Notes to Accounts of CreditAccess Grameen Ltd.

Mar 31, 2025

3.7 Provisions

Provisions are recognised when the Company has a
present obligation (legal or constructive) as a result of
a past event, it is probable that an outflow of resources
embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the
amount of the obligation.

3.8 Contingent liabilities and assets

A contingent liability is a possible obligation that arises
from past events whose existence will be confirmed by the
occurrence or non-occurrence of one or more uncertain
future events beyond the control of the Company or a
present obligation that is not recognised because it is not
probable that an outflow of resources will be required to
settle the obligation. A contingent liability also arises in
extremely rare cases where there is a liability that cannot
be recognised because it cannot be measured reliably.
The Company does not recognise a contingent liability but
discloses its existence in the financial statements.

Contingent assets are not recognised. A contingent
asset is disclosed, where an inflow of economic
benefits is probable.

3.9 Employee benefits

The Company provides short term employee benefits i.e.
expected to be settled wholly before twelve months after
the end of the annual reporting period (such as salaries,
wages, bonus etc), defined benefit plan (gratuity),
retirement benefits (such as provident fund) and other
employee benefits including employee stock options and
other long term employee benefits.

3.9.1Defined contribution plan

Retirement benefits in the form of provident fund
and superannuation are defined contribution
schemes. The Company has no obligation, other
than the contribution payable to the respective
funds. The Company recognises contribution
payable to the respective funds as expenditure,
when an employee renders the related service.

3.9.2 Defined benefit plan

Gratuity liability is a defined benefit obligation and
is provided for on the basis of an actuarial valuation
on projected unit credit method made at the end of
each year. Gains or losses through remeasurements
of net benefit liabilities/ assets are recognised
with corresponding charge/credit to the retained
earnings through other comprehensive income in
the period in which they occur.

3.9.3 Other employee benefits

The Company treats accumulated leave expected to
be carried forward beyond twelve months as longÂ¬
term employee benefit for measurement purposes.
Such long-term compensated absences are
provided for based on the actuarial valuation using
the projected unit credit method at the end of each
financial year. The Company presents the leave as
a current liability in the balance sheet, to the extent
it does not have an unconditional right to defer its
settlement for 12 months after the reporting date.

Accumulated leave, which is expected to be utilized
within the next 12 months, is treated as short-term
employee benefit. The Company measures the
expected cost of such absences as the additional
amount that it expects to pay as a result of the
unused entitlement that has accumulated at the
reporting date.

3.9.4 Share based payments

Equity-settled share based payments to employees
are measured at the fair value of the equity
instruments at the grant date. Details regarding
the determination of the fair value of equity-
settled share based payments transactions are set
out in Note 38.

number of equity instruments that will ultimately
vest. The expense or credit recognised in the
statement of profit and loss for the year represents
the movement in cumulative expense recognised
as at the beginning and end of that year and is
recognised in employee benefits expense.

3.10 Taxes

3.10.1 Current income tax

Current income tax assets and liabilities are
measured at the amount expected to be recovered
from or paid to the taxation authorities in
accordance with Income tax Act, 1961. The tax rates
and tax laws used to compute the amount are those
that are enacted or substantively enacted, at the
reporting date. Current income tax relating to items
recognised outside the statement of profit or loss is
recognised outside the statement of profit or loss
(either in other comprehensive income or in equity).

3.10.2 Deferred tax

Deferred tax is provided using the balance sheet
approach on temporary differences between the
tax bases of assets and liabilities and their carrying
amounts for financial reporting purposes at the
reporting date. Deferred tax assets are recognised
for all deductible temporary differences, the carry
forward of unused tax credits and any unused tax
losses. Deferred tax assets are recognised to the
extent that it is probable that taxable profit will be
available against which the deductible temporary
differences, the carry forward of unused tax credits
and unused tax losses can be utilised.

The carrying amount of deferred tax assets is
reviewed at each reporting date and reduced
to the extent that it is no longer probable that
sufficient taxable profit will be available to allow
all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are re-assessed
at each reporting date and are recognised to the
extent that it has become probable that future
taxable profits will allow the deferred tax asset to
be recovered. Deferred tax assets and liabilities
are measured at the tax rates that are expected to
apply in the year when the asset is realised or the
liability is settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted at
the reporting date.

Deferred tax relating to items recognised outside
the statement of profit or loss is recognised outside
the statement of profit or loss (either in other
comprehensive income or in equity).

Deferred tax assets and deferred tax liabilities are offset
if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred
taxes relate to the same taxable entity and the same
taxation authority.

3.11 Earning per share

Basic earnings per share is calculated by dividing the
net profit or loss for the year attributable to equity
shareholders by the weighted average number of equity
shares outstanding during the period. Partly paid equity
shares are treated as a fraction of an equity share
to the extent that they are entitled to participate in
dividends relative to a fully paid equity share during the
reporting year.

For the purpose of computing diluted earnings per
share, the net profit or loss for the year attributable to
equity shareholders and the weighted average number
of shares outstanding during the period are adjusted for
the effects of all dilutive potential equity shares.

3.12 Segment information

The Company operates in a single business segment i.e.
lending to members, having similar risks and returns
for the purpose of Ind AS 108 on ''Operating Segments''.
The Company operates in a single geographical
segment i.e. domestic.

3.13 Financial instruments

A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability or
equity instrument of another entity.

3.13.1 Business Model Assessment

Classification and measurement of financial assets
depends on the results of business model and the
solely payments of principal and interest ("SPPI")
test. The Company determines the business model
at a level that reflects how groups of financial
assets are managed together to achieve a particular
business objective. This assessment includes
judgement reflecting all relevant evidence including
how the performance of the assets is evaluated
and their performance is measured, the risks that
affect the performance of the assets and how these
are managed and how the managers of the assets
are compensated. The Company monitors financial
assets measured at amortised cost. Monitoring
is part of the Company''s continuous assessment
of whether the business model for which the
remaining financial assets are held continues to
be appropriate and if it is not appropriate whether
there has been a change in business model and

so a prospective change to the classification
of those assets.

3.13.2 Financial Assets

Financial asset of the Company consists predominantly
loan assets, liquidity maintained by Company during
the course of business in the form of Cash and
bank balances, investments and other receivables
such as receivable from assignment of portfolio,
security deposits etc.

3.13.2.1 Initial recognition and measurement

Financial assets are initially recognised on the
trade date, i.e., the date that the Company
becomes a party to the contractual provisions
of the instrument. The classification of financial
instruments at initial recognition depends
on their purpose and characteristics and
the management''s intention when acquiring
them. All financial assets (not measured
subsequently at fair value through profit or
loss) are recognised initially at fair value plus
transaction costs that are attributable to the
acquisition of the financial asset.

3.13.2.2 Classification and Subsequent
measurement

For purposes of subsequent measurement,
financial assets are classified in three categories:

- at amortised cost

- at fair value through other comprehensive
income (FVTOCI)

- Investments in debt instruments and
equity instruments at fair value through
profit or loss (FVTPL)

3.13.2.3 Loans at amortised costs

Loans are measured at the amortised cost if
both the following conditions are met:

(a) Such loan is held within a business model
whose objective is to hold assets for
collecting contractual cash flows, and

calculated by taking into account fees
(such as processing fee) or costs that
are an integral part of the EIR. The EIR
amortisation is included in interest
income in the statement of profit or
loss. The losses arising from impairment
are recognised in the statement of
profit and loss.

3.13.2.4 Loans at fair value through other
comprehensive income (FVTOCI)

Loans are classified as at the FVTOCI if both o1
the following criteria are met:

-The objective of the business model is
achieved both by collecting contractual cash
flows and selling the financial assets, and

- Theasset''scontractual cash flows represent SPPI

Loans included within the FVTOCI category are
measured initially as well as at each reporting
date at fair value. Fair value movements
are recognized in the other comprehensive
income (OCI). However, the Company
recognizes interest income, impairment losses
& reversals and foreign exchange gain or loss
in the statement of profit an d loss. On d e-
recognition of the asset, cumulative gain or
loss previously recognised in OCI is reclassified
from the equity to the statement of profit and
loss. Interest earned whilst holding FVTOC
debt instrument is recognised as interest
income using the EIR method.

3.13.2.5 Investment in debt instruments and
equity instruments at fair value through
profit or loss (FVTPL)

FVTPL is a residual category for debt
instruments. Any debt instrument, which
does not meet the criteria for categorization
as amortized cost or as FVTOCI, is classified
as FVTPL. Debt instruments included within
the FVTPL category are measured at fair value
with all changes recognized in the statement
of profit and loss.

3.13.2.6 Cash and cash equivalents

Cash and cash equivalents, comprise cash in
hand, cash at bank and short-term investments
with an original maturity of three months or
less, that are readily convertible to cash with
an insignificant risk of changes in value.

of similar financial assets) is de-recognised
when the rights to receive cash flows from the
financial asset have expired. The Company
also de-recognises the financial asset if it has
transferred the financial asset and the transfer
qualifies for de-recognition.

The Company has transferred the financial
asset if, and only if, either:

- It has transferred its contractual rights to
receive cash flows from the financial asset
Or

- It retains the rights to the cash flows,
but has assumed an obligation to pay
the received cash flows in full without
material delay to a third party under a
''pass-through'' arrangement.

Pass-through arrangements are transactions
whereby the Company retains the contractual
rights to receive the cash flows of a financial
asset (the ''original asset''), but assumes a
contractual obligation to pay those cash
flows to one or more entities (the ''eventual
recipients''), when all of the following three
conditions are met:

- The Company has no obligation to pay
amounts to the eventual recipients unless
it has collected equivalent amounts from
the original asset, excluding short-term
advances with the right to full recovery
of the amount lent plus accrued interest
at market rates.

- The Company cannot sell or pledge the
original asset other than as security to
the eventual recipients.

- The Company has to remit any cash
flows it collects on behalf of the eventual
recipients without material delay.

In addition, the Company is not entitled
to reinvest such cash flows, except for
investments in cash or cash equivalents
including interest earned, during the period
between the collection date and the date
of required remittance to the eventual
recipients. A transfer only qualifies for deÂ¬
recognition if either:

- The Company has transferred substantially
all the risks and rewards of the asset

3.13.2.7 Investments

Investments in equity instruments are
classified as FVTPL, unless the related
instruments are not held for trading and
the Company irrevocably elects on initial
recognition of financial asset on an asset-byÂ¬
asset basis to present subsequent changes
in fair value in other comprehensive income
(FVTOCI). All other investments are classified
and measured as FVTPL only.

3.13.3 Financial Liabilities

3.13.3.1 Initial recognition and measurement

The Company recognises all financial liabilities
initially at fair value adjusted for transaction
costs that are directly attributable to the issue
of financial liabilities except in the case of
financial liabilities recorded at FVTPL where
the transaction costs are charged to Statement
of Profit and Loss. Generally, the transaction
price is treated as fair value unless there are
circumstances which prove to the contrary
in which case, the difference, if material, is
charged to Statement of Profit and Loss.

Subsequent measurement

The Company subsequently measures all
financial liabilities at amortised cost using the
EIR method, except for derivative contracts
which are measured at FVTPL and accounted
for by applying the hedge accounting
requirements under Ind AS 109.

3.13.3.2 Borrowings

After initial recognition, interest-bearing loans
and borrowings are subsequently measured
at amortised cost using the EIR method. The
EIR amortisation is included as finance costs in
the statement of profit and loss.

3.13.4 Reclassification of financial assets and
liabilities

The Company does not reclassify its financial
assets subsequent to their initial recognition, apart
from the exceptional circumstances in which the
Company acquires, disposes of, or terminates
a business line.

3.13.5 De-recognition of financial assets and liabilities

3.13.5.1 De-recognition of financial assets

A financial asset (or, where applicable, a
part of a financial asset or part of a group

- The Company has neither transferred nor
retained substantially all the risks and
rewards of the asset, but has transferred
control of the asset.

The Company considers control to be
transferred if and only if, the transferee has the
practical ability to sell the asset in its entirety to
an unrelated third party and is able to exercise
that ability unilaterally and without imposing
additional restrictions on the transfer. When
the Company has neither transferred nor
retained substantially all the risks and rewards
and has retained control of the asset, the asset
continues to be recognised only to the extent
of the Company''s continuing involvement, in
which case, the Company also recognises an
associated liability. The transferred asset and
the associated liability are measured on a
basis that reflects the rights and obligations
that the Company has retained.

On derecognition of a financial asset in its
entirety, the difference between: (a) the
carrying amount (measured at the date of
derecognition) and (b) the consideration
received (including any new asset obtained
less any new liability assumed) is recognised in
the statement of profit or loss.

3.13.5.2 De-recognition of financial liabilities

Financial liability is de-recognised when the
obligation under the liability is discharged,
cancelled or expires. Where an existing
financial liability is replaced by another from
the same lender on substantially different
terms or the terms of an existing liability are
substantially modified, such an exchange or
modification is treated as a de-recognition of
the original liability and the recognition of a
new liability. The difference in the respective
carrying amounts is recognised in the
statement of profit and loss.

3.14 Impairment of financial assets

3.14.1 Overview of the Expected Credit Loss (ECL)
allowance principles

The Company is recording the allowance for
expected credit losses for all loans at amortised
cost and FVTOCI and other debt financial assets
not held at FVTPL.

The ECL allowance is based on the credit losses
expected to arise over the life of the asset (the

lifetime expected credit loss or LTECL), unless there
has been no significant increase in credit risk since
origination, in which case, the allowance is based
on the 12 months'' expected credit loss (12mECL).
The Company''s policies for determining if there
has been a significant increase in credit risk are set
out in Note 41.

The 12mECL is the portion of LTECLs that represent
the ECLs that result from default events on a
financial instrument that are possible within the 12
months after the reporting date.

Both LTECLs and 12mECLs are calculated on a
collective basis for identified homogenous pool
of loans. The Company''s policy for grouping
financial assets measured on a collective basis is
explained in Note 41.

Accordingly, the Company groups its loans into
Stage 1, Stage 2, Stage 3, as described below:

Stage 1: When loans are first recognised, the
Company recognises an allowance based on
12mECLs. Stage 1 loans also include facilities where
the credit risk has improved and the loan has been
reclassified from Stage 2 or Stage 3.

Stage 2: When a loan has shown a significant
increase in credit risk since origination, the
Company records an allowance for the LTECLs.

Stage 3: Loans considered credit-impaired (as
outlined in Note 41). The Company records an
allowance for the LTECLs.

For financial assets for which the Company has
no reasonable expectations of recovering either
the entire outstanding amount, or a proportion
thereof, the gross carrying amount of the financial
asset is reduced. This is considered as a (partial) deÂ¬
recognition of the financial asset.

3.14.2 The calculation of ECL

The Company calculates ECLs based on a probability-
weighted scenarios and historical data to measure
the expected cash shortfalls. A cash shortfall is the
difference between the cash flows that are due to
an entity in accordance with the contract and the
cash flows that the entity expects to receive.

ECL consists of three key components: Probability
of Default (PD), Exposure at Default (EAD) and
Loss given default (LGD). ECL is calculated by
multiplying them. Refer Note 41 for explanation of
the relevant terms.

The maximum period for which the credit
losses are determined is the expected life of a
financial instrument.

The mechanics of the ECL method are
summarised below:

Stage 1: The 12mECL is calculated as the portion
of LTECLs that represent the ECLs that result
from default events on a financial instrument
that are possible within the 12 months after
the reporting date. The Company calculates the
12mECL allowance based on the expectation of a
default occurring in the 12 months following the
reporting date. These expected 12-month default
probabilities are applied to an EAD and multiplied
by the expected LGD.

Stage 2: When a loan has shown a significant
increase in credit risk since origination, the
Company records an allowance for the LTECLs. The
mechanics are similar to those explained above,
but PDs and LGDs are estimated over the lifetime of
the instrument.

Stage 3: For loans considered credit-impaired, the
Company recognizes the lifetime expected credit
losses for these loans. The method is similar to that
for Stage 2 assets, with the PD set at 100%.

3.15 Write-offs

Financial assets are written off when the Company has
no reasonable expectation of recovery or expected
recovery is not significant basis experience. If the
amount to be written off is greater than the accumulated
loss allowance, the difference is first treated as an
addition to the allowance that is then applied against the
gross carrying amount. Any subsequent recoveries are
credited to the statement of profit and loss.

3.16 Fair value measurement

The Company measures certain financial instruments
at fair value at each balance sheet date using valuation
techniques. Fair value is the price that would be
received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at
the measurement date. The fair value measurement is
based on the presumption that the transaction to sell the
asset or transfer the liability takes place either:

- In the principal market for the asset or liability, or

- In the absence of a principal market, in the most
advantageous market for the asset or liability.

The principal or the most advantegeous market must be
accessible by the Company.

The Company uses valuation techniques that are
appropriate in the circumstances and for which sufficient
data are available to measure fair value, maximising the
use of relevant observable inputs and minimising the
use of unobservable inputs.

All assets and liabilities for which fair value is measured
are categorised with fair value hierachy into Level I, Level
II and Level III based on the degree to which the inputs
to the fair value measurements are observable and the
significance of the inputs to the fair value measurement
in its entirety, which are as follows:

â¢ Level 1 - Quoted prices (unadjusted) in active
markets for identical assets or liabilities that the
Company can access at the measurement date;

â¢ Level 2 - Other than quoted prices included within
Level 1, that are observable for the asset or liability,
either directly or indirectly; and

â¢ Level 3 - Unobservable inputs for the asset or liability.

3.17 Foreign currency

Company enters to foreign currency transactions
during the course of business predominantly relating
to borrowing (availement/repayment of borrowing) and
payment of fee/charges towards services/products such
as license costs, maintenance charges etc.

3.17.1 All transactions in foreign currency are recognised
at the exchange rate prevailing on the date of the
transaction.

3.17.2 Foreign currency monetary items are reported
using the exchange rate prevailing at the close of
the period.

3.17.3 Exchange differences arising on the settlement
of monetary items or on the restatement of
Company''s monetary items at rates different
from those at which they were initially recorded
during the period, or reported in previous financial
statements, are recognised as income or as an
expenses in the period in which they arise.

3.18 Hedge accounting

The Company enters into swap contracts and other
derivative financial instruments to hedge its exposure to
foreign exchange and interest rates. The Company does
not hold derivative financial instruments for speculative
purpose. Hedges of foreign exchange risk on firm
commitments are accounted as cash flow hedges.

At the inception of the hedge relationship, the entity
documents the relationship between the hedging
instrument and the hedged item, along with its risk
management objectives and its strategy for undertaking
various hedge transactions. Furthermore, at the
inception of the hedge and on an ongoing basis, the
Company documents whether the hedging instrument is
highly effective in offsetting changes in cash flows of the
hedged item attributable to the hedged risk.

Cash flow hedge

A cash flow hedge is a hedge of the exposure to variability
in cash flows that is attributable to a particular risk
associated with a recognised asset or liability and could
affect profit or loss.

Here, the effective portion of changes in the fair value of
derivatives that are designated and qualify as cash flow
hedges is recognised in other comprehensive income
and accumulated in equity as ''hedging reserve''.

The ineffective portion of the gain or loss on the hedging
instrument is recognised immediately in the Statement
of Profit and Loss.

Amounts previously recognised in other comprehensive
income and accumulated in equity relating to the
effective portion are reclassified to profit or loss in the
periods when the hedged item affects profit or loss, in
the same head as the hedged item.

The effective portion of the hedge is determined at the
lower of the cumulative gain or loss on the hedging
instrument from inception of the hedge and the
cumulative change in the fair value of the hedged item
from the inception of the hedge and the remaining
gain or loss on the hedging instrument is treated as
ineffective portion.

Hedge accounting is discontinued when the hedging
instrument expires or is sold, terminated, or exercised,
or when it no longer qualifies for hedge accounting.
Any gain or loss recognised in other comprehensive
income and accumulated in equity at that time remains
in equity and is recognised in profit or loss when the
forecast transaction is ultimately recognised in profit or
loss. When a forecast transaction is no longer expected
to occur, the gain or loss accumulated in equity is
recognised immediately in profit or loss.

A derivative with a positive fair value is recognised as a
financial asset whereas a derivative with a negative fair
value is recognised as a financial liability.

3.19 Leases (where the Company is the lessee)

Company''s lease assets primarily consists of equipments
for information technology infrastructure/ servers and
immovable properties for operating as branches.

Short term leases not covered under Ind AS 116 are
classified as operating lease. Lease payments during
the year are charged to statement of profit and loss.
Future minimum rentals payable under non-cancellable
operating leases.

The Company as a lessee

To assess whether a contract conveys the right to
control the use of an identified asset, the Company
assesses whether:

(i) the contract involves the use of an identified asset;

(ii) the Company has substantially all of the economic
benefits from use of the asset through the period of the
lease; and (iii) the Company has the right to direct the
use of the asset.

On the date of commencement of the lease, the
Company recognises a right-of-use asset ("ROU") and a
corresponding lease liability for all lease arrangements in
which it is a lessee, except for leases with a term of twelve
months or less (short-term leases) and low value leases.
For these short-term and low value leases, the Company
recognizes the lease payments as an operating expense
on a straight-line basis over the term of the lease.

at or prior to the commencement date of the lease plus
any initial direct costs less any lease incentives. They
are subsequently measured at cost less accumulated
depreciation and impairment losses.

Right-of-use assets are depreciated from the
commencement date on a straight-line basis over
the shorter of the lease term and useful life of the
underlying asset.

The lease liability is initially measured at amortized cost at
the present value of the future lease payments. The lease
payments are discounted using the interest rate implicit
in the lease or, if not readily determinable, using the
incremental borrowing rates in the country of domicile
of these leases. Lease liabilities are remeasured with a
corresponding adjustment to the related right of use
asset if the Company changes its assessment if whether
it will exercise an extension or a termination option.

3.20 Recent Accounting pronouncements

3.20.1 Key New and amended standards adopted by
the Company

The Ministry of Corporate Affairs ("MCA") notifies
new standards and amendments to existing
standards under the Companies (Indian Accounting
Standards) Rules, as issued from time to time.
For the year ended March 31, 2025, the MCA has
notified Ind AS 117 - Insurance Contracts and
amendments to Ind AS 116 - Leases, specifically
relating to sale and leaseback transactions, which
are applicable to the Company with effect from
April 1,2024. The Company has reviewed these new
pronouncements and, based on its evaluation, has
determined that they do not have any significant
impact on its financial statements.

3.20.2 Key Amendments applicable from next
Financial year

For the year ended March 31,2025, the Ministry
of Corporate Affairs has not notified any new
standards or amendments to the existing standards
applicable to the Company.

20 Other equity* (Contd..)

Nature and purpose of reserve

20.1 Securities premium

Securities premium is used to record the premium on issue of shares. The reserve can be utilised in accordance with the
provisions of the Companies Act, 2013.

20.2 Capital reserve

During the year ended 2018, the Company pursuant to the scheme of amalgamation, acquired MV Microfin Private Limited
with effect from April 1,2017. As per the accounting treatment of the scheme of amalgamation approved by the Honourable
High Court of Karnataka, the differential amount between the carrying value of investments and net assets acquired from
the transferor companies has been accounted as Capital reserve.

20.3 Statutory reserve (As required by Sec 45-IC of Reserve Bank of India Act, 1934)

Statutory reserve represents the accumulation of amount transferred from surplus year on year based on the fixed
percentage of profit for the year, as per Section 45-IC of Reserve Bank of India Act 1934.

20.4 Share option outstanding account

The share option outstanding account is used to recognise the grant date fair value of option issued to employees under
employee stock option scheme.

20.5 Retained earnings

Retained earnings are the profits that the Company has earned till date, less any transfers to statutory reserve, general
reserve or any other such other appropriations to specific reserves. Remeasurement, comprising of actuarial gains and
losses and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are
recognised immediately in the balance sheet with a corresponding debit or credit to retained earnings through OCI in the
period in which they occur. Remeasurements are not reclassified to the statement of profit and loss in subsequent periods.

20.6 Other comprehensive income

Effective portion of Cash Flow Hedge

For designated and qualifying cash flow hedges, the effective portion of the cumulative gain or loss on the hedging
instrument is initially recognised directly in OCI within equity (cash flow hedge reserve). When the hedged cash flow affects
the statement of profit and loss, the effective portion of the gain or loss on the hedging instrument is recorded in the
corresponding income or expense line of the statement of profit and loss.

31 Employee benefits

A. Defined benefit plan

The Company provides for the gratuity, a defined benefit retirement plan covering qualifying employees. Employees who
are in continous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/
termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied
by the number of years of service subject to maximum benefit of H 0.20 crore. The Company has funded gratuity plan and
makes contibutions to Gratuity scheme administered by the insurance company through its Gratuity Fund.

B. Defined contribution plan

The Company makes Provident fund and Employee State Insurance Scheme contributions which are defined contribution
plans for qualifying employees. Under the schemes, the Company is required to contribute a specified percentage of
the basic salary to fund the benefits. The contributions payable to these plans by the Company are administered by the
Government. The obligation of the Company is limited to the amount contributed and it has no further contractual nor
any constructive obligation.The Company recognised H 40.40 crore (March 31, 2024 : H 35.71 crore) for Provident fund
contributions and H 9.24 crore (March 31, 2024 : H 8.52 crore) for Employee State Insurance Scheme contributions in the
Statement of Profit and Loss.

Inflation risk

The present value of some of the defined benefit plan obligations are calculated with reference to the future salaries of plan
participants. As such, an increase in the salary of the plan participants will increase the plan''s liability.

Life expectancy

The present value of defined benefit plan obligation is calculated by reference to the best estimate of the mortality of plan
participants, both during and after the employment. An increase in the life expectancy of the plan participants will increase
the plan''s liability.

Code on Social Security

The Code on Social Security, 2020 (''Code'') relating to employee benefits during employment and post-employment benefits
received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date
on which the Code will come into effect has not been notified and the final rules/interpretation have not yet been issued.
The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period
the Code becomes effective.

^ATax Matters - Indirect Taxes: This litigation is related to Input tax credit claimed which is disallowed by department of Goods and services tax
in the Tamil Nadu state for FY 2017-18 and 2018-19. The Company filed an appeal against this matter with Commissioner Appeals-II Chennai.

$Tax Matters - Indirect Taxes: This litigation is related to Input tax credit claimed on IPO expenses which is disallowed by department of
Goods and services tax in the Karnataka state for FY 2018-19. The Company has filed an appeal with Commissioner of Appeals. Also, matter
was heard and the Company is awaiting for disposal of the appeal soon.

*Tax Matters- Indirect Taxes: This litigation is related to Input tax credit claimed which is disallowed by department of Goods and services
tax in the West Bengal state for FY 2019-20. The Company filed an appeal against this matter with Commissioner Appeals.

(b) In addition, the Company is involved in other legal proceedings and claims, which have arisen in the ordinary course of
business. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect
on the Company financial position and result of operations.

40 Financial instruments - fair values
Accounting classification and fair values:

Carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy,
are presented below. It does not include the fair value information for financial assets and financial liabilities not measured
at fair value if the carrying amount is a reasonable approximation of fair value.

Fair value hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
(i.e., as prices) or indirectly (i.e., derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

Note: The carrying amounts of cash and cash equivalents, bank balances other than cash and cash equivalents, other
financial assets and payables are considered to be the same as their fair values, due to their short-term nature.

There were no transfers between Level 3 and Level 1 / Level 2 during the current year.

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. The below methodologies and assumptions relate only to the instruments in the above
tables.

Loans (measured at amortised cost)

Fair values of Loans measured at amortised cost have been measured based on a discounted cash flow model of the contractual
cash flows of solely payment of principal and interest. The significant unobservable input is the discount rate, determined using
the recent lending rate of the Company.

Financial liabilities measured at amortised cost

The fair value of fixed rate borrowings is determined by discounting expected future contractual cash flows using current
market interest rate being charged for new borrowings. The fair value of floating rate borrowing is deemed to equal its
carrying value.

41 Risk Management

41.1 Introduction and risk profile

CreditAccess Grameen Limited is one of the leading
microfinance institutions in India focused on providing
financial support to women from low income
households engaged in economic activity with limited
access to financial services. The Company predominantly
offers collateral free loans to women from low income
households, willing to borrow in a group and agreeable
to take joint liability. The wide range of lending products
address the critical needs of customers throughout
their lifecycle and include income generation, home
improvement, children''s education, sanitation and
personal emergency loans. With a view to diversifying the
product profile, the company has introduced individual
loans for matured group lending customers. These
loans are offered to customers having requirement
of larger loans to expand an existing business in their
individual capacity.

The major risks for the company are credit, operational,
market, business environment, political, regulatory,
concentration, expansion and liquidity. As a matter of
policy, these risks are assessed and steps as appropriate,
are taken to mitigate the same.

41.1.a Risk management structure

The Board of Directors are responsible for the
overall risk management approach and for
approving the risk management strategies and
principles.The Risk Management framework
approved by the Board has laid down the
governance structure supporting the identification,
assessment, monitoring, reporting and mitigation
of risk throughout the Company. The objective
of the risk management platform is to make a
conscious effort in developing risk culture within
the organisation and having appropriate systems
and tools for timely identification, measurement
and reporting of risks for managing them.

The Board has a Risk Management committee
which is responsible for monitoring the overall risk
process within the Company and reports to the
Board of Directors.

Committee. The individual departments are
responsible for ensuring implementation of
the risk management framework and policies,
systems and methodologies as approved by the
Board. Assignment of responsibilities in relation
to risk management is prerogative of the Heads
of Departments, in coordination with CRO. While
each department focuses on its specific area of
activity, the Risk Management Unit operates in
coordination with all other departments, utilising all
significant information sourced to ensure effective
management of risks in accordance with the
guidelines approved by the Board. The unit works
closely with and reports to the Risk Management
Committee, to ensure that procedures are
compliant with the overall framework.

Heads of Departments are accountable to a
Management Level Risk Committee (MLRC)
comprising of MD, CEO, CFO, COO, CTO and
CRO. The departmental heads will report for the
implementation of above mentioned guideline
within their respective areas of responsibility. The
department heads are also accountable to the
MLRC for identification, assessment, aggregation,
reporting and monitoring of the risk related to their
respective domain.

The Company''s policy is that risk management
processes throughout the Company are audited by
the Internal Audit function, which examines both
the adequacy of the procedures and the Company''s
compliance with the procedures. Internal Audit
discusses the results of all assessments with
management, and reports its findings and
recommendations to the Audit Committee.

41.1.b Risk mitigation and risk culture

Risk assessments are conducted for all business
activities. The assessments are to address potential
risks and to comply with relevant legal and
regulatory requirements. Risk assessments are
performed by competent personnel from individual
departments and risk management department
including, where appropriate, expertise from
outside the Company. Procedures are established
to update risk assessments at appropriate intervals
and to review these assessments regularly. Based
on the Risk Control and Self Assessment (RCSA),
the Company formulates its Risk Management
Strategy / Risk Management plan on annual basis.
The strategy will broadly entail choosing among
the various options for risk mitigation for each
identified risk. The risk mitigation is planned using
the following key strategies:

Risk Avoidance: By not performing an activity that
could carry risk. Avoidance may seem the answer to
all risks, but avoiding risks also means losing out on
the potential gain that accepting (retaining) the risk
may have allowed.

Risk Transfer: Mitigation by having another party
to accept the risk, either partial or total, typically by
contract or by hedging.

Risk Reduction: Employing methods/solutions that
reduce the severity of the loss.

Risk Retention: Accepting the loss when it occurs.
Risk retention is a viable strategy for small risks
where the cost of insuring against the risk would be
greater over time than the total losses sustained. All
risks that are not avoided or transferred are retained
by default. This includes risks that are so large or
catastrophic that they either cannot be insured
against or the premiums would be infeasible.

41.1.c Risk measurement and reporting systems

Based on a cost / benefit assessment of a risk, as is
undertaken, some risks may be judged as having to
be accepted because it is believed mitigation is not
possible or warranted.

As the risk exposure of any business may undergo
change from time to time due to continuously
changing environment, the updation of the Risk
Register will be done on a regular basis.

All the strategies with respect to managing these
major risks shall be monitored by the CRO and MLRC.

The Management Level Risk Committee meetings
are held as necessary or once a month. The
Management Level Risk Committee would monitor
the management of major risks specifically
and other risks of the Company in general. The
Committee takes an integrated view of the risks
facing the entity and monitor implementation of
the directives received from Risk Management
Committee and actionable items drawn from the
risk management framework.

Accordingly, the Management Level Risk Committee
reviews the following aspects of business specifically
from a risk indicator perspective and suitably record
the deliberations during the monthly meeting.

- Review of business growth and portfolio quality.

- Discuss and review the reported details of Key
Risk Threshold breaches (KRI''s), consequent
actions taken and review of operational loss
events, if any.

- Review of process compliances across
organisation.

- Review of HR management, training and
employee attrition.

- Review of new initiatives and product/policy/
process changes.

- Discuss and review performance of IT systems.

- Review, where necessary, policies that have
a bearing on the operational & credit risk
management and recommend amendments.

- Discuss and recommend suitable controls/
mitigations for managing operational & credit
risk and assure that adequate resources are
being assigned to mitigate the risks.

- Review analysis of frauds, potential
losses, non-compliance, breaches etc. and
determine corrective measures to prevent
their recurrences.

- Understand changes and threats, concur on
areas of high priority and possible actions for
managing/mitigating the same.

41.1.d Risk Management Strategies
Excessive risk concentrations

Concentrations arise when a number of
counterparties are engaged in similar business
activities, or activities in the same geographical
region, or have similar economic features that would
cause their ability to meet contractual obligations
to be similarly affected by changes in economic,
political or other conditions. Concentrations
indicate the relative sensitivity of the Company''s
performance to developments affecting a particular
industry or geographical location.

The following management strategies and policies
are adopted by the Company to manage the
various key risks.

Political Risk mitigation measures:

â¢ Low cost operations and low pricing for
customers.

â¢ Customer centric approach, high customer
retention.

â¢ Rural focus.

â¢ Systematic customer awareness activities.

â¢ High social focused activities.

â¢ Adherence to client protection guidelines.

â¢ Robust grievance redressal mechanism.

â¢ Adherence to regulatory guidelines in letter
and spirit.

Concentration risk mitigation measures:

â¢ District centric approach.

â¢ District exposure cap.

â¢ Restriction on growth in urban locations.

â¢ Maximum disbursement cap per loan account.

â¢ Maximum loan exposure cap per customer.

â¢ Diversified funding resources.

Operational & HR Risk mitigation measures:

â¢ Stringent customer enrolment process.

â¢ Multiple products.

â¢ Proper recruitment policy and appraisal system.

â¢ Adequately trained field force.

â¢ Weekly & fortnightly collections - higher
customer touch, lower amount instalments.

â¢ Multilevel monitoring framework.

â¢ Strong, Independent and fully automated
Internal Audit function.

â¢ Strong IT system with access to real time
client and loan data.

Liquidity risk mitigation measures:

â¢ Diversified funding resources.

â¢ Asset liability management.

â¢ Effective fund management.

â¢ Maximum cash holding cap.

Expansion risk mitigation measures:

â¢ Contiguous growth.

â¢ District centric approach.

â¢ Rural focus.

â¢ Branch selection based on census data &
credit bureau data.

â¢ Three level survey of the location selected.
Credit risk

Credit risk is the risk of financial loss to the
Company if the counterparty to a financial
instrument, whether a customer or otherwise,
fails to meet its contractual obligations towards
the Company. Credit risk is the core business risk
of the Company. The Company therefore has high
appetite for this risk but low tolerance and the
governance structures including the internal control
systems are particularly designed to manage and
mitigate this risk. The Company is mainly exposed
to credit risk from loans to customers (including
loans transferred to SPVs under securitization
agreements, excluding loans sold under assignment
presented as off-balance sheet assets).

The credit risk may arise due to, over borrowing
by customers or over lending by other financial
institutions c

Mar 31, 2024

3.7 Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

3.8 Contingent liabilities and assets

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Company or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Company does not recognise a contingent liability but discloses its existence in the financial statements.

Contingent assets are not recognised. A contingent asset is disclosed, where an inflow of economic benefits is probable.

3.9 Employee benefits

The Company provides short term employee benefits i.e. expected to be settled wholly before twelve months after the end of the annual reporting period (such as salaries, wages, bonus etc), defined benefit plan (gratuity), retirement benefits (such as provident fund) and other employee benefits including employee stock options and other long term employee benefits.

3.9.1 Defined contribution plan

Retirement benefits in the form of provident fund and superannuation are defined contribution schemes. The Company has no obligation, other than the contribution payable to the respective funds. The Company recognises contribution payable to the respective funds as expenditure, when an employee renders the related service.

3.9.2 Defined benefit plan

Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method made at the end of each year. Gains or losses through remeasurements of net benefit liabilities/ assets are recognised with corresponding charge/credit to the retained earnings through other comprehensive income in the period in which they occur.

3.9.3 Other employee benefits

The Company treats accumulated leave expected to be carried forward beyond twelve months as long-term employee benefit for measurement purposes. Such long-term compensated absences are provided for based on the actuarial valuation using the projected unit credit method at the end of each financial year. The Company presents the leave as a current liability in the balance sheet, to the extent it does not have an unconditional right to defer its settlement for 12 months after the reporting date.

Accumulated leave, which is expected to be utilized within the next 12 months, is treated as short-term employee benefit. The Company measures the expected cost of such absences as the additional amount that it expects to pay as a result of the unused entitlement that has accumulated at the reporting date.

3.9.4 Share based payments

Equity-settled share based payments to employees are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share based payments transactions are set out in Note 38.

The cost of equity-settled transactions is measured using the fair value method and recognised, together with a corresponding increase in the "Share options outstanding account" in reserves. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company''s best estimate of the number of equity instruments that will ultimately vest. The expense or credit recognised in the statement of profit and loss for the year represents the movement in cumulative expense recognised as at the beginning and end of that year and is recognised in employee benefits expense.

3.10 Taxes

3.10.1 Current income tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities in accordance with Income tax Act, 1961. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognised outside the statement profit or loss is recognised outside the statement profit or loss (either in other comprehensive income or in equity).

3.10.2 Deferred tax

Deferred tax is provided using the balance sheet approach on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, the carry forward of unused tax credits and unused tax losses can be utilised.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside the statement profit or loss is recognised outside the statement profit or loss (either in other comprehensive income or in equity).

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

3.11 Earning per share

Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders by the weighted average number of equity shares outstanding during the period. Partly paid equity shares are treated as a fraction of an equity share to the extent that they are entitled to participate in dividends relative to a fully paid equity share during the reporting year.

For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity shares.

3.12 Segment information

The Company operates in a single business segment i.e. lending to members, having similar risks and returns for the purpose of Ind AS 108 on ''Operating Segments''. The Company operates in a single geographical segment i.e. domestic.

3.13 Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

3.13.1 Financial Assets

Financial asset of the Company consists predominantly loan assets, liquidity maintained by Company during the course of business in the form of Cash and

bank balances, investments and other receivables such as receivable from assignment of portfolio, security deposits etc.

3.13.1.1 Initial recognition and measurement

Financial assets are initially recognised on the trade date, i.e., the date that the Company becomes a party to the contractual provisions of the instrument. The classification of financial instruments at initial recognition depends on their purpose and characteristics and the management''s intention when acquiring them. All financial assets (not measured subsequently at fair value through profit or loss) are recognised initially at fair value plus transaction costs that are attributable to the acquisition of the financial asset.

3.13.1.2 Classification and Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in three categories:

- at amortised cost

- at fair value through other comprehensive income (FVTOCI)

- Investments in debt instruments and equity instruments at fair value through profit

or loss (FVTPL)

3.13.1.3 Loans at amortised costs

Loans are measured at the amortised cost if both the following conditions are met:

(a) Such loan is held within a business model whose objective is to hold assets for collecting contractual cash flows, and

(b) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method less impairment. Amortised cost is calculated by taking into account fees (such as processing fee) or costs that are an integral part of the EIR. The EIR amortisation is included in interest income in the statement of profit or loss. The losses arising from impairment are recognised in the statement of profit and loss.

3.13.1.4 Loans at fair value through other comprehensive income (FVTOCI)

Loans are classified as at the FVTOCI if both of the following criteria are met:

- The objective of the business model is achieved both by collecting contractual cash flows and selling the financial assets, and

- The asset''s contractual cash flows represent SPPI.

Loans included within the FVTOCI category are measured initially as well as at each reporting date at fair value. Fair value movements are recognized in the other comprehensive income (OCI). However, the Company recognizes interest income, impairment losses & reversals and foreign exchange gain or loss in the statement of profit and loss. On de-recognition of the asset, cumulative gain or loss previously recognised in OCI is reclassified from the equity to the statement of profit and loss. Interest earned whilst holding FVTOCI debt instrument is recognised as interest income using the EIR method.

3.13.1.5 Investment in debt instruments and equity instruments at fair value through profit or loss (FVTPL)

FVTPL is a residual category for debt instruments. Any debt instrument, which does not meet the criteria for categorization as amortized cost or as FVTOCI, is classified as FVTPL. Debt instruments included within the FVTPL category are measured at fair value with all changes recognized in the statement of profit and loss.

3.13.1.6 Cash and cash equivalents

Cash and cash equivalents, comprise cash in hand, cash at bank and short-term investments with an original maturity of three months or less, that are readily convertible to cash with an insignificant risk of changes in value.

3.13.1.7 Investments

Investments in equity instruments are classified as FVTPL, unless the related instruments are not held for trading and the Company irrevocably elects on initial recognition of financial asset on an asset-by-asset basis to present subsequent changes in fair value in other comprehensive income (FVTOCI). All other investments are classified and measured as FVTPL only.

3.13.2 Financial Liabilities

3.13.2.1 Initial recognition and measurement

Financial liabilities are classified and 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 designated as such on initial

recognition. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. The Company''s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and derivative financial instruments, which are measured at amortised cost.

3.13.2.2 Borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. The EIR amortisation is included as finance costs in the statement of profit and loss.

3.13.3 Reclassification of financial assets and liabilities

The Company does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional circumstances in which the Company acquires, disposes of, or terminates a business line.

3.13.4 De-recognition of financial assets and liabilities

3.13.4.1 De-recognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is de-recognised when the rights to receive cash flows from the financial asset have expired. The Company also derecognises the financial asset if it has transferred the financial asset and the transfer qualifies for de-recognition.

The Company has transferred the financial asset if, and only if, either:

- It has transferred its contractual rights to receive cash flows from the financial asset

- It retains the rights to the cash flows, but has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ''passthrough'' arrangement.

Pass-through arrangements are transactions whereby the Company retains the contractual rights to receive the cash flows of a financial asset (the ''original asset''), but assumes a contractual obligation to pay those cash flows to one or more entities (the ''eventual recipients''), when all of the following three conditions are met:

- The Company has no obligation to pay amounts to the eventual recipients unless

it has collected equivalent amounts from the original asset, excluding short-term advances with the right to full recovery of the amount lent plus accrued interest at market rates.

- The Company cannot sell or pledge the original asset other than as security to the eventual recipients.

- The Company has to remit any cash flows it collects on behalf of the eventual recipients without material delay.

In addition, the Company is not entitled to reinvest such cash flows, except for investments in cash or cash equivalents including interest earned, during the period between the collection date and the date of required remittance to the eventual recipients. A transfer only qualifies for de-recognition if either:

- The Company has transferred substantially all the risks and rewards of the asset

- The Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

The Company considers control to be transferred if and only if, the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer. When the Company has neither transferred nor retained substantially all the risks and rewards and has retained control of the asset, the asset continues to be recognised only to the extent of the Company''s continuing involvement, in which case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.

On derecognition of a financial asset in its entirety, the difference between: (a) the carrying amount (measured at the date of derecognition) and (b) the consideration received (including any new asset obtained less any new liability assumed) is recognised in the statement of profit or loss account.

3.13.4.2 De-recognition of financial liabilities

modification is treated as a de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.

3.14 Impairment of financial assets

3.14.1 Overview of the Expected Credit Loss (ECL) allowance principles

The Company is recording the allowance for expected credit losses for all loans at amortised cost and FVOCI and other debt financial assets not held at FVTPL.

The ECL allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or LTECL), unless there has been no significant increase in credit risk since origination, in which case, the allowance is based on the 12 months'' expected credit loss (12mECL). The Company''s policies for determining if there has been a significant increase in credit risk are set out in Note 41.

The 12mECL is the portion of LTECLs that represent the ECLs that result from default events on a financial instrument that are possible within the 12 months after the reporting date.

Both LTECLs and 12mECLs are calculated on a collective basis for identified homogenous pool of loans. The Company''s policy for grouping financial assets measured on a collective basis is explained in Note 41.

Accordingly, the Company groups its loans into Stage 1, Stage 2, Stage 3, as described below:

Stage 1: When loans are first recognised, the Company recognises an allowance based on 12mECLs. Stage 1 loans also include facilities where the credit risk has improved and the loan has been reclassified from Stage 2 or Stage 3.

Stage 2: When a loan has shown a significant increase in credit risk since origination, the Company records an allowance for the LTECLs.

Stage 3: Loans considered credit-impaired (as outlined in Note 41). The Company records an allowance for the LTECLs.

For financial assets for which the Company has no reasonable expectations of recovering either the entire outstanding amount, or a proportion thereof, the gross carrying amount of the financial asset is reduced. This is considered a (partial) de-recognition of the financial asset.

3.14.2 The calculation of ECL

The Company calculates ECLs based on a probability-weighted scenarios and historical

data to measure the expected cash shortfalls. A cash shortfall is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive.

ECL consists of three key components: Probability of Default (PD), Exposure at Default (EAD) and Loss given default (LGD). ECL is calculated by multiplying them. Refer Note 41 for explanation of the relevant terms.

The maximum period for which the credit losses are determined is the expected life of a financial instrument.

The mechanics of the ECL method are summarised below:

Stage 1: The 12mECL is calculated as the portion of LTECLs that represent the ECLs that result from default events on a financial instrument that are possible within the 12 months after the reporting date. The Company calculates the 12mECL allowance based on the expectation of a default occurring in the 12 months following the reporting date. These expected 12-month default probabilities are applied to an EAD and multiplied by the expected LGD.

Stage 2: When a loan has shown a significant increase in credit risk since origination, the Company records an allowance for the LTECLs. The mechanics are similar to those explained above, but PDs and LGDs are estimated over the lifetime of the instrument.

Stage 3: For loans considered credit-impaired, the Company recognizes the lifetime expected credit losses for these loans. The method is similar to that for Stage 2 assets, with the PD set at 100%.

3.15 Write-offs

Financial assets are written off either partially or in their entirety only when the Company has stopped pursuing the recovery. If the amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to the statement profit and loss.

3.16 Fair value measurement

The Company measures certain financial instruments at fair value at each balance sheet date using valuation techniques. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to

sell the asset or transfer the liability takes place either:

- In the principal market for the asset or liability, or

- In the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantegeous market must be accessible by the Company. The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured are categorised with fair value hierachy into Level I, Level II and Level III based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are as follows:

â¢ Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date;

â¢ Level 2 - Other than quoted prices included within Level 1, that are observable for

the asset or liability, either directly or indirectly; and

â¢ Level 3 - Unobservable inputs for the asset or liability.

3.17 Foreign currency

Company enters to foreign currency transactions during the course ofbusiness predominantly relating to borrowing (availement/repayment of borrowing) and payment of fee/charges towards services/products such as license costs, maintenance charges etc.

3.17.1 All transactions in foreign currency are recognised at the exchange rate prevailing on the date of the transaction.

3.17.2 Foreign currency monetary items are reported using the exchange rate prevailing at the close of the period.

3.17.3 Exchange differences arising on the settlement of monetary items or on the restatement of Company''s monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, are recognised as income or as expenses in the period in which they arise.

3.18 Hedge accounting

The Company enters into swap contracts and other derivative financial instruments to hedge its exposure to foreign exchange and interest rates. The Company

does not hold derivative financial instruments for speculative purpose. Hedges of foreign exchange risk on firm commitments are accounted as cash flow hedges.

At the inception of the hedge relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in cash flows of the hedged item attributable to the hedged risk.

Cash flow hedge

A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability and could affect profit or loss.

Here, the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated in equity as ''hedging reserve''.

The ineffective portion of the gain or loss on the hedging instrument is recognised immediately in the Statement of Profit and Loss.

Amounts previously recognised in other comprehensive income and accumulated in equity relating to the effective portion are reclassified to profit or loss in the periods when the hedged item affects profit or loss, in the same head as the hedged item.

The effective portion of the hedge is determined at the lower of the cumulative gain or loss on the hedging instrument from inception of the hedge and the cumulative change in the fair value of the hedged item from the inception of the hedge and the remaining gain or loss on the hedging instrument is treated as ineffective portion.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or when it no longer qualifies for hedge accounting. Any gain or loss recognised in other comprehensive income and accumulated in equity at that time remains in equity and is recognised in profit or loss when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the gain or loss accumulated in equity is recognised immediately in profit or loss.

A derivative with a positive fair value is recognised as a financial asset whereas a derivative with a negative fair value is recognised as a financial liability.

3.19 Leases (where the Company is the lessee)

Company''s lease assets primarily consists of equipments for information technology infrastructure/ servers and immovable properties for operating as branches.

Short term leases not covered under Ind AS 116 are classified as operating lease. Lease payments during the year are charged to statement of profit and loss. Future minimum rentals payable under noncancellable operating leases.

The Company as a lessee

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

(i) the contract involves the use of an identified asset; (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease; and (iii) the Company has the right to direct the use of the asset. At the date of commencement of the lease, the Company recognises a right-of-use asset ("ROU") and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (shortterm leases) and low value leases. For these shortterm and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.

Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised. The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.

using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option.

3.20 Recent Accounting pronouncements

3.20.1 Key New and amended standards adopted by the Company

(a) Ind AS 101 - First time adoption of Ind AS - Deferred tax assets and deferred tax liabilities to be recognized for all temporary differences associated with ROU assets, lease liabilities, decommissioning / restoration / similar liabilities.

(b) Ind AS 1 - Presentation of Financial

Statements & Ind AS 34 - Interim Financial Reporting - Material accounting policy information (including focus on how an entity applied the requirements of Ind AS) shall be disclosed instead of significant accounting policies as part of financial statements.

Disclosures - Information about the measurement basis for financial instruments shall be disclosed as part of material accounting policy information.

(d) Ind AS 8 - Accounting policies, changes in accounting estimate and errors- -Clarification on what constitutes an accounting estimate provided.

(e) Ind AS 12 - Income Taxes - In case of a transaction which give rise to equal taxable and deductible temporary differences, the initial recognition exemption from deferred tax is no longer applicable and deferred tax liability & deferred tax asset shall be recognized on gross basis for such cases.

None of these amendments had any significant effect on the company''s financial statements, except for disclosure of material accounting policy information instead of significant accounting policies in the financial statements.

3.20.2 Key Amendments applicable from next Financial year

For the year ended March 31,2024, the Ministry of Corporate Affairs has not notified any new standards or amendments to the existing standards applicable to the Company.

Nature and purpose of reserve

20.1 Securities premium

Securities premium is used to record the premium on issue of shares. The reserve can be utilised in accordance with the provisions of the Companies Act, 2013.

20.2 Capital reserve

During the year ended 2018, the Company pursuant to the scheme of amalgamation, acquired MV Microfin Private Limited with effect from April 1,2017. As per the accounting treatment of the scheme of amalgamation approved by the Honourable High Court of Karnataka, the differential amount between the carrying value of investments and net assets acquired from the transferor companies has been accounted as Capital reserve.

20.3 Statutory reserve (As required by Sec 45-IC of Reserve Bank of India Act, 1934)

Statutory reserve represents the accumulation of amount transferred from surplus year on year based on the fixed percentage of profit for the year, as per section 45-IC of Reserve Bank of India Act 1934.

20.4 Share option outstanding account

The share option outstanding account is used to recognise the grant date fair value of option issued to employees under employee stock option scheme.

20.5 Retained earnings

Retained earnings are the profits that the Company has earned till date, less any transfers to statutory reserve, general reserve or any other such other appropriations to specific reserves.

20.6 Other comprehensive income

(i) Effective portion of Cash Flow Hedge

For designated and qualifying cash flow hedges, the effective portion of the cumulative gain or loss on the hedging instrument is initially recognised directly in OCI within equity (cash flow hedge reserve). When the hedged cash flow affects the statement of profit and loss, the effective portion of the gain or loss on the hedging instrument is recorded in the corresponding income or expense line of the statement of profit and loss.

(ii) Fair valuation of loans through other comprehensive income (FVTOCI)

The Company had elected to recognize changes in the fair value of loans in other comprehensive income. These changes are accumulated as reserve within equity. The Company transfers amount from this reserve to retained earnings when the relevant loans are derecognized. Also Refer note 7.

31 Employee benefits

A. Defined benefit plan

The Company provides for the gratuity, a defined benefit retirement plan covering qualifying employees. Employees who are in continous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied by the number of years of service subject to maximum benefit of H 0.20 crore. The Company has funded gratuity plan and makes contibutions to Gratuity scheme administered by the insurance company through its Gratuity Fund.

B. Defined contribution plan

The Company makes Provident fund and Employee State Insurance Scheme contributions which are defined contribution plans for qualifying employees. Under the schemes, the Company is required to contribute a specified percentage of the basic salary to fund the benefits. The contributions payable to these plans by the Company are administered by the Government. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation. The Company recognised H 35.71 crore (March 31,2023 : H 30.64 crore) for Provident fund contributions and H 8.52 crore (March 31,2023 : H 6.99 crore) for Employee State Insurance Scheme contributions in the Statement of Profit and Loss.

31.8 Through its defined benefit plans the Company is exposed to a number of risks, the most significant of which are detailed below:

Demographic risks

This is the risk of volatility of results due to unexpected nature of decrements that include mortality attrition, disability and retirement. The effects of this decrement on the defined benefit obligations depend upon the combination of salary increase, discount rate, and vesting criteria and therefore not very straight forward.

Change in bond yields

A decrease in government bond yields will increase plan liabilities, although this is expected to be partially offset by an increase in the value of the plan''s investment in debt instruments.

Inflation risk

The present value of some of the defined benefit plan obligations are calculated with reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan''s liability.

Life expectancy

The present value of defined benefit plan obligation is calculated by reference to the best estimate of the mortality of plan participants, both during and after the employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.

Code on Social Security

The Code on Social Security, 2020 (''Code'') relating to employee benefits during employment and post-employment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified and the final rules/interpretation have not yet been issued. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.

40 Financial instruments - fair values Accounting classification and fair values:

Carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy, are presented below. It does not include the fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

Fair value hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

Note: The carrying amounts of cash and cash equivalents, bank balances other than cash and cash equivalents, other financial assets and payables are considered to be the same as their fair values, due to their short-term nature.

There were no transfers between Level 3 and Level 1 / Level 2 during the current year.

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. The below methodologies and assumptions relate only to the instruments in the above tables.

Loans (measured at amortised cost)

Fair values of Loans measured at amortised cost have been measured based on a discounted cash flow model of the contractual cash flows of solely payment of principal and interest. The significant unobservable input is the discount rate, determined using the recent lending rate of the Company.

Financial liabilities measured at amortised cost

The fair value of fixed rate borrowings is determined by discounting expected future contractual cash flows using current market interest rate being charged for new borrowings. The fair value of floating rate borrowing is deemed to equal its carrying value.

41 Risk Management

41.1 Introduction and risk profile

CreditAccess Grameen Limited is one of the leading microfinance institutions in India focused on providing financial support to women from low income households engaged in economic activity with limited access to financial services. The Company predominantly offers collateral free loans to women from low income households, willing to borrow in a group and agreeable to take joint liability. The wide range of lending products address the critical needs of customers throughout their lifecycle and include income generation, home improvement, children''s education, sanitation and personal emergency loans. With a view to diversifying the product profile, the company has introduced individual loans for matured group lending customers. These loans are offered to customers having requirement of larger loans to expand an existing business in their individual capacity.

The major risks for the company are credit, operational, market, business environment, political, regulatory, concentration, expansion and liquidity. As a matter of policy, these risks are assessed and steps as appropriate, are taken to mitigate the same.

41.1.a Risk management structure

The Board of Directors are responsible for the overall risk management approach and for approving the risk management strategies and principles.The Risk Management framework approved by the Board has laid down the governance structure supporting the identification, assessment, monitoring, reporting and mitigation of risk throughout the Company. The objective of the risk management platform is to make a conscious effort in developing risk culture within the organisation and having appropriate systems and tools for timely identification, measurement and reporting of risks for managing them.

The Board has a Risk Management committee which is responsible for monitoring the overall risk process within the Company and reports to the Board of Directors.

Departments, in coordination with CRO. While each department focuses on its specific area of activity, the Risk Management Unit operates in coordination with all other departments, utilising all significant information sourced to ensure effective management of risks in accordance with the guidelines approved by the Board. The unit works closely with and reports to the Risk Committee, to ensure that procedures are compliant with the overall framework.

Heads of Departments are accountable to a Management Level Risk Committee (MLRC) comprising of MD, CEO, CFO, CAO, CBO, CTO and CRO. The departmental heads will report for the implementation of above mentioned guideline within their respective areas of responsibility. The department heads are also accountable to the MLRC for identification, assessment, aggregation, reporting and monitoring of the risk related to their respective domain.

The Company''s policy is that risk management processes throughout the Company are audited by the Internal Audit function, which examines both the adequacy of the procedures and the Company''s compliance with the procedures. Internal Audit discusses the results of all assessments with management, and reports its findings and recommendations to the Audit Committee.

41.1.b Risk mitigation and risk culture

Risk assessments are conducted for all business activities. The assessments are to address potential risks and to comply with relevant legal and regulatory requirements. Risk assessments are performed by competent personnel from individual departments and risk management department including, where appropriate, expertise from outside the Company. Procedures are established to update risk assessments at appropriate intervals and to review these assessments regularly. Based on the Risk Control and Self Assessment (RCSA), the Company formulates its Risk Management Strategy / Risk Management plan on annual basis. The strategy will broadly entail choosing among the various options for risk mitigation for each identified risk. The risk mitigation is planned using the following key strategies:

Risk Avoidance: By not performing an activity that could carry risk. Avoidance may seem the answer to all risks, but avoiding risks also means losing out on the potential gain that accepting (retaining) the risk may have allowed.

Risk Transfer: Mitigation by having another party to accept the risk, either partial or total, typically by contract or by hedging.

Risk Reduction: Employing methods/solutions that reduce the severity of the loss.

Risk Retention: Accepting the loss when it occurs. Risk retention is a viable strategy for small risks where the cost of insuring against the risk would be greater over time than the total losses sustained. All risks that are not avoided or transferred are retained by default. This includes risks that are so large or catastrophic that they either cannot be insured against or the premiums would be infeasible.

41.1.c Risk measurement and reporting systems

Based on a cost / benefit assessment of a risk, as is undertaken, some risks may be judged as having to be accepted because it is believed mitigation is not possible or warranted.

As the risk exposure of any business may undergo change from time to time due to continuously changing environment, the updation of the Risk Register will be done on a regular basis.

All the strategies with respect to managing these major risks shall be monitored by the CRO and MLRC.

The Management Level Risk Committee meetings are held as necessary or once a month. The Management Level Risk Committee would monitor the management of major risks specifically and other risks of the Company in general. The Committee takes an integrated view of the risks facing the entity and monitor implementation of the directives received from Risk Management Committee and actionable items drawn from the risk management framework.

Accordingly, the Management Level Risk Committee reviews the following aspects of business specifically from a risk indicator perspective and suitably record the deliberations during the monthly meeting.

- Review of business growth and portfolio quality.

- Discuss and review the reported details of Key Risk Threshold breaches (KRI''s), consequent actions taken and review of operational loss events, if any.

- Review of process compliances across organisation.

- Review of HR management, training and employee attrition.

- Review of new initiatives and product/policy/ process changes.

- Discuss and review performance of IT systems.

- Review, where necessary, policies that have a bearing on the operational & credit risk management and recommend amendments.

- Discuss and recommend suitable controls/ mitigations for managing operational & credit risk and assure that adequate resources are being assigned to mitigate the risks.

- Review analysis of frauds, potential losses, non-compliance, breaches etc. and determine corrective measures to prevent their recurrences.

- Understand changes and threats, concur on areas of high priority and possible actions for managing/mitigating the same.

41.1.d Risk Management Strategies

Excessive risk concentrations

Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company''s performance to developments affecting a particular industry or geographical location.

The following management strategies and policies are adopted by the Company to manage the various key risks.

Political Risk mitigation measures:

â¢ Low cost operations and low pricing for customers.

â¢ Customer centric approach, high customer retention.

â¢ Rural focus.

â¢ Systematic customer awareness activities.

â¢ High social focused activities.

â¢ Adherence to client protection guidelines.

â¢ Robust grievance redressal mechanism.

â¢ Adherence to regulatory guidelines in letter and spirit.

Concentration risk mitigation measures:

â¢ District centric approach.

â¢ District exposure cap.

â¢ Restriction on growth in urban locations.

â¢ Maximum disbursement cap per loan account.

â¢ Maximum loan exposure cap per customer.

â¢ Diversified funding resources.

Operational & HR Risk mitigation measures:

â¢ Stringent customer enrolment process.

â¢ Multiple products.

â¢ Proper recruitment policy and appraisal system.

â¢ Adequately trained field force.

â¢ Weekly & fortnightly collections - higher customertouch, lower amount instalments.

â¢ Multilevel monitoring framework.

â¢ Strong, Independent and fully automated Internal Audit function.

â¢ Strong IT system with access to real time client and loan data.

Liquidity risk mitigation measures:

â¢ Diversified funding resources.

â¢ Asset liability management.

â¢ Effective fund management.

â¢ Maximum cash holding cap Expansion risk mitigation measures:

â¢ Contiguous growth.

â¢ District centric approach.

â¢ Rural focus.

â¢ Branch selection based on census data & credit bureau data.

â¢ Three level survey of the location selected. Credit risk

Credit risk is the risk of financial loss to the Company if the counterparty to a financial instrument, whether a customer or otherwise, fails to meet its contractual obligations towards the Company. Credit risk is the core business risk of the Company. The Company therefore has high appetite for this risk but low tolerance and the governance structures including the internal control systems are particularly designed to manage and mitigate this risk. The Company is mainly exposed to credit risk from loans to customers (including loans transferred to SPVs under securitization agreements, excluding loans sold under assignment presented as off-balance sheet assets).

The credit risk may arise due to, over borrowing by customers or over lending by other financial institutions competitors, gaps in joint-liability collateral and repayment issues due to external factors such as political, community influence, regulatory changes and natural disasters (storm, earthquakes, fires, floods) and intentional default by customers.

To address credit risk, the Company has stringent credit policies for customer selection. To ensure

the credit worthiness of the customers, stringent underwriting policies such as credit investigation, both in-house and field credit verification, is in place. In addition, the company follows a systematic methodology in the selection of new geographies where to open branches considering factors such as the portfolio at risk and over indebtedness of the proposed area/region, potential for micro-lending and socio-economic risk evaluation (e.g., the risk of local riots or natural disasters). Loan sanction and rejections are carried out at the head office. A credit bureau rejections analysis is also regularly carried out in Company.

Credit risk is being managed by continuously monitoring the borrower''s performance if borrowers are paying on time based on their amortization dues. The Company ensures stringent monitoring and quality operations through both field supervision (branch/area/region staff supervision, quality control team supervision) and management review. Management at each Company''s head office closely monitors credit risk through system generated reports (e.g., PAR status and PAR movement, portfolio concentration analysis, vintage analysis, flow-rate analysis) and Key Risk Indicators (KRIs) which include proactive actionable thresholds limits (acceptable, watch and breach) developed by CRO, revised at the the MLRC and at the Risk Committee at the Board level.

Some of the main strategies to mitigate credit risk are:

1. Maintain stringent customer enrolment process,

2. Undertake systematic customer awareness activities/ programs,

3. Reduce geographical concentration of portfolio,

4. Maximum loan exposure to member as determined from time to time,

5. Modify product characteristics if needed (e.g., longer maturity for group clients in case the loan is above a certain threshold),

6. Carry out due diligence of new employees and adequate training at induction,

7. Decrease field staff turnover,

8. Supporting technologies: credit bureau checks, GPS tagging and KYC checks..

of the country in which the customers are located, as these factors may have an influence on the credit risk.

41.2 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.

41.2.a Definition of default, significant increase in credit risk and stage assessment

For the measurement of ECL, Ind AS 109 distinguishes between three impairment stages. All loans need to be allocated to one of these stages, depending on the increase in credit risk since initial recognition (i.e. disbursement date):

Stage 1: includes loans for which the credit risk at the reporting date is in line with the credit risk at initial recognition (i.e. disbursement date).

Stage 2: includes loans for which the credit risk at reporting date is significantly higher than at the risk at the initial recognition (Significant Increase in Credit Risk i.e. SICR).

Stage 3: includes default loans. A loan is considered as default at the earlier of (i) the Company considers that the obligor is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realizing collateral (if held); or (ii) the obligor is past due more than 90 days on any material credit obligation to the Company.

The accounts which were restructured under the resolution Framework for Covid-19 related stress as per RBI circular dated August 6, 2020 (Resolution Framework 1.0) and May 05, 2021 (Resolution Framework 2.0) were initially classified under Stage-2.

Mar 31, 2023

Nature and purpose of reserve20.1 Securities premium

Securities premium is used to record the premium on issue of shares. The reserve can be utilised in accordance with the provisions of the Companies Act, 2013.

20.2 Capital reserve

During the year ended 2018, the Company pursuant to the scheme of amalgamation acquired MV Microfin Private Limited with effect from April 1,2017, as per the accounting treatment of the scheme of amalgamation approved by the Honourable High Court of Karnataka, the differential amount between the carrying value of investments and net assets acquired from the transferor companies has been accounted as Capital reserve.

20.3 Statutory reserve (As required by Sec 45-IC of Reserve Bank of India Act, 1934)

Statutory reserve has been created based on the standalone pre-amalgamation profits for the year ended March 31,2022 and March 31,2021 of CreditAccess Grameen Limited and Madura Micro Finance Limited.

20.4 Share option outstanding account

The share option outstanding account is used to recognise the grant date fair value of option issued to employees under employee stock option scheme.

20.5 Retained earnings

Retained earnings are the profits that the Company has earned till date, less any transfers to statutory reserve, general reserve or any other such other appropriations to specific reserves.

20.6 Shares to be issued (Refer Note 45)

The Company has received order of amalgamation of Madura Micro Finance Limited ("MMFL") with CreditAccess Grameen Limited, appointed date being April 1, 2020. The Scheme has been approved by the Hon''ble National Company Law Tribunal, Chennai Bench vide its order dated October 12, 2022, and the Hon''ble National Company Law Tribunal, Bengaluru Bench, vide its order dated February 07, 2023. The Company has issued shares on March 27, 2023 as per swap ratio decided in scheme of amalgamation to Non controlling shareholders of MMFL.

20.7 Other comprehensive income

(i) Effective portion of Cash Flow Hedge

For designated and qualifying cash flow hedges, the effective portion of the cumulative gain or loss on the hedging instrument is initially recognised directly in OCI within equity (cash flow hedge reserve). When the hedged cash flow affects the statement of profit and loss, the effective portion of the gain or loss on the hedging instrument is recorded in the corresponding income or expense line of the statement of profit and loss.

(ii) Fair valuation of loans through other comprehensive income (FVTOCI)

The Company has elected to recognize changes in the fair value of loans in other comprehensive income. These changes are accumulated as reserve within equity. The Company transfers amount from this reserve to retained earnings when the relevant loans are derecognized.

1. In Previous year, the Company has deposited the unspent amount in relation to the CSR expenditure in dedicated bank account.

2. Reason for shortfall in previous year, are as below

a) Few of the projects like the Vaccination Drives, Support to physically/mentally challenged children and the self-learning center had commenced in the last quarter of the previous year and the period of the project extended to the next Financial year with committed payments to be made during this Financial year.

b) Two ongoing projects namely Anganawadi Improvement Program and Rural development program had execution challenges due to the covid situations in certain geographies. Hence, even though the institutions were identified, and events planned, the execution got delayed and some of the event dates had extended to this Financial year.

3. Contribution of ? 11.45 crore made to CreditAccess India Foundation (Section 8 Company which is subsidary of the Company).

4. The Company has a Memorandum of Understanding with CreditAccess India Foundation for CSR Activities (COVID-19 pandemic support program, Community Development activity like education, health Care, livelihood and other support activity).

5. Gross amount required to be spent was computed based on standalone entities'' profit before giving effect of the merger.

** During the previous year, the Company has reversed additional provision carried over and above requirements as per Section 135 of Companies Act, 2013 to the extent of ? 4.96 Crore.

31 Employee benefits

A. Defined benefit plan

The Company provides for the gratuity, a defined benefit retirement plan covering qualifying employees. Employees who are in continous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied by the number of years of service. The Company have funded gratuity plan and makes contibutions to Gratuity scheme administered by the insurance company through its Gratuity Fund.

B. Defined contribution plan

The Company makes Provident fund and Employee State Insurance Scheme contributions which are defined contribution plans for qualifying employees. Under the schemes, the Company is required to contribute a specified percentage of the basic salary to fund the benefits. The contributions payable to these plans by the Company are administered by the Government. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation.The Company recognised ? 30.64 crore (March 31, 2022 : ? 26.65 ) for Provident fund contributions and ? 6.99 crore (March 31, 2022 : ? 6.09 ) for Employee State Insurance Scheme contributions in the Statement of Profit and Loss.

31.8 Through its defined benefit plans the Company is exposed to a number of risks, the most significant of which are detailed below: Demographic risks

This is the risk of volatility of results due to unexpected nature of decrements that include mortality attrition, disability and retirement. The effects of this decrement on the defined benefit obligations depend upon the combination salary increase, discount rate, and vesting criteria and therefore not very straight forward.

Change in bond yields

A decrease in government bond yields will increase plan liabilities, although this is expected to be partially offset by an increase in the value of the plan''s investment in debt instruments.

Inflation risk

The present value of some of the defined benefit plan obligations are calculated with reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan''s liability.

Life expectancy

The present value of defined benefit plan obligation is calculated by reference to the best estimate of the mortality of plan participants, both during and after the employment. An increase in the life expectancy of the plan participants will increase the plan''s liability.

Code on Social Security

The Code on Social Security, 2020 (''Code'') relating to employee benefits during employment and post-employment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified and the final rules/interpretation have not yet been issued. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.

(b) Pertaining to Assessment Year 2017-18 (Financial year 2016-17)

The Assesing Officer, Income Tax, Bangalore, through an order dated 28th December 2019, has confirmed the demand of ?2.62 crores (net demand after adjusting of payment made is ? 1.16 crore) from the Company. The Company has preferred an appeal before Commissioner of Income Tax against said assement order. The Company is of view that the said demand is not tenable and expects to succeed in its appeal.

(_c) In addition, the Company is involved in other legal proceedings and claims, which have arisen in the ordinary course of business. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company financial position and result of operations.

36 Leases36.1 Company as a leasee

The Company''s leased assets mainly comprise office buildings and servers taken on lease. Certain agreements provide for cancellation by either party or certain agreements contains clause for escalation and renewal of agreements. The term of property and server leases ranges from 1-10 years. The Company has applied short term lease exemption for leasing arrangements where the period of lease is less than 12 months.

Fair values of Loans designated under FVOCI have been measured under level 3 at fair value based on a discounted cash flow model of the contractual cash flows of solely payment of principal and interest. The Significant Unobservable Input is the Discount rate, determined using the cost of lending of the Company.

40 Financial instruments - fair values

Accounting classification and fair values:

Carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy, are presented below. It does not include the fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

Fair value hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

The carrying amounts of cash and cash equivalents, bank balances other than cash and cash equivalents, other financial assets and payables are considered to be the same as their fair values, due to their short-term nature.

There were no transfers between Level 3 and Level 1 / Level 2 during the current year.

Fair values of Loans measured at amortised cost have been measured based on a discounted cash flow model of the contractual cash flows of solely payment of principal and interest. The significant unobservable input is the discount rate, determined using the cost of lending of the Company.

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. The below methodologies and assumptions relate only to the instruments in the above tables.

Loans (measured at amortised cost)

Fair values of Loans measured at amortised cost have been measured based on a discounted cash flow model of the contractual cash flows of solely payment of principal and interest. The significant unobservable input is the discount rate, determined using the cost of lending of the Company.

Financial liabilities measured at amortised cost

The fair value of fixed rate borrowings is determined by discounting expected future contractual cash flows using current market interest rate being charged for new borrowings. The fair value of floating rate borrowing is deemed to equal its carrying value.

41 Risk Management41.1 Introduction and risk profile

CreditAccess Grameen Limited is one of the leading microfinance institutions in India focused on providing financial support to women from low income households engaged in economic activity with limited access to financial services. The Company predominantly offers collateral free loans to women from low income households, willing to borrow in a group and agreeable to take joint liability. The wide range of lending products address the critical needs of customers throughout their lifecycle and include income generation, home improvement, children''s education, sanitation and personal emergency loans. With a view to diversifying the product profile, the company has introduced individual loans for matured group lending customers. These loans are offered to customers having requirement of larger loans to expand an existing business in their individual capacity.

The major risks for the company are credit, operational, market, business environment, political, regulatory, concentration, expansion and liquidity. As a matter of policy, these risks are assessed and steps as appropriate, are taken to mitigate the same.

41.1. a Risk management structure

The Board of Directors are responsible for the overall risk management approach and for approving the risk management strategies and principles.The Risk Management framework approved by the Board has laid down the governance structure supporting the identification, assessment, monitoring, reporting and mitigation of risk throughout the Company. The objective of the risk management platform is to make a conscious effort in developing risk culture within the organisation and having appropriate systems and tools for timely identification, measurement and reporting of risks for managing them.

The Board has a Risk Management committee which is responsible for monitoring the overall risk process within the Company and reports to the Board of Directors.

The Risk Management guidelines will be implemented through the established organization structure of Risk Department. The overall monitoring of the Risks is done by the Chief Risk Officer (CRO) with the support from all the department heads of the Company. The Board reviews the status and progress of the risk and risk management system, on a quarterly basis through the Audit Committee and Risk Management Committee. The individual departments are responsible for ensuring implementation of the risk management framework and policies, systems and methodologies as approved by the Board. Assignment of responsibilities in relation to risk management is prerogative of the Heads of Departments, in coordination with CRO. While each department focuses on its specific area of activity, the Risk Management Unit operates in coordination with all other departments, utilising all significant information sourced to ensure effective management of risks in accordance with the guidelines approved by the Board. The unit works closely with and reports to the Risk Committee, to ensure that procedures are compliant with the overall framework.

Heads of Departments is accountable to a Management Level Risk Committee (MLRC) comprising of MD&CEO, CFO, CAO, Deputy CEO & CBO, CTO and CRO. The departmental heads will report for the implementation of above mentioned guideline within their respective areas of responsibility. The department heads are also accountable to the MLRC for identification, assessment, aggregation, reporting and monitoring of the risk related to their respective domain.

The Company''s policy is that risk management processes throughout the Company are audited by the Internal Audit function, which examines both the adequacy of the procedures and the Company''s compliance with the procedures. Internal Audit discusses the results of all assessments with management, and reports its findings and recommendations to the Audit Committee.

41.1. b Risk mitigation and risk culture

Risk assessments are conducted for all business activities. The assessments are to address potential risks and to comply with relevant legal and regulatory requirements. Risk assessments are performed by competent personnel from individual departments and risk management department including, where appropriate, expertise from outside the Company. Procedures are established to update risk assessments at appropriate intervals and to review these assessments regularly. Based on the Risk Control and Self Assessment (RCSA), the Company formulates its Risk Management Strategy / Risk Management plan on annual basis. The strategy

will broadly entail choosing among the various options for risk mitigation for each identified risk. The risk mitigation is planned using the following key strategies:

Risk Avoidance: By not performing an activity that could carry risk. Avoidance may seem the answer to all risks, but avoiding risks also means losing out on the potential gain that accepting (retaining) the risk may have allowed.

Risk Transfer: Mitigation by having another party to accept the risk, either partial or total, typically by contract or by hedging.

Risk Reduction: Employing methods/solutions that reduce the severity of the loss.

Risk Retention: Accepting the loss when it occurs. Risk retention is a viable strategy for small risks where the cost of insuring against the risk would be greater over time than the total losses sustained. All risks that are not avoided or transferred are retained by default. This includes risks that are so large or catastrophic that they either cannot be insured against or the premiums would be infeasible.

41.1.c Risk measurement and reporting systems

Based on a cost / benefit assessment of a risk, as is undertaken, some risks may be judged as having to be accepted because it is believed mitigation is not possible or warranted. As the risk exposure of any business may undergo change from time to time due to continuously changing environment, the updation of the Risk Register will be done on a regular basis.

All the strategies with respect to managing these major risks shall be monitored by the CRO and MLRC. The Management Level Risk Committee meetings are held as necessary or once a month. The Management Level Risk Committee would monitor the management of major risks specifically and other risks of the Company in general. The Committee takes an integrated view of the risks facing the entity and monitor implementation of the directives received from Risk Management Committee and actionable items drawn from the risk management framework.

Accordingly, the Management Level Risk Committee reviews the following aspects of business specifically from a risk indicator perspective and suitably record the deliberations during the monthly meeting.

- Review of business growth and portfolio quality.

- Discuss and review the reported details of Key Risk Threshold breaches (KRI''s), consequent actions taken and review of operational loss events, if any.

- Review of process compliances across organisation.

- Review of HR management, training and employee attrition.

- Review of new initiatives and product/policy/process changes.

- Discuss and review performance of IT systems.

- Review, where necessary, policies that have a bearing on the operational & credit risk management and recommend amendments.

- Discuss and recommend suitable controls/mitigations for managing operational & credit risk and assure that adequate resources are being assigned to mitigate the risks.

- Review analysis of frauds, potential losses, non-compliance, breaches etc. and determine corrective measures to prevent their recurrences.

- Understand changes and threats, concur on areas of high priority and possible actions for managing/ mitigating the same.

Credit risk

41.1.d Risk Management Strategies Excessive risk concentrations

Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Company''s performance to developments affecting a particular industry or geographical location.

The following management strategies and policies are adopted by the Company to manage the various key risks.

Credit risk is the risk of financial loss to the Company if the counterparty to a financial instrument, whether a customer or otherwise, fails to meet its contractual obligations towards the Company. Credit risk is the core business risk of the Company. The Company therefore has high appetite for this risk but low tolerance and the governance structures including the internal control systems are particularly designed to manage and mitigate this risk. The Company is mainly exposed to credit risk from loans to customers (including loans transferred to SPVs under securitization agreements, excluding loans sold under assignment presented as off-balance sheet assets).

To address credit risk, the Company has stringent credit policies for customer selection. To ensure the credit worthiness of the customers, stringent underwriting policies such as credit investigation, both inhouse and field credit verification, is in place. In addition, the compnay follows a systematic methodology in the selection of new geographies where to open branches considering factors such as the portfolio at risk and over indebtedness of the proposed area/region, potential for micro-lending and socio-economic risk evaluation (e.g., the risk of local riots or natural disasters). Loan sanction and rejections are carried out at the head office. A credit bureau rejections analysis is also regularly carried out in Company. Credit risk is being managed by continuously monitoring the borrower''s performance if borrowers are paying on time based on their amortization dues. The Company ensures stringent monitoring and quality operations through both field supervision (branch/area/region staff supervision, quality control team supervision) and management review. Management at each Company''s head office closely monitors credit risk through system generated reports (e.g., PAR status and PAR movement, portfolio concentration analysis, vintage analysis, flowrate analysis) and Key Risk Indicators (KRIs) which include proactive actionable thresholds limits (acceptable, watch and breach) developed by CRO, revised at the the MLRC and at the Risk Committee at the Board level.

Some of the main strategies to mitigate credit risk are:

1. Maintain stringent customer enrolment process,

2. Undertake systematic customer awareness activities/ programs,

3. Reduce geographical concentration of portfolio,

4. Maximum loan exposure to member as determined from time to time,

5. Modify product characteristics if needed (e.g., longer maturity for group clients in case the loan is above a certain threshold),

6. Carry out due diligence of new employees and adequate training at induction,

7. Decrease field staff turnover,

8. Supporting technologies: credit bureau checks, GPS tagging and KYC checks.

The exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Company''s customer base, including the default risk of the country in which the customers are located, as these factors may have an influence on the credit risk.

41.2 Impairment assessment

41.2.a Definition of default, significant increase in credit risk and stage assessment

Stage 1: includes loans for which the credit risk at the reporting date is in line with the credit risk at initial recognition (i.e. disbursement date).

Stage 2: includes loans for which the credit risk at reporting date is significantly higher than at the risk at the initial recognition (Significant Increase in Credit Risk i.e. SICR).

Stage 3: includes default loans. A loan is considered default at the earlier of (i) the Company considers that the obligor is unlikely to pay its credit obligations to the Company in full, without recourse by the Company to actions such as realizing collateral (if held); or (ii) the obligor is past due more than 90 days on any material credit obligation to the Company.

Further, the RBI on March 27, 2020, April 17, 2020 and May 23, 2020, announced ''COVID-19 Regulatory Package'' on asset classification and provisioning. In terms of these RBI guidelines, the Company granted a moratorium on the repayment of all Installments and/or Interest, as applicable, due between March 1,2020 and August 31,2020 to all eligible borrowers. In respect of such accounts that were granted moratorium, the moratorium period has been excluded from determining overdue days.

An assessment of whether credit risk has increased significantly since initial recognition is performed at each reporting date by considering the change in the risk of default occurring over the remaining life of the financial instrument.

(i) Staging classification of Joint Liability Group (JLG) loans of Company

Unlike banks which have more of monthly repayments, the Company offers products with primarily weekly/ biweekly repayment frequency, whereby 15 and above Days past due (''DPD'') means minimum 2 missed instalments from the borrower, and accordingly, the Company has identified the following stage classification to be the most appropriate for such products :

Stage 1: 0 to 15 DPD.

Stage 2: 16 to 60 DPD (SICR).

Stage 3: above 60 DPD (Default).

(ii) Self Help groups (SHG)

The Company has identified the following stage classification to be the most appropriate for its loans as these loans are mainly on monthly repayment basis:

Stage 1: 0 to 30 DPD.

Stage 2: 31 to 60 DPD (SICR).

Stage 3: Above 60 DPD (Default).

(iii) Staging classification of Individual Loans of the Company

For monthly repayment model, the Company has identified the following stage classification to be the most appropriate for these loans :

Stage 1: 0 to 30 DPD.

Stage 2: 31 to 90 DPD (SICR).

Stage 3: Above 90 DPD (Default).

41.2. b Probability of Default (''PD'')(i) Group lending (Including SHG)

PD describes the probability of a loan to eventually falling into Stage 3. PD %age is calculated for each loan account separately and is determined by using available historical observations.

PD for stage 1: is derived as %age of loan outstanding in stage 1 moving into stage 3 in 12-months'' time.

PD for stage 2: is derived as %age of loan outstanding in stage 2 moving into stage 3 in the maximum lifetime of the loans under observation.

PD for stage 3: is derived as 100% in line with accounting standard

(ii) Individual Loans

Individual loans is a relatively new portfolio that was started in November 2016. Performance history of matured vintage loan is not available in adequate number to build PD or LGD model. The ECL estimation for Individual loans portfolio is carried out using a method which is based on management judgement.

41.2. c Exposure at default (EAD)

Exposure at default (EAD) is the sum of outstanding principal and the interest amount accrued but not received on each loan as at reporting date.

41.2 .d Loss given default (LGD)

LGD is the opposite of recovery rate. LGD = 1 - (Recovery rate). LGD is calculated based on past observations of Stage 3 loans.

(i) Group lending loans (Including SHG)

LGD is computed as below:

The Company determines its expectation of lifetime loss by estimating recoveries towards its loan through analysis of historical information. The Company determines its recovery rates by analysing the recovery trends over different periods of time after a loan has defaulted. LGD is the difference between the exposure at default (EAD) and discounted recovery amount ; this is expressed as percentage of EAD.

(ii) Individual loans

Individual loans is a relatively new portfolio that was started in November 2016. Performance history of matured vintage loan is not available in adequate number to build PD or LGD model. The ECL estimation for individual loans portfolio is carried out using a methodology which is based on management judgement.

41.2 .e Grouping financial assets measured on a collective basis

The Company believes that the Joint Group Lending loans (JLG) have shared risk characteristics (i.e. homogeneous) while SHG loans and Individual loans (IL) have risk characteristics different from JLG loans. Therefore, JLG, SHG and IL are treated as three separate groups for the purpose of determining impairment allowance.

41.2 .f The Company''s Loan book consists of a large number of customers spread over diverse geographical area,

hence the Company is not exposed to concentration risk with respect to any particular customer.

41.2 .g Analysis of inputs to the ECL model under multiple economic scenarios

ECL estimates are subject to adjustment based on the output of macroeconomic model which incorporates forward looking assessment of the economic environment under which the company operates in the form of Management overlay.

41.3 Capital

The Company actively manages its capital base to cover risks inherent to its business and meet the capital adequacy requirement of RBI. The adequacy of the Company''s capital is monitored using, among other measures, the regulations issued by RBI.

Capital management

The Company''s objectives when managing capital are to

â¢ safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

â¢ Maintain an optimal capital structure to reduce the cost of capital.

The Company manages its capital structure and makes adjustments to it according to changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities.

Planning

The Company''s assessment of capital requirement is aligned to its planned growth which forms part of an annual operating plan which is approved by the Board and also a long range strategy. These growth plans are aligned to assessment of risks- which include credit, operational, liquidity and interest rate.

The Company monitors its capital to risk-weighted assets ratio (CRAR) on a monthly basis through its Assets Liability Management Committee (ALCO).

The Company endeavours to maintain its CRAR higher than the mandated regulatory norm of 15%. Accordingly, increase in capital is planned well in advance to ensure adequate funding for its growth.

41.4 Liquidity risk and funding management

Liquidity risk arises due to the unavailability of adequate amount of funds at an appropriate cost and tenure. The Company may face an asset-liability mismatch caused by a difference in the maturity profile of its assets and liabilities. This risk may arise from the unexpected increase in the cost of funding an asset portfolio at the appropriate maturity and the risk of being unable to liquidate a position in a timely manner and at a reasonable price. We monitor liquidity risk through our Asset Liability Management Committee. Monitoring liquidity risk involves categorizing all assets and liabilities into different maturity profiles and evaluating them for any mismatches in any particular maturities, particularly in the short-term. We actively monitor our liquidity position to ensure that we can meet all borrower and lender-related funding requirements.

There are Liquidity Risk mitigation measures put in place which helps in maintaining the following:

Diversified funding resources:

The Company''s treasury department secures funds from multiple sources, including banks, financial institutions and capital markets and is responsible for diversifying our capital sources, managing interest rate risks and maintaining strong relationships with banks, financial institutions, mutual funds, insurance companies, other domestic and foreign financial institutions and rating agencies. The Company continuously seek to diversify its sources of funding to facilitate flexibility in meeting our funding requirements. Due to the composition of the loan portfolio, which also qualifies for priority sector lending, it also engages in securitization and assignment transactions.

Asset Liability Management (ALM) can be termed as a risk management technique designed to earn an adequate return while maintaining a comfortable surplus of assets over liabilities. ALM, among other functions, is also concerned with risk management and provides a comprehensive as well as dynamic framework for measuring, monitoring and managing liquidity and interest rate risks. ALM is an integral part of the financial management process of the Company. It is concerned with strategic balance sheet management, involving risks caused by changes in the interest rates and the liquidity position of CAGL. It involves assessment of various types of risks and altering the asset-liability portfolio in a dynamic way in order to manage risks.

ALM committee constitutes of Board of Directors who would review the tolerance limits for liquidity/ interest rate risks and would recommend to Board of Directors for its approval from time to time. As per the directions of the Board, the ALM statements would be reported to the ALM committee on quarterly basis for necessary guidance.

The scope of ALM function can be described as follows:

i. Funding and Capital Management,

ii. Liquidity risk management,

iii. Interest Rate risk management,

iv. Forecasting and analyzing ''What if scenario'' and preparation of contingency plans.

Capital guidelines ensure the maintenance and independent management of prudent capital levels for CAGL to preserve the safety and soundness of the Company, to support desired balance sheet growth and the realization of new business; and to provide a cushion against unexpected losses.

41.5 Market Risk41.5.1 Market risk

Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates and equity prices. The Company classifies exposures to market risk into either trading or non-trading portfolios and manages each of those portfolios separately.

41.5.2 Interest rate risk

Interest rate risk is the risk where changes in market interest rates might adversely affect the Company''s financial condition. The immediate impact of changes in interest rates is on earnings (i.e. reported profits) by changing its Net Interest Margin (NIM). The risk from the earnings perspective can be measured as changes in Net Interest Margin (NIM). In line with RBI guidelines, the traditional Gap analysis is considered as a suitable method to measure the Interest Rate Risk for the Company.

In case of CAGL it may be noted that portfolio loans are not rate sensitive as there is no re-pricing of existing loans carried out. Only some of the liabilities in the form of borrowings are rate sensitive and considering the size of our business the quantum of impact of change of interest rate of borrowings on liquidity is not significant and can be managed with appropriate treasury action.

41.5.3 Currency risk

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Foreign currency risk arise majorly on account of foreign currency borrowings. The Company manages its foreign currency risk by entering in to cross currency swaps and forward contract.

41.5.4 Hedging Policy

The Company''s Hedging Policy only allows for effective hedging relationships to be considered as hedges as per the relevant Ind AS. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. The Company enters into hedge relationship where the critical terms of the hedging instrument match with the terms of the hedged item, and so a qualitative and qualitative assessment of effectiveness is performed.

In respect of Interest rate swaps, there is an economic relationship between the hedged item and the hedging instrument as the terms of the Interest Rate swap contract match that of the foreign currency borrowing (notional amount, interest repayment date etc.). The Company has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the interest rate swap are identical to the hedged risk components.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated under the heading cash flow hedging reserve within equity. The gain or loss relating to the ineffective portion is recognised immediately in the statement of profit and loss, and is included in the ''(Gain) / Loss in Fair Value of Derivatives'' line item.

(vi) Institutional set-up for liquidity risk management

The Company''s Board of Directors has the overall responsibility of management of liquidity risk. The Board decides the strategic policies and procedures of the Company to manage liquidity risk in accordance with the risk tolerance/limits decided by it.

The Company also has a Risk Management Committee, which is a sub-committee of the Board and is responsible for evaluating the overall risk faced by the Company including liquidity risk.

Asset Liability Management Committee (ALCO) of the Company is responsible ensuring adherence to the risk tolerance/limits as well as implementing the liquidity risk management strategy of the Company.

Chief Risk Officer shall be part of the process of identification, measurement and mitigation of liquidity risks.

The ALM support group consist of CFO and Head-Treasury who shall be responsible for analysing, monitoring and reporting the liquidity profile to the ALCO.

*Notes

1. A "Significant counterparty" is defined as a single counterparty or group of connected or affiliated counterparties accounting in aggregate for more than 1% of the NBFC-NDSI''s, NBFC-Ds total liabilities and 10% for other non-deposit taking NBFCs.

2. A "significant instrument/product" is defined as a single instrument/product of group of similar instruments/ products which in aggregate amount to more than 1% of the NBFC-NDSI''s, NBFC-Ds total liabilities and 10% for other non-deposit taking NBFCs.

3. Total Liabilities has been computed as sum of all liabilities (Balance Sheet figure) less Equities and Reserves/ Surplus

4. "Public funds" shall include funds raised either directly or indirectly through public deposits, commercial paper, debentures, inter-corporate deposits and bank finance but excludes funds raised by issue of instruments compulsorily convertible into equity shares within a period not exceeding 10 years from the date of issue as defined in Regulatory Framework for Core Investment Companies issued vide Notification No. DNBS (PD) CC.No. 206/03.10.001/2010-11 dated January 5, 2011.

5. The amount stated in this disclosure is based on the audited standalone financial statements for the year ended March 31, 2023.

ab. Liquidity Coverage Ratio Disclosure

Institutional set-up for liquidity risk management

The RBI has issued final guidelines on Liquidity Risk Management Framework for Non-Banking Financial Companies and Core Investment Companies on November 04, 2019. As per the said guidelines, LCR requirement shall be binding on all non-deposit taking systemically important NBFCs with asset size of ^10,000 crore and above from December 1, 2020, with the minimum LCR to be 50%, progressively increasing, till it reaches the required level of 100%, by December 1,2024.

The Company follows the criteria laid down by RBI for calculation of High Quality Liquid Assets (HQLA), gross outflows and inflows within the next 30-day period. HQLA predominantly comprises cash and balance with other banks in current account. All significant outflows and inflows determined in accordance with RBI guidelines are included in the prescribed LCR computation template.

44 Operating segments

There is no separate reportable segment as per Ind AS 108 on ''Operating Segments'' in respect of the Company. The Company operates in single segment only. There are no operations outside India and hence there is no external revenue or assets which require disclosure. No revenue from transactions with a single external customer amounted to 10% or more of the Company''s total revenue in year ended March 31, 2023 and March 31, 2022.

45 Amalgamation of Madhura Micro Finance Limited ("MMFL") with the Company

(i) Madhura Micro Finance Limited ("MMFL") was subsidiary of the Company and both the Companies are NBFCs MFI registered with RBI. The Board of directors of MMFL and the Company had approved the scheme of amalgamation by way of merger by absorption ("Scheme") of MMFL (referred as "Transferor Company") with the Company (referred as "Transferee Company") on November 27, 2019 effective from April 01, 2020 (Appointed date). The Scheme was also approved by the equity shareholders of both the Companies pending for subsequent approvals by the National Company Law Tribunal (''NCLT'').

The Company received order of amalgamation of MMFL (subsidiary of the Company) with CreditAccess Grameen Limited effective from April 1, 2020 from the Hon''ble ''NCLT'', Chennai Bench vide its order dated October 12, 2022, and the Hon''ble NCLT Bengaluru Bench, vide its order dated February 07, 2023.

(ii) Pursuant to receipt of necessary orders from NCLT Bengaluru and Chennai sanctioning the scheme of amalgamation by way of merger by absorption of MMFL with the Company, under Sections 230 to 232 of the Companies Act, 2013, the Scheme became effective on February 15, 2023. The Company has accounted for the amalgamation on and from the Appointed date, i.e., April 1, 2020, as specified in Scheme.

Due to the aforesaid merger being effective from the Appointed date i.e. April 1, 2020, the Financial Statements of the Company for the previous years have been recast/restated.

(iv) At the time of acquisition of MMFL, the Company recorded deferred tax liability in consolidated financial statements on Customer relationship of ? 40.84 Crore. After amalgamation of MMFL with the Company, the company considers that Customer relationship assets are eligible for tax Depreciation from appointed date April 1, 2020. Hence, in accordance with the Indian Accounting Standard 12 ''Income taxes'', Company has reversed the deferred tax liability on Customer relationship assets in the financial statements.

(v) Company has considered the shares issued in amalgamation transaction while calculating basic and dilutive EPS for the year ended March 31,2023 and March 31,2022, as the appointed date was April 1,2020. (Refer Note 46)

47 Other Disclosures

(i) No Benami Property is held by the Company and/or there are no proceedings that have been initiated or pending against the Company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.

(ii) The Company has reviewed transactions to identify if there are any transactions with struck off companies. To the extent information is available on struck off companies, there are no transactions with struck off companies.

(iii) There were no delay in repayment of borrowings and Subordinated liabilities as at March 31, 2023, March 31, 2022 and March 31, 2021.

(iv) There are no charges or satisfaction in relation to any debt / borrowings which are yet to be registered with ROC beyond the statutory period.

(v) The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017.

(vi) Other than the transactions that are carried out as part of Company normal lending business:

A) The Company has not advanced or loaned or invested funds (either borrowed funds or share premium or any other sources or kind of funds) to any other person(s) or entity(ies), including foreign entities (Intermediaries) with the understanding (whether recorded in writing or otherwise) that the Intermediary shall -

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries;

B) The Company has not received any fund from any person(s) or entity(ies), including foreign entities (Funding Party) with the understanding (whether recorded in writing or otherwise) that the company shall -

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(vii) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year

(viii) There are no transactions which have not been recorded in the books of accounts and has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961. Also, there are no previously unrecorded income and related assets.

(ix) Income tax Demand Notice

During the year, the Company has received a demand notice for an amount of ? 122.63 crore pertaining to Income tax for AY 2018-19. The matter is mainly on the department''s contention of excess consideration received by the Company on conversion of Compulsorily Convertible Debentures (CCDs) into its equity shares. As per Company''s assessment, the probability of the liability devolving on the Company is remote and accordingly, the same is neither been provided for nor been considered as contingent liability.

48 Previous year figures have been regrouped/rearranged, wherever considered necessary, to conform to the classification/disclosure adopted in the current year.

Mar 31, 2022

Statutory reserve (As required by Sec 45-IC of Reserve Bank of India Act, 1934)

Capital reserve

During the year ended 2018, the Company pursuant to the scheme of amalgamation acquired MV Microfin Private Limited with effect from April 1,2017, per the accounting treatment of the scheme of amalgamation approved by the Honourable High Court of Karnataka the differential amount between the carrying value of investments and net assets acquired from the transferor companies has been accounted as Capital reserve.

Securities premium

Securities premium is used to record the premium on issue of shares. The reserve can be utilised in accordance with the provisions of the Companies Act, 2013.

Share option outstanding account

The share option outstanding account is used to recognise the grant date fair value of option issued to employees under employee stock option scheme.

Retained earnings

Retained earnings are the profits that the Company has earned till date, less any transfers to statutory reserve, general reserve or any other such other appropriations to specific reserves.

Other comprehensive income

(i) Effective portion of Cash Flow Hedge

For designated and qualifying cash flow hedges, the effective portion of the cumulative gain or loss on the hedging instrument is initially recognised directly in OCI within equity (cash flow hedge reserve). When the hedged cash flow affects the statement of profit and loss, the effective portion of the gain or loss on the hedging instrument is recorded in the corresponding income or expense line of the statement of profit and loss.

(ii) Debt instruments through Other Comprehensive Income

The Company has elected to recognize changes in the fair value of loans in other comprehensive income . These changes are accumulated as reserve within equity. The Company transfers amount from this reserve to retained earnings when the relevant loans are derecognized.

Note:

1. The Company has deposited the unspent amount in relation to the CSR expenditure in dedicated bank account.

2. Reason for shortfall, are as below

a) Few of the projects like the Vaccination Drives, Support to physically/mentally challenged children and the self-learning center have been commenced in the last quarter of this year and the period of the project extends to the next Financial year with committed payments to be made during the next Financial Year.

3. For nature of CSR activities refer annual report on CSR activities in Directors report.

4. Contribution of ?2.7 crore made to CreditAccess India Foundation (Section 8 Company which is subsidary of the Company).

5. The Company has entered into a Memorandum of Understanding with CreditAccess India Foundation for CSR Activities (COVID-19 pandemic support program, Community Development activity like education, health Care, livelihood and other support activity).

** The Company has reversed additional provision carried over and above requirements as per Section 135 Companies Act, 2013 to the extent of ?4.96 Crore during the current year.

Employee benefits

A. Defined benefit plan Gratuity

The Company provides for the gratuity, a defined benefit retirement plan covering qualifying employees . Employees who are in continous service for a period of 5 years are eligible for gratuity. The amount of gratuity payable on retirement/termination is the employees last drawn basic salary per month computed proportionately for 15 days salary multiplied by the number of years of service. The gratuity is a funded plan and the Company makes contibutions to Gratuity scheme administered by the insurance company through its Gratuity fund.

B. Defined contribution plan

The Company makes Provident fund and Employee State Insurance Scheme contributions which are defined contribution plans for qualifying employees. Under the schemes, the Company is required to contribute a specified percentage of the basic salary to fund the benefits. The contributions payable to these plans by the Company are administered by the Government. The obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation.The Company recognised ''20.25 crores (March 31,2021: ''15.31 crores) for Provident fund contributions and ''4.88 crores (March 31, 2021: ''4.75 crores) for Employee State Insurance Scheme contributions in the Statement of Profit and Loss.

Mortality:

Published rates under the Indian Assured Lives Mortality (2012-14) Ultimate.

Through its defined benefit plans the company is exposed to a number of risks, the most significant of which are detailed below:

Demographic risks

This is the risk of volatility of results due to unexpected nature of decrements that include mortality attrition, disability and retirement. The effects of this decrement on the defined benefit obligations depend upon the combination salary increase, discount rate, and vesting criteria and therefore not very straight forward.

Change in bond yields

A decrease in government bond yields will increase plan liabilities, although this is expected to be partially offset by an increase in the value of the planâs investment in debt instruments.

Inflation risk

The present value of some of the defined benefit plan obligations are calculated with reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the planâs liability.

Life expectancy

The present value of defined benefit plan obligation is calculated by reference to the best estimate of the mortality of plan participants, both during and after the employment. An increase in the life expectancy of the plan participants will increase the planâs liability.

The Code on Social Security, 2020

The Code on Social Security, 2020 (''Codeâ) relating to employee benefits during employment and post-employment benefits received Presidential assent in September 2020. The Code has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified and the final rules/interpretation have not yet been issued. The Company will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.

Transfer of financial assetsTransferred financial assets that are not derecognised in their entirety.

The Company has not transferred any assets that are not derecognised in their entirety.

Transferred financial assets that are derecognised.

The Company has assigned loans (earlier measured at FVTOCI) by way of direct assignment. As per the terms of these deals, since substantial risk and rewards related to these assets were transferred to the extent of 85%-95% of the assets transferred to the buyer, the assets have been de-recognised from the Company''s Balance Sheet. The table below summarises the carrying amount of the derecognised financial assets measured at fair value and the gain/(loss) on derecognition during the year:

Since the Company transferred the above financial asset in a transfer that qualified for derecognition in its entirety, therefore the whole of the interest spread (over the expected life of the asset) is recognised on the date of derecognition itself as ''Receivable from assignment of portfolio'' with a corresponding profit on derecognition of financial asset.

Transferred financial assets that are derecognised in their entirety.

The Company has not transferred any assets that are derecognised during the year in their entirety where the Company continues to have continuing involvement.

Contingent liabilities

Contingent liabilities not provided for in respect of the below:

'' in crore
(a) Particulars	March 31, 2022	March 31, 2021
Performance security provided by the Company pursuant to service provider agreement	0.10	0.11

(b) Pertaining to Assessment Year 2017-18 (Financial year 2016-17)

The Assesing Officer, Income Tax, Bangalore, through an order dated 28th December 2019, has confirmed the demand of ''2.62 crores (net demand after adjusting of payment made is ''1.16 crore) from the Company. The Company has preferred an appeal before Commissioner of Income Tax against said assement order. The Company is of view that the said demand is not tenable and expects to succeed in its appeal.

(c) In addition, the Company is involved in other legal proceedings and claims, which have arisen in the ordinary course of business. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company''s financial position and result of operations.

LeasesCompany as a leasee

The company''s leased assets mainly comprise office building and servers taken on lease. Certain agreements provide for cancellation by either party or certain agreements contains clause for escalation and renewal of agreements. The term of property leases ranges from 1-10 years and server leases are ranging from 1-10 years. The Company has applied short term lease exemption for leasing arrangements where the period of lease is less than 12 months.

Financial instruments - fair values Accounting classification and fair values:

Carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy, are presented below. It does not include the fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.

Fair value hierarchy

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

The carrying amounts of cash and cash equivalents, bank balances other than cash and cash equivalents, other financial assets/liabilities and trade and other payables approximate the fair value because of their short-term nature.

There were no transfers between Level 3 and Level 1/Level 2 during the current year.

Fair values of Loans measured at amortised cost have been measured based on a discounted cash flow model of the contractual cash flows of solely payment of principal and interest. The Significant Unobservable Input is the Discount rate, determined using the cost of lending of the company.

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. The below methodologies and assumptions relate only to the instruments in the above tables.

Loans (measured at amortised cost)

Fair values of Loans measured at amortised cost have been measured based on a discounted cash flow model of the contractual cash flows of solely payment of principal and interest. The Significant Unobservable Input is the Discount rate, determined using the cost of lending of the company.

Financial liabilities measured at amortised cost

The fair value of fixed rate borrowings is determined by discounting expected future contractual cash flows using current market interest rate being charged for new borrowings. The fair value of floating rate borrowing is deemed to equal its carrying value.

Risk Management Introduction and risk profile

CreditAccess Grameen Limited ("Company") is one of the leading microfinance institutions in India focused on providing financial support to women from low income households engaged in economic activity with limited access to financial services. The Company predominantly offers collateral free loans to women from low income households, willing to borrow in a group and agreeable to take joint liability. The wide range of lending products address the critical needs of customers throughout their lifecycle and include income generation, home improvement, children''s education, sanitation and personal emergency loans. With a view to diversifying the product profile, the company has introduced individual loans for matured group lending customers. These loans are offered to customers having requirement of larger loans to expand an existing business in their individual capacity.

The common risks for the company are operational, business environment, political, regulatory, concentration, expansion and liquidity. As a matter of policy, these risks are assessed and steps as appropriate, are taken to mitigate the same.

) Risk management structure

The Board of Directors are responsible for the overall risk management approach and for approving the risk management strategies and principles.The Risk Management framework approved by the Board has laid down the governance structure supporting the identification, assessment, monitoring, reporting and mitigation of risk throughout the company. The objective of the risk management platform is to make a conscious effort in developing risk culture within the organisation and having appropriate systems and tools for timely identification, measurement and reporting of risks for managing them.

The Board has a Risk Management committee which is responsible for monitoring the overall risk process within the Company and reports to the Board of Directors.

The Risk Management guidelines will be implemented through the established organization structure of Risk Department. The overall monitoring of the Risks is done by the Chief Risk Officer (CRO) with the support from all the department heads of the Company. The Board reviews the status and progress of the risk and risk management system, on quarterly basis through the Audit Committee and Risk Management Committee. The individual departments are responsible for ensuring implementation of the risk management framework and policies, systems and methodologies as approved by the Board. Assignment of responsibilities in relation to risk management is prerogative of the Heads of Departments, in coordination with CRO.While each department focuses on its specific area of activity, the Risk Management Unit operates in coordination with all other departments, utilising all significant information sourced to ensure effective management of risks in accordance with the guidelines approved by the Board. The unit works closely with and reports to the Risk Committee, to ensure that procedures are compliant with the overall framework.

Heads of Departments are accountable to a Management Level Risk Committee (MLRC) comprising of MD&CEO, CFO, CAO, Deputy CEO & CBO, CTO and CRO. The departmental heads will report for the implementation of above mentioned guideline within their respective areas of responsibility. The department heads are also accountable to the MLRC for identification, assessment, aggregation, reporting and monitoring of the risk related to their respective domain.

The Company''s policy is that risk management processes throughout the Company are audited by the Internal Audit function, which examines both the adequacy of the procedures and the Company''s compliance with the procedures. Internal Audit discusses the results of all assessments with management, and reports its findings and recommendations to the Audit Committee.

3 Risk mitigation and risk culture

Risk assessments are conducted for all business activities. The assessments are to address potential risks and to comply with relevant legal and regulatory requirements. Risk assessments are performed by competent personnel from individual departments and risk management department including, where appropriate, expertise from outside the Company. Procedures are established to update risk assessments at appropriate intervals and to review these assessments regularly. Based on the Risk Control and Self Assessment (RCSA), the Company formulates its Risk Management Strategy / Risk Management plan on annual basis. The strategy will broadly entail choosing among the various options for risk mitigation for each identified risk. The risk mitigation is planned using the following key strategies:

Risk Avoidance: By not performing an activity that could carry risk. Avoidance may seem the answer to all risks, but avoiding risks also means losing out on the potential gain that accepting (retaining) the risk may have allowed.

Risk Transfer: Mitigation by having another party to accept the risk, either partial or total, typically by contract or by hedging.

Risk Reduction: Employing methods/solutions that reduce the severity of the loss.

Risk Retention: Accepting the loss when it occurs. Risk retention is a viable strategy for small risks where the cost of insuring against the risk would be greater over time than the total losses sustained. All risks that are not avoided or transferred are retained by default. This includes risks that are so large or catastrophic that they either cannot be insured against or the premiums would be infeasible.

Risk measurement and reporting systems

The heads of all the departments in association with risk management department are responsible for coordinating the systems for identifying risks within their own department or business activity through RCSA exercise to be conducted at regular intervals. Based on a cost / benefit assessment of a risk, as is undertaken, some risks may be judged as having to be accepted because it is believed mitigation is not possible or warranted. As the risk exposure of any business may undergo change from time to time due to continuously changing environment, the updation of the Risk Register will be done on a regular basis. All the strategies with respect to managing these major risks shall be monitored by the CRO and MLRC. The Management Level Risk Committee meetings are held as necessary or at least once a month. The Management Level Risk Committee would monitor the management of major risks specifically and other risks of the Company in general. The Committee takes an integrated view of the risks facing the entity and monitor implementation of the directives received from Risk Management Committee and actionable items drawn from the risk management framework.

Accordingly, the Management Level Risk Committee reviews the following aspects of business specifically from a risk indicator perspective and suitably record the deliberations during the monthly meeting.

- Review of business growth and portfolio quality.

- Discuss and review the reported details of Key Risk Threshold breaches (KRI''s), consequent actions taken and review of operational loss events, if any.

- Review of process compliances including audit performance across organisation.

- Review of HR management, training and employee attrition.

- Review of new initiatives and product/policy/process changes.

- Discuss and review performance of IT systems.

- Review the status of strategic projects initiated.

- Review, where necessary, policies that have a bearing on the operational & credit risk management and recommend amendments.

- Discuss and recommend suitable controls/mitigations for managing operational & credit risk and assure that adequate resources are being assigned to mitigate the risks.

- Review analysis of frauds, potential losses, non-compliance, breaches etc. and determine corrective measures to prevent their recurrences.

- Understand changes and threats, concur on areas of high priority and possible actions for managing/mitigating the same.

Risk Management Strategies Excessive risk concentrations

Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Group''s performance to developments affecting a particular industry or geographical location.

The following management strategies and policies are adopted by the Company to manage the various key risks.

Political Risk mitigation measures:

â¢ Low cost operations and low pricing for customers.

â¢ Customer centric approach, high customer retention.

â¢ Rural focus.

â¢ Systematic customer awareness activities.

â¢ High social focused activities.

â¢ Adherence to client protection guidelines.

â¢ Robust grievance redressal mechanism.

â¢ Adherence to regulatory guidelines in letter and spirit.

Concentration risk mitigation measures:

â¢ District centric approach.

â¢ District exposure cap.

â¢ Restriction on growth in urban locations.

â¢ Maximum disbursement cap per loan account.

â¢ Maximum loan exposure cap per customer.

â¢ Diversified funding resources.

Operational & HR Risk mitigation measures:

â¢ Stringent customer enrolment process.

â¢ Multiple products.

â¢ Proper recruitment policy and appraisal system.

â¢ Adequately trained field force.

â¢ Weekly & fortnightly collections - higher customer touch, lower amount instalments.

â¢ Multilevel monitoring framework.

â¢ Strong, Independent and fully automated Internal Audit function.

â¢ Strong IT system with access to real time client and loan data.

Liquidity risk mitigation measures:

â¢ Diversified funding resources.

â¢ Asset liability management.

â¢ Effective fund management.

â¢ Maximum cash holding cap.

Expansion risk mitigation measures:

â¢ Contiguous growth.

â¢ District centric approach.

â¢ Rural focus.

â¢ Branch selection based on census data & credit bureau data.

â¢ Three level survey of the location selected.

Credit risk

Credit risk is the risk of financial loss to the Company if the counterparty to a financial instrument, whether a customer or otherwise, fails to meet its contractual obligations towards the Company. Credit risk is the core business risk of the Company. The Company therefore has high appetite for this risk but low tolerance and the governance structures including the internal control systems are particularly designed to manage and mitigate this risk. The Company is mainly exposed to credit risk from loans to customers (including loans transferred to SPVs under securitization agreements, excluding loans sold under assignment presented as off-balance sheet assets).

Credit risk is being managed by continuously monitoring the borrower''s performance if borrowers are paying on time based on their amortization dues. The company ensures stringent monitoring and quality operations through both field supervision (branch/area/region staff supervision, quality control team supervision) and management review. Management at each company''s head office closely monitors credit risk through system generated reports (e.g., PAR status and PAR movement, portfolio concentration analysis, vintage analysis, flow-rate analysis) and Key Risk Indicators (KRIs) which include proactive actionable thresholds limits (acceptable, watch and breach) developed by CRO, revised at the the MLRC and at the Risk Committee at the Board level.

Some of the main strategies to mitigate credit risk are:

1. Maintain stringent customer enrolment process,

2. Undertake systematic customer awareness activities/ programs,

3. Reduce geographical concentration of portfolio,

4. Maximum loan exposure to member as determined from time to time,

5. Modify product characteristics if needed (e.g., longer maturity for group clients in case the loan is above a certain threshold),

6. Carry out due diligence of new employees and adequate training at induction,

7. Decrease field staff turnover,

8. Supporting technologies: credit bureau checks, GPS tagging and KYC checks.

Impairment assessment

Definition of default, significant increase in credit risk and stage assessment

Stage 1: includes loans for which the credit risk at the reporting date is in line with the credit risk at the initial recognition (i.e. disbursement date).

Stage 2: includes loans for which the credit risk at reporting date is significantly higher than at the risk at the initial recognition (Significant Increase in Credit Risk i.e. SICR).

Stage 3: includes default loans. A loan is considered default at the earlier of (i) the Company considers that the obligor is unlikely to pay its credit obligations to the company in full, without recourse by the company to actions such as realizing collateral (if held); or (ii) the obligor is past due more than 60 / 90 days on any material credit obligation to the company.

(i) Joint liability loans (JLG)

Unlike banks which have more of monthly repayments, the Company offers products with primarily weekly repayment frequency, whereby 15 and above Days past due (''DPD'') means already 2 missed instalments from the borrower, and accordingly, the Company has identified the following stage classification to be the most appropriate for its JLG : Stage 1: 0 to 15 DPD.

Stage 2: 16 to 60 DPD (SICR).

Stage 3: above 60 DPD (Default).

(ii) Individual loans

Since Individual loans are on monthly repayment model, the Company has identified the following stage classification to be the most appropriate for these loans :

Stage 1: 0 to 30 DPD.

Stage 2: 30 to 90 DPD (SICR).

Stage 3: Above 90 DPD (Default).

41.2. b Probability of Default (''PD'')

(i) Joint Liability Loans (JLG)

PD describes the probability of a loan to eventually falling into Stage 3. PD %age is calculated for each loan account separately and is determined by using available historical observations.

PD for stage 1: is derived as %age of all loans in stage 1 moving into stage 3 in 12-months'' time.

PD for stage 2: is derived as %age of all loans in stage 2 moving into stage 3 in the maximum lifetime of the loans under observation.

PD for stage 3: is derived as 100% considering that the default occurs as soon as the loan becomes overdue for 60 days which matches the definition of stage 3.

(ii) Individual loans

41.2. c Exposure at default (EAD)

Exposure at default (EAD) is the sum of outstanding principal and the interest amount accrued but not received on each loan as at reporting date.

41.2. d Loss given default (LGD)

LGD is the opposite of recovery rate. LGD = 1 - (Recovery rate). LGD is calculated based on past observations of Stage 3 loans.

(i) Joint liability loans (JLG)

LGD is computed as below:

In estimating LGD, the Company reviews macro-economic developments taking place in the economy. A select group of Stage 2 and Stage3 loans exhibiting specific payment pattern has been applied an LGD which is lower than the regular LGD estimate.

(ii) Individual loans

Individual loans is a relatively new portfolio that was started in November 2016. Performance history of matured vintage loan is not available in adequate number to build PD or LGD model. The ECL estimation for individual loans portfolio is carried out using a methodology which is based on management judgement.

41.2. e Grouping financial assets measured on a collective basis

The Company believes that the Joint Liability Group (JLG) loans have shared risk characteristics (i.e. homogeneous) which are different from those of Individual loans (IL). Therefore, JLG and IL are treated as two separate groups for the purpose of determining impairment allowance.

41.2. f The Company''s Loan book consists of a large number of customers spread over diverse geographical area, hence the

Company is not exposed to concentration risk with respect to any particular customer.

41.2. g Analysis of inputs to the ECL model under multiple economic scenarios

Adjusting the ECL to reflect the expected changes (if any) in the economic environment for forward looking information in the form of management overlay.

41.2. h Pursuant to the RBI circular dated November 12, 2021 - " Prudential norms on Income Recognition, Asset-Classification

and Provisioning (IRACP) pertaining to Advances - Clarifications", the Company changed its NPA definition to comply with the norms/ changes for regulatory reporting, as applicable. This has resulted in classification of loans amounting to 3.48 Crore as additional non-performing assets (Stage 3) as at March 31, 2022. However, the said change does not have a material impact on the financial results for the quarter / year ended March 31, 2022. On 15 February 2022, the RBI allowed deferment pertaining to the upgradation of Non Performing accounts till 30 September 2022. However, the Company has not opted for such deferment and continues to align Stage 3 definition to revised NPA definition.

41.3 Capital

(i) Capital management

The Company''s objectives when managing capital are to -

â¢ safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

â¢ Maintain an optimal capital structure to reduce the cost of capital.

Planning

The Company monitors its capital to risk-weighted assets ratio (CRAR) on a monthly basis through its Assets Liability Management Committee (ALCO).

The Company endeavours to maintain its CRAR higher than the mandated regulatory norm of 15%. Accordingly, increase in capital is planned well in advance to ensure adequate funding for its growth.

Liquidity risk and funding management

There are Liquidity Risk mitigation measures put in place which helps in maintaining the following:

Diversified funding resources:

Asset Liability Management (ALM) can be termed as a risk management technique designed to earn an adequate return while maintaining a comfortable surplus of assets over liabilities. ALM, among other functions, is also concerned with risk management and provides a comprehensive as well as dynamic framework for measuring, monitoring and managing liquidity and interest rate risks. ALM is an integral part of the financial management process of CA Grameen. It is concerned with strategic balance sheet management, involving risks caused by changes in the interest rates and the liquidity position of CA Grameen. It involves assessment of various types of risks and altering the asset-liability portfolio in a dynamic way in order to manage risks.

The scope of ALM function can be described as follows:

i. Funding and Capital Managementm,

ii. Liquidity risk management,

iii. Interest Rate risk management,

iv. Forecasting and analyzing ''What if scenario'' and preparation of contingency plans

Capital guidelines ensure the maintenance and independent management of prudent capital levels for CA Grameen. to preserve the safety and soundness of the company, to support desired balance sheet growth and the realization of new business; and to provide a cushion against unexpected losses. Refer Note 41.3 with respect to regulatory capital of the Company as at the reporting dates.

Market Risk1 Market risk

2 Interest rate risk

The Interest rate risk is the risk where changes in market interest rates might adversely affect CA Grameen''s financial condition.Theimmediateimpactofchangesininterestratesisonearnings(i.e.reportedprofits)bychangingitsNetInterest Margin (NIM). The riskfromthe earnings perspective can be measured as changes in Net Interest Margin (NIM). In line with RBI guidelines, the traditional Gap analysis is considered as a suitable methodto measure the Interest Rate Riskfor CA Grameen.

In case of CA Grameen. it may be noted that portfolio loans are not rate sensitive as there is no re-pricing of existing loans are carried out. Only some of the liabilities in the form of borrowings are rate sensitive and considering the size of our business the quantum of impact of change of interest rate of borrowings on liquidity is not significant and can be managed with appropriate treasury action.

The following table demonstrates the sensitivity to a reasonably possible charge in interest rates (all other variables being constant) of the Company''s profit and loss statement.

Currency risk

Hedging Policy

In respect of Interest rate swaps, there is an economic relationship between the hedged item and the hedging instrument as the terms of the Interest Rate swap contract match that of the foreign currency borrowing (notional amount, interest repayment date etc. The Company has established a hedge ratio of 1:1 for the hedging relationships as the underlying risk of the interest rate swap are identical to the hedged risk components.

Business combination

On March 18, 2020, the Company had completed the acquisition of a controlling stake (76.08%) in the paid-up equity share capital of Madura Micro Finance Limited (MMFL), an NBFC-MFI registered with the Reserve Bank of India (RBI). During FY21, the Company has acquired 12,241 equity shares, representing 0.17% of the equity share capital of MMFL. Further, during the current year, the Company has acquired 4500 equity shares, representing 0.06% of the equity share capital of MMFL, taking the aggregate shareholding of the Company in MMFL as on March 31,2022 to 76.31%.

The Board of Directors of the Company in its meeting held on November 27, 2019 has approved the scheme of amalgamation of MMFL with the Company, subject to requisite approvals from various regulatory and statutory authorities, respective shareholders and creditors.

Based on the Order by the Hon''ble National Company Law Tribunal (NCLT), Bengaluru dated February 25, 2022, a Meeting of the equity shareholders of the Company was convened on April 25, 2022 for obtaining the approval to the Scheme of Amalgamation. Further, based on the Order by the NCLT Chennai dated March 29, 2022, a meeting of the equity shareholders of MMFL was convened on May 04, 2022. The above Scheme has been approved by the equity shareholders of both the Companies and is now subject to the subsequent approvals of the NCLT Bengaluru and Chennai.

Operating segments

Impact of COVID 19 Expected Credit Losses

The outbreak of COVID-19 pandemic across the globe and in India has contributed to a significant volatility in the financial markets and slowdown in the economic activities. Consequent to the outbreak of the COVID-19 pandemic, the Indian government announced a lockdown in March 2020. Subsequently, the national lockdown was lifted by the government, but regional restrictions continued to be implemented in areas as India witnessed two more waves of the Covid-19 pandemic during the year ended 31 March 2022.

Currently, the number of new Covid-19 cases have reduced significantly and the Government of India has withdrawn most of the Covid-19 related restrictions. As at March 31, 2022, the Company holds an aggregate provision of ''403.84 crores against the advances which includes provision of ''42.16 crores for the accounts restructured under the RBI resolution framework.

i. Exposures

The Company has no exposure to the real estate sector and capital market directly or indirectly in the current and previous year.

j. Details of Financing of Parent Company Products

The Company was not involved in the financing of Parent Company products.

k. Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the NBFC

The Company has not exceeded the prudential exposure limits for Single Borrower Limit (SGL) / Group Borrower Limit (GBL) during the year.

l. Unsecured Advances

The Company has not given any Loans and advances against intangible securities during the year.

Note:

1. Above computation is in accordance with the method accepted by RBI vide its letter no DNBS. PD.NO.4906/03.10.038/2012-13 dated April 4, 2013 to Micro-finance Institutions Network (the "MFIN format") read with the FAQs issued by RBI on October 14, 2016 and RBI circulated dated March 13, 2020 on implementation of Indian Accounting Standards.

2. Average loan outstanding determined for the purpose of calculating NIM is based on carrying value of loans under Ind AS, excluding effect of following:

a. Fair value changes recognised through other comprehensive income;

b. Securitised loans qualifying for de-recognition as per RBI''s "true sale" criteria and related interest income have not been considered for computation of "average interest charged" in accordance with the MFIN format. Accordingly, the purchase consideration received towards such securitisations and related finance costs have also not been considered for computation of "average effective cost of borrowings".

c. Impairment allowance adjusted from the carrying value of loans in accordance with Ind AS 109;

d. Carrying value of loans classified as Stage III loans (i.e. erstwhile NPA classification) as per specific communication from RBI.

3. Interest income considered for computation of "average interest charged" excludes loan processing fee collected from customers in accordance with para 56 (vi) of the RBI Master Directions. As per Ind AS 109, such loan processing fee forms part of interest income in the Ind AS standalone financial statements.

v. Overseas Assets

The Company does not have any subsidiary / joint venture abroad.

w. Off Balance sheet SPVs sponsored (which are required to be consolidated as per accounting norms)

The Company does not have SPVs sponsored (which are required to be consolidated as per accounting norms).

(vi) Institutional set-up for liquidity risk management

The Company''s Board of Directors has the overall responsibility of management of liquidity risk The Board decides the strategic policies and procedures of the Company to manage liquidity risk in accordance with the risk tolerance/limits decided by it.

The Company also has a Risk Management Committee, which is a sub-committee of the Board and is responsible for evaluating the overall risk faced by the Company including liquidity risk.

Chief Risk Officer shall be part of the process of identification, measurement and mitigation of liquidity risks.

The ALM support group consist of CFO and Head-Treasury who shall be responsible for analysing, monitoring and reporting the liquidity profile to the ALCO.

*Notes

2. A "significant instrument/product" is defined as a single instrument/product of group of similar instruments/products which in aggregate amount to more than 1% of the NBFC-NDSI''s, NBFC-Ds total liabilities and 10% for other non-deposit taking NBFCs.

3. Total Liabilities has been computed as sum of all liabilities (Balance Sheet figure) less Equities and Reserves/Surplus.

5. The amount stated in this disclosure is based on the audited standalone financial statements for the year ended March 31, 2022.

af. Liquidity Coverage Ratio Disclosure Institutional set-up for liquidity risk management

The RBI has issued final guidelines on Liquidity Risk Management Framework for Non-Banking Financial Companies and Core Investment Companies on November 04, 2019. As per the said guidelines, LCR requirement shall be binding on all non-deposit taking systemically important NBFCs with asset size of ? 10,000 crore and above from December 1,2020, with the minimum LCR to be 50%, progressively increasing, till it reaches the required level of 100%, by December 1,2024.

The disclosure on Liquidity Coverage Ratio of the Company for the year ended March 31,2022 is as under:

Additional disclosures

(i) No Benami Property are held by the Company and or no proceedings have been initiated or are pending against the company for holding any benami property under the Benami Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder.

(iii) There is no charges or satisfaction in relation to any debt / borrowings yet to be registered with ROC beyond the statutory period.

(iv) The Company has complied with the number of layers prescribed under clause (87) of section 2 of the Act read with Companies (Restriction on number of Layers) Rules, 2017.

(v) Other than the transactions that are carried out as part of Company'' normal lending business:

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like to or on behalf of the Ultimate Beneficiaries;

(a) directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party (Ultimate Beneficiaries) or

(b) provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(vi) The Company has not traded or invested in Crypto currency or Virtual Currency during the financial year

(vii) There are no transactions which have not been recorded in the books of accounts and has been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961. Also, there are no previously unrecorded income and related assets.

Previous year figures have been regrouped/rearranged, wherever considered necessary, to conform to the classification / disclosure adopted in the current year.

Mar 31, 2019

1 Capital commitments

Estimated amounts of contracts remaining to be executed on capital account (net of capital advances) and not provided:

2 Leases Operating Lease

Head office and branch office premises are acquired on operating lease. The branch office premises are generally rented on cancellable term for period of eleven to sixty months with no escalation clause and renewable at the option of the Company.

3 Related party transactions Names of the related parties (as per IndAS - 24)

Key management personnel Mr Udaya Kumar Hebbar, Managing Director & CEO

Holding Company CreditAccess Asia NV

Independent Director Mr R Prabha

Independent Director Mr Anal Kumar Jain

Independent Director Mr M N Gopinath

Independent Director Ms Sucharita Mukherjee (w.e.f. Sept. 11, 2017)

Independent Director Mr George Joseph

Nominee Director Mr Paolo Brichetti

Nominee Director Mr Sumit Kumar

Nominee Director Mr Massimo Vita (w.e.f. July 25, 2017)

Director Mr Suresh Krishna (upto May 19, 2017)

Chairman Ms Vinatha M Reddy (upto June 1, 2017)

Notes:

1. Impairment allowance on Stage 1 and Stage 2 loans has been considered as ''contingent provision for standard asset'' for the purpose of determining Tier II capital;

2. Other comprehensive income towards fair valuation of loans has been considered for determining Tier I capital;

3. Loans transferred through securitization not fulfilling the derecognition criteria under Ind AS 109 are considered as on-balance sheet exposure.

c. Derivatives

The Company has no transactions / exposure in derivatives in the current and previous year.

The Company has no unheeded foreign currency exposure as on March 31, 2019 (March 31, 2018: Nil).

e. Details of financial assets sold to securitization / reconstruction company for asset reconstruction:

The Company has not sold any financial asset to securitization / reconstruction company for asset reconstruction in the current and previous year.

f. Details of assignment transactions:

The Company has undertaken four assignment transactions during the current year (March 31, 2018: Nil)

* this represents principal amount outstanding as at the date of transaction adjusted for any specific provisions.

g. Details of non-performing financial asset purchased / sold:

The Company has not purchased / sold any non-performing financial assets in the current and previous year.

The above maturity pattern of assets and liabilities as on March 31, has been prepared with reference to the carrying values of assets and liabilities.

i. Exposures:

The Company has no exposure to the real estate sector and capital market directly or indirectly in the current and previous year.

j. Unsecured advances: Refer Note 6. k. ''Registration obtained from other financial regulators:

The Company is not registered with any other financial sector regulators.

l. Disclosure of penalties imposed by RBI and other regulators:

No penalties were imposed by RBI and other regulators during current and previous year.

Note:

1. Above computation is in accordance with the method accepted by RBI vide its letter no DNBS.PD.N0.4906/03.10.038/2012-13 dated April 4, 2013 to Micro-finance Institutions Network (the "MFIN format") read with the FAQs issued by RBI on October 14, 2016.

2. Securitized loans qualifying for de-recognition as per RBI''s "true sale" criteria and related interest income have not been considered for computation of "average interest charged" in accordance with the MFIN format. Accordingly, the purchase consideration received towards such securitizations and related finance costs have not been considered for computation of "average effective cost of borrowings". As per Ind AS 109, such loans and borrowings continue to be recognized on the balance sheet in the Ind AS financial statements.

3. Interest income considered for computation of "average interest charged" excludes loan processing fee collected from customers in accordance with para 54 (vi) of the RBI Master Directions. As per Ind AS 109, such loan processing fee forms part of interest income in the Ind AS financial statements.

4. Average loan outstanding considered for computation of "average interest charged" is gross of the impairment allowance. As per Ind AS 109, such allowance is adjusted from the loan balance in the Ind AS financial statements.

v. The Company has not disbursed any loans against the security of gold.

4. Business combination (common control transaction) with MV Microfin Private Limited

The National Company Law Tribunal (NCLT), Bengaluru Bench approved a Scheme of Arrangement on November 22, 2017 (hereinafter referred as ''the Scheme'') for amalgamating the business from MV Microfin Private Limited with the Company (''the Amalgamation''). By virtue of the Scheme, the business operations of MV Microfin Private Limited shall stand transferred, merged and vested with the Company with effect from April 01, 2017 (''the Appointed Date''). MV Microfin Private Limited was registered as an NBFC with RBI. Also, the said amalgamation being in the nature of merger, the accounting thereof has been carried out as per the pooling of interest method specified in Ind AS - 103.

The Scheme inter alia provides for issue of 13 equity shares of the Company with a face value of Rs.10 each for every 10 equity shares held in the MV Microfin Private Limited at par and issue of 852,188 equity shares of the Company with a face value of Rs.10 each for every 1 Compulsorily Convertible Debenture (CCD) held in MV Microfin Private Limited at par as a purchase consideration for the Amalgamation.

As per the Scheme, the Company shall adjust the book value of assets and liabilities on the appointed date in its books of account as follows:

5. During the year ended March 31, 2019, the Company had completed the Initial Public Offer (IPO) comprising a fresh issue of 14,928,909 equity shares having a face value of Rs.10 each at an offer price of Rs.422 each aggregating Rs.630 crores by the Company and an offer for sale of 11,876,485 equity shares by our promoters CreditAccess Asia N.V aggregating Rs.501.18 crores. Pursuant to the IPO, the equity shares of the Company have got listed on BSE Limited and NSE India Limited on August 23, 2018.

6. Risk Management

7. Introduction and risk profile

Credit Access Grameen Limited ("Company") is one of the leading microfinance institutions in India focused on providing financial support to women from low income households engaged in economic activity with limited access to financial services. The Company predominantly offers collateral free loans to women from low income households, willing to borrow in a group and agreeable to take joint liability. The wide range of lending products address the critical needs of customers throughout their lifecycle and include income generation, home improvement, children''s education, sanitation and personal emergency loans. With a view to diversifying the product profile, the company has introduced individual loans for matured group lending customers. These loans are offered to customers having requirement of larger loans to expand an existing business in their individual capacity.

8.a Risk management structure

The Board of Directors are responsible for the overall risk management approach and for approving the risk management strategies and principles. The Risk Management framework approved by the Board has laid down the governance structure supporting the identification, assessment, monitoring, reporting and mitigation of risk throughout the company. The objective of the risk management platform is to make a conscious effort in developing risk culture within the organization and having appropriate systems and tools for timely identification, measurement and reporting of risks for managing them.

The Board has a Risk Management committee which is responsible for monitoring the overall risk process within the Company and reports to the Board of Directors.

The Risk Management guidelines will be implemented through the established organization structure of Risk Department. The overall monitoring of the Risks is done by the Head-Risk Management with the support from all the department heads of the Company. The Board will reviews the status and progress of the risk and risk management system, on quarterly basis through the Audit Committee and Risk Management Committee. The individual departments are responsible for ensuring implementation of the risk management framework and policies, systems and methodologies as approved by the Board. Assignment of responsibilities in relation to risk management is prerogative of the Heads of Departments, in coordination with Head-Risk.While each department focuses on its specific area of activity, the Risk Management Unit operates in coordination with all other departments, utilising all significant information sourced to ensure effective management of risks in accordance with the guidelines approved by the Board. The unit works closely with and reports to the Risk Committee, to ensure that procedures are compliant with the overall framework.

Heads of Departments is accountable to a Management-Level Risk Committee (MLRC) comprising of MD&CEO, CFO and Head-Risk. The departmental heads will report for the implementation of above mentioned guideline within their respective areas of responsibility. The department heads are also accountable to the MLRC for identification, assessment, aggregation, reporting and monitoring of the risk related to their respective domain.

The Company''s policy is that risk management processes throughout the Company are audited quarterly by the Internal Audit function, which examines both the adequacy of the procedures and the Company''s compliance with the procedures. Internal Audit discusses the results of all assessments with management, and reports its findings and recommendations to the Audit Committee.

9 Risk mitigation and risk culture

Risk assessments are conducted for all business activities. The assessments are to address potential risks and to comply with relevant legal and regulatory requirements. Risk assessments are performed by competent personnel from individual departments and risk management department including, where appropriate, expertise from outside the Company. Procedures are established to update risk assessments at appropriate intervals and to review these assessments regularly. Based on the Risk Control and Self Assessment (RCSA), the Company formulates its Risk Management Strategy / Risk Management plan on annual basis. The strategy will broadly entail choosing among the various options for risk mitigation for each identified risk. The risk mitigation is planned using the following key strategies:

Risk Avoidance: By not performing an activity that could carry risk. Avoidance may seem the answer to all risks, but avoiding risks also means losing out on the potential gain that accepting (retaining) the risk may have allowed.

Risk Transfer: Mitigation by having another party to accept the risk, either partial or total, typically by contract or by hedging.

Risk Reduction: Employing methods/solutions that reduce the severity of the loss.

Risk Retention: Accepting the loss when it occurs. Risk retention is a viable strategy for small risks where the cost of insuring against the risk would be greater over time than the total losses sustained. All risks that are not avoided or transferred are retained by default. This includes risks that are so large or catastrophic that they either cannot be insured against or the premiums would be infeasible.

10. Risk measurement and reporting systems

The heads of all the departments in association with risk management department are responsible for coordinating the systems for identifying risks within their own department or business activity through RCSA exercise to be conducted at regular intervals. Based on a cost / benefit assessment of a risk, as is undertaken, some risks may be judged as having to be accepted because it is believed mitigation is not possible or warranted. As the risk exposure of any business may undergo change from time to time due to continuously changing environment, the updating of the Risk Register will be done on a regular basis. All the strategies with respect to managing these major risks shall be monitored by the Head-Risk and MLRC. The Management Level Risk Committee meetings are held as necessary or at least once a month. The Management Level Risk Committee would monitor the management of major risks specifically and other risks of the Company in general. The Committee takes an integrated view of the risks facing the entity and monitor implementation of the directives received from Risk Management Committee and actionable items drawn from the risk management framework.

Accordingly, the Management Level Risk Committee reviews the following aspects of business specifically from a risk indicator perspective and suitably record the deliberations during the monthly meeting.

- Review of business growth and portfolio quality.

- Discuss and review the reported details of PAR, Key Risk Threshold breaches (KRI''s), consequent responses and review of operational loss events, if any.

- Review of process compliances including audit performance across organization.

- Review of HR management, training and employee attrition.

- Review of new initiatives and product/policy/process changes.

- Discuss and review performance of IT systems.

- Review the status of strategic projects initiated.

- Review, where necessary, policies that have a bearing on the operational risk management and recommend amendments.

- Discuss and recommend suitable controls/mitigations for managing operational risk and assure that adequate resources are being assigned to mitigate the risks.

- Review analysis of frauds, potential losses, non-compliance, breaches etc. and determine corrective measures to prevent their recurrences.

- Understand changes and threats, concur on areas of high priority and possible actions for managing / mitigating the same.

11. Risk Management Strategies

Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Group''s performance to developments affecting a particular industry or geographical location.

The following management strategies and policies are adopted by the Company to manage the various key risks. Political Risk mitigation measures:

- Low cost operations and low pricing for customers.

- Customer centric approach, high customer retention.

- Rural focus.

- Systematic customer awareness activities.

- High social focused activities.

- Adherence to client protection guidelines.

- Robust grievance redressal mechanism.

- Adherence to regulatory guidelines in letter and spirit.

Concentration risk mitigation measures:

- District centric approach.

- District exposure cap.

- Restriction on growth in urban locations.

- Maximum disbursement cap per loan account.

- Maximum loan exposure cap per customer.

- Diversified funding resources.

Operational & HR Risk mitigation measures:

- Stringent customer enrolment process.

- Multiple products.

- Proper recruitment policy and appraisal system.

- Adequately trained field force.

- Weekly & fortnightly collections - higher customer touch, lower amount installments.

- Multilevel monitoring framework.

- Strong, Independent and fully automated Internal Audit function.

- Strong IT system with access to real time client and loan data.

Liquidity risk mitigation measures:

- Diversified funding resources.

- Asset liability management.

- Effective fund management.

- Maximum cash holding cap.

Expansion risk mitigation measures:

- Contiguous growth.

- District centric approach.

- Rural focus.

- Branch selection based on census data & credit bureau data.

- Three level survey of the location selected.

12. Impairment assessment

13. Definition of default, significant increase in credit risk and stage assessment

Stage 1: includes loans for which the credit risk at the reporting date is in line with the credit risk at the initial recognition (i.e. disbursement date).

Stage 2: includes loans for which the credit risk at reporting date is significantly higher than at the risk at the initial recognition (Significant Increase in Credit Risk).

Stage 3: includes default loans. A loan is considered default at the earlier of (i) the Company considers that the obligor is unlikely to pay its credit obligations to the company in full, without recourse by the company to actions such as realizing collateral (if held); or (ii) the obligor is past due more than 90 days on any material credit obligation to the company.

Unlike banks which have more of monthly repayments, the Company offers products with weekly repayment frequency, whereby 15 and above Days past due (''DPD'') means already 2 missed installments from the borrower, and accordingly, the Company has identified the following stage classification to be the most appropriate for its Loans:

Stage 1: 0 to 15 DPD.

Stage 2: 16 to 60 DPD (SICR).

Stage 3: above 60 DPD (Default).

14.2.b Probability of Default (''PD'')

PD describes the probability of a loan to eventually falling into Stage 3. PD %age is calculated for each loan account separately and is determined by using available historical observations.

PD for stage 1: is derived as %age of all loans in stage 1 moving into stage 3 in 12-months'' time.

PD for stage 2: is derived as %age of all loans in stage 2 moving into stage 3 in the maximum lifetime of the loans under observation.

PD for stage 3: is derived as 100% considering that the default occurs as soon as the loan becomes overdue for 60 days which matches the definition of stage 3.

15.2.c Exposure at default (EAD)

Exposure at default (EAD) is the sum of outstanding principal and the interest amount accrued but not received on each loan as at reporting date.

16.2.d Loss given default (LGD)

LGD is the opposite of recovery rate. LGD = 1 - (Recovery rate). LGD is calculated based on past observations of Stage 3 loans.

LGD is computed as below:

1. All Loans which are above 60 DPD as on 31 March 2013, are taken and the difference in the principal outstanding as on 31st March 2013 and 31st March 2019 is considered as recovery.

2. Likewise the same is done for all the loans (excluding the loans which are already considered in previous years) which are above 60 DPD as on 31 March 2014, 31 March 2015, 31 March 2016, 31 March 2017 and recovery rate is computed for each year.

3. LGD = 1- Recovery rate which is computed for each period of observation.

There are Liquidity Risk mitigation measures put in place which helps in maintaining the following:

Diversified funding resources:

The Company''s treasury department secures funds from multiple sources, including banks, financial institutions and capital markets and is responsible for diversifying our capital sources, managing interest rate risks and maintaining strong relationships with banks, financial institutions, mutual funds, insurance companies, other domestic and foreign financial institutions and rating agencies. The Company continuously seek to diversify its sources of funding to facilitate flexibility in meeting our funding requirements. Due to the composition of our loan portfolio, which also qualifies for priority sector lending, it also engages in securitization and assignment transactions.

Asset Liability Management (ALM) can be termed as a risk management technique designed to earn an adequate return while maintaining a comfortable surplus of assets over liabilities. ALM, among other functions, is also concerned with risk management and provides a comprehensive as well as dynamic framework for measuring, monitoring and managing liquidity and interest rate risks. ALM is an integral part of the financial management process of CAGL. It is concerned with strategic balance sheet management, involving risks caused by changes in the interest rates and the liquidity position of CAGL. It involves assessment of various types of risks and altering the asset-liability portfolio in a dynamic way in order to manage risks.

The scope of ALM function can be described as follows:

i. Funding and Capital Management,

ii. Liquidity risk management ,

iii. Interest Rate risk management ,

iv. Forecasting and analyzing ''What if scenario'' and preparation of contingency plans.

Capital guidelines ensure the maintenance and independent management of prudent capital levels for CAGL to preserve the safety and soundness of the company, to support desired balance sheet growth and the realization of new business; and to provide a cushion against unexpected losses. Refer Note 35(a) with respect to regulatory capital of the Company as at the reporting dates.

39.2.e Grouping financial assets measured on a collective basis

The Company believes that the Joint Liability Group (JLG) loans have shared risk characteristics (i.e. homogeneous) and Individual loans (IL) have not shared risk characteristics. Therefore, JLG and IL are treated as two separate groups for the purpose of determining impairment allowance.

39.2.f Analysis of inputs to the ECL model under multiple economic scenarios

Adjusting the ECL to reflect the expected changes (if any) in the economic environment for forward looking information in the form of management overlay.

Based on the historical loss experience, adjustments need to be made on the average PD computed to give effect of the current conditions which is done through management overlay by assigning probability weight ages to different scenarios.

The methodology and assumptions used for estimating future cash flows should be reviewed regularly so that there is minimum difference between expected loss and the actual loss expenses.

17 Interest Rate Risk (IRR)

RBI has allowed NBFCs to price most of their assets and liabilities. Interest rate risk is the risk where changes in market interest rates might adversely affect CAGL''s financial condition and the changes in interest rates affect CAGL in a larger way. The immediate impact of changes in interest rates is on earnings (i.e. reported profits) by changing its Net Interest Margin (NIM). The risk from the earnings perspective can be measured as changes in Net Interest Margin (NIM). In line with RBI guidelines, the traditional GAP analysis is considered as a suitable method to measure the Interest Rate Risk for CAGL.

CAGL shall also adhere to these prudential limits and the tolerance/prudential limits for structural liquidity under different time bucket.

Interest rate sensitivity

The following table demonstrates the sensitivity to a reasonably possible charge in interest rates (all other variables being constant) of the Company''s profit and loss statement.

18Liquidity risk and funding management

Liquidity risk arises due to the unavailability of adequate amount of funds at an appropriate cost and tenure. The Company may face an asset-liability mismatch caused by a difference in the maturity profile of our assets and liabilities. This risk may arise from the unexpected increase in the cost of funding an asset portfolio at the appropriate maturity and the risk of being unable to liquidate a position in a timely manner and at a reasonable price. We monitor liquidity risk through our Asset Liability Management Committee. Monitoring liquidity risk involves categorizing all assets and liabilities into different maturity profiles and evaluating them for any mismatches in any particular maturities, particularly in the short-term. We actively monitor our liquidity position to ensure that we can meet all borrower and lender-related funding requirements.

19Disclosure as per Ind AS 101 First-time adoption of Indian Accounting Standards:

20. Overall principle:

The Company has prepared the opening balance sheet as per Ind AS as of 1st April, 2017 (the transition date) by recognizing all assets and liabilities whose recognition is required by Ind AS, not recognizing items of assets or liabilities which are not permitted by Ind AS, by reclassifying items from previous GAAP to Ind AS as required under Ind AS, and applying Ind AS in measurement of recognized assets and liabilities.

However, this principle is subject to certain mandatory exceptions and certain optional exemptions availed by the Company as detailed below:

Mandatory exceptions and optional exemption

Classification of debt instruments:

The Company has determined the classification of debt instruments in terms of whether they meet the amortized cost criteria or the FVTOCI criteria based on the facts and circumstances that existed as of the transition date.

Determining whether an arrangement contains a lease:

The Company has applied Appendix C of Ind AS 17 Determining whether an Arrangement contains a Lease to determine whether an arrangement existing at the transition date contains a lease on the basis of facts and circumstances existing at that date.

Classification and measurement of financial assets:

The Company has classified the financial assets in accordance with Ind AS 109 on the basis of facts and circumstances that exist at the date of transition to Ind AS.

Impairment of financial assets:

The Company has applied the impairment requirements of Ind AS 109 retrospectively; however, as permitted by Ind AS 101, it has used reasonable and supportable information that is available without undue cost or effort to determine the credit risk at the date that financial instruments were initially recognized in order to compare it with the credit risk at the transition date.

Further, the Company has not undertaken an exhaustive search for information when determining, at the date of transition to Ind AS, whether there have been significant increases in credit risk since initial recognition, as permitted by Ind AS 101.

Share based payments:

Ind AS 102 share based payment has not been applied to equity instruments in share-based payment transactions that vested before April 1, 2017.

Estimates:

The estimates at April 1, 2017 and at March 31, 2018 are consistent with those made for the same dates in accordance with Previous GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items where application of Previous GAAP did not require estimation:

- FVPTL / FVOCI - equity and debt instrument.

- Impairment of financial assets based on expected credit loss model.

The estimates used by the Company to present these amounts in accordance with Ind AS reflect conditions at April 1, 2017, the date of transition to Ind AS and as of March 31, 2018.

Notes:

1. EIR on loans and borrowings:

"Under Previous GAAP, loan processing fees received in connection with loans portfolios recognized upfront and credited to profit or loss for the period. Under Ind AS, loan processing fee is credited to profit and loss using the effective interest rate method. The unamortized portion of loan processing fee is adjusted from the loan portfolio.

For Borrowings under Previous GAAP, transaction costs incurred in connection with borrowings are amortized upfront and charged to profit or loss for the period. Under IndAS, transaction costs are included in the initial recognition amount of financial liability and charged to profit or loss using the effective interest method.

2 Expected credit losses on loans:

Under the Ind AS, allowance is provided on the loans given to customers on the basis of percentage obtained by evaluating the loss of the previous years. Under Previous GAAP, the Company has created provision for loans and advances based on the provisioning norms prescribed in NBFC Master Directions. Under Ind AS, impairment allowance has veen determined based on Expected Loss model (ECL). Due to ECL model, the Company impaired its loans and advances. In addition, ECL on off balance sheet has also been determined as per Ind AS. The differential impact has been adjusted in Retained earnings/ Profit and loss during the year. Under Previous GAAP, contingent provision against standard assets and provision for non-performing assets were presented under provisions. However, under Ind AS financial assets measured at amortized cost and FVOCI are presented net of provision for expected credit losses.

3 Defined benefit obligations:

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, are charged to profit or loss. Under Ind AS, remeasurements [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.

4 Share based payments:

Under Previous GAAP, the Company recognized only the intrinsic value for the share based payments plans as an expense. Ind AS requires the fair value of the share options to be determined using an appropriate pricing model recognized over the vesting period.

5 Other comprehensive income

Under Previous GAAP, the Company has not presented other comprehensive income (OCI) separately. Hence, it has reconciled Previous GAAP profit or loss to profit or profit or loss as per Ind AS. Further, Previous GAAP profit or loss is reconciled to total comprehensive income as per Ind AS.

6 Deferred tax

Previous GAAP requires deferred tax accounting using the income statement 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.

7. Earnings per share (EPS)

The following reflects the profit / loss after tax and equity share data used in the basic and diluted EPS calculations:

# Since the impact of conversion potential equity shares is anti-dilutive in nature, the same has not been taken in the calculation of diluted EPS.

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