Notes to Accounts of Capital Small Finance Bank Ltd.

Mar 31, 2025

14 PROVISIONS AND CONTINGENT LIABILITIES & CONTINGENT ASSETS

14.1 As per AS 29 (Provisions, Contingent Liabilities and Contingent Assets), a provision is recognised when there is a
present obligation as a result of past events and it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions are
not discounted to its present value and are determined based on best estimate required to settle the obligation
at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best
estimates.

14.2 A disclosure of contingent liability is made when there is:

• possible obligation arising from a past event, the existence of which will be confirmed by occurrence or non¬
occurrence of one or more uncertain future events not within the control of the Bank; or

• present obligation arising from a past event which is not recognised as it is not probable that an outflow of
resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot
be made.

14.3 When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources
is remote, no provision or disclosure is made.

14.4 Contingent assets, if any, are not recognised/disclosed in the financial statements since this may result in the
recognition of income that may never be realised.

14.5 In cases where the available information indicates that the loss on the contingency is reasonably possible but the
amount of loss cannot be reasonably estimated, a disclosure to this effect is made in the financial statements. In
case of remote possibility, neither provision nor disclosure is made in the financial statements.

15 CASH AND CASH EQUIVALENTS

Cash and cash equivalents include cash in hand (including balance in ATM), balances with the RBI, balances with other
banks in current accounts and money at call and short notice.

16 TRANSACTION INVOLVING FOREIGN EXCHANGE

16.1 Accounting for transactions involving foreign exchange is done in accordance with Accounting Standard (AS) 11,
"The Effects of Changes in Foreign Exchange Rates".

16.2 All transactions in foreign currency are recognised at the exchange rate as notified by the Foreign Exchange Dealers
Association of India (FEDAI).

16.3 Foreign currency monetary items are reported using the exchange rate prevailing at the Balance Sheet date.

16.4 Non-monetary items which are measured in terms of historical cost denominated in foreign currency are reported
using the exchange rate as notified by Foreign Exchange Dealers Association of India (FEDAI) at the date of
transaction. Non-monetary items which are measured at Fair Value or other similar value denominated in a foreign
currency are translated using the exchange rate at the date when such value is determined.

16.5 Exchange differences arising on settlement of monetary items or on reporting of such monetary items at rates
different from those at which they were initially recorded during the year, or reported in previous financial statements,
are recognised as income or expense in the year in which they arise.

17 SHARE ISSUE EXPENSES

Share issue expenses are adjusted from Share Premium Reserve as permitted by Section 52 of the Companies Act,

2013.

18 CORPORATE SOCIAL RESPONSIBILITY

Expenditure towards corporate social responsibility, in accordance with Companies Act, 2013, is recognised in the Profit

and Loss Account.

1 CAPITAL

1.1 Regulatory Capital

The Capital to risk-weighted asset ratio (''Capital Adequacy Ratio'') of the Bank has been computed in accordance with
the Reserve Bank of India (''RBI'') circular no DBR. NBD. No.26/16.13.218/2016-17, dated October 06, 2016 on "Operating
Guidelines for Small Finance Banks".

The Bank has followed Basel II Standardised Approach for computing credit risk. In accordance with the RBI
communication (reference no. DBR.NBD.No.4502/16.13.218/2017-18 dated November 8, 2017), market risk and
operational risk are currently not applicable for computing Capital Adequacy Ratio for Small Finance Banks. Further,
Capital Conservation Buffer and Counter-Cyclical Capital Buffer are not applicable to Small Finance Banks as per the
extant RBI guidelines.

As on March 31, 2025, the Bank''s Capital Adequacy Ratio stood at 25.39% (Previous year: 27.39%), well above the
regulatory minimum requirement of 15% prescribed for Small Finance Banks by the RBI.

1.1 Regulatory Capital (Contd.)

1.1.2 Tier I Capital Infusion

During the year ended March 31, 2025, the Bank has allotted 2,04,417 equity shares to employees of the Bank in

form of employee stock option as per the ESOP plan of the Bank.

During the year ended March 31, 2024, the Bank has issued and allotted:

1.1.2.1 96,15,384 equity shares having face value of '' 10/- each at a premium of '' 458/- (i.e., at the total issue
price of '' 468/-) per equity share aggregating to '' 450.00 crores, as public issue in Initial Public Offering
(IPO) dated February 14, 2024;

1.1.2.2 10,57,700 equity shares having face value of '' 10/- each at a premium of '' 458/- (i.e., at the total issue
price of '' 468/-) per equity share aggregating to '' 49.50 crores on a private placement basis under
preferential allotment; and

1.1.2.3 1,16,982 equity shares to employees of the Bank in form of employee stock option as per the ESOP plans
of the Bank.

1.1.5 Proposed Dividend

For the year ended March 31, 2025, the Board of Directors, in the meeting held on April 29, 2025 recommended a
dividend of '' 4.00 per equity share ('' 1.20 per equity share for the year ended March 31,2024) having face value of
'' 10 each. The recommendation made is in accordance with the guidelines issued by the Reserve Bank of India on
declaration of dividend by banks.

According to the AS 4 - ''Contingencies and events occurring after the balance sheet date'' as notified by the Ministry
of Corporate Affairs through Companies (Accounting Standards) Rules, 2021, the Bank has not accounted proposed
dividend (including tax) as a liability. However, the proposed dividend has been considered as a deduction while
computing capital funds for the purpose of Capital Adequacy Ratio calculation.

1.1.6 Drawdown from Reserves

There has been no draw down from reserves during the year ended March 31, 2025 and March 31,2024 other than
those disclosed under Schedule 2.

3.2 Change in Accounting Policy on Investments

The classification, measurement, and valuation of the Bank''s investment portfolio have been carried out in accordance
with the Reserve Bank of India (RBI) Master Direction - Classification, Valuation and Operation of Investment Portfolio of
Commercial Banks (Directions), 2023, dated September 12, 2023 as amended from time to time, which became effective
from April 01, 2024 ("the RBI Investment Master Directions").

Pursuant to the transition to the revised framework, the Bank has recognised a net transition valuation gain of
'' 1.73 crores (net of applicable taxes) and '' 1.26 crores (net of applicable taxes), which has been appropriated to the
General Reserve and AFS Reserve respectively, thereby resulting in a net positive impact on the Bank''s net worth as on
the date of transition i.e., April 01,2024. Additionally, in compliance with the RBI Investment Master Directions, the Bank
has transferred the balance in the Investment Reserve Account to Investment Fluctuation Reserve by '' 0.02 crores and
the remaining balance of '' 0.95 crores to the General Reserve.

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

• Net gain of '' 6.02 crores (net of applicable taxes) on account fair value of instruments in the AFS-Reserve;

• Net gain of '' 0.19 crores in the Profit & Loss account on account of fair value of instrument in FVTPL category; and

• A debit of '' 0.40 crores in the Profit & Loss Account on account of discount/premium amortisation.

Accordingly, the amounts for previous years are not comparable.

3.3 Sale and Transfer of Investments

During the year ended March 31,2025, there is no sale/transfer of securities to/from HTM categories, which requires the
disclosure as per the RBI guidelines.

During the year ended March 31, 2024, there is no sale/transfer of securities to/from HTM categories exceeding 5% of
the book value of the investments held in HTM category at the beginning of the year, which requires the disclosure as per
the RBI guidelines. However, the Bank after approval of the Board of Directors, at the beginning of the accounting year,
has transferred government securities within the categories as stated below:

4.6 Details of loans transferred/acquired under the master directions of Reserve Bank of India on Transfer of Loan
Exposures dated September 24, 2021 updated as on December 05, 2022

The Bank has not transferred/acquired any stressed loan or loan not in default during the year ended March 31,2025 and
March 31, 2024.

4.7 Disclosure under Rule 11 (e) of the Companies (Audit and Auditors) Rules, 2014

The Bank, as part of its normal banking business, grants loans and advances, makes investments, provides guarantees,
to and accepts deposits and borrowings from its customers and borrowing from entities. These transactions are part
of Bank''s normal banking business, which is conducted ensuring adherence to all regulatory requirements and bank''s
internal policies as applicable.

Other than the transactions described above, no funds have been advanced or loaned or invested (either from borrowed
funds or securities premium or any other sources or kind of funds) by the Bank to or in any other persons or entities,
including foreign entities (Intermediaries) with the understanding, whether recorded in writing or otherwise, that the
Intermediary shall lend or invest in party identified by or on behalf of the Bank (Ultimate Beneficiaries).

The Bank has not received any fund from any parties (Funding Party) with the understanding that the Bank shall whether,
directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Funding Party (Ultimate
Beneficiaries) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

4.9 Sale of Financial Asset under Securitisation/Asset Reconstruction

The Bank has not sold any financial asset to Securitisation/Reconstruction Company for Asset Reconstruction during
the year ended March 31,2025 and March 31, 2024.

4.10 Sale/Purchase of Non-performing financial assets

The Bank has not purchased/sold any non-performing financial assets from/to other banks during the year ended March
31,2025 and March 31,2024.

4.11 Letter of comfort

The Bank has not issued any letter of comfort during the year ended March 31,2025 and year ended March 31, 2024.

4.12 Credit Default Swaps

The Bank has not entered into any Credit Default Swaps (CDS) during the year ended March 31, 2025 and year ended
March 31,2024.

4.13 Divergence in the asset classification and provisioning for NPAs

For the reference year ended March 31,2024, the Inspection & Risk Assessment was conducted by the RBI under Section
35 of Banking Regulation Act 1949.There was no divergence observed in the asset classification and provisioning for
non-performing assets (NPAs) pursuant to the Inspection and Risk Assessment conducted by the RBI.

4.14 Change in Accounting Policy on appropriation of recoveries in non-performing accounts

With effect from May 15, 2024, the Bank has changed its policy in respect of the order of priority, for appropriation of
recoveries in non-performing accounts. The impact of the such change on the financial results is not material.

12.1 Related parties as per Accounting Standard 18 (Contd.)

b. Mr. Munish Jain: Mr. Kimti Lal Jain, Mr. Vishal Jain, Mrs. Usha Jain, Mrs. Ruchi Jain, Mrs. Ritu Jain, Mr. Aagam Jain,
Mr. Gaurish Jain and Munish Jain HUF.

c. Mr. Aseem Mahajan: Mr. Chander Kant Mahajan, Mrs. Sumita Mahajan, Mrs. Isha Sehgal, Mrs. Ritika Mahajan,
Mr. Ayaan Mahajan and Mr. Izaan Mahajan.

d. Mr. Amit Sharma: Mr. Mangal Chand Sharma, Mrs. Bimla Sharma, Mrs. Gitika Sharma, Mr. Kunal Sharma,
Miss Amayra Sharma, Mrs. Poonam Sharma, Mrs. Seema Sharma, Mr. Ajay Sharma and Mrs. Sheetal Sharma.

Associates/Joint Ventures/Others:

a. Capital Foundation Trust

The significant transactions (wherever it exceeds 10% of all related party transactions in that category) between the

Bank and related parties for year ended March 31, 2025 are given below:

1. Interest paid includes (a) '' 0.11 crores paid to Mr. Amarjit Singh Samra (b) '' 0.11 crores paid to Mr. Munish Jain
(c) '' 0.11 crores paid to Mrs. Ruchi Jain; (d) 0.08 crores paid to Mrs. Amarpreet Kaur Hayer;

2. Interest received includes (a) '' 0.02 crores received from Mr. Amit Sharma (b) '' 0.02 crores received from
Mr. Aseem Mahajan;

3. Leasing includes (a) '' 0.51 crores paid to Mr. Amarjit Singh Samra (b) '' 0.51 crores paid to Mrs. Surinder Kaur
Samra (c) '' 0.51 crores paid to Mr. Sarvjit Singh Samra (d) '' 0.51 crores paid to Mr. Amardeep Singh Samra (e)
'' 0.26 crores paid to Mrs. Navneet Kaur Samra;

4. Salary paid includes (a) '' 1.65 crores paid to Mr. Munish Jain (b) '' 1.55 crores paid to Mr. Sarvjit Singh Samra; and

5. CSR Expense/Contribution includes '' 2.38 crores paid to Capital Foundation Trust.

The significant transactions (wherever it exceeds 10% of all related party transactions in that category) between the

Bank and related parties for year ended March 31, 2024 are given below:

1. Interest paid includes (a) '' 0.10 crores paid to Mr. Amarjit Singh Samra (b) '' 0.16 crores paid to Mr. Munish Jain (c)
'' 0.08 crores paid to Mrs. Ruchi Jain;

2. Interest received includes (a) '' 0.02 crores received from Mr. Amit Sharma;

3. Leasing includes (a) '' 0.51 crores paid to Mr. Amarjit Singh Samra (b) '' 0.51 crores paid to Mrs. Surinder Kaur
Samra (c) '' 0.51 crores paid to Mr. Sarvjit Singh Samra (d) '' 0.51 crores paid to Mr. Amardeep Singh Samra (e)
'' 0.25 crores paid to Mrs. Navneet Kaur Samra;

4. Salary paid includes (a) '' 1.75 crores paid to Mr. Munish Jain (b) '' 1.45 crores paid to Mr. Sarvjit Singh Samra; and

5. CSR Expense/Contribution includes '' 1.77 crores paid to Capital Foundation Trust.

16 DISCLOSURE OF PENALTIES IMPOSED BY THE RBI

There has been no penalty imposed by the Reserve Bank of India on the Bank except that of '' 0.02 crores and '' 0.001
crores during the year ended March 31, 2025 ('' 0.02 crores and ''Nil'' during the year ended March 31, 2024) for non¬
replenishment of ATMs in terms of RBI circular no. RBI/2021-22/84 DCM (RMMT) No. S153/11.01.01/2021-22 on
Monitoring of Availability of Cash in ATMs dated August 10, 2021 and for not extending the facility of exchange of
soiled notes to non-customers by the branch in terms of RBI circular no. DCM (CC) G-1/03.44.01/2024-25 on Master
Direction - Scheme of Penalties for bank branches and Currency Chests for deficiency in rendering customer service to
the members of public dated April 01, 2024 respectively.

17 REMUNERATION

17.1 Qualitative Information with reference to Whole Time Directors/Managing Director & Chief Executive Officer/Material
Risk Takers (MRT)

i) Nomination and Remuneration Committee

The Bank has constituted Nomination and Remuneration Committee (NRC) for overseeing and governing
the compensation polices of the Bank. The committee oversees the framing, review and implementation of
compensation policy of the Bank on behalf of the Board for Managing Director & Chief Executive Officer, Whole
Time Directors & Material Risk Takers.

The Committee has four members including three members from Risk Management Committee of the Board. The
majority of the members of the committee are independent non-executive Directors.

As on March 31, 2025 the Committee consists of the following Members:

• Mr. Kamaldeep Singh Sangha, Chairman

• Mr. Dinesh Gupta, Member

• Mr. Gurpreet Singh Chug, Member

• Mr. Sham Singh Bains, Member

ii) Philosophy and Key Objectives

The Compensation Policy ("the Policy") of the Bank aims at the Bank''s philosophy to recruit, motivate, reward
and retain employees who believe in, and live by, our culture and values. The Bank endeavors to encourage
entrepreneurship by creating a working environment that motivates high performance so that all employees can
positively contribute to the strategy, vision, goals and values of the Bank. The key objectives of the Policy are:

• To support the organisation''s strategy by helping to build a competitive, high performance and innovative
company with an entrepreneurial culture that attracts, retains, motivates and rewards high-performing
employees;

• To promote the achievement of strategic objectives within the Company''s risk appetite;

• To promote/support positive outcomes across the economic and social context in which the Company
operates and

• To promote an ethical culture and responsible corporate citizenship.

• To ensure that the remuneration of "MD & CEO", "Whole Time Directors" & Material Risk Takers is fair and
reasonable in the context of overall Bank''s remuneration.

• Adherence to principles of good corporate governance, as depicted in "best practice" and regulatory
frameworks.

• Make a clear distinction between levels of accountability and pay package.

iii) Fixed Pay

The fixed pay is the base element of the remuneration that reflects the employee''s role or position in the Bank
and is payable for doing the expected job, including but not limited to basic salary, statutory bonus, allowances,
perquisites, profit in lieu of salary and any other component paid, measured on the cost to company basis.
Guaranteed remuneration is paid on monthly basis and is normally benchmarked against the financial services
market and is aligned to the expected operational performance.

17.1 Qualitative Information with reference to Whole Time Directors/Managing Director & Chief Executive Officer/Material
Risk Takers (MRT) (Contd.)

iv) Variable Pay

The variable pay is the reward element of the remuneration, focused to create a performance culture in the Bank,
is payable as a reward to individuals or teams for achieving strong results in terms of pre-determined goals. The
variable remuneration of an employee(s) can be short term or long term depending upon the category of the
employee(s): (1) Short Term Variable Remuneration is paid on not greater than yearly frequency on the basis of
performance based scorecard or individual employee rating; or/and (2) Long Term Variable Remuneration is paid
on more than annual frequency on the basis of longevity and long-term performance of the employee in the form of
ESOPs only (including Cash Linked Stock Appreciation Rights).

• The variable pay should be:

> Atleast 100% but not more than 200% of the fixed pay in case of Managing Director and CEO and Whole
Time Director or as approved by the Reserve Bank of India;

> Atleast 50% but not more than 70% (earlier 60%) of the fixed pay for executive overseeing one business
line and atleast 75% (earlier 50%) but not more than 125% (earlier 70%) of the fixed pay for executive
overseeing more than one business line in case of other MRTs.

• Out of above, 50% of the variable pay should be via non cash instruments. In case, any of the executive, is
barred by statute or regulation from grant of Share-linked Instruments, the whole amount can be paid via cash.

• Within the said range and as per the above ceiling, the NRC decides the short term variable pay %age for the
period keeping in the view the various factors including but not limited to present and prospective capital
position, market dynamics and risk position of the Bank.

• The variable pay is linked with the performance of the executive and performance of the Bank during the Period
and accordingly the performance measurement is done basis various key performance indicators including:

> Individual Rating;

> Profitability Achievement;

> Business Growth Achievement;

> Credit Risk (NPA position, SMA 2 position);

> Market Risk (LCR, Duration gap Analysis);

> Solvency Risk (Leverage Ratio, Capital Adequacy Ratio)

• A minimum of 60% of the total variable pay (including at least 50% of the cash component if cash component
is '' 25 lakhs or more), is deferred over a period of 3 years. Further, in case of various events, the deferred
compensation is subject to the malus arrangement.

v) Guaranteed Bonus

The Bank does not allow any guaranteed bonus except bonus payable under the Payment of Bonus Act. Further,
the Joining/Signing bonus is permissible in the context of hiring of executive in the form of ESOPs only and be
limited to the first Period. Further, the Bank will not grant severance pay other than accrued benefits (gratuity, retiral
benefits, etc.) except in case where it is mandatory by any statute.

vi) Hedging

The Bank does not provide any facility or funds or permit employees to insure or hedge their compensation structure
to offset the risk alignment effects embedded in their compensation arrangement.

18 DISCLOSURE ON REMUNERATION TO NON-EXECUTIVE DIRECTORS

During the year ended March 31,2025, remuneration by way of sitting fees paid to Non-Executive Directors for attending
meetings of the Board and its committees amounted to '' 0.45 crores ('' 0.43 crores during the year ended March 31,
2024).

In addition, the Bank paid remuneration amounting to '' 0.88 crores during the year ended March 31,2025 ('' 0.71 crores
during the year ended March 31, 2024) to the Non-Executive Directors.

19 ACCOUNTING FOR EMPLOYEE SHARE-BASED PAYMENTS

19.1 The Bank has following ESOP plans

Capital Small Finance Bank Limited - Employees Stock Option Plan 2018 ("CSFB ESOP 2018") was approved by the
shareholders of the Bank, in the Annual General Meeting held on August 18, 2018 amended further on October 22, 2021,
for granting equity stock options to its employees and directors (other than independent directors).

Capital Small Finance Bank Limited - Employees Stock Option Plan for Material Risk Takers ("CSFB ESOP for MRTs")
was approved by the shareholders of the Bank on July 11, 2020 (amended further on October 22, 2021), for granting
equity stock options to its material risk takers.

Capital Small Finance Bank Limited - Employees Stock Option Plan 2023 ("CSFB ESOP 2023") was approved by the
shareholders of the Bank, in Extraordinary General Meeting of the Bank held on May 12, 2023, for granting equity stock
options to its employees and directors (other than independent directors).

19.2 The stock options will be equity settled.

19.3 The accounting for stock options is in accordance with the Guidance Note on Accounting for Share-based Payments
issued by the Institute of Chartered Accountants of India.

19.4 The Nomination and Remuneration Committee of the Bank is empowered to administrate, implement and superintend
the plan. Its powers include determination of eligible employees, determine the parameters for grant of options, vesting
conditions, determination of exercise period, among others.

27 STATUS OF IND AS IMPLEMENTATION

As per RBI circular RBI/2015 -16/315 DBR.BPBC. No.76/21.07.001/2015-16 dated February 11,2016 Implementation of
Indian Accounting Standards (Ind AS), Banks are advised that scheduled commercial banks (excluding RRBs) shall follow
the Indian Accounting Standards as notified under the Companies (Indian Accounting Standards) Rules, 2015, subject
to any guideline or direction issued by the RBI in this regard. Banks in India currently prepare their financial statements
as per the guidelines issued by the RBI, the Accounting Standards notified under section 133 of the Companies Act,
2013 and generally accepted accounting principles in India (Indian GAAP). In January 2016, the Ministry of Corporate
Affairs issued the roadmap for implementation of new Indian Accounting Standards (Ind AS), which were based on
convergence with the International Financial Reporting Standards (IFRS), for scheduled commercial banks, insurance
companies and non-banking financial companies (NBFCs). In March 2019, RBI deferred the implementation of Ind AS for
banks till further notice as the recommended legislative amendments were under consideration of Government of India.
The Bank had undertaken preliminary diagnostic analysis of the GAAP differences between Indian GAAP vis-a-vis Ind AS
and shall proceed for ensuring the compliance as per applicable requirements and directions in this regard and the Bank
is submitting Proforma Ind AS Financial Statements to the RBI on regular basis.

35 Payment to Auditors (Contd.)

• The audit fees paid during the year ended March 31,2024 includes '' 0.24 crores and certificate fees & fee for other
services includes '' 0.02 crores paid to previous statutory auditor.

• Out of pocket expenses includes expense for statutory auditor and other auditors.

36 COMPARATIVE FIGURES

Figures for the previous year have been regrouped and reclassified wherever necessary to conform to the current year''s
presentation.

As per our report of even date attached

For SCV & Co. LLP For and on behalf of The Board of

Chartered Accountants Capital Small Finance Bank Limited
FRN:000235N/N500089

Sunny Singh Sarvjit Singh Samra Munish Jain Gurpreet Singh Chug

Partner Managing Director Director Director

Membership No. 516834 & Chief Executive Officer DIN : 10132430 DIN: 01003380

DIN: 00477444

Date: April 29, 2025
Place: Noida

Aseem Mahajan Amit Sharma

Chief Financial Officer Company Secretary

Membership No. FCS10888

Date: April 29, 2025
Place: Jalandhar

---

Mar 31, 2024

15 Provisions and Contingent Liabilities & Contingent Assets

15.1 A provision is recognised when there is a present obligation as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

15.2 A disclosure of contingent liability is made when there is:

• possible obligation arising from a past event, the existence of which will be confirmed by occurrence or nonoccurrence of one or more uncertain future events not within the control of the Bank; or

• present obligation arising from a past event which is not recognised as it is not probable that an outflow of resources will be required to settle the obligation or a reliable estimate of the amount of the obligation cannot be made.

15.3 When there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.

15.4 Contingent assets, if any, are not recognised in the financial statements since this may result in the recognition of income that may never be realised.

15.5 In cases where the available information indicates that the loss on the contingency is reasonably possible but the amount of loss cannot be reasonably estimated, a disclosure to this effect is made in the financial statements. In case of remote possibility, neither provision nor disclosure is made in the financial statements.

16 Cash and Cash Equivalents

Cash and cash equivalents include cash in hand (including balance in ATM), balances with the RBI, balances with other

banks in current accounts and money at call and short notice.

17 Transaction involving Foreign Exchange

17.1 All transactions in foreign currency are recognised at the exchange rate as notified by the Foreign Exchange Dealers Association of India (FEDAI).

17.2 Foreign currency monetary items are reported using the exchange rate prevailing at the Balance Sheet date.

17.3 Non-monetary items which are measured in terms of historical cost denominated in foreign currency are reported using the exchange rate as notified by Foreign Exchange Dealers Association of India (FEDAI) at the date of transaction. Non-monetary items which are measured at Fair Value or other similar value denominated in a foreign currency are translated using the exchange rate at the date when such value is determined.

17.4 Exchange differences arising on settlement of monetary items or on reporting of such monetary items at rates different from those at which they were initially recorded during the year, or reported in previous financial statements, are recognised as income or expense in the year in which they arise.

1 CAPITAL

1.1 Regulatory Capital

Capital to risk-weighted asset ratio (''Capital Adequacy Ratio'') of the Bank has been computed in accordance with the Reserve Bank of India (''RBI'') circular no DBR. NBD. No.26/ 16.13.218/2016-17, dated October 06, 2016 on "Operating Guidelines for Small Finance Banks". The Bank has followed Basel II Standardised Approach for credit risk. Market risk and operation risk has not been considered for measurement of Capital Adequacy Ratio as per the letter issued by the Reserve Bank of India vide reference number DBR.NBD.No.4502/16.13.218/2017-18 dated November 08, 2017 to all the small finance banks.

The total Capital Adequacy Ratio of the Bank as at March 31, 2024 is 27.39% (previous year: 18.87%) against the regulatory requirement of 15% as prescribed by the RBI. No Capital Conservation Buffer and Counter - Cyclical Capital Buffer is applicable on Small Finance Banks (SFB) as per operating guidelines issued by the RBI.

1.1.2Tier I Capital Infusion

During the year ended March 31, 2024, the Bank has issued and allotted:

1.1.2.1 96,15,384 equity shares having face value of '' 10/- each at a premium of '' 458/- (i.e., at the total issue

price of '' 468/-) per equity share aggregating to '' 450.00 crores, as public issue in Initial Public Offering (IPO) dated February 14, 2024;

1.1.2.2 10,57,700 equity shares having face value of '' 10/- each at a premium of '' 458/- (i.e., at the total issue price of '' 468/-) per equity share aggregating to '' 49.50 crores on a private placement basis under preferential allotment; and

1.1.2.3 1,16,982 equity shares to employees of the Bank in form of employee stock option as per the ESOP plans of the Bank.

During the year ended March 31, 2023, the Bank has allotted 2,08,363 equity shares to employees of the Bank in form of employee stock option as per the ESOP plan of the Bank.

1.1.3Tier 2 Capital Infusion/Redemption

During the year ended March 31, 2024, the Bank has raised Unsecured Redeemable Non-Convertible Lower Tier II Bond, detailed as below:

1.1.5Proposed Dividend

For the year ended March 31, 2024, the Board of Directors, in its meeting held on May 09, 2024 recommended a dividend of '' 1.20 ('' 1.20 per share for the year ended March 31, 2023) per equity share having face value of '' 10 each. The recommendation made is in accordance with the guidelines issued by the Reserve Bank of India on declaration of dividend by banks.

According to the AS 4 - ''Contingencies and events occurring after the balance sheet date'' as notified by the Ministry of Corporate Affairs through Companies (Accounting Standards) Rules, 2021, the Bank has not accounted proposed dividend (including tax) as a liability. However, the Bank has reckoned proposed dividend in determining capital funds for computing capital adequacy ratio as on March 31, 2024.

4.4 Overseas Assets, NPAs and Revenue

The Bank does not hold any overseas asset/NPA as at March 31,2024 and March 31,2023. No overseas operations were undertaken during the year ended March 31, 2024 and March 31, 2023, hence revenue from overseas operations is Nil.

4.5 Restructuring of Accounts

4.5.1 Disclosure on Prudential Framework on Resolution of Stressed Assets, dated June 07, 2019

The Reserve Bank of India has issued guidelines on Prudential Framework on Resolution of Stressed Assets, dated June 07, 2019. The Bank has not restructured any account under the framework during the year ended March 31, 2024 and March 31, 2023.

4.5.2 Restructuring under "Resolution Framework - 1.0: Resolution Framework for COVID-19-related Stress" and "Resolution Framework - 2.0: Resolution of Covid-19 related stress of Individuals and Small Businesses" is as under:

4.6 Details of loans transferred/acquired under the master directions of Reserve Bank of India on Transfer of Loan Exposures dated September 24, 2021 updated as on December 05, 2022

The Bank has not transferred/acquired any stressed loan or loan not in default during the year ended March 31,2024 and March 31, 2023.

4.7 Disclosure under Rule 11 (e) of the Companies (Audit and Auditors) Rules, 2014

The Bank, as part of its normal banking business, grants loans and advances, makes investments, provides guarantees, to and accepts deposits and borrowings from its customers and borrowing from entities. These transactions are part of Bank''s normal banking business, which is conducted ensuring adherence to all regulatory requirements and bank''s internal policies as applicable. Other than the transactions described above, no funds have been advanced or loaned or invested (either from borrowed funds or securities premium or any other sources or kind of funds) by the Bank to or in any other persons or entities, including foreign entities (Intermediaries) with the understanding, whether recorded in

4.9 Sale of Financial Asset under Securitisation/Asset Reconstruction

The Bank has not sold any financial asset to Securitisation/ Reconstruction Company for Asset Reconstruction during the year ended March 31, 2024 and March 31, 2023.

4.10 Sale/Purchase of Non-performing financial assets

The Bank has not purchased/sold any non-performing financial assets from/to other banks during the year ended March 31, 2024 and March 31, 2023.

4.11 Letter of comfort

The Bank has not issued any letter of comfort during the year ended March 31, 2024 and year ended March 31, 2023.

4.12 Credit Default Swaps

The Bank has not entered into any Credit Default Swaps (CDS) during the year ended March 31, 2024 and year ended March 31, 2023.

4.13 Divergence in the asset classification and provisioning for NPAs

For the reference year ended March 31,2023, the Inspection & Risk Assessment was conducted by the RBI under Section 35 of Banking Regulation Act 1949. As part of the exercise, the RBI has pointed out certain divergence in respect of the Bank''s asset classification and provisioning under the applicable prudential norms on income recognition, asset classification and provision. The details and impact on Profit After Tax relating to divergence between the non-performing advances reported by the Bank and as assessed by RBI as on March 31,2023 in the format as prescribed by the RBI, are as per the table given below.

5.3 Risk Category Wise Country Exposure

The Bank is operating in the state of Punjab, Union Territory of Chandigarh, Haryana, Rajasthan, Himachal and Delhi. Hence, the Bank does not have any country risk exposure.

5.4 Unsecured Advances against Intangible Assets

The Bank has not extended any advance against intangible securities such as charge over the rights, licenses, authority etc. during the year ended March 31,2024 and March 31,2023.

5.5 Details of factoring exposure

The factoring exposure of the Bank as at March 31,2024 and March 31, 2023 is Nil.

5.6 Intra group exposure

The Bank has no intra group exposure during the year ended March 31,2024 and March 31, 2023.

5.7 Unhedged Foreign currency exposure

The Bank does not have any unhedged foreign currency exposure as on March 31, 2024 and on March 31,2023.

5.8 Details of Single Borrower Limit (SBL), Group Borrower Limit (GBL) exceeded by the Bank

The Bank has not exceeded the prudential exposure limits for Single Borrower Limit (SBL) and Group Borrower Limit (GBL) during the year ended March 31, 2024 and March 31, 2023.

12 Related Party Disclosure

12.1 Related parties as per Accounting Standard 18 Key Management Personnel:

a. Mr. Sarvjit Singh Samra - Managing Director

b. Mr. Munish Jain - Executive Director & Chief Financial Officer

c. Mr. Amit Sharma - Company Secretary

d. Mr. S.K. Dhawan - Head of Credit (KMP from October 22, 2021 to February 09, 2023)

e. Mrs. Richa Mahajan - Chief Compliance Officer (KMP from October 22, 2021 to February 09, 2023)

f. Mr. Raghav Aggarwal - Chief Risk Officer (KMP from October 22, 2021 to February 09, 2023)

Relatives of Key Management Personnel:

a. Mr. Sarvjit Singh Samra: Mr. Amarjit Singh Samra, Mr. Amardeep Samra, Mrs. Surinder Kaur Samra, Mrs. Navneet Samra, Mrs. Amarpreet Kaur Hayer, Mr. Shahbaz Singh Samra, Mr. Sangram Singh Samra and Sarvjit Singh Samra HUF.

b. Mr. Munish Jain: Mr. Kimti Lal Jain, Mr. Vishal Jain, Mrs. Usha Jain, Mrs. Ruchi Jain, Mrs. Ritu Jain, Mr. Aagam Jain, Mr. Gaurish Jain and Munish Jain HUF.

c. Mr. Amit Sharma: Mr. Mangal Chand Sharma, Mrs. Bimla Sharma, Mrs. Gitika Sharma, Mr. Kunal Sharma, Ms. Amayra Sharma, Mrs. Poonam Sharma, Mrs. Seema Sharma, Mr. Ajay Sharma and Mrs. Sheetal Sharma.

12.1 Related parties as per Accounting Standard 18 (Contd.)

d. Mr. S.K. Dhawan: Mrs. Jeewan Asha, Mrs. Sujata Dhawan, Mrs. Rajni Dhawan, Mr. Vijay Kumar Dhawan, Mr. Ashwani Kumar Dhawan, Mr. Arun Kumar Dhawan and Mr. Anil Kumar Dhawan.

e. Mrs. Richa Mahajan: Mr. Gaurav Mahajan, Mr. Arnav Mahajan, Miss Arshia Mahajan, Mrs. Neelam Sehgal, Mr. R.K. Sehgal and Mr. Akhil Sehgal.

f. Mr. Raghav Aggarwal: Mr. Sunil Aggarwal, Mrs. Indu Aggarwal, Mrs. Himani Mittal and Mr. Karan Aggarwal

Associates/ Joint Ventures/ Others:

a. Capital Foundation Trust

The significant transactions (wherever it exceeds 10% of all related party transactions in that category) between the

Bank and related parties for year ended March 31, 2024 are given below:

1. Interest paid includes (a) '' 0.10 crores paid to Mr. Amarjit Singh Samra (b) '' 0.16 crores paid to Mr. Munish Jain (c) '' 0.08 crores paid to Mrs. Ruchi Jain;

2. Interest received includes '' 0.02 crores received from Mr. Amit Sharma;

3. Leasing includes (a) '' 0.51 crores paid to Mr. Amarjit Singh Samra (b) '' 0.51 crores paid to Mrs. Surinder Kaur

Samra (c) '' 0.51 crores paid to Mr. Sarvjit Singh Samra (d) '' 0. 51 crores paid to Mr. Amardeep Singh Samra (e)

'' 0.25 crores paid to Mrs. Navneet Kaur Samra;

4. Salary paid includes (a) '' 1.75 crores paid to Mr. Munish Jain (b) '' 1.45 crores paid to Mr. Sarvjit Singh Samra; and

5. CSR Expense/Contribution includes '' 1.77 crores paid to Capital Foundation.

The significant transactions (wherever it exceeds 10% of all related party transactions in that category) between the

Bank and related parties for year ended March 31, 2023 are given below:

1. Interest paid includes (a) '' 0.07 crores paid to Mr. Amarjit Singh Samra (b) '' 0.14 crores paid to Mr. Munish Jain (c) '' 0.08 crores paid to Mrs. Ruchi Jain;

2. Interest received includes (a) '' 0.02 crores received from Mr. Amit Sharma (b) '' 0.02 crores from Mr. Raghav Aggarwal (c) '' 0.01 crores from Mr. Santosh Kumar Dhawan;

3. Leasing includes (a) '' 0.48 crores paid to Mr. Amarjit Singh Samra (b) '' 0.48 crores paid to Mrs. Surinder Kaur

Samra (c) '' 0.48 crores paid to Mr. Sarvjit Singh Samra (d) '' 0.48 crores paid to Mr. Amardeep Singh Samra (e)

'' 0.24 crores paid to Mrs. Navneet Kaur Samra;

4. Salary paid includes (a) '' 1.68 crores paid to Mr. Munish Jain (b) '' 1.71 crores paid to Mr. Sarvjit Singh Samra; and

5. CSR Expense/Contribution includes '' 1.15 crores paid to Capital Foundation.

16 Disclosure of Penalties Imposed by the RBI

There has been no penalty imposed by the Reserve Bank of India on the Bank except that of '' 0.02 crores during the year ended March 31,2024 ('' 0.06 crores during the year ended March 31, 2023) for non-replenishment of ATMs in terms of RBI circular no. RBI/2021-22/84 DCM (RMMT) No. S153/11.01.01/2021-22 on Monitoring of Availability of Cash in ATMs dated August 10, 2021.

17 Remuneration

17.1 Qualitative Information with reference to Whole Time Directors / Managing Director & Chief Executive Officer/Material Risk Takers (MRT)

i) Nomination and Remuneration Committee

The Bank has constituted Nomination and Remuneration Committee (NRC) for overseeing and governing the compensation polices of the Bank. The committee oversees the framing, review and implementation of compensation policy of the Bank on behalf of the Board for Managing Director & Chief Executive Officer, Whole Time Directors & Material Risk Takers.

The Committee has four members including three members from Risk Management Committee of the Board. The majority of the members of the committee are independent non-executive Directors. As on March 31, 2024 the Committee consists of the following Members:

• Mr. Kamaldeep Singh Sangha, Chairman

• Mr. Dinesh Gupta, Member

• Mr. Gurpreet Singh Chug, Member

• Mr. Sham Singh Bains, Member

ii) Philosophy and Key Objectives

The Compensation Policy ("the Policy") of the Bank aims at the Bank''s philosophy to recruit, motivate, reward and retain employees who believe in, and live by, our culture and values. The Bank endeavours to encourage entrepreneurship by creating a working environment that motivates high performance so that all employees can positively contribute to the strategy, vision, goals and values of the Bank. The key objectives of the Policy are:

• To support the organisation''s strategy by helping to build a competitive, high performance and innovative company with an entrepreneurial culture that attracts, retains, motivates and rewards high-performing employees;

• To promote the achievement of strategic objectives within the Company''s risk appetite;

• To promote / support positive outcomes across the economic and social context in which the Company operates and

• To promote an ethical culture and responsible corporate citizenship.

• To ensure that the remuneration of "MD & CEO", "Whole Time Directors" & Material Risk Takers is fair and reasonable in the context of overall Bank''s remuneration.

• Adherence to principles of good corporate governance, as depicted in "best practice" and regulatory frameworks.

• Make a clear distinction between levels of accountability and pay package.

iii) Fixed Pay

The fixed pay is the base element of the remuneration that reflects the employee''s role or position in the Bank and is payable for doing the expected job, including but not limited to basic salary, statutory bonus, allowances, perquisites, profit in lieu of salary and any other component paid, measured on the cost to company basis. Guaranteed remuneration is paid on monthly basis and is normally benchmarked against the financial services market and is aligned to the expected operational performance.

17.1 Qualitative Information with reference to Whole Time Directors / Managing Director & Chief Executive Officer/Material Risk Takers (MRT) (Contd.)

iv) Variable Pay

The variable pay is the reward element of the remuneration, focused to create a performance culture in the Bank, is payable as a reward to individuals or teams for achieving strong results in terms of pre-determined goals. The variable remuneration of an employee(s) can be short term or long term depending upon the category of the employee(s): (1) Short Term Variable Remuneration is paid on not greater than yearly frequency on the basis of performance based scorecard or individual employee rating; or/and (2) Long Term Variable Remuneration is paid on more than annual frequency on the basis of longevity and long-term performance of the employee in the form of ESOPs only (including Cash Linked Stock Appreciation Rights).

• The variable pay should be:

> Atleast 100% but not more than 200% of the fixed pay in case of Managing Director and CEO and Whole Time Director or as approved by the Reserve Bank of India;

> Atleast 50% but not more than 70% (earlier 60%) of the fixed pay for executive overseeing one business line and atleast 75% (earlier 50%) but not more than 125% (earlier 70%) of the fixed pay for executive overseeing more than one business line in case of other MRTs.

• Out of above, 50% of the variable pay should be via non cash instruments. In case, any of the executive, is barred by statute or regulation from grant of Share-linked Instruments, the whole amount can be paid via cash.

• Within the said range and as per the above ceiling, the NRC decides the short term variable pay %age for the period keeping in the view the various factors including but not limited to present and prospective capital position, market dynamics and risk position of the Bank.

• The variable pay is linked with the performance of the executive and performance of the Bank during the Period and accordingly the performance measurement is done basis various key performance indicators including:

> Individual Rating;

> Profitability Achievement;

> Business Growth Achievement;

> Credit Risk (NPA position, SMA 2 position);

> Market Risk (LCR, Duration gap Analysis);

> Solvency Risk (Leverage Ratio, Capital Adequacy Ratio)

• A minimum of 60% of the total variable pay (including at least 50% of the cash component if cash component is '' 25 lakhs or more), is deferred over a period of 3 years. Further, in case of various events, the deferred compensation is subject to the malus arrangement.

v) Guaranteed Bonus

The Bank does not allow any guaranteed bonus except bonus payable under the Payment of Bonus Act. Further, the Joining/Signing bonus is permissible in the context of hiring of executive in the form of ESOPs only and be limited to the first Period. Further, the Bank will not grant severance pay other than accrued benefits (gratuity, retiral benefits, etc.) except in case where it is mandatory by any statute.

vi) Hedging

The Bank does not provide any facility or funds or permit employees to insure or hedge their compensation structure to offset the risk alignment effects embedded in their compensation arrangement.

18 Disclosure on remuneration to Non-Executive Directors

Remuneration by way of sitting fees to the Non-Executive Directors for attending meetings of the Board and its committees during the year ended March 31, 2024 amounted to '' 0.43 crores and '' 0.28 crores during the year ended March 31, 2023.

Further, during the current year, the Bank has paid the remuneration amounting to '' 0.71 crores and '' 0.54 crores during the year ended March 31, 2023 to the Non-Executive Directors.

19 Accounting for employee share-based payments

19.1 The Bank has following ESOP plans-

Capital Small Finance Bank Limited - Employees Stock Option Plan 2018 ("CSFB ESOP 2018") was approved by the shareholders of the Bank, in the Annual General Meeting held on August 18, 2018 amended further on October 22, 2021, for granting equity stock options to its employees and directors (other than independent directors).

Capital Small Finance Bank Limited - Employees Stock Option Plan for Material Risk Takers ("CSFB ESOP for MRTs") was approved by the shareholders of the Bank on July 11, 2020 (amended further on October 22, 2021), for granting equity stock options to its material risk takers.

Capital Small Finance Bank Limited -Employees Stock Option Plan 2023 ("CSFB ESOP 2023") was approved by the shareholders of the Bank, in Extraordinary General Meeting of the Bank held on May 12, 2023, for granting equity stock options to its employees and directors (other than independent directors).

19.2 The stock options will be equity settled.

19.3 The accounting for stock options is in accordance with the Guidance Note on Accounting for Share-based Payments issued by the Institute of Chartered Accountants of India.

19.4 The Nomination and Remuneration Committee of the Bank is empowered to administrate, implement and superintend the plan. Its powers include determination of eligible employees, determine the parameters for grant of options, vesting conditions, determination of exercise period, among others.

19.8 The RBI vide its clarification dated August 30, 2021 on guidelines on compensation of whole-time directors/chief executive officers/material risk takers and control function staff, advised banks that the fair value of the share linked instruments on the date of grant should be recognised as an expense for all instruments granted after the period ending March 31,2021. Accordingly, the Bank measures the cost of ESOP using the fair value method for stock options granted post March 31, 2021 including grant to the Material Risk Takers as a part of their variable compensation and uses the intrinsic value method for stock options granted prior to the said period.

Had the Bank used the fair value method to determine compensation for the grant made before March 31, 2021, there would have been nil incremental cost during the year ended March 31, 2024 and March 31, 2023

27 Status of Ind AS Implementation

As per RBI circular RBI/2015 -16/315 DBR.BPBC. No.76/21.07.001/2015-16 dated February 11,2016 Implementation of Indian Accounting Standards (Ind AS), Banks are advised that scheduled commercial banks (excluding RRBs) shall follow the Indian Accounting Standards as notified under the Companies (Indian Accounting Standards) Rules, 2015, subject to any guideline or direction issued by the RBI in this regard. Banks in India currently prepare their financial statements as per the guidelines issued by the RBI, the Accounting Standards notified under section 133 of the Companies Act, 2013 and generally accepted accounting principles in India (Indian GAAP). In January 2016, the Ministry of Corporate Affairs issued the roadmap for implementation of new Indian Accounting Standards (Ind AS), which were based on convergence with the International Financial Reporting Standards (IFRS), for scheduled commercial banks, insurance companies and non-banking financial companies (NBFCs). In March 2019, RBI deferred the implementation of Ind AS for banks till further notice as the recommended legislative amendments were under consideration of Government of India. The Bank had undertaken preliminary diagnostic analysis of the GAAP differences between Indian GAAP vis-a-vis Ind AS and shall proceed for ensuring the compliance as per applicable requirements and directions in this regard and the Bank is submitting Proforma Ind AS Financial Statements to the RBI on regular basis.

36 Change in accounting estimate

During the year ended March 31,2024, there has been no change in accounting estimate. However, during the year ended March 31, 2023, the Bank has revised the estimated useful life of Office Equipment and Automated Teller Machines (ATMs). Depreciation on these assets has been charged prospectively over the revised useful life of assets. Consequently, depreciation charged has been increased by '' 5.08 crores and profit after tax for the period ended March 31, 2023 was lower by '' 3.83 crores.

37 Comparative Figures

Figures for the previous year have been regrouped and reclassified wherever necessary to conform to the current year''s presentation.

As per our report of even date

For SCV & Co. LLP For and on behalf of The Board of

Chartered Accountants Capital Small Finance Bank Limited

FRN:000235N/N500089

Sunny Singh Sarvjit Singh Samra Munish Jain Dinesh Gupta

Partner Managing Director & CEO Director Director

Membership No. 516834 DIN: 00477444 DIN : 10132430 DIN: 00475319

Aseem Mahajan Amit Sharma

Chief Financial Officer Company Secretary

Membership No.FCS10888

Date: May 09, 2024 Date : May 09, 2024

Place: Noida Place : Jalandhar