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Notes to Accounts of LIC Housing Finance Ltd.

Mar 31, 2023

Provisions and Contingent Liabilities

Provisions involving substantial degree of estimation in
measurement are recognised when the Company has a
present obligation (legal or constructive), as a result of
past events, and it is probable that an outflow of resources,
that can be reliably estimated, will be required to settle
such an obligation.

The amount recognised as a provision is the best estimate of
the consideration required to settle the present obligation
at the balance sheet date, taking into account the risks and
uncertainties surrounding the obligation. When a provision
is measured using the cash flows estimated to settle the
present obligation, its carrying amount is the present value
of those cash flows (when the effect of the time value of
money is material).

When some or all of the economic benefits required to
settle a provision are expected to be recovered from a
third party, a receivable is recognised as an asset if it is
virtually certain that reimbursement will be received and
the amount of the receivable can be measured reliably.

The expense relating to a provision is presented in the
Statement of Profit and Loss net of any reimbursement.
If the effect of the time value of money is material,
provisions are discounted using a current pre-tax rate that
reflects, when appropriate, the risks specific to the liability.
When discounting is used, the increase in the provision
due to the passage of time is recognised as a finance cost.

A Contingent Liability is a possible obligation that arises
from past events and the existence of which will be
confirmed only by the occurrence or non-occurrence of
one or more uncertain future events not wholly within the
control of the company or a present obligation that arises
from past events that may, but probably will not, require
an outflow of resources.

Both provisions and contingent liabilities are reviewed
at each Balance Sheet date and adjusted to reflect the
current best estimates. Contingent Liabilities are not
recognised but are disclosed in the notes. A contingent
asset is disclosed in the Financial Statements, where an
inflow of economic benefits is probable.

Onerous contracts

Present obligations arising under onerous contracts are
recognised and measured as provisions. An onerous
contract is considered to exist where the Company has
a contract under which the unavoidable costs of meeting
the obligations under the contract exceed the economic
benefits expected to be received from the contract.

2.13 Investment in Subsidiaries and Associates

Investment in subsidiaries and associates are recognized
and carried at cost. Where the carrying amount of an
investment is greater than its estimated recoverable
amount, it is written down immediately to its recoverable
amount and the difference is transferred to the Statement
of Profit and Loss. On disposal of investment, the
difference between the net disposal proceeds and the

carrying amount is charged or credited to the Statement
of Profit and Loss.

2.14 Financial Instruments

Financial assets and financial liabilities are recognized when
an entity becomes a party to the contractual provisions of
the instrument.

Financial assets and financial liabilities are initially measured
at fair value. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and financial
liabilities (other than financial assets and financial liabilities
at Fair Value through Profit or Loss (FVTPL)) are added
to or deducted from the fair value of the financial assets
or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of
financial assets or financial liabilities at Fair Value through
Profit or Loss are recognised immediately in Statement of
Profit and Loss.

A. Financial Assets

a) Recognition and initial measurement

The Company initially recognises loans and advances,
deposits and debt securities purchased on the date on
which they originate. Purchases and sale of financial
assets are recognised on the trade date, which is the
date on which the Company becomes a party to the
contractual provisions of the instrument.

All financial assets are recognised initially at fair value
except investment in subsidiaries and associates.
In the case of financial assets not recorded at FVTPL,
transaction costs that are directly attributable to its
acquisition of financial assets are included therein.

b) Classification of Financial Assets and Subsequent
Measurement

On initial recognition, a financial asset is classified to
be measured at -

â¢ Amortised cost; or

â¢ Fair Value through Other Comprehensive

Income (FVTOCI) - debt investment; or

â¢ Fair Value through Other Comprehensive

Income (FVTOCI) - equity investment; or

â¢ Fair Value through Profit or Loss (FVTPL)

A financial asset is measured at amortised cost if it
meets both of the following conditions and is not
designated at FVTPL:

â¢ The asset is held within a business model whose
objective is to hold assets to collect contractual
cash flows; and

â¢ The contractual terms of the financial asset give
rise on specified dates to cash flows that are
solely payments of principal and interest on the
principal amount outstanding.

A debt instrument is classified as FVTOCI only if it
meets both of the following conditions and is not
recognised at FVTPL:

â¢ The asset is held within a business model
whose objective is achieved by both
collecting contractual cash flows and selling
financial assets; and

â¢ The contractual terms of the financial asset give
rise on specified dates to cash flows that are
solely payments of principal and interest on the
principal amount outstanding.

Debt instruments included within the FVTOCI
category are measured initially as well as at each
reporting date at fair value. Fair value movements
are recognised in the Other Comprehensive Income
(OCI). However, the Company recognises interest
income, impairment losses & reversals and foreign
exchange gain or loss in the Statement of Profit and
Loss. On derecognition of the asset, cumulative gain
or loss previously recognised in OCI is reclassified from
equity to Statement of Profit and Loss. Interest earned
whilst holding FVTOCI debt instrument is reported as
interest income using the EIR method.

All equity investments in scope of Ind AS 109 are
measured at fair value. Equity instruments which
are held for trading and contingent consideration
recognised by an acquirer in a business combination
to which Ind AS 103 applies are classified as at FVTPL.
For all other equity instruments, the Company may
make an irrevocable election to present in other
comprehensive income subsequent changes in the
fair value. The Company makes such election on an
instrument-by-instrument basis. The classification is
made on initial recognition and is irrevocable.

If the Company decides to classify an equity
instrument as at FVTOCI, then all fair value changes on
the instrument, excluding dividends, are recognised
in the OCI. There is no recycling of the amounts from
OCI to Statement of Profit and Loss, even on sale of
investment. However, on sale/disposal the Company
may transfer the cumulative gain or loss within equity.

Equity instruments included within the FVTPL
category are measured at fair value with all changes
recognised in the Statement of Profit and Loss.

All other financial assets are classified as
measured at FVTPL.

In addition, on initial recognition, the Company may
irrevocably designate a financial asset that otherwise
meets the requirements to be measured at amortised
cost or at FVTOCI as at FVTPL if doing so eliminates
or significantly reduces accounting mismatch that
would otherwise arise.

Financial assets at FVTPL are measured at fair value
at the end of each reporting period, with any gains
and losses arising on re-measurement recognised
in Statement of Profit and Loss. The net gain or
loss recognised in Statement of Profit and Loss
incorporates any dividend or interest earned on the
financial asset and is included in the ''other income''
line item. Dividend on financial assets at FVTPL is
recognised when:

â¢ The Company''s right to receive the dividends
is established,

â¢ It is probable that the economic benefits
associated with the dividends will flow
to the Company,

â¢ The dividend does not represent a recovery of
part of cost of the investment and the amount
of dividend can be measured reliably.

c) Business Model Test

The Company determines its business model at the
level that best reflects how it manages a group of
financial assets to achieve its business objective.

The Company''s business model is not assessed on
instrument to instrument basis, but at a higher level
of aggregated portfolios and is based on observable
factors such as:

â¢ How the performance of the business model
and the financial assets held within that
business model are evaluated and reported to
the Company''s key management personnel;

â¢ The risks that affect the performance of the
business model (and the financial assets held
within that business model) and, in particular,
the way in which those risks are managed.

At initial recognition of a financial asset, the Company
determines whether newly recognised financial

assets are part of an existing business model or
whether they reflect a new business model.

d) Solely Payments of Principal and Interest (âSPPIâ)
on the principal amount outstanding

The Company assesses the contractual terms
of financial assets to identify whether they
meet the SPPI test.

''Principal'' for the purpose of this test is defined as the
fair value of the financial asset at initial recognition
and may change over the life of the financial asset
(for example, if there are repayments of principal or
amortization of the premium/discount)

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

Contractual terms that introduce exposure to risks
or volatility in the contractual cash flows that are
unrelated to a basic lending arrangement, such as
exposure to changes in equity prices or commodity
prices, do not give rise to contractual cash
flows that are SPPI.

e) Derecognition of Financial Assets

The Company derecognises a financial asset when
the contractual rights to the cash flows from the
financial asset expire, or when it transfers the financial
asset and substantially all the risks and rewards
of ownership of the asset to another party. If the
Company neither transfers nor retains substantially
all the risks and rewards of ownership and continues
to control the transferred asset, the Company
recognises its retained interest in the asset and an
associated liability for amounts it may have to pay.
If the Company retains substantially all the risks and
rewards of ownership of a transferred financial asset,
the Company continues to recognise the financial
asset and also recognises a collateralised borrowing
for the proceeds received.

On derecognition of a financial asset in its entirety,
the difference between the asset''s carrying amount
and the sum of the consideration received and
receivable and the cumulative gain or loss that had
been recognised in other comprehensive income and
accumulated in equity is recognised in Statement
of Profit and Loss if such gain or loss would have
otherwise been recognised in Statement of Profit and
Loss on disposal of that financial asset.

On derecognition of a financial asset other than
in its entirety (e.g. when the Company retains an
option to repurchase part of a transferred asset), the
Company allocates the previous carrying amount
of the financial asset between the part it continues
to recognise under continuing involvement, and
the part it no longer recognises on the basis of the
relative fair values of those parts on the date of the
transfer. The difference between the carrying amount
allocated to the part that is no longer recognised
and the sum of the consideration received for the
part no longer recognised and any cumulative gain
or loss allocated to it that had been recognised in
other comprehensive income is recognised in profit
or loss if such gain or loss would have otherwise been
recognised in Statement of Profit and Loss on disposal
of that financial asset. A cumulative gain or loss that
had been recognised in other comprehensive income
is allocated between the part that continues to be
recognised and the part that is no longer recognised
on the basis of the relative fair values of those parts.

Modification of contractual cash flows

When the contractual cash flows of a financial asset
are renegotiated or otherwise modified, and the
renegotiation or modification does not result in the
derecognition of that financial asset, the Company
recalculates the gross carrying amount of the financial
asset and shall recognise a modification gain or loss
in profit or loss. The gross carrying amount of the
financial asset shall be recalculated as at the present
value of the renegotiated or modified contractual
cash flows that are discounted at the financial asset''s
original effective interest rate (or credit-adjusted
effective interest rate for purchased or originated
credit-impaired financial assets) or, when applicable,
the revised effective interest rate. Any costs or fees
incurred adjust the carrying amount of the modified
financial asset and are amortised over the remaining
term of the modified financial asset.

f) Impairment of Financial Assets

The Company applies the expected credit loss (ECL)
model for recognising impairment loss on financial
assets. The Company applies a three-stage approach
for measuring ECL for the following categories of
financial assets that are not measured at Fair Value
through Profit or Loss:

â¢ debt instruments measured at amortised
cost and Fair Value through Other
Comprehensive Income; and

â¢ financial guarantee contracts.

No ECL is recognised on equity investments,
classified as FVTPL.

Expected credit losses is the weighted average of
credit losses with the respective risks of default
occurring as the weights. Credit loss is the difference
between all contractual cash flows that are due to the
Company in accordance with the contract and all the
cash flows that the Company expects to receive (i.e.
all cash shortfalls), discounted at the original effective
interest rate (or credit-adjusted effective interest
rate for purchased or originated credit-impaired
financial assets). The Company estimates cash flows
by considering all contractual terms of the financial
instrument (for example, prepayment, extension, call
and similar options) through the expected life of that
financial instrument.

Financial assets migrate through the following three
stages based on the change in credit risk since
initial recognition:

Stage 1: 12-months ECL

The Company assesses ECL on exposures where
there has not been a significant increase in credit
risk since initial recognition and that were not credit
impaired upon origination. For these exposures,
the Company recognises as a collective provision
the portion of the lifetime ECL associated with the
probability of default events occurring within the
next 12 months. The Company does not conduct
an individual assessment of exposures in Stage 1 as
there is no evidence of one or more events occurring
that would have a detrimental impact on estimated
future cash flows.

Stage 2: Lifetime ECL - not credit impaired

The Company collectively assesses ECL on exposures
where there has been a significant increase in credit
risk since initial recognition but are not credit impaired.
For these exposures, the Company recognises as a
collective provision, a lifetime ECL (i.e. reflecting the
remaining lifetime of the financial asset). Similar to
Stage 1, the Company does not conduct an individual
assessment on Stage 2 exposures as the increase in
credit risk is not, of itself, an event that could have a
detrimental impact on future cash flows.

Stage 3: Lifetime ECL - credit impaired

The Company identifies, both collectively and
individually, ECL on those exposures that are
assessed as credit impaired based on whether one
or more events, that have a detrimental impact

on the estimated future cash flows of that asset
have occurred. For exposures that have become
credit impaired, a lifetime ECL is recognised as a
collective or specific provision, and interest revenue
is calculated by applying the effective interest rate to
the amortised cost (net of provision) rather than the
gross carrying amount.

Determining the stage for impairment

At each reporting date, the Company assesses whether
there has been a significant increase in credit risk for
exposures since initial recognition by comparing the
risk of default occurring over the remaining expected
life from the reporting date and the date of initial
recognition. The Company considers reasonable and
supportable information that is relevant and available
without undue cost or effort for this purpose.
This includes quantitative and qualitative information
and also, forward-looking analysis.

An exposure will migrate through the ECL stages
as asset quality deteriorates. If, in a subsequent
period, asset quality improves and also reverses any
previously assessed significant increase in credit risk
since origination, then the provision for impairment
losses reverts from lifetime ECL to 12-months ECL.
Exposures that have not deteriorated significantly
since origination are considered to have a low
credit risk. The provision for impairment losses for
these financial assets is based on a 12-months ECL.
When an asset is uncollectible, it is written off against
the related provision. Such assets are written off after
all the necessary procedures have been completed
and the amount of the loss has been determined.
Subsequent recoveries of amounts previously
written off reduce the amount of the expense in the
income statement.

The Company assesses whether the credit risk on an
exposure has increased significantly on an individual
or collective basis. For the purposes of a collective
evaluation of impairment, financial instruments
are grouped on the basis of shared credit risk
characteristics, taking into account instrument type,
class of borrowers, credit risk ratings, date of initial
recognition, remaining term to maturity, industry and
other relevant factors.

Measurement of ECL

ECL are derived from unbiased and
probability-weighted estimates of expected loss, and
are measured as follows:

â¢ Financial assets that are not credit-impaired
at the reporting date: as the present value
of all cash shortfalls over the expected life of
the financial asset discounted by the effective
interest rate. The cash shortfall is the difference
between the cash flows due to the Company
in accordance with the contract and the cash
flows that the Company expects to receive.
If the credit risk on a financial instrument
has not increased significantly since initial
recognition, the Company measures the loss
allowance for that financial instrument at an
amount equal to 12-month expected credit
losses. 12-month expected credit losses is a
portion of the life-time expected credit losses
and represents the lifetime cash shortfalls
that will result if default occurs within the 12
months after the reporting date and thus, are
not cash shortfalls that are predicted over the
next 12 months.

â¢ Financial assets that are credit-impaired at the
reporting date: as the difference between the
gross carrying amount and the present value of
estimated future cash flows discounted by the
effective interest rate.

For further details on how the Company calculates
ECL including the use of forward looking information,
refer to the Credit quality of financial assets in Note ....
Financial risk management.

ECL is recognised using a provision for impairment
losses in Statement of Profit and Loss. In the case of
debt instruments measured at Fair Value through
Other Comprehensive Income, the measurement of
ECL is based on the three-stage approach as applied
to financial assets at amortised cost. The Company
recognises the provision charge in profit and loss,
with the corresponding amount recognised in other
comprehensive income, with no reduction in the
carrying amount of the asset in the Balance Sheet.

Further, for the purpose of measuring lifetime
expected credit loss allowance for trade receivables,
the Company has used a practical expedient as
permitted under Ind AS 109. This expected credit loss
is computed based on a provision matrix which takes
into account historical credit loss experience and
adjusted for forward-looking information.

g) Effective interest method

The effective interest method is a method of
calculating the amortised cost of a debt instrument

and allocating interest income over the relevant
period. The effective interest rate is the rate that
exactly discounts estimated future cash receipts
(including all fees and points paid or received that
form an integral part of the effective interest rate,
transaction costs and other premiums or discounts)
through the expected life of the debt instrument,
or, where appropriate, a shorter period, to the net
carrying amount on initial recognition.

Income is recognised on an effective interest basis
for debt instruments other than those financial
assets classified as at FVTPL and Interest income is
recognised in Statement of Profit and Loss.

h) Reclassification of Financial Assets

The Company determines classification of financial
assets and liabilities on initial recognition. After initial
recognition, no reclassification is made for financial

assets which are equity instruments and financial
liabilities. For financial assets which are debt
instruments, a reclassification is made only if there is
a change in the business model for managing those
assets. Changes to the business model are expected
to be infrequent. The Company''s management
determines change in the business model as a result
of external or internal changes which are significant
to the Company''s operations. Such changes are
evident to external parties. A change in the business
model occurs when the Company either begins or
ceases to perform an activity that is significant to
its operations. If the Company reclassifies financial
assets, it applies the reclassification prospectively
from the reclassification date which is the first day
of the immediately next reporting period following
the change in business model. The Company does
not restate any previously recognised gains, losses
(including impairment gains or losses) or interest.

B. Financial Liabilities and Equity Instruments

a) Classification as Debt or Equity

Debt and equity instruments issued by a
company are classified as either financial
liabilities or as equity in accordance with the
substance of the contractual arrangements
and the definitions of a financial liability and an
equity instrument.

b) Equity Instruments

An equity instrument is any contract that
evidences a residual interest in the assets of
the Company after deducting all of its liabilities.

Equity instruments issued by the Company are
recognised at the proceeds received, net of
directly attributable transaction costs.

c) Financial Liabilities

Financial liabilities are classified as measured at
amortised cost or ''FVTPL''.

A Financial Liability is classified as at FVTPL
if it is classified as held-for-trading or it is
a derivative (that does not meet hedge
accounting requirements) or it is designated as
such on initial recognition.

A financial liability is classified as held
for trading if:

â¢ It has been incurred principally for
the purpose of repurchasing it in
the near term; or

â¢ on initial recognition it is part of a portfolio
of identified financial instruments that
the Company manages together and
has a recent actual pattern of short-term
profit-taking; or

â¢ it is a derivative that is not designated and
effective as a hedging instrument.

A financial liability other than a financial liability
held for trading may be designated as at FVTPL
upon initial recognition if:

â¢ such designation eliminates or significantly
reduces a measurement or recognition
inconsistency that would otherwise arise;

â¢ the financial liability forms part of a
group of financial assets or financial
liabilities or both, which is managed
and its performance is evaluated on a
fair value basis, in accordance with the
Company''s documented risk management
or investment strategy, and information
about the grouping is provided internally
on that basis; or

â¢ it forms part of a contract containing
one or more embedded derivatives, and
Ind AS 109 permits the entire combined
contract to be designated as at FVTPL in
accordance with Ind AS 109.

Financial liabilities at FVTPL are stated at
fair value, with any gains or losses arising on
remeasurement recognised in Statement of
Profit and Loss. The net gain or loss recognised
in Statement of Profit and Loss incorporates
any interest paid on the financial liability and is
included in the ''other gains and losses'' line item
in the Statement of Profit and Loss.

d) Other Financial Liabilities

Other financial liabilities (including borrowings
and trade and other payables) are subsequently
measured at amortised cost using the effective
interest method.

e) Derecognition of Financial Liabilities

The Company derecognises financial liabilities
when, and only when, the Company''s obligations

are discharged, cancelled or have expired.
An exchange with a lender of debt instruments
with substantially different terms is accounted
for as an extinguishment of the original financial
liability and the recognition of a new financial
liability. Similarly, a substantial modification
of the terms of an existing financial liability
(whether or not attributable to the financial
difficulty of the debtor) is accounted for as an
extinguishment of the original financial liability
and the recognition of a new financial liability.
The difference between the carrying amount
of the financial liability derecognised and the
consideration paid and payable is recognised in
profit or loss.

2.15 Assets held for sale

The Company physically repossess properties or other
assets in retail portfolio to settle outstanding recoverable
and the surplus (if any) post auction is refunded to the
loanees. These assets are acquired by the company under
SARFEASI Act, 2002 has been classified as assets held for
sale, as their carrying amounts will be recovered through a
sale of asset. In accordance with Ind AS 105, the company
is committed to sell these assets under possession, are
measured on balance sheet at the lower of carrying value
or fair value and no depreciation is charged on them.

2.16 Hedge Accounting

The Company uses derivative instruments to manage
exposures to interest rate and foreign currency risks.

The hedging transactions entered into by the Company
is within the overall scope of the Derivative Policy
and within the Risk Management framework of the
company as approved by the Board from time to time
and for the risks identified to be hedged in accordance
with the same policies. All derivative contracts are
recognised on the Balance Sheet and measured at fair
value. Hedge accounting is applied to all the derivative
instruments as per Ind AS 109. Hedge effectiveness is
ascertained periodically on a forward looking basis and is
reviewed at each reporting period. Hedge effectiveness is
measured by the degree to which changes in the fair value
or cash flows of the hedged item that are attributed to
the hedged risk are offset by changes in the fair value or
cashflows of the hedging instrument.

Hedges that meet the criteria for hedge accounting are
accounted for, as described below:

Fair Value Hedges

Fair value hedge is a hedge of the exposure to changes in
fair value of a recognized asset or liability or unrecognized

commitment, or a component of any such item, that is
attributable to a particular risk and could affect profit or
loss. The cumulative change in the fair value of a hedging
derivative is recognised in the Statement of Profit and
Loss in net gain on fair value changes. Meanwhile, the
cumulative change in the fair value of the hedged item is
recorded as part of the carrying value of the hedged item
in the Balance Sheet and is also recognized as net gain
on fair value changes in the Statement of Profit and Loss
. The Company classifies a fair value hedge relationship
when the hedged item (or group of items) is a distinctively
identifiable asset or liability hedged by one or a few
hedging instruments. The financial instruments hedged for
interest rate risk in a fair value hedge relationship is fixed
rate debt issued and other borrowed funds. If the hedging
instrument expires or is sold, terminated or exercised, or
where the hedge no longer meets the criteria for hedge
accounting, the hedge relationship is discontinued
prospectively. If the relationship does not meet hedge
effectiveness criteria, the Company discontinues hedge
accounting from the date on which the qualifying criteria
are no longer met. For hedged items recorded at amortised
cost, the accumulated fair value hedge adjustment to the
carrying amount of the hedged item on termination of
the hedge accounting relationship is amortised over the
remaining term of the original hedge using the recalculated
EIR method by recalculating the EIR at the date when the
amortisation begins. If the hedged item is derecognised,
the unamortised fair value adjustment is recognised
immediately in the Statement of Profit and Loss.

Cash Flow Hedges

Cash flow hedge is a hedge of the exposure to variability
in the cash flows of a specific asset or liability, or of a
forecasted transaction, that is attributable to a particular
risk. It is possible to only hedge the risks associated with
a portion of an asset, liability, or forecasted transaction,
as long as the effectiveness of the related hedge can be
measured. The accounting for a cash flow hedge will be
to recognize the effective portion of any gain or loss in
Other Comprehensive Income (OCI), and recognize the
ineffective portion of any gain or loss in Finance cost in the
Statement of Profit and Loss. When a hedging instrument
expires, is sold, terminated, exercised, or when a hedge
no longer meets the criteria for hedge accounting, any
cumulative gain or loss that has been recognised in OCI
at that time remains in OCI and is recognised when the
hedged forecast transaction is ultimately recognised in the
Statement of Profit and Loss. When a forecast transaction
is no longer expected to occur, the cumulative gain or loss
that was reported in OCI is immediately transferred to the
Statement of Profit and Loss.

Interest rate benchmark reforms:

Hedging relationships that are directly affected by interest
rate benchmark reform gives rise to uncertainties about:

a) the interest rate benchmark (contractually or
non-contractually specified) designated as a
hedged risk; and/or

b) the timing or the amount of interest rate
benchmark-based cash flows of the hedged item or
of the hedging instrument.

This may adversely affect the existing hedging relationships
so long as the uncertainties exist. In order to provide relief
to such hedging relationships the accounting standard Ind
AS 109 provides for some relief measures which should be
mandatorily applied for such cases.

Accordingly, the Company applies the relief by
assuming the following:

1. that the interest rate benchmark on which the
hedged cash flows are based is not altered as a
result of the reform.

2. when performing prospective assessments, the
Company assumes that the interest rate benchmark
on which the hedged item, hedged risk and/or
hedging instrument are based is not altered as a
result of the interest rate benchmark reform.

3. for hedges of a non-contractually specified benchmark
component of interest rate risk, the Company applies
the separately identifiable requirement only at the
inception of such hedging relationships.

As per the requirements of IND AS, the Company shall
cease applying the aforesaid exceptions when:

a) the uncertainty arising from interest rate benchmark
reform is no longer present with respect to
the timing and the amount of the interest rate
benchmark-based cash flows; or

b) the hedging relationship is discontinued,
whichever is earlier.

2.17 Cash and Cash Equivalent

Cash and cash equivalent in Balance Sheet comprise of
cash at bank, cash and cheques on hand and short-term
deposits with an original maturity of three months or less
which are subject to insignificant risk of changes in value.

2.18 Earnings Per Share

Basic earnings per share is calculated by dividing the net
profit or loss after tax for the year attributable to equity
shareholders by the weighted average number of equity
shares outstanding during the year. The weighted average
number of equity shares outstanding during the year are
adjusted for events including a bonus issue, bonus element
in right issue to existing shareholders, share split, and
reverse share split (consolidation of shares).

For the purpose of calculating diluted earnings per share,
the net profit or loss after tax as adjusted for dividend,
interest and other charges to expense or income (net of
any attributable taxes) relating to the dilutive potential
equity shares divided by weighted average no of equity
shares year which are adjusted for the effects of all dilutive
potential equity shares.

2.19 Statement of Cash Flow

Cash flows are reported using the indirect method,
whereby profit / (loss) before tax is adjusted for the
effects of transactions of non-cash nature and any
deferrals or accruals of past or future cash receipts or
payments. The cash flows from operating, investing and
financing activities are segregated based on the activities
of the Company.

2.20 Commitments

Commitments are future liabilities for contractual
expenditure. The commitments are classified and
disclosed as follows:

i. The estimated amount of contracts remaining to be
executed on capital account and not provided for; and

ii. Other non-cancellable commitments, if any, to the
extent they are considered material and relevant in
the opinion of the Management.

2.21 Segment Reporting

Operating segments are reported in a manner consistent
with the internal reporting provided to the Chief Operating
Decision Maker (CODM).

The Managing Director & CEO is identified as the Chief
Operating Decision Maker (CODM) by the management
of the Company. CODM has identified only one operating
segment of providing loans for purchase, construction,
repairs renovation etc. and has its operations entirely
within India. All other activities of the Company revolve
around the main business. As such, there are no separate
reportable segments, as per the Indian Accounting
Standard (Ind AS) 108 on ''Segment Reporting''.

3. KEY ESTIMATES AND JUDGEMENTS:

The preparation of the financial statements in conformity
with Indian Accounting Standards ("Ind ASâ) requires
the management to make estimates, judgements
and assumptions. These estimates, judgements and
assumptions affect the application of accounting policies
and the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported
amounts of revenues and expenses during the year.
Accounting estimates could change from period to
period. Actual results could differ from those estimates.
Revisions to accounting estimates are recognised
prospectively. The Management believes that the
estimates used in preparation of the financial statements
are prudent and reasonable. Future results could differ due
to these estimates and the differences between the actual
results and the estimates are recognised in the periods in
which the results are known / materialise.

3.1 Determination of Expected Credit Loss (âECLâ)

The measurement of impairment losses (ECL) across
all categories of financial assets requires judgement, in
particular, the estimation of the amount and timing of
future cash flows based on Company''s historical experience
and collateral values when determining impairment losses
along with the assessment of a significant increase in credit
risk. These estimates are driven by a number of factors,
changes in which can result in different levels of allowances.

Elements of the ECL models that are considered accounting
judgements and estimates include:

â¢ Bifurcation of the financial assets into different
portfolios when ECL is assessed on collective basis.

â¢ Company''s criteria for assessing if there has been a
significant increase in credit risk.

â¢ Development of ECL models, including choice of
inputs / assumptions used.

The various inputs used and process followed by the
Company in measurement of ECL has been detailed
in Note 37.4.2.3

3.2 Fair Value Measurements

In case of financial assets and financial liabilities recorded
or disclosed in financial statements the company uses
the quoted prices in active markets for identical assets or
based on inputs which are observable either directly or
indirectly for determining the fair value. However in certain
cases, the Company adopts valuation techniques and
inputs which are not based on market data. When Market
observable information is not available, the Company has

applied appropriate valuation techniques and inputs to the
valuation model.

The Company uses valuation techniques that are
appropriate in the circumstances and for which sufficient
data is available to measure fair value, maximising the
use of relevant observable inputs and minimising the use
of unobservable inputs. Information about the valuation
techniques and inputs used in determining the fair value of
Investments are disclosed in Note 37.3.

3.3 Income Taxes

The Company''s tax jurisdiction is in India.
Significant judgements are involved in determining the
provision for direct and indirect taxes, including amount
expected to be paid/recovered for certain tax positions.

3.4 Evaluation of Business Model

Classification and measurement of financial instruments
depends on the results of the solely payments of principal
and interest on the principal amount outstanding ("SPPIâ)
and the business model test. The Company determines the
business model at a level that reflects how the Company''s
financial instruments are managed together to achieve a
particular business objective.

The Company monitors financial assets measured at
amortised cost or fair value through other comprehensive
income that are derecognised prior to their maturity to
understand the reason for their disposal and whether
the reasons are consistent with the objective of the
business for which the asset was held. Monitoring is part
of the Company''s continuous assessment of whether
the business model for which the remaining financial
assets are held continues to be appropriate and if it is not
appropriate whether there has been a change in business
model and so a prospective change to the classification of
those instruments.

3.5 Provisions and Liabilities

Provisions and liabilities are recognised in the period when
they become probable that there will be an outflow of
funds resulting from past operations or events that can be
reasonably estimated. The timing of recognition requires
judgment to existing facts and circumstances which may
be subject to change.

4. RECENT INDIAN ACCOUNTING STANDARDS
(IND AS)

Ministry of Corporate Affairs ("MCAâ) notifies new
standards or amendments to the existing standards.
There is no such notification which would have been
applicable from April 1, 2023.

Mar 31, 2022

Secured by a negative lien on the assets of the Company (excluding the company''s current and future receivables and book-debt of whatsoever nature of the Company on which a first pari-pasu floating charge by way of hypothecation to secure the borrowings of the company outstanding as on 31^st March 2015 and the unavailed sanctions of the term loans, cash credit and refinance as on 31^st March 2015), with a minimum asset cover of 100%. Further the Company shall be entitled to dispose of, transact or otherwise deal, in the ordinary course of business upto 5% of the Specific Assets, including by way of a securitization transaction and as may be required under any law, regulations, guidelines or rules. Subject to maintenance of Asset Cover, as may be applicable and in the normal course of business, the Company may without the consent/approval of the Trustee/Debenture Holder(s)/Beneficial Owner(s)/creditors be entitled to make further issue(s) of Debentures, raise further loans and advances and/or avail further deferred payment guarantees or other financial facilities from time to time from any persons/bank/financial institution/body corporate/ any other agency.

Secured by way of Negative Lien on the Assets, to the extent of Asset Cover, without any encumbrance in favour of the Debenture Trustee except to the extent of the charge created in favour of its depositors of the Company pursuant to the regulatory requirement under Section 29B of the NHB Act.

However, the Company shall, from time to time, be entitled to create any charge, mortgage, pledge, security interest, encumber or create lien on its Assets, subject to maintenance of Asset Cover, except to the extent of charge created in favour of its depositors pursuant to the regulatory requirement under Section 29B of the NHB Act or as may be required under any law, regulation, guidelines or rules.

Negative lien on the assets of the Company (excluding current and future receivables and book-debt of whatsoever nature of the Company on which a first pari-pasu floating charge by way of hypothecation to secure the borrowings (Excluding ECB) of the company outstanding as on March 31, 2015 and the unavailed sanctions of the term loans, cash credit and refinance as on March 31, 2015), with a minimum asset cover of 100%. Further the Company shall be entitled to dispose off, transact or otherwise deal, in the ordinary course of business upto 5% of the Specific Assets, including by way of a securitization transaction and as may be required under any law, regulations, guidelines or rules and Immovable Property acquired by Company on or after September 26, 2001.

Nature and purpose of each reserve

Securities Premium Reserve

"Securities Premium Reserveâ is used to denote the Share premium received on issue of shares. The reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.

Cash Flow Hedge Reserve

It represents the effective portion of cumulative gains/(losses) arising on revaluation of the derivative instruments designated as cash flow hedges through OCI.

Special Reserve - I:

Special Reserve - I has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961, out of the distributable profits of the Company. The amounts of Special Reserve account represents, the reserve created in terms of the provision of Section 36(1)(viii) read together with the proviso thereof, from time to time. Special Reserve No. I relates to the amounts transferred upto the Financial Year 1996-97 (Assessment Year 1997-98) when the word was ''created'' only was used in the said section and not ''created and maintained''. Admittedly, the position has changed after the amendment made in Section 36(1)(viii) by the Finance Act 1997 with effect from Assessment year 1998-99, when the mandatory requirement of ''maintaining'' the special reserve created was inserted. Accordingly, it was interpreted that the Special Reserve created upto Assessment Year 1997-98 need not be ''maintained''. As a logical corollary, it is construed that upto Assessment Year 1997-98, the amounts carried to special reserve ought to be understood as amounts created by transferring to the credit of special reserve from time to time.

Special Reserve - II:

Special Reserve - II has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961, out of the distributable profits of the Company transferred from Financial Year 1997-98 (Assessment Year 1998-99). In the F.Y. 2021-22''859.99 crore (F.Y. 2020-21''829.99 crore) has been transferred to Special Reserve No. II in terms of Section 36(1)(viii) of the Income tax Act, 1961.

Statutory Reserves under Section 29C (Regulatory Capital) of NHB:

Upto financial year 1996-97: The Company being regulated by NHB has to mandatorily transfer an amount as per Section 29C of NHB Act, 1987 on the similar lines as that of for Special Reserve - I which has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961 and it relates to the amounts transferred upto the Financial Year 1996-97 (Assessment Year 1997-98).

After financial year 1996-97: The Company being regulated by NHB has to mandatorily transfer an amount as per Section 29C of NHB Act, 1987 on the similar lines as that of for Special Reserve - II which has been created over the years in terms of Section 36(1) (viii) of the Income-tax Act, 1961. For the year under review an amount of '' 1,00,000.00 (F.Y. 2020-21 '' 1,00,000.00) has been transferred to Statutory Reserve under Section 29C the NHB Act.

General Reserve:

However, since the Company utilises the deduction available to Housing Finance Companies registered with National Housing Bank as provided in Section 36(1)(viii) of the Income tax Act, 1961, wherein the proviso of the Section stipulates that the amount carried to such reserve account from time to time exceeds twice the amount of the paid up share capital and general reserves of the Company, the rebate is restricted to the twice of the aggregate of paid up capital and the general reserve. Therefore, the Company transfers funds to General Reserve in order to avail the full benefit of Section 36(1)(viii). For the year, the Company has transferred an amount of '' 700 crore to General Reserve. (F.Y. 2020-21''700 crore).

38. FINANCIAL INSTRUMENTS

38.1 Capital Management

The Company maintains an actively managed capital base to cover risks inherent in the business and is meeting the capital adequacy requirements as per the directions issued by Reserve Bank of India (RBI). The adequacy of the Company''s capital is monitored using, among other measures, the guidelines issued by RBI.

The Company''s objective, when managing Capital, is to safeguard the ability of the Company to continue as a going concern, maintain strong credit ratings and healthy capital ratios in order to support its business and to maximise shareholder''s value.

The Company''s capital management strategy is to effectively determine, raise and deploy capital so as to maximize the shareholder''s value. The capital of the Company comprises of Equity Share Capital and subordinated liabilities. No changes have been made to the objectives, policies and processes from the previous years. However, they are under constant review by the Board.

The Management of the Company monitors the Regulatory capital by overviewing Debt Equity Ratio and makes use of the same for framing the business strategies. For this purpose, the Company does not consider Impairment Reserve to be part of Equity.

38.3 Fair Value Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e., an exit price), regardless of whether that price is directly observable or estimated using a valuation technique.

The Company evaluates the significance of financial instruments and material accuracy of the valuations incorporated in the financial statements as they involve a high degree of judgement and estimation uncertainty in determining the carrying values of financial assets and liabilities at the balance sheet date. Fair value of financial instruments is determined using valuation techniques and estimates which, to the extent possible, use market observable inputs, but in some cases use non-market observable inputs. Changes in the observability of significant valuation inputs can materially affect the fair values of financial instruments. In determining the valuation of financial instruments, the Company makes judgements on the amounts reserved to cater for model and valuation risks, which cover both Level 2 and Level 3 instruments, and the significant valuation judgements in respect of Level 3 instruments.

Fair Value Hierarchy

In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as explained below.

Assets and liabilities carried at fair value or for which fair values are disclosed have been classified into three levels according to the observability of the significant inputs used to determine the fair values. Changes in the observability of significant valuation inputs during the reporting period may result in a transfer of assets and liabilities within the fair value hierarchy. The Company recognises transfers between levels of the fair value hierarchy when there is a significant change in either its principal market or the level of observability of the inputs to the valuation techniques as at the end of the reporting period.

Level 1: Fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets or liabilities

Level 2: Fair value measurements are those with quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in inactive markets and financial instruments valued using models where all significant inputs are observable

Level 3: Fair value measurements are those where at least one input which could have a significant effect on the instrument''s valuation is not based on observable market data

The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:

valuation lecnniques

Equity instruments

Units held in funds having quoted market price are fair valued considering Level 1 inputs. Others which are measured based on their net asset value (NAV) as on reporting date, taking into account redemption and/or other restrictions. Such instruments are generally fair valued considering Level 3 inputs.

Equity instruments in non-listed entities including investment in private equity funds are initially recognised at transaction price and re-measured (to the extent information is available) and valued on a case-by-case basis and classified as Level 3. However, Provision for Diminution in value of Investment has been considered for computing the fair value.

Interest rate derivatives and Cross Currency Swaps

The fair value of a cross currency swap is calculated by determining the future cash flows on both legs (i.e. the receiving leg and the paying leg), and discounting these cash flows using an appropriate discount factor curve.

These contracts are generally Level 2 unless adjustments to yield curves or credit spreads are based on significant non-observable inputs, in which case, they are Level 3.

Valuation adjustments and other inputs and considerations

A one percentage point change in the unobservable inputs used in fair valuation of Level 3 financial assets does not have a significant impact in its value.

No valuation adjustments have been made to the prices/yields provided for valuation.

Financial Instruments not measured using Fair Value, i.e. measured using Amortized Cost/Cost

The following table is a comparison, by class, of the carrying amounts and fair values of the Company''s financial instruments that are not carried at fair value in the financial statements. This table does not include the fair value of non-financial assets and non-financial liabilities.

Valuation methodologies of financial instruments not measured at fair value

Below are the methodologies and assumptions used to determine fair values for the above financial instruments which are not recorded and measured at fair value in the Company''s financial statements. These fair values were calculated for disclosure purposes only.

Government debt securities

market inputs of similar instruments and bond prices to estimate future index levels and extrapolating yields outside the range of active market trading, in which instances the Company classifies those securities as Level 2. The Company does not have Level 3 government securities where valuation inputs would be unobservable.

Investment in subsidiaries and associates

In the opinion of the Company, in case of subsidiaries and associates, the carrying value approximates the fair value.

* The Company has fully impaired its investment in one of its wholly owned subsidiary, LICHFL Care Homes Limited, as per IND AS 36-Impairment of Asset on prudent basis amounting to '' 50 crore, since the carrying amount of the investment exceeded its value in use. The value in use was determined based on the future cash flows of the subsidiary. The financial statements of the subsidiary is prepared on the going concern basis.

Other Financial Assets and Liabilities

With respect to Bank Balances and Cash and Cash Equivalents, Other Financial Assets, Trade Payables and Other Financial Liabilities, the carrying value approximates the fair value.

38.4. Financial Risk Management

Introduction

The Company has operations in India and representative offices in Dubai. Whilst risk is inherent in the Company''s activities, it is managed through an integrated risk management framework, including ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the Company''s continuing profitability and each individual within the Company is accountable for the risk exposures relating to his or her responsibilities. The Company is exposed to credit risk, liquidity risk and market risk. It is also subject to various operating, regulatory and competition risks.

Impact of Covid-19

The outbreak of coronavirus or the Covid-19 pandemic resulted in multiple repercussions for most businesses. As Indian economy dipped, many companies resorted to various cost cutting measures like mass layoffs and sharp pay cuts. Amidst threat of job insecurity, individuals looking for real estate investment had deferred their plans. However, massive vaccine rollout helped in slowly restoring normalcy in a Corona-virus hit housing segment. Low interest rates, concessions such as slashed stamp duty offered by states etc., price benefits associated with lower housing prices helped the sector to recover. Incomes have risen faster than real estate prices, leading to increased housing affordability. The demand and supply both have shown positive signs as the states opened up and the industry continues to show an upward trend attributed to the continuing robust demand.

Risk Management Framework

The Company has a formal risk assessment program to proactively identify the risks and ensure all possible strategies to control & mitigate in pursuit of achieving the Company''s objective. Every department is responsible for identification of their risks and putting it in their Risk Registers. The consolidated Risk Register is analyzed at various Committees.

At present, the risks faced by the Company are broadly categorized as below:-Liquidity Risk Credit Risk Market Risk Interest Rate Risk Operational Risk

A. Compliance Risk

B. Legal Risk Regulatory Risk Competition Risk Currency Risk

Committees

In order to bring the collective knowledge in decision making, the Company has undertaken a Committee approach to deal with the major risks arising in the organization. Committees, their formation and the roles are provided below.

Top Level Committee

Risk Management Committee of Board (RMCB)

Company has a Risk Management Committee of Board in place which consists of Independent Directors and the MD & CEO of the Company.

The role of the Committee is as follows-:

Review of Risk Management Policy

Review of the current status on the risk limits in the Risk Management Policy and Report to the Board

Review the matters on Risk Management

Review and monitor the risks to which the Company is exposed

Internal Committee

Risk Management Committee and Operational Risk Group (RMC & ORG)

Company has an internal Risk Management Committee and Operational Risk Group whose major function include review of Risk Registers submitted on a monthly basis by all departments. It comprises of HODs of Risk Management, Finance, Project Finance, Credit Monitoring, IT, and any other member as nominated by MD & CEO of the Company. A list of functions performed by RMC & ORG is given below -:

Review of Risk Management Policy

Review of monthly Risk Register submitted by various depts.

Review of the current status on the outer limits prescribed in the Risk Policy and submitting the report to RMCB & Board Assessment of risks in the Company and suggesting control/mitigation measures thereof

The Company has exposure to following risks arising from the financial instruments:

38.4.1 Liquidity Risk

Liquidity risk is defined as the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Liquidity risk arises because of the possibility that the Company might be unable to meet its payment obligations when they fall due as a result of mismatches in the timing of the cash flows under both normal and stress circumstances. Such scenarios could occur when funding needed for illiquid asset positions is not available to the Company on acceptable terms. To limit this risk, management has arranged for diversified funding sources in addition to its core deposit base and adopted a policy of managing assets with liquidity in mind and monitoring future cash flows and liquidity on a daily basis. The Company has developed internal control processes and contingency plans for managing liquidity risk. In addition, the Company is also maintaining Liquidity Coverage Ratio (LCR) from 01^st December, 2021 as prescribed by the regulator.( as per notification no. RBI/2020-21/60 DOR.NBFC (HFC). CC.No.118/03.10.136/2020-21 dated 22^nd October, 2020) Housing Finance being the core business, maintaining the liquidity for meeting the growth perspective in the business as also to honor the committed repayments is the fundamental objective of the Asset Liability Management (ALM) framework. Investments, including investments as a part of liquid asset requirement, also forms part of ALM requirement and it is imperative to constantly monitor the liquidity of the investments to achieve the core objective.

Internal Control Process & Liquidity Management

Being in the business of Housing Loans, funds are required to be raised by the Company ahead of loan disbursements so that there is no liquidity crunch. Funds are required to be raised not only for the incremental housing loan assets but also for meeting the committed/due repayments of the earlier borrowings and/or Interest payments on the borrowings. Funds therefore are raised with a reasonable cushion over and above the committed repayments, committed disbursements and unutilized sanctions in pipeline and the expected business targets.

The Company ensures that funds are available from various investor pools and banks. Liquid funds are available in the form of Non-Convertible Debentures and other Market Instruments, Bank Loans, Refinance from NHB and Foreign Currency Loans. In case of Public Deposits accepted by the Company, a prescribed percentage (as defined by NHB from time to time) is to be invested in approved securities in terms of Liquid Asset Requirement (as per notification no. RBI/2020-21/73 DOR.FIN.HFC. CC.No.120/03.10.136/2020-21). On the assets side, the Company has loan products broadly classified under individual retail loans and project finance loans with varying repayment structures depending upon the nature of product.

The liquidity is managed at the Corporate Office of the Company with Back Offices providing their liquidity requirements. The surplus funds available with the Back Offices are pooled and funds from the market are arranged for the Back Offices having a deficit of funds. Only surplus funds arrived at after deducting the committed/confirmed outflows (including projected disbursements of loans) from the available resources - both from internal accretions as well as borrowed funds, would be considered as Surplus available for Investment in approved instruments on day-to-day basis. The Company can place surplus funds in Fixed Deposits with selected Scheduled / Commercial / Foreign Banks and / or Financial Institutions within overall exposure limit fixed for each Bank / FI from time to time by the Board. Considering the market risk and the mark-to-market requirements of the debt mutual funds, currently Company is making Investments only in liquid Mutual Fund schemes. Exposure limits for each Investment instrument is approved by the Board and reviewed from time to time as per the requirements.

ALCO Committee Roles & Responsibilities

The Asset Liability Management (ALM) Committee presents the Structural and Dynamic Liquidity Report to the Risk Management Committee on a quarterly basis and meetings are held every month. The ALM Committee formulates the ALM Policy which is reviewed at least once a year. If any change is required, then, the revised policy along with desired change and rationale for the same shall be put up to the Risk Management Committee or any Other Committee constituted by the Board. Consequent to the recommendation of the Risk Management Committee, the reviewed policy would be put up to the Board for its approval.

Composition

ALCO Committee is headed by the MD & CEO of the Company. Other members of the Committee comprise HODs of Departments Finance, Credit Appraisal, Project Finance, Taxation, Accounts, Marketing, IT, Risk Management, Credit Monitoring and as nominated by MD & CEO of the Company.

Changes from previous period

There are no significant changes in the Financial Policies.

Liquidity Ratios during the year

1) The structural liquidity (as defined by NHB/RBI) negative gap up to one year has not exceeded 15% of the cumulative cash outflows up to one year.

2) The structural liquidity (as defined by NHB) negative gap up to 14 days as also over 14 days and up to one month has not exceeded 15% of the cash outflows during those respective durations.

3) The structural liquidity (as defined by RBI) negative gap up to 7 days as also over 7 days and up to 14 days has not exceeded 10% of the cash outflows during those respective durations.

4) The structural liquidity (as defined by RBI) negative gap over 14 days and up to 1 month has not exceeded 20% of the cash outflows during those respective durations.

38.4.2 Credit Risk

Credit Risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has defined Loan selection principles for establishing creditworthiness of the counterparties and criteria for determining the quantum of loan. The Company has adopted a policy of dealing with creditworthy counter parties and obtaining sufficient collateral as a means of mitigating the risk of financial loss from defaults. The exposure is continuously monitored.

On May 5, 2021 the Reserve bank of India (RBI) announced the Resolution Framework 2.0 for Covid related stressed assets of individuals, small businesses and micro, small and medium enterprises (MSMEs) with aggregate exposure of up to '' 25 crore which was later revised to '' 50 crore. vide notification dated June 4, 2021. This facility is available provided the aforementioned entities had not availed benefits under any of the earlier restructuring frameworks (including Resolution Framework 1.0 dated August 6, 2020), and were classified as standard accounts as on March 31, 2022.

In addition to the above, for the Loans where resolution plan has been implemented in terms of the Resolution Framework 1.0, and where such resolution plan either did not envisage any moratorium/extension of tenor or moratorium/extension of residual tenor permitted was less than two years, then such cases are eligible for Resolution Framework 2.0 to modify earlier resolution plan only to the extent of increasing the period of moratorium / extension of residual tenor by two years.

The carrying amount of loans as at March 31, 2022 is '' 2,51,135.45 crore (F.Y. 2020- 21''2,32,013.80 crore) which best represent the maximum exposure to credit risk, the related Expected credit loss amount to '' 5,839.12 crore (F.Y. 2020-21''3,899.53 crore).

The Company has right to sell the collateral in case borrower defaults. The carrying amount of loans as at March 31, 2022 includes '' 15.70 crore towards Loans to Staff, Loans against Public Deposit and Finance Lease Receivables. (F.Y. 2020-21 '' 11.11 crore).

38.4.2.1 Credit Risk Mitigation measures

I ndependent internal legal and technical evaluation team in the Company makes credit decisions more robust and in line to manage collateral risk. The in-house Credit team conducts a credit check and verification procedure on each customer, ensuring consistent quality standards to minimize future losses. To review the adherence to laid down policies and quality of appraisal, Company''s independent internal audit team conducts a regular review of files on a sample basis. A dedicated collection and recovery team manages lifecycle of transactions and monitors the portfolio quality.

Credit Norms: - Certain credit norms and policies are being followed by the Company to manage credit risk, including a standard credit appraisal policy based on customer credit worthiness. These criteria change between loan products and typically include factors such as profile of applicant, income and certain stability factors such as the employment and dependency detail, other financial obligations of the applicant, Loan to value and the loan-to-cost ratio. Standardized credit approval process including a comprehensive credit risk assessment is in place which encompasses analysis of relevant quantitative and qualitative information to ascertain the credit worthiness of the borrower.

The Credit Policy defines parameters such as Borrower''s ability to pay, Reputation of Employer, Nature of employment/ Self-employed, Qualification of Applicants, Stability of Residence, Family size and dependence on Applicants income, Insufficient sales proceeds to pay the dues in case of Project Loans due to project slowdown etc. to ensure consistency of credit quality.

Retail lending:

For retail lending, credit risk management is achieved by considering various factors like:

Assessment of borrowerâs capability to pay - a detailed assessment of borrower''s capability to pay is conducted. The approach of assessment is laid down in the credit policy of the Company. Various factors considered for assessment are credit information report, analysis of bank account statement and valuation of property.

Security cover - Analysing the value of the property which is offered as security for the loan is essential for the overall underwriting of the loan. It is essential that it is valued before the disbursement of loan to arrive at a clear idea about its cost, valuation, marketability and loan to property ratio.

Additional Security - Additional Security can be by way of pledge of acceptable Additional Collaterals such as LIC Policies, FDs or other immovable properties, etc. is considered. This is taken depending on nature of loan proposal and amount of risk involved.

Geographical region - The Company monitors loan performance in a particular region to assess if there is any stress due to natural calamities etc. impacting the performance of the loan in a particular geographic region.

Project lending:

For project lending, credit risk management is achieved by considering various factors like:

Promoterâs strength - a detailed assessment of borrower''s capability to pay is conducted. Various factors considered for promoter''s assessment are the financial capability, past track record of repayment, management and performance perspective.

Credit information report - It is very essential to check the Creditworthiness of an Applicant & the Credit History of Borrower for Consumer or Commercial Loans. The Company uses this Report for taking a Decision on Credit Sanction by getting details of the Credit History of a Borrower. For Project Loans, reports from independent institutions are referred so as to get the marketability report of the project and its neighbourhood analysis.

Security cover - Analysing the value of the property which is offered as security for the loan is essential for the overall underwriting of the loan. With respect to project loans, the main security taken is underlying land and structure there on. Technical appraisals are conducted to establish the life, soundness, marketability and value of the security.

Additional Security - Additional Security is taken depending on nature of loan proposal and amount of risk involved. In some cases, the hypothecation of receivables from the loan is taken. The Negative lien is marked on the flats in the project to the extent decided by the Competent Authority as per merits of the case. The Company endeavours to maintain the security cover approved by the Competent Authority as per the merit of the case. Personal Guarantee of promoter directors / corporate guarantee of Company is also obtained as Security on case to case basis. In some cases, the Additional Collateral in the form of Fixed Deposits are also accepted. In case of Higher Risk, Debt Service Recovery Account is also maintained. The Charge on the security / Additional Collateral security is also registered in Central Registry / ROC.

The Company manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and for geographical and industry concentrations, and by monitoring exposures in relation to such limits.

Derivative financial instruments:

Interest rate swaps

The exposure of the Company to Derivatives contracts is in the nature of Interest Rate Swap and Currency Swaps to manage risk associated with interest rate movement and fluctuation in currency exchange rate.

Derivative policy of the Company specifies the exposure norms with respect to single counterparty and the total underlying amount at the time of entering into the new derivative contract.

The gain, if any realized on early termination of swap is amortized over the balance tenor of the swap or underlying liability whichever is less. Loss if any on early termination is charged to revenue in the same year. The carry difference, between coupon rate liability and the swap contract rate is accounted quarterly on accrual basis.

38.4.2.2 Collateral and other credit enhancements

With respect to loan cases the main security taken is underlying property mortgaged by the borrower. Apart from the main security additional collaterals are also sought depending upon merits of the case. In some cases the hypothecation of receivables for the loan is also taken.

The Company after exploring all the possible measures, initiates action under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) against the mortgaged properties as a last resort to recover. Company follows the due procedure as laid down in the SARFAESI Act 2002 and accordingly takes the possession of the properties for its logical conclusion.

As the procedure involved under SARFAESI is to be followed in a time-bound manner, different loan accounts will be at various stages of SARFAESI proceedings.

The properties taken under possession through SARFAESI Act by the Company and held such properties for disposal as on 31.03.2022 included in loan portfolio amounting to '' 464.92 crore (FY 2020-21''325.06 crore). Out of these, loan portfolio amounting to '' 107.38 crore (FY 2020-21 '' 126.19 crore) is considered under INDAS 105 (Non-current asset held for sale) being lower of the fair value of the asset possessed and the outstanding as at March 31, 2022.

38.4.2.3 Impairment Assessment

The Company applies general approach to provide for credit losses prescribed by Ind AS 109, which provides to recognise 12-months expected credit losses where credit risk has not increased significantly since initial recognition and to recognise lifetime expected credit losses for financial instruments for which there has been significant increase in credit risk since initial recognition considering all reasonable present and forward looking information.

Definition of Default

The Company considers a financial instrument as defaulted when the borrower becomes 90 days past due on its contractual payments. Such instruments are considered as Stage 3 (credit-impaired) for ECL calculations.

The three stages reflect the general pattern of credit deterioration of a financial instrument. The differences in accounting between stages relate to the recognition of expected credit losses and the calculation and presentation of interest revenue.

Stage wise Categorisation of Loan Assets

The company categorises loan assets into stages based on the Days Past Due status:

Stage 1: [0-30 days Past Due] It represents exposures where there has not been a significant increase in credit risk since initial recognition and that were not credit impaired upon origination. The Company uses the same criteria mentioned in the standard and assume that when the days past due exceeds ''30 days'', the risk of default has increased significantly. Therefore, for those loans for which the days past due is less than 30 days, the Company recognises as a collective provision the portion of the lifetime ECL associated with the probability of default events occurring within the next 12 months.

Stage 2: [31-90 days Past Due] The Company collectively assesses ECL on exposures where there has been a significant increase in credit risk since initial recognition but are not credit impaired. For these exposures, the Company recognises as a collective provision, a lifetime ECL (i.e. reflecting the remaining lifetime of the financial asset)

Stage 3: [More than 90 days Past Due] The Company identifies, both collectively and individually, ECL on those exposures that are assessed as credit impaired based on whether one or more events that have a detrimental impact on the estimated future cash flows of that asset have occurred. The Company use the same criteria mentioned in the standard and assume that when the days past due exceeds ''90 days'', the default has occurred.

Retail Loans:

In case of retail loans, the financial instruments are backed by sufficient margin of underlying security which absorbs the associated risks. Hence, the Company has performed the assessment of significant increases in credit risk on a collective basis for retail loans by considering information that is indicative of significant increases in credit risk on groups of financial instruments.

For the purpose of determining significant increases in credit risk and recognising loss allowance on a collective basis, the Company has grouped financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increase in credit risk identified on a timely basis.

Project Loans:

Project loans are far less in number and more in terms of value per loan. The loans are also credit rated internally. However, the Company does not have any history of the loan transitioning from one rating to the other over a fairly long period of time to arrive at a reliable transition matrix.

The Company has used transition matrix compiled and published by a premier rating agency in India for arriving default rate.

38.4.2.4 ECL Model and Assumptions considered in the ECL model

Another valuable feature is that the Markov chain model maintains the progression and timing of events in the path from "Regularâ to "Defaultedâ. For example, an account in the "Regularâ state doesn''t suddenly become "Defaultedâ. Instead, an account must progress monthly from the "Regularâ state to the "90 days past dueâ state to the "180 days past dueâ state and so on until foreclosure activities are completed and the collateral assets are sold to pay the outstanding debt.

The transition matrix in the Markov chain represents the period-by-period movement of receivables between delinquency classifications or states. The transition evaluates loan quality and loan collection practice. The matrix elements are commonly referred to as "roll-ratesâ since they denote the probability that an account will move from one state to another in one period. The transition matrix is referred to as the "delinquency movement matrixâ.

The bucket intervals are 90 days and the data points considered are also quarterly. The occurrences of every loan over the past several quarters are considered to arrive at the total transitions happening from different buckets in the previous quarter to different buckets in the current quarter. The Company has considered the quarterly loan performance data starting from the quarter ending 30^th June 2013 onwards to compute the transition matrix. The total number of such transition occurrences are converted as a percentage to arrive at the transition matrix. The Company has used transition matrix compiled and published by a premier rating agency in India for arriving default rate for Project loans since the Company do not have any history of the loan transitioning from one rating to the other over a fairly long period of time to arrive at a reliable transition matrix. Accordingly, the transition matrix is computed using matrix multiplication.

Probability of Default

Stage 1 - [No significant increase in credit risk]: Based on Markov model, the quarterly normalized transition matrix is converted into a 12-month transition matrix for determining the probability of default for those loan accounts on which the risk has not increased significantly from the time the loan is originated. The Company use the same criteria mentioned in the standard and assume that when the days past due exceeds ''30 days'', the risk of default has increased significantly. Therefore, for those loans for which the days past due is less than 30 days, one-year default probability is considered.

Stage 2 - [Significant increase in credit risk]: The credit risk is presumed to have increased significantly for loans that are more than 30 days past due and less than 90 days past due. For such loans, lifetime default probability should be considered. Based on the maturity date of the loan, the probability of default is arrived at to determine the quantum of the loan that is likely to move into the buckets ''90 days past due'' and greater. The quarterly transition matrix is used to find out the transition matrix applicable for the loan considering the maturity date of such loan.

Stage 3 - [Defaulted loans]: As per the standard there is a rebuttable presumption that default does not occur later than when a financial asset is 90 days past due unless an entity has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate. The Company assumed that the default has occurred when a loan moves into ''90 days past due'' bucket.

Exposure at default

The exposure at default (EAD) represents the gross carrying amount of the financial instruments subject to the impairment calculation, addressing both the client''s ability to increase its exposure while approaching default and potential early repayments too.

The probability of default (PD) of a loan which is less than 30 days past due [Stage 1] is represented by the one-year transition matrix. This PD is used to measure the quantum of the loan that is likely to move into the buckets 90 days past due and above over the next 12 months. The PD of a loan which is 30 days past due and less than 90 days past due [Stage 2] is represented by the transition matrix of the corresponding maturity period of the loan. This PD is used to measure the quantum of the loan that is likely to move into the buckets 90 days past due and above over the remaining life of the loan. The probability of default (PD) of a loan which is 90 days past due [Stage 3] is 100% as the loan has already defaulted. This PD is used to measure the quantum of the loan that is defaulted as on the valuation date over the remaining life of the loan.

Loss given default

Value of collateral property: The loans are secured by adequate property. The present value of such collateral property is considered while calculating the Expected Credit Loss. The Company initiates recovery process of Non Performing accounts within the statutory time limit as per SARFAESI and other applicable laws and accordingly the realizable period has been considered for computing the Present Value of Collateral.

Forward looking information

The assumptions and estimates on the basis of which, the Expected Credit Losses (ECL) of the loan portfolio have been identified, are primarily based on the historical performance of the loan portfolio, updated to reflect current conditions of pandemic including regulatory interventions. Owing to the prevailing situation, additional sensitivity scenarios considered with suitable weights. Going forward as well, the company will continue to closely monitor any further changes to the business processes, the financial impact due to Covid-19 and other business related events. The definitive assessment of the impact would be dependent upon circumstances as they evolve in the subsequent period.

The Company is into secured lending business where primary collateral security is mostly residential/commercial properties. As stipulated by Regulator, lending is done against part value of security with remaining portion acting as a buffer to absorb fall in property prices. At this point of time, the uncertainties of COVID 19 are still lingering around and it has detrimental impact on economy, property prices in general are expected to fall, but the fall will likely be asymmetric across locations and will depend upon many micro factors including type of property, location, stage/type/age of construction, local micro market, etc.

Scenario 1 is the base scenario without any perturbance. This is assigned a weightage of 20%.

Scenario 2 is based on the forecasted macro-economic parameters and is assigned a weightage of 15%.

Scenario 3 is considered taking perturbed scenario and is assigned a weightage of 15%

COVID - 1 & 2 scenarios are both linked with changes in property prices factoring geography and portfolio category.

COVID - 3 is based on ratio of Principal Outstanding amount to Present value of collateral.

COVID - 4 is based on availing moratorium.

Other Outcome

RBI Notification dated 12^th Nov 2021.

The Reserve Bank of India vide its notification dated 12^th November, 2021 regarding Prudential Norms on Income Recognition, Asset Classification and Provisioning (IRACP) pertaining to advances have provided clarifications which are likely to have a significant impact on the provisioning for all financial institutions including Banks and NBFC''s. These directives would not affect the expected credit loss allowance computation as per Ind AS 109. In order to mitigate the systemic risk, we have treated this as one possible outcome in ECL computation.

OTR Framework

RBI issued a broad framework for one-time restructuring to avoid a systemic risk ("OTR Frameworkâ). This OTR Framework offers a special window for lenders under the existing RBI (Prudential Framework for Resolution of Stressed Assets) Directions, 2019 dated June 07, 2019 ("Resolution Frameworkâ), to implement a resolution plan for personal loans and commercial/ business exposures, without requiring a change in ownership while continuing to classify such exposures as standard assets. This includes all nonbanking financial companies ("NBFCsâ) and housing finance companies within the definition of ''lender''. ECL is computed considering this as another possible outcome.

ECL is computed by assigning different weights to the outcomes i.e. 35% weightage is given for regular model (considering 7 scenarios), 25% weightage is given for RBI notification dtd.12/11/2021 and 40% weightage for OTR Framework.

Write off policy

The Company has over the period has established a well-defined Credit Monitoring Mechanism for follow up of the default / delinquent accounts.

A multi-faceted approach is adopted in Credit Monitoring activities which involves participation of In-House employees as well as outsourced agencies. Each loan account is analysed based on the causative factors of becoming default and appropriate follow-up activity is undertaken. In spite of adopting an appropriate follow-up activity, some accounts continue to be delinquent. Sufficient time, as per law, is given to the borrowers to regularize their repayments and if still the accounts continue to be under the Non-Performing bracket, legal recourse is adopted.

However, there could be accounts wherein no recovery would be forthcoming despite the best efforts put in by the Company. Such accounts are critically examined on case to case basis and if there is no merit of recovery, such accounts are recommended for write-off to/through internal committees as per the policy approved by the Board. Write-off is a de-recognition of a loan the Company has no reasonable expectations of recovering the contractual inflows.

The movement within the tables is a combination of quarterly movements over the year. The credit impairment charge in the Statement of Profit & Loss comprises of the amount in Total column.

Transfers - transfers between stages are deemed to occur at the beginning of a quarter based on prior quarters closing balances

Net re-measurement from stage changes - the re-measurement of credit impairment provisions arising from a change in stage is reported within the stage that the assets are transferred to.

Net changes in exposures - comprises new disbursements less repayments in the year.

38.4.2.5 Modified Loans

Where the contractual terms of a financial instrument have been modified, and this does not result in the instrument being derecognised, a modification gain or loss is recognised in the Statement of Profit and Loss representing the difference between the original cash flows and the modified cash flows, discounted at the effective interest rate. If the modification is credit-related or where the Company has granted concessions that it would not ordinarily consider, then it will be considered credit-impaired. Modifications that are not credit related will be subject to an assessment of whether the asset''s credit risk has increased significantly since origination by comparing the remaining lifetime probability of default (PD) based on the modified terms to that on the original contractual terms.

38.4.3 Market Risk

Market risk is the risk of losses in positions taken by the company which arises from movements in market prices. Any item in the balance sheet which needs re-pricing at frequent intervals and whose pricing is decided by the market forces will be a component of market risk. There are number of items in the Company''s balance sheet which exposes it to market risk like Housing loans at floating rate, loans to developers at floating rate, Non-Convertible Debentures (NCDs) with options, bank loans with option, Foreign Currency Bank Loans, Coupon Swaps, etc. The Company is generally exposed to Interest Rate Risk.

38.4.4 Interest Rate Risk

Interest Rate Risk refers to the risk associated with the adverse movement in the interest rates. Adverse movement would imply rising interest rates on liabilities and falling interest yields on the assets. This is the biggest risk which the company faces. It arises because of maturity and re-pricing mismatches of assets and liabilities.

In order to mitigate the impact of this risk, the Company should track the composition and pricing of assets and liabilities on a continuous basis. For the same purpose, the Company has constituted the ALCO Committee which should actively monitor the ALM position and guide appropriately.

The impact of 10 bps change in interest rates on liabilities on the Profit after tax for the year ended March 31, 2022 is '' 91.60 crore (F.Y. 2020-21''69.41 crore).

38.4.5 Operational Risk

Operational risk is "the risk of a change in value caused by the fact that actual losses, incurred for inadequate or failed internal processes, people and systems, or from external events (including legal risk), differ from the expected lossesâ. It can be subdivided into the following categories:

A. Compliance risk is defined as the risk of legal sanctions, material financial loss, or loss to reputation the Company may suffer as a result of its failure to comply with laws, its own regulations, code of conduct, and standards of best/good practice.

The Company is regulated by RBI and supervised by NHB, registered with SEBI and has listing agreements with stock exchanges, i.e. BSE & NSE and Luxembourg. In order to ensure compliance with applicable laws, the Company has put in place adequate processes.

B. Legal risk

Mar 31, 2021

Secured by a negative lien on the assets of the Company (excluding current and future receivables and book-debt of whatsoever nature of the Company on which a first pari-pasu floating charge by way of hypothecation to secure the borrowings of the company outstanding as on March 31, 2015 and the unavailed sanctions of the term loans, cash credit and refinance as on March 31, 2015), with a minimum asset cover of 100%. Further the Company shall be entitled to dispose off, transact or otherwise deal, in the ordinary course of business upto 5% of the Specific Assets, including by way of a securitization transaction and as may be required under any law, regulations, guidelines or rules. In addition to above the Debentures would be secured by mortgage on an Immovable Property owned by the Company valuing approx '' 0.72 crore (Book Value '' 0.13 crore).

These Bonds are subordinated to present and future senior indebtedness of the Company and qualify as Tier II capital under National Housing Bank (NHB) guidelines for assessing capital adequacy. Based on the balance term to maturity as at March 31, 2021, 100% (F.Y. 2019-20 - 0 %) of the book value of the subordinated debt is considered as Tier II capital for the purpose of capital adequacy computation.

The Company has only one class of equity shares having a par value of '' 2/- per share. Each shareholder is eligible for one vote per share. The Company declares and pays dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company, after distribution of all preferential amount, in proportion to their shareholdings.

Securities Premium Reserve

Securities Premium Reserveâ is used to denote the Share premium received on issue of shares. The reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.

Cash Flow Hedge Reserve

It represents the effective portion of cumulative gains/(losses) arising on revaluation of the derivative instruments designated as cash flow hedges through OCI.

Special Reserve - I:

Special Reserve - II:

Special Reserve - II has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961, out of the distributable profits of the Company transferred from Financial Year 1997-98 (Assessment Year 1998-99). In the F.Y. 2020-21''829.99 crore (F.Y. 2019-20''749.99 crore) has been transferred to Special Reserve No. II in terms of Section 36(1)(viii) of the Income tax Act, 1961.

Statutory Reserves under Section 29C (Regulatory Capital) of NHB:

Upto financial year 1996-97: The Company being regulated by NHB had to mandatorily transfer an amount as per Section 29C of NHB Act, 1987 on the similar lines as that of for Special Reserve - I which has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961 and it relates to the amounts transferred upto the Financial Year 1996-97 (Assessment Year 1997-98).

After financial year 1996-97: The Company being regulated by NHB has to mandatorily transfer an amount as per Section 29C of NHB Act, 1987 on the similar lines as that of for Special Reserve - II which has been created over the years in terms of Section 36(1) (viii) of the Income-tax Act, 1961. For the year under review an amount of '' 1,00,000.00 (F.Y. 2019-20''1,00,000.00) has been transferred to Statutory Reserve under Section 29C the NHB Act.

General Reserve:

Under the erstwhile Companies Act 1956, general reserve was created through an annual transfer of net income at a specified percentage in accordance with applicable regulations. The purpose of these transfers was to ensure that if a dividend distribution in a given year is more than 10% of the paid-up capital of the Company for that year, then the total dividend distribution is less than the total distributable results for that year. Consequent to introduction of Companies Act 2013, the requirement to mandatorily transfer a specified percentage of the net profit to general reserve has been withdrawn. However, the amount previously transferred to the general reserve can be utilised only in accordance with the specific requirements of Companies Act, 2013. However, since the Company utilises the deduction available to Housing Finance Companies registered with National Housing Bank as provided in Section 36(1)(viii) of the Income tax Act, 1961, wherein the proviso of the Section stipulates that the amount carried to such reserve account from time to time exceeds twice the amount of the paid up share capital and general reserves of the Company, the rebate is restricted to the twice of the aggregate of paid up capital and the general reserve. Therefore, the Company transfers funds to General Reserve in order to avail the full benefit of Section 36(1)(viii). For the year, the Company has transferred an amount of '' 700 crore to General Reserve. (F.Y. 2019-20''600 crore).

38. FINANCIAL INSTRUMENTS

38.1 Capital Management

38.1.1 regulatory Capital

For regulatory and supervisory purposes including various types of reporting as per the directions issued by Reserve Bank of India (RBI) have been considered. Accordingly, regulatory capital consists of Tier 1 capital, which comprises share capital, share premium, retained earnings including current year profit. The other component of regulatory capital is Tier 2 Capital Instruments, which includes upper tier 2 and subordinated bonds. Impairment Reserve of ''204.78 crores has not been considered as part of Equity.

38.3 Fair Value Measurement

Fair Value Hierarchy

In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as explained below.

Level 1: Fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets or liabilities

Level 3: Fair value measurements are those where at least one input which could have a significant effect on the instrument''s valuation is not based on observable market data

Equity instruments

Interest rate derivatives and Cross Currency Swaps

These contracts are generally Level 2 unless adjustments to yield curves or credit spreads are based on significant non-observable inputs, in which case, they are Level 3.

Valuation adjustments and other inputs and considerations

A one percentage point change in the unobservable inputs used in fair valuation of Level 3 financial assets does not have a significant impact in its value.

No valuation adjustments have been made to the prices/yields provided for valuation.

Valuation methodologies of financial instruments not measured at fair value

Government debt securities

Government debt securities are financial instruments issued by sovereign governments and include long term bonds with fixed rate interest payments. These instruments are generally highly liquid and traded in active markets resulting in a Level 1 classification. When active market prices are not available, the Company uses discounted cash flow models with observable market inputs of similar instruments and bond prices to estimate future index levels and extrapolating yields outside the range of active market trading, in which instances the Company classifies those securities as Level 2. The Company does not have Level 3 government securities where valuation inputs would be unobservable.

Investment in subsidiaries and associates

In the opinion of the Company, in case of subsidiaries and associates, the carrying value approximates the fair value.

Other Financial Assets and Liabilities

With respect to Bank Balances and Cash and Cash Equivalents, Other Financial Assets, Trade Payables and Other Financial Liabilities, the carrying value approximates the fair value.

38.4 Financial Risk Management

Introduction

The Company has operations in India and representative offices in Kuwait & Dubai. Whilst risk is inherent in the Company''s activities, it is managed through an integrated risk management framework, including ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the Company''s continuing profitability and each individual within the Company is accountable for the risk exposures relating to his or her responsibilities. The Company is exposed to credit risk, liquidity risk and market risk. It is also subject to various operating, regulatory and competition risks.

Impact of Covid-19 (Global pandemic)

The outbreak of coronavirus or the Covid-19 pandemic has resulted in multiple repercussions for most of the businesses. Economic activities in India came to a grinding halt since the lockdown was announced. Multiple adverse effects on the real estate sector were observed resulting in sharp dip in sales and halting of project launches. As Indian economy dipped, many companies resorted to various cost cutting measures like mass layoffs and sharp pay cuts. Amidst threat of job insecurity, individuals looking for real estate investment had deferred their plans. Another effect on real estate sector, was when the housing projects got stalled because of transportation logjams and mass exodus of daily wage workers. To maintain cash flow and liquidity, realtors abstained from investing in new projects and concentrated on completion of their ongoing project and sale of their existing inventory.

risk Management Framework

Committees

Top Level Committee

Risk Management Committee of Board (RMCB)

Company has a Risk Management Committee of Board in place which consists of Independent Directors and the MD & CEO of the Company.

The role of the Committee is as follows-:

Review of Risk Management Policy

Review of the current status on the risk limits in the Risk Management Policy and Report to the Board

Review the matters on Risk Management

Review and monitor the risks to which the Company is exposed

Review the Anti-Fraud Policy

Internal Committee

risk Management Committee and operational risk Group (RMC & oRG)

Company has an internal Risk Management Committee and Operational Risk Group whose major function include review of Risk Registers submitted on a monthly basis by all departments. It comprises of HODs of Risk Management, Finance, Project Finance, Credit Monitoring, IT, and as nominated by MD & CEO of the Company. A list off functions performed by RMC & ORG is given below -:

Review of Risk Management Policy

Review of monthly Risk Register submitted by various depts.

The Company has exposure to following risks arising from the financial instruments:

38.4.1 Liquidity risk

Housing Finance being the core business, maintaining the liquidity for meeting the growth perspective in the business as also to honor the committed repayments is the fundamental objective of the Asset Liability Management (ALM) framework. Investments, including investments as a part of liquid asset requirement, also forms part of ALM requirement and it is imperative to constantly monitor the liquidity of the investments to achieve the core objective.

Internal Control Process & Liquidity Management

The Company ensures that funds are available from various investor pools and banks. Liquid funds are available in the form of Non-Convertible Debentures and other Market Instruments, Bank Loans, Refinance from NHB and Foreign Currency Loans. In case of Public Deposits accepted by the Company, a prescribed percentage (as defined by NHB from time to time) is to be invested in approved securities in terms of Liquid Asset Requirement (as per notification no. RBI/2020-21/73 DOR.FIN.HFC.CC.No.120/03.10.136/2020-21). On the assets side, the Company has loan products broadly classified under individual retail loans and project finance loans with varying repayment structures depending upon the nature of product.

ALCo Committee Roles & Responsibilities

Composition

Changes from previous period

There are no significant changes in the Financial Policies.

Liquidity Ratios during the year

1) The structural liquidity (as defined by NHB) negative gap upto one year has not exceeded 15% of the cumulative cash outflows up to one year.

2) The structural liquidity (as defined by NHB) negative gap upto 14 days as also over 14 days and upto one month has not exceeded 15% of the cash outflows during those respective durations.

Credit Risk

On 6 August 2020 the Reserve Bank of India (RBI) announced a resolution framework for COVID-19-related stress (the framework) to address borrower default pursuant to the stress caused by the pandemic without necessitating a change of ownership and without an asset classification downgrade modifying the existing framework (prudential framework).

The COVID-19 stress framework covers resolutions regarding personal and corporate loan accounts.

Only those borrower accounts which were classified as standard, but not in default for more than 30 days with the lending institution as of 1 March 2020 and those accounts with stress due to COVID-19, were eligible for resolution under the framework.

The carrying amount of loans as at March 31, 2021 is '' 2,32,013.80 crore (F.Y. 2019- 20 '' 2,10,600.42 crore) which best represent the maximum exposure to credit risk, the related Expected credit loss amount to '' 3,899.53 crore (F.Y. 2019-20''2,612.45 crore). The Company has right to sell the collateral in case borrower defaults. The carrying amount of loans as at March 31, 2021 includes '' 11.11 crore towards Loans to Staff, Loans against Public Deposit and Finance Lease Receivables. (F.Y. 2019-20''22.75 crore).

38.4.2.1 Credit Risk Mitigation measures

Independent internal legal and technical evaluation team in the Company makes credit decisions more robust and in line to manage collateral risk. The in-house Credit team conducts a credit check and verification procedure on each customer, ensuring consistent quality standards to minimize future losses. To review the adherence to laid down policies and quality of appraisal, Company''s independent internal audit team conducts a regular review of files on a sample basis. A dedicated collection and recovery team manages lifecycle of transactions and monitors the portfolio quality.

retail lending:

For retail lending, credit risk management is achieved by considering various factors like:

Additional Security - Additional Security can be by way of pledge of acceptable Additional Collaterals such as LIC Policies or other Securities like NSCs, FDs, Kisan Vikas Patra, etc. is considered. This is taken depending on nature of loan proposal and amount of risk involved.

Project lending:

For project lending, credit risk management is achieved by considering various factors like:

Additional Security - Additional Security is taken depending on nature of loan proposal and amount of risk involved. In some cases, the hypothecation of receivables from the loan is taken. The Negative lien is marked on the flats in the project to the extent of 1.5 times or more as per merits of the case. The Company endeavours to maintain the security cover of at least 1.5 times. Personal Guarantee of promoter directors / corporate guarantee of Company is also obtained as Security. In some cases, the Additional Collateral in the form of Fixed Deposits are also accepted. In case of Higher Risk, Debt Service Recovery Account is also maintained. The Charge on the security / Additional Collateral security is also registered in Central Registry / ROC.

Derivative financial instruments:

Interest rate swaps -

The exposure of the Company to Derivatives contracts is in the nature of interest Rate Swaps and currency swaps to manage risk associated with interest rate movement and fluctuation in currency exchange rate.

Derivative policy of the Company specifies the exposure norms with respect to single counterparty and the total underlying amount at the time of entering into the new derivative contract.

The gain realized on early termination of swap is amortized over the balance tenor of the swap or underlying liability whichever is less. Loss if any on early termination is charged to revenue in the same year. The carry difference, between coupon rate liability and the swap contract rate is accounted quarterly on accrual basis.

38.4.2.2 Collateral and other credit enhancements

As the procedure involved under SARFAESI is to be followed in a time-bound manner, different loan accounts will be at various stages of SARFAESI proceedings.

The Company has taken taken possession of the properties under SARFESI and hold such properties for disposal. The Company has commenced recognising in Financial Statements '' 126.19 crore (net of loss of ''. 12.04 crore) (Previous year NIL) as held as Assets Held for Sale. The Loan Portfolio includes Loans amounting to ''. 325.06 crore (F.Y. 2019-20''440.78 crore) against which the Company has taken possession of the properties under SARFAESI and hold such properties for disposal. The Value of assets possessed against the loan is ''. 319.56 crore (F.Y. 2019-20 ''. 425.66 Cr.) being lower of the fair value of the asset possessed and the outstanding as at March 31, 2021.

38.4.2.3 Impairment Assessment

Definition of Default

stage wise Categorisation of Loan Assets

The company categorises loan assets into stages based on the Days Past Due status:

stage 1: [0-30 days Past Due] It represents exposures where there has not been a significant increase in credit risk since initial recognition and that were not credit impaired upon origination. The Company uses the same criteria mentioned in the standard and assume that when the days past due exceeds ''30 days'', the risk of default has increased significantly. Therefore, for those loans for which the days past due is less than 30 days, the Company recognises as a collective provision the portion of the lifetime ECL associated with the probability of default events occurring within the next 12 months.

stage 2: [31-90 days Past Due] The Company collectively assesses ECL on exposures where there has been a significant increase in credit risk since initial recognition but are not credit impaired. For these exposures, the Company recognises as a collective provision, a lifetime ECL (i.e. reflecting the remaining lifetime of the financial asset)

stage 3: [More than 90 days Past Due] The Company identifies, both collectively and individually, ECL on those exposures that are assessed as credit impaired based on whether one or more events that have a detrimental impact on the estimated future cash flows of that asset have occurred. The Company use the same criteria mentioned in the standard and assume that when the days past due exceeds ''90 days'', the default has occurred.

Retail Loans:

project Loans:

The Company has used transition matrix compiled and published by a premier rating agency in India for arriving default rate.

38.4.2.4 ECL Model and Assumptions considered in the ECL model

probability of Default

Exposure at default

Loss given default

Forward looking information

The assumptions and estimates on the basis of which, the Expected Credit Losses (ECL) of the loan portfolio have been identified, are primarily based on the historical performance of the loan portfolio, updated to reflect current conditions of pandemic including regulatory interventions like moratorium. Owing to the prevailing situation, additional sensitivity scenarios in previous year are being continued with same weights. Going forward as well, the company will continue to closely monitor any further changes to the business processes, the financial impact due to Covid-19 and other business related events. The definitive assessment of the impact would be dependent upon circumstances as they evolve in the subsequent period.

Covid 19 can impact the ability of the Borrowers, whether Corporate or Individuals, to meet their obligations under loan relationships. Individual and Corporate Borrowers may have a particular exposure to the economic impacts in their geography and industry sector. More broadly, reductions in forecast in economic growth increase the probability of default across many borrowers and loss given default rate may increase due to fall in value of collateral evident more generally by fall in prices of assets.

The Company is into secured lending business where primary collateral security is mostly residential/commercial properties. As stipulated by Regulator, lending is done against part value of security with remaining portion acting as a buffer to absorb fall in property prices. Due to Covid-19 detrimental impact on economy, property prices in general are expected to fall, but the fall will likely be asymmetric across locations and will depend upon many micro factors including type of property, location, stage/type/age of construction, local micro market, etc.

Scenario 1 is the base scenario without any perturbance. This is assigned a weightage of 20%.

Scenario 2 is based on the forecasted macro-economic parameters and is assigned a weightage of 15%.

Scenario 3 is considered taking perturbed scenario and is assigned a weightage of 15%

COVID - 1 & 2 scenarios are both linked with changes in property prices factoring geography and portfolio category. COVID - 3 is based on ratio of Principal Outstanding amount to Present value of collateral.

COVID - 4 is based on availing moratorium.

Write off policy

The Company has over the period has established a well-defined Credit Monitoring Mechanism for follow up of the default/delinquent accounts.

The movement within the tables is a combination of quarterly movements over the year. The credit impairment charge in the Statement of Profit & Loss comprises of the amount in Total column.

Transfers - transfers between stages are deemed to occur at the beginning of a quarter based on prior quarters closing balances

Net re-measurement from stage changes - the re-measurement of credit impairment provisions arising from a change in stage is reported within the stage that the assets are transferred to.

Net changes in exposures - comprises new disbursements less repayments in the year.

38.4.2.5 Modified Loans

38.4.3 Market Risk

38.4.4 Interest Rate Risk

Interest Rate Risk refers to the risk associated with the adverse movement in the interest rates. Adverse movement would imply rising interest rates on liabilities and falling interest yields on the]- assets. This is the biggest risk which the company faces. It arises because of maturity and re-pricing mismatches of assets and liabilities.

38.4.5 Operational Risk

B. Legal risk is the cost of litigation due to cases arising out of lack of legal due diligence. Litigation can also arise out of failure or frauds in the course of business.

The main business is of lending money for/against mortgage loans and is therefore exposed to legal risk. For handling the same, there are robust legal systems for title verification and legal appraisal of related documents. Company has standards of customer delivery and the operational mechanism to adhere to such standards aimed at minimum instances of customers'' grievances.

38.4.6 Regulatory Risk

Regulatory risk is the risk that a change in laws and regulations will materially impact the Company. Changes in law or regulations made by the government or a regulatory body can increase the costs of operating the business, and/or change the competitive landscape.

Regulatory risk can arise due to change in prudential rules/norms by the regulators viz; NHB, SEBI, RBI etc. In order to mitigate the effects of same, the Company keeps a track of all regulatory changes and quickly adapts to the change.

38.4.7 Competition Risk

Competition Risk is the risk to the market share and profitability arising due to competition. It is present across all the businesses and across all the economic cycle with the intensity of competition risk varying due to several factors, like, barriers to entry, industry growth potential, degree of competition, etc.

The Company''s business environment is characterized by increased youth population, growing economy, increased urbanization, Government incentives, acceptability of credit in society and rise in nuclear families. Due to all these reasons, the Housing Finance industry has seen a higher growth rate than overall economy and several other industries since past several years. This has led to increase in competition and in turn increased pressure on the existing Companies to maintain/grow market share and profitability. In order to mitigate the risk arising due to competition, the Company has customer centric approach coupled with state of art infrastructure including IT interface.

38.4.8 Currency Risk and mitigation

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company manages itself against currency risk by taking out foreign currency swaps and converting the exposures into Indian Rupees. The Company applies cash flow hedge accounting to the foreign currency element of its floating rate dollar-denominated External Commercial Borrowings and associated cross currency interest rate swaps.

The Company converts ECB into fixed rate Indian Rupee exposures with the floating rate and principal of the hedged item matched by those of the hedging instrument. The Company considers the hedge as a hedge of more than one risk and does not split the interest rate from the principal for hedge accounting purposes.

Hedge Accounting

In December 2019 the company raised an ECB of USD 200 million in the form of a syndicated loan facility. The tenor of the facility is 3 years. The proceeds have been fully utilized in accordance with the approval granted by RBI under automatic route and is in conformity with the applicable ECB Guidelines.

As a part of its risk management, the Company has identified a series of risk categories with corresponding hedging strategies using derivative instruments.

When a hedging relationship meets the specified hedge accounting criteria set out in Ind AS 109, the Company applies one of three types of hedge accounting: fair value hedges; cash flow hedges; or hedges of a net investment in a foreign operation.

Transactions that are entered into in accordance with the Company''s hedging objectives but do not qualify for hedge accounting, are referred to in these financial statements as economic hedge relationships.

The nature of risk that is needed to be hedged, the risk management objective and strategy for undertaking the hedge and the method that will be used to assess the effectiveness of the hedging relationship at inception and on an ongoing basis is recorded with reference to the economic relationship between the hedged item and the hedging instrument.

Every hedge relationship is required to be tested to assess whether the hedge relationship meets the hedge effectiveness requirements at the inception of the hedging relationship, and on an on-going basis at each reporting date. This assessment relates to expectations about hedge effectiveness and is therefore only forward looking.

Cash Flow Hedge

Mar 31, 2019

NOTE 17.1

Negative lien on the assets of the Company (excluding the Company''s current and future receivables and book-debt of whatsoever nature of the Company on which a first pari-pasu floating charge by way of hypothecation to secure the borrowings of the company outstanding as on March 31, 2015 and the unavailed sanctions of the term loans, cash credit and refinance as on March 31, 2015), with a minimum asset cover of 100%. Further the Company shall be entitled to dispose off, transact or otherwise deal, in the ordinary course of business up to 5% of the Specific Assets, including by way of a securitization transaction and as may be required under any law, regulations, guidelines or rules and immovable property acquired by company on or after September 26, 2001.

*Foreign Currency Term Loan refers to FCNR B Loan from Bank amounting to US $ 81168831.17 equivalent to INR of Rs,500 crores. ** Maturity Profile of Term Loans, Loan from Other Financial institutions and National Housing Bank (Refinance)

Note.23 (b): Rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs,2/- per share. Each shareholder is eligible for one vote per share. The Company declares and pay dividend in Indian Rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company, after distribution of all preferential amount, in proportion to their shareholdings.

Nature and Purpose of each Reserve Securities Premium Reserve

Securities premium reserveâ is used to denote the Share premium received on issue of shares. The reserve can be utilised only for limited purposes such as issuance of bonus shares in accordance with the provisions of the Companies Act, 2013.

Special Reserve - I:

Special Reserve - I has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961, out of the distributable profits of the Company. The amounts of Special Reserve account represents, the reserve created in terms of the provision of Section 36(1)(viii) read together with the proviso thereof, from time to time. Special Reserve No. I relates to the amounts transferred up to the Financial Year 1996-97 (Assessment Year 1997-98) when the word was ''created'' only was used in the said section and not ''created and maintained''. Admittedly, the position has changed after the amendment made in Section 36(1)(viii) by the Finance Act 1997 with effect from Assessment year 1998-99, when the mandatory requirement of ''maintaining'' the special reserve created was inserted. Accordingly, it was interpreted that the Special Reserve created up to Assessment Year 1997-98 need not be ''maintained''. As a logical corollary, it is construed that up to Assessment Year 1997-98, the amounts carried to special reserve ought to be understood as amounts created by transferring to the credit of Special Reserve from time to time.

Special Reserve - II:

Special Reserve - II has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961, out of the distributable profits of the Company transferred from Financial Year 1997-98 (Assessment Year 1998-99). In the FY. 2018-19 Rs,749.99 Crore (FY 2017-18 Rs,559.99 Crore) has been transferred to Special Reserve No. II in terms of Section 36(1)(viii) of the Income tax Act, 1961.

Statutory Reserves under Section 29C (Regulatory Capital) of NHB:

Up ton financial year 1996-97: The Company being regulated by NHB has to mandatorily transfer an amount to Section 29C of NHB Act, 1987 on the similar lines as that of for Special Reserve - I which has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961 and it relates to the amounts transferred up to the Financial Year 1996-97(Assessment Year 1997-98).

After financial year 1996-97: The Company being regulated by NHB has to mandatorily transfer an amount to Section 29C of NHB Act, 1987 on the similar lines as that of for Special Reserve - II which has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961. For the year under review an amount of Rs,1,00,000.00 (FY 2017-18 Rs,1,00,000.00) has been transferred to Statutory Reserve under Section 29C the NHB Act.

General Reserve:

However, since the Company utilizes the deduction available to Housing Finance Companies registered with National Housing Bank as provided in Section 36(1)(viii) of the Income tax Act, 1961, wherein the proviso of the Section stipulates that the amount carried to such reserve account from time to time exceeds twice the amount of the paid up share capital and general reserves of the Company, the rebate is restricted to the twice of the aggregate of paid up capital and the general reserve. Therefore, the Company transfers funds to General Reserve in order to avail the full benefit of Section 36 (1)(viii). For the year, the Company has transferred an amount of Rs,600 Crore to General Reserve.

* The Previous GAAP figures have been reclassified to conform with IND AS presentation requirements for the purposes of this note. Notes:

1. To comply with the Companies (Indian Accounting Standard) Rules, 2015 (as amended), certain account balances have been regrouped as per the format prescribed under Division III of Schedule III to the Companies Act, 2013.

2. Fair valuation of investments:

Investments in long term investments as per Previous GAAP have been measured at fair value through profit or loss as against cost less diminution of other than temporary nature.

Certain equity investments (other than investments in subsidiaries and associates) have been measured at fair value through profit or loss account (FVTPL).

The difference between the fair value and previous GAAP carrying value on transition date has been recognized as an adjustment to opening General Reserve.

IND AS requires investments to be measured at fair value or amortized cost. Under Previous GAAP, the Company accounted for long term investments in debt securities as investment measured at cost less provision for other than temporary diminution in the value of investments. Under IND AS, the Company has measured these debt investments at amortized cost category. The difference between amortized cost and the Previous GAAP carrying amount has been recognized in retained earnings.

3. Housing Loan to customers

Under Previous GAAP, the Company has created provision for impairment of housing loans to customers for incurred losses based on regulatory provisions issued by NHB. Under IND AS, impairment allowance has been determined based on Expected Credit Loss model (ECL). Due to ECL model, the Company impaired its housing loan to customer by Rs,188.41 Crore on 1^st April 2017 which has been eliminated against opening General Reserve. The impact of Rs,232.60 Crore for year ended on March 31, 2018 has been recognized in the statement of profit and loss.

4. Restatement of provision on standard / non-performing assets (NPA) to Expected Credit Loss (ECL)

Under Previous GAAP provision for NPA and standard asset were presented under provisions. However, under IND AS financial assets measured at amortized cost (majorly loans) are presented net of provision for expected credit losses. Consequently, the Company has restated the Previous GAAP provisions for standard assets / NPA''s to ECL amounting to Rs,850.87 Crore and Rs,1,309.13 Crore as on 1^st April 2017 and March 31, 2018 respectively

5. Effective Interest Rate (EIR):

Borrowings and other financial liabilities which were recognized at historical cost under previous GAAP have been recognized at amortized cost under IND AS as on transition date with the difference been adjusted to opening General Reserve.

Under Previous GAAP, transaction costs incurred on borrowings was charged to statement of profit and loss upfront while under IND AS, such costs are included in the initial recognition amount of financial liabilities and recognized as interest expenses using the effective interest method. Consequently, borrowings on date of transition have decreased by Rs,20.04 Crore and interest expense for the year ended March 31, 18 has increased by Rs,27.10 Crore.

Financial assets held on with an objective to collect contractual cash flows in the nature of principal and interest have been recognized at amortized cost on transition date as against historical cost under the previous GAAP with the difference been adjusted to the opening General Reserve.

Under Previous GAAP, transaction costs charged to customers was recognized upfront while under IND AS, such costs are included in the initial recognition amount of financial asset and recognized as interest income using the effective interest method. Consequently, loan to customers on date of transition have increased by Rs,245.76 Crore, processing fees for the year ended 31^st March, 2018 has decreased by Rs,170.76 Crore and interest income for the year ended March 31, 18 has decreased by Rs,163. 40 Crore.

6 Deferred tax as per balance sheet approach:

Previous GAAP requires deferred tax accounting using the statement of profit and loss approach, which focuses on differences between taxable profits and accounting profits for the period. IND AS 12 requires entities to account for deferred taxes using the balance sheet approach, which focuses on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base. The application of IND AS 12 approach has resulted in recognition of deferred tax on new temporary differences which was not required under Previous GAAP

In addition, the various transitional adjustments lead to temporary differences. According to the accounting policies, the Company has to account for such differences. Deferred tax adjustments are recognized in correlation to the underlying transaction either in retained earnings or a separate component of equity

The major change in deferred tax is on account of, as required by the NHB, the Company had recognized deferred tax liability (DTL) in respect of the balance in the Special Reserve (created under section 36(1)(viii) of the Income-tax Act, 1961) amounting to Rs,1,177.37 Crore as at April 1, 2017. The Company believes that the Special Reserve will not be utilised for payment of dividend or any other purpose and accordingly it does not result in a difference in tax base. Hence, DTL on Special Reserve has been reversed to comply with IND AS 12 on Income Taxes.

7. Defined benefit obligation:

Both under Previous GAAP and IND AS, the Company recognized costs related to its post-employment defined benefit plan on an actuarial basis. Under Previous GAAP, the entire cost, including actuarial gains and losses, were charged to profit or loss. Under IND AS, re-measurements [comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets excluding amounts included in net interest on the net defined benefit liability] are recognized immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI. The employee benefit expenses is adjusted by Rs,2.62 Crore (net of income tax) and recognized in OCI for the year ended March 31, 2018.

8. Other Comprehensive Income:

Under IND AS, all items of income and expense recognized in the period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognized in profit or loss but are shown in the statement of profit and loss and âother comprehensive incomeâ includes re-measurements of defined benefit plans. The concept of other comprehensive income did not exist under previous GAAP

9. Statement of Cash Flows

The transition from Previous GAAP to IND AS has not had a material impact on the statement of cash flows.

37. FINANCIAL INSTRUMENTS

37.1 Capital Management

The Company maintains an actively managed capital base to cover risks inherent in the business and is meeting the capital adequacy requirements of National Housing Bank (NHB). The adequacy of the Company''s capital is monitored using, among other measures, the guidelines issued by NHB.

The Company has complied in full with all its externally imposed capital requirements over the reported period.

The primary objectives of the Company''s capital management policy are to ensure that the Company complies with externally imposed capital requirements and maintains strong credit ratings and healthy capital ratios in order to support its business and to maximize shareholders value.

The Company''s objective, when managing Capital, is to safeguard the ability of the Company to continue as a going concern. The Company''s capital management strategy is to effectively determine, raise and deploy capital so as to maximize the shareholder''s value. The capital of the Company comprises of Equity Share Capital and a mix of debt securities, borrowings (other than debt securities), deposits and subordinated liabilities. No changes have been made to the objectives, policies and processes from the previous years. However, they are under constant review by the Board.

The Management of the Company monitors the Regulatory capital by over viewing Capital Gearing Ratio, Debt Equity Ratio and makes use of the same for framing the business strategies.

37.3 Fair Value Measurement

The Company evaluates the significance of financial instruments and material accuracy of the valuations incorporated in the financial statements as they involve a high degree of judgment and estimation uncertainty in determining the carrying values of financial assets and liabilities at the balance sheet date. Fair value of financial instruments is determined using valuation techniques and estimates which, to the extent possible, use market observable inputs, but in some cases use nonmarket observable inputs. Changes in the observability of significant valuation inputs can materially affect the fair values of financial instruments. In determining the valuation of financial instruments, the Company makes judgmentsâ on the amounts reserved to cater for model and valuation risks, which cover both Level 2 and Level 3 instruments, and the significant valuation judgmentsâ in respect of Level 3 instruments.

Fair Value Hierarchy

In order to show how fair values have been derived, financial instruments are classified based on a hierarchy of valuation techniques, as explained below.

Level 1: Fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets or liabilities

Level 3: Fair value measurements are those where at least one input which could have a significant effect on the instrument''s valuation is not based on observable market data

The following table shows an analysis of financial instruments recorded at fair value by level of the fair value hierarchy:

There were no transfers between Level 1, Level 2 and Level 3 during the year

Valuation Techniques Equity instruments

The equity instruments that are actively traded on public stock exchanges are valued at readily available active prices on a regular basis. Such instruments are classified as Level 1.

Units held in funds having quoted market price are fair valued at Level 1. Others which are measured based on their net asset value (NAV) as on reporting date, taking into account redemption and/or other restrictions. Such instruments are generally Level 3.

Equity instruments in non-listed entities included investment in private equity funds are initially recognized at transaction price and re-measured (to the extent information is available) and valued on a case-by-case basis and classified as Level 3. In respect of Goods and Service Tax Network, valuation has been considered on indicative buyback price.

Interest rate derivatives

Interest rate derivatives include interest rate swaps. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations by estimating future cash flows and discounting them with the appropriate yield curves incorporating funding costs relevant for the position. These contracts are generally Level 2 unless adjustments to yield curves or credit spreads are based on significant non-observable inputs, in which case, they are Level 3.

Valuation adjustments and other inputs and considerations

A one percentage point change in the unobservable inputs used in fair valuation of Level 3 financial assets does not have a significant impact in its value.

No valuation adjustments have been made to the prices/yields provided for valuation.

Financial Instruments not measured using Fair Value, i.e. measured using Amortized Cost

The following table is a comparison, by class, of the carrying amounts and fair values of the company''s financial instrument that are not carried at fair value in the financial statements. This table does not include the fair value of non-financial assets and non-financial liabilities.

Valuation methodologies of financial instruments not measured at fair value

Below are the methodologies and assumptions used to determine fair values for the above financial instruments which are not recorded and measured at fair value in the company''s financial statements. These fair values were calculated for disclosure purposes only.

Government debt securities

Other Financial Assets and Liabilities

With respect to Bank Balances and Cash and Cash Equivalents, Other Financial Assets, Trade Payables and Other Financial Liabilities, the carrying value approximates the fair value.

37.4 Financial Risk Management Introduction

The Company has operations in India, Kuwait & Dubai. Whilst risk is inherent in the Company''s activities, it is managed through an integrated risk management framework, including ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the Company''s continuing profitability and each individual within the Company is accountable for the risk exposures relating to his or her responsibilities. The Company is exposed to credit risk, liquidity risk and market risk. It is also subject to various operating, regulatory and competition risks.

Risk Management Framework

At present, the risks faced by the Company are broadly categorized as below:-

- Credit Risk

- Liquidity Risk

- Market Risk

- Interest Rate Risk

- Operational Risk

A. Compliance Risk

B. Legal Risk

- Regulatory Risk

- Competition Risk Committees

Top Level Committee

Risk Management Committee of Board (RMCB)

Company has a Risk Management Committee of Board in place which consists of Independent Directors and the MD & CEO of the Company.

The role of the Committee is as follows-:

- Review of Risk Management Policy

- Review of the current status on the risk limits in the Risk Management Policy and Report to the Board

- Review the matters on Risk Management

- Review and monitor the risks to which the Company is exposed

- Review the Anti-Fraud Policy

Internal Committee

Risk Management Committee and Operational Risk Group (RMC & ORG)

Company has an internal Risk Management Committee and Operational Risk Group whose major function include review of Risk Registers submitted on a monthly basis by all departments. It comprises of HODs of Risk Management, Finance, Project Finance, Credit Monitoring, IT, and as nominated by MD & CEO of the Company. A list of functions performed by RMC & ORG is given below -:

- Review of Risk Management Policy

- Review of monthly Risk Register submitted by various depts.

- Review of the current status on the outer limits prescribed in the Risk Policy and submitting the report to RMCB & Board

- Assessment of risks in the Company and suggesting control/mitigation measures thereof The Company has exposure to following risks arising from the financial instruments:

37.4.1 Liquidity Risk

Housing Finance being our core business, maintaining the liquidity for meeting the growth perspective in the business as also to honor our committed repayments is the fundamental objective of the Asset Liability Management (ALM) framework.

Investment being our ancillary activity is derived of this ALM requirement and it is imperative to constantly monitor the liquidity of our investments to achieve our core objective.

Internal Control Process & Liquidity Management

The Company ensures that funds are available from various investor pools and banks. Liquid funds are available in the form of Non-Convertible Debentures and other Market Instruments, Bank Loans, Refinance from NHB and Foreign Currency Loans. In case of Public Deposits accepted by the Company, a prescribed percentage (as defined by NHB from time to time) is to be invested in approved securities in terms of Liquid Asset Requirement (u/s. 29B of NHB Act, 1987). On the assets side, the Company has loan products broadly classified under individual retail loans and project finance loans with varying repayment structures depending upon the nature of product.

The liquidity is managed at the Corporate Office of the Company with Back Offices providing their liquidity requirements. The surplus funds available with the Back Offices are pooled and funds from the market are arranged for the Back Offices having a deficit of funds. Only surplus funds arrived at after deducting the committed/confirmed outflows (including projected disbursements of loans) from the available resources - both from internal accretions as well as borrowed funds, would be considered as Surplus available for Investment in approved instruments on day-to-day basis. The Company can place surplus funds in Fixed Deposits with selected Scheduled / Commercial / Foreign Banks and / or Financial Institutions within overall exposure limit fixed for each Bank / FI from time to time by the Board. Considering the market risk and the mark-to-market requirements of the debt mutual funds, currently Company is making Investments only in liquid Mutual Fund schemes. Exposure limits for each Investment instrument would be approved by the Board and reviewed from time to time as per the requirements.

ALCO Committee Roles & Responsibilities

Composition

Changes from previous period

There are no significant changes in the Financial Policies.

Liquidity Ratios

1) The overall structural liquidity (as defined by NHB) negative gap (cumulative gap) has not exceeded 30% of the payables or the liabilities.

2) The structural liquidity (as defined by NHB) negative gap up to one year has not exceeded 15% of the cumulative cash outflows up to one year.

3) The structural liquidity (as defined by NHB) negative gap up to 14 days as also over 14 days and up to one month has not exceeded 15% of the cash outflows during those respective durations.

criteria for determining the quantum of loan. The Company has adopted a policy of dealing with creditworthy counter parties and obtaining sufficient collateral as a means of mitigating the risk of financial loss from defaults. The exposure is continuously monitored.

The carrying amount of loans as at March 31, 2019 is Rs,1,94,652.22 Crore (F.Y. 2017-18 Rs,1,67,471.45 Crore; as at April 1, 2017 Rs,1,45,567.58 Crore) which best represent the maximum exposure to credit risk, the related Expected credit loss amount to Rs,1,659.48 Crore (FY 2017-18 Rs,1,309.13 Crore, as at April 1, 2017 Rs,850.87 Crore). The Company has right to sell or pledge the collateral in case borrower defaults. The carrying amount of loans as at March 31, 2019 includes Rs,5.87 Crore towards Loans to Staff and Loans against Public Deposit (FY 2017-18 Rs,4.87 Crore; as at April 1, 2017 Rs,4.27 Crore)

37.4.2.1 Credit Mitigation measures

Independent internal legal and technical evaluation team in the Company makes credit decisions more robust and in line to manage collateral risk. The in-house Credit team conducts a credit check and verification procedure on each customer, ensuring consistent quality standards to minimize future losses. To review the adherence to laid down policies and quality of appraisal, Company''s independent internal audit team conducts a regular review of files on a sample basis. A dedicated collection and recovery team manages lifecycle of transactions and monitors the portfolio quality

Retail lending:

For retail lending, credit risk management is achieved by considering various factors like:

- Assessment of borrower''s capability to pay - a detailed assessment of borrower''s capability to pay is conducted. The approach of assessment is laid down in the credit policy of the Company. Various factors considered for assessment are credit information report, analysis of bank account statement and valuation of property

- Security cover - Analysing the value of the property which is offered as security for the loan is essential for the overall underwriting of the loan. It is essential that it is valued before the disbursement of loan to arrive at a clear idea about its cost, valuation, marketability and loan to property ratio.

- Additional Security - Additional Security can be by way of pledge of acceptable Additional Collaterals such as LIC Policies or other Securities like NSCs, FDs, Kisan Vikas Patra, etc. is considered. This is taken depending on nature of loan proposal and amount of risk involved.

- Geographical region - The Company monitors loan performance in a particular region to assess if there is any stress due to natural calamities etc. impacting the performance of the loan in a particular geographic region.

Project lending:

For project lending, credit risk management is achieved by considering various factors like:

- Promoter''s strength - a detailed assessment of borrower''s capability to pay is conducted. Various factors considered for promoter''s assessment are the financial capability, past track record of repayment, management and performance perspective.

- Credit information report - It is very essential to check the Creditworthiness of an Applicant & the Credit History of Borrower for Consumer or Commercial Loans. The Company uses this Report for taking a Decision on Credit Sanction by getting details of the Credit History of a Borrower. For Project Loans, reports from independent institutions are referred so as to get the marketability report of the project and its neighborhood analysis.

- Security cover - Analysing the value of the property which is offered as security for the loan is essential for the overall underwriting of the loan. With respect to project loans case the main security taken is underlying land and structure there on. Technical appraisals are conducted to establish the life, soundness, marketability and value of the house property financed.

- Additional Security - Additional Security is taken depending on nature of loan proposal and amount of risk involved. In some cases, the hypothecation of receivables from the loan is taken. The Negative lien is marked on the flats in the project to the extent of 1.5 times or more as per merits of the case. At all times the security cover of at least 1.5 times is maintained. Personal Guarantee of promoter directors / corporate guarantee of Company is also obtained as Security. In some cases, the Additional Collateral in the form of Fixed Deposits are also accepted. In case of Higher Risk, Debt Service Recovery Account is also maintained.

The Charge on the security / Additional Collateral security is also registered in Central Registry / ROC. AS per the recent guidelines by Government of India the process of registering the charge with Information Utility under IBC (Indian Bankruptcy Code) is started.

Derivative financial instruments:

Interest rate swaps -

The exposure of LICHFL to Derivatives contracts is in the nature of interest Rate Swaps and currency swaps to manage risk associated with interest rate movement and fluctuation in currency exchange rate.

Derivative policy of the Company specifies the exposure norms with respect to single counterparty and the total underlying amount at the time of entering into the new derivative contract.

The gain realized on early termination of swap is to be amortized over the balance tenor of the swap or underlying liability whichever is less. Loss if any on early termination is to be charged to revenue in the same year. The carry difference, between coupon rate liability and the swap contract rate is to be accounted quarterly on accrual basis

37.4.2.2 Collateral and other credit enhancements

With respect to loans case the main security taken is underlying land and structure there on. Apart from the main security additional collaterals are also sought depending upon merits of the case. In some cases the hypothecation of receivables from the loan is also taken.

The Company after exploring all the possible measures, initiates action under SARFAESI against the mortgaged properties as a last resort to recover. Company follows the due procedure as laid down in the SARFAESI Act 2002 and accordingly takes the possession of the properties for its logical conclusion.

As the procedure involved under SARFAESI is to be followed in a time-bound manner, different loan accounts will be at various stages of SARFAESI proceedings.

Loan Portfolio includes loans amounting to Rs,309.63 Crore ( FY 2017-18 Rs,264.29 Crore; As at 01.04.2017 Rs,233.07 Crore) against which the company has taken possession of the properties under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and held such properties for disposal. The value of assets possessed against the loan is Rs,295.77 Crore (F.Y. 2017-18 Rs,263.56 Crore; As at 01.04.2017 Rs,251.86 Crore), being lower of the fair value of the asset possessed and the outstanding as at March 31, 2019.

37.4.2.3 Impairment Assessment

The references below show where the Company''s impairment assessment and measurement approach is set out in this report. It should be read in conjunction with the Summary of significant accounting policies.

The Company applies General approach to provide for credit losses prescribed by IND AS 109, which provides to recognized 12-months expected credit losses where credit risk has not increased significantly since initial recognition and to recognized lifetime expected credit losses for financial instruments for which there have been significant increase in credit risk since initial recognition considering all reasonable and supportable information, including that of forward looking.

Definition of Default

The Company considers a financial instrument defaulted and therefore Stage 3 (credit-impaired) for ECL calculations in all cases when the borrower becomes 90 days past due on its contractual payments.

Stage wise Categorization of Loan Assets

The company categorizes loan assets into stages based on the Days Past Due status:

- Stage 1: [0-30 days Past Due] It represents exposures where there has not been a significant increase in credit risk since initial recognition and that were not credit impaired upon origination. The Company uses the same criteria mentioned in the standard and assume that when the days past due exceeds ''30 days'', the risk of default has increased significantly. Therefore, for those loans for which the days past due is less than 30 days, the Company recognizes as a collective provision the portion of the lifetime ECL associated with the probability of default events occurring within the next 12 months.

- Stage 2: [31-90 days Past Due] The Company collectively assesses ECL on exposures where there has been a significant increase in credit risk since initial recognition but are not credit impaired. For these exposures, the Company recognizes as a collective provision, a lifetime ECL (i.e. reflecting the remaining lifetime of the financial asset)

- Stage 3: [More than 90 days Past Due] The Company identifies, both collectively and individually, ECL on those exposures that are assessed as credit impaired based on whether one or more events, that have a detrimental impact on the estimated future cash flows of that asset have occurred. The Company use the same criteria mentioned in the standard and assume that when the days past due exceeds ''90 days'', the default has occurred.

Retail Loans:

Depending on the nature of the financial instruments and the credit risk information available for particular groups of financial instruments, an entity may not be able to identify significant changes in credit risk for individual financial instruments before the financial instrument becomes past due. In case of retail loans, the financial instruments are backed by sufficient margin of underlying security which absorbs the associated risks. Hence, the Company has performed the assessment of significant increases in credit risk on a collective basis for retail loans by considering information that is indicative of significant increases in credit risk on groups of financial instruments.

For the purpose of determining significant increases in credit risk and recognizing loss allowance on a collective basis, the Company has grouped financial instruments on the basis of shared credit risk characteristics with the objective of facilitating an analysis that is designed to enable significant increase in credit risk identified on a timely basis.

Project Loans:

Project loans are far less in number and more in terms of value per loan. The loans are also credit rated internally. However the Company does not have any history of the loan transitioning from one rating to the other over a fairly long period of time to arrive at a reliable transition matrix. The Company has used transition matrix compiled and published by a premier rating agency in India for arriving default rate.

37.4.2.4 ECL Model and Assumptions considered in the ECL model

The Company has used Markov chain model for estimating the probability of default on retail loans. In a Markov chain model for loans receivable an account moves through different delinquency states each quarter. For example, an account in the âRegularâ state this quarter will continue to be in the âRegularâ state next month if a payment is made by the due date and will be in the â90 days past dueâ state if no payment is received during that quarter. Another valuable feature is that the Markov chain model maintains the progression and timing of events in the path from âRegularâ to âDefaultedâ. For example, an account in the âRegularâ state doesn''t suddenly become âDefaultedâ. Instead, an account must progress monthly from the âRegularâ state to the â90 days past dueâ state to the â180 days past dueâ state and so on until foreclosure activities are completed and the collateral assets are sold to pay the outstanding debt.

The transition matrix in the Markov chain represents the period-by-period movement of receivables between delinquency classifications or states. The transition evaluates loan quality or loan collection practice. The matrix elements are commonly referred to as âroll-ratesâ since they denote the probability that an account will move from one state to another in one period. The transition matrix is referred to as the âdelinquency movement matrixâ.

The loan portfolio for the past several quarters are analysed to arrive at the transition matrix. Each loan is traced to find out how the loan has performed over the last several quarters. The days past due is grouped into 6 buckets namely Regular [0 days past due], 1 to 90 days past due, 91 to 180 days past due, 181 to 270 days past due, 271 to 365 days past due and above 365 days past due. In a subsequent quarter, the loan may continue to remain in the same bucket or move into the next bucket or previous bucket depending upon the repayments made by the customer. The bucket intervals are 90 days and the data points considered are also quarterly. The occurrences of every loan over the past several quarters are considered to arrive at the total transitions happening from different buckets in the previous quarter to different buckets in the current quarter. The Company has considered the quarterly loan performance data starting from the quarter ending 30^th June 2013 onwards to compute the transition matrix. The total number of such transition occurrences are converted as a percentage to arrive at the transition matrix.

The Company has used transition matrix compiled and published by a premier rating agency in India for arriving default rate for Project loans since the Company do not have any history of the loan transitioning from one rating to the other over a fairly long period of time to arrive at a reliable transition matrix. Accordingly, the transition matrix is computed using matrix multiplication.

Probability of Default

Stage 1 - [No significant increase in credit risk]: Based on Markov model, the quarterly normalized transition matrix is converted into a 12-month transition matrix for determining the probability of default for those loan accounts on which the risk has not increased significantly from the time the loan is originated. The Company use the same criteria mentioned in the standard and assume that when the days past due exceeds ''30 days'', the risk of default has increased significantly. Therefore, for those loans for which the days past due is less than 30 days, one-year default probability is considered.

Stage 2 - [Significant increase in credit risk]: The credit risk is presumed to have increased significantly for loans that are more than 30 days past due and less than 90 days past due. For such loans, lifetime default probability should be considered. Based on the maturity date of the loan, the probability of default is arrived at to determine the quantum of the loan that is likely to move into the buckets ''90 days past due'' and greater. The quarterly transition matrix is used to find out the transition matrix applicable for the loan considering the maturity date of such loan.

Stage 3 - [Defaulted loans]: As per the standard there is a rebuttable presumption that default does not occur later than when a financial asset is 90 days past due unless an entity has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate. The Company assumed that the default has occurred when a loan moves into ''90 days past due'' bucket.

Exposure at default

Loss given default

Value of collateral property: The loans are secured by the adequate property. The property value for those loans which are over 90 days past due are regularly updated. The present value of such collateral property should be considered while calculating the Expected Credit Loss. The Company initiate the recovery process of Non Performing Accounts within the statutory time limit as per SARFAESI and other applicable laws and accordingly the realizable period has been considered for computing the Present Value of Collateral.

Forward looking information

The Company has considered the rate of inflation as a relevant macro-economic data having a significant impact on the performance of loans based on the historical observation of several quarters in the past. The correlation co-efficient between the inflation rate and the Loans outstanding the ''Not yet due'' bucket is negative meaning that the two variables move in opposite directions. When the inflation rate goes up the Not yet due bucket seems to come down meaning that the loans become more irregular.

Considering this fact, and also considering that the inflation seems to be on the decline, the Company has assumed three scenarios as follows with the respective weights.

Scenario 1: ECL computed without any change in any of the buckets. This scenario is given a weight of 30%.

Scenario 2: For each and every loan all the buckets > 90 days are bumped up by 2% and the ECL is computed as mentioned in the previous sections to arrive at the ECL. This scenario is given a weight of 50%.

Scenario 3: For each and every loan all the buckets > 90 days are bumped down by 6% and the ECL is computed as mentioned in the previous sections to arrive at the ECL. This scenario is given a weight of 20%

Expected credit loss is then computed based on all the three scenarios. ECL is adjusted with the appropriate weights assigned for each scenario and the weighted average ECL is arrived at as the ECL for the quarter

Write off policy

The Company has over the period has established a well-defined Credit Monitoring Mechanism for follow up of the default / delinquent accounts.

A multi-faceted approach is adopted in Credit Monitoring activities which involves participation of In-House employees as well as outsourced agencies. Each loan account is analysed based on the causative factors of becoming default and appropriate follow-up activity is undertaken. In spite of adopting an appropriate follow-up activity, some accounts continue to be delinquent. Sufficient time, as per Law, is given to the Borrowers to regularize their repayments and if still the accounts continue to be under the Non-Performing bracket, legal recourse is adopted.

However, there could be accounts wherein no recovery would be forthcoming despite the best efforts put in by the Company. Such accounts are critically examined on case to case basis and if there is no merit of recovery, such accounts are recommended for write-off to/through internal committees as per the policy approved by the Board. Write-off is a derecognition of a loan the Company has no reasonable expectations of recovering the contractual inflows.

The movement within the tables is a combination of quarterly movements over the year. The credit impairment charge in the Profit & Loss statement comprises of the amount in Total column.

Transfers - transfers between stages are deemed to occur at the beginning of a quarter based on prior quarters closing balances

Net re-measurement from stage changes - the re-measurement of credit impairment provisions arising from a change in stage is reported within the stage that the assets are transferred to.

Net changes in exposures - comprises new disbursements written less repayments in the year

37.4.2.5 Modified Loans

Where the contractual terms of a financial instrument have been modified, and this does not result in the instrument being derecognized, a modification gain or loss is recognized in the Profit and Loss statement representing the difference between the original cash flows and the modified cash flows, discounted at the effective interest rate. If the modification is credit-related or where the Company has granted concessions that it would not ordinarily consider, then it will be considered credit-impaired. Modifications that are not credit related will be subject to an assessment of whether the asset''s credit risk has increased significantly since origination by comparing the remaining lifetime probability of default (PD) based on the modified terms to that on the original contractual terms.

37.4.3 Market Risk

37.4.4 Interest Rate Risk

The exposure of the Company''s borrowing to interest rate changes at the end of the reporting period are

The impact of 10 bps change in interest rates on liabilities on the Profit after tax for the year ended March 31, 2019 is Rs,46.73 Crore (F.Y. 2017-18 Rs,31.03 Crore).

37.4.5 Operations Risk

Operational risk is âthe risk of a change in value caused by the fact that actual losses, incurred for inadequate or failed internal processes, people and systems, or from external events (including legal risk), differ from the expected lossesâ. It can be subdivided into the following categories:

A. Compliance risk is defined as the risk of legal sanctions, material financial loss, or loss to reputation the Company may suffer as a result of its failure to comply with laws, its own regulations, code of conduct, and standards of best/good practice.

In case of LIC HFL, the Company is regulated by NHB, registered with SEBI and has listed agreements with stock exchanges, i.e. BSE & NSE, making it imperative that the Company follows all the applicable laws. In order to deal with the same, the Company has a designated Compliance Officer whose role would entail complying with the statutory requirements of the Company

B. Legal risk is the cost of litigation due to cases arising out of lack of legal due diligence. Litigation can also arise out of failure or frauds in project delivery.

For LIC HFL, the main business is of lending money for/against mortgage loans and is therefore exposed to legal risk. For handling the same, there is robust legal systems for title verification and legal appraisal of related documents. Company has standards of customer delivery and the operational mechanism to adhere to such standards aimed at minimum instances of customers'' grievances.

37.4.6 Regulatory Risk

Regulatory risk is the risk that a change in laws and regulations will materially impact the company. Changes in law or regulations made by the government or a regulatory body can increase the costs of operating our business, and/or change the competitive landscape.

In case of LIC HFL, the regulatory risk can arise due to change in prudential rules/norms by the regulators viz; NHB, SEBI, RBI etc. In order to mitigate the effects of same, the Company is aware of the Business and Regulatory environment and anticipate the likely regulatory changes that may come in the short and medium term so that it is able to quickly change its systems and practices to realign itself with the changed regulatory framework.

37.4.7 Competition Risk

The Company is in Housing Finance business which is going through growth phase due to many reasons including increasing youth population, growing economy, increased urbanization, Government incentives, acceptability of credit in society and rise in nuclear families. Due to all these reasons, the Housing Finance industry has seen a higher growth rate than overall economy and several other industries since past several years. This has attracted lot of Companies in the market with the result being increased pressure on the existing Companies to maintain/grow market share and profitability. In order to mitigate the risk arising due to competition, the Company not only tries to address the customer needs with state of art infrastructure including IT interface but also introduces practices which can attract customers to the Company as well as retain the existing ones. The Company has a market Intelligence system to gather information related to competitors in terms of their product offerings, pricing and other schemes and is in a position to respond to such competition. The entire Marketing force and support teams are continuously aware of challenges of competition through awareness programs, trainings, etc. and the deserving ones are adequately rewarded. The Company has so far been able to increase its market share across time by growing at a faster rate than the industry.

38. SEGMENT REPORTING:

The Company is engaged in the business of providing finance for purchase, construction, repairs, renovation of house/ buildings. As such, there are no separate reportable segments, as per the Indian Accounting Standard (IND AS) 108 on ''Segment Reporting''. Segment reporting is done in the consolidated financial statements as prescribed by IND AS 108.

39. COMMITMENTS:

a) Estimated amounts of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs,0.40 Crore (F.Y. 2017-18 Rs,18.40 Crore; As at 01.04.2017 Rs. 0.55 Crore).

b) Other Commitments: Uncalled liability of Rs,1.14 Crore (F.Y. Rs,1.47 Crore; As at 01.04.2017 Rs. 3.16 Crore) in respect of commitment made for contribution to LICHFL Urban Development Fund by subscription of 50,000 units (F.Y. 2017-18 50,000 units; As at 01.04.2017 50,000 units) of Rs,10,000/- face value each, paid up value being Rs,3,857.34 (F.Y. 2017-18 Rs,7360.32/-; As at 01.04.2017 Rs. 7287.40/-) each.

The Company had committed for an upfront investment of Rs,37.50 Crore subject to a maximum of 10% of aggregate Capital Commitment but not exceeding Rs,100.00 Crore in LICHFL Infrastructure Fund managed by one of the Subsidiary of the Company, namely LICHFL Asset Management Company Limited. The outstanding investment in LICHFL Infrastructure Fund as on 31^st March, 2019 is Rs,1.54 Crore.

40. CONTINGENT LIABILITIES IN RESPECT OF:

a) Claims against the Company not acknowledged as debts Rs,0.91 Crore (F.Y. 2017-18 Rs,0.64 Crore; As at 01.04.2017 Rs. 0.51 Crore).

b) On completion of income tax assessment, the Company had received a demand of Rs,3.48 Crore - (including interest of Rs,0.20 Crore) for AY 2003-04, Rs,22.17 Crore (including interest of Rs,7.22 Crore) for AY. 2004-05 against which the Company received refund of Rs,2.20 Crore , Rs,35.72 Crore (including interest of Rs,6.68 Crore) against which Rs,19.51 Crore was paid under protest for AY 2005-06, Rs,23.85 Crore (including interest of Rs,1.38 Crore against which the Company received refund of Rs,1.37 Crore for AY. 2006-07 and Rs,15.03 Crore (including interest of Rs,6.34 Crore ) for AY 2007-08. The said amounts are disputed and the Company has preferred an appeal against the same. The amounts for the respective years have been paid to the credit of the Central Govt. under protest.

41. MOVEMENT IN PROVISION FOR CONTINGENCIES AS UNDER:

a. Provision includes:

i. Provision for untapped corporate undertaking given for securitization of loans. The outflows in respect of untapped corporate undertaking would arise in the event of a shortfall, if any, in the cash flows of the pool of the securitized receivables, and

ii. Provision for doubtful advances and provision for probable loss on account of bank reconciliation differences.

42. Fixed Deposits with Banks includes earmarked deposits created in favour of trustees for depositors towards maintaining Statutory Liquid Ratio amounting to Rs,177.25 Crore (F.Y. 2017-18 Rs,172.99 Crore; As at 01.04.2017 Rs,253.00 Crore). The Company has beneficial interest on the income earned from these deposits.

43. Temporary Book Overdraft of Rs,6,909.46 Crore (F.Y. 2017-18 Rs,5,064.24 Crore; As at 01.04.2017 Rs,5,739.76 Crore) represents cheques issued towards disbursements to borrowers for Rs,6,894.71 Crore (F.Y. 2017-18 Rs,5,048.24 Crore As at 01.04.2017 Rs,5,728.27 Crore ) and cheques issued for payment of expenses of Rs,14.75 Crore (F.Y. 2017-18 Rs,16.00 Crore, As at 01.04.2017 Rs,11.48 Crore), but not encashed as at March 31, 2019.

47. The Company had requested its suppliers to confirm the status as to whether they are covered under the Micro, Small and Medium Enterprises Development Act, 2006. The disclosure relating to unpaid amount as at the year-end together with interest paid / payable as required under the said Act have been given to the extent such parties could be identified on the basis of the information available with the company regarding the status of suppliers under MSMED Act, 2006. No interest has been paid/payable by the Company during the current year to the parties covered under the Micro, Small and Medium Enterprises Development Act, 2006.

48. DISCLOSURE IN RESPECT OF EMPLOYEE BENEFITS:

In accordance with the Indian Acco

Mar 31, 2018

NOTES TO ACCOUNTS

1. a) Estimated amounts of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs, 1,839.62 Lakhs (Previous year Rs, 55.44 Lakhs).

b) Other Commitments: Uncalled liability of Rs, 146.50 Lakhs (Previous Year Rs, 316.00 Lakhs) in respect of commitment made for contribution to LICHFL Urban Development Fund by subscription of 50,000 units (previous year 50,000 units) of Rs, 10,000/- face value each, paid up value being Rs, 7,360.32 (previous year Rs,7,287.40/-) each.

2. Contingent liabilities in respect of :

a) Claims against the Company not acknowledged as debts Rs, 64.49 Lakhs (Previous Year Rs, 51.02 Lakhs).

b) On completion of income tax assessment, the Company had received a demand of Rs, 347.76 Lakhs- (including interest of Rs,20.39 Lakhs) for FY 2003-04, Rs, 2,217.31Lakhs (including interest of Rs, 721.90Lakhs) for FY 2004-05 against which the Company received refund of Rs, 220.38 Lakhs, Rs,3,571.94 Lakhs (including interest of Rs, 667.94 Lakhs) against which Rs,1,951.62 Lakhs was paid under protest for FY 2005-06, Rs,2,385.58 Lakhs (including interest of Rs, 138.71 Lakhs against which the Company received refund of Rs, 137.47 Lakhs for FY 2006-07 and Rs, 1,503.40 Lakhs (including interest of Rs, 633.94 Lakhs ) for FY 2007-08. The said amounts are disputed and the Company has preferred an appeal against the same. The amounts for the respective years have been paid to the credit of the Central Govt. under protest.

3. (i) Retail / Project Loans are secured by any or all of the following as applicable, based on their categorization :

a) Equitable / Registered Mortgage of Property.

b) Assignment of Life Insurance Policies, NSC, KVP, FD of Nationalized Bank.

c) Assignment of Lease Rent Receivables.

d) Company Guarantees or Personal Guarantees.

e) Negative lien.

f) Undertaking to create a security.

(ii) Loans to employees other than for Housing are secured by lien over Provident Fund balances and / or Hypothecation of Vehicles.

4. Loan Portfolio includes loans amounting to Rs, 26,428.77 Lakhs (Previous year Rs, 23,307.43 Lakhs) against which the company has taken possession of the properties under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and held such properties for disposal. The value of assets possessed against the loan is Rs, 26,356.06 Lakhs (Previous year Rs, 25,186.38 Lakhs), being lower of the fair value of the asset possessed and the outstanding as at March 31, 2018.

5. Advances

Disclosure regarding provisions made for substandard, doubtful and loss assets as per the Prudential Norms contained in the Housing Finance Companies (NHB) Directions, 2010 as amended are as under:

a. Details of Single Borrower Limit ( SGL) / Group Borrower Limit (GBL ) exceeded by the HFC:

As per NHB Direction Housing Finance Company shall not lend more than 15% of its owned fund to Single borrower and 25% of its owned fund to any single group of borrowers. The Company has not exceeded prudential exposure limits during the year.

(a) Interest Rate Swaps for hedging underlying liability aggregate to Rs, 69,600.00 Lakhs (Previous Year Rs, 99,600.00 Lakhs).

(b) For underlying liability of Rs, NIL Lakhs (Previous Year Rs, 65,000.00 Lakhs), Coupon Swap has been entered into which remains unhedged in respect of movement in respective currencies affecting the coupon amount.

(c) Foreign currency exposure in respect of coupon linked with LIBOR that are not hedged by derivative instruments as on March 31, 2018 amount to Rs, NIL Lakhs (Previous Year Rs, 5.05 Lakhs)

Disclosures on Risk Exposure in Derivatives A. Qualitative Disclosure

Derivative policy of the Company specifies the exposure norms with respect to single counterparty and the total underlying amount at the time of entering into the new derivative contract.

8. Movement in Provision for contingencies as under:

a) Provision includes:

ii. Provision for doubtful advances and provision for probable loss on account of bank reconciliation differences.

* Provision on Standard Asset includes provision on Individual Housing Loan Rs, (1,267.87) lakhs (Previous Year Rs,2,358.10 lakhs), CRE-RH Rs, 1,598.34 lakhs (Previous Year Rs, 1,399.98 lakhs), CRE Rs, 561.07 lakhs (Previous Year Rs, 1,618.40 lakhs) and CRE Others of Rs, 2,338.89 lakhs (Previous Year Rs, 2,583.60 lakhs)

9. Fixed Deposits with Banks includes earmarked deposits created in favor of trustees for depositors towards maintaining Statutory Liquid Ratio amounting to Rs, 17,299.61 Lakhs (Previous Year Rs, 25,300 Lakhs). The Company has beneficial interest on the income earned from these deposits.

10. Miscellaneous income includes Rs, 4.89 Lakhs (Previous Year Rs, 4.06 Lakhs) being interest income on staff loans/advances, Rs, 192.21 Lakhs (Previous Year Rs, 196.87 Lakhs) being gain on unwinding of Interest rate SWAP, Rs, 108.13 Lakhs (Previous Year Rs, 117.06 Lakhs) being old outstanding and unclaimed amounts written back, Rs, 318.55 Lakhs (Previous year Rs, -353.19) being interest on income tax refund.

11. Temporary Book Overdraft of Rs, 506,424.24 Lakhs (Previous Year Rs, 573,975.61 Lakhs) represents cheques issued towards disbursements to borrowers for Rs, 504,823.65 Lakhs (Previous Year Rs, 572,827.36 Lakhs) and cheques issued for payment of expenses of Rs, 1,600.59 Lakhs (Previous Year Rs, 1,148.25 Lakhs), but not encashed as at March 31, 2018.

15. Proposed Dividend

The Board has recommended a dividend of Rs, 6.80 per share of Rs, 2/- each (340%) subject to approval of the members of the Company at the forthcoming Annual General Meeting.

16. The Company had requested its suppliers to confirm the status as to whether they are covered under the Micro, Small and Medium Enterprises Development Act, 2006. The disclosure relating to unpaid amount as at the year end together with interest paid / payable as required under the said Act have been given to the extent such parties could be identified on the basis of the information available with the company regarding the status of suppliers under MSMED Act, 2006. No interest has been paid/payable by the Company during the current year to the parties covered under the Micro, Small and Medium Enterprises Development Act, 2006.

17. Disclosure in respect of Employee Benefits:

In accordance with the Accounting Standard on (AS-15) - "Employee Benefits" the following disclosures have been made:

Provident Fund and Pension Fund Liability

The Company has recognized Rs, 1,356.48 Lakhs (Previous year Rs, 1,596.70 Lakhs) in the Statement of Profit and Loss towards contribution to Provident fund in respect of company employees. In respect of LIC employees on deputation who have opted for pension, Rs, 43.89 Lakhs (previous year Rs, 42.67 Lakhs) have been contributed towards LIC of India (Employees) Pension Rules, 1995.

Sick Leave

The Company has recognized Rs, 61.75 Lakhs (Previous year Rs, 264.37 Lakhs) in the Statement of Profit and Loss towards sick leave in respect of company employees.

18. Segment Reporting:

The Company is engaged in the business of providing loans for purchase, construction, repairs and renovation etc. of houses / flats to Individuals, Corporate Bodies, Builders and Co-operative Housing Societies and has its operations within India. Accordingly, there are no separate reportable segments, as per the Accounting Standard on ''Segment Reporting'' (AS 17) notified under the relevant provisions of the Act.

19. Related Party Disclosure:

a) Related Party Policy:

Related Party Policy is uploaded on the website of the Company and annexed to the Director Report.

b) Names of related parties:

(i) Enterprise having significant influence

Life Insurance Corporation of India

(ii) Subsidiaries

LICHFL Care Homes Limited LICHFL Financial Services Limited

LICHFL Asset Management Company Limited (Formerly known as LICHFL Asset Management Company Private Limited)

LICHFL Trustee Company Private Limited

(iii) Entity over which control exists LICHFL Urban Development Fund

(iv) Associates

LIC Mutual Fund Asset Management Limited (Formerly known as LIC Nomura Mutual Fund Asset Management Company Limited)

LIC Mutual Fund Trustee Private Limited (Formerly known as LIC Nomura Mutual Fund Trustee Company Private Limited)

(v) Key Management Personnel

Ms. Sunita Sharma, MD and Chief Executive Officer (From April 1, 2017 to April 11, 2017)

Mr. Vinay Sah, MD and Chief Executive Officer (From April 12, 2017)

*As the Provision for Performance Linked Incentive (PLI) and Leave encashment is accrued for the company as a whole and not decided individually, hence not included. However payment made during the financial year 2017-18 has been included.

**The amount includes Performance Linked Incentive (PLI) paid to Ms. Sunita Sharma ,Ex MD & CEO during the Financial year 2017-18 and salary paid to Mr. Vinay Sah, MD & CEO for financial year 2017-18.

20. Operating Leases:

The Company has taken various offices and residential premises on cancellable operating lease basis for periods which range from 11 to 180 months with an option to renew the lease by mutual consent on mutually agreeable terms. Lease payments recognized in the Statement of Profit and Loss for such premises are '' 2,953.93 Lakhs (Previous year '' 2,649.89 Lakhs).

22. Current Tax:

Provision for current tax is made on the basis of accounting practices consistently followed by the Company, including method of accounting for interest on loans and is after availing deduction under section 36(1)(viii) of the Income Tax Act, 1961. For the purpose of determining the quantum of deduction available under section 36(1)(viii), the methodology applied for the bifurcation of income and expenses for long term housing finance has been relied upon by the auditors.

24. Corporate Social Responsibility

Establishment and Other expenses includes Rs, 678.63 Lakhs for the year ended March 31, 2018 (Previous year Rs, 1,684.72 Lakhs) for contribution towards Corporate Social Responsibility(CSR) in accordance with Companies Act, 2013.

Details of CSR expenditure during the financial year

a) Gross amount required to be spent by the company during the year is Rs, 5,079.58 Lakhs (Previous Year Rs, 4,334.43 Lakhs).

b) Amount spent during the year:

Figures in bracket are in respect of the Previous Year

c) Details of related party transactions as per Accounting Standard (AS-18), "Related Party Disclosures" - Nil

d) No provision has been made for CSR expenditure by the company as on March 31, 2018 (Previous Year Nil).

* Net of Provisions

** Net of Investment diminutions and G-Sec taken at face value.

*** Commercial Paper & Zero Coupon Bond taken at face value.

25. Disclosure regarding penalty or adverse comments as per Housing Finance Companies (NHB) Directions, 2010 during the current year:

a. The Company has paid penalty of Rs, NIL to National Housing Bank (NHB) this year. A penalty of Rs, 2,000/- was paid in the Previous Year to National Housing Bank (NHB) for contravention of Policy Circular No. 30.

b. Observations of National Housing Bank (NHB) made in their Inspection Report with reference to the Company''s position as on 31/03/2016 and 31/03/2017 have been suitably addressed and compliance has been reported to NHB.

26. Draw Down from Reserves

Special Reserve has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961, out of the distributable profits of the Company. Special Reserve No. I relates to the amounts transferred upto the Financial Year 199697, whereas Special Reserve No. II relates to the amounts transferred thereafter. In the current financial year Rs, 55,999.00 Lakhs (Previous year Rs, 56,999.00 Lakhs) has been transferred to Special Reserve No. II in terms of Section 36(1)(viii) of the Income tax Act, 1961 and an amount of Rs, 1.00 Lakhs (Previous Year Rs, 1.00 Lakhs) to Statutory Reserve under Section 29C the NHB Act.

As per National Housing Bank''s (NHB) circular vide circular NHB(ND)/DRS/Pol. 62/2014 dated 27th May, 2014, the Company has adjusted the opening balance of reserves for creation of Deferred Tax Liability (DTL) on the Special Reserve as at 1^st April, 2014 created under Section 36(1)(viii) of the Income tax Act, 1961.

27. Miscellaneous

28 Registration obtained from other financial sector regulators:

The Company was incorporated under the Companies Act, 1956 on 19^th June, 1989 and is governed by Companies Act, 2013. It is regulated by NHB and registered under section 29A of the NHB Act, 1987. Apart from this , the Company is not registered under any other financial regulators.

29 Rating assigned by Credit Rating Agencies and migration of rating during the year:

"CRISIL AAA/ Stable" by CRISIL, "CARE AAA" by CARE & "ICRA A1 " by ICRA. This rating indicates the highest degree of safety regarding timely payment of interest and principal. There is no change in rating during the year.

30 Remuneration of Directors.

The Independent Directors of the Company receive only sitting fees for attending the Board / Committee meetings and they do not have any other material or pecuniary relationships or transaction with the Company, its Promoters, its Directors, Management, Subsidiaries or Associate.

The details of sitting fees paid to Non-Executive Directors (other than LIC Nominee Directors) has been mentioned in Corporate Governance Report forming part of the Annual Report.

31 Management

Management Discussion and Analysis report containing Industry structure and developments, opportunities and threats, segment-wise or product-wise performance, outlook, risks and concerns, internal control systems and their adequacy, discussion on financial performance with respect to operational performance, material developments in HR/Industrial Relations including number of people employed, etc., forming part of a separate section of the Annual Report.

32. Revenue Recognition

Revenue recognition is as per the Accounting Policy mentioned under Significant Accounting Policies. There have been no instances wherein revenue recognition has been postponed pending resolution of significant uncertainties.

33. Net Profit or Loss for the period, prior period items and changes in accounting policies

There are no prior period items that have impact on the current year''s profit and loss.

34. The additional Information pursuant to Schedule III to the Companies Act, 2013 are either Nil or Not Applicable.

35. The previous year figures have been reclassified / regrouped / restated to conform to current year''s classification.

Mar 31, 2017

NOTES TO ACCOUNTS

1. a) Estimated amounts of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs, 55.44 Lakhs (Previous year Rs, 54.25 Lakhs).

b) Other Commitments: Uncalled liability of Rs, 316.00 Lakhs (Previous Year Rs, 663.50 Lakhs) in respect of commitment made for contribution to LICHFL Urban Development Fund by subscription of 50,000 units (previous year 50,000 units) of Rs, 10,000/- face value each, paid up value being Rs, 7,287.40/-(previous year Rs, 7,848.32/-) each.

2. Contingent liabilities in respect of :

a) Claims against the Company not acknowledged as debts Rs, 51.02 Lakhs (Previous Year Rs, 130.19 Lakhs).

b) On completion of income tax assessment, the Company had received a demand of Rs, 347.76 Lakhs- (including interest of Rs, 20.39 Lakhs) for A.Y. 2003-04, Rs, 2,217.31Lakhs (including interest of Rs, 721.90Lakhs) for A.Y. 2004-05 against which the Company received refund of Rs, 220.38 Lakhs, Rs, 3,571.94 Lakhs (including interest of Rs, 667.94 Lakhs) against which Rs, 1,951.62 Lakhs was paid under protest for A.Y. 2005-06, Rs, 2,385.58 Lakhs (including interest of Rs, 138.71 Lakhs) against which the Company received refund of Rs, 137.47 Lakhs for A.Y. 2006-07 and Rs, 1,503.40 Lakhs (including interest of Rs, 633.94 Lakhs ) for A.Y. 2007-08. The said amounts are disputed and the Company has preferred an appeal against the same. The amounts for the respective years have been paid to the credit of the Central Govt. under protest.

3. (i) Retail / Project Loans are secured by any or all of the following as applicable, based on their categorization :

a) Equitable / Registered Mortgage of Property.

b) Assignment of Life Insurance Policies, NSC, KVP, FD of Nationalized Bank.

c) Assignment of Lease Rent Receivables.

d) Company Guarantees or Personal Guarantees.

e) Negative lien

f) Undertaking to create a security.

(ii) Loans to employees other than for Housing are secured by lien over Provident Fund balances and / or Hypothecation of Vehicles.

4. Housing Loans include loans amounting to Rs, 4,138.11 Lakhs (Previous year Rs, 4,198.16 Lakhs) against which the company has taken possession of the properties under Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and held such properties for disposal. The value of assets possessed against the loan is Rs, 5,735.38 Lakhs (Previous year Rs, 5,897.10 Lakhs), being lower of the fair value of the asset possessed and the outstanding as at March 31, 2017.

5. Advances

a. Details of Single Borrower Limit ( SGL) / Group Borrower Limit (GBL ) exceeded by the HFC:

(a) Interest Rate Swaps for hedging underlying liability aggregate to Rs, 99,600.00 Lakhs (Previous Year Rs, 119,600.00 Lakhs).

(b) For underlying liability of '' 65,000.00 Lakhs (Previous Year '' 65,000.00 Lakhs), Coupon Swap has been entered into which remains unheeded in respect of movement in respective currencies affecting the coupon amount.

(c) Foreign currency exposure in respect of coupon linked with LIBOR that are not hedged by derivative instruments as on March 31, 2017 amount to Rs, 5.05 Lakhs (Previous Year Rs, 2.83 Lakhs).

Disclosures on Risk Exposure in Derivatives A. Qualitative Disclosure

Derivative policy of the Company specifies the exposure norms with respect to single counterparty and the total underlying amount at the time of entering into the new derivative contract.

The Asset Liability Management Committee (ALCO) of the Company oversees efficient management of risk associated with derivative transactions. Company identifies, measures, monitors the exposure associated with derivative transaction. For effective mitigation of risk it has an internal mechanism to conduct regular review of the outstanding contracts which is reported to the ALCO & Risk Management Committee of the Board which in turn reports to the Audit Committee and to the Board of Directors. The gain realized on early termination of swap is to be amortized over the balance tenor of the swap or underlying liability whichever is less. Loss if any on early termination is to be charged to revenue in the same year. The carry difference, between coupon rate liability and the swap contract rate is to be accounted quarterly on accrual basis

9. Fixed Deposits with Banks includes earmarked deposits created in favor of trustees for depositors towards maintaining Statutory Liquid Ratio amounting to Rs, 25,300 Lakhs (Previous Year Rs, 8,190.20 Lakhs). The Company has beneficial interest on the income earned from these deposits.

10. Miscellaneous income includes Rs, 4.06 Lakhs (Previous Year Rs, 4.18 Lakhs) being interest income on staff loans/advances, Rs, 196.87 Lakhs (Previous Year Rs, 381.37 Lakhs) being gain on unwinding of Interest rate SWAP, Rs, 117.06 Lakhs (Previous Year Rs, 80.45 Lakhs) being old outstanding and unclaimed amounts written back, (-)353.19 Lakhs (Previous year Rs, Nil) being the reversal of interest on income tax refund.

11. Temporary Book Overdraft of Rs, 573,975.61 Lakhs (Previous Year Rs, 385,305.58 Lakhs) represents cheques issued towards disbursements to borrowers for Rs, 572,827.36 Lakhs (Previous Year Rs, 383,975.90 Lakhs) and cheques issued for payment of expenses of Rs, 1,148.25 Lakhs (Previous Year Rs, 1,329.68 Lakhs), but not encased as at March 31, 2017.

12. Proposed Dividend

The Board has recommended a dividend of Rs, 6.20 per share of Rs, 2/- each (310%) subject to approval of the members of the Company at the forthcoming Annual General Meeting.

13. The Company had requested its suppliers to confirm the status as to whether they are covered under the Micro, Small and Medium Enterprises Development Act, 2006. The disclosure relating to unpaid amount as at the year end together with interest paid / payable as required under the said Act have been given to the extent such parties could be identified on the basis of the information available with the company regarding the status of suppliers under MSMED Act, 2006. No interest has been paid/payable by the Company during the current year to the parties covered under the Micro, Small and Medium Enterprises Development Act, 2006.

14. Disclosure in respect of Employee Benefits:

In accordance with the Accounting Standard on (AS-15) - "Employee Benefits" the following disclosures have been made:

Provident Fund and Pension Fund Liability

The Company has recognized Rs, 1,596.70 Lakhs (Previous year Rs, 860.99 Lakhs) in the Statement of Profit and Loss towards contribution to Provident fund in respect of company employees. In respect of LIC employees on deputation who have opted for pension, Rs, 42.67 Lakhs (previous year Rs, 92.55 Lakhs) have been contributed towards LIC of India (Employees) Pension Rules, 1995.

The estimates of future salary increases, considered in actuarial valuation, include inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market. The above information is certified by the actuary and relied upon by the Auditors.

*Exclusive of Amount Rs, 0.68 Lakhs (previous year Rs, 28.34 Lakhs) towards additional provision made for LIC employees.

Sick Leave

The Company has recognized Rs, 264.37 Lakhs (Previous year Rs, 161.00 Lakhs) in the Statement of Profit and Loss towards sick leave in respect of company employees.

15. In accordance with the Payment of Bonus (Amendment) Act, 2015, due to increase in the eligibility and ceiling limit, provision of Rs, 31.16 (Previous Year Rs, 65.02 Lakhs) has been provided for the year ended March 31, 2017.

16. Segment Reporting:

17) notified under the relevant provisions of the Act.

18 Related Party Disclosure:

a) Related Party Policy:

Related Party Policy is uploaded on the website of the Company and annexed to the Director Report.

b) Names of related parties:

(i) Enterprise having significant influence Life Insurance Corporation of India

(ii) Subsidiaries

LICHFL Care Homes Limited LICHFL Financial Services Limited

LICHFL Asset Management Company Limited (Formerly known as LICHFL Asset Management Company Private Limited)

LICHFL Trustee Company Private Limited

(iii) Entity over which control exists LICHFL Urban Development Fund

(iv) Associates

LIC Mutual Fund Asset Management Limited (Formerly known as LIC Nomura Mutual Fund Asset Management Company Limited)

LIC Mutual Fund Trustee Private Limited (Formerly known as LIC Nomura Mutual Fund Trustee Company Private Limited)

(v) Key Management Personnel

Ms. Sunita Sharma, MD and Chief Executive Officer (Till April 11, 2017)

Mr. Vinay Sah, MD and Chief Executive Officer (From April 12, 2017)

19. Current Tax:

Provision for current tax is made on the basis of accounting practices consistently followed by the Company, including method of accounting for interest on housing loans and is after availing deduction under section 36(1)(viii) of the Income Tax Act, 1961. For the purpose of determining the quantum of deduction available under section 36(1)(viii), the methodology applied for the bifurcation of income and expenses for long term housing finance has been relied upon by the auditors.

20. Corporate Social Responsibility

Establishment and Other expenses includes Rs, 1,684.72 Lakhs for the year ended March 31, 2017 (Previous year Rs, 1,423.82 Lakhs) for contribution towards Corporate Social Responsibility(CSR) in accordance with Companies Act, 2013.

Details of CSR expenditure during the financial year

a) Gross amount required to be spent by the company during the year is Rs, 4,334.43 Lakhs (Previous Year Rs, 3,540.00 Lakhs).

b) Amount spent during the year:

Figures in bracket are in respect of the Previous Year

c) Details of related party transactions as per Accounting Standard (AS-18), "Related Party Disclosures" - Nil

d) No provision has been made for CSR expenditure by the company as on March 31, 2017 (Previous Year Rs, 343.76 Lakhs).

21. Concentration of Public Deposits, Advances, Exposures and NPAs

22 Concentration of Public Deposits (for Public Deposit taking/holding HFCs)

* Net of Provisions

** Net of Investment diminutions and G-Sec taken at face value.

*** Commercial Paper & Zero Coupon Bond taken at face value.

23. Disclosure regarding penalty or adverse comments as per Housing Finance Companies (NHB) Directions, 2010 during the current year:

a. The Company has paid penalty of Rs,2,000/- to National Housing Bank (NHB) for contravention of Policy Circular No. 30.

b. Observations of National Housing Bank (NHB) made in their Inspection Report with reference to the Companyâs position as on 31/03/2015 and 31/03/2016 have been suitably addressed and compliance has been reported to NHB.

24. Draw Down from Reserves

Special Reserve has been created over the years in terms of Section 36(1)(viii) of the Income-tax Act, 1961, out of the distributable profits of the Company. Special Reserve No. I relates to the amounts transferred upto the Financial Year 199697, whereas Special Reserve No. II relates to the amounts transferred thereafter. In the current financial year Rs,56,999.00 Lakhs (Previous year Rs,49,999.00 Lakhs) has been transferred to Special Reserve No. II in terms of Section 36(1)(viii) of the Income tax Act, 1961 and an amount of Rs,1.00 Lakhs (Previous Year Rs,1.00 Lakhs) to Statutory Reserve under Section 29C the NHB Act.

As per National Housing Bank''s (NHB) circular vide circular NHB(ND)/DRS/Pol. 62/2014 dated 27^th May, 2014, the Company has adjusted the opening balance of reserves for creation of Deferred Tax Liability (DTL) on the Special Reserve as at 1^st April, 2014 created under Section 36(1)(viii) of the Income tax Act, 1961.

25. The additional information pursuant to NHB Notification No. NHB.HFC.CG-DIR.1/MD&CEO/2016 - "Housing Finance Companies - Corporate Governance (National Housing Bank) Directions, 2016" are either Nil or Not Applicable.

26. Miscellaneous

27 Registration obtained from other financial sector regulators:

The Company was incorporated under the Companies Act, 1956 on 19^th June, 1989 and is governed by Companies Act,

2013. It is regulated by NHB and registered under section 29A of the NHB Act, 1987. Apart from this , the Company is not registered under any other financial regulators.

28 Rating assigned by Credit Rating Agencies and migration of rating during the year:

"CRISIL AAA/ Stable" by CRISIL & "CARE AAA" by CARE. This rating indicates the highest degree of safety regarding timely payment of interest and principal. There is no change in rating during the year.

29 Remuneration of Directors.

The details of sitting fees paid to Non-Executive Directors (other than LIC Nominee Directors) has been mentioned in Corporate Governance Report forming part of the Annual Report.

30 Management

31 Revenue Recognition

Revenue recognition is as per the Accounting Policy mentioned under Significant Accounting Policies.

32 Accounting Standard 21 - Consolidated Financial Statements (CFS)

The Consolidated Financial Statements is prepared in accordance with Accounting Standard 21 "Consolidated Financial Statements" issued by ICAI and notified under the relevant Provision of the Companies Act, 2013.

The detailed note is included under Significant Accounting Policies and Notes to Accounts of the Consolidated Financial Statements.

33. The additional Information pursuant to Schedule III to the Companies Act, 2013 are either Nil or Not Applicable.

34 The previous year figures have been reclassified / regrouped / restated to conform to

Mar 31, 2016

1. a) Estimated amounts of contracts remaining to be executed on capital account and not provided for (net of advances) are Rs. 54.25 Lacs (Previous Year Rs. 554.40 Lacs).

b) Other Commitments: Uncalled liability of Rs. 663.50 Lacs (Previous Year Rs. 3,125.00 Lacs) in respect of commitment made for contribution to LICHFL Urban Development Fund by subscription of 50,000 units (Previous Year 50,000 units) of Rs. 10,000/- face value each, paid up value being Rs. 7,848.32 (Previous Year Rs. 3,750/-) each.

2. Contingent liabilities in respect of :

a) Claims against the Company not acknowledged as debts Rs. 130.19 Lacs (Previous Year Rs. 289.04 Lacs).

b) On completion of income tax assessment, the Company had received a demand of Rs. 347.76 Lacs- (including interest of Rs. 20.39 Lacs) for A.Y. 2003-04, Rs. 2,217.31 Lacs (including interest of Rs. 721.90 Lacs) for A.Y. 2004-05 against which the Company received refund of Rs. 220.38 Lacs, Rs. 3,571.94 Lacs (including interest of Rs. 667.94 Lacs) against which Rs. 1,951.62 Lacs was paid under protest for A.Y. 2005-06, Rs. 2,385.58 Lacs (including interest of Rs. 138.71 Lacs) against which the Company received refund of Rs. 137.47 Lacs for A.Y. 2006-07 and Rs. 1,503.40 Lacs (including interest of Rs. 633.94 Lacs ) for A.Y. 2007-08. The said amounts are disputed and the Company has preferred an appeal against the same. The amounts for the respective years have been paid to the credit of the Central Govt. under protest.

3. (i) Retail / Project Loans are secured by any or all of the following as applicable, based on their categorisation:

a) Equitable / Registered Mortgage of Property.

b) Assignment of Life Insurance Policies, NSC, KVP, FD of Nationalized Bank.

c) Assignment of Lease Rent Receivables.

d) Company guarantees or personal guarantees.

e) Negative lien.

f) Undertaking to create a security.

(ii) Loans to employees other than for Housing are secured by lien over Provident Fund balances and / or Hypothecation of Vehicles.

4. Housing Loans include loans amounting to Rs. 4,198.16 Lacs (Previous Year Rs. 3,643.06 Lacs) against which the company has taken possession of the properties under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and held such properties for disposal. The fair value of assets possessed against the loan is Rs.5,897.10 Lacs (Previous Year Rs. 3,427.77 Lacs), being lower of the fair value of the asset possessed and the outstanding due under the loans as at March 31, 2016.

5. Movement in Provision for contingencies and diminution in the value of investments are as under:

a) Provision includes:

i. Provision for untapped corporate undertaking given for securitization of housing loans. The outflows in respect of untapped corporate undertaking would arise in the event of a shortfall, if any, in the cash flows of the pool of the securitized receivables, and

ii. Provision for doubtful advances and provision for probable loss on account of bank reconciliation differences.

6. Fixed Deposits with Banks includes earmarked deposits created in favor of trustees for depositors towards maintaining Statutory Liquid Ratio amounting to Rs. 8,190.20 Lacs (Previous Year Rs. 17,033.05 Lacs). The Company has beneficial interest on the income earned from these deposits.

7. Miscellaneous income includes Rs. 4.18 Lacs (Previous Year Rs. 3.39 Lacs) being interest income on staff loans/advances, Rs. 381.37 Lacs (Previous Year Rs. 392.06 Lacs) being gain on unwinding of Interest rate SWAP, Rs. 80.45 Lacs (Previous Year Rs. 98.95 Lacs) being old outstanding and unclaimed amounts written back, Nil (Previous Year Rs. 350.73 Lacs) being interest on income tax refund.

8. Temporary Book Overdraft of Rs. 385,305.58 Lacs (Previous Year Rs. 287,159.72 Lacs) represents cheques issued towards disbursements to borrowers for Rs. 383,975.90 Lacs (Previous Year Rs. 286,111.34 Lacs) and cheques issued for payment of expenses of Rs. 1,329.68 Lacs (Previous Year Rs. 1,048.38 Lacs), but not encashed as at March 31, 2016.

9. The Company had requested its suppliers to confirm the status as to whether they are covered under the Micro, Small and Medium Enterprises Development Act, 2006. The disclosure relating to unpaid amount as at the year end together with interest paid / payable as required under the said Act have been given to the extent such parties could be identified on the basis of the information available with the Company regarding the status of suppliers under MSMED Act, 2006. No interest has been paid/payable by the Company during the current year to the parties covered under the Micro, Small and Medium Enterprises Development Act, 2006.

10. Derivative Instruments:

(a) Interest Rate Swaps for hedging underlying liability aggregate to Rs. 119,600.00 Lacs (Previous Year Rs. 119,600.00 Lacs).

(b) For underlying liability of Rs. 65,000.00 Lacs (Previous Year Rs. 65,000.00 Lacs), Coupon Swap has been entered into which remains unhedged in respect of movement in respective currencies affecting the coupon amount.

(c) The Company as on March 31, 2016 had outstanding interest rate and coupon swaps covering the underlying liability aggregating to Rs. 184,600.00 Lacs (Previous Year Rs. 184,600.00 Lacs). The Mark to Market value of all such Swaps as at March 31, 2016 was negative to the extent of Rs. 3,345.39 Lacs (Previous Year Rs. 5,292.11 Lacs).

(d) Foreign currency exposure in respect of coupon linked with LIBOR that are not hedged by derivative instruments as on March 31, 2016 amount to Rs. 2.83 Lacs (Previous Year Rs. 1.16 Lacs).

11. Disclosure in respect of Employee Benefits:

In accordance with the Accounting Standard on (AS-15) Â "Employee Benefits" the following disclosures have been made:

Provident Fund and Pension Fund Liability

The Company has recognized Rs. 860.99 Lacs (Previous Year Rs. 747.76 Lacs) in the Statement of Profit and Loss towards contribution to Provident fund in respect of company employees. In respect of LIC employees on deputation who have opted for pension, Rs. 92.55 Lacs (Previous Year Rs. 22.63 Lacs) have been contributed towards LIC of India (Employees) Pension Rules, 1995.

Sick Leave

The Company has recognized Rs. 161.00 Lacs (Previous Year Rs. 458.00 Lacs) in the Statement of Profit and Loss towards sick leave in respect of company employees.

12. Segment Reporting:

The Company is engaged in the business of providing loans for purchase, construction, repairs and renovation etc. of houses / fats to Individuals, Corporate Bodies, Builders and Co-operative Housing Societies and has its operations within India. Accordingly, there are no separate reportable segments, as per the Accounting Standard on ''Segment Reporting'' (AS-17) notified under the relevant provisions of the Act.

13. Related Party Disclosure:

a) Names of related parties:

(i) Enterprise having significant influence

Life Insurance Corporation of India

(ii) Subsidiaries

LICHFL Care Homes Ltd.

LICHFL Financial Services Ltd.

LICHFL Asset Management Company Ltd. (Formerly known as LICHFL Asset Management Company Private Ltd.)

LICHFL Trustee Company Private Ltd.

(iii) Entity over which control exists

LICHFL Urban Development Fund

(iv) Associate

LIC Nomura Mutual Fund Asset Management Company Ltd. (Formerly Known as LIC Mutual Fund Asset Management Company Ltd.)

(v) Key Management Personnel

Ms. Sunita Sharma, MD and Chief Executive Officer

14. Operating Leases:

The Company has taken various offices and residential premises on cancellable operating lease basis for periods which range from 11 to 180 months with an option to renew the lease by mutual consent on mutually agreeable terms. Lease payments recognized in the Statement of Profit and Loss for such premises are Rs. 2,401.31 Lacs (Previous Year Rs. 2,153.54 Lacs).

15. Earnings per share:

Earnings per share is calculated by dividing the profit attributable to the equity shareholders by the weighted average number of equity shares outstanding during the year as under:

16. Current tax:

Provision for current tax is made on the basis of accounting practices consistently followed by the Company, including method of accounting for interest on housing loans and is after availing deduction under section 36(1)(viii) of the Income Tax Act, 1961. For the purpose of determining the quantum of deduction available under section 36(1)(viii), the methodology applied for the bifurcation of income and expenses for long term housing finance has been relied upon by the auditors.

17. Corporate Social Responsibility

Establishment and Other expenses includes Rs. 1,423.82 Lacs for the year ended March 31, 2016 (Previous Year Rs. 400.00 Lacs) contribution towards Corporate Social Responsibility(CSR) in accordance with Companies Act, 2013.

Details of CSR spent during the financial year

a) Gross amount required to be spent by the company during the year is Rs. 3,540.00 Lacs

b) Amount spent during the year on:

c) Details of related party transactions as per Accounting Standard (AS-18), "Related Party Disclosures" - Nil

d) An amount of Rs. 343.76 Lacs had been provided for by the company suo-motu as on March 31, 2016 which relates to the projects sanctioned during FY 2015-16 and the disbursement would be done subject to the receipt of a satisfactory feld visit report.

18. In accordance with the Payment of Bonus (Amendment) Act, 2015, due to increase in the eligibility and ceiling limit, provision of Rs. 60.95 Lacs has been provided for the year ended March 31, 2016. Further provision of Rs. 4.07 Lacs has been provided in respect of FY 2014-15 as per the said amendment.

19. Disclosure regarding provisions made for substandard, doubtful and loss assets and depreciation in investments as per the Prudential Norms contained in the Housing Finance Companies (NHB) Directions, 2010 as amended.

20. Disclosure regarding penalty or adverse comments as per Housing Finance Companies (NHB) Directions, 2010 during the current year:

a. The Company has not been imposed any penalty by National Housing Bank (NHB).

b. Observations of National Housing Bank (NHB) have been suitably addressed and compliance has been reported to NHB.

21. The additional Information pursuant to Schedule III to the Companies Act, 2013 are either Nil or Not Applicable.

22. The previous year figures have been reclassified / regrouped / restated to conform to current year''s classification.

Mar 31, 2015

1 Rights attached to equity shares

The Company has only one class of equity shares having a par value of Rs. 2/- per share. Each shareholder is eligible for one vote per share. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company, after distribution of all preferential amount, in proportion to their shareholdings.

2 The NCD are redeemable at par. The NCD are Secured by first pari passu floating charge by way of hypothecation of all current and future receivables, including book debts (to the extent of amounts payable to NCD holders) of the company, except to the extent of 5% of its receivables including book debts and as may be required under any law, regulations, guidelines or rules. In addition to above The NCD are secured by way of a pari passu mortgage and charge in favour of the Debenture trustees on the Company''s immovable property to the extent of Rs. 24.29 Lacs.

3 Zero Coupon Debentures (ZCD):

The ZCD are redeemable at Premium. The ZCD are Secured by first pari passu floating charge by way of hypothecation of all current and future receivables, including book debts (to the extent of amounts payable to the debenture holders) of the company, except to the extent of 5% of its receivables including book debts and as may be required under any law, regulations, guidelines or rules. In addition to above The NCD are secured by way of a pari passu mortgage and charge in favour of the Debenture trustees on the Company''s immovable property to the extent of Rs. 24.29 Lacs

4 a) Estimated amounts of contracts remaining to be executed on capital account and not provided for (net of advances) are Rs. 554.40 Lacs (Previous year Rs. 1,564.20 Lacs).

b) Other Commitments: Uncalled liability of Rs. 3125 Lacs (Previous Year Rs. 3565 Lacs) in respect of commitment made for contribution to LICHFL Urban development fund by subscription of 50000 units (previous year 50,000 units) of Rs. 10,000/- face value each, paid up value being Rs. 3750/-(previous year Rs. 2,870/-) each.

5 Contingent liabilities in respect of :

a) Claims against the Company not acknowledged as debts Rs. 289.04 Lacs (Previous Year Rs. 35.44Lacs).

b) On completion of income tax assessment, the Company had received a demand of Rs. 347.76 Lacs- (including interest of Rs. 20.39 Lacs) for A.Y 2003-04, Rs. 2,217.31 Lacs (including interest of Rs. 721.90 Lacs) for A.Y 2004-05 against which the Company received refund of Rs. 220.38 Lacs, Rs. 3,571.94 Lacs (including interest of Rs. 667.94 Lacs) against which Rs. 1,951.62 Lacs was paid under protest for A.Y. 2005-06, Rs. 2,385.58 Lacs (including interest of Rs. 138.71 Lacs against which the Company received refund of Rs. 137.47 for A.Y. 2006-07 and Rs. 1,503.40 Lacs (including interest of Rs. 633.94 Lacs) for A.Y. 2007-08. The said amounts are disputed and the Company has preferred an appeal against the same. The amounts for the respective years have been paid to the credit of the Central Govt. under protest.

6 (i) Retail / Project Loans are secured by any or all of the following as applicable, based on their categorisation :

a) Equitable / Registered Mortgage of Property.

b) Assignment of Life Insurance Policies, NSC, KVP, FD of Nationalized Bank.

c) Assignment of Lease Rent Receivables.

d) Company guarantees or personal guarantees.

e) Negative lien.

f) Undertaking to create a security.

(ii) Loans to employees other than for Housing are secured by lien over Provident Fund balances and / or Hypothecation of Vehicles.

7 Housing Loans include loans amounting to Rs. 3,643.06 Lacs (Previous year Rs. 2378.65 Lacs) against which the company has taken possession of the properties under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and held such properties for disposal. The fair value of assets possessed against the loan is Rs.3427.77 Lacs (Previous year Rs. 2,362.53 Lacs), being lower of the fair value of the asset possessed and the outstanding due under the loans as at March 31, 2015.

8 Movement in Provision for contingencies and diminution in the value of investments are as under:

a) Provision includes:

i. Provision for untapped corporate undertaking given for securitization of housing loans. The outflows in respect of untapped corporate undertaking would arise in the event of a shortfall, if any, in the cash flows of the pool of the securitized receivables, and

ii. Provision for doubtful advances and provision for probable loss on account of bank reconciliation differences.

8 Fixed Deposits with Banks includes earmarked deposits created in favour of trustees for depositors towards maintaining Statutory Liquid ratio amounting to Rs. 17033.05 Lacs (Previous Year Rs. 8650.30 Lacs). The Company has beneficial interest on the income earned from these deposits.

9 Miscellaneous income includes Rs. 3.39 Lacs (Previous Year Rs. 3.91 Lacs) being interest income on staff loans/advances, Rs. 392.06 Lacs (Previous Year Rs. 401.75 Lacs) being gain on unwinding of Interest rate SWAP, Rs. 98.95 Lacs (Previous Year Rs. 138.83 Lacs) being old outstanding and unclaimed amounts written back, Rs. 350.73 Lacs (Previous year 1947.09) being interest on income tax refund.

10 Temporary Book Overdraft of Rs. 287,159.72 Lacs (Previous Year Rs. 207,104.08 Lacs) represents cheques issued towards disbursements to borrowers for Rs. 286111.34 Lacs (Previous Year Rs. 206,213.92 Lacs) and cheques issued for payment of expenses of Rs. 1048.38 Lacs (Previous Year Rs. 890.16 Lacs), but not encashed as at March 31, 2015.

11 The Company had requested its suppliers to confirm the status as to whether they are covered under the Micro, Small and Medium Enterprises Development Act, 2006. The disclosure relating to unpaid amount as at the year end together with interest paid / payable as required under the said Act have been given to the extent such parties could be identified on the basis of the information available with the company regarding the status of suppliers under MSMED Act, 2006. No interest has been paid/payable by the Company during the current year to the parties covered under the Micro, Small and Medium Enterprises Development Act, 2006.

12 Derivative Instruments:

(a) Interest Rate Swaps for hedging underlying liability aggregate to Rs. 119,600.00 Lacs (Previous year Rs. 119,600.00 Lacs).

(b) For underlying liability of Rs. 65,000.00 Lacs (Previous Year Rs. 65,000.00 Lacs), Coupon Swap has been entered into which remains unhedged in respect of movement in respective currencies affecting the coupon amount.

(c) The Company as on March 31, 2015 had outstanding interest rate and coupon swaps covering the underlying liability aggregating to Rs. 184,600.00 Lacs (Previous year Rs. 184,600.00 Lacs). The Mark to Market value of all such Swaps as at March 31,2015 was negative to the extent of Rs. 5,292.11 Lacs (Previous Year Rs. 14503.79 Lacs).

(d) Foreign currency exposure in respect of coupon linked with LIBOR that are not hedged by derivative instruments as on March 31,2015 amount to Rs. 1.16 lacs.

13 Disclosure in respect of Employee Benefits:

In accordance with the Accounting Standard on (AS-15) - "Employee Benefits" the following disclosure have been made:

Provident Fund and Pension Fund Liability

The Company has recognised Rs. 747.76 lacs (Previous year Rs. 649.37 lacs) in the Statement of Profit and Loss towards contribution to Provident fund in respect of company employees. In respect of LIC employees on deputation who have opted for pension, Rs. 22.63 lacs (previous year Rs. 23.31 lacs) have been contributed towards LIC of India (Employees) Pension Rules, 1995.

14 Segment Reporting:

The Company is engaged in the business of providing loans for purchase, construction, repairs and renovation etc. of houses to Individuals, Corporate Bodies, Builders and Co-operative Housing Societies and has its operations within India. Accordingly, there are no separate reportable segments, as per the Accounting Standard on ''Segment Reporting'' (AS 17) notified underthe relevant provisions ofthe Act.

15 Operating Leases:

The Company has taken various offices and residential premises on cancelable operating lease basis for periods which range from 11 to 120 months with an option to renew the lease by mutual consent on mutually agreeable terms. Lease payments recognized in the Statement of Profit and Lossfor such premises are Rs. 2,153.54 Lacs (Previous year Rs. 1,854.29 Lacs).

16 Current tax:

Provision for current tax is made on the basis of accounting practices consistently followed by the Company, including method of accounting for interest on housing loans and is after availing deduction under section 36(1)(viii) of the Income Tax Act, 1961. For the purpose of determining the quantum of deduction available under section 36(1)(viii), the methodology applied for the bifurcation of income and expenses for long term housing finance has been relied upon by the auditors.

17 Disclosure regarding penalty or adverse comments as per Housing Finance Companies (NHB) Directions, 2010. During the current year, the Company has:

a. neither been imposed any penalty by National Housing Bank

b. nor received any adverse comments in writing from National Housing Bank on regulatory compliances.

18 The additional Information pursuant to Schedule III to the Companies Act, 2013 are either Nil or Not Applicable.

19 The previous year figures have been reclassified / regrouped / restated to conform to current year''s classification.

Mar 31, 2014

1. a) Estimated amounts of contracts remaining to be executed on capital account and not provided for (net of advances)

are Rs. 1,564.20 Lacs (Previous year Rs. 363.64 Lacs).

b) Other Commitments: Uncalled liability of Rs. 3,565 Lacs (Previous Year Rs. 4,000 Lacs) in respect of commitment made for contribution to LICHFL Urban development fund by subscription of 50,000 units (previous year 50,000 units) of Rs. 10,000/- face value each, paid up value being Rs. 2,870/-(previous year Rs. 2,000/-) each.

2. Contingent liabilities in respect of :

a) Corporate Undertaking Nil (Previous year Rs. 1,435.00 Lacs) for Securitization transactions.

b) Claims against the Company not acknowledged as debts Rs. 35.44 Lacs (Previous Year Rs. 23.38 Lacs).

c) The Company has received a demand of Rs. 1,145.56 Lacs, Rs. 1,122.06 Lacs (including interest of Rs. 88.99 Lacs), Rs. 347.76 Lacs (including interest of Rs. 20.39 Lacs), Rs. 2,217.31 Lacs (including interest of Rs. 721.90 Lacs), Rs. 3,571.94 Lacs (including interest of Rs. 667.94 Lacs), Rs. 2,385.58 Lacs (including interest of Rs. 138.71 Lacs) and Rs. 1,503.40 Lacs (including interest of Rs. 633.94 Lacs) on completion of income tax assessment for the assessment year 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 respectively. The said amounts are disputed and the Company has preferred an appeal against the same. The amounts for the respective years have been paid to the credit of the Central Govt. under protest.

3. (i) Retail / Project Loans are secured by any or all of the following as applicable, based on their categorisation :

a) Equitable / Registered Mortgage of Property.

b) Assignment of Life Insurance Policies, NSC, KVP, FD of Nationalized Bank.

c) Assignment of Lease Rent Receivables.

d) Company guarantees or personal guarantees.

e) Negative lien.

f) Undertaking to create a security.

(ii) Loans to employees other than for Housing are secured by lien over Provident Fund balances and / or Hypothecation of Vehicles.

4. Housing Loans include loans amounting to Rs. 2,378.65 Lacs (Previous year Rs. 1,757.68 Lacs) against which the company has taken possession of the properties under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and held such properties for disposal. The fair value of assets possessed against the loan is Rs. 3,819.28 Lacs (Previous year Rs. 2,727.79 Lacs), being lower of the fair value of the asset possessed and the outstanding due under the loans as at March 31, 2014.

5. Provision for contingencies includes:

a) Provision for untapped corporate undertaking given for securitization of housing loans. The outflows in respect of untapped corporate undertaking would arise in the event of a shortfall, if any, in the cash flows of the pool of the securitized receivables.

b) Provision for probable loss on account of bank reconciliation differences.

6. Fixed Deposits with Banks include Rs. 8,650.30 Lacs (Previous Year Rs. 5,650.30 Lacs) kept with designated banks for repay- ment to Public Deposit Holders. The Company has beneficial interest on the income earned from these deposits.

7. Miscellaneous income includes nil (Previous Year Rs. 15.97 Lacs) being management fee from Kotak India Real Estate Venture Fund, Rs. 3.91 Lacs (Previous Year Rs. 3.68 Lacs) being interest income on staff loans/advances, Rs. 401.75 Lacs (Previous Year Rs. 432.11 Lacs) being gain on unwinding of Interest rate SWAP, Rs. 138.83 Lacs (Previous Year Rs. 129.32 Lacs) being old outstanding and unclaimed amounts written back, Rs. 1,947.09 Lacs (Previous year Nil) being interest on income tax refund.

8. Temporary Book Overdraft of Rs. 207,104.08 Lacs (Previous Year Rs. 188,681.35 Lacs) represents cheques issued towards disbursements to borrowers for Rs. 206,213.92 Lacs (Previous Year Rs. 187,799.45 Lacs) and cheques issued for payment of expenses of Rs. 890.16 Lacs (Previous Year Rs. 881.90 Lacs), but not encashed as at March 31, 2014.

9. The Company had requested its suppliers to confirm the status as to whether they are covered under the Micro, Small and Medium Enterprises Development Act, 2006. The disclosure relating to unpaid amount as at the year end together with interest paid / payable as required under the said Act have been given to the extent such parties could be identified on the basis of the information available with the company regarding the status of suppliers under MSMED Act, 2006. No interest has been paid/payable by the Company during the current year to the parties covered under the Micro, Small and Medium Enterprises Development Act, 2006.

10. Derivative Instruments:

(a) Interest Rate Swaps for hedging underlying liability aggregate to Rs. 119,600.00 Lacs (Previous year Rs. 119,600.00 Lacs).

(b) For underlying liability of Rs. 65,000.00 Lacs (Previous Year Rs. 65,000.00 Lacs), Coupon Swap has been entered into which remains unhedged in respect of movement in respective currencies affecting the coupon amount.

(c) The Company as on March 31, 2014 had outstanding interest rate and coupon swaps covering the underlying liability aggregating to Rs. 184,600.00 Lacs (Previous year Rs. 184,600.00 Lacs). The Mark to Market value of all such Swaps as at March 31, 2014 was negative to the extent of Rs. 14,503.79 Lacs (Previous Year Rs. 13,160.70 Lacs).

11. Disclosure in respect of Employee Benefits:

In accordance with the Accounting Standard on Employee Benefits (AS-15) (Revised 2005) notified by Companies (Accounting Standards) Rules , 2006 , the following disclosure have been made :

Provident Fund and Pension Fund Liability

The Company has recognised Rs. 649.37 lacs (Previous year Rs. 533.75 lacs) in the Statement of Profit and Loss towards contribution to Provident fund in respect of company employees. In respect of LIC employees on deputation who have opted for pension, Rs. 23.31 lacs (Previous year Rs. 21.94 lacs) have been contributed towards LIC of India (Employees) Pension Rules, 1995.

12. Segment Reporting:

The Company is engaged in the business of providing loans for purchase, construction, repairs and renovation etc. of houses to Individuals, Corporate Bodies, Builders and Co-operative Housing Societies and has its operations within India. Accordingly, there are no separate reportable segments, as per the Accounting Standard on ''Segment Reporting'' (AS 17) issued by the Institute of Chartered Accountants of India / notified under the Companies (Accounting Standards) Rules, 2006.

13. Related Party Disclosure:

a) Names of related parties where control exists:

Name of the related party

(i) Subsidiaries

LICHFL Care Homes Ltd.

LICHFL Financial Services Ltd.

LICHFL Asset Management Company Ltd. (Formerly known as LICHFL Asset Management Company Private Ltd.)

LICHFL Trustee Company Private Ltd.

(ii) Entities over which control is exercised

LICHFL Urban Development Fund

b) Details of other related parties with whom transactions have taken place:

Name of the related party

(i) Enterprise having significant influence

Life Insurance Corporation of India

(ii) Associate

LIC Nomura Mutual Fund Asset Management Company Limited (Formerly Known as LIC Mutual Fund Asset Management Company Ltd.)

(iii) Key Management Personnel

Ms. Sunita Sharma , Managing Director and Chief Executive Officer (since November 2013) Mr. V.K. Sharma, Managing Director and Chief Executive Officer (upto October 2013)

14. Operating Leases:

The Company has taken various offices and residential premises on cancelable operating lease basis for periods which range from 11 to 120 months with an option to renew the lease by mutual consent on mutually agreeable terms. Lease payments recognized in the Statement of Profit and Loss for such premises are Rs. 1,854.29 Lacs (Previous year Rs. 1,717.49 Lacs).

15. Current tax:

Provision for current tax is made on the basis of accounting practices consistently followed by the Company, including method of accounting for interest on housing loans and is after availing deduction under section 36(1)(viii) of the Income Tax Act, 1961. For the purpose of determining the quantum of deduction available under section 36(1)(viii), the methodology applied for the bifurcation of income and expenses for long term housing finance has been relied upon by the auditors.

16. Disclosure regarding provisions made for substandard, doubtful and loss assets and depreciation in investments as per the Prudential Norms contained in the Housing Finance Companies (NHB) Directions, 2010 as amended.

17. Disclosure as per Clause 32 of the Listing Agreement :

Figures in bracket are in respect of the previous year.

a. Since the above loan is repayable on demand, there is no repayment schedule for the loan.

b. No interest is charged on the above loan. However, the provisions of section 372A of the Companies Act, 1956 are not applicable to above loan in view of the loan being given to the subsidiary of the company.

c. Loans and Advances to employees / customers and investments by such employees / customers in the shares of the Company, if any, are excluded from the above disclosure.

18. Disclosure regarding penalty or adverse comments as per Housing Finance Companies (NHB) Directions, 2010. During the current year, the Company has:

a. neither been imposed any penalty by National Housing Bank

b. nor received any adverse comments in writing from National Housing Bank on regulatory compliances.

19. The additional Information pursuant to revised Schedule VI to the Companies Act, 1956 are either Nil or Not Applicable.

20. The previous year figures have been reclassified / regrouped / restated to conform to current year''s classification.

Mar 31, 2013

1. a) Estimated amounts of contracts remaining to be executed on capital account and not provided for (net of advances) are Rs. 363.64 Lacs (Previous year Rs. 151.31 Lacs).

b) Other Commitments: Uncalled liability of Rs. 4,000 Lacs in respect of commitment made for contribution to LICHFL Urban development fund by subscription of 40,000 units (previous year nil) of Rs. 10,000.00 each.

2. Contingent liabilities in respect of:

a) Corporate Undertaking of Rs. 1,435.00 Lacs (Previous year Rs. 1,435.00 Lacs) for Securitization transactions.

b) Claims against the Company not acknowledged as debts Rs. 23.38 Lacs (Previous Year Rs. 5.93 Lacs).

c) The Company has received a demand of Rs. 1,145.56 Lacs, Rs. 1,122.06 Lacs (including interest of Rs. 88.99Lacs), Rs. 347.76 Lacs (including interest of Rs. 20.39 Lacs), Rs. 2,217.31 Lacs (including interest of Rs. 721.90 Lacs), Rs. 3,571.94 Lacs (including interest of Rs. 667.94 Lacs), Rs. 2,385.58 Lacs (including interest of Rs. 138.71 Lacs) and Rs. 1,503.40 Lacs (including interest of Rs. 633.94 Lacs) on completion of income tax assessment for the assessment year 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 respectively. The said amounts are disputed and the Company has preferred an appeal against the same. The amounts for the respective years have been paid to the credit of the Central Govt, under protest.

3. (i) Retail / Project Loans are secured by any or all of the following as applicable, based on their categorisation :

a) Equitable / Registered Mortgage of Property.

b) Assignment of Life Insurance Policies, NSC, KVR FD of Nationalized Bank.

c) Assignment of Lease Rent Receivables.

d) Company guarantees or personal guarantees.

e) Negative lien.

f) Undertaking to create a security.

(ii) Loans to employees other than for Housing are secured by lien over Provident Fund balances and / or Hypothecation of Vehicles.

4. Housing Loans include loans amounting to Rs. 1,757.68 Lacs (Previous year Rs. 2,246.22 Lacs) against which the company has taken possession of the properties under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and held such properties for disposal. The fair value of assets possessed against the loan is Rs. 2,727.79 Lacs (Previous year Rs. 2,080.89 Lacs), being lower of the fair value of the asset possessed and the outstanding due under the loans as at March 31, 2013.

5. Provision for contingencies includes:

a) Provision for untapped corporate undertaking given for securitization of housing loans. The outflows in respect of untapped corporate undertaking would arise in the event of a shortfall, if any, in the cash flows of the pool of,the securitized receivables.

b) Provision for probable loss on account of bank reconciliation differences.

6. During the previous year, pursuant to the shareholder''s approval in the Extraordinary General;#l6eting held on March 5, 2012 the Company had allotted 3,00,00,000 equity shares of face value of Rs. 2/- each at a premium of Rs. 268/- per share aggregating to Rs. 81,000.00 Lacs to Life Insurance Corporation of India, promoter of the Corrtpany''on a Preferential basis under lock-in period of three years, The said issue was made under chapter VIII of the Securittes aYid Exchange Board of India (Issue of Capital & Disclosure Requirements) Regulations, 2009 as amended.

7. Fixed Deposits with Banks include Rs. 5,650.30 Lacs (Previous Year Rs. 4,296.24 Lacs) kept With designated banks for repayment to Public Deposit Holders. The Company has beneficial interest on the income earned* from these deposits.

8. Miscellaneous income includes Rs. 15.97 Lacs (Previous Year Rs. 30.57 Lacs) being management fee from Kotak India Real Estate Venture Fund, 7 3.68 Lacs (Previous Year Rs. 3.04 Lacs) being interest income on staff loans/advances, Rs. 432.11 Lacs (Previous Year Rs. 537.77 Lacs) being gain on unwinding of Interest rate SWAR Rs. 129.32 Lacs (Previous Year Rs. 93.80 Lacs) being old outstanding and unclaimed amounts written back.

9. The Company had requested its suppliers to confirm the status as to whether they are covered under the Micro, Small and Medium Enterprises Development Act, 2006. The disclosure relating to unpaid amount as at the year end together with interest paid / payable as required under the said Act have been given to the extent such parties could be identified on the basis of the information available with the company regarding the status of suppliers under MSMED Act, 2006. No interest has been paid/payable by the Company during the current year to the parties covered under the Micro, Small and Medium Enterprises Development Act, 2006.

10. Derivative Instruments:

a) Interest Rate SWAP for hedging underlying liability aggregate to Rs. 1,19,600.00 Lacs (Previous year Rs. 1,34,600.00 Lacs).

b) For underlying liability of Rs. 65,000.00 Lacs (Previous year Rs. 65,000.00 Lacs), Coupon SWAP has been entered into which remains unhedged in respect of movement in respective currencies affecting the coupon amount.

c) The Company as on March 31, 2013 had outstanding interest rate and coupon SWAPs covering the underlying liability aggregating to Rs. 1,84,600.00 Lacs (Previous year Rs. 1,99,600.00 Lacs). The mark to market value of all such SWAPs as at March 31, 2013 was negative to the extent of Rs. 13,160.70 Lacs (Previous year Rs. 24,130.27 Lacs).

11. Disclosure In respect of Employee Benefits:

In accordance with the Accounting Standard on Employee Benefits (AS-15) (Revised 2005) notified by Companies (Accounting Standards) Rules, 2006, the following disclosure have been made :

Provident Fund and Pension Fund Liability

The Company has recognised Rs. 533.75 Lacs (Previous year X 434.30 Lacs) in the Statement of Profit and Loss towards contribution to Provident fund in respect of company employees. In respect of LIC employee on deputation who have opted for pension, Rs. 21.94 Lacs (previous year Rs. 22.39 Lacs) have been contributed towards LIC of India (Employees) Pension Rules, 1995.

12. Segment Reporting:

The Company is engaged in the business of providing loRs.tns for purchase, construction, repairs and renovation, etc. of houses to Individuals, Corporate Bodies, Builders and Co-operative Housing Societies and has its operations within India. Accordingly, there are no separate reportable segments, as per the Accounting Standard on ''Segment Reporting1 (AS 17) issued by the Institute of Chartered Accountants of India / notified under the Companies (Accounting Standards) Amendment Rules, 2011.

13. Operating Leases:

The Company has taken various offices and residential premises on cancelable operating lease basis for periods which range from 11 to 120 months with an option to renew the lease by mutual consent on mutually agreeable terms. Lease payments recognized in the Statement of Profit and-koss for such premises are Rs. 1,717.49 Lacs (Previous year Rs. 1,431.76 Lacs).

14. Current tax:

Provision for current tax is made on the basis of accounting practices consistently followed by the Company, including method of accounting for interest on housing loans and is after availing deduction under section 36(1)(viii) of the Income Tax Act, 1961. For the purpose of determining the quantum of deduction available under section 36(1)(vitl), the methodology applied for the bifurcation of income and expenses for long term housing finance has been relied upon by the auditors.

15. Disclosure regarding penalty or adverse comments as per Housing Finance Companies (NHB) Directions, 2010. During the current year, the Company has:

a. neither been imposed any penalty by National Housing Bank

b. nor received any adverse comments in writing from National Housing Bank on regulatory compliances.

16. The additional Information pursuant to revised Schedule VI to the Companies Act, 1956 are either Nil or Not Applicable.

17. The previous year figures have been reclassified / regrouped / restated to conform to current year''s classification.

Mar 31, 2012

1. Estimated amounts of contracts remaining to be executed on capital account and not provided for (net of advances) are Rs 151.31 Lacs (Previous year Rs 150.00 Lacs).

2. Contingent liabilities in respect of :

a) Corporate Undertaking of Rs 1,435.00 Lacs (Previous year Rs 1,435.00 Lacs) for Securitization transactions.

b) Claims against the Company not acknowledged as debts Rs 5.93 Lacs (Previous YearRs 8.38 Lacs).

c) The Company has received a demand of Rs 1,145.56 Lacs, Rs 1,122.06Lacs (including interest of Rs 88.99Lacs), Rs 347.76Lacs (including interest of Rs 20.39 Lacs), Rs 2,217.31 Lacs (including interest of Rs 721.90 Lacs), Rs 3,571.94 (including interest of Rs 667.94 Lacs), Rs 2,385.58 Lacs (including interest of Rs 138.71 Lacs) and Rs 1,503.40 Lacs (including interest of Rs 633.94 Lacs) on completion of income tax assessment for the assessment year 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 respectively. The said amounts are disputed and the Company has preferred an appeal against the same. The amounts for the respective years have been paid to the credit of the Central Govt. under protest.

3. (i) Retail / Project Loans are secured, wholly or partly, by any or all of the following as applicable, based on their categorisation :

a) Equitable / Registered Mortgage of Property.

b) Assignment of Life Insurance Policies, NSC, KVP FD of Nationalized Bank.

c) Assignment of Lease Rent Receivables.

d) Company guarantees or personal guarantees.

e) Negative lien.

f) Undertaking to create a security.

(ii) Loans to employees other than for Housing are secured by lien over Provident Fund balances and / or Hypothecation of Vehicles.

4. During the year, pursuant to the NHB Circulars dated August 5, 2011 and January 19, 2012 on provisioning norms, the Company had undertaken review of its provisioning policy on loans and inter-alia reassessed the identification, classification & provisioning on the loans for the current financial year. Based on this, the Company has aligned its provisioning policy with the extant guidelines and resultantly reversed excess provision over the NHB norms. Had the provisioning policy of the preceding year been continued, the profit before tax for the year ended March 31, 2012 would have been lower by Rs 11,704.33 Lacs.

5. Housing Loans include loans amounting to Rs 2,246.22 Lacs (Previous year Rs 939.49 Lacs) against which the company has taken possession of the properties under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and held such properties for disposal. Of this, fair value of the assets possessed, against the loans of Rs 5.48 Lacs (Previous year Rs 114.27 Lacs), is not available as at March 31, 2012. The balance loans amounting to Rs 2,240.73 Lacs (Previous year Rs 825.21 Lacs), have fair value of Rs 2,080.89 Lacs (Previous year Rs 781.01 Lacs), being lower of the fair value of the asset possessed and the outstanding due under the loans as at March 31, 2012.

6. Provision for contingencies includes:

a) Provision for untapped corporate undertaking given for securitization of housing loans. The outflows in respect of untapped corporate undertaking would arise in the event of a shortfall, if any, in the cash flows of the pool of the securitized receivables.

b) Provision for probable loss on account of bank reconciliation differences.

7. Pursuant to the shareholder's approval in the Extraordinary General Meeting held on March 5, 2012 the Company had allotted 30,000,000 equity shares of face value of Rs 2/- each at a premium of Rs 268/- per share aggregating to Rs 81,000/- Lacs to Life Insurance Corporation of India, promoter of the Company on a Preferential basis under lock-in period of three years, The said issue was made under chapter VIII of the Securities and Exchange Board of India (Issue of Capital & Disclosure Requirements) Regulations, 2009 as amended.

* For disbursement of housing loans to the individuals for construction / purchase of flat / house as per the norms of the Company, the funds so raised has also improved financial position, capital adequacy and net-worth etc.

8. Fixed Deposits with Banks include Rs 4,296.24 Lacs (Previous Year Rs 1,620.99 Lacs) kept with designated banks for repayment to Public Deposit Holders. The Company has beneficial interest on the income earned from these deposits.

9. Miscellaneous income includes Rs 30.57 Lacs (Previous Year Rs 47.96 Lacs) being management fee from Kotak India Real Estate Venture Fund, ' 3.04 Lacs (Previous Year Rs 2.97 Lacs) being interest income on staff loans/advances, Rs 537.77 Lacs (Previous Year Rs 606.08 Lacs) being gain on unwinding of Interest rate swap, Rs 93.80 Lacs (Previous Year Rs 75.89 Lacs) being old outstanding and unclaimed amounts written back, Rs Nil (Previous Year Rs 155.00 Lacs) being Investment written off realized.

10. Temporary Book Overdraft of Rs 131,991.56 Lacs (Previous Year Rs 109,258.92 Lacs) represents cheques issued towards disbursements to borrowers for Rs 130,749.10 Lacs (Previous Year Rs 108,182.65 Lacs) and cheques issued for payment of expenses of Rs1,242.47 Lacs (Previous Year Rs 1,076.27 Lacs), but not encashed as at March 31, 2012.

* includes 7,250 equity shares (previous year 1,450 equity shares) held by the custodian, which is the registered shareholder for all the owners of Company's GDR.

11. The Company had requested its suppliers to confirm the status as to whether they are covered under the Micro, Small and Medium Enterprises Development Act, 2006. The disclosure relating to unpaid amount as at the year end together with interest paid / payable as required under the said Act have been given to the extent such parties could be identified on the basis of the information available with the company regarding the status of suppliers under MSMED Act, 2006.

12. Derivative Instruments:

a) I nterest Rate SWAP for hedging underlying liability aggregate to Rs 134,600.00 Lacs (Previous year Rs 114,600.00 Lacs).

b) For underlying liability of Rs 65,000.00 Lacs (Previous year Rs 65,000.00 Lacs), Coupon Swap has been entered into which remains unhedged in respect of movement in respective currencies affecting the coupon amount.

c) The Company as on March 31, 2012 had outstanding interest rate and coupon swaps covering the underlying liability aggregating to Rs 199,600.00 Lacs (Previous year Rs 179,600.00 Lacs). The fair value of all such Swaps as at March 31,2012 was unfavorable to the extent of Rs 24,130.27 Lacs (Previous year Rs 19,136.00 Lacs).

Gratuity Premium is paid to LIC of India under Gratuity Scheme of LIC.

The Company's best estimate of contributions expected to be paid to the plan during the annual period beginning after March 31, 2012 is Rs 106.17 Lacs (Previous Year Rs 126.30 Lacs).

13. Segment Reporting:

The Company is engaged in the business of providing loans for purchase, construction, repairs and renovation. etc. of houses to Individuals, Corporate Bodies, Builders and Co-operative Housing Societies and has its operations within India. Accordingly, there are no separate reportable segments, as per the Accounting Standard on 'Segment Reporting' (AS 17) issued by the Institute of Chartered Accountants of India / notified under the Companies (Accounting Standards) Amendment Rules, 2011.

*During the year investment in unsecured convertible debentures & advances given to LICHFL Asset Management Co. Ltd. were converted into fully paid up equity shares of LICHFL Asset Management Co. Ltd. at par (face value of Rs 10).

**As the Provision for Performance Linked Incentive (PLI) is accrued for the company as a whole and not decided individually, hence not included.

14. Operating Leases:

The Company has taken various offices and residential premises on cancellable operating lease basis for periods which range from 11 to 120 months with an option to renew the lease by mutual consent on mutually agreeable terms. Lease payments recognized in the Profit and Loss Account for such premises are Rs 1,431.76 Lacs (Previous year Rs 1,269.35 Lacs).

15. Current tax:

Provision for current tax is made on the basis of accounting practices consistently followed by the Company, including method of accounting for interest on housing loans and is after availing deduction under section 36(1)(viii) of the Income Tax Act, 1961. For the purpose of determining the quantum of deduction available under section 36(1)(viii), the methodology applied for the bifurcation of income and expenses for long term housing finance has been relied upon by the auditors.

16. The additional Information pursuant to revised Schedule VI to the Companies Act, 1956 are either Nil or Not Applicable.

17. The financial statements for the year ended March 31, 2011 were prepared as per the then applicable, Schedule VI to the Companies Act, 1956. Consequent to the notification of Revised Schedule VI under the Companies Act, 1956, the financial statements for the year ended March 31, 2012 are prepared in compliance with the Revised Schedule VI. Accordingly, the previous year figures have also been reclassified / regrouped / restated to conform to current year's classification. The adoption of Revised Schedule VI for previous year figures does not impact recognition and measurement principles followed for preparation of the financial statements.

18. Disclosure regarding penalty or adverse comments as per Housing Finance Companies (NHB) Directions, 2010. During the current year, the Company has:

a. neither been imposed any penalty by National Housing Bank

b. nor received any adverse comments in writing from National Housing Bank on regulatory compliances.

Figures in bracket are in respect of the previous year.

a. Since the above loans are repayable on demand, there is no repayment schedule for these loans.

b. No interest is charged on the above loans. However, the provisions of section 372A of the Companies Act, 1956 are not applicable to above loans in view of the loanees being subsidiaries of the company.

c. Loans and Advances to employees / customers and investments by such employees / customers in the shares of the Company, if any, are excluded from the above disclosure.

Mar 31, 2011

1. Estimated amounts of contracts remaining to be executed on capital account and not provided for (net of advances) are Rs.15,000,000 (Previous year Rs.13,601,880).

2. Contingent liabilities in respect of :

a) Corporate Undertaking of Rs.143,500,000 (Previous year Rs.143,500,000) for Securitization transactions.

b) Claims against the Company not acknowledged as debts Rs.837,732 (Previous year Rs.620,367).

c) The Company has received a demand of Rs.35,00,000, Rs.2,78,45,437 (including interest of Rs.82,68,945), Rs.6,33,61,000 (including interest of Rs.1,06,36,607), Rs.2,08,00,000, Rs.9,36,81,691 (including interest of Rs.7,21,90,337), Rs.35,71,94,000 (including interest of Rs.6,67,93,988), Rs.23,85,58,159 (including interest of Rs.1,38,71,157) and Rs.33,10,50,489 on completion of income tax assessment for the assessment years1999-00, 2001-02, 2002-03, 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 respectively. The said amounts are disputed and the Company has preferred an appeal against the same. The amounts for the respective years have been paid under protest to the Central Government.

3. (i) Retail / Project Loans are secured, wholly or partly, by any or all of the following as applicable, based on their categorization :

a) Equitable / Registered Mortgage of Property

b) Assignment of Life Insurance Policies, NSC, KVP, FD of Nationalized Bank

c) Assignment of Lease Rent Receivables

d) Company guarantees or personal guarantees

e) Negative lien

f) Undertaking to create a security

(ii) Loans to employees other than for Housing are secured by lien over Provident Fund balances and / or Hypothecation of Vehicles.

4. As per NHB Circular dated December 24, 2010 provision @2% is required on Teaser Loans (Standard). In order to comply with this circular, the Company vide its letter dated March 22, 2011 has sought clarification from NHB about the treatment of loans under different schemes as teaser loans, which is awaited. Based on Companys assessment, Retail Loans with outstanding balance of Rs.1,284,042.02 lacs (previous period Rs.Nil) have been classified as Teaser Loans (Standard) and provision of Rs.25,680.84 lacs (previous period Rs.Nil) has been made.

5. Housing Loans include loans amounting to Rs.93,948,812 (Previous year Rs.95,116,460) against which the Company has taken possession of the properties under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and held such properties for disposal. Of this, fair value of the assets possessed, against the loans of Rs.11,427,401 (Previous year Rs.16,794,754), is not available as at March 31, 2011. The balance loans amounting to Rs.82,521,411 (Previous year Rs.78,321,705), have fair value of Rs.78,100,730 (Previous year Rs.75,010,517), being lower of the fair value of the asset possessed and the outstanding due under the loans as at March 31, 2011.

6. Provision for contingencies includes:

a) Provision for untapped corporate undertaking given for securitization of housing loans. The outflows in respect of untapped corporate undertaking would arise in the event of a shortfall, if any, in the cash flows of the pool of the securitized receivables.

7. The Company has sold 1730 equity shares of Rs.10/- each of LIC Mutual Fund Asset Management Company Limited and 2000 equity shares of Rs.10/- each of LIC Mutual Fund Trustee Company Private Limited to Nomura Asset Management Strategic Investment Pte. Ltd. for a total consideration of Rs.1,384,092,086. Profit on sale of these equity shares amounting to Rs.1,351,822,428 is included under Income from Investment.

8. Fixed Deposits with Banks include Rs.162,099,208 (Previous Year Rs.12,099,208) kept with designated banks for repayment to Public Deposit Holders. The Company has beneficial interest on the income earned from these deposits.

9. Miscellaneous income includes Rs.4,795,758 (Previous Year Rs.5,000,000) being management fee from Kotak India Real Estate Venture Fund, Rs.297,412 (Previous Year Rs.203,288) being interest income on staff loans/advances, Rs.60,608,310 (Previous Year Rs.66,205,419) being gain on unwinding of Interest rate swap, Rs.7,588,729 (Previous Year Rs.6,365,491) being old outstanding and unclaimed amounts written back, Rs.15,500,000 (Previous Year Rs. NIL) being Investment written off realized.

10. Temporary Book Overdraft of Rs.10,925,892,271 (Previous Year Rs.8,660,552,460) represents cheques issued towards disbursements to borrowers for Rs.10,818,265,123 (Previous Year Rs.8,495,884,847) and cheques issued for payment of expenses of Rs.107,627,148 (Previous Year Rs.164,667,613), but not encashed as at March 31, 2011.

11. The Company has requested its suppliers to confirm the status as to whether they are covered under the Micro, Small and Medium Enterprises Development Act, 2006. In the absence of confirmations from the suppliers, disclosures, if any, relating to unpaid amount as at the year end together with interest paid / payable as required under the said Act have not been given.

12. Derivative instruments:

a) Interest Rate Swaps for hedging underlying liability aggregate to Rs.11,460,000,000 (Previous year Rs.6,000,000,000).

b) For underlying liability of Rs.6,500,000,000 (Previous year Rs.6,500,000,000), Coupon Swap has been entered into which remains unhedged in respect of movement in respective currencies affecting the coupon amount.

c) The Company as on March 31, 2011 had outstanding interest rate and coupon swaps covering the underlying liability aggregating to Rs.17,960,000,000 (Previous year Rs.12,500,000,000). The fair value of all such Swaps as at March 31, 2011 was unfavourable to the extent of Rs.1,913,600,263 (Previous year Rs.1,606,912,869).

Gratuity Premium is paid to LIC of India under Gratuity Scheme of LIC.

The Companys best estimate of contributions expected to be paid to the plan during the annual period beginning after March 31, 2011 is Rs.12,630,116 (Previous Year Rs.22,869,846).

In the absence of detailed information regarding Plan Assets which is funded with Life Insurance Corporation of India, the composition of each major category of plan assets, the percentage or amount for each category to the total fair value of plan assets has not been disclosed.

The details of experience adjustments arising on account of plan assets and plan liabilities as required by paragraph 120(n) (ii) of AS 15 (Revised) on ÃEmployee BenefitsÃ are not readily available in the valuation statement received from LIC of India and hence, are not furnished.

13. Segment reporting:

The Company is engaged in the business of providing loans for purchase, construction, repairs and renovation etc., of houses / flats to Individuals, Corporate Bodies, Builders and Co-operative Housing Societies and has its operations within India. There being only one business segment and geographical segment, the segment information is not provided.

14. Related party disclosure:

a) Names of related parties where control exists:

Sr. No. Name of the related party Nature of relationship

1. LICHFL Care Homes Limited Wholly owned subsidiary company

2. LICHFL Financial Services Ltd. Wholly owned subsidiary company

3. LICHFL Asset Management Company Ltd. (Formerly known Subsidiary company with 90% share holding as LICHFL Asset Management Company Private Ltd.)

4. LICHFL Trustee Company Private Ltd. Wholly owned subsidiary company

b) Details of other related parties with whom transactions have taken place:

Sr. No. Name of the related party Nature of relationship

1. Life Insurance Corporation of India (LIC) Enterprise having significant influence

2. LIC Nomura Mutual Fund Asset Associate Management Company Limited (Formerly Known as LIC Mutual Fund Asset Management Company Ltd.) 3. LIC Nomura Mutual Fund Associate till 14.01.2011 Trustee Company Private Limited (Formerly Known as LIC Mutual Fund Trustee Company Pvt. Ltd.)

4. Mr. R.R. Nair, Director and Chief Executive (Up to 29-11-2010) Key Management Personnel

5. Mr. V.K. Sharma, Director and Chief Executive ( From 01-12-2010) Key Management Personnel

15. Operating Leases:

The Company has taken various office and residential premises on cancelable operating lease basis for periods which range from 11 to 120 months with an option to renew the lease by mutual consent on mutually agreeable terms. Lease payments recognized in the Profit and Loss Account for such premises are Rs.126,934,672 (Previous year Rs.116,264,536).

16. Current tax:

Provision for current tax is made on the basis of accounting practices consistently followed by the Company, including method of accounting for interest on housing loans and is after availing deduction under section 36(1)(viii) of the Income Tax Act, 1961. For the purpose of determining the quantum of deduction available under section 36(1)(viii), the methodology applied for the bifurcation of income and expenses for long term housing finance has been relied upon by the auditors.

17. Disclosure regarding provisions made for substandard, doubtful and loss assets and depreciation in investments as per the Prudential Norms contained in the Housing Finance Companies (NHB) Directions, 2010. (Figures in brackets are for the previous year). The provisions given below are in accordance with the approval given by the Board of Directors, which are higher than those required as per the Prudential Norms.

18. Disclosure regarding penalty or adverse comments as per Housing Finance Companies (NHB) Directions, 2010. During the current year, the Company has:

a) neither been imposed any penalty by National Housing Bank

b) nor received any adverse comments in writing from National Housing Bank on regulatory compliances.

19. Disclosure as per Clause 32 of the Listing Agreement :

Loans and advances in the nature of Loans given to Subsidiaries and Associates: -

Notes:

a) In respect of the above loans there is no repayment schedule and they are repayable on demand.

b) No interest is charged on the loan. However, the provisions of section 372A of the Companies Act, 1956 are not applicable to above loans in view of the loanees being subsidiaries of the company.

c) Loans and Advances to employees / customers and investments by such employees / customers in the shares of the Company, if any, are excluded from the above disclosure.

Figures in bracket are in respect of the previous year.

20. During the year the Company has split its Equity Shares having face value of Rs.10/- each into Equity Shares having face value of Rs.2/- each.

21. Disclosure regarding provisions made for Asset Liability Management (ALM) System for the Housing Finance Companies as per NHB Circular dated October 11, 2010.

22. Previous years figures are regrouped wherever necessary to correspond with the figures of the Current year.

Mar 31, 2010

1. Estimated amounts of contracts remaining to be executed on capital account and not provided for (net of advances) are Rs.13,601,880 (Previous year Rs.12,005,308).

2. Contingent liabilities in respect of:

a. Corporate Undertaking of Rs. 143,500,000 (Previous year Rs.143,500,000) for Securitization transactions.

b. Claims against the Company not acknowledged as debts Rs.620,367 (Previous year Rs.755,367).

c. The Company has received a demand of Rs.31,396,993 towards interest payable, Rs.119,077,050 (including interest of Rs.66,761,297), Rs.233,801,201 (including interest of Rs.13,871,157) and Rs.331,050,489 (including interest of Rs.71,936,658) on completion of income tax assessment for the assessment year 2001-02, 2002-03, 2006-07 and 2007-08 respectively. The said amounts are disputed and the Company has preferred an appeal against the same. The amounts for the respective years have been paid under protest to the credit of the Central Government.

3. (i) Housing loans are secured, wholly or partly, by any or all of the following as applicable, based on their categorization :

a. Equitable / Registered Mortgage of Property.

b. Assignment of Life Insurance Policies, NSC, KVR FD of Nationalized Bank.

c. Assignment of Lease Rent Receivables

d. Company guarantees or personal guarantees.

e. Negative lien.

f. Undertaking to create a security.

(ii) Loans to employees other than for Housing are secured by lien over Provident Fund balances and / or Hypothecation of Vehicles.

4. The Company adopts an approach to provisioning that is based on the past experience, realization of security and other related factors. Additional provisions (over and above the stipulations of the National Housing Bank) in respect of Non-performing Assets (NPA) are made as per the Guidelines prescribed by the Board of Directors. In respect of Standard Assets, the provision on Housing Loans categorized under Retail Loans & Project Loans though not required by National Housing Bank Directions 2001, has been reduced for the current year @ 0.1 percent as against 0.2 percent for Retail Loans and @ 0.5 percent as against 1 percent for Project Loans for the year ended March 31, 2009. Had this practice been followed for the year ended March 31, 2009, the profit before tax would have been Rs.7,635,008,802.

5. Housing Loans include loans amounting to Rs.95,116,460 (Previous year Rs.116,551,212) against which the company has taken possession of the properties under Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and held such properties for disposal. Of this, fair value of the assets possessed, against the loans of Rs.16,794,754 (Previous year Rs.13,605,241), is not available as at March 31, 2010. The balance loans amounting to Rs.78.321,705 (Previous year Rs.102,945,971), have fair value of Rs.75,010,517 (Previous year Rs.99,234,850), being lower of the fair value of the asset possessed and the outstanding

6. Provision for contingencies includes:

a. Provision for untapped corporate undertaking given for securitization of housing loans. The outflows in respect of untapped corporate undertaking would arise in the event of a shortfall, if any, in the cash flows of the pool of the securitized receivables and

b. Provision for probable loss on account of bank reconciliation differences.

7. The Company has entered into agreement dated July 11, 2009 with Nomura Asset Management Strategic Investment Pte. Ltd. for sale of 1730 equity shares of Rs.10/- each of LIC Mutual Fund Asset Management Company Limited and 2000 equity shares of Rs.10/- each of LIC Mutual Fund Trustee Company Private Limited at a total consideration of Rs.138.40 crores approx. Pending approvals from SEBI and RBI, the effect of the aforementioned transaction is not given in the accounts.

8. Fixed Deposits with Banks include Rs.12,099,208 (Previous Year Rs.11,979,661) kept with designated banks for repayment to Public Deposit Holders . The Company has beneficial interest on the income earned from these deposits.

9. Miscellaneous income includes Rs.5,000,000 (Previous Year Rs.5,000,000) being refund of management fee from Kotak India Real Estate Venture Fund, Rs.203,288 (Previous Year Rs.198,479) being interest income on staff loans/advances, Rs.66,205,419 (Previous Year Rs.58,929,518) being gain on unwinding of Interest rate swap, Rs.6,365,491 (Previous Year Rs.6,157,884) being old outstanding and unclaimed amounts written back, Rs.NIL (Previous Year Rs.22,019,540) being Interest on Income Tax Refund.

10. Temporary Book Overdraft of Rs.8,660,552,460 (Previous Year Rs.6,977,890,200) represents cheques issued towards disbursements to borrowers for Rs.8,495,884,847 (Previous Year Rs.6,871,060,778) and cheques issued for payment of expenses of Rs.164,667,613 (Previous Year Rs.106,829,422), but not encashed as at March 31, 2010.

11. The Company has requested its suppliers to confirm the status as to whether they are covered under the Micro, Small and Medium Enterprises Development Act, 2006. In the absence of confirmations from the suppliers, disclosures, if any, relating to unpaid amount as at the year end together with interest paid / payable as required under the said Act have not been given.

12. Derivative instruments:

a) Interest Rate Swaps for hedging underlying liability aggregate to Rs.6,000,000,000 (Previous year Rs.8,000,000,000).

b) For underlying liability of Rs.6,500,000,000 (Previous year Rs.6,500,000,000), Coupon Swap has been entered into which remains unhedged in respect of movement in respective currencies affecting the coupon amount.

c) The Company as on March 31, 2010 had outstanding interest rate and coupon swaps covering the underlying liability aggregating to Rs. 12,500,000,000 (Previous year Rs. 14,500,000,000). The fair value of all such Swaps as at March ,31, 2010 was unfavourable to the extent of Rs.1,606,912,869 (Previous year Rs.1,999,785,721).

13. Segment reporting:

The Company is engaged in the business of providing loans for purchase, construction, repairs and renovation etc., of houses / flats to Individuals, Corporate Bodies, Builders and Co-operative Housing Societies and has its operations within India. There being only one business segment and geographical segment, the segment information is not provided

14. Related party disclosure:

a) Names of related parties where control exists:

Sr. No. Name of the related party Nature of relationship

1. LICHFL Care Homes Limited Wholly owned subsidiary company

2. LICHFL Financial Services Ltd. Wholly owned subsidiary company

3. LICHFL Asset Management Company Private Ltd. Wholly owned subsidiary company

4. LICHFL Trustee Company Private Ltd. Wholly owned subsidiary company

b) Details of other related parties with whom transactions have taken place:

Sr. No.Name of the related party Nature of relationship

1. Life Insurance Corporation of India (LIC) Enterprise having significant influence

2. LIC Mutual Fund Asset Management Company Limited Associate

3 LIC Mutual Fund Trustee Company Private Limited Associate

4. Mr. R.R. Nair, Director and Chief Executive Key Management Personnel

15. Operating Leases:

The Company has taken various office and residential premises on cancelable operating lease basis for periods which range from 11 to 120 months with an option to renew the lease by mutual consent on mutually agreeable terms. Lease payments recognized in the Profit and Loss Account for such premises are Rs.116,264,536 (Previous year Rs.94,508,854).

16. Current tax:

Provision for current tax is made on the basis of accounting practices consistently followed by the Company, including method of accounting for interest on housing loans and is after availing deduction under section 36(1)(viii) of the Income Tax Act, 1961. For the purpose of determining the quantum of deduction available under section 36(1)(viii), the methodology applied for the bifurcation of income and expenses for long term housing finance has been relied upon by the auditors.

17. Disclosure regarding provisions made for substandard, doubtful and loss assets and depreciation in investments as per the Prudential Norms (revised) contained in the National Housing Bank Guidelines. (Figures in brackets are for the previous year). The provisions given below are in accordance with the approval given by the Board of Directors, which are higher than those required as per National Housing Bank Guidelines.

18. Disclosure regarding penalty or adverse comments as per National Housing Bank Guidelines. During the current year, the Company has:

a) neither been imposed any penalty by National Housing Bank

b) nor received any adverse comments in writing from National Housing Bank on regulatory compliances.

19. During the year the Company has issued and allotted 10,000,000 Equity Shares of face value of Rs. 10/-at a premium of Rs.648/-per share aggregating to Rs.6,580,000,000/- (previous year Rs. NIL) to Qualified Institutional Buyers. The said issue was made under Chapter VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

20. Previous years figures are regrouped wherever necessary to correspond with the figures of the Current year.

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