Auditor Report of ESAF Small Finance Bank Ltd.

Mar 31, 2025

We have audited the accompanying financial statements
of ESAF SMALL FINANCE BANK LIMITED (the "Bank"),
which comprise the Balance Sheet as at March 31, 2025,
Profit and Loss Account, the Cash Flow Statement for the
year then ended, and a summary of significant accounting
policies and other explanatory information.

In our opinion and to the best of our information, and
according to the explanations given to us, the aforesaid
financial statements give the information required by the
Banking Regulation Act, 1949 and the Companies Act,
2013 (the "Act") in the manner so required and give a true
and fair view in conformity with the Accounting Standards
prescribed under section 133 of the Act ("Accounting
Standards") as applicable to the Bank, the relevant circulars,
guidelines and directions issued by the Reserve Bank
of India ("RBI") from time to time and other accounting
principles generally accepted in India, of the state of affairs
of the Bank as at March 31, 2025, its profit and its cash
flows for the year ended on that date.

BASIS FOR OPINION

We conducted our audit of the financial statements in
accordance with the Standards on Auditing (SAs) specified
under section 143(10) of the Act. Our responsibilities under
those Standards are further described in the Auditor''s
Responsibility for the Audit of the Financial Statements
section of our report. We are independent of the Bank in
accordance with the Code of Ethics issued by the Institute
of Chartered Accountants of India (ICAI) together with the
ethical requirements that are relevant to our audit of the
financial statements under the provisions of the Act and
the Rules made thereunder, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements and the ICAI''s Code of Ethics. We believe
that the audit evidence obtained by us is sufficient and
appropriate to provide a basis for our audit opinion on the
financial statements.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
financial statements of the current period. These matters
were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
We have determined the matters described below to be
the key audit matters to be communicated in our report.

SI. No.	Key Audit Matter	Auditors Response
1	Classification of Advances, Provisioning and other relevant compliance of RBI Guidelines: The Bank''s portfolio comprises of Net Advances of '' 18,027 crore as at March 31, 2025 comprising Micro Banking and Retail Banking. As required by Income Recognition and Asset Classification Norms (IRaC), guidelines issued by RBI and other circulars, notification and directives issued by RBI, the Bank has classified Advances and has made appropriate provisions in accordance with such guidelines. Income from Advances constitutes '' 3,410.50 crore 78.78% of Total Income. The provision in respect of NPA is '' 1496.60 crore, which constitutes 30.85% of the total expenditure. The carrying value of these advances (net of provisions) may be materially misstated if, either individually or in aggregate the IRAC Norms, are not properly followed. Besides identification of and provisioning requirement for non-performing loans in accordance with the RBI guidelines also includes management estimates and judgement. Since the identification of NPAs and provisioning for such advances is significant to the overall audit, we have concluded that this is a key audit matter.	• We have tested the design and operating effectiveness of the key controls of the system, application, process over approval, recording, monitoring, recovery of loans, overdue & stressed accounts, identification of Non-Performing Advances (NPA), provision of NPA including verification of valuation of reports of experts for primary and collateral securities based on the understanding of the prudential guidelines and overall organisational IT framework of the Bank and communication through various circulars and reports. • We have evaluated the Internal Controls over the sanctioning & monitoring process and the possible system override / circumvention to such controls supervisory framework such as Internal Audit, Credit Audit, Concurrent Audit, Systems Audit, as well as Internal Check, effectiveness of such framework as per the policies and procedures of the Bank and in compliance with prudential guidelines.

SI. No.	Key Audit Matter	Auditors Response
		• Selected samples of NPA borrowers based on quantitative and qualitative risk factors to ascertain proper classification based on the age of the NPA status including computation of overdue period to assess the correct classification and required provision as per the IRAC norms and the Bank''s policy. • We have tested samples of Performing Assets for ascertaining compliance with the IRAC norms. • Performed inquires with the Credit and Risk department to ascertain if there were any indicators of stress or occurrence of an event of default in a loan account or any product which are to be classified as NPA. • We have assessed the adequacy of the disclosures as prescribed in the relevant accounting standards and the RBI requirements relating to NPAs. • With respect to contingency provision held as at March 31, 2025 towards unforeseen risk and stress emanating from certain portfolio of advances, we have tested key inputs, assumptions and methodology used by the management in estimating the required provision.
2	Key Information Technology (IT) systems used in financial reporting process: As a Scheduled Commercial Bank that operates on Core Banking Solution ("CBS") and other applications across its branches, the reliability and security of IT systems plays a key role in the business operations. Since a large volume of transactions are processed daily, the IT controls are required to ensure that applications process data as expected and that changes are made in an appropriate manner. The IT infrastructure is critical for smooth functioning of the Bank''s business operations as well as for timely and accurate financial accounting and reporting. Due to the pervasive nature and complexity of the IT Environment, we have ascertained Key Information Technology ("IT") systems used in financial reporting process as a key audit matter.	In assessing the controls over the IT systems of the Bank, we involved our technology specialists to understand the IT control environment, IT infrastructure and IT systems. We conducted an assessment and identified key IT systems that are critical for accounting and financial reporting process and are relevant for our audit and tested their internal controls. In particular: • We obtained an understanding of the Bank''s IT control environment and key changes during the audit period that may be relevant to the audit; • We tested the design, implementation and operating effectiveness of the Bank''s general IT controls over the key IT systems that are critical to financial reporting. This included evaluation of the Bank''s controls to evaluate segregation of duties and access rights being provisioned / modified based on duly approved requests, access for exit cases being revoked in a timely manner and access of all users being recertified during the period of audit; • We tested key automated and manual business cycle controls and logic for system-generated reports relevant to the audit; and • We also tested compensating controls and performed alternate procedures to assess whether there were any unaddressed IT risks that would materially impact the financial statements.

INFORMATION OTHER THAN THE FINANCIAL
STATEMENTS AND AUDITOR''S REPORT THEREON

• The Bank''s Board of Directors is responsible for the
preparation of the other information. The other
information comprises the Chairman''s Statement,
the Directors'' Report including annexures to the
Directors'' Report included in the Annual Report but
does not include the financial statements and our
Auditors Report thereon and the Basel II Disclosures
under New Capital Adequacy Framework (Basel II
Disclosures). The Directors'' Report is expected to be
made available to us after the date of this Auditors''
Report.

• Our opinion on the financial statements does not
cover the other information and Basel II Disclosures
available in the website of the Bank and we do not
express any form of assurance conclusion thereon.

• In connection with our audit of the financial statements,
our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements
or our knowledge obtained during the course of our
audit or otherwise appears to be materially misstated.

• If, based on the work we have performed on the
other information, we conclude that there is a
material misstatement of this other information, we
are required to communicate the matter to those
charged with governance as required under SA
720 ''The Auditor''s responsibilities Relating to Other
Information''. We have nothing to report in this regard.

RESPONSIBILITIES OF MANAGEMENT AND THOSE
CHARGED WITH GOVERNANCE FOR THE FINANCIAL
STATEMENTS

The Bank''s Board of Directors is responsible for the
matters stated in section 134(5) of the Act with respect
to the preparation of these financial statements that give
a true and fair view of the financial position, financial
performance and cash flows of the Bank in accordance
with the provisions of Section 29 of the Banking Regulation
Act, 1949, Accounting Standards and other accounting
principles generally accepted in India and the circulars,
guidelines and the directions issued by RBI, from time
to time. This responsibility also includes maintenance
of adequate accounting records in accordance with the
provisions of the Act for safeguarding the assets of the
Bank and for preventing and detecting frauds and other
irregularities; selection and application of appropriate
accounting policies; making judgments and estimates that
are reasonable and prudent; and design, implementation
and maintenance of adequate internal financial controls,
that were operating effectively for ensuring the accuracy
and completeness of the accounting records, relevant to
the preparation and presentation of the financial statement

that give a true and fair view and are free from material
misstatement, whether due to fraud or error.

In preparing the financial statements, management is
responsible for assessing the Bank''s ability to continue as
a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of
accounting unless the Board of Directors either intends
to liquidate the Bank or to cease operations, or has no
realistic alternative but to do so.

The Bank''s Board of Directors is also responsible for
overseeing the Bank''s financial reporting process.

AUDITOR''S RESPONSIBILITY FOR THE AUDIT OF THE
FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue an Auditors'' Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with SAs will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.

As part of an audit in accordance with SAs, we exercise
professional judgment and maintain professional
skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement
of the financial statements, whether due to fraud
or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or
the override of internal control.

• Obtain an understanding of internalfinancial
control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances.
Under section 143(3)(i) of the Act, we are also
responsible for expressing our opinion on whether
the Bank has adequate internal financial controls with
reference to financial statements in place and the
operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting estimates
and related disclosures made by the management.

• Conclude on the appropriateness of management''s
use of the going concern basis of accounting and,
based on the audit evidence obtained, whether
a materialuncertainty exists related to events or

conditions that may cast significant doubt on the
Bank''s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are
required to draw attention in our Auditors'' Report
to the related disclosures in the financial statements
or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit
evidence obtained up to the date of our Auditors''
Report. However, future events or conditions may
cause the Bank to cease to continue as a going
concern.

• Evaluate the overall presentation, structure and
content of the financial statements, including the
disclosures, and whether the financial statements
represent the underlying transactions and events in a
manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the
financialstatements that, individually or in aggregate,
makes it probable that the economic decisions of a
reasonably knowledgeable user of the financial statements
may be influenced. We consider quantitative materiality
and qualitative factors in (i) planning the scope of our audit
work and in evaluating the results of our work; and (ii) to
evaluate the effect of any identified misstatements in the
financial statements.

We communicate with those charged with governance
regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including
any significant deficiencies in internalcontrolthat we
identify during our audit.

We also provide those charged with governance with
a statement that we have complied with relevant
ethical requirements regarding independence, and to
communicate with them all relationships and other
matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the financial statements of the
current period and are therefore the key audit matters. We
describe these matters in our Auditors'' Report unless law
or regulation precludes public disclosure about the matter
or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report
because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest
benefits of such communication.

REPORT ON OTHER LEGAL AND REGULATORY
REQUIREMENTS

1. As required by Section 143(3) of the Act and Section
30(3) of the Banking Regulation Act, 1949, based on
our Audit, we report that:

a) We have sought and obtained all the information

and explanations which to the best of our
knowledge and belief were necessary for the
purposes of our audit.

b) In our opinion, the transactions of the Bank
which have come to our notice have been within
the powers of the Bank.

c) As explained in the paragraph 2 below, the
financial accounting system of the Bank is
centralised and, therefore, accounting returns
are not required to be submitted by branches.

d) In our opinion, proper books of account as
required by law have been kept by the Bank so
far as it appears from our examination of those
books.

e) The Balance Sheet, Profit and Loss Account and
the Cash Flow Statement dealt with by this Report
are in agreement with the books of account.

f) In our opinion, the aforesaid financial statements
comply with the Accounting Standards specified
under Section 133 of the Act as applicable to the
Bank.

g) On the basis of the written representations
received from the directors and taken on record
by the Board of Directors, none of the directors
is disqualified as on March 31, 2025 from being
appointed as a director in terms of Section 164(2)
of the Act.

h) With respect to the maintenance of accounts and
other matters connected therewith, reference is
made to our remarks in paragraph 1(b) above on
reporting under Section 143(3)(b) and paragraph
1(k)(v) below on reporting under Rule 11(g) of the
Rules,

i) With respect to the adequacy of the internal
financialcontrols with reference to financial
statements of the Bank and the operating
effectiveness of such controls, refer to our
separate Report in "Annexure A". Our report
expresses an unmodified opinion on the
adequacy and operating effectiveness of the
Bank''s internal financial controls with reference
to financial statements.

j) With respect to the other matters to be included
in the Auditors'' Report in accordance with the
requirements of section 197(16) of the Act, as
amended, in our opinion and to the best of our
information and according to the explanations
given to us, the entity being a banking company,
section 197 of the Act related to the managerial
remuneration is not applicable by virtue of
Section 35B(2A) of the Banking Regulation Act,
1949.

k) With respect to the other matters to be included

in the Auditors'' Report in accordance with Rule
11 of the Companies (Audit and Auditors) Rules,
2014, as amended in our opinion and to the
best of our information and according to the
explanations given to us:

i. The Bank has disclosed the impact of
pending litigations on its financial position
as at the year-end in its financial statements
- Refer Schedule 12 to the financial
statements;

ii. The Bank did not have any long-term
contracts including derivative contracts as
at the year-end for which there were any
material foreseeable losses.

iii. There were no amounts which were
required to be transferred to the Investor
Education and Protection Fund by the Bank.

iv. (a) The Management has represented

that, to the best of it''s knowledge and
belief, as disclosed in the note 18.16 to
the financial statements, no funds have
been advanced or loaned or invested
(either from borrowed funds or share
premium or any other sources or
kind of funds) by the Bank to or in any
other person(s) or entity(ies), including
foreign entities ("Intermediaries"), with
the understanding, whether recorded
in writing or otherwise, that the
Intermediary shall, directly or indirectly
lend or invest in other persons or
entities identified in any manner
whatsoever by or on behalf of the Bank
("Ultimate Beneficiaries") or provide
any guarantee, security or the like on
behalf of the Ultimate Beneficiaries.

(b) The Management has represented, that,
to the best of its knowledge and belief,
as disclosed in Note B.16 of Schedule
18 to the financial statements, no funds
have been received by the Bank from
any person(s) or entity(ies), including

foreign entities ("Funding Parties"), with
the understanding, whether recorded
in writing or otherwise, that the Bank
shall, directly or indirectly, lend or
invest in other persons or entities
identified in any manner whatsoever
by or on behalf of the Funding Party
("Ultimate Beneficiaries") or provide
any guarantee, security or the like on
behalf of the Ultimate Beneficiaries.

(c) Based on the audit procedures
performed that have been considered
reasonable and appropriate in the
circumstances, nothing has come
to our notice that has caused us to
believe that the representations under
sub-clause (i) and (ii) of Rule 11(e),
as provided under (a) and (b) above,
contain any material misstatement.

v. Based on our examination, which included
test checks, the Bank has used accounting
softwares for maintaining its books of
account for the FinancialYear ended
March 31, 2025 which has a feature of
recording audit trail (edit log) facility, and
the same has operated throughout the
year for all relevant transactions recorded
in the software systems. Further, during the
course of our audit, we did not come across
any instance of the audit trail feature being
tampered with and the audit trail has been
preserved by the Bank as per the statutory
requirements for record retention.

2. We report that during the course of our audit, we have
visited and performed select relevant procedures at 34
branches. Since the Bank considers its key operations
to be automated, with the key applications largely
integrated to the Core Banking System, it does not
require its branches to submit any financial returns.
Accordingly, our audit is carried out centrally at Head
Office based on the records and data required for the
purpose of audit being made available to us.

For Abarna & Ananthan For Kirtane & Pandit LLP

Chartered Accountants Chartered Accountants

Firm Registration No. 000003S Firm Registration No.: 105215W/W100057

Abarna Bhaskar Sandeep Welling

Partner Partner

Membership No. 025145 Membership No. 044576

UDIN: 25025145BMKWVP1881 UDIN: 25044576BMKQYD2962

Place: Mannuthy Place: Mannuthy

Date : May 16, 2025 Date : May 16, 2025

---

Mar 31, 2024

We have audited the accompanying financial statements of ESAF SMALL FINANCE BANK LIMITED ("the Bank"), which comprise the Balance Sheet as at March 31, 2024, Profit and Loss Account, the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Banking Regulation Act, 1949 and the Companies Act, 2013 ("the Act") in the manner so required and give a true and fair view in conformity with the Accounting Standards prescribed under section 133 of the Act ("Accounting Standards") as applicable to banks , the relevant circulars, guidelines and directions issued by the Reserve Bank of India ("RBI") from time to time and other accounting principles generally accepted in India, of the state of affairs of the Bank as at March 31, 2024, its profit and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the financial statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor''s Responsibility for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI''s Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

SI NO.	Key Audit Matter	Auditors Response
1	Classification of Advances, Provisioning and other relevant compliance of RBI Guidelines: The Bank''s portfolio comprises of Net Advances of 18,293 Crores as at March 31, 2024 comprising of micro- banking and retail banking. As required by Income Recognition and Asset Classification Norms (IRAC), guidelines issued by RBI and other circulars, notification and directives issued by RBI, the Bank has classified Advances and has made appropriate provisions in accordance with such guidelines. Income from Advances constitutes 3,461.32 crores 81% of Total Income. The provision in respect of NPA is '' 589.01 Crores which constitutes 19.01% of the total expenditure. The carrying value of these advances (net of provisions) may be materially misstated if, either individually or in aggregate the IRAC Norms, are not properly followed.	• We have tested the design and operating effectiveness of the Key controls of the system, application, process over approval, recording, monitoring, recovery of loans, overdue & stressed accounts, identification of Non Performing Advances (NPA), provision of NPA including verification of valuation reports of experts for primary and collateral securities based on the understanding of the prudential guidelines a n d overall organizational IT framework of the Bank and communication through various circulars and reports. • We have evaluated the Internal Controls over the sanctioning & monitoring process and the possible system override / circumvention to such controls supervisory framework such as Internal Audit, Credit Audit, Concurrent Audit, Systems Audit, as well as Internal Check, effectiveness of such framework as per the policies and procedures of the bank and in compliance with prudential guidelines.

SI NO.	Key Audit Matter	Auditors Response
	Besides identification of and provisioning requirement for non- performing loans in accordance with the RBI guidelines also includes management estimates and judgement. Since the identification of NPAs and provisioning for such advances is significant to the overall audit, we have concluded that this as a Key Audit Matter.	• Selected samples of NPA borrowers based on quantitative and qualitative risk factors to ascertain proper classification based on the age of the NPA status including computation of overdue period to assess the correct classification and required provision as per the IRAC norms and Bank''s policy. • We have tested samples of Performing Assets for ascertaining compliance with the IRAC Norms. • Performed inquires with the Credit and Risk department to ascertain if there were any indicators of stress or occurrence of an event of default in a loan account or any product which are to be classified as NPA. • We have assessed the adequacy of the disclosures as prescribed in the relevant accounting standards and the RBI requirements relating to NPAs. • With respect to contingency provision held as at March 31, 2024 towards unforeseen risk and stress emanating from certain portfolio of advances, we have tested key inputs, assumptions and methodology used by the management in estimating the required provision.
2	Key Information technology (IT) systems used in financial reporting process: As Bank that operates on core banking solution ("CBS") and other loan applications across its branches, the reliability and security of IT systems plays a key role in the business operations. Since large volume of transactions are processed daily, the IT controls should ensure that all the applications process the data as expected and that changes are made in an appropriate manner. Considering the pervasive and intricate nature of the IT environment, as well as its critical role in ensuring accurate and timely financial reporting, we have identified this area as a Key Audit Matter.	We involved our IT specialists to obtain an understanding ofthe Bank''s IT related control environment. Furthermore we conducted an assessment and identified critical key IT applications, databases and operating systems that are relevant for our audit. For the key IT systems used to prepare accounting and financial information, our areas of audit focus included access security (including controls over privileged access), program change controls, database management and network operations. In particular, the procedures followed were : • We tested the design, implementation and operating effectiveness of the Bank''s General IT controls over the key IT systems that are critical to financial reporting. This included evaluation of Bank''s controls to evaluate segregation of duties and access rights given / modified based on duly approved requests, access for exit cases being revoked in a timely manner and access of all users being recertified. • We also tested key automated and manual business cycle controls and logic for system generated reports relevant to audit; including testing of compensating controls or performed alternate procedures.

Information Other than the Financial Statements and Auditor''s Report Thereon

• The Bank''s Board of Directors is responsible for the preparation of the other information. The other information comprises the Chairman''s Statement, the Directors Report including annexures to the Directors report included in the Annual Report but does not include the financial statements and our auditors report thereon and the Basel II Disclosures under New Capital Adequacy Framework (Basel II Disclosures). The Director''s report is expected to be made available to us after the date of this auditor''s report.

• Our opinion on the financial statements does not cover the other information and Basel II Disclosures available in the website of the Bank and we do not express any form of assurance conclusion thereon.

• In connection with our audit ofthe financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

• When we read the other information identified above, if we conclude that there is material misstatement therein, we are required to communicate the matter to those charged with governance as required under SA 720 ''The Auditor''s responsibilities relating to other information''

Responsibilities of Management and Those Charged with Governance for the Financial Statements

The Bank''s Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these financial statements that gives a true and fair view of the financial position, financial performance and cash flows of the Bank in accordance with the provisions of Section 29 of the Banking Regulation Act, 1949, Accounting Standards and other accounting principles generally accepted in India and the circulars, guidelines and the directions issued by RBI, from time to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Bank and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy

and completeness of the accounting records, relevant to the preparation and presentation of the financial statement that give a true and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Bank''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so. The Bank''s Board of Directors are also responsible for overseeing the Bank''s financial reporting process.

Auditor''s Responsibility for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor''s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal financial control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Bank has adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the management.

• Conclude on the appropriateness of management''s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor''s report. However, future events or conditions may cause the Bank to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor''s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine

that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Matter

The comparative financial information of the Bank for the previous reporting periods included in the Financial Statements have been audited by Abarna & Ananthan, Chartered Accountants, one of the joint statutory auditors of the Bank, who have expressed an unmodified opinion. Accordingly, Kirtane & Pandit LLP, Chartered Accountants, do not express any opinion on the comparative figures. Our Opinion on the Financial Statements is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143(3) of the Act and Section

30(3) of the Banking Regulation Act, 1949, based on

our Audit, we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit, And found them to be satisfactory

b) In our opinion, the transactions of the Bank which have come to our notice have been within the powers of the bank.

c) As explained in the paragraph 2 below, the financial accounting system of the Bank is centralised and, therefore, accounting returns are not required to be submitted by branches.

d) In our opinion, proper books of account as required by law have been kept by the Bank so far as it appears from our examination of those books.

e) The Balance Sheet, Profit and Loss Account and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

f) In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act as applicable to the Banks.

g) On the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2024 from being appointed as a director in terms of Section 164(2) of the Act.

h) With respect to the adequacy of the internal financial controls with reference to financial statements of the Bank and the operating effectiveness of such controls, refer to our separate Report in "Annexure A". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Bank''s internal financial controls with reference to financial statements.

i) With respect to the other matters to be included in the Auditor''s Report in accordance with the requirements of section 197(16) of the Act, as amended, in our opinion and to the best of our information and according to the explanations given to us, the entity being a banking company, section 197 of the Act related to the managerial remuneration is not applicable by virtue of Section 35B(2A) of the Banking Regulation Act, 1949.

j) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us:

i) The Bank has disclosed the impact of pending litigations on its financial position as at the year-end in its financial statements - Refer Schedule 12 to the financial statements;

ii) The Bank did not have any long-term contracts including derivative contracts as at the year-end for which there were any material foreseeable losses.

iii) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Bank.

iv) (a) The Management has represented

that, to the best of it''s knowledge and belief, as disclosed in the note B.16 of schedule 18 to the financial statements no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Bank to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the

Intermediary shall, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Bank ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(b) TheManagementhas represented, that, to the best of its knowledge and belief, as disclosed in Note B.16 of Schedule 18 to the financial statements, no funds have been received by the Bank from any person(s) or entity(ies), including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Bank shall, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(c) Based on the audit procedures performed that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub- clause (i) and (ii) of Rule 11(e), as provided under (a) and (b) above, contain any material misstatement.

v. As stated in note 18.17 to the financial statements, the Board of Directors of the Bank has proposed final dividend of Rs 0.70 per share (Previous share : Nill per share) for the year ended March 31 2024, which is subject to the approval of the members at the ensuing Annual General Meeting. The dividend proposed is in accordance with section 123 of the Act, as applicable.

vi. Based on our examination, which included test checks, the Bank has used accounting softwares for maintaining its books of account for the financial year ended March 31, 2024 which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the softwares. Further, during the course of our

audit we did not come across any instance of the audit trail feature being tampered with.

2. We report that during the course of our audit we have visited and performed select relevant procedures at 46 branches. Since the Bank considers its key operations

to be automated, with the key applications largely integrated to the Core Banking System, it does not require its branches to submit any financial returns. Accordingly, our audit is carried out centrally at Head Office based on the records and data required for the purpose of Audit being made available to us.

For Abarna & Ananthan For Kirtane & Pandit LLP

Chartered Accountants Chartered Accountants

Firm Registration No. 000003S Firm Registration No.: 105215W/W100057

Abarna Bhaskar Sandeep Welling

Partner Partner

Membership No. 025145 Membership No. 044576

UDIN: 24025145BKBNII1944 UDIN: 24044576BKAUCH3889

Place: Mannuthy Place: Mannuthy

Date: May 08, 2024 Date: May 08, 2024

---

Mar 31, 2023

INDEPENDENT AUDITORS'' REPORT

To

The Members of

ESAF SMALL FINANCE BANK LIMITED

Report on the Audit of the Financial Statements
Opinion

We have audited the accompanying financial statements of ESAF SMALL FINANCE BANK LIMITED ("the Bank"), which
comprise the Balance Sheet as at March 31,2023, Profit and Loss Account, the Cash Flow Statement for the year then
ended, and a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial
statements give the information required by the Banking Regulation Act, 1949 and the Companies Act, 2013 ("the
Act") in the manner so required and give a true and fair view in conformity with the Accounting Standards prescribed
under section 133 of the Act ("Accounting Standards") as applicable to banks and other accounting principles generally
accepted in India, of the state of affairs of the Bank as at March 31, 2023, its profit and its cash flows for the year
ended on that date.

Basis for Opinion

We conducted our audit of the financial statements in accordance with the Standards on Auditing (SAs) specified under
section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor''s Responsibility
for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with the
Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements
that are relevant to our audit of the financial statements under the provisions of the Act and the Rules made thereunder,
and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI''s Code of
Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit
opinion on the financial statements.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have determined the matters described below to be the key audit matters to be communicated in our report.

Information Other than the Financial Statements and Auditor''s Report Thereon

• The Bank''s Board of Directors is responsible for the preparation of the other information. The other information
comprises the Chairman''s Statement, the Directors Report including annexures to the Directors report included in
the Annual Report but does not include the financial statements and our auditors report thereon and the Basel II
Disclosures under New Capital Adequacy Framework (Basel II Disclosures). The Director''s report is expected to be
made available to us after the date of this auditor''s report.

• Our opinion on the financial statements does not
cover the other information and Basel II Disclosures
and we do not and will not express any form of
assurance conclusion thereon.

• In connection with our audit of the financial
statements, our responsibility is to read the other
information identified above when it becomes
available and, in doing so, consider whether the
other information is materially inconsistent with the
financial statements, or our knowledge obtained
during the course of our audit or otherwise appears
to be materially misstated.

• When we read the other information identified above,
if we conclude that there is a material misstatement
therein, we are required to communicate the matter
to those charged with governance as required under
SA 720 ''The Auditor''s responsibilities Relating to
Other Information''

Responsibilities of Management and Those
Charged with Governance for the Financial
Statements

The Bank''s Board of Directors is responsible for the
matters stated in section 134(5) of the Act with respect
to the preparation of these financial statements that
gives a true and fair view of the financial position,
financial performance and cash flows of the Bank in
accordance with the provisions of Section 29 of the
Banking Regulation Act, 1949, Accounting Standards
and other accounting principles generally accepted in
India and the circulars, guidelines and the directions
issued by the Reserve Bank of India, from time to time.
This responsibility also includes maintenance of adequate
accounting records in accordance with the provisions of
the Act for safeguarding the assets of the Bank and for
preventing and detecting frauds and other irregularities;
selection and application of appropriate accounting
policies; making judgments and estimates that are
reasonable and prudent; and design, implementation and
maintenance of adequate internal financial controls, that
were operating effectively for ensuring the accuracy and
completeness of the accounting records, relevant to the
preparation and presentation of the financial statement
that give a true and fair view and is free from material
misstatement, whether due to fraud or error.

In preparing the financial statements, management is
responsible for assessing the Bank''s ability to continue as
a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of
accounting unless the Board of Directors either intends
to liquidate the Bank or to cease operations, or has no
realistic alternative but to do so.

The Bank''s Board of Directors are also responsible for
overseeing the Bank''s financial reporting process.

Auditor''s Responsibility for the Audit of the
Financial Statements

Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor''s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with SAs will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
financial statements.

As part of an audit in accordance with SAs, we exercise
professional judgment and maintain professional
skepticism throughout the audit. We also:

• Identify and assess the risks of material
misstatement of the financial statements, whether
due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from
fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of
internal control.

• Obtain an understanding of internal financial
control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances.
Under section 143(3)(i) of the Act, we are also
responsible for expressing our opinion on whether
the Bank has adequate internal financial controls
with reference to financial statements in place and
the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting estimates
and related disclosures made by the management.

• Conclude on the appropriateness of management''s
use of the going concern basis of accounting and,
based on the audit evidence obtained, whether
a material uncertainty exists related to events
or conditions that may cast significant doubt on
the Bank''s ability to continue as a going concern.
If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor''s
report to the related disclosures in the financial
statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of
our auditor''s report. However, future events or
conditions may cause the Bank to cease to continue
as a going concern.

• Evaluate the overall presentation, structure and
content of the financial statements, including the
disclosures, and whether the financial statements
represent the underlying transactions and events in
a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the
financial statements that, individually or in aggregate,
makes it probable that the economic decisions of
a reasonably knowledgeable user of the financial
statements may be influenced. We consider quantitative
materiality and qualitative factors in (i) planning the
scope of our audit work and in evaluating the results of
our work; and (ii) evaluating the effect of any identified
misstatements in the financial statements.

We communicate with those charged with governance
regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including
any significant deficiencies in internal control that we
identify during our audit.

We also provide those charged with governance with
a statement that we have complied with relevant
ethical requirements regarding independence, and to
communicate with them all relationships and other
matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.

From the matters communicated with those charged with
governance, we determine those matters that were of
most significance in the audit of the financial statements
of the current period and are therefore the key audit
matters. We describe these matters in our auditor''s report
unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in
our report because the adverse consequences of doing
so would reasonably be expected to outweigh the public
interest benefits of such communication.

Other Matter

The comparative financial information of the Bank for
the previous reporting periods included in the Financial
Statements have been audited by Deloitte Haskins & Sells,
Chartered Accountants, one of the joint statutory auditors
of the Bank, who have expressed an unmodified opinion.
Accordingly, Abarna & Ananthan, Chartered Accountants,
do not express any opinion on the comparative figures.

Our Opinion on the Financial Statements is not modified
in respect of this matter.

Report on Other Legal and Regulatory
Requirements

1. As required by Section 143(3) of the Act and Section
30(3) of the Banking Regulation Act, 1949, based on
our Audit, we report that:

a) We have sought and obtained all the
information and explanations which to the best
of our knowledge and belief were necessary for
the purposes of our audit and found them to
be satisfactory.

b) In our opinion, the transactions of the Bank
which have come to our notice have been within
the powers of the bank.

c) As explained in the paragraph 2 below, the
financial accounting system of the Bank is
centralised and, therefore, accounting returns
are not required to be submitted by branches.

d) In our opinion, proper books of account as
required by law have been kept by the Bank
so far as it appears from our examination
of those books.

e) The Balance Sheet, Profit and Loss Account and
the Cash Flow Statement dealt with by this Report
are in agreement with the books of account.

f) In our opinion, the aforesaid financial
statements comply with the Accounting
Standards specified under Section 133 of the Act
as applicable to the Banks.

g) On the basis of the written representations
received from the directors and taken on record
by the Board of Directors, none of the directors
is disqualified as on March 31, 2023 from being
appointed as a director in terms of Section
164(2) of the Act.

h) With respect to the adequacy of the internal
financial controls with reference to financial
statements of the Bank and the operating
effectiveness of such controls, refer to our
separate Report in "Annexure A". Our report
expresses an unmodified opinion on the
adequacy and operating effectiveness of the
Bank''s internal financial controls with reference
to financial statements.

i) With respect to the other matters to be included
in the Auditor''s Report in accordance with the
requirements of section 197(16) of the Act, as
amended, in our opinion and to the best of our
information and according to the explanations
given to us, the entity being a banking
company, section 197 of the Act related to the
managerial remuneration is not applicable
by virtue of Section 35B(2A) of the Banking
Regulation Act, 1949.

j) With respect to the other matters to be included
in the Auditor''s Report in accordance with Rule
11 of the Companies (Audit and Auditors) Rules,

2014, as amended in our opinion and to the
best of our information and according to the
explanations given to us:

i. The Bank has disclosed the impact
of pending litigations on its financial
position as at the yearend in its financial
statements - Refer Schedule 12 to the
financial statements;

ii. The Bank did not have any long-term
contracts including derivative contracts as
at the yearend for which there were any
material foreseeable losses.

iii. There were no amounts which were
required to be transferred to the Investor
Education and Protection Fund by the Bank.

iv. (a) The Management has represented

that, to the best of it''s knowledge
and belief, as disclosed in Note
B.16 of Schedule 18 to the financial
statements no funds have been
advanced or loaned or invested
(either from borrowed funds or share
premium or any other sources or kind
of funds) by the Bank to or in any
other person(s) or entity(ies), including
foreign entities ("Intermediaries"),
with the understanding, whether
recorded in writing or otherwise,
that the Intermediary shall, directly
or indirectly lend or invest in other
persons or entities identified in any
manner whatsoever by or on behalf
of the Bank ("Ultimate Beneficiaries")
or provide any guarantee, security
or the like on behalf of the
Ultimate Beneficiaries.

(b) The Management has represented,
that, to the best of it''s knowledge
and belief, as disclosed in Note
B.16 of Schedule 18 to the financial
statements, no funds have been
received by the Bank from any person(s)

or entity(ies), including foreign
entities ("Funding Parties"), with the
understanding, whether recorded in
writing or otherwise, that the Bank
shall, directly or indirectly, lend or
invest in other persons or entities
identified in any manner whatsoever
by or on behalf of the Funding Party
("Ultimate Beneficiaries") or provide
any guarantee, security or the like on
behalf of the Ultimate Beneficiaries.

(c) Based on the audit procedures
performed that have been considered
reasonable and appropriate in the
circumstances, nothing has come
to our notice that has caused us to
believe that the representations under
sub-clause (i) and (ii) of Rule 11(e),
as provided under (a) and (b) above,
contain any material misstatement.

v. The Bank has not declared or paid any
dividend during the year and has not
proposed final dividend for the year.

vi. Proviso to Rule 3(1) of the Companies
(Accounts) Rules, 2014 for maintaining
books of account using accounting software
which has a feature of recording audit
trail (edit log) facility is applicable to the
Bank w.e.f. April 1, 2023, and accordingly,
reporting under Rule 11(g) of Companies
(Audit and Auditors) Rules, 2014 is not
applicable for the financial year ended
March 31, 2023.

2. We report that during the course of our audit
we have visited and performed select relevant
procedures at 24 branches. Since the Bank considers
its key operations to be automated, with the key
applications largely integrated to the Core Banking
System, it does not require its branches to submit
any financial returns. Accordingly, our audit is carried
out centrally at Head Office based on the records and
data required for the purpose of Audit being made
available to us.

For Deloitte Haskins & Sells For Abarna & Ananthan

Chartered Accountants Chartered Accountants

(Firm Registration No. 117365W) (Firm Registration No. 000003S)

G. K. Subramaniam Mohan Rao G.

Partner Partner

Membership No. 109839 Membership No. 203737

UDIN: 23109839BGXPXR8925 UDIN: 23203737BGZDDX2771

Place: Mannuthy Place: Bengaluru

Date: May 10, 2023 Date: May 10, 2023