Accounting Policies of Jana Small Finance Bank Ltd. Company

Mar 31, 2025

3. SIGNIFICANT ACCOUNTING POLICIES

A. REVENUE RECOGNITION:

i. Interest income on loans, advances and investments is recognized in the Profit and Loss Account on
accrual basis except income on advances, investments and other assets classified as Non-Performing
Assets (NPA), which is recognized upon realization, as per the prudential norms prescribed by RBI.
Unrealized interest on NPA is reversed in the Profit and Loss Account and is recognized only on
receipt basis. Further, charges on advances are recognized on receipt basis.

ii. Income on non-coupon bearing discounted instruments is recognized over the tenure of the
instruments so as to provide a constant periodic rate of return.

iii. Processing fees on loan, direct assignment and securitisation is recognised upfront when it becomes
due.

iv. Dividend is accounted on an accrual basis when the right to receive the dividend is established.

v. Interest income on deposits with banks and financial institutions is recognized on a time
proportion basis taking into account the amount outstanding and the implicit rate of interest.

vi. Fees received on sale of Priority sector lending certificates is recognised upfront in the Profit
and Loss Account.

vii. Amounts recovered against debts written off in earlier years are recognised in the Profit and
Loss Account on cash basis.

viii. Gain / loss on sell down of loans is recognised in line with the extant RBI guidelines.

ix. All other fees, service charges and commission income are accounted for as and when they
become due.

B. INVESTMENTS:

Classification:

In accordance with RBI guidelines, investments are classified under three categories, viz., Held to
Maturity (HTM), Available for Sale (AFS) and Fair Value through Profit and Loss (FVTPL). Held for
Trading (HFT) is a separate investment sub-category within FVTPL. Subsequent shifting amongst
the categories is done in accordance with the RBI guidelines. Under each of these categories,
investments are further classified under five groups - Government Securities, Other Approved
Securities, Shares, Debentures and Bonds. All investments in subsidiaries, associates and joint
ventures are classified in a distinct category from the other investment categories.

The transactions in securities are accounted on settlement date except in the case of equity
shares which are accounted on trade date.

Basis of classification:

a. Held to Maturity (HTM)

Securities meeting the following criteria are classified as HTM:

i. 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

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

b. Available for sale (AFS)

Securities meeting the following criteria are classified as AFS:

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

ii. The contractual terms of the security meet the ''SPPI criterion'' as mentioned above.

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

c. Fair Value through profit and loss account (FVTPL)

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

HFT is a sub-category created within FVTPL, which includes any instrument which the Bank
holds for one or more of the following purposes and having no legal impediment against
selling or fully hedging it:

i. Short-term resale

ii. Profiting from short-term price movements

iii. Locking in arbitrage profit

iv. Hedging risks that arise from instruments meeting (i), (ii), (iii) above
Transfer between categories:

Transfer of investments from one category to the other is done in accordance with RBI guidelines.
Transfer of securities from AFS / HFT category to HTM category is made at the lower of book
value or market value. In the case of transfer of securities from HTM to AFS / HFT category, the
investments held under HTM at a discount are transferred to AFS / HFT category at the acquisition
price and investments placed in the HTM category at a premium are transferred to AFS/ HFT at
the amortized cost. After transfer, these securities are re-valued and resultant depreciation, if any,
is provided.

Transfer of investments from AFS to HFT or vice- a- versa is done at the book value. Depreciation
carried, if any, on such investments is also transferred from one category to another.

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.

Broken period interest if any, paid on acquisition of investments is debited to Profit and Loss
Account. Broken period interest received on sale of securities is recognized as interest income.

Where the securities are quoted or the fair value can be determined based on market observable
inputs (i.e., based on Level 1 or Level 2 inputs) any Day 1 gain / loss is recognised in the Profit and
Loss Account immediately.

Any Day 1 loss arising from Level 3 investments is recognised immediately. Any Day 1 gains
arising from Level 3 investments is deferred. In the case of debt instruments, the Day 1 gain is
amortized on a straight-line basis up to the maturity date, while for unquoted equity instruments,
the gain shall be set aside as a liability until the security is listed or derecognised.

Subsequent Measurement:

The securities held under HTM are carried at cost and are not marked to market (MTM) after
initial recognition. Any discount or premium on the securities under HTM is amortised over the
remaining life of the instrument.

The securities held under AFS are fair valued daily. Any discount or premium on the acquisition
of debt securities under AFS is amortised over the remaining life of the instrument. The valuation
gains and losses across all performing investments, irrespective of classification held under AFS
is aggregated. The net appreciation or depreciation is directly credited or debited to AFS Reserve
without routing through the Profit & Loss Account.

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 daily, whereas other securities in FVTPL are fair
valued quarterly. Any discount or premium on the acquisition of debt securities under FVTPL is
amortised over the remaining life of the instrument.

Disposal of Investments:

Profit / Loss on sale of investments under the aforesaid three categories is recognised in the
Profit and Loss Account. Cost of investments is determined based on the weighted average cost
method.

The profit from sale of investments under HTM category, net of taxes and transfer to Statutory
Reserve is appropriated from the Profit and Loss Account to Capital Reserve.

Upon sale or maturity of a debt instrument in AFS category, the accumulated gain/ loss for that
security in the AFS-Reserve is transferred and recognized in the Profit and Loss Account. In the
case of equity instruments designated under AFS at the time of initial recognition, any gain or
loss on sale of such investments is transferred from AFS-Reserve to the Capital Reserve.

Determination of Fair Value:

Fair value means the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants on the measurement date. The fair value for
the purpose of initial recognition and periodical valuation of investments is determined as per
the RBI directions.

The fair value for the quoted securities is the prices declared by the Financial Benchmarks
India Private Ltd. (FBIL). For securities whose prices are not published by FBIL, the fair value of
the quoted security shall be 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).
Treasury Bills are fair valued at their carrying cost which is the acquisition cost adjusted for the
discount accrued as on the valuation date.

Unquoted Central / State Government securities are valued on the basis of the prices / YTM rates
published by the FBIL. Other Unquoted SLR securities are valued applying the YTM method by
marking them up by 25 basis points above the yields of the Central Government Securities of
equivalent maturity put out by FBIL.

Equity shares for which current quotations are not available, the fair value is the break-up value
which is ascertained from the company''s latest audited balance sheet. In case the latest audited
balance sheet is not available or is more than 18 months old, the shares are valued at ''1 per
company.

Investment in un-quoted mutual fund units is valued on the basis of the latest repurchase price
declared by the mutual fund in respect of each scheme. In case of funds with a lock-in period or
any other Mutual Fund, where repurchase price / market quote is not available, units are valued
at Net Asset Value (NAV) of the scheme. If NAV is not available, these shall be valued at cost, till
the end of the lock-in period.

Investment in security receipts (SRs) and other instruments issued by an Asset Reconstruction
Company (ARC) are valued as per the net asset value provided by the issuing Asset Reconstruction
Company.

Non-performing investments are identified, and provision are made thereon based on RBI
guidelines. The provision on such non-performing investments is not set off against the
appreciation in respect of other performing investments. Interest on non-performing investments
is not recognized in the Profit and Loss Account until received.

Repurchase and reverse repurchase transactions:

In accordance with the RBI guidelines, repurchase (Repo) and reverse repurchase (Reverse Repo)
transactions in government securities and corporate debt securities are reflected as borrowing
and lending transactions respectively. Borrowing cost on repo transactions is accounted as
interest expense and revenue on reverse repo transactions is accounted as interest income.

C. ADVANCES CLASSIFICATION AND PROVISIONING:

Advances are classified into performing and non-performing advances (NPA) as per the RBI guidelines and
are stated net of specific provisions made towards NPA. Further, NPA are classified into sub-standard, doubtful
and loss assets based on the criteria stipulated by RBI. Provisions for NPA is made at rates as prescribed by the
RBI and as per Bank''s internal assessment which is approved by the Board of Directors of the Bank and same
is charged to the Profit and Loss Account under Provisions and Contingencies.

Non-performing advances are written-off in accordance with Bank''s policies. Amounts recovered against
debts written-off are recognised in the Profit and Loss account as "Miscellaneous income" under Other
Income (Schedule 14).

The Bank considers a restructured account 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 advances/securities, which
would generally include, among 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. Necessary
provision including diminution in the fair value of a restructured account is made and classification thereof
is as per the extant RBI guidelines.

The Bank maintains a general provision on standard advances at the rates prescribed by RBI. Provision made
against standard assets is included in "Other liabilities & provisions" (Schedule 5).

The Bank transfers advances through inter-bank participation. In accordance with RBI guidelines, in the case
of participation with risk, the aggregate amount of the participation issued by the Bank is reduced from
advances. In case of participation with non-risk sharing, the aggregate amount of participation is classified
as borrowings.

The Bank trades in Priority Sector portfolio by selling or buying Priority Sector Lending Certificates (PSLCs)
as per RBI prescribed guidelines. There is no transfer of risk on loan assets in these transactions. The fee paid
for purchase of the PSLC is treated as an ''Expense'' and the fee received for the sale of PSLCs is treated as
''Miscellaneous Income''.

Floating Provisions:

Provisions made, if any, in excess of the Bank''s internal assessment for specific loan loss provisions
for non-performing assets and regulatory general provisions are categorised as floating provisions.
Creation of floating provisions is considered by the Bank up to a level approved by the Board of
Directors in accordance with RBI guidelines, floating provisions are used up to a level approved by the
Board of Directors only for contingencies under extraordinary circumstances and for making specific
provisions for impaired accounts as per these guidelines or any regulatory guidance / instructions.
Floating provisions, if any, are shown under "Other liabilities and Provisions" (Schedule 5).

Provision for unhedged Foreign Currency Exposure of borrowers is made as per RBI guidelines.

D. SECURITISATION AND TRANSFER OF ASSETS:

Assets transferred through securitisation and direct assignment of cash flows are de-recognised when they
are sold (true sale criteria being fully met with) and consideration is received. Sales / transfers that do not
meet true sale criteria are accounted for as borrowings. For a securitisation or direct assignment transaction,
the Bank recognises profit upon receipt of the funds and loss is recognised at the time of sale.

On sale of stressed assets, if the sale is at a price below the net book value (i.e., funded outstanding less
specific 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
when the sum of cash received by way of initial consideration and / or redemption or transfer of security
receipts issued by Securitisation Company (''SC'') / Reconstruction Company (''RC'') exceeds the net book value
of the loan at the time of transfer.

In respect of stressed assets sold 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, 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.

The Bank invests in Pass Through Certificates (PTCs) issued by other Special Purpose Vehicles (SPVs). These
are accounted at acquisition cost and are classified as investments. The Bank also buys loans through the
direct assignment route which are classified as advances. These are carried at acquisition cost unless it is
more than the face value, in which case the premium is amortised based on effective interest rate method.

Bank recognizes Excess Interest Spread (EIS) only on cash basis and over collateralization, if any, is included
in the Gross Advances and it is provided for as per the provisioning norms of RBI.

Direct assignment portfolio bought by the Bank, if any, are classified as advances. These are carried at
acquisition cost unless it is more than the face value, in which case the premium is amortised over the tenor
of the loans.

E. FIXED ASSETS AND DEPRECIATION:

Fixed Assets are stated at cost less accumulated depreciation as adjusted for accumulated impairment, if
any. Cost includes cost of purchase inclusive of freight, duties, incidental expenses and all other directly
attributable expenditures towards acquisition and installation of assets before it is ready for intended use.
Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefit /
functioning capability from / of such assets. Specific grant received for acquisition of fixed assets are reduced
from the cost of the asset.

Depreciation on fixed asset is charged over the estimated useful life on a straight line basis after retaining a
residual value of 0.01%, except for leasehold improvements and software which are fully depreciated.

The estimated useful life of the intangible assets are reviewed at the end of each financial year and the
amortisation period is revised to reflect the changed pattern, if any.

Software is depreciated fully over the useful life of the software based on the license validity or five years
whichever is earlier.

Fixed assets purchased during the year are depreciated on the basis of actual number of days the asset has
been put to use in the year. Fixed assets disposed off during the year are depreciated up to the date of disposal.

Profit or losses arising from the retirement or disposal of a Fixed / Intangible Asset are determined as the
difference between the net disposal proceeds and the carrying amount of fixed/ intangible assets and
recognized as income or expense in the Profit and Loss Account. Profit on sale of fixed assets net of taxes and
transfer to statutory reserve, is transferred to Capital Reserve as per RBI guidelines.

F. IMPAIRMENT OF ASSETS (Other than loans and advances):

In accordance with Accounting Standard-28- Impairment of assets, the Bank assesses at each Balance Sheet
date whether there is any indication of impairment of assets based on internal / external factors. Impairment
loss, if any, is provided in the Profit and Loss Account to the extent the carrying amount of assets exceeds
their estimated recoverable amount, which is higher of an asset''s net selling price and its value in use. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and risks specific to the
asset.

After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining
useful life. 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.

G. FOREIGN CURRENCY TRANSACTIONS:

(i) Foreign currency transactions are recorded in the reporting currency, by applying to the foreign
currency amount the exchange rate between the reporting currency and the foreign currency at the
date of the transaction.

(ii) Foreign currency monetary items are reported using the closing rate. Non-monetary items which are
carried in terms of historical cost denominated in a foreign currency are reported using the exchange
rate at the date of the transaction.

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

H. EMPLOYEE BENEFITS:

Defined contribution plan:

Retirement benefits in the form of provident fund and employee state insurance scheme are
defined contribution schemes and the contributions are charged to the Profit and Loss Account of
the year when the contributions to the respective funds are due, when the services are rendered

by the employees. There are no other obligations other than the contribution payable to the
respective funds.

Defined benefit plan and compensated absences:

The Bank accounts for its liability for unfunded compensated absences and funded gratuity based
on actuarial valuation, as at the Balance Sheet date, determined annually by an independent
actuary using the Projected Unit Credit Method to determine present value of the defined benefit
obligations and related service costs. The Bank makes contribution to the Gratuity Fund managed
by life insurance companies. Actuarial gains and losses are recognized in full in the Profit and Loss
Account for the period and are not deferred.

Short term employee benefits:

Short term employee benefits expected to be paid in consideration for the services rendered by
the employees is recognized during the period when the employee renders service.

I. INCOME TAXES:

Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank.
The current tax expense and deferred tax expense are determined in accordance with the provisions of the
Income Tax Act, 1961 and as per Accounting Standard 22 - Accounting for Taxes on Income respectively.

Deferred tax asset/ liability is recognized 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 assets and liabilities are measured using the tax rates and the tax laws
enacted or substantively enacted as at the balance sheet date. Deferred tax assets are recognized only to
the extent there is reasonable certainty that the assets can be realized in future. In case of unabsorbed
depreciation or carried forward loss under taxation laws, deferred tax assets are recognized only if there
is virtual certainty supported by convincing evidence of realization of such assets. Deferred tax assets are
reviewed at each Balance Sheet date and appropriately adjusted to reflect the amount that is reasonably /
virtually certain to be realized.

J. EARNINGS PER SHARE:

Bank reports basic and diluted earnings per share in accordance with Accounting Standard - 20, Earnings
Per Share. Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to
equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares
outstanding during the year. The weighted average number of equity shares outstanding during the year
is adjusted for events of exercise of employee stock options and restricted stock units, bonus issue, bonus
element in a rights issue to existing shareholders and share split.

Diluted earnings per share reflects the potential dilution that could occur if contracts to issue equity shares
were exercised or converted during the year. Diluted earnings per equity share are computed using the
weighted average number of equity shares and the dilutive potential equity shares (stock options, restricted
stock units and convertible preference shares) outstanding during the year, except where the results are anti¬
dilutive.

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Mar 31, 2024

Significant Accounting Policies appended to and forming part of the financial statements for the year ended March 31, 2024

1. CORPORATE INFORMATION:

Jana Small Finance Bank Limited (Formerly known as Janalakshmi Financial Services Limited - the “Company”), headquartered in Bangalore, engaged in providing a wide range of banking and financial services. Originally incorporated on July 24, 2006, the Company registered as a Non-Banking Financial Company (NBFC) with the Reserve Bank of India on March 4, 2008. The Company got classified as a NBFC-MFI effective from September 5, 2013. The Company became a public limited company under the provisions of Companies Act, 2013, with effect from August 10, 2015.

Pursuant to the resolution passed by the shareholders at the Extraordinary General Meeting (EGM) held on January 12, 2018 and the issue of small finance bank license by Reserve Bank of India (RBI) on April 28, 2017 under section 22(1) of the Banking Regulation Act, 1949 “Janalakshmi Financial Services Limited” (the “Company”) converted itself into a Small Finance Bank with effect from March 28, 2018. Accordingly, the name of the Company was changed to Jana Small Finance Bank Limited (the “Bank”).

The Bank has received scheduled Bank status with effect from 16 July, 2019 vide publication in the Gazette of India (Part III - Section 4) dated July 27 - August 02, 2019. Accordingly, Jana Small Finance Bank Limited is included in the second schedule of the Reserve Bank of India Act, 1934.

2. BASIS OF PREPARATION:

The Bank''s financial statements have been prepared and presented under the historical cost convention, on the accrual basis of accounting and on-going concern basis, unless otherwise stated and in conformity with Generally Accepted Accounting Principles (GAAP), which comprise applicable statutory provisions, regulatory norms/guidelines prescribed by the Reserve Bank of India (RBI), Banking Regulation Act 1949, Accounting Standards specified under Section 133 of Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 and the Companies (Accounting Standards) Rules 2021, in so far as they apply to the banks and the current practices prevalent within the banking industry in India.

Use of Estimates:

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

3. REVENUE RECOGNITION:

i. Interest income on loans, advances and investments is recognized in the Profit and Loss Account on accrual basis except income on advances, investments and other assets classified as Non-Performing Assets (NPAs), which is recognized upon realization, as per the prudential norms prescribed by the RBI. Unrealized Interest on NPA is reversed in the Profit and Loss Account and is recognized only on receipt basis. Further, charges and penal interest on advances is recognized on receipt basis.

ii. Income on non-coupon bearing discounted instruments is recognized over the tenure of the instruments so as to provide a constant periodic rate of return.

iii. Processing fees on loan, direct assignment and securitisation is recognised upfront when it becomes due.

iv. Dividend is accounted on an accrual basis where the right to receive the dividend is established.

v. Interest incomes on deposits with banks and financial institutions is recognized on a time proportion basis taking into account the amount outstanding and the implicit rate of interest.

vi. PSLC related income and expenses is recognised as and when they become due.

vii. All other fees are accounted for as and when they become due.

4. INVESTMENTS:

Classification:

In accordance with RBI guidelines, investments are classified into three categories, viz. Held to Maturity (HTM), Available for Sale (AFS) and Held for Trading (HFT). Under each of these categories, investments are further classified under six groups - Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries / Joint Ventures and Other Investments.

The transactions in Securities are accounted on “Settlement Date” of accounting except in the case of equity shares where trade date accounting is followed.

Basis of classification:

i. Investments that the Bank intends to hold till maturity are classified under “Held to Maturity (HTM)” category.

ii. Investments that are held for resale within 90 days from the date of purchase are classified as “Held for Trading (HFT)”.

iii. Investments, which are not classified in the above two categories, are classified as “Available for Sale (AFS)”. Further, as per the RBI guidelines, HFT securities, which remain unsold for a period of 90 days are reclassified as AFS securities.

iv. An investment is classified as HTM, HFT or AFS at the time of its purchase and subsequent shifting amongst categories is done in conformity with regulatory guidelines.

Transfer between categories:

Transfer of investments from one category to the other is done in accordance with RBI guidelines. Transfer of securities from AFS / HFT category to HTM category is made at the lower of book value or market value. In the case of transfer of securities from HTM to AFS / HFT category, the investments held under HTM at a discount are transferred to AFS / HFT category at the acquisition price and investments placed in the HTM category at a premium are transferred to AFS/ HFT at the amortized cost. After transfer, these securities are re-valued and resultant depreciation, if any, is provided.

Transfer of investments from AFS to HFT or vice- a- versa is done at the book value. Depreciation carried, if any, on such investments is also transferred from one category to another.

Acquisition Cost:

Broken period interest if any, paid on acquisition of investments is debited to Profit and Loss Account. Broken period interest received on sale of securities is recognized as interest income.

Valuation:

Investments classified under AFS and HFT categories are marked to market individually and depreciation/appreciation is aggregated for each group and net depreciation in each group is provided and net appreciation is ignored.

Traded investments (if any) are valued based on the trades / quotes on the recognised stock exchanges or prices published by Financial Benchmarks India Pvt Ltd. (FBIL) with Fixed Income Money Market and Derivatives Association (FIMMDA) as the calculating agent.

The market value of unquoted government of India securities, state government securities etc. which are directly issued by the government of India is computed as per the prices published by FBIL with FIMMDA as the calculating agent.

Unquoted equity shares are valued at the break-up value, if the latest Balance sheet is available or at ''1 for each company 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.

Net depreciation in the value, if any, compared to the acquisition cost, in any of the groups, is charged to the Profit and Loss Account. The net appreciation, if any, in any of the groups is not recognised except to the extent of depreciation provided earlier.

Investments classified under HTM category are carried at their acquisition cost and not marked to market. Any premium on acquisition is amortised over the remaining maturity period of the security on a constant yield-to-maturity basis. Such amortisation of premium is adjusted against interest income under the head “Income from investments”. Any diminution, other than the temporary, in the value of investments in HTM category is provided for.

Security receipts (SR) are valued as per the net asset value provided by the issuing Asset Reconstruction Company from time to time.

Non-performing investments are identified and provision are made thereon based on the RBI guidelines. The provision on such non-performing investments are not set off against the appreciation in respect of other performing investments. Interest on non-performing investments is not recognized in the Profit and Loss Account until received.

Disposal of Investments:

Profit / Loss on sale of investments is taken to Profit and Loss Account. However in case of profit on sale of investments in “Held to Maturity” category, an equivalent amount of profit (net of applicable taxes and amount required to be transferred to statutory reserves) is appropriated to Capital Reserve in accordance with RBI guidelines. Cost of investments is based on the weighted average cost method.

Repurchase and reverse repurchase transactions:

In accordance with the RBI guidelines, repurchase (Repo) and reverse repurchase (Reverse Repo) transactions in government securities and corporate debt securities are reflected as borrowing and lending transactions respectively. Borrowing cost on repo transactions is accounted as interest expense and revenue on reverse repo transactions is accounted as interest income.

5. ADVANCES CLASSIFICATION AND PROVISIONING:

Classification:

Advances are classified into performing and non-performing advances (''NPAs'') as per the RBI guidelines and are stated net of specific provisions made towards NPAs. Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by the RBI. Provisions for NPA is made at rates as prescribed by the RBI and as per Bank''s internal credit policy and same is charged to the Profit and Loss Account under Provisions and Contingencies.

Non-performing advances are written-off in accordance with Bank''s policies. Principal amount recovered against debts written-off are recognised in the Profit and Loss account as “Miscellaneous income” under Other Income (Schedule 14).

The Bank considers a restructured account 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 advances/securities, which would generally include, among 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. Necessary provision including diminution in the fair value of a restructured account is made and classification thereof is as per the extant RBI guidelines.

The Bank maintains a general provision on standard advances at the rates prescribed by the RBI. Provision made against standard assets is included in “Other liabilities & provisions” (Schedule 5).

The Bank transfers advances through inter-bank participation. In accordance with the RBI guidelines, in the case of

participation with risk, the aggregate amount of the participation issued by the Bank is reduced from advances. In case of participation with non-risk sharing, the aggregate amount of participation is classified as borrowings.

The Bank vide RBI circular FIDD.CO.Plan.BC.23/04.09.01/2015-16 dated April 07, 2016 trades in Priority Sector portfolio by selling or buying Priority Sector Lending Certificates (PSLCs). There is no transfer of risk on loan assets in these transactions. The fee paid for purchase of the PSLC is treated as an ''Expense'' and the fee received for the sale of PSLCs is treated as ''Miscellaneous Income''.

Floating Provisions:

Provisions made, if any, in excess of the Bank''s policy for specific loan loss provisions for non-performing assets and regulatory general provisions are categorised as floating provisions. Creation of floating provisions is considered by the Bank up to a level approved by the Board of Directors In accordance with the RBI guidelines, floating provisions are used up to a level approved by the Board only for contingencies under extraordinary circumstances and for making specific provisions for impaired accounts as per these guidelines or any regulatory guidance / instructions. Floating provisions, if any, are shown under “Other liabilities and Provisions” (Schedule 5).

6. SECURITISATION AND TRANSFER OF ASSETS:

Assets transferred through securitisation and direct assignment of cash flows are de-recognised when they are sold (true sale criteria being fully met with) and consideration is received. Sales / transfers that do not meet true sale criteria are accounted for as borrowings. For a securitisation or direct assignment transaction, the Bank recognises profit upon receipt of the funds and loss is recognised at the time of sale.

On sale of stressed assets, if the sale is at a price below the net book value (i.e., funded outstanding less specific 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 when the sum of cash received by way of initial consideration and / or redemption or transfer of security receipts issued by SC/RC exceeds the net book value of the loan at the time of transfer.

In respect of stressed assets sold 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, 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.

The Bank invests in Pass Through Certificates (PTCs) issued by other Special Purpose Vehicles (SPVs). These are accounted at acquisition cost and are classified as investments. The Bank also buys loans through the direct assignment route which are classified as advances. These are carried at acquisition cost unless it is more than the face value, in which case the premium is amortised based on effective interest rate method.

Bank recognizes Excess Interest Spread (EIS) only on cash basis and Over Collateralization, if any, is included in the Gross Advances and it is provided for as per the provisioning norms of RBI.

Direct Assignment portfolio bought by the Bank, if any, are classified as advances. These are carried at acquisition cost unless it is more than the face value, in which case the premium is amortised over the tenor of the loans.

7. FIXED ASSETS AND DEPRECIATION:

Fixed Assets are stated at cost less accumulated depreciation as adjusted for impairment, if any. Cost includes cost of purchase inclusive of freight, duties, incidental expenses and all other directly attributable expenditures towards acquisition and installation of assets before it is ready for commercial use. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future benefit / functioning capability from / of such assets. Specific grant received for acquisition of fixed assets are reduced from the cost of the asset.

Depreciation on fixed asset is charged over the estimated useful life on a straight line basis after retaining a residual value of 0.01%, except for leasehold improvements and software which are fully depreciated.

The Bank is following the estimated useful life as stated in the Part C of Schedule II of Companies Act, 2013 which is as below:

Type of Asset	Useful Life
Computers including desktops and electronic equipment	3 Years
Servers and networks	6 Years
Furniture and fixtures	10 Years
Electrical installation	10 Years
Motor vehicles	8 Years
Office equipment	5 Years
Leasehold improvements	Remaining primary lease period as per agreement

Capital work-in-progress includes cost of fixed assets that are not ready for their intended use.

The estimated useful life of the intangible assets are reviewed at the end of each financial year and the amortisation period is revised to reflect the changed pattern, if any.

Software is depreciated fully over the useful life of the software based on the license validity or five years whichever is earlier.

Fixed assets purchased during the year are depreciated on the basis of actual number of days the asset has been put to use in the year. Fixed assets disposed off during the year are depreciated up to the date of disposal.

Profit or losses arising from the retirement or disposal of a Fixed / Intangible Asset are determined as the difference between the net disposal proceeds and the carrying amount of fixed/ intangible assets and recognized as income or expense in the Profit and Loss Account. Profit on sale of premises, if any, is transferred to Capital Reserve as per the RBI guidelines.

8. IMPAIRMENT OF ASSETS (Other than loans and advances):

In accordance with AS-28- Impairment of assets, Bank assesses at each Balance Sheet date whether there is any indication of impairment of assets based on internal / external factors. Impairment loss, if any, is provided in the Profit and Loss Account to the extent of carrying amount of assets exceeds their estimated recoverable amount, which is higher of an asset''s net selling price and its value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset.

After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life. 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.

9. FOREIGN CURRENCY TRANSACTIONS:

i. Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.

ii. Foreign currency monetary items are reported using the closing rate. Non-monetary items which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of the transaction.

All exchange differences are recognized as income or as expenses in the period in which they arise.

10. EMPLOYEE BENEFITS:

Defined contribution plan:

Retirement benefits in the form of provident fund and employee state insurance scheme are defined contribution schemes and the contributions are charged to the Profit and Loss Account of the year when the contributions to the respective funds are due. There are no other obligations other than the contribution payable to the respective funds.

Defined benefit plan and compensated absences:

Liability for defined benefit gratuity plan and accumulated compensated absences is determined by estimating the present value of amount of benefit that employees have earned in return for their service in the current and prior periods. The Bank accounts for its liability for unfunded compensated absences and funded gratuity based on actuarial valuation, as at the Balance Sheet date, determined annually by an independent actuary using the Projected Unit Credit Method. The Bank makes contribution to Gratuity Funds managed by life insurance companies. Actuarial gains and losses are recognized in full in the Profit and Loss Account for the period and are not deferred.

Short term employee benefits:

Short term employee benefits expected to be paid in consideration for the services rendered by the employees is recognized during the period when the employee renders service.

11. INCOME TAXES:

Income tax expense is the aggregate amount of current tax and deferred tax expense incurred by the Bank. The current tax expense and deferred tax expense are determined in accordance with the provisions of the Income Tax Act, 1961 and as per Accounting Standard 22 - Accounting for Taxes on Income respectively.

Deferred tax is recognized 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 assets and liabilities are measured using the tax rates and the tax laws enacted or substantively enacted as at the balance sheet date. Deferred tax assets are recognized only to the extent there is reasonable certainty that the assets can be realized in future. In case of unabsorbed depreciation or carried forward loss under taxation laws, deferred tax assets are recognized only if there is virtual certainty of realization of such assets. Deferred tax assets are reviewed at each Balance Sheet date and appropriately adjusted to reflect the amount that is reasonably / virtually certain to be realized.

12. EARNINGS PER SHARE:

Bank reports basic and diluted earnings per share in accordance with Accounting Standard - 20, Earnings Per Share. Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting attributable taxes) by the weighted average number of equity shares outstanding during the year. The weighted average number of equity shares outstanding during the year is adjusted for events of exercise of employee stock options and restricted stock units, bonus issue, bonus element in a rights issue to existing shareholders and share split.

Diluted earnings per share reflects the potential dilution that could occur if contracts to issue equity shares were exercised or converted during the year. Diluted earnings per equity share are computed using the weighted average number of equity shares and the dilutive potential equity shares (stock options, restricted stock units and convertible preference shares) outstanding during the year, except where the results are anti-dilutive.

13. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS:

In accordance with AS 29 - Provisions, Contingent Liabilities and Contingent Assets, the Bank creates a provision when there is a present legal or constructive obligation as a result of past events and it is probable that an outflow of resources will be required to settle the obligation, in respect of which reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to its present value and are determined based on best estimate required to settle the obligation at the balances sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates. If it is no longer probable that an outflow of resource would be required to settle the obligation, the provision is reversed.

A disclosure for contingent liability is made when there is:

i. A possible obligation arising from the past events, the existence of which will be confirmed by occurrence or non-occurrence of one or more uncertain future events not within the control of the bank; or

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

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

Contingent assets are not recognised in the financial statements. However, contingent assets are assessed continually and if it is virtually certain that an inflow of economic benefits will arise, the asset and related income are recognised in the period in which the change occurs.

14. ACCOUNTING FOR LEASE:

Operating Lease:

Leases, where the lessor effectively retains substantially all the risks and rewards of ownership of the leased term are classified as operating leases in accordance with Accounting Standard 19, Leases. Lease rentals on assets under operating lease is charged off to the Profit and Loss Account on a straight-line basis in accordance with the AS-19.

Finance Lease:

Leases under which the Bank assumes substantially all the risks and rewards of ownership are classified as finance leases. Assets taken on finance lease are initially capitalised at fair value of the asset or present value of the minimum lease payments at the inception of the lease, whichever is lower. Lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to periods during the lease term so as to produce a constant periodic rate of interest on the remaining balance of liability for each period.

Asset given on finance lease

In case of assets given under finance lease, leased assets are recognised as a receivable at an amount equal to the net investment in the lease. Lease rentals are apportioned between principal and interest on the internal rate of return. The principal amount received reduces the net investment in the lease and interest is recognised as revenue.

15. CASH AND CASH EQUIVALENTS:

Cash and cash equivalents include cash in hand, balances with Reserve Bank of India, balances with other banks/ institutions and money at call and short notice.

16. CASH FLOW STATEMENT:

Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Bank are segregated.

17. SHARE ISSUE EXPENSES:

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

18. SEGMENT INFORMATION:

The disclosure relating to segment information is in accordance with Accounting Standard-17, Segment Reporting and as per the guidelines issued by RBI. Bank has classified its business into following for segment reporting:

i. Treasury includes all investment portfolios, Profit / Loss on sale of Investments, equities, income from money market operations.

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

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

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

Unallocated includes Capital and Reserves and other unallocable assets, liabilities, income and expenses.

19. CORPORATE SOCIAL RESPONSIBILITY:

Expenditure incurred towards corporate social responsibility are recognised as and when becomes due.

20. EMPLOYEE STOCK OPTION PLAN AND RESTRICTED STOCK UNITS:

Designated Employees of the Bank receive remuneration in the form of share based payment transactions, whereby employees render services as consideration for equity instruments

(equity-settled transactions).

The Bank has adopted fair value method for options granted from April 1, 2021, the fair value of options has been estimated on the dates of each grant using the Black-Scholes model. All the options granted if any prior to April 01, 2021 are valued at intrinsic value method. Compensation cost is measured by the excess, if any, of the intrinsic value of the underlying stock over the exercise price as determined under the option plan. The compensation cost is amortised on a straight-line basis over the vesting period of the option with a corresponding credit to Employee Stock Options Reserve. On exercise of the stock options, corresponding balance in Employee Stock Options Reserve is transferred to Share Premium Account.

21. BORROWING COST:

Borrowing cost includes interest, amortization of ancillary costs incurred in connection with the arrangement of borrowings and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost.