Accounting Policies of Equitas Small Finance Bank Ltd. Company

Mar 31, 2025

3. Significant accounting policies

3.1. Investments
Classification:

In accordance with the RBI guidelines on
investment classification and valuation, investments
are classified on the date of purchase into three
categories (hereinafter called "categories") as
below:

i) Held to Maturity ("HTM")

ii) Available for Sale ("AFS")

iii) Fair Value through Profit and Loss ("FVTPL"),

Held for Trading ("HFT") is a separate investment
sub-category within FVTPL.

Under each of these categories, investments are
further classified under six groups (hereinafter
called "groups") - Government Securities, Other
Approved Securities, Shares, Debentures and Bonds,
Investments in Subsidiaries/Joint Ventures and
Other Investments. Purchase and sale transactions
in securities are recorded under ''Settlement Date''
accounting, except in the case of equity shares
where ''Trade Date'' accounting is followed.

Basis of classification:

Held to Maturity (HTM):

Securities that fulfil the following conditions are
classified under HTM:

1) The security is acquired with the intention and
objective of holding it to maturity, i.e., the
financial assets are held with an objective to
collect the contractual cash flows; and

2) The contractual terms of the security give
rise to cash flows that are solely payments
of principal and interest on the principal
outstanding (''SPPI criterion'') on specified
dates.

3) Notwithstanding the intent with which the
following securities are acquired, the following
do not meet the SPPI criterion and therefore
are not eligible for classification either as HTM
or AFS:

- Instruments with compulsorily, optionally
or contingently convertible features.

- Instruments with contractual loss

absorbency features such as those
qualifying for Additional Tier 1 and Tier
2 under Basel III Capital Regulations.

- I nstruments whose coupons are not in
the nature of interest as defined in RBI
Guidelines.

- Preference shares and Equity shares.

4) Investments in Securitization notes, other
than the equity tranche, are considered to
meet the SPPI criteria if the tranche in which
the investment is made meets all the following
conditions:

- The contractual terms of the tranche
being assessed for classification (without
looking through to the underlying pool
of financial instruments) give rise to
cash flows that are solely payments of
principal and interest on the principal
amount outstanding.

- The underlying pool of financial
instruments meets the SPPI criteria.

- The credit risk of the tranche is equal
to or lower than the credit risk of the
combined underlying pool of assets.

Available for Sale (AFS):

1) Securities that meet the following
conditions are classified under AFS:

- The security is acquired with an
objective that is achieved by both
collecting contractual cash flows
and selling securities; and

- The contractual terms of the
security meet the SPPI criterion.

Provided that on initial recognition, a
Bank may make an irrevocable election
to classify an equity instrument that is
not held with the objective of trading
under AFS.

2) AFS securities include debt securities held
for asset liability management (ALM)
purposes that meet the SPPI criterion
where the Bank''s intent is flexible with
respect to holding till maturity or selling
before maturity.

Fair Value through Profit or Loss (FVTPL).

Held for Trading (HFT) is a sub-category in
FVTPL.

Securities that do not qualify for inclusion in
HTM or AFS are classified under FVTPL.

Initial recognition

All investments are measured at fair value
on initial recognition. Unless facts and
circumstances suggest that the fair value is
materially different from the acquisition cost,
it is presumed that the acquisition cost is the
fair value. Situations where the presumption is
tested include where:

Â¦ The transaction is between related
parties

Â¦ The transaction is taking place under
duress where one party is forced to
accept the price in the transaction.

Â¦ The transaction is done outside the
principal market for that class of
securities.

Â¦ Other situations, where in the opinion of
the supervisor, facts and circumstances
warrant testing of the presumption.

I n respect of Government securities acquired
through auction (including devolvement),
switch operations and open market operations
(OMO) conducted by the RBI, the price at
which the security is allotted is the fair value
for initial recognition purposes.

Where the securities are quoted or the fair
value can be determined based on market
observable inputs (such as yield curve,
credit spread, etc.) any Day 1 gain/ loss are
recognised in the Profit and Loss Account,
under Schedule 14: ''Other Income'' within the
subhead ''Profit on revaluation of investments''
or ''Loss on revaluation of investments.

Any Day 1 loss arising from Level 3 investments
are recognised immediately.

Any Day 1 gains arising from Level 3
investments are deferred. In the case of debt
instruments, the Day 1 gain are amortized on
a straight-line basis up to the maturity date (or
earliest call date for perpetual instruments),
while for unquoted equity instruments, the

gain are set aside as a liability until the security
is listed or derecognised.

Broken period interest paid to the seller as part
of cost is treated as an item of expenditure
under Profit & Loss Account. The transaction
cost, including brokerage, commission etc.,
paid at the time of acquisition of investments
are charged to Profit and loss.

Subsequent Measurement
HTM;

Securities held in HTM are carried at amortised
cost and are not marked to market (MTM)
after initial recognition.

Any discount or premium on the securities
under HTM are amortised over the remaining
life of the instrument on a straight-line
basis. Such amortisation is adjusted against
interest income under the head "Income from
investments" as per the RBI guidelines.

AFS:

The securities held in AFS are fair valued at
least on a quarterly basis. The valuation gains
and losses across all performing investments,
held under AFS are aggregated. The net
appreciation or depreciation, net of applicable
taxes is directly credited or debited to a reserve
named AFS-Reserve without routing through
the Profit & Loss Account.

The AFS-Reserve is reckoned as Common
Equity Tier (CET) 1 subject to below clause.

Bank does not pay dividends out of net
unrealised gains recognised in the Profit and
Loss Account arising on fair valuation of
Level 3 investments on their Balance Sheet.
Further, such net unrealised gains on Level 3
investments recognised in the Profit and Loss
Account or in the AFS-Reserve is deducted
from CET 1 capital.

The unrealised gains transferred to AFS-
Reserve is not available for any distribution
such as dividend and coupon on Additional
Tier 1.

Any discount or premium on the acquisition
of debt securities under AFS is amortised
over the remaining life of the instrument.
Such amortisation is adjusted against interest

income under the head "Income from
investments" as per the RBI guidelines.

FVTPL:

The securities held in FVTPL are fair valued and
the net gain or loss arising on such valuation
is directly credited or debited to the Profit and
Loss Account. Securities that are classified
under the HFT sub-category within FVTPL are
fair valued on a daily basis, whereas other
securities in FVTPL are fair valued atleast on a
quarterly basis.

Any discount or premium on the acquisition
of debt securities under FVTPL is amortised
over the remaining life of the instrument.
Such amortisation is adjusted against interest
income under the head "Income from
investments" as per the RBI guidelines.

Valuation

Fair value of investments are categorised into
3 levels based on the inputs used for valuation
of the investments.

Level 1 means, inputs used for valuation of a
financial instrument are those inputs which are
quoted prices (unadjusted) in active markets
for identical instruments that the Bank can
access at the measurement date

Level 2 means inputs used for valuation of a
financial instrument are those inputs, other
than quoted prices included within Level 1,
that are observable for the asset or liability,
either directly or indirectly.

Level 3 means inputs used for valuation of a
financial instrument are unobservable inputs.

Quoted Investments are valued based on
the trades/quotes on the recognised stock
exchanges, price list of RBI or prices periodically
declared by Financial Benchmark India Pvt.
Ltd. [FBIL], based on relevant RBI circular.

The market value of unquoted Government
securities which are in the nature of Statutory
Liquidity Ratio (''SLR'') securities included in the
AFS and HFT categories are valued as per rates
published by FBIL.

For securities whose prices are not published
by FBIL, the fair value of the securities are
based upon quoted price as available from

the trades/ quotes on recognised stock
exchanges, reporting platforms or trading
platforms authorized by RBI/SEBI or prices
declared by the Fixed Income Money Market
and Derivatives Association of India (FIMMDA)

The valuation of other unquoted fixed income
securities (viz., State Government securities,
other approved securities, bonds and
debentures) and preference shares, wherever
linked to the YTM rates, is done with a markÂ¬
up (reflecting associated credit and liquidity
risk) over the YTM rates for Government
securities published by FBIL.

I n case of unquoted bonds, debentures and
preference shares where interest/dividend is
received regularly (i.e., not overdue beyond
90 days), the market price is derived based on
the Yield to Maturity (YTM) for Government
Securities as published by FBIL and suitably
marked up for credit risk applicable to the
credit rating of the instrument. The matrix for
credit risk mark-up for each categories and
credit ratings along with residual maturity
issued by FBIL is adopted for this purpose.

Unquoted equity shares are valued at the
break-up value if the latest balance sheet is
available, or at '' 1, as per the RBI guidelines.

Units of mutual funds are valued at the latest
repurchase price/net asset value declared by
the mutual fund.

Treasury, Bills, Commercial Papers (CPs) and
Certificate of Deposits (CDs) being discounted
instruments, are valued at carrying cost.

I n respect of stressed assets sold by the Bank
under an asset securitisation, where the
investment by the Bank in security receipts
(SRs) backed by the assets sold by it is more
than 10 percent of such SRs then the valuation
shall be lower of the following:

i. Value arrived by reckoning the Net Asset
Value (NAV) declared by the ARC based
on the recovery ratings received for such
instruments.

ii. Face value of the SRs reduced by the
notional provisioning rate applicable if
the loans had continued on the books of
the transferor.

I nvestments in SRs issued by ARCs are valued
periodically by reckoning the Net Asset Value
(NAV) declared by the ARC based on the
recovery ratings received for such instruments.
However, in respect of the stressed loans
transferred to ARC, the investments are
carried on an ongoing basis, until its transfer
or realization, at lower of the redemption
value of SRs arrived based on the NAV as
above, and the NBV of the transferred stressed
loan at the time of transfer.

Investment in Pass Through Certificates which
is done to meet the Minimum Retention Ratio
(MRR) are valued at cost.

Non-performing investments are identified
and depreciation/provision is made thereon
based on the RBI guidelines. Interest on nonÂ¬
performing investments is not recognised in
the Profit and Loss Account until received.

The amount outstanding in Repurchase (Repo)
including Marginal Standing Facility (MSF)
are accounted as borrowings and amount
outstanding in Reverse Repurchase (Reverse
Repo) are accounted as Lending. The accrued
income and expenditure till the balance sheet
date is recognised in Profit and Loss account

Transfer between categories:

Post approval of the Board of Directors and
Department of Supervision (DoS)- RBI, the
Bank may shift investments to/from HTM/AFS/
FVTPL as a special case. The reclassification
is applied prospectively from reclassification
date.

Disposal of investments:

Profit/Loss on sale of investments under AFS
and FVTPL categories are recognised in the
Profit and Loss Account.

Upon sale or maturity of a debt instrument in
AFS category, the accumulated gain/ loss for
that security in the AFS-Reserve is transferred
from the AFS-Reserve and recognized in the
Profit and Loss Account under item ''Profit on
sale of investments''.

I n the case of equity instruments designated
under AFS at the time of initial recognition,
any gain or loss on sale of such investments
is not be transferred from AFS-Reserve to the
Profit and Loss Account. Instead, such gain or
loss is being transferred from AFS-Reserve to
the Capital Reserve.

Any sales from HTM are done as per Board
approved policy. In any financial year, the
carrying value of investments sold out of HTM
will not exceed five per cent of the opening
carrying value of the HTM portfolio. Any sale
beyond this threshold will be made with the
prior approval from DoS, RBI.

Sale of securities in the situations given below

are excluded from the regulatory limit of five

per cent:

i. Sale to the RBI under liquidity
management operations of RBI such
as the Open Market Operations (OMO)
and Government Securities Acquisition
Programme (GSAP).

ii. Repurchase of Government Securities by
Government of India from Banks under
buyback or switch operations.

iii. Repurchase of State Development Loans
by respective state governments under
buyback or switch operations.

iv. Repurchase, buyback or exercise of call
option of non-SLR securities by the issuer.

v. Sale of non-SLR securities following a
downgrade in credit ratings or default by
the counterparty.

vi. Sale of securities as part of a resolution
plan under the Prudential Framework
for Resolution of Stressed Assets for a
borrower facing financial distress.

vii. Additional sale of securities explicitly
permitted by the Reserve Bank of India.

Any profit or loss on the sale of investments
in HTM is recognised in the Profit and Loss
Account under ''Other Income''. The profit on
sale of an investments in HTM is appropriated
below the line from the Profit and Loss
Account to the ''Capital Reserve Account''.
The amount so appropriated is net of taxes
and the amount required to be transferred to
Statutory Reserve.

In accordance with extant RBI circular, an
amount not less than the net profit on sale
of investments during the year or net profit
for the year less mandatory appropriations
is created as Investment Fluctuation Reserve
(IFR) until the Bank achieve a reserve balance
of 2% of the FVTPL - HFT and AFS portfolio.

3.2. Advances
Classification:

Advances are classified as Performing Assets
(Standard) and Non-performing Assets (NPAs)
in accordance with the RBI guidelines on Income
Recognition and Asset Classification (IRAC). Further,
NPAs are classified into sub-standard, doubtful and
loss assets based on the criteria stipulated by RBI.

The Advances are stated net of specific provisions
made towards NPAs, unrealised interest on NPAs,
bills rediscounted, amounts received in advance
from customers, if any etc. Interest on NPAs is
transferred to an interest suspense account and
not recognised in the Profit and Loss Account until
received.

The Bank transfers advances through interÂ¬
bank participation with and without risk, which
are accounted for in accordance with the RBI
guidelines, as follows. In the case of participation
with risk, the aggregate amount of participation
transferred out of the Bank is reduced from
advances; and participations transferred in to the
Bank are classified under advances. In the case of
participation without risk, the aggregate amount of
participation issued by the Bank is classified under
borrowings; and where the Bank is participating in,
the aggregate amount of participation is shown as
due from Banks under advances.

Provisioning:

I n accordance with RBI guidelines, the Bank has
provided general provision on standard assets

at levels stipulated by RBI from time to time.
In addition, the Bank has a policy for making
provisions for standard assets at rates higher than
the regulatory minimum, based on evaluation of
risk and stress in various sectors.

Provision for Unhedged Foreign Currency Exposure
(UFCE) of borrower entities is made in accordance
with the guidelines issued by RBI, which requires
the Bank to ascertain the amount of UFCE, estimate
the extent of likely loss and estimate the riskiness of
unhedged position of those entities. The Provision
is classified under Schedule 5 - Other Liabilities in
the Balance Sheet.

Provision for non-performing advances comprising
Sub-standard, Doubtful and Loss Assets is made at
a minimum in accordance with the RBI guidelines.
In addition, specific loan loss provisions in respect
of non-performing assets are made based on
management''s assessment and estimates of the
degree of impairment of advances, based on past
experience, evaluation of security and other related
factors; the nature of product and delinquency
levels. Loan loss provisions in respect of nonÂ¬
performing advances are charged to the Profit
and Loss Account and included under Provisions
and Contingencies. Advances are disclosed, net of
provisions in the Balance Sheet.

Provisions made in excess of the Bank''s policy for
specific loan loss provisions for non-performing assets
and regulatory general provisions are categorised as
Floating Provision. Creation of Floating Provision is
considered by the Bank up to a level approved by
the Board of Directors. In accordance with the RBI
guidelines, Floating Provisions are utilised up to a
level approved by the Board with prior permission
of RBI, only for contingencies under extraordinary
circumstances for making specific provisions for
impaired accounts.

implementation of the restructuring package. In
respect of loans and advances accounts subjected
to restructuring, the accounts are classified as NPA
and the account is upgraded to standard only
after the specified period i.e. a period of one year
after the date when first payment of interest or of
principal, whichever is later, falls due, subject to
satisfactory performance of the account during the
period, in accordance with the extant RBI guidelines
in this regard.

Non-performing advances are written-off in
accordance with the Bank''s policies. Recoveries
from bad debts written-off are recognised in the
Profit and Loss Account and included under ''Other
Income''.

Recording and Presentation

Provisions created against individual accounts as
per RBI guidelines are not netted in the individual
account. For presentation in the financial
statements, provision created is netted against
gross amount of advance. Provision held against
an individual account is adjusted against account
balance at individual level only at the time of write-
off/settlement of the account.

Provision made against standard assets in
accordance with RBI guidelines as above is disclosed
separately under Other Liabilities and not netted off
against Advances.

Financial Assets sold to Reconstruction
Company

I n accordance with RBI guidelines on sale of nonÂ¬
performing advances, if the sale is at a price below
the net book value (i.e., book value less provisions
held), the shortfall is charged to the Profit and Loss
Account and if the sale is for a value higher than the
net book value, the excess provision is credited to
the Profit and Loss Account in the year the amounts
are received. Further, such reversal shall be limited
to the extent to which cash received exceeds the
net book value of the loan at the time of transfer as
per RBI guidelines.

3.3. Securitisation transactions and direct
assignments and transfer of assets

The Bank transfers its loan receivables both through
Direct Assignment route as well as transfers to
Special Purpose Vehicles (SPV).

Any profit, loss or premium realised at the time
of the sale are accounted for in the accounting
period during which the sale is completed in line
with RBI Master Direction - Reserve Bank of India
(Securitisation of Standard Assets) Directions, 2021
dated September 24, 2021.

The unrealised gains, associated with expected
future margin income is recognised in profit and
loss account on receipt of cash, after absorbing
losses, if any.

As per the RBI guidelines issued on September 24,
2021, any loss or realised gain from sale of loan
assets through direct assignment is accounted
through profit and loss account on completion of
transaction.

3.4. Fixed Assets (Property, Plant and Equipment
(PPE) and depreciation)

Property, Plant and Equipment are stated at cost,
net of accumulated depreciation and accumulated
impairment losses, if any. The cost comprises
purchase price, borrowing costs if capitalization
criteria are met, directly attributable cost of bringing
the asset to its working condition for the intended
use and initial estimate of decommissioning,
restoring and similar liabilities, if any.

Any trade discounts and rebates are deducted in
arriving at the purchase price. Such cost includes
the cost of replacing part of the plant and
equipment. When significant parts of the plant and
equipment are required to be replaced at intervals,
the Bank depreciates them separately based on its
specific useful lives. Assets under development as
at balance sheet date are shown as Capital Work in
Progress. Advance paid towards such development
are shown as capital advance.

as per the table below, based on technical advice,
taking into account the nature of the asset, the
estimated usage of the asset, the operating
conditions of the asset, past history of replacement,
anticipated technological changes, manufacturers
warranties and maintenance support etc.

â¢ Leasehold improvements are depreciated over
the primary lease period or over the remaining
useful life of the asset, whichever is lower.

â¢ ''Point of Sale'' terminals are fully depreciated
in the year of purchase.

The useful life of an asset class is periodically
assessed taking into account various criteria such
as changes in technology, changes in business
environment, utility and efficacy of an asset class
to meet with intended user needs etc. Whenever
there is a revision in the estimated useful life of
an asset, the unamortised depreciable amount is
charged over the revised remaining useful life of
the said asset. The residual values, useful lives and
methods of depreciation of property, plant and
equipment are reviewed at the Balance Sheet date
and adjusted prospectively, if appropriate.

Gains or losses arising from de-recognition of
property, plant and equipment are measured as
the difference between the net disposal proceeds
and the carrying amount of the asset and are
recognized in the Profit and Loss Account when the
asset is derecognized.

PPE held for sale is valued at lower of their carrying
amount and net realizable value. Any write-down is
recognized in the Profit and Loss Account.

3.5. Intangible Assets and amortisation

I ntangible assets acquired separately are measured
on initial recognition at cost. Following initial
recognition, intangible assets are carried at cost
less accumulated amortization and accumulated
impairment losses, if any.

I ntangible assets are amortized on a straight line
basis over the estimated useful economic life.
The Bank uses a rebuttable presumption that the
useful life of an intangible asset will not exceed ten
years from the date when the asset is available for
use. Software with perpetual license and system
development expenditure, if any, is amortised over
an estimated economic useful life of 5 years or
license period, whichever is lower. Intangible assets
under development as at balance sheet date are
shown as Capital Work in Progress.

The amortization period and the amortization
method are reviewed at least at the Balance
Sheet date. If the expected useful life of the asset
significantly differs from previous estimates, the
amortization period is changed accordingly. If
there has been a significant change in the expected
pattern of economic benefits from the asset, the
amortization method is changed to reflect the
changed pattern. Such changes are accounted
for in accordance with AS 5 Net Profit or Loss
for the Period, Prior Period Items and Changes in
Accounting Policies.

Gains or losses arising from de-recognition of an
intangible asset are measured as the difference
between the net disposal proceeds and the carrying
amount of the asset and are recognized in the Profit
and Loss Account when the asset is derecognized.

3.6. Impairment of Assets

The carrying values of assets/cash generating
units at the Balance Sheet date are reviewed for
impairment, if any indication of impairment exists.
If the carrying amount of the assets exceed the
estimated recoverable amount, an impairment is
recognised for such excess amount. The impairment
loss is recognised as an expense in the Profit and
Loss Account.

The recoverable amount is the greater of the net
selling price and their value in use. Value in use
is arrived at by discounting the future cash flows
to their present value based on an appropriate
discount factor.

When there is indication that an impairment
loss recognised for an asset in earlier accounting
periods no longer exists or may have decreased,
such reversal of impairment loss is recognised
in the Profit and Loss Account, to the extent the
amount was previously charged to the Profit and
Loss Account.

3.7. Transactions involving foreign exchange
Initial recognition

Transactions in foreign currencies entered into
by the Bank are accounted at the exchange rates
prevailing on the date of the transaction or at rates
that closely approximate the rate at the date of the
transaction.

Measurement at the Balance Sheet date

Foreign currency monetary items, if any, of the
Bank, outstanding at the balance sheet date are
restated at the rates prevailing at the year-end as
notified by Foreign Exchange Dealers Association of
India (''FEDAI''). Non-monetary items of the Bank are
carried at historical cost.

Contingent liabilities on account of foreign exchange
contracts, currency future contracts, guarantees,
letters of credit, acceptances and endorsements are
reported at closing rates of exchange notified by
FEDAI as at the Balance Sheet date.

Treatment of Exchange differences

Exchange differences arising on settlement/
restatement of foreign currency monetary assets
and liabilities of the Bank are recognised as income
or expense in the Profit and Loss Account.

3.8. Revenue Recognition

Interest Income on loans, advances and
investments (including deposits with Banks and
other institutions) are recognised on accrual basis.
Income on Non-performing Assets is recognized
upon realisation as per RBI norms.

Fee and Commission income are recognised as
income when due, except in cases where the Bank
is uncertain of its ultimate collection.

Bank Guarantee commission and commission on
letter of credit, and locker rent are recognised on
a straight- line basis over the period of contract.
Interest Income on deposits/investments is
recognized on a time proportion basis taking into
account the amount outstanding and the rate
applicable. Income on discounted instruments is
recognised over the tenor of the instruments on a
straight line basis.

Dividend income, if any, is accounted for, when the
right to receive the same is established.

Amounts recovered against debts written off in
earlier years and provisions no longer considered
necessary in the context of the current status of
the borrower are recognized in the Profit and Loss
Account.

3.9. Employee Benefits

Employee benefits include provident fund, National
Pension Scheme, gratuity and compensated
absences.

Defined contribution plan:

Provident Fund (PF)

The Bank''s contribution to provident fund are
considered as defined contribution plan and are
charged as an expense as they fall due based on
the amount of contribution required to be made
when the services are rendered by the employees.

National Pension Scheme (NPS)

I n respect of employees who opt for contribution
to the NPS, the Bank contributes certain percentage
of the basic salary of employees to the aforesaid
scheme, a defined contribution plan, which is
managed and administered by pension fund
management companies. The Bank has no liability
other than its contribution, and recognises such
contributions as an expense in the year incurred.

Defined Benefits Plan

on a straight-line basis over the average period
until the benefits become vested. The retirement
benefit obligation recognised in the Balance Sheet
represents the present value of the defined benefit
obligation as adjusted for unrecognised past service
cost, as reduced by the fair value of scheme assets.
Any asset resulting from this calculation is limited to
past service cost, plus the present value of available
refunds and reductions in future contributions to
the schemes.

Long term Employee benefits

The Bank accrues the liability for compensated
absences based on the actuarial valuation as at the
Balance Sheet date conducted by an independent
actuary which includes assumptions about
demographics, early retirement, salary increases,
interest rates and leave utilisation. The net present
value of the Banks'' obligation is determined using
the Projected Unit Credit Method as at the Balance
Sheet date. Actuarial gains/losses are recognised in
the Profit and Loss Account in the year in which
they arise.

Other Employee benefits

Employee Stock Compensation Cost

The Bank follows intrinsic value method to account
for its stock based employee compensation plans
for all the options granted till the accounting period
ending March 31, 2021.

For all options granted after March 31, 2021, the
Bank follows the fair value method and recognizes
the fair value of such options computed using the
Black-Scholes model, as compensation expense
over the vesting period, as per RBI Guidelines
dated August 30, 2021. The compensation cost is

amortised on a straight-line basis over the vesting
period of the option with a corresponding credit
to Share Based Reserve. On exercise of the stock
options, corresponding balance in the Share
Based Reserve is transferred to Share Premium. In
respect of the options which expire unexercised,
the balance standing to the credit of Share Based
Reserve is transferred to the Balance in Surplus in
profit and loss account. Also refer Note 18.21

3.10. Leases

Lease arrangements where the risks and rewards
incidental to ownership of an asset substantially
vest with the lessor are recognised as operating
leases. Lease rentals under operating leases are
recognised in the Profit and Loss Account on a
straight-line basis over the lease term.

3.11. Accounting of Priority Sector Lending
Certificate (PSLC)

The Bank enters into transactions for the sale or
purchase of Priority Sector Lending Certificates
(PSLCs). In the case of a sale transaction, the Bank
sells the fulfilment of priority sector obligation and
in the case of a purchase transaction the Bank buys
the fulfilment of priority sector obligation through
the RBI trading platform. There is no transfer of
risks or loan assets. The fee received for the sale
of PSLCs is recorded as Other Income and the fee
paid for purchase of the PSLCs is recorded as other
Expenditure in Profit and Loss Account. These are
amortised over the period of the Certificate.

3.12. Taxes on Income

Current tax is the amount of tax payable on the
taxable income for the year as determined in
accordance with the applicable tax rates and the
provisions of the Income Tax Act, 1961 and other
applicable Income tax laws.

the extent that reasonable certainty exists that
sufficient future taxable income will be available
against which these can be realised. However,
if there are unabsorbed depreciation and carry
forward of losses and items relating to capital
losses, deferred tax assets are recognised only if
there is virtual certainty supported by convincing
evidence that there will be sufficient future taxable
income available to realise the assets. Deferred tax
assets and liabilities are offset if such items relate to
taxes on income levied by the same governing tax
laws and the Bank has a legally enforceable right
for such set off. Deferred tax assets are reviewed at
each balance sheet date for their realizability.

At each reporting date, the Bank re-assesses
unrecognized deferred tax assets. It recognizes
unrecognized deferred tax asset to the extent
that it has become reasonably certain or virtually
certain, as the case may be, that sufficient future
taxable income will be available against which such
deferred tax assets can be realized.

3.13. Earnings per Share

Basic earnings per share is computed by dividing
the profit after tax (including the post-tax effect
of extraordinary items, if any) by the weighted
average number of equity shares outstanding
during the year. Diluted earnings per share is
computed by dividing the profit after tax (including
the post-tax effect of extraordinary items, if any) as
adjusted for dividend, interest and other charges to
expense or income relating to the dilutive potential
equity shares, by the weighted average number of
equity shares considered for deriving basic earnings
per share and the weighted average number of
equity shares which could have been issued on the
conversion of all dilutive potential equity shares.

Potential equity shares are deemed to be dilutive
only if their conversion to equity shares would
decrease the net profit per share from continuing
ordinary operations. Potential dilutive equity shares
are deemed to be converted as at the beginning
of the period, unless they have been issued at a
later date. The dilutive potential equity shares are
adjusted for the proceeds receivable had the shares
been actually issued at fair value (i.e. average market
value of the outstanding shares). Dilutive potential
equity shares are determined independently for
each period presented. The number of equity

shares and potentially dilutive equity shares are
adjusted for share splits/reverse share splits and
bonus shares, as appropriate.

3.14. Proposed Dividend

Dividend proposed/ declared after the balance
sheet date is accounted in the books of the Bank
in the year in which the dividend is approved by
the shareholders. Proposed dividend or dividend
declared after the balance sheet date are disclosed
in the notes to accounts. However, the Bank reckons
proposed dividend in determining the capital fund
in computing the capital adequacy ratio.

3.15. Segment reporting

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

I n accordance with guidelines issued by RBI, the
Bank has adopted segment reporting as under:

Treasury includes all investment portfolios, Profit/
Loss on sale of investments, Profit/Loss on foreign
exchange transaction, equities, income from
derivatives and money market operations. The
expenses of this segment consist of interest expenses
on funds borrowed from external sources as well as
internal sources and depreciation/amortisation of
premium on HTM category investments.

Corporate/Wholesale Banking includes all
advances to trusts, partnership firms, companies
and statutory bodies, which are not included under
''Retail Banking''.

Retail Banking includes lending to and deposits,
from retail customers and identified earnings and
expenses of the segment.

Other Banking Operations includes all other
operations not covered under Treasury, Corporate/
Wholesale Banking and Retail Banking.

Unallocated includes Capital and reserves and
other un-allocable assets, liabilities, income and
expenditure.

Geographic segment

The Bank operations are predominantly confined
within one geographical segment (India) and
accordingly, this is considered as the only secondary
segment.

Mar 31, 2024

3. Significant accounting policies

3.1. Use of Estimates

The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses for the reporting period. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Actual results could differ due to these estimates. Any revision in the accounting estimates is recognised prospectively.

3.2. Investments Classification:

In accordance with the RBI guidelines on investment classification and valuation, investments

are classified on the date of purchase into three categories (hereinafter called "categories") as below:

i) Held to Maturity ("HTM") - Securities acquired with the intention to hold till maturity

ii) Held for Trading ("HFT") - Securities acquired with the intention to trade

iii) Available for Sale ("AFS") - Securities which do not fall within the above two categories

Subsequent shifting amongst the categories is done in accordance with the RBI guidelines. Under each of these categories, investments are further classified under six groups (hereinafter called "groups") -Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries / Joint Ventures and Other Investments. Purchase and sale transactions in securities are recorded under ''Settlement Date'' accounting, except in the case of equity shares where ''Trade Date'' accounting is followed.

Basis of classification:

Investments that are held principally for sale within 90 days from the date of purchase are classified under HFT category. Investments which the Bank intends to hold till maturity are classified as HTM securities. Investments in the equity of subsidiaries / joint ventures are categorised as HTM in accordance with the RBI guidelines. Investments which are not classified in the above categories are classified under AFS category.

Acquisition cost:

The cost of investment is determined on weighted average cost basis. Broken period interest on debt instruments is treated as a revenue item. The transaction cost, including brokerage, commission etc., paid at the time of acquisition of investments are charged to revenue in accordance with the requirements of valuation norms prescribed by RBI.

Transfer between categories

Transfer between categories is done at the lower of the acquisition cost/book value/market value on the date of the transfer and depreciation, if any, on such transfer is fully provided for, in accordance with the RBI guidelines.

Valuation:

Investments classified under AFS and HFT categories are ''marked to market'' as per the RBI guidelines. The securities are valued scrip wise and depreciation / appreciation is aggregated for each category. Net appreciation in each category, if any, is ignored, while net depreciation is provided for. The book value of the individual securities is not changed consequent to periodic valuation of investments.

Investments classified under HTM category are carried at their acquisition cost or at amortised cost, if acquired at a premium over face value. Any premium on acquisition is amortised over the remaining maturity period of the security on a straight-line basis. Such amortisation of premium is adjusted against interest income under the head "Income from investments" as per the RBI guidelines. Any diminution, other than temporary, in the value of investments in subsidiaries / joint ventures, if any, is provided for.

Quoted Investments are valued based on the trades / quotes on the recognised stock exchanges, price list of RBI or prices periodically declared by Financial Benchmark India Pvt. Ltd. [FBIL], based on relevant RBI circular.

The market value of unquoted government securities which are in the nature of Statutory Liquidity Ratio (''SLR'') securities included in the AFS and HFT categories is valued as per rates published by FBIL.

The valuation of other unquoted fixed income securities (viz., state government securities, other approved securities, bonds and debentures) and preference shares, wherever linked to the YTM rates, is done with a mark-up (reflecting associated credit and liquidity risk) over the YTM rates for government securities published by FBIL.

In case of unquoted bonds, debentures and preference shares where interest/dividend is received regularly (i.e., not overdue beyond 90 days), the market price is derived based on the Yield to Maturity (YTM) for Government Securities as published by FBIL and suitably marked up for credit risk applicable to the credit rating of the instrument. The matrix for credit risk mark-up for each categories and credit ratings along with residual maturity issued by FBIL is adopted for this purpose.

Unquoted equity shares are valued at the break-up value if the latest balance sheet is available, or at '' 1, as per the RBI guidelines.

Units of mutual funds are valued at the latest repurchase price / net asset value declared by the mutual fund.

Treasury bills, commercial papers and certificate of deposits being discounted instruments, are valued at carrying cost.

In respect of stressed assets sold by the Bank under an asset securitisation, where the investment by the bank in security receipts (SRs) backed by the assets sold by it is more than 10 % of such SRs, in accordance with RBI guidelines, provisions held are higher of the provisions required in terms of net asset value declared by the Securitisation Company (''SC'') / Reconstruction Company (''RC'') and provisions as per the extant norms applicable to the underlying loans, notionally treating the book value of these SRs as the corresponding stressed loans assuming the loans remained in the books of the Bank.

Investments in SRs issued by ARCs are valued periodically by reckoning the Net Asset Value (NAV) declared by the ARC based on the recovery ratings received for such instruments. However, in respect of the stressed loans transferred to ARC, the investments are carried on an ongoing basis, until its transfer or realisation, at lower of the redemption value of SRs arrived based on the NAV as above, and the NBV of the transferred stressed loan at the time of transfer.

Net depreciation in the value, if any, compared to the acquisition cost, in any of the aforesaid six groups, is charged to the Profit and Loss Account. The net appreciation, if any, in the six groups is not recognised except to the extent of depreciation already provided. The book value of individual securities is not changed after the valuation of investments.

Non-performing investments are identified and depreciation / provision is made thereon based on the RBI guidelines. Interest on non-performing investments is not recognised in the Profit and Loss Account until received.

In accordance with RBI Circular, Repurchase (Repo) and Reverse Repurchase (Reverse Repo) transactions (including transactions under Liquid Adjustment

Facility [LAF] and Marginal Standing Facility [MSF]) with RBI are accounted for as borrowings and lending, as the case may be. Accordingly, amounts outstanding in Repo and Reverse Repo account as at the Balance Sheet date is shown as part of Borrowings and Money at Call and at Short Notice respectively and the accrued expenditure and income till the Balance Sheet date is recognised in the Profit and Loss account.

Disposal of investments:

Profit / Loss on sale of investments under AFS and HFT categories are recognised in the Profit and Loss Account.

Profit in respect of investments sold from HTM category is included in the Profit on Sale of Investments and an equivalent amount (net of taxes, if any, and net of transfer to Statutory Reserves as applicable to such profits) is appropriated from the Profit and Loss Appropriation account to Capital Reserve account as per RBI guidelines.

In the event, provisions created on account of depreciation in the AFS or HFT categories are found to be in excess of the required amount in any year, the excess is credited to the Profit and Loss account and an equivalent amount (net of taxes, if any, and net of transfer to Statutory Reserves as applicable to such excess provisions) is appropriated to an Investment Reserve Account (IRA).

With a view to building up of adequate reserves to protect against increase in yields in future, in accordance with extant RBI circular, an amount not less than the net profit on sale of investments during the year or net profit for the year less mandatory appropriations is created as Investment Fluctuation Reserve (IFR) until the bank achieve a reserve balance of 2% of the HFT and AFS portfolio.

3.3. Advances Classification:

Advances are classified as Performing Assets (Standard) and Non-performing Assets (NPAs) in accordance with the RBI guidelines on Income Recognition and Asset Classification (IRAC). Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI.

The Advances are stated net of specific provisions made towards NPAs, unrealised interest on NPAs, bills rediscounted, amounts received in advance

from customers, if any etc. Interest on NPAs is transferred to an interest suspense account and not recognised in the Profit and Loss Account until received.

The bank transfers advances through interbank participation with and without risk, which are accounted for in accordance with the RBI guidelines, as follows. In the case of participation with risk, the aggregate amount of participation transferred out of the Bank is reduced from advances; and participations transferred in to the Bank are classified under advances. In the case of participation without risk, the aggregate amount of participation issued by the Bank is classified under borrowings; and where the bank is participating in, the aggregate amount of participation is shown as due from banks under advances.

Provisioning:

In accordance with RBI guidelines, the Bank has provided general provision on standard assets at levels stipulated by RBI from time to time. In addition, the Bank has a policy for making provisions for standard assets at rates higher than the regulatory minimum, based on evaluation of risk and stress in various sectors.

Provision for Unhedged Foreign Currency Exposure (UFCE) of borrower entities is made in accordance with the guidelines issued by RBI, which requires the Bank to ascertain the amount of UFCE, estimate the extent of likely loss and estimate the riskiness of unhedged position of those entities. The Provision is classified under Schedule 5 - Other Liabilities in the Balance Sheet.

Provision for non-performing advances comprising Sub-standard, Doubtful and Loss Assets is made at a minimum in accordance with the RBI guidelines. In addition, specific loan loss provisions in respect of non-performing assets are made based on management''s assessment and estimates of the degree of impairment of advances, based on past experience, evaluation of security and other related factors; the nature of product and delinquency levels. Loan loss provisions in respect of nonperforming advances are charged to the Profit and Loss Account and included under Provisions and Contingencies. Advances are disclosed, net of provisions in the Balance Sheet.

Provisions made in excess of the Bank''s policy for specific loan loss provisions for non-performing assets and regulatory general provisions are categorised as Floating Provision. Creation of Floating Provision is considered by the Bank up to a level approved by the Board of Directors. In accordance with the RBI guidelines, Floating Provisions are utilised up to a level approved by the Board with prior permission of RBI, only for contingencies under extraordinary circumstances for making specific provisions for impaired accounts.

The Bank considers restructured account, if any, as one where the Bank, for economic or legal reasons relating to the borrower''s financial difficulty, grants to the borrower concessions that the Bank would not otherwise consider. Restructuring would normally involve modification of terms of the advance / securities, which would generally include, amongst others, alteration of repayment period / repayable amount / the amount of instalments / rate of interest (due to reasons other than competitive reasons). Restructured accounts are classified as such by the Bank only upon approval and implementation of the restructuring package. In respect of loans and advances accounts subjected to restructuring, the account is upgraded to standard only after the specified period i.e. a period of one year after the date when first payment of interest or of principal, whichever is later, falls due, subject to satisfactory performance of the account during the period, in accordance with the extant RBI guidelines in this regard.

Non-performing advances are written-off in accordance with the Bank''s policies. Recoveries from bad debts written-off are recognised in the Profit and Loss Account and included under ''Other Income''.

Recording and Presentation

Provisions created against individual accounts as per RBI guidelines are not netted in the individual account. For presentation in the financial statements, provision created is netted against gross amount of advance. Provision held against an individual account is adjusted against account balance at individual level only at the time of writeoff / settlement of the account.

Provision made against standard assets in accordance with RBI guidelines as above is disclosed separately under Other Liabilities and not netted off against Advances.

Financial Assets sold to Reconstruction Company

In accordance with RBI guidelines on sale of nonperforming advances, if the sale is at a price below the net book value (i.e., book value less provisions held), the shortfall is charged to the Profit and Loss Account and if the sale is for a value higher than the net book value, the excess provision is credited to the Profit and Loss Account in the year the amounts are received. Further, such reversal shall be limited to the extent to which cash received exceeds the net book value of the loan at the time of transfer as per RBI guidelines.

3.4. Securitisation transactions and direct assignments and transfer of assets

The Bank transfers its loan receivables both through Direct Assignment route as well as transfers to Special Purpose Vehicles (SPV).

The securitisation transactions are without recourse to the Bank. The transferred loans and such securitised receivables are de-recognised as and when these are sold (true sale criteria being fully met) and the consideration has been received by the Bank.

Any profit , loss or premium realised at the time of the sale are accounted for in the accounting period during which the sale is completed in line with RBI Master Direction - Reserve Bank of India (Securitisation of Standard Assets) Directions, 2021 dated September 24, 2021.

The unrealised gains, associated with expected future margin income is recognised in profit and loss account on receipt of cash, after absorbing losses, if any.

As per the RBI guidelines issued on September 24, 2021, any loss or realised gain from sale of loan assets through direct assignment is accounted through profit and loss account on completion of transaction.

3.5. Fixed Assets (Property, Plant and Equipment (PPE) and depreciation)

Property, Plant and Equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalisation criteria are met, directly attributable cost of bringing the asset to its working condition for the intended

use and initial estimate of decommissioning, restoring and similar liabilities, if any.

Any trade discounts and rebates are deducted in arriving at the purchase price. Such cost includes the cost of replacing part of the plant and equipment. When significant parts of the plant and equipment are required to be replaced at intervals, the Bank depreciates them separately based on its specific useful lives. Assets under development as at balance sheet date are shown as Capital Work in Progress. Advance paid towards such development are shown as capital advance.

Depreciation on PPE has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as per the table below, based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support etc.

â¢ Leasehold improvements are depreciated over the primary lease period or over the remaining useful life of the asset, whichever is lower

â¢ ''Point of Sale'' terminals are fully depreciated in the year of purchase

the said asset. The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at the Balance Sheet date and adjusted prospectively, if appropriate.

Gains or losses arising from de-recognition of property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Profit and Loss Account when the asset is derecognised.

PPE held for sale is valued at lower of their carrying amount and net realisable value. Any write-down is recognised in the Profit and Loss Account.

3.6. Intangible Assets and amortisation

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any.

Intangible assets are amortised on a straight line basis over the estimated useful economic life. The Bank uses a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. Software with perpetual license and system development expenditure, if any, is amortised over an estimated economic useful life of 5 years or license period, whichever is lower.

The amortisation period and the amortisation method are reviewed at least at the Balance Sheet date. If the expected useful life of the asset significantly differs from previous estimates, the amortisation period is changed accordingly. If there has been a significant change in the expected pattern of economic benefits from the asset, the amortisation method is changed to reflect the changed pattern. Such changes are accounted for in accordance with AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the Profit and Loss Account when the asset is derecognised.

3.7. Impairment of Assets

The carrying values of assets / cash generating units at the Balance Sheet date are reviewed for impairment, if any indication of impairment exists.

If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognised for such excess amount. The impairment loss is recognised as an expense in the Profit and Loss Account.

The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor.

When there is indication that an impairment loss recognised for an asset in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Profit and Loss Account, to the extent the amount was previously charged to the Profit and Loss Account.

3.8. Transactions involving foreign exchange Initial recognition

Transactions in foreign currencies entered into by the Bank are accounted at the exchange rates prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction.

Measurement at the Balance Sheet date

Foreign currency monetary items, if any, of the Bank, outstanding at the balance sheet date are restated at the rates prevailing at the year-end as notified by Foreign Exchange Dealers Association of India (''FEDAI''). Non-monetary items of the Bank are carried at historical cost.

Contingent liabilities on account of foreign exchange contracts, currency future contracts, guarantees, letters of credit, acceptances and endorsements are reported at closing rates of exchange notified by FEDAI as at the Balance Sheet date.

Treatment of Exchange differences

Exchange differences arising on settlement / restatement of foreign currency monetary assets and liabilities of the Bank are recognised as income or expense in the Profit and Loss Account.

3.9. Revenue Recognition

Interest Income on loans, advances and investments (including deposits with banks and other institutions) are recognised on accrual basis.

Income on Non-performing Assets is recognised upon realisation as per RBI norms.

Fee and Commission income are recognised as income when due, except in cases where the Bank is uncertain of its ultimate collection.

Bank Guarantee commission and commission on letter of credit, and locker rent are recognised on a straight- line basis over the period of contract. Interest Income on deposits / investments is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable. Income on discounted instruments is recognised over the tenor of the instruments on a straight line basis.

Dividend income, if any, is accounted for, when the right to receive the same is established.

Amounts recovered against debts written off in earlier years and provisions no longer considered necessary in the context of the current status of the borrower are recognised in the Profit and Loss Account.

3.10. Employee Benefits

Employee benefits include provident fund, gratuity and compensated absences.

Defined contribution plan:

The Bank''s contribution to provident fund are considered as defined contribution plan and are charged as an expense as they fall due based on the amount of contribution required to be made when the services are rendered by the employees.

Defined Benefits Plan

For defined benefit plans in the form of gratuity fund, the cost of providing benefits is determined using the Projected Unit Credit method, with actuarial valuations being carried out at each Balance Sheet date. Actuarial gains and losses are recognised in the Profit and Loss Account in the period in which they occur. Past service cost is recognised immediately to the extent that the benefits are already vested while otherwise, it is amortised on a straight-line basis over the average period until the benefits become vested. The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligation as adjusted for unrecognised past service cost, as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to

past service cost, plus the present value of available refunds and reductions in future contributions to the schemes.

Short term Employee benefits

The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised during the year when the employees render the service. These benefits include performance incentive and compensated absences which are expected to occur within twelve months after the end of the period in which the employee renders the related service. The cost of such compensated absences is accounted as under:

(a) in case of accumulated compensated absences,

when employees render the services that increase their entitlement of future compensated absences; and

(b) in case of non-accumulating compensated absences, when the absences occur.

Long term Employee benefits

The Bank accrues the liability for compensated absences based on the actuarial valuation as at the Balance Sheet date conducted by an independent actuary which includes assumptions about demographics, early retirement, salary increases, interest rates and leave utilisation. The net present value of the Banks'' obligation is determined using the Projected Unit Credit Method as at the Balance Sheet date. Actuarial gains / losses are recognised in the Profit and Loss Account in the year in which they arise.

Employee Stock Compensation Cost

The Bank follows intrinsic value method to account for its stock based employee compensation plans for all the options granted till the accounting period ending 31 March, 2021.

For all options granted after 31 March, 2021, the Bank follows the fair value method and recognises

the fair value of such options computed using the Black-Scholes model, as compensation expense over the vesting period, as per RBI Guidelines dated August 30, 2021. The compensation cost is amortised on a straight-line basis over the vesting period of the option with a corresponding credit to Share Based Reserve. On exercise of the stock options, corresponding balance in the Share Based Reserve is transferred to Share Premium. In respect of the options which expire unexercised, the balance standing to the credit of Share Based Reserve is transferred to the Balance in Surplus in profit and loss account. Also refer Note 18.22

3.11. Leases

Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Profit and Loss Account on a straight-line basis over the lease term.

3.12. Accounting of Priority Sector Lending Certificate (PSLC)

The Bank enters into transactions for the sale or purchase of Priority Sector Lending Certificates (PSLCs). In the case of a sale transaction, the Bank sells the fulfilment of priority sector obligation and in the case of a purchase transaction the Bank buys the fulfilment of priority sector obligation through the RBI trading platform. There is no transfer of risks or loan assets. The fee received for the sale of PSLCs is recorded as Other Income and the fee paid for purchase of the PSLCs is recorded as other Expenditure in Profit and Loss Account. These are amortised over the period of the Certificate.

3.13. Taxes on Income

Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961 and other applicable Income tax laws.

depreciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. However, if there are unabsorbed depreciation and carry forward of losses and items relating to capital losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income available to realise the assets. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Bank has a legally enforceable right for such set off. Deferred tax assets are reviewed at each balance sheet date for their realisability.

At each reporting date, the Bank re-assesses unrecognised deferred tax assets. It recognises unrecognised deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realised.

3.14. Earnings per Share

Basic earnings per share is computed by dividing the profit after tax (including the post-tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit after tax (including the post-tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.

Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for

each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate.

3.15 Proposed Dividend

Dividend proposed/ declared after the balance sheet date is accounted in the books of the Bank in the year in which the dividend is approved by the shareholders. Proposed dividend or dividend declared after the balance sheet date are disclosed in the notes to accounts. However, the Bank reckons proposed dividend in determining the capital fund in computing the capital adequacy ratio.

3.16. Segment reporting

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

In accordance with guidelines issued by RBI, the bank has adopted segment reporting as under:

Treasury includes all investment portfolios, Profit/ Loss on sale of investments, PSLC Fee, Profit/Loss on foreign exchange transaction, equities, income from derivatives and money market operations. The expenses of this segment consist of interest expenses on funds borrowed from external sources as well as internal sources and depreciation/amortisation of premium on HTM category investments.

Corporate / Wholesale Banking includes all advances to trusts, partnership firms, companies and statutory bodies, which are not included under ''Retail Banking''.

Retail Banking includes lending to and deposits, from retail customers and identified earnings and expenses of the segment.

Other Banking Operations includes all other operations not covered under Treasury, Corporate / Wholesale Banking and Retail Banking.

Unallocated includes Capital and reserves and other un-allocable assets, liabilities, income and expenditure.

Geographic segment

The Bank operations are predominantly confined within one geographical segment (India) and accordingly, this is considered as the only secondary segment.

Mar 31, 2023

Corporate information

1. Background

Equitas Small Finance Bank Limited (CIN: L65191TN1993PLC025280) ("ESFBL" or the "Bank"), is engaged in retail banking business with focus on micro-finance, commercial vehicle finance, home finance, loan against-property, corporate finance, and providing financing solutions for individuals and micro and small enterprises (MSEs) that are underserved by formal financing channels while providing a comprehensive banking and digital platform for all. The shares of the Bank are listed on National stock exchange (NSE) and BSE Ltd.

The Board of Directors of Equitas Small Finance Bank Limited (ESFBL) and Equitas Holdings Limited (EHL) at their respective Meetings held on March 21, 2022 approved the revised Scheme of Amalgamation (Scheme) between EHL, ESFBL and their respective shareholders, after complying with the Minimum Public Shareholding (MPS) requirements through Qualified Institutions Placement (QIP) of its equity shares in February 2022. The Scheme was then filed with the Stock Exchanges and RBI for necessary approvals/ sanctions, which were received duly. The Joint application filed by EHL and ESFBL for the Scheme under sections 230 to 232 and other applicable provisions of the Companies Act, 2013 with the Hon''ble National Company Law Tribunal, Chennai Bench (NCLT) was allowed by NCLT vide its Order dated 12th January 2023.

The Appointed date under the Scheme approved by NCLT is 1st January 2023. Accordingly, this Scheme has been given effect to in these Financial Statements with effect from January 1, 2023. Form INC-28 was filed with ROC, Chennai on February 01, 2023 by EHL and on February 02, 2023 by ESFBL respectively. Thus, the Scheme has become effective from February 02, 2023. The shareholders of EHL, on February 8, 2023, were allotted 231 equity Shares of H10/- each credited as fully paid up of ESFBL, in respect of every 100 Equity Shares of H10/- each held by them in EHL. The fractional entitlements were dealt with as provided in the approved scheme. Accordingly, ESFBL stands fully complied with all the statutory / regulatory requirements pertaining to the approved Scheme of Amalgamation.

2. Basis of preparation

applicable requirements of the Banking Regulation Act, 1949 and circulars, guidelines and directions issued by Reserve Bank of India from time to time. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous financial year.

3. Significant accounting policies

3.1. Use of Estimates

3.2. Investments Classification:

In accordance with the RBI guidelines on investment classification and valuation, investments are classified on the date of purchase into three categories (hereinafter called "categories") as below:

i) Held to Maturity ("HTM") - Securities acquired with the intention to hold till maturity

ii) Held for Trading ("HFT") - Securities acquired with the intention to trade

iii) Available for Sale ("AFS") - Securities which do not fall within the above two categories

Subsequent shifting amongst the categories is done in accordance with the RBI guidelines. Under each of these categories, investments are further classified under six groups (hereinafter called "groups") - Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries / Joint Ventures and Other Investments. Purchase and sale transactions in securities are recorded under ''Settlement Date'' accounting, except in the case of equity shares where ''Trade Date'' accounting is followed.

Basis of classification:

the equity of subsidiaries / joint ventures are categorised as HTM in accordance with the RBI guidelines. Investments which are not classified in the above categories are classified under AFS category.

Acquisition cost:

Transfer between categories

Valuation:

I nvestments classified under HTM category are carried at their acquisition cost or at amortised cost, if acquired at a premium over face value. Any premium on acquisition is amortised over the remaining maturity period of the security on a straight-line basis. Such amortisation of premium is adjusted against interest income under the head "Income from investments" as per the RBI guidelines. Any diminution, other than temporary, in the value of investments in subsidiaries / joint ventures, if any, is provided for.

Quoted Investments are valued based on the trades / quotes on the recognised stock exchanges, price list of RBI or prices periodically declared by Financial Benchmark India Pvt. Ltd. [FBIL], based on relevant RBI circular.

I n case of unquoted bonds, debentures and preference shares where interest/dividend is received regularly (i.e., not overdue beyond 90 days), the market price is derived based on the Yield to Maturity (YTM) for Government Securities as published by FBIL and suitably marked up for credit risk applicable to the credit rating of the instrument. The matrix for credit risk mark-up for each categories and credit ratings along with residual maturity issued by FBIL is adopted for this purpose.

Unquoted equity shares are valued at the breakup value if the latest balance sheet is available, or at ''.1, as per the RBI guidelines.

Units of mutual funds are valued at the latest repurchase price / net asset value declared by the mutual fund.

Treasury bills, commercial papers and certificate of deposits being discounted instruments, are valued at carrying cost.

I n respect of stressed assets sold by the Bank under an asset securitisation, where the investment by the bank in security receipts (SRs) backed by the assets sold by it is more than 10 percent of such SRs, in accordance with RBI guidelines, provisions held are higher of the provisions required in terms of net asset value declared by the Securitisation Company (''SC'') / Reconstruction Company (''RC'') and provisions as per the extant norms applicable to the underlying loans, notionally treating the book value of these SRs as the corresponding stressed loans assuming the loans remained in the books of the Bank.

I nvestments in SRs issued by ARCs are valued periodically by reckoning the Net Asset Value (NAV) declared by the ARC based on the recovery ratings received for such instruments. However, in respect of the stressed loans transferred to ARC, the investments are carried on an ongoing basis, until its transfer or realization, at lower of the redemption value of SRs arrived based on the NAV as above, and the NBV of the transferred stressed loan at the time of transfer.

Non-performing investments are identified and depreciation / provision is made thereon based on the RBI guidelines. Interest on nonperforming investments is not recognised in the Profit and Loss Account until received.

In accordance with RBI Circular, Repurchase (Repo) and Reverse Repurchase (Reverse Repo) transactions (including transactions under Liquid Adjustment Facility [LAF] and Marginal Standing Facility [MSF]) with RBI are accounted for as borrowings and lending, as the case may be. Accordingly, amounts outstanding in Repo and Reverse Repo account as at the Balance Sheet date is shown as part of Borrowings and Money at Call and at Short Notice respectively and the accrued expenditure and income till the Balance Sheet date is recognised in the Profit and Loss account.

Disposal of investments:

Profit / Loss on sale of investments under AFS and HFT categories are recognised in the Profit and Loss Account.

I n the event, provisions created on account of depreciation in the AFS or HFT categories are found to be in excess of the required amount in any year, the excess is credited to the Profit and Loss account and an equivalent amount (net of taxes, if any, and net of transfer to Statutory Reserves as applicable to such excess provisions) is appropriated to an Investment Reserve Account (IRA).

bank achieve a reserve balance of 2% of the HFT and AFS portfolio.

3.3. Advances Classification:

Advances are classified as Performing Assets (Standard) and Non-performing Assets (NPAs) in accordance with the RBI guidelines on Income Recognition and Asset Classification (IRAC). Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI.

The Advances are stated net of specific provisions made towards NPAs, unrealised interest on NPAs, bills rediscounted, amounts received in advance from customers, if any etc. Interest on NPAs is transferred to an interest suspense account and not recognised in the Profit and Loss Account until received.

Provisioning:

I n accordance with RBI guidelines, the Bank has provided general provision on standard assets at levels stipulated by RBI from time to time. In addition, the Bank has a policy for making provisions for standard assets at rates higher than the regulatory minimum, based on evaluation of risk and stress in various sectors.

Provision for non-performing advances comprising Sub-standard, Doubtful and Loss Assets is made at a minimum in accordance with the RBI guidelines. In addition, specific loan loss provisions in respect of non-performing assets are made based on management''s assessment and estimates of the degree of impairment of advances, based on past experience, evaluation of security and other related factors; the nature of product and delinquency levels. Loan loss provisions in respect of non-performing advances are charged to the Profit and Loss Account and included under Provisions and Contingencies.

Advances are disclosed, net of provisions in the Balance Sheet.

Provisions made in excess of the Bank''s policy for specific loan loss provisions for non-performing assets and regulatory general provisions are categorised as Floating Provision. Creation of Floating Provision is considered by the Bank up to a level approved by the Board of Directors. In accordance with the RBI guidelines, Floating Provisions are utilised up to a level approved by the Board with prior permission of RBI, only for contingencies under extraordinary circumstances for making specific provisions for impaired accounts.

Non-performing advances are written-off in accordance with the Bank''s policies. Recoveries from bad debts written-off are recognised in the Profit and Loss Account and included under ''Other Income''.

Recording and Presentation

Provisions created against individual accounts as per RBI guidelines are not netted in the individual account. For presentation in the financial statements, provision created is netted against gross amount of advance. Provision held against an individual account is adjusted against account balance at individual level only at the time of write-off / settlement of the account.

Provision made against standard assets in accordance with RBI guidelines as above is disclosed separately under Other Liabilities and not netted off against Advances.

Financial Assets sold to Reconstruction Company

I n accordance with RBI guidelines on sale of nonperforming advances, if the sale is at a price below the net book value (i.e., book value less provisions held), the shortfall is charged to the Profit and Loss Account and if the sale is for a value higher than the net book value, the excess provision is credited to the Profit and Loss Account in the year the amounts are received.

3.4. Securitisation transactions and direct assignments and transfer of assets

The Bank transfers its loan receivables both through Direct Assignment route as well as transfers to Special Purpose Vehicles (SPV).

The securitization transactions are without recourse to the Bank. The transferred loans and such securitized receivables are de-recognized as and when these are sold (true sale criteria being fully met) and the consideration has been received by the Bank. Gains / losses are recognized only if the Bank surrenders the rights to the benefits specified in the loan contracts.

In terms of RBI guidelines, profit / premium arising on account of sale of standard assets, being the difference between the sale consideration and book value, is amortized over the life of the securities issued by the Special Purpose Vehicles (SPV). Any loss arising on account of the sale is recognized in the Profit and Loss Account in the period in which the sale occurs.

3.5. Fixed Assets (Property, Plant and Equipment (PPE) and depreciation)

Property, Plant and Equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met, directly attributable cost of bringing the asset to its working condition for the intended use and initial estimate of decommissioning, restoring and similar liabilities, if any.

Any trade discounts and rebates are deducted in arriving at the purchase price. Such cost includes the cost of replacing part of the plant and equipment. When significant parts of the plant and equipment are required to be replaced at intervals, the Bank depreciates them separately based on its specific useful lives. Assets under development as at balance sheet date are shown as Capital Work in Progress. Advance paid towards such development are shown as capital advance.

Asset	Estimated useful life as assessed by the Bank	Estimated useful life specified under Schedule II of the Companies Act 2013
Office Equipment	3 Years	5 Years
Furniture and Fixtures	3 Years	10 years
Vehicles	4 Years	8 Years
Automated Teller Machines (ATMs)	7 Years	15 Years
Modems, Routers, switches, servers, network and related IT equipment	5 Years	6 Years

â¢ Leasehold improvements are depreciated over the primary lease period or over the remaining useful life of the asset, whichever is lower.

â¢ ''Point of Sale'' terminals are fully depreciated in the year of purchase.

The useful life of an asset class is periodically assessed taking into account various criteria such as changes in technology, changes in business environment, utility and efficacy of an asset class to meet with intended user needs etc. Whenever there is a revision in the estimated useful life of an asset, the unamortised depreciable amount is charged over the revised remaining useful life of the said asset. The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at the Balance Sheet date and adjusted prospectively, if appropriate.

Gains or losses arising from de-recognition of property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Profit and Loss Account when the asset is derecognized.

PPE held for sale is valued at lower of their carrying amount and net realizable value. Any write-down is recognized in the Profit and Loss Account.

3.6. Intangible Assets and amortisation

I ntangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any.

Intangible assets are amortized on a straight line basis over the estimated useful economic life. The Bank uses a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. Software with perpetual license and system development expenditure, if any, is amortised over an estimated economic useful life of 5 years or license period, whichever is lower.

The amortization period and the amortization method are reviewed at least at the Balance Sheet date. If the expected useful life of the asset significantly differs from previous estimates, the amortization period is changed accordingly. If there has been a significant change in the expected pattern of economic benefits from the asset, the amortization method is changed to reflect the changed pattern. Such changes are accounted for in accordance with AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Profit and Loss Account when the asset is derecognized.

3.7. Impairment of Assets

The carrying values of assets / cash generating units at the Balance Sheet date are reviewed for impairment, if any indication of impairment exists. If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognised for such excess amount. The impairment loss is recognised as an expense in the Profit and Loss Account.

The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor.

When there is indication that an impairment loss recognised for an asset in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Profit and Loss Account, to the extent the amount was previously charged to the Profit and Loss Account.

3.8. Transactions involving foreign exchange Initial recognition

Transactions in foreign currencies entered into by the Bank are accounted at the exchange rates prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction.

Measurement at the Balance Sheet date

Foreign currency monetary items, if any, of the Bank, outstanding at the balance sheet date are restated at the rates prevailing at the year-end as notified by Foreign Exchange Dealers Association of India (''FEDAI''). Non-monetary items of the Bank are carried at historical cost.

Contingent liabilities on account of foreign exchange contracts, currency future contracts, guarantees, letters of credit, acceptances and endorsements are reported at closing rates of exchange notified by FEDAI as at the Balance Sheet date.

Treatment of Exchange differences

Exchange differences arising on settlement / restatement of foreign currency monetary assets and liabilities of the Bank are recognised as income or expense in the Profit and Loss Account.

3.9. Revenue Recognition

Interest Income on loans, advances and investments (including deposits with banks and other institutions) are recognised on accrual basis. Income on Non-performing Assets is recognized upon realisation as per RBI norms.

Fee and Commission income are recognised as income when due, except in cases where the Bank is uncertain of its ultimate collection.

Bank Guarantee commission and commission on letter of credit, and locker rent are recognised on a straight- line basis over the period of contract. Interest Income on deposits / investments is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. Income on discounted instruments is recognised over the tenor of the instruments on a straight line basis.

Dividend income, if any, is accounted for, when the right to receive the same is established.

In accordance with the RBI guidelines on Securitisation Transactions, gains arising from assignment / securitisation are amortised over the life of the underlying portfolio loans. In case of any loss, the same is recognised in the Profit and Loss Account immediately.

Amounts recovered against debts written off in earlier years and provisions no longer considered necessary in the context of the current status of the borrower are recognized in the Profit and Loss Account.

3.10. Employee Benefits

Employee benefits include provident fund, gratuity and compensated absences.

Defined contribution plan:

The Bank''s contribution to provident fund are considered as defined contribution plan and are charged as an expense as they fall due based on the amount of contribution required to be made when the services are rendered by the employees.

Defined Benefits Plan

Short term Employee benefits

(a) in case of accumulated compensated absences, when employees render the services that increase their entitlement of future compensated absences; and

(b) i n case of non-accumulating compensated absences, when the absences occur.

Long term Employee benefits

The Bank accrues the liability for compensated absences based on the actuarial valuation as at the Balance Sheet date conducted by an independent actuary which includes assumptions about demographics, early retirement, salary increases, interest rates and leave utilisation. The net present value of the Banks'' obligation is determined using the Projected Unit Credit Method as at the Balance Sheet date. Actuarial gains / losses are recognised in the Profit and Loss Account in the year in which they arise.

Employee Stock Compensation Cost

Employee stock compensation cost for stock options is recognised as per the Guidance Note on Accounting for Employee Share-based Payments, issued by the Institute of Chartered Accountants of India and Guidelines issued by the Reserve Bank of India on Compensation of Whole Time Directors /Chief Executive Officers / Material Risk Takers and Control Function Staff (WTD/CEO/ MRTS). The Bank measures compensation cost relating to the employee stock options using the intrinsic value method. The compensation cost, if any, is amortised uniformly over the vesting period of the options. However, in respect of WTD/CEO/MRTS, as required under RBI Guidelines, the Bank has recognised expenses related to instruments granted to them on the basis of fair value of stock options using Black-Scholes model, as compensation expense over the vesting period.

3.11. Leases

Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Profit and Loss Account on a straight-line basis over the lease term.

3.12. Accounting of Priority Sector Lending Certificate (PSLC)

The Bank enters into transactions for the sale or purchase of Priority Sector Lending Certificates (PSLCs). In the case of a sale transaction, the Bank sells the fulfilment of priority sector obligation and in the case of a purchase transaction the Bank buys the fulfilment of priority sector obligation through the RBI trading platform. There is no transfer of risks or loan assets. The fee received for the sale of PSLCs is recorded as Other Income and the fee paid for purchase of the PSLCs is recorded as other Expenditure in

Profit and Loss Account. These are amortised over the period of the Certificate.

3.13. Taxes on Income

Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961 and other applicable Income tax laws.

Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets are recognised for timing differences of items other than unabsorbed depreciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. However, if there are unabsorbed depreciation and carry forward of losses and items relating to capital losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income available to realise the assets. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Bank has a legally enforceable right for such set off. Deferred tax assets are reviewed at each balance sheet date for their realizability.

At each reporting date, the Bank re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.

3.14. Earnings per Share

Basic earnings per share is computed by dividing the profit after tax (including the post-tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit after tax (including the post-tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share

a maximum period of three months including the day of trade. The short position is reflected as the amount received on sale in a separate account and is classified under ''Other Liabilities''. The short position is marked to market and loss, if any, is charged to the Profit and Loss account, while gain, if any, is not recognised. Profit or loss on settlement of the short position is recognised in the Profit and Loss account.

3.20. Reward Points

and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.

Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate.

3.15 Proposed Dividend

Dividend proposed/ declared after the balance sheet date is accounted in the books of the Bank in the year in which the dividend is approved by the shareholders. Proposed dividend or dividend declared after the balance sheet date are disclosed in the notes to accounts. However, the Bank reckons proposed dividend in determining the capital fund in computing the capital adequacy ratio.

3.16. Segment reporting

The disclosure relating to segment information is in accordance with the guidelines issued by RBI. In accordance with guidelines issued by RBI, the bank has adopted segment reporting as under:

Treasury includes all investment portfolios, Profit/Loss on sale of investments, PSLC Fee, Profit/Loss on foreign exchange transaction, equities, income from derivatives and money market operations. The expenses of this segment consist of interest expenses on funds borrowed from external sources as well as internal sources and depreciation/amortisation of premium on HTM category investments.

Corporate / Wholesale Banking includes all advances to trusts, partnership firms, companies and statutory bodies, which are not included under ''Retail Banking''.

Retail Banking includes lending to and deposits, from retail customers and identified earnings and expenses of the segment.

Other Banking Operations includes all other operations not covered under Treasury, Corporate / Wholesale Banking and Retail Banking.

Unallocated includes Capital and reserves and other un-allocable assets, liabilities, income and expenditure.

Geographic segment

The Bank operations are predominantly confined within one geographical segment (India) and accordingly, this is considered as the only secondary segment.

3.17. Provisions. Contingent Liabilities and Contingent Assets

A provision is recognized when the Bank has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Bank or a present obligation that is not recognized 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 recognized because it cannot be measured reliably. The Bank does not recognize a contingent liability but discloses its existence in the financial statements. Contingent assets are neither recognised nor disclosed in the financial statements.

3.18. Cash and Cash Equivalents

Cash and cash equivalents comprises of Cash in Hand and Balances with RBI and Balances with Banks and Money at Call and Short Notice. Cash and cash equivalents for the purpose of cash flow statement comprise of Cash in Hand and Balances with RBI and Balances with Banks and Money at Call and Short Notice.

3.19. Short sale transactions

In respect of the short sale transactions in Central Government dated securities, the short position is covered by outright purchase of an equivalent amount of the same security within

redemption of such loyalty/reward points using an actuarial method at the Balance Sheet date by employing an independent actuary. Provision for the said reward points is then made based on the actuarial valuation report as furnished by the said independent actuary.

3.21. Share issue expenses

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

3.22. Corporate social responsibility

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

Mar 31, 2022

Corporate information

1(a). Background

Equitas Small Finance Bank Limited (CIN: U65191TN1993PLC025280) ("ESFBL" or the "Bank", or the "Company") was incorporated in 1993 as V.A.P Finance Private Limited later renamed as Equitas Finance Private Limited in August 2011. In 2011, Equitas Holdings Limited acquired the Company. The Company''s name was subsequently changed to Equitas Finance Limited in September 2015 consequent to it becoming a Public Limited Company. Pursuant to a scheme of amalgamation approved by the Hon''ble High Court of Judicature at Madras (the "Scheme"), and upon fulfilment of all conditions specified under the said Scheme, Equitas Micro Finance Limited and Equitas Housing Finance Limited amalgamated with the Company, and the Company was renamed Equitas Small Finance Bank Limited ("ESFBL"). Consequent to the above amalgamation the microfinance and housing finance businesses of the erstwhile EMFL and EHFL were transferred to the Company effective September 2, 2016. ESFBL commenced its banking operations after the receipt of final banking license from the Reserve Bank of India on September 5, 2016. During year ended March 31, 2021, the Bank successfully completed Initial Public Offer (IPO) of its shares pursuant to which, the equity shares of the Bank got listed on National stock exchange (NSE) and BSE Ltd.

The Bank is engaged in retail banking business with focus on micro-finance, commercial vehicle finance, home finance, loan against-property finance, corporate finance, and providing financing solutions for individuals and micro and small enterprises (MSEs) that are underserved by formal financing channels while providing a comprehensive banking and digital platform for all.

2. Basis of Preparation

The Financial Statements have been prepared and presented under the historical cost convention and on accrual basis of accounting in accordance with provisions of accounting standards as specified under section 133 of the Companies Act 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 in so far as they apply to the Bank, and other accounting principles generally accepted in India ("Indian GAAP") as applicable to banking companies and the applicable requirements of the Banking Regulation Act, 1949 and circulars, guidelines and directions issued by Reserve Bank of India from time to time. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous financial year.

2.1. The Board of Directors of Equitas Small Finance Bank Limited (ESFBL) and Equitas Holdings Limited (EHL) at their respective Meetings held on July 26, 2021

approved a Scheme of Amalgamation between EHL, ESFBL and their respective shareholders, contemplating amalgamation of EHL with ESFBL under applicable provisions of the Companies Act 2013. The Scheme was designed to achieve the RBI licensing requirement of dilution of promoter shareholding in the Bank and minimum public shareholding (MPS) requirements prescribed by SEBI Regulations, in a manner that is in the best interests of and without being prejudicial to EHL, ESFBL, their respective shareholders or any other stakeholders.

Subsequently, ESFBL achieved the MPS through a Qualified Institutions Placement (QIP) of its shares, in February 2022, after obtaining the necessary approvals. QIP comprised of issue of 10,26,31,087 equity shares of '' 10/ each at premium of '' 43.59 per share, aggregating to a fund raise of '' 550 crore. As a result of this QIP, the public shareholding in the Bank increased from 18.70% to 25.37%, thereby complying with the Minimum Public Shareholding (MPS) requirements prescribed by SEBI Regulations.

Consequently, the aforesaid Scheme was revised to include the change in capital structure arising from QIP as well as the necessary change in objects of the Scheme. The Scheme, so revised was approved by the Boards of EHL and ESFBL in their respective Meetings held on March 21, 2022. The Scheme has been filed with the Stock Exchanges and RBI for necessary approvals/ sanctions.

Upon coming into effect of this Scheme and in consideration of the amalgamation of EHL with ESFBL, ESFBL, without any further application, act or deed, shall issue and allot to each of the equity shareholders of EHL as on the Record Date defined in the Scheme, 231 equity Shares of '' 10/- each credited as fully paid up of ESFBL, in respect of every 100 Equity Shares of '' 10/- each fully paid up held by them in EHL.

2.2. The COVID-19 pandemic (declared as such by the World Health Organisation on March 11,2020), has contributed to a significant decline and volatility, and a significant decrease in economic activity, in global and Indian markets. The Indian government had announced a strict nation-wide lockdown in India in march 2020 to contain the spread of the virus. Subsequently, while the national lockdown was lifted, regional post COVID-19 disruptions continued in many parts of the country as the world including India experienced multiple waves of outbreak on account of new coronavirus variants during the year ended March 31, 2022.

The impact of Covid 19 coupled with change in customer behaviour and pandemic scare has led to significant disruptions and dislocations for individuals and businesses, with consequential impact on regular banking operations including lending, deposit-

mobilisation, and collection activities and consequent increase in provisioning and credit cost. The country is emerging out of the pandemic and restrictions have been substantially lifted. However, outbreak of further variants of COVID-19 could not be ruled out. The extent to which any such new wave of COVID-19 pandemic would affect the Bank''s operations, and financial metrics (including impact on provisioning on advances) will depend on future developments, including new information on severity of the new and evolving virus variants, action taken to spread or mitigate its impact, whether mandated or voluntary, resilience of customers to bounce back and their behaviour patterns.

3. Significant accounting policies

3.1. Use of Estimates

3.2. Investments Classification:

In accordance with the RBI guidelines on investment classification and valuation, investments are classified on the date of purchase into three categories (hereinafter called "categories") as below:

i) Held to Maturity ("HTM") - Securities acquired with the intention to hold till maturity

ii) Held for Trading ("HFT") - Securities acquired with the intention to trade

iii) Available for Sale ("AFS") - Securities which do not fall within the above two categories

Basis of classification:

I nvestments that are held principally for sale within 90 days from the date of purchase are classified under HFT category. Investments which the Bank intends to hold till maturity are classified as HTM securities. Investments in the equity of subsidiaries / joint ventures are categorised as HTM in accordance with the RBI guidelines. Investments which are not classified in the above categories are classified under AFS category.

Acquisition cost:

Transfer between categories

Valuation:

Quoted Investments are valued based on the trades / quotes on the recognised stock exchanges, price list of RBI or prices periodically declared by Financial Benchmark India Pvt. Ltd. [FBIL], based on relevant RBI circular.

In case of unquoted bonds, debentures and preference shares where interest/dividend is received regularly (i.e., not overdue beyond 90 days), the market price is derived based on the Yield to Maturity (YTM) for Government Securities as published by FBIL and suitably marked up for credit risk applicable to the credit rating of the instrument. The matrix for credit risk mark-up for each categories and credit ratings along with residual maturity issued by FBIL is adopted for this purpose.

Unquoted equity shares are valued at the break-up value if the latest balance sheet is available, or at ''.1, as per the RBI guidelines.

Units of mutual funds are valued at the latest repurchase price / net asset value declared by the mutual fund.

Treasury bills, commercial papers and certificate of deposits being discounted instruments, are valued at carrying cost.

Security receipts, if any, are valued as per the net asset value provided by the issuing Asset Reconstruction Company from time to time.

I n accordance with RBI Circular, Repurchase (Repo) and Reverse Repurchase (Reverse Repo) transactions (including transactions under Liquid Adjustment Facility [LAF] and Marginal Standing Facility [MSF]) with RBI are accounted for as borrowings and lending, as the case may be. Accordingly, amounts outstanding in Repo and Reverse Repo account as at the Balance Sheet date is shown as part of Borrowings and Money at Call and at Short Notice respectively and the accrued expenditure and income till the Balance Sheet date is recognised in the Profit and Loss account.

Disposal of investments:

Profit / Loss on sale of investments under AFS and HFT categories are recognised in the Profit and Loss Account.

3.3. Advances Classification:

Advances are classified as Performing Assets (Standard) and Non-performing Assets (NPAs) in accordance with the RBI guidelines on Income Recognition and Asset Classification (IRAC). Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by RBI.

The Advances are stated net of specific provisions made towards NPAs, unrealised interest on NPAs, bills rediscounted, if any etc. Interest on NPAs is transferred to an interest suspense account and not recognised in the Profit and Loss Account until received.

The bank transfers advances through inter-bank participation with and without risk, which are accounted for in accordance with the RBI guidelines, as follows. In the case of participation with risk, the aggregate amount of participation transferred out of the Bank is reduced from advances; and participations transferred in to the Bank are classified under advances. In the case of participation without risk, the aggregate amount of participation issued by the Bank is classified under borrowings; and where the bank is participating in, the aggregate amount of participation is shown as due from banks under advances.

Provisioning:

In accordance with RBI guidelines, the Bank has provided general provision on standard assets at levels stipulated by RBI from time to time - direct advances to sectors agricultural, and Small and Micro Enterprises(SMEs) at 0.25%, commercial real estate at 1.00%, restructured standard advances progressively to reach 5.00%, commercial real estate-residential housing at 0.75% and for other sectors at 0.40%. In addition, the Bank has a policy for making provisions for standard assets at rates higher than the regulatory minimum, based on evaluation of risk and stress in various sectors

Provision for non-performing advances comprising Sub-standard, Doubtful and Loss Assets is made at a minimum in accordance with the RBI guidelines. In addition, specific loan loss provisions in respect of nonperforming assets are made based on management''s assessment and estimates of the degree of impairment of advances, based on past experience, evaluation of security and other related factors; the nature of product and delinquency levels. Loan loss provisions in respect of non-performing advances are charged to the Profit and Loss Account and included under Provisions and Contingencies. Advances are disclosed, net of provisions in the Balance Sheet (Also refer Note 18.4).

Provisions made in excess of the Bank''s policy for specific loan loss provisions for non-performing assets and regulatory general provisions are categorised as Floating Provision. Creation of Floating Provision is considered by the Bank up to a level approved by the Board of Directors. In accordance with the RBI guidelines, Floating Provisions are utilised up to a level approved by the Board with prior permission of RBI, only for contingencies under extraordinary circumstances for making specific provisions for impaired accounts.

account during the period, in accordance with the extant RBI guidelines in this regard.

Non-performing advances are written-off in accordance with the Bank''s policies. Recoveries from bad debts written-off are recognised in the Profit and Loss Account and included under ''Other Income''.

Recording and Presentation

Provisions created against individual accounts as per RBI guidelines are not netted in the individual account. For presentation in the financial statements, provision created is netted against gross amount of advance. Provision held against an individual account is adjusted against account balance at individual level only at the time of write-off / settlement of the account.

Provision made against standard assets in accordance with RBI guidelines as above is disclosed separately under Other Liabilities and not netted off against Advances.

3.4. Securitisation transactions and direct assignments and transfer of assets

The Bank transfers its loan receivables both through Direct Assignment route as well as transfers to Special Purpose Vehicles (SPV).

I n terms of RBI guidelines, profit / premium arising on account of sale of standard assets, being the difference between the sale consideration and book value, is amortized over the life of the securities issued by the Special Purpose Vehicles (SPV). Any loss arising on account of the sale is recognized in the Profit and Loss Account in the period in which the sale occurs.

3.5. Fixed Assets (Property, Plant and Equipment (PPE) and depreciation)

Property, Plant and Equipment, capital work in progress are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any. The cost comprises purchase price, borrowing costs if capitalization criteria are met, directly attributable cost of bringing the asset to its working condition for the intended use and initial estimate of decommissioning, restoring and similar liabilities, if any.

Any trade discounts and rebates are deducted in arriving at the purchase price. Such cost includes the

cost of replacing part of the plant and equipment. When significant parts of the plant and equipment are required to be replaced at intervals, the Bank depreciates them separately based on its specific useful lives. Assets under development as at balance sheet date are shown as Capital Work in Progress. Advance paid towards such development are shown as capital advance.

Asset	Estimated useful life as assessed by the Bank	Estimated useful life specified under Schedule II of the Companies Act 2013
Office Equipment	3 Years	5 Years
Furniture and Fixtures	3 Years	10 years
Vehicles	4 Years	8 Years
Automated Teller Machines (ATMs)	7 Years	15 Years
Modems, Routers, switches, servers, network and related IT equipment	5 Years	6 Years

â¢ Leasehold improvements are depreciated over the primary lease period or over the remaining useful life of the asset, whichever is lower.

â¢ ''Point of Sale'' terminals are fully depreciated in the year of purchase.

The useful life of an asset class is periodically assessed taking into account various criteria such as changes in technology, changes in business environment, utility and efficacy of an asset class to meet with intended user needs etc. Whenever there is a revision in the estimated useful life of an asset, the unamortised depreciable amount is charged over the revised remaining useful life of the said asset. The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at the Balance Sheet date and adjusted prospectively, if appropriate.

Gains or losses arising from de-recognition of property, plant and equipment are measured as the difference between the net disposal proceeds and the carrying

amount of the asset and are recognized in the Profit and Loss Account when the asset is derecognized.

PPE held for sale is valued at lower of their carrying amount and net realizable value. Any write-down is recognized in the Profit and Loss Account.

3.6. Intangible Assets and amortisation

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less accumulated amortization and accumulated impairment losses, if any.

Intangible assets are amortized on a straight line basis over the estimated useful economic life. The Bank uses a rebuttable presumption that the useful life of an intangible asset will not exceed ten years from the date when the asset is available for use. Software with perpetual license and system development expenditure, if any, is amortised over an estimated economic useful life of 5 years or license period, whichever is lower.

The amortization period and the amortization method are reviewed at least at the Balance Sheet date. If the expected useful life of the asset significantly differs from previous estimates, the amortization period is changed accordingly. If there has been a significant change in the expected pattern of economic benefits from the asset, the amortization method is changed to reflect the changed pattern. Such changes are accounted for in accordance with AS 5 Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies.

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in the Profit and Loss Account when the asset is derecognized.

3.7. Impairment of Assets

The carrying values of assets / cash generating units at the Balance Sheet date are reviewed for impairment, if any indication of impairment exists. If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognised for such excess amount. The impairment loss is recognised as an expense in the Profit and Loss Account.

The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor.

When there is indication that an impairment loss recognised for an asset in earlier accounting periods no longer exists or may have decreased, such reversal

of impairment loss is recognised in the Profit and Loss Account, to the extent the amount was previously charged to the Profit and Loss Account.

3.8. Transactions involving foreign exchange Initial recognition

Transactions in foreign currencies entered into by the Bank are accounted at the exchange rates prevailing on the date of the transaction or at rates that closely approximate the rate at the date of the transaction.

Measurement at the Balance Sheet date

Foreign currency monetary items, if any, of the Bank, outstanding at the balance sheet date are restated at the rates prevailing at the year-end as notified by Foreign Exchange Dealers Association of India (''FEDAI''). Non-monetary items of the Bank are carried at historical cost.

Contingent liabilities on account of foreign exchange contracts, currency future contracts, guarantees, letters of credit, acceptances and endorsements are reported at closing rates of exchange notified by FEDAI as at the Balance Sheet date.

Treatment of Exchange differences

Exchange differences arising on settlement / restatement of foreign currency monetary assets and liabilities of the Bank are recognised as income or expense in the Profit and Loss Account.

3.9. Revenue Recognition

Interest Income on loans, advances and investments (including deposits with banks and other institutions) are recognised on accrual basis. Income on Nonperforming Assets is recognized upon realisation as per RBI norms.

Fee and Commission income are recognised as income when due, except in cases where the Bank is uncertain of its ultimate collection.

Bank Guarantee commission and commission on letter of credit, and locker rent are recognised on a straight- line basis over the period of contract. Interest Income on deposits / investments is recognized on a time proportion basis taking into account the amount outstanding and the rate applicable. Income on discounted instruments is recognised over the tenor of the instruments on a straight line basis.

Dividend income, if any, is accounted for, when the right to receive the same is established.

the same is recognised in the Profit and Loss Account immediately.

Amounts recovered against debts written off in earlier years and provisions no longer considered necessary in the context of the current status of the borrower are recognized in the Profit and Loss Account.

3.10.Employee Benefits

Employee benefits include provident fund, gratuity and compensated absences.

Defined contribution plan:

The Bank''s contribution to provident fund are considered as defined contribution plan and are charged as an expense as they fall due based on the amount of contribution required to be made when the services are rendered by the employees.

Defined Benefits Plan

Short term Employee benefits

(a) i n case of accumulated compensated absences, when employees render the services that increase their entitlement of future compensated absences; and

(b) in case of non-accumulating compensated absences, when the absences occur.

Long term Employee benefits

The Bank accrues the liability for compensated absences based on the actuarial valuation as at the Balance Sheet date conducted by an independent actuary which includes assumptions about demographics, early retirement, salary increases, interest rates and leave utilisation. The net present value of the Banks'' obligation is determined using the Projected Unit Credit Method as at the Balance Sheet date. Actuarial gains / losses are recognised in the Profit and Loss Account in the year in which they arise.

Employee Stock Compensation Cost

Employee stock compensation cost for stock options is recognised as per the Guidance Note on Accounting for Employee Share-based Payments, issued by the Institute of Chartered Accountants of India and Guidelines issued by the Reserve Bank of India on Compensation of Whole Time Directors / Chief Executive Officers / Material Risk Takers and Control Function Staff (WTD/CEO/MRTS). The Bank measures compensation cost relating to the employee stock options using the intrinsic value method. The compensation cost, if any, is amortised uniformly over the vesting period of the options. However, in respect of WTD/CEO/MRTS, as required under RBI Guidelines, the Bank has recognised expenses related to instruments granted to them on the basis of fair value of stock options using Black-Scholes model, as compensation expense over the vesting period.

3.11. Leases

Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Profit and Loss Account on a straight-line basis over the lease term.

3.12. Accounting of Priority Sector Lending Certificate (PSLC)

The Bank enters into transactions for the sale or purchase of Priority Sector Lending Certificates (PSLCs). In the case of a sale transaction, the Bank sells the fulfilment of priority sector obligation and in the case of a purchase transaction the Bank buys the fulfilment of priority sector obligation through the RBI trading platform. There is no transfer of risks or loan assets. The fee received for the sale of PSLCs is recorded as Other Income and the fee paid for purchase of the PSLCs is recorded as other Expenditure in Profit and Loss Account. These are amortised over the period of the Certificate.

3.13. Taxes on Income

Current tax is the amount of tax payable on the taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961 and other applicable Income tax laws.

At each reporting date, the Bank re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset to the extent that it has become reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be realized.

3.14.Earnings per Share

Basic earnings per share is computed by dividing the profit after tax (including the post-tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit after tax (including the post-tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.

equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate.

3.15.Proposed Dividend

Proposed dividend after the balance sheet date is accrued in the books of the Bank in the year in which the dividend is declared / approved.

3.16.Segment reporting

The disclosure relating to segment information is in accordance with the guidelines issued by RBI. In accordance with guidelines issued by RBI, the bank has adopted segment reporting as under:

Corporate / Wholesale Banking includes all advances to trusts, partnership firms, companies and statutory bodies, which are not included under ''Retail Banking''.

Retail Banking includes lending to and deposits, from retail customers and identified earnings and expenses of the segment.

Other Banking Operations includes all other operations not covered under Treasury, Corporate / Wholesale Banking and Retail Banking.

Unallocated includes Capital and reserves and other un-allocable assets, liabilities, income and expenditure.

Geographic segment

The Bank operations are predominantly confined within one geographical segment (India) and accordingly, this is considered as the only secondary segment.

3.17. Provisions. Contingent Liabilities and Contingent Assets

3.18. Cash and Cash Equivalents

3.19. Short sale transactions

I n respect of the short sale transactions in Central Government dated securities, the short position is covered by outright purchase of an equivalent amount of the same security within a maximum period of three months including the day of trade. The short position is reflected as the amount received on sale in a separate account and is classified under ''Other Liabilities''. The short position is marked to market and loss, if any, is charged to the Profit and Loss account, while gain, if any, is not recognised. Profit or loss on settlement of the short position is recognised in the Profit and Loss account.

3.20. Reward Points

The Bank runs a loyalty program, which seeks to recognize and reward customers based on their relationship with the Bank. Under the program, eligible customers are granted loyalty points redeemable in future, subject to certain conditions. The Bank estimates the probable redemption of such loyalty/reward points using an actuarial method at the Balance Sheet date by employing an independent actuary. Provision for the said reward points is then made based on the actuarial valuation report as furnished by the said independent actuary.

3.21. Share issue expenses

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

3.22. Corporate social responsibility

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

1 Regulatory Capital a) Composition of Regulatory Capital

The Capital Adequacy Ratio ["CRAR"] of the Bank, calculated as per the Standardised approach for Credit Risk under Basel II regulation is set out below. Market Risk and Operational Risk are not considered for computation of Risk Weighted Assets in the current year as per Guidelines applicable for Small Finance Banks.

^S Particulars No	As at Mar 31, 2022	As at Mar 31, 2021
i) Common Equity Tier 1 capital	3,939.14	3,150.78
ii) Additional Tier 1 Capital	-	-
iii) Tier 1 Capital (i ii)	3,939.14	3,150.78
iv) Tier 2 Capital	100.87	128.60
v) Total Capital (Tier 1 Tier 2)	4,040.01	3,279.38
vi) Total Risk Weighted Assets (RWAs)	16,056.09	13,564.70
vii) CET 1 Ratio (CET 1 as a percentage of RWAs)	24.53%	23.23%
viii) Tier 1 Ratio (Tier 1 capital as a percentage of RWAs)	24.53%	23.23%
ix) Tier 2 Ratio (Tier 2 capital as a percentage of RWAs)	0.63%	0.95%
x) Capital to Risk Weighted Assets Ratio (CRAR) (Total Capital as a percentage of RWAs)	25.16%	24.18%
xi) Leverage Ratio #	14.73%	12.85%
xii) Percentage of the shareholding of
a) Government of India	NA	NA
b) State Government of India	NA	NA
c) Sponsor Bank	NA	NA
xiii) Amount of paid-up equity capital raised during the year*	112.75	85.88
xiv) Amount of non-equity Tier 1 capital raised during the year	0.00	0.00
xv) Amount of Tier 2 capital raised during the year	0.00	0.00

* Leverage Ratio computed as per Basel III framework

* During the quarter/ year ended March 31, 2022, the Bank successfully completed Qualified Institutions Placement (QIP) of its shares comprising issue of 10,26,31,087 equity shares of ?.10/ each at premium of ?.43.59 per share, thereby raising ?.550 crore. The allotment was completed on February 19, 2022 and these equity shares of the Bank got listed on February 23, 2022 on National Stock Exchange (NSE) and BSE Ltd. As a result of this QIP, the public shareholding in the Bank increased from 18.70% to 25.37%, thereby complying with the Minimum Public Shareholding (MPS) requirements prescribed by SEBI Regulations.

The Bank, during the year ended March 31,2022 has allotted 1,01,18,318 equity shares of '' 10/- each, fully paid up, on exercise of options by its employees and employees of the Holding company (Equitas Holdings Limited) in accordance with the ESFB ESOP Scheme.

* During year ended March 31, 2021, the Bank successfully completed Initial Public Offer (IPO) of its shares comprising issue of 8,48,48,484 equity shares of '' 10/ each at premium of '' 23 per share, thereby raising '' 280 crore and an offer for sale of 7,20,00,000 equity shares @ '' 33 per share, by the Equitas Holdings Limited. The equity shares of the Bank got listed on November 2, 2020 on National Stock Exchange (NSE) and BSE Ltd, thereby complying with the licensing condition of listing the shares of the Bank.

The Bank, during the year ended March 31, 2021, has allotted 10,28,164 equity shares of '' 10 each, fully paid up, on exercise of options by its employees and employees of the Holding company(Equitas Holdings Limited) in accordance with the Banks''s Employee Stock Option Scheme.

1b) Draw down from Reserves:

The Bank has not drawn down any amount from its opening reserves during the year ended March 31, 2022 and March 31, 2021.

Share premium

An amount of '' 11.14 crore (Previous Year '' 14.82 crore ) being the expenditure in connection with issue of shares during the year has been drawn down from Share Premium account as permitted under section 52 of the Companies Act 2013.

1c) Appropriations to reserve:

(i) Statutory reserve

As mandated by the Banking Regulation Act, 1949, all banking companies incorporated in India shall create a reserve fund, out of the balance of profit of each year as disclosed in the profit and loss account and before any dividend is declared and transfer a sum equivalent to not less than twenty five per cent of such profit. The Bank has transferred '' 70.18 Crore (Previous year '' 96.06 Crore) to Statutory Reserve for the year.

(ii) Capital Reserve

During the year, the Bank had appropriated '' 1.06 Crore (Previous Year '' 23.66 Crore), net of taxes and transfer to statutory reserve, to the Capital Reserve, being the gain on sale of HTM Investments in accordance with RBI guidelines.

(iii) Special reserve

As per the provisions under Section 36(1)(viii) of Income Tax Act, 1961, the specified entity is allowed the deduction in respect of any special reserve created and maintained by it, i.e. an amount not exceeding twenty per cent of the profits derived from eligible business computed under the head "Profits and gains of business or profession" (before making any deduction under this clause). This would be applicable till the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid up share capital (excluding the amounts capitalized from reserves) of the entity. During the year, the Bank has transferred an amount

(All amounts in crore of unless otherwise specified)

of '' 9.68 Crore (Previous year '' 7.42 Crore) to Special Reserve. There is no drawdown from this reserve during FY 21-22 and FY 20-21.

(iv) Investment Fluctuation Reserve

During the FY 2021-22, the bank has apportioned '' 1.25 Crore (Previous year : '' 1.98 Crore) to Investment Fluctuation Reserve, based on net profit on sale of investment and the value of investments in HFT and AFS category, to protect against future increase in yield, in accordance RBI guidelines.

(v) Declaration of Dividends

Considering the need to preserve capital to support growth and expansion, the Board did not recommend any dividend for the financial year ended March 31, 2022.

RBI vide its notification reference RBI/2021-22/23/ DOR.ACC.REC.7/21.02.067/2021-22 Dated: April 22, 2021, stated that in view of the continuing uncertainty caused by the ongoing second wave of COVID-19 in the country, it is crucial that banks remain resilient and proactively raise and conserve capital as a bulwark against unexpected losses. While allowing banks to pay dividend on equity shares at the half of that permitted vide circular dated May 4, 2005, the said circular requires the Board of Directors of the Bank to consider projected capital position and requirements, adequacy of provisions, etc before deciding upon payment of dividend. Accordingly, considering the need to preserve capital in these uncertain times, the Board did not recommend any dividend for the financial year ended March 31, 2021.

Disclaimer: This is 3rd Party content/feed, viewers are requested to use their discretion and conduct proper diligence before investing, GoodReturns does not take any liability on the genuineness and correctness of the information in this article

IFSC Code
Currency

More Information on Equitas Small Finance Bank Ltd.

Equitas Small Finance Bank Ltd. Tools
Bulk Deals
Block Deals
Equitas Small Finance Bank Ltd. Company Details
Company Profile
Company History
Management Team
Capital Structure
Product Mix
Banker/Auditor/Registrar
Company History
BSE Price History
NSE Price History
Equitas Small Finance Bank Ltd. Key Financial Ratios
Ratios
Equitas Small Finance Bank Ltd. Results
Quarterly Results
Half Yearly Results
Nine Months Results
Annual Results
Equitas Small Finance Bank Ltd. Financial Data
Audited Results
Cash Flow
Balance Sheet
Equitas Small Finance Bank Ltd. Reports
Accounting Policies
Auditors Report
Directors Report
Notes To Account
Equitas Small Finance Bank Ltd. Corporate Announcements
Book Closure
Dividend
Board Meetings
Change of Name

Notifications

Settings

Clear Notifications

Notifications

Use the toggle to switch on notifications

Block for 8 hours
Block for 12 hours
Block for 24 hours
Don't block

Gender

Select your Gender

Age

Select your Age Range

Sign Out

Accounting Policies of Equitas Small Finance Bank Ltd. Company

3. Significant accounting policies

3.1. InvestmentsClassification:

Basis of classification:

Held to Maturity (HTM):

Available for Sale (AFS):

Fair Value through Profit or Loss (FVTPL).

Initial recognition

Subsequent MeasurementHTM;

AFS:

FVTPL:

Valuation

Transfer between categories:

Disposal of investments:

3.2. AdvancesClassification:

Provisioning:

Recording and Presentation

Financial Assets sold to ReconstructionCompany

3.3. Securitisation transactions and directassignments and transfer of assets

3.4. Fixed Assets (Property, Plant and Equipment(PPE) and depreciation)

3.5. Intangible Assets and amortisation

3.6. Impairment of Assets

3.7. Transactions involving foreign exchangeInitial recognition

Measurement at the Balance Sheet date

Treatment of Exchange differences

3.8. Revenue Recognition

3.9. Employee Benefits

Defined contribution plan:

National Pension Scheme (NPS)

Defined Benefits Plan

Long term Employee benefits

Other Employee benefits

Employee Stock Compensation Cost

3.10. Leases

3.11. Accounting of Priority Sector LendingCertificate (PSLC)

3.12. Taxes on Income

3.13. Earnings per Share

3.14. Proposed Dividend

3.15. Segment reporting

Geographic segment

3. Significant accounting policies

3.1. Use of Estimates

3.2. Investments Classification:

Transfer between categories

Valuation:

Disposal of investments:

3.3. Advances Classification:

Provisioning:

Recording and Presentation

Financial Assets sold to Reconstruction Company

3.4. Securitisation transactions and direct assignments and transfer of assets

3.5. Fixed Assets (Property, Plant and Equipment (PPE) and depreciation)

3.6. Intangible Assets and amortisation

3.7. Impairment of Assets

3.8. Transactions involving foreign exchange Initial recognition

Measurement at the Balance Sheet date

Treatment of Exchange differences

3.9. Revenue Recognition

3.10. Employee Benefits

Defined contribution plan:

Defined Benefits Plan

Short term Employee benefits

Long term Employee benefits

Employee Stock Compensation Cost

3.11. Leases

3.12. Accounting of Priority Sector Lending Certificate (PSLC)

3.13. Taxes on Income

3.14. Earnings per Share

3.15 Proposed Dividend

3.16. Segment reporting

Geographic segment

1(a). Background

2. Basis of Preparation

3. Significant accounting policies

3.8. Transactions involving foreign exchange Initial recognition

Measurement at the Balance Sheet date

Treatment of Exchange differences

3.9. Revenue Recognition

3.10.Employee Benefits

Defined contribution plan:

3.1. Investments
Classification:

Subsequent Measurement
HTM;

3.2. Advances
Classification:

Financial Assets sold to Reconstruction
Company

3.3. Securitisation transactions and direct
assignments and transfer of assets

3.4. Fixed Assets (Property, Plant and Equipment
(PPE) and depreciation)

3.7. Transactions involving foreign exchange
Initial recognition

3.11. Accounting of Priority Sector Lending
Certificate (PSLC)