Notes to Accounts of SBI Cards and Payment Services Ltd.

Mar 31, 2025

4.13. Provisions, contingent liabilities and
contingent assets

The Company creates a provision when there is a present
obligation as a result of a past event that probably
requires an outflow of resources and a reliable estimate
can be made of the amount of the obligation. The amount
recognised as a provision is the best estimate of the
consideration required to settle the present obligation
at the reporting date, taking into account the risks and
uncertainties surrounding the obligation.

Provisions are reviewed at each Balance Sheet date and
adjusted to reflect the current best estimate. If it is no
longer probable that an outflow of resources would be
required to settle the obligation, the provision is reversed.

A contingent liability is disclosed in respect of a possible
obligation that arise from past events whose existence
will be confirmed only on the occurrence or nonÂ¬
occurrence of one or more uncertain future events not
wholly within the control of the Company or from a
present obligation that arises from past events which are
not recognised because:

a) it is not probable that an outflow of resources
embodying economic benefits will be required to
settle the obligation; or

b) the amount of the obligation cannot be measured
with sufficient reliability

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.

4.14. Provision for reward points redemption

The Company has a reward pointâs program which allows
card members to earn points based on spends through
the cards that can be redeemed for cash, gift vouchers
and retail merchandize. The Company makes payments
to its reward partners when card members redeem their
points and creates provisions , based on the actuarial
valuation by an independent valuer, to cover the cost
of future reward redemptions. The liability for reward
points outstanding as at the year-end and expected to
be redeemed in the future is estimated based on an
actuarial valuation.

4.15. Cash and Cash Equivalent

Cash and cash equivalents comprise cash balances on
hand, cash balances in bank, funds in transit lying in nodal
account of intermediaries/payment gateway aggregators
and highly liquid investments with original maturity period
of three months or less from date of investment that
are readily convertible to known of cash and which are
subject to an insignificant risk of change in value.

4.16. Critical accounting judgements and key sources
of estimation uncertainty

(I) Revenue Recognition: Application of the various
accounting principles in Ind AS 115 related to the
measurement and recognition of revenue requires
us to make judgments and estimates such as
identifying performance obligations, wherein the
company provides multiple services as part of the
contract. Specifically, complex arrangements with
nonstandard terms and conditions may require
significant contract interpretation to determine the
appropriate accounting. The Company consider
various factors in estimating transaction volumes
and estimated marketing activities target fulfilment,
expected behavioural life of card etc.

(II) Business development incentive: Estimation of
business development incentives relies on forecasts
of payments volume, card issuance etc. Performance
is estimated using, transactional information -
historical and projected information and involves
certain degree of future estimation.

(III) Card life: Estimation of card life relies on behavioural
life trend established basis past customer behaviour
/ observed life cycle at a portfolio level.

(IV) Differences between actual results and our estimates
are adjusted in the period of actual performance

(V) Management is required to assess the probability
of loss and amount of such loss with respect
to legal proceedings, if any, in preparing of
financial statements

(VI) Property, Plant and equipment: The Company
reviews the estimated useful lives of property,
plant and equipment at the end of each reporting
period. The lives are based on historical experience
with similar assets as well as anticipation of future
events, which may impact their life, such as change
in technology.

(VII) Impairment of financial assets: A number of
significant judgements are also required in applying
the accounting requirements for measuring ECL
such as;

â¢ Establishing groups of similar financial assets
for the purposes of measuring ECL (Portfolio
segmentation)

â¢ Defining default

â¢ Determining criteria for significant increase in
credit risk.

â¢ Choosing appropriate models and assumptions
for measurement of ECL.

â¢ Use of significant judgement in estimating future
economic scenario to calculate management
overlay over base ECL model.

(VIII) Fair value measurements and valuation processes

â¢ I n estimating the fair value of an asset or a
liability, the Company uses market-observable
data to the extent it is available. Where Level 1
inputs are not available, the Company engages
third party qualified valuers to perform the
valuation. The management works closely with
the qualified external valuers to establish the
appropriate valuation techniques and inputs to
the model.

â¢ Information about the valuation techniques
and inputs used in determining the fair value
of various assets and liabilities are disclosed
in note 38.

â¢ All assets and liabilities for which fair value
is measured in the financial statements are
categorised within the fair value hierarchy,
described as follows, based on the lowest
level"

â¢ Input that is significant to the fair value
measurement as a whole:"

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

Level 2 â Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is directly or indirectly observable.

Level 3 â Valuation techniques for which the
lowest level input that is significant to the fair value
measurement is unobservable.

â¢ For assets and liabilities that are recognised in
the financial statements on a recurring basis,
the Company determines whether transfers
have occurred between levels in the hierarchy
by re-assessing categorisation (based on the
lowest level input that is significant to the fair
value measurement as a whole) at the end of
each reporting period.

(IX) Cost of reward points: The cost of reward point
includes the cost of future reward redemption which
is determined using actuarial valuations. An actuarial
valuation involves making various assumptions that
may differ from actual developments in the future.

the determination of the discount rate; future
salary increases and mortality rates. Due to the
complexities involved in the valuation and its longÂ¬
term nature, a defined benefit obligation is highly
sensitive to changes in these assumptions. All
assumptions are reviewed at each reporting date.

(XI) Lease: The Company evaluates if an arrangement
qualifies to be a lease as per the requirements of Ind
AS 116. Identification of a lease requires significant
judgment. The Company uses significant judgement
in assessing the lease term (including anticipated
renewals) and the applicable discount rate.

The Company determines the lease term as the nonÂ¬
cancellable period of a lease, together with both periods
covered by an option to extend the lease if the Company
is reasonably certain to exercise that option; and periods
covered by an option to terminate the lease if the Company
is reasonably certain not to exercise that option. In
assessing whether the Company is reasonably certain to
exercise an option to extend a lease, or not to exercise an
option to terminate a lease, it considers all relevant facts
and circumstances that create an economic incentive for
the Company to exercise the option to extend the lease,
or not to exercise the option to terminate the lease. The
Company revises the lease term if there is a change in
the non-cancellable period of a lease. The discount rate
is generally based on the incremental borrowing rate
specific to the lease being evaluated or for a portfolio of
leases with similar characteristics.

The Companyâs accounting policies for its revenue streams are disclosed in detail under Note 4 above and is generated in India.
For Critical accounting estimates, refer note 4.16 to the financial statements.

Disaggregation of Revenue

Disaggregation of revenue is not required as the Companyâs primary business is to provide credit card facility and interest on
loans which is governed by Ind AS 109.

Transaction price allocated to the remaining performance obligations

The Company applies practical expedient in Ind AS 115 and does not disclose information about remaining performance obligations
wherein the Company has a right to consideration from customer in an amount that directly corresponds with the value to the
customer of entityâs performance till date.

The Companyâs remaining performance periods for its incentive arrangements with network partners are typically long-term in
nature (typically ranging from 3-5 years). Consideration is variable based upon the number of transactions processed and volume
of activity on the cards. As at March 31, 2025, the estimated aggregate consideration allocated to unsatisfied performance
obligations for these other value-added services is '' 12.54 Crores (previous year: Nil)

Receivables from contracts with customers and contract balances

The following table provides information about receivables, contract assets, contract cost and contract liabilities from contract
with customers

Contract costs

The contract cost primarily relates to:

â¢ Incremental costs that are directly linked to obtaining a new contract with a customer and which would not have been
incurred if the contract had not been obtained, are recognised in the statement of profit and loss over behavioral life of
the portfolio.

â¢ A part of sales promotion expense, fees and commission expense and advertisement expenses which are in the nature of
card value proposition offered to customers, etc and are directly related to selling card membership to new customers are
deferred over the membership period consisting of 12 months.

35 CAPITAL MANAGEMENT

Capital risk is the risk that the Company has insufficient capital resources to meet the minimum regulatory requirements to support
its credit rating and to support its growth and strategic options. The Companyâs capital plans are deployed with the objective of
maintaining capital that is adequate in quantity and quality to support the Companyâs risk profile, regulatory and business needs.
Asset Liability Management Committee [ALCO] is responsible for ensuring the effective management of capital risk. Capital risk
is measured and monitored using limits set out in in relation to the capital and leverage, all of which are calculated in accordance
with relevant regulatory requirements.

As contained in RBI Master Directions - Non-Banking Financial Company - Systemically Important Non-Deposit taking
Company and Deposit taking Company (Reserve Bank) Directions, 2016 (hereinafter referred to as âRBI Master Directions"),
the Company is required to maintain a capital ratio consisting of Tier I and Tier II capital not less than 15 % of its aggregate
risk weighted assets on-balance sheet and of risk adjusted value of off- balance sheet items. Out of this, Tier I capital shall not
be less than 10%. The Board of Director''s regularly monitors the maintenance of prescribed levels of Capital Risk Adjusted
Ratio (CRAR).

The Company makes all efforts to comply with the above requirements. Further, the Company has complied with all externally
imposed capital requirements and internal and external stress testing requirements.

The Board of Directors approved the Dividend distribution policy which is in line with the regulatory requirement and
guidelines as prescribed by RBI from time to time. The policy focuses on the internal and external factors (which includes
long term growth plan, cash flow position, auditorsâ qualification, supervisory findings of RBI on divergence in classification
and provisioning in Stage 3 assets, prevalent economic conditions and market practices etc) which the Board shall consider
before declaring the dividend.

(C) Interim dividend on equity shares declared: During the year ended March 31, 2025, the Board of Directors have
declared interim dividend of 25% ('' 2.50 per equity share of the face value of '' 10.00) for the financial year 2024-25 in
accordance with Section 123(3) of the Companies Act, 2013, as amended. (March 31, 2024 - '' 2.50 per equity share of the
face value of '' 10.00)

Hierarchy of Fair value measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the
asset or transfer the liability takes place either:

â¢ In the principal market for the asset or liability, or

â¢ In the absence of a principal market, in the most advantageous market for the asset or liability
The principal or the most advantageous market must be accessible by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use pricing the asset or
liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits
by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest
and best use.

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

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair
value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

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

Level 2 - Inputs other than quoted prices included within Level 1, that are observable for the asset or liability, either directly
or indirectly;

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

37 FINANCIAL RISK MANAGEMENT
37.1 Financial risk factors

The Company has exposure to the following types of risks from financial instruments:

â¢ Market risk;

â¢ Credit risk; and

â¢ Liquidity risk;

The Companyâs Board of Directors have overall responsibility for the establishment and oversight of the Companyâs risk
management framework. The Risk Management Committee manages the risk management framework and appetite. The Board of
Directors has established the Enterprise Risk Management Committee (ERMC) which is responsible for approving and monitoring
Companyâs risk management framework. The risk management policies, processes and tools are reviewed regularly to reflect
changes in market conditions and the Companyâs activities.

37.1.1 Market risk

Market risk is the risk of loss of future earnings, to fair values or to future cash flows that may result from a change in variables
such as changes in the interest rates, foreign currency exchange rates and other market changes that affect market risk
sensitive instruments.

The Company uses a wide range of qualitative and quantitative tools to manage and monitor various types of market risks it is
exposed to. Quantitative analysis such as net income sensitivities, stress tests etc. are used to monitor and manage companyâs
market risk appetite.

A. Interest risk

Interest rate risk is the risk of loss from fluctuations in the future cash flows or fair value of financial instruments because
of changes in market interest rates.

Company''s investments are categorized under HTM (Held to Maturity) category. Investments are done in Government
securities (T-Bill/ G Sec) only, hence there is no credit risk involved. To monitor the interest rate risk, Treasury function
monitors the modified duration of these investments on monthly basis and report the same to Enterprise Risk Management
Committee through KRI reporting. Further, Company has fixed as well as floating rate borrowings to which it is exposed to
interest rate risk as well as repricing risk at the time of re-borrowing.

Mar 31, 2024

4.13. Provisions, contingent liabilities and contingent assets

The Company creates a provision when there is a present obligation as a result of a past event that probably requires an outflow of resources and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation.

Provisions are reviewed at each Balance Sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources would be required to settle the obligation, the provision is reversed.

A contingent liability is disclosed in respect of a possible obligation that arise from past events whose existence will be confirmed only on the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company or from a present obligation that arises from past events which are not recognised because:

a) it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

b) the amount of the obligation cannot be measured with sufficient reliability

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.

4.14. Provision for reward points redemption

The Company has a reward pointâs program which allows card members to earn points based on spends through the cards that can be redeemed for cash, gift vouchers and retail merchandise. The Company makes payments to its reward partners when card members redeem their points and creates provisions , based on the actuarial valuation by an independent valuer, to cover the cost of future reward redemptions. The liability for reward points outstanding as at the year-end and expected to be redeemed in the future is estimated based on an actuarial valuation.

4.15. Cash and Cash Equivalent

Cash and cash equivalents comprise cash balances on hand, cash balances in bank, funds in transit lying in nodal account of intermediaries/payment gateway aggregators and highly liquid investments with maturity period of three months or less from date of investment that are readily convertible to known of cash and which are subject to an insignificant risk of change in value.

4.16. Critical accounting judgements and key sources of estimation uncertainty

(I) Revenue Recognition: Application of the various accounting principles in Ind AS 115 related to the measurement and recognition of revenue requires us to make judgments and estimates such as identifying performance obligations, wherein the Company provides multiple services as part of the contract. Specifically, complex arrangements with nonstandard terms and conditions may require significant contract interpretation to determine the appropriate accounting. The Company consider various factors in estimating transaction volumes and estimated marketing activities target fulfilment, expected behavioural life of card etc.

(II) Business development incentive: Estimation of business development incentives relies on forecasts of payments volume, card issuance etc. Performance is estimated using, transactional information - historical and projected information and involves certain degree of future estimation.

(III) Card life: Estimation of card life relies on behavioural life trend established basis past customer behaviour / observed life cycle at a portfolio level.

(IV) Differences between actual results and our estimates are adjusted in the period of actual performance

(V) Management is required to assess the probability of loss and amount of such loss with respect to legal proceedings, if any, in preparing of financial statements

(VI) Property, Plant and equipment: The Company reviews the estimated useful lives of property, plant and equipment at the end of each reporting period. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as change in technology.

(VII) Impairment of financial assets: A number of significant judgements are also required in applying the accounting requirements for measuring ECL such as;

â¢ Establishing groups of similar financial assets for the purposes of measuring ECL (Portfolio segmentation)

â¢ Defining default

â¢ Determining criteria for significant increase in credit risk.

â¢ Choosing appropriate models and assumptions for measurement of ECL.

â¢ Use of significant judgement in estimating future economic scenario to calculate management overlay over base ECL model.

(VIII) Fair value measurements and valuation processes

â¢ In estimating the fair value of an asset or a liability, the Company uses market-observable data to the extent it is available. Where Level 1 inputs are not available, the Company engages third party qualified valuers to perform the valuation. The management works closely with the qualified external valuers to establish the appropriate valuation techniques and inputs to the model.

â¢ Information about the valuation techniques and inputs used in determining the fair value of various assets and liabilities are disclosed in note 38.

â¢ All assets and liabilities for which fair value is measured in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level

â¢ Input that is significant to the fair value measurement as a whole:

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

Level 2 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

Level 3 â Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

â¢ For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers

have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

(IX) Cost of reward points: The cost of reward point includes the cost of future reward redemption which is determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future.

(X) Defined Benefit Plans (Gratuity): The cost of the defined benefit gratuity plan and the present value of the gratuity obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate; future salary increases and mortality rates. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

(XI) Lease: The Company evaluates if an arrangement qualifies to be a lease as per the requirements of Ind AS 116. Identification of a lease requires significant judgment. The Company uses significant judgement in assessing the lease term (including anticipated renewals) and the applicable discount rate.

The Company determines the lease term as the noncancellable period of a lease, together with both periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option; and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. In assessing whether the Company is reasonably certain to exercise an option to extend a lease, or not to exercise an option to terminate a lease, it considers all relevant facts and circumstances that create an economic incentive for the Company to exercise the option to extend the lease, or not to exercise the option to terminate the lease. The Company revises the lease term if there is a change in the non-cancellable period of a lease. The discount rate is generally based on the incremental borrowing rate specific to the lease being evaluated or for a portfolio of leases with similar characteristics.

4.17. Recent pronouncements

In the current year, the Company has applied the below amendments to Ind ASs that are effective for an annual period that begins on or after 1^st April, 2023:

(I) Amendments to Ind AS-1 Presentation of financial statements

The Company has adopted the amendments to Ind AS 1 for the first time in the current year. The amendments change the requirements in Ind AS 1 with regard to disclosure of accounting policies. The amendments replace all instances of the term ''significant accounting policies'' with ''material accounting policy information''. Accounting policy information is material if, when considered together with other information included in an entity''s financial statements, it can reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements.

The supporting paragraphs in Ind AS 1 are also amended to clarify that accounting policy information that relates to immaterial transactions, other events or conditions is immaterial and need not be disclosed. Accounting policy information may be material because of the nature of the related transactions, other events or conditions, even if the amounts are immaterial.

However, not all accounting policy information relating to material transactions, other events or conditions is itself material.

(II) Amendments to Ind AS-8 Accounting policies, Changes in accounting estimates and errors-Definition of accounting estimates

The Company has adopted the amendments to Ind AS 8 for the first time in the Accounting Policies, current year. The amendments replace the definition of a change in accounting estimates with a definition of accounting estimates. Under the new definition, accounting estimates are "monetary amounts in financial statements that are subject to measurement uncertainty". The definition of a change in accounting estimates was deleted.

(III) Amendments to Ind AS-12 Income taxes-Deferred tax related to assets and liabilities arising from a single transaction

This amendment has narrowed the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences. No changes would be necessary as a consequence of amendments made to Ind AS 12 as the Company''s accounting policy already complies with the now mandatory treatment.

The Companyâs accounting policies for its revenue streams are disclosed in detail under Note 4 above and is generated in India. For Critical accounting estimates, refer note 4.16 to the financial statements.

Disaggregation of Revenue

Disaggregation of revenue is not required as the Companyâs primary business is to provide credit card facility and interest on loans which is governed by Ind AS 109.

Transaction price allocated to the remaining performance obligations

The Company applies practical expedient in Ind AS 115 and does not disclose information about remaining performance obligations wherein the Company has a right to consideration from customer in an amount that directly corresponds with the value to the customer of entityâs performance till date.

The Companyâs remaining performance periods for its incentive arrangements with network partners are typically long-term in nature (typically ranging from 3-5 years). Consideration is variable based upon the number of transactions processed and volume of activity on the cards. At March 31,2024, the estimated aggregate consideration allocated to unsatisfied performance obligations for these other value-added services is Nil (previous period: ''334.44 Crores.)

Receivables from contracts with customers and contract balances

The following table provides information about receivables, contract assets, contract cost and contract liabilities from contract with customers

Contract assets are presented net of impairment in Note 10 of the Balance sheet.

The below table discloses balances in receivables and unbilled receivables.

36 CAPITAL MANAGEMENT

Capital risk is the risk that the Company has insufficient capital resources to meet the minimum regulatory requirements to support its credit rating and to support its growth and strategic options. The Companyâs capital plans are deployed with the objective of maintaining capital that is adequate in quantity and quality to support the Companyâs risk profile, regulatory and business needs. Management/Asset Liability Management Committee [ALCO] is responsible for ensuring the effective management of capital risk. Capital risk is measured and monitored using limits set out in in relation to the capital and leverage, all of which are calculated in accordance with relevant regulatory requirements.

Hierarchy of Fair value measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

â¢ In the principal market for the asset or liability, or

â¢ In the absence of a principal market, in the most advantageous market for the asset or liability The principal or the most advantageous market must be accessible by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participantâs ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

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

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

38 FINANCIAL RISK MANAGEMENT

38.1 Financial risk factors

The Company has exposure to the following types of risks from financial instruments:

â¢ Market risk;

â¢ Credit risk; and

â¢ Liquidity risk;

The Companyâs Board of Directors have overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Risk Management Committee manages the risk management framework and appetite. The Board of Directors has established the Enterprise Risk Management Committee (ERMC) which is responsible for approving and monitoring Companyâs risk management framework. The risk management policies, processes and tools are reviewed regularly to reflect changes in market conditions and the Companyâs activities.

38.1.1 Market risk

Market risk is the risk of loss of future earnings, to fair values or to future cash flows that may result from a change in variables such as changes in the interest rates, foreign currency exchange rates and other market changes that affect market risk sensitive instruments.

The Company uses a wide range of qualitative and quantitative tools to manage and monitor various types of market risks it is exposed to. Quantitative analysis such as net income sensitivities, stress tests etc. are used to monitor and manage Companyâs market risk appetite.

A. Interest risk

Interest rate risk is the risk of loss from fluctuations in the future cash flows or fair value of financial instruments because of changes in market interest rates.

Company''s investments are categorised under HTM (Held to Maturity) category. Investments are done in Governmenl securities (T-Bill/ G Sec) only, hence there is no credit risk involved. To monitor the interest rate risk, Treasury functior monitors the modified duration of these investments on monthly basis and report the same to Enterprise Risk Managemenl Committee through KRI reporting. Further, Company has fixed as well as floating rate borrowings to which it is exposec to interest rate risk as well as repricing risk at the time of re-borrowing.

Foreign Currency risk is the risk that the fair value or future cash flows of a financial instrument, denominated in currency other than functional currency, will fluctuate because of changes in foreign exchange rates. The Company is exposed to foreign currency risk on its borrowings, business development income and vendor payments denominated in foreign currency. Company has Board approved Foreign Exchange Risk Management Policy in place for monitoring the currency exchange risk.

The Companyâs currency risk management policy lays down the appropriate systems and controls to identify, measure and monitors, the currency risk for reporting to the management. Parameters like hedging ratio, un- hedged exposure, exposure limit with banks etc. are continuously monitored as a part of currency risk management. Exchange rate exposures are managed within approved parameters using forward foreign exchange contracts. Foreign currency exposure under borrowings is fully hedged at the time of taking the loan itself.

Derivative financial instruments

38.1.2 Credit Risk

Credit risk is the risk of financial loss arising out of customerâs failing to meet their contractual obligations to the Company.

The Company has a board approved Credit Risk policy. The Chief Risk Officer (CRO) owns the policy.

Credit risk arises mainly from loans and advances to retail and corporate customers arising on account of facilitating credit card loans to customers. The Company also has exposure to credit risk arising from other financial assets such as cash and cash equivalents, other financial assets including fixed deposits with banks, other receivables from contracts with customers and contract assets etc. Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies.

A. Credit risk management approach

Managing credit risk is the most important part of total risk management exercise. The CRO of the Company is responsible for the key policies and processes for managing credit risk, which include formulating credit policies and risk rating frameworks, guiding the Companyâs appetite for credit risk exposures, undertaking independent reviews and objective assessment of credit risk, monitoring performance and management of portfolios. The principal objectives being maintaining a strong culture of responsible lending across the Company and robust risk policies and control frameworks, implementing and continually re-evaluating our risk appetite and ensuring there is adequate monitoring of credit risks, their costs and their mitigation.

The basic credit risk management would cover two key areas, viz., (a) customer selection & (b) customer management. These are governed by Board Approved Credit Policy and Collections Policy which is reviewed on a regular basis.

(a) Customer Selection

Key criterion for customer selection is in accordance with Board Approved Credit Policy, which defines, inter alia, type of customers, category, market segment, income criterion, KYC requirement, documentation etc. The Policy also spells out details of credit appraisal process, delegation structure. The customer selection process aims to ensure quality portfolio and lower delinquency.

(I) Retail Customer Selection process

All the fulfilled approved applications undergo a number of checks which include

â¢ internal deduplication checks,

â¢ fraud deduplication check

â¢ scrutiny of KYC and income documents

â¢ Sophisticated Machine Learning (ML) application models

â¢ Bureau checks etc

For Credit limit is assigned basis ML models to estimate the debt and income of a customer

(II) Unsecured Corporate customer selection process

â¢ For all unsecured corporate card exposures, SBI Card conducts a detailed subjective assessment based on information taken from the corporate, bureau reports, third party credit assessment agencies like rating agencies and any publicly available information.

â¢ To accurately assess the credit profile of a corporate, SBI Card assesses the detailed financials, stock price performance (if listed) trends over the recent past. The critical parameters are collated as a credit proposal and approval is done by the credit committee.

â¢ In general, the Company evaluate the business risks associated with the corporate and its industry, its financial profile, liquidity situation and financial flexibility. A peer comparison is also made between the corporate and other reputed companies from the same industry.

(III) Secured Corporate customer selection process

SBI Card allows exposure to corporates against liquid securities (e.g. Fixed Deposit & Bank Guarantee). For all secured corporate card exposures, SBI Card checks the bureau reports and a slightly shorter proposal is put before the approving authority (as per the delegation authority approved by the Board of Directors). The security is validated before any cards are issued.

(b) Customer Management

Customer management relates to credit controls once a card is issued, broadly consisting of:

i. Portfolio monitoring

The Company perform continuous monitoring of the portfolio leveraging various capabilities including ML based behavior scores, bureau refresh, bureau alerts, payment behavior, transaction trends, and periodic update on income estimation

ii. Portfolio management

Portfolio management activities enable us to grow lower risk exposures while restricting high risk. The Company have robust capabilities around dynamic limit management, cross-sell of term loans, balance transfers. Account management capabilities including a robust blocking strategy, reinstatements, dispute management, and overlimit strategies

iii. Fraud control

Continuous monitoring of transactions and a risk-based approach is leveraged to identify instances of fraud like account takeover, unauthorised access. ML models are leveraged to identify potential frauds and proactively protect against the same

iv. Collection strategy

Customers who fail to pay their dues by the stipulated payment due dates, at various stages of delinquency come under the purview of collection and recovery strategies. The Company has developed ML models to prioritise collection efforts and also guide the intensity of efforts across delinquency buckets. Hardship tools are leveraged to help resolve cases including settlements and restructuring. Post write-off, ML based segmentation is leveraged to prioritise efforts. For secured cards, liens on FDs / BGs are invoked

B. Credit risk analysis

This section analyses Companyâs credit risk split as follows;

(a) Exposure to credit risk - Analysis of overall exposure to credit risk before and after credit risk mitigation.

(b) Credit quality analysis - Analysis of overall loan portfolio by credit quality.

(d) Credit risk mitigation - Analysis of collaterals held by client segment and collateral type.

(a) Exposure to credit risk

Maximum exposure to credit risk is given below:

Loans to customer includes loans secured by lien on Fixed deposits and Bank Guarantee held with third party banks.

Secured loans account for 0.54% as at March 31, 2024, (0.72% as at March 31, 2023) of total loans.

Notes:

â¢ Loans to customers which accounts for 87.8% of total exposure to credit risk, as at March 31,2024, is segregated based on risk characteristics of the population to manage credit quality and measure impairment.

â¢ Credit risk on cash and cash equivalents is limited as we generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies.

â¢ Investments in Government Securities are measured at amortised cost and Investments in unquoted instruments are valued at Fair value as on balance sheet date and effect has been routed through Other Comprehensive Income to be in line with Ind AS guideline.

â¢ Derivative instruments taken by the Company are from the same party (Parent Company) from whom the Company has taken the underlying loan. Hence, default risk from counterparty is also being a financial institution with high credit rating is limited.

â¢ Company follows simplified approach for recognition of impairment loss allowance on trade receivables/other financial assets wherein Company uses a provision matrix to determine the impairment loss allowance on the portfolio of receivables.

Credit concentration risk

Credit concentration risk may arise from a single large exposure to a counterparty or a group of connected

counterparties, or from multiple exposures across the portfolio that are closely correlated.

Large exposure concentration risk is managed through concentration limits set by a counterparty or a group of

connected counterparties based on control and economic dependence criteria.

For concentrations that are material at a Company level, breaches and potential breaches are monitored by the

respective governance committees and reported to the Risk Committee and CRO.

The Company follows the prescribed Regulatory Prudential Norms:

Â¦ Single Borrower Exposure limit - 25% of Tier I Capital of SBI Cards & Payment Services Ltd.

Â¦ Group Borrower Exposure limit - 40% of Tier I Capital of SBI Cards & Payment Services Ltd.

In addition, there is also an internal capping on the single borrower exposure at '' 200 Crores

(b) Credit quality analysis Credit grading

The Company classifies credit exposure basis risk characteristics into high/medium/low risk. The Company has in place a credit risk grading model (Internal rating model) which is supplemented by external data such as credit bureau scoring information, financials statements and payment history that reflects its estimates of probabilities of defaults of individual counterparties and it applies blocks(soft/hard) on accounts based on activity pattern of the borrower. Hard blocks are permanent blocks in scenarios such as Death, Voluntary closure or NPA which prevent any further use of the card. Soft blocks are temporary blocks put in response to certain triggers like missed payment, over limit usage, etc. which are removed once the issue is resolved. A breakdown of loans by credit quality is given below.

Credit quality by client segment

An overall breakdown of loan portfolio by client segment is provided below differentiating between performing and non-performing loan book.

The Company segregates its credit risk exposure from loans & advances to customers as Stage 1 (Good), Stage 2 (Increased credit risk), Stage 3 (Impaired loans). The staging is done based on criteria specified in Ind AS 109 and other qualitative factors.

(c) Impairment

Collective measurement model (Retail and Corporate)

The estimation of credit exposure for risk management purposes is complex and requires the use of models, as the exposure varies with the change in market conditions, expected cash flows and the passage of time. The assessment of credit risk of a portfolio of assets entails further estimations as to likelihood of defaults occurring, of the associated loss ratios, collaterals and coverage ratio etc.

The Company measures credit risk using Probability of Default (PD), Exposure of Default (EAD), Loss Given Default (LGD). Ind-AS 109 outlines a three staged model for measurement of impairment based on changes in credit risk since initial recognition.

â¢ A financial instrument that is not credit impaired on initial recognition is classified in ''Stage 1'',

â¢ If a Significant Increase in Credit Risk (SICR) is identified the financial instrument moves to ''Stage 2'',

â¢ If the financial instrument is credit-impaired, the financial instrument moves to ''Stage 3'' category.

The Company uses multiple economic factors to measure the ECL on a forward looking basis.

Some of these factors include GDP growth rate, bank credit to specific sectors, Wholesale Price Index (WPI), Consumer Price Index (CPI), currency circulation. Correlations have been tested with past NPA trends.

Factors where management views the correlations to be acceptable are then used to assess the extent of impact on the portfolio.

The RBI Financial Stability Report (FSR) is used as an indicator of future economic scenario. The impact of these scenarios is then transmitted back into our ECL model basis the factors with acceptable correlations which enables the Company to ensure that adverse future economic conditions are covered in the ECL.

The Company defines default or Significant Increase in Credit Risk (SICR) based on the following quantitative and qualitative criteria.

Definition of Default

Quantitative criteria

The borrower is more than 90 days past due on its contractual payments.

Qualitative criteria

The borrower meets unlikeliness to pay criteria, which indicates that the borrower is in significant difficulty wherein a ''hard block'' is applied on accounts and is blocked for further activity on meeting the following criteria;

â¢ Arrangement to Pay

â¢ Settlement

â¢ Cardholder is deceased

â¢ Restructured

Further, for any borrower to be upgraded from Stage 3, the entire overdue balance on all accounts, must be cleared. Definition of Significant increase in credit risk (SICR)

Quantitative criteria

The borrower is 30-90 past due on its contractual payments.

Qualitative criteria

When borrowers are classified as "high risk" or when the account is tagged as "over-limit" i.e. when borrowers are expected to/approach their credit limit it is considered as indicator of increased credit risk.

The default definition has been applied consistently to model the PD, LGD and EAD for measurement of ECL.

Measuring ECL- Explanation of inputs, assumptions and estimation techniques

ECL is measured on either a 12 month or lifetime basis depending on whether there is an increase in SICR since initial recognition. ECL is the discounted product of PD, LGD and EAD.

Estimation for retail accounts PD

Month on month (MOM) default rates were calculated for all vintages.

Post calculating MOM default rates, cumulative yearly PDs being calculated till lifetime.

â¢ For Stage 1 accounts 1- year marginal PD were calculated.

â¢ For Stage 2 accounts - Lifetime PDs were calculated

â¢ For Stage 3 accounts a 100% PD was taken

The Company segments the entire portfolio into Retail Unsecured, Retail Secured, Corporate Unsecured and Corporate Secured, in line with the standard keeping each segment homogenous at the time of on-boarding. The Retail Unsecured segment PDs are further derived by evaluating the PDs at a sub-segment level basis credit history i.e. New to Credit (NTC), New to Credit Card (NTCC) and Carded. These sub-segmented PDs are then rolled up to arrive at the overall retail unsecured PD

LGD

All discounted recoveries net of collection costs is calculated segment wise against exposures to arrive at loss estimates. Discount rate being considered is the average yield rate across segments. LGD is floored at 0% and capped at 100%

EAD

Segment wise EAD is calculated using the below formula:

EAD = Balance Outstanding CCF*(Credit Limit - Balance Outstanding), where CCF is proportion of unutilised credit limit which is expected to be utilised till the time of default. CCF is applicable only for stage 1 accounts, as stage 2 and stage 3 accounts cannot utilise the unused credit limit. CCF % = Utilisation (t 12) - Utilisation (t) i.e. change of utilisation rates over next 1 year, its being floored at 0%.

The Company recalibrates the components of ECL model at regular intervals using,

1. Available incremental and recent information

2. assessing changes to its statistical techniques for estimation.

38.1.3 Liquidity risk

The Company has put in place an effective Asset Liability Management System, constituted an Asset Liability Management Committee (âALCO") headed by Managing Director & CEO of the Company.

The Company manages its liquidity risk through a mix of strategies, including forward-looking resource mobilisation based on projected disbursements and maturing obligations. ALCO is responsible for managing the Companyâs liquidity risk via a combination of policy formation, review and governance, analysis, stress testing, limit setting and monitoring.

Companyâs borrowing program is rated by CRISIL & ICRA. Short term rating is A1 and long-term rating is AAA/Stable by both the agencies. There has been no change in ratings from last 10 years.

The maturity pattern of items of non-derivative financial assets and liabilities at undiscounted principal and interest cash flows are as under:

b. SBI Card Employee Stock Option Plan 2023 (the Plan)

On August 09, 2023, pursuant to approval by the shareholders in the Annual General Meeting, the Board has been authorised to introduce, offer, issue and provide share-based incentives to eligible employees of the Company under the Plan.

Under the plan, two types of employee stock options are granted, performance share units and restricted share units. During the year ended March 31, 2024, Performance share units and restricted share units were granted on October 18, 2023. Each employee stock option converts into one equity share of the Company on exercise.

Performance based options shall vest with the participants upon completion of 3 years from the grant date. Restriction based options shall vest with the participants in 3 tranches: - 30%, 30%, 40% at the end of year 1, 2, 3 of continued service respectively. However, vesting of options shall be contingent upon the Participant being employed with the Company and few other defined annual performance parameters.

Performance parameters will be set annually and approved by the Nomination and Remuneration Committee (NRC) and approved parameters for each financial year will be notified to the employees. Further, the NRC and Board holds the power to modify targets between the date of grant and vesting Date.

As per Ind AS 102, for the purpose of accounting grant date is considered as the date when performance parameters are approved and notified to the employees by NRC. Fair value of the equity instruments is estimated (i.e., by reference to the fair value of the equity instruments at the end of the reporting period) for the purpose of recognising the services received during the period between the date of commencement of service (i.e. October 18, 2023) and the grant date as per Ind AS 102. On occurrence of the grant date, the Company revises the earlier estimate of fair value to ultimately recognise the expense in relation to such grant, based on the grant date fair value.

47 SEGMENT INFORMATION

There is only reportable segment (âCredit cards") an envisaged by Ind AS 108 Segment reporting, specified under Section 133 of the Companies Act 2013, read with Rule 7 of the Companies (Accounts) Rules 2014. Further, the economic environment is which the Company operates is significantly similar and not subject to materially different risk and rewards.

Accordingly, as the Company operates in a single business and geographical segment, the reporting requirement for primary and secondary disclosures prescribed by Ind AS 108 are not required to be given.

For the year end balances of account receivables and account payables, the management is of the opinion that adjustments, if any required through the above-mentioned process, will not have any material impact on the financials of the Company.

49 The Company deposited Goods and Service Tax (GST) on Interchange received by it in respect of VISA International transactions. However, in February 2019, Company has received a declaration from VISA that Settlement of International Interchange is being done in INR as per approval of RBI obtained by VISA in 1995. On the basis of said declaration, the Company has obtained opinion from legal firm confirming that the same can be treated as receipt of consideration in convertible foreign exchange and consequently as export of service and therefore not chargeable to GST. The Company has accordingly decided to stop paying GST on International Interchange henceforth and decided to file a refund application for '' 4.51 Crores for the GST paid from July 2017 to March 2018 with GST authorities.

The said refund is subject to interpretation of law for which there is no precedence in the form of judgements/ departmental clarifications. In view of the above, the Company has provided for 100% provision against the refund claim to mitigate the uncertainty risk.

Further, on February 21,2023, the refund claim filed by the Company has been rejected by the GST authorities. Company has filed a Writ Petition before the Honâble Punjab & Haryana High Court challenging the said rejection.The Department has filed the reply and also Company has filed the rejoinder. Next date of hearing is scheduled on August 07, 2024 with a direction to Department to file reply to re-joinder (if any).

50 The Company is a registered Corporate Insurance agent having license from Insurance Regulatory & Development Authority of India (IRDAI). The Company is engaged in the sale of Life Insurance and Non-Life/General insurance products to its credit card customers. Commission income arising from selling of insurance product is recognised as Insurance commission income. Commission from sale are as under:

i) Life Insurance is '' 0.00 Crores in each FY 2023-24 and FY 2022-23.

ii) Non-life/General Insurance is '' 3.15 Crores in FY 2023-24 and '' 3.45 Crores in FY 2022-23.

51 The Board of Directors have declared interim dividend of '' 2.50 per equity share (25%) of the face value of '' 10/- each for the Financial Year 2023-24 in accordance with Section 123(3) of the Companies Act, 2013, as amended.

52 The Company has made following changes in estimates during quarter and the year ended March 31, 2024

(i) The Company has revised the estimation model for Expected Credit Loss (ECL) on account of change in provisioning on identified stressed assets in Stage 1 and Stage 2 of the credit card portfolio, resulting in a higher ECL of '' 0.69 Crores during the quarter and year ended March 31,2024. Estimation of future impact in ECL of such identified stressed portfolio is not ascertainable at the end of the reporting period.

(ii) The Company also revised the estimated life of IPADs to match with the useful life of such assests in use, impact of such change in estimation resulted in higher depreciation of '' 0.08 Crores for the quarter and year ended March 31, 2024. Impact of such change will result in lower depreciation in future period to the tune of '' 0.01 Crores.

53 During the period ended March 31, 2024, the Company did not have any exceptional items or extraordinary items as defined under Ind AS 1, Presentation of Financial Statements.

55.1.2 Disclosure on Liquidity Coverage Ratio

Reserve Bank of India, through the Liquidity Risk Management Framework for Non-Banking Financial Companies, introduced Liquidity Coverage Ratio (LCR) with the objective that NBFC shall maintain a liquidity buffer in terms of LCR which will promote resilience of NBFCs to potential liquidity disruptions by ensuring that they have sufficient High Quality Liquid Asset (HQLA) to survive any acute liquidity stress scenario lasting for 30 days. HQLA means liquid assets that can be readily sold or immediately converted into cash at little or no loss of value or used as collateral to obtain funds in a range of stress scenarios. Liquidity management in the Company is driven by the Board approved Asset Liability Management (ALM) Policy. The Asset Liability Committee (ALCO) is a decision-making unit responsible for implementing the liquidity risk management strategy of the Company, formulating the Companyâs funding strategies to ensure that the funding sources are well diversified and is consistent with the operational requirements of the Company and ensures adherence to the risk tolerance/limits set by the Board.

The LCR requirement were effective December 01, 2020, with the minimum HQLAs to be held being 50% of the LCR, progressively increase it by 10% / 15%, to reach up to the required level of 100% by December 01, 2024. From December 01, 2023, the minimum HQLAs to be held are at 85% of the LCR. The LCR is calculated by dividing Stock of HQLA by total net cash outflows over the next 30 calendar days. Total net cash outflows over the next 30 days are equal to stressed outflows minus Minimum of stressed inflows or 75% of stressed outflows (wherein stressed outflows are 115% of outflows and stressed inflows are 75% of inflows).

Gross inflow means any issue raised by our customers across channels and recognised and tagged as a complaint basis the initial voice of the customer.

As per our report of even date attached

For Ambani & Associates LLP For Mahesh C Solanki & Co For and on behalf of the Board of Directors

Chartered Accountants Chartered Accountants

FRN: 016923N FRN: 006228C

Hitesh Ambani Rajat Jain Abhijit Chakravorty Shriniwas Yeshwant Joshi

Partner Partner Managing Director & CEO Director

Membership No.: 506267 Membership No.: 413515 DIN: 09494533 DIN: 05189697

Chief Financial Officer Company Secretary

Place: Gurugram Place: Gurugram Place: Gurugram

Date: April 26, 2024 Date: April 26, 2024 Date: April 26, 2024

Mar 31, 2023

The Companyâs accounting policies for its revenue streams are disclosed in detail under Note 4 above and is generated in India. For Critical accounting estimates, refer note 4.16 to the financial statements.

Disaggregation of Revenue

Disaggregation of revenue is not required as the Companyâs primary business is to provide credit card facility and interest on loans which is governed by Ind AS 109.

Transaction price allocated to the remaining performance obligations

The Company applies practical expedient in Ind AS 115 and does not disclose information about remaining performance obligations wherein the Company has a right to consideration from customer in an amount that directly corresponds with the value to the customer of entityâs performance till date.

The Companyâs remaining performance periods for its incentive arrangements with network partners contracts with customers for its payment network services are typically long-term in nature (typically ranging from 3-5 years). Consideration is variable based upon the number of transactions processed and volume activity on the cards. At March 31, 2023, the estimated aggregate consideration allocated to unsatisfied performance obligations for these other value-added services is '' 334.44 Crores which is expected to be recognised through financial year 2023 and later, (previous period was '' 118.26 Crores.)

Receivables from contracts with customers and contract balances

The following table provides information about receivables, contract assets, contract cost and contract liabilities from contract with customers

37 CAPITAL MANAGEMENT

Capital risk is the risk that the Company has insufficient capital resources to meet the minimum regulatory requirements to support its credit rating and to support its growth and strategic options. The Companyâs capital plans are deployed with the objective of maintaining capital that is adequate in quantity and quality to support the Companyâs risk profile, regulatory and business needs. Management/Asset Liability Management Committee [ALCO] is responsible for ensuring the effective management of capital risk. Capital risk is measured and monitored using limits set out in in relation to the capital and leverage, all of which are calculated in accordance with relevant regulatory requirements.

As contained in RBI Master Directions - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 (hereinafter referred to as âRBI Master Directions"), the Company is required to maintain a capital ratio consisting of Tier I and Tier II capital not less than 15 % of its aggregate risk weighted assets on-balance sheet and of risk adjusted value of off- balance sheet items. Out of this, Tier I capital shall not be less than 10%. The Board of Director''s regularly monitors the maintenance of prescribed levels of Capital Risk Adjusted Ratio (CRAR).

The Company makes all efforts to comply with the above requirements. Further, the Company has complied with all externally imposed capital requirements and internal and external stress testing requirements.

The Board of Directors approved the Dividend distribution policy which is in line with the regulatory requirement and guidelines as prescribed by RBI from time to time. The policy focuses on the internal and external factors (which includes long term growth plan, cash flow position, auditorsâ qualification, supervisory findings of RBI on divergence in classification and provisioning in Stage 3 assets, prevalent economic conditions and market practices etc) which the Board shall consider before declaring the dividend.

(C) Interim dividend on equity shares declared: During the year ended March 31, 2023, the Board of Directors have declared interim dividend of 25% ('' 2.50 per equity share of the face value of '' 10.00) for the financial year 2022-23 in accordance with Section 123(3) of the Companies Act, 2013, as amended. (March 31,2022 - '' 2.50 per equity share of the face value of '' 10.00).

38.1 Financial risk management

Financial risk factors

The Company has exposure to the following types of risks from financial instruments:

â¢ Market risk;

â¢ Credit risk; and

â¢ Liquidity risk;

The Companyâs Board of Directors have overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Risk Management Committee manages the risk management framework and appetite. The Board of Directors has established the Enterprise Risk Management Committee (ERMC) which is responsible for approving and monitoring Companyâs risk management framework. The risk management policies, processes and tools are reviewed regularly to reflect changes in market conditions and the Companyâs activities.

38.1.1 Market risk

Market risk is the risk of loss of future earnings, to fair values or to future cash flows that may result from a change in variables such as changes in the interest rates, foreign currency exchange rates and other market changes that affect market risk sensitive instruments.

The Company uses a wide range of qualitative and quantitative tools to manage and monitor various types of market risks it is exposed to. Quantitative analysis such as net income sensitivities, stress tests etc. are used to monitor and manage companyâs market risk appetite.

A. Interest risk

Interest rate risk is the risk of loss from fluctuations in the future cash flows or fair value of financial instruments because of changes in market interest rates.

Company''s investments are categorized under HTM (Held to Maturity) category. Investments are done in Government securities (T-Bill/ G Sec) only, hence there is no credit risk involved. To monitor the interest rate risk, Treasury function monitors the modified duration of these investments on monthly basis and report the same to Enterprise Risk Management Committee through KRI reporting. Further, Company has fixed as well as floating rate borrowings to which it is exposed to interest rate risk as well as repricing risk at the time of re-borrowing.

Derivative financial instruments

During the year, Company has designated certain foreign exchange forward contracts as cash flow hedges the movement in spot rates to mitigate the risk of foreign exchange exposure on underlying foreign currency exposures. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items. If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting and any hedge ineffectiveness is calculated and accounted for in the statement of profit or loss at the time of the hedge relationship rebalancing.

38.1.2. Credit Risk

Credit risk is the risk of financial loss arising out of customerâs failing to meet their contractual obligations to the Company.

The Company has a board approved Credit Risk policy. The Chief Risk Officer (CRO) owns the policy.

Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. "

A. Credit risk management approach

(a) Customer Selection

(I) Retail Customer Selection process

All the fulfilled approved applications undergo a number of checks which include

â¢ internal deduplication checks,

â¢ fraud deduplication check

â¢ scrutiny of KYC and income documents

â¢ Sophisticated Machine Learning (ML) application models

â¢ Bureau checks etc

For Credit limit is assigned basis ML models to estimate the debt and income of a customer

(II) Unsecured Corporate customer selection process

â¢ For all unsecured corporate card exposures, SBI Cards conducts a detailed subjective assessment based on information taken from the corporate, bureau reports, third party credit assessment agencies like rating agencies and any publicly available information.

â¢ To accurately assess the credit profile of a corporate, SBI Cards assesses the detailed financials, stock price performance (if listed) trends over the recent past. The critical parameters are collated as a credit proposal and approval is done by the credit committee.

â¢ In general, we evaluate the business risks associated with the corporate and its industry, its financial profile, liquidity situation and financial flexibility. A peer comparison is also made between the corporate and other reputed companies from the same industry.

(III) Secured Corporate customer selection process

SBI Cards allows exposure to corporates against liquid securities (e.g. Fixed Deposit & Bank Guarantee). For all secured corporate card exposures, SBI Cards checks the bureau reports and a slightly shorter proposal is put before the approving authority (as per the delegation authority approved by the Board of Directors). The security is validated before any cards are issued.

(b) Customer Management

Customer management relates to credit controls once a card is issued, broadly consisting of:

i. Portfolio Monitoring

We perform continuous monitoring of the portfolio leveraging various capabilities including ML based behavior scores, bureau refresh, bureau alerts, payment behavior, transaction trends, and periodic update on income estimation

ii. Portfolio management

Portfolio management activities enable us to grow lower risk exposures while restricting high risk. We have robust capabilities around dynamic limit management, cross-sell of term loans, balance transfers. Account management capabilities including a robust blocking strategy, reinstatements, dispute management, and overlimit strategies

iii. Fraud control

Continuous monitoring of transactions and a risk-based approach is leveraged to identify instances of fraud like account takeover, unauthorized access. ML models are leveraged to identify potential frauds and proactively protect against the same

iv. Collection strategy

Customers who fail to pay their dues by the stipulated payment due dates, at various stages of delinquency come under the purview of collection and recovery strategies. The company has developed ML models to prioritize collection efforts and also guide the intensity of efforts across delinquency buckets. Hardship tools are leveraged to help resolve cases including settlements and restructuring. Post write-off, ML based segmentation is leveraged to prioritize efforts. For secured cards, liens on FDs / BGs are invoked "

B. Credit risk analysis

This section analyses Companyâs credit risk split as follows;

(a) Exposure to credit risk - Analysis of overall exposure to credit risk before and after credit risk mitigation.

(b) Credit quality analysis - Analysis of overall loan portfolio by credit quality.

(d) Credit risk mitigation - Analysis of collaterals held by client segment and collateral type.

Loans to customer includes loans secured by lien on Fixed deposits and Bank Guarantee held with third party banks. Secured loans account for 0.72% as at March 31, 2023, (1.13% as at March 31, 2022) of total loans.

Notes:

â¢ Loans to customers which accounts for 90.7% of total exposure to credit risk, as at March 31, 2023, is segregated based on risk characteristics of the population to manage credit quality and measure impairment.

â¢ Investments in Government Securities are measured at amortized cost and Investments in unquoted instruments are valued at Fair value as on balance sheet date and effect has been routed through Other Comprehensive Income to be in line with Ind AS guideline.

â¢ Derivative instruments taken by the Company are from the same party (Parent company) from whom the Company has taken the underlying loan. Hence, default risk from counterparty is also being a financial institution with high credit rating is limited.

Credit concentration risk

Credit concentration risk may arise from a single large exposure to a counterparty Credit concentration risk may arise from a single large exposure to a counterparty or a group of connected counterparties, or from multiple exposures across the portfolio that are closely correlated.

Large exposure concentration risk is managed through concentration limits set by a counterparty or a group of connected counterparties based on control and economic dependence criteria

For concentrations that are material at a Company level, breaches and potential breaches are monitored by the respective governance committees and reported to the Risk Committee and CRO."

The Company follows the prescribed Regulatory Prudential Norms:

â¢ Single Borrower Exposure limit - 25% of Tier I Capital of SBI Cards & Payment Services Ltd.

â¢ Group Borrower Exposure limit - 40% of Tier I Capital of SBI Cards & Payment Services Ltd

In addition, there is also an internal capping on the single borrower exposure at '' 200 Cr.

(b) Credit quality analysis Credit grading

Credit quality by client segment

An overall breakdown of loan portfolio by client segment is provided below differentiating between performing and non-performing loan book,

(c) Impairment

Collective measurement model (Retail and Corporate)

â¢ A financial instrument that is not credit impaired on initial recognition is classified in ''Stage 1'',

â¢ If a significant increase in credit risk (SICR) is identified the financial instrument moves to ''Stage 2'',

â¢ If the financial instrument is credit-impaired, the financial instrument moves to ''Stage 3'' category.

The Company uses multiple economic factors to measure the ECL on a forward looking basis.

Some of these factors include GDP growth rate, bank credit to specific sectors, wholesale price index (WPI), consumer price index (CPI), currency circulation. Correlations have been tested with past NPA trends.

Factors where management views the correlations to be acceptable are then used to assess the extent of impact on the portfolio. The RBI Financial Stability Report (FSR) is used as an indicator of future economic scenario. The impact of these scenarios is then transmitted back into our ECL model basis the factors with acceptable correlations which enables the Company to ensure that adverse future economic conditions are covered in the ECL.

The Company defines default or significant increase in credit risk (SICR) based on the following quantitative and qualitative criteria.

Definition of Default Quantitative criteria

The borrower is more than 90 days past due on its contractual payments.

Qualitative criteria

â¢ Arrangement to Pay

â¢ Settlement

â¢ Cardholder is deceased

â¢ Restructured

Further, for any borrower to be upgraded from Stage 3, the entire overdue balance on all accounts, must be cleared. Definition of Significant increase in credit risk (SICR)

Quantitative criteria

The borrower is 30-90 past due on its contractual payments.

Qualitative criteria

The default definition has been applied consistently to model the PD, LGD and EAD for measurement of ECL.

Measuring ECL- Explanation of inputs, assumptions and estimation techniques

ECL is measured on either a 12 month or lifetime basis depending on whether there is an increase in SICR since initial recognition. ECL is the discounted product of PD, LGD and EAD.

Estimation for retail accounts PD

Month on month (MOM) default rates were calculated for all vintages.

Post calculating MOM default rates, cumulative yearly PDs being calculated till lifetime.

â¢ For Stage 1 accounts 1- year marginal PD were calculated.

â¢ For Stage 2 accounts - Lifetime PDs were calculated

â¢ For Stage 3 accounts a 100% PD was taken

LGD

EAD

Segment wise EAD is calculated using the below formula:

EAD = Balance Outstanding CCF*(Credit Limit - Balance Outstanding), where CCF is proportion of unutilized credit limit which is expected to be utilized till the time of default. CCF is applicable only for stage 1 accounts, as stage 2 and stage 3 accounts cannot utilize the unused credit limit. CCF % = Utilisation (t 12) - Utilisation (t) i.e. change of utilization rates over next 1 year, its being floored at 0%.

The Company recalibrates the components of ECL model at regular intervals using,

1. Available incremental and recent information

2. Assessing changes to its statistical techniques for estimation.

However, data of COVID impact, where resolution plan was implemented in line with RBIâs Resolution Framework for COVID-19-related Stress, is not consumed in the ECL model since, this scheme introduced a distortion in customer behavior. Such pool was largely provided using management overlays.

The Company revisits the inputs, assumptions used in measurement of ECL whenever there is a significant change, at least every quarter.

â¢ Individual Measurement (Corporate)

The Companyâs credit risk function segregates loans with specific risk characteristics based on trigger events identified using sufficient and credible information available from internal sources supplemented by external data.

Specific reserve may be created in following scenarios: -

â¢ Rating of the corporate is downgraded significantly.

â¢ Public news of default or fraud by the corporate or any group company with any lender.

â¢ Adverse reporting in bureau with respect to the corporate or promoters (overdues with other lenders)

â¢ Adverse public information on corporate or associated group.

â¢ Significant Overdues of the corporate or group companies with SBI Card or SBI.

â¢ If corporate exposure is backed by security, and there is a deterioration in the value of the underlying security.

38.1.3. Liquidity risk

Liquidity risk is the risk that the Company doesnât have sufficient financial resources to meet its obligations as and when they fall due or will have to do so at an excessive cost. This risk arises from the mismatches in the timing of the cash flows which is inherent in all financing operations and can be affected by a range of company specific and market wide events. Therefore, Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Company has put in place an effective Asset Liability Management System, constituted an Asset Liability Management Committee (âALCO") headed by Managing Director & CEO of the Company. The Company manages its liquidity risk through a mix of strategies, including forward-looking resource mobilization based on projected disbursements and maturing obligations. ALCO is responsible for managing the Companyâs liquidity risk via a combination of policy formation, review and governance, analysis, stress testing, limit setting and monitoring. Companyâs borrowing program is rated by CRISIL & ICRA. Short term rating is A1 and long-term rating is AAA/Stable by both the agencies. There has been no change in ratings from last 10 years. The maturity pattern of items of non-derivative financial assets and liabilities at undiscounted principal and interest cash flows are as under: "

43 LEASES

I. Short Term lease payments

For the operating lease agreements entered into by the Company which are considered as short team leases (lease term of less than 12 months period) under IND AS 116, right of use asset and lease liability has not been recognized during the year. Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Low-value assets comprise IT-equipment and small items of office furniture.

II. Variable lease payments

Under certain contracts, payments are variable in nature as it depends on number of man hours worked by non-full-time employee in a particular month. Variable lease payments are recognised in profit or loss in the period in which the condition that triggers those payments occurs.

The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotion & Other relevant factors, such as supply & demand in the employment market.

* Based on Indiaâs standard mortality table with modification to reflect expected changes in mortality/ others.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the balance sheet for the gratuity plan. The present value of the defined benefit obligation and the related current service cost are measured using the Projected Unit Credit Method with actuarial valuations being carried out at each balance sheet date.

Sensitivity Analysis:

Gratuity is a lump sum plan and the cost of providing these benefits is typically less sensitive to small changes in demographic assumptions. The key actuarial assumptions to which the benefit obligation results are particularly sensitive to are discount rate and future salary escalation rate. The following table summarizes the change in defined benefit obligation and impact in percentage terms compared with the reported defined benefit obligation at the end of the reporting period arising on account of an increase or decrease in the reported assumption by 50 basis points.

45 CONTINGENT LIABILITIES AND COMMITMENTS
Particulars	For the year ended March 31, 2023	For the year ended March 31, 2022
Claims against the Company not acknowledged as debt
(a) Demand notices from Service tax department	27.81	26.03
(b) Claims against the company in the ordinary course of business	41.92	24.94
(c) Guarantees	8.48	8.17
(d) Demand notice from Income tax department	1.98	1.98
(e) Contribution notice from ESIC & EPFO	7.08	7.08
Total	87.28	68.20
Pre-deposit against claims	2.62	2.49

i. Certain show cause notices relating to indirect taxes matters amounting to '' 3.13 Crores (previous period '' 0.42 Crores) and interest as applicable, have neither been acknowledged as claims nor acknowledged as contingent liabilities. Based on internal assessment and discussion with tax advisors, the Company is of the view that the possibility of any of these tax demands materializing is remote.

ii. In absence of any specific entry in the Indian Stamp Act, 1899 for amalgamation, which is open to interpretation of the stamp collector, the Company has filed an application dated June 30, 2019 for adjudication of the stamp duty. During the pendency of the adjudication application, it is difficult to provide an estimate of the actual stamp duty that would be leviable on the Company and therefore no provision has been made in the financial statements for the year ended March 31, 2023.

iii. Capital Commitments: Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) amounted to '' 18.11 Crores as at March 31, 2023 ('' 10.22 Crores as at March 31, 2022)

46 As per the best available information on records, Company does not have any transactions with the companies struck off under Section 248 of the Companies Act, 2013 or Section 560 of the Companies Act,1956 during the financial year 2022-23.

47 SEGMENT INFORMATION

There is only reportable segment (âCredit cards") an envisaged by Ind AS 108 Segment reporting, specified under section 133 of the Companies act 2013, read with Rule 7 of the Companies (Accounts) Rules 2014. Further, the economic environment is which the Company operates is significantly similar and not subject to materially different risk and rewards.

48 In respect of accounts receivables, the Company is regularly generating and dispatching customer statements on periodic interval wherever transactions or outstanding are there. In case of disputes with regard to billing, there is a process of resolution and adjustments are carried out on regular basis. Moreover, in respect of accounts payable, the Company has a process of receiving regular balance confirmation from its vendors. For the year end balances of account receivables and account payables, the management is of the opinion that adjustments, if any required through the above-mentioned process, will not have any material impact on the financials of the Company.

49 The Company deposited Goods and Service Tax [GST] on Interchange received by it in respect of VISA International transactions.

However, in February 2019, Company has received a declaration from VISA that Settlement of International Interchange is being done in INR as per approval of RBI obtained by VISA in 1995. On the basis of said declaration, the Company has obtained opinion from legal firm confirming that the same can be treated as receipt of consideration in convertible foreign exchange and consequently as export of service and therefore not chargeable to GST. The Company has accordingly decided to stop paying GST on International Interchange henceforth and decided to file a refund application for '' 4.51 Crores for the GST paid from July 2017 to March 2018 with GST authorities.

Further, on February 21, 2023, the refund claim filed by the Company has been rejected by the GST authorities. Company has filed a Writ Petition before the Honâble Punjab & Haryana High Court challenging the said rejection. The same came up for hearing on April 18, 2023. The bench vide Order dated April 18, 2023 has issued notice to the GST department and has directed them to file a reply.

50 The Company is a registered Corporate Insurance agent having license from Insurance Regulatory & Development Authority of India (IRDAI). The company is engaged in the sale of Life Insurance and Non-Life/General insurance products to its credit card customers. Commission income arising from selling of insurance product is recognised as Insurance commission income. Commission from sale are as under:

i) Life Insurance is '' 0.001 Crores in each FY 2022-23 and FY 2021-22.

ii) Non-life/General Insurance is '' 3.45 Crores in FY 2022-23 and '' 4.88 Crores in FY 2021-22.

52 The Company has revised the estimation model for Expected Credit Loss [ECL] on account of change in estimation, including forward looking macro-economic factors in probability of default of the credit card portfolio resulting to higher ECL of '' 24.92 Crores during the quarter and year ended March 31, 2023.

The company also revised the Management Overlay on the RBI RE accounts as the remaining portfolio has reduced substantially and performing in line with regular portfolio, resulting to lower ECL of '' 4.38 Crores during the quarter and year ended March 31, 2023.

53 During the period ended March 31,2023, the Company did not have any exceptional items or extraordinary items as defined under Ind AS 1, Presentation of Financial Statements.

57.1.2. Disclosure on Liquidity Coverage Ratio

The LCR is calculated by dividing Stock of HQLA by total net cash outflows over the next 30 calendar days. Total net cash outflows over the next 30 days are equal to stressed outflows minus Minimum of stressed inflows or 75% of stressed outflows (wherein stressed outflows are 115% of outflows and stressed inflows are 75% of inflows).

The following table sets out the average of unweighted and weighted value of the LCR components of the Company calculated in accordance with RBI circular no RBI/2019-20/88 DOR.NBFC (PD) CC. No.102/03.10.001/2019-20 dated November 04, 2019. The average weighted and unweighted amounts are calculated taking simple averages of daily observations over the respective quarter, during the financial year 2022-23:

The main drivers of the LCR calculation in outflow over 30 days period is contractual borrowing obligations of the Company in the form of bank lines, commercial papers, debentures and term loans. Other contractual funding obligations consist of liabilities towards network partners, vendor payments and other liabilities. Further Company has used the behavioral study to take the impact of unused credit and liquidity facilities that Company has provided to its cardholders. Main driver of inflows is the repayments from the cardholders which are taken basis the past behavioral pattern observed. Other cash inflows consist of incomes accruals which Company expects to receive in next 30 days.

The average LCR of the Company for the three months ended March 31,2023 was 85.95% as against 79.06% for the previous year ended March 31, 2022. The LCR remains above the regulatory minimum requirement of 70%.

The average HQLA for the period ended March 31, 2023 was '' 2349.43 crores as against '' 1311.17 crores for the previous year ended March 31, 2022. The net cash outflow position has gone up by '' 1075.06 crores due to increase in next 30 days outflows and HQLA level has up by '' 1038.26 crores. HQLA comprises of Investment in Government Securities (62.87%), Investments in Treasury Bills (33.67%) and balances held in current account with Scheduled Commercial Banks (3.46%)

Management is of the view that the Company has sufficient liquidity cover to meet its likely future short-term requirements.

60.18.2 Disclosure of Penalties imposed by RBI and other regulators

No penalties have been imposed by any regulators during financial year 2022-23

60.18.3 Ratings assigned by credit rating agencies and migration of ratings during the year

The short-term debt rating of the Company is A1 by CRISIL and ICRA. Long-term debt rating is AAA / Stable by CRISIL and ICRA. There is no change in the rating during financial year 2022-23.

60.18.4 Revenue Recognition

There is no circumstance in which revenue recognition has been postponed pending the resolution of significant uncertainties.

60.18.5 Remuneration to Directors

During the year the Company has paid '' 1.18 Crores towards Directors fees, allowances and expenses.

Refer note 33

60.18.6 Net Profit or loss for the period, prior period items and change in accounting policies

There has been no change in the Significant Accounting policies followed during the financial year 2022-23 in comparison to the financial Year 2021-22. Further, there are no adjustment of prior period items during the financial year 2022-23.

Mar 31, 2022

The Companyâs accounting policies for its revenue streams are disclosed in detail under Note 4 above and is generated in India. For Critical accounting estimates, refer note 4.16 to the financial statements.

Disaggregation of Revenue

Disaggregation of revenue is not required as the Companyâs primary business is to provide credit card facility and interest on loans which is governed by Ind AS 109.

Transaction price allocated to the remaining performance obligations

The Company applies practical expedient in Ind AS 115 and does not disclose information about remaining performance obligations wherein the Company has a right to consideration from customer in an amount that directly corresponds with the value to the customer of entityâs performance till date.

The Companyâs remaining performance periods for its incentive arrangements with network partners contracts with customers for its payment network services are typically long-term in nature (typically ranging from 3-5 years). Consideration is variable based upon the number of transactions processed and volume activity on the cards. At March 31,2022, the estimated aggregate consideration allocated to unsatisfied performance obligations for these other value-added services is ''118.26 Crores which is expected to be recognised through financial year 2023 and later, (previous period was '' 85.36 Crores.)

Receivables from contracts with customers and contract balances

The following table provides information about receivables, contract assets, contract cost and contract liabilities from contract with customers

The Company might satisfy a performance obligation before it receives the consideration in which case the Company recognises a contract asset or receivable, depending on whether something other than the passage of time is required before the consideration is due.

Contract Assets

The contract assets primarily relate to the Companyâs right to consideration for work completed but not billed at the reporting date. The contract assets are transferred to receivables when the right become unconditional. Below table shows the movement.

The Company makes all efforts to comply with the above requirements. Further, the Company has complied with all externally imposed capital requirements and internal and external stress testing requirements.

The Board of Directors approved the Dividend distribution policy which is in line with the regulatory requirement and guidelines as prescribed by RBI from time to time. The policy focuses on the internal and external factors (which includes long term growth plan, cash flow position, auditorsâ qualification, supervisory findings of RBI on divergence in classification and provisioning in Stage 3 assets, prevalent economic conditions and market practices etc) which the Board shall consider before declaring the dividend.

(C) Interim dividend on equity shares declared: During the year ended March 31, 2022, the Board of Directors have declared interim dividend of 25% ('' 2.50 per equity share of the face value of '' 10.00) for the financial year 2021-22 in accordance with Section 123(3) of the Companies Act, 2013, as amended. (March 31, 2021 - NIL)

38.1 Financial risk management Financial risk factors

The Company has exposure to the following types of risks from financial instruments:

Â¦ Market risks;

Â¦ Credit risk; and

Â¦ Liquidity risk;

The Companyâs Board of Directors have overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Risk Management Committee manages the risk management framework and appetite. The Board of Directors has established the Enterprise Risk Management Committee (ERMC) which is responsible for approving and monitoring Companyâs risk management framework. The risk management policies, processes and tools are reviewed regularly to reflect changes in market conditions and the Companyâs activities.

38.1.1 Market risk

Market risk is the risk of loss of future earnings, to fair values or to future cash flows that may result from a change in variables such as changes in the interest rates, foreign currency exchange rates and other market changes that affect market risk sensitive instruments.

The Company uses a wide range of qualitative and quantitative tools to manage and monitor various types of market risks it is exposed to. Quantitative analysis such as net income sensitivities, stress tests etc. are used to monitor and manage companyâs market risk appetite.

A. Interest risk

Interest rate risk is the risk of loss from fluctuations in the future cash flows or fair value of financial instruments because of changes in market interest rates.

The Company has fixed as well as floating rate loans. The Company is exposed to interest rate risk on Loans as well as repricing risk at the time of re-borrowing. The below table shows the interest rate sensitivity for a period up to one year.

The above sensitivity analysis is prepared assuming the amount outstanding at the end of the reporting period was outstanding for the whole year. A 50-basis point increase or decrease represents managementâs assessment of the reasonably possible change in interest rates. The Companyâs sensitivity to interest rate has increased on a year to year basis primarily due to business growth and correspondingly increase in borrowings.

B. Foreign currency risk

Foreign Currency risk is the risk that the fair value or future cash flows of a financial instrument, denominated in currency other than functional currency, will fluctuate because of changes in foreign exchange rates. The Company is exposed to foreign currency risk mainly on its borrowings denominated in foreign currency resulting in exposures to foreign exchange rate fluctuations.

The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation for a 5% change in foreign currency rates. Sensitivity analysis given above is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting periods does not reflect the exposure during the years.

Foreign currency risk monitoring and management

The Companyâs currency risk management policy lays down the appropriate systems and controls to identify, measure and monitors, the currency risk for reporting to the management. Parameters like hedging ratio, unhedged exposure, mark-to market position, exposure limit with banks etc. are continuously monitored as a part of currency risk management. Exchange rate exposures are managed within approved parameters using forward foreign exchange contracts. Foreign currency exposure under borrowings is fully hedged at the time of taking the loan itself.

Derivative financial instruments

The Company enters into derivative financial instruments such as foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is a bank. As on reporting date March 31, 2022 and March 31, 2021 company do not have any foreign currency borrowing outstanding.

Contracts included in hedge relationship

During the year Company has designated certain foreign exchange forward contracts as cash flow hedges the movement in spot rates to mitigate the risk of foreign exchange exposure on underlying foreign currency exposures. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items. If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting and any hedge ineffectiveness is calculated and accounted for in the statement of profit or loss at the time of the hedge relationship rebalancing.

As on March 31, 2022 the company does not have any outstanding contract which was designated under Hedge relationship (March 31, 2021 - NIL)

38.1.2. Credit Risk

Credit risk is the risk of financial loss arising out of customerâs failing to meet their contractual obligations to the Company. The Company has a board approved Credit Risk policy. The Chief Risk Officer (CRO) owns the policy.

A. Credit risk management approach

Managing credit risk is the most important part of total risk management exercise. The CRO of the Company is responsible for the key policies and processes for managing credit risk, which include formulating credit policies and risk rating frameworks, guiding the Companyâs appetite for credit risk exposures, undertaking independent reviews and objective assessment of credit risk, and monitoring performance and management of portfolios. The principal objectives being maintaining a strong culture of responsible lending across the Company, and robust risk policies and control frameworks, implementing and continually re-evaluating our risk appetite and ensuring there is adequate monitoring of credit risks, their costs and their mitigation.

(a) Customer Selection

(I) Retail Customer Selection process

All the fulfilled approved applications undergo a number of checks which include

â¢ internal deduplication checks,

â¢ fraud deduplication check

â¢ scrutiny of KYC and income documents

â¢ Sophisticated Machine Learning (ML) application models

â¢ Bureau checks etc

For Credit limit is assigned basis ML models to estimate the debt and income of a customer

(II) Unsecured Corporate customer selection process

(III) Secured Corporate customer selection process

(b) Customer Management

Customer management relates to credit controls once a card is issued, broadly consisting of:

i. Portfolio Monitoring

ii. Portfolio management

iii. Fraud control

iv. Collection strategy

B. Credit risk analysis

This section analyses Companyâs credit risk split as follows;

(a) Exposure to credit risk - Analysis of overall exposure to credit risk before and after credit risk mitigation.

(b) Credit quality analysis - Analysis of overall loan portfolio by credit quality.

(d) Credit risk mitigation - Analysis of collaterals held by client segment and collateral type.

Loans to customer includes loans secured by lien on Fixed deposits and Bank Guarantee held with third party

banks. Secured loans account for 1.13% as at March 31, 2022, (1.35% as at March 31, 2021) of total loans.

Notes:

Â¦ Loans to customers which accounts for 91.6% of total exposure to credit risk, as at March 31, 2022, is segregated based on risk characteristics of the population to manage credit quality and measure impairment.

Â¦ Credit risk on cash and cash equivalents is limited as we generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies.

Â¦ Investments in Government Securities are measured at amortized cost and Investments in unquoted instruments are valued at Fair value as on balance sheet date and effect has been routed through Other Comprehensive Income to be in line with Ind AS guideline.

Â¦ Derivative instruments taken by the Company are from the same party (Parent company) from whom the Company has taken the underlying loan. Hence, default risk from counterparty is also being a financial institution with high credit rating is limited.

Â¦ Company follows simplified approach for recognition of impairment loss allowance on trade receivables/ other financial assets wherein Company uses a provision matrix to determine the impairment loss allowance on the portfolio of receivables.

Credit concentration risk

Large exposure concentration risk is managed through concentration limits set by a counterparty or a group of connected counterparties based on control and economic dependence criteria

For concentrations that are material at a Company level, breaches and potential breaches are monitored by the respective governance committees and reported to the Risk Committee and CRO.

The Company follows the prescribed Regulatory Prudential Norms:

Â¦ Single Borrower Exposure limit - 15% of net owned funds of SBI Cards & Payments Services Ltd.

Â¦ Group Borrower Exposure limit - 25% of net owned funds of SBI Cards & Payments Services Ltd In addition, there is also an internal capping on the single borrower exposure at '' 200 Cr.

(b) Credit quality analysis Credit grading

Credit quality by client segment

An overall breakdown of loan portfolio by client segment is provided below differentiating between performing and non-performing loan book,

Collective measurement model (Retail and Corporate)

Â¦ A financial instrument that is not credit impaired on initial recognition is classified in âStagelâ

Â¦ If a significant increase in credit risk (SICR) is identified the financial instrument moves to âStage 2â,

Â¦ If the financial instrument is credit-impaired, the financial instrument moves to âStage3â category.

The Company defines default or significant increase in credit risk (SICR) based on the following quantitative and qualitative criteria.

Definition of Default

Quantitative criteria

The borrower is more than 90 days past due on its contractual payments.

Qualitative criteria

The borrower meets unlikeliness to pay criteria, which indicates that the borrower is in significant difficulty wherein a âhard blockâ is applied on accounts and is blocked for further activity on meeting the following criteria;

â¢ Arrangement to Pay

â¢ Settlement

â¢ Cardholder is deceased

â¢ Restructured

Further, for any borrower to be upgraded from Stage 3, the entire overdue balance on all accounts, must be cleared.

Definition of Significant increase in credit risk (SICR)

Quantitative criteria

The borrower is 30-90 past due on its contractual payments.

Qualitative criteria

When borrowers are classified as âhigh risk" or when the account is tagged as â over-limit" i.e. when borrowers are expected to/approach their credit limit it is considered as indicator of increased credit risk.

The default definition has been applied consistently to model the PD, LGD and EAD for measurement of ECL. Measuring ECL- Explanation of inputs, assumptions and estimation techniques

ECL is measured on either a 12 month or lifetime basis depending on whether there is an increase in SICR since initial recognition. ECL is the discounted product of PD, LGD and EAD.

Estimation for retail accounts

PD

Month on month (MOM) default rates were calculated for all vintages.

Post calculating Mom default rates, cumulative yearly PDs being calculated till lifetime.

Â¦ For Stage 1 accounts 1- year marginal PD were calculated.

Â¦ For Stage 2 accounts - Lifetime PDs were calculated

Â¦ For Stage 3 accounts a 100% PD was taken LGD

EAD

Segment wise EAD is calculated using the below formula.

The Company revisits the inputs, assumptions used in measurement of ECL whenever there is a significant change, at least every quarter.

â¢ Individual Measurement (Corporate)

Specific reserve may be created in following scenarios: -

Â¦ Rating of the corporate is downgraded significantly.

Â¦ Public news of default or fraud by the corporate or any group company with any lender.

Â¦ Adverse reporting in bureau with respect to the corporate or promoters (overdues with other lenders)

Â¦ Adverse public information on corporate or associated group.

Â¦ Significant Overdues of the corporate or group companies with SBI Card or SBI.

Â¦ If corporate exposure is backed by security, and there is a deterioration in the value of the underlying security.

Impairment allowance for these exposures are reviewed and accounted on a case by case basis. Below table states different scenarios and effect of the same on point in time provision.

The normal ECL model for provisioning will not apply to corporates, where specific reserves are being held.

In the event where above stated conditions show improvement and corporate no longer falls under any of triggers for consistently 3 months, provision is restated basis Collective measurement model.

Management overlay on ECL model due to COVID-19

The current ECL model does not cater to future economic deterioration expected due to COVID-19 fall out. Accordingly, in anticipation of the expected economic fallout, the Company has identified specific segments prone to stress in the current situation. These have been identified on the basis of behaviour in the last 12 months as well as the efforts required to collect on these segments. The stress segments identified are customers who opted for RBI resolution package as per RBI circular dated August 6, 2020 and are in stage 2 or stage 3 on the reporting date. The Company has created additional management overlay on these segments. The Company is closely monitoring its asset quality and taking suitable actions to manage its exposures. The impact of COVID-19 on the Companyâs financial statements may differ from that estimated as at the date of approval of these financial statements.

38.1.3. Liquidity risk

The Company has put in place an effective Asset Liability Management System, constituted an Asset Liability Management Committee (âALCO") headed by Managing Director & CEO of the Company.

The Company manages its liquidity risk through a mix of strategies, including forward-looking resource mobilization based on projected disbursements and maturing obligations. ALCO is responsible for managing the Companyâs liquidity risk via a combination of policy formation, review and governance, analysis, stress testing, limit setting and monitoring.

Companyâs borrowing program is rated by CRISIL & ICRA. Short term rating is A1 and long-term rating is AAA/Stable by both the agencies. There has been no change in ratings from last 10 years.

The maturity pattern of items of non-derivative financial assets and liabilities at undiscounted principal and interest cash flows are as under:

43 Leases

I. Short Term lease payments

II. Variable lease payments

Under certain contracts, payments are variable in nature as it depends on number of man hours worked by non-fulltime employee in a particular month. Variable lease payments are recognised in profit or loss in the period in which the condition that triggers those payments occurs.

Defined benefit plans

The Company has a defined benefit gratuity plan for its employees. Under the gratuity plan, every employee who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme of gratuity is unfunded.

The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotion & Other relevant factors, such as supply & demand in the employment market.

* Based on Indiaâs standard mortality table with modification to reflect expected changes in mortality/ others.

*For the year ended March 31, 2022, contribution of '' 0.13 Crores has been made by trust maintained with SBI Life insurance Company limited.

The current service cost and the net interest expense for the year are included in the âEmployee benefits expenseâ line item in the statement of profit and loss.

The remeasurement of the net defined benefit liability is included in other comprehensive income.

The amount included in the balance sheet arising from the entityâs obligation in respect of its defined benefit plans is as follows ;

These sensitivities have been calculated to show the movement in defined benefit obligation in isolation and assuming there are no other changes in market conditions at the accounting date. There have been no changes from the previous periods in the methods and assumptions used in preparing the sensitivity analyses.

i. Certain show cause notices relating to indirect taxes matters amounting to '' 0.42 Crores (previous period '' 0.42 Crores) and interest as applicable, have neither been acknowledged as claims nor acknowledged as contingent liabilities. Based on internal assessment and discussion with tax advisors, the Company is of the view that the possibility of any of these tax demands materializing is remote.

iii. Capital Commitments: Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) amounted to '' 10.22 crores as at March 31, 2022 ('' 22.07 crores as at March 31, 2021)

46 As per the best available information on records, Company does not have any transactions with the companies struck off under Section 248 of the Companies Act,2013 or Section 560 of the Companies Act,1956 during the financial year 202122.

47 Segment Information

49 The Company deposited Goods and Service Tax [GST] on Interchange received by it in respect of VISA International transactions. However, in February 2019, Company has received a declaration from VISA that Settlement of International Interchange is being done in INR as per approval of RBI obtained by VISA in 1995. On the basis of said declaration, the Company has obtained opinion from legal firm confirming that the same can be treated as receipt of consideration in convertible foreign exchange and consequently as export of service and therefore not chargeable to GST. The Company has accordingly decided to stop paying GST on International Interchange henceforth and decided to file a refund application for '' 11.06 Crores for the GST paid from July 2017 to February 2019 with GST authorities.

Further, on 16th July 2019, the Company has withdrawn refund application for '' 6.54 Crores for the period April 2018 -February 2019 and have adjusted this amount from tax payable of the subsequent period basis opinion from legal firm and accordingly provision to the extent of '' 6.54 Crores have been reduced/ reversed.

50 The Company deposited GST on Interchange Income for the period April, 2018 to December, 2018 considering them as intra-state supplies for the year ended March 31 2020. However, post receiving bank wise details of such Interchange Income from network partners, such supplies are held as Inter-state transaction for which IGST is applicable. Consequently, company had filed a refund claim under Section 77 of the CGST Act of '' 108.41 Crores which has been rejected by the adjudicating authority as well as the first Appellate Commissioner. As GST Tribunals have not been set up as of now, Company has filed a Writ Petition before Honâble Punjab & Haryana High Court against such rejection order. The Company has created 100% provision against the refund claim as at March 31, 2022to mitigate the uncertainty risk considering that the said refund is subject to interpretation of law in view of the above.

The refund claim under Section 77 of the CGST Act of '' 108.41 crore was allowed during the year ended March 31, 2022, and subsequently refund amount was received on January 04, 2022. In view of the above, impairment loss against the refund claim has been reversed and effect thereof has been recognised in the Statement of Profit and Loss, under Other Income, during the year ended March 31, 2022.

The consideration on sales of asset [Stage 3] has been settled in cash as of March 31, 2022.

52 The Company has made following changes in estimates during the year ended March 31, 2022

i. During the year ended March 31, 2022, the Company has triggered an early write off of loan balances of '' 304.73 Crores [40983 accounts] on account of change in estimation of recovery expectation of certain category of retail accounts in Stage 3. There is no impact of this change in the statement of Profit and Loss account as the same was fully provided under Expected Credit Loss [ECL] model including management overlay.

ii. The Company has classified all the linked accounts of written off accounts (having balances > 0) as Stage 3 instead of their independent staging. This has resulted in higher Stage 3 balance by '' 26.19 crore with a corresponding increase in ECL by '' 15.11 crore during the quarter and year ended March 31, 2022, in the statement of profit and loss account.

57.1.2. Disclosure on Liquidity Coverage Ratio

The LCR is calculated by dividing Stock of HQLA by total net cash outflows over the next 30 calendar days. Total net cash outflows over the next 30 days are equal to stressed outflows minus Minimum of (stressed inflows or 75% of stressed outflows), wherein stressed outflows are 115% of outflows and stressed inflows are 75% of inflows.

The main drivers of the LCR calculation in outflow over 30 days period is contractual borrowing obligations of the company in the form of commercial papers, bank lines, debentures. Other contractual funding obligations consist of liabilities towards network partners, vendor payments, other liabilities. Further company has used the behavioural study to take the impact of unused credit and liquidity facilities that Company has provided to its cardholders. Main driver of inflows is the repayments from the cardholders which are taken basis the past behavioural pattern observed. Other cash inflows consist of incomes accruals which company expects to receive in next 30 days.

The average LCR of the Company for the three months ended March 31, 2022 was 79.06% as against 72.83% for the quarter ended December 31, 2021. The LCR remains above the regulatory minimum requirement of 60%. The average HQLA for the quarter ended March 31, 2022 was '' 1311.17 crores as against '' 1188.68 crores for the quarter ended December 31,2021. The net cash outflow position has gone up by '' 26.30 crores and HQLA level has gone up by '' 122.49 crores as cash outflows in next 30 days has reduced.HQLA comprises of balances in demand deposits with Scheduled Commercial Banks (6.26%), Investments in Treasury Bills (63.33%) and investment in Government Securities (30.41%). The company takes forward cover to hedge the foreign exchange liabilities and do not foresee any material impact of derivative exposure/potential collateral calls/ currency mismatch in the LCR.

Management is of the view that the Company has sufficient liquidity cover to meet its likely future short-term requirements.

58 Schedule to Balance Sheet of a Non-Banking Financial Company as required in terms of Paragraph 13 of Non- Banking Financial Companies (non-deposit accepting or holding) Prudential Norms (Reserve Bank) Directions, 2016:

* The number of complaints reported by the Company in the Annual Report for FY2020-2021 comprised of Net Internal Complaints and Gross Banking Ombudsman Complaints. The organization has moved towards reporting of Gross Inflow and Net complaints, from above mentioned internal and external channels, derived as per defined processes. Numbers reported in the annual report for FY 2020-21 are not comparable with FY2021-22 numbers. Further numbers for FY2020-21 have been revised as per the revised methodology.

Mar 31, 2021

Disaggregation of Revenue

Disaggregation of revenue is not required as the Companyâs primary business is to provide credit card facility and loans which is governed by Ind AS 109. Companyâs revenue from provision of services arising from contracts entered with customers to provide interchange services, business development services, membership services and other fees is not concentrated to specific customer/segment. Management reviews the revenue of the Company on the information available as disclosed in Statement of Profit and Loss.

Transaction price allocated to the remaining performance obligations

The Company applies practical expedient in Ind AS 115 and does not disclose information about remaining performance obligations wherein the Company has a right to consideration from customer in an amount that directly corresponds with the value to the customer of entityâs performance till date.

The Companyâs remaining performance periods for its incentive arrangements with network partners contracts with customers for its payment network services are typically long-term in nature (typically ranging from 3-5 years). Consideration is variable based upon the number of transactions processed and volume activity on the cards. At March 31,2021, the estimated aggregate consideration allocated to unsatisfied performance obligations for these other value-added services is H 85.36 Crores which is expected to be recognised through financial year 2022, previous period was H 95.23 Crores

36. Impact of application of Ind AS 115 Revenue from Contracts with Customers (Contd..)

Capital Management

Capital risk is the risk that the Company has insufficient capital resources to meet the minimum regulatory requirements to support its credit rating and to support its growth and strategic options. The Companyâs capital plans are deployed with the objective of maintaining capital that is adequate in quantity and quality to support the Companyâs risk profile, regulatory and business needs. Management/ALCO is responsible for ensuring the effective management of capital risk. Capital risk is measured and monitored using limits set out in in relation to the capital and leverage, all of which are calculated in accordance with relevant regulatory requirements.

Tier 1 capital consists of Equity share capital, Reserve & Surplus (netted off Intangibles).

As contained in RBI Master Directions - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 (hereinafter referred to as âRBI Master Directions"), the Company is required to maintain a capital ratio consisting of Tier I and Tier II capital not less than 15 % of its aggregate risk weighted assets on-balance sheet and of risk adjusted value of off- balance sheet items. Out of this, Tier I capital shall not be less than 10%. The Board of Directorâs regularly monitors the maintenance of prescribed levels of Capital Risk Adjusted Ratio (CRAR).

Company makes all efforts to comply with the above requirements. Further, Company has complied with all externally imposed capital requirements and internal and external stress testing requirements.

Also, the management of the Company monitors its dividend pay-out. Dividend distribution policy of the Company focuses on the factors including but not limited to future capital expenditure plans, profits earned during the financial year, cost of raising funds from alternate sources, cash flow position and applicable taxes including tax on dividend, subject to the guidelines as applicable from time to time.

37.2. Financial risk management

Financial risk factors

The Company has exposure to the following types of risks from financial instruments:

â¢ Market risks;

â¢ Credit risk; and

â¢ Liquidity risk;

The Company has put in place a mechanism to ensure that the risks are monitored carefully and managed efficiently. The Company seeks to minimize the effects of these risks by using asset liability matching strategies and use of derivative financial instruments. The Companyâs risk management policies are guided by well-defined policies appropriate for various risk categories, independent risk oversight and periodic monitoring. The Company does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

The Companyâs Board of Directors have overall responsibility for the establishment and oversight of the Companyâs risk management framework. The Board of Directors has established the Enterprise Risk Management Committee (ERMC) which is responsible for approving and monitoring company risk management policies. The Companyâs risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. The risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Companyâs activities.

37.2.1. Market risk

Market risk is the risk of loss of future earnings, to fair values or to future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates and other market changes that affect market risk sensitive instruments.

The Company uses a wide range of qualitative and quantitative tools to manage and monitor various types of market risks it is exposed to. Quantitative analysis such as net income sensitivities, stress tests etc. are used to monitor and manage companyâs market risk appetite.

A. Interest risk

Interest rate risk is the risk of loss from fluctuations in the future cash flows or fair value of financial instruments because of changes in market interest rates.

Interest rate sensitivity analysis

50-basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents managementâs assessment of the reasonably possible change in interest rates.

The below table presents the impact on Profit / (Loss) before tax for 50 basis point increase or decrease in interest rate on Companyâs short-term interest rates liabilities and assets which are open to repricing risk (assuming all other variables are held constant):

B. Foreign Currency risk

Foreign Currency risk is the risk that the fair value or future cash flows of a financial instrument, denominated in currency other than functional currency, will fluctuate because of changes in foreign exchange rates. The Company is exposed to foreign currency risk mainly on its borrowings denominated in foreign currency resulting in exposures to foreign exchange rate fluctuations.

Foreign currency risk monitoring and management

The Companyâs currency risk management policy lays down the appropriate systems and controls to identify, measure and monitors, the currency risk for reporting to the management. Parameters like hedging ratio, un- hedged exposure, mark-to market position, exposure limit with banks etc. are continuously monitored as a part of currency risk management. Exchange rate exposures are managed within approved parameters using forward foreign exchange contracts. Foreign currency exposure under borrowings is fully hedged at the time of taking the loan itself.

Derivative financial instruments

The Company enters into derivative financial instruments such as foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is a bank. As on reporting date March 31, 2021 and March 31,2020, company do not have any foreign currency borrowing outstanding.

Contracts included in hedge relationship

Credit risk is the risk of suffering financial loss, should any of the Companyâs customers fail to fulfil their contractual obligations to the Company. The credit risk management team reports to Chief risk officer. The Chief Risk Officer meets with the Risk Management Committee of Board of Directors (RMCB) independently every quarter.

Credit risk on cash and cash equivalents is limited as we generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies.

A. Credit risk management approach

Managing credit risk is the most important part of total risk management exercise. The Companyâs credit risk subfunction headed by Chief Risk Officer (CRO) is responsible for the key policies and processes for managing credit risk, which include formulating credit policies and risk rating frameworks, guiding the Companyâs appetite for credit risk exposures, undertaking independent reviews and objective assessment of credit risk, and monitoring performance and management of portfolios. The principal objectives being maintaining a strong culture of responsible lending across the Company, and robust risk policies and control frameworks, implementing and continually re-evaluating our risk appetite and ensuring there is adequate monitoring of credit risks, their costs and their mitigation.

(a) Customer Selection

(I) Retail Customer Selection process

All the fulfilled applications undergo a number of checks which include internal dedupe checks, fraud dedupe check through a fraud detection software for national and local fraud matches. The cases also undergo scrutiny of KYC and income documents where all the approvable cases get screened by internal fraud prevention team for probable fraud alerts. The organization also works on system sampling through rules driven triggers that are based on market knowledge, fraud trends and other portfolio levels indicators.

For retails customers Credit limit is derived based on credit assessment of the individual based on bureau, income documents provided by the applicant and basis the overall risk profiling along with internal credit assessments process. The applications go through the application scorecards for approval. Multiple scorecards tailormade to different customer segments have been implemented which take into consideration; an applicantâs demographic, financial details along with credit worthiness assessment derived through the relationships & performance with the competitors.

Organization has worked on strengthening the credit decision process with pre-qualification of the probable customers and scientific selection based on liability score model developed internally for appropriate customer selection and targeting. We have made multiple interventions throughout the year to strengthen the acquisition quality. This has led to improvement in approval rates in the current financial year. The changes include discontinuation of programs, revision in MCP, scorecard level changes etc.

Credit limit assignment is a function of income capacity and risk assessment done for the individual applicant. Risk assessment is done based on internal scorecards that are based on applicant bureau history, application profile and demographic variables.

(II) Unsecured Corporate customer selection process

â¢ To accurately assess the credit profile of a corporate, SBI Card assesses the detailed financials, stock price performance (if listed) trends over the recent past. While the most critical indicators are detailed in the annexure along with the benchmarks approved by the board, many other performance indicators are presented in our credit proposals. These also vary slightly depending on the industry of operation of the corporate (for e.g., for manufacturing companies, working capital cycle and cash flow is assessed in detail; for companies in the service industry profitability margins and customer profile is studied in detail).

â¢ In general, we evaluate the business risks associated with the corporate and its industry, its financial profile, liquidity situation and financial flexibility (in case of any perceived liquidity stress). We assess the trend over the years of various financial indicators like net revenue movement, profitability margins, interest cover, debt-toequity, current ratio, working capital cycle, cash flow assessment etc. A peer comparison is also made between the corporate and other reputed companies from the same industry.

â¢ Further, we assess the credit history indicators as determined by independent 3rd party agencies - external rating, bureau reporting, RBI negative list and asset classification letters from bankers. If the corporate has availed SBI credit facilities relationship, we also receive the details highlighting the type of facilities, payment track record, SB rating etc.

â¢ If the credit profile of the corporate is deemed acceptable, and the corporate meets all the regulatory guidelines, the proposal is put before the approving authority (as per the delegation authority approved by the Board of Directors).

(III) Secured Corporate customer selection process

(b) Customer Management

Customer management is carried out through Account Management System, which includes:

â¢ Fraud detection

â¢ Portfolio quality review

â¢ Credit line increase

â¢ Cross sell on cards

â¢ Behavior scorecard;

â¢ Collection score card etc.

The Company deploys right tools & contemporary technology to ensure the same. The Company has deployed

practices/analytics such as the following to monitor and mitigate credit risk apart from accepting collaterals (for

secured category of loan products)

Delinquency metrics have been developed and constantly evaluated & portfolio interventions leading to better

quality of incoming new accounts

Strong collection practices driving consistent improvements in collection metrics &leveraging the latest credit bureau information to improve recoveries from older pools

Strong use of analytics in measuring and monitoring credit risk are used such as;

â¢ Scorecards assessing default risk & payment propensity

â¢ Predictive Business Analytics Models Viz. Debt Estimation, Line Assignment, Profitability based models

â¢ Loss Forecasting Models

Portfolio Risk Management encapsulates the full spectrum of the customer lifecycle once the customerâs account is onboarded on system. Building on the information captured at the time of sourcing, credit-intelligence enriching activities are undertaken to create a customerâs profile around propensity to spend-pay-revolve-cross sell, delinquency, debt burden, spend affinity etc. The profiles are further matured in due course of time with customerâs credit behavior- both onus (within the bank) and off us (with competitors from Credit Bureaus).

(I) Portfolio Risk Management Tools

Portfolio Risk Management leverages a host of information available on customerâs behavior, both internal (account performance) and external (credit bureau information). These data points are collected at various stages of the customer lifecycle- active, inactive, predelinquency, early-delinquency, severe delinquency and post write-off. The usage of these data points is as below:

â¢ Predictive Modeling: This is one of the strongest tools available for risk management where statistical scorecards are developed to predict customerâs behavior.

â¢ Bureau data: Bureau data is a very rich source to create a holistic credit profile of the customer and is refreshed on a quarterly basis. Industry data covers number of trades (by type of trade- PL, Card, mortgage etc.), balances, delinquency history on each trade etc.

â¢ Bureau event triggers: Event based triggers can be set to alert a specific activity by the customer with competition banks which is reported to credit bureaus. For example, an inquiry for a personal loan in bureau can be a trigger to offer a Loan on card internally

â¢ Spend Indicators: Spends data offers a rich insight into customerâs differential risk profile when every other parameter (scores, payment ratio, spend ratio) is constant.

A sudden and drastic shift from stable consumption based spend (utilities, groceries, fuel etc.) to aspirational spend (jewelry, apparel, gaming) can indicate future deterioration of risk grade.

â¢ Income estimator model: For income-based sourcing, an inflation adjusted indexation is done to derive the current income based on past income docs. For nonincome-based segment, income estimation models have been built to derive the income based on onus and bureau variables. The income derived from this model is used to calculate the debt burden ratio which is used as a non-score parameter for portfolio actions.

(II) Portfolio Management activities

Multiple portfolio management activities are undertaken based on the Risk Management tools described above. These activities and programs heavily leverage the bureau information in addition to onus data

a) Portfolio Segmentation and Management

Using scorecards and other account behavior metrices, portfolio is segmented into Grow, Keep and Liquidate for non-delinquent portfolio. These segments offer a better risk grading compared to individual scorecards since it has an overlay of non-score parameters. The idea is to take positive credit expansion

action on the Grow segment (Prime credit grade), monitor and take calibrated positive actions on the Keep segment (Semi-prime credit grade) and take negative actions on the Liquidate segment (Sub-prime credit grade). The positive and negative actions have been described later in the document.

For delinquent portfolio similar score and non-score-based segmentations are created which then are allocated to collections as per defined collections and recovery strategies. In the current scenario we have created more granular microsegments and taken a number of portfolio actions on higher risk segments. The actions are in the nature of credit limit reductions, authorisation blocks, as well as declining potentially higher risk transactions.

b) Cross-Sell & authorization

Credit expanding activities are taken on the portfolio based on portfolio segments which include loan on card, limit increase, balance transfer and card upgrades. Cross-sell is targeted towards Prime and SemiPrime segments and aims to grow the good asset and bring in low risk revenues. In additional to permanent increase in exposure, temporary increase in exposure is also taken by means of risk based over limit authorization to allow customer convenience and generate fee-based revenue.

c) Account Management

Detailed policies and processes are created for end to end management of the account by means of a comprehensive services policy. It covers security checks at call center/website, account modification activities (address/contact detail change), customer-initiated requests (balance refund, loan requests), account reinstatement, card renewals, supplementary card, billing cycle change, reversal of charges, bureau reporting, dispute/fraud chargeback among others. The primary objective is to respond to queries in a timely and accurate manner and resolve disputes expediently. Technology is heavily leveraged here wherein bulk of the policies and processes are automated with self-service channels for customers. Processes have been created to simplify the customer journey for fulfilment of customer requests. It is also ensured that all account management policies adhere to regulatory guidelines with respect to KYC norms, customer consent etc.

d) Collections and Recoveries

Strategies have been created for repayment at various stages which starts when customer has missed the payment due date. Further segments have been created using the collections scorecards and other variables and the output is passed on to the collections team for on tele calling /field activities. The frequency, mode and verbiage of communication is decided based on the segmentations.

e) Fraud Control

Checks have been built into the account management policy to prevent unauthorized access or takeover of customer account. In addition to that, a robust strategy has been created around transaction fraud covering:

â¢ Decline/alert Rules based on Volume-velocity-variety

â¢ Daily dispute review to identify fraud pattern and merchant

â¢ Daily new merchant review to block fraudulent merchants before they gain momentum

A feedback loop is also created for the sourcing policy to discontinue segments which show considerable and persistent delinquencies. The portfolio review across these metrices is not just with the Company but also with the industry by means of reports or custom analysis from network (Visa/Mastercard/Rupay) or bureau.

(III) Key levers and actions

When it comes to taking actions on portfolio based on the portfolio indicators there are multiple levers of change depending on the desired outcome. These primarily are credit limit reductions, over limit strategies, cross-sell offers, account blocking etc.

Collection Approach

Customers who fail to pay their dues by the stipulated payment due date, at various stages of delinquency, come under the purview of collections & recovery strategies, as is decided by risk and/or collections team from time to time. Company uses various measures for collection of dues including tele-calling, field visits, written reminders, SMS, legal recourse etc. as is permitted by the approved strategy. Collection of dues will follow definitive treatment hierarchy (viz. total amount payment, minimum amount payment, bucket outstanding payment followed by financial hardship tools) and will involve laid down procedures, duly approved. Collection team may segregate treatment of accounts based on effectiveness of collections, cost implications & productivity benefit as well as the stage of delinquency. Accounts may also get allocated to external agencies, duly empaneled, depending on the severity, vintage of delinquency or any other related parameters.

SBI Card may block the customerâs account, in the event payment is not received within stipulated payment due date, as communicated through statements & SMS. The account block, in such cases, may be temporary or permanent depending on delinquency stage, default potential, payment history. Accounts charged off post 191 days from payment due date are classified as Recovery Pool / Post charge-off bucket. Alternate Dispute Resolution channels like Arbitration, Conciliation, Bilingual Legal Notice, Privilege Police Complaint and

Lok Adalat recourse taken depending upon risk profile. Also, Quasi-legal, legal action under Sec 138 of Negotiable Instruments Act.

Also, the collaterals in the case of secured retail and corporate loans given are Fixed Deposit (FD) or Bank Guarantee (BG) from banks and hence, there is no significant/minimal credit risk associated for secured pool of loans which constitutes generally 1% - 2 % of the total credit exposure.

Stress testing on portfolio would be carried out periodically and results are regularly reported to RMCB and necessarily follow up action is taken. The review of portfolio analysis & trends, including recovery rates, is carried out at monthly intervals at the Executive Risk Management Committee of the Company.

Managing customer life cycle is a functional priority of the credit risk function. However, the Company may still continue to recover amounts legally and contractually owed.

Prohibited Practices

Tele callers / Recovery agents are prohibited in conducting the following acts but not limited to:

â¢ Engaging in any conduct or practices that harass, threat, oppress or abuse any person in connection with the collection of a debt.

â¢ Using false, deceptive or misleading representations or practices in collection of any debt.

â¢ Refrain from action that could damage the integrity and reputation of SBI Card.

â¢ Threatening or using violence to harm an individualâs body, reputation or property.

â¢ Using obscene gestures and abusive language (either orally or in writing).

B. Credit risk analysis

This section analyses Companyâs credit risk split as follows;

(a) Exposure to credit risk - Analysis of overall exposure to credit risk before and after credit risk mitigation.

(b) Credit quality analysis - Analysis of overall loan portfolio by credit quality.

(d) Credit risk mitigation - Analysis of collaterals held by client segment and collateral type.

Loans to customer includes loans secured by lien on Fixed deposits and Bank Guarantee held with third party banks. Secured loans account for 1.35% .as at March 31, 2021, 1.34% as at March 31, 2020 of total loans.

Notes:

â¢ Loans to customers which accounts for 92.3% of total exposure to credit risk, as at March 31, 2021, is segregated based on risk characteristics of the population to manage credit quality and measure impairment.

â¢ Investment are valued at Fair value as on balance sheet date and effect has been routed through Other Comprehensive Income to be in line with Ind AS guideline

â¢ Derivative instruments taken by the Company are from the same party (Parent company - Refer Note 16) from whom the Company has taken the underlying loan. Hence, default risk from counterparty is also being a financial institution with high credit rating is limited.

Credit concentration risk

Large exposure concentration risk is managed through concentration limits set by a counterparty or a group of connected counterparties based on control and economic dependence criteria

For concentrations that are material at a Company level, breaches and potential breaches are monitored by the respective governance committees and reported to the Risk Committee and CRO.

The Company follows the prescribed Regulatory Prudential Norms:

â¢ Single Borrower Exposure limit - 15% of net owned funds of SBI Cards & Payments Services Ltd.

â¢ Group Borrower Exposure limit - 25% of net owned funds of SBI Cards & Payments Services Ltd

In arlrlitinn thprp iq alQn an intprnal rannina nn thp Qinalp hnrmiA/pr pvnrtQiirp at ? 900 Cr

Stage 1 Includes borrowers that have not had a significant increase in credit risk since initial recognition or

have low credit risk at the reporting date. 12-month expected credit losses (''ECL'') are recognized and interest revenue is calculated on the gross carrying amount of the asset.

Stage 2 Includes borrowers that have not had a significant increase in credit risk since initial recognition but

that does not have objective evidence of impairment. Lifetime ECL are the expected credit losses that result from all possible default events over the expected life of the card.

Stage 3 Includes borrowers that have objective evidence of impairment at the reporting that. Lifetime

ECL is calc

An overall breakdown of loan portfolio by client segment is provided below differentiating between performing and non-performing loan book,

Collective measurement model (Retail and Corporate)

â¢ A financial instrument that is not credit impaired on initial recognition is classified in âStage1â

â¢ If a significant increase in credit risk (SICR) is identified the financial instrument moves to âStage 2â,

â¢ If the financial instrument is credit-impaired, the financial instrument moves to âStage3â category.

The Company defines default or significant increase in credit risk (SICR) based on the following quantitative and qualitative criteria.

Definition of Default

Quantitative criteria

The borrower is more than 90 days past due on its contractual payments.

Qualitative criteria

â¢ Arrangement to Pay

â¢ Settlement

â¢ Cardholder is deceased

â¢ Restructured

Further, for any instrument to be upgraded from Stage 3, the entire overdue balance must be cleared.

Definition of Significant increase in credit risk (SICR)

Quantitative criteria

The borrower is 30-90 past due on its contractual payments.

Qualitative criteria

The default definition has been applied consistently to model the PD, LGD and EAD for measurement of ECL.

Measuring ECL- Explanation of inputs, assumptions and estimation techniques

ECL is measured on either a 12 month or lifetime basis depending on whether there is an increase in SICR since initial recognition. ECL is the discounted product of PD, LGD and EAD.

Estimation for retail accounts

Month on month (MOM) default rates were calculated for all vintages.

Post calculating Mom default rates, cumulative yearly PDs being calculated till lifetime.

â¢ For Stage 1 accounts 1- year marginal PD were calculated.

â¢ For Stage 2 accounts - Lifetime PDs were calculated

â¢ For Stage 3 accounts a 100% PD was taken LGD

EAD

Segment wise EAD is calculated using the below formula.

EAD = Balance Outstanding CCF¹(Credit Limit - Balance Outstanding), where CCF is proportion of unutilized credit limit which is expected to be utilized till the time of default. CCF is applicable only for stage 1 accounts, as stage 2 and stage 3 accounts cannot utilize the unused credit limit. CCF % = Utilisation (t 12) - Utilisation (t) i.e. change of utilization rates over next 1 year, its being floored at 0%

Specific reserve may be created in following scenarios: -

â¢ Rating of the corporate is downgraded significantly.

â¢ Public news of default or fraud by the corporate or any group company with any lender.

â¢ Adverse reporting in bureau with respect to the corporate or promoters (overdues with other lenders)

â¢ Adverse public information on corporate or associated group.

â¢ Significant Overdues of the corporate or group companies with SBI Card or SBI.

â¢ If corporate exposure is backed by security, and there is a deterioration in the value of the underlying security.

Impairment allowance for these exposures are reviewed and accounted on a case by case basis. Below table states different scenarios and effect of the same on point in time provision.

Management overlay on ECL model due to COVID-19

The current ECL model does not cater to future economic deterioration expected due to COVID-19 fall out and is not forward looking as it is based on past historical data. Accordingly, in anticipation of the expected economic fallout, we have now identified specific segments prone to stress in the current situation. These have been identified on the basis of behaviour in the last 12 months as well as the efforts required to collect on these segments. The stress segments identified are erstwhile SC Stand still accounts and customers who opted for RBI resolution package as per RBI circular dated August 6, 2020 and are in stage 2 or stage 3 on the reporting date. We have created additional management overlay on these segments. We are closely monitoring our asset quality and taking suitable actions to manage our exposures. These segments and strategies are being actively monitored and will be refined as more data becomes available.

The Company has put in place an effective Asset Liability Management System, constituted an Asset Liability Management Committee (âALCO") headed by Managing Director & CEO of the Company.

The Company manages its liquidity risk through a mix of strategies, including forwardlooking resource mobilization based on projected disbursements and maturing obligations. ALCO is responsible for managing the Companyâs liquidity risk via a combination of policy formation, review and governance, analysis, stress testing, limit setting and monitoring.

Companyâs borrowing program is rated by CRISIL & ICRA. Short term rating is A1 and long-term rating is AAA/Stable by both the agencies. There has been no change in ratings from last 10 years.

The maturity pattern of items of non-derivative financial assets and liabilities at undiscounted principal and interest cash flows are as under:

Maturity Analysis of Derivative financial assets & liabilities :

The table above details the Companyâs expected maturities for its non-derivative and derivative financial instruments drawn up based on the undiscounted contractual maturities including interest. When the amount payable or receivable is not fixed, the amount disclosed has been determined by reference to the projected interest rates as illustrated by the yield curves at the end of the reporting period.

The Company has leases of various offices and equipment. Rental contracts are typically made for fixed periods of 3 to 9 years but may have extension options as described in (II) below. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the company. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

â¢ Fixed payments (including in-substance fixed payments), less any lease incentives receivable wherever applicable.

â¢ Variable lease payment that are based on an index or a rate if applicable.

â¢ Amounts expected to be payable by the lessee under residual value guarantees if applicable.

â¢ The exercise price of a purchase option if the lessee is reasonably certain to exercise that option if applicable, and

â¢ Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lesseeâs incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

Right-of-use assets are measured at cost comprising the following:

â¢ the amount of the initial measurement of lease liability.

â¢ any lease payments made at or before the commencement date less any lease incentives received if applicable, and

â¢ any initial direct costs if applicable.

Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise ITequipment and small items of office furniture.

I. Variable lease payments

Estimation uncertainty arising from variable lease payments

II. Extension and termination options

Extension and termination options are included in a number of lease contracts. These terms are used to maximize operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only by the company and not by the respective lessor.

Defined contribution plans (Contd..)

Certain show cause notices relating to indirect taxes matters amounting to H 4.72 Crores (previous period H 4.72 Crores) and interest as applicable, have neither been acknowledged as claims nor acknowledged as contingent liabilities. Based on internal assessment and discussion with tax advisors, the Company is of the view that the possibility of any of these tax demands materializing is remote.

In absence of any specific entry in the Indian Stamp Act, 1899 for amalgamation, which is open to interpretation of the stamp collector, the Company has filed an application dated June 30, 2019 for adjudication of the stamp duty. During the pendency of the adjudication application, it is difficult to provide an estimate of the actual stamp duty that would be leviable on the Company and therefore no provision has been made in the financial statements for the year ended March 31, 2021.

46. SEGMENT INFORMATION

The Segment reporting disclosed by the Company in this section is presented in accordance with the disclosureâs requirements of Ind AS 108 âOperating Segment".

Definition of the operating segments of the Company is based on the identification of the various activities performed which generate revenues and expenses, while also taking into consideration the organizational structure approved by the Board of Directors for business management purposes. Based on these segments, management analyses the main operating and financial metrics for the purpose of taking resource allocation decisions and assessing the Companyâs performance. The Company has not aggregated any operating segments for presentation purposes.

Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) amounted to

H 22.07 crores as at March 31, 2021, (H 23.08 crores as at March 31, 2020).

48. In respect of accounts receivables, the Company is regularly generating and dispatching customer statements on periodic interval wherever transactions or outstanding are there. In case of disputes with regard to billing, there is a process of resolution and adjustments are carried out on regular basis. Moreover, in respect of accounts payable, the Company has a process of receiving regular balance confirmation from its vendors. The balances are reconciled with the balance confirmation received and discrepancies, if any are accounted on regular basis. For the year end balances of Account Receivables, Account Payables and Loans, the management is of the opinion that adjustments, if any required through the abovementioned process, will not have any material impact on the financials of the Company.

49. The Company deposited GST on Interchange received by it in respect of VISA International transactions. However, in February 2019, Company has received a declaration from VISA that Settlement of International Interchange is being done in INR as per approval of RBI obtained by VISA in 1995. On the basis of said declaration, the Company has obtained opinion from legal firm confirming that the same can be treated as receipt of consideration in convertible foreign exchange and consequently as export of service and therefore not chargeable to GST. The Company has accordingly decided to stop paying GST on International Interchange henceforth and decided to file a refund application for H 11.06 Crores for the GST paid from July, 2017 to February 2019 with GST authorities.

Further, on July 16, 2019, the Company has withdrawn refund application for H 6.54 Crores for the period April, 2018 -February, 2019 and have adjusted this amount from tax payable of the subsequent period basis opinion from legal firm and accordingly provision to the extent of H 6.54 Crores have been reduced/ reversed.

50. The Company deposited GST on Interchange Income for the period April, 2018 to December, 2018 considering them as intrastate supplies for the year ended March 31, 2019. However, post receiving bank wise details of such Interchange Income from network partners, such supplies are held as Inter-state transaction for which IGST is applicable. Consequently, company had filed a refund claim under Section 77 of the CGST Act of H 108.41 Crores which has been rejected by the adjudicating authority as well as the first Appellate Commissioner. As GST Tribunals have not been set up as of now, Company has filed a Writ Petition before Honâble Punjab & Haryana High Court against such rejection order. The Company has created 100% provision against the refund claim as at March 31, 2021 to mitigate the uncertainty risk considering that the said refund is subject to interpretation of law in view of the above.

51. All financial information presented in INR has been rounded off to the nearest crores (up to two decimals), except as stated otherwise. Till previous year, all financial information was rounded off to the nearest lakhs (up to two decimals), except as stated otherwise.

53. In accordance with RBI circular dated April 07, 2021, the Company shall refund / adjust âinterest on interestâ to all categories of eligible borrowers including those who had availed of working capital facilities during the moratorium period, irrespective of whether moratorium had been fully or partially availed, or not availed. Pursuant to these instructions and IBA notification bearing reference No. CIB/ADV/MBR/9833 dated April 19, 2021 on methodology for calculation of the amount of such âinterest on interestâ, Company has formulated a Board- approved policy for such refund and also recognised a charge of H 4.17 Crores in its Statement of Profit and Loss for the year ended March 31, 2021, and the same shall be credited to customerâs account in due course of time.

57.1.2. Disclosure on Liquidity Coverage Ratio

Liquidity management in the Company is driven by the Board approved Asset Liability Management (ALM) Policy. The Asset Liability Committee (ALCO) is a decision-making unit responsible for implementing the liquidity risk management strategy of the Company , formulating the Companyâs funding strategies to ensure that the funding sources are well diversified and is consistent with the operational requirements of the Company and also ensures adherence to the risk tolerance/limits set by the Board.

The LCR requirement were effective December 1, 2020, with the minimum HQLAs to be held being 50% of the LCR, progressively increase it by 10% annually, to reach up to the required level of 100% by December 1, 2024. The LCR is calculated by dividing stock of HQLA by total net cash outflows over the next 30 calendar days. Total net cash outflows over the next 30 days is equal to stressed outflows minus Minimum of (stressed inflows or 75% of stressed outflows), wherein stressed outflows are 115% of outflows and stressed inflows are 75% of inflows.

The following table sets out the average of unweighted and weighted value of the LCR components of the Company calculated in accordance with RBI circular no RBI/2019-20/88 DOR.NBFC (PD) CC. No.102/03.10.001/2019-20 dated November 04, 2019. The average weighted and unweighted amounts are calculated taking simple averages of monthly observations over the previous/reporting quarter.

The main drivers of the LCR calculation in outflow over 30 days period is contractual borrowing obligations of the company in the form of commercial papers, bank lines, debentures. Other contractual funding obligations consist of liabilities towards network partners, vendor payments, other liabilities. Further company has used the behavioural study to take the impact of unused credit and liquidity facilities that Company has provided to its cardholders. Main driver of inflows is the repayments from the cardholders which are taken basis the past behavioural pattern observed. Other cash inflows consist majorly incomes accruals which company expects to receive in next 30 days.

The average LCR of the Company for the three months ended March 31,2021 was 61.55% as against 65.81% for the quarter ended December 31, 2020. The LCR remains above the regulatory minimum requirement of 50%. The average HQLA for the quarter ended March 31, 2021 was H 961.09 crores as against H 1,113.18 crores for the quarter ended December 31, 2020. The net cash outflow position has gone down by H 129.94 crores and HQLA level has gone down by H 152.09 crores as cash outflows in next 30 days has reduced. HQLA comprises of balances in demand deposits with Scheduled Commercial Banks (1.85%), Investments in Treasury Bills (64.67%) and investment in Government Securities (33.48%). The company takes forward cover to hedge the foreign exchange liabilities and do not foresee any material impact of derivative exposure/ potential collateral calls/ currency mismatch in the LCR.

Management is of the view that the Company has sufficient liquidity cover to meet its likely future short-term requirements.

Individual Measurement (Corporate)

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Notes to Accounts of SBI Cards and Payment Services Ltd.

4.13. Provisions, contingent liabilities andcontingent assets

4.14. Provision for reward points redemption

4.15. Cash and Cash Equivalent

4.16. Critical accounting judgements and key sourcesof estimation uncertainty

Disaggregation of Revenue

Transaction price allocated to the remaining performance obligations

Receivables from contracts with customers and contract balances

Contract costs

35 CAPITAL MANAGEMENT

Hierarchy of Fair value measurements

37 FINANCIAL RISK MANAGEMENT37.1 Financial risk factors

37.1.1 Market risk

A. Interest risk

4.13. Provisions, contingent liabilities and contingent assets

4.14. Provision for reward points redemption

4.15. Cash and Cash Equivalent

4.16. Critical accounting judgements and key sources of estimation uncertainty

Disaggregation of Revenue

Transaction price allocated to the remaining performance obligations

Receivables from contracts with customers and contract balances

36 CAPITAL MANAGEMENT

Hierarchy of Fair value measurements

38 FINANCIAL RISK MANAGEMENT

38.1 Financial risk factors

38.1.1 Market risk

A. Interest risk

Derivative financial instruments

38.1.2 Credit Risk

A. Credit risk management approach

(a) Customer Selection

(I) Retail Customer Selection process

(II) Unsecured Corporate customer selection process

(III) Secured Corporate customer selection process

(b) Customer Management

B. Credit risk analysis

(a) Exposure to credit risk

Credit concentration risk

(b) Credit quality analysis Credit grading

(c) Impairment

Quantitative criteria

Qualitative criteria

Quantitative criteria

Qualitative criteria

Measuring ECL- Explanation of inputs, assumptions and estimation techniques

Estimation for retail accounts PD

LGD

EAD

38.1.3 Liquidity risk

b. SBI Card Employee Stock Option Plan 2023 (the Plan)

47 SEGMENT INFORMATION

55.1.2 Disclosure on Liquidity Coverage Ratio

Disaggregation of Revenue

Transaction price allocated to the remaining performance obligations

Receivables from contracts with customers and contract balances

38.1 Financial risk management

38.1.1 Market risk

Derivative financial instruments

38.1.2. Credit Risk

A. Credit risk management approach

(a) Customer Selection

(I) Retail Customer Selection process

(III) Secured Corporate customer selection process

(b) Customer Management

i. Portfolio Monitoring

ii. Portfolio management

iii. Fraud control

iv. Collection strategy

B. Credit risk analysis

Credit concentration risk

(b) Credit quality analysis Credit grading

Credit quality by client segment

(c) Impairment

Definition of Default Quantitative criteria

Qualitative criteria

Quantitative criteria

Qualitative criteria

Measuring ECL- Explanation of inputs, assumptions and estimation techniques

Estimation for retail accounts PD

LGD

4.13. Provisions, contingent liabilities and
contingent assets

4.16. Critical accounting judgements and key sources
of estimation uncertainty

37 FINANCIAL RISK MANAGEMENT
37.1 Financial risk factors

â¢ Individual Measurement (Corporate)