission
of India (the "CCI”) and the Reserve Bank of India (the "RBI”) on January 23, 2024 and March 4, 2024 respectively.
At the request of the Transferor Company and the Transferee Company, RBI approved the appointed date as April
1, 2024.
As per the Scheme, upon its coming into effect from the effective date i.e. April 1, 2024, the entire undertaking of eFincare
SFB including all its assets, liabilities and reserves and surplus stood transferred / deemed to be transferred to and vest in
AUSFBL. Further, in consideration of the transfer of and vesting of the undertaking of Fincare, 579 (Five Hundred Seventy
Nine) equity shares of face value of ? 10/- each of AUSFBL for every 2,000 (Two Thousand) equity shares of face value of
? 10/- each of eFincare SFB were issued to shareholders of eFincare SFB on the record date i.e. March 22, 2024.
Accordingly 7,35,25,352 equity shares of ? 10/- each of AUSFBL were allotted at par to the shareholders of eFincare
SFB vide board resolution dated April 1, 2024. In addition, the Bank is required to issue its shares on exercise of
options which have been granted to the employees of the Transferor Company in terms of its ESOP plan.
Accordingly, the paid-up share capital has increased from ? 669.16 crore consisting of 66,91,62,451 equity shares of
? 10/- each to ? 742.69 crore consisting of 74,26,87,803 equity shares of ? 10/- each on April 1, 2024 .
The excess of the paid up value of equity shares of Transferor Company over the paid up value of equity shares
issued as consideration amounting to ? 180.45 crore has been transferred to Amalgamation Reserve as per the
Scheme of Amalgamation.
The amalgamation has been accounted using the pooling of interest method under Accounting Standard 14 prescribed
under Section 133 of the Companies Act, 2013 (AS-14), "Accounting for amalgamation” and the principles laid down
in Clause 20 (b) to (g) of the approved Scheme of Amalgamation.
The assets, liabilities and reserves and surplus of eFincare SFB were recorded by the Bank at their carrying amounts
as on April 1, 2024 except for necessary adjustments which were made to bring uniformity of accounting policies
as required under AS-14. The net impact of these adjustments has been adjusted in the balance of Profit and Loss
Account.
2. Regulatory Capital
a. Composition of Regulatory Capital
The Capital adequacy ratio ("CAR”) is computed in accordance with the RBI Master Direction DOR.CAP.REC.101/21-
01-002/2025-26 dated November 28, 2025, as amended, and the CAR for the corresponding previous period
is computed on the basis of the applicable RBI guideline on the relevant reporting dates. No separate capital
charge is prescribed for market risk and operational risk for Small Finance Banks as per above mentioned master
directions.
Further, No Capital Conservation Buffer and Counter-Cyclical Capital Buffer is applicable on Small Finance Bank
(SFB) as per operating guidelines issued on SFB by the RBI.
The Total Capital Adequacy ratio of the Bank as at March 31, 2026 is 18.68% (previous year: 20.06%) against
the regulatory requirement of 15.00% as prescribed by the RBI.
*During the year ended March 31, 2026, the Bank has allotted 37,36,590 equity shares in respect of stock options (previous year:
7,53,68,080 equity shares out of which 7,35,25,352 shares were issued due to merger of Fincare unit and 18,42,728 equity shares in
respect of stock options), aggregating to paid up share capital of f 3.74 crore (previous year: f 75.37 crore). Further, the reserves
(Share premium) of the Bank have increased by f 177.47 crore (previous year: f 59.47 crore) in respect of stock options exercised.
''During the year ended March 31, 2026, Bank has allotted Nil Tier 2 Bonds for an amount aggregating up to f Nil on a private placement
basis (Previous year : 77,000 Unsecured, Rated, Listed, Redeemable, Subordinated, Non-Convertible Lower Tier II Bonds in the nature of
Non-Convertible Debentures categorized as Tier II Capital of face value of f 1,00,000/- each aggregating up to f 770.00 crore on a private
placement basis).
b. Draw down from reserves
There has been no draw down from reserves during the year ended March 31, 2026 and March 31, 2025 other
than those disclosed under Schedule 2.
ii) Qualitative disclosure on Liquidity Coverage Ratio (LCR):
To assess Bank's resilience in liquidity stress scenario of 30 days with its high-quality liquid assets, Banks is
computing Liquidity Coverage Ratio (LCR) as per RBI-Basel 3 Framework on Liquidity Standards. High Ratio
signifies Bank has enough liquid assets which it can use to fulfil its liquidity obligations in acute stress scenario.
Ratio to compute as below:
Stock of High Quality Liquid Asset is total funds liquid assets could generate in stress scenario. Net Cash outflows
is the difference as derived by multiplying the outstanding balances of various categories or types of liabilities
by the outflow run-off rates and cash inflows are calculated by multiplying the outstanding balances of various
categories of contractual receivables by the rates at which they are expected to flow in.
The Minimum LCR Requirement for Small Finance Banks is 100% as per RBI guidelines.
The Bank has consistently maintained the LCR percentage well above the regulatory threshold limit. The average LCR
for the quarter ended March 31, 2026 was 119.02% which is above the regulatory limit of 100%. For the quarter ended
March 31, 2026 average HQLA stood at ? 31,578.20 Crores.
Asset Liability Committee (ALCO) of the Bank is the primary governing body for Liquidity Risk Management,
Treasury is entrusted with the responsibility of liquidity management within the Bank under the guidance of
the ALCO. ALM Risk unit independently measures, monitors & reports Liquidity Risk as per regulatory & internal
guidelines.
In computing the above information, certain estimates and assumptions have been made by the Bank's Management
which have been relied upon by the auditors.
c. Net Stable Funding Ratio (NSFR)
As per the extant RBI guidelines, Banks are required to make Pillar III disclosures including Leverage ratio, Liquidity
Coverage Ratio and Net Stable Funding Ratio (NSFR) under the Basel 3 Capital regulations. These disclosures
would be available on the Bank's website at "https://www.au.bank.in/reports/regulatory-disclosures”. These
disclosures have not been subjected to audit by the Joint Statutory Auditors.
d. Details of sales made out of HTM
During the year ended Mar 31, 2026 and the previous year ended March 31, 2025 the Bank has not sold and transferred
securities to or from HTM category exceeding 5% of the book value of investment held in HTM category at the beginning
of the year. The 5% threshold referred to above does not include transfer of securities to/from HTM category with
the approval of Board of Directors and RBI undertaken by Banks as per extant RBI guidelines, sale of securities under
pre-announced Open Market Operation (OMO) auction to the RBI and sale of securities or transfer to AFS / FVTPL
consequent to the reduction of ceiling on SLR securities under HTM, Repurchase of Government Securities by Government
of India from banks under buyback / switch operations, Repurchase of State Government Securities by respective state
governments under buyback / switch operations and Additional shifting of securities explicitly permitted by the Reserve
Bank of India as the case may be.
i. Government Security Lending (GSL) transactions
In reference to the RBI Notification No: FMRD.DIRD.No.06/14.03.061/2023-2024 dated December 27, 2023 the disclosure
related to Government securities lending and borrowing transactions undertaken Over-the-Counter markets. During the
Financial Year 2025-26 and Previous Year 2024-25, the bank has not entered into any such type of transactions.
j. Disclosure for transitional adjustments as at April 01, 2024
Following is the disclosure as per RBI circular on Master Direction- Classification, Valuation and Operation of Investment
Portfolio of Commercial Banks (Directions), 2023' dated September 12, 2023, for transitional adjustments.
In compliance with the RBI Investment Master Directions dated September 12, 2023, the Bank implemented changes
relating to classification, measurement and valuation of investments with effect from April 1, 2024. Consequently, the
net fair value gain of ? 997.71 lakh (net of taxes) was accounted for in General Reserve as per the transition provision in
the aforesaid Directions.
In addition, the Bank has transferred balance in Investment Reserve amounting to ? 876.74 lakh on the date of the transition
to General Reserve in compliance with these Directions.
Subsequent changes in fair value of performing investments under Available for Sale (AFS) and Fair Value Through Profit
and Loss ('FVTPL') (including sub category Held For Trading ('HFT')) categories was recognised through AFS reserve and
Profit and Loss Account respectively.
c. Resolution of Stressed Assets - Revised Framework
As at March 31, 2026, the Bank does not have any loan accounts under resolution under the Revised Framework for
Resolution of Stressed Assets, in terms of RBI Circular dated November 28, 2025 - RBI/DOR/2025-26/196 (Small Finance
Banks - Resolution of Stressed Assets Directions, 2025). (Previous year: Nil).
d. Divergence in the asset classification and provisioning
In terms of the RBI guidelines, banks are required to disclose the divergence in asset classification and provisioning
consequent to RBI's annual supervisory process in their notes to accounts to the financial statements, wherever the
additional provisioning assessed / additional gross NPAs identified by RBI exceeds the threshold specified by RBI.
The threshold for provisioning is 5 per cent of the reported profit before provisions and contingencies for the
reference period and that for additional gross NPAs is 5 per cent of the published incremental Gross NPAs for
the reference period.
There was no reportable divergence in asset classification and provisioning for NPAs for the year ended
March 31, 2025 and RBI did not conducted the Annual Financial Inspection for FY-2023-2024.
e. Disclosure of transfer of loan exposures
i. Loans not in default :
1. During the year ended March 31, 2026 and March 31, 2025 the bank has not acquired "loans not in default”
through assignment of loans.
2. Details of "loans not in default” transferred during the year as given below:
ii. Stressed loans transferred or acquired :
1. During the year ended March 31, 2026 and March 31, 2025, the bank has not acquired any stressed loans (Non¬
performing asset and Special Mention Account).
2. Details of MFI Non-Performing Assets (NPAs) and Special Mention Accounts (SMAs) transferred to NBFCs under
Business Correspondent arrangement during the year as given below:
e. Details of factoring exposure:
The factoring exposure of the Bank as at March 31, 2026 is Nil.(Previous year: Nil).
f. Intra-Group exposure
The Bank does not have any intra-group entities and, accordingly, does not have any intra-group exposure
(Previous year: Nil).
g. Unhedged foreign currency exposure
The RBI, through its Master Direction DOR.CRE.REC.107/07-02-002/2025-26 on Reserve Bank of India (Small Finance
Banks - Credit Risk Management) Directions, 2025 dated November 28, 2025, had advised banks to create incremental
provision on standard loans and advances to entities with unhedged foreign currency exposure (UFCE). The Bank assesses
the UFCEs of the borrowers through its credit appraisal and internal ratings process. The Bank also undertakes reviews
of such exposures through thematic reviews evaluating the impact of exchange rate fluctuations on the Bank's portfolio
on a yearly basis.
Incremental provisioning (over and above provision applicable for standard assets) is made in Bank's Profit and Loss
Account, on borrower counter parties having UFCE, depending on the likely loss / EBID ratio, in line with stipulations
by RBI. Incremental capital is maintained in respect of borrower counter parties in the highest risk category, in line with
stipulations by RBI. These requirements are given below:
d. Disclosures on risk exposure in derivatives
Qualitative disclosures
a. Structure and organization for management of risk in derivatives trading, the scope and nature of risk
measurement,riskreporting and risk monitoring systems, policies for hedging and/or mitigating risk and strategies
and processes for monitoring the continuing effectiveness of hedges/ mitigants:
i. The Bank undertakes transactions in FX and derivatives for the purpose of Balance Sheet management, support
customer FX and derivatives hedging / business requirements and takes proprietary positions. The Bank deals in
various kinds of products viz. FX spot and forwards, INR and CCY swaps.
ii. All the derivative transactions are governed by the FX & Derivative policy, Market Risk Management policy of the
Bank as well as by RBI guidelines. Various operational/risk limits are set up and actual exposures are monitored
vis-a-vis the limits allocated. These limits are set up taking into account market volatility, risk appetite, business
strategy and management experience. Risk limits are in place for risk parameters viz. Value at Risk (VaR), Net
loss, deal size and Price Value of a Basis Point (PVBP). Actual positions are monitored against these limits on a
daily basis and breaches if any are reported promptly. Risk assessment of the portfolio is undertaken periodically.
iii. The Treasury front office enters into derivative transaction with customers and interbank counterparties. The Bank
has an independent back office and mid office as per regulatory guidelines. The MTM position of the derivative
portfolio is monitored on a regular basis. The impact on derivative portfolio on account of the probable market
movements are assessed on regular basis. The risk profile of the outstanding portfolio is reviewed by the Board
at regular intervals.
b. Accounting policy for recording hedge and non-hedge transactions, recognition of income, premiums and
discounts, valuation of outstanding contracts, provisioning, collateral and credit risk mitigation:
The Bank undertakes derivative transactions for market making/trading and Bank book transactions on balance sheet
assets and liabilities. All market making/trading transactions are marked to market on daily basis and the resultant
unrealized gains/losses are recognized in the profit and loss account. Premium/discount on Bank book transactions
is recognised as interest income/expense and is amortised on a pro-rata basis over the underlying swap period.
Pursuant to RBI guidelines, any overdue receivables representing positive mark-to market value under derivative
contracts which remain unpaid for a period of 90 days or more from the specified due date for payment is a Non¬
Performing Asset & the mark-to-market unrealised gains on all derivative contracts already taken in the profit and
loss account with the same counterparties are reversed and held in Suspense Account-Crystalised Receivable.
The Bank maintains adequate collateral arrangements with central counterparties and exchanges, wherever applicable.
In accordance with prevailing market practices, transactions with inter-bank counterparties such as Banks and
Primary Dealers do not ordinarily require collateral; however, where a Credit Support Annex (CSA) has been executed,
collateral is obtained strictly in line with the stipulated terms.
In the Interbank segment, the Bank's exposure is primarily to major and well-established banks, where the perceived
default risk is relatively low. Wherever a CSA is in place, exposures are appropriately collateralised in accordance
with contractual provisions and managed within the Bank's approved limit framework.
13. Penalties imposed by the RBI
During the year ended March 31, 2026, in terms of the provisions contained in the RBI circular Ref. DCM (RMMT)
No.S153/11.01.01/2021-22 dated August 10, 2021 on "Monitoring of Availability of Cash in ATMs” and the subsequent
addendum thereto, RBI has imposed penalties of ? 20,000 (2 instances) on the Bank on account of Cash out in an ATM
for more than 10 hours in a month (previous year: ? 40,000, 4 instances). Previous year, RBI had imposed penalty of ?
5,000 (1 instance) on the Bank on account of deficiencies observed during incognito visit at Bank Branch.
14. Disclosures on remuneration
Qualitative Disclosures:
a. Information relating to the composition and mandate of the Nomination and Remuneration Committee:
In compliance of Companies Act 2013, Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015, Banking Regulation Act, 1949 and other guidelines as applicable, the Board of Directors
has constituted Nomination and Remuneration Committee (NRC) to oversee the framing, review, and implementation of
the Compensation Policy of the Bank. This Committee works in coordination with Risk Management Committee & Audit
Committee of the Board, for achieving effective alignment between risk and remuneration.
As on March 31, 2026, the Nomination and Remuneration Committee consist of Non-Executive (Independent) Directors
and the said composition is in line with the applicable guidelines.
The Composition of NRC is as follows:
• Mr. J M Prasad-Independent Director (Chairman)
• Mr. Kamlesh Vikamsey-Independent Director
• Ms. Malini Thadani-Independent Director
• Mr. H R Khan-Independent Director
The roles and responsibilities of the NRC are as under:
i. Assist the Board in formulation and implementation of compensation policy and lay down the criteria for remuneration
of Directors, Key Management Personnel (KMPs) and Senior Management Personnel (SMPs), Material Risk Takers
(MRTs), Control Function Staff and other employees.
ii. Take inputs from the Risk Management Committee of the Board to ensure balance between remuneration and risks
as required. The Committee shall ensure that the mix of Fixed and Variable forms of compensation is consistent with
risk alignment and objectives of the Bank.
iii. Lay down the comprehensive criteria for assessment in terms of qualifications, positive attributes, independence,
professional experience, track record, integrity and considering other parameters for appointment of Directors,
KMPs and SMPs.
iv. Develop policies and lay down criteria for appointment/removal/reappointment of the Directors on the Board capturing
the statutory and regulatory requirements.
v. Assist in defining the performance evaluation criteria for Directors, KMPs, SMPs, MRTs and Control Functions and
ensure that relationship of remuneration to performance is clear and meets appropriate performance benchmarks
vi. Ensure that the compensation policy formulated for remuneration of Directors, KMPs and SMPs is reasonable sufficient
to attract, retain and motivate quality talent required to run the Bank.
vii. Ensure that the compensation for Directors, KMPs, SMPs is a mix of fixed and variable pay and such compensation
reflects short and long-term performance objectives appropriate to the working and the goals of the Bank.
viii. Ensure that appropriate procedures are in place to assess Board effectiveness and also provide the suggestions on
governance to the Board of Directors.
ix. Review and oversee the Employee Benefits program of the Bank including deferred benefits and retirement plans.
b. Information relating to the design and structure of remuneration processes and the key features and objectives
of remuneration policy:
The Bank has formulated a Compensation Policy in alignment with the RBI guidelines, covering all components of
compensation including fixed pay, perquisites, performance bonus, guaranteed bonus (joining / sign-on bonus),
share-linked instruments such as Employee Stock Option Plan (ESOPs), retirement benefits such as Provident Fund
and Gratuity, and below are the key features and objectives of the policy :
• Establish standards on compensation/ remuneration including fixed and variable pay covering share-linked
instruments, which are in alignment with the applicable rules and regulations and is based on the trends and
practices of remuneration prevailing in the industry.
• Retain, motivate, and promote talent and to ensure long term sustainability of Director, KMP, SMP, MRT, Control
Function Staff and other employees as applicable.
• Define internal guidelines for payment of other reimbursement to the Directors and KMPs.
• Institutionalize a mechanism for the appointment/ removal/ resignation/evaluation of performance of Directors.
• Perform such functions as are required to be performed by the NRC under the Securities and Exchange Board
of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, including the following:
- administering the ESOP plans;
- determining the eligibility of employees to participate under the ESOP plans;
- granting options to eligible employees and determining the date of grant;
- determining the number of options to be granted to an employee;
- determining the exercise price under the ESOP plans and
• Ensure compliance with applicable laws, rules, and regulations as well as 'Fit and Proper criteria' of directors before
their appointment.
c. Description of the ways in which current and future risks are taken into account in the remuneration
processes. It should include the nature and type of the key measures used to take account of these risks:
The Key parameters taken into account for the structuring of remuneration covering fixed pay and variable pay
are mentioned below:
i. Risk factors that are significant to the Banking operations of the Bank are taken into consideration in devising
the remuneration structure and it is symmetric to the risk outcomes.
ii. Compensation payout is scheduled in manner where sensitivity to time horizon of risks is taken into consideration
in the review process.
iii. Individual performance is reviewed on the basis of Key Responsibility Areas (KRAs) and the review is carried out
under the Annual Performance Review (APR) of the Bank.
iv. Industry Benchmarking, inflation and increase of cost of living.
In addition, it includes a 'malus' and 'clawback' option to take care of any disciplinary issue or future drop in
performance of individual/ business/ Bank.
d. Description of the ways in which the bank seeks to link performance during a performance measurement period
with levels of remuneration:
Individual performances are assessed in line with business/ individual delivery of the Key responsibility Areas (KRAs),
top priorities of business, budgets, and overall contribution to the organisation etc.
In linking the performance and level of remuneration, the job roles, levels, business budgets, risk factors, achievement
of individual KRAs are taken into consideration for taking decision in this regard
e. A discussion of the Bank's policy on deferral and vesting of variable remuneration and a discussion of the Bank's
policy and criteria for adjusting deferred remuneration before vesting and after vesting:
In compliance of Reserve Bank of India (Small Finance Banks-Governance) Directions, 2025, the Bank has a
Compensation Policy that covers all aspects of the compensation structure such as Fixed pay, Variable Pay and
Deferral pay.
The Variable Pay of senior executives, including WTDs, and other employees who are MRTs shall be deferred over
the period so that compensation is adjusted for all types of risks that organisation may be exposed to.
The deferral period shall be a minimum of three years. This would be applicable for both the cash and non-cash
components of the variable pay :
i. A minimum of 60% of the total variable pay must invariably be under deferral arrangements.
ii. If cash component is part of variable pay, at least 50% of the cash bonus shall also be deferred and where the
cash component of variable pay is under ? 25 lakhs in a year, deferral requirements shall not be applicable.
iii. Deferred remuneration should either vest fully at the end of the deferral period or be spread out over the course
of the deferral period. The first such vesting should be not before one year from the commencement of the
deferral period and shall not take place more frequently than on a yearly basis.
iv. The vesting should be no faster than on a pro rata basis.
The adjustment of Variable Pay before and after the vesting shall be considered in the event of subdued or negative
financial performance of the bank and/or the relevant line of business in any year and the malus/clawback arrangements
shall be invoked subject to due assessment.
f. Description of the different forms of variable remuneration (i.e., cash and types of share-linked instruments)
that the bank utilizes and the rationale for using these different forms:
The Variable pay consist of Cash, Share linked Instrument and same is decided considering risk factors, job profile,
level of performance and industry norms to ensure that employee morale is high and to promote consistency in
performance over the time horizon.
The breakup of variable remuneration is the follows:
Variable Pay: Variable pay compensation is paid depending upon the performance of the Employees against set key
responsibility areas (KRAs) and it is ensured that there is a proper balance between fixed pay and variable pay while
devising the remuneration structure.
i. A substantial proportion of compensation i.e., at least 50%, should be variable and paid on the basis of individual,
business performance & other parameters and this shall not be applicable on risk control and compliance staff.
ii. In case variable pay is:
• Up to 200% of the fixed pay, a minimum of 50% of the variable pay should be via non-cash instruments.
• Above 200%, a minimum of 67% of the variable pay should be via non-cash instruments.
• shall be limited to a maximum of 300% of the fixed pay; (for the relative performance measurement period).
iii. In the event that an executive is barred by statute or regulation from grant of share-linked instruments, his/her
variable pay will be capped at 150% of the fixed pay but shall not be less than 50% of the fixed pay.
iv. The deterioration in the financial performance of the Bank shall generally lead to a contraction in the total amount
of variable compensation, which can even be reduced to zero and the proportion of variable pay shall be higher
depending on the higher responsibility at higher level.
Share-linked Instruments: Share-linked Instruments consisting of ESOPs or other linked instruments shall be forming
part of variable pay.
Definitions of certain items in Business ratios / information:
1. Working funds to be reckoned as monthly average of total assets (excluding accumulated losses, if any) as reported
to Reserve Bank of India in Form X under Section 27 of the Banking Regulation Act, 1949.
2. Operating profit = (Interest Income Other Income - Interest expenses - Operating expenses).
3. "Business” is the total of monthly average of net advances and deposits (net of inter-bank deposits).
4. Productivity ratios (Business per employee and Profit per employee) are based on monthly average of employees count.
5. Net Interest Margin is Net Interest Income/ Average Earning Assets. Net Interest Income = Interest Income - Interest
Expense and Average Earning Assets is yearly average of total of net advances, investments, balance with banks
and money at call and short notice and Balances with Reserve Bank of India in Other Account.
6. Cost of Deposit is calculated based on weighted average interest rate of deposits.
The Bank has compiled the data for the purpose of this disclosure from its internal MIS system/reports and has been
relied upon by the auditors.
c. Marketing and distribution
The Bank does not receive any fees/remuneration in respect of Marketing and Distribution function (excluding bancassurance
business) during the year ended March 31, 2026 (Previous year: Nil).
f. Implementation of IFRS converged Indian Accounting Standards (Ind AS)
As per the Reserve Bank of India (RBI) circular no. RBI/2015-16/315 DBR.BP.BC.No.76/21.07.001/2015-16 dated February
11, 2016 on the implementation of Indian Accounting Standards (Ind AS), banks are advised to follow Ind AS as notified
under the Companies (Indian Accounting Standards) Rules, 2015, subject to any guidelines or directions issued by the
Reserve Bank of India in this regard.
Banks in India currently prepare their financial statements in accordance with the guidelines issued by the RBI, the
Accounting Standards notified under Section 133 of the Companies Act, 2013, and generally accepted accounting principles
in India (Indian GAAP). In January 2016, the Ministry of Corporate Affairs issued the roadmap for implementation of Ind AS,
which are converged with International Financial Reporting Standards (IFRS), for scheduled commercial banks, insurance
companies and non-banking financial companies. In March 2019, the RBI deferred the implementation of Ind AS for banks
until further notice, as the recommended legislative amendments were under consideration by the Government of India.
The Bank has undertaken a preliminary diagnostic assessment of differences between Indian GAAP and Ind AS and will
progress implementation in line with applicable requirements and regulatory directions.
Subsequently, the RBI, through its discussion paper on the introduction of the Expected Credit Loss (ECL) framework
for provisioning by banks, proposed a shift from the incurred loss approach to an ECL-based framework aligned broadly
with Ind AS 109, supplemented by regulatory backstops where necessary. Further, the RBI issued the Master Direction
on Classification, Valuation and Operation of Investment Portfolio of Commercial Banks, 2023, which became effective
from April 1, 2024. These directions bring the accounting and classification of investments closer to Ind AS principles
and have been implemented by the Bank with effect from April 1, 2024.
The RBI has also issued draft guidelines for implementation of the Expected Credit Loss (ECL) approach to replace the
existing incurred-loss-based provisioning framework. As per the draft guidelines, the ECL framework is proposed to be
effective from April 1, 2027, with a transition period of five years, subject to issuance of the final guidelines.
h. Disclosure on Green Deposit
The disclosure on portfolio-level information regarding the use of the green deposit funds with effect from June 1, 2023
as per 'Reserve Bank of India (Small Finance Banks-Financial Statements : Presentation and Disclosures) Directions, 2025'
dated November 28, 2025 and as amended thereafter, are given below:
B. OTHER DISCLOSURES
1. Disclosure of Letters of Comfort (LoC) issued by the Bank
The Bank has not issued any Letter of Comfort during the year ended March 31, 2026 and March 31, 2025.
2. Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the bank
During the year ended March 31, 2026 and March 31, 2025, the Bank has not exceeded the prudential credit exposure
limit as prescribed by the Reserve Bank of India in respect of Single Borrower and Group Borrowers.
3. Provision for reward points
The following table sets forth, for the period indicated, movement in provision for rewards points :
6. Small and micro industries
Under the Micro, Small and Medium Enterprises Development Act, 2006 which came into force from October 2, 2006,
certain disclosures are required to be made relating to Micro, Small and Medium enterprises. There have been no reported
case of delays in payments to micro and small enterprises or of interest payments due to delays in such payments during
the year ended March 31, 2026 and March 31, 2025. The above is based on the information available with the Bank which
has been relied upon by the auditors.
7. Proposed dividend
The Board of Directors at their meeting held on April 27, 2026, proposed a dividend of ? 1 per equity share at 10% of face
value for the year ended March 31, 2026 (previous year: ? 1 per equity share at 10% of face value) subject to the approval
of the shareholders at the ensuing Annual General Meeting. The effect of the proposed dividend has been considered in
determination of Capital adequacy ratio (CAR) as at March 31, 2026 and March 31, 2025 respectively.
8. Disclosure under Rule 11 (e) of the Companies (Audit and Auditors) Rules, 2014
As part of the normal banking business, the Bank grants loans and advances to its borrowers with permission to lend/
invest or provide guarantee/security in other entities identified by such borrowers or on the basis of the basis of security/
guarantee provided by the co-borrower. Similarly, the Bank may accept funds from its customers, who may instruct the
Bank to lend/invest/provide guarantee or security or the like against such deposit in other entities identified by such
customers. These transactions are part of Bank's normal banking business, which is conducted after exercising proper
due diligence including adherence to "Know Your Customer” guidelines.
Other than the nature of transactions described above:
• No funds have been advanced or loaned or invested by the Bank to or in any other person(s) or entity(ies), including
foreign entities ("Intermediaries”) with the understanding that the Intermediary shall lend or invest in party identified
by or on behalf of the Bank (Ultimate Beneficiaries).
• The Bank has not received any fund from any party(s), including foreign entities (Funding Party) with the understanding
that the Bank shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of
the Bank ("Ultimate Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
9. Micro, Small and Medium Enterprises (MSME) sector - Restructuring of Advances
The Bank has restructured the account as per RBI Circular DOR.No.BP.BC/4/21.04.048/2020-21 dated August 06, 2020
and DOR.STR.REC.12/21.04.048/2021-22 dated May 5, 2021.
10. Disclosures on Change in Ownership of Projects Under Implementation:
The Bank does not have any account which are currently under the scheme of Change in Ownership of Projects Under
Implementation as on March 31, 2026 (Previous year: Nil).
11. Inter-bank Participation with risk sharing:
The outstanding amount of participation issued by the Bank is reduced from the advances as per regulatory guidelines.
Outstanding participation amount as at March 31, 2026 is ?600.00 Crore and as at March 31, 2025 was Nil.
12. Investor education and protection fund
There has been no delay in transferring amounts, required to be transferred to the Investor Education and Protection
Fund by the Bank during the year ended March 31, 2026 (Previous year: Nil).
13. Other income includes processing fee, profit / loss on sale and revaluation of investments, non-fund based income
such as commission earned from guarantees, selling of third party products, income from dealing in PSLC, etc.
Part B: Geographic segments
The business of the Bank is in India only. Accordingly, geographical segment is not applicable.
*Digital Banking Segment reported as a sub-segment of Retail Banking Segment is related to Digital Banking Units (DBUs)
of the bank. As at March 31, 2026, the Bank has two DBU's.
Business Segments have been identified and reported taking into account the target customer profile, the nature of
products and services, the differing risks and returns, the organisation structure, the internal business reporting system
and guidelines prescribed by the RBI and in compliance with the Accounting Standard 17 - "Segment Reporting”. The
business operations of the Bank are in India and for the purpose of segment reporting as per Accounting Standard-17
(Segment reporting) the bank is considered to operate only in domestic segment.
10. Material transactions with related parties
The following table sets forth, for the periods indicated, the material transactions between the Bank and its related
parties. A specific related party transaction is disclosed as a material related party transaction wherever it exceeds 10%
of all related party transactions in that category.
The Ministry of Corporate Affairs vide G.S.R. 169(E) dated 10th March 2026 has amended AS 22 to incorporate provisions
relating to OECD Pillar Two Model Rules. The Bank operates exclusively within India and does not have any foreign
subsidiary or joint venture. Accordingly, the Pillar Two framework is not applicable to the Bank and has no impact on its
financial statements.
21. Accounting for employee share based payments
Stock options
The Bank has granted employee stock options to its Employees which are equity settled under various Employee Stock
Option Plans / Schemes. The plans in operation are 2015(A), 2015(B), 2016, 2018, 2020 and 2023.
22.Employee benefits
a. Defined benefit plans
Gratuity
The gratuity plan provides a lumpsum payment to vested employees at retirement, death or on termination of employment
based on respective employee's salary and years of employment with the Bank.
Reconciliation of opening and closing balance of present value of defined benefit obligation for gratuity benefits as per
AS-15 "Employee Benefits” is given below.
The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion
and other relevant factors.
The Expected rate of return on plan assets is based on the prevailing yields of Government of India securities (G-Sec)
for the future period as same is considered appropriate for the nature of assets under consideration.
Major Categories of Plan Assets
The Bank has invested 100% of the plan assets of its Gratuity Fund in insurer managed funds administered by the
respective insurers.
Impact of the New Labour Code
The Government of India notified four Labour Codes — the Code on Wages, 2019, the Industrial Relations Code, 2020,
the Code on Social Security, 2020, and the Occupational Safety, Health and Working Conditions Code, 2020 (collectively
referred to as the "New Labour Codes”) on November 21, 2025, thereby consolidating and replacing 29 existing labour
laws. Subsequently, on December 30, 2025, the Ministry of Labour & Employment issued the draft Central Rules along
with Frequently Asked Questions (FAQs), to facilitate assessment of the financial impact arising from these regulatory
changes.
Accordingly, the Bank has recognised an estimated incremental impact of ? 19.81 Crore under "Employees Cost” in the
Statement of Profit and Loss for Financial year ended March 31, 2026. This impact primarily relates to the expected
changes in employee benefits and other statutory obligations pursuant to the New Labour Codes.
The Bank continues to monitor developments relating to the implementation of the New Labour Codes and will review
its estimates on ongoing basis. The amounts recognised are based on management's best estimates derived from the
currently available information and are subject to revision upon issuance of the final rules or further clarification by the
relevant authorities.
b. Defined contribution plans
Provident fund
The Bank makes Provident Fund contributions to a defined contribution retirement benefit plans for qualifying
employees. Under the schemes, the bank is required to contribute a specified percentage of the payroll costs to the
Provident Fund Commissioner to fund the benefits.
The Bank recognized ? 143.84 Crore (previous year ? 121.04 Crore) for provident fund contributions in the Profit and Loss
Account. The contributions paid to these plans by the Bank are at rates specified in the rules of the schemes.
c. Compensated absences
The Bank has provided for compensatory leaves which can be availed and not encashed as per policy of the Bank as
present value obligation of the benefit at related current service cost measured using the Projected Unit Credit Method
on the basis of an actuarial valuation. The Bank has accordingly booked ? 1.87 Crore (previous year booked ? 0.21 Crore)
in the books of accounts for the year.
23.Audit Trail
The Bank has used certain accounting software(s) for maintaining its books of account, which has a feature of recording
the audit trail (edit log) facility, except that audit trail feature was enabled from May 20, 2025 for certain relevant
masters in respect of one software at application level.
Further, to the extent enabled, the audit trail feature has been operated for the relevant transactions recorded in the accounting
software(s) and was not tampered with. Additionally, the audit trail feature of prior year(s) has been preserved by the
Company as per the statutory requirements for record retention to the extent it was enabled and recorded in respective years.
The Bank has established and maintained an adequate internal control framework and based on its assessment, believes
that this was effective throughout the period.
24. Update on Change in Key Managerial Personnel (KMP)
The Board of Directors and the Reserve Bank of India have approved the appointment of Mr. Vivek Tripathi as Whole¬
Time Director (Executive Director) of the Bank. Consequent to approval, Mr. Vivek Tripathi assumed charge as Executive
Director with effect from April 24, 2026.
Mr. Uttam Tibrewal completed his tenure as a Director on the Board of the Bank on April 18, 2026 and continue with the
Bank in the capacity as Deputy CEO.
Further, the appointment of Mr. Gaurav Jain, Interim Chief Financial Officer, as Chief Financial Officer of the Bank has
been approved by the Board of Directors on April 27, 2026.
25. Update on voluntary transition to Universal Bank
The Bank had made an application to RBI on September 03, 2024 for voluntary transition to Universal Bank as per the
extant guidelines of the RBI. The RBI has intimated its in-principle approval to Bank on August 7, 2025. The in-principle
approval is valid for 18 months from the issue of the letter and stipulates that the shares held by promoters / promoter
group shall be transferred to a Non-Operating Financial Holding Company (NOFHC).
Pursuant to the Bank's request, RBI, vide its letter dated March 6, 2026, has replaced the aforesaid stipulation. This
requirement for NOFHC will now be applicable on the transitioned Universal Bank, if the Bank or its promoter (including
promoter group) proposes to establish any group entity in the future. Grant of the final license shall remain subject to
RBI's assessment of the Bank's compliance with applicable regulatory guidelines and instructions. Further the Bank has
submitted its application for the final Universal Banking license during March 2026, in line with RBI's letter dated August
7, 2025.
26. Comparative figures
Figures for the previous year have been regrouped and reclassified wherever necessary to conform to the current
year's presentation.
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