RED HERRING PROSPECTUS

Dated: October 28, 2023

Please read Section 32 of the Companies Act, 2013
100% Book Built Offer
(Please scan this QR Code to view this Red Herring Prospectus)

ESAF SMALL FINANCE BANK LIMITED

CORPORATE IDENTITY NUMBER: U65990KL2016PLC045669
REGISTERED AND CONTACT E-MAIL AND TELEPHONE WEBSITE
CORPORATE OFFICE PERSON
Building No. VII/83/8, ESAF Bhavan, Ranjith Raj P, E-mail: www.esafbank.com
Thrissur-Palakkad National Highway, Company Secretary investor.relations@esafbank.com
Mannuthy, Thrissur 680 651, Kerala, and Compliance Tel: +91 487 7123 907
India Officer
THE PROMOTERS OF OUR BANK: KADAMBELIL PAUL THOMAS AND ESAF FINANCIAL HOLDINGS
PRIVATE LIMITED
DETAILS OF THE OFFER
TYPE SIZE OF SIZE OF TOTAL OFFER SIZE ELIGIBILITY AND SHARE
FRESH ISSUE OFFER FOR RESERVATION AMONG QIB, RIB,
SALE NIB AND ELIGIBLE EMPLOYEES
Fresh Issue Fresh Issue of up Offer for Sale up Up to [●] equity shares of face The Offer is being made pursuant to
and Offer to [●] equity to [●] equity value of ₹10 each aggregating Regulation 6(1) of the Securities and
for Sale shares of face shares of face up to ₹4,630.00 million Exchange Board of India (Issue of Capital
value of ₹10 value of ₹10 each and Disclosure Requirements)
each aggregating aggregating up to Regulations, 2018, as amended (“SEBI
up to ₹ 3,907.00 ₹723.00 million ICDR Regulations”) as our Bank fulfils
million the requirements under Regulation 6(1) of
the SEBI ICDR Regulations. For further
details, see “Other Regulatory and
Statutory Disclosures – Eligibility for the
Offer” on page 441. For details in relation
to the share reservation among QIBs,
RIBs, NIBs and Eligible Employees see
“Offer Structure” on page 467.
DETAILS OF THE OFFER FOR SALE
NAME OF SELLING TYPE NUMBER OF EQUITY WEIGHTED AVERAGE COST
SHAREHOLDER SHARES OFFERED/ OF ACQUISITION PER
AMOUNT (₹ IN MILLION) EQUITY SHARE ON A FULLY
DILUTED BASIS (IN ₹)*
ESAF Financial Holdings Promoter Selling [●] equity shares of face value of 10.11
Private Limited Shareholder ₹10 each aggregating up to
₹492.60 million
PNB MetLife India Insurance Other Selling [●] equity shares of face value of 40.07
Company Limited Shareholder ₹10 each aggregating up to
₹126.70 million
Bajaj Allianz Life Insurance Other Selling [●] equity shares of face value of 40.07
Company Limited Shareholder ₹10 each aggregating up to
₹103.70 million
*As certified by A. John Moris & Co., Chartered Accountants pursuant to their certificate dated October 28, 2023
RISKS IN RELATION TO THE FIRST OFFER
The face value of the Equity Shares is ₹10 each. The Floor Price and the Cap Price as determined and justified by our Bank
and Promoter Selling Shareholder, in consultation with the Book Running Lead Managers (“BRLMs”) and the Offer Price
as determined and justified by our Bank and the Selling Shareholders, in consultation with the BRLMs, on the basis of the
assessment of market demand of the Equity Shares by way of the book building process, as stated under “Basis for Offer
Price” on page 130 should not be considered to be indicative of the market price of the Equity Shares after the Equity Shares
are listed. No assurance can be given regarding an active and/or sustained trading in the Equity Shares nor regarding the price
at which the Equity Shares will be traded after listing.
GENERAL RISKS
Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in the
Offer unless they can afford to take the risk of losing their entire investment. Investors are advised to read the risk factors
carefully before taking an investment decision in the Offer. For taking an investment decision, investors must rely on their
own examination of our Bank and the Offer, including the risks involved. The Equity Shares in the Offer have not been
recommended or approved by the Securities and Exchange Board of India (“SEBI”), nor does SEBI guarantee the accuracy
or adequacy of the contents of this Red Herring Prospectus. Specific attention of the investors is invited to “Risk Factors” on
page 35.
 ISSUER’S AND SELLING SHAREHOLDERS’ABSOLUTE RESPONSIBILITY
Our Bank, having made all reasonable inquiries, accepts responsibility for and confirms that this Red Herring Prospectus
contains all information with regard to our Bank and the Offer, which is material in the context of the Offer, that the
information contained in this Red Herring Prospectus is true and correct in all material aspects and is not misleading in any
material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the
omission of which makes this Red Herring Prospectus as a whole or any of such information or the expression of any such
opinions or intentions misleading in any material respect. Each of the Selling Shareholders, severally and not jointly, accepts
responsibility for and confirms only such statements specifically made or confirmed by such Selling Shareholders in this Red
Herring Prospectus to the extent of information specifically pertaining to itself and its respective portion of the Offered Shares
in the Offer for Sale and assumes responsibility that such statements are true and correct in all material respects and not
misleading in any material respect.
LISTING
The Equity Shares that will be offered through this Red Herring Prospectus are proposed to be listed on the Stock Exchanges
being BSE and NSE. Our Bank has received ‘in-principle’ approvals from BSE and NSE for the listing of the Equity Shares
pursuant to letters, each dated September 7, 2023. For the purposes of the Offer, the Designated Stock Exchange shall be
BSE.
BOOK RUNNING LEAD MANAGERS
NAMES OF THE BRLMS AND LOGOS CONTACT PERSON TELEPHONE AND E-MAIL
ICICI Securities Limited Kristina Dias / Ashik Tel: +91 22 6807 7100
Joisar E-mail: esafsfb.ipo@icicisecurities.com
DAM Capital Advisors Chandresh Sharma Tel: +91 22 4202 2500
Limited E-mail: esaf.ipo@damcapital.in

Nuvama Wealth Management Lokesh Shah Tel: +91 22 4009 4400

Limited (formerly known as E-mail: ESAF@nuvama.com
Edelweiss Securities Limited)*
REGISTRAR TO THE OFFER
NAME OF THE REGISTRAR CONTACT PERSON TELEPHONE AND E-MAIL
Link Intime India Private Limited Shanti Gopalkrishnan Tel: +91 022 4918 6060
E-mail: esaf.ipo@linkintime.co.in
BID/ OFFER PERIOD
ANCHOR INVESTOR BIDDING DATE THURSDAY, NOVEMBER 2, 2023
BID/OFFER OPENS ON FRIDAY, NOVEMBER 3, 2023
BID/OFFER CLOSES ON TUESDAY, NOVEMBER 7, 2023(1)
* Pursuant to order passed by Hon’ble National Company Law Tribunal, Mumbai Bench dated April 27, 2023, the merchant banking
business of Edelweiss Financial Services Limited has demerged and now transferred to Nuvama Wealth Management Limited and therefore
the said merchant banking business is part of Nuvama Wealth Management Limited.
(1) The UPI mandate end time and date shall be at 5:00 p.m. on Bid/Offer Closing Day.
 ESAF SMALL FINANCE BANK LIMITED
Our Bank was incorporated as ‘ESAF Small Finance Bank Limited’ on May 5, 2016 at Thrissur, Kerala, as a public limited company under the Companies Act, 2013, and was granted the certificate
of incorporation by the Registrar of Companies, Kerala at Ernakulam (“RoC”). Our Promoter, ESAF Financial Holdings Private Limited, was granted in-principle approval to establish a small
finance bank (“SFB”), by the RBI, pursuant to its letter dated October 7, 2015. Subsequently, our Bank received the final approval to carry on the SFB business in India, pursuant to a letter dated
November 18, 2016 issued by the RBI. Our Bank commenced its business with effect from March 10, 2017 and was included in the second schedule to the RBI Act pursuant to a notification dated
November 12, 2018 issued by the RBI. For further details, see “History and Certain Corporate Matters” on page 241.
Registered and Corporate Office: Building No. VII/83/8, ESAF Bhavan, Thrissur-Palakkad National Highway, Mannuthy, Thrissur 680 651, Kerala, India;
Tel: +91 487 7123 907; Website: www.esafbank.com; Contact Person: Ranjith Raj P, Company Secretary and Compliance Officer; E-mail: investor.relations@esafbank.com;
Corporate Identity Number: U65990KL2016PLC045669
OUR PROMOTERS: KADAMBELIL PAUL THOMAS AND ESAF FINANCIAL HOLDINGS PRIVATE LIMITED
INITIAL PUBLIC OFFER OF UP TO [●] EQUITY SHARES OF FACE VALUE OF ₹10 EACH (“EQUITY SHARES”) OF ESAF SMALL FINANCE BANK LIMITED (“BANK” OR “ISSUER”) FOR CASH AT A
PRICE OF ₹[●] PER EQUITY SHARE (INCLUDING A SHARE PREMIUM OF ₹[●] PER EQUITY SHARE) AGGREGATING UP TO ₹ 4,630.00 MILLION (THE “OFFER”) COMPRISING A FRESH ISSUE OF
UP TO [●] EQUITY SHARES AGGREGATING UP TO ₹ 3,907.00 MILLION (THE “FRESH ISSUE”) AND AN OFFER FOR SALE OF UP TO [●] EQUITY SHARES AGGREGATING UP TO ₹723.00 MILLION
(“THE OFFER FOR SALE”), COMPRISING UP TO [●] EQUITY SHARES AGGREGATING UP TO ₹492.60 MILLION BY THE PROMOTER SELLING SHAREHOLDER (AS DEFINED HEREUNDER), AND
UP TO [●] EQUITY SHARES AGGREGATING UP TO ₹126.70 MILLION BY PNB METLIFE INDIA INSURANCE COMPANY LIMITED AND UP TO [●] EQUITY SHARES AGGREGATING UP TO ₹103.70
MILLION BY BAJAJ ALLIANZ LIFE INSURANCE COMPANY LIMITED (THE “OTHER SELLING SHAREHOLDERS” AND TOGETHER WITH THE PROMOTER SELLING SHAREHOLDER, THE
“SELLING SHAREHOLDERS”, AND SUCH EQUITY SHARES THE “OFFERED SHARES”).
THE OFFER INCLUDES A RESERVATION OF UP TO [●] EQUITY SHARES, AGGREGATING UP TO ₹125.00 MILLION (CONSTITUTING UP TO [●]% OF THE POST-OFFER PAID-UP EQUITY SHARE
CAPITAL), FOR SUBSCRIPTION BY ELIGIBLE EMPLOYEES (“EMPLOYEE RESERVATION PORTION”). OUR BANK AND THE PROMOTER SELLING SHAREHOLDER MAY, IN CONSULTATION
WITH THE BRLMS OFFER A DISCOUNT OF UP TO [●]% OF THE OFFER PRICE TO ELIGIBLE EMPLOYEES BIDDING IN THE EMPLOYEE RESERVATION PORTION (“EMPLOYEE DISCOUNT”),
SUBJECT TO NECESSARY APPROVALS AS MAY BE REQUIRED. THE OFFER LESS THE EMPLOYEE RESERVATION PORTION IS HEREINAFTER REFERRED TO AS THE “NET OFFER”. THE
OFFER AND THE NET OFFER SHALL CONSTITUTE [●]% AND [●]%, RESPECTIVELY, OF THE POST-OFFER PAID-UP EQUITY SHARE CAPITAL OF OUR BANK.
THE FACE VALUE OF EQUITY SHARES IS ₹10 EACH. THE PRICE BAND AND THE MINIMUM BID LOT SHALL BE DECIDED BY OUR BANK AND THE PROMOTER SELLING SHAREHOLDER, IN
CONSULTATION WITH THE BRLMS AND WILL BE ADVERTISED IN ALL EDITIONS OF THE FINANCIAL EXPRESS, AN ENGLISH NATIONAL DAILY NEWSPAPER, ALL EDITIONS OF JANSATTA,
A HINDI NATIONAL DAILY NEWSPAPER AND THRISSUR EDITIONS OF THE MALAYALAM DAILY NEWSPAPER, MANGALAM (MALAYALAM BEING THE REGIONAL LANGUAGE OF KERALA,
WHERE OUR REGISTERED AND CORPORATE OFFICE IS LOCATED), EACH WITH WIDE CIRCULATION, RESPECTIVELY, AT LEAST TWO WORKING DAYS PRIOR TO THE BID/ OFFER OPENING
DATE AND SHALL BE MADE AVAILABLE TO THE BSE LIMITED (“BSE”) AND THE NATIONAL STOCK EXCHANGE OF INDIA LIMITED (“NSE”, AND TOGETHER WITH BSE, THE “STOCK
EXCHANGES”) FOR THE PURPOSE OF UPLOADING ON THEIR RESPECTIVE WEBSITES IN ACCORDANCE WITH SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND
DISCLOSURE REQUIREMENTS) REGULATIONS, 2018, AS AMENDED (THE “SEBI ICDR REGULATIONS”).
In case of any revision in the Price Band, the Bid/ Offer Period will be extended by at least three additional Working Days after such revision in the Price Band, subject to the Bid/ Offer Period not exceeding 10 Working Days.
In cases of force majeure, banking strike or similar circumstances, our Bank and the Promoter Selling Shareholder may, for reasons to be recorded in writing, extend the Bid/Offer Period for a minimum of three Working Days,
subject to the Bid/ Offer Period not exceeding 10 Working Days. Any revision in the Price Band and the revised Bid/ Offer Period, if applicable, shall be widely disseminated by notification to the Stock Exchanges, by issuing a
public notice, and also by indicating the change on the respective websites of the BRLMs and at the terminals of the Syndicate Members and by intimation to Designated Intermediaries and the Sponsor Banks.
The Offer is being made through the Book Building Process, in terms of Rule 19(2)(b) of the Securities Contracts (Regulation) Rules, 1957, as amended (“SCRR”) read with Regulation 31 of the SEBI ICDR Regulations and in
compliance with Regulation 6(1) of the SEBI ICDR Regulations, wherein not more than 50% of the Net Offer shall be available for allocation on a proportionate basis to Qualified Institutional Buyers (“QIBs”, the “QIB
Portion”), provided that our Bank and the Promoter Selling Shareholder may, in consultation with the BRLMs, allocate up to 60% of the QIB Portion to Anchor Investors on a discretionary basis (“Anchor Investor Portion”),
of which one-third shall be reserved for domestic Mutual Funds, subject to valid Bids being received from domestic Mutual Funds at or above the Anchor Investor Allocation Price in accordance with the SEBI ICDR Regulations.
In the event of under-subscription, or non-allocation in the Anchor Investor Portion, the balance Equity Shares shall be added to the QIB Portion (other than Anchor Investor Portion) (“Net QIB Portion”). Further, 5% of the Net
QIB Portion shall be available for allocation on a proportionate basis only to Mutual Funds, and the remainder of the Net QIB Portion shall be available for allocation on a proportionate basis to all QIBs, including Mutual Funds,
subject to valid Bids being received at or above the Offer Price. However, if the aggregate demand from Mutual Funds is less than 5% of the Net QIB Portion, the balance Equity Shares available for allocation in the Mutual Fund
Portion will be added to the remaining Net QIB Portion for proportionate allocation to QIBs. Further, not less than 15% of the Net Offer shall be available for allocation to Non-Institutional Bidders, out of which (a) one third of
such portion shall be reserved for Bidders with Bids exceeding ₹0.20 million and up to ₹1.00 million; and (b) two third of such portion shall be reserved for Bidders with application size of more than ₹1.00 million, provided that
the unsubscribed portion in either of such sub-categories may be allocated to Bidders in the other sub-category of Non-Institutional Bidders, subject to valid Bids received at or above the Offer Price, and not less than 35% of the
Net Offer shall be available for allocation to Retail Individual Bidders in accordance with the SEBI ICDR Regulations, subject to valid Bids being received at or above the Offer Price. Further, Equity Shares will be allocated on
a proportionate basis to Eligible Employees applying under the Employee Reservation Portion, subject to valid Bids received from them at or above the Offer Price. All potential Bidders (except Anchor Investors) are required to
mandatorily required to participate in the Offer through the Application Supported by Blocked Amount (“ASBA”) process by providing details of their respective ASBA Account (as defined hereinafter), and UPI ID in case of
UPI Bidders (defined hereinafter), if applicable, pursuant to which the corresponding Bid Amount will be blocked by the Self Certified Syndicate Banks (“SCSBs”) or the Sponsor Banks, as the case may be, to the extent of their
respective Bid Amount. Anchor Investors are not permitted to participate in the Offer through the ASBA process. For details, see “Offer Procedure” on page 471.
RISKS IN RELATION TO THE FIRST OFFER
This being the first public issue of our Bank, there has been no formal market for the Equity Shares of our Bank. The face value of the Equity Shares is ₹10. The Floor Price and the Cap Price as determined and justified by our
Bank and Promoter Selling Shareholder, in consultation with the BRLMs and the Offer Price as determined and justified by our Bank and the Selling Shareholders, in consultation with the BRLMs, in accordance with the SEBI
ICDR Regulations, as stated under “Basis for Offer Price” on page 130 should not be considered to be indicative of the market price of the Equity Shares after the Equity Shares are listed. No assurance can be given regarding an
active and/or sustained trading in the Equity Shares nor regarding the price at which the Equity Shares will be traded after listing.
GENERAL RISK
Investments in equity and equity-related securities involve a degree of risk and investors should not invest any funds in the Offer unless they can afford to take the risk of losing their entire investment. Investors are advised to
read the risk factors carefully before taking an investment decision in the Offer. For taking an investment decision, investors must rely on their own examination of our Bank and the Offer, including the risks involved. The Equity
Shares in the Offer have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”), nor does SEBI guarantee the accuracy or adequacy of the contents of this Red Herring Prospectus. Specific
attention of the investors is invited to “Risk Factors” on page 35.
ISSUER’S AND THE SELLING SHAREHOLDERS’ ABSOLUTE RESPONSIBILITY
Our Bank, having made all reasonable inquiries, accepts responsibility for and confirms that this Red Herring Prospectus contains all information with regard to our Bank and the Offer, which is material in the context of the
Offer, that the information contained in this Red Herring Prospectus is true and correct in all material aspects and is not misleading in any material respect, that opinions and intentions expressed herein are honestly held and that
there are no other facts, the omission of which makes this Red Herring Prospectus as a whole or any of such information or the expression of any such opinions or intentions misleading in any material respect. Each of the Selling
Shareholders, severally and not jointly, accepts responsibility for and confirms only such statements specifically made or confirmed by such Selling Shareholders in this Red Herring Prospectus to the extent of information
specifically pertaining to itself and its respective portion of the Offered Shares in the Offer for Sale and assumes responsibility that such statements are true and correct in all material respects and not misleading in any material
respect.
LISTING
The Equity Shares offered through this Red Herring Prospectus are proposed to be listed on National Stock Exchange of India Limited (“NSE”) and BSE Limited (“BSE”, and together with NSE, the “Stock Exchanges”). Our
Bank has received ‘in-principle’ approvals from BSE and NSE for the listing of the Equity Shares pursuant to letters, each dated September 7, 2023. For the purposes of the Offer, the Designated Stock Exchange shall be BSE. A
signed copy of the Red Herring Prospectus has been filed with the RoC and a copy of the Prospectus shall be filed with the RoC in accordance with Section 26(4) of the Companies Act 2013. For details of the material contracts
and documents available for inspection from the date of this Red Herring Prospectus up to the Bid/ Offer Closing Date, see “Material Contracts and Documents for Inspection” on page 497.
BOOK RUNNING LEAD MANAGERS REGISTRAR TO THE OFFER

ICICI Securities Limited DAM Capital Advisors Limited Nuvama Wealth Management Limited (formerly Link Intime India Private Limited
ICICI Venture House One BKC, Tower C, 15th Floor, Unit No. 1511 known as Edelweiss Securities Limited)* C-101, 1st Floor, 247 Park
Appasaheb Marathe Marg Bandra Kurla Complex, Bandra (East) 801 - 804, Wing A, Building No 3 Lal Bahadur Shastri Marg
Prabhadevi Mumbai 400 051 Inspire BKC, G Block Vikhroli (West)
Mumbai 400 025 Maharashtra, India Bandra Kurla Complex, Bandra East Mumbai 400 083
Maharashtra, India Tel: +91 22 4202 2500 Mumbai 400 051 Maharashtra, India
Tel: +91 22 6807 7100 E-mail: esaf.ipo@damcapital.in Maharashtra, India Tel: +91 022 4918 6060
E-mail: esafsfb.ipo@icicisecurities.com Website: www.damcapital.in Tel: +91 22 4009 4400 E-mail: esaf.ipo@linkintime.co.in
Website: www.icicisecurities.com Investor Grievance ID: complaint@damcapital.in E-mail: ESAF@nuvama.com Website: www.linkintime.co.in
Investor Grievance ID: Contact Person: Chandresh Sharma Website: www.nuvama.com Investor Grievance ID: esaf.ipo@linkintime.co.in
customercare@icicisecurities.com SEBI Registration No.: MB/INM000011336 Investor Grievance ID: Contact Person: Shanti Gopalkrishnan
Contact Person: Kristina Dias/ Ashik Joisar customerservice.mb@nuvama.com SEBI Registration Number: INR000004058
SEBI Registration No.: INM000011179 Contact person: Lokesh Shah
SEBI registration no.: INM000013004
BID/ OFFER SCHEDULE
BID/ OFFER OPENS ON Friday, November 3, 2023 BID/ OFFER CLOSES ON Tuesday, November 7, 2023(1)
* Pursuant to order passed by Hon’ble National Company Law Tribunal, Mumbai Bench dated April 27, 2023, the merchant banking business of Edelweiss Financial Services Limited has demerged and now transferred to Nuvama
Wealth Management Limited and therefore the said merchant banking business is part of Nuvama Wealth Management Limited.
(1)
The UPI mandate end time and date shall be at 5:00 p.m. on Bid/Offer Closing Day.
(This page is intentionally left blank)
 TABLE OF CONTENTS
SECTION I: GENERAL ...................................................................................................................................................... 1
DEFINITIONS AND ABBREVIATIONS ......................................................................................................................... 1
OFFER DOCUMENT SUMMARY ................................................................................................................................. 21
CERTAIN CONVENTIONS, PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA AND
CURRENCY OF PRESENTATION ................................................................................................................................ 30
FORWARD-LOOKING STATEMENTS ........................................................................................................................ 33
SECTION II: RISK FACTORS ........................................................................................................................................ 35
SECTION III: INTRODUCTION..................................................................................................................................... 95
THE OFFER ..................................................................................................................................................................... 95
SUMMARY OF FINANCIAL INFORMATION ............................................................................................................. 97
GENERAL INFORMATION ......................................................................................................................................... 101
CAPITAL STRUCTURE ............................................................................................................................................... 109
OBJECTS OF THE OFFER ............................................................................................................................................ 126
BASIS FOR OFFER PRICE ........................................................................................................................................... 130
STATEMENT OF SPECIAL TAX BENEFITS ............................................................................................................. 150
SECTION IV: ABOUT OUR BANK .............................................................................................................................. 155
INDUSTRY OVERVIEW .............................................................................................................................................. 155
OUR BUSINESS ............................................................................................................................................................ 190
KEY REGULATIONS AND POLICIES ........................................................................................................................ 221
HISTORY AND CERTAIN CORPORATE MATTERS ................................................................................................ 241
OUR MANAGEMENT .................................................................................................................................................. 251
OUR PROMOTERS AND PROMOTER GROUP ......................................................................................................... 274
DIVIDEND POLICY...................................................................................................................................................... 279
SELECTED STATISTICAL INFORMATION .............................................................................................................. 280
SECTION V: FINANCIAL INFORMATION ............................................................................................................... 304
FINANCIAL STATEMENTS ........................................................................................................................................ 304
OTHER FINANCIAL INFORMATION ........................................................................................................................ 370
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ............................................................................................................................................................... 372
CAPITALISATION STATEMENT ............................................................................................................................... 416
FINANCIAL INDEBTEDNESS .................................................................................................................................... 417
SECTION VI: LEGAL AND OTHER INFORMATION ............................................................................................. 420
OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS ..................................................................... 420
GOVERNMENT AND OTHER APPROVALS ............................................................................................................. 436
OTHER REGULATORY AND STATUTORY DISCLOSURES .................................................................................. 441
OUR GROUP ENTITIES ............................................................................................................................................... 453
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS ......................................................... 457
SECTION VII: OFFER INFORMATION ..................................................................................................................... 461
TERMS OF THE OFFER ............................................................................................................................................... 461
OFFER STRUCTURE .................................................................................................................................................... 467
OFFER PROCEDURE ................................................................................................................................................... 471
RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES................................................................ 490
SECTION VIII: DESCRIPTION OF EQUITY SHARES AND TERMS OF ARTICLES OF ASSOCIATION .... 491
SECTION IX: OTHER INFORMATION ...................................................................................................................... 497
MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ........................................................................ 497
DECLARATION .............................................................................................................................................................. 501

i
 SECTION I: GENERAL

DEFINITIONS AND ABBREVIATIONS

This Red Herring Prospectus uses certain definitions and abbreviations which, unless the context otherwise indicates or implies,
shall have the meaning as provided below. References to any legislation, act, regulation, rules, guidelines or policies shall be
to such legislation, act, regulation, rules, guidelines or policies as amended, supplemented or re-enacted from time to time, and
any reference to a statutory provision shall include any subordinate legislation made from time to time under that provision.

The words and expressions used in this Red Herring Prospectus but not defined herein shall have, to the extent applicable, the
same meaning ascribed to such terms under the SEBI ICDR Regulations, the Companies Act, the SCRA, the Depositories Act
and the rules and regulations made thereunder. Notwithstanding the foregoing, the terms used in “Industry Overview”, “Key
Regulations and Policies”, “Statement of Special Tax Benefits”, “Financial Statements”, “Basis for Offer Price”, “History
and Certain Corporate Matters”, “Selected Statistical Information”, “Financial Indebtedness”, “Other Regulatory and
Statutory Disclosures”, “Outstanding Litigation and Material Developments” and “Description of Equity Shares and Terms
of Articles of Association” on pages 155, 221, 150, 304, 130, 241, 280, 417, 441, 420 and 491, respectively, shall have the
meaning ascribed to them in the relevant section.

General Terms

Term Description

“our Bank”, “the Bank”, “the Issuer” ESAF Small Finance Bank Limited, a company incorporated under the Companies Act, 2013 and
registered as a small finance bank with the RBI, having its Registered and Corporate Office at
Building No. VII/83/8, ESAF Bhavan, Thrissur-Palakkad National Highway, Mannuthy, Thrissur
680 651, Kerala, India

“we”, “us” or “our” Unless the context otherwise indicates or implies, refers to our Bank

Bank and Selling Shareholders Related Terms

Term Description

“Articles of Association” or “AoA” Articles of association of our Bank, as amended

Audit Committee Audit committee of the Board of our Bank, constituted in accordance with the applicable provisions
of the Companies Act, 2013, the Listing Regulations, guidelines issued by the RBI from time to
time, and as described in “Our Management” on page 251

“Auditors” or “Statutory Auditors” or Deloitte Haskins & Sells, Chartered Accountants and Abarna & Ananthan, Chartered Accountants,
“Joint Statutory Auditors” current Joint Statutory Auditors of our Bank

Bajaj Allianz Life Bajaj Allianz Life Insurance Company Limited

Bank SHA Shareholders agreement dated July 27, 2018 entered into by and amongst PNB MetLife India
Insurance Company Limited, Bajaj Allianz Life Insurance Company Limited, Muthoot Finance
Limited, PI Ventures LLP, our Promoters and our Bank, read along with the deeds of adherence,
each dated September 27, 2018, executed by and amongst ESMACO, ICICI Lombard General
Insurance Company Limited, Yusuffali Musaliam Veettil Abdul Kader and George Ittan
Maramkandathil, as amended by the waiver cum amendment agreement dated July 7, 2023

“Board” or “Board of Directors” Board of directors of our Bank

Business Transfer Agreement Agreement to sell business undertaking dated February 22, 2017 entered into between ESAF
Financial Holdings Private Limited and our Bank for the transfer of the business undertaking of
ESAF Financial Holdings Private Limited, comprising its lending and financing business

“CEDAR Retail” or “ESAF Retail” CEDAR Retail Private Limited, previously known as ESAF Retail Private Limited

“CFO” or “Chief Financial Officer” Chief Financial Officer of our Bank, being Gireesh C.P. For details, see “Our Management” on page
251

Company Secretary and Compliance Company Secretary and Compliance Officer of our Bank, being Ranjith Raj P. For details, see “Our
Officer Management” on page 251

Corporate Social Responsibility and Corporate social responsibility and sustainability committee of the Board of our Bank constituted in
Sustainability Committee accordance with the applicable provisions of the Companies Act, 2013 and as described in “Our
Management” on page 251

CRISIL MI&A CRISIL Market Intelligence & Analytics, a division of CRISIL Limited

1
 Term Description

CRISIL MI&A Report Report titled “Industry Report on Small Finance Banks in India” dated September 2023 issued by
CRISIL MI&A, which has been commissioned by and paid for by our Bank pursuant to an agreement
with CRISIL MI&A dated August 17, 2022, as amended pursuant to an addendum dated March 13,
2023, exclusively for the purposes of the Offer.

The CRISIL MI&A Report is available on the website of our Bank at

https://www.esafbank.com/investor-relations-info/ till the Bid/ Offer Closing Date

Director(s) The directors on the Board of our Bank

“EFHPL” or “EFHL” or “Promoter The corporate promoter of our Bank, namely ESAF Financial Holdings Private Limited
Selling Shareholder”

EFHPL SHA Shareholders agreement dated December 23, 2019 entered into amongst ESAF Financial Holdings
Private Limited, Kadambelil Paul Thomas, ESAF Staff Welfare Trust, ESMACO, SIDBI Trustee
Company Limited and, Dia Vikas Capital Private Limited, as amended by the first amendment
agreement dated March 29, 2021, as amended by the amendment agreement to the EFHPL SHA
dated March 29, 2021 and the letter amendment agreement dated June 26, 2023

Equity Shares Equity shares of face value of ₹10 each of our Bank

ESAF ESOP Plan 2019 ESAF Small Finance Bank Employee Stock Option Plan 2019, as amended

ESAF Foundation ESAF Foundation (formerly known as Evangelical Social Action Forum)

ESAF Swasraya Producers or ESAF ESAF Swasraya Producers Company Limited

Producer Company

“ESMACO” or “ESCO” ESAF Swasraya Multi-State Agro Co-operative Society Limited

Group Entities Our group entities as defined and disclosed in “Our Group Entities” on page 453

IPO Steering Committee The IPO steering committee of the Board of our Bank as described in “Our Management” on page
251

“Key Managerial Personnel” or Key Managerial Personnel of our Bank shall have the meaning as set out under Regulation 2(1)(bb)
“KMP” of the SEBI ICDR Regulations as described in “Our Management” on page 251, other than in the
Restated Financial Information, where Key Managerial Personnel shall refer to only such persons
required to be identified as Key Managerial Personnel as per Accounting Standard 18 - Related Party
Disclosures

“Lahanti” or “LLMS” Lahanti Lastmile Services Private Limited

Lahanti Homes Lahanti Homes and Infrastructure Private Limited (formerly ESAF Homes & Infrastructure Private
Limited)

Managing Director and Chief Kadambelil Paul Thomas

Executive Officer

“Memorandum of Association” or Memorandum of association of our Bank, as amended

“MoA”

Nomination, Remuneration and Nomination, remuneration and compensation committee of the Board of our Bank, constituted in
Compensation Committee accordance with the applicable provisions of the Companies Act, 2013, the Listing Regulations and
guidelines issued by the RBI from time to time and as described in “Our Management” on page 251

Non-Executive Independent Non-executive independent directors on the Board, as described in “Our Management” on page 251
Directors

Other Selling Shareholders Collectively, PNB MetLife and Bajaj Allianz Life

Part-Time Chairman Ravimohan Periyakavil Ramakrishnan

PI Ventures PI Ventures LLP

PNB MetLife PNB MetLife India Insurance Company Limited

Prachodhan Prachodhan Development Services

Previous Sole Statutory Auditors Deloitte Haskins & Sells, Chartered Accountants

2
 Term Description

Promoter Group Persons and entities constituting the promoter group of our Bank in terms of Regulation 2(1)(pp) of
the SEBI ICDR Regulations, as disclosed in “Our Promoters and Promoter Group” on page 274

Promoters Promoters of our Bank, being Kadambelil Paul Thomas and ESAF Financial Holdings Private
Limited

RBI Final Approval RBI letter dated November 18, 2016 bearing no. DBR.NBD(SFB-ESAF) No. 5654/16.13.216/2016-
17, pursuant to which the RBI granted license no. MUM:124 to our Bank to carry on the SFB
business in terms of Section 22 of the Banking Regulation Act

RBI In-Principle Approval RBI letter dated October 7, 2015 bearing no. DBR.PSBD.NBC(SFB-ESAF). No.
4917/16.13.216/2015-16, pursuant to which the RBI granted ESAF Financial Holdings Private
Limited an in-principal approval to establish an SFB in the private sector under Section 22 of the
Banking Regulation Act

Registered and Corporate Office Building No. VII/83/8, ESAF Bhavan, Thrissur-Palakkad National Highway, Mannuthy, Thrissur
680 651, Kerala, India

“Registrar of Companies” or “RoC” Registrar of Companies, Kerala at Ernakulam

Restated Financial Information The restated financial information of the Bank, comprising the restated statements of assets and
liabilities as at June 30, 2023 and June 30, 2022 and as at March 31, 2023, March 31, 2022 and
March 31, 2021, the restated profit and loss accounts and restated statements of cash flows for the
three months period ended June 30, 2023 and June 30, 2022, and for the years ended March 31,
2023, March 31, 2022 and March 31, 2021 and the summary statement of significant accounting
policies, and other explanatory notes prepared by the Bank in terms of the requirements of Section
26 of Part I of Chapter III of the Companies Act, 2013, as amended, the Securities and Exchange
Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended and
the Guidance Note on Reports on Company Prospectuses (Revised 2019) issued by the Institute of
Chartered Accountants of India, as amended from time to time

Selling Shareholders Collectively, the Promoter Selling Shareholder and the Other Selling Shareholder

Senior Management Personnel Senior management personnel of our Bank shall have the meaning as set out under Regulation
2(1)(bbbb) of SEBI ICDR Regulations as described in “Our Management” on page 251

Shareholders Holders of Equity Shares of our Bank from time to time

SIDBI Small Industries Development Bank of India

Stakeholders’ Relationship Stakeholders’ relationship committee of the Board of our Bank, constituted in accordance with the
Committee applicable provisions of the Companies Act, 2013 and the Listing Regulations and as described in
“Our Management” on page 251

Offer Related Terms

Term Description

Abridged Prospectus Abridged prospectus means a memorandum containing such salient features of a prospectus as may
be specified by the SEBI in this behalf

Acknowledgement Slip The slip or document issued by a Designated Intermediary(ies) to a Bidder as proof of registration
of the Bid cum Application Form

“Allot” or “Allotment” or “Allotted” Unless the context otherwise requires, allotment of the Equity Shares pursuant to the Fresh Issue and
transfer of Offered Shares pursuant to the Offer for Sale to the successful Bidders

Allotment Advice Note or advice or intimation of Allotment sent to the successful Bidders who have been or are to be
Allotted the Equity Shares after the Basis of Allotment has been approved by the Designated Stock
Exchange

Allottee A successful Bidder to whom the Equity Shares are Allotted

Anchor Investor A Qualified Institutional Buyer, applying under the Anchor Investor Portion in accordance with the
requirements specified in the SEBI ICDR Regulations and this Red Herring Prospectus and who has
Bid for an amount of at least ₹100.00 million. For further details, see “Offer Procedure” on page
471

3
 Term Description

Anchor Investor Allocation Price Price at which Equity Shares will be allocated to Anchor Investors in terms of this Red Herring
Prospectus and the Prospectus, which will be decided by our Bank and the Selling Shareholders, in
consultation with the BRLMs, during the Anchor Investor Bid/Offer Period

Anchor Investor Application Form Application form used by an Anchor Investor to make a Bid in the Anchor Investor Portion and
which will be considered as an application for Allotment in terms of this Red Herring Prospectus
and the Prospectus

Anchor Investor Bid/Offer Period The day being one Working Day prior to the Bid/ Offer Opening Date, on which Bids by Anchor
Investors shall be submitted and allocation to Anchor Investors shall be completed

Anchor Investor Bidding Date The day, being one Working Day prior to the Bid / Offer Opening Date i.e. Thursday, November 2,
2023, on which Bids by Anchor Investors shall be submitted, prior to and after which the BRLMs
will not accept any Bids from Anchor Investors, and allocation to Anchor Investors shall be
completed

Anchor Investor Offer Price Final price at which the Equity Shares will be Allotted to Anchor Investors in terms of this Red
Herring Prospectus and the Prospectus, which price will be equal to or higher than the Offer Price
but not higher than the Cap Price.

The Anchor Investor Offer Price will be decided by our Bank and the Promoter Selling Shareholder,
in consultation with the BRLMs

Anchor Investor Portion Up to 60% of the QIB Portion which shall be allocated by our Bank and Promoter Selling
Shareholder, in consultation with the BRLMs, to Anchor Investors on a discretionary basis in
accordance with the SEBI ICDR Regulations.

One-third of the Anchor Investor Portion shall be reserved for domestic Mutual Funds, subject to
valid Bids being received from domestic Mutual Funds at or above the Anchor Investor Allocation
Price, in accordance with the SEBI ICDR Regulations

“Application Supported by Blocked Application, whether physical or electronic, used by ASBA Bidders to make a Bid and authorizing
Amount” or “ASBA” an SCSB to block the Bid Amount in the ASBA Account and will include applications made by UPI
Bidders using the UPI Mechanism where the Bid Amount will be blocked upon acceptance of UPI
Mandate Request by the UPI Bidders using the UPI Mechanism

ASBA Account Bank account maintained with an SCSB by an ASBA Bidder, as specified in the ASBA Form
submitted by ASBA Bidders for blocking the Bid Amount mentioned in the relevant ASBA Form
and includes the account of UPI Bidders which is blocked upon acceptance of a UPI Mandate
Request made by the UPI Bidders using the UPI Mechanism

ASBA Bid A Bid made by an ASBA Bidder

ASBA Bidder(s) All Bidders except Anchor Investors

ASBA Form Application form, whether physical or electronic, used by ASBA Bidders to submit Bids, which will
be considered as the application for Allotment in terms of this Red Herring Prospectus and the
Prospectus

Bankers to the Offer Collectively, Escrow Collection Bank, Public Offer Account Bank, Sponsor Banks and Refund
Bank, as the case may be

Basis of Allotment Basis on which Equity Shares will be Allotted to successful Bidders under the Offer and which is
described in “Offer Structure” on page 467

Bid Indication to make an offer during the Bid/ Offer Period by an ASBA Bidder pursuant to submission
of the ASBA Form, or during the Anchor Investor Bid/ Offer Period by an Anchor Investor, pursuant
to submission of the Anchor Investor Application Form, to subscribe to or purchase the Equity
Shares at a price within the Price Band, including all revisions and modifications thereto as permitted
under the SEBI ICDR Regulations and in terms of this Red Herring Prospectus and the Bid cum
Application Form. The term “Bidding” shall be construed accordingly

Bid Amount The highest value of optional Bids indicated in the Bid cum Application Form and, in the case of
RIBs Bidding at the Cut off Price, the Cap Price multiplied by the number of Equity Shares Bid for
by such Retail Individual Bidder and mentioned in the Bid cum Application Form and payable by
the Bidder or blocked in the ASBA Account of the Bidder, as the case may be, upon submission of
the Bids.

Eligible Employees applying in the Employee Reservation Portion can apply at the Cut Off Price
and the Bid amount shall be Cap Price (net of the Employee Discount), multiplied by the number of
Equity Shares Bid for such Eligible Employee and mentioned in the Bid cum Application Form.

4
 Term Description

The maximum Bid Amount under the Employee Reservation Portion by an Eligible Employee shall
not exceed ₹0.50 million (net of the Employee Discount). However, the initial Allotment to an
Eligible Employee in the Employee Reservation Portion shall not exceed ₹0.20 million. Only in the
event of under-subscription in the Employee Reservation Portion, the unsubscribed portion will be
available for allocation and Allotment, proportionately to all Eligible Employees who have Bid in
excess of ₹0.20 million, subject to the maximum value of Allotment made to such Eligible Employee
not exceeding ₹0.50 million (net of the Employee Discount)

Bid cum Application Form Anchor Investor Application Form or the ASBA Form, as the context requires

Bid Lot [●] Equity Shares and in multiples of [●] Equity Shares thereafter

Bid/ Offer Closing Date Except in relation to any Bids received from the Anchor Investors, the date after which the
Designated Intermediaries will not accept any Bids, being Tuesday, November 7, 2023, which shall
be notified in all editions of The Financial Express, an English national daily newspaper and all
editions of Jansatta, a Hindi national daily newspaper and Thrissur editions of the Malayalam daily
newspaper, Mangalam (Malayalam being the regional language of Kerala, where our Registered and
Corporate Office is located), each with wide circulation, respectively, and in case of any such
extension, the extended Bid/Offer Closing Date shall also be notified on the website and terminals
of the Members of the Syndicate and communicated to the intermediaries Designated Intermediaries
and the Sponsor Banks, as required under the SEBI ICDR Regulations.

Our Bank and the Promoter Selling Shareholder may, in consultation with the BRLMs, consider
closing the Bid/Offer Period for QIBs one Working Day prior to the Bid/Offer Closing Date in
accordance with the SEBI ICDR Regulations. In case of any revision, the extended Bid/ Offer
Closing Date shall be widely disseminated by notification to the Stock Exchanges, and also be
notified on the websites of the BRLMs and at the terminals of the Syndicate Members, which shall
also be notified in an advertisement in same newspapers in which the Bid/Offer Opening Date was
published, as required under the SEBI ICDR Regulations

Bid/ Offer Opening Date Except in relation to any Bids received from the Anchor Investors, the date on which the Designated
Intermediaries shall start accepting Bids, being Friday, November 3, 2023, which shall be notified
in all editions of The Financial Express, an English national daily newspaper, all editions of Jansatta,
a Hindi national daily newspaper and Thrissur editions of the Malayalam daily newspaper,
Mangalam (Malayalam being the regional language of Kerala, where our Registered and Corporate
Office is located), each with wide circulation, respectively

Bid/ Offer Period Except in relation to Anchor Investors, the period between the Bid/ Offer Opening Date and the Bid/
Offer Closing Date, inclusive of both days, during which prospective Bidders can submit their Bids,
including any revisions thereof, in accordance with the SEBI ICDR Regulations. Provided that the
Bidding shall be kept open for a minimum of three Working Days for all categories of Bidders, other
than Anchor Investors

Bidder Any prospective investor who makes a Bid pursuant to the terms of this Red Herring Prospectus and
the Bid cum Application Form and unless otherwise stated or implied, includes an Anchor Investor

Bidding Centres Centres at which the Designated Intermediaries shall accept the ASBA Forms, i.e., Designated
Branches for SCSBs, Specified Locations for the Syndicate, Broker Centres for Registered Brokers,
Designated RTA Locations for RTAs and Designated CDP Locations for CDPs

Book Building Process Book building process, as provided in Schedule XIII of the SEBI ICDR Regulations, in terms of
which the Offer is being made

“Book Running Lead Managers” or The book running lead managers to the Offer, namely, ICICI Securities Limited, DAM Capital
“BRLMs” Advisors Limited and Nuvama Wealth Management Limited (formerly known as Edelweiss
Securities Limited)

Broker Centres Centres notified by the Stock Exchanges where ASBA Bidders can submit the ASBA Forms to a
Registered Broker.

The details of such Broker Centres, along with the names and contact details of the Registered
Brokers are available on the respective websites of the Stock Exchanges (www.bseindia.com and
www.nseindia.com)

“CAN” or Confirmation of Allocation Notice or intimation of allocation of the Equity Shares sent to Anchor Investors, who have been
Note allocated the Equity Shares, on or after the Anchor Investor Bid/ Offer Period

Cap Price Higher end of the Price Band, above which the Offer Price and the Anchor Investor Offer Price will
not be finalised and above which no Bids will be accepted

5
 Term Description

Cash Escrow and Sponsor Bank Agreement dated October 28, 2023 entered amongst our Bank, the Selling Shareholders, the
Agreement BRLMs, Syndicate Members, the Registrar to the Offer, the Sponsor Banks, the Escrow Collection
Bank, the Public Offer Bank and the Refund Bank in respect of for collection of the Bid Amounts
and where applicable, remitting refunds (if any) on the terms and conditions thereof and the
appointment of Sponsor Banks in accordance with the UPI Circulars

Client ID Client identification number maintained with one of the Depositories in relation to demat account

“Collecting Depository Participant” A depository participant as defined under the Depositories Act, 1996 registered with SEBI and who
or “CDP” is eligible to procure Bids at the Designated CDP Locations in terms of circular no.
CIR/CFD/POLICYCELL/11/2015 dated November 10, 2015 issued by SEBI as per the list available
on the websites of the Stock Exchanges

Cut-off Price Offer Price, finalised by our Bank and the Selling Shareholders, in consultation with the BRLMs,
which shall be any price within the Price Band.

Only Retail Individual Bidders Bidding in the Retail Portion and Eligible Employees Bidding in the
Employee Reservation Portion are entitled to Bid at the Cut-off Price. QIBs (including the Anchor
Investors) and Non-Institutional Bidders are not entitled to Bid at the Cut-off Price

DAM Capital DAM Capital Advisors Limited

Demographic Details The demographic details of the Bidders including the Bidders’ address, name of the Bidders’
father/husband, investor status, occupation, bank account details and UPI ID, wherever applicable

Designated CDP Locations Such locations of the CDPs where Bidders can submit the ASBA Forms.

The details of such Designated CDP Locations, along with names and contact details of the
Collecting Depository Participants eligible to accept ASBA Forms are available on the respective
websites of the Stock Exchanges (www.bseindia.com and www.nseindia.com), as updated from time
to time

Designated SCSB Branches Such branches of the SCSBs which shall collect the ASBA Forms, a list of which is available on the
website of SEBI at https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognised=yes or at
such other website as may be prescribed by SEBI from time to time

Designated Date The date on which the Escrow Collection Bank(s) transfer funds from the Escrow Account to the
Public Offer Account or the Refund Account, as the case may be, and the instructions are issued to
the SCSBs (in case of UPI Bidders using UPI Mechanism, instruction issued through the Sponsor
Banks) for the transfer of amounts blocked by the SCSBs in the ASBA Accounts to the Public Offer
Account or the Refund Account, as the case may be, after finalisation of the Basis of Allotment in
terms of this Red Herring Prospectus following which Equity Shares will be Allotted in the Offer

Designated Intermediary(ies) Collectively, the members of the Syndicate, sub-syndicate or agents, SCSBs (other than in relation
to RIBs using the UPI Mechanism), Registered Brokers, CDPs and RTAs, who are authorised to
collect Bid cum Application Forms from the relevant Bidders, in relation to the Offer.

In relation to ASBA Forms submitted by RIBs Bidding in the Retail Portion and Eligible Employees
Bidding in the Employee Reservation Portion by authorising an SCSB to block the Bid Amount in
the ASBA Account, Designated Intermediaries shall mean SCSBs.

In relation to ASBA Forms submitted by UPI Bidders where the Bid Amount will be blocked upon
acceptance of UPI Mandate Request by such UPI Bidder using the UPI Mechanism, Designated
Intermediaries shall mean Syndicate, sub-syndicate/agents, Registered Brokers, CDPs, SCSBs and
RTAs.

In relation to ASBA Forms submitted by QIBs and Non-Institutional Bidders (not using the UPI
Mechanism), Designated Intermediaries shall mean Syndicate, sub-syndicate/ agents, SCSBs,
Registered Brokers, the CDPs and RTAs

Designated RTA Locations Such locations of the RTAs where Bidders can submit the ASBA Forms to RTAs. The details of
such Designated RTA Locations, along with names and contact details of the RTAs eligible to accept
ASBA Forms are available on the respective websites of the Stock Exchanges (www.bseindia.com
and www.nseindia.com)

Designated Stock Exchange BSE

“Draft Red Herring Prospectus” or The draft red herring prospectus dated July 7, 2023, issued in accordance with the SEBI ICDR
“DRHP” Regulations, which did not contain complete particulars of the price at which the Equity Shares will
be Allotted and the size of the Offer

6
 Term Description

Eligible Employees Permanent employees, working in India or outside India (excluding such employees who are not
eligible to invest in the Offer under applicable laws), of our Bank; or a Director of our Bank, whether
whole-time or not, as on the date of the filing of this Red Herring Prospectus with the RoC and who
continues to be a permanent employee of our Bank until the date of submission of the Bid cum
Application Form, but not including (i) Promoters; (ii) persons belonging to the Promoter Group; or
(iii) Directors who either themselves or through their relatives or through any body corporate,
directly or indirectly, hold more than 10% of the outstanding Equity Shares of our Bank.

The maximum Bid Amount under the Employee Reservation Portion by an Eligible Employee shall
not exceed ₹0.50 million (net of the Employee Discount). However, the initial Allotment to an
Eligible Employee in the Employee Reservation Portion shall not exceed ₹0.20 million. Only in the
event of under-subscription in the Employee Reservation Portion, the unsubscribed portion will be
available for allocation and Allotment, proportionately to all Eligible Employees who have Bid in
excess of ₹0.20 million, subject to the maximum value of Allotment made to such Eligible Employee
not exceeding ₹0.50 million (net of the Employee Discount)

Eligible FPIs FPIs from such jurisdictions outside India where it is not unlawful to make an offer / invitation under
the Offer and in relation to whom the Bid cum Application Form and this Red Herring Prospectus
constitute an invitation to subscribe to the Equity Shares

Eligible NRI(s) NRI(s) from jurisdictions outside India where it is not unlawful to make an Offer or invitation under
the Offer and in relation to whom the ASBA Form and this Red Herring Prospectus will constitute
an invitation to subscribe to or to purchase the Equity Shares

Employee Discount Our Bank and the Promoter Selling Shareholder may, in consultation with the BRLMs, offer a
discount of up to [●]% to the Offer Price (equivalent of ₹[●] per Equity Share) to Eligible
Employee(s) Bidding in the Employee Reservation Portion, subject to necessary approvals as may
be required, and which shall be announced at least two Working Days prior to the Bid / Offer
Opening Date

Employee Reservation Portion The portion of the Offer being up to [●] Equity Shares aggregating ₹125.00 million which shall not
exceed 5% of the post-Offer Equity Share capital of our Bank, available for allocation to Eligible
Employees, on a proportionate basis.

Escrow Account(s) Accounts opened with the Escrow Collection Bank and in whose favour the Anchor Investors will
transfer money through NACH/direct credit/NEFT/RTGS in respect of the Bid Amount when
submitting a Bid

Escrow Collection Bank(s) Bank(s) which are a clearing members and registered with SEBI as banker to an offer under the
Securities and Exchange Board of India (Bankers to an Issue) Regulations, 1994 and with whom the
Escrow Account in relation to the Offer for Bids by Anchor Investors, will be opened, in this case
being HDFC Bank Limited

First or sole Bidder Bidder whose name shall be mentioned in the Bid cum Application Form or the Revision Form and
in case of joint Bids, whose name shall also appear as the first holder of the beneficiary account held
in joint names

Floor Price Lower end of the Price Band, subject to any revision(s) thereto, not being less than the face value of
Equity Shares, at or above which the Offer Price and the Anchor Investor Offer Price will be finalised
and below which no Bids will be accepted

Fresh Issue Fresh issue of up to [●] Equity Shares aggregating up to ₹ 3,907.00 million by our Bank.

General Information Document The General Information Document for investing in public issues prepared and issued in accordance
with the SEBI circular no. SEBI/HO/CFD/DIL1/CIR/P/2020/37 dated March 17, 2020 and the UPI
Circulars, as amended from time to time. The General Information Document shall be available on
the websites of the Stock Exchanges and the BRLMs

“ICICI” or “I-Sec” ICICI Securities Limited

Maximum RIB Allottees Maximum number of RIBs who can be Allotted the minimum Bid Lot. This is computed by dividing
the total number of Equity Shares available for Allotment to RIBs by the minimum Bid Lot, subject
to valid Bids being received at or above the Offer Price

Mutual Fund Portion 5% of the Net QIB Portion, or [●] Equity Shares which shall be available for allocation to Mutual
Funds only, subject to valid Bids being received at or above the Offer Price

Net Offer The Offer, less the Employee Reservation Portion

NBFC Non-banking financial company

7
 Term Description

Net Proceeds Proceeds of the Fresh Issue less our Bank’s share of the Offer expenses. For further details regarding
the use of the Net Proceeds and the Offer expenses, see “Objects of the Offer” on page 126

Net QIB Portion The QIB Portion less the number of Equity Shares allocated to the Anchor Investors

Non-Institutional Bidders All Bidders that are not QIBs or Retail Individual Bidders or Eligible Employees Bidding in the
Employee Reservation Portion who have Bid for Equity Shares for an amount of more than ₹0.20
million (but not including NRIs other than Eligible NRIs)

Non-Institutional Portion The portion of the Offer being not less than 15% of the Net Offer consisting of [●] Equity Shares
which shall be available for allocation to Non-Institutional Bidders, of which (a) one-third portion
shall be reserved for Bidders with application size of more than ₹0.20 million and up to ₹1.00
million, and (b) two-third portion shall be reserved for Bidders with application size of more than
₹1.00 million, provided that the unsubscribed portion in either of such sub-categories may be
allocated to Bidders in the other sub-category of Non-Institutional Bidders, subject to valid Bids
being received at or above the Offer Price

Non-Resident Person resident outside India, as defined under FEMA

Nuvama Nuvama Wealth Management Limited (formerly known as Edelweiss Securities Limited)

Offer The initial public offer of Equity Shares comprising the Fresh Issue and the Offer for Sale comprising
of Net Offer and Employee Reservation Portion.

Offer Agreement Agreement dated July 7, 2023, as amended pursuant to amendment agreement dated October 18,
2023, entered amongst our Bank, the Selling Shareholders and the BRLMs, pursuant to which certain
arrangements have been agreed to in relation to the Offer

Offer for Sale The offer for sale of up to [●] Equity Shares aggregating up to ₹723.00 million, comprising up to
[●] Equity Shares aggregating up to ₹492.60 million by the Promoter Selling Shareholder, up to [●]
Equity Shares aggregating up to ₹126.70 million by PNB MetLife and up to [●] Equity Shares
aggregating up to ₹103.70 million by Bajaj Allianz Life in the Offer

Offer Price The final price (within the Price Band) at which Equity Shares will be Allotted to ASBA Bidders in
terms of this Red Herring Prospectus and the Prospectus. Equity Shares will be Allotted to Anchor
Investors at the Anchor Investor Offer Price, which will be decided by our Bank and the Selling
Shareholders, in consultation with the BRLMs in terms of this Red Herring Prospectus and the
Prospectus.

The Offer Price will be decided by our Bank and each of the Selling Shareholders, in consultation
with the BRLMs, on the Pricing Date in accordance with the Book Building Process and this Red
Herring Prospectus.

A discount of up to [●]% on the Offer Price (equivalent of ₹[●] per Equity Share) may be offered to
Eligible Employees Bidding in the Employee Reservation Portion, subject to necessary approvals as
may be required. The Employee Discount, if any, will be decided by our Bank and the Promoter
Selling Shareholder may, in consultation with the BRLMs

Offer Proceeds The proceeds of the Fresh Issue which shall be available to our Bank and the proceeds of the Offer
for Sale which shall be available to the Selling Shareholders. For further information about use of
the Offer Proceeds, see “Objects of the Offer” on page 126

Offered Shares Up to [●] Equity Shares aggregating up to ₹723.00 million, comprising up to [●] Equity Shares
aggregating up to ₹492.60 million by the Promoter Selling Shareholder, up to [●] Equity Shares
aggregating up to ₹126.70 million by PNB MetLife and up to [●] Equity Shares aggregating up to
₹103.70 million by Bajaj Allianz Life

Price Band Price band of a minimum price of ₹[●] per Equity Share (Floor Price) and the maximum price of
₹[●] per Equity Share (Cap Price) including any revisions thereof.

The Price Band and the minimum Bid Lot size for the Offer will be decided by our Bank and
Promoter Selling Shareholder, in consultation with the BRLMs, and will be advertised, at least two
Working Days prior to the Bid/ Offer Opening Date, in all editions of The Financial Express, an
English national daily newspaper, all editions of Jansatta, a Hindi national daily newspaper and
Thrissur editions of the Malayalam daily newspaper, Mangalam (Malayalam being the regional
language of Kerala, where our Registered and Corporate Office is located), each with wide
circulation, respectively, and shall be made available to the Stock Exchanges for the purpose of
uploading on their respective websites

Pricing Date Date on which our Bank and the Promoter Selling Shareholder, in consultation with the BRLMs,
will finalise the Offer Price

8
 Term Description

Prospectus Prospectus to be filed with the RoC on or after the Pricing Date in accordance with Section 26 of the
Companies Act, 2013, and the SEBI ICDR Regulations containing, inter alia, the Offer Price, the
size of the Offer and certain other information, including any addenda or corrigenda thereto

Public Offer Account No lien and non-interest bearing account to be opened with the Public Offer Account Bank, under
Section 40(3) of the Companies Act, 2013 to receive monies from the Escrow Account and ASBA
Accounts on the Designated Date

Public Offer Account Bank A bank which is a clearing member and registered with SEBI as a banker to an issue and with which
the Public Offer Account will be opened, in this case being Kotak Mahindra Bank Limited

QIB Portion The portion of the Offer (including the Anchor Investor Portion) being not more than 50% of the
Net Offer consisting of [●] Equity Shares which shall be available for allocation to QIBs (including
Anchor Investors), subject to valid Bids being received at or above the Offer Price or Anchor
Investor Offer Price

“Qualified Institutional Buyers” or Qualified institutional buyers as defined under Regulation 2(1)(ss) of the SEBI ICDR Regulations
“QIBs” or “QIB Bidders”

“Red Herring Prospectus” or “RHP” This Red Herring Prospectus dated October 28, 2023 issued in accordance with Section 32 of the
Companies Act, 2013 and the provisions of the SEBI ICDR Regulations, which does not have
complete particulars of the Offer Price and the size of the Offer, including any addenda or corrigenda
thereto.

This Red Herring Prospectus will be filed with the RoC at least three Working Days before the
Bid/Offer Opening Date and will become the Prospectus upon filing with the RoC on or after the
Pricing Date

Refund Account(s) No lien and non-interest bearing account opened with the Refund Bank(s), from which refunds, if
any, of the whole or part of the Bid Amount to the Bidders shall be made

Refund Bank(s) A Banker(s) to the Offer and with whom the Refund Account will be opened, in this case being
HDFC Bank Limited

Registered Brokers Stock brokers registered under SEBI (Stock Brokers) Regulations, 1992, as amended with the Stock
Exchanges having nationwide terminals, other than the BRLMs and the Syndicate Members and
eligible to procure Bids in terms of Circular No. CIR/ CFD/ 14/ 2012 dated October 4, 2012 issued
by SEBI

Registrar Agreement Agreement dated July 7, 2023 entered by and amongst our Bank, the Selling Shareholders and the
Registrar to the Offer, in relation to the responsibilities and obligations of the Registrar to the Offer
pertaining to the Offer

“Registrar and Share Transfer Registrar and share transfer agents registered with SEBI and eligible to procure Bids at the
Agents” or “RTAs” Designated RTA Locations as per the list available on the websites of the Stock Exchanges, and the
UPI Circulars

“Registrar to the Offer” or “Registrar” Link Intime India Private Limited

“Retail Individual Bidder(s)” or Individual Bidders, who have Bid for the Equity Shares for an amount not more than ₹0.20 million
“RIB(s)” in any of the bidding options in the Offer (including HUFs applying through their Karta and Eligible
NRIs)

Retail Portion Portion of the Offer being not less than 35% of the Net Offer consisting of [●] Equity Shares which
shall be available for allocation to Retail Individual Bidders (subject to valid Bids being received at
or above the Offer Price)

Revision Form Form used by the Bidders to modify the quantity of the Equity Shares or the Bid Amount in any of
their ASBA Form(s) or any previous Revision Form(s), as applicable.

QIB Bidders and Non-Institutional Bidders are not allowed to withdraw or lower their Bids (in terms
of quantity of Equity Shares or the Bid Amount) at any stage. Retail Individual Bidders and Eligible
Employees Bidding in the Employee Reservation Portion can revise their Bids during the Bid/ Offer
Period and withdraw their Bids until Bid/Offer Closing Date

“Self-Certified Syndicate Bank(s)” or The banks registered with SEBI, which offer the facility of ASBA services, (i) in relation to ASBA,
“SCSB(s)” where the Bid Amount will be blocked by authorising an SCSB, a list of which is available on the
website of SEBI at
www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=34 and updated
from time to time and at such other websites as may be prescribed by SEBI from time to time, (ii)
in relation to UPI Bidders using the UPI Mechanism, a list of which is available on the website of

9
 Term Description

SEBI at https://sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=40 or
such other website as may be prescribed by SEBI and updated from time to time.

Applications through UPI in the Offer can be made only through the SCSBs mobile applications
(apps) whose name appears on the SEBI website. A list of SCSBs and mobile application, which,
are live for applying in public issues using UPI mechanism is available on to the website of SEBI at
www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=43. The said list
shall be updated on the SEBI website and at such other website as may be prescribed by SEBI from
time to time

Share Escrow Agent Escrow agent to be appointed pursuant to the Share Escrow Agreement, namely, Link Intime India
Private Limited

Share Escrow Agreement Agreement dated October 28, 2023 entered into amongst our Bank, the Selling Shareholders and
the Share Escrow Agent in connection with the transfer of the Offered Shares by the Selling
Shareholders and credit of such Equity Shares to the demat account of the Allottees

Specified Locations Bidding Centres where the Syndicate shall accept ASBA Forms from Bidders, a list of which is
available on the website of SEBI (www.sebi.gov.in) and updated from time to time

Sponsor Banks HDFC Bank Limited and Kotak Mahindra Bank Limited, appointed by our Bank to act as conduits
between the Stock Exchanges and NPCI in order to push the mandate collect requests and / or
payment instructions of the UPI Bidders using the UPI Mechanism and carry out other
responsibilities, in terms of the UPI Circulars

“Syndicate” or “Members of the Together, the BRLMs and the Syndicate Members
Syndicate”

Syndicate Agreement Agreement dated October 28, 2023 entered amongst our Bank, the Selling Shareholders, the
BRLMs, the Registrar and the Syndicate Members, in relation to collection of Bids by the Syndicate

Syndicate Members Intermediaries (other than the BRLMs) registered with SEBI who are permitted to accept bids,
applications and place order with respect to the Offer and carry out activities as an underwriter,
namely, Nuvama Wealth Management Limited (formerly known as Edelweiss Securities Limited)
and Sharekhan Limited

Systemically Important Non-Banking Systemically important non-banking financial company as defined under Regulation 2(1)(iii) of the
Financial Company SEBI ICDR Regulations

Underwriters [●]

Underwriting Agreement Agreement to be dated [●] entered amongst our Bank and the Underwriters to be entered into on or
after the Pricing Date but prior to filing of the Prospectus with the RoC

UPI Unified payments interface which is an instant payment mechanism, developed by NPCI

UPI Bidders Collectively, individual investors applying as (i) Retail Individual Bidders in the Retail Portion; (ii)
Eligible Employees Bidding in the Employee Reservation Portion; and (iii) Non-Institutional
Bidders with an application size of up to ₹0.50 million in the Non-Institutional Portion, and Bidding
under the UPI Mechanism through ASBA Form(s) submitted with Syndicate Member, Registered
Brokers, Collecting Depository Participants and Registrar and Share Transfer Agents.

Pursuant to Circular no. SEBI/HO/CFD/DIL2/P/CIR/P/2022/45 dated April 5, 2022 issued by SEBI,

all individual investors applying in public issues where the application amount is up to ₹0.50 million
shall use UPI and shall provide their UPI ID in the bid-cum-application form submitted with: (i) a
syndicate member, (ii) a stock broker registered with a recognized stock exchange (whose name is
mentioned on the website of the stock exchange as eligible for such activity), (iii) a depository
participant (whose name is mentioned on the website of the stock exchange as eligible for such
activity), and (iv) a registrar to an issue and share transfer agent (whose name is mentioned on the
website of the stock exchange as eligible for such activity)

UPI Circulars SEBI circular no. CFD/DIL2/CIR/P/2018/22 dated February 15, 2018, SEBI circular number
SEBI/HO/CFD/DIL2/CIR/P/2018/138 dated November 1, 2018, SEBI circular number
SEBI/HO/CFD/DIL2/CIR/P/2019/50 dated April 3, 2019, SEBI circular number
SEBI/HO/CFD/DIL2/CIR/P/2019/76 dated June 28, 2019, SEBI circular number
SEBI/HO/CFD/DIL2/CIR/P/2019/85 dated July 26, 2019, SEBI circular number
SEBI/HO/CFD/DCR2/CIR/P/2019/133 dated November 8, 2019, SEBI circular number
SEBI/HO/CFD/DIL2/CIR/P/2020 dated March 30, 2020, SEBI circular number
SEBI/HO/CFD/DIL-2/CIR/P/2021/2480/1/M dated March 16, 2021, SEBI circular number
SEBI/HO/CFD/DIL2/P/CIR/2021/570 dated June 2, 2021, SEBI circular number
SEBI/HO/CFD/DIL2/CIR/P/2022/45 dated April 5, 2022, SEBI circular number
SEBI/HO/CFD/DIL2/CIR/P/2022/51 dated April 20, 2022, SEBI circular number
10
 Term Description

SEBI/HO/CFD/DIL2/P/CIR/2022/75 dated May 30, 2022, SEBI circular number

SEBI/HO/CFD/TPD1/CIR/P/2023/140 dated August 9, 2023, SEBI master circular with circular
number SEBI/HO/MIRSD/POD-1/P/CIR/2023/70 dated May 17, 2023 (to the extent that such
circulars pertain to the UPI Mechanism), SEBI master circular no. SEBI/HO/CFD/PoD-
2/P/CIR/2023/00094 dated June 21, 2023, along with the circular issued by the National Stock
Exchange of India Limited having reference no. 25/2022 dated August 3, 2022 and the circular
issued by BSE Limited having reference no. 20220803-40 dated August 3, 2022 and any subsequent
circulars or notifications issued by SEBI and Stock Exchanges in this regard

UPI ID ID created on the UPI for single-window mobile payment system developed by the NPCI

UPI Mandate Request A request (intimating the UPI Bidder by way of a notification on the UPI linked mobile application
as disclosed by SCSBs on the website of SEBI and by way of an SMS on directing the UPI Bidder
to such UPI linked mobile application) to the UPI Bidder initiated by the Sponsor Banks to authorise
blocking of funds on the UPI application equivalent to Bid Amount and subsequent debit of funds
in case of Allotment

UPI Mechanism The bidding mechanism that shall be used by an UPI Bidder submitted with intermediaries with UPI
as a mode of payment in accordance with the UPI Circulars to make an ASBA Bid in the Offer

UPI PIN Password to authenticate a UPI transaction

Wilful Defaulter or a Fraudulent An entity or person categorized as a wilful defaulter or a fraudulent borrower by any bank or
Borrower financial institution or consortium thereof, in accordance with the guidelines on wilful defaulters or
fraudulent borrowers issued by the RBI and in terms of regulation 2(1)(lll) of the SEBI ICDR
Regulations

Working Day All days on which commercial banks in Mumbai are open for business. In respect of announcement
of Price Band and Bid/Offer Period, Working Day shall mean all days, excluding Saturdays, Sundays
and public holidays, on which commercial banks in Mumbai are open for business. In respect of the
time period between the Bid/ Offer Closing Date and the listing of the Equity Shares on the Stock
Exchanges, Working Day shall mean all trading days of the Stock Exchanges, excluding Sundays
and bank holidays in India, as per circulars issued by SEBI, including the UPI Circulars

Technical/Industry Related Terms/Abbreviations

Term Description

AFS Available for Sale

ALCO Assets Liability Committee

AML Anti-money laundering

ANBC Adjusted net bank credit

ASM Additional Surveillance Measures

ATM Automated teller machine

“Advances Under Management” or Gross advances plus advances originated and transferred under securitization, assignment and inter-
“AUM” bank participation certificates for which a bank continues to hold collection responsibilities

Average Borrowings Borrowings calculated on the basis of the average of the opening balance at the start of the relevant
period/fiscal year and the closing balance as at quarter end for all quarters in the relevant
period/fiscal year

Average CASA CASA calculated on the basis of the average of the opening balance at the start of the relevant
period/fiscal year and the closing balance as at quarter end for all quarters in the relevant
period/fiscal year

Average Deposits Deposits calculated on the basis of the average of the opening balance at the start of the relevant
period/fiscal year and the closing balance as at quarter end for all quarters in the relevant
period/fiscal year

Average Interest-Earning Advances Interest-Earning Advances calculated on the basis of the average of the opening balance at the start
of the relevant period/fiscal year and the closing balance as at quarter end for all quarters in the
relevant period/fiscal year

11
 Term Description

Average Interest-Earning Advances Interest-earning advances of the Retail Banking segment calculated on the basis of the average of
of the Retail Banking Segment the opening balance at the start of the relevant period/fiscal year and the closing balance as at quarter
end for all quarters in the relevant period/fiscal year

Average Interest-Earning Balance Balances with banks in other deposits accounts and money at call and short notice calculated on the
with Reserve Bank of India and other basis of the average of the opening balance at the start of the relevant period/fiscal year and the
Inter-Bank Funds closing balance as at quarter end for all quarters in the relevant period/fiscal year

Average Interest-Earning Interest-Earning Investments calculated on the basis of the average of the opening balance at the
Investments start of the relevant period/fiscal year and the closing balance as at quarter end for all quarters in the
relevant period/fiscal year

Average Interest-Earning Micro Gross Micro Loans net of provisions for NPAs for Micro Loans calculated on the basis of the average
Loans of the opening balance at the start of the relevant period/fiscal year and the closing balance as at
quarter end for all quarters in the relevant period/fiscal year

Average Interest-Earning Other Gross Other Loans net of provisions for NPAs for Other Loans calculated on the basis of the average
Loans of the opening balance at the start of the relevant period/fiscal year and the closing balance as at
quarter end for all quarters in the relevant period/fiscal year

Average Investments in Government Investments in government securities calculated on the basis of the average of the opening balance
Securities at the start of the relevant period/fiscal year and the closing balance as at quarter end for all quarters
in the relevant period/fiscal year

Average Savings Bank Deposits Savings bank deposits calculated on the basis of the average of the opening balance at the start of
the relevant period/fiscal year and the closing balance as at quarter end for all quarters in the relevant
period/fiscal year

Average Term Deposits Term deposits calculated on the basis of the average of the opening balance at the start of the relevant
period/fiscal year and the closing balance as at quarter end for all quarters in the relevant
period/fiscal year

Average Total Assets Total assets calculated on the basis of the average of the opening balance at the start of the relevant
period/fiscal year and the closing balance as at quarter end for all quarters in the relevant
period/fiscal year

Average Total Interest-Bearing Total interest-bearing liabilities calculated on the basis of the average of the opening balance at the
Liabilities start of the relevant period/fiscal year and the closing balance as at quarter end for all quarters in the
relevant period/fiscal year

Average Total Interest-Earning Total Interest-Earning Assets calculated on the basis of the average of the opening balance at the
Assets start of the relevant period/fiscal year and the closing balance as at quarter end for all quarters in the
relevant period/fiscal year

Banking outlets A fixed point service delivery unit, manned by either the bank’s staff or its business correspondent,
where services of acceptance of deposits, encashment of cheques, cash withdrawal or lending of
money are provided for a minimum of 4 hours per day for at least five days a week

BC Business correspondent

BCBS Basel Committee on Banking Supervision

Branches Our branches that make loans and accept deposits

BTI BTI Payments Private Limited

Bulk Deposits Single rupee term deposits of ₹20.00 million or more

CAR Capital adequacy ratio

CASA Current account deposits and savings bank deposits

CASA Ratio Current account deposits and savings account deposits to total deposits as of the last day of the
relevant period/fiscal year, expressed as a percentage

CBS Core banking solution

CFT Combatting financing of terrorism

Cost of Average Borrowings The ratio of interest expended on borrowings to Average Borrowings

12
 Term Description

Cost of Average CASA The ratio of interest expended on CASA to Average CASA

Cost of Average Deposits The ratio of interest expended on deposits to Average Deposits

Cost of Average Savings Bank The ratio of interest expended on savings deposits to Average Savings Bank Deposits
Deposits

Cost of Average Term Deposits The ratio of interest expended on term deposits to Average Term Deposits

Cost of Deposits The ratio of interest expended on deposits during the year to the average of total deposits

Cost of Funds The ratio of interest expended to Average Total Interest-Bearing Liabilities

Cost to Income Ratio Operating expenses for the relevant period/fiscal year to the sum of Net Interest Income (interest
earned minus interest expended) and other income for the relevant period/fiscal year, expressed as a
percentage

CRAR Capital to risk (weighted) assets ratio

Credit Cost Ratio The ratio of total provisions towards NPAs and write-offs and provision towards standard assets to
the company’s average net advances expressed as a percentage

CRR Cash reserve ratio

ECS Electronic Clearance Service

ESG Environmental, Social and Governance

FBIL Financials Benchmark India Private Limited

FFI Foreign financial institution

FIMMDA Fixed Income Money Market and Derivatives Association

FIS FIS Payment Solutions and Services India Private Limited

GDP Gross domestic product

GLP Gross loan portfolio, which is equal to gross advances plus off-balance sheet advances (i.e.,
securitisation/ assignment and inter-bank participation certificates)

GSM Graded Surveillance Measures

HFT Held for Trading

HNIs High net worth individuals

HTM Held to Maturity

IBA Indian Banks Association

IBPC Inter-bank participation certificate

ICAAP Internal Capital Adequacy Assessment Process

IGA Intergovernmental agreement

IMPS Immediate Payment System

IRAC Income Recognition and Asset Classification

Interest-Earning Advances Gross advances net of provisions for NPAs, which is the amount of advances shown on the balance
sheet

Interest-Earning Balance with the Balances with banks in other deposits accounts and money at call and short notice
Reserve Bank of India and other Inter-
Bank Funds

Interest-Earning Investments Government securities, treasury bills and other interest earning securities net of depreciation or
provision for investments, if any

13
 Term Description

KMLA Kerala Money Lenders Act, 1958

KYC Know your Customer

LAF Liquidity Adjustment Facility

MCLR Marginal cost of funds based lending rate

MIS Management Information System

Micro Loans Microfinance Loans and Other Micro Loans

Microfinance Loan A loan that satisfies the following two criteria: (1) the borrower is individual in a sub-group, which
usually comprises two to 10 people, which is itself or combined with other sub-groups (usually one
to five sub-groups) is a “sangam” - the sangam facilitates the repayment process and other activities
among the individuals by holding meetings at regular intervals with sangam members; and (2) the
borrower’s annual household income is up to ₹0.30 million provided that the percentage of the
monthly household income to be used for the repayment of loans (including the new loan) shall be
a maximum of 50% of the monthly household income. Household means an individual family unit,
i.e., husband, wife and their unmarried children. Until the introduction of the RBI Regulatory
Framework for Microfinance Loans Direction, 2022, we considered all of our loans to individuals
who were members of a sub-group to be Micro Loans. Effective October 17, 2022, we segregated
our Micro Loans into Microfinance Loans and Other Micro Loans

Metro centre A metro centre means a centre with a population 1,000,000 people and above (as per the RBI Circular
on Rationalisation of Branch Authorisation Policy: Revision of Guidelines dated 18 May 2017)

MR-ALCO Market Risk and Asset Liability Management Committee

MSMEs Micro, Small, and Medium Enterprises

NABARD National Bank for Agriculture and Rural Development

NBFC-MFIs Non-banking finance company-microfinance institutions

NCDs Non-convertible debentures

NDS-OM Negotiated Dealing System- Order Matching System

Net Interest Income Interest earned minus interest expended

Net Interest Margin Net Interest Income divided by the Average Total Interest Earning Assets

Net Profit Before Tax Net profit plus provisions made towards income tax

Net Worth or Shareholders’ Fund The aggregate of Capital and Reserves and Surplus

NM Non-meaningful

NPA(s) Non–performing assets

NRI Non-resident Indian

Operating Expenses to Average Total Operating expenses for the relevant period/fiscal year to the Average Total Assets for the relevant
Assets period/fiscal year, expressed as a percentage

Operating Income Interest earned minus interest expended plus other income for the period/fiscal year

Other Loans Retail loans, MSME loans, loans to financial institutions and agricultural loans

Other Loans, excluding Gold Loans Retail loans, MSME loans, loans to financial institutions and agricultural loans, excluding gold loans
and Loans Against Deposit and loans against deposit

Other Micro Loan A loan that satisfies the following two criteria: (1) the borrower is individual in a sub-group, which
normally comprises two to 10 people, which is itself or combined with other sub-groups (usually
one to five sub-groups) is a “sangam” - the sangam facilitates the repayment process and other
activities among the individuals process by holding meetings at regular intervals with sangam
members; and (2) the borrower’s annual income above ₹0.30 million provided that the percentage
of the monthly household income to be used for the repayment of loans (including the new loan)
shall be a maximum of 50% of the monthly income

14
 Term Description

PAR Portfolio at risk

PMLA Prevention of Money Laundering Act, 2002

PMLR Prevention of Money-laundering Rules

POS Point of sale

Pre-Provisioning Operating Profit Total income minus interest expensed minus operating expenses for the period/fiscal year. Pre-
Provisioning Operating Profit can also be expressed as Operating Income minus operating expenses
for the period/fiscal year.

Provision Coverage Ratio The ratio of NPA provision including technical write off and gross NPA, including technical write
off

PSL Priority sector lending requirements

Repo Rate Repurchasing Option Rate

Retail Deposits CASA plus Retail Term Deposits

Retail Deposits Ratio Retail Deposits to total deposits as of the last day of the relevant period/fiscal year, expressed as a
percentage

Retail Term Deposits Single rupee term deposits of less than ₹20.00 million

Return on Average Assets Net profit for the relevant period/fiscal year to Average Total Assets expressed as a percentage

Return on Average Equity Net profit for the relevant period/fiscal year to Average Net Worth expressed as a percentage

Rural centre A rural centre means a centre with a population of up to 9,999 people (as per the RBI Circular on
Rationalisation of Branch Authorisation Policy: Revision of Guidelines dated 18 May 2017)

RWAs Risk weighted assets

Semi-urban centre A semi-urban centre means a centre with a population from 10,000 people to 99,999 people (as per
the RBI Circular on Rationalisation of Branch Authorisation Policy: Revision of Guidelines dated
18 May 2017)

SHA Shareholder agreement

SHG Self-help group

SLR Statutory liquidity ratio

SMS Short message service

Total Interest-Earning Assets Interest-Earning Advances, Interest-Earning Investments and Interest-Earning Balance with the
Reserve Bank of India and other Inter-Bank Funds

Urban centre An urban centre means a centre with a population from 100,000 people to 999,999 people (as per
the RBI Circular on Rationalisation of Branch Authorisation Policy: Revision of Guidelines dated
18 May 2017)

Yield on Advances The ratio of interest income on advances for the relevant period/fiscal year to the average net
advances as of the last day of the relevant period/fiscal year, expressed as a percentage

Yield on Average Interest-Earning The ratio of interest earned on advances to Average Interest-Earning Advances
Advances

Yield on Average Interest-Earning The ratio of interest earned on investments to Average Interest-Earning Investments
Investments

Yield on Average Interest-Earning The ratio of interest earned on Interest-Earning Balance with Reserve Bank of India and other Inter-
Balances with Reserve Bank of India Bank Funds to Average Interest-Earning Balances with Reserve Bank of India and other Inter-Bank
and other Inter-Bank Funds Funds

Yield on Average Interest-Earning The ratio of interest earned on Micro Loans to Average Interest-Earning Micro Loans
Micro Loans

15
 Term Description

Yield on Average Interest-Earning The ratio of interest earned on Other Loans to Average Interest-Earning Other Loans
Other Loans

Yield on Average Total Interest- The ratio of interest earned to Average Total Interest-Earning Assets
Earning Assets

YTM Yield to maturity

Conventional and General Terms or Abbreviations

Term Description

₹/Rs./Rupees/INR/Indian Rupees Indian Rupees

AGM Annual General Meeting

AIFs Alternative Investments Funds

Banking Regulation Act Banking Regulation Act, 1949, as amended

Basel Master Circular Master Circular – Basel III Capital Regulations, RBI/2015-16/58,
DBR.No.BP.BC.1/21.06.201/2015-16 dated July 1, 2015

BSE BSE Limited

CAGR Compound annual growth rate (as a %): (End Year Value/Base Year Value)^ (1/No. of years
between Base year and end year) – 1 (^ denotes ‘raised to’)

CSR Corporate Social Responsibility

Calendar Year A calendar year is a one-year period that begins on January 1 and ends on December 31, based on
the commonly used Gregorian calendar

Category I AIF AIFs who are registered as “Category I Alternative Investment Funds” under the SEBI AIF
Regulations

Category I FPIs FPIs who are registered as “Category I Foreign Portfolio Investors” under the SEBI FPI Regulations

Category II AIF AIFs who are registered as “Category II Alternative Investment Funds” under the SEBI AIF
Regulations

Category II FPIs FPIs who are registered as “Category II Foreign Portfolio Investors” under the SEBI FPI Regulations

Category III AIF AIFs who are registered as “Category III Alternative Investment Funds” under the SEBI AIF
Regulations

CCIL Clearing Corporation of India Limited

CDSL Central Depository Services (India) Limited

CERSAI Central Registry of Securitization Asset Reconstruction and Security Interest of India

CFO Chief Financial Officer

CIN Corporate Identity Number

Civil Code The Code of Civil Procedure, 1908

“Companies Act” or “Companies Companies Act, 2013, along with the relevant rules made thereunder, as amended
Act, 2013”

Companies Act, 1956 Companies Act, 1956, along with the relevant rules made thereunder

CrPC Code of Criminal Procedure, 1973, as amended

Depositories NSDL and CDSL

Depositories Act The Depositories Act, 1996, as amended

16
 Term Description

DIN Director Identification Number

DPIIT Department for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry,
Government of India (earlier known as the Department of Industrial Policy and Promotion)

DP ID Depository Participant Identification

DP/ Depository Participant Depository participant as defined under the Depositories Act

EBITDA Earnings before interest (net), taxes, depreciation and amortisation

EGM Extraordinary General Meeting

EPS Earnings Per Share

FDI Foreign direct investment

FDI Policy Consolidated Foreign Direct Investment Policy notified by the DPIIT through notification dated
October 15, 2020 effective from October 15, 2020

FEMA Foreign Exchange Management Act, 1999, read with rules and regulations there under

FEMA Non-debt Instruments Rules Foreign Exchange Management (Non-debt Instruments) Rules, 2019

FEMA Regulations The Foreign Exchange Management (Non Debt Instruments) Rules, 2019, the Foreign Exchange
Management (Mode of Payment and Reporting of Non Debt Instruments) Regulations, 2019 and the
Foreign Exchange Management (Debt Instruments) Regulations, 2019, as applicable

FIMMDA Fixed Income Money Market & Derivates Association of India

Financial Year/ Fiscal/ FY Unless stated otherwise, the period of 12 months ending March 31 of that particular year.

FIR First information report

FPI(s) Foreign portfolio investors as defined under the SEBI FPI Regulations

FVCI(s) Foreign venture capital investors as defined and registered under the SEBI FVCI Regulations

Finance Act Finance Act, 2022

GAAR General Anti-Avoidance Rules

Gazette Gazette of India

GoI or Government or Central Government of India

Government

GST Goods and Services Tax

Guidelines on Auditors Reserve Bank of India’s Guidelines for Appointment of Statutory Central Auditors/ Statutory
Auditors of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs) dated April
27, 2021

HUF Hindu Undivided Family

IFRS International Financial Reporting Standards

IFSC Indian Financial System Code

Ind AS/ Indian Accounting Standards Indian Accounting Standards notified under Section 133 of the Companies Act, 2013 read with the
Companies (Indian Accounting Standards) Rules, 2015, as amended

India Republic of India

Indian GAAP/ IGAAP Accounting principles generally accepted in India including Accounting Standards prescribed under
Section 133 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014 to the
extent applicable and other relevant provisions of the Companies Act, 2013 and current practices
prevailing within the Banking industry in India and the requirements prescribed under the Banking
Regulation Act, 1949, the circulars and guidelines issued by RBI from time to time

17
 Term Description

IPC The Indian Penal Code, 1860

IPO Initial public offering

IRDAI Insurance Regulatory and Development Authority of India

IST Indian Standard Time

IT Information Technology

IT Act The Income Tax Act, 1961

KYC Know your customer

Listing Regulations Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements)
Regulations, 2015, as amended

MCA Ministry of Corporate Affairs

MICR Magnetic Ink Character Recognition

Mutual Fund (s) Mutual Fund(s) means mutual funds registered under the SEBI (Mutual Funds) Regulations, 1996

N/A Not applicable

NACH National Automated Clearing House

NAV Net Asset Value

NBFC Non-banking financial company

NEFT National Electronic Funds Transfer

NPCI National Payments Corporation of India

NRI Person resident outside India, who is a citizen of India or a person of Indian origin, and shall have
the meaning ascribed to such term in the Foreign Exchange Management (Deposit) Regulations,
2016 or an overseas citizen of India cardholder within the meaning of Section 7(A) of the Citizenship
Act, 1955

NRE Account Non-resident external rupee account

NRO Account Non-resident ordinary account

NSDL National Securities Depository Limited

NSE National Stock Exchange of India Limited

OCB/Overseas Corporate Body A company, partnership, society or other corporate body owned directly or indirectly to the extent
of at least 60% by NRIs including overseas trusts, in which not less than 60% of beneficial interest
is irrevocably held by NRIs directly or indirectly and which was in existence on the date of
commencement of the Foreign Exchange Management (Withdrawal of General Permission to
Overseas Corporate Bodies (OCBs) Regulations, 2003 i.e. October 3, 2003 and immediately before
such date had taken benefits under the general permission granted to OCBs under FEMA. OCBs are
not allowed to invest in the Offer

p.a. Per annum

P/E Price/earnings

P/E Ratio Price/earnings ratio

PAN Permanent account number

PAT Profit after tax

PFRDA Pension Fund Regulatory and Development Authority

PFRDA Act, 2013 Pension Fund regulatory and Development Act, 2013

18
 Term Description

RBI The Reserve Bank of India

RBI Act The Reserve Bank of India Act, 1934, as amended

RBI Compensation Guidelines Reserve Bank of India’s Guidelines on Compensation of Whole Time Directors/ Chief Executive
Officers/ Material Risk Takers and Control Function Staff dated November 4, 2019

Regulation S Regulation S under the U.S. Securities Act

RTGS Real Time Gross Settlement

Rule 144A Rule 144A under the U.S. Securities Act

SCRA Securities Contracts (Regulation) Act, 1956, as amended

SCRR Securities Contracts (Regulation) Rules, 1957, as amended

SEBI Securities and Exchange Board of India constituted under the SEBI Act

SEBI Act Securities and Exchange Board of India Act, 1992, as amended

SEBI AIF Regulations Securities and Exchange Board of India (Alternative Investments Funds) Regulations, 2012, as
amended

SEBI FPI Regulations Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2019, as amended

SEBI FVCI Regulations Securities and Exchange Board of India (Foreign Venture Capital Investors) Regulations, 2000, as
amended

SEBI ICDR Regulations Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations,
2018, as amended

SEBI Merchant Bankers Regulations SEBI (Merchant Bankers) Regulations, 1992, as amended

SEBI SBEB & SE Regulations Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity)
Regulations, 2021, as amended

SEBI VCF Regulations Securities and Exchange Board of India (Venture Capital Fund) Regulations, 1996 as repealed
pursuant to the SEBI AIF Regulations, as amended

SFB Small Finance Bank within the meaning of the SFB Licensing Guidelines

SFB Licensing Guidelines Guidelines for Licensing of “Small Finance Banks” in the Private Sector dated November 27, 2014
issued by the RBI, as amended

SFB Operating Guidelines Reserve Bank of India’s Operating Guidelines for Small Finance Bank dated October 6, 2016

State Government The government of a state in India

Stock Exchanges BSE and NSE

STT Securities transaction tax

Takeover Regulations Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011, as amended

U.S. GAAP Generally Accepted Accounting Principles in the United States

U.S. Holder A beneficial owner of Equity Shares that is for United States federal income tax purposes: (a) an
individual who is a citizen or resident of the United States; (b) a corporation organised under the
laws of the United States, any state thereof or the District of Columbia; (c) an estate whose income
is subject to United States federal income taxation regardless of its source; or (d) a trust that (1) is
subject to the primary supervision of a court within the United States and the control of one or more
U.S. persons for all substantial decisions of the trust, or (2) has a valid election in effect under the
applicable U.S. Treasury regulations to be treated as a U.S. person

U.S. Securities Act U.S. Securities Act of 1933, as amended

U.S./USA/United States United States of America

19
 Term Description

USD/US$ United States Dollars

VCFs Venture Capital Funds as defined in and registered with SEBI under the SEBI VCF Regulations

20
 OFFER DOCUMENT SUMMARY

The following is a general summary of the terms of the Offer and is neither exhaustive, nor purports to contain a summary of
all the disclosures in this Red Herring Prospectus or the Prospectus, or all details relevant to prospective investors. This
summary should be read in conjunction with, and is qualified in its entirety by, the more detailed information appearing
elsewhere in this Red Herring Prospectus, including “Definitions and Abbreviations”, “Risk Factors”, “Objects of the Offer”,
“Our Business”, “Industry Overview”, “Capital Structure”, “The Offer”, “Financial Statements”, “Outstanding Litigation
and Material Developments”, “Offer Procedure” and “Description of Equity Shares and Terms of Articles of Association” on
pages 1, 35, 126, 190, 155, 109, 95, 304, 420, 471 and 491, respectively.

Summary of the We are a small finance bank headquartered in Kerala with a focus on unbanked and under-banked customer
primary business of segments, especially in rural and semi-urban centres. Our primary products are our advances and deposits (current
the Bank accounts, savings accounts, term deposits and recurring deposits). Our advances comprise: (a) micro loans,
comprising microfinance loans (loans made in compliance with RBI Regulatory Framework for Microfinance Loans
Direction, 2022) and other micro loans; (b) retail loans, which includes gold loans, mortgages, personal loans, and
vehicle loans; (c) loans to micro, small and medium enterprises (MSMEs); (d) loans to financial institutions; and
(e) agricultural loans.
Summary of the Small finance banks aim to service the underserved through savings instruments, and supplying credit to small
industry in which business units, small and marginal farmers, micro and small industries, and other unorganized sector/lending through
our Bank operates informal channels. The 12 small finance banks, including us, cumulatively accounted for approximately 13% of the
total AUM of the industry as of June 30, 2023. Small finance banks advances under management (AUM) clocked
29% CAGR from March 31, 2018 to June 30, 2023 and CRISIL MI&A expects this to increase by a CAGR of 22-
24% between June 30, 2023 and March 31, 2025. (Source: CRISIL MI&A Report)
Name of our Kadambelil Paul Thomas and ESAF Financial Holdings Private Limited
Promoters
Organization Chart The chart below sets forth the shareholding and corporate structure of our Bank as of the date of this Red Herring
Prospectus.

Sources of revenue The pie-chart below sets forth the sources of revenue contribution of our Bank for Fiscal 2023:
contribution

Source of Income

6% 3%
Interest Income on
10%
advances
Interest Income on
Investments/ Others
Commission income

Other Income
81%

Offer size Offer of up to [●] Equity Shares for cash at price of ₹[●] per Equity Share (including a premium of ₹[●] per Equity
Share) aggregating up to ₹ 4,630.00 million comprising a Fresh Issue of up to [●] Equity Shares aggregating up to
₹ 3,907.00 million by our Bank and an Offer for Sale of up to [●] Equity Shares aggregating up to ₹723.00 million,
comprising up to [●] Equity Shares aggregating up to ₹492.60 million by the Promoter Selling Shareholder, up to

21
 [●] Equity Shares aggregating up to ₹126.70 million by PNB MetLife and up to [●] Equity Shares aggregating up
to ₹103.70 million by Bajaj Allianz Life in the Offer.

Details of Offered Shares offered in the Offer for Sale are as follows:

Sr. Name of the Selling Number of Offered Shares Date of Date of corporate
No. Shareholder consent letter action/ board resolution/
power of attorney
Promoter Selling Shareholder
1. ESAF Financial Holdings [●] Equity Shares aggregating July 5, 2023 June 2, 2023
Private Limited up to ₹492.60 million and October
18, 2023
Other Selling Shareholders
2. PNB MetLife [●] Equity Shares aggregating July 5, 2023 November 9, 2020
up to ₹126.70 million
3. Bajaj Allianz Life [●] Equity Shares aggregating July 5, 2023 December 6, 2011
up to ₹103.70 million

Each Selling Shareholder severally and not jointly confirms that the Offered Shares have been held by such Selling
Shareholder for a period of at least one year prior to filing of the Draft Red Herring Prospectus with SEBI in
accordance with Regulation 8 of the SEBI ICDR Regulations and accordingly, are eligible for the Offer in
accordance with the provisions of the SEBI ICDR Regulations.

In the event of under-subscription in the Employee Reservation Portion (if any), the unsubscribed portion will be
available for allocation and Allotment, proportionately to all Eligible Employees who have Bid in excess of ₹0.20
million (net of the Employee Discount), subject to the maximum value of Allotment made to such Eligible
Employee not exceeding ₹0.50 million (net of the Employee Discount). The unsubscribed portion, if any, in the
Employee Reservation Portion (after allocation up to ₹0.50 million), shall be added to the Net Offer. Our Bank and
the Promoter Selling Shareholder may, in consultation with the BRLMs, offer a discount of up to [●]% to the Offer
Price (equivalent of ₹[●] per Equity Share) to Eligible Employees Bidding in the Employee Reservation Portion,
subject to necessary approvals as may be required, and which shall be announced at least two Working Days prior
to the Bid/ Offer Opening Date.

The Offer shall and Net Offer shall constitute [●]% and [●]%, respectively, of the post-Offer paid-up equity share
capital of our Bank. For further details, please see “Offer Structure” on page 467.
Employee The Offer includes a reservation of up to [●] Equity Shares, aggregating up to ₹125.00 million, for subscription by
Reservation Portion Eligible Employees. As of the date of this Red Herring Prospectus, the Bank has 5,048 Eligible Employees eligible
to Bid in the Employee Reservation Portion
Objects of the Offer The objects for which the Net Proceeds shall be utilised are as follows:
(₹ in million)
Particulars Amount to be funded from the Net
Proceeds(1)
For augmentation of our Bank’s Tier – 1 capital base(1) [●]
(1)
To be finalised upon determination of the Offer Price and updated in the Prospectus prior to filing with the RoC

For further details, see “Objects of the Offer” on page 126.

Aggregate pre-Offer The aggregate pre-Offer shareholding of our Promoters and Promoter Group as a percentage of the pre-Offer paid-
shareholding of our up Equity Share capital of the Bank is set out below:
Promoters and
Promoter Group, Name Number of Equity Shares Percentage of the pre-Offer
and Selling Equity Share Capital (%)
Shareholders as a Promoters
percentage of our ESAF Financial Holdings Private Limited 280,758,396* 62.46
paid-up Equity Kadambelil Paul Thomas 31,186,785 6.94
Share capital Total (A) 311,945,181 69.40
Promoter Group
ESMACO 22,413,659 4.99
Beena George 40,000 0.01
Bosco Joseph 40,000 0.01
Mereena Paul 33,333 0.01
Leo Joseph 33,333 0.01
Savio Joseph 13,333 Negligible
Alok Thomas Paul 13,333 Negligible
Emy Acha Paul 13,333 Negligible
Total (B) 22,600,324 5.03
Total (A+B) 334,545,505 74.43
* 280,758,391 Equity Shares are held by ESAF Financial Holdings Private Limited and one Equity Share each is held by
Mereena Paul, Alok Thomas Paul, Emy Acha Paul, George Kalaparambil John and Beena George, as nominees on behalf
of ESAF Financial Holdings Private Limited, who is the beneficial owner of such Equity Shares. Mereena Paul, Alok Thomas
Paul, Emy Acha Paul and Beena George are also members of the Promoter Group of our Bank. Further, Mereena Paul is
also a director of ESAF Financial Holdings Private Limited.

22
 The aggregate pre-Offer shareholding of our Selling Shareholders in number of Equity Shares and as a percentage
of the pre-Offer paid-up Equity Share capital of the Bank is set out below:

Selling Shareholders Number of Equity Shares Percentage of the pre-Offer

held Equity Share Capital (%)
ESAF Financial Holdings Private Limited 280,758,396* 62.46
PNB MetLife 21,346,993 4.75
Bajaj Allianz Life 17,469,428 3.89
Total 319,574,817 71.10
* 280,758,391 Equity Shares are held by ESAF Financial Holdings Private Limited and one Equity Share each is held by
Mereena Paul, Alok Thomas Paul, Emy Acha Paul, George Kalaparambil John and Beena George, as nominees on behalf
of ESAF Financial Holdings Private Limited, who is the beneficial owner of such Equity Shares.
Summary of The following details of our capital, net worth, the net asset value per Equity Share and total borrowings as at June
Restated Financial 30, 2023 and June 30, 2022 and as at March 31, 2023, 2022 and 2021 are derived from the Restated Financial
Information Information:
(₹ in million, except per share data)
Particulars As at June 30, As at March 31,
2023 2022 2023 2022 2021
Equity Share Capital 4,494.74 4,494.74 4,494.74 4,494.74 4,494.74
Net worth 18,390.93 15,127.62 17,091.29 14,067.96 13,520.64
Net asset value per Equity Share 40.92 33.66 38.03 31.30 30.08
Total borrowings 27,391.25 25,555.00 33,541.95 29,528.33 16,940.00

The following details of our total income, net profit and earnings per Equity Share (basic and diluted) for the three
months period ended June 30, 2023 and June 30, 2022 and the Fiscals 2023, 2022 and 2021 are derived from the
Restated Financial Information:
(₹ in million, except per share data)
Particulars As at and for the three months As at March 31,
period ended June 30,
2023 2022 2023 2022 2021
Total income 9,917.75 7,383.24 31,415.72 21,475.08 17,684.21
Net profit 1,299.64 1,059.66 3,023.33 547.32 1,053.96
Earnings per Equity Share
- Basic 2.89* 2.36* 6.73 1.22 2.46
- Diluted 2.89* 2.35* 6.71 1.22 2.46
*Not annualised
Summary of Selected The following sets forth certain of the key line items included in “Selected Statistical Information” on page 280.
Statistical
Information Particulars As at and for the three months As at and for the year ended
period ended
June 30, 2023 June 30, 2022 March 31, March 31, March 31,
2023 2022 2021
(₹ in million, except
percentages) (₹ in million, except percentages)
AUM(1) 172,039.68 127,352.96 163,312.65 123,406.91 84,259.30
Disbursements 45,093.40 28,684.49 146,906.51 119,452.20 62,863.74
Deposits 156,558.54 134,577.46 146,656.25 128,150.72 89,994.26
Net Interest Income(2) (*) 5,854.53 4,487.62 18,363.40 11,471.39 9,215.91
Average Total Assets(3) 205,097.98 179,058.33 185,256.79 143,504.36 110,306.75
Return on Average Assets(4) (%) 0.63(8) 0.59(8) 1.63 0.38 0.96
Return on Average Equity(5) (%) 7.33 7.26 19.36 4.12 8.85
Provision Coverage Ratio(6) (%) 74.35 62.00 56.67 59.38 52.77
Gross NPAs as a percentage of 1.65 6.16 2.49 7.83 6.70
gross advances (%)
Net NPAs as a percentage of net 0.81 3.78 1.13 3.92 3.88
advances (net of provisions) (%)
Yield on Average Interest- 5.81(8) 5.31(8) 20.87 18.46 20.14
(7)
Earning Advances (%)
Notes:
(*)
Non-GAAP financial measure.
(1)
AUM is a non-GAAP financial measure and is calculated as gross advances plus advances originated and transferred under
securitization, assignment and inter-bank participation certificates for which we continue to hold collection responsibilities
(“AUM” or “Advances Under Management”).
(2)
Net Interest Income is a non-GAAP financial measure and is calculated as interest earned minus interest expended (“Net
Interest Income”).
(3)
Average Total Assets is calculated on the basis of the average of the opening balance of total assets as at the start of the
relevant year and the closing balance as at the quarter ended for all quarters in the relevant period/fiscal year (“Average
Total Assets”).
(4)
Return on Average Assets is a non-GAAP financial measure and is computed as a percentage of net profit for the period/
year divided by Average Total Assets.
(5)
Return on Average Equity is a non-GAAP financial measure and is computed as a percentage of net profit for the period/
year divided by the average of the opening balance of capital and reserves and surplus as at the start of the relevant period/
year and the closing balance as at the quarter ended for all quarters in the relevant period/ fiscal year (“Average
Shareholders’ Funds”).

23
 (6)
Provision Coverage Ratio is computed as a percentage of total provisions towards gross NPAs as at the dated indicated
plus outstanding balance of technical written off accounts as at the date indicated divided by the sum of gross NPAs plus
outstanding balance of technical written off accounts as at the date indicated.
(7)
Yield on Average Interest-Earning Advances is a non-GAAP financial measure and is computed as ratio of interest earned
on advances to average advances net of provisions for NPAs calculated as the average of the opening balance at the start
of the relevant period/fiscal year and the closing balance as at quarter end for all quarters in the relevant period/fiscal year.
(8)
Not annualized.
For further details, see “Selected Statistical Information” on page 280.
Auditor Nil
qualifications which
have not been given
effect to in the
Restated Financial
Information
Summary table of A summary of outstanding litigation proceedings involving our Bank, Promoters, Directors and Group Entities
outstanding (having a material impact on our Bank) as of the date of this Red Herring Prospectus is provided below:
litigations
Category of Criminal Tax Statutory or Disciplinary actions Material Aggregate
individuals / proceedings proceedings regulatory by SEBI or Stock civil amount
entities proceedings Exchanges against litigation involved (₹
our Promoters in million)(1)
Bank
By the Bank 862# NA NA NA 1 136.24
Against the Bank 1 13 5 NA Nil 288.67
Directors (excluding Kadambelil Paul Thomas)
By the Directors Nil NA NA NA Nil Nil
Against the Nil Nil Nil NA Nil Nil
Directors
Kadambelil Paul Thomas
By Kadambelil Nil NA NA NA Nil Nil
Paul Thomas
Against Nil Nil Nil Nil(2) Nil Nil
Kadambelil Paul
Thomas
ESAF Financial Holdings Private Limited
By ESAF Financial Nil NA NA NA Nil Nil
Holdings Private
Limited
Against ESAF Nil 9 2 Nil Nil 271.40
Financial Holdings
Private Limited
For further details of the outstanding litigation proceedings, see “Outstanding Litigation and Material
Developments” on page 420.
Notes:
(1)
To the extent ascertainable and quantifiable. As at June 30, 2023, the Bank has not made any provisions and contingent
liabilities for outstanding litigation, except for with respect to fraud cases, where the Bank has made provisions for all
amount related to such fraud cases. The contingent liabilities of the Bank as a percentage of its net worth as of June 30,
2023, is 0.10%.
(2)
Excludes directions issued by the RBI to our Bank in respect of the office of Kadambelil Paul Thomas.
# Includes 729 cases filed by our Bank for alleged violation of Section 138 of the Negotiable Instruments Act,1881 and 85
police complaints filed by our Bank under the IPC.

Material litigation involving our Group Entities

As of the date of this Red Herring Prospectus, there are no outstanding litigation involving our Group Entities which
has a material impact on our Bank.
Risk Factors The top ten risk factors are set out below:

1. As at June 30, 2023 and March 31, 2023, 2022 and 2021, 74.70%, 75.04%, 81.16% and 84.80%, respectively,
of our advances under management, which is gross advances plus advances originated and transferred under
securitization, assignment and inter-bank participation certificates for which we continue to hold collection
responsibilities (“Advances Under Management” or “AUM”) were Micro Loans. As at June 30, 2023 and
March 31, 2023, 56.52% and 63.66%, respectively, of our AUM were Microfinance Loans and 18.18% and
11.38%, respectively, of our AUM were Other Micro Loans. Any decrease in demand for our Micro Loans
could adversely affect our business, financial condition, results of operations and cash flows.

2. As at June 30, 2023, and March 31, 2023, 2022 and 2021, 75.15%, 75.35%, 83.59% and 85.50% of our
advances (net of provisions) were unsecured advances, respectively. If we are unable to recover such advances
in a timely manner or at all, our financial condition, results of operations and cash flows may be adversely
affected.

3. We could be subject to various sanctions and penalties by the Reserve Bank of India (RBI) for failing to comply
with the requirement to list the Equity Shares on a stock exchange in India before July 31, 2021.

24
 4. Our business is concentrated in Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Telangana and the Union
Territory of Puducherry, particularly in the states of Kerala and Tamil Nadu. Any adverse change in the
economy of those states, particularly in the states of Kerala and Tamil Nadu, could have an adverse effect on
our financial condition, results of operations and cash flows.

5. As at March 31, 2023, we were in non-compliance with 17 out of the 272 Risk Based Supervision Tranche III
requirements and if the Reserve Bank of India imposes penalties on us for this non-compliance, it could
adversely affect our reputation, business, financial condition, results of operations and cash flows.

6. We are subject to inspections by the Reserve Bank of India. Inspection by the RBI is a regular exercise for all
banks and financial institutions. The RBI and external auditors appointed by the RBI have observed various
non-compliances by us in the past and have required us to, among other things, take corrective actions and pay
compensation. We are currently in non-compliance with certain major observations of the RBI, which we are
in the process of rectifying. Any significant deficiencies identified by the RBI in a final inspection report or
other observations made that we are unable to rectify to the RBI’s satisfaction could lead to sanctions and
penalties being imposed by the RBI on our Bank, which could materially and adversely affect our reputation,
business, financial condition, results of operations and cash flows.

7. The Reserve Bank of India has in the past sought clarifications on acquisition of Equity Shares by ESAF
Swasraya Multi-State Agro Co-operative Society Limited, a member of our Promoter Group and one of the
Group Entities, and Lahanti Lastmile Services Private Limited, one of the Group Entities. We cannot assure
you that our holding structure will not be subject to additional scrutiny by the RBI in the future.

8. Certain directions have been issued by the Reserve Bank of India to our Bank in respect of the office of
Kadambelil Paul Thomas, the Managing Director, Chief Executive Officer and one of our promoters. We
cannot assure you that our Bank and Kadambelil Paul Thomas will not be subject to issuance of further
directions by the RBI in future, which could have an adverse reputational effect on our business and operations.

9. The Insurance Regulatory and Development Authority of India and SEBI have issued orders to two of our
Selling Shareholders, namely, PNB MetLife and Bajaj Allianz, directing them to pay certain penalties and
imposing certain restrictions on them. While they have complied with the said orders, there is no assurance
that the IRDAI or SEBI will not take any further action against PNB MetLife and Bajaj Allianz and any such
action could adversely affect our reputation.

10. Our Bank will not receive any proceeds from the Offer for Sale.

For details of the risks applicable to us, see “Risk Factors” on page 35.
Summary table of The following is a summary table of our contingent liabilities as at June 30, 2023, as per AS 29 – Provisions,
contingent liabilities Contingent Liabilities and Contingent Assets:

(₹ in million)
Contingent Liabilities As at June 30, 2023
Guarantees given on behalf of constituents in India 14.03
Other items for which the Bank is contingently liable 5.00
Total 19.03

For details of the contingent liabilities of our Bank as per AS 29 – Provisions, Contingent Liabilities and Contingent
Assets, see “Restated Financial Information – Note 19-B-7” on page 363.
Summary of related We have entered into certain transactions with related parties for the three months period ended June 30, 2023 and
party transactions June 30, 2022 and the Financial Years ended March 31, 2023, March 31, 2022 and March 31, 2021 whose arithmetic
aggregated absolute total amounts to ₹61.29 million and ₹36.09 million and ₹364.97 million, ₹2,908.46 million and
₹3,140.85 million, respectively, which represented 0.62% and 0.49% and 1.16%, 13.54% and 17.76%, respectively
of our total revenue.

The details of related party transactions of our Bank for the three months period ended June 30, 2023 and June 30,
2022 and for the fiscal years March 31, 2023, 2022 and 2021 as per AS 18 – Related Party Disclosures read with
SEBI ICDR Regulations, are set forth in the table below:
(₹ in million)
Nature of Related Party For the For the For the For the For the
Transaction three three financial financial financial
months months year ended year ended year ended
ended June ended March 31, March 31, March 31,
30, June 30, 2023 2022 2021
2023 2022
Liabilities
Term Deposit ESCO NA NA NA NA 90.00
placed ESAF Foundation - 1.50 31.50 6.10 -
LLMS NA NA NA NA 22.00
Kadambelil Paul 0.12 - - - 4.00
Thomas
Emy Acha Paul 0.30 - 0.50 0.50 -
Alok Paul Thomas 0.10 - - - -
Beena George 0.03 - 1.05 0.20 0.10

25
 Cedar Retail - - - 5.00 80.00
EFHL 5.00 - - 724.20 -
Term Deposit EFHL - - - 1,089.20 -
Matured Cedar Retail - 5.00 5.00 - 117.50
Kadambelil Paul - - - 2.90 -
Thomas
Beena George - - 0.10 0.10 0.20
ESAF Foundation - 3.00 13.00 3.60 -
Emy Acha Paul - - 0.50 0.70 -
LLMS NA NA NA NA 5.00
Transactions in ESCO NA NA NA NA 1.00
Demand Deposit Cedar Retail 1.16 (21.27) 9.36 24.30 (10.10)
(net) ESAF Foundation (0.20) * * * (0.90)
EFHL (9.33) (3.81) 9.88 0.40 (12.60)
LLMS NA NA NA NA 22.60
Lahanti Homes - - - (1.90) 1.90
Prachodhan 0.57 (0.06) 0.10 0.10 0.40
ESAF Producer - 0.03 - - -
Company
Transactions in Kadambelil Paul 1.76 1.91 1.39 2.80 (3.70)
Savings Deposit Thomas
(net) Mereena Paul 1.00 0.40 0.81 3.50 (1.70)
ESCO NA NA NA NA (130.30)
Emy Acha Paul (0.80) (0.07) 0.88 0.10 0.10
Alok Paul Thomas (0.10) * 0.08 * *
ESAF Foundation (6.19) 3.60 13.79 29.50 8.50
Prachodhan 4.31 (4.19) (1.64) (4.80) 9.80
Abhishek Joe Paul - * * * *
Ashish Krish Paul - * * * *
Beena George 1.08 0.27 * (0.30) 0.20
ESAF Producer - - * (0.10) 0.20
Company
Interest accrued and ESCO NA NA NA NA 27.50
due on Deposits Cedar Retail - 0.02 * 0.10 0.50
EFHL 0.77 0.56 2.26 49.40 52.10
ESAF Foundation 1.94 1.33 6.26 4.90 3.20
LLMS NA NA NA NA 2.40
Kadambelil Paul 0.18 0.17 0.67 0.80 0.70
Thomas
Mereena Paul 0.10 0.06 0.27 0.10 0.10
Emy Acha Paul * 0.01 0.03 0.10 0.10
Alok Paul Thomas * * * * *
Abhishek Joe Paul - - * * *
Ashish Krish Paul - - * * *
Beena George * 0.02 0.09 * *
Prachodhan 0.07 0.04 0.32 0.80 0.60
Interest Accrued & ESCO NA NA NA NA 62.40
Payable on PDI
Interest Accrued & ESCO NA NA NA NA 95.40
Payable on Sub
Debt
Interest Accrued & EFHL 5.61 5.71 22.50 0.10 -
Payable on Sub
Debt
Issue of Equity Mereena Paul - - - - 0.30
Shares Emy Acha Paul - - - - 0.10
Alok Paul Thomas - - - - 0.10
Beena George - - - - 0.40
Share premium Mereena Paul - - - - 2.20
Emy Acha Paul - - - - 0.90
Alok Paul Thomas - - - - 0.90
Beena George - - - - 2.60
Issue of Sub debt EFHL - - - 200.00 -
Contingent Liability
Bank Guarantee ESAF Foundation - - (1.50) 4.50 -
(Given/ Closed)
Assets
Advances EFHL - - - 215.80 11.00
Beena George - - - - 1.40
Advances repaid Cedar Retail - - - - 10.30
EFHL - - - 324.00 -

26
 Beena George - 0.30 - - 6.20
Rent Deposit repaid Kadambelil Paul - - - - 0.70
Thomas
Expenses
Rent paid Lahanti Homes 6.03 6.03 24.12 21.00 21.00
ESAF Foundation 0.06 0.06 0.20 0.20 0.20
Interest paid on ESCO NA NA NA NA 27.50
deposits Cedar Retail - 0.02 * 0.10 0.50
EFHL 0.77 0.56 2.26 49.40 52.10
ESAF Foundation 1.94 1.33 6.26 4.90 3.20
LLMS NA NA NA NA 2.40
Kadambelil Paul 0.18 0.17 0.67 0.80 0.70
Thomas
Mereena Paul 0.10 0.06 0.10 0.10 0.10
Emy Acha Paul * 0.01 0.10 0.10 0.10
Alok Paul Thomas * * * * *
Abhishek Joe Paul - - * * *
Ashish Krish Paul - - * * *
Beena George * 0.02 0.09 * *
Prachodhan 0.07 0.04 0.32 0.80 0.60
Interest paid on PDI ESCO NA NA NA NA 62.40
Interest paid on Sub ESCO NA NA NA NA 95.40
Debt
Gift and Conference EFHL 5.61 5.71
kit 22.50 0.10 -
BC Servicer Fee ESCO NA NA NA NA 1,950.30
LLMS NA NA NA NA 184.70
Corporate Facility ESCO NA NA NA NA 124.60
Management
service
Remuneration and Kadambelil Paul 6.58 2.33 31.30 24.50 14.10
Sitting Fees Thomas
Reimbursement of Kadambelil Paul 0.04 0.22 2.30 - 1.20
expenses Thomas
Contribution ESAF Foundation - - 42.50 87.60 32.60
towards Corporate Prachodhan - - 30.10 - 39.00
Responsibility
expense
Royalty Expense ESAF Foundation 32.43 25.00 84.95 14.36 26.85
Income
Interest received on Beena George - * 0.00 - 0.60
Advances Cedar Retail - - - - *
EFHL - - - 17.80 14.40
Figures in brackets indicate net outflow
* Amounts are below ₹0.05 million
Note: The Bank has issued a bank guarantee to ESAF Foundation amounting to ₹12.38 million as on June 30, 2023. Please
note that such issuance of bank guarantee does not have any risk on recoverability or on the financials of the Bank as such
guarantee is secured by a deposit maintained by ESAF Foundation with the Bank.
The remuneration to Key Managerial Personnel does not include the provisions made for gratuity and leave
benefits, as they are determined on an actuarial basis for the Bank as a whole.

For details of the related party transactions, see “Restated Financial Information – Related Party Transactions –
Note 19-B-7” on page 363.
Details of all Our Promoters, members of our Promoter Group, the directors of ESAF Financial Holdings Private Limited, our
financing Directors, Selling Shareholders and their relatives have not financed the purchase by any person of securities of our
arrangements Bank other than in the normal course of the business of the financing entity during the period of six months
whereby the immediately preceding the date of the Draft Red Herring Prospectus and this Red Herring Prospectus.
Promoters, members
of the Promoter
Group, the directors
of ESAF Financial
Holdings Private
Limited, our
Directors, Selling
Shareholders and
their relatives have
financed the
purchase by any
other person of
securities of the
Bank other than in
the normal course of

27
the business of the
financing entity
during the period of
six months
immediately
preceding the date of
the Draft Red
Herring Prospectus
and this Red Herring
Prospectus
Weighted average Our Promoters and Selling Shareholders have not acquired any Equity Shares in the one year preceding the date of
price at which the this Red Herring Prospectus.
Equity Shares were
acquired by our
Promoters or Selling
Shareholders, in the
one year preceding
the date of this Red
Herring Prospectus
Weighted average Our Promoters and Selling Shareholders have not acquired any Equity Shares in the 18 months preceding the date
price at which the of this Red Herring Prospectus.
Equity Shares were
acquired by our
Promoters or Selling
Shareholders, in the
18 months preceding
the date of this Red
Herring Prospectus
Weighted average The weighted average price at which the Equity Shares were acquired by our Promoters and the Selling Shareholders
price at which the in the three years preceding the date of this Red Herring Prospectus is as follows:
Equity Shares were
acquired by our Name Number of Equity Shares Weighted average price of
Promoters or Selling acquired in the last three acquisition per Equity
Shareholders, in the years Share*(in ₹)
three years Promoters
preceding the date of ESAF Financial Holdings Private Limited^ Nil Nil
this Red Herring Kadambelil Paul Thomas Nil Nil
Prospectus Selling Shareholders (other than Promoter Selling Shareholder)
PNB MetLife Nil Nil
Bajaj Allianz Life Nil Nil
* As certified by A. John Moris & Co., Chartered Accountants pursuant to their certificate dated October 28, 2023
^ Also the Selling Shareholder
Weighted average Weighted average cost of acquisition of all Equity Shares transacted in one year, eighteen months and three years
cost of acquisition of preceding the date of this Red Herring Prospectus:
all Equity Shares
transacted in one Period Weighted average Upper end of the Range of
year, eighteen cost of acquisition price band (₹[●]) acquisition price:
months and three per Equity Share is ‘X’ times the Lowest price –
years preceding the (in ₹) weighted average Highest price (in ₹)*
date of this Red cost of acquisition
Herring Prospectus Last one year preceding the date of this Red Nil NA NA
Herring Prospectus
Last 18 months preceding the date of this Red Nil NA NA
Herring Prospectus
Last three years preceding the date of this Red 75 [●] 75.00-75.00
Herring Prospectus
*
As certified by A. John Moris & Co., Chartered Accountants pursuant to their certificate dated October 28, 2023
Details of price at Except as stated below, there have been no specified securities that were acquired in the last three years preceding
which Equity Shares the date of this Red Herring Prospectus, by our Promoters, members of the Promoter Group, Selling Shareholders
were acquired in the and Shareholders with right to nominate directors or other rights. The details of the price at which these acquisitions
last three years were undertaken are stated below:
preceding the date of
this Red Herring Name of the Date of Number of Face value per Acquisition price
Prospectus by our acquirer/shareholder acquisition of Equity Shares Equity Shares per Equity
Promoters, the Equity Shares acquired* Shares (in ₹)*
Promoter Group, the Promoters
Selling Shareholder ESAF Financial Holdings Nil Nil Nil Nil
and the shareholders Private Limited
with rights to Kadambelil Paul Thomas Nil Nil Nil Nil
nominate directors Promoter Group
or have other rights ESMACO March 31, 2021 1,066,666 10 75
Bosco Joseph March 31, 2021 40,000 10 75
Beena George March 31, 2021 40,000 10 75

28
 Mereena Paul March 31, 2021 33,333 10 75
Leo Joseph March 31, 2021 33,333 10 75
Alok Thomas Paul March 31, 2021 13,333 10 75
Emy Acha Paul March 31, 2021 13,333 10 75
Savio Joseph March 31, 2021 13,333 10 75
Selling Shareholders
ESAF Financial Holdings Nil Nil Nil Nil
Private Limited
PNB MetLife India Insurance Nil Nil Nil Nil
Company Limited
Bajaj Allianz Life Insurance Nil Nil Nil Nil
Company Limited
Shareholders with special rights (other than the Promoters and members of the Promoter Group)
NA Nil Nil Nil Nil
#
As certified by A. John Moris & Co., Chartered Accountants pursuant to their certificate dated October 28, 2023
Average cost of The average cost of acquisition of Equity Shares of our Promoters is as follows:
acquisition of Equity
Shares of our Name of the Promoter Number of Equity Shares as Average cost of acquisition
Promoters and the on June 30, 2023 per Equity Share# (in ₹)
Selling Shareholders ESAF Financial Holdings Private Limited^ 280,758,396* 10.11
Kadambelil Paul Thomas 31,186,785 10.16
* 280,758,391 Equity Shares are held by ESAF Financial Holdings Private Limited and one Equity Share each is held by
Mereena Paul, Alok Thomas Paul, Emy Acha Paul, George Kalaparambil John and Beena George, as nominees on behalf
of ESAF Financial Holdings Private Limited, who is the beneficial owner of such Equity Shares.
#
As certified by A. John Moris & Co., Chartered Accountants pursuant to their certificate dated October 28, 2023
^ Also the Selling Shareholder

The average cost of acquisition of Equity Shares of the Other Selling Shareholders is as follows:

Name of the Selling Shareholders Number of Equity Shares as Average cost of acquisition
on the date of this Red per Equity Share* (in ₹)
Herring Prospectus
PNB MetLife 21,346,993 40.07
Bajaj Allianz Life 17,469,428 40.07
* As certified by A. John Moris & Co., Chartered Accountants pursuant to their certificate dated October 28, 2023
Size of the pre-IPO Our Bank is not contemplating a pre-IPO placement.
placement and
allottees, upon
completion of the
placement
Any issuance of Our Bank has not issued any Equity Shares in the last one year from the date of this Red Herring Prospectus, for
Equity Shares in the consideration other than cash.
last one year for
consideration other For further details, please see “Capital Structure” on page 109.
than cash
Any Our Bank has not split or consolidated the face value of the Equity Shares in the last one year from the date of this
split/consolidation of Red Herring Prospectus.
Equity Shares in the For further details, please see “Capital Structure” on page 109.
last one year
Exemption from Our Bank filed an application dated May 18, 2023 (“Exemption Application”) under Regulation 300(1)(c) of the
complying with any SEBI ICDR Regulations to SEBI seeking relaxation from disclosing Dia Vikas Capital Private Limited (“Dia
provisions of Vikas”), a pure financial investor in ESAF Financial Holdings Private Limited holding 19.99% of the paid-up equity
securities laws, if share capital of ESAF Financial Holdings Private Limited and also holding 1,804,850, 1% compulsorily convertible
any, granted by preference shares of face value of ₹100 each of ESAF Financial Holdings Private Limited, as a part of the “promoter
SEBI group” of the Bank in accordance with the SEBI ICDR Regulations on the following grounds: (i) under the first
proviso to Regulation 2(1)(pp) of the SEBI ICDR Regulations, a financial institution, scheduled bank, foreign
portfolio investor other than individuals, corporate bodies and family offices, mutual fund, venture capital fund,
alternative investment fund, foreign venture capital investor, insurance company registered with the IRDAI or any
other category as specified by SEBI from time to time are not deemed to be part of the promoter group merely by
virtue of the fact that 20% or more of the equity share capital of the promoter of the issuer is held by such person
or entity. Our Bank sought such exemption on the grounds that a financial investor such as Dia Vikas should not be
considered to form part of promoter group of our Bank merely by virtue of holding more than 20% of the paid-up
capital of ESAF Financial Holdings Private Limited on a fully diluted basis; (ii) Dia Vikas has no control or special
rights over the Bank either as a shareholder of ESAF Financial Holdings Private Limited or by virtue of the EFHPL
SHA or the charter documents of ESAF Financial Holdings Private Limited; (iii) Dia Vikas has not held any shares
in the Bank, or had any other rights in the Bank at any point in the past, as a result of which, there has been no
identifiable relation between the Bank and Dia Vikas at any point of time; and (iv) Dia Vikas does not exercise any
control or influence over the Bank, nor is Dia Vikas involved in the day-to-day operations or administrative
functions of the Bank. Our Bank pursuant to the Exemption Application sought exemption from (i) naming Dia
Vikas as promoter group in the Offer Documents; and (ii) providing any confirmations as required to be provided
by an issuer’s promoter group under the SEBI ICDR Regulations in respect of Dia Vikas in the Offer Documents.
The Exemption Application has been granted by SEBI by its approval letter dated June 23, 2023.

29
 CERTAIN CONVENTIONS, PRESENTATION OF FINANCIAL, INDUSTRY AND MARKET DATA AND
CURRENCY OF PRESENTATION

Certain Conventions

All references in this Red Herring Prospectus to “India” are to the Republic of India. All references to the “Government”,
“Indian Government”, “GOI”, “Central Government” or the “State Government” are to the Government of India, central or
state, as applicable.

All references to the “US”, “U.S.” “USA” or “United States” are to the United States of America and its territories and
possession.

All references to time in this Red Herring Prospectus are to Indian Standard Time (“IST”) and unless indicated otherwise, all
references to a year in this Red Herring Prospectus are to a calendar year.

Unless stated otherwise, all references to page numbers in this Red Herring Prospectus are to the page numbers of this Red
Herring Prospectus.

Financial Data

Unless stated otherwise or the context otherwise requires, the financial data in this Red Herring Prospectus is derived from the
restated statements of assets and liabilities as at June 30, 2023 and June 30, 2022, and as at March 31, 2023, March 31, 2022
and March 31, 2021, the restated profit and loss accounts and restated statements of cash flows for the three months period
ended June 30, 2023 and June 30, 2022 and for the years ended March 31, 2023, March 31, 2022 and March 31, 2021 and the
summary statement of significant accounting policies, and other explanatory notes prepared by the Bank in terms of the
requirements of Section 26 of Part I of Chapter III of the Companies Act, 2013, as amended, the Securities and Exchange Board
of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended and the Guidance Note on Reports on
Company Prospectuses (Revised 2019) issued by the Institute of Chartered Accountants of India, as amended from time to time.
For further information on the Bank’s financial information, see “Financial Statements” on page 304. Certain other financial
information in relation to ESAF Financial Holdings Private Limited and Group Entities are derived from their respective audited
financial statements.

Our Bank’s Financial Year commences on April 1 and ends on March 31 of the next year. Accordingly, all references to a
particular Financial Year, unless stated otherwise, are to the 12-month period ended on March 31 of that year.

There are significant differences between Indian GAAP, Ind AS, U.S. GAAP and IFRS. The Restated Financial Information
included in this Red Herring Prospectus have been compiled by the management from the audited financial statements as at
and for the three months period ended June 30, 2023 and June 30, 2022 and as at for the years ended March 31, 2023, 2022 and
2021, prepared by the Bank in accordance with the provisions of Section 29 of the Banking Regulation Act 1949, accounting
principles generally accepted in India including accounting standards prescribed under Section 133 of the Companies Act, 2013,
read with the Companies (Accounts) Rules, 2014 to the extent applicable and other relevant provisions of the Companies Act,
2013 and current practices prevailing within the Banking industry in India and the requirements prescribed under the Banking
Regulation Act, 1949, the circulars and guidelines issued by RBI from time to time. Our Bank has not attempted to explain
those differences or quantify their impact on the financial data included in this Red Herring Prospectus and it is urged that you
consult your own advisors regarding such differences and their impact on our Bank’s financial data. For risks in this regard, see
“Risk Factors – Banking companies in India, including us, may be required to report financial statements as per Ind AS in the
future. Differences exist between Ind AS and Indian GAAP. In the future, if we are required to prepare our financial statements
in accordance with Ind AS, there is a possibility that our financial condition, results of operations and cash flows could be
worse than if we prepared our financial statements in accordance with Indian GAAP” and “Risk Factor – Significant differences
exist between Indian GAAP and other accounting principles, such as U.S. GAAP and IFRS, which investors outside India may
be more familiar with and may consider material to their assessment of our financial condition, results of operations and cash
flows” on pages 78 and 87, respectively. Accordingly, the degree to which the financial information included in this Red Herring
Prospectus will provide meaningful information is entirely dependent on the reader’s level of familiarity with Indian accounting
policies and practices, the Companies Act and the SEBI ICDR Regulations. Any reliance by persons not familiar with Indian
accounting policies and practices on the financial disclosures presented in this Red Herring Prospectus should accordingly be
limited. Our Bank does not provide reconciliation of its financial information to IFRS or U.S. GAAP. Unless the context
otherwise indicates, any percentage or amounts, with respect to financial information of our Bank in this Red Herring Prospectus
have been derived from the Restated Financial Information.

In this Red Herring Prospectus, any discrepancies in any table between the total and the sums of the amounts listed are due to
rounding off. All figures in decimals have been rounded off to the second decimal and all the percentage figures have been
rounded off to two decimal places.

Non-GAAP Financial Measures

Certain non-GAAP financial measures and certain other statistical and operational information relating to our operations and
financial performance have been included in this section and elsewhere in this Red Herring Prospectus. We compute and
disclose such non-GAAP financial measures and such other statistical information relating to our operations and financial

30
performance as we consider such information to be useful measures of our business and financial performance, and because
such measures are frequently used by securities analysts, investors and others to evaluate the operational performance of
financial services businesses, many of which provide such non-GAAP financial measures and other statistical and operational
information when reporting their financial results. Such non-GAAP financial measures and other statistical and operational
information are not measures of operating performance or liquidity defined by generally accepted accounting principles. These
non-GAAP financial measures and other statistical and other information relating to our operations and financial performance
may not be computed on the basis of any standard methodology that is applicable across the industry and therefore may not be
comparable to non-GAAP financial measures and statistical information of similar nomenclature that may be computed and
presented by other banks in India or elsewhere. These non-GAAP financial measures and other statistical and operational
information have been reconciled to their nearest GAAP financial measure in “Risk Factors” “Our Business”, “Selected
Statistical Information”, “Other Financial Information” and “Capitalisation Statement” on pages 35, 190, 280, 370 and 416,
respectively.

Currency and Units of Presentation

All references to:

• “Rupees” or “₹” or “INR” or “Rs.” are to Indian Rupee, the official currency of the Republic of India; and

• “USD” or “US$” or “$” are to United States Dollar, the official currency of the United States of America.

Our Bank has presented certain numerical information in this Red Herring Prospectus in “lakh”, “million” and “crores” units
or in whole numbers where the numbers have been too small to represent in such units. One million represents 1,000,000, one
billion represents 1,000,000,000 and one trillion represents 1,000,000,000,000. One lakh represents 100,000 and one crore
represents 10,000,000.

Figures sourced from third-party industry sources may be expressed in denominations other than millions or may be rounded
off to other than two decimal points in the respective sources, and such figures have been expressed in this Red Herring
Prospectus in such denominations or rounded-off to such number of decimal points as provided in such respective sources.

Exchange Rates

This Red Herring Prospectus contains conversion of certain other currency amounts into Indian Rupees that have been presented
solely to comply with the SEBI ICDR Regulations. These conversions should not be construed as a representation that these
currency amounts could have been, or can be converted into Indian Rupees, at any particular rate or at all.

The following table sets forth, as at the indicated, information with respect to the exchange rate between the Rupee and USD
(in Rupees per USD):

Currency As at*
June 30, 2023 June 30, 2022 March 31, 2023 March 31, 2022 March 31, 2021
1 USD 82.04 78.94 82.22 75.81 73.50
Source: RBI reference rate and www.fbil.org.in.
* In case March 31 of any of the respective years is a public holiday, the previous working day not being a public holiday has been considered.

Industry and Market Data

Unless stated otherwise, all information pertaining to the industry in which our Bank operates in and market data used in this
Red Herring Prospectus has been obtained or derived from the CRISIL MI&A Report and publicly available information as
well as other industry publications and sources. The CRISIL MI&A Report titled “Industry Report on Small Finance Banks in
India” has been commissioned by and paid for by our Bank pursuant to an agreement with CRISIL MI&A dated August 17,
2022, as amended pursuant to an addendum dated March 13, 2023, exclusively for the purposes of confirming our understanding
of the industry in which the Bank operates, in connection with the Offer. The CRISIL MI&A Report is available on the website
of our Bank at https://www.esafbank.com/investor-relations-info/ from the date of this Red Herring Prospectus till the Bid/
Offer Closing Date.

CRISIL MI&A is an independent agency which has no relationship with our Bank, our Promoters, any of our Directors, KMPs,
Senior Management Personnel or the Book Running Lead Managers.

This Red Herring Prospectus contains data and statistics from the CRISIL MI&A Report which is subject to the following
disclaimer:

“CRISIL Market Intelligence and Analytics (MI&A), a division of CRISIL Limited (CRISIL) has taken due care and caution in
preparing this report (Report) based on the Information obtained by CRISIL from sources which it considers reliable (Data).
This Report is not a recommendation to invest / disinvest in any entity covered in the Report and no part of this Report should
be construed as an expert advice or investment advice or any form of investment banking within the meaning of any law or
regulation. Without limiting the generality of the foregoing, nothing in the Report is to be construed as CRISIL providing or
intending to provide any services in jurisdictions where CRISIL does not have the necessary permission and/or registration to
carry out its business activities in this regard. ESAF Small Finance Bank Limited will be responsible for ensuring compliances
31
and consequences of non-compliances for use of the Report or part thereof outside India. CRISIL MI&A operates independently
of, and does not have access to information obtained by CRISIL Ratings Limited which may, in their regular operations, obtain
information of a confidential nature. The views expressed in this Report are that of CRISIL MI&A and not of CRISIL Ratings
Limited. No part of this Report may be published/reproduced in any form without CRISIL’s prior written approval.”

For risks in this regard, see “Risk Factors – Statistical and industry data in this Red Herring Prospectus are derived from the
CRISIL MI&A Report commissioned and paid for by us for such purpose. The CRISIL MI&A Report is not exhaustive and is
based on certain assumptions, parameters and conditions. The data and statistics in the CRISIL MI&A Report may be
inaccurate, incomplete or unreliable” on page 89.

The extent to which the market and industry data used in this Red Herring Prospectus is meaningful depends on the reader’s
familiarity with and understanding of the methodologies used in compiling such data. There are no standard data gathering
methodologies in the industry in which the business of our Bank is conducted, and methodologies and assumptions may vary
widely among different industry sources. Industry publications generally state that the information contained in such
publications has been obtained from publicly available documents from various sources believed to be reliable, but their
accuracy and completeness are not guaranteed and their reliability cannot be assured. The data used in these sources may have
been reclassified by us for the purposes of presentation. Data from these sources may also not be comparable. Such data involves
risks, uncertainties and numerous assumptions and is subject to change based on various factors, including those disclosed in
“Risk Factors-Statistical and industry data in this Red Herring Prospectus are derived from the CRISIL Research MI&A Report
commissioned and paid for by us for such purpose. The CRISIL Research MI&A Report is not exhaustive and is based on
certain assumptions, parameters and conditions. The data and statistics in the CRISIL Research MI&A Report may be
inaccurate, incomplete or unreliable.” on page 89. Accordingly, no investment decision should be made solely on the
information based on or derived from the CRISIL MI&A Report.

In accordance with the SEBI ICDR Regulations, “Basis for Offer Price” on page 130 includes information relating to our peer
group companies that is derived from the CRISIL MI&A Report. Accordingly, no investment decision should be made solely
on the basis of such information.

32
 FORWARD-LOOKING STATEMENTS

This Red Herring Prospectus contains certain “forward-looking statements”. All statements contained in this Red Herring
Prospectus that are not statements of historical fact constitute “forward-looking statements”. All statements regarding our
expected financial condition and results of operations, business, plans and prospects are “forward-looking statements”. These
forward-looking statements include statements as to our business strategy, plans, revenue and profitability (including, without
limitation, any financial or operating projections or forecasts) and other matters discussed in this Red Herring Prospectus that
are not historical facts. However, these are not the exclusive means of identifying forward-looking statements. These forward-
looking statements generally can be identified by words or phrases such as “aim”, “anticipate”, “believe”, “can”, “could”,
“expect”, “estimate”, “intend”, “may”, “likely to”, “seek to”, “shall”, “objective”, “plan”, “project”, “propose”, “will”, “will
continue”, “will pursue” or other words or phrases of similar import. Similarly, statements that describe our strategies,
objectives, plans or goals are also forward-looking statements.

All forward-looking statements whether made by us or any third parties in this Red Herring Prospectus are based on our current
plans, estimates, presumptions and expectations and are subject to risks, uncertainties and assumptions about us that could cause
actual results to differ materially from those contemplated by the relevant forward-looking statement, including but not limited
to, regulatory changes pertaining to the banking industry and our ability to respond to them, our ability to successfully
implement our strategy, our growth and expansion, technological changes, our exposure to market risks, general economic and
political conditions which have an impact on our business activities or investments, the monetary and fiscal policies of India,
inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices, the
performance of the financial markets in India and globally, changes in domestic laws, regulations and taxes and changes in
competition in the banking/ microfinance industry and incidence of any natural calamities and/or acts of violence. Important
factors that could cause actual results to differ materially from our expectations include, but are not limited to, the following:

• As at June 30, 2023 and March 31, 2023, 2022 and 2021, 74.70%, 75.04%, 81.16% and 84.80%, respectively, of our
advances under management, which is gross advances plus advances originated and transferred under securitization,
assignment and inter-bank participation certificates for which we continue to hold collection responsibilities
(“Advances Under Management” or “AUM”) were Micro Loans. As at June 30, 2023 and March 31, 2023, 56.52%
and 63.66%, respectively, of our AUM were Microfinance Loans and 18.18% and 11.38%, respectively, of our AUM
were Other Micro Loans. Any decrease in demand for our Micro Loans could adversely affect our business, financial
condition, results of operations and cash flows.

• As at June 30, 2023, and March 31, 2023, 2022 and 2021, 75.15%, 75.35%, 83.59% and 85.50% of our advances (net
of provisions) were unsecured advances, respectively. If we are unable to recover such advances in a timely manner
or at all, our financial condition, results of operations and cash flows may be adversely affected.

• We could be subject to various sanctions and penalties by the Reserve Bank of India for failing to comply with the
requirement to list the Equity Shares on a stock exchange in India before July 31, 2021.

• Our business is concentrated in Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Telangana and the Union Territory
of Puducherry (collectively, “South India”), particularly in the states of Kerala and Tamil Nadu. Any adverse change
in the economy of South India, particularly in the states of Kerala and Tamil Nadu, could have an adverse effect on
our financial condition, results of operations and cash flows.

• As at March 31, 2023, we were in non-compliance with 17 out of the 272 Risk Based Supervision Tranche III
requirements and if the Reserve Bank of India imposes penalties on us for this non-compliance, it could adversely
affect our reputation, business, financial condition, results of operations and cash flows.

• We are subject to inspections by the Reserve Bank of India. Inspection by the RBI is a regular exercise for all banks
and financial institutions. The RBI and external auditors appointed by the RBI have observed various non-compliances
by us in the past and have required us to, among other things, take corrective actions and pay compensation. We are
currently in non-compliance with certain major observations of the RBI, which we are in the process of rectifying.
Any significant deficiencies identified by the RBI in a final inspection report or other observations made that we are
unable to rectify to the RBI’s satisfaction could lead to sanctions and penalties being imposed by the RBI on our Bank,
which could materially and adversely affect our reputation, business, financial condition, results of operations and
cash flows.

• The Reserve Bank of India has in the past sought clarifications on acquisition of Equity Shares by ESAF Swasraya
Multi-State Agro Co-operative Society Limited (“ESMACO”), a member of our Promoter Group and one of the Group
Entities, and Lahanti Lastmile Services Private Limited (“Lahanti”), one of the Group Entities. We cannot assure you
that our holding structure will not be subject to additional scrutiny by the RBI in the future.

• Certain directions have been issued by the Reserve Bank of India to our Bank in respect of the office of Kadambelil
Paul Thomas, the Managing Director, Chief Executive Officer and one of our promoters. We cannot assure you that
our Bank and Kadambelil Paul Thomas will not be subject to issuance of further directions by the RBI in future, which
could have an adverse reputational effect on our business and operations.

33
• The Insurance Regulatory and Development Authority of India and SEBI have issued orders to two of our Selling
Shareholders, namely, PNB MetLife and Bajaj Allianz, directing them to pay certain penalties and imposing certain
restrictions on them. While they have complied with the said orders, there is no assurance that the IRDAI or SEBI will
not take any further action against PNB MetLife and Bajaj Allianz and any such action could adversely affect our
reputation.

• Our Bank will not receive any proceeds from the Offer for Sale.

Certain information in “Industry Overview”, “Our Business” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” on pages 155, 190 and 372, respectively of this Red Herring Prospectus has been obtained
from the report titled “Industry Report on Small Finance Banks in India” dated September 2023 issued by CRISIL MI&A, which
is available at our Bank’s website at https://www.esafbank.com/investor-relations-info/.

For further discussion of factors that could cause the actual results to differ from our expectations, see “Risk Factors”, “Our
Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 35, 190
and 372, respectively. By their nature, certain market risk disclosures are only estimates and could be materially different from
what actually occurs in the future. As a result, actual future gains or losses could materially differ from those that have been
estimated and are not a guarantee of future performance.

Forward-looking statements reflect current views as of the date of this Red Herring Prospectus and are not a guarantee of future
performance. There can be no assurance to investors that the expectations reflected in these forward-looking statements will
prove to be correct. Given these uncertainties, investors are cautioned not to place undue reliance on such forward-looking
statements and not to regard such statements to be a guarantee of our future performance.

Forward-looking statements are based on our management’s belief and assumptions, which in turn are based on currently
available information. Although we believe the assumptions upon which these forward-looking statements are based on are
reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these
assumptions could be incorrect. Given these uncertainties, investors are cautioned not to place undue reliance on such forward-
looking statements and not to regard such statements as a guarantee of future performance. Neither our Bank, our Promoters,
our Directors, the Selling Shareholders, the BRLMs nor any of their respective affiliates have any obligation to update or
otherwise revise any statements reflecting circumstances arising after the date hereof or to reflect the occurrence of underlying
events, even if the underlying assumptions do not come to fruition. In accordance with the requirements of SEBI, our Bank
shall ensure that investors in India are informed of material developments from the date of filing of this Red Herring Prospectus
with the RoC until the time of the grant of listing and trading permission by the Stock Exchanges for this Offer. Each of the
Selling Shareholders shall ensure that they will keep our Bank and the BRLMs informed of all material developments pertaining
to their respective portion of the Offered Shares and itself, as a Selling Shareholder, from the date of this Red Herring Prospectus
until receipt of final listing and trading approvals by the Stock Exchanges for this Offer, that may be material in the context of
the Offer.

34
 SECTION II: RISK FACTORS

An investment in the Equity Shares involves a high degree of risk. Prospective investors should carefully consider all the
information in this Red Herring Prospectus, including the risks and uncertainties described below, before evaluating our
business and making an investment in the Equity Shares. This section should be read in conjunction with “Industry Overview”,
“Our Business”, “Selected Statistical Information”, “Financial Statements”, and “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” on pages 155, 190, 280, 304 and 372, respectively, before making an
investment decision in relation to the Equity Shares.

The risks and uncertainties described in this section are not the only risks that are relevant to us or the Equity Shares or the
industry and segment in which we operate. Additional risks and uncertainties not currently known to us or that we currently
believe to be immaterial may also have an adverse effect on our business, financial condition, results of operations and cash
flows. If any of the following risks or other risks that are not currently known or are now deemed immaterial actually occur,
our business, financial condition, results of operations and cash flows could be adversely affected and the trading price of the
Equity Shares could decline and you may lose all or part of your investment. The financial and other related implications of
risks concerned, wherever quantifiable, have been disclosed in the risk factors described below. However, there are certain
risk factors where such implications are not quantifiable, and hence any quantification of the underlying risks has not been
disclosed in such risk factors.

In making an investment decision, prospective investors must rely on their own examination of our Bank and the terms of the
Offer, including the merits and risks involved. You should consult your tax, financial and legal advisors about the particular
consequences to you of an investment in the Equity Shares.

The industry and market data used in this section have been derived from the CRISIL MI&A Report, which was prepared and
released by CRISIL MI&A in connection with the Offer and commissioned and paid for by us pursuant to an agreement with
CRISIL MI&A dated August 17, 2022, as amended pursuant to an addendum dated March 13, 2023. For further details on the
CRISIL MI&A Report, see “Certain Conventions, Presentation of Financial, Industry and Market Data and Currency of
Presentation – Industry and Market Data” on page 31. The CRISIL MI&A Report is available on our Bank’s website at
www.esafbank.com/investor-relations-info/.

This Red Herring Prospectus contains forward-looking statements that involve risks and uncertainties. Our results could differ
materially from such forward-looking statements as a result of certain factors, including the considerations described below
and elsewhere in this Red Herring Prospectus. See “Forward-Looking Statements” on page 33.

RISKS RELATING TO OUR BUSINESS

1. As at June 30, 2023 and March 31, 2023, 2022 and 2021, 74.70%, 75.04%, 81.16% and 84.80%, respectively, of our
advances under management, which is gross advances plus advances originated and transferred under
securitization, assignment and inter-bank participation certificates for which we continue to hold collection
responsibilities (“Advances Under Management” or “AUM”) were Micro Loans. As at June 30, 2023 and March
31, 2023, 56.52% and 63.66%, respectively, of our AUM were Microfinance Loans and 18.18% and 11.38%,
respectively, of our AUM were Other Micro Loans. Any decrease in demand for our Micro Loans could adversely
affect our business, financial condition, results of operations and cash flows.

Our business is significantly dependent on our micro loan segment, which comprises our Microfinance Loans and
Other Micro Loans (together, “Micro Loans”). Our Microfinance Loans and Other Micro Loans are provided to
individuals without being secured by collateral. In order to be given a Microfinance Loan or Other Micro Loan, an
individual must be part of a sub-group, which usually comprises two to 10 people. One to five sub-groups combine to
form a “sangam”. The sangam facilitates the repayment process and other activities among the individuals by holding
meetings at regular intervals with sangam members. Until the introduction of the Reserve Bank of India (“RBI”)
Regulatory Framework for Microfinance Loans Direction, 2022, which was effective from October 17, 2022, we
considered all of our loans to individuals who were members of a sub-group to be Micro Loans. Effective from October
17, 2022, we segregated our Micro Loans into Microfinance Loans and Other Micro Loans. A person whose annual
household income is up to ₹0.30 million is eligible for a Microfinance Loan provided that the percentage of the monthly
household income to be used for the repayment of loans (including the new loan) shall be a maximum of 50% of the
monthly household income. Household means an individual family unit, i.e., husband, wife and their unmarried
children. Persons whose household income is above ₹0.30 million can apply for Other Micro Loans. Demand for our
Micro Loans is affected by a number of factors, including changes in regulations and policies, any adverse publicity
or litigation relating to the microfinance sector and public criticism of the microfinance sector in general.

The table below sets forth certain details in relation to our Micro Loans as at the dates indicated.

Particulars As at June 30, As at March 31, As at March 31, As at March 31,

2023 2023 2022 2021
(₹ in million, except for percentages)
AUM(1) of Micro Loans [A] 128,511.97 122,548.83 100,159.62 71,452.80
Of which:
Microfinance Loans [A1] 97,239.08 103,964.49 NA NA

35
 Particulars As at June 30, As at March 31, As at March 31, As at March 31,
2023 2023 2022 2021
(₹ in million, except for percentages)
Other Micro Loans [A2] 31,272.89 18,584.34 NA NA
Total AUM [B] 172,039.68 163,312.65 123,406.91 84,259.30
AUM of Micro Loans as a percentage of total 74.70% 75.04% 81.16% 84.80%
AUM [C = A / B] (%)
Of which:
Microfinance Loans [C1 = A1/B] (%) 56.52% 63.66% NA NA
Other Micro Loans [C2 = A2/B] (%) 18.18% 11.38% NA NA
Gross Micro Loans [D] 1,02,375.62 101,441.84 98,161.91 71,343.55
Of which:
Microfinance Loans [D1] 73,591.08 83,826.42 NA NA
Other Micro Loans [D2] 28,784.54 17,615.44 NA NA
Gross Micro Loans NPAs [E] 2,124.17 3,145.47 9,254.16 5,329.90
Of which:
Microfinance Loans [E1] 2,066.00 3,141.60 NA NA
Other Micro Loans [E2] 58.17 3.87 NA NA
Gross Micro Loans NPAs as a percentage of 2.07% 3.10% 9.43% 7.47%
gross Micro Loans [F = E/D] (%)
Of which:
Microfinance Loans [F1 = E1/D] (%) 2.02% 3.10% NA NA
Other Micro Loans [E2 = E2/D2] (%) 0.06% * NA NA
Note:
(1) AUM is calculated as gross advances plus advances originated and transferred under securitization, assignment and inter-bank participation
certificates for which we continue to hold collection responsibilities (“Advances Under Management” or “AUM”).
* denotes a figure below rounding of limit.

Our Micro Loan borrowers generally have limited sources of income and credit histories, and may not have tax returns,
bank or credit card statements, statements of previous loan exposures, or other documents through which we can
accurately assess their credit worthiness. For more details, see “-We depend on the accuracy and completeness of
information about customers and counterparties and any misrepresentation, errors or incompleteness of such
information could cause our business to suffer” on page 82.

The focus of our Micro Loan business is on customers in rural and semi-urban centres. The microfinance industry
faces challenges in doing business in rural centres, including the high cost of reaching customers, potential customers’
lack of financial and product awareness and vulnerability of household’s income to local developments. For more
details in relation to how these challenges affect our Bank, see “-We face challenges in our rural–focused Microfinance
Loan business, including the high cost of reaching customers, potential customers’ lack of financial and product
awareness and vulnerability of household’s income to local developments, which could adversely affect our business,
financial condition, results of operations and cash flows” on page 43.

For further details on our Micro Loans, see “Our Business-Asset Products-Micro Loans-Microfinance Loans and Other
Micro Loans” on page 198.

For details on the microfinance sector, see “Industry Overview-Microfinance” on page 172.

Demand for our Micro Loans is affected by a number of factors, including:

• Changes in regulations and policies. For instance, the RBI, in February 2021, outlined that there is a need to
harmonise regulations governing the MFI lending industry and therefore, it is relooking at the current
regulatory framework. In recent years, as several large players converted into SFBs, the current regulations
are applicable to only NBFC-MFIs who contribute to 37% of total microfinance lending. A potential
harmonisation of regulations for microfinance lending can have a negative effect on our Bank, as we will also
be governed by the same regulations, hence, eliminating the competitive edge we currently have over NBFC-
MFIs. (Source: CRISIL MI&A Report).

• Any adverse publicity or litigation relating to the microfinance sector.

• Public criticism of the microfinance sector in general.

Any decline in the demand for our Microfinance Loans and Other Micro Loans would adversely affect our business,
financial condition, results of operations and cash flows.

2. As at June 30, 2023, and March 31, 2023, 2022 and 2021, 75.15%, 75.35%, 83.59% and 85.50% of our advances
(net of provisions) were unsecured advances, respectively. If we are unable to recover such advances in a timely
manner or at all, our financial condition, results of operations and cash flows may be adversely affected.

Our Micro Loans and some of our retail loans are unsecured and, as such, are at a higher credit risk than secured loans
because they are not supported by collateral. Since these advances are unsecured, in the event of defaults by such
36
 customers, our ability to realise the amounts due to us would be restricted to initiating legal proceedings for recovery.
There can be no guarantee as to the amount of our resources that would be utilised and the length of time it could take
to conclude such legal proceedings or for the legal proceedings to result in a favourable decision to us. For details, see
“Outstanding Litigation and Material Developments” on page 420.

The table below sets forth our unsecured advances (net of provisions) and as a percentage of our advances (net of
provisions) as at the date indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
(₹ in million, except for percentages)
Unsecured advances (net of 107,623.26 104,926.62 97,274.43 69,836.01
provisions) [A]
Advances (net of provisions) 143,215.54 139,243.31 116,370.05 81,675.86
[B]
Unsecured advances (net of 75.15% 75.35% 83.59% 85.50%
provisions) as a percentage of
advances (net of provisions)
[C = A / B] (%)

As at June 30, 2023, our provisions and contingent liabilities for litigation were nil. Any failure to recover the full
amount of principal and interest on unsecured advances given to our customers could adversely affect our financial
condition, results of operations and cash flows.

3. We could be subject to various sanctions and penalties by the Reserve Bank of India (RBI) for failing to comply
with the requirement to list the Equity Shares on a stock exchange in India before July 31, 2021.

Under the provisions of the SFB Licensing Guidelines, the RBI In-Principle Approval and the RBI Final Approval,
the Equity Shares are required to be mandatorily listed on a stock exchange in India within three years from the date
our Bank reached a net worth of ₹5.00 billion, which we reached on July 31, 2018. Therefore, the Equity Shares were
required to be listed on a stock exchange in India before July 31, 2021, which we did not comply with. Our Bank has
made best efforts to list the Equity Shares on a stock exchange in India and in connection therewith filed draft red
herring prospectuses on January 6, 2020 and July 24, 2021 with SEBI. Pursuant to our letter dated July 26, 2021, we
requested RBI’s permission to extend our listing deadline to December 31, 2021. The RBI, vide its letter dated August
20, 2021, did not accede to our request for the extension. In an email dated February 23, 2022, the RBI enquired about
the progress made toward listing and we responded in an email dated February 24, 2022 saying that we would initiate
the listing of the Equity Shares in the first quarter of Fiscal 2023. In its letter dated June 29, 2022, the RBI directed us
to complete the listing of the Equity Shares before the expiry of current approval of SEBI, i.e., by October 19, 2022,
or else the RBI would treat this as a violation of our licensing conditions and take the necessary
supervisory/enforcement action against our Bank. We responded to the RBI via a letter dated July 8, 2022, updating
the RBI on the status of our preparations for the listing of the Equity Shares. However, our Bank was unable to launch
the initial public offering on account of unfavourable market conditions. Pursuant to our letter dated October 14, 2022,
we requested SEBI to extend the final date of its approval for our listing from October 19, 2022 to March 31, 2023.
SEBI, vide its letter dated November 2, 2022, did not accede to our request for the extension. The RBI pursuant to its
letter June 9, 2023 observed that our Bank continued to be in violation of the listing deadline and directed our Bank to
ensure that our Bank’s third draft red herring prospectus is filed by June 30, 2023 and the Equity Shares are listed by
November 30, 2023. We responded to the RBI letter vide our letter dated June 13, 2023 saying that we are working
towards filing the draft red herring prospectus by June 30, 2023 with an outer timeline of July 15, 2023. We have filed
the Draft Red Herring Prospectus dated July 7, 2023 with SEBI on July 8, 2023. As on the date of this Red Herring
Prospectus, the RBI has not taken any action in relation to our failure to comply with the requirement to list the Equity
Shares but the RBI may take regulatory action against us in the future. Such regulatory action could include imposition
of monetary penalties, revocation of the RBI Final Approval or such other penal actions and restrictions deemed fit by
the RBI. Any such action by the RBI could adversely affect our business, financial condition, results of operations and
cash flows.

4. Our business is concentrated in Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Telangana and the Union
Territory of Puducherry (collectively, “South India”), particularly in the states of Kerala and Tamil Nadu. As at
June 30, 2023, 62.43% of our banking outlets are located in South India (including 43.43% in Kerala and 13.86%
in Tamil Nadu), 73.09% of our gross advances are from customers in South India (including 43.45% from Kerala
and 22.14% from Tamil Nadu) and 86.90% of our deposits are from banking outlets in South India (including
80.04% from Kerala and 3.36% from Tamil Nadu). Any adverse change in the economy of South India, particularly
in the states of Kerala and Tamil Nadu, could have an adverse effect on our financial condition, results of
operations and cash flows.

Our business is concentrated in South India, particularly in the states of Kerala and Tamil Nadu. While our operations
are spread out across India, a significant number of our banking outlets are located in South India, especially Kerala
and Tamil Nadu, and a majority of our gross advances and deposits are from customers in South India, especially
Kerala and Tamil Nadu. We do not have a documented diversification plan in terms of products as well as regions.

37
 The table below sets forth the number of our Banking outlets in South India, including Kerala and Tamil Nadu, and
the rest of India and as a percentage of our total banking outlets as at the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Number of % of total Number of % of total Number of % of total Number of % of total
banking banking banking banking banking banking banking banking
outlets outlets outlets outlets outlets outlets outlets outlets
Total banking 437 62.43 437 62.43 406 70.61 396 72.00
outlets in South
India
Of which:
Kerala 304 43.43 304 43.43 279 48.52 277 50.36
Tamil Nadu 97 13.86 97 13.86 93 16.17 91 16.55
Total banking 263 37.57 263 37.57 169 29.39 154 28.00
outlets in the
Rest of India(3)
Total banking 700 100.00 700 100.00 575 100.00 550 100.00
outlets
Notes:
(1) Rest of India comprises Assam, Bihar, Chhattisgarh, Gujarat, Haryana, Jharkhand, Madhya Pradesh, Maharashtra, Meghalaya, New Delhi,
Odisha, Rajasthan, Union Territory of Chandigarh, West Bengal and Uttar Pradesh as at March 31, 2021, Uttarakhand (in addition to the
foregoing) as at March 31, 2022 and Tripura (in addition to the foregoing) as at March 31, 2023 (the “Rest of India”).

The table below sets forth our gross advances from South India, including Kerala and Tamil Nadu, and the rest of
India and as a percentage of our gross advances as at the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Advances % of gross Advances % of gross Advances % of gross Advances % of gross
(₹ in advances (₹ in advances (₹ in advances (₹ in advances
million) million) million) million)
Gross advances 105,550.62 73.09 102,154.23 72.36 88,718.37 73.14 67,392.26 80.09
from South India
Of which:
Kerala 62,751.09 43.45 60,379.97 42.77 55,329.21 45.61 47,102.12 55.9%
Tamil Nadu 31,974.13 22.14 31,421.90 22.26 27,630.51 22.78 16,694.15 19.84
Gross advances 38,884.92 26.91 39,027.04 27.64 32,588.06 26.86 16,757.79 19.91
from the Rest of
India
Gross advances 144,435.54 100.00 141,181.27 100.00 121,306.43 100.00 84,150.05 100.00

The table below sets forth our deposits from South India, including Kerala and Tamil Nadu, and the rest of India and
as a percentage of our total deposits as at the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Deposits % of total Deposits % of total Deposits % of total Deposits % of total
(₹ in deposits (₹ in deposits (₹ in deposits (₹ in deposits
million) million) million) million)
Deposits from 136,051.19 86.90 130,739.31 89.15 112,690.52 87.93 82,355.24 91.51
South India
Of which:
Kerala 125,315.96 80.04 122,534.14 83.55 105,325.81 82.19 77,857.62 86.51
Tamil Nadu 5,265.00 3.36 5,145.27 3.51 3,789.33 2.96 2,486.50 2.76
Deposits from 20,507.35 13.10 15,916.93 10.85 15,460.20 12.07 7,639.02 8.49
the Rest of India
Total deposits 156,558.54 100.00 146,656.25 100.00 128,150.72 100.00 89,994.26 100.00

Any disruption, disturbance or sustained downturn in the economy of, or any adverse geological, ecological or political
circumstances in South India, in particular in the states of Kerala and Tamil Nadu, could adversely affect our business,
financial condition, results of operations and cash flows.

5. As at March 31, 2023, we were in non-compliance with 17 out of the 272 Risk Based Supervision (“RBS”) Tranche
III requirements and if the Reserve Bank of India (RBI) imposes penalties on us for this non-compliance, it could
adversely affect our reputation, business, financial condition, results of operations and cash flows.

The table below sets forth the number of our non-compliances with RBS Tranche III requirements as at the dates
indicated.

Particulars As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Total number of RBS Tranche III 272 262 218
requirements

38
 Particulars As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Total Number of RBS Tranche III 17 20 17
requirements we were non-compliant
with

As at March 31, 2023, we were in non-compliance with 17 RBS Tranche III requirements, namely: (i) periodic
updation of know your customer (“KYC”) details, which is a re-KYC process, of which 372 high-risk customer
accounts are yet to be updated and are an ongoing exercise; (ii) credit information for few fresh MSME/corporate
loans were not obtained during sanction; (iii) our Central Know Your Customer Registry update is pending for legal
entities; (iv) some risk items identified by the vulnerability assessment and penetration testing are breaching the
remediation timelines; (v) some public applications are not covered in the vulnerability assessment and penetration
testing; (vi) there were two instances where the compensation to customers for a failed transaction was paid with a
delay; (vii) one time combination lock for cash replenishment in ATMs is yet to be implemented in all our ATMs;
(viii) system enabled regulatory controls are to be implemented for accounts opened using OTP in non-face-to-face
mode to monitor breaches; (ix) suitable mechanism to monitor unauthorised services/executables/software that are
running in the processing platform/gateways/end points/access points is to be implemented; (x) interest subvention
was not extended to certain Kisan Credit Card accounts; (xi) we are working with the National Payments Corporation
of India to implement online dispute redressal; (xii) ad hoc/short review /renewal of credit facilities is not under audit;
(xiii) we have yet to implement cassette swaps process in ATMs; (xiv) the contract between us and the third-party
ATM switch application service provider did not mandate that party to comply with the RBI circular on cyber security
controls for third-party ATM switch application service providers; (xv) our compensation policy not properly covering
all the instances of failure of the transaction; (xvi) statements of cash shortages in ATMs are to be submitted to the
RBI every month within five days of the following month for which there were delays in the submission for certain
months; and (xvii) risk assessments are conducted with regard to the safety and security of digital payment products
and associated processes and services for their suitability and appropriateness whenever such products are launched,
however, an ongoing risk assessment is yet to be performed (our compliance department has communicated with the
respective department of our Bank to rectify this non-compliance by implementing the necessary processes, and the
same will be reviewed by our compliance department as per the chart of review). The RBI could impose penalties on
us for our non-compliance with the RBS Tranche III requirements, which could adversely affect our reputation,
business, financial condition, results of operations and cash flows.

6. We are subject to inspections by the Reserve Bank of India (RBI). Inspection by the RBI is a regular exercise for
all banks and financial institutions. The RBI and external auditors appointed by the RBI have observed various
non-compliances by us in the past and have required us to, among other things, take corrective actions and pay
compensation. We are currently in non-compliance with certain major observations of the RBI, which we are in
the process of rectifying. Any significant deficiencies identified by the RBI in a final inspection report or other
observations made that we are unable to rectify to the RBI’s satisfaction could lead to sanctions and penalties being
imposed by the RBI on our Bank, which could materially and adversely affect our reputation, business, financial
condition, results of operations and cash flows.

We are subject to inspections by the RBI. Inspection by the RBI is a regular exercise for all banks and financial
institutions. Most recently, the RBI conducted an on-site inspection for supervisory evaluation from August 22, 2022
to September 2, 2022 and again from September 12, 2022 to September 23, 2022 for Fiscal 2022 and an off-site
analysis of the data and information furnished by our Bank (“Inspection”). Based on the Inspection, the RBI issued
its (a) inspection report and (b) risk assessment report and noted certain deficiencies, including three observations from
the RBI inspection report for Fiscal 2019 that were yet to be complied with. We responded to such observations and
submitted a three-round compliance status to the RBI with respect to the Inspection. The table below sets forth details
of the observations in the inspection report and risk assessment report for Fiscal 2022 and the status of compliance in
relation to the same, that we have informed the RBI vide letters dated August 14, 2023 bearing reference numbers
ESFB/COMPL/PKS/ 229 /2023-24 and ESFB/COMPL/PKS/264/2023-24 that we are still in the process of complying
with as at the date of this Red Herring Prospectus.

S. No. RBI’s Observation Status of Compliance

1. The bank shall ensure the Pursuant to complying with the observation pertaining to the listing process, the Board
completion of its listing process has authorized the Offer pursuant to resolutions passed on June 22, 2023 along with
at the earliest to comply with the the revised Offer for Sale portion pursuant to its resolution dated July 7, 2023. Further,
relevant regulatory guidelines. the Shareholders, pursuant to a resolution dated June 29, 2023, have approved the
IPO steering Committee to Fresh Issue. In relation to the listing process, our Bank filed the Draft Red Herring
prepare a roadmap with Prospectus dated July 7, 2023 with SEBI on July 8, 2023 and this Red Herring
milestones and Board to monitor Prospectus with the RoC.
the progress against milestones.

2. The bank shall ensure integration Due to the inability of the vender supplying our core banking solution (“CBS”) to
of its treasury system with CBS. deliver certain functionalities that are necessary for the integration of our treasury
system with our CBS, the Board decided to seek for an extension of time to comply
with this requirement during its meeting held on August 11, 2023. Accordingly, our
Bank has submitted a request letter dated August 14, 2023 to the RBI for the extension

39
 S. No. RBI’s Observation Status of Compliance

of time for compliance with this requirement until March 31, 2024 and the RBI has
approved the extension requested by us.

3. The bank should ensure Our Bank is in the process of updating the know your customer (“KYC”) details in
completion of re-KYC of line with the re-KYC process. The Audit Committee has stipulated the timeline of
pending accounts with particular March 31, 2024 within which the process is required be completed, with a sub-target
focus on high-risk customers, for completing 50% of the pending customers for re-KYC by December 31, 2023.
including the 2867 customers for
whom re-KYC was pending as on
the date of the inspection carried
out by RBI.

4. KYC details of pending current Our Bank is in the process of uploading current and legacy accounts to the Central
and legacy accounts to be Know Your Customer Registry (“CKYC”), which is a centralised depository of KYC
uploaded to CKYC within the documents of customers availing various services of the financial sector. The Audit
defined timespan. The bank may Committee has stipulated the timeline of March 31, 2024 within which the process is
also ensure that for new accounts, required to completed, with a sub-target for completing 50% of the pending current
details are uploaded to CKYC as and legacy accounts by December 31, 2023.
per prescribed timelines.

5. Pendency in sharing KYC data Our Bank is in the process of uploading current and legacy accounts. The Audit
with CKYCR. Committee has stipulated the timeline of March 31, 2024 within which the process is
required to be completed, with a sub-target for completing 50% of the pending
accounts by December 31, 2023.

6. There was no automated system Our Bank is in the process of implementing an asset liability management SAS, which
for Asset Liability Management. is at the user acceptance testing stage. We were supposed to complete the process by
September 30, 2023, however, due to some delays our Bank is aiming to complete the
process by December 30, 2023.

7. BSBD holders were allowed to Our Bank has implemented a system-level control to ensure customers with a Basic
hold additional savings bank Saving Bank Deposit (“BSBD”) account (which is a savings account that offer certain
account in the Bank. minimum facilities without any charges or any minimum balance requirement), are
restricted from opening another savings bank account with our Bank and vice versa.

Our Bank has sent letters to the customers with both a BSBD account and another
savings bank account for closure of either of the accounts. In the absence of a response
from the customer within the timeline provided, our Bank began initiating a
centralized freeze/closure of such accounts on August 31, 2023.

Of the 1,704 cases identified by the RBI in its observation in this regard, as at August
30, 2023:

i. 352 cases have been closed;

ii. 15 cases were identified as the accounts of deceased person and we are in
the process of putting the accounts into deceased claim settlement and,
following which, the accounts will be closed; and

iii. the remaining 1,337 cases are being followed up by the branches.

8. Account opening forms, loan Our Bank is in the process of complying with these requirements. Our Bank has
application forms, challans, submitted a request letter dated August 14, 2023 to the RBI for the extension of time
passbooks, etc., were not printed for compliance with these requirements until December 31, 2023.
in tri-lingual form. Also, the
option of third gender was not
included in the abovementioned
printed forms.

Any significant deficiencies identified by the RBI in a final inspection report or other observations made that we are
unable to rectify to the RBI’s satisfaction could lead to sanctions (such as restrictions being applied on carrying out
certain business activities or our ability to obtain the regulatory permits and approvals required to expand our business)
and penalties being imposed by the RBI on our Bank, which could materially and adversely affect our reputation,
business, financial condition, results of operations and cash flows.

7. The Reserve Bank of India (RBI) has in the past sought clarifications on acquisition of Equity Shares by ESAF
Swasraya Multi-State Agro Co-operative Society Limited (“ESMACO”), a member of our Promoter Group and one
of the Group Entities, and Lahanti Lastmile Services Private Limited (“Lahanti”), one of the Group Entities. We
cannot assure you that our holding structure will not be subject to additional scrutiny by the RBI in the future.

40
Pursuant to the preferential allotment made by our Bank on September 28, 2018, certain members of our Promoter
Group and Group Entities, namely, ESMACO and Lahanti, acquired 21,346,993 Equity Shares and 149,738 Equity
Shares, respectively, representing 4.99% and 0.03% of the issued and paid-up share capital of our Bank as at the date
of this Red Herring Prospectus, respectively. For further details, see “Capital Structure” on page 109. The RBI has
pursuant to its letter dated May 13, 2019 sought clarifications on why the Equity Shares acquired by these Promoter
Group entities should not be considered as Equity Shares acquired by them as persons acting in concert with our
individual Promoter, Kadambelil Paul Thomas as per the provisions of Section 12B of the Banking Regulation Act
read with Section 2(77) of the Companies Act, 2013. Our Bank has pursuant to its letter dated May 29, 2019 responded
to this stating that Kadambelil Paul Thomas is not a person acting in concert with ESMACO on the basis that (i)
ESMACO is managed by a board of directors consisting of certain eleceted and decisions are taken on majority basis
and there is no significant voting power or shareholding either with Kadambelil Paul Thomas or Mereena Paul, his
wife in ESMACO, as they hold only one equity share each and have one vote each in ESMACO, (ii) substantial powers
of the management is vested with the chief executive officer of ESMACO; and (iii) Kadambelil Paul Thomas and his
relatives do not hold any managerial position in ESMACO. It has further been clarified that while Mereena Paul, his
wife is the honorary chairperson of ESMACO, she is not entitled to any substantial powers of management over
ESMACO and is not involved in the day-to-day affairs of ESMACO and neither does she have any pecunary
relationship with ESMACO. Further, in respect of Kadambelil Paul Thomas’s relationship with Lahanti, our Bank has
stated that Kadambelil Paul Thomas is a person acting in concert with Lahanti and since Kadambelil Paul Thomas has
received approval of the RBI to hold up to 10.00% of the total issued and paid-up share capital of our Bank, the
aggregate shareholding of Lahanti and Kadambelil Paul Thomas in our Bank was within such cap on shareholding.
Further, the RBI, pursuant to its inspection report for Fiscal 2019 dated September 7, 2020, observed that the arm’s
length relationship of our Bank and our group entities could not be established as our Bank had entered into agreement
with ESMACO where Mereena Paul, the wife of Kadambelil Paul Thomas and Alok Paul Thomas, son of Kadambelil
Paul Thomas were the directors and with Lahanti where Emy Acha Paul, daughter of Kadambelil Paul Thomas and
Sunny Thomas, brother of Kadambelil Paul Thomas were directors and had substantial interests, respectively, which
is also against the terms of agreement entered into with business correspondents, namely, that the business
correspondents should not be owned or controlled by a relative of any director of our Bank. In order to adhere to the
“Principles of Good Corporate Governance”, our Bank has requested the relatives of Kadambelil Paul Thomas to
relinquish their directorship on the board of directors of ESMACO and Lahanti, and divest their substantial interests
in Lahanti in view of RBI circular on “Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial
Services by Banks” dated November 3, 2006, pursuant to which, the relatives of Kadambelil Paul Thomas relinquished
their directorship from the respective boards of ESMACO and Lahanti as at March 13, 2021 and January 14, 2021,
respectively, and have also divested substantial interests in Lahanti through transfer of 1.10 million equity shares of
face value of ₹ 10 each at a transfer price of ₹ 10 each to unrelated third parties on January 14, 2021. In addition, Samu
John, son in law of Kadambelil Paul Thomas, resigned as managing director and chief executive officer of Lahanti on
March 15, 2021. While there has been no further correspondence with the RBI in this regard, we cannot assure you
that the RBI will not seek additional clarifications or question other aspects of our holding structure in the future. Any
adverse finding by the RBI with respect to our holding structure or allotments made by our Bank could adversely affect
our reputation.

Further, please see below a table of compliance of RBI circular on Financial Inclusion by Extension of Banking
Services – Use of Business Correspondents (BCs) with reference number DBOD.No.BL.BC.43 /22.01.009/2010-11
issued on September 28, 2010 and with reference number DBOD.No.BAPD.BC.122 /22.01.009/2013-14 issued on
June 24, 2014 (“RBI BC Circular”) by the business correspondents of our Bank:

Sr. No. Particulars Status of compliance

1. The banks may formulate a policy for engaging BCs with the approval of their Our Bank has adopted a BC policy
board of directors. Due diligence may be carried out on the individuals/entities to in line with the RBI BC Circular
be engaged as BCs prior to their engagement. The due diligence exercise may,
inter alia, cover aspects such as (i) reputation/market standing, (ii) financial
soundness, (iii) management and corporate governance, (iv) cash handling ability
and (v) ability to implement technology solutions in rendering financial services.

2. Eligible individuals/entities. All the BCs engaged by our Bank

have complied with the norms
prescribed by the RBI under the
RBI BC Circular

3. The terms and conditions governing the contract between the bank and the BC Complied with
should be carefully defined in written agreements and subjected to a thorough legal
vetting. While drawing up agreements, banks should strictly adhere to instructions
contained in the guidelines on managing risks and code of conduct in outsourcing
of financial services by banks, issued by Reserve Bank of India on November 3,
2006.

4. Scope of activities. The scope of activities are defined

in the BC policy of our Bank in
alignment with the RBI norms

41
 Sr. No. Particulars Status of compliance

which has been appropriately

incorporated in the agreements with
BCs

5. The banks may, if necessary, use the services of the BC for preliminary work Complied with
relating to account opening formalities. However, ensuring compliance with KYC
and AML norms under the BC model continues to be the responsibility of banks.

6. The banks should ensure the preservation and protection of the security and Complied with
confidentiality of customer information in the custody or possession of BC.

7. The banks should ensure that equipment and technology used by the BC are of Complied with
high standards.

8. The banks may pay reasonable commission/ fee to the BC, the rate and quantum Complied with. The terms and
of which may be reviewed periodically. The agreement with the BC should conditions are covered in the
specifically prohibit them from charging any fee to the customers directly for agreement with BCs
services rendered by them on behalf of the bank. Commission structure or
incentive mechanism should be devised in a manner that mere increase in the
number of clients served or the transaction volume does not drive the commission.
The remuneration should combine fixed and variable parts dependent, inter alia,
on some indication or measure of customer satisfaction. Some part of the variable
remuneration could be deferred or clawed back in case of deficiency of service.

9. The banks should adopt technology-based solutions for managing the risk, besides Complied with
increasing the outreach in a cost-effective manner. The transactions should
normally be put through ICT devices (handheld device/mobile phone) that are
seamlessly integrated to the Core Banking Solution (CBS) of the bank. The
transactions should be accounted for on a real time basis and the customers should
receive immediate verification of their transactions through visuals (screen based)
or other means (debit or credit slip).

10. The banks should carry out a detailed review of the performance of various BCs Complied with
engaged by them at least once in a year and they should monitor the activities of
BCs through their Controlling Offices and also through various fora under Lead
Bank Scheme i.e. (SLBC, DLCC, BLBC). The internal control mechanism in the
bank should include visit to BCs and interface with customers at periodical
intervals.

11. Consumer Protection Measures Complied with

12. The banks should constitute Grievance Redressal Machinery within the bank for Complied with
redressing complaints about services rendered by the BCs and give wide publicity
about it through electronic and print media.

13. Customer Education Complied with

8. Certain directions have been issued by the Reserve Bank of India (RBI) to our Bank in respect of the office of
Kadambelil Paul Thomas, the Managing Director, Chief Executive Officer and one of our promoters. We cannot
assure you that our Bank and Kadambelil Paul Thomas will not be subject to issuance of further directions by the
RBI in future, which could have an adverse reputational effect on our business and operations.

Pursuant to the RBI letter dated May 28, 2018 read with the RBI letter dated March 9, 2017, Kadambelil Paul Thomas,
the Managing Director, Chief Executive Officer and one of our promoters, was required to divest his shareholding in
EFHPL, our corporate promoter, within a period of one year, i.e., March 8, 2018, before taking charge as Managing
Director and Chief Executive Officer in compliance with Section 10B(4) of the Banking Regulation Act. While
Kadambelil Paul Thomas transferred majority of his shareholding in EFHPL on February 22, 2018, the balance equity
share holding, which was issued to him as sweat equity was subject to a three-year lock-in period from allotment, i.e.,
up to September 28, 2018, and accordingly, could not be transferred within the aforementioned timeline. As a result,
Kadambelil Paul Thomas was directed by the RBI pursuant to a letter dated May 28, 2018 to step down from his
position of Managing Director and Chief Executive Officer. Kadambelil Paul Thomas resigned from his position of
Managing Director and Chief Executive Officer on June 2, 2018 and re-joined on October 1, 2018 with the approval
of the RBI dated October 1, 2018, post divesture of his shareholding in EFHPL in compliance with the letters issued
by the RBI. For more details, see “Outstanding Litigation and Material Developments – Litigation against Kadambelil
Paul Thomas – Disciplinary action” on page 431.

While there have been no further directions issued by the RBI to our Bank and Kadambelil Paul Thomas in this regard,
we cannot assure you that RBI will not issue other directions in respect to compliance with the applicable laws, in the

42
 future. Any adverse direction issued by the RBI to our Bank and our Promoters could have an adverse reputational
effect on our business and operations.

9. The Insurance Regulatory and Development Authority of India (“IRDAI”) and the Securities and Exchange Board
of India (SEBI) have issued orders to two of our Selling Shareholders, namely, PNB MetLife and Bajaj Allianz,
directing them to pay certain penalties and imposing certain restrictions on them. While they have complied with
the said orders, there is no assurance that the IRDAI or SEBI will not take any further action against PNB MetLife
and Bajaj Allianz and any such action could adversely affect our reputation.

The IRDAI has issued an order for two violations to PNB MetLife and imposed a penalty on account of delayed
settlement of maturity claims and for usage of various external service providers for lead generation. Additionally,
IRDAI has issued four orders to Bajaj Allianz imposing penalties, and prescribing certain restrictive measures and
directions thereto on account of non-compliances, including, among other things, (i) enrolment of new members in
violation of existing group scheme violating provisions, and (ii) opening of offices without prior approval of the
IRDAI. Bajaj Allianz has also received an order from SEBI for launch of unit linked insurance products without
requisite authorisation from SEBI. As on the date of this Red Herring Prospectus, PNB MetLife and Bajaj Allianz
have certified to us that they have complied with all the aforementioned orders by remitting the penalties imposed and
complied with the prescribed directions. However, we cannot assure you that IRDAI and SEBI will not take any further
action against PNB MetLife and Bajaj Allianz and any such action could adversely affect our reputation.

10. We will not receive any proceeds from the Offer for Sale.

The Offer consists of a Fresh Issue and an Offer for Sale. The Offer is up to [●] Equity Shares for cash at a price of
₹[●] per Equity Share (including a premium of ₹[●] per Equity Share) aggregating up to ₹ 4,630.00 million, comprising
a Fresh Issue of up to [●] Equity Shares aggregating up to ₹ 3,907.00 million by our Bank and an Offer for Sale of up
to [●] Equity Shares aggregating up to ₹723.00 million, comprising up to [●] Equity Shares aggregating up to ₹492.60
million by the Promoter Selling Shareholder, up to [●] Equity Shares aggregating up to ₹126.70 million by PNB
MetLife and up to [●] Equity Shares aggregating up to ₹103.70 million by Bajaj Allianz Life in the Offer.

The Offer for Sale is [●] times of the Fresh Issue. Details of Offered Shares offered in the Offer for Sale are as follows:

Name Number of Equity Shares Average cost of Number of Offered Shares

as on the date of this Red acquisition per Equity
Herring Prospectus Share (in ₹)
ESAF Financial Holdings 280,758,396* 10.11 [●] Equity Shares aggregating up to
Private Limited ₹492.60 million
PNB MetLife 21,346,993 40.07 [●] Equity Shares aggregating up to
₹126.70 million
Bajaj Allianz Life 17,469,428 40.07 [●] Equity Shares aggregating up to
₹103.70 million
*
280,758,391 Equity Shares are held by ESAF Financial Holdings Private Limited and one Equity Share each is held by Mereena Paul, Alok
Thomas Paul, Emy Acha Paul, George Kalaparambil John and Beena George, as nominees on behalf of ESAF Financial Holdings Private
Limited, who is the beneficial owner of such Equity Shares. Mereena Paul, Alok Thomas Paul, Emy Acha Paul and Beena George are also
members of the Promoter Group of our Bank. Further, Mereena Paul is also a director of ESAF Financial Holdings Private Limited.

Further, our Bank proposes to utilize the Net Proceeds from the Fresh Issue towards augmenting our Bank’s Tier – I
capital base to meet our Bank’s future capital requirements and for increasing business of our Bank which is primarily
onward lending. Further, the proceeds from the Fresh Issue will also be used towards meeting the expenses in relation
to the Offer. Each of the Selling Shareholders will be entitled to their respective portion of the proceeds from the Offer
for Sale in proportion of the Equity Shares offered by the respective Selling Shareholders as part of the Offer for Sale.
Our Bank will not receive any proceeds from the Offer for Sale.

11. We face challenges in our rural–focused Microfinance Loan business, including the high cost of reaching
customers, potential customers’ lack of financial and product awareness and vulnerability of household’s income
to local developments, which could adversely affect our business, financial condition, results of operations and cash
flows.

Our business is significantly dependent on Microfinance Loans. Microfinance Loans are made to the poorer sections
of society (annual household income of up to ₹0.30 million), because of which there are some inherent challenges
faced by us in our Microfinance Loans business, especially in rural centres, including the following:

• High cost of reaching customers: Providing microfinance loans in rural India requires reaching people in
remote and sparsely populated regions, where deploying manpower and requisite infrastructure for disbursing
loans and for recovery can often be expensive. (Source: CRISIL MI&A Report). The high cost of reaching
out to customers in rural centres, and the small volume and ticket size of microfinance loans elongates the
breakeven period. (Source: CRISIL MI&A Report). If we are unable to control our costs, it could have an
adverse effect on our business, financial condition, results of operations and cash flows. For more details, see
“The ratio of our operating expenses to the sum of our net interest income, which is defined as interest earned
minus interest expended (“Net Interest Income”), and other income (together with Net Interest Income,

43
 “Operating Income”) (the “Cost to Income Ratio”) was 55.69%, 54.65%, 57.93%, 63.69%, 60.24% for the
three months period ended June 30, 2023 and 2022 and Fiscals 2023, 2022 and 2021, respectively. An
increase our Cost to Income Ratio will adversely affect our financial condition, results of operations and
cash flows” on page 59.

• Lack of financial and product awareness: Lack of financial and product awareness is a major challenge for
a bank in rural centres. (Source: CRISIL MI&A Report). Our business correspondents are faced with the task
of educating people about the benefits of financial inclusion, about the product and services offered by them,
and establish trust before selling Microfinance Loans. If our business correspondents fail to educate potential
borrowers about our Microfinance Loans, it could adversely affect our business, financial condition, results
of operations and cash flows.

• Vulnerability of household’s income to local developments: Uncertainty and unpredictability faced by

low-income households, and vulnerability of their incomes to local developments can make it difficult for
borrowers to make repayments on time. (Source: CRISIL MI&A Report). If borrowers fail to make their
repayments on time or at all, it could lead to an increase in our NPAs, provisions for NPAs and write-offs,
thereby adversely affecting our business, financial condition, results of operations and cash flows. For more
details, see “As at June 30, 2023 and March 31, 2023, 2022 and 2021, our gross non-performing advances
(NPAs) as a percentage of gross advances were 1.65%, 2.49%, 7.83% and 6.70%, respectively, our gross
NPAs less provisions for NPAs (“net NPAs”) as a percentage of our gross advances less provisions for NPAs
were 0.81%, 1.13%, 3.92% and 3.88%, respectively, and the percentage of (total provisions towards gross
NPAs as at the end of the period/fiscal year plus outstanding balance of technical written off accounts as at
the end of the period/fiscal year) divided by (the sum of gross NPAs plus outstanding balance of technical
written off accounts as at the end of the period/fiscal year) (“Provision Coverage Ratio”) was 74.35%,
56.67%, 59.38% and 52.77%, respectively. If we are unable to control the level of gross NPAs in our portfolio
effectively or if we are unable to improve our Provision Coverage Ratio, our business, financial condition,
results of operations and cash flows could be adversely affected” on page 56.

As noted in the CRISIL MI&A Report, there is a high proportion of cash collections in unbanked and rural centres.
However, our business correspondents are responsible for collections for Microfinance Loans.

12. The attrition rate of our employees was 3.87% (not annualized), 5.66% (not annualized), 24.07%, 20.07%, 13.03%
for the three months period ended June 30, 2023 and Fiscals 2023, 2022 and 2021, respectively. Our payments to
and provisions for employees as a percentage of net interest income, which is defined as interest earned minus
interest expended, and other income (“Operating Income”) were 11.77%, 12.28%, 13.09%, 17.14% and 17.90% for
the three months period ended June 30, 2023 and 2022 and Fiscals 2023, 2022 and 2021, respectively. If the attrition
rate of our employees continues to increase, we may need to increase the compensation paid to employees in order
to retain more of our employees, which could have an adverse effect on our financial condition, results of operations
and cash flows.

The tables below set forth the attrition of our employees and the attrition rate of our employees during the periods and
Fiscals indicated.

Particulars Three months period ended

June 30, 2023 June 30, 2022
Attrition of employees [A] 208 232
Attrition rate of employees [B = A/D] (%) 3.87%(1) 5.66(1)
Total employees as at the end of the period/[C] 5,160 3,868
Total of employees who left during the period and employees at the end of the period 5,368 4,100
[D = A + C]
Note:
(1) Not annualized.

Particulars Year ended March 31,

2023 2022 2021
Attrition of employees [A] 1,596 1,040 570
Attrition rate of employees [B = A/D] (%) 24.07% 20.07% 13.03%
Total employees as at the end of the Fiscal [C] 5,034 4,141 3,803
Total of employees who left during the Fiscal and employees 6,630 5,181 4,373
at the end of the Fiscal [D = A + C]

If our attrition rate continues to increase, we may be required to increase our levels of employee compensation more
rapidly than in the past to remain competitive in retaining employees, which could have an adverse effect on our
financial condition, results of operations and cash flows. The tables below set forth our payments to and provisions
for employees and such amounts as a percentage of our Operating Income for the periods/Fiscals indicated.

44
 Particulars Three months period ended June 30,
2023 2022
(₹ in million) % of (₹ in million) % of
Operating Operating
Income Income
Payments to and provisions for employees 798.73 11.77 609.96 12.28
Operating Income(*) 6,784.82 100.00 4,967.73 100.00
Note:
(*) Non-GAAP financial measure.

Particulars Year ended March 31,

2023 2022 2021
(₹ in % of (₹ in % of (₹ in % of
million) Operating million) Operating million) Operating
Income Income Income
Payments to and provisions for employees 2,779.98 13.09 2,321.37 17.14 1,877.84 17.90
Operating Income(*) 21,242.53 100.00 13,547.22 100.00 10,488.39 100.00
Note:
(*) Non-GAAP financial measure.

Failure to train and motivate our employees properly may result in an increase in employee attrition rates, require
additional hiring, erode the quality of customer service, divert management resources, increase our exposure to high-
risk credit and impose significant costs on us, thereby adversely affecting our business, financial condition, results of
operations, and cash flows.

13. Our business correspondents (which includes ESAF Swasraya Multi-State Agro Co-operative Society Limited
(ESMACO), a Promoter Group and Group Entity, and Lahanti Lastmile Services Private Limited (Lahanti), a
Group Entity) sourced or serviced 74.75%, 75.53%, 83.35% and 84.78% of our gross advances as at June 30, 2023,
and March 31, 2023, 2022 and 2021. Our income contributed by business correspondents represented 77.13%,
79.02%, 76.06%, 77.93% and 80.97% of our total income for the three months period ended June 30, 2023 and
2022 and Fiscals 2023, 2022 and 2021, respectively. All of our business correspondents work for us on a non-
exclusive basis. If any of our business correspondents, and in particular ESMACO, prefer to promote our
competitors’ loans over our loans or the agreements between us and them are terminated or not renewed, it would
adversely affect our business, financial condition, results of operations and cash flows.

Our results of operations and financial condition depends significantly on the performance of our business
correspondents and in particular on the performance of ESMACO. Our business correspondent entities are responsible
for sourcing and servicing of customers for Microfinance Loans and Other Micro Loans (we do not do this ourselves).
Our business correspondents also source customers for mortgage loans, vehicle loans, micro, small and medium
enterprises (“MSMEs”) loans, agricultural loans and select deposit products. In addition, our business correspondents
are responsible for sourcing and servicing our banking agents. The table below sets forth the number of our business
correspondents as at the dates indicated.

Particulars As at June 30, As at March As at March As at March

2023 31, 2023 31, 2022 31, 2021
Number of business correspondents 22 20 14 12

ESMACO has been acting as a business correspondent for us on a non-exclusive basis since we began our operations.
We have an agreement with ESMACO dated January 1, 2019 that is valid until December 31, 2028. ESMACO, which
is an entity forming part of the Promoter Group and is a Group Entity, owns 63.49% of the equity shares in EFHPL,
our corporate promoter, which in turn owns 62.46% of the Equity Shares prior to the Offer. ESMACO was a related
party of our Bank until March 13, 2021. For further details on our business correspondents, see “Our Business –
Delivery Channels – Business Correspondents” on page 208.

Set forth below are certain details of our advances that our business correspondents, including ESMACO, were
responsible for sourcing or servicing as at the dates indicated.

Particulars As at June 30, As at March As at March As at March

2023 31, 2023 31, 2022 31, 2021
(₹ in million, except for percentages)
Gross advances sourced or serviced by business 107,959.47 106,638.60 101,104.45 71,343.55
correspondents [A]
Of which:
Gross advances sourced or serviced by ESMACO [B] 88,341.31 87,773.07 91,131.33 63,217.49
Total gross advances [C] 144,435.54 141,181.27 121,306.43 84,150.05
Gross advances sourced or serviced by business 74.75% 75.53% 83.35% 84.78%
correspondents as a percentage of total gross advances
[D = A/C] (%)
Of which:

45
 Particulars As at June 30, As at March As at March As at March
2023 31, 2023 31, 2022 31, 2021
(₹ in million, except for percentages)
Gross advances sourced or serviced by ESMACO as a 61.16% 62.17% 75.12% 75.12%
percentage of total gross advances [E = B/C] (%)
Gross NPAs sourced or serviced by business 2,153.93 3,164.63 9,112.20 5,232.79
correspondents [F]
Of which:
Gross NPAs sourced or serviced by ESMACO [G] 1,945.50 2,859.59 7,889.90 4,632.09
Gross NPAs [H] 2,376.14 3,516.90 9,495.94 5,639.97
Gross NPAs sourced or serviced by business 90.65% 89.98% 95.96% 92.78%
correspondents as a percentage of gross NPAs [I = F/H]
(%)
Of which:
Gross NPAs sourced or serviced by ESMACO as a 81.88% 81.31% 83.08% 82.12%
percentage of gross NPAs [J = G/H] (%)

Set forth below is a table showing our deposits sourced by business correspondents, including deposits sourced by
ESMACO, and such amounts as a percentage of our deposits as at the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
(₹ in % of total (₹ in % of total (₹ in % of total (₹ in % of total
million) deposits million) deposits million) deposits million) deposits
Deposits sourced by 1,601.20 1.02 2,536.15 1.73 2,145.14 1.67 1,495.12 1.66
business respondents
Of which:
Deposits sourced by 1,390.23 0.89 2,247.74 1.53 1,828.12 1.43 1,264.76 1.41
ESMACO
Total deposits 156,558.54 100.00 146,656.25 100.00 128,150.72 100.00 89,994.26 100.00

Set forth below are tables showing our income from advances sourced or serviced by business correspondents as well
as other income from customers sourced by business correspondents (income contributed by business correspondents)
and such amounts as a percentage of our total income for the periods and Fiscals indicated.

Particulars Three months period ended June 30,

2023 2022
(₹ in million) % of total income (₹ in million) % of total income
Income contributed by business 7,649.29 77.13 5,834.50 79.02
correspondents
Total income 9,917.75 100.00 7,383.24 100.00

Particulars Year ended March 31,

2023 2022 2021
(₹ in million) % of total (₹ in million) % of total (₹ in million) % of total
income income income
Income contributed 23,896.28 76.06 16,734.61 77.93 14,318.83 80.97
by business
correspondents
Total income 31,415.72 100.00 21,475.08 100.00 17,684.21 100.00

We terminated our agreement with Sambandh Finserve Pvt Ltd (“Sambandh”), pursuant to which it acted for us as a
business correspondent, on October 24, 2020 following revelations of serious alleged irregularities in the conduct and
functioning on the part of Sambandh. For further details, see “-We terminated our agreement with Sambandh Finserve
Pvt Ltd (Sambandh) pursuant to which it acted for us as a business correspondent on October 24, 2020 following
revelations of serious alleged irregularities in the conduct and functioning on the part of Sambandh. However,
Sambandh had not committed any fraudulent acts against us. Our gross advances sourced or serviced by Sambandh,
which totalled ₹124.60 million, or 0.13% of our gross advances, as at September 30, 2021, were transferred to
Lastmile Services Private Limited (Lahanti) effective November 1, 2020. The termination of Sambandh did not have
any material adverse effect on our business, financial condition, results of operations or cash flows.” on page 85.

We also terminated our agreement with Margdarshak Financial Services Ltd (“Margdarshak”), pursuant to which it
acted for us as a business correspondent, effective May 31, 2021, in accordance with a termination letter dated May
11, 2021 we sent to Margdarshak, because they were undergoing liquidity issues due to the COVID-19 pandemic and
were unable to adequately manage their loan portfolio for us, which was subsequently taken over by Lahanti on June
1, 2021. As at March 31, 2021, Margdarshak was responsible for sourcing and/or servicing customers for gross
advances of ₹249.82 million, or 0.30% of our gross advances. The termination of Margdarshak did not have any
material adverse effect on our business.

We have not terminated the services of any other business correspondents in the past due to liquidity issues and have
put in place checks and balances to avoid such instances in the future, namely: (i) we have Board-approved policies
46
 and standard operating procedures to monitor the performance of our business correspondents on a periodic basis; (ii)
our BC Channel Vertical closely monitors our business correspondents by periodically collecting business
correspondents’ financial statements and other information to assess their financial liquidity position; (iii) we review
operational efficiencies to ensure that business correspondents are acquiring adequate income and that they have
sufficient funds for their operational activities; (iv) we closely monitor our business correspondents’ relationships to
other business partners and service providers; (v) we review the credit bureau reports of our business correspondents;
(vi) we periodically visit our business correspondents in person to assess their operations; (vii) we collect first loss
default guarantees from business correspondents that operate through their own premises to mitigate any credit loss;
and (viii) our executive-level business correspondent committee monitors our business correspondents on a regular
basis.

Further, pursuant to the agreement dated January 1, 2019 with ESMACO, ESMACO is required to obtain
authorisations and licenses in compliance with legal and statutory requirements from time to time in relation to the
banking outlets operated by it. As on the date of this Red Herring Prospectus, four of our banking outlets operated by
ESMACO do not have a registered shops and establishments license. In the event that these registrations are not availed
by ESMACO within the prescribed timelines as required under the Rajasthan Shops and Commercial Establishments
Act, 1958, and Punjab Shops and Commercial Establishments Act, 1958, in which these banking outlets are located,
being 30 days from the date of opening of the banking outlets in Rajasthan, and Haryana, respectively, it may adversely
affect our operations.

All of our business correspondents work for us on a non-exclusive basis. If ESMACO or any of our other business
correspondents prefer to promote our competitors’ loans or our agreements with them ae terminated or not renewed it
would adversely affect our business, financial condition, results of operations and cash flows.

14. We are subject to stringent regulatory requirements and prudential norms. If we are unable to comply with such
laws, regulations and norms it may have an adverse effect on our business, financial condition, results of operations
and cash flows.

We are regulated under the Banking Regulation Act and have to comply with circulars and directives issued by the
RBI that apply to a small finance bank within the meaning of SFB licensing guidelines (“SFB”). The Banking
Regulation Act limits the flexibility of shareholders and management of an SFB in many ways, including by way of
specifying certain matters for which a banking company would require RBI approval. The RBI In-Principle Approval,
RBI Final Approval, SFB Licensing Guidelines, SFB Operating Guidelines, the Recommendations of the Internal
Working Group to Review Extant Ownership Guidelines and Corporate Structure for Indian Private Sector Banks
dated November 26, 2021, Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking
Companies ) Directions, 2023 and Reserve Bank of India Guidelines on Acquisition and Holding of Shares dated
January 16, 2023 requires us to comply with certain conditions in order to operate our business. For further details on
these regulatory requirements and prudential norms, see “Key Regulations and Policies” on page 221 and the following
risk factors:

• “We are required to maintain a minimum cash reserve ratio (“CRR”) and statutory liquidity ratio (“SLR”).
In the event that the CRR or SLR requirements applicable to us are increased in the future, our ability to
make advances would be correspondingly reduced, which may adversely affect our results of operations and
cash flows” on page 55;

• “We are required to maintain a minimum total of capital to risk weighted asset ratio (“CRAR”). As we
continue to grow our loan portfolio and asset base, we may be required to raise additional capital in order
to continue to meet applicable CRARs with respect to our business. However, we cannot assure you that we
will be able to raise adequate additional capital in the future on terms favourable to us, or at all, which may
adversely affect the growth of our business” on page 55;

• “At least 25.00% of our total banking outlets, which comprises our Branches and business correspondent–
operated banking outlets, are required to be located in Unbanked Rural Centres. This requirement is only
applicable to small finance bank within the meaning of SFB licensing guidelines (SFB)” on page 62;

• “As a small finance bank within the meaning of SFB licensing guidelines (SFB), we are required to extend
75.00% of our adjusted net bank credit, which is gross advances less bills re-discounted and other permissible
reductions as per Reserve Bank of India (RBI) guidelines and increased by bonds/debentures in investments
eligible by priority sectors (“ANBC”), to the sectors eligible for classification as priority sector lending by
the RBI, such as agriculture, micro, small and medium enterprises (MSMEs), export credit, education,
housing, social infrastructure, renewable energy and other sectors. The priority sector lending requirements
applicable to a SFB are significantly higher than the priority sector lending requirements applicable to other
scheduled commercial banks, which could subject us to higher delinquency rates and may limit our funding
from securitizations and assignments to comply with such requirements. In case of any shortfall by us in
meeting the priority sector lending requirements, we would subsequently be required to place the allocated
amount by the RBI in an account with the National Bank for Agriculture and Rural Development under the
Rural Infrastructure Development Fund Scheme, or with other institutions specified by the RBI, which may

47
 earn lower rates of interest, compared to other interest-bearing securities. As at June 30, 2023 and March
31, 2023, 2022 and 2021, our gross advances to the Agricultural and Allied Activities sector were 80.03%,
65.91%, 62.34% and 56.74% of our ANBC. Deterioration in the performance of the Agricultural and Allied
Activities sector or any other industry sector in which we have significant exposure may adversely affect our
financial condition, results of operations and cash flows” on page 48; and

• “The RBI In-Principle Approval, RBI Final Approval, SFB Licensing Guidelines and SFB Operating
Guidelines require us to comply with certain restrictions relating to the Equity Shares” on page 58.

In addition, in the past, there have been certain instances of ATM cash-out penalties aggregating to ₹0.05 million
imposed by the RBI for any ATM being out of cash for more than 10 hours in a month under the provision of the
Banking Regulation Act, 1949 and the RBI circular titled “Monitoring of Availability of Cash in ATMs” dated August
10, 2021. We have made the payments in respect of such penalties imposed.

In case we fail to comply with the applicable directives and reporting requirements or meet the prescribed prudential
norms, the RBI may charge penalties, restrict our banking activities or otherwise enforce increased scrutiny and control
over our banking operations, including by way of withholding approvals, or issuing conditional approvals, in respect
of any proposed actions for which we may seek RBI approval in the future, or even cancel our banking license. If we
are unable to comply with laws and regulations applicable to an SFB, it may have an adverse effect on our business,
financial condition, results of operations and cash flows.

15. As a small finance bank within the meaning of SFB licensing guidelines (SFB), we are required to extend 75.00%
of our adjusted net bank credit, which is gross advances less bills re-discounted and other permissible reductions
as per Reserve Bank of India (RBI) guidelines and increased by bonds/debentures in investments eligible by priority
sectors (“ANBC”), to the sectors eligible for classification as priority sector lending by the RBI, such as agriculture,
micro, small and medium enterprises (MSMEs), export credit, education, housing, social infrastructure, renewable
energy and other sectors. The priority sector lending requirements applicable to a SFB are significantly higher
than the priority sector lending requirements applicable to other scheduled commercial banks, which could subject
us to higher delinquency rates and may limit our funding from securitizations and assignments to comply with such
requirements. In case of any shortfall by us in meeting the priority sector lending requirements, we would
subsequently be required to place the allocated amount by the RBI in an account with the National Bank for
Agriculture and Rural Development under the Rural Infrastructure Development Fund Scheme, or with other
institutions specified by the RBI, which may earn lower rates of interest, compared to other interest-bearing
securities. As at June 30, 2023 and March 31, 2023, 2022 and 2021, our gross advances to the Agricultural and
Allied Activities sector were 80.03%, 65.91%, 62.34% and 56.74% of our ANBC. Deterioration in the performance
of the Agricultural and Allied Activities sector or any other industry sector in which we have significant exposure
may adversely affect our financial condition, results of operations and cash flows.

SFBs in India are required to lend, through advances or investment, 75.00% of their ANBC, or credit equivalent
amount of off-balance sheet exposures, whichever is higher, to specified sectors known as “priority sectors”, subject
to certain exemptions permitted by the RBI from time to time. Priority sector advances include advances to the
agriculture sector, micro and small enterprises, weaker sections, housing and education finance up to certain ceilings.

We are required to comply with the priority sector lending requirements on a quarterly basis. Any shortfall in the
amount required to be lent to the priority sectors is required to be deposited with the Rural Infrastructure Development
Fund established by NABARD or funds with other financial institutions as specified by the RBI, which generally
provide for lower than market interest rate. Therefore, if we are unable to meet the priority sector conditions
requirements, it could have an adverse effect on our results of operations.

The tables below set out our outstanding Priority Sector advances (as defined by the Government and the RBI) by
sector and as a percentage of our ANBC as at the dates indicated.

Particulars As at June 30, 2023 As at March 31,

2023 2022 2021
Advances % of Advances % of Advances % of Advances % of
(₹ in ANBC(1) (₹ in ANBC(1) (₹ in ANBC(1) (₹ in ANBC(1)
million) million) million) million)
Agricultural and 95,443.37 80.03 79,955.15 65.91 52,458.84 62.34 37,485.27 56.74
Allied Activities
Advances to 7,660.08 6.42 6,827.71 5.62 8,498.18 10.10 4,474.44 6.77
Industry Sector
eligible for Priority
Sector Lending
Services 16,586.21 13.91 18,610.10 15.34 16,015.00 19.03 4,657.95 7.05
Personal Loans 8,460.71 7.09 7,942.06 6.55 15,075.36 17.92 6,659.72 10.08
Gross advances to 128,150.37 107.45 113,335.02 93.42 92,047.38 109.39 53,277.38 80.64
the priority sectors

48
 As shown in the table above, we have a high-concentration of loans in the Agricultural and Allied Activities sector.
We make advances to borrowers in the Agricultural and Allied Activities sector in order to satisfy our priority sector
lending requirements. As such, we expect to continue to have a concentration of loans in the Agricultural and Allied
Activities sector. Any significant deterioration in the performance of the Agricultural and Allied Activities sector or
in any other sector in which we have significant exposure would adversely affect the ability of borrowers within that
sector to service their debt obligations to us. As a result, we would experience increased delinquency risk, which may
adversely affect our financial condition, results of operations and cash flows.

16. We are required to create a reserve fund and shall, out of the balance of profit of each year as disclosed in the profit
and loss account and before any dividend is declared, transfer to the reserve fund a sum equivalent to not less than
25% of such profit. Non-compliance of such requirement may have an adverse effect on our business, financial
condition, results of operations and cash flows.

In terms of the Banking Regulation Act, every banking company incorporated in India shall create a reserve fund and
shall, out of the balance of profit of each year as disclosed in the profit and loss account and before any dividend is
declared, transfer to the reserve fund a sum equivalent to not less than 20% of such profit. However RBI vide its
notification DBOD.No.BP.BC.24/21.04.018/ 2000-2001 dated September 23, 2000 and Master Direction on Financial
Statements - Presentation and Disclosures dated August 30, 2021 requires commercial banks (excluding local area
banks and regional rural banks) to transfer not less than 25% of the net profit before appropriations, to the reserve
fund. Further, if there is an appropriation from the reserve fund or the share premium account, the bank is required
report the fact to RBI within 21 days from the date of such appropriation, explaining the circumstances leading to such
appropriation. The RBI may exend the said period of 21 days by such period as it thinks fit or condone any delay in
the making of such report. For details, please see “Key Regulations and Policies” on page 221. While there have been
no instances of delay in reporting to RBI in this regard by our Bank, we cannot assure you we will be able to comply
with the requirements within the prescribed timelines in the future. If we fail to comply with the regulations, we may
be subject to certain penal actions, including, a fine which may extend to ₹10 million or twice the amount involved in
such contravention or default where such amount is quantifiable, and where a contravention or default is a continuing
one, with a further fine which may extend to ₹0.10 million for every day, during which the contravention or default
continues.

17. We have in the past entered into related party transactions and may continue to do so in the future, which may
potentially involve conflicts of interest with the Shareholders. For the three months period ended June 30, 2023
and 2022, the absolute arithmetic aggregate of gross values of related party transactions having an effect on the
Statement of Profit and Loss was ₹53.81 million and ₹41.56 million, respectively, which represented 0.54% and
0.56% of our total income, respectively. For Fiscals 2023, 2022 and 2021, the absolute arithmetic aggregate of
gross values of related party transactions having an effect on the Statement of Profit and Loss was ₹247.77 million,
₹221.76 million and ₹2,654.55 million, respectively, which represented 0.79%, 1.03% and 15.01% of our total
income, respectively.

We have entered into various transactions with related parties, including for payment of salaries and wages of key
management persons, payment of consideration for business correspondent services, facility management fees,
payment of lease rentals, interest on perpetual debt instruments, interest on Tier II bonds, interest on deposits, payment
for acting as an implementation agent for our corporate social responsibility (“CSR”) activities and royalty expenses
for the right to use certain trademarks and logos. While we believe that all such transactions have been conducted on
an arm’s length basis in compliance with the Companies Act, 2013 and contain commercially reasonable terms, we
cannot assure you that we could not have achieved more favourable terms had such transactions been entered into with
unrelated parties. It is likely that we may enter into related party transactions in the future. Although going forward,
all related party transactions that we may enter into, will be subject to Board or Shareholder approval, as necessary
under the Companies Act, 2013 and the Listing Regulations, we cannot assure you that such transactions, individually
or in the aggregate, will not have an adverse effect on our financial condition and results of operations or that we could
not have achieved more favourable terms if such transactions had not been entered into with related parties. Such
related party transactions may potentially involve conflicts of interest. The tables below set forth the absolute
arithmetic aggregate of gross values of related party transactions having an effect on the Statement of Profit and Loss)
entered into by our Bank for the periods and Fiscals indicated.

Particulars Three months period ended June 30,

2023 2022
Amount % of total income Amount % of total income
(₹ in million) (₹ in million)
Related party transactions having an effect 53.81 0.54 41.56 0.56
on our Statement of Profit and Loss
Total income 9,917.75 100.00 7,383.24 100.00

49
 Particulars Year ended March 31,
2023 2022 2021
Amount % of total Amount % of total Amount % of total
(₹ in income (₹ in income (₹ in income
million) million) million)
Related party transactions having an effect 247.77 0.79 221.76 1.03 2,654.55 15.01
on our Statement of Profit and Loss
Total income 31,415.72 100.00 21,475.08 100.00 17,684.21 100.00

The decrease in the absolute arithmetic aggregate of the gross values of related party transactions having an effect on
our Statement of Profit and Loss from ₹2,654.55 million for Fiscal 2021 to ₹221.76 million for Fiscal 2022 was
primarily due to ESMACO and Lahanti, both of which act as business correspondents for us, ceasing to be related
parties of our Bank effective March 13, 2021 and March 15, 2021, respectively. Effective March 13, 2021, Mereena
Paul and Alok Thomas Paul (both of whom are relatives of Kadambelil Paul Thomas, the Managing Director and
Chief Executive Officer and one of our promoters), resigned as directors of ESMACO, as a result of which ESMACO
ceased to be a related party of our Bank. ESMACO is a member of the Promoter Group and a Group Entity. Effective
January 24, 2021, Emy Acha Paul and Sunny Thomas (both of whom are relatives of Kadambelil Paul Thomas, the
Managing Director and Chief Executive Officer and one of our promoters) resigned as directors of and relinquished
their shareholding in Lahanti and effective March 15, 2021, Samu John (a relative of Kadambelil Paul Thomas, the
Managing Director and Chief Executive Officer and one of our promoters), resigned as a director of Lahanti, as a result
of which Lahanti ceased to be a related party of our Bank. Lahanti is a Group Entity.

Set forth below are tables showing our payments to related parties for each of Fiscals 2023, 2022 and 2021 that were
more than 10% of an expense by type for Fiscals 2023, 2022 and 2021 combined and such payments made to those
related parties for the three months period ended June 30, 2023 and 2022.

Particulars Fiscal 2023 Fiscal 2022 Fiscal 2021 Total

(₹ in million, except percentages)
Business correspondent expense:
Business correspondent expense payable - - 1,950.30 1,950.30
to ESMACO [A]
Business correspondent expense payable - - 83.77% 17.33%
to ESMACO as a percentage of business
correspondent expense [B = A/E] (%)
Business correspondent expense payable - - 184.70 184.70
to Lahanti [C]
Business correspondent expense payable - - 7.93% 1.64%
to Lahanti as a percentage of business
correspondent expense [D = C/E] (%)
Business correspondent expense [E] 5,442.36 3,486.58 2,328.08 11,257.02
Interest expended on Tier II bonds:
Interest expended on Tier II bonds payable - - 95.40 95.40
to ESMACO [F]
Interest expended on Tier II bonds payable - - 38.90% 14.64%
to ESMACO as a percentage of interest
expended on Tier II bonds [G = F/J] (%)
Interest expended on Tier II bonds payable 22.50 0.10 - 22.60
to EFHPL [H]
Interest expended on Tier II bonds payable 12.30% 0.04% - 3.47%
to EFHPL as a percentage of interest
expended on Tier II bonds [I = H/J] (%)
Interest expended on Tier II bonds [J] 182.90 223.30 245.25 651.45
Interest expended on perpetual debt:
Interest expended on perpetual debt - - 62.40 62.40
payable to ESMACO [K]
Interest expended on perpetual debt - - 100.00% 33.33%
payable to ESMACO as a percentage of
perpetual debt [L = K/M] (%)
Interest expended on perpetual debt [M] 62.40 62.40 62.40 187.20
Corporate facility management service
charges:
Corporate facility management service - - 124.60 124.60
charges payable to ESMACO [N]
Corporate facility management service - - 97.75% 28.16%
charge payable to ESMACO as a
percentage of corporate facility
management service charge [O = N/P] (%)
Corporate facility management service 163.12 151.86 127.47 442.45
charge [P]
CSR expense:
CSR expense payable to Prachodhan [Q] 30.10 - 39.00 69.10

50
 Particulars Fiscal 2023 Fiscal 2022 Fiscal 2021 Total
(₹ in million, except percentages)
CSR expense payable to Prachodhan as a 36.44% - 54.51% 28.58%
percentage of CSR expense
[R = N/P] (%)
CSR expense payable to ESAF 42.50 87.60 32.55 162.65
Foundation [S]
CSR expense payable to ESAF 51.45% 100.00% 45.49% 67.28%
Foundation as a percentage of CSR
expense [T = N/P] (%)
CSR expense [U] 82.60 87.60 71.55 241.75
Royalty:
Royalty payable to ESAF Foundation [V] 84.95 14.36 26.85 126.16
Royalty payable to ESAF Foundation as a 100.00% 100.00% 100.00% 100.00%
percentage of Royalty
[W = V/W] (%)
Royalty [X] 84.95 14.36 26.85 126.16

Particulars Three months period ended Three months period ended

June 30, 2023 June 30, 2022
(₹ in million, except percentages)
Interest expended on Tier II bonds:
Interest expended on Tier II bonds payable to ESMACO [F] - -
Interest expended on Tier II bonds payable to ESMACO as a - -
percentage of interest expended on Tier II bonds
[G = F/J] (%)
Interest expended on Tier II bonds payable to EFHPL [H] 5.61 5.71
Interest expended on Tier II bonds payable to EFHPL as a 13.89% 12.51%
percentage of interest expended on Tier II bonds
[I = H/J] (%)
Interest expended on Tier II bonds [J] 40.40 45.63
Royalty:
Royalty payable to ESAF Foundation [K] 32.43 25.00
Royalty payable to ESAF Foundation as a percentage of royalty 100.00% 100.00%
[L = K/M] (%)
Royalty [M] 32.43 25.00

As at June 30, 2023, there were no loans or advances given by our Bank to its related parties. Our Bank has issued a
bank guarantee to ESAF Foundation amounting to ₹12.38 million as at June 30, 2023, which does not have any risk
on recoverability or our financial condition or results of operations, as such guarantee is secured by a deposit
maintained by ESAF Foundation with our Bank.

For a summary of the lease agreements our Bank has entered with related parties as of the date of this Red Herring
Prospectus, see “Our Business - Properties” on page 218.

For more details on the royalty payable to ESAF Foundation, see “–If we fail to successfully enforce our intellectual
property rights or are unable to renew our trademark licencing agreement, our business, results of operations and
cash flows would be adversely affected” and “History and Certain Corporate Matters – Key terms of other subsisting
material agreements” on pages 68 and 247, respectively.

For more details on our CSR expenses, see “Our Business- Corporate Social Responsibility” on page 219.

For a summary of the related party transactions into by our Bank for the three months period ended June 30, 2023 and
2022 and Fiscals 2023, 2022 and 2021, see “Offer Document Summary – Summary of related party transactions” on
page 25. For further details, see “Other Financial Information – Related Party Transactions” on page 371. We cannot
assure you that such transactions, individually or in the aggregate, will always be in the best interests of public
shareholders and will not have an adverse effect on our business, financial condition, results of operations and cash
flows.

18. We have entered into lease transactions with Lahanti Homes and Infrastructure Private Limited (“Lahanti
Homes”), a member of our Promoter Group, and we make payment of rent to such entity. We also pay certain
interest to our Promoter and members of Promoter Group, and royalty expenses to ESAF Foundation (formerly
known as Evangelical Social Action Forum) (“ESAF Foundation”).

We have entered into a lease transaction with Lahanti Homes and we make payment of rent to such entity. A summary
of such transactions made by our Bank to Lahanti Homes is set forth below:

51
 (₹ in million)
Particulars Three months period ended For the year ended
June 30, 2023 June 30, 2022 March 31, 2023 March 31, 2022 March 31, 2021
Lahanti Homes* 6.03 6.03 24.12 21.00 21.00
Note:
* Member of the Promoter Group.

Our Bank also pays interests on deposits, perpetual debt instruments (“PDI”) and sub-debt to our Promoters and certain
members of Promoter Group and royalty expenses to ESAF Foundation. A summary of such transactions entered into
by our Bank with ESAF Foundation, Promoters and members of our Promoter Group is set forth below:
(₹ in million)
Particulars Three months period ended For the year ended
June 30, 2023 June 30, 2022 March 31, March 31, March 31,
2023 2022 2021
Interest paid on deposits
ESMACO 21.18 17.98 54.48 30.03 27.50
EFHL 0.77 0.56 2.26 49.40 52.10
ESAF Foundation 1.94 1.33 6.26 4.90 3.20
Kadambelil Paul Thomas 0.18 0.17 0.67 0.80 0.70
Mereena Paul 0.10 0.06 0.10 0.10 0.10
Emy Acha Paul * 0.01 0.10 0.10 0.10
Alok Paul Thomas * * * * *
Abhishek Joe Paul - - * * *
Ashish Krish Paul - - * * *
Beena George * 0.02 0.09 * *
Interest paid on PDI
ESMACO 15.56 15.56 62.40 62.40 62.40
Interest paid on sub-debt
ESMACO 23.81 23.81 95.50 95.50 95.40
EFHL 5.61 5.71 22.50 0.10 -
Royalty expense
ESAF Foundation 32.43 25.00 84.95 14.36 26.85
* Amounts are below ₹0.05 million

While all such transactions with our Promoter, members of the Promoter Group and ESAF Foundation are legitimate
business transactions conducted on an arms’ length basis, we cannot assure you that we could not have achieved more
favourable terms had such arrangements not been entered into with related parties. Further, we cannot assure you that
these or any future similar transactions that we may enter into, individually or in the aggregate, will not have an adverse
effect on our business, results of operations and financial condition. Further, the transactions we have entered into and
any future similar transactions could potentially involve conflicts of interest which may be detrimental to our Bank
and the Shareholders. For details of the related party transactions, see “Restated Financial Information - Related
Party Transactions - Note 19-B-7” on page 363.

19. If we are unable to resolve our customers’ complaints to their satisfaction, they may decide to no longer bank with
us, which could have an adverse effect on our business, financial condition, results of operations and cash flows.

The customer complaints we receive pertaining to the area of ATM cards and debit cards include: transaction disputes
related to withdrawal of cash from ATM through ATM cards; and disputes related to debit card transactions carried
out at the merchant through point-of-sale machines. The grievances are on account of of the connectivity issues
between our Bank and the payment networks. The grounds of complaint on ATM cards/ debit cards consists of various
such disputes, such as, cash withdrawn from our Bank’s ATMs and other bank’s ATMs where cash was not received
fully or partially, or an account debited where the transaction was unsuccessful in POS machine etc.

All customer complaints pertaining to the issues in operating internet banking, mobile banking and other eletronic
transactions are categorized in “Internet banking/ mobile banking/ electronic banking” grounds of complaint. The
transaction disputes pertaining to the transactions done through internet/mobile banking/other electronic channels,
such as UPI or payment gateways, etc., has the highest number of complaints in this grounds of complaint. The issues
include: account debited for declined or unsuccessful transactions in Billdesk (payment gateways) IMPS and UPI
methods of fund transfer, request for refund in case of amount transferred to wrong account, credit not received for
the NEFT or RTGS electronic transactions, NEFT/RTGS wrong credit reversal request, etc.

The tables below set forth details of the complaints we have received from our customers during the periods and Fiscals
indicated.

52
 Three months period ended June 30, 2023
Grounds of Number of Number of % increase/ Number of Of 5, number of
complaints, (i.e., complaints complaints (decrease) in the complaints complaints
complaints relating to) pending at the received during number of pending at the pending beyond
beginning of the the period complaints end of the period 30 days
year received over the
previous period
(30 June 2022)
(1) (2) (3) (4) (5) (6)
ATM cards/ debit cards 42 972 (3.76%) 49 -
Internet banking/ mobile 178 1,477 76.67% 245 5
banking/ electronic
banking
Account opening/ - 8 (11.10)% - -
difficulty in operation of
accounts
Loans and advances - 7 133.33% - -
Others - 5 100.00% 1 -
Total 220 2,469 32.88% 295 5

Three months period ended June 30, 2022

Grounds of complaints Number of Number of % increase/ Number of Of 5, number of
(i.e., complaints complaints complaints (decrease) in complaints complaints
relating to) pending at the received during the number of pending at the pending beyond
beginning of the period complaints end of the 30 days
the year received over period
the previous
period (30 June
2021)
(1) (2) (3) (4) (5) (6)
ATM cards/ debit cards 43 1,010 (7.33%) 36 -
Internet banking/ mobile 40 836 (35.84%) 52 -
banking/ electronic
banking
Account opening/ 1 9 125.00% - -
difficulty in operation of
accounts
Loans and advances - 3 (40.00%) - -
Total 84 1,858 (22.77%) 88 -

Year ended March 31, 2023

Grounds of Number of Number of % increase/ Number of Of 5, number of
complaints, (i.e., complaints complaints (decrease) in the complaints complaints
complaints relating to) pending at the received during number of pending at the pending beyond
beginning of the the year complaints end of the year 30 days
year received over the
previous year
(1) (2) (3) (4) (5) (6)
ATM cards/ debit cards 43 3,475 (51.06%) 42 -
Internet banking/ mobile 40 4,122 (28.25%) 178 -
banking/ electronic
banking
Account 1 28 21.74% - -
opening/difficulty in
operation of accounts
Loans and advances - 14 7.69% - -
Levy of charges without - 8 100.00% - -
prior notice/ excessive
charges/ foreclosure
charges
Others - 11 10.00% - -
Total 84 7,658 (40.61%) 220 -

53
 Year ended March 31, 2022
Grounds of Number of Number of % increase/ Number of Of 5, number of
complaints, (i.e., complaints complaints (decrease) in the complaints complaints
complaints relating to) pending at the received during number of pending at the pending beyond
beginning of the the year complaints end of the year 30 days
year received over the
previous year
(1) (2) (3) (4) (5) (6)
ATM cards/ debit cards 150 7,101 40.61% 43 -
Internet banking/ mobile 68 5,745 153.53% 40 1
banking/ electronic
banking
Account opening/ - 23 (59.65%) 1 -
difficulty in operation of
accounts
Loans and advances - 13 (18.75%) - -
Para banking - 2 100.00% - -
Others - 10 233.33% - -
Total 218 12,894 74.41% 84 1

Year ended March 31, 2021

Grounds of Number of Number of % increase/ Number of Of 5, number of
complaints, (i.e., complaints complaints (decrease) in the complaints complaints
complaints relating to) pending at the received during number of pending at the pending beyond
beginning of the the year complaints end of the year 30 days
year received over the
previous year
(1) (2) (3) (4) (5) (6)
ATM cards/ debit cards 23 5,050 (2.13%) 150 2
Internet banking/ 10 2,266 177.00% 68 -
mobile banking/
electronic banking
Account opening/ - 57 (8.06%) - -
difficulty in operation of
accounts
Loans and advances - 16 (54.28%) - -
Cheques/ drafts/ bills - 1 100.00% - -
Others - 3 (76.90%) - -
Total 33 7,393 21.41% 218 2

If we are unable to resolve our customers’ complaints to their satisfaction, they may decide to no longer bank with us,
which could have an adverse effect on our business, financial condition, results of operations and cash flows.

For details on outstanding litigation and regulatory proceedings, see “-We and our Promoters are involved in certain
material legal proceedings, including including 862 criminal proceedings by our Bank with an aggregate amount
involved of ₹78.86 million, any adverse developments related to which could adversely affect our reputation, business
and cash flows on page 66.

We have not received any investor complaints since our Bank’s incorporation.

20. We do not have much of a presence in Bihar, Uttar Pradesh, West Bengal, Odisha or Rajasthan, which are among
the top 10 states for Microfinance Loans advances under management for the industry as at June 30, 2023, and we
do not have any customers in Jammu and Kashmir, Himachal Pradesh, and Manipur, which are three of the top
five most underpenetrated states as at June 30, 2023. As such, we may not be able to take advantage of the growth
opportunities in those states to the same extent as some of our competitors who have a presence or bigger presence
than us in those states and, as a result, the growth rate for our Microfinance Loans may be less than some of our
competitors.

Over 83% of the advances under management, which as defined in the CRISL MI&A Report is gross advances plus
advances originated and transferred under securitization, assignment and inter-bank participation certificates the
lenders continue to hold collection responsibilities for, for Microfinance Loans for the industry is concentrated in the
top 10 states with Bihar (14%), Tamil Nadu (14%) and Uttar Pradesh (10%), recording the highest shares as at June
30, 2023. (Source: CRISIL MI&A Report). In the last few years, many MFIs have opened branches in untapped
districts, thus increasing their penetration in geographies with an underserved population. CRISIL MI&A expects
growth in the MFI portfolio to come from states that have a relatively lower penetration. (Source: CRISIL MI&A
Report). The states with the lowest level of penetration for microfinance loans (calculated as the unique number of
unique microfinance loan borrowers by the estimated number of households as at June 30, 2023) were Jammu and
Kashmir, Himachal Pradesh, Andhra Pradesh, Manipur, and Telangana. (Source: CRISIL MI&A Report). These under
penetrated states in particular provide an opportunity for existing players to improve their penetration and market
share. (Source: CRISIL MI&A Report). Going forward, CRISIL MI&A expects penetration to deepen in most states,
54
 which will further drive growth of MFI in the coming years. (Source: CRISIL MI&A Report). For more details, see
“Industry Overview-Microfinance” on page 172.

Our business is concentrated in South India, particularly in the states of Kerala and Tamil Nadu. For more details, see
“Our business is concentrated in Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Telangana and the Union
Territory of Puducherry (collectively, “South India”), particularly in the states of Kerala and Tamil Nadu. As at June
30, 2023, 62.43% of our banking outlets are located in South India (including 43.43% in Kerala and 13.86% in Tamil
Nadu), 73.09% of our gross advances are from customers in South India (including 43.45% from Kerala and 22.14%
from Tamil Nadu) and 86.90% of our deposits are from banking outlets in South India (including 80.04% from Kerala
and 3.36% from Tamil Nadu). Any adverse change in the economy of South India, particularly in the states of Kerala
and Tamil Nadu, could have an adverse effect on our financial condition, results of operations and cash flows” on
page 37. We do not have much of a presence in Bihar, Uttar Pradesh, West Bengal, Odisha or Rajasthan, which are
among the top 10 states for Microfinance Loans advances under management as at June 30, 2023, and we do not have
any customers in Jammu and Kashmir, Himachal Pradesh, and Manipur. As such, we may not be able to take advantage
of the growth opportunities in those states to the same extent as some of our competitors who have a presence or bigger
presence than us in those states and, as a result, the growth rate for our Microfinance Loans may be less than some of
our competitors.

21. We are required to maintain a minimum cash reserve ratio (“CRR”) and statutory liquidity ratio (“SLR”). In the
event that the CRR or SLR requirements applicable to us are increased in the future, our ability to make advances
would be correspondingly reduced, which may adversely affect our results of operations and cash flows.

We are currently required to maintain a CRR of a minimum of 4.50% of our demand and time liabilities with the RBI,
on which no interest is paid. Due to the COVID-19 pandemic, from the fortnight beginning on March 27, 2021, the
RBI raised the minimum CRR from 3.00% to 3.50% of net demand and time liabilities, which was revised to 4.00%
from the fortnight beginning on May 22, 2021, and further revised to 4.50% from May 21, 2022. Further, the RBI vide
its circular dated August 10, 2023 directed banks to maintain an incremental CRR (“I-CRR”) of 10% on the increase
in net demand and time liabilities between May 19, 2023 and July 28, 2023. The RBI reviewed the I-CRR on September
8, 2023 and decided to discontinue the I-CRR in a phased manner. The release of funds is as follows: (i) September 9,
2023 – 25% of the I-CRR maintained; (ii) September 23, 2023 – 25% of the I-CRR maintained; and (iii) October 7,
2023 – 50% of the I-CRR maintained.

We are also currently required to maintain a SLR equivalent to 18.00% of our net demand and time liabilities in cash
and invested in Government and other RBI-approved securities.

The table below sets forth our CRR and SLR as the dates indicated, which were above the minimum CRR and SLR
required by the RBI as at the dates indicated.

Particulars As at June 30. 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
CRR 4.53% 4.54% 4.69% 3.39%
SLR 27.62% 24.04% 29.13% 35.23%

As an SFB, our net interest margin, which is the difference of interest earned and interest expended divided by the
average interest-earning assets (“Net Interest Margin”) calculated on the basis of a quarterly average and return on
net worth may be adversely affected, as we are required to set aside resources to meet the RBI’s CRR and SLR
requirements. Maintaining the CRR and SLR may impose liquidity constraints on us by reducing the amount of cash
available with us for lending. However, we have maintained a SLR that is higher than the minimum required by the
RBI in order to reduce our liquidity risk, which is as a prime risk in the banking industry. During the first phase of the
COVID-19 pandemic, we expected liquidity to be tight due to restrictions on economic activity. As a matter of
prudence, we availed the liquidity support offered by the RBI in the form of Special Repo at competitive interest rates,
which increased our SLR. The interest rates on the RBI liquidity availed during the end of Fiscal 2021 and in Fiscal
2022 and other refinance support availed during those Fiscals was almost at par / less that the yield on Government
securities. On account of the same, having a higher than required SLR did not have a material adverse effect on our
results of operations in the three months period ended June 30, 3023 and 2022 and Fiscals 2023, 2022 and 2021.

In the event that the CRR or SLR requirements applicable to us are increased in the future, our ability to make advances
would be correspondingly further reduced, which may adversely affect our business, financial condition, results of
operations and cash flows.

22. We are required to maintain a minimum total of capital to risk weighted asset ratio (“CRAR”). As we continue to
grow our loan portfolio and asset base, we may be required to raise additional capital in order to continue to meet
applicable CRARs with respect to our business. However, we cannot assure you that we will be able to raise adequate
additional capital in the future on terms favourable to us, or at all, which may adversely affect the growth of our
business.

As per the SFB Operating Guidelines and the Master Circular – Basel II Capital Regulations, we are required to
maintain a minimum CRAR, which is currently 15.00% of the risk weighted assets (“RWAs”), on a continuous basis
subject to any higher percentage as may be prescribed by the RBI from time to time, with Tier I capital of at least
55
 7.50% of the RWAs and Tier II capital of not more than 100.00% of the Tier I capital. The table below sets forth our
CRAR and Tier 1 capital, which were above the minimum CRAR and Tier I capital required by the RBI, as at the
dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
CRAR 20.56% 19.83% 18.64% 24.23%
Of which:
Tier 1 capital 18.95% 18.12% 16.16% 21.54%

Currently, the RBI does not require SFBs to provide any capital charge for operational risk or market risk. However,
there can be no assurance that the RBI will not require SFBs, including us, to provide capital charge for such risk in
future and to migrate to Basel III approach for credit risk.

As we continue to grow our loan portfolio and asset base, we may be required to raise additional capital in order to
continue to meet applicable CRARs with respect to our business. We cannot assure you that we will be able to raise
adequate additional capital in the future on terms favourable to us, or at all, which may adversely affect the growth of
our business.

23. As at June 30, 2023 and March 31, 2023, 2022 and 2021, our gross non-performing advances (NPAs) as a
percentage of gross advances were 1.65%, 2.49%, 7.83% and 6.70%, respectively, our gross NPAs less provisions
for NPAs (“net NPAs”) as a percentage of our gross advances less provisions for NPAs were 0.81%, 1.13%, 3.92%
and 3.88%, respectively, and the percentage of (total provisions towards gross NPAs as at the end of the period/fiscal
year plus outstanding balance of technical written off accounts as at the end of the period/fiscal year) divided by
(the sum of gross NPAs plus outstanding balance of technical written off accounts as at the end of the period/fiscal
year) (“Provision Coverage Ratio”) was 74.35%, 56.67%, 59.38% and 52.77%, respectively. If we are unable to
control the level of gross NPAs in our portfolio effectively or if we are unable to improve our Provision Coverage
Ratio, our business, financial condition, results of operations and cash flows could be adversely affected.

The following table sets forth details on our NPAs, advances, provisions, technical write-offs and Provision Coverage
Ratio as at and for the three months period ended June 30, 2022 and 2023 and as at and for the years ended March 31,
2023, 2022 and 2021.

Particulars As at and for the As at and for the year ended March 31,
three months period ended June 30,
2023 2022 2023 2022 2021
(₹ in million, except percentages)
Opening balance of gross NPAs at the 3,516.90 9,495.94 9,495.94 5,639.97 1,008.61
beginning of the period/year
Additions during the period/year 1,200.43 2,075.05 7,190.49 6,424.56 4,734.65
Less: Reductions during the period/year on 73.51 214.82 294.61 210.14 23.84
account of recovery
Less: Reductions during the period/year on 260.36 1,373.07 2,026.21 1,613.90 79.45
account of upgradations
Less: Reductions during the period/year on 2,007.32 2,639.51 4,965.95 744.55 -
account of write-offs (including technical
write-offs)
Less: Reductions during the period/year on - - 5,882.76 - -
account of sale of NPAs to an asset
reconstruction company
Gross NPAs at the end of the period/year 2,376.14 7,343.59 3,516.90 9,495.94 5,639.97
[A]
Total provision towards NPAs at the end of 1,220.00 2,949.38 1,937.96 4,936.38 2,474.19
the period/year [B]
Net NPAs [C = A – B] 1,156.14 4,394.21 1,578.94 4,559.56 3,165.78
Gross advances [D] 144,435.54 119,260.14 141,181.27 121,306.43 84,150.05
Net Advances [E = D – B] 143,215.54 116,310.76 139,243.31 116,370.05 81,675.86
Gross NPAs as a percentage of gross 1.65 6.16 2.49 7.83 6.70
advances [F = A / D] (%)
Net NPAs as a percentage of net advances 0.81 3.78 1.13 3.92 3.88
[G = C / E] (%)
Provision for standard assets(1) [H] 860.22 2,335.78 896.57 2,177.65 1,241.42
Total of provision towards NPAs and 2,080.22 5,285.16 2,834.53 7,114.03 3,715.61
provision towards standard assets(1) [I = B +
H]
Total of provision towards NPAs and 1.44 4.43 2.01 5.86 4.41
provision towards standard assets held as
percentage of gross advances (%) [J = I /
D](*)

56
 Particulars As at and for the As at and for the year ended March 31,
three months period ended June 30,
2023 2022 2023 2022 2021
(₹ in million, except percentages)
Total provision towards NPAs held as 51.34 40.16 55.10 51.98 43.87
percentage of gross NPAs (%) [K = B / A]
(*)

Outstanding balance of technical written- 2,130.80 4,219.28 127.13 1,728.03 1,063.33

off accounts [L]
Provision Coverage Ratio [M = 74.35 62.00 56.67 59.38 52.77
(B+L)/(A+L)] (%)
Notes:
1. The COVID-19 pandemic has adversely affected the world economy, including India. The extent to which the COVID-19 pandemic will
continue to adversely affect our operations and asset quality will depend on the future developments, which are uncertain. Considering the
prevailing uncertainty over the business due to COVID-19 pandemic, we held provisions of ₹163.30 million, ₹132.40 million, ₹660.70 million
and ₹404.00 million as at June 30, 2023 and March 31, 2023, 2022 and 2021, respectively, against the potential effect of COVID‐19 as
additional contingency provision on standard assets (other than provisions held for restructuring under COVID-19 norms). The provisions
we held were in excess of the RBI prescribed norms.
* Non-GAAP financial measure.

The adverse effects of COVID-19, including the lockdowns and restrictions, on some our borrowers meant that they
were unable to repay the advances we had made to them on time or at all. As a result, our gross NPAs increased from
₹5,639.97 million, or 68.37%, as at March 31, 2021 to ₹9,495.94 million as at March 31, 2022. Our gross NPAs
decreased by ₹5,979.04 million, or 62.96%, from ₹9,495.94 million as at March 31, 2022 to ₹3,516.90 million as at
March 31, 2023. This decrease was primarily due to (i) the sale of NPAs to an asset reconstruction company that
resulted in reductions of ₹5,882.76 million in Fiscal 2023 compared to nil in Fiscal 2022, and (ii) an increase in
reductions on account of write-offs (including technical write-offs) that resulted in reductions of ₹ 4,965.95 million in
Fiscal 2023 compared to ₹744.55 million in Fiscal 2022.

The table below sets forth, for the periods and years indicated, the ratio of gross NPAs added during the period/year
to the opening balance of standard advances at the beginning of the period/year (“Slippage Ratio”),

Particulars Three months period ended June 30, Year ended March 31,
2023 2022 2023 2022 2021
(₹ in million, except percentages)
Additions of NPAs during the period/year 1,200.43 2,075.05 7,190.49 6,424.56 4,734.65
[A]
Opening balance of standard advances at 137,664.37 111,810.49 111,810.49 78,510.08 65,056.50
the beginning of the period/year [B]
Slippage Ratio [C = A/B] (*) 0.87% 1.86% 6.43% 8.18% 7.28%
Note:
* Non-GAAP financial measure.

Our gross NPAs may increase in the future, due to numerous factors, including a new variant of COVID-19 emerging
or the effects of any new pandemics or epidemics, the occurrence of other natural disasters, adverse effects on our
borrowers’ businesses, a rise in unemployment, slow business growth, changes in customer behaviour and
demographic patterns and central and state government policies and regulations (including agricultural loan waivers
that may affect our agricultural portfolio in the short-term). While we believe that we have appropriate internal
controls, our credit monitoring and risk management policies and procedures may not be accurate, properly designed,
or appropriately implemented or complied with by our customers, and we could suffer material credit losses. In
addition, even if our policies and procedures are accurate and appropriate, we may be unable to anticipate future
economic or financial developments or downturns, which could lead to an increase in our gross NPAs. As at March
31, 2023, we used the services of 32 third-party collection agencies for collection of retail loans (except gold loans
and retail loans that are sourced through business correspondents) that are SMA1 onwards and non-performance by
them may lead to further delinquencies and an increase in gross NPAs. Our agreements with these third-party collection
agencies all expire on March 31, 2024. Furthermore, it was noted by the RBI in its risk assessment report for its on-
site inspection for supervisory evaluation undertaken from August 22, 2022 to September 2, 2022 and from September
12, 2022 to September 23, 2022 and an off-site analysis of the data and information furnished by our Bank, that there
was a lag in our system-based identification of NPAs and our core banking solution was not equipped to arrive at the
provisioning requirements in respect of NPAs. We have informed the RBI in our April 2023 compliance status for the
risk assessment report that provisioning requirements for NPAs are automated through a solution outside the core
banking solution and that we aim to ensure the straight-through processing for updating provisions into the core
banking solution is set up by September 30, 2023. However, our Bank is still in the process of implementing the same.

There can be no assurance that our Provision Coverage Ratio will not decline in the future. We may need to make
further provisions if there is dilution/ deterioration in the quality of our security or down-grading of the account or
recoveries with respect to such NPAs do not materialize in time or at all.

Accordingly, if we are unable to control the level of our gross NPAs, it would have an adverse effect on our financial
condition, results of operations and cash flows.

57
24. We may face asset liability mismatches, which could affect our liquidity and consequently may adversely affect our
financial condition, results of operations and cash flows.

We face liquidity risks due to mismatches in the maturity of our assets and liabilities. For details on the maturity profile
of our liabilities and assets as at June 30, 2023, see “Selected Statistical Information – Asset Liability Gap” on page
289. For details on the maturity pattern of certain items of our assets and liabilities as at June 30, 2023 and March 31,
2023, 2022 and 2021, as per the disclosure prepared in line with the RBI Master Direction on Financial Statements –
Presentation and Disclosures dated August 30, 2021 (as amended) see “Financial Statements – Note 19 - Notes to
Accounts Forming Part of Restated Financial Information – Disclosures as Laid Down by RBI Circulars – Note 2 -
Asset Liability Management” on page 328 . We may rely on funding options with a short-term maturity period for
extending long-term loans, which may lead to an asset liability mismatch for certain periods. Mismatches between our
assets and liabilities are compounded in case of pre-payments of the advances we grant to our customers. Further, asset
liability mismatches create liquidity surplus or liquidity crunch situations and depending upon the interest rate
movement, such situations may adversely affect our Net Interest Income. Although we have implemented procedures
and policies that are designed to mitigate our liquidity risks, if we are unable to obtain additional borrowings or renew
our existing credit facilities for matching tenures of our loan portfolio in a timely and cost-effective manner or at all,
it may lead to mismatches between our assets and liabilities, which could adversely affect our financial condition,
results of operations and cash flows. For details on how we manage our liquidity risks, see “Our Business – Risk
Management – Market Risk Management – Liquidity risk” on page 213.

25. The Previous Sole Statutory Auditors, namely, Deloitte Haskins & Sells, Chartered Accountants, have included
certain matters of emphasis in our audited financial statements for Fiscals 2022 and 2021.

The Previous Sole Statutory Auditors, namely, Deloitte Haskins & Sells, Chartered Accountants, have included certain
matters of emphasis in relation to our Bank in our audited financial statements for Fiscal 2022 and 2021. These include:

• An emphasis of matter in their audit report on our audited financial statements for Fiscal 2022, noting that
the potential impact of the continuing COVID-19 pandemic on our Bank’s results are dependent on future
developments which are uncertain. The Previous Sole Statutory Auditors’ opinion has not been modified in
respect of this matter.

• An emphasis of matter in their audit report on our audited financial statements for Fiscal 2021, noting that
our Bank has recognized additional contingency provision on loans to reflect the continuing uncertainties
arising from the COVID-19 pandemic. Such estimates are based on current facts and circumstances and may
not necessarily reflect the future uncertainties and events arising from the full impact of the COVID-19
pandemic. The Previous Sole Statutory Auditors’ opinion has not been modified in respect of this matter.

26. The RBI In-Principle Approval, RBI Final Approval, SFB Licensing Guidelines and SFB Operating Guidelines
require us to comply with certain restrictions relating to the Equity Shares.

The RBI In-Principle Approval, RBI Final Approval, SFB Licensing Guidelines and SFB Operating Guidelines require
us to comply with certain restrictions relating to the Equity Shares. Some of the material restrictions are summarised
below:

• We are required to be owned and controlled by residents of India in accordance with the Foreign Exchange
Management Act, 1999 (“FEMA”) at all times from the date of commencement of our business, which we
are in compliance with;

• Our Promoters are required to reduce their shareholding to 26.00% of our paid-up Equity Share Capital or
voting rights after the completion of 15 years from the commencement of our business operations which was
on March 10, 2017 as per the Reserve Bank of India Guidelines on Acquisition and Holding of Shares dated
January 16, 2023 read with Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in
Banking Companies) Directions, 2023. During the period prior to the completion of the 15 years, our
Promoters may be allowed to hold a higher percentage of shareholding as part of the licensing conditions or
as part of the shareholding dilution plan submitted by our Bank and approved by the RBI with such conditions
as it deems fit. Our Promoters hold 69.40% of our Pre-Offer paid-up Equity Share capital and following the
Offer (assuming all of the Equity Shares offered in the Offer are sold), our Promoters will hold [●]% of our
Post-Offer paid-up Equity Share capital).

• We are required to maintain a minimum paid-up Equity Share capital and a minimum net worth of ₹1.00
billion, which we were in compliance with as at June 30, 2023 and March 31, 2023, 2022, and 2021.

• No Shareholder will be entitled to exercise voting rights in excess of 26.00% of the total voting rights of all
Shareholders.

• An investor proposing to acquire shares in our Bank (directly or indirectly) where the aggregate holding of
such investor, their relatives, associate enterprise or persons acting in concert, entitles the investor to hold
5.00% or more of the paid-up share capital of our Bank or 5.00% or more of the voting rights in our Bank
58
 will need to apply for the RBI’s approval. For further details, see “-Investors will not, without the Reserve
Bank of India’s (RBI) prior approval, be able to acquire Equity Shares if such acquisition would result in an
individual or group holding 5.00% or more of our share capital or voting rights directly or indirectly.
Further, no Shareholder will be permitted to exercise voting rights in excess of 26.00% of the total voting
rights of our Bank” on page 91.

• The Equity Shares were required to be listed on a stock exchange in India before July 31, 2021, which we
were unable to comply with. For further details, see “ –We could be subject to various sanctions and penalties
by the Reserve Bank of India (RBI) for failing to comply with the requirement to list the Equity Shares on a
stock exchange in India before July 31, 2021” on page 37.

27. We are subject to inspections by various regulatory authorities including Pension Fund Regulatory and
Development Authority (“PFRDA”), Insurance Regulatory and Development Authority of India (IRDAI) and
National Pension System Trust (“NPS Trust”) and there have been instances of delays in submission of compliance
certificates as required by the regulators under the applicable laws. Non-compliance with the observations of such
regulators could adversely affect our business, financial condition, results of operations and cash flows.

We are subject to inspections by various regulatory authorities, including the PFRDA, IRDAI and NPS Trust. In
addition, there have been instances of delays in the submission of compliance certificates as required under the Pension
Fund Regulatory and Development Authority (Aggregators) Regulations, 2015. Further, pursuant to the audit and
inspection report for Fiscal 2017 issued by the auditor appointed by the NPS Trust and the subsequent letters issued
by the NPS Trust, EFHPL, our corporate promoter, and our Bank were directed to, among other things, compensate
1,771 subscribers for the delay in uploading the subscriber contribution file (“SCF”) and transferring funds to the
trustee bank. Accordingly, EFHPL was required to compensate its NPS subscribers for an amount aggregating to
₹142,470. Pursuant to its letter dated January 2, 2020, EFHPL has communicated to the NPS Trust that out of this total
compensation amount of ₹142,470 payable to 1,771 subscribers, a compensation amount of ₹134,600, pertaining to
1,686 subscribers has been paid by EFHPL and that the remaining amount has not been paid owing to technical
difficulties, i.e., completion of 60 years of age of certain subscribers or completion of withdrawal process by certain
subscribers. Accordingly, EFHPL, our corporate promoter has sought guidance from the NPS Trust on how to
complete this process. Based on the approval from the NPS Trust, EFHPL sent a letter dated July 28, 2020 to the
PFRDA informing them that, out of the remaining amount of ₹7,870 pertaining to 85 subscribers, a compensation
amount of ₹5,860 pertaining to 60 subscribers has been transferred. Subsequently, EFHPL sent a letter dated March
24, 2021 to the NPS Trust, stating that the remaining compensation amount of ₹2,010 pertaining to 25 subscribers has
been transferred and the withdrawal process has been completed. We are yet to receive written communication from
PFRDA in this regard.

We cannot assure you that such regulators will not issue further observations in this regard or any other observations
under the applicable laws and any non-compliance with such observations could lead to sanctions and penalties being
imposed by such regulators on our Bank, which could materially and adversely affect our reputation, business,
financial condition, results of operations and cash flows.

28. The ratio of our operating expenses to the sum of our net interest income, which is defined as interest earned minus
interest expended (“Net Interest Income”), and other income (together with Net Interest Income, “Operating
Income”) (the “Cost to Income Ratio”) was 55.69%, 54.65%, 57.93%, 63.69%, 60.24% for the three months period
ended June 30, 2023 and 2022 and Fiscals 2023, 2022 and 2021, respectively. An increase our Cost to Income Ratio
will adversely affect our financial condition, results of operations and cash flows.

The table below sets forth the details of our Cost to Income Ratio for the periods and Fiscals indicated.

Particulars Three months period ended June 30, Year ended March 31,
2023 2022 2023 2022 2021
(₹ in million, except for percentages)
Operating expenses [A] 3,778.13 2,714.82 12,305.41 8,628.71 6,318.55
Of which:
Business correspondent expenses 1,783.09 1,254.60 5,442.36 3,486.58 2,328.08
Payments to and provisions for employees 798.73 609.96 2,779.98 2,321.37 1,877.84
Rent, taxes and lighting 199.06 166.87 748.01 600.21 420.39
Depreciation on Bank’s property 122.69 100.98 417.89 327.74 285.73
Interest earned [B] 8,987.46 6,903.13 28,536.59 19,399.25 16,411.73
Interest expended [C] 3,132.93 2,415.51 10,173.19 7,927.86 7,195.82
Net Interest Income(*) [D = B – C] 5,854.53 4,487.62 18,363.40 11,471.39 9,215.91
Other income [E] 930.29 480.11 2,879.13 2,075.83 1,272.48
Operating Income(*) [F = D + E] 6,784.82 4,967.73 21,242.53 13,547.22 10,488.39
Cost to Income Ratio(*) [G = A / F] (%) 55.69% 54.65% 57.93% 63.69% 60.24%
Note:
(*) Non-GAAP financial measure.

Our material fixed operating expenses comprise: (i) payments to and provisions for employees; (ii) rent, taxes and
lighting; and (iii) depreciation on Bank’s property. Our business correspondent expenses are primarily variable in
59
 nature as we pay our business correspondents a variable fee based on collections, which is the largest part of their
compensation, and a fixed fee for the acquisition and maintenance of each customer.

Cost to Income Ratio is an important parameter in measuring how efficient a bank’s operations are. A higher Cost to
Income Ratio results in lower profitability and vice-versa. An increase in our Cost to Income Ratio will adversely
affect our financial condition, results of operations and cash flows.

29. Our non-convertible debentures are listed on Bombay Stock Exchange Limited (BSE) and we are subject to rules
and regulations with respect to such listed non-convertible debentures. If we fail to comply with such rules and
regulations, we may be subject to certain penal actions, which may have an adverse effect on our business, results
of operations, financial condition and cash flows.

Our non-convertible debentures are listed on the debt segment of the BSE. Details of our listed convertible debentures
outstanding as at September 30, 2023 are as set out in the table below.

ISIN Amount (₹ in million) Date of Listing

INE818W08016 200.00 December 30, 2017
INE818W08032 400.00 June 1, 2018
INE818W08024 200.00 March 28, 2018
INE818W08099 850.00 September 4, 2023
Total 1,650.00

We are required to comply with various applicable rules and regulations, including the Securities and Exchange Board
of India (Issue and Listing of Debt Securities) Regulations, 2008 and Listing Regulations, in terms of our listed non-
convertible debentures. In the past, there have been delays in complying with certain provisions of the Listing
Regulations. For instance, in January 2020, the Department of Debt and Hybrid Securities of SEBI observed, among
other things, that there was a delay in the submission of compliance certificate to the stock exchange as required under
Regulation 7(3) of the Listing Regulation for the half year ended September 30, 2018 and for the year ended March
31, 2019, and a delay in the submission of specified line items along with the half yearly financial results for the half
year ended September 30, 2018 as required to be submitted under Regulation 52(4) of the Listing Regulations, along
with the signed certificate from the debenture trustee as required under Regulation 52(5) of the Listing Regulations.
Additionally, our Bank submitted an undertaking to BSE as required under Regulation 52(7) of the Listing Regulations
for the financial year ended March 31, 2018 on March 10, 2020. There was an inadvertent delay in submitting such
undertaking. While no actions were taken against us in relation to the foregoing, we cannot assure you that SEBI or
any other regulatory authority will not take any actions against us or make similar observations in the future.

There have been no instances since April 1, 2020 where we have failed to comply with the rules and regulations
applicable to our listed non-convertible debentures. If we fail to comply with such rules and regulations, we may be
subject to certain penal actions, including, without limitation, restrictions on the further issuance of securities and the
freezing of transfers of securities, which may have an adverse effect on our business, results of operations, financial
condition and cash flows.

30. The ratio of (interest earned minus interest expended) (“Net Interest Income”) to (total interest-earning assets
(comprising interest-earning advances, interest earning investments (comprising government securities, treasury
bills and other interest earning securities) and interest-earning Balance with the Reserve Bank of India and other
Inter-Bank Funds) calculated on the basis of the average of the opening balance at the start of the relevant
period/fiscal year and the closing balance as at quarter end for all quarters in the relevant period/fiscal year)
(“Average Total Interest-Earning Assets”) was 3.08% (not annualized), 2.69% (not annualized), 10.67%, 8.64%
and 8.98% for the three months period ended June 30, 2023 and 2022 and Fiscals 2023, 2022 and 2021, respectively.
Volatility in interest rates could cause our Net Interest Margin to decline and adversely affect our results of
operations and cash flows. In addition, an increase in interest rates results in a decrease in the value of our fixed
income investments and as a result of the Reserve Bank of India (RBI) mandated reserve requirements, we are also
more structurally exposed to this risk than banks in many other countries.

Our results of operations are substantially dependent upon the amount of our Net Interest Income. Our Net Interest
Income is significantly dependent on our average performing assets for a particular period and our Net Interest Margin.
The table below sets forth our Net Interest Income and Net Interest Margin for the periods/Fiscals indicated.

Particulars Three months period ended June 30, Year ended March 31,
2023 2022 2023 2022 2021
(₹ in million, except for percentages)
Interest earned [A] 8,987.46 6,903.13 28,536.59 19,399.25 16,411.73
Interest expended [B] 3,132.93 2,415.51 10,173.19 7,927.86 7,195.82
Net Interest Income(*) [C] = [A] - [B] 5,854.53 4,487.62 18,363.40 11,471.39 9,215.91
Average Total Interest-Earning Assets(1) 190,088.89 166,755.91 172,093.03 132,794.66 102,678.60
[D]
Net Interest Margin(2)(*) (%) [E = [C/D] 3.08(3) 2.69(3) 10.67 8.64 8.98
Notes:

60
(1) Average Total Interest-Earning Assets are total interest-earning assets (comprising interest-earning advances, interest earning investments
(comprising government securities, treasury bills and other interest earning securities) and interest-earning Balance with the Reserve Bank
of India and other Inter-Bank Funds) calculated on the basis of the average of the opening balance at the start of the relevant period/fiscal
year and the closing balance as at quarter end for all quarters in the relevant period/fiscal year (“Average Total Interest-Earning Assets”).
(2) Net Interest Margin, which is a non-GAAP financial measure, is the ratio of Net Interest Income to Average Total Interest-Earning Assets.
(3) Not annualized.
(*) Non-GAAP financial measure.

Our interest earning assets are our advances and investments. Our interest-bearing liabilities are our deposits and our
borrowings. The table below sets forth the amount and percentage of our advances, investments, deposits and
borrowings on fixed or floating interest rates as at the date provided.

Particulars As at June 30, 2023

Floating interest rates Fixed interest rates
Amount % on floating Amount % on fixed
(₹ in million) interest rates (₹ in million) interest rates
Gross Advances 3,333.05 2.31 141,102.49 97.69
Investments - - 48.821.17 100.00
Deposits - - 156,558.54 100.00
Borrowings - - 27,391.25 100.00

We have a very high percentage of fixed interest rate advances as at June 30, 2023 as the majority of our advances are
Microfinance Loans and Micro Loans, which have a maturity of less than three years. In line with the RBI guidelines,
Microfinance Loans are given as fixed interest rate loans and we follow the same practice for Micro Loans. Golds loan
have a maturity of up to one year and are also fixed rate loans as per RBI guidelines.

Interest rates are highly sensitive and volatility in interest rates could be a result of many factors, including the RBI’s
monetary policies, deregulation of the financial services sector in India, domestic and international economic and
political conditions, inflation and economic policies in India.

In a rising interest rate environment, if the yield on our interest-earning assets does not increase simultaneously with
or to the same extent as our cost of funds, and conversely, in a declining interest rate environment, if our Cost of Funds
does not decline simultaneously or to the same extent as the yield on our interest-earning assets, our Net Interest
Income and Net Interest Margin would be adversely affected. While any reduction in the interest rates we pay on our
deposits and borrowings may be passed on to customers for our loans, we are unable to pass on any increase in interest
rates at which we lend to our customers who have existing loans on fixed interest rates. Competitive pressure may also
require us to reduce the interest rates at which we lend to our customers without a proportionate reduction in interest
rates at which we raise funds. Our customers may also prepay their loans to take advantage of a declining interest rate
environment. An increase in the interest rates charged by us on our advances could result in our customers, particularly
those with variable interest rate loans, prepaying their loans if less expensive loans are available from other sources.

In addition, as a result of the RBI-mandated reserve requirements, we are also more structurally exposed to interest
rate risk with respect to fixed income securities than banks in many other countries. Under the RBI regulations, our
liabilities are subject to the SLR requirement such that a minimum specified percentage, currently 18.00%, of a bank’s
net demand and time liabilities must be invested in cash, Government securities and other RBI approved securities.
These securities generally carry fixed coupons and, in an environment of rising interest rates, the value of Government
securities and other fixed income securities decline. The table below sets forth our fixed rate securities as a percentage
of our SLR portfolio as at the date indicated.

Particulars As at June, 2023

Amount (₹ in million) % of SLR portfolio
SLR portfolio(1) 47,687.86 100.00
Of which:
Fixed rate securities 47,687.86 100.00
Note:
(1) SLR portfolio includes investments in Government securities.

In addition to our SLR portfolio, we also invest in other fixed income securities. For further details, see “Selected
Statistical Information-Investment Portfolio” on page 285.

Investments are classified into three categories at the time of purchase as per guidelines issued by RBI: held to maturity
(“HTM”); available for sale (“AFS”); and held for trading (“HFT”). Investments we intend to hold until maturity are
classified as HTM category. Investments that are held principally for resale within 90 days from the date of purchase
are classified under HFT category. Investments which are not classified in either of the above two categories are
classified under AFS category.

HTM securities are carried at their acquisition cost. Any premium on acquisition of government securities is amortised
over the remaining maturity of the security on a straight-line basis. Any diminution, other than temporary, in the value
of such securities is provided for.

61
 AFS and HFT securities are valued periodically as per RBI guidelines. The market/fair value for the purpose of
periodical valuation of quoted investments included in the AFS and HFT categories is measured with respect to the
market price of the scrip as available from the trades/quotes on the stock exchanges, SGL account transactions, price
list of RBI or prices periodically declared by Financial Benchmark India Pvt. Ltd. (“FBIL”), based on the relevant
RBI circular.

The valuation of non-SLR securities, other than those quoted on the stock exchanges, wherever linked to the yield to
maturity rates, shall be with a mark-up (reflecting associated credit risk) over the yield to maturity rates for government
securities put out by the Fixed Income Money Market and Derivatives Association of India/FBIL. Securities are valued
scrip wise and depreciation/appreciation aggregated for each category. Net appreciation in each basket if any, being
unrealised, is ignored, while net depreciation is provided for.

Treasury bills and certificate of deposits, being discounted instruments, are valued at carrying cost. Non-performing
investments are identified and valued based on RBI guidelines.

With a view to building up of adequate reserves to protect against increase in yields, in accordance with RBI guidelines,
we started an Investment Fluctuation Reserve with effect from Fiscal 2019. The amount transferred to the Investment
Fluctuation Reserve is not less than lower of the following:

i. net profit on sale of investments during the year or

ii. net profit for the year less mandatory appropriations, until the amount of Investment Fluctuation Reserve is
at least 2 percent of the HFT and AFS portfolio, on a continuing basis.

The amount held in the Investment Fluctuation Reserve shall be utilized by way of draw down, in accordance with the
provisions of the RBI guidelines.

The table below shows the Investment Fluctuation Reserve as at the dates indicated.

Particulars As at June 30, As at March 31, As at March 31, As at March 31,

2023 2023 2022 2021
(₹ in million)
Investment Fluctuation Reserve 321.42 321.42 261.94 41.27

The table below shows our provisions for investments for the periods/Fiscals indicated.

Particulars Three months period ended June 30, Year ended March 31,
2023 2022 2023 2022 2021
(₹ in million)
Provisions for investments 967.74 410.39 1,019.99 239.35 6.88

Our provisions for investments increased by 135.81% from ₹410.39 million for the three months period ended June
30, 2022 to ₹967.74 million for the three months period ended June 30, 2023 due to increasing interest rates, which
resulted in the depreciation of the value of our fixed income investments. Our provisions for investments increased by
326.15% from ₹239.35 million for Fiscal 2022 to ₹1,019.99 million for Fiscal 2023 due to increasing interest rates,
which resulted in the depreciation of the value of our fixed income investments.

There can be no assurance that we will be able to adequately manage our interest rate risk in the future, which could
have an adverse effect on our financial condition, results of operations and cash flows.

31. At least 25.00% of our total banking outlets, which comprises our Branches and business correspondent–operated
banking outlets, are required to be located in Unbanked Rural Centres. This requirement is only applicable to small
finance bank within the meaning of SFB licensing guidelines (SFB).

At least 25.00% of our total banking outlets, which comprises our Branches and business correspondent–operated
banking outlets, are required to be located in unbanked rural centres. Left Wing Extremism affected districts as notified
by the Government are considered as equivalent to unbanked rural centres as per RBI guidelines. The table below sets
forth the number of our banking outlets in unbanked rural centres and as a percentage of our total banking outlets as
at the dates indicated.

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 Banking As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Outlets Number of % of total Number of % of total Number of % of total Number of % of total
banking banking banking banking banking banking banking banking
outlets outlets outlets outlets outlets outlets outlets outlets
(actual (actual (actual (actual
number, number, number, number,
not in not in not in not in
million) million) million) million)
Unbanked 187 26.71 187 26.71 174 30.26 172 31.27
rural
centres(1)
Total 700 100.00 700 100.00 575 100.00 550 100.00
Note:
(1) Includes Left Wing Extremism affected districts as notified by the Government, which are equivalent to unbanked rural centres as per RBI
guidelines.

32. COVID-19 has had and could continue to have an adverse effect on our business, financial condition, results of
operations and cash flows.

The World Health Organization (“WHO”) declared the outbreak of COVID-19 a global pandemic on March 11, 2020.
The Government of India initiated a nation-wide lockdown from March 25, 2020 for three weeks on all services except
for essential services (which included banking outlets and ATMs), which was extended to May 31, 2020. Although
the nation-wide lockdown was lifted on June 1, 2020, restrictions on non-essential activities and travel were imposed
until August 31, 2020 in multiple states across specific districts that were witnessing increases in COVID-19 cases.
On September 1, 2020, the Government’s notification dated August 29, 2020 that all states to allow economic activities
to function normally while continuing with restrictions only in containment zones came into effect.

India witnessed a second wave of COVID-19 at the end of February 2021, leading to state governments imposing
curfews and lockdowns in an attempt to control the spread of COVID-19. Since March 25, 2020, we have closed down
our Branches at different points of time in order to comply with state and local COVID-19-related regulations. In
particular, on May 6, 2021, the Government of Kerala notified a state-wide lockdown from May 8, 2021 to May 16,
2021, which was extended until July 15, 2021, during which banks were permitted to remain open for a limited number
of hours per day, on alternate days (i.e., Monday, Wednesday and Friday), with minimal staff. Our banking outlets in
Kerala were permitted to operate on all five weekdays from July 15, 2021 onwards. The table below sets forth the
number of our banking outlets located in and outside Kerala as at the date provided.

Particulars As at June 30, 2023

Number of banking outlets % of total banking outlets
Banking outlets in Kerala 304 43.43%
Banking outlets outside Kerala 396 56.57%
Total banking outlets 700 100.00%

Pursuant to the RBI’s circulars, we granted a full or partial moratorium on the payment of all loan instalments falling
due between March 1, 2020 and August 31, 2020 to all eligible borrowers who requested the moratorium. As per the
RBI’s directions, loans that benefited from the moratorium were not classified as NPAs if the accounts had any
instalments that fell overdue during the moratorium period. The RBI circulars in relation to the moratorium required
us to make provisions of up to 10.00% on loans that are subject to moratorium and that were overdue but standard as
at February 29, 2020.

The Supreme Court of India in Gajendra Sharma v. Union of India & Anr., vide its interim order dated September 3,
2020 directed banks that accounts that were not declared as NPAs as at August 31, 2020 shall not be declared as NPAs
until further orders. On March 23, 2021, in Small Scale Industrial Manufactures Association v. Union of India and
others, the Supreme Court directed that the interim order granted on September 3, 2020 to not declare the accounts of
borrowers as NPAs stands vacated. As per the RBI’s notification dated April 7, 2021, for the period commencing
September 1, 2020, asset classification for all such accounts shall be as per the applicable RBI asset classification
norms.

On August 6, 2020, the RBI issued a circular that permitted lenders to implement a resolution plan (“Resolution
Framework 1.0”), along with asset classification benefits, for eligible corporate and individual borrower segments.
Lenders had to ensure that the resolution facility was provided only to borrowers impacted by COVID-19. The
resolution facility was applicable for accounts classified as standard and not in default for more than 30 days as at
March 1, 2020. The resolution plans had to be finalized by December 31, 2020 and implemented within 180 days from
the date of invocation. Restructuring of loans was also allowed for MSMEs. The table below sets forth certain details
of our advances under Resolution Framework 1.0 as at the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
(₹ in million, except for percentages)
Gross advances under 129.70 143.50 169.35 192.60
Resolution Framework 1.0
[A]
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 Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
(₹ in million, except for percentages)
Gross advances [B] 144,435.54 141,181.27 121,306.43 84,150.05
Gross advances under 0.09 0.10 0.14 0.23
Resolution Framework 1.0
as percentage of gross
advances [C] = [A] / [B] (%)

On May 5, 2021, the RBI announced the resolution framework 2.0 (“Resolution Framework 2.0”) to protect
individuals and MSMEs from the adverse effect of the second wave of COVID-19. The Resolution Framework 2.0
was applicable for accounts classified as ‘Standard’ as at March 31, 2021, wherein individuals and MSMEs having an
aggregate loan exposure of up to ₹250 million who have not availed restructuring under any of the earlier restructuring
frameworks and who were classified as ‘Standard’ as on March 31, 2021 were allowed to restructure their loans.
Restructuring under the proposed framework was able to be invoked up to September 30, 2021 and had to be finalised
and implemented within 90 days after invocation of the resolution process (with the last date to implement the
restructuring for banks being December 31, 2021). The Resolution Framework 2.0 included rescheduling of loan
equated monthly instalments and the granting of a moratorium as per our Board-approved policy. In accordance with
Resolution Framework 2.0 and our Board approved policy, our Bank restructured loans that were standard as at March
31, 2021. For the purpose of restructuring, the balance outstanding as at the date of restructuring includes interest
accrued as at such date, which is considered to be residual debt, and the equated monthly instalment is fixed for such
debt by extending the tenure of the loan, if required. Our Bank also provided initial holidays at the customer’s request
to start repaying their loan as per Resolution Framework 2.0. Our Bank restructured 706,061 accounts amounting to
₹16,735.77 million as per Resolution Framework 2.0. The table below sets forth certain details of our advances under
Resolution Framework 2.0 as at the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022
(₹ in million, except for percentages)
Gross advances under Resolution Framework 2.0 [A] 562.00 1,110.31 9,115.67
Gross advances [B] 144,435.54 141,181.27 121,306.43
Gross advances under Resolution Framework 2.0 as 0.39% 0.79% 7.51%
percentage of gross advances [C] = [A] / [B] (%)
Gross standard advances under Resolution 475.72 868.33 5,515.25
Framework 2.0
Provision for gross standard advances under 72.44 130.73 850.47
Resolution Framework 2.0
Gross NPAs under Resolution Framework 2.0 86.28 241.98 3,600.42
Provision for NPAs under Resolution Framework 2.0 49.09 92.68 929.88

For further details on loans restructured under Resolution Framework 1.0 and Resolution Framework 2.0, as per the
disclosure prepared in line with the RBI Master Direction on Financial Statements – Presentation and Disclosures
dated August 30, 2021 (as amended) see “Financial Statements – Note 4.8 – Disclosure under Resolution framework
for Covid-19 related stress” on page 355.

On October 23, 2020, the Department of Financial Services, Ministry of Finance, Government of India announced the
scheme for grant of ex-gratia payment of difference between compound interest and simple interest for six months to
borrowers in specified loan accounts, which mandates lending institutions, including our Bank, to make ex-gratia
payments to borrowers with less than ₹20.00 million in total borrowings at all lending institutions by crediting, on or
before November 5, 2020, the difference between simple interest and compound interest for the period between March
1, 2020 and August 31, 2020. Lending institutions could then make claims for reimbursement from the Government
on or before December 15, 2020, which we did. Our claim for such reimbursement was ₹165.74 million for Fiscal
2021, which was reimbursed by the Government in Fiscal 2022.

The effects of COVID-19, including lockdowns and restrictions, led to significant disruptions for individuals and
businesses, including us, and adversely affected our operations and our business correspondents’ operations, including
lending, collection of loan repayments and the acceptance of deposits, thereby adversely affecting our financial
condition, results of operations and cash flows.

We terminated our agreement with Margdarshak, pursuant to which it acted for us as a business correspondent,
effective May 31, 2021, because they were undergoing liquidity issues due to the COVID-19 pandemic and were
unable to adequately manage their loan portfolio for us, which was transferred to Lahanti on June 1, 2021. For further
details, including details on the checks and balances put in place to avoid such instances in the future, see “-Our
business correspondents (which includes ESAF Swasraya Multi-State Agro Co-operative Society Limited (ESMACO),
a Promoter Group and Group Entity, and Lahanti Lastmile Services Private Limited (Lahanti), a Group Entity)
sourced or serviced 74.75%, 75.53%, 83.35% and 84.78% of our gross advances as at June 30, 2023, and March 31,
2023, 2022 and 2021. Our income contributed by business correspondents represented 77.13%, 79.02%, 76.06%,
77.93% and 80.97% of our total income for the three months period ended June 30, 2023 and 2022 and Fiscals 2023,
2022 and 2021, respectively. All of our business correspondents work for us on a non-exclusive basis. If any of our
business correspondents, and in particular ESMACO, prefer to promote our competitors’ loans over our loans or the

64
agreements between us and them are terminated or not renewed, it would adversely affect our business, financial
condition, results of operations and cash flows” on page 45.

The adverse effects of COVID-19, including the lockdowns and restrictions, on some our borrowers meant that they
were unable to repay the advances we had made to them on time or at all. As a result, our gross NPAs increased by
₹3,855.97 million, or 68.37%, from ₹5,639.97 million as at March 31, 2021 to ₹9,495.94 million as at March 31, 2022.
Our gross NPAs decreased by ₹5,979.04 million, or 62.96%, from ₹9,495.94 million as at March 31, 2022 to ₹3,516.90
million as at March 31, 2023. This decrease was primarily due to (i) the sale of NPAs to an asset reconstruction
company that resulted in reductions of ₹5,882.76 million in Fiscal 2023 compared to nil in Fiscal 2022, and (ii) an
increase in reductions on account of write-offs (including technical write-offs) that resulted in reductions of
₹4,965.95 million in Fiscal 2023 compared to ₹744.55 million in Fiscal 2022.

Considering the prevailing uncertainty over the business due to COVID-19 pandemic, we held provisions of ₹163.30
million, ₹132.40 million, ₹660.70 million and ₹404.00 million as at June 30, 2023 and March 31, 2023, 2022 and
2021, respectively, against the potential effect of COVID‐19 as additional contingency provision on standard assets
(other than provisions held for restructuring under COVID-19 norms).

The COVID-19 pandemic adversely affected our disbursements in Fiscal 2021. The table below shows our
disbursements for the periods and Fiscals indicated.

Particulars Three months period ended June 30, Year ended March 31,
2023 2022 2023 2022 2021
(₹ in million)
Disbursements 45,093.40 28,684.49 146,906.51 119,452.20 62,863.74

As a result of the second wave of the pandemic, our collection efficiency was adversely affected in April 2021
compared to the previous three months and was materially and adversely affected in May 2021. The third wave of the
pandemic did not have a material adverse effect on our collection efficiency.

For further details on the effects of COVID-19, including the lockdowns and restrictions, on our business and on our
financial condition, results of operations and cash flows as at and for the three months period ended June 30, 2023 and
2022 and Fiscals 2023, 2022 and 2021, see “Management’s Discussion and Analysis of Financial Condition and
Results of Operations – Significant Factors Affecting our Financial Condition, Results of Operations and Cash Flows
– Effects of the COVID-19 Pandemic” on page 381.

The previous sole statutory auditors of our Bank, namely, Deloitte Haskins & Sells, Chartered Accountants (the
“Previous Sole Statutory Auditors”) have included an emphasis of matters in their audit reports on our audited
financial statements for Fiscals 2022 and 2021, noting that the extent to which the COVID-19 pandemic will impact
our operations and asset quality will depend on future developments, which are highly uncertain.

The extent to which the COVID-19 pandemic adversely affects our businesses, results of operations, financial
condition and cash flows in the future will depend on future developments that cannot be predicted, including the
scope and duration of the pandemic and in particular the emergence of any new strains of COVID-19 that are more
virulent, future actions taken by governmental authorities, central banks and other third parties in response to the
pandemic, and the effects on our customers, counterparties, employees and third-party service providers. In addition
to the risks discussed above, the COVID-19 pandemic exposes us to the following risks, the occurrence of any of
which could have an adverse effect on our business, financial condition, results of operations and cash flows:

• A decrease in cash flows and income of borrowers and the value of savings of borrowers could cause
borrowers to default on repayments of advances, thereby increasing our NPAs and our provisions, and result
in a decrease of eligible potential borrowers for new loans, thereby adversely affecting new loans.

• There could be a decrease in demand for our products due to lockdowns or other travel restrictions, an
economic downturn or illness.

• Our operations and the operations of our business correspondents and other third-party service providers
could be disrupted by social distancing, split-team, work from home and quarantine measures. As at March
31, 2023, we had 20 business correspondents and if their operations are disrupted, they may be unable to
collect the cash from borrowers for the repayment of Microfinance Loans and Other Micro Loans or source
new borrowers for such loans. In addition, due to the foregoing, our business correspondents may be unable
to maintain sufficient liquidity and we may choose to provide support to them or terminate their services if
they are unable to continue servicing our customers adequately.

• We could incur increased costs to ensure that we comply with any health and safety rules or regulations
adopted by the Government or state governments in response to the COVID-19 pandemic.

The effects of the COVID-19 pandemic could heighten the other risks described in this “Risk Factors” section.

65
33. We and our Promoters are involved in certain material legal proceedings, including 862 criminal proceedings by
our Bank with an aggregate amount involved of ₹78.86 million, any adverse developments related to which could
adversely affect our reputation, business and cash flows.

There are outstanding legal proceedings involving our Bank, our Promoters and our Directors. These proceedings are
pending at different levels of adjudication before various courts, tribunals and appellate tribunals. We cannot assure
you that these proceedings will be decided in our favour.

A summary of outstanding litigation proceedings involving our Bank, Promoters, Directors and Group Entities (having
a material impact on our Bank) as of the date of this Red Herring Prospectus is provided below:

Category of Criminal Tax Statutory or Disciplinary actions by Material Aggregate

individuals / entities proceedings proceedings regulatory SEBI or Stock civil amount
proceedings Exchanges against our litigation involved (₹ in
Promoters million)(1)
Bank
By the Bank 862# NA NA NA 1 136.24
Against the Bank 1 13 5 NA Nil 288.67
Directors (excluding Kadambelil Paul Thomas)
By the Directors Nil NA NA NA Nil Nil
Against the Directors Nil Nil Nil NA Nil Nil
Kadambelil Paul Thomas
By Kadambelil Paul Nil NA NA NA Nil Nil
Thomas
Against Kadambelil Nil Nil Nil Nil(2) Nil Nil
Paul Thomas
ESAF Financial Holdings Private Limited
By ESAF Financial Nil NA NA NA Nil Nil
Holdings Private
Limited
Against ESAF Nil 9 2 Nil Nil 271.40
Financial Holdings
Private Limited
For further details of the outstanding litigation proceedings, see “Outstanding Litigation and Material Developments” on page
420.
Notes:
(1)
To the extent ascertainable and quantifiable. As at June 30, 2023, the Bank has not made any provisions and contingent liabilities for
outstanding litigation, except for with respect to fraud cases, where the Bank has made provisions for all amount related to such fraud cases.
The contingent liabilities of the Bank as a percentage of its net worth as of June 30, 2023, is 0.10%.
(2)
Excludes directions issued by the RBI to our Bank in respect of the office of Kadambelil Paul Thomas.
# Includes 729 cases filed by our Bank for alleged violation of Section 138 of the Negotiable Instruments Act,1881 and 85 police complaints
filed by our Bank under the IPC.

The amounts claimed in these proceedings have been disclosed to the extent ascertainable and include amounts claimed
jointly and severally. As at June 30, 2023, our provisions and contingent liabilities for the litigation as set forth above
were nil, except for with respect to fraud cases, where we have made provisions for all amounts related to such fraud
cases. If any new developments arise, such as a change in Indian law or rulings against us by appellate courts or
tribunals, we may need to make provisions in our financial statements, which would increase our expenses and current
liabilities. Further, such legal proceedings could divert our management’s time and attention and cause us to incur
expenses. Any adverse decision in any of these proceedings may have an adverse effect on our business, results of
operations and financial condition.

For further information, see “Outstanding Litigation and Material Developments” on page 420.

Material litigation involving our Group Entities

As of the date of this Red Herring Prospectus, there are no outstanding litigation involving our Group Entities which
has a material effect on our Bank.

34. For the three months period ended June 30, 2023 and 2022 and the years ended March 31, 2023, 2022 and 2021,
our net profit for the period/year was ₹1,299.64 million, ₹1,059.66 million, ₹3,023.33 million, ₹547.32 million and
₹1,053.96 million, respectively, and our basic earnings per share was ₹2.89 (not annualized), ₹2.36 (not
annualized), ₹6.73, ₹1.22 and ₹2.46, respectively. We may continue to experience fluctuations in our net profit for
the period/year and basic earnings per share.

We have experienced fluctuations in our net profit for the period/year, and consequently our basic earnings per share,
The table below sets forth our net profit and basic earnings per share for the periods and the years indicated:

66
 Particulars Three months period ended June 30, Year ended March 31
2023 2022 2023 2022 2021
(₹ in millions, except per share amounts)
Net profit for the period/year 1,299.64 1,059.66 3,023.33 547.32 1,053.96
Basic earnings per share (₹)(2) 2.89(2) 2.36(2) 6.73 1.22 2.46
Notes:
(1) Basic earnings per share is calculated by dividing the net profit for the period/year, attributable to equity shareholders of our Bank by the
weighted average number of Equity Shares outstanding during the period/year.
(2) Not annualized.

Our net profit for the period increased by ₹239.98 million, or 22.65%, to ₹1,299.64 million for the three months period
ended June 30, 2023 from ₹1,059.66 million for the three months period ended June 30, 2022. This increase was
primarily due to an increase in our interest earned by ₹2,084.33 million, or 30.19%, to ₹8,987.46 million for the three
months period ended June 30, 2023 from ₹6,903.13 million for the three months period ended June 30, 2022, which
was primarily due to an increase in interest/discount on advances/bills by ₹2,028.72 million, or 32.83%, to ₹8,208.28
million for the three months period ended June 30, 2023 from ₹6,179.56 million for the three months period ended
June 30, 2022 on account of a ₹24,889.02 million, or 21.39%, increase in Average Interest-Earning Advances to
₹141,229.42 million for the three months period ended June 30, 2023 from ₹116,340.40 million for the three months
period ended June 30, 2022.

Our net profit for the year decreased by ₹506.64 million, or 48.07%, to ₹547.32 million for Fiscal 2022 from ₹1,053.96
million for Fiscal 2021 primarily due an increase in our operating expenses by ₹2,310.16 million, or 36.56%, to
₹8,628.71 million for Fiscal 2022 from ₹6,318.55 million for Fiscal 2021, which was primarily on account of the
increase in our other expenditure by ₹1,556.19 million, or 45.56%, to ₹4,972.01 million for Fiscal 2022 from ₹3,415.82
million for Fiscal 2021. The reasons for the changes in basic earnings per share are the same as the reasons for the
changes in net profit for the year.

Our net profit for the year increased by ₹2,476.01 million, or 452.39%, to ₹3,023.33 million for Fiscal 2023 from
₹547.32 million for Fiscal 2022, primarily due to an increase in our interest earned by ₹9,137.34 million, or 47.10%,
to ₹28,536.59 million for Fiscal 2023 from ₹19,399.25 million for Fiscal 2022, which was primarily due to an increase
in interest/discount on advances/bills by ₹8,053.33 million, or 46.64%, to ₹25,320.45 million for Fiscal 2023 from
₹17,267.12 million for Fiscal 2022 on account of a ₹27,799.86 million, or 29.72%, increase in Average Interest-
Earning Advances to ₹121,335.33 million for Fiscal 2023 from ₹93,535.47 million for Fiscal 2022. The reasons for
the changes in basic earnings per share are the same as the reasons for the changes in net profit for the year.

For more details regarding the changes in our net profit for the period/year, see “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” on page 372. The reasons for the changes in basic earnings
per share are the same as the reasons for the changes in net profit for the years.

We may experience fluctuations in our net profit for the period/year and basic earnings per share as well as other
financial metrics in the future.

Our net profit for the period/year (net profit) and basic earnings per share (“EPS (Basic)”) for the periods and years
indicated as compared to certain listed peers is set forth below. The following peer group has been determined based
on companies listed on Indian stock exchanges whose business profile is comparable to our business:

Particulars Three months period ended June 30,

2023 2022
Net profit EPS (Basic) ₹2 Net profit EPS (Basic) ₹2
(₹ in million) (₹ in million)
ESAF Small Finance 1,299.64 2.89 1,059.66 2.36
Bank Limited*
Listed peers (1):
Suryoday Small Finance 476.00 4.48 77.50 0.73
Bank Limited
Credit Access Grameen 3,484.60 21.79 1,395.60 8.85
Limited
Spandana Sphoorty 1,194.62 16.83 (2,197.21) (31.42)
Financial Limited
Bandhan Bank Limited 7,210.54 4.48 8,865.04 5.50
Ujjivan Small Finance 3,240.70 1.66 2,029.40 1.17
Bank Limited
Equitas Small Finance 1,912.01 1.72 970.05 0.77
Bank Limited

67
 Particulars Year ended March 31,
2023 2022 2021
Net profit/ EPS (Basic) ₹2 Net profit/ EPS (Basic) ₹2 Net profit EPS (Basic) ₹2
(net loss) (loss) (₹ in million)
(₹ in million) (₹ in million)
ESAF Small Finance 3,023.33 6.73 547.32 1.22 1,053.96 2.46
Bank Limited*
Listed peers (1):
Suryoday Small Finance 777.00 7.32 (930.32) (8.76) 118.55 1.32
Bank Limited
Credit Access Grameen 8,260.30 52.04 3,821.40 24.54 1,423.90 9.52
Limited
Spandana Sphoorty 123.94 1.74 698.27 10.75 1,454.60 22.55
Financial Limited
Bandhan Bank Limited 21,946.38 13.62 1,257.94 0.78 22,054.57 13.70
Ujjivan Small Finance 10,999.20 5.88 (4,145.90) (2.40) 82.97 0.05
Bank Limited
Equitas Small Finance 5,735.91 4.71 2,807.32 2.43 3,842.23 3.53
Bank Limited
Notes:
(1) All the financial information for listed industry peers mentioned above is on a consolidated basis (unless otherwise available only on
standalone basis) and is sourced from the annual reports/ financial results as available of the respective company submitted to stock
exchanges.
(2) Basic earnings per share as reported in the relevant financial results of the respective company. EPS (Basic) has not been annualized for the
three months period ended June 30, 2023 and 2022.
(Source for listed peers: CRISIL MI&A Report)

35. We depend on our brand recognition. Negative publicity about our brand, third parties who use the “ESAF” brand,
including ESAF Financial Holdings Private Limited (EFHPL), our corporate promoter, and third parties whose
products we distribute could damage our reputation and, in turn, our business, financial condition, results of
operation and cash flows.

The “ESAF” brand is owned by ESAF Foundation (formerly known as Evangelical Social Action Forum). We have a
licence from ESAF Foundation to use the “ESAF” brand and certain logos. For details, see “–If we fail to successfully
enforce our intellectual property rights or are unable to renew our trademark licencing agreement, our business,
results of operations and cash flows would be adversely affected” and “History and Certain Corporate Matters – Key
terms of other subsisting material agreements” on pages 68 and 247, respectively. We have invested in promoting the
“ESAF” brand for our Bank, and we expect to continue to invest in increasing our brand awareness. With the market
becoming increasingly competitive, we believe that maintaining and enhancing our brand will become more important
for our business. Reputational risk, or the risk to our business, earnings and capital from negative publicity, is inherent
in our business. If we experience any negative publicity, it could adversely affect our brand and ability to attract and
retain customers. In addition, the brand “ESAF” is used by other entities, including EFHPL, our corporate promoter.
We have no control over the operations of these entities and EFHPL and in case any of these entities do something
that adversely affects their reputation it could have an adverse effect on our reputation, and in turn on our business,
financial condition, results of operations and cash flows.

Furthermore, we distribute several third-party products, including life insurance, general insurance, Atal Pension
Yojana and the National Pension System. We have no control over the actions of such third parties. Any regulatory
action taken against such third parties or any adverse publicity relating to such party could, in turn, result in negative
publicity about us and adversely affect our reputation.

36. If we fail to successfully enforce our intellectual property rights or are unable to renew our trademark licencing
agreement, our business, results of operations and cash flows would be adversely affected.

We have entered into a trademark licencing agreement dated January 5, 2020 with ESAF Foundation (the “Trademark
Agreement”), pursuant to which ESAF Foundation has granted our Bank an exclusive, irrevocable license and right

to use the trademarks , , , , “CREATING OPPORTUNITIES” and

“FIGHTING THE PARTIALITY OF PROSPERITY”, which are registered trademarks of the ESAF Foundation under
certain classes, and “ESAF” (word mark), of which the application status is ‘opposed’ (collectively, the
“Trademarks”), exclusively in relation to the banking and financial services business subject to the rights already
enjoyed and granted to EFHPL, our corporate promoter and ESMACO to use the mark and name “ESAF” in respect
of their current business activities. Further, pursuant to the Trademark Agreement, our Bank has agreed to hold the
trademark “ESAF SMALL FINANCE BANK”, which is a registered trademark of the Bank, and any other mark
registered by us containing “ESAF” in trust for the ESAF Foundation for so long as the Trademark Agreement is in
force. The exclusive license is valid for a period of 15 years from January 5, 2020 (“Term”) or until such time that it
is terminated as per the Trademark Agreement. The consideration for the grant of the license for the Trademarks is
0.30% of the total income (calculated as the sum of interest earned and other income) or 2.50% of the net profit of our
Bank, whichever is less (exclusive of applicable indirect taxes), as recorded in the audited financial statements of the

68
 respective financial year, payment of which commenced from April 1, 2020, and shall be annually payable on
September 30 of the subsequent financial year. Set forth below are tables showing the amounts payable to ESAF
Foundation for use of the Trademarks pursuant to the Trademark Agreement and such amounts as percentage of our
total income for the periods and Fiscals indicated.

Three months period ended

June 30, 2023 June 30, 2022
Amount % of total income Amount % of total income
(₹ in million) (₹ in million)
Amount payable to ESAF 32.43 0.33 25.00 0.34
Foundation for use of the
Trademarks
Total income 9,917.75 100.00 7,383.24 100.00

Year ended
March 31, 2023 March 31, 2022 March 31, 2021
Amount % of total Amount % of total Amount % of total
(₹ in million) income (₹ in million) income (₹ in million) income
Amount payable to ESAF 84.95 0.27 14.36 0.07 26.85 0.15
Foundation for use of the
Trademarks
Total income 31,415.72 100.00 21,475.08 100.00 17,684.21 100.00

Prior to entering into the Trademark Agreement, we did not pay any fees to use ESAF Foundation’s trademarks. Our
individual promoter, Managing Director and Chief Executive Officer, Kadambelil Paul Thomas, is a board member
of ESAF Foundation.

The Trademark Agreement shall stand automatically terminated: (a) in the event that our Bank goes into liquidation
(other than voluntary liquidation for the purpose of reconstruction or amalgamation); or (b) upon revocation of our
banking license by the RBI. Upon expiry of the Term or termination of the Trademark Agreement, our Bank shall be
required to immediately, among other things: (i) cancel its registered trademark “ESAF SMALL FINANCE BANK”
and any other application/registration for trademarks in its name containing “ESAF”; (ii) discontinue the use of the
Trademarks, and dispose any material bearing or using the Trademarks; and (iii) change or procure to change its
corporate name and/or trading style in such a manner so as to delete “ESAF” therefrom. If we change our corporate
name, trading name, trademarks and logos, this may cause a loss of goodwill and result in increased costs, which
would adversely affect our business, results of operations and cash flows.

For further details on the Trademark Agreement, see “History and Certain Corporate Matters – Key terms of other
subsisting material agreements” on page 247.

At present, we have two trademark registrations for our corporate logos, i.e., and . Further, our
application for the registration of the wordmark “Joy of Banking” has been refused by the Trademark Registry. Further,
the application status of “ESAF” (word mark) was opposed by ESAB AB, Goteborg, Sweden under certain classes on
July 16, 2018, and on July 14, 2021, Evangelical Social Action Forum filed an application to withdraw from the classes
that have been objected to. The Bank is using the “ESAF” (word mark) under class 36, which has not been opposed.
There can be no assurances that these applications will be successful or that we will be able to gain trademark
protection over other key business names. Further, if a dispute arises with respect to any of our intellectual property
rights or proprietary information, we will be required to produce evidence to defend or enforce our claims, and we
may become party to litigation, which may strain our resources and divert the attention of our management. We cannot
assure you that any infringement claims that are material will not arise in the future or that we will be successful in
defending any such claims when they arise. Unauthorized use of our intellectual property rights by third parties could
adversely affect our reputation. Any adverse outcome in such legal proceedings or our failure to successfully enforce
our intellectual property rights could adversely affect our ability to use intellectual property, which could have an
adverse effect on our business, results of operations and cash flows. For further details on our intellectual property,
see “Government and Other Approvals – Intellectual Property” on page 440.

37. If we are unable to secure funding on acceptable terms and at competitive rates when needed, it could have a
material adverse effect on our business, financial condition, results of operations and cash flows.

Our funding requirements historically have been met from a combination of shareholder capital and funds generated
from, deposits, borrowings from other institutions, subordinated debt, borrowings from other banks and perpetual debt
instruments. Unless we are able to access the necessary amounts of additional capital, any incremental capital
requirement may adversely affect our ability to grow our business and may even require us to curtail or withdraw from
some of our current business operations. There can also be no assurance that we will be able to raise adequate additional
funding in the future on terms favourable to us, or at all, and this may hamper our growth plans, apart from those that
can be funded by internal accruals.

69
 Our Tier II Bonds (Basel III) issued by us in the form of subordinated debt instruments and also our proposed Tier II
Bonds (Basel III) are rated by CARE Ratings Limited as “CARE A; Stable”. Our proposed certificate of deposits are
rated by CARE Ratings India Limited as “CARE A1+”. The table below shows our ratings as on the date of this Red
Herring Prospectus and the history of our ratings for the period and Fiscals indicated:

Particulars As on the date of Three months Year ended March 31,

this Red Herring period ended June 2023 2022 2021
Prospectus 30, 2023
Tier II Bonds (Basel CARE A; Stable(1) CARE A; Negative CARE A; Negative CARE A; Negative CARE A; Negative
III)
Certificate of CARE A1+(2) CARE A1+ CARE A1+ CARE A1+ CARE A1+
deposits
Notes:
(1) On July 4, 2023, CARE Ratings Limited reaffirmed the rating and revised the outlook from Negative to Stable.
(2) On July 4, 2023, CARE Ratings Limited reaffirmed the rating.

Any downgrade in our ratings may increase interest rates for refinancing our outstanding debt, which would increase
our financing costs, and adversely affect our future issuances of debt and our ability to raise new capital on a
competitive basis, which may adversely affect our business, financial condition, results of operations and cash flows.

38. The Indian finance industry is intensely competitive and if we are unable to compete effectively it would adversely
affect our business, financial condition, results of operations and cash flows.

The Indian finance industry is intensely competitive. We face intense competition in all our principal products and
services.

Loans in the microfinance sector are provided by banks, SFBs, non-banking finance company-microfinance
institutions (“NBFC-MFIs”), other non-banking finance companies (“NBFCs”), and non-profit organisations. Banks
provide loans under the self-help group model. However, they also disburse microfinance loans directly or through
business correspondents to meet their priority-sector lending targets. NBFC-MFIs and non-profit MFIs are the only
two player groups with loan portfolios exclusively focused towards microcredit. The RBI has awarded in-principle
SFB licences to 12 applicants as of March 31, 2023. (Source: CRISIL MI&A Report). These 12 SFBs, including us,
cumulatively accounted for approximately 13% of the total AUM of the industry as at June 30, 2023. (Source: CRISIL
MI&A Report). Our AUM of Micro Loans was ₹128,511.97 million as at June 30, 2023, which represented 3.62% of
the microfinance sector’s (JLG portfolio) AUM of approximately ₹3.55 trillion as at June 30, 2023 as per the CRISIL
MI&A Report. For further details, see “Industry Overview – Competitive Dynamics” on page 176.

Our competitors in the organized sector may have a better brand recognition, greater business experience, more
diversified operations, a greater customer and depositor base, a larger branch network and better access to funding and
at lower costs than we do. Furthermore, certain requirements that are applicable to SFBs in terms of the SFB Operating
Guidelines and other banking laws and regulations are significantly more stringent in comparison to scheduled
commercial banks and NBFCs. Ensuring compliance with these laws and regulations has and will continue to limit
our revenue, thereby making it more difficult to compete with other players in the organized sector. For further details,
see “–We are subject to stringent regulatory requirements and prudential norms. If we are unable to comply with such
laws, regulations and norms it may have an adverse effect on our business, financial condition, results of operations
and cash flows” on page 47. In addition, we compete with informal sources of lending for Micro Loans, including
moneylenders, landlords, local shopkeepers and traders.

On December 5, 2019, the RBI issued guidelines for on-tap licensing of SFBs, which allows applicants to apply for
an SFB license at any time, subject to the fulfilment of certain eligibility criteria and other conditions. We expect this
to increase competition for us. Further, consolidation in the industry driven by the merger of other banks is likely to
further increase competition by creating larger, more homogeneous and potentially stronger competitors in the market.
Increases in operations of existing competitors or the entry of additional banks offering a similar or wider range of
products and services could also increase competition. Further, with the advent of technology-based initiatives and
alternative modes of banking, we may face increased competition in this sector, which may in turn adversely affect
our results of operations. We also face competition from specialized fintech companies who could disrupt our
origination, sales and distribution process.

If we are unable to compete effectively, it would adversely affect our business, financial condition, results of operations
and cash flows.

39. Our advances under management, which is gross advances plus advances originated and transferred under
securitization, assignment and inter-bank participation certificates for which we continue to hold collection
responsibilities (AUM) increased at a compound annual growth rate (CAGR) of 39.22% from March 31, 2021 to
March 31, 2023 and increased by 5.34% as at June 30, 2023 and our deposits increased at a CAGR of 27.66% from
March 31, 2021 to March 31, 2023 and increased by 6.75% as at June 30, 2023. If we fail to effectively manage our
growth, our business may be adversely affected.

70
 The table below shows the growth from March 31, 2023 to June 30, 2023 and the year-end to period-end/ year-end to
year-end growth in our AUM, total deposits and number of banking outlets as at the dates indicated.

Particulars As at June % increase / As at March % increase / As at March % increase / As at March

30, 2023 (decrease) 31, 2023 (decrease) 31, 2022 (decrease) 31, 2021
from March from March from March
31, 2023 31, 2022 31, 2021
AUM (₹ in 172,039.68 5.34% 163,312.65 32.34% 123,406.91 46.46% 84,259.30
million)
Deposits (₹ in 156,558.54 6.75% 146,656.25 14.44% 128,150.72 42.40% 89,994.26
million)
Number of 700 0.00% 700 21.74% 575 4.55% 550
banking
outlets

We intend to deepen our distribution within the states and territories we operate in by, among other things, opening
additional Branches. Our newly opened Branches may not be profitable immediately upon their opening or may take
time to break even. We also intend to deepen our distribution within the states and territories we operate in by having
business correspondents open more business correspondent-operated banking outlets and customer service centres,
and encouraging them to enter into agreements with more banking agents, entering into relationships with new business
correspondent entities, business facilitators and banking agents and adding ATMs. For details, see “Our Business-Our
Strategies-Penetrate deeper into our existing geographies” on page 196. As we plan to deepen our distribution within
the states and union territories we operate in, our business may be exposed to additional challenges, including obtaining
additional governmental or regulatory approvals, identifying and collaborating with local business partners with whom
we may have no existing relationship, successfully marketing our products in markets in which we have no familiarity,
attracting customers in a market in which we do not have significant experience or visibility, maintaining standardized
systems and procedures, adapting our marketing strategy and operations to new markets in India in which different
languages are spoken, higher technology costs, upgrading, expanding and securing our technology platform in new
Branches, operational risks, including integration of internal controls and procedures, compliance with KYC, AML,
combatting financing of terrorism (“CFT”) and other regulatory norms, ensuring customer satisfaction, recruiting,
training and retaining skilled personnel, failure to manage third-party service providers in relation to any outsourced
services and difficulties in the integration of new Branches with our network of existing Branches. To address these
challenges, we may have to make significant investments that may not yield desired results or incur costs that we may
not be able to recover. If we are unable to implement such growth strategies, our business, financial condition, results
of operations and cash flows will be adversely affected.

40. As at June 30, 2023 and March 31, 2023, 2022 and 2021, our demand accounts (current accounts) and savings
accounts (“CASA”) ratio to total deposits (“CASA Ratio”) was 18.22%, 21.39%, 22.84% and 19.42%, respectively,
and our CASA plus terms deposits of less than ₹20.00 million (“Retail Term Deposits” and together with CASA
referred to as “Retail Deposits”) ratio to total deposits (‘Retail Deposits Ratio”) was 89.28%, 90.85%, 93.71% and
97.74%, respectively. If our CASA Ratio or our Retail Deposits Ratio decreases our cost of funds could increase
compared to our primary competitors, which could adversely affect our ability to compete for market share for loans
unless we decrease our Net Interest Margin.

As an NBFC-MFI, ESAF Financial Holdings, our corporate promoter, was unable to accept deposits as per applicable
laws in India. After acquiring the business of ESAF Financial Holdings, our corporate promoter, we have placed a
strong emphasis on increasing our Retail Deposits, and in particular our CASA, as CASA tend to provide a stable and
low-cost source of deposits compared to term deposits. We have been able to leverage the strength of the “ESAF”
brand to grow our deposit portfolio since we commenced operations as an SFB. Our Retail Deposits, which is a non-
GAAP financial measure, increased from ₹87,963.84 million as at March 31, 2021 to ₹133,230.03 million as at March
31, 2023, representing a CAGR of 23.07%, and increased to ₹139,772.67 million as at June 30, 2023, representing an
increase of 4.91%. Our CASA, which is a non-GAAP financial measure, increased from ₹17,476.45 million as at
March 31, 2021 to ₹31,374.47 million as at March 31, 2023, representing a CAGR of 33.99%, and decreased to
₹28,519.70 million as at June 30, 2023, representing an decrease of 9.10%. The primary reason for the decrease in our
CASA was a ₹2,589.98 million, or 9.01%, decrease in our savings bank deposits, which decrease was primarily due
to the increase in fixed deposit interest rates and a corresponding shift from savings to term deposits. As at June 30,
2023 and March 31, 2023, 2022 and 2021, our CASA Ratio was 18.22%, 21.39%, 22.84% and 19.42%, respectively,
and our Retail Deposits Ratio was 89.28%, 90.85%, 93.71% and 97.74% respectively. Set forth below is a table setting
forth details our deposits as at the dates indicated.

Particulars As at June % of total As at % of total As at % of total As at % of total

30, 2023 deposits March 31, deposits March 31, deposits March 31, deposits
(₹ in 2023 2022 2021
million) (₹ in (₹ in (₹ in
million) million) million)
Demand deposits 2,372.74 1.52 2,637.53 1.80 2,197.91 1.72 1,531.84 1.70
[A]
Savings bank 26,146.96 16.70 28,736.94 19.59 27,076.07 21.13 15,944.61 17.72
deposits [B]
71
 Particulars As at June % of total As at % of total As at % of total As at % of total
30, 2023 deposits March 31, deposits March 31, deposits March 31, deposits
(₹ in 2023 2022 2021
million) (₹ in (₹ in (₹ in
million) million) million)
CASA (*) [C = A 28,519.70 18.22 31,374.47 21.39 29,273.98 22.84 17,476.45 19.42
+ B]
Term deposits 128,038.84 81.78 115,281.78 78.61 98,876.74 77.16 72,517.81 80.58
Of which:
Retail Term 111,252.97 71.06 101,855.56 69.45 90,814.46 70.87 70,487.39 78.32
Deposits(*) [D]
Bulk Deposits(1) 16,785.87 10.72 13,426.21 9.15 8,062.28 6.29 2,030.42 2.25
(*)

Retail 139,772.67 89.28 133,230.03 90.85 120,088.44 93.71 87,963.84 97.74

Deposits(2) (*)
[E = C + D]
Total deposits 156,558.54 100.00 146,656.25 100.00 128,150.72 100.00 89,994.26 100.00
Of which:
Total NRI 32,853.29 20.98 31,662.32 21.59 26,529.35 20.70 20,191.50 22.44
deposits
Notes:
(1) Bulk Deposits are single Rupee term deposits of ₹20.00 million or more (“Bulk Deposits”).
(2) Retail Deposits can also be calculated as total deposits less Bulk Deposits.
(*) Non-GAAP financial measure.

Below is a table sourced from the CRISIL MI&A Report setting forth various details of our and our compared peers’
deposits as at June 30, 2023 (except as noted).

As of June 30, 2023 Deposits to net Deposits to Retail CASA to total Retail Term Bulk Deposits
(except as noted) advances (loan total Deposits to deposits (%) Deposits to to total
book) (%) borrowings total deposits total deposits deposits
(%) (%) (%) (%)
SFBs
AU Small Finance 110.3% 90.1% 67.7% 35.0% 32.6% 31.3%
Bank Limited
Equitas Small Finance 100.7% 88.4% 76.6% 38.4% 38.2% 23.4%
Bank Limited
Ujjivan Small Finance 120.3% 91.3% 65.7% 24.6% 41.1% 33.5%
Bank Limited
Jana Small Finance 92.0% 72.2% 70.2% 20.2% 50.0% 29.7%
Bank Limited *
ESAF Small Finance 109.3% 85.1% 89.3% 18.2% 71.1% 10.7%
Bank Limited
Utkarsh Small Finance 103.4% 86.2% 62.0% 19.0% 42.0% 38.0%
Bank Limited
Fincare Small Finance 99.5% 74.3% 79.8% 33.1% 46.7% 20.2%
Bank Limited *
Suryoday Small 92.6% 69.2% 75.7% 14.9% 60.7% 24.3%
Finance Bank Limited
Banks-MFI
Bandhan Bank Limited 110.5% 85.2% 71.2% 36.0% 35.2% 28.8%
Notes: 1) Retail Deposits comprises CASA and Retail Term Deposits, which are term deposits of less than ₹20 million. 2) CASA to total deposits
(CASA ratio) is calculated based on total deposits excluding certificates of deposits (CoD) 3) Bulk Deposits are term deposits of ₹20 million or
more. 4) (*) Data as of Fiscal 2023.
Source: Company reports, CRISIL MI&A
(Source: CRISIL MI&A Report)

We pay no interest on demand accounts (current accounts) and we pay a lower average rate of interest on savings
accounts compared to term deposits. The table below sets forth our Cost of Average CASA, Cost of Average Term
Deposits and our Cost of Funds, which are all non-GAAP financial measures, for the periods and Fiscals indicated.

Particulars Three months period ended Year ended

June 30, 2023(1) June 30, 2022(1) March 31, 2023 March 31, 2022 March 31, 2021
Cost of Average CASA 1.08%(1) 1.35%(1) 4.87% 4.93% 4.67%
Cost of Average Term 1.82%(1) 1.60%(1) 6.55% 6.71% 8.00%
Deposits
Cost of Funds 1.72%(1) 1.52%(1) 6.19% 6.30% 7.56%
Note:
(1) Not annualized.

One of our strategies is to increase our Retail Deposits in order to reduce our Cost of Funds. For details, see “Our
Business – Our Strategies - Increase our deposits and in particular our Retail Deposits” on page 196. If we are unable
to increase our Retail Deposits Ratio (which is Retail Deposits to total deposits), and in particular our CASA Ratio
72
 (which is CASA to total deposits), to the desired extent, we may have a higher cost of funds than our competitors,
which could adversely affect our ability to compete for market share for loans unless we decrease our Net Interest
Margin. While we believe that the interest rate to be charged on a loan is not the only consideration a borrower takes
into account when deciding between competing offers, we believe it is an important consideration. Therefore, if we
are unable to increase our Retail Deposits Ratio, and in particular our CASA Ratio, to the desired extent, it could
adversely affect our business, financial condition, results of operations and cash flows.

41. Weaknesses, disruptions or failures in IT systems could adversely affect our business.

We are heavily reliant on IT systems in connection with, but not limited to, financial controls, risk management and
transaction processing. Our critical IT systems are managed by FIS. FIS provides us with an end-to-end banking
solution, which encompasses core banking solution, risk management, domestic treasury, switching solutions, debit
card issuance services and internet banking solutions. Any failure by FIS to perform any of these functions could
adversely affect our business, financial condition and results of operations. In addition, we use another software service
provider for managing our Micro Loan business. If this software fails to perform, it could adversely affect our business,
financial condition and results of operations.

Our online delivery channels are subject to various risks, such as cyber security attacks and network availability issues.
We may also be subject to disruptions of our IT systems arising from events that are wholly or partially beyond FIS’
control (including, for example, damage or incapacitation by human error, natural disasters, electrical or
telecommunication outages, cyber crimes, such as sabotage, computer viruses and hacking sabotage, computer viruses,
hacking, or loss of support services from other third parties, such as internet backbone providers).

We have identified several areas where we need to strengthen our IT systems, including getting our Information
Technology, Information Security (IT/ IS) policies and practices certified for compliance with ISO 27001: 2022, and
ensuring the availability of our information security team monitoring our IT environment via a dedicated security
operations centre on a 24 hours per day, seven days a week basis.

We plan to strengthen our IT systems through Payment Card Industry – Data Security Standard 4.0 certification
process, which we plan to follow with a remediation exercise and certification process. Having a security operations
centre in place will enable us to better identify cyber-attacks and recover from cyber-attacks quicker.

Since April 1, 2020, we have experienced no instances of cyber-security breaches and no instances of leakage of
customer data and other sensitive information. Since April 1, 2020, we have experienced failures in our IT systems in
the past that have resulted in all or some of our banking services and payment systems being unavailable for short
periods of time (the maximum time was 325 minutes, which occurred in February 2019), and our Android mobile
banking app did not work for 663 minutes in November 2018, 5,000 minutes in December 2018, and 55 minutes in
November 2020. However, these IT failures did not have a material adverse effect on our business, financial condition,
results of operations and cash flows.

In the event we experience material interruptions in our IT systems in the future, this could give rise to deterioration
in customer service and to loss or liability to us and it could adversely affect our business, financial condition, results
of operations and cash flows.

We have a master service agreement with FIS dated June 10, 2016, which was renewed on January 1, 2022 and will
expire on December 31, 2026, pursuant to which FIS maintains a data centre in Mumbai and disaster recovery centre
in Hyderabad for us as part of our business continuity measures. However, if for any reason the switch over to the
back-up system does not take place or if a calamity occurs in both Mumbai and Hyderabad such that our data is
compromised at both places, it would have an adverse effect on our business, financial condition, results of operations
and cash flows.

42. We may face cyber threats attempting to exploit our network to disrupt services to customers and/ or theft of sensitive
internal data or customer information, which may cause damage to our reputation and adversely affect our
financial condition, results of operations and cash flows.

We offer online banking services to our customers. Our online banking channel includes multiple services, such as
funds transfer, balance enquiry, bill payment, online payment for certain services and payment of direct and indirect
taxes. We are therefore exposed to various cyber threats, including (a) phishing and Trojans targeting our customers,
wherein fraudsters send unsolicited mails to our customers seeking account sensitive information or to infect customer
machines to search and attempt exfiltration of account sensitive information; and (b) hacking, wherein attackers seek
to hack into our website with the primary intention of causing reputational damage to us by disrupting services; and
(c) data theft, wherein cyber criminals may attempt to enter our network with the intention of stealing our data or
information. In addition, we also face the risk of our customers incorrectly blaming us and terminating their accounts
with us for any cyber security breaches that may have occurred on their own system or with that of an unrelated third
party. Since April 1, 2020, we have not experienced any cyber security breaches that have had a material adverse effect
on our financial condition, results of operations and cash flows. Cyber security breaches could lead to the loss of trade
secrets or other intellectual property or could lead to the public exposure of personal information (including sensitive
financial and personal information) of our customers and employees. Although we intend to continue to implement
73
 security technology and establish operational procedures to prevent break-ins, damage and failures, there can be no
assurance that instances of IT infringements and security breaches will not take place in the future or that our security
measures will be adequate or successful. Any cyber security breach could also subject us to additional regulatory
scrutiny and expose us to civil litigation and related financial liability.

43. We have introduced several new products and services since April 1, 2017 and we cannot assure you that such
products and services will be profitable in the future. Further, we may be unable to successfully diversify our
product portfolio or enter into new lines of business, which may adversely affect our business, financial condition,
results of operations and cash flows.

Prior to Fiscal 2018, all of our loans were Micro Loans. In Fiscal 2018, we began offering retail loans and since then
we have been expanding our portfolio of retail loan products, including offering gold loans in Fiscal 2019. We began
distributing third party products in Fiscal 2019 when we started distributing the National Pension System, Atal Pension
Yojna and third-party general insurance products. In Fiscal 2020, we began distributing third-party life insurance
products and offering platinum debit cards, MSME loans and loans to financial institutions. In Fiscal 2021, we began
agricultural loans. For a table showing the income from these products and services and such income as a percentage
of our total income for the three months period ended June 30, 2023 and 2022 and Fiscals 2023, 2022 and 2021, see
“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Significant Factors
Affecting our Results of Operation and Financial Condition – Increase in Product Offerings” on page 384.

We cannot assure you that such products and services will be successful, whether due to factors within or outside of
our control, such as general economic conditions, a failure to understand customer demand and market requirements
or management focus on these new products. In the event that we fail to develop and launch new products or services
successfully, we may lose any or all of the investments that we have made in promoting them and training our
employees, and our reputation would be harmed. Further, we require approval from regulatory authorities before we
commence offering certain products and services, such as mutual fund distribution and any additional foreign exchange
services. If we fail to obtain such approvals, or to develop and launch such products and services successfully, we may
lose a part or all of the costs incurred in the development of such offerings, or we may discontinue these offerings. If
we are unable to effectively manage any of these issues it could adversely affect our business, financial condition,
results of operations and cash flows.

44. We may be unable to maintain or renew certain of our statutory and regulatory permits, licences and approvals
required to operate our business.

We require certain statutory and regulatory permits and approvals to operate our business. These include approvals
from the RBI for various aspects of our banking operations (including for services such as NEFT, RTGS and foreign
exchange dealing), approvals to commence and operate mobile banking services and registrations from other
regulatory authorities, such as the IRDAI for acting as a Category Corporate Agent (Composite) and PFRDA to
transact in pension schemes. We may not, at all points of time, have all approvals required for our business. Further,
in relation to our banking outlets, certain approvals may have lapsed in their normal course and our Bank has either
made an application to the appropriate authorities for renewal of such registration or is in the process of making such
application. Our RBI In-Principle Approval and RBI Final Approval also require us to comply with certain terms and
conditions. The list of material approvals in relation to our material branches and registration as a Category Corporate
Agent with IRDAI, required to be obtained by our Bank which has a validity and are expiring in the next three months
from the date of this Red Herring Prospectus is provided below:

Sr. No. Name of branch/ approval Nature of branch Expiry/renewal date

Shops and establishments registrations
1. Balaramapuram BCOBO December 31, 2023
2. Kanichar BCOBO December 31, 2023
3. Hyderabad - SR Nagar Banking Outlet December 31, 2023
4. Nalhati Banking Outlet January 1, 2024
Others
1. Registration as Category Corporate Agent - IRDAI SFB level January 17, 2024

In the event that we are unable to comply with any or all of these terms and conditions or seek waivers or extention of
time for complying with these terms and conditions, it is possible that the RBI may revoke this licence or may place
stringent restrictions on our operations. This may result in the interruption of all or some of our operations. If we fail
to obtain, renew or maintain the required permits, licences or approvals, including those set out above, we could be
subjected to penalties by the relevant regulatory authorities, including withdrawal of the relevant approval which may
result in the interruption of our operations or delay or prevent our expansion plans. While our Bank has not been
subjected to such an instance of withdrawal of the approval as on the date of this Red Herring Prospectus, such
occurrences may have an adverse effect on our business, financial condition, results of operations and cash flows. On
April 20, 2023, the RBI issued us an Authorised Dealer Category-I license. We have yet to receive approval for our
application dated March 3, 2022 to the RBI for the request for empanelment of our Bank as an agency bank of the RBI
to conduct a government agency business.

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 Further, we are required to obtain certain approvals, registrations and licenses for the operation and functioning of our
Branches. We have not applied for the shops and establishments registration for 11 of our Branches. Furthermore, in
relation to our Branches, registrations under shops and establishments legislations in various states, as applicable, may
either be pending approval or renewal in ordinary course of business. If we fail in the future to obtain or retain any of
these registrations, or renewals thereof, in a timely manner, or at all, our business may be adversely affected. For
further details, please see “Government and Other Approvals” on page 436.

Furthermore, our business correspondents are required to obtain certain approvals, registrations and licenses for the
operation and functioning of our business correspondent-operated banking outlets. Four of our banking outlets
operated by ESMACO have not obtained shops and establishments registration. As per the agreement dated January
1, 2019 with ESMACO, ESMACO is required to obtain authorizations and licenses in compliance with legal and
statutory requirements from time to time in relation to the banking outlets operated by it.

See also, “-We could be subject to various sanctions and penalties by the Reserve Bank of India (RBI) for failing to
comply with the requirement to list the Equity Shares on a stock exchange in India before July 31, 2021” on page 37.

45. If our risk management policies are ineffective, it could adversely affect our business, financial condition, results
of operations and cash flows.

We have devoted significant resources to develop our risk management policies and procedures and plan to continue
to do so in the future. For details on our risk management policies, see “Our Business – Risk Management” on page
211. Despite this, our policies and procedures to identify, monitor and manage risks may not be fully effective. Some
of our risk management systems are not automated and are subject to human error. Some of our methods of managing
risks are based on the use of observed historical market behaviour. As a result, these methods may not accurately
predict future risk exposures, which could be significantly greater than those indicated by the historical measures.

To the extent any of the instruments and strategies we use to hedge or otherwise manage our exposure to market or
credit risk are not effective, we may be unable to effectively mitigate our risk exposures in particular market
environments or against particular types of risk. Further, some of our risk management strategies may not be effective
in a difficult or less liquid market environment, where other market participants may be attempting to use the same or
similar strategies to deal with the difficult market conditions. In such circumstances, it may be difficult for us to reduce
our risk positions due to the activity of such other market participants. Other risk management methods depend upon
an evaluation of information regarding markets, clients or other matters. This information may not in all cases be
accurate, complete, up-to-date or properly evaluated.

Our investment and interest rate risk are dependent upon our ability to properly identify, and mark-to-market changes
in the value of financial instruments caused by changes in market prices or rates. Our earnings are dependent upon the
effectiveness of our management of changes in credit quality and risk concentrations, the accuracy of our valuation
models and our critical accounting estimates and the adequacy of our allowances for loan losses. To the extent our
assessments, assumptions or estimates prove inaccurate or not predictive of actual results, we could suffer higher than
anticipated losses.

Management of operations, legal and regulatory risks requires, among other things, policies and procedures to properly
record and verify a large number of transactions and events, and these policies and procedures may not be fully
effective. Further, as we seek to expand the scope of our operations, we also face the risk that we may not be able to
develop risk management policies and procedures for new business areas or manage the risks associated with the
growth of our existing business effectively. If we are unable to develop and implement effective risk management
policies, it could adversely affect our business, financial condition, results of operations and cash flows.

46. Our Treasury segment revenue was ₹896.82 million, ₹466.65 million, ₹2,471.94 million, ₹2,342.22 million and
₹1,925.31 million for the three months period ended June 30, 2023 and 2022 and Fiscals 2023, 2022 and 2021,
respectively. We could be subject to volatility in income from our treasury operations, which could have an adverse
effect on our results of operations and cash flows.

Our income from treasury operations comprises interest and dividend income from investments, profit from sale of
investments and income from our foreign exchange operations. The table below sets forth our treasury segment
revenue and as a percentage of our total income for the Fiscals indicated.

Particulars Three months period ended June 30, Year ended March 31,
2023 2022 2023 2022 2021
Amount % of Amount % of Amount % of Amount % of Amount % of
(₹ in total (₹ in total (₹ in total (₹ in total (₹ in total
million) income million) income million) income million) income million) income
Treasury 896.82 9.04 466.65 6.32 2,471.94 7.87 2,342.22 10.91 1,925.31 10.89
segment revenue
Total income 9,917.75 100.00 7,383.24 100.00 31,415.72 100.00 21,475.08 100.00 17,684.21 100.00

75
 Our treasury operations are vulnerable to changes in interest rates, exchange rates, equity prices and other factors
beyond our control, including the domestic and international economic and political scenario, inflationary expectations
and the RBI’s monetary policies. In particular, if interest rates rise, the valuation of our fixed income securities
portfolio, such as Government securities and corporate bonds, would decline. For further details, see “The ratio of
(interest earned minus interest expended) (“Net Interest Income”) to (total interest-earning assets (comprising
interest-earning advances, interest earning investments (comprising government securities, treasury bills and other
interest earning securities) and interest-earning Balance with the Reserve Bank of India and other Inter-Bank Funds)
calculated on the basis of the average of the opening balance at the start of the relevant period/fiscal year and the
closing balance as at quarter end for all quarters in the relevant period/fiscal year) (“Average Total Interest-Earning
Assets”) was 3.08% (not annualized), 2.69% (not annualized), 10.67%, 8.64% and 8.98% for the three months period
ended June 30, 2023 and 2022 and Fiscals 2023, 2022 and 2021, respectively. Volatility in interest rates could cause
our Net Interest Margin to decline and adversely affect our results of operations and cash flows. In addition, an
increase in interest rates results in a decrease in the value of our fixed income investments and as a result of the
Reserve Bank of India (RBI) mandated reserve requirements, we are also more structurally exposed to this risk than
banks in many other countries” on page 60. Although we have operational controls and procedures in place for our
treasury operations, such as counterparty limits, position limits, stop loss limits and exposure limits, that are designed
to mitigate the extent of such losses, there can be no assurance that we will not incur losses in the course of our
proprietary trading on our fixed income book held in the available for sale and held for trading portfolios. Any such
losses could adversely affect our financial condition, results of operations and cash flows.

47. We are exposed to operational risks, including employee negligence, petty theft, burglary and embezzlement and
fraud by employees, agents (including business correspondents and banking agents), customers or third parties,
which could harm our reputation, business, financial condition, results of operations and cash flows. For the three
months period ended June 30, 2023 and 2022 and Fiscals 2023, 2022 and 2021, our losses due to fraud were ₹
11.67 million, ₹ 8.85 million, ₹14.40 million, ₹8.50 million and ₹0.50 million, respectively, and the operating risk
loss to the Bank on account of cash shortage, customer settlements, vendor/ IT issues etc. was ₹ 0.35 million, ₹ 0.35
million, ₹2.75 million, ₹0.94 million and ₹0.66 million, respectively.

We are exposed to many types of operational risks, including employee negligence, petty theft, burglary and
embezzlement and fraud by employees, agents (including business correspondents and banking agents), customers or
third parties. The tables below sets forth the amounts of our losses due to fraud and operating risk loss to the Bank on
account of cash shortage, customer settlements, vendor/ IT issues etc. and such amounts as a percentage of our
Operating Income for the Fiscals indicated.

Particulars Three months period ended June 30,

2023 2022
Amount % of Operating Amount % of Operating
(₹ in million) Income (₹ in million) Income
Losses due to fraud 11.67 0.17 8.85 0.18
Operating risk loss to the Bank on 0.35 0.01 0.35 0.01
account of cash shortage, customer
settlements, vendor/ IT issues etc
Operating Income(*) 6,784.82 100.00 4,967.73 100.00
Note:
(*) Non-GAAP financial measure.

Particulars Year ended March 31,

2023 2022 2021
Amount % of Amount % of Amount % of
(₹ in million) Operating (₹ in million) Operating (₹ in million) Operating
Income Income Income
Losses due to fraud 14.40 0.07 8.50 0.06 0.50 0.00
Operating risk loss to the Bank on 2.75 0.01 0.94 0.01 0.66 0.01
account of cash shortage, customer
settlements, vendor/ IT issues etc
Operating Income(*) 21,242.53 100.00 13,547.22 100.00 10,488.39 100.00
Note:
(*) Non-GAAP financial measure.

Operational risks can result from a variety of factors, including failure to obtain proper internal authorisations,
improperly documented transactions, failure of operational and information security procedures, computer systems,
software or equipment, fraud, inadequate training and employee errors. We attempt to mitigate operational risk by
maintaining a comprehensive system of internal controls, establishing systems and procedures to monitor transactions.
For details, see “Our Business – Risk Management – Operational Risk” on page 213. Although we intend to continue
to implement technology-based security measures and establish operational procedures to prevent fraud, break-ins,
damage and failures, there can be no assurance that these security measures will be adequate. Any failure to mitigate
such risks may adversely affect our financial condition, results of operations and cash flows.

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 In addition, some of our transactions expose us to the risk of theft or unauthorized transactions by our employees and
fraud by our employees, agents (including business correspondents and banking agents), customers or third parties. In
the past, we have been subject to acts of fraud and theft of a non-material nature. As at the date of this Red Herring
Prospectus, our Bank had filed 862 criminal cases for claims totalling ₹78.86 million. For details in relation to criminal
cases filed by us, see “Outstanding Litigation and Material Developments – Litigation by our Bank – Criminal
Litigation” on page 423. Our security systems and measures undertaken to detect and prevent the occurrence of these
risks may be insufficient to prevent or deter such activities in all cases. Furthermore, we may be subject to regulatory
or other proceedings in connection with any unauthorized transaction, fraud or misappropriation by our representatives
and employees, which could adversely affect our reputation, business, financial condition, results of operations and
cash flows.

48. The number of our banking agents has increased from 48 as at March 31, 2021 to 2,116 as at June 30, 2023. The
increase in the number of banking agents increases our exposure to the risk of fraud by banking agents.

Our banking agents are third-party agents that provide banking services on behalf of our Bank from premises managed
by themselves. Each banking agent has a POS terminal (also called a Micro ATM) installed on its premises and using
this POS terminal it can offer (a) cash deposits, cash withdrawals, balance enquiries, and mini bank statements through
debit cum ATM cards and the Aadhaar enabled payment system, (b) intrabank and interbank fund transfers through
the Immediate Payment Service (IMPS) and the Aadhaar enabled payment system, and (c) the payment of bills using
the Bharat Bill Payment System. We provide the software for the POS terminals to the banking agents. Our business
correspondents are responsible for sourcing and servicing our banking agents.

Our banking agents serve unbanked and underbanked markets. In addition, banking agents are usually familiar with
the customer base they have in their area. We began using banking agents in Fiscal 2021. We call our banking agents
customer service points. The table below sets forth certain details of our banking agents as the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Number of banking agents 2,116 2,023 579 48
(customer service points)
Number of states and union 12 (inclusive of 1 12 (inclusive of 1 9 (inclusive of 1 union 5
territories with banking agents union territory) union territory) territory)
(customer service points)

We have increased the number of our banking agents primarily to provide our customers with increased access to
banking services. The increase in the number of banking agents increases our exposure to the risk of fraud by banking
agents. For further details, see “- We are exposed to operational risks, including employee negligence, petty theft,
burglary and embezzlement and fraud by employees, agents (including business correspondents and banking agents),
customers or third parties, which could harm our reputation, business, financial condition, results of operations and
cash flows. For the three months period ended June 30, 2023 and 2022 and Fiscals 2023, 2022 and 2021, our losses
due to fraud were ₹ 11.67 million, ₹ 8.85 million, ₹14.40 million, ₹8.50 million and ₹0.50 million, respectively, and
the operating risk loss to the Bank on account of cash shortage, customer settlements, vendor/ IT issues etc. was ₹
0.35 million, ₹ 0.35 million, ₹2.75 million, ₹0.94 million and ₹0.66 million, respectively.” on page 75.

We have historically not earned any income from the services provided by our banking agents. However, we plan to
start sharing the net fee charged to our customers by banking agents (after netting off the direct costs) between our
Bank and the banking agents, The tables below set forth remuneration paid for banking agency services by us and such
amounts as a percentage of our Operating Income for the periods and years indicated.

Particulars Three months period ended June 30,

2023 2022
Amount % of Operating Amount % of Operating
(₹ in million) Income (₹ in million) Income
Remuneration paid for banking 1.07 0.02% 2.20 0.04%
agency services
Operating Income(*) 6,784.82 100.00% 4,967.73 100.00%
Note:
(*) Non-GAAP financial measure.

Particulars Year ended March 31,

2023 2022 2021
Amount % of Amount % of Amount % of
(₹ in million) Operating (₹ in million) Operating (₹ in million) Operating
Income Income Income
Remuneration paid for banking 8.31 0.04% 3.87 0.03% 0.25 0.00%
agency services
Operating Income(*) 21,242.53 100.00% 13,547.22 100.00% 10,488.39 100.00%
Note:
(*) Non-GAAP financial measure.

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49. Banking companies in India, including us, may be required to report financial statements as per Ind AS in the
future. Differences exist between Ind AS and Indian GAAP. In the future, if we are required to prepare our
financial statements in accordance with Ind AS, there is a possibility that our financial condition, results of
operations and cash flows could be worse than if we prepared our financial statements in accordance with Indian
GAAP. In addition, the Reserve Bank of India (RBI) has recently announced changes to Indian GAAP that
incorporate accounting policies set forth in Ind AS with respect to fair valuation, initial recognition and subsequent
measurement and proposed changes to Indian GAAP that will incorporate accounting policies set forth in Ind AS
with respect to expected credit losses.

We currently prepare our financial statements under Indian GAAP. However, the Ministry of Corporate Affairs, in its
press release dated January 18, 2016, issued a roadmap for the implementation of Ind AS for scheduled commercial
banks, insurance companies and NBFCs, which are also applicable to our Bank. Such roadmap provided that these
institutions were required to prepare Ind AS financial statements for accounting periods commencing April 1, 2018
(including comparative financial statements for the corresponding periods in the previous year). The RBI, by its
circular dated February 11, 2016, required all scheduled commercial banks to comply with Ind AS for financial
statements commencing April 1, 2018 and also required such entities to prepare and submit proforma Ind AS financial
statements to the RBI since the six months ended September 30, 2016. As we became a scheduled bank on November
12, 2018, we were only required to submit such proforma Ind AS financial statements from November 12, 2018
onwards. Furthermore, the RBI granted us an exemption for the quarter ended December 31, 2018. In compliance of
such regulatory requirements, we have submitted proforma Ind AS financial statements for the quarter ended March
31, 2019. We are required to continue to submit such proforma Ind AS financial statements every quarter to the RBI.
However, the RBI, through its notification dated March 22, 2019, decided to defer the implementation of Ind AS until
further notice for all scheduled commercial banks (except regional rural banks). Under applicable regulations,
scheduled commercial banks, including our Bank, are not permitted to adopt Ind AS financial statements until
permitted by the RBI. Accordingly, we continue to prepare and present our financial statements under Indian GAAP,
while still submitting proforma Ind AS financial statements to the RBI. The Bank has undertaken preliminary
diagnostic analysis of the GAAP differences between Indian GAAP vis-à-vis Ind AS to ensure the compliance as per
applicable requirement and directions of the RBI in this regard.

Ind AS is different in many respects from Indian GAAP. There can be no assurance that the transition to Ind AS will
not further increase our provisioning requirements in the future. Furthermore, if we are required to prepare our financial
statements in accordance with Ind AS, there is a possibility that our financial condition, results of operations and cash
flows could be worse than if we prepared our financial statements in accordance with Indian GAAP. Although we
have procured a software solution for Ind AS from a third-party vendor and implementation of the same is in progress,
if the RBI decides to implement the adoption of Ind AS for scheduled commercial banks, in our transition to Ind AS
reporting, we may encounter difficulties in the on-going process of implementing and enhancing our management
information systems. Our management may also have to divert significant time and additional resources in order to
implement Ind AS on a timely and successful basis. Therefore, our transition to Ind AS reporting could have an adverse
effect on our business, financial condition, results of operations and cash flows.

The RBI issued a circular on September 12, 2023 on “Master Direction - Classification, Valuation and Operation of
Investment Portfolio of Commercial Banks (Directions), 2023” pursuant to which certain Ind-AS guidelines, such as
fair valuation, initial recognition and subsequent measurement, will become effective for banks from April 1, 2024.
We expect the implementation of these Ind-AS guidelines will have the following material effects on our Bank’s
financial statements:

• Classification norms: The directions introduce new criteria for classifying investments held by banks and
also provide guidelines for categorising various types of investments. e.g., the introduction of a category for
Fair Value Through P&L (FVTPL) and Held for Trading (HFT) shall be a separate investment sub-category
within FVTPL and the ceiling criteria for holding HFT investments for a 90-day period is removed. There
will be separate classification norms for subsidiaries, joint ventures, and associates.

• Valuation guidelines: The RBI has included fair valuation requirements along with accounting treatment for
gain/loss ensuring that investment portfolios are assessed accurately, reflecting their current market values.
All investments shall be measured at fair value on initial recognition. Fair value measurement of investments
is based on a hierarchy of level 1, level 2, and level 3 inputs.

• Accounting guidelines: The RBI has incorporated comprehensive guidelines for accounting treatment across
various scenarios, encompassing various aspects, including initial recognition, subsequent measurement, and
re-classification. These guidelines have been introduced to address ambiguities and bring uniformity
throughout the banking industry. For example, where the securities are quoted or the fair value can be
determined based on market observable inputs any day 1 gain/loss shall be recognised in the profit and loss
account but any day 1 gains arising from level 3 investments shall be deferred and any day 1 loss arising from
level 3 investments shall be recognised immediately.

• Reporting requirements: The RBI has introduced extensive reporting requirements, enabling better
oversight and monitoring of commercial banks' investment activities. This aims to improve regulatory

78
 compliance and transparency. For example, the introduction of new disclosure requirements based on the
inclusion of disclosure of fair value by category, fair value by a hierarchy of valuation basis (levels 1,2 and
3), and carrying value of investments

• Regulatory supervision: The RBI has introduced additional supervision on the investment portfolio of a
bank and a bank’s compliance with these directions. For example, the implementation of these directions
shall be reviewed under the supervisory process and any non-compliance in this regard shall be dealt with
appropriately by the RBI. Banks shall not reclassify investments between categories without the approval of
their board of directors and prior approval of the Department of Supervision (DoS), RBI.

The RBI released the Discussion Paper on Introduction of Expected Credit Loss (ECL) Framework for Provisioning
by Banks on January 16, 2023. As per the discussion paper, banks would be allowed to design and implement their
own models for measuring expected credit losses for the purpose of estimating loss provisions in line with the proposed
principles. The discussion paper further states that the RBI will be issuing broad guidance that will be required to be
considered while designing the risk models to be used by the banks. The guidance is expected to provide detailed
requirements, drawing on the guidance provided in IFRS 9 and principles laid out by Basel Committee of Banking
Supervision. The provisions as per the banks’ internal assessments shall be subject to a prudential floor, to be specified
by the RBI based on comprehensive data analysis. In order to enable a seamless transition, as permitted under the
Basel guidelines, banks shall be provided an option to phase out the effect of increased provisions on Common Equity
Tier I capital, over a maximum period of five years. The RBI has yet to issue final guidelines on the above referenced
framework. There is a possibility that our financial condition and results of operations could be worse if we measured
expected credit losses for the purpose of estimating loss provisions in line with the proposed principles than if we
prepared our financial statements in accordance with current Indian GAAP.

50. If we breach third-party intellectual property rights it could have an adverse effect on our reputation, business,
financial condition, results of operations and cash flows.

While we take care to ensure that we comply with the intellectual property rights of others, we cannot determine with
certainty as to whether we are infringing on any existing third-party intellectual property rights, which may force us
to alter our technologies, obtain licenses or cease some of our operations. We may be subject to claims by third parties,
both inside and outside India, if we breach their intellectual property rights by using slogans, names, designs, software
or other such rights that are of a similar nature to the intellectual property these third parties may have registered or
are using. We might also be in breach of such third-party intellectual property rights due to accidental or purposeful
actions by our employees where we may also be subjected to claims by such third parties.

Any legal proceedings that result in a finding that we have breached third parties’ intellectual property rights, or any
settlements concerning such claims, may require us to provide financial compensation to such third parties or stop
using the relevant intellectual property (including by way of temporary or permanent injunction) or make changes to
our marketing strategies or to the brand names of our products, any of which may have a material adverse effect on
our reputation, business, financial condition, results of operations and cash flows.

51. If we fail to adapt to technological advancements in the financial services sector, it could affect the performance
and features of our products and services and reduce our attractiveness to customers.

Our continued success will depend, in part, on our ability to respond to technological advancement in the way
customers prefer to execute their financial services. Technological innovation in digital wallets, mobile operator
banking, advancements in blockchain technology payment banks, internet banking through smart phones, could disrupt
the banking industry as a whole. If we fail to adapt to such technological advancements quickly and effectively it could
affect the performance and features of our products and services and reduce our attractiveness to existing and potential
customers hereby adversely affecting our business, financial condition, results of operations, and cash flows.

52. We lease or licence all of our business premises and any failure to renew such leases or licences or their renewal
on terms unfavourable to us may adversely affect our business, financial condition and results of operations and
cash flows.

Our Corporate Office and Registered Office as well as 16 other offices are located on leased premises. As at June 30,
2023, we leased/licensed 641 Branches. As at June 30, 2023, we had 559 ATMs, all of which are on leased/licensed
premises. For further details, see “Our Business – Properties” on page 218. A failure to renew lease or licence
agreements would require us to relocate operations. We may also face the risk of being evicted in the event that our
landlords allege a breach on our part of any terms under these lease or licence agreements or the landlord does not
have the title of the property and the actual owner of the property evicts us. If we are required to relocate a significant
number of our Branches or ATMs, this may cause a disruption to our operations or result in increased costs, or both,
which may adversely affect our business, financial condition and results of operations. In addition, we may not be able
to renew our leases or licences on terms that are favourable to us, which would lead to an increase in costs, thereby
affecting our business, financial condition, results of operations and cash flows.

53. As at June 30, 2023, 274 out of our 700 our lease/ license agreements have not been registered.

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 As at June 30, 2023, 274 out of our 700 lease/license agreements have not been registered as required under the
Registration Act, 1908. The delay in registration of lease agreements is primarily on account of many of our
lease/license agreements being with multiple landlords as well as due to difficulties with getting landlords to physically
appear at the registration office because of various reasons, such as landlords that live abroad. We are in
communication with the landlords to complete these registrations. Further, we are in the process of shifting the
premises of some of our Branches. Accordingly, registration charges, and consequent penalties will have to be paid
on such documents. Unregistered lease/license agreements that are required to be registered under the Registration
Act, 1908 may not be produced for enforcement before a court of law until the applicable registration charges and
consequent penalties are paid on such documents. Further, this may affect our ability to renew such agreements or
result in us being required to enter into a new agreement and consequently, we may experience business disruption.
This may adversely affect our business, financial condition and result of operations.

54. We have failed to comply with KYC mandatory requirements in the past. Any non-compliance with mandatory
AML, KYC and CFT laws and regulations could expose us to liability and harm our business and reputation.

In accordance with the requirements applicable to banks in India, we are mandated to comply with applicable AML,
KYC and CFT regulations. These laws and regulations require us, among other things, to adopt and enforce AML,
KYC and CFT policies and procedures. Our reputation and business could suffer if any such parties use or attempt to
use us for money-laundering or illegal or improper purposes and such attempts are not detected or reported to the
appropriate authorities in compliance with applicable regulatory requirements.

In its inspection report for its on-site Inspection for Supervisory Evaluation from August 22, 2022 to September 2,
2022 and again from September 12, 2022 to September 23, 2022 and an off-site analysis of the data and information
furnished by our Bank, the RBI noted that KYC details of 1.02 million accounts (historical data) and 0.22 million
accounts during the year of the inspection, were yet to be shared with the Central KYC Records Registry. In its risk
assessment report for the same inspection, the RBI noted that out of the 5,339 customers whose periodic updates of
KYC was pending, we had not yet updated the KYC of 2,867 customers as on the date of the conclusion of the
inspection.

During the RBI’s process audit of our Bank, which was carried out from April 18, 2022 to April 22, 2022, the following
shortcomings were observed with respect to adherence to KYC guidelines: (i) 29,742 instances were detected where
the same Aadhar ID had multiple customer information files; (ii) in 2,782 cases, KYC details were entered as random
numbers and letters; (iii) some minor customer accounts indicated that the KYC details of the respective guardians
have not been obtained; (iv) there were 13,590 instances where KYC data in our system indicated “Null” in both
individual and non-individual accounts; (v) a sample check of 9,122 high risk customers indicated that we had not
carried out periodic updates of KYC in respect of 5,339 cases at the prescribed interval of once every two years.

For more details, see “-As at March 31, 2023, we were in non-compliance with 17 out of the 272 Risk Based Supervision
(“RBS”) Tranche III requirements and if the Reserve Bank of India (RBI) imposes penalties on us for this non-
compliance, it could adversely affect our reputation, business, financial condition, results of operations and cash
flows” and “-We are subject to inspections by the Reserve Bank of India (RBI). Inspection by the RBI is a regular
exercise for all banks and financial institutions. The RBI and external auditors appointed by the RBI have observed
various non-compliances by us in the past and have required us to, among other things, take corrective actions and
pay compensation. We are currently in non-compliance with certain major observations of the RBI, which we are in
the process of rectifying. Any significant deficiencies identified by the RBI in a final inspection report or other
observations made that we are unable to rectify to the RBI’s satisfaction could lead to sanctions and penalties being
imposed by the RBI on our Bank, which could materially and adversely affect our reputation, business, financial
condition, results of operations and cash flows” on pages 38 and 39, respectively.

Although, except as noted above, we believe that we currently have adequate internal policies, processes and controls
in place to prevent and detect AML and CFT activity and ensure KYC compliance, there may be significant
inconsistencies in the manner in which specific operational and KYC, AML, CFT policies are actually interpreted and
implemented at an operational level in each of our Branches. If we fail to comply with such laws and regulations, we
may be subject to regulatory actions, including imposition of fines and other penalties by the relevant government
agencies to whom we report.

55. As at September 30, 2023, June 30, 2023 and March 31, 2023, 2022 and 2021 our aggregate outstanding borrowings
were ₹24,419.30 million, ₹27,391.25 million, ₹33,541.95 million, ₹29,528.33 million and ₹16,940.00 million,
respectively. We are required to comply with certain restrictive covenants under our financing agreements. Any
non-compliance may lead to, amongst others, accelerated repayment schedule, securitization of assets charged and
suspension of further drawdowns, which may adversely affect our business, financial condition, results of
operations and cash flows.

As at September 30, 2023, our borrowings were ₹24,419.30 million. The below table sets forth our borrowings as at
the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
(₹ in million)
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 Borrowings 27,391.25 33,541.95 29,528.33 16,940.00

We have paid the due amount of principal and interest on our borrowings on or before the applicable due dates as at
September 30, 2023 and in the three months period ended June 30, 2023 and 2022 and Fiscals 2023, 2022 and 2021.

Since April 1, 2020, we have not violated any of the restrictive covenants in our financing agreements or been in
default under the terms of any of our financing agreements and none of our borrowings has been rescheduled.

Some of the financing arrangements entered into by us include conditions that require us to obtain respective lenders’
consent prior to carrying out certain activities and entering into certain transactions. Failure to meet these conditions
or obtain these consents could have significant consequences on our business and operations. These covenants vary
depending on the requirements of the financial institution extending such loan and the conditions negotiated under
each financing agreement. Some of the corporate actions that require prior consents from certain lenders include,
among others, prepayment of loan availed, reorganisation or restructuring and change in terms of the NCDs. We are
also required to maintain certain financial ratios and ensure compliance with regulatory requirements, such as
maintenance of capital adequacy ratio, qualifying asset norms and ensure positive net worth. Failure to comply with
such covenants may restrict or delay certain actions or initiatives that we may propose to take from time to time.

In addition, our lenders may recall all or part of such unsecured amounts borrowed by us on short or no notice. Such
recalls on borrowed amounts may be contingent upon happening of an event beyond our control and there can be no
assurance that we will be able to persuade our lenders to give us extensions or to refrain from exercising such recalls,
which may adversely affect our results of operations and cash flows.

Further, pursuant to clauses in certain financing agreements, any defaults under such facilities may also trigger
acceleration provisions. If the obligations under any of our financing documents are accelerated, we may have to
dedicate a portion of our cash flow from operations to make payments under such financing documents, thereby
reducing the availability of cash for our working capital requirements and other general corporate purposes. In addition,
during any period in which we are in default, we may be unable to raise, or face difficulties raising, further financing.

For further details on our material covenants under our financing agreements, see “Financial Indebtedness” on page
417.

56. We had negative cash flows generated from operating activities for Fiscals 2023 and 2022 of ₹5,730.00 million and
₹5,845.02 million, respectively, and we may experience negative cash flows from operating activities in the future.

The table below sets forth a summary of our statement of cash flows for the three months period ended June 30, 2023
and 2022 and Fiscals 2023, 2022 and 2021.

Particulars Three months period ended June 30, For the year ended March 31,
2023 2022 2023 2022 2021
(₹ in millions)
Cash flow from / (used in) 7,057.89 3,063.26 (5,730.00) (5,845.02) 11,274.45
operating activities [A]
Of which:
Cash generated from operations 3,037.32 2,641.88 10,243.99 5,169.58 4,305.14
before adjustments
Adjustments for:
(Increase)/decrease in (243.50) (4,986.02) (3,976.14) (11,979.40) 4,075.38
investments (other than HTM
investments)
(Increase)/decrease in advances (5,261.44) (593.21) (29,031.17) (37,900.94) (18,084.91)
(Increase)/decrease in fixed - - - (2.94) 2,264.25
deposit with banks (original
maturity greater than 3 months)
(Increase) in other assets (726.60) (543.20) (1,693.47) (497.39) (424.03)
Increase in deposits 9,902.31 6,426.73 18,505.51 38,156.46 19,710.44
Increase/(decrease) in other 607.08 219.94 834.32 1,378.63 521.25
liabilities and provisions
Direct taxes (paid)/refunded (257.28) (102.86) (613.04) (169.02) (1,093.07)
Cash flow from / (used in) 290.46 (3,036.86) (5,732.17) (9,818.47) (6,379.55)
investing activities [B]
Cash flows from/(used in) (6,150.70) (3,973.33) 4,013.62 12,588.33 6,532.70
financing activities [C]
Net increase/(decrease) in 1,197.65 (3,946.93) (7,448.55) (3,075.16) 11,427.60
cash and cash equivalents
[A]+[B]+[C]
Cash and cash equivalents at 7,664.24 15,112.79 15,112.79 18,187.95 6,760.35
the beginning of the year
Cash and cash equivalents at 8,861.89 11,165.86 7,664.24 15,112.79 18,187.95
the end of the year

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 Our cash generated from operations before adjustments was positive in Fiscals 2023 and 2022 and it was primarily an
increase in advances and an increase in investments (other than HTM investments) that resulted in us having net cash
used in operating activities for Fiscals 2023 and 2022. For further details, see “Financial Statements – Restated Cash
Flow Statement” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations–
Liquidity and Capital Resources–Cash Flows–Operating Activities” on pages 312 and 410, respectively. We may
experience negative cash flows from operating activities in the future, which could adversely affect our business and
financial condition.

57. We may face labour disruptions that would interfere with our operations and have an adverse effect on our business,
financial condition, results of operations and cash flows.

Although none of our employees are in a trade union, we are exposed to the risk of labour disruptions. While our
relations have been good with our employees, we cannot guarantee that our employees will not participate in work
stoppages or other industrial action in the future. Our Bank is involved in two labour disputes, which are non-
quantifiable in nature. These proceedings are pending at District Labour Offices at different jurisdictions. We cannot
assure you that these proceedings will be decided in our favour. Any other such event could disrupt our operations,
possibly for a significant period of time, and result in increased wages and other benefits, which could have an adverse
effect on our business, financial condition, results of operations and cash flows.

58. We depend on the accuracy and completeness of information about customers and counterparties and any
misrepresentation, errors or incompleteness of such information could cause our business to suffer.

In deciding whether to extend credit or enter into other transactions with customers and counterparties, we may rely
on information furnished to us by or on behalf of customers and/or counterparties. We may also rely on certain
representations as to the accuracy and completeness of that information. To further verify the information provided by
potential customers, we conduct searches through credit bureaus for creditworthiness of our customers who have a
credit history.

Our business involves lending money to smaller, relatively low-income entrepreneurs and individuals who may not
have any credit history. A significant majority of our customers belong to the low-income group and may not have
any credit history supported by tax returns, credit card statements, statements of previous loan exposures or other
related documents. They may also have limited formal education and are generally able to furnish very limited
information for us to be able to assess their creditworthiness accurately. In addition, we may not receive updated
information regarding any change in the financial condition of our customers or may receive inaccurate or incomplete
information. It is therefore difficult to carry out a formal credit risk analyses on our customers based on financial
information.

Difficulties in assessing credit risks associated with our day-to-day lending operations may lead to an increase in the
level of our NPAs, which could adversely affect our business, financial condition, results of operations and cash flows.

59. We are dependent on our Key Managerial Personnel, Senior Management Personnel and other key personnel, and
the loss of, or our inability to attract or retain, such persons could adversely affect our business, financial condition,
results of operations and cash flows. The attrition rate of rate of Key Managerial Personnel and Senior
Management Personnel (combined) was nil, 15.38%, 16.67% and 9.90% for the three months period ended June
30, 2023 and Fiscals 2023, 2022 and 2021, respectively.

Our performance depends largely on the efforts and abilities of our Key Managerial Personnel, Senior Management
Personnel and other key personnel, including our operational, credit managers and branch managers. We believe that
the inputs and experience of our Key Managerial Personnel and Senior Management Personnel, in particular, are
valuable for the development of our business and operations and the strategic directions taken by us. For details in
relation to the experience of our Key Managerial Personnel and Senior Management Personnel, see “Our
Management” on page 251. Further, the terms of employment of certain of our Senior Management Personnel, namely,
George Thomas, Hari Velloor, Hemanth Kumar Tamta, Sivakumar P., E.A. Jacob, and Wilson Cyriac, are on a
contractual basis, and are renewable subject to the terms and conditions of their respective appointments. The table
below sets forth the attrition of our Key Managerial Personnel and Senior Management Personnel (combined) during
the period and Fiscals indicated.

Particulars Three months period Year ended March 31,

ended June 30, 2023 2023 2022 2021
Attrition of Key Managerial Personnel and Senior - 2 2 1
Management Personnel (combined) [A]
Attrition rate of Key Managerial Personnel and Senior - 15.38% 16.67% 9.90%
Management Personnel (combined) [B = A/D] (%)
Total Key Managerial Personnel and Senior 11 11 10 10
Management personnel (combined) as at the end of the
Fiscal [C]

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 Particulars Three months period Year ended March 31,
ended June 30, 2023 2023 2022 2021
Total Key Managerial Personnel and Senior 11 13 12 11
Management personnel (combined) who left during the
Fiscal and total Key Managerial Personnel and Senior
Management personnel (combined) as at the end of the
Fiscal [D = A +C]

We cannot assure you that we will renew the terms of employment of our Senior Management Personnel or that these
individuals or any other member of our senior management team will not leave us or join a competitor or that we will
be able to retain such personnel or find adequate replacements in a timely manner, or at all. We may require a long
period of time to hire and train replacement personnel when qualified personnel terminate their employment with us.
Further, the RBI is required to approve candidates proposed to be appointed as chairman, managing director and
executive director. Additionally, the RBI has the power and the authority to remove any employee or managerial
person under certain circumstances. For instance, in the past, the RBI has directed , Kadambelil Paul Thomas, our
individual promoter, to step down from his position of Managing Director and Chief Executive Officer of our Bank
on account of his holding substantial interests in EFHPL, our corporate promoter and not being able to divest his
shareholding in EFHPL, our corporate promoter in accordance with the Banking Regulation Act. As a result,
Kadambelil Paul Thomas resigned from his position of Managing Director and Chief Executive Officer on June 2,
2018 and re-joined on October 1, 2018 with the approval of the RBI dated October 1, 2018, post divestiture of his
shareholding in the EFHPL in compliance with the directions of the RBI. For further details, see “Certain directions
have been issued by the Reserve Bank of India (RBI) to our Bank in respect of the office of Kadambelil Paul Thomas,
the Managing Director, Chief Executive Officer and one of our promoters. We cannot assure you that our Bank and
Kadambelil Paul Thomas will not be subject to issuance of further directions by the RBI in future, which could have
an adverse reputational effect on our business and operations” and “-Outstanding Litigation and Material
Developments – Litigation against Kadambelil Paul Thomas – Disciplinary action” on pages 42 and 431, respectively.

For details of the attrition of our employees, see “- The attrition rate of our employees was 3.87% (not annualized),
5.66% (not annualized), 24.07%, 20.07%, 13.03% for the three months period ended June 30, 2023 and Fiscals 2023,
2022 and 2021, respectively. Our payments to and provisions for employees as a percentage of net interest income,
which is defined as interest earned minus interest expended, and other income (Operating Income) were 11.77%,
12.28%, 13.09%, 17.14% and 17.90% for the three months period ended June 30, 2023 and 2022 and Fiscals 2023,
2022 and 2021, respectively. If the attrition rate of our employees continues to increase, we may need to increase the
compensation paid to employees in order to retain more of our employees, which could have an adverse effect on our
financial condition, results of operations and cash flows.” on page 44.

60. One of our Non-Executive Independent Directors, namely Ravi Venkatraman is on the board of directors of
companies engaged in a line of business similar to that of ours. Any conflict of interest that may occur as a result
could adversely affect our business, financial condition, results of operations and cash flows.

One of our Directors is on the board of directors of companies that are engaged in a line of business similar to that of
our Bank. Ravi Venkatraman, our Non-Executive Independent Director, is on the board of directors of Avanse
Financial Services Limited, Kotak Mahindra Prime Limited and Sarvagram Fincare Private Limited. The
abovementioned companies may provide comparable services, expand their presence, solicit our employees or acquire
interests in competing ventures in the locations or segments in which we operate. A conflict of interest may occur
between us and the abovementioned companies, which could have an adverse effect on our business, financial
condition, result of operations and cash flows.

61. We have insurance policies covering 90.85% of our tangible fixed assets on a gross block basis as at June 30, 2023.
We also have a bankers indemnity insurance policy covering cash in hand, coverage for which is based on a certain
average amount based on industry practice. As at June 30, 2023, this insurance policy covered 100.00% of our cash
in hand. If we were to incur a serious uninsured loss or a loss that significantly exceeds the limits of our insurance
policies, it could have an adverse effect on our financial condition, results of operations and cash flows.

We have insurance policies covering 90.85% of our tangible fixed assets on a gross block basis as at June 30, 2023.
We also have a bankers indemnity insurance policy covering cash in hand, coverage for which is based on a certain
average amount based on industry practice. As at June 30, 2023, this insurance policy covered 100.00% of our cash in
hand. For details on the insurance policies that we hold, see “Our Business – Insurance” on page 217. While we are
covered by a range of insurance policies that we believe is consistent with industry practice in India to cover risks
associated with our business, we cannot assure you that our current insurance policies will insure us fully against all
risks and losses that may arise in the future. Even if such losses are insured, we may be required to pay a significant
deductible on any claim for recovery of such a loss, or the amount of the loss may exceed our coverage for the loss. In
addition, our insurance policies are subject to annual review, and we cannot assure you that we will be able to renew
these policies on similar or otherwise acceptable terms, or at all. If we were to incur a serious uninsured loss or a loss
that significantly exceeds the limits of our insurance policies, it could have an adverse effect on our financial condition,
results of operations and cash flows.

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62. Any non-compliance with law or unsatisfactory service by the third-party service providers engaged by us for certain
services could have an adverse effect on our business, results of operations and cash flows.

We enter into outsourcing arrangements with third-party vendors and independent contractors, in compliance with the
RBI guidelines on outsourcing. These vendors and contractors provide services that include, among others, ATM/card-
related services, business correspondents, facility management services related to information technology, software
services and call centre services. We are also dependent on various vendors for certain elements of our operations
including branch rollouts, networking, managing our data centre, and back-up support for disaster recovery. As a result
of outsourcing such services, we are exposed to various risks including strategic, compliance, operational, fraud, theft,
embezzlement, legal and contractual risks. Any failure by a service provider to provide a specified service or a breach
in security/confidentiality or non-compliance with legal and regulatory requirements, may result in financial loss or
loss of reputation. Since April 1, 2020, we have not suffered any material losses due to non-compliance with law or
unsatisfactory service by the third-party service providers. However, we cannot assure you that there will be no
disruptions in the provision of such services or that these third parties will adhere to their contractual obligations. If
there is a disruption in the third-party services, or if the third-party service providers discontinue their service
agreement with us, our business, financial condition and results of operations may be adversely affected. We cannot
assure you that the terms of such agreements will not be breached, and in case of any dispute, it may result in litigation
costs. Such additional cost, in addition to the cost of entering into agreements with third parties in the same industry,
may adversely affect our business, financial condition and results of operations.

The “Guidelines on Managing Risks and Code of Conduct in Outsourcing of Financial Services by Bank” issued by
the RBI on March 11, 2015 places obligations on banks, its directors and senior management for ultimate responsibility
for the outsourced activity. We have an outsourcing and vendor risk management policy. Banks are required to ensure
outsourced service providers obtain prior approval for the use of subcontractors. The RBI has also directed banks to
review the subcontracting arrangements and ensure that such arrangements are compliant with aforementioned RBI
guidelines. Legal risks, including actions being undertaken by the RBI, if our third-party service providers act
unethically or unlawfully, could adversely affect our business, financial condition, results of operations and cash flows.

63. Our Promoters will continue to exercise significant influence over our Bank after the completion of the Offer.

As at the date of this Red Herring Prospectus, our Promoters hold 69.40% of the issued, subscribed and paid-up Equity
Share capital of our Bank. Upon completion of the Offer, our Promoters will hold [●]% of our Equity Share capital,
continuing to hold minimum capital as prescribed by the RBI. As per applicable law, our Promoters’ voting rights in
our Bank are capped to 26.00% of the total voting rights of our Bank (i.e., the maximum voting rights permitted to be
exercised by any shareholder in a banking company). As long as our Promoters continue to hold a significant
ownership stake in us, our Promoters have the ability to significantly influence the outcome of any matter submitted
to Shareholders for approval, including matters relating to sale of all or part of our business, mergers, acquisitions, and
changes to our capital structure or financing. Pursuant to the terms of the EFHPL SHA, ESAF Financial Holdings
Private Limited has agreed to (upon successful completion of the Offer) to: (i) undertake a buy-back of its shares in
accordance with applicable law from the amount received from the Offer for Sale of its Equity Shares and such buy-
back shall be computed in the manner set out in the EFHPL SHA; and (ii) file a suitable application before the NCLT
in accordance with the Companies Act, 2013 for cancellation and reduction of a certain portion of the share capital of
ESAF Financial Holdings Private Limited, in consideration for which ESAF Financial Holdings Private Limited has
agreed to transfer Equity Shares that ESAF Financial Holdings Private Limited holds in the Bank to SIDBI Trustee
Company Limited and Dia Vikas Capital Private Limited (collectively, the Investors in ESAF Financial Holdings
Private Limited) in such proportion as agreed to under EFHPL SHA as per the formula set out therein. The reduction
of shares of ESAF Financial Holdings Private Limited and the transfer of its Equity Shares of the Bank to the Investors
in ESAF Financial Holdings Private Limited shall be subject to applicable laws and receipt of the order of the NCLT
approving such reduction of capital. In the event that the Offer is not completed within the timeline prescribed under
the EFHPL SHA, the Investors in ESAF Financial Holdings Private Limited are, amongst other things, entitled to
exercise a put option and require ESAF Financial Holdings Private Limited, Kadambelil Paul Thomas or ESMACO
to buy-back or redeem or purchase the shares held by the Investors in ESAF Financial Holdings Private Limited. Upon
the occurrence of an event of default as set out in the EFHPL SHA, which are not remedied within the prescribed time
periods, the Investors in ESAF Financial Holdings Private Limited may be entitled to transfer their shareholding to
any third party without offering Kadambelil Paul Thomas a right of first refusal. This could result in significant dilution
in shareholding of ESAF Financial Holdings Private Limited in our Bank. For further details, see “History and
Corporate Matters – Shareholders’ Agreements and Other Agreements” and “-Any future issuance of Equity Shares
or securities convertible into Equity Shares by us or sales of Equity Shares by the Promoters could adversely affect
the trading price of the Equity Shares, and in the case of the issuance of Equity Shares by us, result in the dilution of
our then current Shareholders” on pages 245 and 90, respectively. The trading price of the Equity Shares could be
adversely affected if potential new investors are disinclined to invest in us because they perceive there to be
disadvantages in our Promoters holding a large percentage of the Equity Shares.

64. Our Promoters, certain of our Directors, Key Managerial Personnel and Senior Management Personnel and the
relatives of the Key Managerial Personnel and Senior Management Personnel have interests in us other than
reimbursement of expenses incurred and normal remuneration or benefits.

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 Our Promoters, certain of our Directors, Key Managerial Personnel and Senior Management Personnel and the
relatives of the Key Managerial Personnel and Senior Management Personnel may be regarded as having an interest
in our Bank other than reimbursement of expenses incurred and normal remuneration or benefits. Our Promoters,
certain Directors, Key Managerial Personnel, Senior Management Personnel and the relatives of George Kalaparambil
John, Kadambelil Paul Thomas and George Thomas may be deemed to be interested to the extent of Equity Shares
held by them as well as to the extent of any dividends, bonuses, or other distributions on such Equity Shares and to the
extent of employee stock options granted to them, if any.

Additionally, George Kalaparambil John is a member of Prachodhan Development Services, a party with which our
Bank has entered into an agreement for implementing CSR activities. George Thomas is interested in our Bank to the
extent of benefits arising out of him being a shareholder in EFHPL, our corporate promoter, a shareholder in
Prachodhan Development Services and the chairman of ESAF Staff Welfare Trust.

Furthermore, Kadambelil Paul Thomas and George Thomas are board members of the ESAF Foundation, a party with
which our Bank has entered into an agreement for implementing CSR activities, and a trademark licencing agreement
for the right to use the “ESAF” brand and certain logos, and a leasing agreement. For details on the trademark licencing
agreement, see “–If we fail to successfully enforce our intellectual property rights or are unable to renew our
trademark licencing agreement, our business, results of operations and cash flows would be adversely affected” and
“History and Certain Corporate Matters – Key terms of other subsisting material agreements” on pages 68 and 247,
respectively. For details on the leasing agreement, see “Our Business - Properties” on page 218. Kadambelil Paul
Thomas is interested in our Bank to the extent of benefits arising out of him being a shareholder in EFHPL. Further,
Kadambelil Paul Thomas is interested in our Bank to the extent of benefits arising out of him being a shareholder in
Lahanti Homes and Infrastructure Private Limited (formerly ESAF Homes & Infrastructure Private Limited) with
which our Bank has entered into an agreement for leasing of property. For details on the leasing agreement, see “Our
Business - Properties” on page 218.

For further details, see “Capital Structure”, “Our Management – Interests of Directors”, “Our Business - Properties”
and “Our Promoters and Promoter Group – Interests of our Promoters” on pages 109, 256, 218 and 276, respectively.

65. We terminated our agreement with Sambandh Finserve Pvt Ltd (Sambandh) pursuant to which it acted for us as a
business correspondent on October 24, 2020 following revelations of serious alleged irregularities in the conduct
and functioning on the part of Sambandh. However, Sambandh had not committed any fraudulent acts against us.
Our gross advances sourced or serviced by Sambandh, which totalled ₹124.60 million, or 0.13% of our gross
advances, as at September 30, 2021, were transferred to Lastmile Services Private Limited (Lahanti) effective
November 1, 2020. The termination of Sambandh did not have any material adverse effect on our business,
financial condition, results of operations or cash flows.

We terminated our agreement with Sambandh pursuant to which it acted for us as a business correspondent on October
24, 2020 following revelations of serious alleged irregularities in the conduct and functioning on the part of Sambandh.
We notified the RBI vide a letter dated October 21, 2020 that Sambandh had not committed any fraudulent acts against
us; the alleged fraud was committed by Sambandh against other parties. Our gross advances sourced or serviced by
Sambandh, which totalled ₹124.60 million, or 0.13% of our gross advances, as at September 30, 2021, were transferred
to Lahanti effective November 1, 2020. The termination of Sambandh did not have any material adverse effect on our
business. Financial condition, results of operations or cash flows

66. We have in this Red Herring Prospectus included certain non-GAAP financial measures and certain other selected
statistical information related to our operations and financial condition. These non-GAAP financial measures and
statistical information may vary from any standard methodology that is applicable across the financial services
industry, and therefore may not be comparable with financial or statistical information of similar nomenclature
computed and presented by other financial services companies.

Certain non-GAAP financial measures and certain other statistical information relating to our operations and financial
performance have been included in this section and elsewhere in this Red Herring Prospectus. For information on the
non-GAAP financial measures, see “Selected Statistical Information – Certain Non-GAAP Financial Measures” on
page 302. We compute and disclose such non-GAAP financial measures and such other statistical information relating
to our operations and financial performance as we consider such information to be useful measures of our business
and financial performance, and because such measures are frequently used by securities analysts, investors and others
to evaluate the operational performance of financial services businesses, many of which provide such non-GAAP
financial measures and other statistical and operational information when reporting their financial results. Such non-
GAAP financial measures and other statistical and operational information are not measures of operating performance
or liquidity defined by generally accepted accounting principles. These non-GAAP financial measures and other
statistical and other information relating to our operations and financial performance may not be computed on the basis
of any standard methodology that is applicable across the industry and therefore may not be comparable to financial
measures and statistical information of similar nomenclature that may be computed and presented by other banks in
India or elsewhere.

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EXTERNAL RISKS

67. Any downturn in the macroeconomic environment in India could adversely affect our business, financial condition,
results of operations and cash flows.

Our performance and the growth of our business are necessarily dependent on the health of the overall Indian economy.
Therefore, any downturn in the macroeconomic environment in India could adversely affect our business, financial
condition, results of operations and cash flows. The Indian economy could be adversely affected by various factors,
such as the effect of COVID-19 or other pandemics, epidemics, political and regulatory changes, including adverse
changes in the Government’s liberalisation policies, social disturbances, religious or communal tensions, terrorist
attacks and other acts of violence or war, natural calamities, volatility in interest rates, volatility in commodity and
energy prices, a loss of investor confidence in other emerging market economies and any worldwide financial
instability. In addition, an increase in India’s trade deficit, a downgrading in India’s sovereign debt rating or a decline
in India’s foreign exchange reserves could increase interest rates and adversely affect liquidity, which could adversely
affect the Indian economy and thereby adversely affect our business, financial condition, results of operations and cash
flows.

Also see “–COVID-19 has had and could continue to have an adverse effect on our business, financial condition,
results of operations and cash flows” on page 63.

68. The occurrence of natural disasters and man-made disasters could adversely affect our business, financial
condition results of operations and cash flows. In addition, terrorist attacks and other acts of violence or war as
well as civil unrest or rioting in India could create a perception that investment in Indian companies involves a
higher degree of risk, thereby adversely affecting the market price of the Equity Shares.

The occurrence of natural disasters, including cyclones, storms, floods, earthquakes, tsunamis, fires, explosions,
pandemics (such as COVID-19) and epidemics, and man-made disasters, including acts of terrorism, other acts of
violence and war, could adversely affect our business, financial condition, results of operations and cash flows. In
addition, terrorist attacks and other acts of violence or war as well as civil unrest or rioting in India could create a
perception that investment in Indian companies involves a higher degree of risk, thereby adversely affecting the market
price of the Equity Shares.

69. Changing laws, rules and regulations and legal uncertainties, including adverse application of tax laws and
regulations, across the multiple states we operate in, may have a material adverse effect on our business, financial
condition, results of operations and cash flows.

Our business and financial condition could be materially adversely affected by changes in the laws, rules, regulations
or directions applicable to us and our general and Micro Loan businesses, or the interpretations of such existing laws,
rules and regulations, or the promulgation of new laws, rules and regulations.

The governmental and regulatory bodies may notify new regulations and/ or policies, which may require us to obtain
approvals and licenses from the government and other regulatory bodies, impose onerous requirements and conditions
on our operations, in addition to those that we are undertaking currently, or change the manner in which we conduct
KYC or authenticate our customers. Any such changes and the related uncertainties with respect to the implementation
of new regulations may have a material adverse effect on our business, financial condition, results of operations and
cash flows.

In addition, unfavourable changes in or interpretations of existing, or the promulgation of new laws, rules and
regulations including foreign investment laws governing our business, operations and investments in our Bank by non-
residents, could result in us being deemed to be in contravention of such laws and/ or may require us to apply for
additional approvals.

Tax and other levies imposed by the central and state governments in India that affect our tax liability include central
and state taxes and other levies, income tax, turnover tax, GST, stamp duty and other special taxes and surcharges
which are introduced on a temporary or permanent basis from time to time. The final determination of our tax liabilities
involves the interpretation of local tax laws and related regulations in each jurisdiction as well as the significant use
of estimates and assumptions regarding the scope of future operations and results achieved and the timing and nature
of income earned and expenditures incurred. Moreover, the central and state tax scheme in India is extensive and
subject to change from time to time. Any future increases or amendments may affect the overall tax efficiency of
companies operating in India and may result in significant additional taxes becoming payable. If the tax costs
associated with certain transactions because of a particular tax risk materializing are greater than anticipated, it could
affect the profitability of such transactions.

In addition, many laws and regulations relating to privacy and the collection, storing, sharing, use, disclosure, and
protection of certain types of data are subject to varying degrees of enforcement and new and changing interpretations
by courts or regulators. The Digital Personal Data Protection Act, 2023 (“DPDP Act”) has been enacted on August
11, 2023. All data fiduciaries, determining the purpose and means of processing personal data, are mandated to provide
an itemised notice in plain and clear language containing a description of the personal data sought to be collected along
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 with the purpose of processing such data. The DPDP Act further provides that where consent is the basis of processing
personal data, the data principal providing the consent, may withdraw such consent at any time. Any form of non-
compliance shall attract a financial penalty as prescribed in Schedule I of the DPDP Act, not exceeding ₹2.500 million
in each instance. The RBI has also issued a circular on the procedure of storage of payment systems data, to ensure
that data, relating to payment systems operated by us is stored only in India. Changes in laws or regulations relating
to privacy, data protection, and information security, particularly any new or modified laws or regulations, or changes
to the interpretation or enforcement of such laws or regulations, that require enhanced protection of certain types of
data or new obligations with regard to data retention, transfer, or disclosure, could require us to modify our existing
systems or invest in new technologies to ensure compliance with such applicable laws, which may require us to incur
additional expenses.

In addition, unfavourable changes in or interpretations of existing, or the promulgation of new laws, rules and
regulations including foreign investment laws governing our business, operations and group structure could result in
us being deemed to be in contravention of such laws or may require us to apply for additional approvals. We may incur
increased costs and other burdens relating to compliance with such new requirements, which may also require
significant management time and other resources, and any failure to comply may adversely affect our business, results
of operations and prospects. Uncertainty in the applicability, interpretation or implementation of any amendment to,
or change in, governing law, regulation or policy, including by reason of an absence, or a limited body, of
administrative or judicial precedent may be time consuming as well as costly for us to resolve and may affect the
viability of our current business or restrict our ability to grow our business in the future. For example, the Government
has recently introduced (a) the Code on Wages, 2019 (“Wages Code”); (b) the Code on Social Security, 2020 (“Social
Security Code”); (c) the Occupational Safety, Health and Working Conditions Code, 2020; and (d) the Industrial
Relations Code, 2020, which consolidate, subsume and replace numerous existing central labour legislations. The rules
for the implementation of these codes have not been announced, and as such, the full impact of such laws on our
business, operations and growth prospects, remain uncertain. For example, the Social Security Code aims to provide
uniformity in providing social security benefits to employees which were previously segregated under different acts
and had different applicability and coverage. A change of law that requires us to treat and extend benefits to our
outsourced personnel, and personnel retained on a contractual basis, similar to our full-time employees may create
potential liability for us. If we fail to comply with current and future health and safety and labour laws and regulations
at all times, including obtaining relevant statutory and regulatory approvals, this may materially and adversely affect
our business, financial condition, results of operations and cash flows.

70. Financial difficulties and other problems in certain long-term lending institutions and investment institutions in
India could have a negative effect on our business, financial condition, results of operation and cash flows and the
trading price of the Equity Shares could decrease.

As an Indian SFB, we are exposed to the risks of the Indian financial system, which may be affected by the financial
difficulties faced by certain Indian financial institutions because the commercial soundness of many financial
institutions may be closely related as a result of credit, trading, clearing or other relationships. This risk, which is
referred to as “systemic risk,” may adversely affect financial intermediaries, such as clearing agencies, banks,
securities firms and exchanges with whom we interact. Our transactions with these financial institutions expose us to
credit risk in the event of default by the counterparty, which can be exacerbated during periods of market illiquidity.
As the Indian financial system operates within an emerging market, we face risks of a nature and extent not typically
faced in more developed economies, including the risk of deposit runs notwithstanding the existence of a national
deposit insurance scheme. The problems faced by individual Indian financial institutions and any instability in, or
difficulties faced by, the Indian financial system generally could create adverse market perception about Indian
financial institutions and banks. This in turn could adversely affect our business, financial condition, results of
operations, cash flows and the trading price of the Equity Shares.

71. Our ability to borrow in foreign currencies is restricted by Indian law.

Indian banks and companies are subject to foreign exchange regulations that regulate borrowing in foreign currencies,
including those specified under FEMA. Such regulatory restrictions limit our ability to borrow in foreign currencies
and, therefore, could negatively affect our ability to obtain financing on competitive terms. In addition, we cannot
assure you that any required approvals for borrowing in foreign currency will be granted to us without onerous
conditions, or at all. Such, and other, limitations on raising foreign capital may adversely affect our business results of
operations, financial condition and cash flows. Our foreign currency borrowings were nil, nil, nil and nil as at June 30,
2023, March 31, 2023, 2022 and 2021.

72. Significant differences exist between Indian GAAP and other accounting principles, such as U.S. GAAP and IFRS,
which investors outside India may be more familiar with and may consider material to their assessment of our
financial condition, results of operations and cash flows.

The Restated Financial Information has been compiled by the management from the audited financial statements as at
and for the three months period ended June 30, and the years ended March 31, 2023, 2022 and 2021. The above
mentioned audited financial statements have been prepared in accordance with the requirements prescribed under the
Banking Regulation Act. The accounting and reporting policies used in the preparation of these financial statements

87
 conform in all material aspects with Indian GAAP, the circulars and guidelines issued by the RBI from time to time
and the Accounting Standards prescribed under Section 133 of the Companies Act (as amended), read with the
Companies (Accounts) Rules, 2014 and the Companies (Accounting Standards) Amendment Rules, 2016 to the extent
applicable and other relevant provisions of the Companies Act and current practices prevailing within the Banking
industry in India. The Restated Financial Information have been prepared in accordance with the requirements of
section 26 of Part 1 of Chapter III of the Companies Act, the SEBI ICDR Regulations and the Guidance Note on
Reports in Company Prospectuses (Revised 2019). Indian GAAP differs in certain significant respects from IFRS,
U.S. GAAP and other accounting principles with which prospective investors outside India may be familiar. If the
Restated Financial Information were to be prepared in accordance with such other accounting principles, our results
of operations, financial condition and cash flows may be substantially different. Prospective investors should review
the accounting policies applied in the preparation of the Restated Financial Information and consult their own
professional advisers for an understanding of the differences between these accounting principles and those with which
they may be more familiar. Any reliance by persons unfamiliar with Indian GAAP on the financial information
presented in this Red Herring Prospectus should accordingly be limited.

RISKS RELATING TO THE EQUITY SHARES AND THE OFFER

73. The determination of the Price Band is based on various factors and assumptions and the Offer Price of the Equity
Shares may not be indicative of the market price of the Equity Shares upon listing on the Stock Exchanges.
Investors bear the risk of fluctuations in the price of Equity Shares and there can be no assurance that a liquid
market for the Equity Shares will develop following the listing of the Equity Shares on the Stock Exchanges.

There has been no public market for the Equity Shares prior to the Offer. The determination of the Price Band is based
on various factors and assumptions and will be determined by us and the EFHPL corporate promoter, in consultation
with the BRLMs. Our total income and net profit for the year for Fiscal 2023 were ₹31,415.72 million and ₹3,023.33
million, respectively. Our price to earnings ratio, based on our net profit for the year for Fiscal 2023 is [●] times at the
upper end of the Price Band. Our market capitalization to total income for Fiscal 2023 multiple is [●] times at the
upper end of the Price Band.

The Offer Price of the Equity Shares will be determined by us and the Selling Shareholders, in consultation with the
BRLMs, through the Book Building Process. This price will be based on numerous factors, as described under in
“Basis for Offer Price” on page 130. The Offer Price may not necessarily be indicative of the market price of the
Equity Shares after the Offer is completed. You may not be able to re-sell your Equity Shares at or above the Offer
Price and could, as a result, lose all or part of your investment. The price at which the Equity Shares will trade at after
the Offer will be determined by the marketplace and may be influenced by many factors, including:

• our financial condition, results of operations and cash flows;

• the history of and prospects for our business;

• an assessment of our management, our past and present operations and the prospects for as well as timing of
our future revenues and cost structures;

• the valuation of publicly traded companies that are engaged in business activities similar to ours;

• quarterly variations in our results of operations;

• results of operations that vary from the expectations of securities analysts and investors;

• results of operations that vary from those of our competitors;

• changes in expectations as to our future financial condition, including financial estimates by research analysts
and investors;

• a change in research analysts’ recommendations;

• announcements by us or our competitors of significant acquisitions, strategic alliances, joint operations or

capital commitments;

• announcements of significant claims or proceedings against us;

• new laws and government regulations that directly or indirectly affect our business;

• additions or departures of Key Managerial Personnel;

• changes in the interest rates;

• fluctuations in stock market prices and volume; and

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 • general economic conditions.

The Indian stock markets have, from time to time, experienced significant price and volume fluctuations that have
affected market prices for the securities of Indian companies. As a result, investors in the Equity Shares may experience
a decrease in the value of the Equity Shares regardless of our financial condition, results of operations and cash flows.

The Equity Shares are expected to trade on NSE and BSE after the Offer, but there can be no assurance that active
trading in the Equity Shares will develop after the Offer, or if such trading develops that it will continue. Investors
may not be able to sell the Equity Shares at the quoted price if there is no active trading in the Equity Shares.

74. Pursuant to the listing of the Equity Shares on the Stock Exchanges, the Equity Shares may be subject to pre-
emptive surveillance measures, including additional surveillance measures (“ASM”) and graded surveillance
measures (“GSM”) by the Stock Exchanges and SEBI, which may have an adverse effect on the market price of
the Equity Shares or may in general cause disruptions in the development of an active market for, and trading and
liquidity of the Equity Shares and could also adversely affect our reputation.

On and post the listing of the Equity Shares, the Equity Shares may be subject to ASM and GSM by the Stock
Exchanges and SEBI. These measures have been introduced by SEBI in order to enhance market integrity, safeguard
the interest of investors and to alert and advise investors to be extra cautious and carry out necessary due diligence
while dealing in such securities. The criteria for listing any scrip trading on the Stock Exchanges under the ASM is
based on an objective criteria as jointly decided by SEBI and the Stock Exchanges, which includes market-based
dynamic parameters (such as high low variation, client concentration, close to close price variation, market
capitalization, volume variation, delivery percentage, number of unique PANs and price to equity ratio). A scrip is
typically subjected to GSM where there is an abnormal price rise that is not commensurate with the financial health
and fundamentals of a company, which includes factors such as earnings, book value, fixed assets, net worth and price
to equity ratio. In the event the Equity Shares are covered under such pre-emptive surveillance measures implemented
by SEBI and the Stock Exchanges, the Equity Shares may be subject to certain additional restrictions in relation to
trading, such as limiting trading frequency (for example, trading either allowed once in a week or a month), higher
margin requirements, requirement of settlement on a trade for trade basis without netting off, requirement of settlement
on gross basis or freezing of the price on the upper side of trading, additional deposit amount for surveillance deposit,
which shall be retained for an extended period and any other surveillance measure as deemed fit in the interest of
maintaining the market integrity, any of which may have an adverse effect on the market price of the Equity Shares or
may in general cause disruptions in the development of an active market for, and trading and liquidity of the Equity
Shares and could also adversely affect our reputation.

75. Investors will not be able to sell immediately on an Indian stock exchange any of the Equity Shares they purchase
in the Offer.

The Equity Shares will be listed on the Stock Exchanges. Pursuant to applicable Indian laws, certain actions must be
completed before the Equity Shares can be listed and trading in the Equity Shares may commence. The Allotment of
Equity Shares in this Offer and the credit of such Equity Shares to the applicant’s demat account with depository
participant could take approximately six Working Days from the Bid/ Offer Closing Date and trading in the Equity
Shares upon receipt of final listing and trading approvals from the Stock Exchanges is expected to commence within
six Working Days of the Bid/ Offer Closing Date. There could be a failure or delay in listing of the Equity Shares on
the Stock Exchanges. Any failure or delay in obtaining the approval or otherwise any delay in commencing trading in
the Equity Shares would restrict investors’ ability to dispose their Equity Shares. There can be no assurance that the
Equity Shares will be credited to investors’ demat accounts, or that trading in the Equity Shares will commence, within
the time periods specified in this risk factor. We could also be required to pay interest at the applicable rates if allotment
is not made, refund orders are not dispatched or demat credits are not made to investors within the prescribed time
periods.

76. Statistical and industry data in this Red Herring Prospectus are derived from the CRISIL MI&A Report, which was
commissioned and paid for by us for the purposes of the Offer. The CRISIL MI&A Report is not exhaustive and is
based on certain assumptions, parameters and conditions. Reliance on information from the CRISIL MI&A Report
for making an investment decision in the Offer is subject to inherent risks.

This Red Herring Prospectus includes information that is derived from the CRISIL MI&A Report, which was prepared
and released by CRISIL MI&A in connection with the Offer and commissioned and paid for by us pursuant to an
agreement with CRISIL MI&A dated August 17, 2022, as amended pursuant to an addendum dated March 13, 2023.
CRISIL MI&A is not in any manner related to us, our Directors or our Promoters.

The CRISIL MI&A Report is subject to various limitations and based upon certain assumptions that are subjective in
nature. The CRISIL MI&A Report contains estimates, projections and forecasts as well as forward looking statements
that may prove to be incorrect. Accordingly, potential investors should not place undue reliance on, or base their
investment decision solely on this information. For further details, see “Industry Overview” on page 155.

77. Our funding requirements and the proposed deployment of Net Proceeds have not been appraised and our
management will have broad discretion over the use of the Net Proceeds.
89
 We intend to utilise the Net Proceeds to augment our Bank’s Tier - I capital base to meet our Bank’s future capital
requirements, which are expected to arise out of growth in our Bank’s assets, primarily our Bank’s advances and
investment portfolio, and to ensure compliance with applicable RBI regulations and guidelines. For further details, see
“Objects of the Offer – Net Proceeds” on page 126. As stipulated in Regulation 41 of the ICDR Regulations, we are
not required to appoint a monitoring agency for the use of the Net Proceeds and we do not intend to do so. Our proposed
deployment of the Net Proceeds has not been appraised and it is based on management estimates. Our management
will therefore have broad discretion to use the Net Proceeds. Various risks and uncertainties, including those set forth
in this section, may limit or delay our efforts to use of the Net Proceeds to achieve profitable growth in our business.

78. We have never declared or paid any cash dividends on the Equity Shares. Our ability to pay dividends in the future
will depend on our financial condition, results of operations, cash flows, capital requirements, capital expenditures
and restrictive covenants of our financing arrangements, as well as compliance with applicable Reserve Bank of
India (RBI) regulations.

We have never declared or paid any cash dividends on the Equity Shares and have not adopted a formal dividend
policy. Any future determination as to the declaration and payment of dividends will be, subject to relevant RBI
regulations, at the discretion of our Board and subsequent approval of shareholders and lenders and will depend on
factors that our Board and shareholders deem relevant, including among others, our future financial condition, results
of operations, cash flows, capital requirements, capital expenditures, business prospects and restrictive covenants
under our financing arrangements. We may decide to retain all of our earnings to finance the development and
expansion of our business and, therefore, may not declare dividends on the Equity Shares. In addition, the declaration
and payment of dividends is subject to relevant RBI regulations (including RBI circular DBOD.NO.BP.BC. 88 /
21.02.067 / 2004-05 dated May 4, 2005, as amended). In its circular dated April 22, 2021, the RBI permitted banks,
including our Bank, to pay dividends on equity shares from profits for Fiscal 2021, subject to the quantum of dividend
not exceeding more than 50.00% of the amount determined by the dividend payout ratio specified in in the RBI circular
dated May 4, 2005. We cannot assure you that we will be able to pay dividends at any point in the future.

79. Any future issuance of Equity Shares or securities convertible into Equity Shares by us or sales of Equity Shares
by the Promoters could adversely affect the trading price of the Equity Shares, and in the case of the issuance of
Equity Shares by us, result in the dilution of our then current Shareholders.

As disclosed in “Capital Structure” on page 109, an aggregate of 20.00% of our fully diluted post-Offer capital held
by our Promoters shall be considered as minimum Promoters’ contribution and locked in for a period of 18 months
and the balance Equity Shares held by the Promoters and the other pre-Offer Shareholders following the Offer will be
locked-in for six months from the date of Allotment. There can be no assurance that we will not issue additional Equity
Shares or that the Promoters will not sell, pledge or encumber their Equity Shares during the lock-in period.
Furthermore, our Promoters were required to reduce their aggregate shareholding to 40.00% of our paid-up Equity
Share capital within a period of five years from the date of commencement of our business operation, which was on
March 10, 2017, and thereafter required to reduce their aggregate shareholding to 30.00% and 26.00% of our paid-up
Equity Share capital within a period of 10 years and 12 years, respectively, from the date of commencement of our
business operations. As per the SFB Licensing Guidelines, our Promoters were required to reduce their shareholding
to 40.00% of our paid-up Equity Share capital by March 9, 2022. See also, “-We are subject to stringent regulatory
requirements and prudential norms. If we are unable to comply with such laws, regulations and norms it may have an
adverse effect on our business, financial condition, results of operations and cash flows” on page 47.

Further, pursuant to the terms of the EFHPL SHA, EFHPL, the parties to the EFHPL SHA have acknowledged to
(upon successful completion of the Offer) (i) undertake a buy-back of its shares in accordance with applicable law
from the amount received from the Offer for Sale of its Equity Shares and such buy-back shall be computed in the
manner set out in the EFHPL SHA; and (ii) to file a suitable application before the NCLT in accordance with the
Companies Act, 2013 for cancellation and reduction of a certain portion of share capital of the ESAF Financial
Holdings Private Limited, in consideration for which the ESAF Financial Holdings Private Limited has agreed to
transfer Equity Shares that the ESAF Financial Holdings Private Limited holds in the Bank to the Investors in the
ESAF Financial Holdings Private Limited in such proportion as agreed to under the EFHPL SHA as per the formula
set out therein. For further details, see “History and Corporate Matters – Shareholders’ Agreements and Other
Agreements” and “– Our Promoters will continue to exercise significant influence over our Bank after the completion
of the Offer” on pages 245 and 84, respectively. Further, any future issuances of Equity Shares or convertible securities
could dilute the holdings of our Shareholders and adversely affect the trading price of the Equity Shares. Such
securities may also be issued at prices below the Offer Price. Sales of Equity Shares by the Promoters could also
adversely affect the trading price of the Equity Shares. Such securities may also be issued at prices below the Offer
Price. Sales of Equity Shares by the Promoters could also adversely affect the trading price of the Equity Shares.

80. Investors may be subject to Indian taxes arising out of capital gains and stamp duty on the sale of the Equity Shares
and on the payment of dividends.

Under current Indian tax laws, unless specifically exempted, capital gains arising from the sale of equity shares held
as investments in an Indian company are generally taxable in India. A securities transaction tax (“STT”) is levied on
and collected by an Indian stock exchange on which equity shares are sold. Any gain realised on the sale of listed

90
 equity shares on a stock exchange held for more than 12 months may be subject to long-term capital gains tax in India
at the specified rates depending on certain factors, such as STT paid, the quantum of gains and any available treaty
exemptions. Accordingly, you may be subject to payment of long-term capital gains tax in India, in addition to payment
of STT, on the sale of any equity shares held for more than 12 months. STT will be levied on and collected by a
domestic stock exchange on which the Equity Shares are sold. Further, any gain released on the sale of our equity
shares held for a period of 12 months or less will be subject to short-term capital gains tax in India. While non-residents
may claim tax treaty benefits in relation to such capital gains income, generally, Indian tax treaties do not limit India’s
right to impose tax on capital gains arising from sale of shares of an Indian company.

The Finance Act, 2020 (“Finance Act 2020”) had stipulated that the sale, transfer and issue of certain securities
through exchanges, depositories or otherwise to be charged with stamp duty. The Finance Act 2020 also clarified that,
in the absence of a specific provision under an agreement, the liability to pay stamp duty in case of sale of certain
securities through stock exchanges will be on the buyer, while in other cases of transfer for consideration through a
depository, the onus will be on the transferor. The stamp duty for transfer of certain securities other than debentures,
on a delivery basis, is currently specified under the Finance Act at 0.015% and on a non-delivery basis is specified at
0.003% of the consideration amount.

Under the Finance Act 2020, any dividends paid by an Indian company is subject to tax in the hands of the shareholders
at applicable rates. Such taxes are to be withheld by the Indian company paying dividends. Further, the Finance Act,
2020 removed the requirement for dividend distribution tax to be payable in respect of dividends declared, distributed
or paid by a domestic company after March 31, 2020, and accordingly, such dividends would not be exempt in the
hands of the Shareholders, both resident as well as non-resident. Our Bank may grant the benefit of a tax treaty (where
applicable) to a non-resident Shareholder for the purposes of deducting tax at source pursuant to any corporate action,
including dividends, subject to appropriate documentation provided by such non-resident Shareholder. Investors are
advised to consult their own tax advisors and to carefully consider the potential tax consequences of owning Equity
Shares.

81. Qualified Institutional Bidders (QIBs) and Non-Institutional Bidders are not permitted to withdraw or lower their
Bids (in terms of quantity of Equity Shares or the Bid Amount) at any stage after submitting a Bid.

Pursuant to the SEBI ICDR Regulations, QIBs and Non-Institutional Bidders are not permitted to withdraw or lower
their Bids (in terms of quantity of Equity Shares or the Bid Amount) at any stage after submitting a Bid. Retail
Individual Bidders can revise their Bids during the Bid/ Issue Period and withdraw their Bids until Bid/ Issue Closing
Date. While our Bank is required to complete Allotment within six Working Days from the Bid or Offer Closing Date,
events affecting the Bidders’ decision to invest in the Equity Shares, including material adverse changes in
international or national monetary policy, political or economic conditions, or changes to our business or financial
condition, may arise between the date of submission of the Bid and Allotment. Our Bank may complete the Allotment
of the Equity Shares even if such events occur, and such events may limit the Bidders’ ability to sell the Equity Shares
Allotted pursuant to the Offer or cause the trading price of the Equity Shares to decline on listing.

82. Fluctuations in the exchange rate between the Rupee and other currencies could have an adverse effect on the
value of the Equity Shares in those currencies, independent of our results of operations.

The Equity Shares will be quoted in Rupees on the Stock Exchanges. Any dividends in respect of the Equity Shares
will be paid in Rupees. Any adverse movement in currency exchange rates during the time it takes to undertake such
conversion may reduce the net dividend received by investors. In addition, any adverse movement in currency
exchange rates during a delay in repatriating the proceeds from a sale of Equity Shares outside India, for example,
because of a delay in regulatory approvals that may be required for the sale of Equity Shares, may reduce the net
proceeds received by investors. The exchange rate between the Rupee and other currencies (such as the U.S. dollar,
the Euro, the pound sterling, the Hong Kong dollar and the Singapore dollar) has changed substantially in the past and
could fluctuate substantially in the future, which may have an adverse effect on the value of the Equity Shares and
returns from the Equity Shares in foreign currency terms, independent of our operating results.

83. Investors will not, without the Reserve Bank of India’s (RBI) prior approval, be able to acquire Equity Shares if
such acquisition would result in an individual or group holding 5.00% or more of our share capital or voting rights
directly or indirectly. Further, no Shareholder will be permitted to exercise voting rights in excess of 26.00% of the
total voting rights of our Bank.

The Banking Regulation Act, read with the SFB Licensing Guidelines and RBI (Prior Approval for acquisition of
shares or voting rights in private sector banks) Directions, 2015, requires any person to seek prior approval of the RBI,
to acquire or agree to acquire shares or voting rights of a bank, either directly or indirectly, beneficial or otherwise, by
himself or acting in concert with other persons, wherein such acquisition (taken together with shares or voting rights
held by him or his relative or associate enterprise or persons acting in concert with him) results in the aggregate
shareholding of such persons to be 5.00% or more of the paid-up share capital of a bank or entitles them to exercise
5.00% or more of the voting rights in a bank. Such approval may be granted by the RBI if it is satisfied that the
applicant meets certain fitness and propriety tests. The RBI may require the proposed acquirer to seek further RBI
approval for subsequent acquisitions. Further, the RBI may, by passing an order, restrict any person holding more than
5.00% of our total voting rights from exercising voting rights in excess of 5.00% if such person is deemed not to be fit
91
 and proper by the RBI. Further, as per the Banking Regulations Act read with gazette notification dated
DBR.PSBD.No.1084/16.13.100/2016-17 dated July 21, 2016 and in terms of RBI Master Direction
DOR.HOL.No.95/16.13.100/2022-23 dated January 16, 2023 on Reserve Bank of India (Acquisition and Holding of
Shares or Voting Rights in Banking Companies) Directions, 2023, no shareholder in a bank can exercise voting rights
on poll in excess of 26.00% of total voting rights of all the shareholders of the bank.

An approval may be granted by the RBI if it is satisfied that the applicant meets the fit and proper criteria laid down
by the RBI. The RBI may require the proposed acquirer to seek further RBI approval for subsequent acquisitions in
accordance with the provisions of applicable law. Further, the RBI may restrict any person holding more than 5.00%
of our total voting rights from exercising voting rights in excess of 5.00%, if such person is deemed to be not fit and
proper by the RBI.

For details, see “Key Regulations and Policies” on page 221. Consequently, even if a potential takeover of our Bank
would result in the purchase of Equity Shares at a premium to their market price or would otherwise be beneficial to
our Shareholders, such a takeover may not be attempted or consummated because of the regulatory framework
applicable to us.

84. The individual foreign investment limit of registered foreign portfolio investor (“FPI”) in our Bank is 10.00% of
the total paid-up equity share capital of our Bank and the aggregate foreign investment limit for registered FPIs in
our Bank is 49.00% of the total paid-up equity share capital of our Bank under the automatic route and 74.00% of
the total paid-up equity share capital of our Bank with the Government’s approval.

Foreign investment in India is governed by the provisions of FEMA along with the rules, regulations and notifications
made by the RBI thereunder, and the Consolidated Foreign Direct Investment (“FDI”) Policy issued by the Department
of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India from time to time.
Under the current FDI Policy (effective October 15, 2020), up to 49.00% foreign direct investment in our Bank is
permitted under the automatic route and beyond 49.00% up to 74.00% foreign direct investment in our Bank is
permitted under the Government approval route.

In terms of the SEBI (Foreign Portfolio Investors) Regulations, 2019 (the “SEBI FPI Regulations”), the issue of
Equity Shares to a single FPI, including its investor group (which means the same multiple entities registered as foreign
portfolio investors having common ownership directly or indirectly of more than 50.00% or common control), must
be below 10.00% of our Bank’s post-Offer paid-up equity share capital on a fully diluted basis. Further, in terms of
the FEMA Regulations, the total holding by each FPI, or an investor group, shall be below 10.00% of the total paid-
up equity share capital, on a fully diluted basis, of our Bank and the total holdings of all FPIs put together can be up
to 74.00% of the paid-up equity share capital of our Bank, being the sectoral cap applicable to our Bank. For calculating
the aggregate holding of FPIs in our Bank, the holdings of all registered FPIs shall be included. Further, under the FDI
Policy, at least 26.00% of the paid-up capital of our Bank is required to be held by residents. Also see “-Investors will
not, without the Reserve Bank of India’s (RBI)’s prior approval, be able to acquire Equity Shares if such acquisition
would result in an individual or group holding 5.00% or more of our share capital or voting rights directly or
indirectly. Further, no Shareholder will be permitted to exercise voting rights in excess of 26.00% of the total voting
rights of our Bank” on page 91.

As per the circular issued by SEBI on November 24, 2014, the above investment restrictions shall also apply to
subscribers of P-Notes. Two or more subscribers of P-Notes having a common beneficial owner shall be considered
together as a single subscriber of the P-Notes. In the event an investor has investments as a FPI and as a subscriber of
P-Notes, these investment restrictions shall apply on the aggregate of the FPI and P-Notes investments in our Bank.

85. Foreign investors are subject to investment restrictions under Indian law that limit our ability to attract foreign
investors, which may adversely affect the trading price of the Equity Shares.

Under foreign exchange regulations currently in force in India, transfers of shares between non-residents and residents
are freely permitted (subject to certain restrictions), if they comply with the valuation and reporting requirements
specified under applicable law. If a transfer of shares is not in compliance with such requirements and does not fall
under any of the exceptions, then prior approval of the relevant regulatory authority is required. Additionally,
shareholders who seek to convert Rupee proceeds from a sale of shares in India into foreign currency and repatriate
that foreign currency from India require a no-objection or a tax clearance certificate from the Indian income tax
authorities. Further, this conversion is subject to the shares having been held on a repatriation basis and, either the
security having been sold in compliance with the pricing guidelines or, the relevant regulatory approval having been
obtained for the sale of shares and corresponding remittance of the sale proceeds. We cannot assure you that any
required approval from the RBI or any other governmental agency can be obtained with or without any particular terms
or conditions. Further, in accordance with Press Note No. 3 (2020 Series), dated April 17, 2020, issued by the
Department for Promotion of Industry and Internal Trade, Government of India, and the Foreign Exchange
Management (Non-debt Instruments) Amendment Rules, 2020, which came into effect from April 22, 2020,
investments where the beneficial owner of the Equity Shares is situated in or is a citizen of a country which shares
land border with India, can only be made through the Government approval route, as prescribed in the FDI Policy.
These investment restrictions shall also apply to subscribers of offshore derivative instruments. We cannot assure you
that any required approval from the RBI or any other governmental agency can be obtained on any particular terms or
92
 at all. For further information, see “Restrictions on Foreign Ownership of Indian Securities” on page 490. Our ability
to raise foreign capital under the FDI route is therefore constrained by Indian law, which may adversely affect our
business, financial condition, results of operations and cash flows.

86. A third party could be prevented from acquiring control over our Bank because of anti-takeover provisions under
Indian law and the provisions of the Banking Regulation Act.

There are provisions in Indian law that may delay, deter or prevent a future takeover or change in control of our Bank.
These provisions may discourage or prevent certain types of transactions involving actual or threatened change in
control of us. Under the Takeover Regulations, an acquirer has been defined as any person who, directly or indirectly,
acquires or agrees to acquire shares or voting rights or control over a company, whether individually or acting in
concert with others. Although these provisions have been formulated to ensure that interests of investors/shareholders
are protected, these provisions may also discourage a third party from attempting to take control of our Bank. Further,
given that our Bank is governed by the RBI, any significant change in shareholding would require the RBI’s prior
approval. Consequently, even if a potential takeover of our Bank would result in the purchase of the Equity Shares at
a premium to their market price or would otherwise be beneficial to our Shareholders, such a takeover may not be
attempted or consummated because of the regulatory framework applicable to us.

87. Holders of Equity Shares could be restricted in their ability to exercise pre-emptive rights under Indian law and
could thereby suffer future dilution of their ownership position.

Under the Companies Act, 2013, a company incorporated in India must offer holders of its equity shares pre-emptive
rights to subscribe and pay for a proportionate number of shares to maintain their existing ownership percentages prior
to the issuance of any new equity shares, unless the pre-emptive rights have been waived by the adoption of a special
resolution by holders of three-fourths of the equity shares who have voted on such resolution. However, if the law of
the jurisdiction that you are in does not permit the exercise of such pre-emptive rights without our Bank filing an
offering document or registration statement with the applicable authority in such jurisdiction, you will be unable to
exercise such pre-emptive rights unless our Bank makes such a filing. Our Bank may elect not to file a registration
statement in relation to pre-emptive rights otherwise available by Indian law to you. To the extent that you are unable
to exercise pre-emptive rights granted in respect of the Equity Shares, you may suffer future dilution of your ownership
position and your proportional interests in our Bank would be reduced.

88. Withholding may be imposed on payments on the Equity Shares under the U.S. Foreign Account Tax Compliance
Act.

Certain U.S. tax provisions in the U.S. Foreign Account Tax Compliance Act, which is commonly referred to as
FATCA, may impose 30.00% withholding on “foreign passthru payments” made by a “foreign financial institution”
(an “FFI”). Under current guidance, the term “foreign passthru payment” is not defined and it is therefore not clear
whether or to what extent payments on the Equity Shares would be considered foreign passthru payments. Withholding
on foreign passthru payments would not be required with respect to payments made before the date that is two years
after the date of publication in the Federal Register of final regulations defining the term “foreign passthru payment.”
The United States has entered into an intergovernmental agreement with India (the “IGA”), which potentially modifies
the FATCA withholding regime described above. We have registered as an FFI with the U.S. Internal Revenue Service
and we believe that we may be subject to diligence, reporting and withholding obligations under the FATCA rules and
the IGA. It is not yet clear how the IGA will address foreign passthru payments. Prospective investors in the Equity
Shares should consult their tax advisors regarding the potential effect of FATCA, the IGA and any non-U.S. legislation
implementing FATCA on their investment in the Equity Shares. For further details, see “Certain United States Federal
Income Tax Considerations” on page 457.

89. If our Bank is classified as a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes,
it could result in adverse U.S. federal income tax consequences to U.S. holders of Equity Shares.

Our Bank will be classified as a PFIC for any taxable year if either: (a) at least 75.00% of its gross income is “passive
income” for purposes of the PFIC rules or (b) at least 50.00% of the value of its assets (determined on the basis of a
quarterly average) is attributable to assets that produce or are held for the production of passive income. Passive income
for this purpose generally includes, among other things, dividends, interest, royalties, rents and gains from
commodities and securities transactions and from the sale or exchange of property that gives rise to passive income;
however, under final and proposed U.S. Treasury Regulations and a notice from the U.S. Internal Revenue Service,
special rules apply to income derived in the active conduct of a banking business. Based on the current and anticipated
composition of the income, assets (including their expected values) and operations of our Bank and the application to
our Bank of the relevant PFIC rules governing banks referred to above, our Bank does not expect to be treated as a
PFIC for the preceding taxable year, the current taxable year or in the foreseeable future. Whether our Bank is treated
as a PFIC is a factual determination that must be made annually after the close of each taxable year. This determination
will depend on, among other things, the composition of the income and assets, as well as the value of the assets (which
may fluctuate with our Bank’s market capitalization) of our Bank from time to time. In addition, the manner in which
the PFIC rules governing banks apply to our Bank is unclear in some respects. Some of the administrative guidance
governing the application of the PFIC rules to banks is in the form of proposed U.S. Treasury Regulations and may
change significantly when finalized, and new or revised regulations or pronouncements interpreting or clarifying the
93
PFIC bank provisions may be forthcoming. Therefore, there can be no assurance that our Bank will not be classified
as a PFIC in any taxable year. If our Bank were treated as a PFIC for any taxable year during which a U.S. Holder
held Equity Shares, certain adverse U.S. federal income tax consequences would apply to such U.S. Holder. For further
details, see “Certain United States Federal Income Tax Considerations” on page 457.

94
 SECTION III: INTRODUCTION

THE OFFER

The following table sets forth details of the Offer:

Equity Shares Offered

Offer of Equity Shares* Up to [●] Equity Shares, aggregating up to ₹4,630.00 million
of which
Fresh Issue(1) Up to [●] Equity Shares, aggregating up to ₹3,907.00 million
Offer for Sale(1)(2) Up to [●] Equity Shares, aggregating up to ₹723.00 million by the
Selling Shareholders
of which:
Employee Reservation Portion(3) Up to [●] Equity Shares aggregating up to ₹125.00 million
Net Offer Up to [●] Equity Shares aggregating up to ₹[●] million
The Net Offer consists of:
A) QIB Portion(4)(5) Not more than [●] Equity Shares
of which:
Anchor Investor Portion(6) Up to [●] Equity Shares
Net QIB Portion (assuming the Anchor Investor Portion is fully [●] Equity Shares
subscribed)
of which:
Mutual Fund Portion (5% of the Net QIB Portion)(5) [●] Equity Shares
Balance for all QIBs including Mutual Funds [●] Equity Shares
B) Non-Institutional Portion(4)(6)(7)(8) Not less than [●] Equity Shares
of which:
One-third of the Non-Institutional Portion available for allocation to [●] Equity Shares
Bidders with an application size of more than ₹0.20 million and up to
₹1.00 million
Two-thirds of the Non-Institutional Portion available for allocation to [●] Equity Shares
Bidders with an application size of more than ₹1.00 million
C) Retail Portion(4)(6)(8) Not less than [●] Equity Shares

Pre and post-Offer Equity Shares(9)

Equity Shares outstanding prior to the Offer 449,473,798 Equity Shares
Equity Shares outstanding after the Offer [●] Equity Shares

Use of Net Proceeds See “Objects of the Offer” on page 126 for information about the use
of the proceeds from the Fresh Issue. Our Bank will not receive any
proceeds from the Offer for Sale
* Except with the prior approval from the RBI, and in terms of the Banking Regulation Act and circulars issued thereunder, no person can acquire or agree
to acquire, directly or indirectly, by himself or acting in concert with any other person, Equity Shares or voting rights of our Bank, if such acquisition,
taken together with Equity Shares and voting rights of our Bank held by such person or his relative or associate enterprise or person acting in concert
with him, results in such person holding or exercising, five percent or more of the paid-up Equity Share capital or voting rights, respectively, of our Bank.
(1)
The Offer has been authorized by our Board of Directors pursuant to a resolution passed on June 22, 2023. The Fresh Issue has been authorized by our
Shareholders pursuant to a special resolution passed on June 29, 2023. The Board of Directors has revised the Offer for Sale portion pursuant to its
resolution dated July 7, 2023 and subsequently, the IPO Steering Committee revised the Offer for Sale portion and took on record the revised Offer size
pursuant to its resolution dated October 18, 2023. The IPO Steering Committee revised the Fresh Issue portion and took on record the revised Offer size
pursuant to its resolution dated October 27, 2023. The Board has pursuant to its resolutions dated June 22, 2023 and July 7, 2023 and the IPO Steering
Committee has pursuant to its resolution dated October 18, 2023 taken on record approval for the Offer for Sale for the Offered Shares by the Selling
Shareholders.
(2)
Each of the Selling Shareholders has authorised and consented to participate in the Offer for Sale. Each Selling Shareholder severally and not jointly
confirms that the Offered Shares have been held by such Selling Shareholder for a period of at least one year prior to filing of the Draft Red Herring
Prospectus in accordance with Regulation 8 of the SEBI ICDR Regulations and accordingly, are eligible for the Offer in accordance with the provisions
of the SEBI ICDR Regulations. The Selling Shareholders have confirmed and authorized their participation in the Offer for Sale as set out below:
Sr. Name of the Selling Shareholder Number of Offered Shares Date of consent Date of corporate
No. letter action/board resolution/
power of attorney
Promoter Selling Shareholder
a. ESAF Financial Holdings Private Limited [●] Equity Shares aggregating up to ₹492.60 million July 5, 2023 and June 2, 2023
October 18, 2023
Other Selling Shareholders
b. PNB MetLife [●] Equity Shares aggregating up to ₹126.70 million July 5, 2023 November 9, 2020
e
c. Bajaj Allianz Life [●] Equity Shares aggregating up to ₹103.70 million July 5, 2023 December 6, 2011
(3)
The Employee Reservation Portion shall not exceed 5% of our post-Offer paid-up Equity Share capital. Any unsubscribed portion remaining in the
Employee Reservation Portion shall be added to the Net Offer. For further details, see “Offer Structure” on page 467. Unless the Employee Reservation
Portion is under-subscribed, the value of allocation to an Eligible Employee Bidding in the Employee Reservation Portion shall not exceed ₹0.20 million.
In the event of under-subscription in the Employee Reservation Portion (if any), the unsubscribed portion will be available for allocation and Allotment,
proportionately to all Eligible Employees who have Bid in excess of ₹0.20 million, subject to the maximum value of Allotment made to such Eligible
Employee not exceeding ₹0.50 million. The unsubscribed portion, if any, in the Employee Reservation Portion (after such allocation up to ₹0.50 million),
shall be added to the Net Offer. Further, an Eligible Employee Bidding in the Employee Reservation Portion can also Bid in the Net Offer and such Bids
will not be treated as multiple Bids subject to applicable limits. Our Bank and the Promoter Selling Shareholder may, in consultation with the BRLMs,
offer a discount of up to [●]% to the Offer Price (equivalent of ₹[●] per Equity Share) to Eligible Employees Bidding in the Employee Reservation
Portion, subject to necessary approvals as may be required, and which shall be announced at least two Working Days prior to the Bid / Offer Opening
Date.

95
(4)
Subject to valid Bids being received at or above the Offer Price, under-subscription, if any, in the Non-Institutional Portion or the Retail Portion, would
be allowed to be met with spill over from any other category or combination of categories at the discretion of our Bank and the Promoter Selling
Shareholder, in consultation with the BRLMs and the Designated Stock Exchange. Under-subscription, if any, in the Net QIB Portion would not be
allowed to be met with spill-over from other categories or a combination of categories. In the event of an undersubscription in the Offer, Equity Shares
offered pursuant to the Fresh Issue shall be allocated in the Fresh Issue prior to the Equity Shares offered pursuant to the Offer for Sale. However, after
receipt of minimum subscription of 90% of the Fresh Issue, the Offered Shares shall be allocated proportionately prior to the Equity Shares offered
pursuant to the Fresh Issue.
(5)
Our Bank and the Promoter Selling Shareholder may, in consultation with the BRLMs, allocate up to 60% of the QIB Portion to Anchor Investors on a
discretionary basis in accordance with the SEBI ICDR Regulations. One-third of the Anchor Investor Portion shall be reserved for domestic Mutual
Funds, subject to valid Bids being received from domestic Mutual Funds at or above the Anchor Investor Allocation Price. In the event of under-
subscription or non-Allotment in the Anchor Investor Portion, the remaining Equity Shares shall be added to the Net QIB Portion. 5% of the Net QIB
Portion shall be available for allocation on a proportionate basis to Mutual Funds only, and the remainder of the QIB Portion shall be available for
allocation on a proportionate basis to all QIB Bidders (other than Anchor Investors), including Mutual Funds, subject to valid Bids being received at or
above the Offer Price. However, if the aggregate demand from Mutual Funds is less than [●] Equity Shares, the balance Equity Shares available for
allotment in the Mutual Fund Portion will be added to the QIB Portion and allocated proportionately to the QIB Bidders (other than Anchor Investors)
in proportion to their Bids. For details, see “Offer Procedure” on page 471.
(6)
Allocation to Bidders in all categories, except Anchor Investors, if any, Non-Institutional Bidders and Retail Individual Bidders, shall be made on a
proportionate basis subject to valid Bids received at or above the Offer Price. The allocation to each Retail Individual Bidders shall not be less than the
minimum Bid Lot, subject to availability of Equity Shares in the Retail Portion and the remaining available Equity Shares, if any, shall be allocated on a
proportionate basis. Allocation to Anchor Investors shall be on a discretionary basis. For details, see “Offer Procedure” on page 471.
(7)
The Equity Shares available for allocation to Non-Institutional Bidders under the Non-Institutional Portion, shall be subject to the following: (i) one-
third of the portion available to Non-Institutional Bidders shall be reserved for applicants with an application size of more than ₹0.20 million and up to
₹1.00 million, and (ii) two-third of the portion available to Non-Institutional Bidders shall be reserved for applicants with application size of more than
₹1.00 million, provided that the unsubscribed portion in either of the aforementioned sub-categories may be allocated to applicants in the other sub-
category of Non-Institutional Bidders. The allotment to each Non-Institutional Bidder shall not be less than the minimum application size, subject to the
availability of Equity Shares in the Non- Institutional Portion, and the remaining Equity Shares, if any, shall be allotted on a proportionate basis.
(8)
SEBI through its circular (SEBI/HO/CFD/DIL2/CIR/P/2022/45) dated April 5, 2022, has prescribed that all individual investors applying in initial public
offerings opening on or after May 1, 2022, where the application amount is up to ₹0.50 million shall use UPI. Individual investors bidding under the
Non-Institutional Portion bidding for more than ₹0.20 million and up to ₹0.50 million, using the UPI Mechanism, shall provide their UPI ID in the Bid-
cum-Application Form for bidding through Syndicate, sub-syndicate members, Registered Brokers, RTAs or CDPs, or online using the facility of linked
online trading, demat and bank account (3 in 1 type accounts), provided by certain brokers.
(9)
The aggregate pre-Offer and post-Offer shareholding of the Selling Shareholders and the percentage of the pre-Offer and post-Offer paid-up Equity
Share capital, respectively, of our Bank is set out below:
Sr. Name of the Selling Total No. of Percentage Number of Equity Shares offered in Total No. of Percentage of
No. Shareholders Equity Shares of Pre-Offer the Offer for Sale Equity Shares Post-Offer
held prior to the capital held post the capital
Offer Offer
1. ESAF Financial Holdings 280,758,396* 62.46 [●] Equity Shares aggregating up to [●] [●]
Private Limited ₹492.60 million
2. PNB MetLife 21,346,993 4.75 [●] Equity Shares aggregating up to [●] [●]
₹126.70 million
3. Bajaj Allianz Life 17,469,428 3.89 [●] Equity Shares aggregating up to [●] [●]
₹103.70 million
Total 319,574,817 71.10 [●] [●]
* 280,758,391 Equity Shares are held by ESAF Financial Holdings Private Limited and one Equity Share each is held by Mereena Paul, Alok Thomas
Paul, Emy Acha Paul, George Kalaparambil John and Beena George, as nominees on behalf of ESAF Financial Holdings Private Limited, who is
the beneficial owner of such Equity Shares

For further details, see “Offer Structure” on page 467. For details of the terms of the Offer, see “Terms of the Offer” on page
461.

96
 SUMMARY OF FINANCIAL INFORMATION

The summary financial information presented below should be read in conjunction with “Financial Statements” and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 304 and 372, respectively.

(The remainder of this page has intentionally been left blank)

97
 SUMMARY RESTATED STATEMENT OF ASSETS AND LIABILITIES

(₹ in million)
Particulars As at As at As at As at As at
June 30, June 30, March 31, March 31, March 31,
2023 2022 2023 2022 2021
CAPITAL AND LIABILITIES
Capital 4,494.74 4,494.74 4,494.74 4,494.74 4,494.74
Employee Stock Options Outstanding 58.10 63.31 58.75 48.06 -
Reserves and Surplus 13,896.19 10,632.88 12,596.55 9,573.22 9,025.90
Deposits 156,558.54 134,577.46 146,656.25 128,150.72 89,994.26
Borrowings 27,391.25 25,555.00 33,541.95 29,528.33 16,940.00
Other Liabilities and Provisions 5,560.59 5,717.62 4,888.33 5,280.57 2,931.62
Total 207,959.41 181,041.01 202,236.57 177,075.64 123,386.52
ASSETS
Cash and Balances with Reserve Bank of India 8,212.69 9,574.98 7,395.48 13,006.68 16,180.72
Balances with Banks and Money at Call and Short Notice 655.45 1,597.13 275.01 2,112.36 2,010.54
Investments 48,821.17 48,295.53 48,885.28 40,702.98 19,320.69
Advances 143,215.54 116,310.76 139,243.31 116,370.05 81,675.86
Fixed Assets 1,872.56 1,648.31 1,879.27 1,594.75 1,385.12
Other Assets 5,182.00 3,614.30 4,558.22 3,288.82 2,813.59
Total 207,959.41 181,041.01 202,236.57 177,075.64 123,386.52
Contingent Liabilities 19.03 18.98 18.98 20.52 15.04
Bills for collection - - - - -

98
 SUMMARY RESTATED PROFIT AND LOSS ACCOUNT

(₹ in million except per share data)

Particulars Three Three Year ended Year ended Year ended
months months March 31, March 31, March 31,
period ended period ended 2023 2022 2021
June 30, June 30,
2023 2022
I. INCOME
Interest Earned 8,987.46 6,903.13 28,536.59 19,399.25 16,411.73
Other Income 930.29 480.11 2,879.13 2,075.83 1,272.48
Total 9,917.75 7,383.24 31,415.72 21,475.08 17,684.21
II. EXPENDITURE
Interest Expended 3,132.93 2,415.51 10,173.19 7,927.86 7,195.82
Operating Expenses 3,778.13 2,714.82 12,305.41 8,628.71 6,318.55
Provisions and Contingencies 1,707.05 1,193.25 5,913.79 4,371.19 3,115.88
Total 8,618.11 6,323.58 28,392.39 20,927.76 16,630.25
III. PROFIT
Net Profit for the year (I - II) 1,299.64 1,059.66 3,023.33 547.32 1,053.96
Add: Balance in Restated Profit and Loss Account 5,420.22 3,214.96 3,214.96 3,062.43 2,271.96
brought forward from Previous Year
IV. APPROPRIATIONS
Transfer to Statutory Reserve - - 755.83 136.83 263.49
Transfer to Capital Reserve - - 2.76 37.29 -
Transfer to/(from) Investment Fluctuation Reserve - - 59.48 220.67 -
Account
Balance carried over to Restated Statement of 6,719.86 4,274.62 5,420.22 3,214.96 3,062.43
Assets and Liabilities
Total 6,719.86 4,274.62 6,238.29 3,609.75 3,325.92
Earnings per share (face value of ₹10 each)
Basic 2.89 2.36 6.73 1.22 2.46
Diluted 2.89 2.35 6.71 1.22 2.46

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 SUMMARY RESTATED STATEMENT OF CASH FLOWS

(₹ in million)
Particulars Three Three Year ended Year ended Year ended
months months March 31, March 31, March 31,
period ended period ended 2023 2022 2021
June 30, June 30,
2023 2022
Cash Flows from Operating Activities
Net Profit before tax 1,737.46 1,416.68 4,060.45 738.50 1,413.73
Adjustments for:
Depreciation on Bank’s Property 122.69 100.98 417.89 327.74 285.73
Amortisation of Premium on HTM Investments 15.82 15.62 62.70 80.35 68.46
Profit on sale of investments (net) (62.14) (44.21) (156.35) (435.14) (230.40)
Profit/(Loss) on sale of Fixed Assets (0.27) 0.10 3.38 (0.06) 23.34
Provision for Non Performing Advances 1,289.22 652.50 6,157.91 3,206.75 1887.27
Provision/ (Reversal) for Standard Advances (36.35) 158.13 (1,281.08) 936.22 925.52
Expense on Employee Stock Option (0.65) 15.25 10.69 48.06 -
Provision for Depreciation on investments (52.26) 304.28 913.88 233.06 (11.44)
Provision/ (Reversal) for Other Contingencies 23.80 22.55 54.52 34.10 (57.07)
3,037.32 2,641.88 10,243.99 5,169.58 4,305.14
Adjustments for:-
(Increase)/ Decrease in Investments (other than HTM (243.50) (4,986.02) (3,976.14) (11,979.40) 4,075.38
Investments)
(Increase)/ Decrease in Advances (5,261.44) (593.21) (29,031.17) (37,900.94) (18,084.91)
(Increase)/ Decrease in Fixed Deposit with Bank (Original - - - (2.94) 2,264.25
Maturity greater than 3 months)
(Increase)/ Decrease in Other Assets (726.60) (543.20) (1,693.47) (497.39) (424.03)
Increase/ (Decrease) in Deposits 9,902.31 6,426.73 18,505.51 38,156.46 19,710.44
Increase/ (Decrease) in Other liabilities and provisions 607.08 219.94 834.32 1,378.63 521.25
Direct taxes paid (257.28) (102.86) (613.04) (169.02) (1,093.07)
Net Cash Flows from/(used in) Operating Activities (A) 7,057.89 3,063.26 (5,730.00) (5,845.02) 11,274.45

Cash Flows Used in Investing Activities

Purchase of Fixed Assets (119.34) (154.67) (716.51) (540.14) (495.01)
Proceeds from Sale of Fixed Assets 3.62 0.02 10.72 2.83 1.89
(Increase)/ Decrease in Held to Maturity Investments 406.18 (2,882.21) (5,026.38) (9,281.16) (5,886.43)
Net Cash Used in Investing Activities (B) 290.46 (3,036.86) (5,732.17) (9,818.47) (6,379.55)
Cash Flows from Financing Activities
Proceeds from Issue of Share Capital (including Share - - - - 1,625.87
Premium)
Increase/(Decrease) in Borrowings (6,150.70) (3,973.33) 4,013.62 12,588.33 4,906.83
Cash Flows from Financing Activities (C) (6,150.70) (3,973.33) 4,013.62 12,588.33 6,532.70
Net Increase/(Decrease) in Cash and Cash Equivalents 1,197.65 (3,946.93) (7,448.55) (3,075.16) 11,427.60
(A+B+C)
Cash and Cash Equivalents at the beginning of year 7,664.24 15,112.79 15,112.79 18,187.95 6,760.35
Cash and Cash Equivalents at the end of year (Refer note 8,861.89 11,165.86 7,664.24 15,112.79 18,187.95
below)
Note:
Cash in Hand 1,916.56 1,789.02 1,544.46 1,466.22 1,155.33
Balance with RBI in Current Account 6,296.13 5,155.96 5,851.02 5,200.46 3,125.39
Balance with Banks in India in Current Account 649.20 490.88 268.76 356.11 2,007.23
Money at Call and Short Notice - 100.00 - 1,750.00 -
Balance with Banks in Fixed Deposit - 1,000.00 - - -
Balance with RBI in Other Account - 2,630.00 - 6,340.00 11,900.00
Cash and cash equivalents at the end of the year 8,861.89 11,165.86 7,664.24 15,112.79 18,187.95

100
 GENERAL INFORMATION

Our Promoter, ESAF Financial Holdings Private Limited was granted the RBI In-Principle Approval to establish an SFB, on
October 7, 2015. Our Bank was incorporated as ‘ESAF Small Finance Bank Limited’ on May 5, 2016 at Thrissur, Kerala, as a
public limited company under the Companies Act, 2013, and was granted a certificate of incorporation by the RoC. Our Bank
was thereafter granted the RBI Final Approval vide license no. MUM:124, to carry on business as an SFB, on November 18,
2016. For further details, see “History and Certain Corporate Matters” on page 241.

Registered and Corporate Office

ESAF Small Finance Bank Limited

Building No. VII/83/8
ESAF Bhavan, Thrissur-Palakkad National Highway
Mannuthy, Thrissur 680 651
Kerala, India
Registration Number: 045669
CIN: U65990KL2016PLC045669
RBI Registration Number: MUM:124

Address of the RoC

Our Bank is registered with the RoC situated at the following address:

Registrar of Companies, Kerala at Ernakulam

Company Law Bhawan
BMC Road, Thrikkakara
Kochi 682 021
Kerala, India

Company Secretary and Compliance Officer

Ranjith Raj P

ESAF Small Finance Bank Limited

Building No. VII/83/8
ESAF Bhavan, Thrissur-Palakkad National Highway
Mannuthy, Thrissur 680 651
Kerala, India
Tel: +91 487 7123 907
Email: investor.relations@esafbank.com

Board of Directors

As on the date of this Red Herring Prospectus, the Board of our Bank comprises the following:

Name Designation DIN Address

Ravimohan Periyakavil Part-Time Chairman and 08534931 Flat No. N 074, DLF New Town Heights, Seaport
Ramakrishnan Non-Executive Independent Airport Road, Opposite Doordarshan Kendra, Kakkanad
Director P.O., Ernakulam 682 030, Kerala
Kadambelil Paul Thomas Managing Director and Chief 00199925 Kadambelil House, Mannuthy P.O., Nettissery, Thrissur
Executive Officer 680 651, Kerala
Thomas Jacob Kalappila Non-Executive Independent 00812892 Kalappilayil TC 5/2548(2), Krishna Gardens, Golf Links
Director Road, Kowdiar P O, Trivandrum 695 003, Kerala
Vinod Vijayalekshmi Non-Executive Independent 02503201 TC 4/ 2483-1, Saket, Marappalam, UM Road, Pattom
Vasudevan Director Palace P.O, Trivandrum 695 004, Kerala
Ravi Venkatraman Non-Executive Independent 00307328 A/4, Plot No. NA-52, New Samrat Society, Andheri
Director Kurla Road, Opp. Vishal Hall, Andheri East Mumbai
400 069, Maharashtra
Kolasseril Chandramohanan Non-Executive Independent 01735529 Kolasseril House, Neendoor, Vadakkekara, PIN 683
Ranjani Director 522, Paravur, Ernakulam 683 513, Kerala
Biju Varkkey Additional Non-Executive 01298281 House No. 303, IIM Campus, Vastrapur, Ahmedabad
Independent Director^ 380 015, Gujarat
John Samuel Non-Executive Nominee 07725212 A-6, MS Flats, Tilak Lane, Type 5, NDMC, New Delhi,
Director G.P. Central Delhi 110 001, Delhi
Ajayan Mangalath Non-Executive Nominee 09782416 50/261-C, Shivaganga, House No. 153, Road No. 4-B,
Gopalakrishnan Nair Director Behind Edapally St. George Church, Prashanthinagar,
Edapally S.O, Ernakulam 682 024, Kerala
^
The appointment of Biju Varkkey to the Board will be regularised in the ensuing annual general meeting.

101
For further details of our Directors, see “Our Management” on page 251.

Filing

A copy of the Draft Red Herring Prospectus has been filed electronically on the SEBI intermediary portal and emailed at
cfddil@sebi.gov.in. in accordance with the instructions issued by the SEBI on March 27, 2020, in relation to “Easing of
Operational Procedure – Division of Issues and Listing – CFD.”

It was also filed with the Securities and Exchange Board of India at:

Securities and Exchange Board of India

SEBI Bhavan, Plot No. C4 A, ‘G’ Block

Bandra Kurla Complex
Bandra (E)
Mumbai 400 051
Maharashtra, India

A copy of this Red Herring Prospectus, along with the material contracts and documents required to be filed under Section 32
of the Companies Act, 2013 will be with the RoC and a copy of the Prospectus to be filed under Section 26 of the Companies
Act, 2013 would be filed with the RoC at its office.

Book Running Lead Managers

ICICI Securities Limited DAM Capital Advisors Limited

ICICI Venture House One BKC, Tower C, 15th Floor, Unit No. 1511
Appasaheb Marathe Marg Bandra Kurla Complex, Bandra (East)
Prabhadevi Mumbai 400 051
Mumbai 400 025 Maharashtra, India
Maharashtra, India Tel: +91 22 4202 2500
Tel: +91 22 6807 7100 E-mail: esaf.ipo@damcapital.in
E-mail: esafsfb.ipo@icicisecurities.com Investor Grievance ID: complaint@damcapital.in
Investor grievance e-mail: Website: www.damcapital.in
customercare@icicisecurities.com Contact Person: Chandresh Sharma
Website: www.icicisecurities.com SEBI Registration No.: MB/INM000011336
Contact Person: Kristina Dias / Ashik Joisar
SEBI Registration No.: INM000011179

Nuvama Wealth Management Limited (formerly known as

Edelweiss Securities Limited)
801 - 804, Wing A, Building No 3
Inspire BKC, G Block
Bandra Kurla Complex, Bandra East
Mumbai 400 051
Maharashtra, India
Tel: +91 22 4009 4400
E-mail: ESAF@nuvama.com
Investor grievance e-mail:
customerservice.mb@nuvama.com
Website: www.nuvama.com
Contact Person: Lokesh Shah
SEBI Registration No.: INM000013004

Syndicate Members

Nuvama Wealth Management Limited (formerly known as Edelweiss Securities Limited)

Registered Office: at 801 - 804, Wing A
Building No 3, Inspire BKC, G Block
Bandra Kurla Complex, Bandra East
Mumbai 400 051
Maharashtra, India
Tel: +91 22 4009 4400
E-mail: ESAF@nuvama.com
Website: www.nuvama.com
Contact Person: Prakash Boricha
Investor grievance Email: grievance.nwm@nuvama.com
SEBI registration no.: INZ000166136

102
Sharekhan Limited
The Ruby 18th Floor
29 Senapati Bapat Marg, Dadar (West)
Mumbai 400 028
Maharashtra, India
Telephone: +91 22 6750 2000
Email: pravin@sharekhan.com
Website: www.sharekhan.com
Contact person: Pravin Darji
Investor grievance Email: myaccount@sharekhan.com
SEBI registration no.: INB231073330/INB011073351

Legal Counsel to our Bank as to Indian Law

Cyril Amarchand Mangaldas

Prestige Falcon Tower
3rd Floor, Brunton Road
Craig Park Layout, Victoria Layout
Bengaluru 560 025
Karnataka, India
Tel: +91 80 6792 2000

Joint Statutory Auditors to our Bank

Deloitte Haskins & Sells, Chartered Accountants

19th Floor, Shapath-V, S.G. Highway
Ahmedabad 380 015
Gujarat, India
Tel: +91 79 6682 7300
Email: sgk@deloitte.com
Firm Registration Number: 117365W
Peer Review Certificate Number: 012965

Abarna & Ananthan, Chartered Accountants

521, 3rd Main Road, 2nd Phase, 6th Block
Banashankari 3rd Stage, Bengaluru 560 085
Karnataka, India
Tel: +91 88 8009 7322
Email: mohanrao@aaca1987.co.in
Firm Registration Number: 000003S
Peer Review Certificate Number: 014667

There has been no change in our auditors in the last three years preceding the date of this Red Herring Prospectus, except as
disclosed below:

Particulars Date of change Reason for change

Abarna & Ananthan, Chartered Accountants December 13, 2022 Appointment as one of the Joint Statutory Auditors
521, 3rd Main Road, 2nd Phase, 6th Block of the Bank
Banashankari 3rd Stage, Bengaluru 560 085
Karnataka, India
Tel: +91 88 8009 7322
Email: mohanrao@aaca1987.co.in
Firm Registration Number: 000003S
Peer Review Certificate Number: 014667

Note: In terms of the Guidelines on Auditors, the Bank is required to appoint a minimum of two audit firms as joint statutory auditors with effect from Financial
Year 2023. The Bank has appointed Deloitte Haskins & Sells, Chartered Accountants and Abarna & Ananthan, Chartered Accountants as its joint statutory
auditors pursuant to the Board and shareholders’ resolution dated June 20, 2022 and December 13, 2022, respectively, and the RBI approval dated July 22,
2022.

Registrar to the Offer

Link Intime India Private Limited

C-101, 1st Floor, 247 Park
Lal Bahadur Shastri Marg
Vikhroli (West)
Mumbai 400 083
Maharashtra, India
Tel: +91 022 4918 6060

103
E-mail: esaf.ipo@linkintime.co.in
Investor grievance e-mail: esaf.ipo@linkintime.co.in
Website: www.linkintime.co.in
Contact Person: Shanti Gopalkrishnan
SEBI Registration No.: INR000004058

Bankers to the Offer

Escrow Collection Bank, Refund Bank and Sponsor Bank

HDFC Bank Limited

Lodha, I Think Techno Campus
0-3 Level, Next to Kanjurmarg
Railway Station, Kanjurmarg (East)
Mumbai 400 042
Maharashtra, India
Tel: +91 22 3075 2929 / 2928 / 2914
Email:siddharth.jadhav@hdfcbank.com,sachin.gawade@hdfcbank.com,eric.bacha@hdfcbank.com,tushar.gavankar@hdfcba
nk.com, pravin.teli2@hdfcbank.com
Website: www.hdfcbank.com
Contact person: Siddharth Jadhav, Sachin Gawade, Eric Bacha, Tushar Gavankar, Pravin Teli
SEBI Registration No.: INBI00000063

Public Offer Bank and Sponsor Bank

Kotak Mahindra Bank Limited

27 BKC, C 27, G Block
Bandra Kurla Complex, Bandra (E)
Mumbai 400 051
Maharashtra, India
Tel: +91 022 6605 6588
E-mail: cmsipo@kotak.com
Website: www.kotak.com
Contact person: Siddhesh Shirodkar
SEBI Registration No.: INBI00000927

Banker to the Bank

Federal Bank Limited

Corporate & Institutional Banking Department
1st Floor, Corporate Office, Federal Towers
Aluva, Ernakulum, 683 101
Telephone Number: +91 81 2990 2707
Contact Person: Vishnu M
Website: www.federalbank.co.in
Email: vishnum@federalbank.co.in

Self-Certified Syndicate Banks

The banks registered with SEBI, which offer the facility of ASBA services, (i) in relation to ASBA, where the Bid Amount will
be blocked by authorising an SCSB, a list of which is available on the website of SEBI at
www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=34 and updated from time to time and at such
other websites as may be prescribed by SEBI from time to time, (ii) in relation to UPI Bidders using the UPI Mechanism, a list
of which is available on the website of SEBI at
https://sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=40 or such other website as updated from
time to time.

Applications through UPI in the Offer can be made only through the SCSBs mobile applications (apps) whose name appears
on the SEBI website. A list of SCSBs and mobile applications, which, are live for applying in public issues using UPI
mechanism is provided as Annexure ‘A’ to the SEBI circular no. SEBI/HO/CFD/DIL2/CIR/P/2019/85 dated July 26, 2019.
The said list shall be updated on SEBI website.

Syndicate SCSB Branches

In relation to Bids (other than Bids by Anchor Investor) submitted to a member of the Syndicate, the list of branches of the
SCSBs at the Specified Locations named by the respective SCSBs to receive deposits of Bid cum Application Forms from the
members of the Syndicate is available on the website of the SEBI
(http://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognised=yes) and updated from time to time. For more

104
information on such branches collecting Bid cum Application Forms from the Syndicate at Specified Locations, see the website
of the SEBI http://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognised=yes as updated from time to time.

Registered Brokers

The list of the Registered Brokers eligible to accept ASBA forms, including details such as postal address, telephone number
and e-mail address, is provided on the websites of the BSE and the NSE at
www.bseindia.com/Markets/PublicIssues/brokercentres_new.aspx? and
www.nseindia.com/products/content/equities/ipos/ipo_mem_terminal.htm, respectively, as updated from time to time.

Registrar and Share Transfer Agents

The list of the RTAs eligible to accept ASBA Forms at the Designated RTA Locations, including details such as address,
telephone number and e-mail address, is provided on the websites of Stock Exchanges at
www.bseindia.com/Static/Markets/PublicIssues/RtaDp.aspx? and
www.nseindia.com/products/content/equities/ipos/asba_procedures.htm, respectively, as updated from time to time.

Collecting Depository Participants

The list of the CDPs eligible to accept ASBA Forms at the Designated CDP Locations, including details such as name and
contact details, is provided on the websites of BSE at www.bseindia.com/Static/Markets/PublicIssues/RtaDp.aspx? and on the
website of NSE at www.nseindia.com/products/content/equities/ipos/asba_procedures.htm, as updated from time to time.

Expert

Except as stated below, our Bank has not obtained any expert opinions:

Our Bank has received written consent dated October 25, 2023 from our Joint Statutory Auditors namely, Deloitte Haskins &
Sells, Chartered Accountants and Abarna & Ananthan, Chartered Accountants, respectively to include their name in this Red
Herring Prospectus, as required under Section 26(5) of the Companies Act, 2013, read with SEBI ICDR Regulations, and as an
“expert” as defined under Section 2(38) of the Companies Act, 2013, to the extent and in their capacity as an auditor, in respect
of the examination report dated October 17, 2023 issued by it on our Restated Financial Information, and the statement of
special tax benefits dated October 25, 2023 included in this Red Herring Prospectus and such consent has not been withdrawn
as on the date of this Red Herring Prospectus. However, the term “expert” and the consent thereof shall not be construed to
mean an “expert” or consent within the meaning as defined under the U.S. Securities Act.

Our Bank has received written consent dated October 17, 2023 from A. John Moris & Co., independent chartered accountants,
holding a valid peer review certificate from ICAI, to include their name in this Red Herring Prospectus, as required under
Section 26(5) of the Companies Act, 2013, read with the SEBI ICDR Regulations, as an “expert” as defined under Section
2(38) of the Companies Act in respect of the certificates issued by them in their capacity as an independent chartered accountant
to our Bank. However, the term “expert” and the consent thereof shall not be construed to mean an “expert” or consent within
the meaning as defined under the U.S. Securities Act.

Monitoring Agency

In terms of the proviso to Regulation 41(1) of the SEBI ICDR Regulations, our Bank is not required to appoint a monitoring
agency for this Offer.

Appraising Entity

None of the objects for which the Net Proceeds will be utilised have been appraised by any agency.

Credit Rating

As this is an offering of Equity Shares, there is no credit rating required for the Offer.

IPO Grading

No credit agency registered with SEBI has been appointed in respect of obtaining grading for the Offer.

Trustees

As this is an offering of Equity Shares, the appointment of trustees is not required.

Green Shoe Option

No green shoe option is contemplated under the Offer.

Inter-se allocation of responsibilities

105
The following table sets forth the inter-se allocation of responsibilities for various activities among the Book Running Lead
Managers:

Sr. No. Activity Responsibility Co-ordination

1. Due diligence of the Company including its operations/management/business All BRLMs I-Sec
plans/legal etc. Drafting and design of this Draft Red Herring Prospectus, the Red
Herring Prospectus, the Prospectus, abridged prospectus and application form. The Book
Running Lead Managers shall ensure compliance with stipulated requirements and
completion of prescribed formalities with the Stock Exchanges, RoC and SEBI including
finalisation of Prospectus and RoC filing

2. Capital structuring with the relative components and formalities such as type of All BRLMs I-Sec
instruments, size of issue, allocation between primary and secondary, etc.

3. Drafting and approval of all statutory advertisements All BRLMs I-Sec

4. Drafting and approval of all publicity material other than statutory advertisements as All BRLMs Nuvama
mentioned in 3 above, including corporate advertising, brochures, media monitoring,
etc. and filing of media compliance report

5. Appointment of registrar and advertising agency All BRLMs DAM Capital

6. Appointment of intermediaries (including co-ordinating all agreements to be entered All BRLMs Nuvama
with such parties): printers, banker(s) to the Offer, Sponsor Bank, Anchor Escrow Bank,
Share escrow agent, syndicate members / brokers to the Offer and underwriters.

7. Preparation of road show presentation and frequently asked questions All BRLMs Nuvama

8. International institutional marketing of the Offer, which will cover, inter alia: All BRLMs Nuvama

• Institutional marketing strategy and preparation of publicity budget;

• Finalising the list and division of international investors for one-to-one

meetings

• Finalising international road show and investor meeting schedules

9. Domestic institutional marketing of the Offer, which will cover, inter alia: All BRLMs I-Sec

• Institutional marketing strategy and preparation of publicity budget;

• Finalising the list and division of domestic investors for one-to-one meetings

• Finalising domestic road show and investor meeting schedules

10. Non - institutional Marketing including finalising media, marketing and public relations All BRLMs DAM Capital
strategy

11. Retail marketing of the offer, which will cover, inter alia: All BRLMs Nuvama

• Finalising media, marketing and public relations strategy including list of

frequently asked questions at retail road shows;

• Finalising centers for holding conferences for brokers etc.;

• Follow - up on distribution of publicity and offer material including forms, the

Prospectus and deciding on the quantum of Issue material; and

• Finalising collection centres

• Finalising the calculation of Brokerage, commission and processing fees post

closure of the Offer

12. Coordination with Stock Exchanges for book building software, bidding terminals, mock All BRLMs DAM Capital
trading, including allocation to anchor investors and intimation to Stock Exchange for
anchor portion and deposit of 1% security deposit with designated stock exchange.

13. Managing the book and finalization of pricing in consultation with our Company and/or All BRLMs DAM Capital
the Selling Shareholders

14. Post bidding activities including management of escrow accounts, coordinate non- All BRLMs DAM Capital
institutional allocation, coordination with registrar, SCSBs and banks, intimation of

106
 Sr. No. Activity Responsibility Co-ordination

allocation and dispatch of refund to bidders, etc. Post-Offer activities, which shall
involve essential follow-up steps, finalisation of the basis of allotment or weeding out
of multiple applications, coordination for unblock of funds by SCSBs, finalization of
trading and listing of instruments, dispatch of certificates or demat credit and refunds
and coordination with various agencies connected with the post-issue activity such as
registrar to the Offer, bankers to the Offer, SCSBs including responsibility for
underwriting arrangements, as applicable

Payment of the applicable securities transaction tax (“STT”) on sale of unlisted equity
shares by the Selling Shareholder under the Offer for Sale to the Government by the
prescribed due date as per Chapter VII of Finance (No. 2) Act, 2004.

Co-ordination with SEBI and stock exchanges for refund of 1% security deposit and
submission of all post-offer reports including final post-offer report to SEBI.

Book Building Process

Book Building Process, in the context of the Offer, refers to the process of collection of Bids from investors on the basis of this
Red Herring Prospectus, the Bid cum Application Forms and the Revision Forms within the Price Band. The Price Band and
minimum Bid Lot size will be decided by our Bank and the Promoter Selling Shareholder, in consultation with the BRLMs,
and advertised in all editions of The Financial Express, an English national daily newspaper, all editions of Jansatta, a Hindi
national daily newspaper and Thrissur editions of the Malayalam daily newspaper Mangalam (Malayalam being the regional
language of Kerala, where our Registered and Corporate Office is located), each with wide circulation, respectively, at least
two Working Days prior to the Bid/ Offer Opening Date and shall be made available to the Stock Exchanges for the purpose of
uploading on their respective websites. The Offer Price shall be determined by our Bank and the Promoter Selling Shareholder,
in consultation with the BRLMs after the Bid/ Offer Closing Date.

All Bidders, except Anchor Investors, are mandatorily required to use the ASBA process for participating in the Offer
by providing details of their respective ASBA Account in which the corresponding Bid Amount will be blocked by
SCSBs. In addition to this, the RIBs may participate through the ASBA process by either (a) providing the details of
their respective ASBA Account in which the corresponding Bid Amount will be blocked by the SCSBs; or (b) through
the UPI Mechanism. Anchor Investors are not permitted to participate in the Offer through the ASBA process.

In accordance with the SEBI ICDR Regulations, QIBs and Non-Institutional Bidders are not allowed to withdraw or
lower the size of their Bids (in terms of the quantity of the Equity Shares or the Bid Amount) at any stage. Retail
Individual Bidders (subject to the Bid Amount being up to ₹0.20 million) can revise their Bids during the Bid/Offer
Period and withdraw their Bids on or before the Bid/Offer Closing Date. Further, Anchor Investors cannot withdraw
their Bids after the Anchor Investor Bid/Offer Period. Allocation to the Anchor Investors will be on a discretionary
basis.

For further details on the method and procedure for Bidding, see “Offer Structure” and “Offer Procedure” on pages 467 and
471, respectively.

Illustration of Book Building and Price Discovery Process

For an illustration of the Book Building Process and the price discovery process, see “Offer Procedure” on page 471.

Underwriting Agreement

After the determination of the Offer Price and allocation of Equity Shares, but prior to the filing of the Prospectus with the RoC,
our Bank and each of the Selling Shareholders intend to enter into an Underwriting Agreement with the Underwriters for the
Equity Shares proposed to be issued and offered in the Offer. The Underwriting Agreement is dated [●]. Pursuant to the terms
of the Underwriting Agreement, the obligations of each of the Underwriters will be several and will be subject to certain
conditions specified therein.

The Underwriters have indicated their intention to underwrite the following number of Equity Shares:

(This portion has been intentionally left blank and will be filled in before filing of the Prospectus with the RoC)

Name, address, telephone number and Indicative number of Equity Shares to be Amount underwritten
email address of the Underwriters underwritten (₹ in million)
[●] [●] [●]

The abovementioned underwriting commitments are indicative and will be finalised after pricing of the Offer, the Basis of
Allotment and actual allocation in accordance with provisions of the SEBI ICDR Regulations.

107
In the opinion of our Board, the resources of the abovementioned Underwriters are sufficient to enable them to discharge their
respective underwriting obligations in full. The abovementioned Underwriters are registered with the SEBI under Section 12(1)
of the SEBI Act or registered as brokers with the Stock Exchanges. Our Board/ IPO Steering Committee, at its meeting held on
[●], has accepted and entered into the Underwriting Agreement mentioned above on behalf of our Bank.

Allocation among the Underwriters may not necessarily be in proportion to their underwriting commitment set forth in the table
above.

Notwithstanding the above table, the Underwriters shall be severally responsible for ensuring payment with respect to the Equity
Shares allocated to investors respectively procured by them in accordance with the Underwriting Agreement. In the event of
any default in payment, the respective Underwriter, in addition to other obligations defined in the Underwriting Agreement,
will also be required to procure subscribers for or subscribe to the Equity Shares to the extent of the defaulted amount in
accordance with the Underwriting Agreement. The Underwriting Agreement has not been executed as on the date of this Red
Herring Prospectus and will be executed after determination of the Offer Price and allocation of Equity Shares, but prior to the
filing of the Prospectus with the RoC. The extent of underwriting obligations and the Bids to be underwritten in the Offer shall
be as per the Underwriting Agreement.

Subject to the applicable laws and pursuant to the terms of the Underwriting Agreement, the BRLMs will be responsible for
bringing in the amount devolved in the event that the Syndicate Members do not fulfil their underwriting obligations.

108
 CAPITAL STRUCTURE

The Equity Share capital of our Bank, as on the date of this Red Herring Prospectus, is set forth below:

(in ₹, except share data)

Sr. No. Particulars Aggregate value at face Aggregate value at
value (₹) Offer Price*
A. AUTHORIZED SHARE CAPITAL(1)
600,000,000 equity shares of face value of ₹10 each 6,000,000,000 -
Total 6,000,000,000 -

B. ISSUED, SUBSCRIBED AND PAID-UP SHARE CAPITAL BEFORE

THE OFFER
449,473,798 equity shares of face value of ₹10 each# 4,494,737,980 -

C. PRESENT OFFER
Offer of up to [●] Equity Shares aggregating up to ₹4,630.00 million(2)(3) [●] [●]
of which
Fresh Issue of up to [●] Equity Shares aggregating up to ₹3,907.00 million(2) [●] [●]
Offer for Sale of up to [●] Equity Shares aggregating up to ₹723.00 million(4) [●] [●]
which includes
Employee Reservation Portion of up to [●] Equity Shares(4) [●] [●]
Net Offer of up to [●] Equity Shares [●] [●]

D. ISSUED, SUBSCRIBED AND PAID-UP CAPITAL AFTER THE

OFFER
[●] Equity Shares of face value of ₹10 each (assuming full subscription in [●] [●]
the Offer)

E. SECURITIES PREMIUM ACCOUNT

Before the Offer 4,887,627,991.95
After the Offer [●]
* To be updated upon finalisation of the Offer Price
(1) For details in relation to the changes in the authorised share capital of our Bank, see “History and Certain Corporate Matters – Amendments to the
Memorandum of Association” on page 242.
(2) The Offer has been authorized by our Board of Directors pursuant to a resolution passed on June 22, 2023. The Fresh Issue has been authorized by our
Shareholders pursuant to a special resolution passed on June 29, 2023. The Board of Directors has revised the Offer for Sale portion pursuant to its
resolution dated July 7, 2023 and subsequently, the IPO Steering Committee revised the Offer for Sale portion and took on record the revised Offer size
pursuant to its resolution dated October 18, 2023. The IPO Steering Committee revised the Fresh Issue portion and took on record the revised Offer size
pursuant to its resolution dated October 27, 2023. The Board has pursuant to its resolutions dated June 22, 2023 and July 7, 2023 and the IPO Steering
Committee has pursuant to its resolution dated October 18, 2023 taken on record approval for the Offer for Sale for the Offered Shares by the Selling
Shareholders.
(3) Each Selling Shareholder severally and not jointly confirms that the Offered Shares have been held by such Selling Shareholder for a period of at least
one year prior to filing of the Draft Red Herring Prospectus in accordance with Regulation 8 of the SEBI ICDR Regulations and accordingly, are eligible
for the Offer in accordance with the provisions of the SEBI ICDR Regulations. For details on the authorization of each of the Selling Shareholders in
relation to the Offered Shares, see “The Offer” on page 95.
(4) Eligible Employees bidding in the Employee Reservation Portion must ensure that the maximum Bid Amount does not exceed ₹0.50 million (net of the
Employee Discount). However, the initial Allotment to an Eligible Employee in the Employee Reservation Portion shall not exceed ₹0.20 million (net of
the Employee Discount). Only in the event of an under-subscription in the Employee Reservation Portion post the initial Allotment, such unsubscribed
portion may be Allotted on a proportionate basis to Eligible Employees Bidding in the Employee Reservation Portion, for a value in excess of ₹0.20
million (net of the Employee Discount), subject to the total Allotment to an Eligible Employee not exceeding ₹0.50 million (net of the Employee Discount).
Our Bank and the Promoter Selling Shareholder may, in consultation with the Book Running Lead Managers, offer a discount of up to [●]% to the Offer
Price (equivalent of ₹[●] per Equity Share) to Eligible Employees Bidding in the Employee Reservation Portion, subject to necessary approvals as may
be required, and which shall be announced at least two Working Days prior to the Bid / Offer Opening Date.

Notes to the Capital Structure

1. Share Capital History of our Bank

(a) Equity Share capital

The history of the Equity Share capital of our Bank is set forth in the table below:

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 Date of Number of Details of allottees Face value Issue price Nature of Nature of allotment Cumulative Cumulative
allotment of Equity Shares per Equity per Equity consideration number of paid-up Equity
Equity Shares allotted Share Share Equity Shares Share capital
(in ₹) (in ₹) (in ₹)

May 5, 2016 100,000 Allotment of 94,995 Equity Shares to ESAF Financial Holdings Private 10 10 Cash Initial subscription to 100,000 1,000,000
Limited, and one Equity Share each to Mereena Paul, Alok Thomas Paul, the Memorandum of
Emy Acha Paul, George Kalaparambil John and Beena George, who hold Association
such Equity Shares as nominees on behalf of ESAF Financial Holdings
Private Limited, who is the beneficial owner of such Equity Shares, and
5,000 Equity Shares to Kadambelil Paul Thomas

May 20, 2016 109,900,000 Allotment of 108,805,000 Equity Shares to ESAF Financial Holdings 10 10 Cash Preferential 110,000,000 1,100,000,000
Private Limited and 1,095,000 Equity Shares to Kadambelil Paul Thomas allotment(1)

March 9, 2017 78,817,733 Allotment of 59,113,300 Equity Shares to ESAF Financial Holdings 10 10.15 Cash Preferential 188,817,733 1,888,177,330
Private Limited and 19,704,433 Equity Shares to Kadambelil Paul allotment(2)
Thomas

March 10, 2017 58,823,529 Allotment of 58,823,529 Equity Shares to ESAF Financial Holdings 10 10.20 Cash Preferential 247,641,262 2,476,412,620
Private Limited allotment(3)

March 29, 2017 49,019,607 Allotment of 49,019,607 Equity Shares to ESAF Financial Holdings 10 10.20 Cash Preferential 296,660,869 2,966,608,690
Private Limited allotment(4)

March 30, 2017 4,901,960 Allotment of 4,901,960 Equity Shares to ESAF Financial Holdings 10 10.20 Other than Preferential allotment 301,562,829 3,015,628,290
Private Limited pursuant to the Business Transfer Agreement cash pursuant to the
Business Transfer
Agreement(5)

January 31, 10,382,352 Allotment of 10,382,352 Equity Shares to Kadambelil Paul Thomas 10 10.20 Cash Preferential 311,945,181 3,119,451,810
2018 allotment(6)

July 31, 2018 63,638,630 Allotment of 18,717,244 Equity Shares to PNB MetLife India Insurance 10 40.07 Cash Preferential 375,583,811 3,755,838,110
Company Limited, 18,717,244 Equity Shares to Muthoot Finance allotment(7)
Limited, 17,469,428 Equity Shares to Bajaj Allianz Life Insurance
Company Limited, and 8,734,714 Equity Shares to PI Ventures LLP

September 28, 52,211,679 Allotment of 2,629,749 Equity Shares to PNB MetLife India Insurance 10 40.07 Cash Preferential 427,795,490 4,277,954,900
2018 Company Limited, 21,346,993 Equity Shares to ESMACO, 21,346,993 allotment(8)
Equity Shares to Yusuffali Musaliam Veettil Abdul Kader, 6,239,081
Equity Shares to ICICI Lombard General Insurance Company Limited,
149,738 Equity Shares to Lahanti, 124,781 Equity Shares to Abraham K
John, 249,563 Equity Shares to John Chakola and 124,781 Equity Shares
to Assan Khan Akbar

110
 Date of Number of Details of allottees Face value Issue price Nature of Nature of allotment Cumulative Cumulative
allotment of Equity Shares per Equity per Equity consideration number of paid-up Equity
Equity Shares allotted Share Share Equity Shares Share capital
(in ₹) (in ₹) (in ₹)

March 31, 2021 21,678,308 Allotment of 13,333,333 Equity Shares to George lttan Maramkandathil, 10 75 Cash Preferential 449,473,798 4,494,737,980
1,000,000 Equity Shares to George Mammoottil Thomas, 1,066,666 allotment(9)
Equity Shares to ESMACO, 1,066,666 Equity Shares to Yusuffali
Musaliam Veettil Abdul Kader, 1,000,000 Equity Shares to George
Thomas (in the capacity as Chairman of M/s. ESAF Staff Welfare Trust),
666,666 Equity Shares to Mohan V. Mathew, 200,000 Equity Shares to
Balu P. Mani, 200,000 Equity Shares to Sobha Balu Mani, 33,333 Equity
Shares to KR Raju, 33,333 Equity Shares to Sobha Raju, 33,333 Equity
Shares to Vinod Jacob Cherian, 66,666 Equity Shares to Mathew T.
Thomas, 33,333 Equity Shares to Susan Mathew, 60,000 Equity Shares
to Elizabeth Sabu, 66,666 Equity Shares to Mary Abraham, 40,000
Equity Shares to Lucy Sabu, 33,333 Equity Shares to Mereena Paul,
33,333 Equity Shares to Annie Varghese, 13,333 Equity Shares to Anand
Menon, 13,333 Equity Shares to Radha Anand Menon, 13,333 Equity
Shares to Abhijit Anand Menon, 26,666 Equity Shares to VM Xaviour,
33,333 Equity Shares to Sheena Kurian, 30,000 Equity Shares to Renny
Varghese, 33,333 Equity Shares to Jameson Jacob, 33,333 Equity Shares
to Sajo Jacob, 33,333 Equity Shares to Abraham Vinu Sam, 33,333
Equity Shares to Leo Joseph, 13,333 Equity Shares to Sarun Jobi Paul,
33,333 Equity Shares to Gigi Kesavan, 66,666 Equity Shares to Johnson
Tharayilliathu Abraham, 13,333 Equity Shares to Joji Joshua Philipose,
13,333 Equity Shares to V. Venugopalan, 33,333 Equity Shares to
Sisilamma George, 26,666 Equity Shares to TS Anantharaman, 13,333
Equity Shares to Saji P A, 33,333 Equity Shares to Hari Velloor, 40,000
Equity Shares to Mathews Markose, 33,333 Equity Shares to Soney Jose,
1,333,333 Equity Shares to Arakkanatil Oommen lype, 66,666 Equity
Shares to KT Mathew, 86,666 Equity Shares to Jancy Mathew, 60.000
Equity Shares to Saju Abraham, 40,000 Equity Shares to Beena George,
13,333 Equity Shares to Nandakumar C. P, 13,333 Equity Shares to
Gireesan C, 13,333 Equity Shares to Paul Valiyanirappel Joseph, 13,333
Equity Shares to Prema Rajan MV, 13,333 Equity Shares to Sajeev J,
40,000 Equity Shares to Bosco Joseph, 13,333 Equity Shares to Pratap
Varkey, 15,000 Equity Shares to Vinod Manjila, 26,666 Equity Shares to
Jins Antony, 26,666 Equity Shares to Rajesh Sreedharan PiIlai, 13,333
Equity Shares to M Rajan, 40,000 Equity Shares to Christo George,
26,666 Equity Shares to Catherine Christo, 13,333 Equity Shares to Sunil
G. Nampoothiri, 13,333 Equity Shares to James V. Cheeran, 13,333
Equity Shares to Sidharth Ram, 13,333 Equity Shares to Uday Kumar
Gopinathan, 26,666 Equity Shares to Dr. MA Joy, 20,000 Equity Shares
to Girish Bhaskaran Nair, 13,333 Equity Shares to Joseph Varghese,
26,666 Equity Shares to Santhosh KR, 26,666 Equity Shares to Manoj V
George, 20,000 Equity Shares to Rajan Varughese, 26,666 Equity Shares
to Seejo PJ, 13,333 Equity Shares to Savio Joseph, 13,333 Equity Shares

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 Date of Number of Details of allottees Face value Issue price Nature of Nature of allotment Cumulative Cumulative
allotment of Equity Shares per Equity per Equity consideration number of paid-up Equity
Equity Shares allotted Share Share Equity Shares Share capital
(in ₹) (in ₹) (in ₹)

to Ajo Varghese, 13,333 Equity Shares to Arun Joseph, 13,333 Equity

Shares to Shruthi V, 13,333 Equity Shares to Alok Thomas Paul and
13,333 Equity Shares to Emy Acha Paul

Total 449,473,798 449,473,798 4,494,737,980

(1)
Details of allottees for the preferential allotment dated May 20, 2016
S. No. Name of Allottee Description of Allottee
1. ESAF Financial Holdings Private Limited Our corporate promoter. For details, see “Our Promoters and Promoter Group” on page 274.
2. Kadambelil Paul Thomas Our individual promoter. For details, see “Our Promoters and Promoter Group” on page 274.
(2)
Details of allottees for the preferential allotment dated March 9, 2017
S. No. Name of Allottee Description of Allottee
1. ESAF Financial Holdings Private Limited Our corporate promoter. For details, see “Our Promoters and Promoter Group” on page 274.
2. Kadambelil Paul Thomas Our individual promoter. For details, see “Our Promoters and Promoter Group” on page 274.
(3)
Details of allottees for the preferential allotment dated March 10, 2017
S. No. Name of Allottee Description of Allottee
1. ESAF Financial Holdings Private Limited Our corporate promoter. For details, see “Our Promoters and Promoter Group” on page 274.
(4)
Details of allottees for the preferential allotment dated March 29, 2017
S. No. Name of Allottee Description of Allottee
1. ESAF Financial Holdings Private Limited Our corporate promoter. For details, see “Our Promoters and Promoter Group” on page 274.
(5)
Details of allottees for the preferential allotment dated March 30, 2017 pursuant to the Business Transfer Agreement.
S. No. Name of Allottee Description of Allottee
1. ESAF Financial Holdings Private Limited Our corporate promoter. For details, see “Our Promoters and Promoter Group” on page 274.
For further details on the Business Transfer Agreement, see “History and Certain Corporate Matters” on page 241.
(6)
Details of allottees for the preferential allotment dated January 31, 2018
S. No. Name of Allottee Description of Allottee
1. Kadambelil Paul Thomas Our individual promoter. For details, see “Our Promoters and Promoter Group” on page 274.
(7)
Details of allottees for the preferential allotment dated July 31, 2018
S. No. Name of Allottee Description of Allottee
1. PNB MetLife India Insurance Company Limited An insurance company situated in Bangalore, which is an institutional investor in our Bank and one of the Selling Shareholders
2. Muthoot Finance Limited A financial institution, situated in Ernakulam, Kerala and an institutional investor in our Bank
3. Bajaj Allianz Life Insurance Company Limited An insurance Company, situated in Pune, Maharashtra, which is an institutional investor in our Bank and one of the Selling Shareholders
4. PI Ventures LLP A body corporate situated in Mumbai, which is a non-institutional investor in our Bank and one of the Selling Shareholders
(8)
Details of allottees for the preferential allotment dated September 28, 2018
S. No. Name of Allottee Description of Allottee
1. PNB MetLife India Insurance Company Limited, An insurance company situated in Bangalore, which is an institutional investor in our Bank and one of the Selling Shareholders
2. ESMACO A cooperative society, situated in Kerala, and an investor in our Bank
3. Yusuffali Musaliam Veettil Abdul Kader An individual investor in our Bank
4. ICICI Lombard General Insurance Company Limited An insurance company situated in Mumbai, and an institutional investor in our Bank
5. Lahanti A body corporate, situated in Thrissur, Kerala, which is a non-institutional investor in our Bank and one of our Group Entities. For details, see “Our Group Entities”
on page 453.
6. Abraham K John An individual investor in our Bank
7. John Chakola An individual investor in our Bank
8. Assan Khan Akbar An individual investor in our Bank and an erstwhile Non-Executive Nominee Director of our Bank
(9)
Details of allottees for the preferential allotment dated March 31, 2021

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 S. No. Name of Allottee Description of Allottee
1. George lttan Maramkandathil An individual investor in our Bank
2. George Mammoottil Thomas An individual investor in our Bank
3. ESMACO A member of our Promoter Group and Group Entity of our Bank. For further details see, “Our Promoters and Promoter Group” and “Our Group Entities” on pages
274 and 453, respectively.
4. Yusuffali Musaliam Veettil Abdul Kader An individual investor in our Bank
5. George Thomas A trustee holding Equity Shares on behalf of ESAF Staff Welfare Trust and Executive Vice President – Corporate Services of our Bank. For further details see, “Our
Management – Key Managerial Personnel” on page 270.
6. Mohan V. Mathew An individual investor in our Bank
7. Balu P. Mani An individual investor in our Bank
8. Sobha Balu Mani An individual investor in our Bank
9. KR Raju An individual investor in our Bank
10. Sobha Raju An individual investor in our Bank
11. Vinod Jacob Cherian An individual investor in our Bank
12. Mathew T. Thomas An individual investor in our Bank
13. Susan Mathew An individual investor in our Bank
14. Elizabeth Sabu An individual investor in our Bank
15. Mary Abraham An individual investor in our Bank
16. Lucy Sabu An individual investor in our Bank
17. Mereena Paul A member of our Promoter Group of our Bank. Further, she is also a director of ESAF Financial Holdings Private Limited. For further details see, “Our Promoters
and Promoter Group” on page 274.
18. Annie Varghese An individual investor in our Bank
19. Anand Menon An individual investor in our Bank
20. Radha Anand Menon An individual investor in our Bank
21. Abhijit Anand Menon An individual investor in our Bank
22. VM Xaviour An individual investor in our Bank
23. Sheena Kurian An individual investor in our Bank
24. Renny Varghese An individual investor in our Bank
25. Jameson Jacob An individual investor in our Bank
26. Sajo Jacob An individual investor in our Bank
27. Abraham Vinu Sam An individual investor in our Bank
28. Leo Joseph An individual investor in our Bank
29. Sarun Jobi Paul An individual investor in our Bank
30. Gigi Kesavan An individual investor in our Bank
31. Johnson Tharayilliathu Abraham An individual investor in our Bank
32. Joji Joshua Philipose An individual investor in our Bank
33. V. Venugopalan An individual investor in our Bank
34. Sisilamma George An individual investor in our Bank
35. TS Anantharaman An individual investor in our Bank
36. Saji P A An individual investor in our Bank
37. Hari Velloor An Executive Vice President - Network - 1 South of our Bank. For further details see, “Our Management - Key Managerial Personnel” on page 270.
38. Mathews Markose An individual investor in our Bank
39. Soney Jose An individual investor in our Bank
40. Arakkanatil Oommen lype An individual investor in our Bank
41. KT Mathew An individual investor in our Bank
42. Jancy Mathew An individual investor in our Bank
43. Saju Abraham An individual investor in our Bank
44. Beena George A member of our Promoter Group of our Bank. For further details see, “Our Promoters and Promoter Group” on page 274.
45. Nandakumar C. P An individual investor in our Bank
46. Gireesan C An individual investor in our Bank
47. Paul Valiyanirappel Joseph An individual investor in our Bank
48. Prema Rajan MV An individual investor in our Bank

113
 S. No. Name of Allottee Description of Allottee
49. Sajeev J An individual investor in our Bank
50. Bosco Joseph A member of our Promoter Group of our Bank. For further details see, “Our Promoters and Promoter Group” on page 274.
51. Pratap Varkey An individual investor in our Bank
52. Vinod Manjila An individual investor in our Bank
53. Jins Antony An individual investor in our Bank
54. Rajesh Sreedharan PiIlai An individual investor in our Bank
55. M Rajan An individual investor in our Bank
56. Christo George An individual investor in our Bank
57. Catherine Christo An individual investor in our Bank
58. Sunil G. Nampoothiri An individual investor in our Bank
59. James V. Cheeran An individual investor in our Bank
60. Sidharth Ram An individual investor in our Bank
61. Uday Kumar Gopinathan An individual investor in our Bank
62. Dr. MA Joy An individual investor in our Bank
63. Girish Bhaskaran Nair An individual investor in our Bank
64. Joseph Varghese An individual investor in our Bank
65. Santhosh KR An individual investor in our Bank
66. Manoj V George An individual investor in our Bank
67. Rajan Varughese An individual investor in our Bank
68. Seejo PJ An individual investor in our Bank
69. Savio Joseph A member of our Promoter Group of our Bank. For further details see, “Our Promoters and Promoter Group” on page 274.
70. Ajo Varghese An individual investor in our Bank
71. Arun Joseph An individual investor in our Bank
72. Shruthi V An individual investor in our Bank
73. Alok Thomas Paul A member of our Promoter Group of our Bank. For further details see, “Our Promoters and Promoter Group” on page 274.
74. Emy Acha Paul A member of our Promoter Group of our Bank. For further details see, “Our Promoters and Promoter Group” on page 274.

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 (b) Preference Share capital

Our Bank has not issued any preference shares since its incorporation.

2. Issue of Equity Shares at a price lower than the Offer Price in the last year

Our Bank has not issued any Equity Shares during a period of one year preceding the date of this Red Herring
Prospectus.

3. Issue of Equity Shares for consideration other than cash or out of revaluation of reserves

(a) Our Bank has not issued any Equity Shares out of revaluation of reserves since its incorporation.

(b) Except as stated below, our Bank has not issued any Equity Shares for consideration other than cash or by
way of bonus issue as on the date of this Red Herring Prospectus:

Date of Number of Face Offer Reason for Benefits accrued to our Bank Allottee
allotment Equity Value per price (₹) allotment
of Equity Shares Equity
Shares allotted Share (₹)
March 30, 4,901,960 10 10.20 Preferential The business undertaking ESAF Financial
2017 allotment comprising the lending and Holdings
pursuant to financing business of ESAF Private Limited’
the Financial Holdings Private
Business Limited was transferred to our
Transfer Bank pursuant to the Business
Agreement Transfer Agreement. For further
details, see “History and Certain
Corporate Matters” on page 241.

4. Issue of Equity Shares pursuant to schemes of arrangement

Our Bank has not allotted any Equity Shares pursuant to a scheme of amalgamation approved under Sections 230 to
234 of the Companies Act, 2013.

5. History of the Equity Share capital held by our Promoters

As on the date of this Red Herring Prospectus, our Promoters namely ESAF Financial Holdings Private Limited and
Kadambelil Paul Thomas collectively hold 311,945,181 Equity Shares equivalent to 69.40% of the issued, subscribed
and paid-up Equity Share capital of our Bank. ESAF Financial Holdings Private Limited holds 280,758,396 Equity
Shares (which includes five Equity Shares held by individuals beneficially on behalf of ESAF Financial Holdings
Private Limited) equivalent to 62.46% of the issued, subscribed and paid-up Equity Share capital of our Bank.
Kadambelil Paul Thomas holds 31,186,785 Equity Shares equivalent to 6.94% of the issued, subscribed and paid-up
Equity Share capital of our Bank.

(a) Build-up of the shareholding of our Promoters in our Bank

The details regarding the Equity Shareholding of our Promoters since incorporation of our Bank is set forth
in the table below:

Date of Nature of Number of Nature of Face Offer Percentage of Percentage of

allotment and transaction Equity consideration Value Price per the pre- the post-
date on which Shares per Equity Offer capital Offer capital
Equity Shares Equity Share (₹) (%) (%)
were made Share
fully paid-up (₹)
Kadambelil Paul Thomas
May 5, 2016 Initial subscription 5,000 Cash 10 10 0.00 [●]
to the
Memorandum of
Association
May 20, 2016 Preferential 1,095,000 Cash 10 10 0.24 [●]
allotment
March 9, 2017 Preferential 19,704,433 Cash 10 10.15 4.39 [●]
allotment
January 31, Preferential 10,382,352 Cash 10 10.20 2.31 [●]
2018 allotment
Total (A) 31,186,785 6.94 [●]
ESAF Financial Holdings Private Limited
May 5, 2016 Initial subscription 95,000* Cash 10 10 0.02 [●]
to the

115
 Date of Nature of Number of Nature of Face Offer Percentage of Percentage of
allotment and transaction Equity consideration Value Price per the pre- the post-
date on which Shares per Equity Offer capital Offer capital
Equity Shares Equity Share (₹) (%) (%)
were made Share
fully paid-up (₹)
Memorandum of
Association
May 20, 2016 Preferential 108,805,000 Cash 10 10 24.20 [●]
allotment
March 9, 2017 Preferential 59,113,300 Cash 10 10.15 13.15 [●]
allotment
March 10, 2017 Preferential 58,823,529 Cash 10 10.20 13.09 [●]
allotment
March 29, 2017 Preferential 49,019,607 Cash 10 10.20 10.91 [●]
allotment
March 30, 2017 Preferential 4,901,960 Other than 10 10.20** 1.09 [●]
allotment pursuant cash
to the Business
Transfer
Agreement
Total (B) 280,758,396 62.46 [●]
Total (A+B) 311,945,181 69.40 [●]
* One Equity Share each held by Mereena Paul, Alok Thomas Paul, Emy Acha Paul, George Kalaparambil John and Beena George,
as nominees on behalf of ESAF Financial Holdings Private Limited, who is the beneficial owner of such Equity Shares
** The Equity Shares were allotted to ESAF Financial Holdings Private Limited towards the discharge of purchase consideration for
the business undertaking transferred to our Bank, pursuant to the Business Transfer Agreement. For further details, see “History
and Certain Corporate Matters” on page 241.

All the Equity Shares held by our Promoters were fully paid-up on the respective dates of allotment of such
Equity Shares.

As of the date of this Red Herring Prospectus, none of the Equity Shares held by our Promoters are pledged.

Our Promoters do not hold any preference shares as of the date of this Red Herring Prospectus.

(b) Details of Promoter’s contribution and lock-in

(i) Pursuant to Regulations 14 and 16 of the SEBI ICDR Regulations, an aggregate of 20% of the fully
diluted post-Offer Equity Share capital of our Bank held by our Promoters (assuming full conversion
of vested options, if any, under the ESAF ESOP Plan 2019), shall be locked in for a period of 18
months as minimum Promoters’ contribution from the date of Allotment and the shareholding of the
Promoters in excess of 20% of the fully diluted post-Offer Equity Share capital shall be locked in
for a period of six months from the date of Allotment.

(ii) Details of the Equity Shares to be locked-in for 18 months from the date of Allotment as minimum
Promoters’ contribution are set forth in the table below:

Name of Number of Date of Nature of Face Value Offer/ Percentage Percentage

Promoter Equity allotment of allotment per Equity Acquisition of the pre- of the post-
Shares Equity Share (₹) price per Offer paid- Offer paid-
locked-in Shares and Equity up capital up capital
when made Share (₹) (%) (%)
fully paid-
up*
Kadambelil [●] [●] [●] [●] [●] [●] [●]
Paul Thomas
ESAF [●] [●] [●] [●] [●] [●] [●]
Financial
Holdings
Private
Limited
Total [●] [●] [●] [●] [●] [●] [●]
* All Equity Shares allotted to our Promoter were fully paid-up at the time of allotment

(iii) Our Bank undertakes that the Equity Shares that are being locked-in are not ineligible for
computation of Promoters’ contribution in terms of Regulation 15 of the SEBI ICDR Regulations.

(iv) Our Promoters have given consent to include such number of Equity Shares held by it as may
constitute 20% of the fully diluted post-Offer Equity Share capital of our Bank as Promoter’s
Contribution (assuming exercise of all vested employee stock options, if any, under the ESAF ESOP
Plan 2019).

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 (iv) In this connection, our Bank confirms the following:

(a) The Equity Shares offered for Promoters’ contribution do not include (i) Equity Shares
acquired in the three immediately preceding years for consideration other than cash and
revaluation of assets or capitalisation of intangible assets was involved in such transaction,
or (ii) Equity Shares resulting from bonus issue by utilization of revaluation reserves or
unrealised profits of our Bank or bonus shares issued against Equity Shares, which are
otherwise ineligible for computation of minimum Promoters’ contribution.

(b) The minimum Promoters’ contribution does not include any Equity Shares acquired during
the immediately preceding one year at a price lower than the price at which the Equity
Shares are being offered to the public in the Offer.

(c) Our Bank has not been formed by the conversion of one or more partnership firms or a
limited liability partnership firm.

(d) The Equity Shares forming part of the Promoters’ contribution are not subject to any
pledge.

(e) All the Equity Shares held by our Promoter are in dematerialised form.

(d) Other lock-in requirements:

(i) In addition to the 20% of the fully diluted post-Offer shareholding of our Bank held by the Promoters
locked in for 18 months as specified above, in accordance with Regulation 17 of the SEBI ICDR
Regulations, the entire pre-Offer Equity Share capital of our Bank, will be locked-in for a period of
six months from the date of Allotment, except for (i) the Equity Shares offered pursuant to the Offer
for Sale; and (ii) any Equity Shares held by the eligible employees (whether currently employees or
not, and including the legal heirs or nominees of any deceased employees or past employees ) of our
Bank which have been or will be allotted to them under the ESAF ESOP Plan 2019, prior to the
Offer, except as required under applicable law. Any unsubscribed portion of the Equity Shares
offered pursuant to the Offer for Sale will be locked-in as required under the SEBI ICDR
Regulations. For details, see “Offer Procedure” on page 471.

(ii) Our Promoters have agreed not to sell, transfer, charge, pledge or otherwise encumber in any
manner, the Promoters’ contribution from the date of filing this Red Herring Prospectus, until the
expiry of the lock-in specified above, or for such other time as required under SEBI ICDR
Regulations, except as may be permitted, in accordance with the SEBI ICDR Regulations.

(iii) Further, pursuant to the SFB Licensing Guidelines, our Promoters’ minimum initial contribution to
the paid-up Equity Share capital of our Bank is required to be at least 40% which is required to be
held for a period of five years from the date of commencement of business. Our Promoters are
required to reduce their shareholding to 26.00% of our paid-up Equity Share Capital or voting rights
after the completion of 15 years from the commencement of our business operations which was on
March 10, 2017 as per the Reserve Bank of India Guidelines on Acquisition and Holding of Shares
dated January 16, 2023 read with Reserve Bank of India (Acquisition and Holding of Shares or
Voting Rights in Banking Companies ) Directions, 2023. During the period prior to the completion
of the 15 years, our Promoters may be allowed to hold a higher percentage of shareholding as part
of the licensing conditions or as part of the shareholding dilution plan submitted by our Bank and
approved by the RBI with such conditions as it deems fit as described in “Key Regulations and
Policies” on page 221.

(iv) 50% of the Equity Shares Allotted to Anchor Investors under the Anchor Investor Portion shall be
locked-in for a period of 90 days from the date of Allotment and the remaining 50% of the Equity
Shares Allotted to Anchor Investors in the Anchor Investor Portion shall be locked-in for a period
of 30 days from the date of Allotment.

(v) The Equity Shares held by persons other than the Promoters and locked-in for a period of six months
from the date of Allotment in the Offer may be transferred to any other person holding the Equity
Shares which are locked-in, subject to continuation of the lock-in in the hands of transferees for the
remaining period and compliance with the SEBI Takeover Regulations.

(iv) As required under Regulation 20 of the SEBI ICDR Regulations, our Bank shall ensure that details
of the Equity Shares locked-in are recorded by the relevant Depository.

(v) The Equity Shares held by the Promoters that are locked-in may be pledged only with scheduled
commercial banks or public financial institutions or Systemically Important NBFCs or housing
finance companies, as collateral security for loans granted by such banks or public financial

117
institutions or Systemically Important NBFCs or housing finance companies in terms of Regulation
21 of the SEBI ICDR Regulations.

118
6. Shareholding Pattern of our Bank

The table below presents the equity shareholding pattern of our Bank as on the date of this Red Herring Prospectus.

Category Category of Number of Number of Number Number of Total Shareholding Number of Voting Rights held Number of Shareholding, as Number of Number of Number of
(I) shareholder shareholders fully paid-up of Partly shares number of as a % of total in each class of securities shares a % assuming Locked in Shares pledged Equity Shares
(II) (III) Equity Shares paid-up underlying shares held number of (IX) Underlying full conversion shares or otherwise held in
held Equity Depository (VII) shares Outstanding of convertible (XII) encumbered dematerialised
(IV) Shares Receipts =(IV)+(V)+ (calculated as convertible securities ( as a (XIII) form
held (VI) (VI) per SCRR, Number of Voting Total securities percentage of Number As a % Number As a % (XIV)
(V) 1957) Rights as a % (including diluted share (a) of total (a) of total
(VIII) As a % Class: Total of Warrants) capital) Shares Shares
of (A+B+C2) Equity (A+B+ (X) (XI)= (VII)+(X) held held
Shares C) As a % of (b) (b)
(A+B+C2)
#
(A) Promoter 10* 334,528,839** - - 334,528,839 74.43 334,528,839 334,528,839 74.43 - - - - 334,528,839
and
Promoter
Group
(B) Public 77 114,944,959 114,944,959 25.57 114,944,959 114,944,959 25.57 - - - - 114,944,959
(C) Non - - - - - - - - - - - - - -
Promoter-
Non Public
(C1) Shares - - - - - - - - - - - - - -
underlying
depository
receipts
(C2) Shares held - - - - - - - - - - - - - -
by employee
trusts
Total 87 449,473,798 449,473,798 100.00 449,473,798 449,473,798 100.00 - - - - 449,473,798
(A+B+C)
* Includes Mereena Paul, Alok Thomas Paul, Emy Acha Paul, George Kalaparambil John and Beena George, who hold shares as nominees of the ESAF Financial Holdings Private Limited who is the beneficial owner of such shares.
Mereena Paul, Alok Thomas Paul, Emy Acha Paul and Beena George are also members of the Promoter Group of our Bank.
** 280,758,391 Equity Shares are held by ESAF Financial Holdings Private Limited and one Equity Share each is held by Mereena Paul, Alok Thomas Paul, Emy Acha Paul, George Kalaparambil John and Beena George, as nominees on
behalf of ESAF Financial Holdings Private Limited, who is the beneficial owner of such Equity Shares, of which Mereena Paul, Alok Thomas Paul, Emy Acha Paul and Beena George are also members of the Promoter Group of our
Bank. For details of the Equity Shares held by our Promoters and Promoter Group, see “Offer Document Summary” and “Capital Structure” on pages 21 and 109, respectively.
# As per the Banking Regulations Act read with gazette notification dated DBR.PSBD.No.1084/16.13.100/2016-17 dated July 21, 2016, no shareholder in a banking company can exercise voting rights on poll in excess of 26% of total
voting rights of all the shareholders of the bank.

119
7. Details of Equity Shareholding of the major Shareholders of our Bank

(i) The major Equity Shareholders holding 1% or more of the paid-up Equity Share capital of the Bank and the
number of Equity Shares held by them as on the date of this Red Herring Prospectus are set forth in the table
below:

Sr. Name of the Shareholder Number of Equity Shares Percentage of the pre- Offer
No. of face value of ₹10 each Equity Share capital (%)
1. ESAF Financial Holdings Private Limited 280,758,396* 62.46
2. Kadambelil Paul Thomas 31,186,785 6.94
3. ESMACO 22,413,659 4.99
4. Yusuffali Musaliam Veettil Abdul Kader 22,413,659 4.99
5. PNB MetLife India Insurance Company Limited 21,346,993 4.75
6. Muthoot Finance Limited 18,717,244 4.16
7. Bajaj Allianz Life Insurance Company Limited 17,469,428 3.89
8. George Ittan Maramkandathil 13,333,333 2.97
9. PI Ventures LLP 8,734,714 1.94
10. ICICI Lombard General Insurance Company 6,239,081 1.39
Limited
Total 442,613,292 98.48
* 280,758,391 Equity Shares are held by ESAF Financial Holdings Private Limited and one Equity Share each is held by Mereena
Paul, Alok Thomas Paul, Emy Acha Paul, George Kalaparambil John and Beena George, as nominees on behalf of ESAF Financial
Holdings Private Limited, who is the beneficial owner of such Equity Shares.

(ii) The major Equity Shareholders who held 1% or more of the paid-up Equity Share capital of the Bank and the
number of Equity Shares held by them 10 days prior to the date of this Red Herring Prospectus are set forth
in the table below:

Sr. Name of the Shareholder Number of Equity Shares Percentage of the pre- Offer
No. of face value of ₹10 each Equity Share capital (%)
1. ESAF Financial Holdings Private Limited 280,758,396* 62.46
2. Kadambelil Paul Thomas 31,186,785 6.94
3. ESMACO 22,413,659 4.99
4. Yusuffali Musaliam Veettil Abdul Kader 22,413,659 4.99
5. PNB MetLife India Insurance Company Limited 21,346,993 4.75
6. Muthoot Finance Limited 18,717,244 4.16
7. Bajaj Allianz Life Insurance Company Limited 17,469,428 3.89
8. George Ittan Maramkandathil 13,333,333 2.97
9. PI Ventures LLP 8,734,714 1.94
10. ICICI Lombard General Insurance Company 6,239,081 1.39
Limited
Total 442,613,292 98.48
* 280,758,391 Equity Shares are held by ESAF Financial Holdings Private Limited and one Equity Share each is held by Mereena
Paul, Alok Thomas Paul, Emy Acha Paul, George Kalaparambil John and Beena George, as nominees on behalf of ESAF Financial
Holdings Private Limited, who is the beneficial owner of such Equity Shares.

(iii) The major Equity Shareholders who held 1% or more of the paid-up Equity Share capital of our Bank and the
number of Equity Shares held by them one year prior to the date of this Red Herring Prospectus are set forth
in the table below:

Sr. Name of the Shareholder Number of Equity Shares Percentage of the pre- Offer
No. of face value of ₹10 each Equity Share capital (%)
1. ESAF Financial Holdings Private Limited 280,758,396* 62.46
2. Kadambelil Paul Thomas 31,186,785 6.94
3. ESMACO 22,413,659 4.99
4. Yusuffali Musaliam Veettil Abdul Kader 22,413,659 4.99
5. PNB MetLife India Insurance Company Limited 21,346,993 4.75
6. Muthoot Finance Limited 18,717,244 4.16
7. Bajaj Allianz Life Insurance Company Limited 17,469,428 3.89
8. George Ittan Maramkandathil 13,333,333 2.97
9. PI Ventures LLP 8,734,714 1.94
10. ICICI Lombard General Insurance Company 6,239,081 1.39
Limited
Total 442,613,292 98.48
* 280,758,391 Equity Shares are held by ESAF Financial Holdings Private Limited and one Equity Share each is held by Mereena
Paul, Alok Thomas Paul, Emy Acha Paul, George Kalaparambil John and Beena George, as nominees on behalf of ESAF Financial
Holdings Private Limited, who is the beneficial owner of such Equity Shares.

(iv) The major Equity Shareholders who held 1% or more of the paid-up Equity Share capital of the Bank and the
number of shares held by them two years prior to the date of this Red Herring Prospectus are set forth in the
table below:

120
 Sr. Name of the Shareholder Number of Equity Shares Percentage of the pre- Offer
No. of face value of ₹10 each Equity Share capital (%)
1. ESAF Financial Holdings Private Limited 280,758,396* 62.46
2. Kadambelil Paul Thomas 31,186,785 6.94
3. ESMACO 22,413,659 4.99
4. Yusuffali Musaliam Veettil Abdul Kader 22,413,659 4.99
5. PNB MetLife India Insurance Company Limited 21,346,993 4.75
6. Muthoot Finance Limited 18,717,244 4.16
7. Bajaj Allianz Life Insurance Company Limited 17,469,428 3.89
8. George Ittan Maramkandathil 13,333,333 2.97
9. PI Ventures LLP 8,734,714 1.94
10. ICICI Lombard General Insurance Company 6,239,081 1.39
Limited
Total 442,613,292 98.48
* 280,758,391 Equity Shares are held by ESAF Financial Holdings Private Limited and one Equity Share each is held by Mereena
Paul, Alok Thomas Paul, Emy Acha Paul, George Kalaparambil John and Beena George, as nominees on behalf of ESAF Financial
Holdings Private Limited, who is the beneficial owner of such Equity Shares.

8. Details of Equity Shares held by our Promoters, members of our Promoter Group, Directors, Key Managerial
Personnel, Senior Management Personnel and directors of ESAF Financial Holdings Private Limited

(i) None of our Promoters, members of our Promoter Group, Directors and directors of ESAF Financial Holdings
Private Limited hold any employee stock options in our Bank.

(ii) Set out below are details of the Equity Shares held by our Directors, Key Managerial Personnel and Senior
Management Personnel in our Bank:

Sr. Name Number of Number of Number of Percentage of Percentage of

No. Equity Shares vested unvested the pre-Offer the post-Offer
of face value employee employee Equity Share of Equity
of ₹10 each stock options stock options Capital (%) Share Capital
(%)
Directors
1. Kadambelil Paul 31,186,785 - - 6.94 [●]
Thomas*
Total (A) 31,186,785 - - 6.94 [●]
Key Managerial Personnel and Senior Management Personnel
1. Ranjith Raj P - - 2,891 -
2. George Thomas - - 22,653 - [●]
3. George Kalaparambil - - 40,809 - [●]
John
4. Hari Velloor 33,333 - - Negligible [●]
Total (B) 33,333 - 66,353 - [●]
Total (A+B) 31,220,118 - 66,353 6.94 [●]
* Kadambelil Paul Thomas is also a Key Managerial Personnel and one of our Promoters of our Bank.

(iii) Set out below are the details of the Equity Shares held by our Promoters, directors of ESAF Financial
Holdings Private Limited and the members of our Promoter Group in our Bank:

Name Number of Equity Shares of Percentage of the pre-Offer

face value of ₹10 each Equity Share Capital (%)
Promoters
ESAF Financial Holdings Private Limited 280,758,396* 62.46
Kadambelil Paul Thomas 31,186,785 6.94
Total (A) 311,945,181 69.40
Promoter Group
ESMACO 22,413,659 4.99
Beena George 40,000 Negligible
Bosco Joseph 40,000 0.01
Mereena Paul 33,333 0.01
Leo Joseph 16,667 0.01
Savio Joseph 13,333 0.01
Alok Thomas Paul 13,333 Negligible
Emy Acha Paul 13,333 Negligible
Total (B) 22,583,658 5.03
Total (A+B) 334,545,505 74.43
* 280,758,391 Equity Shares are held by ESAF Financial Holdings Private Limited and one Equity Share each is held by Mereena
Paul, Alok Thomas Paul, Emy Acha Paul, George Kalaparambil John and Beena George, as nominees on behalf of ESAF Financial
Holdings Private Limited, who is the beneficial owner of such Equity Shares. Mereena Paul, Alok Thomas Paul, Emy Acha Paul
and Beena George are also members of the Promoter Group of our Bank. Further, Mereena Paul is also a director of ESAF
Financial Holdings Private Limited.

121
9. Except for ICICI Lombard General Insurance Company Limited, an associate of one of the BRLMs, namely ICICI,
which holds 6,239,081 Equity Shares aggregating 1.39% of our pre-Offer Equity Share capital, none of the BRLMs
or their respective associates, as defined in the SEBI Merchant Bankers Regulations hold any Equity Shares in our
Bank as on the date of this Red Herring Prospectus. The BRLMs and their associates may engage in transactions with
and perform services for our Bank in the ordinary course of business or may in the future engage in commercial
banking and investment banking transactions with our Bank, for which they may in the future receive customary
compensation.

10. There are no partly paid-up Equity Shares as on the date of this Red Herring Prospectus and all Equity Shares were
fully paid-up as on the date of allotment.

11. Our Bank has not made any public or rights issue of any kind or class of securities since its incorporation.

12. Our Bank has not made any bonus issue of any kind or class of securities since its incorporation.

13. ESAF ESOP Plan 2019

Our Bank, pursuant to the resolutions passed by the Board on December 23, 2019 and Shareholders on January 3,
2020, adopted the ESAF ESOP Plan 2019, which was amended pursuant to the SEBI SBEB & SE Regulations and
adopted pursuant to the resolution passed by the Board on June 22, 2023 and Shareholders’ on June 29, 2023. Pursuant
to the ESAF ESOP Plan 2019, the Bank may grant an aggregate number of up to 22,515,552 employee stock options
under the ESAF ESOP Plan 2019. However, the Bank will not make any further grants which involves allotment or
transfer of Equity Shares to its employees under ESAF ESOP Plan 2019 from the date of this Red Herring Prospectus
unless such grant is ratified by the Shareholders subsequent to the listing of the Equity Share, in conformity with the
SEBI SBEB & SE Regulations. Upon exercise and payment of the exercise price, the option holder will be entitled to
be allotted one Equity Share per employee stock option. Accordingly, the number of Equity Shares that may be issued
under the ESAF ESOP Plan 2019 shall not exceed 22,515,552 Equity Shares of face value ₹10 each. The objectives
of the ESAF ESOP Plan 2019 are, among others, to attract and retain employees with employee stock options as a
compensation tool. Through the ESAF ESOP Plan 2019, our Bank intends to offer an opportunity of sharing the value
created with those employees who have contributed or are expected to contribute to the growth and development of
our Bank.

The ESAF ESOP Plan 2019 has been framed in compliance with the SEBI SBEB & SE Regulations. The ESOP grant
is of two types (i) loyalty grant and (ii) performance grant. As on the date of this Red Herring Prospectus, no options
under performance grant have been granted by our Bank under the ESAF ESOP Plan 2019.The details of the options
granted under the ESAF ESOP Plan 2019 as loyalty grant are as follows:

Particulars Details
Fiscal Fiscal 2022 Fiscal 2023 For the three From July 1, 2023 till
2021 months period the date of this Red
ended June 30, 2023 Herring Prospectus
Options granted Nil 1,125,590 (loyalty Nil Nil Nil
grant)

Exercise price on options (in Nil 18.75 Nil Nil Nil

₹)

Vesting period Nil Vesting of the Nil Nil Nil

options granted will
happen on the first
anniversary

Options vested and not Nil Nil 1,125,590 1,044,483 (loyalty 1,032,851
exercised (loyalty grant) grant) (loyalty grant)

Options exercised Nil Nil Nil Nil Nil

The total number of Equity Nil Nil Nil Nil Nil

Shares arising as a result of
exercise of options

Options forfeited/lapsed Nil Not Applicable 81,107 11,632 12,582

Variation of terms of options Nil Nil Nil Nil Nil

Money realized by exercise of Nil Nil Nil Nil Nil

options

122
 Particulars Details
Fiscal Fiscal 2022 Fiscal 2023 For the three From July 1, 2023 till
2021 months period the date of this Red
ended June 30, 2023 Herring Prospectus
Total number of options in Nil 1,125,590 (loyalty 1,044,483 1,032,851 (loyalty 1,020,269
force as of the date of this Red grant) (loyalty grant) grant)
Herring Prospectus (loyalty grant)

Employee-wise detail of
options granted to:

i. Key managerial Nil • George Nil Nil Nil

personnel and Senior Kalaparambil
Management Personnel John– 40,809
options

• George Thomas
- 22,653 options

• Ranjith Raj P –
2,891 options

ii. Any other employee who Nil Nil Nil Nil Nil
received a grant in any
one year of options
amounting to 5% or more
of the options granted
during the year

iii. Identified employees Nil

who were granted
options during any one
year equal to or
exceeding 1% of the
issued capital (excluding
outstanding warrants and
conversions) of the Bank
at the time of grant

Fully diluted Earnings per

Equity Share – (face value ₹10 Year ended Year ended Year ended For the three From July 1,
per Equity Share) pursuant to March 31, 2021 March 31, 2022 March 31, 2023 months period 2023 till the date
issue of Equity Shares on ended June 30, of this Red
exercise of options calculated 2023 Herring
in accordance with applicable Prospectus
accounting standard for 2.46 1.22 6.71 2.89 NA
‘Earnings per Share’

Lock-in The shares are freely transferable and there is no lock in period envisaged in the scheme

Difference, if any, between If “Fair Value Method” had been adopted based on “Black-Scholes pricing model” for pricing
employee compensation cost and accounting of options, net profit would be lower by Rs. Nil, Rs. 47.93 million, Rs. 12.36
calculated using the intrinsic million, Rs. Nil and Rs, Nil for three months period ended 30 June 2023 and years ended 31 March
value of stock options and the 2022, 31 March 2021 and 31 March 2020 respectively. The modified basic and diluted earnings
employee compensation cost per share for the year, had the Bank followed Fair Value Method of accounting for ESOS
calculated on the basis of fair compensation cost would be as follows:
value of stock options and its
impact on profits and on the Particulars Year ended Year ended Year ended For the three
Earnings per Equity Share – March 31, 2021 March 31, 2022 March 31, 2023 months period
(face value ₹10 per Equity ended June 30,
Share) 2023
Basic earnings NA 1.22 6.72 2.89
per share
Diluted earnings NA 1.22 6.71 2.89
per share

Description of the pricing Following methods and assumptions were used for computing the weighted average fair value as
formula method and per Restated Financial Information. The Black shoes model has been used for computing the
significant assumptions used weighted average value
during the year to estimate the
fair values of options, Risk Free rate 6.17%
including weighted-average Expected life of option 1 Year
information, namely, risk-free Expected dividend (Annualised) 0.00

123
 Particulars Details
Fiscal Fiscal 2022 Fiscal 2023 For the three From July 1, 2023 till
2021 months period the date of this Red
ended June 30, 2023 Herring Prospectus
interest rate, expected life, Annualised Standard Deviation 11.78%
expected volatility, expected Market Price at the time of Grant ₹75.00
dividends and the price of the Exercise Price ₹18.75
underlying share in market at Fair Value of Option ₹57.37 per option
the time of grant of the option

Impact on profit and Earnings Complied with the SEBI SBEB & SE Regulations and the Guidance Note on Accounting for
per Equity Share – (face value Employee Share-based Payments, issued by the Institute of Chartered Accountants of India
₹10 per Equity Share) of the
last three years if the
accounting policies prescribed
in the SEBI SBEB & SE
Regulations had been
followed in respect of options
granted in the last three years

Intention of the key Nil

managerial personnel, senior
management personnel and
whole-time directors who are
holders of Equity Shares
allotted on exercise of options
granted to sell their equity
shares within three months
after the date of listing of
Equity Shares pursuant to the
Issue

Intention to sell Equity Shares Nil

arising out of an employee
stock option scheme within
three months after the listing
of Equity Shares, by
Directors, key managerial
personnel, senior management
personnel and employees
having Equity Shares arising
out of an employee stock
option scheme, amounting to
more than 1% of the issued
capital (excluding outstanding
warrants and conversions)

14. None of the members of our Promoter Group, Kadambelil Paul Thomas, directors of ESAF Financial Holdings Private
Limited, our Directors, or their relatives have purchased or sold any securities of our Bank during the period of six
months immediately preceding the date of filing of this Red Herring Prospectus.

15. As of the date of the filing of this Red Herring Prospectus, our Bank has 87 Shareholders.

16. Our Bank, our Directors and the BRLMs have not made any or entered into any buy-back arrangements for purchase
of Equity Shares.

17. All Equity Shares issued pursuant to the Offer will be fully paid-up at the time of Allotment.

18. Except the Equity Shares allotted pursuant to the Offer, the conversion of vested employee stock options, if any granted
under the ESAF ESOP Plan 2019 and the sweat equity shares which may be allotted to the Managing Director and
Chief Executive Officer, subject to approval from the RBI, there will be no further issue of Equity Shares whether by
way of issue of bonus shares, rights issue, preferential issue or any other manner during the period commencing from
the date of filing of this Red Herring Prospectus until the listing of the Equity Shares on the Stock Exchanges pursuant
to the Offer.

19. Our Bank shall ensure that all transactions in Equity Shares by our Promoters and members of our Promoter Group
between the date of filing of the Draft Red Herring Prospectus and the date of closing of the Offer shall be reported to
the Stock Exchanges within 24 hours of such transaction.

20. There have been no financing arrangements whereby our Promoters, members of the Promoter Group, the directors of
ESAF Financial Holdings Private Limited, our Directors, and their relatives have financed the purchase by any other
124
 person of securities of our Bank other than in the normal course of the business of the financing entity, during a period
of six months preceding the date of filing of this Red Herring Prospectus.

21. Our Bank presently does not intend or propose and is not under negotiations or considerations to alter its capital
structure for a period of six months from the Bid/ Offer Opening Date, by way of split or consolidation of the
denomination of Equity Shares or further issue of Equity Shares (including issue of securities convertible into or
exchangeable, directly or indirectly for Equity Shares) whether on a preferential basis or by way of issue of bonus
shares or on a rights basis or by way of further public issue of Equity Shares or qualified institutions placements or
otherwise. Provided, however, that the foregoing restrictions do not apply to: (a) the issuance of any Equity Shares
under the Offer; (b) any issuance pursuant to the exercise of vested employee stock options, if any under the ESAF
ESOP Plan 2019; and (c) the sweat equity shares which may be allotted to the Managing Director and Chief Executive
Officer, subject to approval from the RBI as disclosed in “Our Management - Terms of appointment of Directors -
Remuneration paid to the Executive Director” on page 254.

22. Other than employee stock options granted under the ESAF ESOP Plan 2019, there are no outstanding convertible
securities or any other right granted by the Bank which would entitle any person any option to receive Equity Shares,
as on the date of this Red Herring Prospectus.

125
 OBJECTS OF THE OFFER

The Offer comprises of the Fresh Issue and the Offer for Sale.

Offer for Sale

Each of the Selling Shareholders will be entitled to their respective portion of the proceeds from the Offer for Sale in proportion
of the Equity Shares offered by the respective Selling Shareholders as part of the Offer for Sale. Our Bank will not receive any
proceeds from the Offer for Sale.

For details regarding the aggregate pre-Offer and post-Offer shareholding of the Selling Shareholders and the percentage of the
pre-Offer and post-Offer paid-up Equity Share capital, respectively, of our Bank, see “The Offer” on page 95.

Objects of the Offer

In terms of the SFB Licensing Guidelines, the Bank is required to list its Equity Shares on the Stock Exchanges within a period
of three years from reaching a net worth of ₹5,000 million. Further, our Bank is required to maintain a minimum capital
adequacy ratio of 15% of our risk weighted assets on a continuous basis, subject to any higher percentage as may be prescribed
by RBI from time to time, and our Tier - I capital is required to be at least 7.5% of the risk weighted asset. For details, see “Key
Regulations and Policies” on page 221. Our Bank’s CRAR, Tier-I capital base and Tier-II capital base in accordance with
Restated Financial Information, as applicable, as at June 30, 2023 was 20.56%, ₹18,389,402,698.00 and ₹1,559,187,785.22,
respectively and as at March 31, 2023 was 19.83%, ₹17,096,364,483.99 and ₹1,617,247,367.37, respectively.

The details of composition of the Bank’s Tier - 1 capital as at June 30, 2023 and June 30, 2022 and as at March 31, 2023, March
31, 2022 and March 31, 2021:

(in ₹ million)
Particulars As at June 30, As at June As at March As at March As at March 31,
2023 30, 2022 31, 2023 31, 2022 2021
Share Capital 4,494.74 4,494.74 4,494.74 4,494.74 4,494.74
Reserves and surplus (excluding invest 13,574.78 10,370.94 12,275.13 9,311.28 8,984.63
fluctuation reserve)
Additional Tier 1 Capital 480.00 480.00 480.00 480.00 480.00
Expenditure incurred for initial public offering (160.12) (130.55) (153.51) (130.55) (70.30)
purpose
Tier Capital - I 18,389.40 15,215.13 17,096.36 14,155.47 13,889.07
Sub debt 450.00 700.00 530.00 810.00 890.00
General Provision & Standard Assets Provisions 787.78 1,060.83 765.83 1,094.28 806.12
Investment Fluctuation Reserve 321.41 261.94 321.42 261.93 41.27
Tier Capital - II 1,559.19 2,022.77 1,617.25 2,166.21 1,737.39
Total Capital Fund (Tier I & II) 19,948.59 17,237.90 18,713.61 16,321.68 15,626.46

We are required to maintain certain minimum capital adequacy ratio on an ongoing basis towards mitigation of unexpected risk
in accordance with regulatory guidelines. The ability to grow the business comes from the sufficiency of adequate capital
cushion besides regulatory comfort of having enough margin above minimum levels. The cash being the working capital of our
Bank, utilisation will be for increasing the assets which are primarily the advances and investments similar to any resources
like deposits or borrowings. The Net Proceeds will increase our Tier I capital and the capital adequacy ratio.

Our Bank proposes to utilize the Net Proceeds from the Fresh Issue towards augmenting our Bank’s Tier – I capital base to
meet our Bank’s future capital requirements and for increasing our Bank’s business, which is primarily onward lending. Further,
the proceeds from the Fresh Issue will also be used towards meeting the expenses in relation to the Offer.

Our Bank expects to receive the benefits of listing the Equity Shares on the Stock Exchanges.

Net Proceeds

The details of the proceeds from the Fresh Issue are summarized in the following table:

Particulars Estimated amount (₹ in million)

Gross proceeds of the Fresh Issue 3,907.00
(Less) Fresh Issue expenses(1) [●]
Net Proceeds(1) [●]
(1)
To be finalised upon determination of the Offer Price and updated in the Prospectus prior to filing with the RoC

Requirement of Funds and Utilization of Net Proceeds

The Net Proceeds are proposed to be utilised towards augmentation of our Bank’s Tier-I capital base to meet our Bank’s future
capital requirements, and for increasing business of our Bank which is primarily onward lending, which are expected to arise
out of growth in our Bank’s assets, primarily our Bank’s loans/advances and investment portfolio, and to ensure compliance
with regulatory requirements on capital adequacy prescribed by the RBI from time to time.
126
Offer Expenses

The total expenses of the Offer are estimated to be approximately ₹[●] million.

The Offer related expenses primarily include fees payable to the BRLMs and legal counsel, fees payable to the Auditors,
brokerage and selling commission, underwriting commission, commission payable to Registered Brokers, RTAs, CDPs,
SCSBs’ fees, Registrar’s fees, printing and stationery expenses, advertising and marketing expenses and all other incidental and
miscellaneous expenses for listing the Equity Shares on the Stock Exchanges. Other than the listing fees which will be borne
by the Bank, each of the Selling Shareholders and the Bank shall, upon successful completion of the Offer, share the costs and
expenses (including all the applicable taxes) directly attributable to the Offer, on a pro-rata basis, in the manner agreed, based
on the proportion of Equity Shares included in the Offer for Sale, among themselves, and the Equity Shares allotted by the
Bank, respectively, as a percentage of the total Equity Shares sold in the Offer. Any payments by our Bank in relation to the
Offer expenses on behalf of Selling Shareholders shall be reimbursed by each of the Selling Shareholders to our Bank, upon
successful completion of the Offer, inclusive of taxes. Each Selling Shareholder shall be entitled to its respective portion of the
proceeds of the Offer for Sale (net of their proportion of Offer-related expenses and the relevant taxes thereon). It is clarified
that in the event of withdrawal or postponement of the Offer or if the Offer is not successful or consummated or is abandoned
for any reason, all costs and expenses (including all applicable taxes) with respect to the Offer shall be shared between: (a) the
Bank, and (b) the Selling Shareholders, in proportion to the number of Equity Shares proposed to be issued and Allotted by the
Bank pursuant to the Fresh Issue and offered for sale by each of the Selling Shareholders in the Offer for Sale.

The estimated Offer related expenses are as under:

Activity Estimated expenses(1) As a % of the total As a % of the

(₹ in million) estimated Offer total Offer
expenses(1) size(1)
BRLMs fees and commissions (including underwriting [●] [●] [●]
commission, brokerage and selling commission)
Commission/processing fee for SCSBs and Bankers to the Offer [●] [●] [●]
and fee payable to the Sponsor Banks for Bids made by RIBs using
UPI and Eligible Employees(1)(3)(4)
Brokerage and selling commission and bidding charges for [●] [●] [●]
Members of the Syndicate, Registered Brokers, RTAs and CDPs(2)
Fees payable to the Registrar to the Offer [●] [●] [●]
Fees payable to the other advisors to the Offer [●] [●] [●]
- Auditors# [●] [●] [●]
- Independent chartered accountant# [●] [●] [●]
- Industry expert# [●] [●] [●]
Others
- Listing fees, SEBI filing fees, upload fees, BSE and NSE [●] [●] [●]
processing fees, book building software fees and other
regulatory expenses
- Printing and stationery [●] [●] [●]
- Advertising and marketing expenses [●] [●] [●]
- Fees payable to legal counsels [●] [●] [●]
- Miscellaneous [●] [●] [●]
Total estimated Offer expenses [●] [●] [●]
#
The names, roles and responsibilities of the other parties/ advisors to the Offer are as follows:
(i) Auditors: Our Joint Statutory Auditors have been engaged for the purposes of audit and for providing certain deliverables in connection with the
Offer.
(ii) Independent chartered accountant: A. John Moris & Co., Chartered Accountants, has been engaged to certify certain information in the Offer
Documents.
(iii) Industry expert: CRISIL MI&A is engaged to provide an industry report exclusively in connection with the Offer.

(1) Amounts will be finalized and incorporated in the Prospectus on determination of the Offer Price.
(2) Selling commission payable to the SCSBs on the portion for Retail Individual Bidders and Non-Institutional Bidders which are directly procured
and uploaded by the SCSBs would be as follows.
Portion for RIBs* 0.35% of the Amount Allotted (plus applicable taxes)

Portion for Non-Institutional Bidders* 0.20% of the Amount Allotted (plus applicable taxes)

Employee Reservation Portion* 0.20% of the Amount Allotted (plus applicable taxes)

*Amount Allotted is the product of the number of Equity Shares Allotted and the Offer Price.

Selling Commission payable to the SCSBs will be determined on the basis of the bidding terminal id as captured in the Bid Book of BSE or NSE.

(3) No processing fees shall be payable by our Company and the Selling Shareholders to the SCSBs on the applications directly procured by them.

Processing fees payable to the SCSBs on the portion for RIBs and NIBs (excluding UPI Bids) which are procured by the members of the
Syndicate/sub-Syndicate/Registered Broker/CRTAs/ CDPs and submitted to SCSB for blocking, would be as follows.

Portion for RIBs, NIBs, Employee Reservation* ₹ 10.00 per valid application (plus applicable taxes)

127
 * Processing fees payable to the SCSBs for capturing Syndicate Member/Sub-syndicate (Broker)/Sub-broker code on the ASBA Form for Non-
Institutional Bidders and Qualified Institutional Bidders with bids above ₹ 0.50 million would be ₹10.00 plus applicable taxes, per valid
application.

(4) Selling commission on the portion for RIBs (up to ₹0.20 million) and NIBs which are procured by members of the Syndicate (including their
sub-Syndicate Members), Registered Brokers, CRTAs and CDPs or for using 3-in-1 type accounts- linked online trading, demat & bank account
provided by some of the Registered Brokers which are Members of the Syndicate (including their Sub-Syndicate Members) would be as follows.

Portion for RIBs 0.35% of the Amount Allotted* (plus applicable taxes)

Portion for Non-Institutional Bidders 0.20% of the Amount Allotted* (plus applicable taxes)

Employee Reservation Portion* 0.20% of the Amount Allotted (plus applicable taxes)

*Amount Allotted is the product of the number of Equity Shares Allotted and the Offer Price.

The Selling Commission payable to the Syndicate / Sub-Syndicate Members will be determined (i) for RIBs and NIBs (up to ₹0.5 million), on the
basis of the application form number / series, provided that the application is also bid by the respective Syndicate / Sub-Syndicate Member. For
clarification, if a Syndicate ASBA application on the application form number / series of a Syndicate / Sub-Syndicate Member, is bid by an SCSB,
the selling commission will be payable to the SCSB and not the Syndicate / Sub-Syndicate Member,’ and (ii) for NIBs (above ₹ 0.50 million),
Syndicate ASBA Form bearing SM Code & Sub-Syndicate Code of the application form submitted to SCSBs for Blocking of the Fund and uploading
on the Exchanges platform by SCSBs. For clarification, if a Syndicate ASBA application on the application form number / series of a Syndicate /
Sub-Syndicate Member, is bid by an SCSB, the Selling Commission will be payable to the Syndicate / Sub Syndicate members and not the SCSB.

Bidding Charges payable to members of the Syndicate (including their sub-Syndicate Members) on the applications made using 3-in-1 accounts
would be ₹ 10.00 plus applicable taxes, per valid application bid by the Syndicate (including their sub-Syndicate Members). Bidding charges payable
to SCSBs on the QIB Portion and NIBs (excluding UPI Bids) which are procured by the Syndicate/sub-Syndicate/Registered Broker/RTAs/ CDPs and
submitted to SCSBs for blocking and uploading would be ₹ 10.00/- per valid application (plus applicable taxes).

The selling commission and bidding charges payable to Registered Brokers the CRTAs and CDPs will be determined on the basis of the bidding
terminal id as captured in the Bid Book of BSE or NSE.

Selling commission / bidding charges payable to the Registered Brokers on the portion for RIBs and NIBs which are directly procured by the
Registered Broker and submitted to SCSB for processing, would be as follows.

Portion for RIBs, NIBs and Employees Reservation ₹ 10.00 per valid application (plus applicable taxes)

Bidding charges / processing fees for applications made by UPI Bidders would be as under.
Payable to members of the Syndicate (including their sub-Syndicate ₹ 30.00 per valid application (plus applicable taxes) subject to a maximum
Members)/ RTAs / CDPs of ₹ 9,000,000 (Rupees Ninety Lakhs) payable on a pro rata basis

Payable to Sponsor Bank ₹ Nil per valid application (plus applicable taxes)

The Sponsor Banks shall be responsible for making payments to the third parties
such as remitter bank, NPCI and such other parties as required in connection with
the performance of its duties under applicable SEBI circulars, agreements and
other Applicable Laws

All such commissions and processing fees set out above shall be paid as per the timelines in terms of the Syndicate Agreement and Cash Escrow and
Sponsor Bank Agreement.

Pursuant to SEBI circular no. SEBI/HO/CFD/DIL2/P/CIR/2022/75 dated May 30, 2022, applications made using the ASBA
facility in initial public offerings shall be processed only after application monies are blocked in the bank accounts of investors
(all categories). Accordingly, Syndicate / sub-Syndicate Member shall not be able to Bid the Application Form above ₹ 0.50
million and the same Bid cum Application Form need to be submitted to SCSB for blocking of the fund and uploading on the
Stock Exchange bidding platform. To identify bids submitted by Syndicate / sub-Syndicate Member to SCSB a special Bid-
cum application form with a heading / watermark “Syndicate ASBA” may be used by Syndicate / sub-Syndicate Member along
with SM code and broker code mentioned on the Bid-cum Application Form to be eligible for brokerage on allotment. However,
such special forms, if used for Retail Individual Bidders and Non Institutional Bidder Bids up to ₹ 0.50 million will not be
eligible for brokerage.

The processing fees for applications made by UPI Bidders may be released to the remitter banks (SCSBs) only after such banks
provide a written confirmation on compliance with SEBI circular no. SEBI/HO/CFD/DIL2/CIR/P/2022/51 dated April 20, 2022
read with SEBI Circular No: SEBI/HO/CFD/DIL2/CIR/P/2021/570 dated June 02, 2021 read with SEBI Circular No:
SEBI/HO/CFD/DIL2/CIR/P/2021/2480/l/M dated March 16, 2021.

Means of finance

The fund requirements set out for the aforesaid objects of the Offer are proposed to be met entirely from the Net Proceeds.
Accordingly, our Bank confirms that there is no requirement to make firm arrangements of finance through verifiable means
towards at least 75% of the stated means of finance, excluding the amount to be raised from the Fresh Issue and existing
identifiable accruals as required under the SEBI ICDR Regulations.

Interim use of Net Proceeds

128
Our Bank, in accordance with the policies established by the Board from time to time, will have the flexibility to deploy the
Net Proceeds. Pending utilization for the purposes described above, our Bank will deposit the Net Proceeds only with one or
more scheduled commercial banks included in the second schedule of the RBI Act as may be approved by our Board or IPO
Steering Committee.

In accordance with Section 27 of the Companies Act, 2013, our Bank confirms that it shall not use the Net Proceeds for buying,
trading or otherwise dealing in the equity shares of any other listed company or for any investment in equity markets.

Bridge Financing Facilities

Our Bank has not raised any bridge loans from any bank or financial institution as on the date of this Red Herring Prospectus,
which are proposed to be repaid from the Net Proceeds.

Appraising Entity

None of the objects of the Offer for which the Net Proceeds will be utilised have been appraised by any bank/ financial
institution.

Monitoring of Utilization of Funds

In terms of the proviso to Regulation 41(1) of the SEBI ICDR Regulations, our Bank is not required to appoint a monitoring
agency for this Offer. To the extent applicable, our Bank will disclose the utilization of the Net Proceeds under a separate head
in our balance sheet along with the relevant details, for all such amounts that have not been utilised.

Our Audit Committee shall monitor the Net Proceeds till utilisation of the Net Proceeds.

Our Bank will indicate investments, if any, of unutilised Net Proceeds in the balance sheet of our Bank for the relevant Fiscals
subsequent to receipt of listing and trading approvals from the Stock Exchanges.

Pursuant to Regulations 18(3) and 32(3) of the Listing Regulations, our Bank shall, on a quarterly basis, disclose to the Audit
Committee the uses and applications of the Net Proceeds.

On an annual basis, our Bank shall prepare a statement of funds utilized for purposes other than those stated in this Red Herring
Prospectus and place it before the Audit Committee and make other disclosures as may be required until such time as the Net
Proceeds remain unutilized. Such disclosure shall be made only until such time that all the Net Proceeds have been utilized in
full. The statement shall be certified by the Statutory Auditors of our Bank.

Further, in accordance with Regulation 32(1) of the Listing Regulations, our Bank shall furnish to the Stock Exchanges on a
quarterly basis, a statement indicating (i) deviations, if any, in the actual utilization of the Net Proceeds of the Fresh Issue from
the objects of the Fresh Issue as stated above; and (ii) details of category wise variations in the actual utilization of the proceeds
of the Fresh Issue from the objects of the Fresh Issue as stated above. This information will also be published in newspapers
simultaneously with the interim or annual financial results and explanation for such variation (if any) will be included in our
Directors’ report, after placing the same before the Audit Committee.

Variation in Objects

In accordance with Sections 13(8) and 27 of the Companies Act and applicable rules, our Bank shall not vary the objects of the
Offer without our Bank being authorised to do so by the Shareholders by way of a special resolution through postal ballot. In
addition, the notice issued to the Shareholders in relation to the passing of such special resolution (“Postal Ballot Notice”) shall
specify the prescribed details as required under the Companies Act and applicable rules.

The Postal Ballot Notice shall simultaneously be published in the newspapers, one in English and one in Malayalam, being the
regional language of Kerala, where the Registered and Corporate Office is situated in accordance with the Companies Act and
applicable rules. Our Promoters or controlling shareholders will be required to provide an exit opportunity to such Shareholders
who do not agree to the proposal to vary the objects, at such price, and in such manner, in accordance with our Articles of
Association and the SEBI ICDR Regulations.

Other Confirmations

No part of the Net Proceeds will be paid by us as consideration to our Promoters, Promoter Group, the Directors, Key
Managerial Personnel and Senior Management Personnel, except in the normal course of business and in compliance with
applicable law.

Our Bank has not entered into and is not planning to enter into any arrangement/ agreements with the Promoters, Promoter
Group, Directors, Key Managerial Personnel, Senior Management Personnel and Group Entities in relation to the utilisation of
the Net Proceeds. Further there is no existing or anticipated interest of such individuals and entities in the objects of the Fresh
Issue as set out above.

129
 BASIS FOR OFFER PRICE

The Offer Price will be determined by our Bank and the Selling Shareholders, in consultation with the BRLMs, on the basis of
assessment of market demand for the Equity Shares offered through the Book Building Process and on the basis of quantitative
and qualitative factors as described below. The face value of the Equity Shares is ₹10 each and the Offer Price is [●] times the
face value, [●] times the Floor Price and [●] times the Cap Price. The financial information included herein is derived from our
Restated Financial Information. Prospective investors should also see “Our Business”, “Risk Factors”, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” and “Other Financial Information” on pages 190,
35, 372 and 370, respectively, to have an informed view before making an investment decision.

Qualitative Factors

We believe the following business strengths allow us to successfully compete in the industry:

• Our understanding of the micro loan segment, which has enabled us to grow our business outside of Kerala, our home
state;

• Main focus on our rural and semi-urban banking franchise;

• Growing Retail Deposits portfolio;

• Customer connections driven by our customer-centric products and processes and other non-financial services for
Micro Loan customers;

• Technology-driven model with a digital technology platform; and

• Experienced Board, Key Managerial Personnel and Senior Management Personnel

For further details, see “Our Business – Our Strengths” on page 193.

Quantitative Factors

Some of the information presented below relating to our Bank is based on the Restated Financial Information. For details, see
“Financial Statements” on page 304.

Some of the quantitative factors which may form the basis for computing the Offer Price are as follows:

1. Basic and diluted earnings per share (“EPS”):

Fiscal Year/Period Basic EPS (in ₹) Diluted EPS (in ₹) Weight

Fiscal year ended March 31, 2023 6.73 6.71 3
Fiscal year ended March 31, 2022 1.22 1.22 2
Fiscal year ended March 31, 2021 2.46 2.46 1
Weighted Average 4.18 4.17 -
Three months period ended June 30, 2023* 2.89 2.89 -
Three months period ended June 30, 2022* 2.36 2.35 -
* Not annualised
Net profit, as restated, attributable to equity shareholders of the Bank
(i) Basic/diluted earnings per share =
Weighted average number of equity shares outstanding during the year/ period
(ii) Earnings per share calculations are done in accordance with Accounting Standard 20 “Earnings Per Share” (“AS 20”) as notified under section
133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014

The Weighted Average basic and diluted EPS is a product of basic and diluted EPS and respective assigned weight, dividing the resultant by total
aggregate weight.

2. P/E Ratio in relation to the in relation to Price Band of ₹[●] to ₹[●] per Equity Share:

Particulars P/E at the Floor Price P/E at the Cap Price

(no. of times) (no. of times)
Based on basic EPS for year ended March 31, 2023 [●] [●]
Based on diluted EPS for year ended March 31, 2023 [●] [●]

3. Industry peer group P/E ratio

Based on the peer group information (excluding our Bank) given below in this section, the highest P/E ratio is
471.38, the lowest P/E ratio is 9.81 and the average P/E ratio is 94.74.

Particulars Industry P/E Name of the company Face value of the

equity shares (₹)
Highest 471.38 Spandana Spoorthy Financial Limited 10

130
 Particulars Industry P/E Name of the company Face value of the
equity shares (₹)
Lowest 9.81 Ujjivan Small Finance Bank Limited 10
Average 94.74 -
The industry high and low has been considered from the industry peer set provided later in this section.
For Industry P/E, P/E figures for the peers are computed based on closing market price as on October 20, 2023 at BSE, divided by Basic EPS (on
consolidated basis unless otherwise available only on standalone basis) based on financial results of the respective company for the year ended
March 31, 2023 submitted to stock exchanges.

4. Industry peer group price/book ratio

Based on the peer group information (excluding our Bank) given below in this section, the highest P/B ratio is 4.25,
the lowest P/B ratio is 1.10 and the average P/B ratio is 2.33.

Particulars Industry Peer Name of the company Face value of the

P/B equity shares (₹)
Highest 4.25 Credit Access Grameen Limited 10
Lowest 1.10 Suryoday Small Finance Bank 10
Limited
Average 2.33 -
Notes: The industry high and low have been considered from the industry peer set provided later in this section. The industry composite has been
calculated as the arithmetic average P/B of the industry peer provided in this section.
For Industry P/B, P/B figures for the peers are computed based on closing market price as on October 20, 2023 at BSE, divided by book value per
share based on financial results of the respective company for the year ended March 31, 2023 submitted to stock exchanges.

5. Average return on net worth (“RoNW”)

Derived from Restated Financial Information:

Fiscal Year/Period RoNW (%) Weight

Fiscal year ended March 31, 2023 17.69 3
Fiscal year ended March 31, 2022 3.89 2
Fiscal year ended March 31, 2021 7.80 1
Weighted Average 11.44 -
Three months period ended June 30, 2023* 7.07 -
Three months period ended June 30, 2022* 7.00 -
* Not annualised
(i) Return on net worth (%) = Net profit, as restated, attributable to equity shareholders of the Bank
Net worth at the end of the year/period
(ii) “Net worth” means the aggregate of capital and reserves and surplus or other equity
The weighted average return on net worth is a product of return on net worth and respective assigned weight, dividing the resultant by total aggregate
weight

6. NAV per Equity Share

Particulars Amount (in ₹)

As at June 30, 2023 40.92
As at June 30, 2022 33.66
Year ended March 31, 2023 38.03
After the completion of the Offer
Floor Price# [●]
Cap Price# [●]
Offer Price* [●]
* Offer Price per Equity Share will be determined on conclusion of the Book Building Process
(i) Net asset value per equity Net Worth, as per restated at the end of the period or years
shares = Total number of Equity Shares outstanding at the end of the period/years

(ii) “Net worth” means the aggregate of capital and reserves and surplus

#
Net Asset Value per equity share represents net worth as at the end of the financial year/period, as restated, divided by the number of Equity
Shares outstanding at the end of the period/ year. Adjusted net worth has been calculated as sum of net worth as on June 20, 2023 and additional
equity share capital and securities premium raised pursuant to proposed Issue.

7. Comparison with listed industry peers

The following peer group has been determined on the basis of companies listed on Indian stock exchanges, whose
business profile is comparable to our businesses:

Name of the bank Total Face Value P/E P/B EPS EPS RoNW NAV (₹
revenue (₹ in per equity (Basic) (Diluted) (%) per
million) share (₹) (₹) (₹) equity
share)
ESAF Small Finance Bank [●] [●]
Limited* 31,415.72 10.00 6.73 6.71 17.69 38.03

131
 Name of the bank Total Face Value P/E P/B EPS EPS RoNW NAV (₹
revenue (₹ in per equity (Basic) (Diluted) (%) per
million) share (₹) (₹) (₹) equity
share)
Listed peers
Suryoday Small Finance Bank
Limited 12,811.00 10.00 22.39 1.10 7.32 7.32 4.90 149.28
CreditAccess Grameen Limited
35,507.90 10.00 26.81 4.25 52.04 51.82 16.18 326.89
Spandana Sphoorty Financial
Limited 14,770.32 10.00 471.38 1.88 1.74 1.74 0.40 436.58
Bandhan Bank Limited
183,732.50 10.00 16.55 1.85 13.62 13.62 11.21 121.58
Ujjivan Small Finance Bank
Limited 47,541.90 10.00 9.81 2.71 5.88 5.87 26.45 21.27
Equitas Small Finance Bank
Limited 48,314.64 10.00 21.51 2.16 4.71 4.67 11.12 46.44
* Financial information for ESAF Small Finance Bank Limited is derived from the Restated Financial Information for the year ended March
31, 2023.
Notes:
i All the financial information for listed industry peers mentioned above is on a consolidated basis (unless otherwise available only on
standalone basis) and is sourced from the annual reports/ financial results as available of the respective company for the year ended March
31, 2023 submitted to stock exchanges.
ii P/E ratio is calculated as closing share price (October 20, 2023 - BSE) / Basic EPS for the year ended March 31, 2023.
iii Basic and diluted EPS as reported in the relevant financial results of the respective company for the year ended March 31, 2023.
iv Return on net worth (%) = Net profit/(loss) after tax / Net worth at the end of the year.
v Net asset value per share (in ₹) = Net worth at the end of the year / Total number of equity shares outstanding at the end of the year.
vi P/B Ratio is calculated as closing share price as at October 20, 2023 at BSE divided by Net Asset Value (₹ per equity share).

The trading price of the Equity Shares could decline due to the factors mentioned in the “Risk Factors” on page 35
and you may lose all or part of your investment.

8. Key Performance Indicators

The table below sets forth the details of KPIs that our Bank considers have a bearing for arriving at the basis for Offer
Price. All the KPIs disclosed below have been approved by a resolution of our Audit Committee dated October 17,
2023 and the Audit Committee has confirmed that verified and certified details of all the KPIs pertaining to the Bank
that have been disclosed to earlier investors at any point of time during the three years period prior to the date of filing
of this Red Herring Prospectus have been disclosed in this section. Further, the KPIs herein have been certified by A.
John Moris & Co., Chartered Accountants pursuant to certificate dated October 17, 2023.

Our Bank confirms that it shall continue to disclose all the KPIs included in this section on a periodic basis, at least
once in a year (or any lesser period as determined by the Board of our Bank), for a duration of one year after the date
of listing of the Equity Shares on the Stock Exchange or till the complete utilisation of the proceeds of the Fresh Issue
as per the disclosure made in the Objects of the Offer Section, whichever is later or for such other duration as may be
required under the SEBI ICDR Regulations.

Key Performance Indicators:

KPIs Three Three Fiscal 2021 Fiscal 2022 Fiscal 2023

months months
period ended period ended
June 30, June 30,
2023 2022
Operations
Banking Outlets (1) 700 576 550 575 700
AUM (in INR million) (2) 172,039.68 127,352.96 84,259.30 123,406.91 163,312.65
AUM Growth (%) (3) 5.34% 3.20% N.A. 46.46% 32.34%
Deposits (in INR million) 156,558.54 134,577.46 89,994.26 128,150.72 146,656.25
Deposits Growth (%) (4) 6.75% 5.01% N.A. 42.40% 14.44%
CASA Ratio (%) (5) 18.22% 23.29% 19.42% 22.84% 21.39%
CASA + Retail Term Deposits Ratio (as 89.28% 92.93% 97.74% 93.71% 90.85%
percentage of total deposits) (6)
Capital
Net worth (in INR million) (7) 18,390.93 15,127.62 13,520.64 14,067.96 17,091.29
Total Capital Ratio (CRAR) (%) (8) 20.56% 20.31% 24.23% 18.64% 19.83%
Tier 1 Capital Ratio (%) (9) 18.95% 17.93% 21.54% 16.16% 18.12%
Cost of Deposits (%) (10) 1.67%* 1.52%* 7.54% 6.22% 6.10%
Cost of Funds (%) (11) 1.72%* 1.52%* 7.60% 5.99% 6.02%
Asset Quality
Gross NPA (%) (12) 1.65% 6.16% 6.70% 7.83% 2.49%
Provision Coverage Ratio (%) (13) 74.35% 62.00% 52.77% 59.38% 56.67%

132
 KPIs Three Three Fiscal 2021 Fiscal 2022 Fiscal 2023
months months
period ended period ended
June 30, June 30,
2023 2022
Restructured Book as % of Advances (%) (14) 0.41% 3.46% NA 4.84% 0.69%
Net NPA (%) (15) 0.81% 3.78% 3.88% 3.92% 1.13%
Profitability
Pre-Provision Operating Profit (PPOP)(16) 3,006.69 2,252.91 4,169.84 4918.51 8,937.12
Net Profit (in INR million) 1,299.64 1,059.66 1,053.96 547.32 3,023.33
Yield on Advances (%) (17) 5.81%* 5.31%* 20.03% 17.44% 19.81%
Net Interest Margin (%) (18) 2.85%* 2.51%* 8.45% 7.64% 9.68%
Credit Cost Ratio (%) (19) 0.90%* 0.72%* 3.75% 4.22% 3.82%
Operating Expenses to Average Total Assets 1.84%* 1.52%* 5.79% 5.74% 6.49%
(%) (20)
Cost to Income Ratio (%) (21) 55.69% 54.65% 60.31% 63.69% 57.93%
Return on Average Assets (%) (22) 0.63%* 0.59%* 0.97% 0.36% 1.59%
Return on Average Equity (%) (23) 7.33%* 7.26%* 8.65% 3.97% 19.41%
Basic EPS (in INR) (24) 2.89 * 2.36* 2.46 1.22 6.73
* Not annualized
(1) Number of banking outlets represents aggregate number of banking outlets (including Business Correspondent run outlets) as of the last day
of the relevant fiscal year / quarter.
(2) AUM represents Advances under Management and is calculated as the sum of gross advances plus advances originated and transferred under
securitization, assignment and inter-bank participation certificates for which the company continues to hold collection responsibilities.
(3) AUM growth represents growth in AUM as of the last day of the relevant fiscal year/ quarter over AUM as of the last day of the previous
fiscal year.
(4) Deposits growth represents the percentage increase in deposits as of the last day of the relevant fiscal year / quarter over deposits as of the
last day of the previous fiscal year.
(5) CASA Ratio represents current account deposits and savings account deposits (together, “CASA”) to total deposits as of the last day of the
relevant fiscal year / quarter, expressed as a percentage
(6) CASA + Retail Term Deposits Ratio represents CASA and retail term deposits (term deposits of less than Rs. 20 million) to total deposits as
of the last day of the relevant fiscal year / quarter, expressed for the period as a percentage
(7) Net worth represents the sum of equity share capital and reserves and surplus as of the last day of the relevant fiscal year / quarter.
(8) CRAR (%) as of the last day of the relevant fiscal year / quarter as reported by the company.
(9) Tier 1 Capital Ratio (%) of the last day as of the last day of the relevant fiscal year / quarter as reported by the company.
(10) Cost of Deposits represents interest expense on deposits for the relevant fiscal year / quarter to the average deposits as of the last day of the
relevant fiscal year / quarter, expressed as a percentage
(11) Cost of funds represents total interest expense for the relevant fiscal year / quarter to the average of sum of deposits and borrowings as of the
last day of the relevant fiscal year / quarter, expressed as a percentage
(12) Gross NPA (%) as reported by the company represents Gross NPAs to gross advances as of the last day of the relevant fiscal year / quarter.
(13) Provision Coverage Ratio (%) – Provision Coverage Ratio represent the ratio of NPA provision including technical write off and Gross NPA,
including technical write-off
(14) Restructured book as % of advances represent standard restructured book to net advances as of the last day of the relevant fiscal year /
quarter, expressed as percentage
(15) Net NPA disclosed by the company as of the last day of the relevant fiscal year / quarter.
(16) Pre-Provision Operating Profit represents difference of total income minus interest expended minus operating expenses for the relevant fiscal
year/quarter.
(17) Yield on Advances represents the ratio of interest income on loan assets for the relevant fiscal year / quarter to the average net advances as
of the last day of the relevant fiscal year / quarter, expressed as a percentage.
(18) Net Interest Margin represents net interest income for the relevant fiscal year/ quarter to the Average Total Assets for the relevant fiscal year
/ quarter, represented as a percentage.
(19) Credit Cost Ratio is calculated as the ratio of total provisions and contingencies (excluding provision for tax) to the company’s average net
advances for the relevant fiscal year / quarter, expressed as a percentage.
(20) Operating Expenses to Average Total Assets represents operating expenses for the relevant fiscal year / quarter to the Average Total Assets
for the relevant fiscal year / quarter, expressed as a percentage.
(21) Cost to Income Ratio represents operating expenses for the relevant fiscal year / quarter to the sum of Net Interest Income (interest earned
minus interest expended) and other income for the relevant fiscal year / quarter, expressed as a percentage.
(22) Return on Average Assets is calculated as the net profit for the relevant fiscal year / quarter to Average Total Assets for the relevant fiscal
year / quarter, expressed as a percentage.
(23) Return on Average Equity is calculated as the net profit for the relevant fiscal year / quarter to Average Net Worth for the relevant fiscal year
/ quarter, expressed as a percentage.
(24) Basic EPS: Basic EPS as reported by the company represents EPS as computed in accordance with Accounting Standard 20 notified under
the Companies Act (Accounting Standards) Rules of 2014 (as amended).

For details of our other operating metrics disclosed elsewhere in this Red Herring Prospectus, see “Our Business” and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations” on pages 190 and 372,
respectively. We have described and defined the KPIs, as applicable, in the section “Definitions and Abbreviations”
on page 1.

Operational Key Performance Indicators

KPIs As at June 30, As at June 30, As at March As at March As at March

2023 2022 31, 2021 31, 2022 31, 2023
Operations
Banking Outlets (1) 700 576 550 575 700
AUM (in INR million) (2) 172,039.68 127,352.96 84,259.30 123,406.91 163,312.65
AUM Growth (%) (3) 5.34% 3.20% N.A. 46.46% 32.34%

133
 KPIs As at June 30, As at June 30, As at March As at March As at March
2023 2022 31, 2021 31, 2022 31, 2023
Deposits (in INR million) 156,558.54 134,577.46 89,994.26 128,150.72 146,656.25
Deposits Growth (%) (4) 6.75% 5.01% N.A. 42.40% 14.44%
CASA Ratio (%) (5) 18.22% 23.29% 19.42% 22.84% 21.39%
CASA + Retail Term Deposits Ratio (as 89.28% 92.93% 97.74% 93.71% 90.85%
percentage of total deposits) (6)
Notes:
(1) Number of banking outlets represents aggregate number of banking outlets (including Business Correspondent run outlets) as of the last day
of the relevant fiscal year/ quarter.
(2) AUM represents Advances under Management and is calculated as the sum of gross advances plus advances originated and transferred under
securitization, assignment and inter-bank participation certificates for which the company continues to hold collection responsibilities.
(3) AUM growth represents growth in AUM as of the last day of the relevant fiscal year/ quarter over AUM as of the last day of the previous
fiscal year.
(4) Deposits growth represents the percentage increase in deposits as of the last day of the relevant fiscal year/quarter over deposits as of the
last day of the previous fiscal year.
(5) CASA Ratio represents current account deposits and savings account deposits (together, “CASA”) to total deposits as of the last day of the
relevant fiscal year/quarter, expressed as a percentage.
(6) CASA + Retail Term Deposits Ratio represents CASA and retail term deposits (term deposits of less than Rs. 20 million) to total deposits as
of the last day of the relevant fiscal year/quarter, expressed for the period as a percentage.

9. Description on the historic use of the KPIs by our Bank to analyze, track or monitor the operational and/or
financial performance of our Bank

In evaluating our business, we consider and use certain KPIs, as presented above, as a supplemental measure to review
and assess our financial and operating performance. The presentation of these KPIs is not intended to be considered in
isolation or as a substitute for the Restated Financial Information. We use these KPIs to evaluate our financial and
operating performance. These KPIs have limitations as analytical tools.

Key Performance Indicator Description and rationale

Operations Banking Outlets Number of Branches including banking outlets This metric is used by the
operated by business correspondents management to assess the
physical presence, footprints and
geographical expansion of the
business of our Bank

AUM AUM represents Advances under Management These metrics are used by the
and is calculated as the sum of gross advances plus management to assess the growth
advances originated and transferred under in terms of scale and composition
securitization, assignment and inter-bank of business of our Bank
participation certificates for which the company
continues to hold collection responsibilities

AUM Growth (%) AUM growth represents growth in AUM as of the

last day of the relevant fiscal year/ quarter over
AUM as of the last day of the previous fiscal year

Deposits Total deposits of the Bank

Deposits Growth (%) Growth in deposits for the relevant period over
deposits of the previous period

CASA Ratio (%) Current and saving account deposit to total

deposits for the period expressed as percentage

Retail Deposits Ratio Current account deposit, saving account deposit

(CASA plus Retail Term and retail deposit to total deposits expressed for
deposits as a percentage the period as percentage
of total deposits)

Capital Net worth Sum of equity share capital and other equity as of These metrics are used by the
the last day of the relevant period management to ensure the
adequacy of capital for the
Total Capital Ratio (%) Total Capital Ratio (CRAR) is the total of Capital business growth of our Bank
(CRAR) to Risk Weighted Asset Ratio (CRAR) (as a
percentage of Credit Risk Weighted Assets)

Tier 1 Capital Ratio (%) Tier 1 Capital Ratio consists mainly of share
capital and disclosed reserves, and it is a bank's
highest quality capital because it is fully available
to cover losses

134
 Key Performance Indicator Description and rationale

Cost of Deposits (%) Interest expense on deposits to average total These metrics are used by the
deposits for the period expressed as percentage management to assess the cost
for financial resources which are
Cost of Funds (%) Interest expense to the average of sum of deposits deployed for the business growth
and borrowings for the period expressed as of our Bank
percentage

Asset Quality Gross NPA as a Gross NPA to the Gross Loan Advances as of the These metrics are used by the
percentage of gross loan last day of the relevant period management to assess the asset
advances (%) quality of the loan portfolio and
adequacy of provisions against
Provision Coverage Provision Coverage Ratio represents the ratio of the delinquent loans
Ratio (%) NPA provision including technical write off and
gross NPA, including technical write off

Restructured Book as a % Standard restructured book to net advances for the

of Advances (standard period expressed as percentage
restructured book to net
advances) (%)

Net NPA as a percentage Net NPA (%) is net Non-Performing Assets as at

of net advances (%) the year/period end / Net Advances

Profitability Pre-Provision Operating Pre-Provision Operating Profit represents This metrics is used by the
Profit (PPOP) difference of total income minus interest management for assessing the
expended minus operating expenses for the financial performance of our
relevant fiscal year/ period Bank during a particular period

Net Profit Net Profit is net profit after tax available for equity These metrics are used by the
shareholders management to assess the
financial and profitability metrics
Yield on Advances (%) Ratio of interest income on loan assets for a period and cost efficiency of the
to the average net advances for the period business of our Bank
expressed as a percentage

Net interest Margin (%) Net interest income on the loans for a period to the
average total assets for the period, represented as
a percentage

Credit Cost Ratio (%) Credit Cost Ratio is calculated as the ratio of total
provisions towards NPAs and write-offs and
provision towards standard assets to the
company’s average net advances for the relevant
fiscal year, expressed as a percentage

Operating Expenses to Operating expenses for a period to the Average

Total Average Assets Total Assets for the period
(%)

Cost to Income Ratio (%) Operating expenses for a period to the sum of net
interest income and non-interest income for the
period

Return on Average Total Profit after Tax for the relevant period as a These metrics are used by the
Assets (%) percentage of Average Total Assets in such period management to assess the returns
on the deployed capital and the
Return on Average Profit After Tax for the relevant period as a assets in the business of our Bank
Equity (%) percentage of Average Net Worth/Equity in such
period

Basic EPS EPS as computed in accordance with Indian

Accounting Standard 20 issued by ICAI

10. Comparison of KPIs with Listed Peers

I. AU Small Finance Bank Limited

135
 Certain Key GAAP Measures and Key Three Three Fiscal 2021 Fiscal 2022 Fiscal 2023
Performance Indicators (KPIs) months months
period period
ended June ended June
30, 2023 30, 2022
Operations Banking Outlets (1) 1,038 953 744 919 1027
AUM (in INR million) (2) 636,350.00 501,610.00 377,120.00 478,310.00 591,580.00
AUM Growth (%) (3) 7.57% 4.87% NA 26.83% 23.68%
Deposits (in INR million) 693,150.00 546,310.00 359,793.14 525,846.21 693,649.86
Deposits Growth (%) (4) (0.07%) 3.89% NA 46.15% 31.91%
CASA Ratio (%) (5) 35.04% 38.84% 23.00% 37.29% 38.43%
CASA + Retail Term Deposits 67.67% 70.07% 54.87% 66.61% 68.76%
Ratio (as percentage of total
deposits) (6)
Capital Net worth (in INR million) (7) 113,790.00 77,890.00 61,720.99 74,726.82 109,333.19
Total Capital Ratio (CRAR) 21.46% 19.36% 23.37% 21.00% 23.59%
(%) (8)
Tier 1 Capital Ratio (%) (9) 19.90% 18.40% 21.53% 19.69% 21.80%
Cost of Deposits (%) (10) NA* NA* 5.98% 5.11% NA
Cost of Funds (%) (11) 1.59%* 1.42%* 6.50% 5.29% 5.63%
Asset Quality Gross NPA (%) (12) 1.76% 1.96% 4.25% 1.98% 1.66%
Provision Coverage Ratio (%) 73.00% 72.00% 50.00% 75.00% 75.00%
(13)

Restructured Book as % of 1.00% 2.10% 1.80% 2.50% 1.20%

Advances (%) (14)
Net NPA (%) (15) 0.55% 0.56% 2.18% 0.50% 0.42%
Profitability Pre-Provision Operating Profit 5,460.40 3,940.70 2,157.98 1,815.00 2,019.48
(PPOP)(16)
Net Profit (in INR million) 386.90 2,678.66 11,706.80 11,300.00 14,279.25
Yield on Advances (%) (17) 3.31%* 3.16%* 12.82% 12.10% 13.10%
Net Interest Margin (%) (18) 1.37%* 1.39%* 5.05% 5.36% 5.56%
Credit Cost Ratio (%) (19) 0.05%* 0.08%* 1.27% 0.89% 0.30%
Operating Expenses to Average 1.12%* 1.06%* 3.54% 4.00% 4.32%
Total Assets (%) (20)
Cost to Income Ratio (%) (21) 65.03% 65.28% 43.46% 57.07% 63.01%
Return on Average Assets (%) 0.43%* 0.38%* 2.50% 1.87% 1.79%
(22)

Return on Average Equity (%) 3.47%* 3.51%* 22.31% 16.56% 15.52%

(23)

Basic EPS (in INR) (24) 5.80* 4.25* 38.19 18.03 21.86

NA- Not available

* Not annualized
Source: CRISIL MI&A Report
(1)
Number of banking outlets represents aggregate number of banking outlets (including Business Correspondent run outlets) as of
the last day of the relevant fiscal year/quarter.
(2)
AUM represents Advances under Management and is calculated as the sum of gross advances plus advances originated and
transferred under securitization, assignment and inter-bank participation certificates for which the company continues to hold
collection responsibilities.
(3)
AUM growth represents growth in AUM as of the last day of the relevant fiscal year/ quarter over AUM as of the last day of the
previous fiscal year.
(4)
Deposits growth represents the percentage increase in deposits as of the last day of the relevant fiscal year/quarter over deposits
as of the last day of the previous fiscal year.
(5)
CASA Ratio represents current account deposits and savings account deposits (together, “CASA”) to total deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(6)
CASA + Retail Term Deposits Ratio represents CASA and retail term deposits (term deposits of less than Rs. 20 million) to total
deposits as of the last day of the relevant fiscal year/quarter, expressed for the period as a percentage
(7)
Net worth represents the sum of equity share capital and reserves and surplus as of the last day of the relevant fiscal year/quarter.
(8)
CRAR (%) as of the last day of the relevant fiscal year/quarter as reported by the company.
(9)
Tier 1 Capital Ratio (%) of the last day as of the last day of the relevant fiscal year/quarter as reported by the company.
(10)
Cost of Deposits represents interest expense on deposits for the relevant fiscal year/quarter to the average deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(11)
Cost of funds represents total interest expense for the relevant fiscal year/quarter to the average of sum of deposits and borrowings
as of the last day of the relevant fiscal year/quarter, expressed as a percentage
(12)
Gross NPA (%) as reported by the company represents Gross NPAs to gross advances as of the last day of the relevant fiscal
year/quarter.
(13)
Provision Coverage Ratio (%) - Provision Coverage Ratio represents the ratio of NPA provision including Technical Write off and
Gross NPA, including Technical write off.
(14)
Restructured book as % of advances represents standard restructured book to net advances as of the last day of the relevant fiscal
year/quarter, expressed as percentage
(15)
Net NPA disclosed by the company as of the last day of the relevant fiscal year/quarter.
(16)
Pre-Provision Operating Profit represents difference of total income minus interest expended minus operating expenses for the
relevant fiscal year/quarter.
(17)
Yield on Advances represents the ratio of interest income on loan assets for the relevant fiscal year/quarter to the average net
advances as of the last day of the relevant fiscal year/quarter, expressed as a percentage.
(18)
Net Interest Margin represents net interest income for the relevant fiscal year/quarter to the Average Total Assets for the relevant
fiscal year/quarter, represented as a percentage.
136
 (19)
Credit Cost Ratio is calculated as the ratio of total provisions and contingencies (excluding provision for tax) to the company’s
average net advances for the relevant fiscal year/quarter, expressed as a percentage.
(20)
Operating Expenses to Average Total Assets represents operating expenses for the relevant fiscal year/quarter to the Average Total
Assets for the relevant fiscal year/quarter, expressed as a percentage.
(21)
Cost to Income Ratio represents operating expenses for the relevant fiscal year/quarter to the sum of Net Interest Income (interest
earned minus interest expended) and other income for the relevant fiscal year/quarter, expressed as a percentage.
(22)
Return on Average Assets is calculated as the net profit for the relevant fiscal year/quarter to Average Total Assets for the relevant
fiscal year/quarter, expressed as a percentage.
(23)
Return on Average Equity is calculated as the net profit for the relevant fiscal year/quarter to Average Net Worth for the relevant
fiscal year/quarter, expressed as a percentage.
(24)
Basic EPS: Basic EPS as reported by the company represents EPS as computed in accordance with Accounting Standard 20.

II. Equitas Small Finance Bank Limited

Certain Key GAAP Measures and Key Three Three Fiscal 2021 Fiscal 2022 Fiscal 2023
Performance Indicators (KPIs) months months
period period
ended June ended June
30, 2023 30, 2022
Operations Banking Outlets (1) 927 876 861 869 922
AUM (in INR million) (2) 296,010.00 216,880.00 179,250.00 205,970.00 278,610.00
AUM Growth (%) (3) 6.25% 5.30% NA 14.91% 35.27%
Deposits (in INR million) 277,090.00 203,860.00 163,919.72 189,507.97 253,805.56
Deposits Growth (%) (4) 9.17% 7.57% NA 15.61% 33.93%
CASA Ratio (%) (5) 38.41% 51.74% 34.25% 52.00% 42.28%
CASA + Retail Term Deposits 76.59% 86.49% 70.05% 89.44% 77.49%
Ratio (as percentage of total
deposits) (6)
Capital Net worth (in INR million) (7) 53,600.00 43,480.00 33,963.41 42,460.00 51,579.48
Total Capital Ratio (CRAR) 22.06% 24.62% 24.18% 25.16% 23.80%
(%) (8)
Tier 1 Capital Ratio (%) (9) 21.36% 24.07% 23.23% 24.53% 23.08%
Cost of Deposits (%) (10) 1.65%* NA* 7.14% 6.42% 6.13%
Cost of Funds (%) (11) 1.71%* 1.50%* 7.66% 6.75% 6.48%
Asset Quality Gross NPA (%) (12) 2.75% 4.10% 3.73% 4.24% 2.76%
Provision Coverage Ratio (%) 57.79% 48.46% 58.59% 42.73% 56.90%
(13)

Restructured Book as % of NA NA NA 3.12% 1.00%

Advances (%) (14)
Net NPA (%) (15) 1.18% 2.15% 1.58% 2.47% 1.21%
Profitability Pre-Provision Operating Profit 3,121.17 2,681.86 886.60 873.00 1,176.01
(PPOP)(16)
Net Profit (in INR million) 1,912.01 970.05 3,842.23 2,807.32 5,735.91
Yield on Advances (%) (17) 4.28%* 4.29%* 18.97% 17.33% 16.67%
Net Interest Margin (%) (18) 2.04%* 2.10%* 8.17% 7.89% 8.22%
Credit Cost Ratio (%) (19) 0.23%* 0.71%* 2.45% 2.73% 1.80%
Operating Expenses to Average 1.65%* 1.61%* 6.04% 6.60% 6.58%
Total Assets (%) (20)
Cost to Income Ratio (%) (21) 65.87% 62.43% 59.99% 66.12% 63.41%
Return on Average Assets (%) 0.52%* 0.35%* 1.75% 1.09% 1.85%
(22)

Return on Average Equity (%) 3.64%* 2.26%* 12.52% 7.35% 12.20%

(23)

Basic EPS (in INR) (24) 1.72* 0.77* 3.53 2.43 4.71

NA- Not available

* Not annualized
Source: CRISIL MI&A Report
(1)
Number of banking outlets represents aggregate number of banking outlets (including Business Correspondent run outlets) as of
the last day of the relevant fiscal year/quarter.
(2)
AUM represents Advances under Management and is calculated as the sum of gross advances plus advances originated and
transferred under securitization, assignment and inter-bank participation certificates for which the company continues to hold
collection responsibilities.
(3)
AUM growth represents growth in AUM as of the last day of the relevant fiscal year/ quarter over AUM as of the last day of the
previous fiscal year.
(4)
Deposits growth represents the percentage increase in deposits as of the last day of the relevant fiscal year/quarter over deposits
as of the last day of the previous fiscal year.
(5)
CASA Ratio represents current account deposits and savings account deposits (together, “CASA”) to total deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(6)
CASA + Retail Term Deposits Ratio represents CASA and retail term deposits (term deposits of less than Rs. 20 million) to total
deposits as of the last day of the relevant fiscal year/quarter, expressed for the period as a percentage
(7)
Net worth represents the sum of equity share capital and reserves and surplus as of the last day of the relevant fiscal year/quarter.
(8)
CRAR (%) as of the last day of the relevant fiscal year/quarter as reported by the company.
(9)
Tier 1 Capital Ratio (%) of the last day as of the last day of the relevant fiscal year/quarter as reported by the company.
(10)
Cost of Deposits represents interest expense on deposits for the relevant fiscal year/quarter to the average deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage

137
 (11)
Cost of funds represents total interest expense for the relevant fiscal year/quarter to the average of sum of deposits and borrowings
as of the last day of the relevant fiscal year/quarter, expressed as a percentage
(12)
Gross NPA (%) as reported by the company represents Gross NPAs to gross advances as of the last day of the relevant fiscal
year/quarter.
(13)
Provision Coverage Ratio (%) - Provision Coverage Ratio represents the ratio of NPA provision including Technical Write off and
Gross NPA, including Technical write off.
(14)
Restructured book as % of advances represents standard restructured book to net advances as of the last day of the relevant fiscal
year/quarter, expressed as percentage
(15)
Net NPA disclosed by the company as of the last day of the relevant fiscal year/quarter.
(16)
Pre-Provision Operating Profit represents difference of total income minus interest expended minus operating expenses for the
relevant fiscal year/quarter.
(17)
Yield on Advances represents the ratio of interest income on loan assets for the relevant fiscal year/quarter to the average net
advances as of the last day of the relevant fiscal year/quarter, expressed as a percentage.
(18)
Net Interest Margin represents net interest income for the relevant fiscal year/quarter to the Average Total Assets for the relevant
fiscal year/quarter, represented as a percentage.
(19)
Credit Cost Ratio is calculated as the ratio of total provisions and contingencies (excluding provision for tax) to the company’s
average net advances for the relevant fiscal year/quarter, expressed as a percentage.
(20)
Operating Expenses to Average Total Assets represents operating expenses for the relevant fiscal year/quarter to the Average Total
Assets for the relevant fiscal year/quarter, expressed as a percentage.
(21)
Cost to Income Ratio represents operating expenses for the relevant fiscal year/quarter to the sum of Net Interest Income (interest
earned minus interest expended) and other income for the relevant fiscal year/quarter, expressed as a percentage.
(22)
Return on Average Assets is calculated as the net profit for the relevant fiscal year/quarter to Average Total Assets for the relevant
fiscal year/quarter, expressed as a percentage.
(23)
Return on Average Equity is calculated as the net profit for the relevant fiscal year/quarter to Average Net Worth for the relevant
fiscal year/quarter, expressed as a percentage.
(24)
Basic EPS: Basic EPS as reported by the company represents EPS as computed in accordance with Accounting Standard 20.

III. Ujjivan Small Finance Bank Limited

Certain Key GAAP Measures and Key Three Three Fiscal 2021 Fiscal 2022 Fiscal 2023
Performance Indicators (KPIs) months months
period period
ended June ended June
30, 2023 30, 2022
Operations Banking Outlets (1) 661 575 575 575 629
AUM (in INR million) (2) 253,260.00 194,090.00 151,399.60 181,620.00 240,850.00
AUM Growth (%) (3) 5.15% 6.87% NA 19.96% 32.61%
Deposits (in INR million) 266,600.00 184,490.00 131,357.70 182,922.20 255,380.00
Deposits Growth (%) (4) 4.39% 0.86% NA 39.26% 39.61%
CASA Ratio (%) (5) 24.59% 27.94% 20.55% 27.30% 26.41%
CASA + Retail Term Deposits 65.74% 59.86% 47.52% 54.24% 66.03%
Ratio (as percentage of total
deposits) (6)
Capital Net worth (in INR million) (7) 44,820.00 29,630.00 31,750.20 27,604.30 41,580.00
Total Capital Ratio (CRAR) 26.69% 20.03% 26.44% 18.99% 25.81%
(%) (8)
Tier 1 Capital Ratio (%) (9) 23.62% 18.70% 25.06% 17.70% 22.69%
Cost of Deposits (%) (10) NA* NA* 6.53% 5.69% -
Cost of Funds (%) (11) 1.72%* 1.51%* 6.93% 5.70% 6.08%
Asset Quality Gross NPA (%) (12) 2.62% 6.51% 7.07% 7.34% 2.88%
Provision Coverage Ratio (%) NA NA 60.34% 92.20% 98.00%
(13)

Restructured Book as % of NA NA NA NA NA
Advances (%) (14)
Net NPA (%) (15) 0.06% 0.11% 2.93% 0.61% 0.04%
Profitability Pre-Provision Operating Profit 4,578.90 2,710.60 808.41 591.00 1,484.91
(PPOP)(16)
Net Profit (in INR million) 3,240.70 2,029.40 82.97 (4,145.90) 10,999.20
Yield on Advances (%) (17) 5.22%* 4.99%* 18.22% 16.73% 19.73%
Net Interest Margin (%) (18) 2.33%* 2.51%* 8.91% 8.07% 9.48%
Credit Cost Ratio (%) (19) 0.12%* 0.002%* 5.60% 7.41% 0.09%
Operating Expenses to Average 1.50%* 1.77%* 6.34% 6.80% 6.33%
Total Assets (%) (20)
Cost to Income Ratio (%) (21) 52.79% 60.99% 60.34% 71.68% 54.82%
Return on Average Assets (%) 0.95%* 0.85%* 0.04% (1.89)% 3.86%
(22)

Return on Average Equity (%) 7.50%* 7.09%* 0.26% (13.97)% 31.80%

(23)

Basic EPS (in INR) (24) 1.66* 1.17* 0.05 (2.40) 5.88

NA- Not available

* Not annualized
Source: CRISIL MI&A Report
(1)
Number of banking outlets represents aggregate number of banking outlets (including Business Correspondent run outlets) as of
the last day of the relevant fiscal year/quarter.

138
 (2)
AUM represents gross advances. AUM does not include advances originated and transferred under securitization, assignment and
inter-bank participation certificates for which the company continues to hold collection responsibilities.
(3)
AUM growth represents growth in AUM as of the last day of the relevant fiscal year/ quarter over AUM as of the last day of the
previous fiscal year.
(4)
Deposits growth represents the percentage increase in deposits as of the last day of the relevant fiscal year/quarter over deposits
as of the last day of the previous fiscal year.
(5)
CASA Ratio represents current account deposits and savings account deposits (together, “CASA”) to total deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(6)
CASA + Retail Term Deposits Ratio represents CASA and retail term deposits (term deposits of less than Rs. 20 million) to total
deposits as of the last day of the relevant fiscal year/quarter, expressed for the period as a percentage
(7)
Net worth represents the sum of equity share capital and reserves and surplus as of the last day of the relevant fiscal year/quarter.
(8)
CRAR (%) as of the last day of the relevant fiscal year/quarter as reported by the company.
(9)
Tier 1 Capital Ratio (%) of the last day as of the last day of the relevant fiscal year/quarter as reported by the company.
(10)
Cost of Deposits represents interest expense on deposits for the relevant fiscal year/quarter to the average deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(11)
Cost of funds represents total interest expense for the relevant fiscal year/quarter to the average of sum of deposits and borrowings
as of the last day of the relevant fiscal year/quarter, expressed as a percentage
(12)
Gross NPA (%) as reported by the company represents Gross NPAs to gross advances as of the last day of the relevant fiscal
year/quarter.
(13)
Provision Coverage Ratio (%) - Provision Coverage Ratio represents the ratio of NPA provision including Technical Write off and
Gross NPA, including Technical write off.
(14)
Restructured book as % of advances represents standard restructured book to net advances as of the last day of the relevant fiscal
year/quarter, expressed as percentage
(15)
Net NPA disclosed by the company as of the last day of the relevant fiscal year/quarter.
(16)
Pre-Provision Operating Profit represents difference of total income minus interest expended minus operating expenses for the
relevant fiscal year/quarter.
(17)
Yield on Advances represents the ratio of interest income on loan assets for the relevant fiscal year/quarter to the average net
advances as of the last day of the relevant fiscal year/quarter, expressed as a percentage.
(18)
Net Interest Margin represents net interest income for the relevant fiscal year/quarter to the Average Total Assets for the relevant
fiscal year/quarter, represented as a percentage.
(19)
Credit Cost Ratio is calculated as the ratio of total provisions and contingencies (excluding provision for tax) to the company’s
average net advances for the relevant fiscal year/quarter, expressed as a percentage.
(20)
Operating Expenses to Average Total Assets represents operating expenses for the relevant fiscal year/quarter to the Average Total
Assets for the relevant fiscal year/quarter, expressed as a percentage.
(21)
Cost to Income Ratio represents operating expenses for the relevant fiscal year/quarter to the sum of Net Interest Income (interest
earned minus interest expended) and other income for the relevant fiscal year/quarter, expressed as a percentage.
(22)
Return on Average Assets is calculated as the net profit for the relevant fiscal year/quarter to Average Total Assets for the relevant
fiscal year/quarter, expressed as a percentage.
(23)
Return on Average Equity is calculated as the net profit for the relevant fiscal year/quarter to Average Net Worth for the relevant
fiscal year/quarter, expressed as a percentage.
(24)
Basic EPS: Basic EPS as reported by the company represents EPS as computed in accordance with Accounting Standard 20.

IV. Fincare Small Finance Bank Limited

Certain Key GAAP Measures and Key Three Three Fiscal 2021 Fiscal 2022 Fiscal 2023
Performance Indicators (KPIs) months months
period period
ended June ended June
30, 2023 30, 2022
Operations Banking Outlets (1) NA NA 806 919 1231
AUM (in INR million) (2) NA NA 60,722.11 76,001.65 99,111.44
AUM Growth (%) (3) NA NA NA 25.16% 30.41%
Deposits (in INR million) NA NA 53,184.98 64,561.65 80,331.94
Deposits Growth (%) (4) NA NA NA 21.39% 24.43%
CASA Ratio (%) (5) NA NA 23.76% 36.30% 33.06%
CASA + Retail Term Deposits NA NA 91.70% 86.40% 79.79%
Ratio (as percentage of total
deposits) (6)
Capital Net worth (in INR million) (7) NA NA 10,169.10 11,954.80 12,991.30
Total Capital Ratio (CRAR) 19.93% 23.04% 29.60% 22.30% 20.04%
(%) (8)
Tier 1 Capital Ratio (%) (9) NA NA 24.91% 19.48% 18.64%
Cost of Deposits (%) (10) NA NA 8.34% 7.15% 6.48%
Cost of Funds (%) (11) NA NA 8.63% 7.07% 6.47%
Asset Gross NPA (%) (12) 2.12% 5.92% 6.42% 7.79% 3.25%
Quality Provision Coverage Ratio (%) NA NA 73.68% 78.16% 60.82%
(13)

Restructured Book as % of NA NA 1.05% 5.26% 0.94%

Advances (%) (14)
Net NPA (%) (15) 1.09% 2.63% 2.80% 3.55% 1.30%
Profitability Pre-Provision Operating Profit 1,585.90 859.00 365.08 431.07 443.07
(PPOP)(16)
Net Profit (in INR million) 971.3 (486.90) 1,131.40 88.70 1,036.40
Yield on Advances (%) (17) NA NA 24.73% 21.45% 21.03%
Net Interest Margin (%) (18) NA NA 9.29% 9.28% 9.33%
Credit Cost Ratio (%) (19) NA NA 4.98% 6.84% 4.14%

139
 Certain Key GAAP Measures and Key Three Three Fiscal 2021 Fiscal 2022 Fiscal 2023
Performance Indicators (KPIs) months months
period period
ended June ended June
30, 2023 30, 2022
Operating Expenses to Average NA NA 6.14% 6.85% 7.48%
Total Assets (%) (20)
Cost to Income Ratio (%) (21) 62.38% 69.71% 55.93% 60.01% 66.36%
Return on Average Assets (%) NA NA 1.50% 0.09% 0.89%
(22)

Return on Average Equity (%) NA NA 11.78% 0.80% 8.31%

(23)

Basic EPS (in INR) (24) 4.40* (2.21)* 5.55 0.38 4.69

NA- Not available

* Not annualized
Source: CRISIL MI&A Report
(1)
Number of banking outlets represents aggregate number of banking outlets (including Business Correspondent run outlets) as of
the last day of the relevant fiscal year/quarter.
(2)
AUM represents Advances under Management and is calculated as the sum of gross advances plus advances originated and
transferred under securitization, assignment and inter-bank participation certificates for which the company continues to hold
collection responsibilities.
(3)
AUM growth represents growth in AUM as of the last day of the relevant fiscal year/ quarter over AUM as of the last day of the
previous fiscal year.
(4)
Deposits growth represents the percentage increase in deposits as of the last day of the relevant fiscal year/quarter over deposits
as of the last day of the previous fiscal year.
(5)
CASA Ratio represents current account deposits and savings account deposits (together, “CASA”) to total deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(6)
CASA + Retail Term Deposits Ratio represents CASA and retail term deposits (term deposits of less than Rs. 20 million) to total
deposits as of the last day of the relevant fiscal year/quarter, expressed for the period as a percentage
(7)
Net worth represents the sum of equity share capital and reserves and surplus as of the last day of the relevant fiscal year/quarter.
(8)
CRAR (%) as of the last day of the relevant fiscal year/quarter as reported by the company.
(9)
Tier 1 Capital Ratio (%) of the last day as of the last day of the relevant fiscal year/quarter as reported by the company.
(10)
Cost of Deposits represents interest expense on deposits for the relevant fiscal year/quarter to the average deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(11)
Cost of funds represents total interest expense for the relevant fiscal year/quarter to the average of sum of deposits and borrowings
as of the last day of the relevant fiscal year/quarter, expressed as a percentage
(12)
Gross NPA (%) as reported by the company represents Gross NPAs to gross advances as of the last day of the relevant fiscal
year/quarter.
(13)
Provision Coverage Ratio (%) - Provision Coverage Ratio represents the ratio of NPA provision including Technical Write off and
Gross NPA, including Technical write off.
(14)
Restructured book as % of advances represents standard restructured book to net advances as of the last day of the relevant fiscal
year/quarter, expressed as percentage
(15)
Net NPA disclosed by the company as of the last day of the relevant fiscal year/quarter.
(16)
Pre-Provision Operating Profit represents difference of total income minus interest expended minus operating expenses for the
relevant fiscal year/quarter.
(17)
Yield on Advances represents the ratio of interest income on loan assets for the relevant fiscal year/quarter to the average net
advances as of the last day of the relevant fiscal year/quarter, expressed as a percentage.
(18)
Net Interest Margin represents net interest income for the relevant fiscal year/quarter to the Average Total Assets for the relevant
fiscal year/quarter, represented as a percentage.
(19)
Credit Cost Ratio is calculated as the ratio of total provisions and contingencies (excluding provision for tax) to the company’s
average net advances for the relevant fiscal year/quarter, expressed as a percentage.
(20)
Operating Expenses to Average Total Assets represents operating expenses for the relevant fiscal year/quarter to the Average Total
Assets for the relevant fiscal year/quarter, expressed as a percentage.
(21)
Cost to Income Ratio represents operating expenses for the relevant fiscal year/quarter to the sum of Net Interest Income (interest
earned minus interest expended) and other income for the relevant fiscal year/quarter, expressed as a percentage.
(22)
Return on Average Assets is calculated as the net profit for the relevant fiscal year/quarter to Average Total Assets for the relevant
fiscal year/quarter, expressed as a percentage.
(23)
Return on Average Equity is calculated as the net profit for the relevant fiscal year/quarter to Average Net Worth for the relevant
fiscal year/quarter, expressed as a percentage.
(24)
Basic EPS: Basic EPS as reported by the company represents EPS as computed in accordance with Accounting Standard 20.

V. Suryoday Small Finance Bank Limited

Certain Key GAAP Measures and Key Three Three Fiscal 2021 Fiscal 2022 Fiscal 2023
Performance Indicators (KPIs) months months
period period
ended June ended June
30, 2023 30, 2022
Operations Banking Outlets (1) 609 564 556 565 577
AUM (in INR million) (2) 63,720.00 51,322.00 42,060.00 50,634.00 61,140.00
AUM Growth (%) (3) 4.22% 1.36% NA 20.38% 20.75%
Deposits (in INR million) 57,216.30 40,201.00 32,556.76 38,498.02 51,667.20
Deposits Growth (%) (4) 10.74% 4.42% NA 18.25% 34.21%
CASA Ratio (%) (5) 14.92% 20.32% 15.45% 18.81% 17.11%
CASA + Retail Term Deposits 75.66% 78.78% 80.00% 78.14% 73.10%
Ratio (as percentage of total
deposits) (6)

140
 Certain Key GAAP Measures and Key Three Three Fiscal 2021 Fiscal 2022 Fiscal 2023
Performance Indicators (KPIs) months months
period period
ended June ended June
30, 2023 30, 2022
Capital Net worth (in INR million) (7) 16,329.80 15,138.70 15,969.00 15,051.20 15,847.30
Total Capital Ratio (CRAR) 32.65% 36.37% 51.47% 37.86% 33.72%
(%) (8)
Tier 1 Capital Ratio (%) (9) 30.20% 33.50% 47.23% 34.44% 30.80%
Cost of Deposits (%) (10) NA NA 7.81% 6.43% NA
Cost of Funds (%) (11) 1.65%* 1.59%* 8.09% 6.31% 6.10%
Asset Gross NPA (%) (12) 3.04% 10.03% 9.41% 11.80% 3.13%
Quality Provision Coverage Ratio (%) NA 75.10% 63.73% 69.83% 51.43%
(13)

Restructured Book as % of NA 6.10% 2.70% 10.40% NA

Advances (%) (14)
Net NPA (%) (15) 1.63% 5.02% 4.73% 5.97% 1.55%
Profitability Pre-Provision Operating Profit 1,170.70 794.20 181.34 264.91 337.40
(PPOP)(16)
Net Profit (in INR million) 476.00 77.50 118.55 (930.32) 777.00
Yield on Advances (%) (17) 5.15%* 4.99%* 17.73% 18.72% 19.04%
Net Interest Margin (%) (18) 2.24%* 2.12%* 6.80% 7.85% 8.28%
Credit Cost Ratio (%) (19) 0.88%* 1.44%* 4.50% 8.98% 4.40%
Operating Expenses to Average 1.58%* 1.33%* 5.44% 5.55% 5.62%
Total Assets (%) (20)
Cost to Income Ratio (%) (21) 57.54% 58.25% 64.44% 60.93% 60.02%
Return on Average Assets (%) 0.47%* 0.09%* 0.20% (1.25)% 0.86%
(22)

Return on Average Equity (%) 2.96%* 0.51%* 0.89% (6.00)% 5.03%

(23)

Basic EPS (in INR) (24) 4.48* 0.73* 1.32 (8.76) 7.32

NA- Not available

* Not annualized
Source: CRISIL MI&A Report.
(1)
Number of banking outlets represents aggregate number of banking outlets (including Business Correspondent run outlets) as of
the last day of the relevant fiscal year/quarter.
(2)
AUM represents gross advances. AUM does not include advances originated and transferred under securitization, assignment and
inter-bank participation certificates for which the company continues to hold collection responsibilities.
(3)
AUM growth represents growth in AUM as of the last day of the relevant fiscal year/ quarter over AUM as of the last day of the
previous fiscal year.
(4)
Deposits growth represents the percentage increase in deposits as of the last day of the relevant fiscal year/quarter over deposits
as of the last day of the previous fiscal year.
(5)
CASA Ratio represents current account deposits and savings account deposits (together, “CASA”) to total deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(6)
CASA + Retail Term Deposits Ratio represents CASA and retail term deposits (term deposits of less than Rs. 20 million) to total
deposits as of the last day of the relevant fiscal year/quarter, expressed for the period as a percentage
(7)
Net worth represents the sum of equity share capital and reserves and surplus as of the last day of the relevant fiscal year/quarter.
(8)
CRAR (%) as of the last day of the relevant fiscal year/quarter as reported by the company.
(9)
Tier 1 Capital Ratio (%) of the last day as of the last day of the relevant fiscal year/quarter as reported by the company.
(10)
Cost of Deposits represents interest expense on deposits for the relevant fiscal year/quarter to the average deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(11)
Cost of funds represents total interest expense for the relevant fiscal year/quarter to the average of sum of deposits and borrowings
as of the last day of the relevant fiscal year/quarter, expressed as a percentage
(12)
Gross NPA (%) as reported by the company represents Gross NPAs to gross advances as of the last day of the relevant fiscal
year/quarter.
(13)
Provision Coverage Ratio (%) - Provision Coverage Ratio represents the ratio of NPA provision including Technical Write off and
Gross NPA, including Technical write off.
(14)
Restructured book as % of advances represents standard restructured book to net advances as of the last day of the relevant fiscal
year/quarter, expressed as percentage
(15)
Net NPA disclosed by the company as of the last day of the relevant fiscal year/quarter.
(16)
Pre-Provision Operating Profit represents difference of total income minus interest expended minus operating expenses for the
relevant fiscal year/quarter.
(17)
Yield on Advances represents the ratio of interest income on loan assets for the relevant fiscal year/quarter to the average net
advances as of the last day of the relevant fiscal year/quarter, expressed as a percentage.
(18)
Net Interest Margin represents net interest income for the relevant fiscal year/quarter to the Average Total Assets for the relevant
fiscal year/quarter, represented as a percentage.
(19)
Credit Cost Ratio is calculated as the ratio of total provisions and contingencies (excluding provision for tax) to the company’s
average net advances for the relevant fiscal year/quarter, expressed as a percentage.
(20)
Operating Expenses to Average Total Assets represents operating expenses for the relevant fiscal year/quarter to the Average Total
Assets for the relevant fiscal year/quarter, expressed as a percentage.
(21)
Cost to Income Ratio represents operating expenses for the relevant fiscal year/quarter to the sum of Net Interest Income (interest
earned minus interest expended) and other income for the relevant fiscal year/quarter, expressed as a percentage.
(22)
Return on Average Assets is calculated as the net profit for the relevant fiscal year/quarter to Average Total Assets for the relevant
fiscal year/quarter, expressed as a percentage.
(23)
Return on Average Equity is calculated as the net profit for the relevant fiscal year/quarter to Average Net Worth for the relevant
fiscal year/quarter, expressed as a percentage.
(24)
Basic EPS: Basic EPS as reported by the company represents EPS as computed in accordance with Accounting Standard 20.

141
VI. Jana Small Finance Bank Limited

Certain Key GAAP Measures and Key Three Three Fiscal 2021 Fiscal 2022 Fiscal 2023
Performance Indicators (KPIs) months months
period period
ended June ended June
30, 2023 30, 2022
Operations Banking Outlets (1) NA NA 585 700 NA
AUM (in INR million) (2) NA NA 116,119.20 130,066.79 177,595.55
AUM Growth (%) (3) NA NA NA 12.01% 36.54%
Deposits (in INR million) 168,093.53 134,726.80 123,859.30 135,402.02 163,340.16
Deposits Growth (%) (4) 2.91% (0.50%) NA 9.32% 20.63%
CASA Ratio (%) (5) NA NA 16.76% 22.55% NA
CASA + Retail Term Deposits NA NA NA NA NA
Ratio (as percentage of total
deposits) (6)
Capital Net worth (in INR million) (7) 24,451.12 13,208.10 11,268.60 12,006.99 17,972.55
Total Capital Ratio (CRAR) 18.70% NA 15.51% 15.26% NA
(%) (8)
Tier 1 Capital Ratio (%) (9) NA NA 11.75% 11.83% 13.80%
Cost of Deposits (%) (10) NA NA 7.90% 7.18% NA
Cost of Funds (%) (11) 1.86%* 1.72%* 8.30% 7.58% 6.96%
Asset Gross NPA (%) (12) 2.90% NA 7.20% 4.98% NA
Quality Provision Coverage Ratio (%) NA NA 27.89% 32.19% NA
(13)

Restructured Book as % of NA NA NA 2.70% NA

Advances (%) (14)
Net NPA (%) (15) 1.20% NA 5.30% 3.43% NA
Profitability Pre-Provision Operating Profit 2,730.16 2,372.06 450.90 574.73 1,000.37
(PPOP)(16)
Net Profit (in INR million) 903.65 451.14 (843.09) (54.06) 2,559.71
Yield on Advances (%) (17) NA* NA* 21.34% 22.15% 19.99%
Net Interest Margin (%) (18) 1.77%* 1.72%* 7.60% 7.08% 7.24%
Credit Cost Ratio (%) (19) 1.01%* 1.44%* 3.40% 4.63% 4.84%
Operating Expenses to Average 1.45%* 1.44%* 6.30% 5.80% 5.61%
Total Assets (%) (20)
Cost to Income Ratio (%) (21) 57.99% 55.77% 69.90% 66.46% 56.22%
Return on Average Assets (%) 0.35% 0.22%* 0.51% 0.03% 1.12%
(22)

Return on Average Equity (%) 4.26%* 3.58%* 7.77% 0.46% 17.08%

(23)

Basic EPS (in INR) (24) 16.20* 8.76* 16.62 1.06 47.47

NA- Not available

* Not annualized
Source: CRISIL MI&A Report
(1)
Number of banking outlets represents aggregate number of banking outlets (including Business Correspondent run outlets) as of
the last day of the relevant fiscal year/quarter.
(2)
AUM represents Advances under Management and is calculated as the sum of gross advances plus advances originated and
transferred under securitization, assignment and inter-bank participation certificates for which the company continues to hold
collection responsibilities.
(3)
AUM growth represents growth in AUM as of the last day of the relevant fiscal year/ quarter over AUM as of the last day of the
previous fiscal year.
(4)
Deposits growth represents the percentage increase in deposits as of the last day of the relevant fiscal year/quarter over deposits
as of the last day of the previous fiscal year.
(5)
CASA Ratio represents current account deposits and savings account deposits (together, “CASA”) to total deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(6)
CASA + Retail Term Deposits Ratio represents CASA and retail term deposits (term deposits of less than Rs. 20 million) to total
deposits as of the last day of the relevant fiscal year/quarter, expressed for the period as a percentage
(7)
Net worth represents the sum of equity share capital and reserves and surplus as of the last day of the relevant fiscal year/quarter.
(8)
CRAR (%) as of the last day of the relevant fiscal year/quarter as reported by the company.
(9)
Tier 1 Capital Ratio (%) of the last day as of the last day of the relevant fiscal year/quarter as reported by the company.
(10)
Cost of Deposits represents interest expense on deposits for the relevant fiscal year/quarter to the average deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(11)
Cost of funds represents total interest expense for the relevant fiscal year/quarter to the average of sum of deposits and borrowings
as of the last day of the relevant fiscal year/quarter, expressed as a percentage
(12)
Gross NPA (%) as reported by the company represents Gross NPAs to gross advances as of the last day of the relevant fiscal
year/quarter.
(13)
Provision Coverage Ratio (%) - Provision Coverage Ratio represents the ratio of NPA provision including Technical Write off and
Gross NPA, including Technical write off.
(14)
Restructured book as % of advances represents standard restructured book to net advances as of the last day of the relevant fiscal
year/quarter, expressed as percentage
(15)
Net NPA disclosed by the company as of the last day of the relevant fiscal year/quarter.
(16)
Pre-Provision Operating Profit represents difference of total income minus interest expended minus operating expenses for the
relevant fiscal year/quarter.

142
 (17)
Yield on Advances represents the ratio of interest income on loan assets for the relevant fiscal year/quarter to the average net
advances as of the last day of the relevant fiscal year/quarter, expressed as a percentage.
(18)
Net Interest Margin represents net interest income for the relevant fiscal year/quarter to the Average Total Assets for the relevant
fiscal year/quarter, represented as a percentage.
(19)
Credit Cost Ratio is calculated as the ratio of total provisions and contingencies (excluding provision for tax) to the company’s
average net advances for the relevant fiscal year/quarter, expressed as a percentage.
(20)
Operating Expenses to Average Total Assets represents operating expenses for the relevant fiscal year/quarter to the Average Total
Assets for the relevant fiscal year/quarter, expressed as a percentage.
(21)
Cost to Income Ratio represents operating expenses for the relevant fiscal year/quarter to the sum of Net Interest Income (interest
earned minus interest expended) and other income for the relevant fiscal year/quarter, expressed as a percentage.
(22)
Return on Average Assets is calculated as the net profit for the relevant fiscal year/quarter to Average Total Assets for the relevant
fiscal year/quarter, expressed as a percentage.
(23)
Return on Average Equity is calculated as the net profit for the relevant fiscal year/quarter to Average Net Worth for the relevant
fiscal year/quarter, expressed as a percentage.
(24)
Basic EPS: Basic EPS as reported by the company represents EPS as computed in accordance with Accounting Standard 20.

VII. Bandhan Bank

Certain Key GAAP Measures and Key Three Three Fiscal 2021 Fiscal 2022 Fiscal 2023
Performance Indicators (KPIs) months months
period ended period ended
June 30, June 30,
2023 2022
Operations Banking Outlets (1) 6,140 5,640 5,310 5,639 5,723
AUM (in INR million) (2) 1,031,700.00 966,500.00 870,430.00 993,380.00 1,091,200.00
AUM Growth (%) (3) (5.45%) (2.71%) NA 14.13% 9.85%
Deposits (in INR million) 1,084,800.00 930,570.00 779,722.25 963,306.13 1,080,693.13
Deposits Growth (%) (4) 0.38% (3.40%) NA 23.54% 12.19%
CASA Ratio (%) (5) 36.02% 43.19% 43.38% 41.61% 39.29%
CASA + Retail Term 71.20% 78.39% 78.79% 77.28% 71.20%
Deposits Ratio (as percentage
of total deposits) (6)
Capital Net worth (in INR million) (7) 203,080.00 182,700.00 174,081.84 173,811.45 195,841.53
Total Capital Ratio (CRAR) 19.75% 19.44% 23.47% 20.10% 19.76%
(%) (8)
Tier 1 Capital Ratio (%) (9) 18.80% 18.30% 22.48% 18.89% 18.70%
Cost of Deposits (%) (10) NA NA 5.87% 4.95% NA
Cost of Funds (%) (11) 1.56%* 1.32%* 5.89% 4.88% 5.34%
Asset Quality Gross NPA (%) (12) 6.76% 7.25% 6.81% 6.46% 4.87%
Provision Coverage Ratio NA NA 67.38% 87.23% 76.82%
(%) (13)
Restructured Book as % of NA NA NA NA NA
Advances (%) (14)
Net NPA (%) (15) 2.18% 1.92% 3.51% 1.66% 1.17%
Profitability Pre-Provision Operating 15,622.99 18,206.35 6,855.26 8,013.40 7,091.35
Profit (PPOP)(16)
Net Profit (in INR million) 7,210.54 8,865.04 22,054.57 1,257.94 21,946.38
Yield on Advances (%) (17) 3.85%* 3.84%* 14.69% 13.88% 13.86%
Net Interest Margin (%) (18) 1.62%* 1.80%* 7.32% 6.87% 6.29%
Credit Cost Ratio (%) (19) 0.59%* 0.70%* 6.67% 8.98% 4.23%
Operating Expenses to 0.86%* 0.73%* 2.73% 2.78% 3.15%
Average Total Assets (%) (20)
Cost to Income Ratio (%) (21) 45.67% 35.99% 29.13% 30.54% 39.54%
Return on Average Assets 0.47%* 0.63%* 2.13% 0.10% 1.49%
(%) (22)
Return on Average Equity 3.62%* 4.97%* 13.53% 0.72% 11.87%
(%) (23)
Basic EPS (in INR) (24) 4.48* 5.50* 13.70 0.78 13.62

NA- Not available

* Not annualized
Source: CRISIL MI&A Report
(1)
Number of banking outlets represents aggregate number of banking outlets (including Business Correspondent run outlets) as of
the last day of the relevant fiscal year/quarter
(2)
AUM represents Advances under Management and is calculated as the sum of gross advances plus advances originated and
transferred under securitization, assignment and inter-bank participation certificates for which the company continues to hold
collection responsibilities.
(3)
AUM growth represents growth in AUM as of the last day of the relevant fiscal year/ quarter over AUM as of the last day of the
previous fiscal year. For quarter, AUM growth represents growth in AUM as of the last day of the relevant quarter over AUM of
the last day of the previous quarter.
(4)
Deposits growth represents the percentage increase in deposits as of the last day of the relevant fiscal year/quarter over deposits
as of the last day of the previous fiscal year.
(5)
CASA Ratio represents current account deposits and savings account deposits (together, “CASA”) to total deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(6)
CASA + Retail Term Deposits Ratio represents CASA and retail term deposits (term deposits of less than Rs. 20 million) to total
deposits as of the last day of the relevant fiscal year/quarter, expressed for the period as a percentage

143
 (7)
Net worth represents the sum of equity share capital and reserves and surplus as of the last day of the relevant fiscal year/quarter.
(8)
CRAR (%) as of the last day of the relevant fiscal year/quarter as reported by the company.
(9)
Tier 1 Capital Ratio (%) of the last day as of the last day of the relevant fiscal year/quarter as reported by the company.
(10)
Cost of Deposits represents interest expense on deposits for the relevant fiscal year/quarter to the average deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(11)
Cost of funds represents total interest expense for the relevant fiscal year/quarter to the average of sum of deposits and borrowings
as of the last day of the relevant fiscal year/quarter, expressed as a percentage
(12)
Gross NPA (%) as reported by the company represents Gross NPAs to gross advances as of the last day of the relevant fiscal
year/quarter.
(13)
Provision Coverage Ratio (%) - Provision Coverage Ratio represents the ratio of NPA provision including Technical Write off and
Gross NPA, including Technical write off.
(14)
Restructured book as % of advances represents standard restructured book to net advances as of the last day of the relevant fiscal
year/quarter, expressed as percentage
(15)
Net NPA disclosed by the company as of the last day of the relevant fiscal year/quarter.
(16)
Pre-Provision Operating Profit represents difference of total income minus interest expended minus operating expenses for the
relevant fiscal year/quarter.
(17)
Yield on Advances represents the ratio of interest income on loan assets for the relevant fiscal year/quarter to the average net
advances as of the last day of the relevant fiscal year/quarter, expressed as a percentage.
(18)
Net Interest Margin represents net interest income for the relevant fiscal year/quarter to the Average Total Assets for the relevant
fiscal year/quarter, represented as a percentage.
(19)
Credit Cost Ratio is calculated as the ratio of total provisions and contingencies (excluding provision for tax) to the company’s
average net advances for the relevant fiscal year/quarter, expressed as a percentage.
(20)
Operating Expenses to Average Total Assets represents operating expenses for the relevant fiscal year/quarter to the Average Total
Assets for the relevant fiscal year/quarter, expressed as a percentage.
(21)
Cost to Income Ratio represents operating expenses for the relevant fiscal year/quarter to the sum of Net Interest Income (interest
earned minus interest expended) and other income for the relevant fiscal year/quarter, expressed as a percentage.
(22)
Return on Average Assets is calculated as the net profit for the relevant fiscal year/quarter to Average Total Assets for the relevant
fiscal year/quarter, expressed as a percentage.
(23)
Return on Average Equity is calculated as the net profit for the relevant fiscal year/quarter to Average Net Worth for the relevant
fiscal year/quarter, expressed as a percentage.
(24)
Basic EPS: Basic EPS as reported by the company represents EPS as computed in accordance with Accounting Standard 20.

VIII. Credit Access Grameen

Certain Key GAAP Measures and Key Three Three Fiscal 2021 Fiscal 2022 Fiscal 2023
Performance Indicators (KPIs) months months
period period
ended June ended June
30, 2023 30, 2022
Operations Banking Outlets (1) 1,826 1,207 964 1,164 1,786
AUM (in INR million) (2) 218,140.00 129,910.00 113,410.00 137,320.00 175,610.00
AUM Growth (%) (3) 24.22% (5.40%) NA 21.08% 27.88%
Deposits (in INR million) NM NM NM NM NM
Deposits Growth (%) (4) NM NM NM NM NM
CASA Ratio (%) (5) NM NM NM NM NM
CASA + Retail Term Deposits NM NM NM NM NM
Ratio (as percentage of total
deposits) (6)
Capital Net worth (in INR million) (7) 54,490.00 41,461.00 36,340.00 39,398.00 51,069.40
Total Capital Ratio (CRAR) 24.40% 28.60% 31.75% 26.54% 23.58%
(%) (8)
Tier 1 Capital Ratio (%) (9) 23.50% 27.90% 30.50% 25.87% NA
Cost of Deposits (%) (10) NM NM NM NM NM
Cost of Funds (%) (11) 2.33%* 2.26%* 8.82% 8.18% 8.30%
Asset Gross NPA (%) (12) 0.89% 2.50% 4.38% 3.12% 1.21%
Quality Provision Coverage Ratio (%) 70.00% NA NA 70.55% 71.58%
(13)

Restructured Book as % of NA NA NA NA NA
Advances (%) (14)
Net NPA (%) (15) 0.27% 0.80% 1.37% 0.94% 0.35%
Profitability Pre-Provision Operating Profit 5,437.70 2,897.20 850.00 1,087.40 1,506.41
(PPOP)(16)
Net Profit (in INR million) 3,484.60 1,395.60 1,423.90 3,821.40 8,260.30
Yield on Advances (%) (17) NA NA 19.67% 19.16% 19.39%
Net Interest Margin (%) (18) 3.23%* 2.69%* 9.80% 9.72% 10.75%
Credit Cost Ratio (%) (19) 0.39%* 0.70%* 6.85% 4.87% 2.37%
Operating Expenses to Average 1.08%* 1.12%* 3.84% 3.93% 4.23%
Total Assets (%) (20)
Cost to Income Ratio (%) (21) 30.80% 39.73% 34.57% 35.38% 37.48%
Return on Average Assets (%) 1.56%* 0.82%* 1.22% 2.78% 4.20%
(22)

Return on Average Equity (%) 6.60%* 3.36%* 4.52% 9.05% 17.81%

(23)

Basic EPS (in INR) (24) 21.79* 8.85* 9.52 24.54 52.04

144
 NA – Not Applicable
* Not annualized
Source: CRISIL MI&A
(1)
Number of banking outlets represents aggregate number of banking outlets (including Business Correspondent run outlets) as of
the last day of the relevant fiscal year/quarter
(2)
AUM represents Advances under Management and is calculated as the sum of gross advances plus advances originated and
transferred under securitization, assignment and inter-bank participation certificates for which the company continues to hold
collection responsibilities.
(3)
AUM growth represents growth in AUM as of the last day of the relevant fiscal year/ quarter over AUM as of the last day of the
previous fiscal year. For quarter, AUM growth represents growth in AUM as of the last day of the relevant quarter over AUM of
the last day of the previous quarter.
(4)
Deposits growth represents the percentage increase in deposits as of the last day of the relevant fiscal year/quarter over deposits
as of the last day of the previous fiscal year.
(5)
CASA Ratio represents current account deposits and savings account deposits (together, “CASA”) to total deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(6)
CASA + Retail Term Deposits Ratio represents CASA and retail term deposits (term deposits of less than Rs. 20 million) to total
deposits as of the last day of the relevant fiscal year/quarter, expressed for the period as a percentage
(7)
Net worth represents the sum of equity share capital and reserves and surplus as of the last day of the relevant fiscal year/quarter.
(8)
CRAR (%) as of the last day of the relevant fiscal year/quarter as reported by the company.
(9)
Tier 1 Capital Ratio (%) of the last day as of the last day of the relevant fiscal year/quarter as reported by the company.
(10)
Cost of Deposits represents interest expense on deposits for the relevant fiscal year/quarter to the average deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(11)
Cost of funds represents total interest expense for the relevant fiscal year/quarter to the average of sum of deposits and borrowings
as of the last day of the relevant fiscal year/quarter, expressed as a percentage
(12)
Gross NPA (%) as reported by the company represents Gross NPAs to gross advances as of the last day of the relevant fiscal
year/quarter.
(13)
Provision Coverage Ratio (%) - Provision Coverage Ratio represents the ratio of NPA provision including Technical Write off and
Gross NPA, including Technical write off.
(14)
Restructured book as % of advances represents standard restructured book to net advances as of the last day of the relevant fiscal
year/quarter, expressed as percentage
(15)
Net NPA disclosed by the company as of the last day of the relevant fiscal year/quarter.
(16)
Pre-Provision Operating Profit represents difference of total income minus interest expended minus operating expenses for the
relevant fiscal year/quarter.
(17)
Yield on Advances represents the ratio of interest income on loan assets for the relevant fiscal year/quarter to the average net
advances as of the last day of the relevant fiscal year/quarter, expressed as a percentage.
(18)
Net Interest Margin represents net interest income for the relevant fiscal year/quarter to the Average Total Assets for the relevant
fiscal year/quarter, represented as a percentage.
(19)
Credit Cost Ratio is calculated as the ratio of total provisions and contingencies (excluding provision for tax) to the company’s
average net advances for the relevant fiscal year/quarter, expressed as a percentage.
(20)
Operating Expenses to Average Total Assets represents operating expenses for the relevant fiscal year/quarter to the Average Total
Assets for the relevant fiscal year/quarter, expressed as a percentage.
(21)
Cost to Income Ratio represents operating expenses for the relevant fiscal year/quarter to the sum of Net Interest Income (interest
earned minus interest expended) and other income for the relevant fiscal year/quarter, expressed as a percentage.
(22)
Return on Average Assets is calculated as the net profit for the relevant fiscal year/quarter to Average Total Assets for the relevant
fiscal year/quarter, expressed as a percentage.
(23)
Return on Average Equity is calculated as the net profit for the relevant fiscal year/quarter to Average Net Worth for the relevant
fiscal year/quarter, expressed as a percentage.
(24)
Basic EPS: Basic EPS as reported by the company represents EPS as computed in accordance with Accounting Standard 20.

IX. Spandana Sphoorty

Certain Key GAAP Measures and Key Three Three Fiscal 2021 Fiscal 2022 Fiscal 2023
Performance Indicators (KPIs) months months
period period
ended June ended June
30, 2023 30, 2022
Operations Banking Outlets (1) 1,303 1,117 1,052 1,120 1,227
AUM (in INR million) (2) 88,480.00 55,130.00 73,284.82 65,810.00 85,110.00
AUM Growth (%) (3) 3.96% (16.23%) NA (10.20)% 29.33%
Deposits (in INR million) NM NM NM NM NM
Deposits Growth (%) (4) NM NM NM NM NM
CASA Ratio (%) (5) NM NM NM NM NM
CASA + Retail Term Deposits NM NM NM NM NM
Ratio (as percentage of total
deposits) (6)
Capital Net worth (in INR million) (7) 32,280.00 28,199.00 27,510.97 30,899.45 30,992.48
Total Capital Ratio (CRAR) 37.60% 47.90% 39.20% 50.74% 36.87%
(%) (8)
Tier 1 Capital Ratio (%) (9) NA NA 39.74% 50.55% NA
Cost of Deposits (%) (10) NM NM NM NM NM
Cost of Funds (%) (11) 3.20%* 2.77%* 10.10% 11.86% 12.86%
Asset Gross NPA (%) (12) 1.63% 6.51% 5.60% 15.00% 1.95%
Quality Provision Coverage Ratio (%) 70.00% 51.70% NA NA 70.00%
(13)

Restructured Book as % of NA NA NA NA NA
Advances (%) (14)
Net NPA (%) (15) 0.49% 3.34% 3.10% 6.20% 0.58%

145
 Certain Key GAAP Measures and Key Three Three Fiscal 2021 Fiscal 2022 Fiscal 2023
Performance Indicators (KPIs) months months
period period
ended June ended June
30, 2023 30, 2022
Profitability Pre-Provision Operating Profit 1,891.24 506.52 848.33 451.24 562.13
(PPOP)(16)
Net Profit (in INR million) 1,194.62 (2,197.21) 1,454.60 698.27 123.94
Yield on Advances (%) (17) NA NA 22.88% 21.47% 19.24%
Net Interest Margin (%) (18) 3.06%* 2.20%* 14.73% 12.12% 9.96%
Credit Cost Ratio (%) (19) 0.36%* 6.59%* 10.83% 7.72% 8.20%
Operating Expenses to Average 1.45%* 1.67%* 3.26% 4.76% 5.55%
Total Assets (%) (20)
Cost to Income Ratio (%) (21) 42.30% 68.75% 21.63% 38.56% 44.84%
Return on Average Assets (%) 1.25%* (3.29%*) 2.02% 0.91% 0.15%
(22)

Return on Average Equity (%) 3.78%* (7.44%*) 5.41% 2.38% 0.40%

(23)

Basic EPS (in INR) (24) 16.83* (31.42*) 22.55 10.75 1.74

NA- Not available

* Not annualized
Source: CRISIL MI&A Report
(1)
Number of banking outlets represents aggregate number of banking outlets (including Business Correspondent run outlets) as of
the last day of the relevant fiscal year/quarter
(2)
AUM represents Advances under Management and is calculated as the sum of gross advances plus advances originated and
transferred under securitization, assignment and inter-bank participation certificates for which the company continues to hold
collection responsibilities.
(3)
AUM growth represents growth in AUM as of the last day of the relevant fiscal year/ quarter over AUM as of the last day of the
previous fiscal year. For quarter, AUM growth represents growth in AUM as of the last day of the relevant quarter over AUM of
the last day of the previous quarter.
(4)
Deposits growth represents the percentage increase in deposits as of the last day of the relevant fiscal year/quarter over deposits
as of the last day of the previous fiscal year/ quarter.
(5)
CASA Ratio represents current account deposits and savings account deposits (together, “CASA”) to total deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(6)
CASA + Retail Term Deposits Ratio represents CASA and retail term deposits (term deposits of less than Rs. 20 million) to total
deposits as of the last day of the relevant fiscal year/quarter, expressed for the period as a percentage
(7)
Net worth represents the sum of equity share capital and reserves and surplus as of the last day of the relevant fiscal year/quarter.
(8)
CRAR (%) as of the last day of the relevant fiscal year/quarter as reported by the company.
(9)
Tier 1 Capital Ratio (%) of the last day as of the last day of the relevant fiscal year/quarter as reported by the company.
(10)
Cost of Deposits represents interest expense on deposits for the relevant fiscal year/quarter to the average deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(11)
Cost of funds represents total interest expense for the relevant fiscal year/quarter to the average of sum of deposits and borrowings
as of the last day of the relevant fiscal year/quarter, expressed as a percentage
(12)
Gross NPA (%) as reported by the company represents Gross NPAs to gross advances as of the last day of the relevant fiscal
year/quarter.
(13)
Provision Coverage Ratio (%) - Provision Coverage Ratio represents the ratio of NPA provision including Technical Write off and
Gross NPA, including Technical write off.
(14)
Restructured book as % of advances represents standard restructured book to net advances as of the last day of the relevant fiscal
year/quarter, expressed as percentage
(15)
Net NPA disclosed by the company as of the last day of the relevant fiscal year/quarter.
(16)
Pre-Provision Operating Profit represents difference of total income minus interest expended minus operating expenses for the
relevant fiscal year/quarter.
(17)
Yield on Advances represents the ratio of interest income on loan assets for the relevant fiscal year/quarter to the average net
advances as of the last day of the relevant fiscal year/quarter, expressed as a percentage.
(18)
Net Interest Margin represents net interest income for the relevant fiscal year/quarter to the Average Total Assets for the relevant
fiscal year/quarter, represented as a percentage.
(19)
Credit Cost Ratio is calculated as the ratio of total provisions and contingencies (excluding provision for tax) to the company’s
average net advances for the relevant fiscal year/quarter, expressed as a percentage.
(20)
Operating Expenses to Average Total Assets represents operating expenses for the relevant fiscal year/quarter to the Average Total
Assets for the relevant fiscal year/quarter, expressed as a percentage.
(21)
Cost to Income Ratio represents operating expenses for the relevant fiscal year/quarter to the sum of Net Interest Income (interest
earned minus interest expended) and other income for the relevant fiscal year/quarter, expressed as a percentage.
(22)
Return on Average Assets is calculated as the net profit for the relevant fiscal year/quarter to Average Total Assets for the relevant
fiscal year/quarter, expressed as a percentage.
(23)
Return on Average Equity is calculated as the net profit for the relevant fiscal year/quarter to Average Net Worth for the relevant
fiscal year/quarter, expressed as a percentage.
(24)
Basic EPS: Basic EPS as reported by the company represents EPS as computed in accordance with Accounting Standard 20.

X. Fusion Micro Finance Limited

Certain Key GAAP Measures and Key Three Three Fiscal 2021 Fiscal 2022 Fiscal 2023
Performance Indicators (KPIs) months months
period period
ended June ended June
30, 2023 30, 2022
Operations Banking Outlets (1) 1,103 966 725 934 1,086
AUM (in INR million) (2) 97,117.50 73,890.23 46,378.40 67,859.70 92,960.00

146
 Certain Key GAAP Measures and Key Three Three Fiscal 2021 Fiscal 2022 Fiscal 2023
Performance Indicators (KPIs) months months
period period
ended June ended June
30, 2023 30, 2022
AUM Growth (%) (3) 4.47% 8.89% NA 46.32% 36.99%
Deposits (in INR million) NM NM NM NM NM
Deposits Growth (%) (4) NM NM NM NM NM
CASA Ratio (%) (5) NM NM NM NM NM
CASA + Retail Term Deposits NM NM NM NM NM
Ratio (as percentage of total
deposits) (6)
Capital Net worth (in INR million) (7) 24,454.40 14,164.65 12,463.55 13,379.51 23,219.19
Total Capital Ratio (CRAR) 28.26% 21.13% 27.26% 21.94% 27.94%
(%) (8)
Tier 1 Capital Ratio (%) (9) NA 9.45% 25.52% 19.93% NA
Cost of Deposits (%) (10) NM NM NM NM NM
Cost of Funds (%) (11) 2.63%* 2.43%* 10.29% 9.83% 10.24%
Asset Gross NPA (%) (12) 3.20% 3.67% 5.50% 5.71% 3.46%
Quality Provision Coverage Ratio (%) 76.22% NA NA 71.26% 75.50%
(13)

Restructured Book as % of NA NA NA NA 0.20%

Advances (%) (14)
Net NPA (%) (15) 0.78% 1.35% 2.20% 1.71% 0.87%
Profitabilit Pre-Provision Operating Profit 2,353.90 1,201.93 277.57 393.25 712.35
y (PPOP)(16)
Net Profit (in INR million) 1,204.60 751.02 439.44 217.55 3,871.45
Yield on Advances (%) (17) NA 5.22%* 21.48% 20.56% 22.92%
Net Interest Margin (%) (18) 3.06%* 2.50%* 9.54% 8.66% 11.50%
Credit Cost Ratio (%) (19) 0.92%* 0.32%* 5.73% 7.17% 2.87%
Operating Expenses to Average 1.39%* 1.30%* 4.37% 4.75% 5.34%
Total Assets (%) (20)
Cost to Income Ratio (%) (21) 36.26% 44.68% 44.26% 44.26% 38.44%
Return on Average Assets (%) 1.25%* 1.01%* 0.87% 0.33% 4.65%
(22)

Return on Average Equity (%) 5.05%* 5.45%* 3.60% 1.68% 21.16%

(23)

Basic EPS (in INR) (24) 12.00* 9.07* 5.56 2.67 43.29

NA- Not Available

* Not annualized
Source: CRISIL MI&A
(1)
Number of banking outlets represents aggregate number of banking outlets (including Business Correspondent run outlets) as of
the last day of the relevant fiscal year/quarter
(2)
AUM represents Advances under Management and is calculated as the sum of gross advances plus advances originated and
transferred under securitization, assignment and inter-bank participation certificates for which the company continues to hold
collection responsibilities.
(3)
AUM growth represents growth in AUM as of the last day of the relevant fiscal year/ quarter over AUM as of the last day of the
previous fiscal year. For quarter, AUM growth represents growth in AUM as of the last day of the relevant quarter over AUM of
the last day of the previous quarter.
(4)
Deposits growth represents the percentage increase in deposits as of the last day of the relevant fiscal year/quarter over deposits
as of the last day of the previous fiscal year.
(5)
CASA Ratio represents current account deposits and savings account deposits (together, “CASA”) to total deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(6)
CASA + Retail Term Deposits Ratio represents CASA and retail term deposits (term deposits of less than Rs. 20 million) to total
deposits as of the last day of the relevant fiscal year/quarter, expressed for the period as a percentage
(7)
Net worth represents the sum of equity share capital and reserves and surplus as of the last day of the relevant fiscal year/quarter.
(8)
CRAR (%) as of the last day of the relevant fiscal year/quarter as reported by the company.
(9)
Tier 1 Capital Ratio (%) of the last day as of the last day of the relevant fiscal year/quarter as reported by the company.
(10)
Cost of Deposits represents interest expense on deposits for the relevant fiscal year/quarter to the average deposits as of the last
day of the relevant fiscal year/quarter, expressed as a percentage
(11)
Cost of funds represents total interest expense for the relevant fiscal year/quarter to the average of sum of deposits and borrowings
as of the last day of the relevant fiscal year/quarter, expressed as a percentage
(12)
Gross NPA (%) as reported by the company represents Gross NPAs to gross advances as of the last day of the relevant fiscal
year/quarter.
(13)
Provision Coverage Ratio (%) - Provision Coverage Ratio represents the ratio of NPA provision including Technical Write off and
Gross NPA, including Technical write off.
(14)
Restructured book as % of advances represents standard restructured book to net advances as of the last day of the relevant fiscal
year/quarter, expressed as percentage
(15)
Net NPA disclosed by the company as of the last day of the relevant fiscal year/quarter.
(16)
Pre-Provision Operating Profit represents difference of total income minus interest expended minus operating expenses for the
relevant fiscal year/quarter.
(17)
Yield on Advances represents the ratio of interest income on loan assets for the relevant fiscal year/quarter to the average net
advances as of the last day of the relevant fiscal year/quarter, expressed as a percentage.
(18)
Net Interest Margin represents net interest income for the relevant fiscal year/quarter to the Average Total Assets for the relevant
fiscal year/quarter, represented as a percentage.

147
 (19)
Credit Cost Ratio is calculated as the ratio of total provisions and contingencies (excluding provision for tax) to the company’s
average net advances for the relevant fiscal year/quarter, expressed as a percentage.
(20)
Operating Expenses to Average Total Assets represents operating expenses for the relevant fiscal year/quarter to the Average Total
Assets for the relevant fiscal year/quarter, expressed as a percentage.
(21)
Cost to Income Ratio represents operating expenses for the relevant fiscal year/quarter to the sum of Net Interest Income (interest
earned minus interest expended) and other income for the relevant fiscal year/quarter, expressed as a percentage.
(22)
Return on Average Assets is calculated as the net profit for the relevant fiscal year/quarter to Average Total Assets for the relevant
fiscal year/quarter, expressed as a percentage.
(23)
Return on Average Equity is calculated as the net profit for the relevant fiscal year/quarter to Average Net Worth for the relevant
fiscal year/quarter, expressed as a percentage.
(24)
Basic EPS: Basic EPS as reported by the company represents EPS as computed in accordance with Accounting Standard 20.

11. Price per share of the Bank (as adjusted for corporate actions, including split, bonus issuances) based on
primary issuances of Equity Shares or convertible securities (excluding Equity Shares issued under the ESOP
Schemes and issuance of Equity Shares pursuant to a bonus issue) during the 18 months preceding the date of
this Red Herring Prospectus, where such issuance is equal to or more than 5% of the fully diluted paid-up share
capital of the Bank in a single transaction or multiple transactions combined together over a span of rolling 30
days (“Primary Issuances”)

Our Bank has not issued any Equity Shares or convertible securities during the 18 months preceding the date of this
Red Herring Prospectus, where such issuance is equal to or more that 5% of the fully diluted paid-up share capital of
our Bank (calculated based on the pre-Offer capital before such transaction(s) and excluding ESOPs granted but not
vested), in a single transaction or multiple transactions combined together over a span of rolling 30 days.

12. Price per share of the Bank (as adjusted for corporate actions, including bonus issuances) based on secondary
sale or acquisition of equity shares or convertible securities (excluding gifts) involving any of the Selling
Shareholders or other shareholders with rights to nominate directors during the 18 months preceding the date
of filing of the DRHP/ RHP, where the acquisition or sale is equal to or more than 5% of the fully diluted paid-
up share capital of our Bank (calculated based on the pre-Offer capital before such transaction/s and excluding
ESOPs granted but not vested), in a single transaction or multiple transactions combined together over a span
of rolling 30 days (“Secondary Transactions”)

There has been no secondary sale/ acquisitions of Equity Shares or any convertible securities (“Security(ies)”), where
the Selling Shareholders or Shareholder(s) having the right to nominate Director(s) on our Board are a party to the
transaction (excluding gifts), during the 18 months preceding the date of this Red Herring Prospectus, where either
acquisition or sale is equal to or more than 5% of the fully diluted paid up share capital of our Bank (calculated based
on the pre-Offer capital before such transaction/s and excluding ESOPs granted but not vested), in a single transaction
or multiple transactions combined together over a span of rolling 30 days.

Since there are no such transaction to report to under 11 and 12, the following are the details basis the last five
primary or secondary transactions (secondary transactions where Promoters or members of the Promoter
Group or Selling Shareholders or Shareholder(s) having the right to nominate Director(s) on our Board, are a
party to the transaction), not older than three years prior to the date of this Red Herring Prospectus irrespective
of the size of transactions:

Date of allotment Number of Face value of Offer price per Nature of Nature of Total
equity shares equity shares Equity share allotment consideration consideration
transacted (₹) (₹)
March 31, 2021 1,236,664 10 75 Private Cash 93,999,825
Placement

13. The Floor Price is [●] times and the Cap Price is [●] times the weighted average cost of acquisition at which the
Equity Shares were issued by our Bank, or acquired or sold by our Promoters, the Promoter Group or other
shareholders with rights to nominate directors in the last 18 months preceding the date of this Red Herring
Prospectus are disclosed below:

Past Transactions Weighted average Floor Price Cap Price

cost of acquisition (in ₹)* (in ₹)*
(in ₹)#
WACA of Equity Shares that were issued by our Bank Nil N.A N.A
WACA of Equity Shares that were acquired or sold by Nil N.A N.A
way of secondary transactions
WACA of past five primary issuances/secondary 75.00 [●]* times [●]* times
transactions, as disclosed above (point 12)
* To be updated at the Prospectus stage.
# As certified by A. John Moris & Co., Chartered Accountants pursuant to their certificate dated October 28, 2023

14. Justification for Basis of Offer Price

The following provides an explanation to the Cap Price being [●] times of weighted average cost of acquisition
of primary issuances price and secondary transactions price of equity shares (as disclosed above) along with

148
 our Bank’s KPIs and financial ratios for the Financial Years ended March 31, 2023, March 31, 2022 and March
31, 2021 and in view of external factors, if any

[●]*
* To be included on finalisation of Price Band

15. The Offer price is [●] times of the face value of the Equity Shares

The Offer Price of ₹[●] has been determined by our Bank and the Selling Shareholders, in consultation with the
BRLMs, on the basis of market demand from investors for Equity Shares through the Book Building Process and is
justified in view of the above qualitative and quantitative parameters.

Investors should read the above-mentioned information along with “Risk Factors”, “Our Business”, “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and “Financial Statements” on pages 35, 190, 372, and 304,
respectively, to have a more informed view. The trading price of the Equity Shares could decline due to the factors mentioned
in the “Risk Factors” and you may lose all or part of your investments.

149
 STATEMENT OF SPECIAL TAX BENEFITS

STATEMENT OF SPECIAL TAX BENEFITS AVAILABLE TO ESAF SMALL FINANCE BANK LIMITED (“THE
BANK”) AND THE SHAREHOLDERS OF THE BANK UNDER THE DIRECT AND INDIRECT TAX LAWS IN
INDIA

The Board of Directors

ESAF Small Finance Bank Limited
Building No. VII/83/8
ESAF Bhavan, Mannuthy
Thrissur – Palakkad National Highway
Thrissur – 680 651
Kerala, India

Dear Sirs,

Sub: Statement of possible Special Tax Benefits available to the Bank and its shareholders under the direct and indirect
tax laws

We refer to the proposed initial public offering of equity shares (the “Offer”) of ESAF Small Finance Bank Limited) (“ESAF”
or the “Bank”). We enclose herewith the statement (the “Annexure”) showing the current position of special tax benefits
available to the Bank and to its shareholders as per the provisions of the Indian direct and indirect tax laws including the Income-
tax Act, 1961 (“Act”) as amended by the Finance Act 2023, i.e. applicable for the Financial Year 2023-24 relevant to the
Assessment Year 2024-25, the Central Goods and Services Tax Act, 2017, the Integrated Goods and Services Tax Act, 2017,
the Union Territory Goods and Services Tax Act, 2017, respective State Goods and Services Tax Act, 2017 (collectively the
“GST Act”)-, the Customs Act, 1962 (“Customs Act”) and the Customs Tariff Act, 1975 (“Tariff Act”) (collectively the
“Taxation Laws”) including the rules, regulations, circulars and notifications issued in connection with the Taxation Laws, as
presently in force and applicable to the assessment year 2024-25 relevant to the financial year 2023-24 for inclusion in the Red
Herring Prospectus (“RHP”) and prospectus (“Prospectus”) for the proposed initial public offering of shares of the Bank as
required under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018,
as amended (“ICDR Regulations”).

Several of these benefits are dependent on the Bank or its shareholders fulfilling the conditions prescribed under the relevant
provisions of the Taxation Laws. Hence, the ability of the Bank or its shareholders to derive these direct and indirect tax benefits
is dependent upon their fulfilling such conditions.

The benefits discussed in the enclosed Annexure are neither exhaustive nor conclusive. The contents stated in the Annexure are
based on the information and explanations obtained from the Bank. This statement is only intended to provide general
information to guide the investors and is neither designed nor intended to be a substitute for professional tax advice. In view of
the individual nature of the tax consequences and the changing tax laws, each investor is advised to consult their own tax
consultants, with respect to the specific tax implications arising out of their participation in the Offer particularly in view of the
fact that certain recently enacted legislation may not have a direct legal precedent or may have a different interpretation on the
benefits, which an investor can avail. We are neither suggesting nor are we advising the investors to invest or not to invest
money based on this statement.

We do not express any opinion or provide any assurance whether:

● The Bank or its shareholders will continue to obtain these benefits in future;
● The conditions prescribed for availing the benefits have been/would be met;
● The revenue authorities/courts will concur with the views expressed herein.

This statement is provided solely for the purpose of assisting the Bank in discharging its responsibilities under the ICDR
Regulations. We hereby give our consent to include this report and the enclosed Annexure regarding the tax benefits available
to the Bank and its shareholders in the RHP and Prospectus for the proposed initial public offer of equity shares which the Bank
intends to file with the Securities and Exchange Board of India and the National Stock Exchange of India Limited and BSE
Limited (the "Stock Exchanges") where the equity shares of the Bank are proposed to be listed, as applicable, provided that
the below statement of limitation is included in the RHP and Prospectus.

LIMITATIONS

Our views expressed in the enclosed Annexure are based on the facts and assumptions indicated above. No assurance is given
that the revenue authorities/courts will concur with the views expressed herein. Our views are based on the information,
explanations and representations obtained from the Bank and on the basis of our understanding of the business activities and
operations of the Bank and the existing provisions of taxation laws in force in India and its interpretation, which are subject to
change from time to time. We do not assume responsibility to update the views consequent to such changes. Reliance on the

150
statement is on the express understanding that we do not assume responsibility towards the investors and third parties who may
or may not invest in the initial public offer relying on the statement. This statement has been prepared solely in connection with
the proposed initial public offering of equity shares of the Bank under the ICDR Regulations.

For Deloitte Haskins & Sells For Abarna & Ananthan

Chartered Accountants Chartered Accountants
(Firm’s Registration No. 117365W) (Firm’s Registration No.000003S)

G. K. Subramaniam Mohan Rao G

Partner Partner
Membership No. 109839 Membership No. 203737
UDIN: 23109839BGXQJU6873 UDIN: 23203737BGZDET3625

Place: Mumbai Place: Bengaluru

Date: October 25, 2023 Date: October 25, 2023

151
ANNEXURE TO THE STATEMENT OF SPECIAL TAX BENEFITS AVAILABLE TO ESAF SMALL FINANCE
BANK LIMITED (“BANK”) AND BANK’S SHAREHOLDERS (“SHAREHOLDERS”)

The information provided below sets out the possible special direct and indirect tax benefits available to the Bank and the
Shareholders in a summary manner only and is not a complete analysis or listing of all potential tax consequences of the
subscription, ownership and disposal of equity shares of the Bank, under the current tax laws presently in force in India. Several
of these benefits are dependent on the Shareholders fulfilling the conditions prescribed under the relevant tax laws. Hence, the
ability of the Shareholders to derive the tax benefits is dependent upon fulfilling such conditions, which, based on business /
commercial imperatives a Shareholder faces, may or may not choose to fulfill. We do not express any opinion or provide any
assurance as to whether the Bank or its Shareholders will continue to obtain these benefits in future. The following overview
is not exhaustive or comprehensive and is not intended to be a substitute for professional advice. In view of the individual nature
of the tax consequences and the changing tax laws, each investor is advised to consult their own tax consultant with respect to
the specific tax implications arising out of their participation in the issue. We are neither suggesting nor are we advising the
investor to invest money or not to invest money based on this statement.
The statement below covers only relevant special direct and indirect tax law benefits and does not cover benefits under any
other law.
INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX CONSULTANT WITH RESPECT TO THE TAX
IMPLICATIONS OF AN INVESTMENT AND CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING
OF EQUITY SHARES IN THE SECURITIES, PARTICULARLY IN VIEW OF THE FACT THAT CERTAIN
RECENTLY ENACTED LEGISLATION MAY NOT HAVE A DIRECT LEGAL PRECEDENT OR MAY HAVE A
DIFFERENT INTERPRETATION ON THE BENEFITS, WHICH AN INVESTOR CAN AVAIL IN THEIR
PARTICULAR SITUATION.

STATEMENT OF POSSIBLE SPECIAL DIRECT TAX BENEFITS AVAILABLE TO THE BANK AND
SHAREHOLDERS

A. SPECIAL DIRECT TAX BENEFITS AVAILABLE TO THE BANK

The statement of tax benefits enumerated below is as per the Act as amended from time to time and applicable for financial
year 2023-24 relevant to assessment year 2024-25.

Lower Corporate tax rate under section 115BAA of the Act

• As per section 115BAA of the Act inserted by the Taxation Laws (Amendment) Act, 2019 (“the Amendment Act, 2019”)
w.e.f. April 1, 2020 i.e. AY 2020-21 an option is granted to domestic companies to compute corporate tax at a reduced
rate of 25.17% (22% plus surcharge of 10% and cess of 4%), provided the company does not avail specified
exemptions/incentives and complies with other conditions specified in section 115BAA of the Act. Further, a company
availing such option will not be required to pay Minimum Alternate Tax (“MAT”) on its book profits under section 115JB
of the Act.

However, such company will not be eligible to avail specified exemptions / incentives under the Act and will also need
to comply with the other conditions specified in section 115BAA of the Act. Also, if a company opts for section 115BAA
of the Act, the tax credit (under section 115JAA of the Act), if any, which it is entitled to on account of MAT paid in
earlier years, will no longer be available. Further, it shall not be allowed to claim set-off of any brought forward loss
arising to it on account of additional depreciation and other specified incentives. Further, once a company opts to be taxed
under section 115BAA of the Act in a particular financial year, it cannot withdraw from the option subsequently.

The Bank has exercised the aforesaid option to be taxed at the reduced rate of 25.17% (including surcharge and cess).

Deduction in respect of inter-corporate dividends – Section 80M of the Act

• Dividend is taxable in the hands of the Shareholders, hence, the Bank shall be required to deduct tax at source at applicable
rates specified under the Act, subject to Double Taxation Avoidance Agreement, in case of Shareholders who are eligible
to claim benefit under Double Taxation Avoidance Agreement.

• As per the provisions of section 80M of the Act, a domestic company (“Resident Corporate Shareholder”) can claim a
deduction of an amount equal to dividends received from another domestic company or a foreign company or a business
trust. Such deduction shall be claimed from gross total income of the Resident Corporate Shareholder and shall not exceed
the amount of dividend distributed by it on or before the due date. The “due date” means the date one month prior to the
date for furnishing the return of income under sub-section (1) of section 139 of the Act.

Deduction under section 80JJAA of the Act

152
 • As per the provisions of Section 80JJAA of the Act, where the gross total income of an assessee, to whom provisions of
section 44AB of the Act applies, includes any profit and gains derived from business, then such assessee shall be entitled
to claim a deduction of an amount equal to thirty percent of additional employee cost incurred in the course of such
business in the previous year, for three assessment years including the assessment year relevant to the previous year in
which such employment is provided. The eligibility to claim the deduction is subject to fulfilment of prescribed conditions
specified in sub-section (2) of section 80JJAA of the Act.

Deduction for Bad and doubtful debts

• The Bank, being a Small Finance Bank, is entitled for accelerated deduction of bad and doubtful debts in terms of provision
for bad and doubtful debts up to a specified limit under section 36(1)(viia) of the Act in computing its income under the
head “Profits and gains of Business or Profession”(computed before making any deduction under this section and Chapter
VI-A). The said deduction, which represents a timing difference for tax purposes, is available to the extent of 8.5% of the
gross total income and 10% of the aggregate average advances made by rural branches of such bank, subject to the
satisfaction of prescribed conditions. However, subsequent claim of deduction of actual bad debts under section 36(1)(vii)
of the Act shall be reduced to the extent of deduction already allowed under section 36(1)(viia) of the Act. Where a
deduction has been allowed in respect of a bad debt or part thereof under the provisions of section 36(1)(vii)/36(1)(viia)
of the Act, then, if any amount is subsequently recovered, the said amount is deemed to be profits and gains of business
or profession under section 41 of the Act and is taxable accordingly to the extent it exceeds the deduction earlier allowed.

Other deductions

• Further, the Bank being a Small Finance Bank, is also eligible for a deduction of 20% of the eligible profits or an amount
transferred to the special reserve, whichever is lower, as per the provisions of section 36(1)(viii) of the Act in computing
its income under the head “Profits and gains of Business or Profession” (computed before making any deduction under
this section). However, where the aggregate amounts transferred to such special reserve from time to time, exceeds two
hundred percent of the paid-up share capital and general reserves, the Bank shall not get a deduction for such excess.

• In terms of section 43D of the Act, and subject to the conditions specified therein interest income of a bank and certain
other specified financial institutions on certain categories of bad and doubtful debts as specified in Rule 6EA of the
Income-tax Rules, 1962, shall be chargeable to tax only in the year of receipt or credit to Profit and Loss Account,
whichever is earlier.

B. SPECIAL DIRECT TAX BENEFITS AVAILABLE TO THE SHAREHOLDERS

• The Bank would be required to deduct tax at source on the dividend paid to the Shareholders, at applicable rates specified
under the Act, subject to Double Taxation Avoidance Agreement, in case of Shareholders who are eligible to claim benefit
under Double Taxation Avoidance Agreement. In case of shareholders who are individuals, Hindu Undivided Family,
Association of Persons, Body of Individuals, whether incorporated or not and every artificial juridical person, surcharge
would be restricted to 15%, if the income exceeds INR 1 crore. However, if the income is between INR 50 lakhs to INR
1 crore, surcharge at the rate of 10% shall apply. The Shareholders would be eligible to claim the credit of such tax in
their return of income.

• As per the provisions of section 80M of the Act, a Resident Corporate Shareholder can claim deduction of an amount
equal to dividends received from another domestic company or a foreign company or a business trust. Such deduction
shall be claimed from gross total income of the resident corporate shareholder and shall not exceed the amount of dividend
distributed by it on or before the due date. The “due date” means the date one month prior to the date for furnishing the
return of income under sub-section (1) of section 139 of the Act.

• As per Section 112A of the Act, long-term capital gains arising from transfer of an equity share1, or a unit of an equity-
oriented fund 2 or a unit of a business trust 3 shall be taxed at 10% (plus applicable surcharge and cess) (without
indexation) of such capital gains subject to fulfillment of prescribed conditions under the Act as well as per Notification
No. 60/2018/F.No.370142/9/2017-TPL dated 1 October 2018. It is worthwhile to note that tax shall be levied where
such capital gains exceed INR 1,00,000.

1 Where Securities Transaction Tax (STT) was paid on the acquisition and transfer of such share
2 Where STT was paid on the transfer of such unit
3 Where STT was paid on the transfer of such unit

153
 • As per Section 111A of the Act, short term capital gains arising from transfer of a listed equity share, or a unit of an
equity-oriented fund or a unit of a business trust shall be taxed at 15% (plus applicable surcharge and cess) subject to
fulfillment of prescribed conditions under the Act.

• Non-resident shareholders can offer the income to tax under the beneficial provisions of the Double Taxation
Avoidance Agreement, if any, subject to eligibility and furnishing of requisite documents such as tax residency
certificate, electronically filed Form 10F, No Permanent Establishment Certificate, etc. (as may be applicable) Further,
non-resident shareholders would be eligible to claim the foreign tax credit, based on the local laws of the country of
which the shareholder is the resident. Shareholders being Individual and HUF can opt to be taxed as per the new tax
rates mentioned under section 115BAC of the Act.

• There are no other possible special tax benefits available to the Shareholders for investing in the shares of the Bank.

STATEMENT OF POSSIBLE SPECIAL INDIRECT TAX BENEFITS AVAILABLE TO THE BANK AND
SHAREHOLDERS OF THE BANK

The Central Goods and Services Tax Act, 2017, the Integrated Goods and Services Tax Act, 2017, the Union Territory Goods
and Services Tax Act, 2017, respective State Goods and Services Tax Act, 2017, the Customs Act, 1962 and the Customs Tariff
Act, 1975 (collectively referred to as “Indirect tax laws”)

A. SPECIAL INDIRECT TAX BENEFITS AVAILABLE TO THE BANK

• As per the GST law (vide GST notification no 12/2017- Central Tax (Rate) dated 28 June 2017), income earned out
of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount is
exempted from payment of GST. Thus, interest income earned by Banks is exempted from payment of GST.

• Further, in accordance to the provisions of the GST law, every registered person is required to reverse input tax credit
attributable to the exempt income (arrived by determining the ratio of exempt income over total income). However,
Banks are given an option to reverse merely 50% of their total eligible input tax credit.

B. SPECIAL INDIRECT TAX BENEFITS AVAILABLE TO THE SHAREHOLDERS

• There are no possible special indirect tax benefits available to the Shareholders.

154
 SECTION IV: ABOUT OUR BANK

INDUSTRY OVERVIEW

The industry and market data used in this section have been derived from the CRISIL MI&A Report, which was prepared and
released by CRISIL MI&A in connection with the Offer and commissioned and paid for by us pursuant to an agreement with
CRISIL MI&A dated August 17, 2022, as amended pursuant to an addendum dated March 13, 2023. The CRISIL MI&A Report
is subject to the disclaimer set out in “Certain Conventions, Currency of Presentation, Use of Financial Information – Industry
and Market Data” on page 31. Except as noted otherwise, all forward looking statements, estimates and projections in this
section are CRISIL MI&A’s forward-looking statements, estimates and projections. For risks in relation to the CRISIL MI&A
Report, see “Risk Factors – External Risks –Statistical and industry data in this Red Herring Prospectus are derived from the
CRISIL MI&A Report, which was commissioned and paid for by us for the purposes of the Offer. The CRISIL MI&A Report is
not exhaustive and is based on certain assumptions, parameters and conditions. Reliance on information from the CRISIL
MI&A Report for making an investment decision in the Offer is subject to inherent risks” on page 89.

The use of the letter “E” after a number means it is an estimated number and the use of the letter “P” after a number means it
is a projected number. The use of the symbol “~” means approximately.

Macroeconomic scenario

Global economy is witnessing tightening of monetary conditions

The global economy is witnessing tightening of monetary conditions in most regions. As per the IMF (World Economic Outlook
Update – July 2023), global growth prospects are estimated to fall from 3.5% in 2022 to 3.0% in 2023 and 2024, the impact of
which is expected to be witnessed in the Indian economy as well. The rise in central bank policy rates in a bid to tame inflation
will continue to weigh on economic activity. Global trade is estimated to have reached a record level of approximately US$32
trillion in 2022, but its growth had turned negative during the second half of 2022. The trade outlook for 2023 is expected to be
negatively impacted because of geopolitical frictions, persisting inflation and lower global demand. Further, deceleration in
domestic growth could lead to some softening in imports.

The US economy grew by an annualised 2.1% in the second quarter of 2023, slowing compared with the previous quarter
(2.2%). A deceleration in consumer spending, slowed exports and lower government spending prompted growth to slow down
in the second quarter. The United Kingdom’s (UK) economy grew at 0.2% quarter-on-quarter in the second quarter of 2023 as
compared to 0.3% growth in the first quarter of 2023. Manufacturing activity in China contracted for the first time since the
country reopened after ending its zero-COVID policy. According to IMF, continued weakness in the Chinese real estate sector
is weighing on investment with rising youth employment indicating labour market weakness. Inflation, although high, is easing
in most economies with different economies witnessing different scenarios. The US Federal Reserve (Fed) paused rate hikes in
its September meeting but signalled rate hikes ahead. Bank of England also paused rate hikes in their September meeting while
European Central Bank (ECB) hiked interest rates by 25 basis points at their September 2023 policy meetings.

The Reserve Bank of India (RBI) kept the repo rate unchanged for the third consecutive meeting in August 2023. However, the
RBI’s stance on inflation projections have changed with recent flare up in food prices. RBI signalled greater upside risks to
inflation and also increased its inflation forecast for Fiscal 2024. Monetary Policy Committee (MPC) revised Consumer Price
Index (CPI) inflation forecast by 30 bps to 5.4% in Fiscal 2023. Inflation is expected to increase from 4.6% in the first quarter
(Q1) to 6.2% in Q2 (revised up 100 bps from previous meeting), decrease to 5.7% in Q3 (30 bps up), and further decrease to
5.2% in Q4 (no change). Moreover, bond yields eased significantly as investors factored in a pause in rate hikes. Foreign
Portfolio Investments (FPIs) increased their investment in the Indian markets as global risk sentiment revived with the US
banking turmoil staying largely under control. Equity markets also gained amid the pause in rate hike and rising FPI inflows.

External risks remain high because of the possible impact of elevated interest rates in advanced economies on the leveraged
market segments. However, CRISIL Market Intelligence & Analytics, a division of CRISIL Limited (CRISIL MI&A), expects
India’s macroeconomic fundamentals to improve in Fiscal 2024, which should cushion its vulnerability to global shocks. This,
coupled with a pause on rate hikes by the RBI and US Federal Reserve, should limit tightening of domestic financial conditions
going ahead.

India is expected to remain one of the fastest growing economies amid global slowdowns

As the Indian economy battled the four Cs — COVID-19, conflict (geopolitical), climate change, and central bank actions —
it has shown a fair degree of resilience. Despite global slowdown, tightening of monetary conditions, and high inflation, India
recorded a higher economic growth rate compared with many peer economies owing to its relatively strong local consumption,
lower reliance on global demand, and continued resilience to external blows.

The growth pattern, though, highlights two key features. First, the economy has recovered faster in nominal terms than in real
terms (because of high inflation). Second, official data revisions released in May 2023 peg real GDP growth in Fiscal 2023 at
7.2% year-on-year, which reveals that the economy was more resilient than estimated earlier. This was largely owing to healthy
domestic demand, aided by a catch-up in contact-based services, strong investment activity, government push for capital
expenditure (capex), relatively accommodative financial conditions, and an overall normal monsoon for the fourth time in a
155
row.

CRISIL MI&A expects growth outlook for Fiscal 2024 to be fettered with multiple risks including sluggish exports and lagged
impact of rate hikes manifested fully into the economy. Nevertheless, India is expected to remain the fastest growing economy
in the world with GDP growth of 6.0% projected in Fiscal 2024 as per CRISIL MI&A.

India’s economy to grow at 6.0% in Fiscal 2024

8.3% 9.1%
250 8.0% 7.2% 10%
7.0% 6.3% 6.0%
200 4.5%
5%
Rs Trillion

150
0%
100 217
148 159 169
132 140 147 136 -5%
50 114 123

-7.3%
0 -10%
FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24P FY2028P
Real GDP Growth (Y-o-Y)

Note: FY24 is projected based on CRISIL estimates; FY25-FY28 is projected based on IMF estimates; P: Projected; E: Estimated
Source: CRISIL MI&A, IMF World Economic Outlook – July 2023

Macroeconomic outlook for Fiscal 2024

Macro variables FY23E FY24P Rationale for outlook
Slowing global growth is likely to weaken India’s export in Fiscal 2024.
GDP (year-on-year) 7.2% 6.0% Domestic demand could also come under pressure as Reserve Bank of
India (RBI) rate hikes are transmitted to consumers.
Lower commodity prices, stable core inflation and softened food
Consumer price index
inflation to lower inflation expectation in Fiscal 2024. Food inflation
(CPI) inflation (year-on- 6.7% 5.5%
although lower as compared to last Fiscal is high and hence will remain
year)
a key monitorable.
10-year Government A moderate increase in gross market borrowings is budgeted for Fiscal
security yield 7.4% 7.0% 2024. This, coupled with lower inflation and the RBI’s rate outs, is likely
(Fiscal-end) to moderate yields in Fiscal 2024.
Lower commodity prices, especially in energy space and support from
CAD (Current account
-2.0% -1.8% healthy services exports is expected to lead to moderation of trade deficit
balance)/GDP (%)
in Fiscal 2024.
While a lower current account deficit (CAD) will support the rupee,
Rs/$ (March average) 82.3 83.0 challenging external financing conditions will continue to exert pressure
in the next Fiscal.
Note: E- Estimated, P – Projected;
Source: Reserve Bank of India (RBI), National Statistics Office (NSO), CRISIL MI&A

Positive government measures to aid economic growth

Going forward, CRISIL MI&A expects India’s gross domestic product (GDP) growth to decelerate to 6.0% in Fiscal 2024 from
7.2% in Fiscal 2023 due to a global slowdown, monetary policy impact and a volatile geopolitical scenario. However, some
optimism can be seen in the form of moderating consumer inflation, capital and productivity increases aided by better physical
and digital infrastructure. CRISIL MI&A expects this growth to be supported by the following factors:

• Production linked incentive (PLI) scheme, which aims to incentivise local manufacturing by giving volume-linked
incentives, has been launched by the government for six of the India’s top 10 export verticals, which is likely to propel
incremental exports. In Fiscal 2024, PLI-driven exports will be the lone growth driver for India, helping improve the overall
export growth by 2-4%.

• Focus on investments rather than consumption push enhancing the productive capacity of the economy. Policy push and
new age opportunities to lead capex growth in Fiscal 2024.

• Policies aimed towards greater formalisation of the economy, which are bound to lead to an acceleration in per capita income
growth.

156
Despite the mark-down in near-term growth, CRISIL MI&A expects India to remain a growth outperformer over the medium
term. Stronger domestic demand is expected to drive India’s growth premium over peers in the medium term. Investment
prospects are optimistic given the government’s capex push, progress of Production-linked Incentive (“PLI”) scheme, healthier
corporate balance sheets, and a well-capitalised banking sector with low non-performing assets (“NPA”s). India is also likely
to benefit from the China-plus-one policy as global supply chains get reconfigured with shifting focus from efficiency towards
resilience and friend-shoring. World Economic Forum defines friend-shoring as the rerouting of supply chains to countries
perceived as politically and economically safe of low-risk, to avoid disruption to the flow of business. Private consumption
(which was approximately 58% of GDP as of March 31, 2023) will play a supportive role in raising GDP growth over the
medium term.

Financial Inclusion on a fast path in India

Overall literacy in India is at 77.7% as per the results of recent NSSO survey conducted from July 2017 to June 2018, which is
still below the world literacy rate of 86.5%. However, according to the National Financial Literacy and Inclusion Survey
(NCFE-FLIS) 2019, only 27% of Indian population is financially literate indicating huge gap and potential for financial services
industry. The survey defines financial literacy as combination of awareness, knowledge, skill, attitude and behaviour necessary
to make sound financial decisions and ultimately achieve individual financial wellbeing. According to the World Bank’s Global
Findex Database 2021, the global average percentage of adult population with an account opened with a bank, financial
institution or mobile money provider, was approximately 78% in calendar year 2021. India’s financial inclusion has improved
significantly over calendar years 2014 to 2021 as adult population with bank accounts increased from 53% to 78% (Source:
Global Findex Database) due to the Indian government’s efforts to promote financial inclusion and the proliferation of
supporting institutions.

Adult population with a bank account (%): India vis-à-vis other countries

100%
90%
80%
70%
100%

100%

100%

100%

100%

60%
99%

99%

98%

98%

98%

97%

96%

95%

90%

89%

89%

85%
50%

84%

79%

78%

76%

74%

74%

72%
40%

52%
30%
20%
10%
0%
Russian…
France
Denmark

Japan

Indonesia
Saudi Arabia

Turkey
Spain

United States

Kenya
Germany

South Africa

India
Netherlands

Brazil
Canada

Italy

World
Australia

Thailand

Sri Lanka

China

Argentina
United Kingdom

Singapore

Notes: 1. Global Findex data for India excludes northeast states, remote islands and selected districts. 2. Account penetration is for the
population within the age group of 15+, Source: World Bank – The Global Findex Database 2021, CRISIL MI&A

The two key initiatives launched by the Government to promote financial inclusion are the Pradhan Mantri Jan Dhan Yojana
(PMJDY) and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY). Under the PMJDY, the Government’s aim is to ensure
that every household in India has a bank account which they can access from anywhere and avail of all financial services such
as savings and deposit accounts, remittances, credit and insurance affordably.

As of September 2023, 506 million PMJDY accounts had been opened, of which 67% were in rural and semi-urban centres,
with total deposits of ₹ 2,045 billion. (Source: Pradhan Mantri Jan-Dhan Yojana: Progress Report)

Number of PMJDY accounts Total balance in PMJDY accounts

600 (in Millions) 2,500 (in ₹ billions) 1,988
487 506 2,045
500 451
422 2,000 1,665
383
400 353 1,455
314 1,500 1,184
282
300 961
214 785
1,000 630
200 145
500 357
100 146
0 -

Note: As at the end of each Fiscal and as of September 2023 for H1FY24. Note: As at the end of each Fiscal and as of September 2023 for
Source: PMJDY; CRISIL MI&A H1FY24.
Source: PMJDY; CRISIL MI&A

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PMJJBY is a one-year life insurance scheme that offers a life cover of ₹ 0.2 million at a premium of ₹ 330 per annum per
member, which can be renewed every year. The Government has also launched the Pradhan Mantri Suraksha Bima Yojana
(PMSBY), which is an accident insurance policy and offers an accidental death and full disability cover of ₹ 0.2 million at a
premium of ₹ 12 annually. According to the Ministry of Finance, 162 million and 342 million cumulative enrolments have been
done under PMJJBY and PMSBY, respectively, as of 26th April 2023. (Source: Pradhan Mantri Suraksha Bima Yojana
(PMSBY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Atal Pension Yojana (APY) complete 8 years of providing
social security cover)

Credit penetration is lower in India compared to other countries

In terms of the credit to GDP ratio, India has a low credit penetration compared with other developing countries, such as China,
indicating the potential that can be tapped.

Credit to GDP ratio (%)

223
213
220
227
206

250
201

174

164
163
157

157
200

155

153
152
151

151

151
149
131
130
129
126
122
120
150
99
92

90
90
89

88
86

86
86
84

77
74

73
73
72
100

68
67
66
50

0
India China Brazil Germany South Africa United United States
Kingdom
2018 2019 2020 2021 2022 Q1 2023

Note: Credit from all sectors to private non-financial sector;

Source: Bank of International Settlements, CRISIL MI&A

Rural India – Under penetration and untapped market presents a huge opportunity for growth

Credit to metropolitan centres has decreased over the past few years with its share decreasing from 66% as at March 31, 2018
to 62% as at June 30, 2023. Between the same period, credit share has witnessed a marginal rise in rural and urban centres. For
semi-urban centres, credit share has gone up from 12% as of March 31, 2018, to 13% as of June 30, 2023.

As at March 31, 2023, rural centres, which accounted for 47% of GDP, received just 8% of the overall banking credit, which
shows the vast market opportunity for banks and NBFCs to lend in these centres. With increasing focus of government towards
financial inclusion, rising financial awareness, increasing smartphone and internet penetration, CRISIL MI&A expects delivery
of credit services in rural centre to increase. Further, usage of alternative data to underwrite customers will also help the
financiers to assess customers and cater to the informal sections of the society in these regions.

Share of rural and semi-urban credit has increased marginally between March 31, 2018 and June 30, 2023

100%

80%
66% 66% 65% 63% 62% 62% 62%
60%

40%
15% 15% 15% 16% 17% 17% 17%
20%
12% 12% 12% 13% 13% 13% 13%
0% 7% 7% 7% 8% 8% 8% 8%
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 Q1FY2024

Rural Semi Urban Urban Metropolitan

Note: As at the end of each Fiscal and as of June 2023 for Q1FY2024
Source: RBI, MOSPI, CRISIL MI&A

Indian Banking Industry

Bank credit to move marginally faster than systemic credit

158
Over the past decade, banking credit growth lagged systemic credit growth for several years as NBFCs grew at a much faster
pace. However, the NBFCs suffered a blow after IL&FS defaulted in September 2018. NBFCs, not having the advantage of
size, rating and/or parentage, had to grapple with a liquidity crisis and as raising funding became difficult. Initially, post the
IL&FS crisis, banks were expected to fill the space left out by NBFCs. However, with slower economic growth and muted
private capex, banking credit growth remained low at ~6.8% in Fiscal 2020.

In the fourth quarter of Fiscal 2020 and the first quarter of Fiscal 2021, with the outbreak COVID-19 pandemic, challenges had
intensified for both banks and NBFCs. NBFCs were hit harder in terms of demand, and they also turned cautious as they lend
to borrowers with relatively weaker credit profile. In the second half of Fiscal 2021, the Indian economy showed signs of
improvement, the effect of which was seen in the credit growth.

At the end of Fiscal 2021, the banking credit grew by ~5% on year while NBFCs witnessed a growth of 7.3% during the same
period. In Fiscal 2022, the second wave of the COVID-19 pandemic led to weak demand for credit in the first quarter of the
year. However, the pace of credit recovered, with overall credit growing by 8.4% and retail credit increasing by 11.6% year-
on-year as of March 2022. Further, high frequency indicators point out that economic activity and consumer spending is
returning to pre-COVID-19 levels. With the effect of COVID-19 waning, vaccination coverage progressively improving, the
situation and growth improved further.

Due to COVID-19 pandemic, demand for credit reduced drastically on account of economic activity coming down to standstill
due to lockdown led sharp fall in disbursements. However, there was a pickup in disbursements since the second half of Fiscal
2022, a trend that continued in Fiscal 2023. The bank credit demand was broad based in Fiscal 2023 growing at 15% year on
year. There was strong retail credit demand from segments like personal loans, consumer durables, credit card, vehicle loans
etc.

Going forward, credit to the overall retail segment is expected to lead the growth of the banking sector, supported by healthy
growth in housing, consumer durable, gold and other personal loans segments. CRISIL MI&A expects bank credit to grow at
12-14% CAGR between Fiscal 2023 and Fiscal 2025.

• Bank credit to clock a CAGR of 12-14% through Fiscal 2023 to Fiscal 2025

200 172

150 137
109 119
96 102
100 85

50

0
FY18 FY19 FY20 FY21 FY22 FY23 FY25P
•
Note: P: Projected; As at the end of each Fiscal.
Source: RBI, CRISIL MI&A

Retail segment is estimated to account for 32% of overall Retail credit growth to continue a strong footing in
systemic credit as of March 31, 2023 Fiscal 2024 and 2025
100% (In Rs. Tn)
90% 90
77
80% 80
68
70% 70
67%
60% 74% 74% 71% 71% 70% 68% 67% 60
59
50
50% 50 45
41
40% 40 35
30
30% 30
20% 20
33%
10% 26% 26% 29% 29% 30% 32% 33%
10
0% 0
FY18 FY19 FY20 FY21 FY22 FY23 FY24P FY25P FY18 FY19 FY20 FY21 FY22 FY23 FY24PFY25P
Systemic non-retail credit (%) Systemic retail credit (%)
Systemic retail credit (In INR tn)

Note: E: Estimated; P = Projected. As at the end of each Fiscal.

Source: RBI, CRISIL MI&A

159
Bank deposits to grow 11-12% in Fiscal 2024

In Fiscal 2018, deposit growth rate fell to its lowest in over 55 years to ~7%, as the effect of demonetisation subsided, and
households moved their savings from deposits to other lucrative instruments such as shares and debentures. However, in Fiscal
2019, deposit growth picked up and clocked 11%, in the wake of capital market volatility and higher deposit rates offered by
the banks. In addition, inclusion of more people under the formal financial services channel improved deposit mobilisation as
players continued to expand in the underbanked centres. Banking deposit growth was higher in semi-urban centres as compared
to urban and rural centres, which witnessed similar growth.

In Fiscal 2020, with slowdown in the economy, deposits grew at a moderate ~9%. The banking sector witnessed movement of
deposits from private sector banks to public sector banks as one of the private sector banks gross NPAs spiralled. Towards the
end of Fiscal 2020, Yes Bank was put under moratorium for 30 days, wherein withdrawal of deposits was restricted before a
management change was effected by the regulator and the central Government. Earlier, in 2019, the RBI had imposed
operational restrictions and restrictions on withdrawals from Punjab and Maharashtra Co-operative Bank Limited after finding
financial irregularities. Fiscal 2020 also saw deposit rates coming down with lending linked to an external benchmark and
interest rate cycle on a downward scenario, resulting in banks reducing deposit rates to preserve their spread.

With the outbreak of COVID-19 in the last quarter of Fiscal 2021, conserving money became a priority and households reduced
their private consumption, leading to a 11% deposit growth in Fiscal 2021.

The weighted average domestic term deposit rate declined 80 bps from 6.07% as of April 30, 2020 to 5.28% as of March 31,
2021. (Source: CRISIL MI&A). With the RBI maintaining its accommodative stance with policy rates unchanged for the entire
Fiscal 2022, the weighted average term deposit rate declined a further 25 bps to 5.03% as of March 31, 2022. RBI hiked the
policy rates by 40 bps in May 2022, 50 bps in each of June 2022, August 2022 and September 2022, 35 bps in December 2022
and 25 bps in February 2023 taking the repo rate to 6.50% as of February 2023. With this, the weighted average term deposit
rate moved upwards to 5.90% as of January 31, 2023. Further, the incremental credit to deposit ratio rose to more than 100%
during the second quarter of Fiscal 2023 and deposit growth continued to lag credit growth.

CRISIL MI&A expects deposits rate to inch up with increase in competition and to support the credit growth. However, the
increase in Fiscal 2024 might be at a slower pace on account of new taxation rule that will come into effect from April 1, 2023,
which will take away tax advantage from most debt mutual funds and will give edge to bank fixed deposits. Hence, the deposits
are expected to grow by 11-12% in Fiscal 2024.

Share of current and savings deposits decreased as of June 30, 2023

100%
80%
58% 58% 58% 56% 55% 56% 58%
60%
40% 9% 9% 9% 10% 10% 10% 9%
20% 33% 33% 33% 34% 35% 34% 32%
0%
FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24

Savings Current Term

Note: As at the end of each Fiscal and quarter for Q1FY24. Data includes data for banking deposits of public sector banks, private sector
banks, regional rural banks, foreign banks and small finance banks
Source: RBI, CRISIL MI&A

Share of bank deposits in rural and semi-urban centres has increased over the last decade
100%
90%
80%
57% 53% 51% 52% 54%
70%
60%
50%
40% 22% 22%
21% 22% 22%
30%
20% 15% 16% 16% 16%
13%
10%
9% 10% 11% 10% 9%
0%
FY10 FY15 FY20 FY23 Q1FY24

Rural Semi Urban Urban Metropolitan

Note: As at the end of each Fiscal and quarter for Q1FY24.

160
Source: RBI, CRISIL MI&A

SFBs share in overall banking credit and banking deposit at 1.4% and 0.9% respectively as of March 31, 2023

1.8% 1.6%
1.6% 1.4% 1.4%
1.4% 1.2% 1.2%
1.2% 1.1%
0.9% 0.9% 0.9%
1.0%
0.7%
0.8% 0.6% 0.6%
0.6% 0.5%
0.4%
0.4% 0.3%
0.1%
0.2%
0.0%
FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24 FY25P
SFB share in Banking Credit SFB share in Banking Deposit

Note: As at the end of each Fiscal and quarter for Q1FY24. P: Projected
Source: RBI, CRISIL MI&A

Credit-to-deposit ratio

76.1% 75.8%
74.4% 74.3%
73.5%

69.5% 69.9%

FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24

Note: As at the end of each Fiscal and quarter for Q1FY24; Source: RBI, CRISIL MI&A

GNPA of banks is expected to improve further to 3.8-4.0% in Fiscal 2024

The pandemic resulted in one of the worst economic declines in decades. Airlines, hospitality, travel, gems and jewelry, auto
dealers, and real estate were hit the hardest, given the discretionary nature of these sectors. Both collections and disbursements
were impacted significantly in the first half of Fiscal 2021. However, with measures taken by the government and the RBI
assisting in containing the deterioration in asset quality, overall GNPA ended Fiscal 2021 at 7.4%.

About 0.9% of the total credit outstanding was restructured by the RBI as of March 2021 under the one-time restructuring
framework 1.0, which was significantly lower than earlier estimates. In the case of public banks, the majority of the
restructurings come from the corporate sector. In the case of large and mid-size private sector banks, the proportion of retail
assets in total restructuring (invoked + implemented) was relatively high.

On May 5, 2021, the RBI announced the restructuring framework 2.0 to protect individuals and MSMEs from the adverse
impact of the second wave. The resolution facility was applicable for accounts classified as ‘Standard’ as at March 31, 2021,
wherein individuals and MSMEs having an aggregate loan exposure of up to ₹250 million who have not availed restructuring
under any of the earlier restructuring frameworks and who were classified as ‘Standard’ as on March 31, 2021 were allowed to
restructure their loans. Restructuring under the proposed framework was able to be invoked up to September 30, 2021 and had
to be finalised and implemented within 90 days after invocation of the resolution process (with the last date to implement the
restructuring for banks being December 31, 2021). This framework saw better response from corporate borrowers. CRISIL
MI&A estimates the overall restructuring (1.0 and 2.0) at ~1.4% of the loans outstanding as of March 2023. However, the stress
on account of slippages from this portfolio remains to be monitored.

GNPA of both private and public banks improved in Fiscal 2022 on account of reduction in fresh slippages and improvement
in upgrades and recoveries. GNPA of scheduled commercial banks stood at a six-year low of ~5.9% as of March 2022. CRISIL
MI&A estimates the GNPA of scheduled commercial banks to have declined further in Fiscal 2023 on account of lower
slippages, higher recoveries and expectation of recoveries via the NCLT and National Asset Reconstruction Company Ltd
(NARCL) route.

161
Going forward, CRISIL MI&A expects GNPA of banks to improve to 3.8%-4.0% in Fiscal 2024 due to robust collections,
upgrades for large corporate accounts and lower slippages.

GNPAs of banks to improve to 3.8-4.0% in Fiscal 2024

12.0% 11.3%

10.0% 9.0% 8.5%

7.4%
8.0%
5.9%
6.0% 4.2% 3.8%-4.0%
4.0%
2.0%
0.0%
FY18 FY19 FY20 FY21 FY22 FY23 FY24P
Note: As at the end of each Fiscal P – Projected
Source: RBI, Company Reports, CRISIL MI&A

Profitability to improve in Fiscal 2024

The Reserve Bank of India cut the repo rate by ~225 bps (including 40 bps cut in Fiscal 2021) since March 2019. Since the RBI
perceived that banks tend to transmit interest rates more rapidly in a rising rate scenario than in reducing interest rate regime,
the RBI introduced new guidelines on external benchmark linking rates (EBLR; linked to repo rate), mandating banks to link
all new personal or retail floating rate loans, and micro, small and medium enterprises floating rate loans to the external
benchmark effective October 1, 2019.

As a result, interest earned as a percentage of total assets declined ~40 basis points (bps) to 6.6% in Fiscal 2021 with lowering
of the repo rate. However, with interest expended as a % of total assets reducing ~60 bps, Net Interest Income rose ~20 bps.
The apex bank-maintained status quo on the repo rate at 4% in Fiscal 2022 and, hence, interest expended as a percentage of
total assets declined further to 3.2%.

In Fiscal 2023, to tackle inflation RBI started increasing policy repo rate rating by 40 bps in May 2022 and 50 bps in June,
August and September 2022, 35 bps in December 2022 and 25 bps in February 2023, taking policy repo rate to 6.50%. With
faster increase in repo rates the yield on loans are expected rise quicker as compared to historical trend due to implementation
of new guidelines on EBLR linking of loans and cost of deposits to rise at a slower pace since banks will be benefitted by lower
cost of funds during Fiscals 2022 and 2023.

During Fiscal 2023, CRISIL MI&A estimates interest earned as a percentage of total assets to have risen by ~80 bps and interest
expended as a percentage of total assets to have risen by ~40%, resulting in an improvement in Net Interest Income to total
assets at 3.3%.

Operating profitability of banks to improve in Fiscal 2024

Small finance banking industry

In order to promote financial inclusion, the Indian banking industry has seen several changes in recent years. NBFCs, such as
Bandhan and IDFC, received permission to set up universal banks. Also, a few microfinance companies, a local area banks and
an NBFC as well as one urban co-operating bank have received permission to set up small finance banks (SFBs). The RBI
awarded SFB licences to 12 players keeping in with the government’s focus on financial inclusion and inclusive banking.

Growth drivers for small finance banks

• Customized products aided by technology and information availability

Greater use of technology is enabling lenders to provide customised products, that too at much lower turnaround time. Multiple
data points are available for lenders that is facilitating quick decision making. In fact, they can take lending decisions within
minutes using data-driven automated models. These models would help in supply of credit to small business units and the
unorganised sector at low cost. Technology also helps these players expand their reach to under penetrated population in remote
centres at a lower operating cost.

• Availability of funds at cheaper rates

CASA and other retail deposits are a cheap source of funds for SFBs, which help them expand their product portfolio. They
can provide lower rates in the market to compete with NBFCs. With SFBs expanding in the underserved regions further, their

162
deposit base is expected to further widen. The CASA deposits for SFBs is estimated to have grown at 66% CAGR from Fiscal
2018 to Fiscal 2023. This will give them an advantage over NBFCs and help expand their asset book.

Industry growth and outlook

• Huge opportunity to support growth over next three years (AUM)

3,000 2,700-2,800

2,500
1,991
2,000 1,879

1,442
1,500 1,179
1,003
1,000 745
520
500

-
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 Q1FY2024E FY2025P
•
Note: P: Projected; The amounts are as of the end of the quarter/period/Fiscal indicated.
Source: Company reports, CRISIL MI&A

The small finance banks’ advances under management (which is gross advances plus off-balance sheet advances (“AUM”) is
estimated to have clocked 29% CAGR from March 31, 2018 to June 30, 2023. CRISIL MI&A estimates that the top three SFBs
accounted for ~60% of the aggregate AUM as of June 30, 2023, up from 55% as of March 31, 2017 indicating the rising
concentration and expansion of players within the SFBs. CRISIL MI&A also estimates that the top six players accounted for
~85% of the market share as of June 30, 2023. In Fiscals 2021 and 2022, new loan origination remained low as SFBs turned
cautious and selective in disbursals due to the pandemic. However, as economy revived and business operations normalised,
SFBs’ AUM witnessed strong growth post pandemic. As of June 30, 2023, SFB AUM is estimated to have crossed ₹1,900
billion. CRISIL MI&A expects SFB’s AUM to grow at ~22-24% CAGR between June 30, 2023 and March 31, 2025, as most
of the SFBs have completed the transition phase and are likely to benefit from their operating leverage.

Growth in SFB AUM will be driven by following factors:

• Huge market opportunity in the rural segment – Despite its larger contribution to GDP of 47%, the rural
segment’s share in credit remains fairly low at ~8-9% of the overall credit outstanding as of March 31, 2023. This
provides a huge market opportunity for SFBs and other players present in the segment
• Presence of informal credit channels – In remote centres, informal credit channels have a major presence. In other
words, there is a huge section of unbanked population. SFBs have an opportunity to tap this market
• Geographic diversification – With increased focus on diversifying their portfolio and expanding their reach, SFBs
are expected to log higher growth as they tap newer geographies
• Loan recovery and control on aging NPAs – SFBs are experienced in collection and monitoring of default risk.
This will help them keep asset quality under check
• Ability to manage local stakeholders – With their microfinance experience, SFBs have the ability to manage local
stakeholders and maintain operational efficiency
• Access to low-cost funds & huge cross sell opportunity– SFBs’ cost of funds is low substantially as they are
allowed to raise CASA deposits. This will also help them lend at more reasonable rates to its customers, hence
enhancing their cross-sell opportunity in terms of asset products, insurance etc.

163
 Top six players accounted for 85% of industry AUM as of June 30, 2023

Shivalik , 1%
North East, 1%
AU , 32%
Unity, 2%
Capital , 3%
Suryoday , 3%

Fincare , 5%
Equitas , 15%
Utkarsh,
7%

ESAF , Ujjivan ,
9% Jana , 13%
11%

Note: The market share is estimated as of June 30, 2023.

Source: Company reports; CRISIL MI&A

Gross advances across regions for SFBs as of June 30, 2023

100% 1% 1% 2% 2% 2% 1% 1%
7% 9% 10% 9% 9% 9% 9%
8% 10%
80% 11% 13% 15% 15% 14%
18% 16% 15% 18% 18% 19%
60% 21%
31% 33%
40% 36% 29% 28% 26% 31%

20% 35% 32% 26% 28% 28% 28% 26%

0%
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 Q1FY2024

North South West Central East North-east

Note: The percentages are as of the end of the Fiscal indicated and quarter for Q1FY2024.
Source: RBI, CRISIL MI&A
SFBs continue to diversify their portfolio beyond microfinance business

Eight of the 10 firms that got SFB licences in the initial phase were MFIs and for most of them, microfinance is the central
product. The microfinance segment is estimated to account for 34% (including Capital and AU SFB) of the overall business of
SFBs as of March 31, 2023.

In fact, SFBs have shifted their focus from microfinance to other products. But their core customer base is unlikely to have
changed much because of the regulatory norms. After the conversion of NBFC-MFIs to SFBs, the focus is now on diversifying
the product portfolio. As a result, the share of their MFI portfolio in total advances reduced to 34% as of March 31, 2023 from
90-95% as of March 31, 2016. Going forward, SFBs will have to focus on small-ticket size lending to financially under-served
and un-served segments (loans below ₹2.5 million will have to form at least 50% of their loan portfolio (gross advances).
CRISIL MI&A expects MFIs that converted to SFBs to further diversify and focus on allied segment loans, such as MSME
loans, affordable housing finance, gold loans, CV/non-CV loans and two-wheeler loans, which will reduce the dominance of
microfinance in their overall loan portfolio.

164
Advances mix for small finance banks

66% 77%
44% 56% 52% 48%
34% 23%

FY18 FY23 FY18 FY23

With AU and Capital SFB Without AU and Capital SFB
MFI business Non MFI business
Notes: E: Estimated, 1) Capital and AU SFB are excluded as they mostly deal with non-MFI business, 2) Portfolio mix calculated on best
available information 3) Graph includes data for 12 SFBs. The percentages are as of the end of the Fiscal indicated.
Source: Company reports, CRISIL MI&A

Top three players estimated to account for 40% of the total functioning offices as of June 30, 2023

Capital , 3% Shivalik , 1%
North East, 3%
Unity, 5%

Suryoday , 8% Equitas , 14%

Fincare , 13%
Jana , 9%

Utkarsh, 13%
Ujjivan ,
10%

ESAF ,
10% AU , 12%

Source: RBI; CRISIL MI&A

CRISIL MI&A estimates that the top three players accounted for 40% of the total number of functioning offices as of June 2023.
Expansion of functioning offices has also helped diversification of loan portfolios and overcome geographic concentration.

Share of semi-urban branches and rural branches constant as of June 30, 2023
100%
20% 20% 18% 17% 18% 18% 18%
80%
60% 32% 37% 38% 38% 37% 37% 37%

40%
25% 25% 25% 26% 26% 25% 25%
20%
23% 18% 18% 19% 19% 20% 20%
0%
FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24

Metropolitan Urban Semi-urban Rural

Note: Rural: Population less than 10,000, Semi urban: 10,000 <=Population <0.1 million, Urban: 0.1 million <=Population <1 million,
Metropolitan: Population 1 million and above. The percentages are as of the end of the Fiscal indicated and quarter for Q1FY24.
Source: RBI, CRISIL MI&A

SFB deposits to grow faster than private and public-sector banks

SFBs have a significant growth potential as most of them were functioning as NBFCs/MFIs previously. Immediately after
commencement of their operation, all SFBs focused on increasing their deposit base. Their overall deposit base doubled to around
₹375 billion as of March 31, 2019. Further, the proportion of CASA deposits is estimated to have shot up from nearly ~20% as
of March 31, 2020 to ~36% as of June 30, 2023. The increase could be attributed to the higher interest rates they offer and the
increase in their branch network.

165
Deposit for SFBs reached ₹1,971 billion at the end of June 2023. Going forward, CRISIL MI&A expects SFBs’ deposit to grow
at 40-45% CAGR over June 2023 and March 2025 as players focus on popularizing convenient banking habits to cover the last
mile and widen financial inclusion by deepening their penetration in untapped geographies.

SFB deposits to grow robustly

4,000 (in Rs billions) 3,300-3,400

3,000
1,914 1,971
2,000
1,211
877
1,000 625
375
167
-
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 Q1FY2024E FY2025P
Note: Amounts are as at the end of the Fiscal indicated and quarter for Q1FY24; P: Projected, E: Estimated.
Source: Company reports, CRISIL MI&A.

Around 80% deposits is from metropolitan and urban regions for SFBs
100% 7% 5% 4% 4% 4% 4% 4%
90% 16% 16% 16% 15% 15% 15%
14%
80%
70% 21% 25% 29% 29%
28% 29% 29%
60%
50%
40%
30% 57% 54% 52% 51% 52% 52% 52%
20%
10%
0%
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 Q1FY2024

Metro Urban Semi-urban Rural

Note: As at the end of each Fiscal and quarter for Q1FY24. Rural: Population less than 10,000, Semi urban: 10,000 <=Population <0.1
million, Urban: 0.1 million <=Population <1 million, Metropolitan: Population 1 million and above
Source: RBI, CRISIL MI&A

• Share of retail deposits to total deposit for SFBs is estimated at 72% as at June 30, 2023
•

Bulk
Deposit ,
28%

Retail
Deposit ,
72%

•
Note: Retail deposit include CASA and Retail term deposits; Data excludes data for Jana and North East SFB;
Source: Company reports, CRISIL MI&A

CASA Deposits for SFBs reached ₹ 581 billion as at June 30, 2023

166
 (in Rs. billions)
800
617 581
600 490
400 259
200 90 125
51
0
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 Q1FY2024
Note: The amounts are as of the end of the Fiscal indicated and quarter for Q1FY24.
Source: RBI, CRISIL MI&A

CASA Ratio for small finance banks

50%
41%
38% 36%
40%
31% 30%
30% 24%
20%
20%
10%
0%
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 Q1FY2024
Note: As at the end of each Fiscal.
Source: RBI, Company Reports, CRISIL MI&A

Over the next couple of years, CRISIL MI&A expects SFBs to focus on gradually building their banking business and
complying with tougher regulatory norms. In addition, transformation into SFBs will provide access to stable and granular
public deposits over the long run, which will bring down their cost of funds.

Transformation in Resource profile of SFBs

The resource profile of SFBs has completely transformed in the last two to three years owing to a decrease in share of
borrowings from 44% as of March 31, 2018 to 12% as of March 31, 2023 and a rise share of deposits from 38% to 71% during
the same period. In Fiscal 2023, the deposit rate lagged the credit growth rate. Further, CRISIL MI&A expects the deposits rate
to inch up with increase in competition and to support the credit growth. Their asset-liability management (ALM) profile
remains comfortable owing to conservative liquidity policy, mobilisation of deposits and shorter tenure loans. Their liquidity
profile is also supported by regulatory requirements such as higher requirement of minimum net owned funds ensuring capital
adequacy and mandatory maintenance of CRR/SLR ratio, which provides access to call money market and provide better
cushion than other NBFCs.

Rapid ramp-up in deposits for SFBs

4% 4% 3% 4% 6% 5%
22% 17% 13% 12%
28%
44%

67% 70% 71%

63%
56%
38%

8% 7% 8% 9% 8% 9%
6% 5% 4% 3% 3% 3%
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023
Capital Reserve and Surplus Deposits Borrowing Other Liabilities and Provisions
Note: E = Estimated; the percentages are as at the end of the Fiscal indicated.
Source: Company reports, CRISIL MI&A

Profitability for SFBs bounced back in Fiscal 2023

In Fiscal 2020, the return on assets (RoA) of SFBs increased by 20-30 bps. However, outbreak of COVID-19 followed by the
nationwide lockdown in the month of March 2020, caused a rise in Credit Costs for SFBs who made special COVID-19

167
provisioning, in addition to standard provisioning as of March 31, 2020. In Fiscal 2022, the industry RoA declined sharply to
0.7% from 1.5% in Fiscal 2021 and 1.9% in Fiscal 2020 largely due to increased provisioning made by many players in the
industry, considering the likely impact of COVID-19 on asset quality. Players who had adequate capital went for front loading
of Credit Costs in Fiscal 2021 itself, while players who had lower margins and higher operating costs spread out the increased
provisioning over the course of Fiscal 2021 and Fiscal 2022.

In Fiscal 2023, to tackle inflation, RBI started increasing policy repo rating by 40 bps in May 2022, 50 bps in June, August and
September 2022, and an additional 25 bps increase in February 2023. With faster increase in repo rates, yields on loans rose
quickly. Moreover, interest earned for SFBs increased at a faster pace than interest expended, which resulted in an improvement
in Net Interest Margins (NIM). As at March 31, 2023, the Net Interest Income ratio is estimated to reach 7.5% from 6.8% in
Fiscal 2022. Improvement in profitability is estimated to increase return on assets (RoA) of SFBs to 2.1% in Fiscal 2023 from
0.7% in Fiscal 2022.

Going forward, increasing interest earned coupled with a reduction in Opex Ratio and Credit Cost because of improved collection
efficiency is expected to augment profitability for small finance banks.

Increasing Credit Cost amid COVID-19 pandemic weighed on profitability of SFBs

RoA tree (SFB) FY19 FY20 FY21 FY22 FY23

Interest earned 14.1% 14.5% 12.9% 11.8% 12.5%
Interest expended 6.6% 6.7% 6.0% 5.0% 5.1%
Net Interest Income 7.5% 7.8% 6.9% 6.8% 7.5%
Opex ratio 6.1% 5.8% 4.9% 5.3% 5.5%
Other income 2.0% 1.7% 2.1% 1.6% 1.6%
Credit Cost 0.9% 1.3% 2.2% 2.3% 1.0%
RoA 1.6% 1.9% 1.5% 0.7% 2.1%
Note: E: Estimated Numbers are based on Ind-AS,. Data excludes Jana, Northeast SFB, Shivalik SFB and Unity SFB.
Source: Company reports, CRISIL MI&A

Asset quality for SFBs to marginally improve after pandemic related stress

GNPA of SFBs improved to 1.6% as of March 31, 2019 from 2.2% as of March 31, 2018 which was majorly impacted by
demonetization and residual asset quality issues. This could be attributed to diversification of product mix into relatively less
risky assets, write-off of legacy loans and reduction in microfinance loans due to better collection mechanism and deep
understanding of their local geographies and customers. In Fiscal 2021, SFBs faced severe asset quality issues, as near-term
collections saw disruptions on account of COVID-19. However, RBI in March 2020 announced the moratorium on term loans/
working capital for instalments falling due between March 1, 2020 and May 31, 2020. This was subsequently extended in May
2020 by another three months to August 31, 2020. A stand-still in asset classification for accounts availing the moratorium was
provided from March 1, 2020 to August 31, 2020. For all accounts classified as standard as on February 29, 2020, even if
overdue, the moratorium period, wherever granted, was to be excluded by the lending institutions from the number of days
past-due for the purpose of asset classification.

Despite government measures, the lockdown impacted the low- and middle-income segments the most. They also happened to
be the target audience of SFBs. While banks offered moratorium period to borrowers, SFBs’ asset quality deteriorated due to
difficulties faced by their borrowers. As of March 31, 2022, the GNPAs improved marginally to 3.9%. In Fiscal 2023, the asset
quality of SFBs improved on account of lower slippages, writing offs and improved collection efficiencies. GNPA for SFBs is
at 2.9% at March 31, 2023 and 2.3% as at June 30, 2023.

Going forward, the asset quality of SFBs is expected to improve further, however, it will vary depending on efficiency in credit
underwriting, monitoring and collection over the long term.

GNPA trend of overall SFB Industry

168
 4.5% 4.1%
3.9%
4.0%
3.5%
2.9%
3.0%
2.5% 2.2% 2.3%
1.9%
2.0% 1.6%
1.5%
1.0%
0.5%
0.0%
FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 Q1FY2024E
Note: E= Estimated; Data excludes data for Jana SFB and North-east SFB. Percentages are as of the end of the Fiscal.
Source: Company reports, CRISIL MI&A

Peer Comparison

In this section, CRISIL MI&A compared ESAF SFB with all its peers in India based on the latest available data for Fiscals
2021, 2022 and 2023 and three months ended Fiscal 2024. Capital SFB, North East Small Finance Bank and Shivalik Small
Finance Bank are not considered as peer banks as these banks are comparatively smaller in terms of scale. CRISIL MI&A also
looked at large listed NBFC-MFI players like Credit Access Grameen, Fusion Microfinance and Spandana Sphoorty since many
SFBs were present in this space before switching to SFB. CRISIL MI&A has also analysed the performance of Bandhan Bank
which was a former MFI before obtaining a banking license.

ESAF SFB reported the highest AUM growth over Fiscals 2021 to 2023 among the compared SFBs

ESAF SFB was the fifth largest SFB in India in terms of AUM as on June 30, 2023. Among the compared SFBs, ESAF posted
the fastest AUM CAGR of 39% over Fiscals 2021 to 2023. Among all the compared peers, Equitas SFB, ESAF SFB, Ujjivan
SFB and Fincare SFB reported the fastest year-on-year AUM growth of 35.2%, 34.6%, 32.3% and 32.1% respectively as of
March 31, 2023.

ESAF SFB reported the second highest year on year AUM growth for three months ended Fiscal 2024 among compared
SFBs

Article I. Among the compared SFBs, ESAF posted the second highest AUM growth of 35% year on year as of Q1FY24
after Equitas SFB (36%).

AUM year- AUM year- AUM AUM year-

AUM
AUM AUM AUM on-year on-year CAGR on-year
(Rs. Billion) (Q1
(FY21) (FY22) (FY23) growth growth (FY21- growth
FY24)
(FY22) (FY23) 23) (Q1FY24)
SFBs
AU SFB 377 478 592 636 27% 24% 25% 27%
Equitas SFB 179 206 279 296 15% 35% 25% 36%
Ujjivan SFB 151 182 241 253 20% 33% 26% 30%
Jana SFB 128 153 201 NA 12% 20% 18% NA
ESAF SFB 84 123 163 172 46% 32% 39% 35%
Utkarsh SFB 84 106 140 144 26% 32% 29% 31%
Fincare SFB 61 76 99 NA 24% 32% 27% NA
Suryoday SFB 42 51 61 64 20% 21% 21% 24%
NBFC-MFIs
CreditAccess
113 137 176 218* 21% 28% 25% 40%#
Grameen Ltd.
Fusion Microfinance
46 68 93 97 46% 37% 42% 31%
Pvt. Ltd.
Spandana Sphoorty
73 66 85 88 -19% 29% 2% 60%
Financial Ltd.
Banks-MFI
Bandhan Bank 870 993 1091 1032 14% 10% 12% 7%
Note: 1) Players are arranged in descending order of AUM as of June 30, 2023. 2) (*) Post merger with Madura Micro Finance Limited 3)
(#) Year on year growth rate calculated on the consolidated AUM of Credit Access Grameen Ltd. and Madura Micro Finance Limited as of
June 30, 2022.
Source: Company reports, CRISIL MI&A

ESAF SFB posted the fourth highest deposit growth over Fiscals 2021 to 2023 amongst the compared peers

ESAF SFB reported fourth highest deposit growth of 28% over Fiscals 2021 to 2023 among the compared peers including
banks-MFI, with Ujjivan SFB reporting the highest deposit growth of 40% over Fiscal 2021-23. This is followed by AU SFB,

169
which reported 39% deposit growth over the same period. Ujjivan SFB reported the fastest deposit growth year-on-year of 40%
in Fiscal 2023.

Comparison of deposit growth

Deposits Deposits Deposits Deposits
year-on- year-on- CAGR year-on-
Deposits Deposits Deposits Deposits
(Rs. Billion) year year (FY21- year
(FY21) (FY22) (FY23) (Q1FY24)
growth growth 23) growth
(FY22) (FY23) (Q1FY24)
SFBs
AU SFB 360 526 694 693 46% 32% 39% 27%
Equitas SFB 164 190 254 277 16% 34% 24% 36%
Ujjivan SFB 131 183 255 267 39% 40% 40% 45%
Jana SFB 124 135 163 168 9% 21% 15% 25%
ESAF SFB 90 128 147 157 42% 15% 28% 16%
Utkarsh SFB 75 101 137 140 34% 36% 35% 36%
Fincare SFB 53 65 80 NA 21% 24% 23% NA
Suryoday SFB 33 39 52 57 18% 34% 25% 42%
Banks – MFI
Bandhan Bank 780 963 1081 1085 24% 12% 18% 17%
Source: Company reports, CRISIL MI&A

ESAF SFB has the highest proportion of retail deposits in total deposits as of June 30, 2023
ESAF SFB had the highest retail deposits as a percentage of total deposits at 89.3% as of June 30, 2023. Also, ESAF SFB was
third in deposits to net advances (loan book) at 109.3% and fifth in deposits to overall borrowings at 85.1% among the compared
SFBs as of June 30, 2023. This reflects greater granularity in ESAF SFB’s deposits base.

Deposits to net Deposits to CASA to Retail Term Bulk Deposits

Retail Deposits
As of June 30, advances (loan total total Deposits to total to total deposits
to total
2023 book) borrowings deposits deposits (%)
deposits (%)
(%) (%) (%) (%)
SFBs
AU SFB 110.3% 90.1% 67.7% 35.0% 32.6% 31.3%
Equitas SFB 100.7% 88.4% 76.6% 38.4% 38.2% 23.4%
Ujjivan SFB 120.3% 91.3% 65.7% 24.6% 41.1% 33.5%
Jana SFB* 92.0% 72.2% 70.2% 20.2% 50.0% 29.7%
ESAF SFB 109.3% 85.1% 89.3% 18.2% 71.1% 10.7%
Utkarsh SFB 103.4% 86.2% 62.0% 19.0% 42.0% 38.0%
Fincare SFB* 99.5% 74.3% 79.8% 33.1% 46.7% 20.2%
Suryoday SFB 92.6% 69.2% 75.7% 14.9% 60.7% 24.3%
Banks-MFI
Bandhan Bank 110.5% 85.2% 71.2% 36.0% 35.2% 28.8%
Notes: 1) Retail Deposits comprises CASA and Retail Term Deposits, which are term deposits of less than Rs. 20 million. 2) CASA to total
deposits (CASA ratio) is calculated based on total deposits 3) Bulk Deposits are term deposits of Rs. 20 million or more 4) (*) Data as of
Fiscal 2023
Source: Company reports, CRISIL MI&A
ESAF SFB has the highest growth rate of banking outlets year on year for Q1FY24
For Q1FY24, ESAF SFB has the highest growth rate of banking outlets among its peers growing by 21.5% year on year.

No. of banking outlets Banking outlets year-on-year growth

FY21 FY22 FY23 Q1FY24 FY22 FY23 Q1FY24
SFBs
AU SFB 744 919 1,027 1,038 23.5% 11.8% 8.9%
Equitas SFB 861 869 922 927 0.9% 6.1% 5.8%
Ujjivan SFB 575 575 629 661 0.0% 9.4% 15.0%
Jana SFB 619 715 754 NA 15.5% 5.5% NA
ESAF SFB 553 575 700 700 39.8% 21.7% 21.5%
Utkarsh SFB 558 686 830 851 22.9% 21.0% NA
Fincare SFB 806 919 1,231 NA NA 33.9% NA
Suryoday SFB 556 565 577 609 1.6% 2.1% 8.0%
NBFC-MFIs
CreditAccess
964 1,164 1,786# 1,826 20.7% 53.4% 51.3%
Grameen Ltd.
Fusion
Microfinance Pvt. 725 934 1,086 1,103 28.8% 16.3% 14.2%
Ltd.
Spandana Sphoorty
1,062 1,120 1,227 1,303 6.5% 9.6% 16.7%
Financial Ltd.

170
 No. of banking outlets Banking outlets year-on-year growth
FY21 FY22 FY23 Q1FY24 FY22 FY23 Q1FY24
Banks-MFI
Bandhan Bank 5,310 5,639 5,999 6,140 6.2% 6.4% 8.9%
Note: 1) Banking Outlets includes physical outlets of the respective bank as well as its business correspondents where services of acceptance
of deposits, encashment of cheques/cash withdrawal or lending of money are provided, 2) NA – Not available, 3) (#) On a consolidated basis.
Source: Company reports, CRISIL MI&A

ESAF SFB is highly concentrated in rural and semi-urban region

ESAF SFB’s portfolio is largely concentrated in rural and semi-urban region as compared to other SFBs. Its portfolio share of
63% from rural and semi-urban is the highest among the compared SFBs as on June 30, 2023. ESAF SFB has 72% branches
present in rural and semi-urban region as on June 30, 2023.

Share of rural Share of Portfolio

+ semi-urban rural + semi- Concentration
No. of states and
As of June 30, 2023 branches urban of states
UTs
portfolio
Top state Top 3 states
SFBs
AU SFB 24 71% 63% 34% 64%
Equitas SFB 18 NA NA NA 76%*
Ujjivan SFB 25 NA 34% 15% 41%
Jana SFB 24 48%* NA 13%* 38%
ESAF SFB 23 72% 63% 43% 74%
Utkarsh SFB 26 63%* 56%* 31%* 69%*
Fincare SFB 19* 80%* 58%* 18%* 49%*
Suryoday SFB 15 NA NA 30% 68%
NBFC-MFIs
CreditAccess
15 NA NA 33% 75%
Grameen Ltd.
Fusion Microfinance
20 94% NA NA NA
Pvt. Ltd
Spandana Sphoorty
18 NA NA 16% 42%
Financial Ltd.
Banks-MFI
Bandhan Bank 34 72% NA NA 47%*
Note: 1) NA – Not available 3) (*) Data as of Fiscal 2023
Source: Company reports, CRISIL MI&A

ESAF SFB had the highest AUM per employee and highest business per employee among SFBs as of June 30, 2023

ESAF SFB had the highest AUM per employee as of June 30, 2023 and the highest business per employee among the compared
SFBs as of June 30, 2023.

Number Retail Deposits

AUM per Business^^ per
As at June 30, 2023 of per employee (in Rs.
employee (in Rs. Mn) employee (in Rs. Mn)
employees Mn)
SFBs
AU SFB 28,400 22.4 46.5 16.5
Equitas SFB 20,996 14.1 26.3 10.1
Ujjivan SFB 19,294 13.1 25.3 9.1
Jana SFB 18,184* 11.1* 18.7* 6.3*
ESAF SFB 5,160 33.3 58.1 27.1
Utkarsh SFB 15,909 9.0 17.3 5.4
Fincare SFB 14,804* 6.7* 11.3* 4.3*
Suryoday SFB 6,386 10.0 18.6 6.8
NBFC-MFIs
CreditAccess Grameen Ltd. 17,391 12.5 11.4 NM
Fusion Microfinance Pvt. Ltd 10,363# 9.4# 8.1# NM
Spandana Sphoorty Financial Ltd. 10,671 8.3 7.7 NM
Banks-MFI
Bandhan Bank 72,121 14.3 28.7 10.7
Note: 1)^^Business comprises net advances and deposits. 2) (*) Data as of Fiscal 2023 3) (#) Number of employees data as of March 2023
4) NM: Not Meaningful.
Source: Company reports, CRISIL MI&A.

ESAF SFB has the highest yield on advances among compared SFBs for Q1FY2024

For Q1FY2024, ESAF SFB ranked highest in yield on advances among the compared SFBs.
171
 Cost to
Yields on Cost of Opex Credit
Q1FY2024 NIM income RoE RoA
advances borrowing ratio Cost Ratio
ratio
SFBs
AU SFB 3.3% 1.6% 1.4% 1.1% 65.0% 0.1% 3.5% 0.4%
Equitas SFB 4.3% 1.7% 2.0% 1.7% 65.9% 0.2% 3.6% 0.5%
Ujjivan SFB 5.2% 1.7% 2.3% 1.5% 52.8% 0.1% 7.5% 1.0%
Jana SFB 4.9%$ 1.9% 1.8% 1.4% 58.0% 1.0% 4.3% 0.3%
ESAF SFB 5.8% 1.7% 2.9% 1.8% 55.7% 0.9% 7.3% 0.6%
Utkarsh SFB 4.9% 1.8% 2.2% 1.5% 57.0% 0.6% 5.2% 0.6%
Fincare SFB NA NA NA NA NA NA NA NA
Suryoday SFB 5.1% 1.6% 2.2% 1.6% 57.5% 0.9% 3.0% 0.5%
NBFC-MFIs
CreditAccess Grameen Ltd. 5.7%$ 2.3% 3.2% 1.1% 30.8% 0.4% 6.6% 1.6%
Fusion Microfinance Pvt. Ltd 5.8%$ 2.6% 3.1% 1.4% 36.3% 0.8% 5.1% 1.2%
Spandana Sphoorty Financial Ltd. 6.2%$ 3.2% 3.1% 1.4% 42.3% 0.4% 3.8% 1.2%
Banks-MFIs
Bandhan Bank 3.8% 1.6% 1.6% 0.9% 45.7% 0.6% 3.6% 0.5%
Note: 1) ($) Yield on advances calculated as total interest earned to average interest-earning assets
Source: Company reports, CRISIL MI&A

Product mix of all SFBs (as of June 30, 2023)

Except for AU SFB all of the compared SFBs were pure MFI turned SFB, resulting in a huge concentration in MFI products.
Equitas’ relatively lower concentration in MFI products is due to its diversification into other businesses. With SFBs’ focus on
portfolio diversification, CRISIL MI&A expects the product mix across SFBs to be distributed into multiple asset classes in the
coming years.

Large and
Vehicle Mortgage
Product mix MFI MSME mid-corporate Gold loans Agriculture Others
loans loans
loans
SFBs
AU SFB - 33% 7% 30% 21% - - 8%
Equitas SFB 19% 25% 11% 36% 4% - - 4%
Ujjivan SFB 72% - 14% 6% 5% - - 2%
ESAF SFB 75% 1% 2% 1% 4% 13% 5% 1%
Utkarsh SFB 63% 4% 4% 12% 11% - - 6%
Fincare SFB* 61% 0% 12% 16% 2% 9% - 1%
Suryoday SFB 60% 7% 11% 7% 12% - - 4%
Note: 1) (*) For Fincare SFB, data as of Fiscal 2023
Source: Company reports, CRISIL MI&A

ESAF SFB had the best asset quality as of June 30, 2023, among comparable peers

ESAF SFB had the best asset quality among compared peers as of June 30, 2023. ESAF SFB’s capital adequacy ratio, which is
the ratio of capital to risk weighted assets and current liabilities, as at June 30, 2023 was 20.6%.

Provision GNPA (%) NNPA (%) Restructured CRAR Tier 1

As of June 30, 2023 Coverage Book % Ratio
Ratio
SFBs
AU SFB 73% 1.76% 0.55% 1.0% 21.5% 19.9%
Equitas SFB 58% 2.75% 1.18% 1.0%* 22.1% 21.4%
Ujjivan SFB 98%* 2.62% 0.06% 0.7% 26.7% 23.6%
Jana SFB 60% 2.90% 1.20% 1.0% 18.7% 16.7%
ESAF SFB 74% 1.65% 0.81% 0.3% 20.6% 19.0%
Utkarsh SFB 90% 3.13% 0.33% 0.2%* 19.8% 17.9%
Fincare SFB 92%* 2.12% 1.09% 0.9%* 19.9% NA
Suryoday SFB 52%* 3.04% 1.63% NA 32.7% 30.2%
NBFC-MFIs
CreditAccess Grameen Ltd. 70% 0.89% 0.27% NA 24.4% 23.5%
Fusion Microfinance Pvt. Ltd 76% 3.20% 0.78% 0.2%* 28.3% NA
Spandana Sphoorty Financial Ltd. 70% 1.63% 0.49% NA 37.6% NA
Banks-MFIs
Bandhan Bank NA 6.76% 2.18% NA 19.8% 18.8%
Note: 1) NA – Not available 2) (*) As of March 2023
Source: Company reports, CRISIL MI&A

Microfinance

172
Industry AUM surged at 21% CAGR from March 31 2018 to June 30, 2023

The microfinance industry (JLG portfolio) has recorded healthy growth in the past few years. The industry’s AUM increased
at a CAGR of 21% since March 31, 2018 to reach ~₹3.55 trillion as of June 30, 2023.

In Fiscal 2021, the industry had been adversely impacted due to the onset of the COVID-19 pandemic. While disbursements
came to a standstill in the first quarter of the year, they picked up subsequently. Disbursements reached to the pre-COVID levels
for NBFC-MFI in the third and fourth quarter of Fiscal 2021. The second wave of COVID-19 led to a slow start in Fiscal 2022,
however, the situation improved from the second half, as number of cases declined, and collections started improving. The
revised regulation by the RBI, applicable from October 1 of 2022 (post revision), would give more flexibility to NBFC-MFIs
and is expected to gain share from banks. The overall microfinance industry grew by 21% year on year in Fiscal 2023 on
account of improved collection efficiency, steady demand and lower GNPA levels. Going forward, the overall microfinance
industry will continue to see strong growth on back of government’s continued focus on strengthening the rural financial
ecosystem, strong credit demand, and higher ticket sized loans disbursed by microfinance lenders.

AUM clocked 21% CAGR between March 31, 2018 to June 30, 2023

(in Rs. billion)

4,000 3,555
3,377
3,500
3,000 2,787
2,538
2,322
2,500
1,835
2,000
1,305
1,500
1,000
500
0
FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24
Note: Data includes data for banks lending through joint liability group (“JLG”), SFBs, NBFC-MFIs, other NBFCs and non-profit MFIs. It excludes data for
banks lending through the Self Help Group model (“SHG”). Self Help Groups are informal and unregistered groups engaged in promoting saving habits
among their members. The amounts are as at the end of the Fiscal and quarter for Q1FY24.
Source: CRIF Highmark, CRISIL MI&A

Industry resilient despite major setbacks and changing landscape

The industry’s growth has been regardless facing various headwinds in the past decade – national farm loan waivers (2008),
the Andhra Pradesh crisis (2010), Andhra Pradesh farm loan waiver (2014), demonetisation (2016), and farm loan waiver across
some more states (2017 and 2018). Of these events, the Andhra Pradesh crisis of 2010 had a lasting impact on the industry.
Some players had to undertake corporate debt restructuring and found it difficult to sustain business. Since then, however, no
other event has affected a complete state to such a degree. While demonetisation of ₹500 and ₹1,000 denomination banknotes
in November 2016 hurt the industry, the impact was not as serious as the Andhra Pradesh crisis and limited to certain districts.
Portfolio at risk (PAR) data as of September 2018 indicates that the industry has recovered fairly strongly from the aftermath
of demonetisation. Furthermore, collections of loan disbursements since September 2017 have been healthy. The liquidity crisis
in 2018, however, has had a ripple effect on microfinance lending as smaller NBFC-MFIs with capital constraints and lenders
relying on NBFCs for funding slowed down disbursements.

NBFC- MFIs faced initial hiccups at the start of Fiscal 2021 due to the COVID-19 pandemic on account of uncertainty over
collections and aversion by lenders to extend further funding to them; however, the situation improved gradually and most
NBFC-MFIs, with the exception of a few, were able to improve the liquidity buffers during the course of the year by raising
funds and support from various government schemes. While the resurgence of COVID-19 again led to a fresh bout of
uncertainty in respect of collections in first quarter of Fiscal 2022, the impact was not as pronounced as in the early part of the
previous Fiscal. The industry gradually rebounded in Fiscal 2022 on account of increased disbursements. The industry grew in
Fiscal 2023 on account of change in RBI guidelines, higher consumption demand and lower slippages.

173
MFI industry has shown resilience over the past decade

National farm AP farm loan Covid- 19 RBI new

Demonetisation &
loan waiver waiver 1st wave guidelines
Farm Loan Waiver
AP ordinance
95% (2016-17) Covid- 19
4,000 100%
Farm loan waiver 2nd wave
84%
3,500 2018, floods,
72% 72% NBFC crisis 80%
3,000
50% 60%
2,500
43%
36%
2,000 40%
23% 23% 25%
22%
1,500 14% 17%
11% 10% 20%
1,000 -14% 1%
0%
500
60 117 175 200 173 212 249 428 787 1069 1,311 1,868 2,343 2,594 2,854 3,483 3503
0 -20%

FY16
FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY17

FY18

FY19

FY20

FY21

FY22

FY23

Q1FY24
GLP GLP Growth

Note: Data includes data for Banks lending through joint liability group (JLG), SFBs, NBFC-MFIs, other NBFCs and non-profit MFIs. It
excludes data for Banks lending through SHG. The amounts are as at the end of fiscal year and as the end of quarter for Q1FY24. For
Q1FY24 industry gross loan portfolio as of May 2023.
Source: MFIN, CRISIL MI&A

Impact of COVID-19 pandemic

The extended nationwide lockdown to contain the spread of COVID-19 affected the income-generation ability and the savings
of borrowers accessing MFIs, who typically have weaker credit profiles compared with other borrowers. About 50-60% of the
Micro Loans were under moratorium as of August 2020. Also, because of the nationwide lockdown, and several state-imposed
lockdowns thereafter, normal operations of MFIs – loan origination and collections – were a challenge, especially during the
first few months post-COVID-19. This had an adverse impact on MFIs as their operations are field-intensive, involving high
personal interactions, such as home visits and physical collection of cash.

Prior to the lockdown, many MFIs had managed to shore up their liquidity by March-end in Fiscal 2020, by which the majority
of the collection had already happened before the lockdown was announced. In fact, collection efficiency was largely intact at
98-99%. The MFIs also drew down bank loans for the purpose of on-lending in the last week of March, which is typically a
period marked by high business activity. However, planned disbursements did not happen on account of the lockdown.
Disbursements reached to the pre-COVID-19 level in the third and fourth quarters of Fiscal 2021 led by rural and semi-urban
regions as the COVID-19 impact was relatively lower.

The growth of microfinance industry was again impacted at the beginning of Fiscal 2022 due to the onset of second wave of
COVID-19 pandemic. But the industry recovered faster as there was no stringent complete national lock down as was done
during the first wave and commercial operations related to essential services were allowed to be operational. The RBI also
allowed MFIs branches to operate. Moreover, based on their experience from the first wave of COVID-19, lenders were better
prepared to handle the second wave by making extensive use of technology and third-party tie-ups to facilitate disbursements
and collections.

Key reforms proposed by the government for microfinance to counter COVID-19 crisis

• Reducing debt servicing burden through moratorium period: The RBI initially permitted lending institutions to
allow a moratorium of three months on repayment of instalments for term loans outstanding as on March 1, 2020 and
defer interest payments due on working capital facilities outstanding. The moratorium was further extended by another
three months till August 31, 2020. However, the banks were instructed to provide 10% additional provisioning for
availing of this benefit which could be later adjusted against the provisioning requirements for actual slippages. These
measures are intended to boost confidence in the economy and provide relief to the borrowers.

• Refinance support from RBI: In April 2020, the RBI announced refinancing support of ₹250 billion to NABARD,
which provides support to NBFC-MFIs, RRBs and co-operative banks.

• Loan interest subvention scheme: Under this scheme, the government has provided 2% interest subvention to loans
given under the Mudra-Shishu scheme. These loans are up to a ticket size of ₹50,000 and are primarily given by NBFC-
MFIs catering to low-income groups.

174
On May 5, 2021, the RBI announced that fresh lending by Small Finance Banks to NBFC – MFIs with asset size less than ₹
500 Crore for on-lending to individual borrowers will be classified under Priority Sector Lending. Extending the priority-sector
lending eligibility to NBFC – MFIs with asset size up to₹ 500 crores will encourage flow of credit to smaller MFIs, which have
been facing relatively bigger funding-access challenges. The facility to SFBs will be available up to March 31, 2022.
The RBI had announced special long term repo operation (SLTRO) programme for SFB amounting to ₹ 100 billion to soften
the impact of the second pandemic wave. The first auction will take place on May 17, 2021, and on subsequent month till the
amount is fully utilised. The amount borrowed from this scheme should be utilised to lend to small business units and other
unorganised sectors.
On June 28, 2021, the finance minister announced the Credit Guarantee scheme through micro finance institutions (MFIs) for
the first 2.5 million customers for a maximum tenure of 3 years. The 75% of guarantee will be provided to scheduled commercial
banks for ticket size up to₹ 1.25 lakh to new or existing NBFC-MFIs. This is likely to address the severe cash flow distress
caused by the 2nd wave of the pandemic to the individuals and small businesses.
Rising penetration to support continued growth of the industry

Although India’s household credit penetration on MFI loan has increased, the penetration is still on the lower side which
suggests that there is huge untapped market available for MFI players. The domestic microfinance industry has shown resilience
towards external shocks in the past and is expected to gain momentum in the next two Fiscals with pickup in economic growth
and improved capital availability for players who are able to wade through the challenges created by COVID-19.

Between Q1FY2024 and FY2025, CRISIL MI&A expects the MFI loan portfolio to clock 16-20% CAGR. Growth would be
driven by continuous expansion in the client base of MFIs and increased penetration in rural centres. SFBs witnessed a double-
digit growth of 13% over Fiscal 2018-23 as they continue to diversify their portfolio to other asset classes including mortgage
loan, MSME and vehicle loan.

There has seen a significant jump in the number of MFIs operating in Assam, Bihar, Odisha, and West Bengal. The total number
of branches in these states have more than doubled since Fiscal 2017, leading to a similar jump in AUM for these states. The
availability of borrower credit related data from credit information companies ensures that MFIs have access to more data on
borrowers, helping them make informed lending decisions.

MFI Industry AUM

6,000
4,864
5,000

4,000 3,377 3,555

2,787
3,000 2,322 2,538
1,835
2,000 1,305
1,000

0
FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24 FY25P

Note: Data includes data for Banks lending through joint liability group (JLG), SFBs, NBFC-MFIs, other NBFCs and non-profit MFIs. It excludes data
for Banks lending through SHG. The amounts are as at the end of the fiscal.
Source: CRIF Highmark, CRISIL MI&A

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 SFB’s market share is projected to increase from 13% in Q1 Fiscal 2024 to 16% in Fiscal 2025

120%

100%
14% 13% 13% 15% 12% 18% 13%
19%
80% 17% 16% 14% 17% 16%
18% 13% 13%

60%
31% 31% 34%
37% 37% 37% 43%
37%
40%

20% 34% 39% 41% 37%

30% 32% 32% 28%
0%
FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24 FY25P

Banks NBFC MFI SFBs Others

Note: P: Projected, Data includes data for Banks lending through joint liability group (JLG), SFBs, NBFC-MFIs, other NBFCs and non-profit MFIs. It excludes
data for Banks lending through SHG. The amounts are as at the end of the Fiscal/Quarter,

Source: CRIF Highmark, CRISIL MI&A

Competitive dynamics

Loans in the microfinance sector are provided by banks, SFBs, NBFC-MFIs, other NBFCs, and non-profit organisations. Banks
provide loans under the (SHG) model. However, they also disburse microfinance loans directly or through BCs to meet their
priority-sector lending targets.

Key participants in the MFI lending business are:

• Banks-SHGs, which refers to banks who provide microcredit under the SHG programme
• Banks (direct and indirect through BCs) includes portfolios for direct and indirect lending (through BCs) by banks;
private banks are key constituents
• NBFC-MFIs includes MFIs exclusively focused on the microfinance business, and accordingly registered as NBFC-
MFIs with the RBI. Major players in this category include Satin Creditcare Network Ltd., CreditAccess Grameen
Ltd (formerly Grameen Koota Financial Services Ltd) and Fusion Micro Finance Ltd.
• SFBs: This category includes 12 players (AU, Capital, ESAF, Equitas, Fincare, Jana, North East, Suryoday, Ujjivan,
Shivalik, Unity and Utkarsh), which were formerly NBFC-MFIs/NBFCs, but have now converted into SFBs
• NBFCs include ASA, Fullerton, L&T Finance, and Reliance Commercial Finance Ltd, each of which has a microcredit
lending business, in addition to other lending businesses
• Non-profit MFIs refers to MFIs registered as not-for-profit organisation, such as Cashpor

NBFC-MFIs and non-profit MFIs are the only two player groups with loan portfolios exclusively focused towards microcredit.
Some of the well-established MFIs have converted to SFBs or have been acquired by banking institutions, which has led to a
change in the landscape. However, after commencement of operations, SFBs with microfinance business started looking at
other asset classes, such as affordable housing, SMEs, and vehicle finance, to provide buoyance to the loan book.

Comparison of different participants in microfinance lending business

Scheduled Commercial Banks Small Finance Bank MFI

Priority sector lending

Targeted • 40% for priority sector lending • 75% for priority sector lending of • 75% of loans should be
lending to of their Adjusted Net Bank their Adjusted Net Bank Credit qualifying micro-finance assets
sectors Credit (ANBC) or equivalent (ANBC) o Income generation loans >
off-balance sheet exposure o 18% of ANBC to Agriculture 50% of total loans
(whichever is higher) o 7.5% of ANBC to micro-
o 18% of ANBC to Agriculture enterprises
o 7.5% of ANBC to micro- o 10% of ANBC to weaker
enterprises sections
o 10% of ANBC to weaker • At least 50 per cent of loan portfolio
sections should constitute loans and advances
of up to ₹ 2.5 million
Prudential norms

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 Scheduled Commercial Banks Small Finance Bank MFI

Capital • Minimum Tier 1 capital: 7% • Minimum Tier 1 capital: 7.5% • Tier 1 capital > Tier 2 capital
adequacy • Minimum capital adequacy • Minimum capital adequacy ratio: • Minimum capital adequacy ratio:
framework ratio: 9% 15% 15%
Margin cap • No Margin Cap • No Margin Cap • No Margin Cap

CRR / SLR • Maintenance of CRR/SLR ratio • Maintenance of CRR/SLR ratio • No such requirement
mandatory mandatory

Leverage ratio • Minimum leverage ratio of 4% • Minimum leverage ratio of 4% • No such requirement

LCR (liquidity • Mandatory requirement to • Minimum liquidity coverage ratio of • No such requirement
coverage ratio)/ maintain liquidity coverage ratio 100% by Jan 1, 2021
NSFR (net • NSFR will be applicable to SFBs on
stable funding par with scheduled commercial banks
ratio) as and when finalized
Funding

Deposits • Primarily rely on deposits for • Primarily rely on deposits for • Cannot accept deposits
funding requirements funding requirements
• Deposit ramp-up will take time

Bank loans / • Access to broader array of • Access to broader array of market • Diversified funding sources
market funding market borrowings borrowings including bank loans, short term
• No access to bank loans and long term market
borrowings. Funding from
NABARD, MUDRA loans etc.
Products

Products • Full spectrum of banking, • Can offer savings and investment • Can act as Business
offered savings, investment and products apart from credit products / Correspondent to another bank
insurance products loans and offer savings, deposits,
• Can act as Corporate Agent to offer credit and investment products
insurance products • Can act as Corporate Agent to
• Cannot act as Business offer insurance products
Correspondent to other banks
Source: RBI, CRISIL MI&A

Players tapping newer states and districts to widen their client base; underpenetrated states to drive growth for MFI in
the coming years

In the last few years, many MFIs have opened branches in untapped districts, thus increasing their penetration in geographies
with an underserved population. CRISIL MI&A expects growth in the MFI portfolio to come from states that have a relatively
lower penetration. The states with the lowest level of penetration for microfinance loans (calculated as the unique number of
unique microfinance loan borrowers by the estimated number of households as at June 30, 2023) were Jammu and Kashmir,
Himachal Pradesh, Andhra Pradesh, Manipur, and Telangana. These under penetrated states in particular provide an opportunity
for existing players to improve their penetration and market share. Going forward, CRISIL MI&A expects penetration to deepen
in most states, which will further drive growth of MFI in the coming years.

The map below shows the level of penetration for microfinance loans by state as at June 30, 2023.

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 Underpenetrated states (up to 17%)

Moderately penetrated states (17-36%)

Highly penetrated states (>36%)

Source: MFIN, CRISIL MI&A

Notes: 1) Penetration has been computed by dividing number of unique MFI borrowers by estimated number of households in June 2023.

2) Pan-India penetration has been determined based on the analysis of 24 states.

3) Data includes data for banks lending through joint liability group (JLG), SFBs, NBFC-MFIs, other NBFCs and non-profit MFIs.
It excludes data for Banks lending through SHG. The amounts are as at June 30, 2023.

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 Number of MFIs in each state as of March 31, 2018 and June 30, 2023

35 29
26 27 27 27 20
30 24 25 24 23
25 22
20 20 21
17 19 17 19 19 18
20 14 14 16 14 14
13 13 11 11
15 10 8 9 89
10 7 65
3
5
0

Haryana

Assam

Punjab
Odisha

West Bengal
Rajasthan

Chattisgarh

Tamil Nadu

Uttarakhand

Kerala
Uttar Pradesh

Gujarat

Karnataka

Meghalaya
Madhya Pradesh

Jharkhand
Bihar

Delhi
Maharashtra
FY18 Q1FY24

Source: MFIN, CRISIL MI&A. The amounts are as at the end of the Fiscal/period,
Rural segment to drive NBFC-MFI business

CRISIL MI&A expects the share of rural segment in MFIs’ business to remain higher, with burgeoning demand expected from
this segment. Despite 2/3rd of population, 47% of GDP contribution and 2/3 rd of two-wheeler demand; the rural segment’s share
in credit remains fairly low at 8% of the overall credit outstanding, thereby opening up a huge opportunity for savings and loan
products.

Under the Digital India program, the government also proposed to provide free-high speed Wi-Fi in 2,500 cities and towns, at
an estimated investment of₹ 70 billion. Under the plan, the government aims to set up 50,000-60,000 Wi-Fi hotspots across the
country. CRISIL MI&A expects on completion these projects will help catalyse the growth of digital services to the rural
masses, and especially to the lower category of the population.

Compared to banks, MFIs have higher focus on rural centres. Going forward as well, for MFIs, rural clientele is expected to
remain high in the range of 55-60% compared to urban clientele. CRISIL MI&A believes that establishing a good relationship
with rural customers and engaging with them regulalry leads to longer and more loyal customer relationship, which can be
further leveraged to cross-sell other products.

With the Government’s focus on financial inclusion and financial institutions opening up branches in the unbanked centres,
CRISIL MI&A has seen that demand for loan is higher in rural centres. As of June 30, 2023, the rural share has increased to
76% of the NBFC-MFI portfolio from 66% in Fiscal 2018 due to less competition, lower credit penetration and less migration
in rural centres. It also benefitted from overall better credit behaviours and, in turn, lower delinquency rates. The significant
under-penetration of credit in rural centres offers strong potential for improvement and that given the relatively deeper reach,
existing client relationships and employee base, microfinance institutions are well placed to address this demand which is
currently being met by informal sources such as local money lenders.

Rural accounts for ~76% share in overall NBFC-MFI portfolio outstanding as of June 2023
100%
27% 25% 24% 22% 23% 24%
80% 34%

60%

40% 73% 75% 76% 78% 77% 76%

66%
20%

0%
FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24

Rural Urban

Note: The percentage are as at the end of the Fiscal/period,

Source: MFIN, CRISIL MI&A

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Advantages in rural focused business
• Huge market opportunity in the rural segment – Despite its larger contribution to GDP of 47%, the rural segment’s
share in credit remains fairly low at 8% of the overall credit outstanding. This provides a huge market opportunity for
MFI players present in the segment
• Less competition – In remote areas, informal credit channels have a major presence. In other words, there is a huge
section of unbanked population with low competition. MFI players are better placed to tap this market
• Geographic diversification – With increased focus on diversifying their portfolio and expanding their reach, MFI
players are expected to log higher growth as they tap newer geographies
• Ability to manage local stakeholders – With their microfinance experience, have the ability to manage local
stakeholders and maintain operational efficiency
• Lower delinquency rates: Asset quality of rural region is better than urban and semi urban region since Fiscal 2017
due to better risk profile of customer and better credit discipline than the urban and semi-urban region.
• Loan recovery and control on aging NPAs – MFI players are experienced in collection and monitoring of default
risk. This will help them keep asset quality under check
Challenges in rural-focused business
The microfinance industry mainly caters to the poorer section of society, because of which there are some inherent challenges
faced by the institutions, especially in rural centres:

• High cost of reaching customer: Providing microfinance loans in rural India requires reaching people in remote and
sparsely populated regions, where deploying manpower and requisite infrastructure for disbursing loans and for
recovery can often be expensive. The high cost of reaching out, and the small volume and ticket size of transactions
elongates the breakeven period. Therefore, players need to focus on optimising costs and delivery model, especially
in the initial stages of operations
• Lack of financial awareness: Lack of financial and product awareness is a major challenge for institutions in rural
centres. They are faced with the task of educating people about the benefits of financial inclusion, about the product
and services offered by them, and establish trust before selling the product
• Vulnerability of household’s income to local developments: Uncertainty and unpredictability faced by low-income
households, and vulnerability of their incomes to local developments can make it difficult for the borrowers to make
repayments on time
• High proportion of cash collections: Despite having a large proportion of loans disbursed through the cashless mode,
the collection process in unbanked and rural centres is still done through cash. This leads to increased time spent on
reconciliation, risk involved in handling cash, and higher TAT from the financier’s perspective

However, the rural economy has been resilient in the last year, amidst the COVID-19 pandemic. India has witnessed above
normal, timely and largely well distributed monsoon, benefitting the agriculture industry and rural India. Further, increase in
the agriculture credit target and allocation of infrastructure fund for development of Agriculture Produce and Livestock Market
Committee (APMC) reiterates government’s commitment to provide a thrust to rural India.
Regulations

New regulatory regime for MFI loans levels the playing field and benefits NBFC-MFIs

The RBI, in its master directions on microfinance loans, released in March 2022, has done away with the interest rate cap
applicable on loans given by NBFC-MFIs. Entities providing microfinance loans will have to put in place a Board approved
policy for the pricing of loans. The policy should include the interest rate model, range of spread of each component for
categories of borrowers, and ceiling on interest rate and all other charges on MFI loans.

The RBI’s move levels the playing field, with both NBFC-MFIs and banks/SFBs providing microfinance loans now being
subject to the same rules, which was not the case in the earlier regime. This move is expected to positively impact NBFC-MFIs.
The increase in the annual household income cap for micro finance borrowers (to ₹300,000 in both urban and rural centres),
removal of the two-lender norm for lending by NBFC-MFIs and allowing NBFC-MFIs greater flexibility to offer non-MFI
loans (MFI loans required to account for 75% of total assets for NBFC-MFIs, as per then new regulations) would increase the
market opportunity available to MFIs and enable them to create a more balanced portfolio.

On the flip side, the increase in annual household income threshold could increase the maximum permissible indebtedness limit
of borrowers from the old level of ₹125,000. While the limit on the loan repayment obligation would act as a safeguard against
excessive leveraging, the increased permissible debt limit and possibility of divergences in household income assessment
criteria across lenders still pose risks. Proper data infrastructure would be required to analyse and estimate household incomes,
especially in rural centres.

Subsequent to the RBI’s revised regulations for MFI loans, effective October 1, 2022, some MFIs have increased interest rates
for borrowers, especially those who are credit untested. CRISIL MI&A expects the rates to slowly settle down as MFIs begin
to adapt to the new regime and put in place processes for household income, leverage and risk capture, given the new guidelines.

180
Competitive forces would prevent a substantial spurt in rates for MFI customers, especially those with a good repayment track
record and credit behaviour.

Area of Existing regulations Revised regulations (effective from April 01, 2022)
regulation For NBFC-MFIs For Banks and SFBs For all Regulated Entities*
Margin cap at 10% for large MFIs No pricing cap; underwriting of loans will be done on a risk-
(loan portfolios > ₹1 billion); based analysis, and a risk premium will be charged based on the
Loan pricing
12% for small MFIs (loan borrower.
No restrictions for
portfolios <Rs. 1 billion) Board approved policy for pricing of loans to be put in place.
Banks and SFBs
The policy should include the interest rate model, range of
Not more than 1% of gross loan spread of each component for categories of borrowers, and
Processing fees
amount ceiling on interest rate and all other charges on MFI loans.
The minimum requirement of microfinance loans for NBFC-
Have to meet the MFIs revised to 75% of the total assets.
Qualifying
85% loans unsecured target set for priority The maximum limit on microfinance loans for NBFCs other
criteria
sector loans (PSL) than NBFC-MFIs revised to 25% of the total assets from 10%
earlier
Rural centres: ₹125,000 per
Household annum
income Urban centres: ₹200,000 per Annual household income: Up to ₹300,000 in urban as well as
annum rural centres (This amount is higher than what was stated in the
No restrictions for
consultation paper issued in June 2021 – up to ₹125,000 for
Ticket size of ₹75,000 in the first cycle and Banks and SFBs
rural centres and ₹200,000 for urban and semi-urban centres)
loans ₹125,000 in the subsequent cycles
Board-approved policy for assessment of household income
Not to be less than 24 months for
Tenure of loans
loan amount in excess of ₹30,000
Lending to the Not more than 2 lenders allowed More than 2 banks can
same borrower per borrower lend to same borrower Limit on Maximum Loan Repayment Obligation of a household
Overall borrower No restrictions for Banks towards all loans: 50% of monthly household income
Should not exceed ₹125,000
indebtedness and SFBs
Note: Regulated entities*: All Commercial Banks (including Small Finance Banks, Local Area Banks, and Regional Rural Banks) excluding
Payments Banks, All Primary (Urban) Co-operative Banks/ State Co-operative Banks/ District Central Co-operative Banks, All Non-Banking
Financial Companies (including Microfinance Institutions and Housing Finance Companies)
Source: RBI, CRISIL MI&A

The revised regulation likely to have a level playing field with same set of rules for all player categories including banks and
SFBs.

State wise analysis

Top 10 states contribute over 83% of MFI loans as of June 2023

Over 83% of the AUM is concentrated in the top 10 states with Bihar (14%), Tamil Nadu (14%) and Uttar Pradesh (10%),
recording the highest shares as of June 30, 2023. Assam asset quality is the weakest at 44.4%, it is followed by West Bengal
(16.1%) and Maharashtra (13.4%) as of June 30, 2023.

181
 State-wise distribution of MFI portfolio outstanding as of June 30, 2023

Others, 17% Bihar , 14%

Kerala, 4%

Rajasthan , 4% Tamil Nadu , 14%

Odisha, 6%

Uttar Pradesh ,
Madhya Pradesh , 10%
6%

Maharashtra , 7%
Karnataka, 9%
West Bengal, 9%
Note: Data includes data for Banks lending through joint liability group (JLG), SFBs, NBFC-MFIs, other NBFCs and non-profit MFIs. It excludes data
for Banks lending through SHG.
Source: CRIF High Mark, CRISIL MI&A

Asset quality

Portfolio at risk (PAR), the primary indicator of risk for the sector, equals the percentage of loans overdue. Asset quality
deteriorated drastically post demonetisation, especially for MFIs. PAR>30 and PAR>90 for MFIs jumped post demonetisation.
However, banks and MFIs invested significantly in educating borrowers, which gradually improved collection efficiency and
reduced their overall PAR. Furthermore, since Fiscal 2018, collection efficiency of fresh loans disbursed has been strong.
Therefore, the PAR for MFIs as well as the industry had been trending downward till Fiscal 2020.

The nationwide lockdown imposed in March 2020 to control the spread of COVID-19 and the subsequent moratorium granted
by the RBI adversely impacted collections and repayments from MFI borrowers leading to a sharp rise in NPAs in Fiscal 2021.

The PAR>30 and PAR>90 for the industry shot up to 14.1% and 8.8% respectively as of March 2021. In the first quarter of
Fiscal 2022, PAR>30 for the industry further deteriorated mainly due to fall in collection efficiencies experienced in months of
May and June 2021 in the aftermath of the second COVID-19 wave. Pressure on asset quality was higher as a result of the
second wave as compared to the first wave, as borrowers did not have a blanket moratorium this time while their cash flows
have been impacted by the second wave. The collections started to improve from July 2021 onwards owing to relaxations in
COVID-19 restrictions across the country and economic activity picking pace. Nevertheless, in Fiscal 2022, asset quality
remained under some pressure, on account of strain on MFI borrowers’ earning capabilities. By the end of Fiscal 2023, PAR>90
and PAR>30 reached 10.2% and 11.4% respectively on account of lower stress. CRISIL believes that going forward, timely
recoveries and controlling incremental slippages would be critical for the MFIs to keep their asset quality under check. PAR>
30 and PAR>90 was 11.8% and 10.7% respectively as of June 30, 2023.

182
 Asset quality trend over the years

16.0% 14.7%
14.1%
14.0%
11.4% 11.8%
12.0%

10.0% 11.3%
7.9% 10.2% 10.7%
8.0%
5.8% 8.8%
5.6%
6.0% 7.2%
4.0% 5.0% 5.0%
2.0%

0.0%
FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24

PAR>30 PAR>90

Note: PAR>30 and PAR>90 include delinquency beyond 180 days of microfinance industry. Percentages are as of the end of the
Fiscal/Quarter,
Source: CRIF High Mark, CRISIL MI&A
Portfolio at risk for player groups in microfinance industry (PAR>30 days)

25.0% 21.9% 13.3%

12.3% 11.9%
20.0% 15.6% 16.7%
16.8% 10.5% 12.2%
15.3% 14.1%
14.1% 14.2%
15.0% 12.3% 12.9% 13.0%
3.0% 9.4%
9.2%
10.0% 2.2% 4.2% 6.2%
5.7% 5.8% 6.3% 5.8%
4.0% 4.6%
5.0%

0.0%
FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24

Banks NBFC MFI SFBs Others

Note: PAR>30 includes delinquency beyond 180 days of MFI industry, Percentages are as of the end of the Fiscal/Quarter,
Source: CRIF Highmark, CRISIL MI&A

Asset quality of player groups in microfinance industry (PAR>90 days)

25.0%
20.8%
20.0% 10.7%
14.7% 12.9% 9.7% 11.2%
15.0% 9.2% 12.9% 12.4%11.6% 13.0%
11.4% 8.6% 10.8%
2.5% 9.0% 8.3%
10.0% 2.0% 7.9%
3.8% 6.1%
5.2% 5.3% 5.1% 5.3%
5.0% 3.5% 3.5% 4.5%

0.0%
FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24

Banks NBFC MFI SFBs Others

Note: PAR>90 includes delinquency beyond 180 days of MFI industry. Percentages are as of the end of the Fiscal/Quarter.
Source: CRIF Highmark, CRISIL MI&A

The nationwide lockdown imposed in March 2020 to control the spread of COVID-19 and the subsequent moratorium granted
by the RBI adversely impacted collections and repayments from MFI borrowers leading to a sharp rise in NPAs in Fiscal 2021.
However, with phase-wise unlock of the nation, the collection efficiency has improved to 90-93% in December 2020. Many of
the lenders have provided enhanced flexibility in the form of increased tenure and have informed the borrowers the impact of
moratorium on interest outgo. The lenders have also started disbursing to existing customers. Also, out of the existing customers,
lenders are disbursing to those customers who are making on-time payments. Since microfinance borrowers highly depend on
the source of credit for their daily livelihood, they have started making payment thus increasing the overall collection efficiency,
which we further expect to improve.
183
GNPAs for NBFC MFI in Fiscal 2022 rose, due to the fall in collection efficiency in May and June, owing to outbreak of second
wave of COVID-19. However, restrictions began to ease in second half of 2022 causing the asset quality to improve
substantially in Fiscal 2023. In Fiscal 2024, CRISIL expects GNPAs to moderate, as economic activity picks up and industry
bounces back to normal collections and disbursements.

Asset quality improved across states in Fiscal 2023

Asset quality had worsened across states due to the COVID-19 pandemic. Assam had seen a sharp deterioration in asset quality,
the PAR 90+ increased by 13% to 45% by Fiscal 2023 as compared to Fiscal 2022. Chandigarh and Haryana witnessed increase
in PAR 90+ by 1 and 2 percentage points respectively by Fiscal 2023 as compared to Fiscal 2022. Assam’s PAR 90+, although
high decreased to 44.4% as of Q1FY24. Chandigarh’s PAR 90+ and Haryana’s PAR 90+ stood at 11.4% and 9.2% respectively
as of Q1FY24.

Asset quality of top 15 states

50% 45% 44.4%

45%
40% 16% 32%
35% 17% 13% 12% 12%
30% 16.1% 11% 11% 7%
9% 8% 13.4% 11% 9% 11% 8%
25% 18% 18% 9% 11% 9% 7%
20% 8% 4% 8% 4% 9%
9% 4% 4% 12% 12% 12% 10% 8% 12%
15%
10% 5%
9% 6% 8% 7%9%
5%
0%

FY22 (Par>90) FY23 (Par>90) Q1FY24 (Par>90)

Note: 1) Data includes data for Banks lending through joint liability group (JLG), SFBs, NBFC-MFIs, other NBFCs and non-profit MFIs. It excludes
data for Banks lending through SHG. 2) The amounts are as at the end of Fiscal year. 3) PAR>90 includes delinquency beyond 180 days. 4) Top 15 states
as per MFI loans portfolio as on Fiscal 2022 have been considered. Percentages are as of the end of the Fiscal/Quarter.
Source: CRIF Highmark, CRISIL MI&A

Gold loans

Overview of gold loan market in India

Gold loans are typically small ticket, short duration, convenient and instant credit. While the industry has been around for
several decades with local financiers and moneylenders extending finance against gold, especially in semi-urban and rural
centres, the industry has witnessed a spurt in organized financiers offering gold loans since 2008 with the specialized gold loan
NBFCs expanding their branch network and making available loans in a very easy and consumer friendly manner by putting in
place strong systems and processes. Though moneylenders and pawn brokers understand the psyche of local borrowers and
offer immediate liquidity without any documentation formalities, customers are left vulnerable to exploitation, due to the
absence of regulatory oversight. Such players also give lower loan-to-value ratio compared with organized ones while charging
exorbitant interest.

As banks and NBFCs aggressively moved in to seize this vast untapped market, they cornered a significant market share from
unorganized lenders, growing at a compounded annual growth rate (CAGR) of 76% between Fiscals 2009 and 2012. Sustained
increase in gold price till 2012 also supported the gold loan business boom in India. In such a scenario, customers would be
offered higher and higher loan amounts on their gold, while lenders would benefit by price increases acting as a natural hedge,
in the event of default. Gold prices in India, rose at a rapid rate until 2013 following which it decreased in line with global
prices. Gold prices declined in India until 2015-2016 following which the gold prices have seen a continuous uptrend resulting
in the overall gold loan market growing at a CAGR of 8% between Fiscal 2015 and Fiscal 2020.

Gold loans AUM is expected to grow at 10-12% CAGR between Fiscal 2023 and 2025

In Fiscal 2020, gold loan industry (including Banks and NBFCs) AUM grew ~15% YoY to reach ₹ 2.92 trillion on account of
increased focus of players on diversifying their regional presence, strong growth in non-southern regions and rise in gold prices
by ~19% in Fiscal 2020.

In Fiscal 2021, the demand for gold loan finance witnessed a massive surge with AUM shooting up from ₹ 2.9 trillion as at
March 31, 2020 to ₹ 3.8 trillion, as India’s economy coped with the devastating effect of the global pandemic and consumers
availed of gold loans to meet their consumption and emergency funding needs. Many consumers, who had gold stock and
ornaments lying with them, considered gold loans as an option to meet their credit requirements during this period. The demand

184
for gold loans was also supported by a consistent surge in gold price, liquidity crunch in the immediate aftermath of the
pandemic and lenders’ hesitancy to give unsecured loans due to risk aversion. The RBI also revisited its guidelines for banks’
lending gold loans by increasing the maximum LTV allowed to 90% from existing 75% for non-agricultural gold loans extended
during August 2020 to March 2021 to help stressed borrowers to unlock more value. The growth was also supported by players
continued focus to wean away consumers from the unorganised gold loan market by means of awareness and diversifying their
regional presence with the help of branch as well as digital channels.

In Fiscal 2022 as well, the gold loan market continued to witness strong growth, with industry AUM increasing by 24% year-
on-year to reach ₹ 4.7 trillion as of March 2022. By the end of March 2023, gold loans market crossed ₹7 trillion mark. Increase
in AUM can be attributed to factors such as high gold prices, strong demand and increased promotion by financiers to acquire
unorganised gold loan market by means of awareness and diversifying their regional presence with the help of branch as well
as digital channels. Financiers also were very aggressive in tapping new customers during the year with some of them running
campaigns offering gold loans at a lower interest rate for short tenures. For instance, Manappuram Finance introduced low
interest rate, for retail customers with a tenure of 3 months.

Going forward, CRISIL MI&A expects gold loans to grow at CAGR of 10-12% between June 30, 2023 and March 31, 2025 as
demand for gold is likely to remain buoyant for it is considered as a secured asset. The transformation in the gold loan sector
continues – shift from unorganised to organised and further from organised to digital and online means. Increasing focus on
online gold loans in the current scenario is expected to support overall growth in the coming years.

(in Rs. billions)

9,000 8,509
8,000 7,065 7,146
7,000
6,000 4,773
5,000 3,847
4,000 2,922
3,000 2,289 2,546
2,000
1,000
-
FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24 FY25P
Note: Amount as at the end of the Fiscal indicated and quarter for Q1FY24; P – Projected
Source: CRIF Highmark, CRISIL MI&A

Growth Drivers

Rising share of organised financier in gold loans

Due to increasing awareness about benefits of availing gold loans from organised segment, the share of unorganised god loan
financiers has decreased from 50% in Fiscal 2015 to ~37% in Fiscal 2023. Going forward, CRISIL MI&A expects the trend to
continue, and the share of organised loan market is expected to further improve from ~63% in Fiscal 2023 to ~65% in Fiscal
2025.

Share of organised players to further improve in gold loans segment

100%
80% 50%
63% 65%
60%
40%
20% 50%
37% 35%
0%
FY2015E FY2023E FY2025P

Unorganised Organised

Note: As at Fiscal end. E: Estimated, P: Projected

Source: CRISIL MI&A

India has largest private gold holdings in the world

India has world’s largest private gold holdings which is estimated to almost 3 times US official gold reserves and around twice
the total gold held in China. According to World Gold Council Report (A Central Banker’s Guide to Gold as a Reserve Asset),

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gold reserves with Indian households account for ~75% of the total gold reserves of 35,568 tonnes held by Central Banks across
the world as of March 2022. The massive gold reserve can be potentially unlocked by the owners to avail funds at a short notice
at the time of need.

Gold has been known to act as a hedge against inflation and is also attractive for financiers

Over the years, gold prices have shown a consistent increase, and have, in most part, increased at a pace higher than the annual
rate of inflation.
The hedge against inflation provided by gold has attracted consumers to gold over the years. From a financier perspective, the
yield on gold loans and minimal risk of credit losses due to security provided in the form of the gold being pledged and the
additional cushion due to the loan-to-value (average of 65% for NBFCs) makes gold loans a profitable product.
Greater accessibility and growing customer base to boost growth for SFBs and NBFCs

SFBs to witness strong growth due to following reasons:

• Large customer base: With experience in the microfinance sector over the years, SFBs have access to a large customer
segment, both agriculture and non-agriculture. Large set of such loans would classify under PSL and customers would get
subsidies. This would help SFBs cater to customers by providing gold loans at competitive interest rates as compared to
gold loans by NBFCs.
• Greater accessibility: SFBs will be able to better penetrate in the gold loan segment due to their ability or past experience
to serve non-bankable and underbanked customers in tier III and tier IV cities. This would not only help SFBs to capture
share in organised market but will also increase the share of organised financiers in the industry by catering untapped
customers in remote regions.

Over the past decade, specialized gold loan NBFCs have witnessed exceptional growth amongst organized players. This growth
is driven by aggressive expansion of branches, heavy expenditures on marketing and rapid acquisition of customers. NBFCs
and banks approach the gold loan market differently, which is reflected in their interest rates, ticket sizes and loan tenures.
NBFCs focus more single-mindedly on the gold loans business and have, accordingly, built their service offerings by investing
significantly in manpower, systems, processes and branch expansion. This has helped them attract and serve more customers.

Share of Banks to remain stable in overall gold loans segment

100%
20% 23% 24% 22% 26% 24% 23%
80%

60%

40% 80% 77% 76% 78% 74% 76% 77%

20%

0%
FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24

Banks Others

Note: Amount as at the end of Fiscal/Quarter indicated

Source: CRIF Highmark, CRISIL MI&A

Comparison of Gold loan institutions on select business parameters

Banks Gold loan NBFCs Unorganised moneylenders
Interest rate 9-18% 21-26% 25-45%
LTV Up to 75% Up to 75% More than 75%
Tenure 8-12 months 2-12 months 6-12 months
Processing fee No/minimal processing
Higher than NBFCs None
fees
Regulator RBI RBI None
Documentation required KYC Compliance Minimal Minimal
Product focus and customer Gold loan is core focus,
Non-core product Gold loan is core focus
service excellent customer service
Mode of disbursements Mainly cheque and direct Cash/ cheque and direct
Mostly cash
transfer to account transfer to account
Turnaround time 30 min – 2 hours 10 – 20 mins 10 – 20 mins
Opening hours More flexible than banks in
Banking hours Beyond banking hours
terms of working hours
Source: CRISIL MI&A

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Clearly banks offer the lowest interest rate, but gold loans being one of the numerous products that they offer, the focus on this
product is not as sharp as that of NBFCs. NBFCs on the other hand, especially the gold focused NBFCs, offer far greater
customized products and services and are nimble in the operations.
MSME loans

MSME loans witnessed a reasonable growth in the past

MSME loans grew at a fast pace, registering a CAGR of 14% over Fiscal 2018 and Q1FY2024. Over the years, more data
availability and government initiatives like GST has led to increasing focus of lenders on the underserved segment of MSME
customers as lending to this segment has become easier compared to the past. In Fiscals 2019 and 2020, however, the growth
was relatively muted due to the NBFC liquidity crisis as well as cautious stance being taken while lending to MSMEs due to
slower economic growth. Due to liquidity constraints for NBFCs, the growth slowed in Fiscal 2019.

In Fiscal 2021, the nationwide lockdown to contain the spread of the pandemic disrupted economic activity, hit production
facilities, impacted working capital needs and supply chains along with future investments and expansions. Domestic supplies
and supplies from imports also suffered, affecting both, their availability and cost. Contractual and wage labour was also hit
due to more layoffs. MSMEs in the sectors such as hotels, tourism, logistics, construction, textiles and gems and jewellery
suffered the most during the first half of the Fiscal year. In the second half of the Fiscal year, MSMEs started recovering with
economic activity. However, in the first quarter of Fiscal 2022, owing to the second wave of pandemic, MSMEs suffered due
to local lockdowns as economic activity also declined.

The first half of Fiscal 2022 was also impacted by the second wave leading to lower disbursements to these MSMEs. This led
to extension of the ECLGS scheme which cushioned the impact of pandemic. As of March 2022, loans sanctioned under the
scheme crossed ₹3.19 trillion (of ₹5 trillion), with about 64% of the guarantees issued for loans sanctioned to MSMEs, and the
disbursement aggregated ₹2.59 trillion. In Union budget 2022-23, the allocation under ECLGS was increased from ₹4.5 trillion
to ₹5.0 trillion, and the timeline for sanctions has been extended till March 2023. The enhancement of ₹500 million is earmarked
exclusively for hospitality and related enterprises. Revival of economic activity, strong export and domestic support, coupled
with a mild third wave, helped the segment to remain stable in Fiscal 2022, as a result of which, MSME loans grew by 24%
year-on-year in Fiscal 2022.

The overall MSME loan outstanding stood at ₹26.2 trillion growing at 17% year on year in Fiscal 2023. The overall MSME
loan outstanding market grew in Fiscal 2023 due to normalization of economic activities and increased revenue growth for
SMEs. Going forward, CRISIL MI&A expects the MSME portfolio to grow at 12-14% CAGR, aided by increasing penetration
of such loans, enhanced availability of data making it easier to underwrite such loans, enhanced use of technology, newer
players entering the segment and continued government support.

Overall MSME portfolio

(in Rs. billions)

35,000 32,912

30,000 26,239 25,835

25,000 22,461
20,000 18,078
12,946 13,694 13,982
15,000
10,000
5,000
-
FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24 FY25P
Note: As at Fiscal end and quarter end for Q1FY24. P-Projected.
Source: CRIF Highmark, CRISIL MI&A

Growth drivers

High credit gap in the MSME segment

Less than 15% of approximately 70 million MSMEs have access to formal credit in any manner as of March 2022. High risk
perception and the prohibitive cost of delivering services physically have constrained traditional institutions’ ability to provide
credit to underserved or unserved MSMEs and self-employed individuals historically. As a result, they resort to credit from
informal sources. This untapped market offers huge growth potential for financial institutions. As stated earlier, the credit gap
was estimated at around 58.4 trillion as of 2017 (Source: IFC report named Financing India’s MSMEs released in November
2018) and is estimated to have widened further to around ₹92.3 trillion as of March 31, 2023.

187
Government initiatives

GST to boost demand for MSME loans

CRISIL MI&A expects transparency in MSME operations to improve as GST compliance will compel them to record their
transactions. This will improve the quality of their books of accounts, thus boosting their creditworthiness. For financial
institutions, this will ease the credit appraisal process and lower credit risk. Due to improvement in the quality of books of
accounts, financial institutions will be able to lend to MSMEs in the unorganised sector that were previously unable to get credit
due to their books of accounts not being maintained properly or not maintained at all. This will open up previously untapped
credit demand for financial institutions, leading to a robust expansion of the MSME loans credit market.

Credit Guarantee Fund Scheme extended to cover NBFCs

One of the major reasons why MSMEs are credit-starved is the insistence by banks or financial institutions for the provision of
collateral against loans. Collaterals are not easily available with such enterprises, leading to a high risk perception and higher
interest rates for these MSMEs. In order to address this issue, the Government launched the Credit Guarantee Fund Scheme
under the aegis of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) in order to make collateral-
free credit available to micro and small enterprises. In January 2017, the scheme was extended to cover systemically important
NBFCs as well. Key eligibility criteria for this scheme are: 1) the NBFC should have made a profit for the three preceding
Fiscals at the time of enrolment; and 2) it should have long-term credit rating of at least BBB. There are a few other performance-
related parameters too related to asset quality. The overall limit under the scheme has also been enhanced to₹ 20 million.
Between Fiscals 2022 and 2023, around 450,000 guarantees worth ₹487 billion were approved to NBFCs.

Government initiatives addressing structural issues in the MSME market

The Government has unveiled a number of initiatives aimed at addressing some of the structural issues plaguing MSME lending
segment. These include the Pradhan Mantri Mudra Yojana (PMMY), licenses for trade receivables platforms called Trades
Receivables Discounting System (TReDS) and GST. The RBI has also proposed to introduce NBFC-account aggregators, which
have the potential to transform the MSME finance space. These account aggregators would provide granular insights to lenders
into customers’ financial assets and their borrowing history based on customer consent.

Affordable housing loans (ticket size <₹ 2.5 million)

Affordable housing loans segment to log 11-12% CAGR between March 31, 2023 to March 31, 2025

Despite the enormous unmet demand in the affordable housing finance market, the segment clocked 10% CAGR from the end
of Fiscal 2018 to the end of Fiscal 2023. As at end of Fiscal 2023, outstanding loans stood at ~Rs. 13.0 trillion growing from
~Rs. 9.3 trillion from the end of Fiscal 2020.

In Fiscal 2023, affordable housing market witnessed strong growth due to increased loan disbursals. Going forward, increased
disbursals supported by improvement in the economic activities for the economic weaker section and low-income group
segments will aid the growth of affordable housing market. CRISIL MI&A expects the affordable housing market to grow 10-
12% year on year in Fiscal 2024.

In the longer term, CRISIL MI&A expects the segment to bounce back sharply and grow at ~11-12% CAGR over Fiscals 2023-
2025 on account of the following:

• Favourable government and regulatory support to promote housing loans (up to ₹2.5mn) industry
• Recovery in economic activity over the medium term
• Increased supply of affordable homes
• Rising demand for affordable homes as consumers increasingly work out of Tier 2/3/4 cities in a post-COVID-19
world
• Work from home scenario pushing purchase decision for houses
• Ease of access to finance and rise in finance penetration

Housing loan growth (up to ₹2.5 mn) to grow at a CAGR of 11-12% from March 31, 2023 to March 31, 2025

188
 (in Rs. trillion)
18.0 16.2
16.0
14.0 13.0
11.8
12.0 10.0 10.6
9.0 9.3
10.0 8.1
8.0
6.0
4.0
2.0
0.0
FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24 FY25P
Note: As at Fiscal end and quarter end for Q1FY24. P - Projected
Source: CRIF High Mark, CRISIL MI&A
Banks to gain market share in low-ticket housing finance

CRISIL MI&A expect banks to grow at a faster pace vis-à-vis HFCs in housing loans (up to ₹2.5 mn), given their advantage in
terms of cost of funds and base of deposit accounts. Despite HFCs focus on housing loans (up to ₹2.5mn), as they attempt to
ward off competition from banks and protect profitability, the liquidity crisis coupled with sluggish economic activity post
COVID-19 has plagued their share. CRISIL MI&A expects that SFBs will grow at a faster pace as compared to other banks
and HFCs over the next two to three years, owing to its increased focus on portfolio diversification and relatively secure nature
of housing loans as compared to other asset classes.

Banks to continue to increase their foothold in the segment

100.0%
80.0% 40.5% 39.6% 37.3% 37.3% 37.2% 45.1% 36.1% 36.0%

60.0%
40.0%
59.5% 60.4% 62.7% 62.7% 62.8% 54.9% 63.9% 64.0%
20.0%
0.0%
FY18 FY19 FY20 FY21 FY22 FY23 Q1FY24 FY25P

Banks HFCs/NBFCs

Note: As at Fiscal end and quarter end for Q1FY24. P - Projected

Source: CRIF High Mark, CRISIL MI&A

Key factors contributing to high competitiveness of SFBs in Low-Cost Housing will be:

• Clear understanding of target market: Given the target borrower’s profile, players need to have a clear and deeper
understanding of micro markets and develop a strong local network. The strong network helps players to source
business from niche customer category by having references from their existing customers. It is observed that
successful players in the segment generally focus on a few geographies where they have a good understanding and
scale up gradually to manage costs and asset quality better.

• Access to public deposits for the SFBs gives it a pricing advantage due to lower cost of funds as compared to HFCs

• Collection Efficiency: Given that players in the segment typically cater to the lower income customer segment, many
of whom may not be financially literate, a strong focus and understanding of SFBs on collections and monitoring risk
of default at customer level will help them to keep asset quality under check.

189
 OUR BUSINESS

To obtain a complete understanding of our Bank, prospective investors should read this section in conjunction with “Risk
Factors”, “Industry Overview”, “Selected Statistical Information”, “Financial Statements” and “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” on pages 35, 155, 280, 304 and 372, respectively.

Unless otherwise indicated, industry and market data used in this section have been derived from the CRISIL MI&A Report,
which was prepared and released by CRISIL MI&A in connection with the Offer and commissioned and paid for by us pursuant
to an agreement with CRISIL MI&A dated August 17, 2022, as amended pursuant to an addendum dated March 13, 2023. For
more details on the CRISIL MI&A Report, see “Certain Conventions, Presentation of Financial, Industry and Market Data
and Currency of Presentation – Industry and Market Data” on page 31. The CRISIL MI&A Report is available on our Bank’s
website at www.esafbank.com/investor-relations-info/.

Certain non-GAAP financial measures and certain other statistical information relating to our operations and financial
performance have been included in this section and elsewhere in this Red Herring Prospectus. We compute and disclose such
non-GAAP financial measures and such other statistical information relating to our operations and financial performance as we
consider such information to be useful measures of our business and financial performance, and because such measures are
frequently used by securities analysts, investors and others to evaluate the operational performance of financial services
businesses, many of which provide such non-GAAP financial measures and other statistical and operational information when
reporting their financial results. Such non-GAAP financial measures and other statistical and operational information are not
measures of operating performance or liquidity defined by generally accepted accounting principles. These non-GAAP financial
measures and other statistical and other information relating to our operations and financial performance may not be computed
on the basis of any standard methodology that is applicable across the industry and therefore may not be comparable to non-
GAAP financial measures and statistical information of similar nomenclature that may be computed and presented by other
banks in India or elsewhere.

This Red Herring Prospectus contains certain forward-looking statements that involve risks and uncertainties. Our results could
differ materially from such forward-looking statements as a result of certain factors, including the considerations described
below and elsewhere in this Red Herring Prospectus. For details, see “Forward-Looking Statements” on page 33.

Overview

We are a small finance bank with a focus on unbanked and under-banked customer segments, especially in rural and semi-
urban centres. As at June 30, 2023, our gross advances to our customers in rural and semi-urban centres (combined) accounted
for 62.97% of our gross advances and 71.71% of our banking outlets were located in rural and semi-urban centres (combined).
Our primary products are our advances (asset products) and deposits (liability products). Our advances comprise: (a) Micro
Loans, which comprises Microfinance Loans and Other Micro Loans; (b) retail loans, which includes gold loans, mortgages,
personal loans, and vehicle loans; (c) MSME loans; (d) loans to financial institutions; and (e) agricultural loans. Our liability
products comprise current accounts, savings accounts, term deposits and recurring deposits. Our AUM grew from ₹84,259.30
million to ₹163,312.65 million as at March 31, 2021 and 2023, respectively, registering a CAGR of 39.22%, and increased to
₹172,039.68 million as at June 30, 2023, an increase of 5.34%. Our deposits grew from ₹89,994.26 million to ₹146,656.25
million as at March 31, 2021 and 2023, respectively, registering a CAGR of 27.66%, and increased to ₹156,558.54 million as
at June 30. 2023, an increase of 6.75%. Our services includes safety deposit lockers, foreign currency exchange, giving our
customers access to the Bharat Bill Payment System, money transfer services and Aadhaar Seva Kendra services. We also
distribute third-party life and general insurance policies and Government pension products.

We have a network of 700 banking outlets (including 59 business correspondent-operated banking outlets), 767 customer
service centres (which are operated by our business correspondents), 22 business correspondents, 2,116 banking agents, 525
business facilitators and 559 ATMs spread across 21 states and two union territories, serving 7.15 million customers as at June
30, 2023. While our operations are spread out across India, our business is concentrated in South India, particularly in the states
of Kerala and Tamil Nadu. As at June 30, 2023, 62.43% of our banking outlets are located in South India (including 43.43% in
Kerala and 13.86% in Tamil Nadu), 73.09% of our gross advances are from customers in South India (including 43.45% from
Kerala and 22.14% from Tamil Nadu) and 86.90% of our deposits are from banking outlets in South India (including 80.04%
from Kerala and 3.36% from Tamil Nadu).

We commenced our business as a small finance bank on March 10, 2017 and we were included in the second schedule to the
RBI Act pursuant to a notification dated November 12, 2018 issued by the RBI. Our Bank does not have any subsidiaries,
associates or joint ventures or a holding company.

Kadambelil Paul Thomas, our Managing Director and Chief Executive Officer and one of our promoters, along with others,
founded ESAF Foundation, a foundation focused on the development of microenterprises, community development, and
community health development. ESAF Foundation is governed by the society registrar under the Travancore-Cochin Literary,
Scientific and Charitable Societies Registration Act, 1955. ESAF Foundation started its micro loan activities in 1995, when
micro loans were not subject to regulation by the RBI. In 2006, Kadambelil Paul Thomas along with others acquired EFHPL,
our corporate promoter. Thereafter, ESAF Foundation transferred its micro loan business undertaking to EFHPL pursuant to a
business transfer agreement dated March 31, 2008. As of the date of this Red Herring Prospectus, ESAF Foundation does not
undertake a micro loans business. EFHPL was awarded NBFC-MFI status by the RBI on January 7, 2014. EFHPL transferred

190
its business undertaking, comprising its lending and financing business undertaken as an NBFC-MFI and other business
activities incidental thereto, to our Bank on March 10, 2017 pursuant to a business transfer agreement dated February 22, 2017.
For more details on our history and our major events and milestones, see “History and Certain Corporate Matters” on page
241.

As a small finance bank, we are required to have at least 75.00% of our adjusted net bank credit to the priority sectors. Our
business model focuses on the principles of responsible banking, providing customer-centric products and services through the
innovative application of technology.

We follow a social business strategy seeking a triple bottom line impact: people; planet; and prosperity. We believe that the
social, environmental, and economic outcomes of our business create synergies that have an amplified impact on our
stakeholders. The legacy of a mission, fighting the partiality of prosperity (i.e., the drive for inclusion of marginalised sections
of society and the equity of opportunities) led to the formation of our Bank. Our vision is to be India’s leading social bank that
offers equal opportunities through universal financial access and inclusion and livelihood and economic development. We have
adopted various policies to implement our triple bottom line approach, including an Environmental, Social and Governance
(“ESG”) policy. Pursuant to the ESG policy, we are committed to (i) the protection of the environment and ensuring sustainable
development, (ii) promoting financial inclusion and gender equality through specialised financial services; and (iii) establishing
a governance framework to ensure accountability, transparency and compliance with internal and external ESG standards. In
2020 we won the “Global Sustainability Award 2020” for outstanding achievements in sustainability management by the Energy
and Environment Foundation. Our ESG Grading scores from CARE Advisory Research & Training Limited in its report titled
“ESG Grading Report of ESAF Small Finance Bank” published in June 2023 were: (i) 62% for the Environmental pillar, with
remarks including our commitment to green finance and environment conscious operations; (ii) 68% for the Social pillar, with
remarks including that we have demonstrated healthy labour management practices, including the implementation of various
policies that embody international and national human rights standards; and (iii) 76% for the Governance pillar, with remarks
including that we have aligned with leading governance practices, such as adequate independence of our Board (66%
independent members on the Board) and committee levels. We received a rating of CareEdge ESG 3 (good), with an overall
score of 71 compared with the industry average overall score of 59.8. CARE Advisory Research & Training Limited’s ESG
specialist team undertook the ESG Grading of our Bank during May 2023.

The table below sets forth our AUM by product type and as a percentage of AUM as at the dates indicted.

AUM As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Amount % of AUM Amount % of AUM Amount % of AUM Amount % of AUM
(₹ in (₹ in (₹ in (₹ in
million) million) million) million)
Micro Loans 128,511.97 74.70% 122,548.83 75.04% 100,159.62 81.16% 71,452.80 84.80%
Retail loans 27,984.48 16.26% 26,147.54 16.01% 14,649.74 11.87% 9,607.19 11.40%
MSME loans 1,531.69 0.89% 1,600.61 0.98% 1,233.15 1.00% 483.57 0.57%
Loans to financial 6,173.07 3.59% 6,137.43 3.76% 4,096.30 3.32% 2,625.44 3.12%
institutions
Agricultural loans 7,838.51 4.56% 6,878.24 4.21% 3,268.10 2.65% 90.30 0.11%
Total AUM 172,039.68 100.00% 163,312.65 100.00% 123,406.91 100.00% 84,259.30 100.00%

The “ESAF” brand has been built over more than 27 years, beginning in 1995 when ESAF Foundation started its micro loan
activities. We have a license to use the “ESAF Brand” and related logos from ESAF Foundation. For details, see “History and
Certain Corporate Matters - Key terms of other subsisting material agreements” on page 247. As an NBFC-MFI, EFHPL, our
corporate promoter, was unable to accept deposits as per applicable laws in India. After acquiring the business of EFHPL, we
have been able to leverage the strength of the “ESAF” brand to grow our deposits since we began our business as a small finance
bank on March 10, 2017. We have placed an emphasis on increasing our Retail Deposits. As at June 30, 2023, our Retail
Deposits were ₹139,772.67 million, which accounted for 89.28% of our total deposits. As at June 30, 2023, we had 6.74 million
deposit accounts. The table below sets forth details our deposits as at the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
(₹ in million) % of Total (₹ in % of Total (₹ in % of Total (₹ in % of Total
Deposits million) Deposits million) Deposits million) Deposits

Demand deposits 2,372.74 1.52 2,637.53 1.80 2,197.91 1.72 1,531.84 1.70
[A]
Savings bank 26,146.96 16.70 28,736.94 19.59 27,076.07 21.13 15,944.61 17.72
deposits [B]
CASA [C = A + 28,519.70 18.22 31,374.47 21.39 29,273.98 22.84 17,476.45 19.42
B](1)
Retail Term 111,252.97 71.06 101,855.56 69.45 90,814.46 70.87 70,487.39 78.32
Deposits(2) [D]
Bulk Deposits [E] 16,785.87 10.72 13,426.21 9.15 8,062.28 6.29 2,030.42 2.25
Total term deposits 128,038.84 81.78 115,281.78 78.61 98,876.74 77.16 72,517.81 80.58
[F = D + E]
Total Retail 139,772.67 89.28 133,230.03 90.85 120,088.44 93.71 87,963.84 97.74
Deposit(3)

191
 Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
(₹ in million) % of Total (₹ in % of Total (₹ in % of Total (₹ in % of Total
Deposits million) Deposits million) Deposits million) Deposits

[G = C + D]
Total deposits 156,558.54 100.00 146,656.25 100.00 128,150.72 100.00 89,994.26 100.00
[H = C + E]
Of which:
Total NRI 32,853.29 20.98 31,662.32 21.59 26,529.35 20.70 20,191.50 22.44
deposits
Notes:
(1) CASA, which is a non-GAAP financial measure, is computed as the sum of demand deposits and savings bank deposits.
(2) Retail Term Deposits are single Rupee term deposits of less than ₹20.00 million.
(3) Retail Deposits are CASA plus Retail Term Deposits. Retail Deposits can also be calculated as total deposits less Bulk Deposits.

We use business correspondent entities to source and service customers for Micro Loans. Our business correspondents also
source customers for mortgage loans, vehicle loans, MSME loans, agricultural loans and select deposit products. In addition,
our business correspondents are responsible for sourcing and servicing our banking agents. The table below set forth our AUM
sourced or serviced by our business correspondents and as a percentage of our AUM as at the dates indicated.

AUM As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Amount % of total Amount % of total Amount % of total Amount % of total
(₹ in AUM (₹ in AUM (₹ in AUM (₹ in AUM
million) million) million) million)
AUM of Micro Loans 128,511.63 74.70% 122,548.83 75.04% 100,159.62 81.16% 71,452.80 84.80%
sourced or serviced by
business correspondents
AUM of other loans sourced 7,059.64 4.10% 6,221.16 3.81% 3,045.31 2.47% - -
or serviced by business
correspondents
Total AUM sourced or 135,571.27 78.80% 128,769.99 78.85% 103,204.93 83.63% 71,452.80 84.80%
serviced by business
correspondents
Total AUM 172,039.68 100.00% 163,312.65 100.00% 123,406.91 100.00% 84,259.30 100.00%

The table below set forth our deposits sourced by our business correspondents and as a percentage of our total deposits as at the
dates indicated.

Deposits As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Amount % of total Amount % of total Amount % of total Amount % of total
(₹ in deposits (₹ in deposits (₹ in deposits (₹ in deposits
million) million) million) million)
Deposits sourced by our 1,601.20 1.02% 2,536.15 1.73% 2,145.14 1.67% 1,495.12 1.66%
business correspondents
Total deposits 156,558.54 100.00% 146,656.25 100.00% 128,150.72 100.00% 89,994.26 100.00%

We focus on leveraging technology to deliver products and services and we continuously work towards improving our
customers’ experience through the use of technology. We have crossed a technology milestone with the successful adoption of
e-signatures for Micro Loan disbursals. In Fiscal 2023, we disbursed over 0.53 million loans using e-signatures. We offer our
customers various digital platforms, including an internet banking portal, a mobile banking platform, SMS alerts, bill payments
and RuPay branded ATM cum debit cards. Our customers are also able to register for our savings accounts on a unified payment
interface based mobile applications. Our account opening and loan underwriting processes have been digitalised by using
tablets. We have a digitalised central credit-processing unit for our Micro Loans. Our customer on-boarding process has been
predominantly digitalised for our Micro Loans. We leverage technology for underwriting and credit sanctioning for our loan
products based on inputs from credit bureaus and/or our customer data analytics. We have implemented technology solutions
that enable us to ensure cashless disbursement of loans and implemented electronic signing for Micro Loans, both of which
have reduced paperwork. Our collections mechanism has also been digitalised through the use of mobile applications and a
payment gateway through which our borrowers can repay their loans. We have also implemented a customer relationship
management solution to better handle customer requests.

We are led by Mr. Kadambelil Paul Thomas, our Managing Director and Chief Executive Officer and one of our promoters,
who has over 27 years of experience in the banking/microfinance industry in India, beginning in 1995 when ESAF Foundation,
of which he was one of the founders, started its micro loan activities. Our Board comprises individuals having diverse
experience across industries and our Independent Directors provide strategic guidance to help improve and grow our operations.
Our senior management team has significant experience in the banking and financial services industry. For more details on our

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Board, Key Managerial Personnel and Senior Management Personnel, see “Our Management” on page 251. We had 5,160
employees as at June 30, 2023.

Set forth below are certain key GAAP and non-GAAP financial measures relating to our operations and financial performance
as at or for the periods and years indicated:

Particulars As at and for the three months As at and for the year ended March 31,
period ended June 30,
2023 2022 2023 2022 2021
(₹ in million, except percentages)
AUM(1) 172,039.68 127,352.96 163,312.65 123,406.91 84,259.30
Disbursements 45,093.40 28,684.49 146,906.51 119,452.20 62,863.74
Deposits 156,558.54 134,577.46 146,656.25 128,150.72 89,994.26
Net Worth(2) 18,390.93 15,127.62 17,091.29 14,067.96 13,520.64
Net Interest Income(3) 5,854.53 4,487.62 18,363.40 11,471.39 9,215.91
Net profit for the period/year 1,299.64 1,059.66 3,023.33 547.32 1,053.96
Average Total Assets (4) 205,097.98 179,058.33 185,256.79 143,504.36 110,306.75
Return on Average Assets(5) (%) 0.63(10) 0.59(10) 1.63 0.39 0.95
Return on Average Equity(6) (%) 7.33 (10) 7.26(10) 19.36 4.12 8.85
Retail Deposits to total deposit ratio(7) (%) 89.28 92.93 90.85 93.71 97.74
Provision Coverage Ratio(8) (%) 74.35 62.00 56.67 59.38 52.77
Gross NPAs as a percentage of gross 1.65 6.16 2.49 7.83 6.70
advances (%)
Net NPAs as a percentage of net advances 0.81 3.78 1.13 3.92 3.88
(net of provisions) (%)
Yield on Average Interest-Earning 5.81(10) 5.31(10) 20.87 18.46 20.14
Advances(9) (%)
Notes:
(1)
AUM is a non-GAAP financial measure and is calculated as gross advances plus advances originated and transferred under
securitization, assignment and inter-bank participation certificates for which we continue to hold collection responsibilities (“AUM” or
“Advances Under Management”).
(2)
Net Worth is a non-GAAP financial measure and is computed as the sum of capital and reserves and surplus.
(3)
Net Interest Income is a non-GAAP financial measure and is calculated as interest earned minus interest expended (“Net Interest
Income”).
(4)
Average Total Assets is calculated on the basis of the average of the opening balance of total assets as at the start of the relevant
period/year and the closing balance as at the quarter ended for all quarters in the relevant period/year (“Average Total Assets”).
(5)
Return on Average Assets is a non-GAAP financial measure and is computed as a percentage of net profit for the period/year divided by
Average Total Assets.
(6)
Return on Average Equity is a non-GAAP financial measure and is computed as a percentage of net profit for the period/year divided by
the average of the opening balance of capital and reserves and surplus as at the start of the relevant period/year and the closing balance
as at the quarter ended for all quarters in the relevant fiscal year (“Average Shareholders’ Funds”).
(7)
Retail Deposits to total deposit ratio is a non-GAAP financial measure and is calculated the ratio of (total deposits less Bulk Deposits)
to total deposits. Bulk Deposits are single Rupee term deposits of ₹20.00 million or more.
(8)
Provision Coverage Ratio is computed as a percentage of total provisions towards gross NPAs as at the dated indicated plus outstanding
balance of technical written off accounts as at the date indicated divided by the sum of gross NPAs plus outstanding balance of technical
written off accounts as at the date indicated.
(9)
Yield on Average Interest-Earning Advances is a non-GAAP financial measure and is computed as ratio of interest earned on advances
to average advances net of provisions for NPAs calculated as the average of the opening balance at the start of the relevant period/year
and the closing balance as at quarter end for all quarters in the relevant period/fiscal year.
(10)
Not annualized.

Our Tier II bonds (Basel III) issued by us in the form of subordinated debt instruments and also our proposed Tier II Bonds are
rated by CARE Ratings Limited as “CARE A; Stable”.

Our Strengths

Our understanding of the micro loan segment has enabled us to grow our business outside of Kerala, our home state

We can trace our microfinance roots back to 1995. As at June 30, 2023, we had over 3.25 million customers with Micro Loans,
the majority of whom were women. Our understanding of the micro loan segment has enabled us to successfully expand our
business outside of Kerala. As at June 30, 2023, our products and services were offered in 21 states and two union territories.
Our gross Micro Loans to customers outside of Kerala were ₹43,305.24 million, representing 42.30% of our total gross Micro
Loans, as at June 30, 2023. As at June 30, 2023, our top five states outside Kerala for gross Micro Loans were Tamil Nadu,
Maharashtra, Madhya Pradesh, Karnataka and Chhattisgarh, with gross Micro Loans in those states (combined) being
₹50,437.31 million, which represented 49.27% of our total gross Micro Loans.

Main focus on our rural and semi-urban banking franchise

Our main focus is on providing loans to customers in rural and semi-urban centres. Our customers in rural and semi-urban
centres (combined) have increased from 3.00 million as at March 31, 2021 to 3.93 million as at March 31, 2023 and further
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increased to 4.07 million as at June 30, 2023. As at June 30, 2023, our gross advances to customers in rural and semi-urban
centres (combined) were ₹90,951.76 million, representing 62.97% of our gross advances. As at June 30, 2023, 4.07 million of
our customers were in rural and semi-urban centres (combined), representing 56.92% of our total customers, and the number
of banking outlets in rural and semi-urban centres (combined) was 502, representing 71.71% of our total banking outlets

We believe that we have developed an understanding of the rural and semi-urban households in the regions in which we operate.
In 2023, we were awarded ‘Excellence in Customer Service and Product Distribution’ Award at the Eastern India Micro Finance
Summit, ‘Best Customer Experience Bank of the Year’ Award at the India Customer Excellence Summit and Awards 2023 and
‘Innovative Bank of the Year’ Award at the India Banking Summit and Awards 2023. In 2022, we were awarded ‘Small Finance
Bank of the Year’ certification at the IBS India Banking Summit and Awards 2022 and ‘Rising Category: Banking’ Award at
the Prestigious Brand Asia Awards presented by BARC Herald Global. In 2021, we were a Semi Finalist at the SKOCH Award
2021 in the category ‘Financial, Digital Inclusion and Education’. In 2019, we received the “Best performance award for SHG-
Bank linkage” from NABARD and the “Banking Gold” SKOCH award for access and affordable banking services for
financially underserved areas. In 2018, we received the “Banking & Finance Gold” SKOCH award for financial inclusion for
all.

There are growth opportunities in rural centres in India as rural centres have lower financial inclusion compared with urban
areas and there is thus less competition for banking services in rural centres compared with urban centres. As at March 31,
2023, rural centres, which accounted for 47% of GDP, received just 8% of the overall banking credit, which shows the vast
market opportunity for banks and NBFCs to lend in these areas. (Source: CRISIL MI&A Report). With increasing focus of the
government towards financial inclusion, rising financial awareness, increasing smartphone and internet penetration, CRISIL
MI&A expects delivery of credit services in rural area to increase. (Source: CRISIL MI&A Report). Further, usage of alternative
data to underwrite customers will also help the financiers to assess customers and cater to the informal sections of the society
in these regions. (Source: CRISIL MI&A Report). We believe our rural and semi-urban franchise will enable us to take advantage
of this growth opportunity.

Growing Retail Deposits portfolio

Our total deposits increased from ₹89,994.26 million as at March 31 2021 to ₹146,656.25 million as at March 31, 2023,
representing a CAGR of 27.66%, and further increased to ₹156,558.54 million as at June 30, 2023, an increase of 6.75%.

We have placed an emphasis on increasing our Retail Deposits. Our Retail Deposits increased from ₹87,963.84 million as at
March 31, 2021 to ₹133,230.03 million as at March 31, 2023, representing a CAGR of 23.07%, and further increased to
₹139,772.67 million as at June 30, 2023, an increase of 4.91%.

CASA tends to provide a stable and low-cost source of deposits compared to term deposits. Our CASA increased from
₹17,476.45 million as at March 31, 2021 to ₹31,374.47 million as at March 31, 2023, representing a CAGR of 33.99%, and
decreased to ₹28,519.70 million as at June 30, 2023, a decrease of 9.10%.

The table below sets forth our Cost of Average CASA, Cost of Average Term Deposits and our Cost of Funds, which are non-
GAAP financial measures, for the periods and Fiscals indicated.

Particulars Three months period ended June 30, Year ended March 31,
2023 2022 2023 2022 2021
Cost of Average CASA 1.08%(1) 1.35%(1) 4.87% 4.93% 4.67%
Cost of Average Term Deposits 1.82%(1) 1.60%(1) 6.55% 6.71% 8.00%
Cost of Funds 1.72%(1) 1.52%(1) 6.19% 6.30% 7.56%
Note:
(1) Not annualized.

Kerala is our home state and we have a presence in all 14 districts. In calendar year 2022, India received US$ 100 billion in
remittances, which was the highest amount of remittances out of any country followed by Mexico (US$ 60 billion). (Source:
CRISIL MI&A Report). Due to the foregoing and our presence in all districts in Kerala, we have been able to capitalise on this
opportunity and increase our NRI deposits. We began offering NRIs savings bank and term deposits in June 2018 and current
accounts in June 2021. Our NRI deposits increased from ₹20,191.50 million as at March 31, 2021 to ₹31,662.32 million as at
March 31, 2023, representing a CAGR of 25.22%, and further increased to ₹32,853.29 million as at June 30, 2023. Representing
an increase of 3.76%.

Customer connections driven by our customer-centric products and processes and other non-financial services for Micro
Loan customers

We aim to provide the best-in-class banking services to our customers, as we believe our customers are the most important
stakeholders in our business. Our products and services are designed to meet the various lifecycle needs of our customers, such
as home loans, clean energy product loans, loans for agricultural activities, loans against property, personal loans, education
loans, gold loans and vehicle loans.

An example of our customer-centric approach is that our Micro Loans can be repaid on a weekly, fortnightly or monthly basis
based on our customers’ preferences. As at June 30, 2023, 55.31% of our Micro Loan customers repaid their loans on a weekly
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basis. Our business correspondents collect cash repayments on our behalf and through regularly meeting with our Micro Loan
customers, our business correspondents are better able to understand those customers’ requirements. We believe our business
correspondents’ constant engagement with our Micro Loan customers helps to keep delinquencies in check.

In addition to the provision of financial services, our business correspondents undertake various non-financial services, which
include, among other things, conducting financial literacy programmes, livelihood programmes, entrepreneurship training
programmes and community engagement programmes.

Our guiding principles include transparency, preventing our customers from becoming over-indebted, treating our customers
fairly and being empathetic towards our customers in times of crisis, which we have demonstrated by launching three new loan
products to assist our customers during the COVID-19 pandemic: (1) Income Generation Loan Top Up, which is a pre-approved
loan and a variant of the Income Generation Loan and is targeted at customers who have an existing Income Generation loan;
(2) Utdhan Loan Series 3 – Covid Care Loan, which was tailor made to support the financial needs of customers adversely
affected by the COVID-19 pandemic; and (3) Pratheeksha Kiran Loan, which was mainly for the restoration of livelihoods and
households of customers impacted by the pandemic. On May 5, 2021, the RBI announced Resolution Framework 2.0 for
advances to individuals and small businesses. The resolution facility was applicable for accounts classified as standard as at
March 31, 2021. The resolution plan included rescheduling of loan EMIs. In accordance with the RBI guidelines and the Board’s
approved policy, we restructured loans that were standard as at March 31, 2021. We also provided an initial repayment-holiday
based on a borrower’s request to start the repayment of a loan as per the Resolution Framework 2.0. Another example is how
we supported our customers during Kerala’s floods in 2018 and 2019 by providing emergency funding in the form of “Utdhan
Loans” to customers for rebuilding their livelihood and meeting other expenses, moratoriums on repayment of their loans for a
period of up to four months depending on the needs of such customers affected by the floods and extending total repayment
periods for up to 36 months on certain categories of loans.

We believe our customer-centric products and processes have resulted in high customer retention rates.

In 2019, we received the “Kerala Bank of the Year 2019” award from Dhanam Business Magazine and the “Banking Gold”
SKOCH award for access and affordable banking services for financially underserved areas. In 2018, we received the “Banking
& Finance Gold” SKOCH award for financial inclusion for all as well as the “Special Jury Award for Serving MSMEs” MSME
Banking Excellence Award from the Chamber of Indian Micro Small and Medium Enterprises.

Technology-driven model with a digital technology platform

We offer our customers various digital platforms, including an internet banking portal, a mobile banking platform, SMS alerts,
bill payments and RuPay branded ATM cum debit cards. All banking and payment transactions, such as remittances and utility
payments, can be completed through these platforms. Our customers are also able to register our savings accounts on a unified
payment interface based mobile applications.

Our account opening and loan underwriting processes have been digitalised by using tablets, which enabled us to reduce our
turnaround time and offer better service to customers. CASA accounts can be opened through tablets, which enables us to
provide doorstep services to our customers. By leveraging technology solutions, we provide customers with pre-generated kits
immediately upon account opening, enabling them to use the ATM-cum-debit card provided with the pre-generated kits without
having to wait for the ATM-cum-debit card to be activated across channels, thereby resulting in increased customer satisfaction.
We have crossed a milestone in technology with the successful adoption of e-signatures for Micro Loan disbursals. In Fiscal
2023, we disbursed over 0.53 million loans using e-signatures, which showcases our commitment to digital advancement.
Through the adoption of e-signatures, we have saved paper, which were earlier being utilized for the purpose of loan
disbursement documentation, involving handwritten signatures. This will indirectly save water and reduce deforestation as per
our commitment to reduce greenhouse gases emissions commitment set forth in our Bank’s ESG policy.

We have a digitalised central credit-processing unit for our micro loans. Our customer on-boarding process has been
predominantly digitalised for our micro loans. We leverage technology for underwriting and credit sanctioning for our loan
products based on inputs from credit bureaus and/or our customer data analytics. We have implemented technology solutions
that enable us to ensure cashless disbursement of loans and implemented electronic signing for micro loans, both of which have
reduced paperwork. Our collections mechanism has also been digitalised through the use of mobile applications and a payment
gateway through which our borrowers can repay their loans.

We continuously work towards improving our customers’ experience through the use of technology. We have implemented a
customer relationship management solution to better handle customer requests. We believe that such initiatives have helped us
improve our customer service and enable us to deliver our services in a more cost-effective manner.

Experienced Board and Key Managerial Personnel and Senior Management Personnel

We have an experienced Board comprising members with diverse business experience, many of whom have held senior
positions in well-known financial services institutions. Mr. Kadambelil Paul Thomas, our Managing Director and Chief
Executive Officer and one of our Promoters, was previously a senior field representative at Indian Farmers Fertilizers Co-
operative Limited and since 2013 he has been the president of the Kerala Association of Micro Institutional Entrepreneurs.
Members of our Senior Management Personnel and Key Managerial Personnel have been working in the banking and financial
services sector for more than 27 years. The members of our Senior Management Personnel have expertise in scaling up financial
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services organizations and collectively they have all the relevant experience in credit evaluation, risk management, treasury and
technology. For details of our Board, Key Managerial Personnel and Senior Management Personnel, see “Our Management”
on page 251.

Our Strategies

Penetrate deeper into our existing geographies

As at June 30, 2023, we had 700 banking outlets (including 59 business correspondent-operated banking outlets), 767 customer
service centres (which are operated by business correspondents), 22 business correspondents, 2,116 banking agents, 525
business facilitators and 559 ATMs. As at June 30, 2023, we served over 7.15 million customers in 21 states and two union
territories.

Since April 2020, we have considerably expanded the number of states and territories we operate in. In Fiscal 2021, we
expanded our operations to Meghalaya, Uttar Pradesh, Haryana, Tripura and Chandigarh, by opening banking outlets and/or
appointing business correspondents for these states/union territory. In Fiscal 2022, we expanded our operations to Uttarakhand
by appointing a business correspondent for that state. In Fiscal 2023, we opened Branches in Tripura and Uttarakhand for the
first time. We intend to deepen our distribution within the states and union territories we operate in by opening additional
Branches, having business correspondents open more customer service centres and business correspondent-operated banking
outlets and encouraging them to enter into agreements with more banking agents, entering into relationships with new business
correspondent entities and business facilitators and adding ATMs. We plan to continue to open Branches in urban and semi-
urban centres after taking into account data from the RBI for certain parameters, such as aggregate deposits, deposit growth,
number of urban households, households with banking access, share of PSU deposits and total NRI remittances.

Increase our deposits and in particular our Retail Deposits

We plan to continue to increase our deposits, in particular our Retail Deposits, in order to help grow our business and reduce
our Cost of Funds. Our total deposits increased from ₹89,994.26 million as at March 31 2021 to ₹146,656.25 million as at
March 31, 2023, representing a CAGR of 27.66%, and further increased to ₹156,558.54 million as at June 30, 2023, an increase
of 6.75%. Our Retail Deposits increased from ₹87,963.84 million as at March 31, 2021 to ₹133,230.03 million as at March 31,
2023, representing a CAGR of 23.07%, and further increased to ₹139,772.67 million as at June 30, 2023, an increase of 4.91%.
To increase our deposits, our banking outlets and business correspondents will continue to target new and existing customers
to source deposits in the form of CASA, fixed deposits and recurring deposits by focusing on customer service and offering
competitive pricing.

Our business correspondent entities are the primary channel for sourcing deposits from our Micro Loan customers. We plan to
add more business correspondents, which will help to increase our deposits.

Furthermore, we intend to continue to target NRIs to scale up our deposit base and in particular our CASA base. We began
offering NRIs savings bank and term deposits in June 2018 and current accounts in June 2021. As at June 30, 2023, our deposits
from NRIs were ₹32,852.29 million, which represented 20.98% of our total deposits as at that date. To target NRIs, we will
continue to focus on regions where NRI remittances are high by launching targeted campaigns around festivals, conducting
marketing activities at airports, malls, etc., and entering into tie-ups with third parties, such as remittance arrangers. We also
plan to continue to open new banking outlets in centres that have a large population dependent on remittances.

We also intend to continue to target HNIs to scale up our deposit base and in particular our CASA base. To target additional
HNIs, we intend to continue to leverage our banking outlets by appointing dedicated relationship managers to source deposits
and other business from HNI customers. We currently have a HNI programme dedicated to HNI customers and we plan to offer
differentiated services and pricing to HNIs based on the relationship value.

The RBI granted us an Authorised Dealer Category I licence to deal in Foreign Exchange in India in April 2023, which enables
us to offer deposits in foreign currency, thereby helping to increase our NRI customer base.

We also plan to establish relationships with more farmer producers’ associations, co-operative societies, government
departments, non-government organisations, and educational institutions in order to offer our products and services, including
CASA, to their members/employees.

We will also offer savings accounts targeted at different types of workers.

Continue to grow our Micro Loans while increasing our other categories of advances both in absolute terms and as a
percentage of our total AUM

Continue to grow our Micro Loan business

Our AUM of Micro Loans increased from ₹71,452.80 million as at March 31, 2021 to ₹122,548.83 million as at March 31,
2023, representing a CAGR of 30.96%, and further increased to ₹128,511.97 million as at June 30, 2023, an increase of 4.87%.
CRISIL MI&A expects small finance banks’ AUM to grow at approximately 22-24% CAGR between June 30, 2023 and March
31, 2025. (Source: CRISIL MI&A Report). We plan to continue to grow our Micro Loans by cross-selling and up-selling to our

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customer base and marketing these loans to family members of our existing customers, thereby deepening our relationships
with them and becoming their trusted bank of choice. We also plan to appoint new business correspondents and have our
banking agents start to source customers.

Expand our retail loan business

In Fiscal 2018, we began offering retail loans and since then we have been expanding our portfolio of retail loan products,
including offering gold loans in Fiscal 2019. Gold loans in particular have contributed to the growth of our retail loans. The
table below sets forth our AUM of retail loans by loan type as at the dates indicated and the percentage change from the previous
balance sheet date.

AUM As at June 30, % increase / As at March % increase / As at March % increase / As at March

2023 (decrease) 31, 2023 (decrease) 31, 2022 (decrease) 31, 2021
(₹ in million) from March (₹ in million) from March (₹ in million) from March (₹ in million)
31, 2023 31, 2022 31, 2021
Gold loans 22,098.64 7.60% 20,537.35 94.40 10,564.59 61.61 6,537.19
Mortgage loans 2,680.79 2.14% 2,624.56 48.10 1,772.15 53.48 1,154.64
Vehicle loans 1,146.81 4.80% 1,094.24 28.21 853.45 24.42 685.92
Other retail loans 2,058.24 8.82% 1,891.39 29.58 1,459.55 18.71 1,229.44
Total retail loans 27,984.48 7.03% 26,147.54 74.48 14,649.74 52.49 9,607.19

We plan to continue to increase our retail advances both in terms of amount and as a percentage of our AUM by targeting
agriculturists / small farmers, small-scale entrepreneurs, salaried employees, students and senior citizens in small towns and
rural India, thereby expanding our retail loan customer base. We plan to continue to focus on our individual customers to
continue to build our retail loan portfolio, as well as capitalise on our relationships with our existing micro loan customers
whose borrowing ability has increased and who require increased loan amounts. We will continue offering personalised loan
products to our salaried account holders. In addition, we will continue to expand the number of our Branches that offer gold
loans. We have increased the number of Branches offering gold loans from 345 Branches, or 62.73% of our 550 Branches, as
at March 31, 2021, to 551 Branches, or 85.96% of our 641 Branches, as at June 30, 2023. We plan to increase our mortgage
business by increasing the number of Branches that offer mortgages (as at June 30, 2023, 375, or 58.50%, of our Branches
offered mortgages) through focusing on affordable housing loans with new policies and processes designed to increase the ease
and efficiency for granting housing loans. We plan to introduce a mobile-based loan origination system for mortgage loans. In
Fiscal 2023, we hired a senior vice president in our retail assets department to concentrate on increasing our mortgage business.

Increase our MSME loans

We started offering MSME loans in Fiscal 2020. Our AUM of MSME Loans increased from ₹483.57 million as at March 31,
2021 to ₹1,600.61 million as at March 31, 2023, representing a CAGR of 81.93%, and decreased to ₹1,531.69 million as at
June 30, 2023, a decrease of 4.31%. We plan to increase our MSME loans both in terms of amount and as a percentage of our
AUM by having our relationship managers in our banking outlets reach out to MSMEs and offer them working capital and term
loans. We will also help our existing Micro Loan customers to grow their businesses with additional funding. We will encourage
our business correspondents and business facilitators to find more customers for our small ticket term loans. We also plan to
increase our supply chain finance by partnering with fintechs/tech platforms to find more customers for our working capital
loans. We use web-based platforms operated by certain entities to facilitate financing/discounting of trade receivables of
MSMEs, and we plan to increase our activity on these platforms, thereby increasing our receivables discounting business.

Grow our agricultural loan business

We set up our agricultural (agri) loan business department in Fiscal 2020. In Fiscals 2023, 2022 and 2021, we introduced two,
two and three new agricultural loan products, respectively, resulting in us having seven agricultural loan products as at June 30,
2023. Our AUM of agricultural loans increased from ₹90.30 million as at March 31, 2021 to ₹6,878.24 million as at March 31,
2023, representing a CAGR of 772.76%, and increased to ₹7,838.51 million as at June 30, 2023, an increase of 13.96%.

We currently have agri relationship officers who are responsible for sourcing agri loans in Tamil Nadu, Maharashtra, Madhya
Pradesh, Chhattisgarh, Karnataka, Andhra Pradesh, Telangana, Puducherry and Kerala. We plan to continue to increase our
agricultural advances both in terms of amount and as a percentage of our AUM by appointing agri relationship officers in more
states, by entering into relationships with more farmer producer organisations and sourcing more loans through our banking
outlets and business correspondents.

Increase fee-based income by cross-selling, expanding third-party products and service offerings and expanding our fee-
based offerings

We intend to increase our fee-based income by cross-selling third-party products and service offerings to our customers and
expanding third-party products and service offerings. In Fiscal 2019, we began distributing the National Pension System, Atal
Pension Yojna and third-party general insurance products. In Fiscal 2020, we began distributing third-party life insurance
products. In Fiscal 2023, we began distributing third-party mutual funds and offering third-party depositary services. In addition,
we plan to offer bank guarantees and letters of credit to MSMEs.

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For a table setting forth our fees/remuneration from Bancassurance for selling life insurance policies and non-life insurance
policies and as a percentage of our total income for the three months period ended June 30, 2023 and 2022 and Fiscals 2023,
2022 and 2021, see “-Distribution of Third-Party Products-Insurance Products” on page 205.

The table below sets forth our fees/remuneration from distributing pension products, income from locker rent and income from
foreign exchange services and as a percentage of our total income for the three months period ended June 30, 2023 and 2022
and Fiscals 2023, 2022 and 2021, see “-Distribution of Third-Party Products-Other Services” on page 205.

Continue to leverage technology and customer data analytics

We believe our use of technology has significantly improved the efficiency of our operations. We plan to further enhance our
technology platforms, such as internet banking, mobile banking, ATMs, cash deposits machines, customer service applications
and payment interfaces, which we believe will increase the adoption of our service delivery mechanisms. This will also enable
us to perform more reliable data analytics, resulting in more efficient risk management processes, targeted customer profiling
and offer customised products to suit our customers’ diverse requirements.

Asset Products

Our asset products comprise: (a) Micro Loans (Microfinance Loans and Other Micro Loans); (b) retail loans, which includes,
gold loans, mortgages, personal loans, and vehicle loans; (c) MSME loans; (d) loans to financial institutions; and (e) agricultural
loans. The table below sets forth our AUM by product type and as a percentage of total AUM as at the dates indicated.

AUM As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Amount % of AUM Amount % of AUM Amount % of AUM Amount % of AUM
(₹ in million) (₹ in (₹ in (₹ in
million) million) million)
Micro Loans(1) 128,511.97 74.70 122,548.83 75.04% 100,159.62 81.16% 71,452.80 84.80%
Of which:
Microfinance 97,239.08 56.52 103,964.49 63.66% N.A. N.A. N.A. N.A.
Loans(1)
Other Micro 31,272.89 18.18 18,584.34 11.38% N.A. N.A. N.A. N.A.
Loans(1)
Retail loans 27,984.48 16.26 26,147.54 16.01% 14,649.74 11.87% 9,607.19 11.40%
MSME loans 1,531.69 0.89 1,600.61 0.98% 1,233.15 1.00% 483.57 0.57%
Loans to 6,173.03 3.59 6,137.43 3.76% 4,096.3 3.32% 2,625.44 3.12%
financial
institutions
Agricultural 7,838.51 4.56 6,878.24 4.21% 3,268.10 2.65% 90.30 0.11%
loans
Total AUM 172,039.68 100.00% 163,312.65 100.00% 123,406.91 100.00% 84,259.30 100.00%
Note:
(1) Our Micro Loans comprise Microfinance Loans and Other Micro Loans. Our Microfinance Loans and Other Micro Loans are provided to individuals
without being secured by collateral. In order to be given a loan, an individual must be part of a sub-group, which usually comprises two to 10 people.
One to five sub-groups combine to form a “sangam”. The sangam facilitates the repayment process and other activities among the individuals by
holding meetings at regular intervals with sangam members. Until the introduction of the RBI Regulatory Framework for Microfinance Loans
Direction, 2022, we considered all of our loans to individuals who were members of a sub-group to be Micro Loans. Effective October 17, 2022, we
segregated our Micro Loans into Microfinance Loans and Other Micro Loans.

For more details on our AUM, see “Selected Statistical Information – Advances Under Management” on page 289.

Micro Loans - Microfinance Loans and Other Micro Loans

Our Micro Loans comprise our Microfinance Loans and Other Micro Loans, which are provided to individuals without being
secured by collateral. In order to be given a loan, an individual must be part of a sub-group, which usually comprises two to 10
people. One to five sub-groups combine to form a “sangam”. The sangam facilitates the repayment process and other activities
among the individuals by holding meetings at regular intervals with sangam members. Until the introduction of the RBI
Regulatory Framework for Microfinance Loans Direction, 2022, we considered all of our loans to individuals who were
members of a sub-group to be Micro Loans. Effective October 17, 2022, we segregated our Micro Loans into Microfinance
Loans and Other Micro Loans. A person whose annual household income is up to ₹0.30 million is eligible for a Microfinance
Loan provided that the percentage of the monthly household income to be used for the repayment of loans (including the new
loan) shall be a maximum of 50% of the monthly household income. Household means an individual family unit, i.e., husband,
wife and their unmarried children. Persons whose household income is above ₹0.30 million can apply for Other Micro Loans.

Our current Microfinance Loans comprise the following loan products:

Name of the loan Purpose Maximum loan Loan tenure

amount (in ₹)
ESAF Income Generation Loan Loan for income generation activities 150,000 12 to 35 months
ESAF Vidyajyoti Loan Loan for education expenses for children 50,000 12 to 24 months
ESAF General Loan Loan for general/consumption purposes 150,000 12 to 35 months

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 Name of the loan Purpose Maximum loan Loan tenure
amount (in ₹)
ESAF Jeevadhara Loan Loan for water connection and storage facilities 40,000 12 to 24 months
ESAF Nirmal Loan Loan for the construction of toilets 40,000 12 to 24 months

Our current Other Micro Loans comprise the following loan products:

Name of the loan Purpose Maximum loan Loan tenure

amount (in ₹)
ESAF Nano Loan Loan for income generation activities 150,000 12 to 35 months
ESAF Asha Loan Loan for general/consumption purposes 150,000 12 to 35 months
ESAF Vidyajyoti Plus Loan Loan for education expenses for children 50,000 12 to 24 months
ESAF Nirmal Plus Loan Loan for the construction of toilets 40,000 12 to 24 months
ESAF Jeevadhara Plus Loan Loan for water connection and storage facilities 40,000 12 to 24 months

The interest rates on our Microfinance Loans and Other Micro Loans are fixed. Interest rates on new Microfinance Loans and
Other Micro Loans with a tenure of less than three years are fixed based on our MCLR, which is approved by our Market Risk
and Assets Liability Committee (“MR-ALCO”) on a monthly basis. Our interest rates are displayed at our banking outlets and
on our website to ensure transparency in our operations.

Customers

Our target customers for our Microfinance Loans and Other Micro Loans are women in unserved and underserved households
in India. As at June 30, 2023, we had over 3.25 million Micro Loan customers. Our business correspondents source and service
customers for our Microfinance Loans and Other Micro Loans.

Credit Approval and Disbursement Process

An employee of a business correspondent entity conducts initial promotional meetings in the area and amongst prospective
sangam members to source a new customer and requests for their KYC documents to allow for data capture. The applicant’s
data and the loan application are captured on a tablet and submitted to us electronically. A house verification visit is carried out
by an employee of a business correspondent entity. We conduct a de-duplication check, AML validation and automatic credit
bureau check. This is followed by a compulsory group training program and group recognition test for our new customers,
which is undertaken by an employee of the business correspondent entity. Post successful validation, an employee of the
business correspondent entity recommends the loan based on the customer’s need and our credit sanction team approves the
loan based on pre-set parameters. An authorised officer then verifies the loan documents, KYC documents, etc., following
which we issue a loan card to the customer and then transfer the funds into the customer’s savings account or to an account
with another bank as opted by the customer. In case a loan agreement has been signed using an electronic signature, the loans
disbursement is made after authenticating the electronic signature.

Loan Collection and Monitoring Process

We tailor our collection schedule to weekly, fortnightly or monthly repayments depending on the sangam’s preference. The
table below sets forth the percentage of our Micro Loan customers who repaid their loans on a weekly, fortnightly and monthly
basis for the three months period ended June 30, 2023 and Fiscal 2023.

Particulars Three months period Year ended March 31,

ended June 30, 2023 2023
Percentage of Micro Loan customers who repaid their loans on a weekly basis 55.31% 55.30%
Percentage of Micro Loan customers who repaid their loans on a fortnightly basis 17.29% 18.19%
Percentage of Micro Loan customers who repaid their loans on a monthly basis 27.40% 26.52%

Our business correspondents collect the repayments and enter each repayment on a tablet, which is then automatically reflected
in our system.

Retail Loans

The following is a description of our retail loan products:

Type and name of the Purpose Maximum loan Loan tenure

loan amount (in ₹)
Mortgage loans:
ESAF Dream Home Loan Loan to a salaried / self-employed customer for construction of a house 50,000,000 Up to 25 years
or purchase of a new house, flat, or villa and for renovations of an
existing property
ESAF Flexi Home Loan for construction of a house or purchase of a new house or flat and 3,500,000 Up to 25 years
for renovations of an existing property for customers with undocumented
income

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 Type and name of the Purpose Maximum loan Loan tenure
loan amount (in ₹)
ESAF Loan Against Loan for any specified purpose, including business, education, marriage, 50,000,000 3 to 15 years
Property commercial purchase and commercial construction or other purposes
secured by property
ESAF Lease Rental Loans against lease / rental receipts 50,000,000 Up to 10 years
Discounting
Gold loans:
ESAF Gold Loan Loans for short term funding needed to meet 20,000,000 Up to 1 year
personal/family/business/agricultural requirements and other unforeseen
requirements, including consumption purposes, secured by gold
Personal loans:
Salary Overdraft Loan Loan for personal purposes 1,000,000 24 months
ESAF Personal Loan Personal loan offered to a salaried customer for general purposes 500,000 12 months to 35
months
Education loans:
Education Loan Loan for higher education studies inside India 1,000,000 Up to 7 years
ESAF Dream Education Loans for Higher Educations both overseas and India 10,000,000 Up to 12 years
Loans
ESAF School Loan Loans for Infrastructure development of educational institutions 30,000,000 Up to 10 years
Vehicle loans:
ESAF New Car Loan Loan for the purchase of a new car 15,000,000 Up to 7 years
ESAF Used Car Loan Loan for the purchase of a used car / refinance with asset as collateral / 15,000,000 Up to 5 years
loan take over
ESAF New LCV Loan Loan for the purchase of a new commercial vehicle 10,000,000 1 to 5 years
ESAF Used LCV Loan Loan for the purchase of a used commercial vehicle / refinance with asset 2,000,000 1 to 5 years
as collateral / loan take over
ESAF Two-Wheeler Loan for the purchase of a two-wheeler 1,000,000 Up to 5 years
Loan
ESAF Three-Wheeler Loan for the purchase of a three-wheeler 300,000 Up to 5 years
Loan(1)
Other loans:
Loan against deposit Loan secured against a fixed deposit Up to 90% of the Up to the tenure
term deposit value of the Deposit
ESAF Clean Energy Loan for the purpose of solar-based power generators, biomass-based 1,000,000 Up to 7 years
Loans power generators, non-conventional energy based public utilities, home
lighting systems and solar inverters

The interest rates we charge on our retail loans are fixed or floating depending on the product. Our fixed rate loans with a tenure
of less than three years are based on the MCLR. Our MCLR is reviewed by our MR-ALCO on a monthly basis. Our floating
rate loans are based on the RBI’s repo rate.

For a table setting forth our AUM of retail loans by loan type, see “- Our Strategies - Expand our retail loan business” on page
197.

Customers

Our target customers for our retail loans are salaried individuals, the self-employed, businesses and customers who have
graduated from Microfinance Loans and Other Micro Loans. We source customers for our retail loans through our sales
executives, dealers and direct sales agents on a walk-in basis in our banking outlets and through our business correspondents
and business facilitators.

Credit Approval and Disbursement Process

Upon sourcing a customer, an officer collects their application and applicable supporting documents. A series of checks are
performed which include credit bureau checks, house verification, and eligibility assessment in order to verify the applicant’s
credit history and credit worthiness. For new customers, the officer will assist with the opening of a savings account. The officer
then prepares the proposal in the system, after which the application undergoes a reference check for certain loans such as home
loans, car loans and business loans, before being forwarded to the credit appraisal and credit sanction teams. Our credit
department has centralised processing hubs for home loans and vehicle loans. The credit officer arranges for legal and technical
reports for mortgage loans if the customer is applying for a mortgage loan. The loan requires the final approval by the
appropriate credit sanction officer. Once the loan has been approved, a member of the operations team prepares the documents

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to be executed at one of our banking outlets. Subsequently, the operations manager takes custody of the documents to verify
them. Once verified, a checklist of all documents is sent to the central loan administration team for disbursement.

For vehicle loans up to a certain loan size and for customers with certain credit score rating, we use a mobile-based loan
origination system for customer on-boarding, KYC authentication, bank account verification, de-duplication, credit bureau
check and loan sanction by an internal risk scorecard is done via a straight through process. Physical customer verification is
done on the basis of a risk score. This has cut down the turnaround time on the loan approval process to a few hours.

Furthermore, our gold loan staff appraise the gold provided for as security for our ESAF Gold Loans. Our ESAF Gold Loans
are approved by the Branch head.

Loan Collection and Monitoring Process

When the loan documents are executed for certain loan products, we collect NACH instructions, standing instructions or post-
dated cheques for loan repayment. To monitor loan collection, we have a collection and recovery department, which sends
reminders to our customers before each repayment date.

MSME Loans

The following is a description of our MSME loan products:

Name of the loan Purpose Maximum loan Loan tenure

amount (in ₹)
ESAF Micro Enterprise Loan Loans to an existing sangam member 300,000 35 months
(Microfinance Loan or Other Micro Loans
customer) to further grow their business
Vyapar Vikas Yojana Loan to a resident individual having a shop/ 150,000 6 months to 24 months
business with a minimum vintage of three months
in the same location as working capital for their
business
ESAF TReDS (Financing Trade Discounting of bills using a TreDS platform. We 500,000,000 Maximum tenure of 180 days
Receivables e-Discounting are a member of certain TreDS platforms
System) (TreDS)
ESAF MSME Easy Business Loan for meeting working capital through 2,500,000 CC/OD – 1 to 2 years
Loan (CC(1)/ OD(2) /TL(3))* overdraft and long-term fund requirements of a (renewable after one year)
Micro enterprise for the growth of their business TL – 36 to 84 months
ESAF MSME Smart Loan Loan for meeting working capital and long-term 10,000,000 OD – 1 year
(OD/TL)* fund requirement of small enterprises for the TL – 36 months to 120 months
growth of their business
ESAF Udyog Loan (CC/ OD/ TL/ Loan for meeting working capital and long-term Up to a certain CC/OD – 1 year
Demand Loan/ Non-funded) fund requirement of an MSME for the growth of percentage of TL – 84 months
their business costs of
assets/land to be Demand Loan – 180 days
acquired Non-funded – 5 years
(tenure over 5 years and up to 10
years may be permitted by a
Managing Director or the Chief
Executive Officer)
ESAF GST Power OD Loan for meeting the working capital of the 10,000,000 OD - 30 months
borrower engaged in any business for last 24
months
ESAF MSME Business Lap Loan for bona-fide business needs like build-up of 5,000,000 120 months
current assets, fixed assets, purchase of equipment,
computers, air conditioner, furniture, plant and
machinery, repairs and renovation of business
unit/factory etc and for general business purpose
other than for purchase of vacant land on
standalone basis or speculative purpose.
ESAF Secured Business Loan to Loan to facilitate expansion goals and general 100,000,000 Short TL – up to 12 Months
Enterprises (ESSBLE) business requirement of business/service units Medium TL – 12 months to 60
months
OD – 12 months
Term Loan – up to 7 years
Notes:
(1) CC means cash credit.
(2) OD means overdraft.

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(3) TL means term loan.
* Yet to be sanctioned.

The interest rates we charge on our MSME loans are fixed or floating depending on the product. Our fixed rate loans with a
tenure of less than three years are based on the MCLR. Our MCLR is reviewed by our MR-ALCO on a monthly basis. Our
floating rate loans are based on the RBI’s repo rate.

Customers

Our target customers for our MSME loans are MSMEs, and our existing Microfinance Loan customers and Other Micro Loans
who want to grow their business.

We source customers for our MSME through banking outlets, digital channels (except for corporate loans), direct sourcing and
third-party intermediaries, including business correspondents. We are a member of certain TreDS platforms and bills are
discounted by participating in the bidding process on these platforms.

Credit Approval and Disbursement Process

Upon sourcing a customer, a relationship officer collects the application and applicable supporting documents. These documents
are handed over to an officer who performs a series of checks, which include credit bureau checks, house verification, and
eligibility assessment in order to verify the applicant’s credit history. For new customers, a relationship officer will assist with
the opening of a current account. The relationship officer then prepares the proposal in the system, after which the application
undergoes a reference check for certain loans by a member of the back-office before forwarding the application to the credit
appraisal and credit sanction teams. Our credit department has centralised processing hubs for processing loan applications.
The officer arranges for legal and technical reports for collateral for loans. The loan requires the final approval by the appropriate
credit sanction officer. Once the loan has been approved, a member of the operations team prepares the documents to be
executed at one of our banking outlets. Subsequently, the operations manager takes custody of the documents to verify them.
Once verified, a checklist of all documents is sent to the central loan administration team for disbursement.

Loan Collection and Monitoring Process

When the loan documents are executed for certain loan products, we collect NACH instructions, standing instructions or post-
dated cheques for loan repayment. To monitor loan collection, we have a collection and recovery department, which sends
reminders to our customers before each repayment date.

Loans to Financial Institutions

We make loans to NBFCs and MFIs for onward lending. Such loans are provided after due diligence on the NBFC’s/MFI’s
business model and other factors, such as experience of the board and management, external rating of the company, the quality
of its loan portfolio and the segments that it lends to. The following is a description of our loans to NBFCs and MFIs:

Name of the loan Purpose Maximum loan amount Loan tenure

(in ₹)

Loans to NBFCs & MFIs Loans to NBFCs and MFIs for Up to 5% of our capital funds Cash credit or overdraft – 1 year
onward lending (total of our Tier 1 and Tier 2
capital) Term loan – 60 months

Credit Appraisal and Disbursement Process

When a loan application is received, the relationship manager collects relevant documents, such as the audited financial
statements for the last two to three years, provisional financial statements, ratings reports, NBFC/MFI grading reports and other
essential documents to appraise the loan application. These documents are submitted to the credit department. The credit
department evaluates the financial position, credit history and growth plans of the company by reviewing financial statements,
business reports, discussions with senior management team of the applicant and prepares a detailed credit appraisal
memorandum. We also obtain credit opinion reports from other lenders of the applicant. The credit appraisal memorandum is
submitted to the risk management department. All loans to NBFCs and MFIs are required to be recommended by the Executive
Credit Committee, which consists of two executive vice presidents and the Managing Director. The loan is then sanctioned by
the Executive Credit Committee or Management Committee of the Board or the Board of Directors, as per the policy
prescriptions and the delegated powers. The loan documents are executed at one of our banking outlets or at the applicant’s
office in the presence of one of our authorised bank officials. Once the documents are executed and the confirmation is given
to the credit monitoring team, the loan is disbursed to the bank account of the applicant.

Loan Collection and Monitoring Process

The loan is repaid as per the repayment schedule provided for in the loan documentation. Borrowers are required to submit a
monthly progress report and a monthly receivables statement. Receivables statements are to be certified by a chartered

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accountant every quarter. We monitor the special mention account status of the borrower with other banks and seek further
information from the borrower in the event that the borrower has a special mention account status with another bank.

Agricultural Loans

The following is a description of our agricultural loan products:

Name of the loan Purpose Maximum Loan tenure

loan amount
(in ₹)
ESAF Haritha Loan Loans for all agricultural activities, including farm credit, agricultural 100,000,000 1 to 7 year(s) including
infrastructure and ancillary activities, such as purchase of implements, moratorium period
developmental activities undertaken in the farm, vermicomposting and
agri-entrepreneurship etc.

ESAF Dairy Loan for the purchase and maintenance of animals for milk production 1,000,000 3 to 5 years
Development Loan and loans for the construction of shed(s) for keeping the animals and
purchase of dairy machinery and equipment.

ESAF Kisan Credit Loans in terms of working capital for all agricultural activities, including 10,000,000 1 to 7 year(s)
Card dairy production, inland fisheries, etc., and term loans for farm
credit/agriculture infrastructure, such as land development, minor
irrigation, purchase of equipment, construction, etc.

ESAF Farmer Credit support for all business activities of the farmer producer 10,000,000 Working capital loan –
Producer organization, including purchase of input material for farmers, setting up 12 months
Organization Finance of customer service centres, processing units, other productive purposes
and/or working capital requirements. Term loan – up to 7
years

Demand loan – up to
180 days

ESAF Kisan Jyoti Loan for meeting post-harvest expenses, value addition to agricultural 10,000,000 Overdraft: 3 years.
produce, maintenance of farm assets, farm development activities,
purchase of land for agriculture purposes by small and marginal farmers Term Loan: 1 to 5
and consumption requirement of the individual farmers/joint borrowers year(s)
who are owner cultivators engaged in agriculture and in other agri-
related/allied activities.

ESAF Farmer Interest Agriculture, allied agriculture and consumption purposes of small & 160,000 Up to 35 months
Group Loan marginal farmers

ESAF SHG-BLP Financial assistance to self-help group (“SHGs”) for income generation 2,000,000 Up to 3 years for First
activities, meeting social needs, Construction or repair house, toilet, and Second Cycle
taking up sustainable livelihood by individual members within the SHGs
or to finance any viable common activity started by SHGs, etc. Up to 5 years for Third
and Fourth Cycle

The interest rates we charge on our agricultural loans are fixed or floating depending on the product. Our fixed rate loans with
a tenure of less than three years are based on the MCLR. Our MCLR is reviewed by our MR-ALCO on a monthly basis. Our
floating rate loans are based on the RBI’s repo rate.

Customers

Our target customers for our agricultural loans are individual farmers and joint borrowers engaged in agriculture and allied
activities, such as dairy farming, fishery, animal husbandry, poultry farming, beekeeping, sericulture, agri infrastructure, agri
processing units, and agri ancillary activities.

We primarily source customers for our agricultural loans through agri relationship officers, who are our employees. Each agri
relationship officer handles four to five Branches in the vicinity of 50 to 75 kilometres. As at June 30, 2023, we had 49 agri
relationship officers in the states of Tamil Nadu, Maharashtra, Madhya Pradesh, Chhattisgarh, Karnataka, Andhra Pradesh,
Telangana, Puducherry and Kerala. We also source customers for our agricultural loans through our banking outlets, farmer
producer organizations and business correspondents. Farmer producer organizations help us to originate loans to farmers and
then help those farmers to be more successful through training, technical support, marketing of produce, processing and value
addition, thereby leading to a reduced risk of default on those loans. As at June 30, 2023, we had entered into relationships with
24 farmer producer organisations.

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Credit Approval and Disbursement Process

Upon sourcing a customer, the agri relationship officer conducts the field visit, collects the application and applicable supporting
documents. These documents are handed over to an officer who performs a series of checks, which include credit bureau checks,
house verification, applicant’s credit history and eligibility assessment. For new customers, the agri relationship officer will
assist with the opening of a savings account. The officer then prepares the proposal in the system, after which the application
undergoes a reference check for certain loans, by a member of the back-office before forwarding the application to the credit
appraisal and credit sanction teams. Our credit department has centralised processing hubs for further processing of proposals.
The officer arranges for legal and technical reports for mortgage loans, if applicable. The loan requires the final approval by
the appropriate credit sanction officer. Once the loan has been approved, a member of the operations team prepares the
documents to be executed at one of our banking outlets. Subsequently, the operations manager takes custody of the documents
to verify them. Once verified, a checklist of all documents is sent to the Asset Operations team for disbursement.

Loan Collection and Monitoring Process

When the loan documents are executed for certain loan products, we collect NACH instructions, standing instructions or post-
dated cheques for loan repayment. To monitor loan collection, we have a collection and recovery department, which sends
reminders to our customers before each repayment date.

Liability Products

Our liability products comprise current accounts, savings accounts, fixed deposits and recurring deposits. We also serve NRI
customers and offer NRE and NRO current accounts, saving accounts, fixed deposits and recurring deposits.

As an NBFC-MFI, EFHPL, our corporate promoter, was unable to accept deposits as per applicable laws in India. After
acquiring the business of EFHPL, we have been able to leverage the strength of the “ESAF” brand to grow our deposits since
we began our business as a small finance bank on March 10, 2017. The “ESAF” brand has been built over more than 27 years,
beginning in 1995 when ESAF Foundation started its micro loan activities. We have a license to use the “ESAF Brand” and
related logos from ESAF Foundation. For details, see “History and Certain Corporate Matters - Key terms of other subsisting
material agreements” on page 247. We have placed an emphasis on increasing our Retail Deposits.

Current Accounts

Our current accounts are demand deposits for customers that do not accrue interest. As at June 30, 2023, we had eight variants
of current account products catering to the needs of our diverse customer base in India, including corporate entities, individuals,
sole proprietorship, trusts. In June 2021, we started offering NRE and NRO current accounts.

Savings Accounts

Savings accounts are demand deposits for customers that accrue interest. As at June 30, 2023, we had 23 variants of savings
account products catering to the needs of our diverse customer base in India, including women, senior citizens, societies and
clubs, children above 10 years, our staff, salaried employees of corporates, transgender and farmers. We offer NRE and NRO
savings accounts.

Recurring Deposits

Recurring deposits are a kind of term deposit where a fixed amount is deposited into the account every month over a fixed term
and which accrue interest at a fixed rate. The deposits may be withdrawn before maturity in accordance with applicable terms
and conditions. As at June 30, 2023, the tenures ranged from six months to 10 years. As at June 30, 2023, we had four variants
of recurring deposit products catering the needs of our diverse customer base in India, including individuals, senior citizens,
corporate entities. We offer NRE and NRO recurring deposits.

Fixed Deposits

Fixed deposits are tenure-based deposits of a fixed amount over a fixed term that accrue interest at a fixed rate and may be
withdrawn before maturity in accordance with applicable terms and conditions. As at June 30, 2023, the tenures for our fixed
deposits ranged from seven days to 10 years. We offer fixed deposits on which we pay simple or cumulative interest. The
minimum tenure for our cumulative interest fixed deposits is six months. We also offer NRE fixed deposits and NRO fixed
deposits with a tenure ranging from one to 10 years.

In addition, we also offer the Hrudaya Deposit Scheme, which gives our customers the opportunity to be a part of a social cause,
as these deposits are lent to marginalised sections of society. An individual or a corporate entity can join the Hrudaya Deposit
Scheme with a minimum deposit amount of ₹100,000 and for a minimum period of one year.

For more details on our deposits, see “– Our Strengths – Growing Retail Deposits portfolio” and “Selected Statistical
Information – Deposits” on pages 194 and 286, respectively.

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Distribution of Third-Party Products

Insurance Products

We are a corporate agent for Bajaj Allianz Life Insurance Company Limited, Kotak Mahindra Life Insurance Company Limited
and PNB MetLife India Insurance Company Limited for life insurance products and ICICI Lombard and IFFCO Tokio General
Insurance for general insurance products. We distribute a range of insurance products, including term plans, unit linked
insurance plans, guaranteed savings plan, motor insurance, fire insurance, health insurance, travel insurance and personal
accident policies. We started distributing third-party life and general insurance policies in Fiscal 2019.

The table below sets forth our fees/remuneration received from Bancassurance for selling life insurance policies and non-life
insurance policies and as a percentage of our total income for the periods and Fiscals indicated.

Particulars For the three months period ended June For the year ended March 31,
30,
2023 2022 2023 2022 2021
Amount % of Amount % of Amount % of Amount % of Amount % of
(₹ in total (₹ in total (₹ in total (₹ in total (₹ in total
million) income million) income million) income million) income million) income
Fees/remuneration 76.27 0.77 33.30 0.45 192.80 0.61 146.73 0.68 87.44 0.49
received from
Bancassurance for
selling life insurance
policies and non-life
insurance policies
Total income 9,917.75 100.00 7,383.24 100.00 31,415.72 100.00 21,475.08 100.00 17,684.21 100.00

Other Services

Pension Systems

We act as one of the point of presence service providers in the country to provide services to subscribers of Atal Pension Yojna
and the National Pension System introduced by Pension Fund Regulatory and Development Authority. The National Pension
System is a pension and investment scheme launched by the Government to provide financial security to senior citizens. Atal
Pension Yojna is a guaranteed pension product launched by the Government and it is primarily targeted towards the unorganised
sector. Subscribers of Atal Pension Yojna receive a fixed minimum monthly pension when they turn 60, depending on the
amount they contributed and when they became subscribers. We started distributing Government pension products in Fiscal
2019.

As at June 30, 2023, 700, or 100%, of our banking outlets acted as point of presence service providers.

Safe Deposit Lockers

We provide safe deposit lockers to our customers to store their valuables for a fee.

Foreign Exchange Services

We buy from and sell foreign currency to our customers. We also provide overseas money transfer services through an
authorised dealer.

The table below sets forth our fees/remuneration from distributing pension products, income from locker rent and income from
foreign exchange services and as a percentage of our total income for the periods and Fiscals indicated.

Particulars For the three months period ended June For the year ended March 31,
30,
2023 2022 2023 2022 2021
Amount % of Amount % of Amount % of Amount % of Amount % of
(₹ in total (₹ in total (₹ in total (₹ in total (₹ in total
million) income million) income million) income million) income million) income
Fees/remuneration 1.03 0.01 0.83 0.01 2.83 0.01 2.01 0.01 0.94 0.01
from distributing
pension products
Income from locker 11.10 0.11 10.51 0.14 11.08 0.04 8.87 0.04 5.32 0.03
rent
Income from foreign 2.93 0.03 2.70 0.04 11.12 0.04 9.24 0.04 5.48 0.03
exchange services
Total income 9,917.75 100.00 7,383.24 100.00 31,415.72 100.00 21,475.08 100.00 17,684.21 100.00

205
Bharat Bill Payment System

We offer our customers access to the Bharat Bill Payment System, which is a one-stop payment solution for all bills across
India. It is an interoperable and accessible bill payment service for utility services and also other categories, such as education
fees, insurance and municipal taxes. Customer can access the Bharat Bill Payment System via our website, mobile app and our
banking agents.

Money Transfer Services

We provide our customers with a remittance service for transferring money on NPCI’s Immediate Payment Service (IMPS), on
the RBI’s Real Time Gross Settlement (RTGS) system and on the National Electronic Funds Transfer (NEFT) system.

Aadhaar Seva Kendra Services

We have been onboarded by the Unique Identification Authority of India (UIDAI) as a Registrar and Enrolment Agency for
providing Aadhaar enrolment/update services to citizens. We first operationalised Aadhaar Seva Kendra service in certain of
our banking outlets in July 2020 and As at June 30, 2023, 95, or 13.57%, of our banking outlets were equipped with Aadhaar
Seva Kendra services. Aadhaar Seva Kendra services include Aadhaar enrolment, downloading/printing of e-Aadhaar and
updating of demographic information, such as name, date of birth, gender, mobile number, email address, and biometric
information, such as a photo, fingerprints and iris scan.

Delivery Channels

We deliver our products and services through our business correspondents, banking outlets (including business correspondent-
operated banking outlets), customer service centres (which are operated by business correspondents), banking agents, business
facilitators, ATMs, ATM cum debit cards, mobile banking platforms, internet banking portals, unified payment interface
facilities and SMS alerts.

As at June 30, 2023, we had 700 banking outlets (including 59 business correspondent-operated banking outlets), 767 customer
service centres (which are operated by business correspondents), 22 business correspondents, 2,116 banking agents, 525
business facilitators and 559 ATMs. The map and table below shows our banking outlets, customer service centres and ATMs
as at June 30, 2023.

Note: CSC means customer service centre.

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Banking Outlets

Our banking outlets comprise our Branches (all of which we operate) and our business correspondent-operated banking outlets
(in which we have some employees assisting with the operations). The table below sets forth the number of our Branches and
our business correspondent-operated banking outlets as at the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
(actual number, not in million)
Number of Branches (all of which 641 641 573 550
we operate)
Number of business correspondent- 59 59 2 -
operated banking outlets (in which
we have some employees assisting
with the operations)
Total number of banking outlets 700 700 575 550

We intend to continue to increase the number of our banking outlets. For details, see “– Our Strategies – Penetrate deeper into
our existing geographies” on page 196.

The table below sets forth the number of our banking outlets in rural, semi-urban, urban and metro centres (as defined in RBI
Circular on Rationalisation of Branch Authorisation Policy- Revision of Guidelines dated May 18, 2017) and as a percentage
of our total banking outlets as at the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Number of % of total Number of % of total Number of % of total Number of % of total
banking banking banking banking banking banking banking banking
outlets outlets outlets outlets outlets outlets outlets outlets
Rural centre 83 11.86% 83 11.86% 73 12.70% 73 13.27%
Semi-urban 419 59.86% 419 59.86% 336 58.43% 331 60.18%
centre
Urban centre 123 17.57% 123 17.57% 95 16.52% 82 14.91%
Metro centre 75 10.71% 75 10.71% 71 12.35% 64 11.64%
Total 700 100.00% 700 100.00% 575 100.00% 550 100.00%
Note: As per RBI Circular on Rationalisation of Branch Authorisation Policy- Revision of Guidelines dated May 18, 2017, a rural centre has
a population of up to 9,999, a semi-urban centre has a population from 10,000 to 99,999, an urban centre has a population from 100,000 to
999,999 and a metro centre has a population of 1,000,000 and above.

As per the applicable RBI guidelines, at least 25% of our banking outlets must be in unbanked rural centres. Left Wing
Extremism affected districts as notified by the Government are considered as equivalent to unbanked rural centres as per RBI
guidelines. The table below sets forth the number of our banking outlets in unbanked rural centres and as a percentage of our
total banking outlets as at the dates indicated.

Banking As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Outlets Number of % of total Number of % of total Number of % of total Number of % of total
banking banking banking banking banking banking banking banking
outlets outlets outlets( outlets outlets( outlets outlets outlets
Unbanked 187 26.71% 187 26.71% 174 30.26% 172 31.27%
rural centres(1)
Total 700 100.00% 700 100.00% 575 100.00% 550 100.00%
Note:
(1) Includes Left Wing Extremism affected districts as notified by the Government, which are equivalent to unbanked rural centres as per RBI
guidelines.

The following table sets forth our banking outlets by region and state/union territory as at dates indicated.

Geographical State / Union As at June 30, As at March 31,

Distribution Territory 2023 2023 2022 2021
Number % of Number of % of Number of % of Number of % of
of banking Total banking Total banking Total banking Total
outlets outlets outlets outlets
Eastern Bihar 10 1.43% 10 1.43% 7 1.22% 6 1.09%
Jharkhand 15 2.14% 15 2.14% 13 2.26% 13 2.36%
Odisha 10 1.43% 10 1.43% 3 0.52% 2 0.36%
West Bengal 5 0.71% 5 0.71% 4 0.70% 4 0.73%
Meghalaya 1 0.14% 1 0.14% 1 0.17% 1 0.18%
Tripura 3 0.43% 3 0.43% - - - -

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Geographical State / Union As at June 30, As at March 31,
Distribution Territory 2023 2023 2022 2021
Number % of Number of % of Number of % of Number of % of
of banking Total banking Total banking Total banking Total
outlets outlets outlets outlets
Assam 3 0.43% 3 0.43% 1 0.17% 1 0.18%
Subtotal 47 6.71% 47 6.71% 29 5.04% 27 4.91%
Western Gujarat 5 0.71% 5 0.71% 5 0.87% 5 0.91%
Maharashtra 71 10.14% 71 10.14% 53 9.22% 47 8.55%
Subtotal 76 10.86% 76 10.86% 58 10.09% 52 9.45%
Northern Chhattisgarh 35 5.00% 35 5.00% 26 4.52% 24 4.36%
Delhi 9 1.29% 9 1.29% 8 1.39% 6 1.09%
Madhya 68 9.71% 68 9.71% 42 7.30% 40 7.27%
Pradesh
Rajasthan 9 1.29% 9 1.29% 2 0.35% 1 0.18%
Haryana 6 0.86% 6 0.86% 2 0.35% 2 0.36%
Uttar Pradesh 9 1.29% 9 1.29% 1 0.17% 1 0.18%
Uttarakhand 3 0.43% 3 0.43% - - - -
Chandigarh 1 0.14% 1 0.14% 1 0.17% 1 0.18%
Subtotal 140 20.00% 140 20.00% 82 14.26% 75 13.64%
Southern Andhra 3 0.43% 3 0.43% 3 0.52% 1 0.18%
Pradesh
Telangana 4 0.57% 4 0.57% 4 0.70% 2 0.36%
Karnataka 26 3.71% 26 3.71% 25 4.35% 23 4.18%
Kerala 304 43.43% 304 43.43% 279 48.52% 277 50.36%
Puducherry 3 0.43% 3 0.43% 2 0.35% 2 0.36%
Tamil Nadu 97 13.86% 97 13.86% 93 16.17% 91 16.55%
Subtotal 437 62.43% 437 62.43% 406 70.61% 396 72.00%
Total banking outlets 700 100% 700 100% 575 100% 550 100%
Note:
* Below round off limit.

Business Correspondents

Our business correspondent entities are responsible for sourcing and servicing of customers for Microfinance Loans and Other
Micro Loans (we do not do this ourselves). Our business correspondents also source customers for mortgage loans, vehicle
loans, MSME loans, agricultural loans and select deposit products. In addition, our business correspondents are responsible for
sourcing and servicing our banking agents. Our business correspondent entities act for us on a non-exclusive basis. The table
below sets forth the number of our business correspondents as at the dates indicated.

As at June 30, As at March As at March As at March

Particulars 2023 31, 2023 31, 2022 31, 2021
Number of business correspondents 22 20 14 12

We have two different models for our business correspondents and the compensation terms are based on different parameters.
One model is where the business correspondent uses our Branch to operate from and the other model is where the business
correspondent uses its own premise to operate from. By having a separate payment model for business correspondents that use
their own premises to operate from, we are able to grow our business beyond areas where we currently do not have our own
Branch without incurring any capital expenditure.

The name of each of our business correspondents and the last date of the term of the current agreement pursuant to which they
act for us as a business correspondent are set forth in the table below.

S. No Name of Business Correspondent Last Date of the Term of the Agreement

1. ESAF Swasraya Multi State Agro Co-operative Society Ltd (ESMACO) December 31, 2028
2. PAFT Inclusive Financial Services Private Limited October 31, 2025
3. Lahanti Lastmile Services Pvt Ltd March 1, 2029
4. Navachetana Microfin Services Pvt Ltd October 16, 2024
5. DVARA Kshetriya Gramin Financial Service Pvt Ltd October 31, 2025
6. Grameen Development & Finance Pvt Ltd December 31, 2025
7. Sumpurna Finance Service Pvt Ltd January 9, 2027
8. Adhikar June 30, 2025
9. Kamal Fincap Pvt Ltd September 22, 2024
10. Agora Microfinance India Ltd June 30, 2024
11. Dhanvarsha Finvest Ltd Can be terminated by giving 90 days’ notice
12. Easy Home Finance Ltd Can be terminated by giving 90 days’ notice
13. Loanzen Finance Pvt Ltd Can be terminated by giving 15 days’ notice
14. Desiderata Impact Ventures Pvt Ltd (Progcap) July 20, 2025
15. Dhosa Chandaneswar Bratyajana Samity May 23, 2027
16. Grameen Shakti Microfinance Services Pvt Ltd May 23, 2027

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 S. No Name of Business Correspondent Last Date of the Term of the Agreement
17. Janakalyan Financial Services Pvt Ltd July 7, 2027
18. SHARE Microfin Ltd July 19, 2027
19. Samparna Business Correspondence Pvt Ltd December 5, 2027
20. WeGrow Financial Services Pvt Ltd December 4, 2027
21 Disha India Micro Credit May 18, 2028
22 Rootsreforms Initiative (OPC) Private Limited May 18, 2028

The tables below set forth our AUM sourced or serviced by our business correspondents and as a percentage of our AUM as at
the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Amount % of total Amount % of total Amount % of total Amount % of total
(₹ in AUM (₹ in AUM (₹ in AUM (₹ in AUM
million) million) million) million)
AUM of Micro Loans 128,511.63 74.70 122,548.83 75.04 100,159.62 81.16 71,452.80 84.80
sourced or serviced by
business
correspondents
AUM of other loans 7,059.64 4.10 6,221.16 3.81 3,045.31 2.47 - -
sourced or serviced by
business
correspondents
Total AUM sourced or 135,571.27 78.80 128,769.99 78.85 103,204.93 83.63 71,452.80 84.80
serviced by business
correspondents
Total AUM 172,039.68 100.00 163,312.65 100.00 123,406.91 100.00 84,259.30 100.00

The table below set forth our deposits sourced by our business correspondents and as a percentage of our total deposits as at the
dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Amount % of total Amount % of total Amount % of total Amount % of total
(₹ in deposits (₹ in deposits (₹ in deposits (₹ in deposits
million) million) million) million)
Deposits sourced 1,601.20 1.02 2,536.15 1.73 2,145.14 1.67 1,495.12 1.66
by our business
correspondents
Total deposits 156,558.54 100.00 146,656.25 100.00 128,150.72 100.00 89,994.26 100.00

On March 10, 2017, we acquired the business of EFHPL, our corporate promoter, through a Business Transfer Agreement dated
February 22, 2017. Certain of EFHPL’s employees were responsible for sourcing and servicing Micro Loan customers until
February 28, 2017. We decided to use business correspondents for sourcing and servicing Micro Loans, which led to the
employees responsible for servicing Micro Loan customers to get the opportunity to be engaged by ESMACO with effect from
March 1, 2017. When our Bank was founded in 2017, EFHPL had decided to transfer its business undertaking to our Bank as
per the licensing conditions of the RBI and the terms of the Business Transfer Agreement, pursuant to which the number of
employees under EFHPL had to be reduced substantially, since EFHPL’s operations would be reduced upon being converted
into a core investment company. At the same time, we decided to use a business correspondent model to build our assets and
business. Hence, all of EFHPL’s then employees were given the choice to either move to our Bank subject to available vacancies
and eligibility, or to move to other entities that had expressed their interest to employ them. ESMACO, which was then acting
as a collection of agent for EFHPL had also expressed its interest to employ experienced employees then working for EFHPL.
Accordingly, 3,012, or 87.23%, of the 3,453 employees then working for EFHPL moved to ESMACO as per their choice and
331, or 9.59% of the 3,453 employees then working for EFHPL moved to our Bank.

ESMACO entered into an agreement with our Bank to act as a business correspondent for our Bank with effect from March 10,
2017. Our Bank has an agreement with ESMACO to act as our business correspondent that is valid until December 31, 2028.
Until January 2018, ESMACO was our only business correspondent. ESMACO is compensated on the same basis as our other
business correspondents. Until March 13, 2021, ESMACO was a related party of our Bank. ESMACO focuses on promoting
social and economic opportunities by conducting various programs, such as financial literacy programmes, livelihood training,
environment education, skill development and healthcare programmes. ESMACO owns 63.49% of the equity shares in EFHPL,
our corporate promoter, which owns 62.46% of the Equity Shares prior to the Offer.

The tables below set forth our gross advances sourced by ESMACO and as a percentage of our total gross advances and our
deposits sourced by ESMACO and as a percentage of our total deposits as at the dates indicated.

209
Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Amount % of total Amount % of total Amount % of total Amount % of total
(₹ in gross (₹ in gross (₹ in gross (₹ in gross
million) advances million) advances million) advances million) advances
Gross advances 88,341.31 61.16 87,773.07 62.17 91,131.33 75.12 63,217.49 75.12
sourced or serviced
by ESMACO
Total gross advances 144,435.54 100.00 141,181.27 100.00 121,306.43 100.00 84,150.05 100.00

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Amount % of total Amount % of total Amount % of total Amount % of total
(₹ in deposits (₹ in deposits (₹ in deposits (₹ in deposits
million) million) million) million)
Deposits sourced by 1,390.23 0.89 2,247.74 1.53 1,828.12 1.43 1,264.76 1.41
ESMACO
Total deposits 156,558.54 100.00 146,656.25 100.00 128,150.72 100.00 89,994.26 100.00

Business Facilitators

We appoint business facilitators to generate product-specific leads from potential customers and collect relevant documentation
from customers. We began using business facilitators to generate leads for advances in Fiscal 2019 and to generate leads for
deposits in Fiscal 2023.

Particulars As at June 30, As at March 31, As at March 31, As at March 31,

2023 2023 2022 2021
Number of business facilitators for sourcing customers 217 198 145 49
for vehicle loans
Number of business facilitators for sourcing customers 194 183 164 105
for mortgage loans
Number of business facilitators for sourcing customers 76 65 - -
for retail loans
Number of business facilitators for sourcing customers 38 35 4 -
for MSME loans
Total number of business facilitators 525 481 313 154
Number of states and union territories with business 13 (inclusive of 2 12 (inclusive of 2 10 (inclusive of 2 7 (inclusive of 1
facilitators union territories) union territories) union territories) union territory)

Banking Agents

Banking agents are third-party agents that provide banking services on behalf of our Bank from premises managed by
themselves. Each banking agent has a POS terminal (also called a Micro ATM) installed on its premises and using this POS
terminal it can offer (a) cash deposits, cash withdrawals, balance enquiries, and mini bank statements through debit cum ATM
cards and the Aadhaar enabled payment system, (b) intrabank and interbank fund transfers through the Immediate Payment
Service (IMPS) and the Aadhaar enabled payment system, and (c) the payment of bills using the Bharat Bill Payment System.
We provide the software for the POS terminals to the banking agents through our business correspondents.

Our business correspondents are responsible for sourcing and servicing our banking agents.

Our banking agents serve unbanked and underbanked markets. In addition, banking agents are usually familiar with the
customer base they have in their area. We began using banking agents in Fiscal 2021. We call our banking agents customer
service points. The table below sets forth certain details of our banking agents as the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021

Number of banking agents 2,116 2,023 579 48

(customer service points)

Number of states and union 12 (inclusive of 1 union 12 (inclusive of 1 union 9 (inclusive of 1 union 5
territories with banking agents territory) territory) territory)
(customer service points)

210
ATMs

As at June 30, 2023, we had 559 ATMs. Our ATMs are set up and operated by NCR Corporation India Pvt Ltd but are branded
as our ATMs. The table below shows the number of our ATMs added during the Fiscals indicated and the number of ATMs as
at the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
ATMs 559 528 386 318

We intend to continue to increase the number of our ATMs. For details, see “–Our Strategies–Penetrate deeper into our existing
geographies” on page 196.

ATM cum Debit Cards

We offer Classic and Platinum RuPay branded ATM cum debit cards to our customers. The cards can be used to withdraw cash
through our ATMs and the ATMs of any other bank in India and for purchase transactions at POS/online terminals in India.
Platinum RuPay branded ATM cum debit cards also provide enhanced insurance coverage and access to certain airport lounges.
We started distributing Platinum RuPay branded ATM cum debit cards in Fiscal 2020.

Internet Banking

We offer a suite of internet banking services, allowing our customers to conduct banking operations at any time, on any day
and from anywhere in the world. Our internet banking services include fund transfers within our Bank, fund transfers to other
banks, balance enquiry, bill payment, online payment for certain services, and the payment of direct and indirect taxes.

Mobile Banking

Mobile banking services help customers maintain a virtual connection with our Bank at all times. We currently offer a mobile
banking application that connects with the National Payments Corporation of India’s unified payments interface platform,
thereby enabling our customers to pay bills, transfer funds to other banks instantaneously and use scan and pay facilities at
merchant outlets. Our mobile application is compatible with both Android and iOS operating systems.

SMS & Missed Call Banking

We offer SMS & missed call banking services under our mobile banking solutions. Our customers can avail various services,
such as balance enquiry, mini statement, cheque status checks, stop cheque request, debit card pin regeneration and change of
primary account number, through an SMS to the dedicated mobile numbers allocated by us for this purpose. Our customers can
avail services such as balance enquiry and mini statement through a missed call to the dedicated mobile number allocated by
us for this purpose. All of our customers are enrolled for missed call banking service by default.

WhatsApp Banking

ESAF WhatsApp Banking offers customers a safe and secure platform to conveniently perform banking tasks through
WhatsApp. This service enables easy interaction with our Bank, providing real-time support and a user-friendly interface. By
leveraging WhatsApp's extensive reach and features, customers can manage their finances in an easier manner through
simplified banking processes and as a result leading to enhanced customer satisfaction. The services include accessing
information about our Bank and performing basic banking transactions, such as balance inquiries, mini statements, and cheque
status checks.

Customer Service

We make use of both interactive voice responses systems and call centre agents to manage our customers’ queries. Our call
centre facility is available to our customers 24 hours per day, seven days per week. Our call centre agents are multi-lingual and
can assist our customers in most languages spoken in areas where we operate. All calls made to our call centre are recorded and
these recordings are made available to us for monitoring, quality control and reference purposes. Daily reports of all calls
handled by our call centre are monitored by our Customer Service Quality department. Our call centre facility is managed by
FIS.

The customer service quality department also conducts fortnightly review calls to discuss areas of improvement to ensure the
efficient resolution of customer complaints. We undertake surveys from customers to obtain their feedback on the quality of
our customer service.

Treasury Operations

Our treasury department is responsible for fund raising and asset liability management, minimizing the cost of our borrowings,
liquidity management and control, managing interest rate risk and investing funds in accordance with the criteria set forth in
our investment policy.

Risk Management
211
Risk Management Architecture

Our Bank has put in place a well-defined risk management architecture with the following key features:

• active Board and senior management overseeing risk management;

• appropriate policies, procedures and limits;

• comprehensive and timely identification, measurement, mitigation, controlling, monitoring and reporting of risks;

• appropriate management information systems at the business and bank-wide level; and

• comprehensive internal controls.

While the Board is responsible for overall governance and overseeing of core risk management activities, it has delegated
authority to the Risk Management Committee of the Board for overseeing and review of the processes and practices of risk
management, and further sub-delegated to the executive level Credit Risk Management Committee for managing credit risk;
Operational Risk and Business Continuity Management Committee for managing operational risk and Business Continuity and
the MR-ALCO for managing market risk, ALM risk, interest rate risk and liquidity risk. The Risk Management Committee
approves and recommends to the Board for its review and approval, the policies, strategies and framework for management of
risk. It ensures an appropriate risk organization structure with authority and responsibility clearly defined, ensuring the
independence of risk management function.

The Risk Management Department is responsible for the formulation of risk policies and the Internal Capital Adequacy
assessment Process (“ICAAP”), identifying risks, assessing its materiality, measuring the magnitude of each type of risk,
formulating risk-capital linkages, suggesting appropriate controls and mitigations, conducting stress tests, identifying impact
on key risk parameters, coordinating the implementation of risk management framework approved by the Board and periodical
risk reporting.

The Risk Management Department is headed by the Chief Risk Officer, who is independent of all businesses and other
functions, and reports to the Managing Director & Chief Executive Officer on administrative matters and to the Board of
Directors through the Risk Management Committee of the Board, on functional matters. The Risk Management Department,
in the process of identifying, measuring, monitoring and managing various risks, focuses on Credit Risk, Market Risk,
Operational Risk, Transaction Monitoring, Information Security and Internal Financial Controls. Heads of the Credit, Market
and Operational Risk Divisions report to the Chief Risk Officer. The Chief Information Security Officer reports to the Chief
Risk Officer.

Various functional departments are responsible for devising and implementing suitable policies and processes for effective
management of risks embedded in their respective functions, in consultation with the Risk Management Department. Business
units are responsible for compliance of various policies and procedures stipulated by the Risk Management Department for
effective implementation of risk management systems.

The Internal Audit Function cross verifies the risk management activities and results thereof through various systems of audits
and inspections, pointing out deficiencies and shortfalls, if any, for rectification and compliance. Other important aspects of our
risk architecture are:

• Segregation of duties across the ‘three lines of defense’ model, whereby business functions, risk management and
compliance and internal audit roles are made independent of one another;

• Risk strategy is approved by the Board on an annual basis and is defined based on our risk appetite aligning risk,
capital and performance targets;

• All major risk classes are managed through focused and specific risk management processes; these risks include
credit risk, market risk, operational risk and liquidity risk. Policies, processes and systems are in place to enhance
our risk management capability; and

• The risk function has appropriate representation on all management committees to ensure that risk view is factored
into business decisions. Stress testing tools and escalation processes are established to monitor the performance
against approved risk appetite parameters.

Our risk management activities are governed by various policy documents approved by the Board.

Credit Risk

Credit risk is defined as the possibility of losses due to default by the borrowers and/or reduction in the value of the portfolio
due to deterioration of credit quality of borrowers or counterparties.

Credit risk management is the direct responsibility of the Credit Risk Management Committee. The Credit Risk Management
Committee manages implementation of credit risk management framework and provides recommendations to the Risk
212
Management Committee and the Board. It ensures implementation of Credit Risk Management Policy and procedures, as
approved by the Risk Management Committee and the Board and recommends changes thereto, considering any changes in the
regulatory instructions, business or economic conditions. It also monitors quality of the loan portfolio at periodic intervals,
identifies problem areas and instructs business units with directions to rectify the deficiencies.

The Credit Risk Division of the Risk Management Department implements policies and processes for credit risk identification,
assessment, measurement, monitoring and control. Credit risk appetite statements are drawn up with inputs from the business
units, and credit risk parameters and credit exposure and concentration limits are set by the Board, based on regulatory
guidelines. The Credit Risk Division constructs credit risk identification systems, monitors the quality of our loan portfolio,
identifies problem credits and undertakes asset quality reviews with support from the business units and submits its analysis
and reports to the Risk Management Committee on an on-going basis. The Credit Risk Division captures early warning signals
in the loan portfolio for identification of weak exposures, suggests remedial measures and monitors the actions taken.

Market Risk Management

The Basel Committee on banking supervision defines market risk as the risk of losses in on- and off-balance sheet positions
that arise from movement in market prices.

The primary components of market risk are discussed below.

Interest Rate Risk

Interest rate risk refers to fluctuations in our Net Interest Income and the value of our assets and liabilities arising from external
and internal factors. Internal factors include the composition of assets and liabilities, borrowings, loans and investments, quality,
maturity and interest rates. External factors cover general economic and monetary conditions. While the immediate impact of
this risk is on Net Interest Income and the value of fixed income investments, in the long term, variations in interest rates affect
our Net Worth, since the economic value of the assets, liabilities and off-balance sheet positions get affected.

Liquidity Risk

Liquidity refers to our ability to fund a decrease in liabilities or increase in assets and meet both cash and collateral obligations
at a reasonable cost without adversely affecting our financial status. Liquidity risk arises when we are unable to meet such
obligations. Liquidity risk is dependent on specific factors, such as maturity profile and composition of sources and uses of
funding, the quality and size of the liquid asset buffer, and broader market factors, such as wholesale market conditions
alongside depositor and investor behaviour. This type of risk may result in our failure to meet regulatory liquidity requirements,
support normal banking activity or, at worst, cease to be an ongoing concern.

Market risk management is overseen and undertaken by the Market Risk Division of the Risk Management Department. The
Division is responsible for the design and implementation of our market risk management and asset liability management
systems. The Division is independent from business and trading units, and provides an independent risk assessment, which is
critical to controlling and managing market risk. The Treasury Mid Office function is attached to the Market Risk Division of
the Risk Management Department. The Mid Office prepares and analyses daily reports on various activities of Treasury
Department. The Mid Office is responsible for independent market risk monitoring, measurement and analysis. The Mid office
reports to the Chief Risk Officer.

The market risk management and asset liability management functions are handled by the MR-ALCO, the executive level
committee headed by the Managing Director & Chief Executive Officer.

The major functions of the MR-ALCO with respect to managing risks in our banking and investment books include:

• design and implementation of effective market risk management and asset liability management framework;

• review of new directives and regulatory limits for market risk, interest rate risk and liquidity risk, monitoring and
revising tolerance limits prescribed in the market risk management policy, with the approval of the Board;

• ensuring that our risk management strategies are aligned to the business strategies;

• determining the structure, responsibilities and controls for managing market risk and the liquidity positions; and

• ensuring independence in the working of the mid office and market risk functions.

Operational Risk

Operational risk is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from
external events. This definition includes legal risk but excludes strategic risk and reputational risk. While operational risk
management is the responsibility of various functions and business units handling operational activities, it is overseen at
executive level by the Operational Risk and Business Continuity Management Committee.

213
The Operational Risk and Business Continuity Management Committee mitigates operational risk by creation and maintenance
of an explicit operational risk management process. It conducts detailed reviews of all operational risk exposures and focuses
on all operational risk issues.

The Operational Risk and Business Continuity Management Committee reviews the risk profile to take into account future
changes and threats, and concurs on areas of high priority and related mitigation strategies with different departments and
business units. The committee ensures that adequate resources are being assigned to mitigate risks as needed, and communicates
to business units and staff, the importance of operational risk management.

In addition to the Operational Risk and Business Continuity Management Committee, the Operational Risk Division also
coordinates the functions of the Crisis Management and Quick Response Team, which is responsible for swift actions to address
the business continuity issues in the event of the occurrence of a crisis.

Business continuity management and coordination of relevant activities are also the functions of the Operational Risk
management team. Activities include building up understanding of the risk profile, implementing tools related to business
continuity management, and working towards the goals of improved controls and lower risk.

We have operationalised the risk control and self-assessment process, which assesses the operational risks in various banking
operations and the effectiveness of existing controls. We monitor key risk indicators on a quarterly basis for risk movements.
Appropriate corrective action plans are initiated in case of adverse movement in risk levels. The operational risk management
model facilitates risk and control assessments and scenario assessments, controls testing, investigation of incidents, tracking of
issues and development of action plans. Each of these activities can be linked to the other activities in the system, thereby
providing an integrated and centralised framework for collecting, managing and storing information on operational risks.

Information Security Risk and Cyber Security Risk

Overseeing of information security governance is the responsibility of the Information Security Governance Committee. The
Information Security Governance Committee is an executive level committee headed by the Managing Director and Chief
Executive Officer. The Information Security Governance Committee monitors, reviews, directs and manages our information
security risk management system by establishing a robust information security risk management framework. This committee
reports to the Board through the IT Strategy Committee of the Board and keeps the Board apprised of relevant risks that need
attention.

Our information security policy and cyber security policy are approved and periodically reviewed by the Board. The Chief
Information Security Officer is responsible for articulating and enforcing the policies that we use to protect our information
assets for coordinating with relevant external agencies on the information security related issues. Our cyber security
management functions are guided directly by the Board approved Cyber Security Policy and also by other related policies,
including the Operational Risk Management Policy, Business Continuity Management Policy, Fraud Risk Management Policy
and Information Security Policy.

Transaction Monitoring

We have controls and compliance mechanisms in place for ensuring that our customers do not include persons prone to money
laundering and other financial crimes. The Transaction Monitoring team focuses on the following:

• risk categorization of customers at the time of account opening, and transaction monitoring measures that align with
the risk categorization of our customers;

• maintenance of a compliance culture across the organization ensures that all our employees understand money
laundering risks and the consequences of breaches in AML norms;

• effective implementation of our KYC and AML policy helps ensure that we are not used for money laundering or
terrorist financing activities;

• development and maintenance of a comprehensive AML and CFT programme in line with the regulatory
requirements;

• reporting on cash transactions above the limits specified, transaction involving receipts by non-profit organizations
and transactions involving the use of forged or counterfeit currency notes to Financial Intelligence Unit India; and

• monitoring of transactions with the intention of identifying and preventing frauds and malpractices, using fraud
monitoring systems.

Internal Financial Controls

Internal financial controls are the policies and procedures adopted by us to ensure orderly and efficient conduct of our business,
including adherence to our policies, safeguarding of our assets, prevention and detection of frauds and errors, accuracy and
completeness of accounting records, and timely preparation of reliable financial information. We have developed an internal

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financial control framework in line with the requirements prescribed by the Companies Act, 2013. We have an Internal Financial
Control team in the Risk Management Department for implementing the internal financial controls. The Audit Committee of
the Board oversees implementation of internal financial controls and submits a report to the Board. The Board confirms that
the internal financial controls are adequate and operating effectively.

We have identified and documented risk control matrices incorporating all the major processes along with the key risks
associated with them.

The Internal Financial Control team maintains repository of all process walk-through documents and the risk control matrices.
Based on the risk assessment, processes are categorised into different risk categories for the purpose of determining testing
frequency. Testing includes both the testing of design gaps as well as test of operating effectiveness. After certifications from
heads of departments, the Chief Financial Officer certifies our internal financial control compliance and the same is disclosed
in our annual report.

Material Risk Assessment

The Risk Management Department assesses on a quarterly basis and presents to the Board all the major risks faced by us and
identifies the risks that are material through the ICAAP review document. Our policies and procedures provide specific guidance
for the implementation of broad business strategies and establish, where appropriate, internal limits for various types of risks
to which we may be exposed.

Material risks are those risks that impact our earnings, capital and people. A combination of the following qualitative and
quantitative parameters is assessed to study the impact of a specific risk on us to check for materiality:

Earnings

Earnings include Net Interest Income and non-interest income. The assessment is forward looking and aligned to financial
plans.

Capital

The material risk assessment exercise assesses the impact of adverse events on our capital requirements. This is mainly done
through the stress testing exercise.

People

This criterion assesses the impact of different risk events on the staff, including staff morale, attrition rate, performance
management, training and development and balancing business requirements with personal goals of employees.

ICAAP

As per the directives set out by the RBI, banks with varying levels of complexity in their operations shall be classified as
‘simple’, ‘moderately complex’ or ‘complex’ while formulating ICAAP. The objective of ICAAP is to ensure that we have
adequate capital to support all risks found in our businesses as well as to develop and use better risk management techniques
for monitoring and managing these risks. In accordance with the criteria outlined by the RBI, we have classified ourselves as
‘Simple’ bank, taking into account the nature and level of complexities of our business.

A comprehensive review of Pillar 1 and Pillar 2 risks is undertaken during each quarter. Pillar 1 risks comprise credit risks,
market risks and operational risks. Pillar 2 risks include credit concentration risks, liquidity risks, interest rate risks, strategic
risks, reputational risks, compliance risks, IT and cyber security risks, human resources risks, group risks, outsourcing risks,
internal frauds and malpractices risks, governance risks, regulatory norms violation risks, settlement risks, legal risks,
sustainability risks and process risks.

Risk Tolerance Levels and Risk Appetite Statement

Risk appetite is the level of risk that we are prepared to accept in pursuit of our business objectives, the level beyond which we
do not intend to go. It represents a balance between the potential benefits and the threats. We have varying degrees of risk
appetite for various types of risks defined under the Pillar I and Pillar II categories under Basel III norms. This has been
established through our Risk Appetite Statement, which is approved by the Board. The risk appetite or tolerance levels include
both qualitative and quantitative parameters.

Our business plans and Risk Appetite Statement are aimed at optimal capital position, defined by regulatory and internal ratios
as well as optimal liquidity and funding management.

Stress Testing

Stress testing is done by the Risk Management Department on various parameters on a quarterly basis. Stress testing provides
a means for estimating our risk exposure under stressed conditions enabling development of our choice of appropriate strategies
for mitigating such risks (e.g., restructuring positions and developing appropriate contingency plans). It improves our
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understanding of our risk profile and facilitates monitoring of changes in that profile over time. It allows the Board and senior
management to determine whether our risk exposures correspond to our risk appetite and evaluate our capacity to withstand
stressed situations in terms of profitability and capital adequacy. The stress tests used by us include sensitivity analysis and
scenario analysis. Sensitivity tests are used to assess the impact of change in one variable on our financial position and scenario
tests include simultaneous moves in a number of variables based on historical or hypothetical events and assessment of their
impact on our financial position.

We test a variety of scenarios of increasing NPAs, since credit quality generally tends to deteriorate during an economic
downturn as borrowers begin to experience cash flow problems, which in turn affect servicing of debt, leading to possible
deterioration in asset quality.

Liquidity risk stress tests are done on the parameters of ‘baseline’ (with respect to institution specific crisis), ‘medium’ (with
respect to general market crisis) and ‘severe’ (with respect to combined scenarios).

We also conduct stress tests on interest rate risk using the economic value of equity approach. The economic value of equity
approach analyses the long-term impact of changing interest rates on the market value of our equity or net worth under various
scenarios. The economic value of our assets, liabilities and off-balance sheet positions get affected due to variation in market
interest rates.

Business Continuity Planning

We rely on increasingly complex technology and business models to deliver our products. Technology based products include
interconnected ATM networks, tele-banking, core banking solutions, a mobile banking application and internet banking
solutions.

We have established a business continuity plan, which involves the creation and implementation of strategies that recognise
threats and risks that we may be subject to, with a focus on the protection of personnel and assets, while maintaining continued
operations in the event of a disaster. The process defines potential risks, measures their impact, designs safeguards and
procedures to mitigate those risks, tests those procedures to ensure that they work, and executes the implementation part. These
plans and processes are periodically reviewed to ensure that they are effective and functional.

We have an executive-level Crisis Management and Quick Response Team that is responsible for initiating immediate actions
in the event of occurrence of a crisis and to guide the business units on steps to be taken to protect our assets and to ensure
continuity of business. The Crisis Management and Quick Response Team is responsible for initiating remedial actions in case
of any breakdown or failure of critical systems, occurrence of natural disasters or accidents or any other events affecting
business continuity.

Information Technology

FIS provides us with a fully integrated banking and payments platform through a totally outsourced delivery model, which
encompasses a core banking solution, risk management, domestic treasury management, analytics and the entire suite of
payments services, which includes switching, debit card management services and ATM management for our ATMs. The
service agreement between our Bank and FIS is dated June 10, 2016, which was renewed on January 1, 2022 and expires on
December 31, 2026. Our Bank has the option to renew the agreement for a further period of three years on the same terms and
conditions. We decided to outsource our IT requirements to FIS in order to minimise our upfront capital expenditure costs and
avoid redundancy risk. We have rolled out FIS’ core banking solution in all of our banking outlets. All of the accounts of our
customers are on our core banking solution.

In addition, we use another software service provider for our Microfinance Loan business and Other Micro Loans business.

Our primary data centre is in Mumbai and our disaster recovery centre is in Hyderabad, both of which are operated by FIS.

For further information, see “Risk Factors – Weaknesses, disruptions or failures in IT systems could adversely affect our
business” on page 73.

Marketing

To enhance our brand visibility, we advertise using banners, newspaper advertisements and billboards. We also have
kiosks/umbrellas in crowd-pulling areas where our team members distribute leaflets. One of our major lead generation activities
includes associating with local cultural organisations. We set up counters at events held by such organizations where our staff
distributes leaflets and interact with potential customers. We also organise our own lead generating activities, such as health
check-ups at our banking outlets or in nearby residential societies to connect with people. Furthermore, we use social media to
promote our Bank.

Competition

The Indian finance industry is intensely competitive. We face intense competition in all our principal products and services.

Loans in the microfinance sector are provided by banks, SFBs, NBFC-MFIs, other NBFCs and non-profit organisations. Banks
216
provide loans under the self-help group model. However, they also disburse microfinance loans directly or through business
correspondents to meet their priority-sector lending targets. NBFC-MFIs and non-profit MFIs are the only two player groups
with loan portfolios exclusively focused towards microcredit. The RBI has awarded in-principle SFB licences to 12 applicants
as of March 31, 2023, of which eight were MFIs. All the MFI applicants received final approval from the RBI to start operations.
These 12 SFBs, including us, cumulatively accounted for approximately 13% of the total AUM of the industry as at June 30,
2023. (Source: CRISIL MI&A Report). Our AUM of Micro Loans was ₹128,511.97 million as at June 30, 2023, which
represented 3.62% of the microfinance sector’s (JLG portfolio) AUM of approximately ₹3.55 trillion as at June 30, 2023 as per
the CRISIL MI&A Report. For further details, see “Industry Overview – Competitive Dynamics” on page 176.

Our competitors in the organised sector may have a better brand recognition, greater business experience, more diversified
operations, a greater customer and depositor base, a larger branch network and better access to funding and at lower costs than
we do. Furthermore, certain requirements that are applicable to SFBs in terms of the SFB Operating Guidelines and other
banking laws and regulations are significantly more stringent in comparison to scheduled commercial banks and NBFCs.
Ensuring compliance with these laws and regulations has and will continue to limit our revenue, thereby making it more difficult
to compete with other players in the organised sector. For further details, see “Risk Factors – We are subject to stringent
regulatory requirements and prudential norms. If we are unable to comply with such laws, regulations and norms it may have
an adverse effect on our business, financial condition, results of operations and cash flows” on page 47. In addition, we compete
with informal sources of lending for microfinance loans, including moneylenders, landlords, local shopkeepers and traders.

On December 5, 2019, the RBI issued guidelines for on-tap licensing of SFBs, which allows applicants to apply for a SFB
license at any time, subject to the fulfilment of certain eligibility criteria and other conditions. We expect this to increase
competition for us. Further, consolidation in the industry driven by the merger of other banks is likely to further increase
competition by creating larger, more homogeneous and potentially stronger competitors in the market. Increases in operations
of our existing competitors or the entry of additional banks offering a similar or wider range of products and services could also
increase competition. Further, with the advent of technology-based initiatives and alternative modes of banking, we may face
increased competition in this sector, which may in turn adversely affect our results of operations. We also face competition
from specialised fintech companies who could disrupt our origination, sales and distribution process.

Insurance

We maintain insurance policies that we believe are customary for banks operating in our industry. Our principal insurance
policies are commercial general liability insurance, cyber risk insurance, standard insurance for fire and special perils, special
contingency policy (electronic crime), group health insurance, bankers’ indemnity, professional indemnity and directors’ and
officers’ liability insurance. For more details on our insurance, see “Risk Factors –We have insurance policies covering 90.85%
of our tangible fixed assets on a gross block basis as at June 30, 2023. We also have a bankers indemnity insurance policy
covering cash in hand, coverage for which is based on a certain average amount based on industry practice. As at June 30,
2023, this insurance policy covered 100.00% of our cash in hand. If we were to incur a serious uninsured loss or a loss that
significantly exceeds the limits of our insurance policies, it could have an adverse effect on our financial condition, results of
operations and cash flows” on page 83.

Intellectual Property

For details on our intellectual property, see “Government and Other Approvals – Intellectual Property”, “Risk Factors-We
depend on our brand recognition. Negative publicity about our brand, third parties who use the “ESAF” brand, including
ESAF Financial Holdings Private Limited (EFHPL), our corporate promoter, and third parties whose products we distribute
could damage our reputation and, in turn, our business, financial condition, results of operation and cash flows.” and “Risk
Factors – If we fail to successfully enforce our intellectual property rights or are unable to renew our trademark licencing
agreement, our business, results of operations and cash flows would be adversely affected” on pages 440, 68 and 68,
respectively.

Employees

The following table sets forth the numbers of our employees, categorised by function, as at June 30, 2023:

Functions Number of Employees

Audit 83
Administration and other support department 694
Retail assets 155
Retail liabilities 4,070
MSME business 43
Financial institutions business 1
Agri business 73
Total 5,160

We believe our employees are one of our most important assets and that a content and happy workforce will deliver the joy of
banking to our customers and drive our performance.

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Internal promotions are conducted every year based on a well-defined process, published in advance to make the process fully
transparent. Promoted employees are given special training on leadership and team building. We recognise the importance of
continuous learning and have adopted a comprehensive learning and development policy.

Each employee on-boarded has to mandatorily undergo a minimum of two weeks’ training, which includes on-the-job training
in Microfinance at our banking outlets. After on the job training at our banking outlets, they are given one week’s residential
induction training and also another week’s training on core banking solution software.

We have facilitated a culture of self-learning for our employees by establishing an online learning portal, ESAF Small Finance
Bank Online Academy. We conduct various topic-based trainings for our employees. We also have tie-ups with coaching
institutes in multiple locations for approved certification courses at concessional fees for employees and we give incentives to
those employees who pass those courses. We also regularly nominate senior staff to attend programmes arranged by certain
financial educational institutes.

Since April 1, 2020, we have made all provident fund payments and paid all other statutory dues in relation to employees on a
timely basis.

For details of the attrition of our employees, see “Risk Factors-The attrition rate of our employees was 3.87% (not annualized),
5.66% (not annualized), 24.07%, 20.07%, 13.03% for the three months period ended June 30, 2023 and June, 30, 2022 and
Fiscals 2023, 2022 and 2021, respectively. Our payments to and provisions for employees as a percentage of net interest
income, which is defined as interest earned minus interest expended, and other income (Operating Income) were 11.77%,
12.28%, 13.09%, 17.14% and 17.90% for the three months period ended June 30, 2023 and 2022 and Fiscals 2023, 2022 and
2021, respectively. If the attrition rate of our employees continues to increase, we may need to increase the compensation paid
to employees in order to retain more of our employees, which could have an adverse effect on our financial condition, results
of operations and cash flows” on page 44.

For details of the attrition of our Key Managerial Personnel and Senior Management Personnel, see “Risk Factors- We are
dependent on our Key Managerial Personnel, Senior Management Personnel and other key personnel, and the loss of, or our
inability to attract or retain, such persons could adversely affect our business, financial condition, results of operations and
cash flows. The attrition rate of rate of Key Managerial Personnel and Senior Management Personnel (combined) was nil
15.38%, 16.67%, 9.90% for the three months period ended June 30, 2023 and Fiscals 2023, 2022 and 2021, respectively” on
page 82.

Properties

We do not own any real property. We lease our corporate office and registered office as well as 16 other offices. As at June 30,
2023, we leased/licensed 641 Branches. As at June 30, 2023, we had 559 ATMs, all of which are on leased/licensed premises.

The following table sets forth certain details with respect to the lease agreements our Bank has entered with related parties as
of the date of this Red Herring Prospectus.

Lease Agreement Related Details of Properties Tenure Rent payable

Party escalation clause

A building owned by ESAF Foundation ESAF A building admeasuring 800 Sq. 10 years with effect Increase at the rate of
(formerly known as Evangelical Social Foundation Ft. at Marayoor, Idukki District from February 10, 5% per annum
Action Form) located at Marayoor, 2018
Idukki District has been taken on lease by
our Bank.(1)(2)

Our Bank has taken on lease a property Lahanti Registered and Corporate Office 14 years with effect Increase at the rate of
held by Lahanti Homes for functioning Homes from April 1, 2017 15% of the monthly
as the Registered and Corporate Office of rent paid every three
our Bank. (3)(4) years

Notes:
(1) This leased property is not directly or indirectly owned by any Promoters, Promoter Group, Directors, Key Managerial Personnel,
Senior Management Personnel or their relatives or Group Entities.
(2) There are no conflicts of interests between ESAF Foundation with any of the Promoters, Promoter Group, Directors, Key Managerial
Personnel, Senior Management Personnel and the Entities. or any of their relatives, as applicable.
(3) Lahanti Homes is a member of the Promoter Group and a Group Entity of the Bank. Other than this, the leased property is not directly
or indirectly owned by any Promoters, Promoter Group, Directors, Key Managerial Personnel, Senior Management Personnel and
Group Entities or any of their relatives, as applicable.
(4) There are no conflicts of interests between Lahanti Homes with any of the Promoters, Promoter Group, Directors, Key Managerial
Personnel, Senior Management Personnel and the Group Entities or any of their relatives, as applicable.

The following tables set forth the rent payable by us to ESAF Foundation and Lahanti Homes for the periods and years indicated.

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 Particulars Three months ended June 30, Year ended March 31,
2023 2022 2023 2022 2021
Amount % of Amount % of Amount % of Amount % of Amount % of
(₹ in total (₹ in total (₹ in total (₹ in total (₹ in total
million) income million) income million) income million) income million) income
Rent payable 0.06 * 0.06 * 0.20 * 0.20 * 0.20 *
to ESAF
Foundation(1)
Rent payable 6.03 0.06 6.03 0.08 24.12 0.08 21.00 0.10 21.00 0.12
to Lahanti
Homes(2)(3)
Total income 9,917.75 100.00 7,383.24 100.00 31,415.72 100.00 21,475.08 100.00 17,684.21 100.00
Notes:
(1) The market value of the lease as at October 10, 2023 is ₹0.28 million per year as per the valuation report by Sanoj P. Vincent (chartered
engineer and registered valuer) dated October 10, 2023.
(2) The market value of the lease as at October 10, 2023 is ₹30.84 million per year as per the valuation report by Sanoj P. Vincent (chartered
engineer and registered valuer) dated October 10, 2023.
(3) Lahanti Homes is a member of the Promoter Group and a Group Entity of the Bank.
* Denotes below rounding off limit.

Corporate Social Responsibility

We have adopted a Board-approved CSR policy in compliance with the requirements of the Companies Act, 2013 and the
Companies (Corporate Social Responsibility) Rules, 2014. We have established a Board-level CSR committee. Our CSR focus
areas are education, healthcare, sanitation and livelihood development. We have entered into a memorandum of understanding
dated of December 20, 2021 with ESAF Foundation (formerly known as Evangelical Social Action Forum), pursuant to which
the ESAF Foundation provides services to us for the execution of CSR projects, including providing project proposals, timelines
and budgetary estimates for CSR projects within our focus areas. The memorandum of understanding is valid for a term of four
years. We have also entered into an agreement with Prachodhan Development Services dated August 29, 2022, pursuant to
which it provides services to us for the execution of certain CSR projects. The agreement is valid for a term of four years.

In Fiscal 2023, the Board gave approval to our Bank to spend up to 5% of our average net profit for the immediately preceding
three years on CSR activities. As per Section 135 of the Companies Act, 2013, read with Companies (Corporate Social
Responsibility Policy) Rules, 2014, a company, meeting the applicability threshold, is required to spend at least 2% of its
average net profits of the company made during the immediately preceding three financial years on CSR activities. If a company
fails to spend the required amount, the board of the company in its report made under clause (o) of sub-section (3) of Section
134 of Companies Act, specify reasons for not spending the amount and transfer such unspent amount to a fund specified in
Schedule VII of the Companies Act, 2013 within a period of six months from the end of the relevant financial year. Further, if
a company defaults in complying with such provisions, it shall be liable to a penalty of twice the amount required to be
transferred to such fund or the unspent corporate social responsibility account or ₹10 million rupees, whichever is less, and
every officer of the company who is in default shall be liable to a penalty of one-tenth of the amount required to be transferred
to such fund or the unspent corporate social responsibility account or ₹0.2 million, whichever is less.

The table below sets forth our expenditure on CSR activities for the three months period ended June 30, 2023 and 2022,
respectively.

Three months period ended June 30,

2023 2022
Particulars (₹ in million)
Expenditure on CSR activities - -

The details with respect to our required minimum expenditure on CSR activities and our actual expenditure towards CSR
activities for Fiscals 2023, 2022 and 2021 are set forth below:

Year ended March 31,

2023 2022 2021
Particulars (₹ in million)
Amount required to be spent during the Fiscal Year, including 129.90(1) 128.20(2) 71.60
deficit of the previous Fiscal Year, as per Section 135 of the
Companies Act, 2013, read with Companies (Corporate Social
Responsibility Policy) Rules, 2014 [A]

Amount spent during the Fiscal [B] 69.20 80.90 31.00

Excess/(deficit) of the amount required to be spent for the (60.70) (47.30) (40.60)
Fiscal [C] = [B] – [A]

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Notes:
(1) Includes a deficit of ₹47.30 million for Fiscal 2022.
(2) Includes a deficit of ₹40.60 million for Fiscal 2021.

As at March 31, 2023, the deficit of the amount required to be spent on CSR was ₹60.70 million. With respect to the same, we
paid ₹2.70 million before March 31, 2023 to our CSR implementation agency, i.e., ESAF Foundation, which is being utilised
for ongoing projects and we transferred the balance amount of ₹58.00 million in “Unspent CSR Account” in Fiscal 2023 for
spending over the following three Fiscals Years on ongoing CSR projects, pursuant to Sections 135(5) and 135(6) of the
Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, in Fiscal 2023.

As at March 31, 2022, the deficit of the amount required to be spent on CSR was ₹47.30 million. With respect to the same, we
paid ₹12.90 million before March 31, 2022 to our CSR implementation agency, i.e., ESAF Foundation, which is being utilised
for ongoing projects and we transferred the balance amount of ₹34.40 million in “Unspent CSR Account” in Fiscal 2022 for
spending over the following three Fiscal Years on ongoing CSR projects, pursuant to Sections 135(5) and 135(6) of the
Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014.

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 KEY REGULATIONS AND POLICIES

The following description is a summary of certain key sector specific laws and regulations in India, which are applicable to us.
The information detailed in this section has been obtained from publications available in the public domain. The regulations
and their descriptions set out below may not be exhaustive and are only intended to provide general information to the bidders
and are neither designed nor intended to substitute for professional legal advice. Judicial and administrative interpretations
are subject to modification or clarification by subsequent legislative, judicial or administrative decisions.

Our Bank is engaged in the business of operating as a small finance bank primarily serving the unserved and underserved, with
a focus on financial inclusion. We deliver our products and services through our Branches and our business correspondents.
Other services include ATMs, ATM cum debit cards, mobile banking platforms, SMS alerts, internet banking portals and
unified payment interface facilities. Under the provisions of various Central Government and State Government statutes and
legislations, our Bank is required to obtain and regularly renew certain licenses or registrations and to seek statutory permissions
to conduct our business and operations. For information regarding regulatory approvals obtained by our Bank, see “Government
and Other Approvals” on page 436.

The following is an overview of some of the important laws and regulations, which are relevant to our business as an SFB.

BANKING RELATED LEGISLATIONS

Banking Regulation Act, 1949 (“Banking Regulation Act”)

Banks in India are required to obtain a license from the RBI to carry on banking business in India. Such license is granted to
the bank subject to compliance with certain conditions some of which include that: (i) the bank has or will have the ability to
pay its present and future depositors in full as their claims accrue; (ii) the affairs of the bank are not or are not likely to be
conducted in a manner detrimental to the interests of present or future depositors; (iii) the bank has adequate capital structure
and earnings prospects; (iv) public interest will be served if such a license is granted to the bank; and (v) the general character
of the proposed management of the company will not be prejudicial to public interest or the interests of the depositors. The RBI
has the power to cancel the license if a bank fails to meet the conditions or if the bank ceases to carry on banking operations in
India. Additionally, the RBI has issued various reporting and record-keeping requirements for such commercial banks. The
appointment of the auditors of the banks is subject to the approval of the RBI. The RBI can direct a special audit in public
interest, or in the interest of the banking company, or in the interest of its depositors. It also sets out the provisions in relation
to the loan granting activities of a banking company. The Banking Regulation Act specifies the business activities in which a
bank may engage. Banks are prohibited from engaging in other business activities. As per the Banking Regulation Act read
with the gazette notification DBR.PSBD. No. 1084/16.13.100/2016-17 dated July 21, 2016 and in terms of RBI Master
Direction DOR.HOL.No.95/16.13.100/2022-23 dated January 16, 2023 on Reserve Bank of India (Acquisition and Holding of
Shares or Voting Rights in Banking Companies) Directions, 2023 there is a limit of 26% on voting rights in respect of private
sector banks. Pursuant to amendments to the Banking Regulation Act in January 2013, private sector banks are permitted,
subject to the guidelines framed by the RBI, to issue preference shares in addition to ordinary equity shares.

Further, the Banking Regulation Act, requires any person to seek prior approval of the RBI, to acquire or agree to acquire,
directly or indirectly, shares or voting rights of a bank, by himself or with persons acting in concert, wherein such acquisition
(taken together with shares or voting rights held by him or his relative or associate enterprise or persons acting in concert with
him) results in aggregate shareholding of such person to be 5% or more of the paid-up capital of a bank or entitles him to
exercise 5% or more of the voting rights in a bank. Further, the RBI may, by passing an order, restrict any person or persons
acting in concert with him, holding more than 5% of the total voting rights of all the shareholders of the banking company from
exercising voting rights on poll in excess of the said 5%, if such person is deemed to be not fit and proper to hold shares or
voting rights, by the RBI. Under the RBI (Prior Approval for Acquisition of Shares or Voting Rights in Private Sector Banks)
Directions, 2015, as amended, an existing shareholder who has already obtained prior approval of the RBI for having a “major
shareholding” in a private sector bank, need not obtain approval for an additional fresh acquisition resulting up to 10% aggregate
shareholding in such bank. However, if the additional acquisition results in an aggregate shareholding that is in excess of 10%,
the prior approval of RBI must be obtained. Further, persons with ‘major shareholding’ shall also periodically report to the
concerned bank on continuing to be fit and proper.

Further, the RBI requires the banks to create a reserve fund to which it must transfer not less than 25% of the net profit before
appropriations. In terms of Section 17(2) of the Banking Regulation Act, if there is an appropriation from this account or the
share premium account, the bank is required to report the same to the RBI within 21 days, explaining the circumstances leading
to such appropriation. However, in terms of the RBI circular bearing number DBOD.BP.BC No. 31 / 21.04.018/ 2006-07 dated
September 20, 2006, banks are advised in their own interest to take prior approval from the RBI before any appropriation is
made from the statutory reserve or any other reserves.

Certain amendments also permit the RBI to establish a ‘Depositor Education and Awareness Fund’ (the “Fund”), which will
take over any credit balances in any account in India with a banking company which has not been operated upon for a period
of 10 years or any deposit or any amount remaining unclaimed for more than 10 years. The credit balances or any deposit
amount shall be credited to the Fund within a period of three months from the expiry of the said period of ten years. The bank
shall be liable to repay a depositor or any other claimant at such rate of interest as may be specified by the RBI. In terms of the
RBI circular bearing number DoR.DEA.REC.No.16/30.01.002/2021-22 dated May 11, 2021, rate of interest payable by banks

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to the depositors/claimants on the unclaimed interest bearing deposit amount transferred to the Fund shall be 3 per cent simple
interest per annum.

The amendments also confer power on the RBI (in consultation with the central government) to supersede the board of directors
of a banking company for a period not exceeding a total period of 12 months, in public interest or for preventing the affairs of
the bank from being conducted in a manner detrimental to the interest of the depositors or any banking company or for securing
the proper management of any banking company.

The appointment, re-appointment, or termination of the appointment of a chairman, managing director or whole-time director,
manager, chief executive officer of a bank shall have effect only if it is made with the prior approval of the RBI. Further, no
amendment in relation to the maximum number of permissible directors, remuneration of the chairman, managing director,
whole-time director or any other director, manager, chief executive officer shall have effect unless approved by the RBI. RBI
is also empowered to remove a chairman, director, chief executive officer or other officer or employee from office on the
grounds of public interest, interest of depositors or securing the proper management. Moreover, RBI may order meetings of the
board of directors to discuss any matter in relation to the bank, appoint observers to such meetings, make such changes to the
management as it may deem necessary, and may also order the convening of a general meeting of the bank’s shareholders to
elect new directors. Banking companies are restricted from granting loans or advances on the security of its own shares, enter
into any commitment for granting any loan or advance to or on behalf of (i) any of its directors; (ii) any firm in which any of
its directors is interested as partner, manager, employee or guarantor or (iii) any company which is not a subsidiary of the
banking company, a company registered under Section 25 of the Companies Act, 1956, a government company, a subsidiary
or a holding company of which any of the directors of the banking company is a director, managing agent, manager, employee
or guarantor or in which the director holds substantial interest; or (iv) any individual in respect of whom any of its Directors is
a partner or a guarantor.

The RBI can impose penalties on banks, directors and its employees in case of infringement of regulations under the Banking
Regulation Act. The penalty may be a fixed amount or may be related to the amount involved in the contravention. The penalty
may also include imprisonment of the concerned director or employee. Banks are also required to disclose the penalty in their
annual report.

The RBI Act, 1934 (“RBI Act”)

The RBI Act provides a framework for supervision of banking companies in India. The RBI Act was passed to constitute a
central bank to, inter alia, regulate the issue of bank notes and keeping of reserves with a view to securing monetary stability
in India and generally to operate the currency and credit system of the country. RBI may, subject to certain conditions, direct
the inclusion or exclusion of any bank from the second schedule of the RBI Act. Scheduled banks are required to maintain cash
reserves with the RBI. In this regard, RBI may stipulate an average daily balance requirement to be complied with by such
banks and may direct that such banks regard a transaction or class of transactions as a liability. Further, RBI may direct any
banking company to submit returns for the collection of credit information and may also furnish such information to a banking
company upon an application by such company. RBI has the power to impose penalties against any person for inter-alia failure
to produce any book, account or other document or furnish any statement, information or particulars which such person is duty-
bound to produce or furnish under the RBI Act, or any order, regulation or direction thereunder.

Reserve Bank of India’s Guidelines for Licensing of “Small Finance Banks” in the Private Sector dated November 27, 2014,
updated as on March 28, 2020 (the “SFB Licensing Guidelines”)

The RBI issued the SFB Licensing Guidelines and clarifications dated January 1, 2015, for licensing of SFBs in the private
sector. The following is an indicative list of guidelines applicable to our Bank:

1. Registration, licensing and regulations: An SFB is required to be registered as a public limited company under the
Companies Act and licensed under Section 22 of the Banking Regulation Act. The SFB is required to use the words
“Small Finance Bank” in its name. SFBs are governed by the provisions of the Banking Regulation Act, RBI Act,
FEMA, Payment and Settlement Systems Act, 2007, Credit Information Companies (Regulation) Act, 2005, as
amended, Deposit Insurance and Credit Guarantee Corporation Act, 1961, as amended, and other relevant statutes and
the directives, prudential regulations and other guidelines/instructions issued by RBI and other regulators from time
to time. The SFBs will be given scheduled bank status once they commence their operations and are found suitable as
per Section 42(6)(a) of the RBI Act. Pursuant to a notification dated March 28, 2020, titled ‘Guidelines for Licensing
of Small Finance Banks in Private Sector’ dated November 27, 2014 – Modifications to existing norms (“RBI March
28, 2020 Notification”), the RBI revised certain requirements under the SFB Licensing Guidelines including, inter
alia; (i) providing general permission to all existing SFBs to open banking outlets subject to adherence to unbanked
rural centre norms as per RBI circular DBR.No.BAPD.BC.69/22.01.001/2016-17 dated May 18, 2017; (ii) exempting
all existing SFBs from seeking prior approval of the RBI for undertaking such non risk sharing simple financial service
activities, which do not require any commitment of own funds, after three years of commencement of business.

2. Eligible promoters: Resident individuals/professionals with ten years of experience in banking and finance and
companies and societies owned and controlled by residents will be eligible as promoters to set up SFBs. Existing
NBFCs, MFIs and local area banks that are owned and controlled by residents can also opt for conversion into an SFB.
However, joint ventures by different promoter groups for the purpose of setting up SFBs would not be permitted.
Promoters/ promoter groups should be ‘fit and proper’, on the basis of their past record of their sound credentials and
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 integrity, financial soundness and successful track record of professional experience or of running their business for
at least a period of five years in order to be eligible to promote SFB. Pursuant to the RBI March 28, 2020 Notification,
the RBI clarified that the promoters of the existing SFBs could cease to be promoters or could exit from the bank after
completion of a period of 5 years, depending on the RBI’s regulatory and supervisory comfort/discomfort and SEBI
regulations in this regard at that time.

3. Scope of activities: The SFB is required to primarily undertake basic banking activities of acceptance of deposits and
lending to unserved and underserved sections and supply of credit to small business units, small and marginal farmers,
micro and small industries, and other unorganised sector entities, through high technology-low cost operations. It can
also undertake other non-risk sharing simple financial services activities, not requiring any commitment of own funds,
such as distribution of mutual fund units, insurance products, pension products, etc. with the prior approval of RBI
and after complying with the requirements of the sectoral regulator for such products. The SFB can also become a
Category II Authorised Dealer in foreign exchange business for its clients’ requirements. It cannot set up subsidiaries
to undertake non-banking financial services activities. Further, the other financial and non-financial service activities
of the promoters, if any, should be kept distinctly ring-fenced and not comingled with the banking business. The annual
branch expansion plans should be compliant with the requirement of opening at least 25% of its branches in unbanked
rural centres (“URC”) (having population of up to 9,999 as per the latest census). A URC is a rural centre that does
not have a core banking service-enabled ‘banking outlet’ of a scheduled commercial bank, an SFB, a payment bank or
a regional rural bank nor a branch of local area bank or licensed co-operative bank for carrying out customer based
banking transactions. In case of a conversion from NBFC/MFI, the SFB is allowed to preserve the advantages of the
former structure for a period of three years from the date of commencement of their business, to align banking network
with the extant guidelines. The existing structures would be treated as ‘banking outlets’ and would not be subjected to
the 25% norm. However, for all new outlets opened or converted from the existing NBFC/MFI branches in a year shall
be required to open at least 25% banking outlets in URCs. Further, there shall not be any restriction in the area of
operations of a SFB, however, preference will be given to SFBs who are in the initial phase to set up the bank in a
cluster of under-banked states/ districts, such as in the North-East, East and Central regions of India. Such SFBs shall
not have any hindrance to expand to other regions in due course. It is expected from the SFBs that it shall be primarily
responsive to local needs.

4. Capital requirement: The minimum paid-up equity capital of an SFB is required to be ₹1,000 million. It shall be
required to maintain a minimum capital adequacy ratio of 15% of its risk weighted assets on a continuous basis, subject
to any higher percentage as may be prescribed by RBI from time to time. The tier I capital should be at least 7.5% of
the risk weighted asset. The tier II capital should be limited to a maximum of 100% of the tier I capital. Further, the
capital adequacy ratio should be computed as per the Basel committee’s standardised approaches.

5. Promoter's contribution: The promoter's minimum initial contribution to the paid-up equity capital of the SFB shall
at least be 40% which shall be locked in for a period of five years from the date of commencement of business of the
SFB. However, if an existing NBFC, MFI or local area bank has diluted the promoter’s shareholding to less than 40%
but above 26%, due to regulatory requirements or otherwise, the RBI may not insist on the promoter’s minimum initial
contribution. Further, the promoter’s shareholding should be brought down in prescribed phases. If the initial
shareholding of the promoters is more than 40%, it should be brought down to 40% within a period of five years and
thereafter to 30% within 10 years and to 26% within 12 years from the date of commencement of business of the SFB.
Further, if an SFB reaches the net worth of ₹5,000 million, listing will be mandatory within three years of reaching
that net worth.*

* Pursuant to the Recommendations of the Internal Working Group to Review Extant Ownership Guidelines and Corporate Structure for Indian
Private Sector Banks dated November 26, 2021, RBI has provided that no intermediate sub-targets between five and 15 years may be required,
however, at the time of issue of license, promoters may submit a dilution schedule while may be examined and approved by the RBI, the
progress of which shall be periodically reported by the bank and shall be monitored by RBI. For further details, see “ - Recommendations of
the Internal Working Group to Review Extant Ownership Guidelines and Corporate Structure for Indian Private Sector Banks dated November
26, 2021” below on page 235.

6. Foreign shareholding: Foreign shareholding would be as per the FDI Policy for private sector banks, as amended
from time to time. As per the current FDI Policy, foreign direct investment is permitted up to 49% under the automatic
route and up to 74% under government route in a private sector Indian bank.

The aggregate limit for FPI investments shall be the sectoral caps applicable to our Bank (i.e. up to 74% of the paid-up capital
of our Bank).

7. Voting rights and transfer/ acquisition of shares: The RBI Guidelines on Acquisition and Holding of Shares or
Voting Rights in Banking Companies dated January 16, 2023, provide that as per the Banking Regulation Act read
with the gazette notification DBR.PSBD. No. 1084/16.13.100/2016-17 dated July 21, 2016, there is a limit of 26% on
voting rights in respect of private sector banks. This will also apply to SFBs.

8. Prudential norms: The SFB will be subject to all prudential norms and regulations of RBI as applicable to existing
commercial banks. Further, the SFB will have to comply with additional conditions/ norms such as extending 75% of
its adjusted net bank credit to sectors eligible for classification as priority sector lending by RBI, while 40% of its
adjusted net bank credit shall be allocated to different sub-sectors under priority sector lending as per the extant priority

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 sector lending prescriptions, the SFB can allocate the balance of 35% to any one or more sub-sectors under priority
sector lending where it has competitive advantage, maximum loan size and investment limit exposure to a single and
group obligor being restricted to 10% and 15% of its capital funds, respectively, at least 50% of its loan portfolio
should constitute loans and advances of up to ₹2.5 million, etc. However, after the initial stabilisation period of five
years, and after a review, RBI may relax the above exposure limits. The SFB is also precluded from having any
exposure to its promoters, major shareholders (who have shareholding of 10% of paid-up equity shares in the bank),
and relatives (as defined in Section 2 (77) of the Companies Act, 2013 and rules made thereunder) of the promoters as
also the entities in which they have significant influence or control (as defined under Accounting Standards AS 21 and
AS 23).

9. Corporate Governance: The Board of the SFB should have a majority of independent directors. Further, the SFB
will have to comply with the corporate governance guidelines including ‘fit and proper’ criteria for directors as issued
by RBI from time to time.

10. Others:

• Individuals (including relatives) and entities other than the promoters will not be permitted to have
shareholding in excess of 10% of the paid-up equity capital. In case of NBFCs or MFIs converting to an SFB,
if shareholding of entities (other than the promoters) in the NBFC is in excess of 10% of the paid-up equity
capital, RBI may consider providing time up to three years for the shareholding to be brought down to 10%.

• An SFB cannot be a Business Correspondent (“BC”) for another bank. However, it can have its own BC
network.

• A promoter of an SFB cannot be granted licenses for both universal bank and small finance bank even if the
proposal is to set them up under the non-operative financial holding company structure.

• If an SFB wishes to transit into a universal bank, it will have to apply to the RBI for such conversion and
fulfil the minimum paid-up capital / net worth requirement as applicable to universal banks and also comply
with other criteria prescribed in this regard.

• The operations of the bank should be technology driven from the beginning, conforming to generally accepted
standards and norms; while new approaches (such as for data storage, security and real time data updating)
are encouraged, a detailed technology plan for the same shall be furnished to RBI.

• The compliance of terms and conditions laid down by RBI is an essential condition of grant of licence. Any
non-compliance will attract penal measures including cancellation of licence of the bank.

Reserve Bank of India’s Operating Guidelines for Small Finance Bank dated October 6, 2016 (“SFB Operating Guidelines”)

The SFB Operating Guidelines are supplementary to SFB Licensing Guidelines. The SFB Operating Guidelines came into force
considering the differentiated nature of business and financial inclusion focus of SFBs. The SFB Operating Guidelines set out
the following:

1. Prudential Regulation: The prudential regulatory framework for the SFBs will be largely drawn from the Basel
standards. However, given the financial inclusion focus of these banks, it will be suitably calibrated:

a) Capital adequacy framework: The minimum capital requirement is 15%;

b) Leverage ratio: The leverage ratio is 4.5%, calculated as percentage of Tier 1 capital to total exposure; and

c) Inter-bank borrowings: SFBs are allowed exemption from the existing regulatory ceiling of interbank
borrowings till the existing loans mature or up to three years, whichever is earlier. Afterwards, it will be on
par with scheduled commercial banks. However, the borrowings made by the SFBs after the commencement
of its banking operations shall be subject to inter-bank borrowing limits.

2. Corporate governance:

a) Constitution and functioning of board of directors: The extant provisions as applicable to banking
companies shall be applicable to SFBs as well. Specifically, in case of entities being converted into SFBs, the
existing terms and conditions of appointment of directors will be grandfathered till completion of their present
term; and

b) Constitution and functioning of committees of the board, management level committees, and
remuneration policies: The extant provisions in this regard as applicable to private sector banks, shall be
applicable to SFBs as well.

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3. Banking Operations:

a) Branch authorization policy: SFBs should follow the extant instructions pertaining to the branch
authorization policy applicable to scheduled commercial banks as laid down in the Rationalisation of Branch
Authorisation Policy - Revision of Guidelines issued by the RBI on May 18, 2017 and March 28, 2020. SFBs
are required to have 25% of their branches in unbanked rural centres within one year from the date of
commencement of business. The SFBs are given three years from the date of commencement of the business
to align with this requirement, however, during these three years, at least 25% of total number of branches
opened by SFBs in a financial year should be in unbanked rural centres.

b) Regulation of Business Correspondents: The SFBs may engage all permitted entities including the
companies owned by their business partners and own group companies on an arm’s length basis as business
correspondents These business correspondents can have their own branches managed by their employees
operating as “access points” or may engage other entities/persons to manage the “access points” which could
be managed by the latter’s staff. In such cases, from the regulatory perspective, the SFB will be responsible
for the business carried out at the ‘access points’ and the conduct of all the parties in the chain regardless of
the organizational structure including any other intermediaries inserted in the chain to manage the BC
network. Further, the Operating Guidelines also provide that the business correspondents must be doing
online transactions/using point of sale terminals for doing transactions; and

c) Bank charges, lockers, nominations, facilities to disabled persons: The extant provisions applicable to
scheduled commercial banks shall be applicable to SFBs as well.

d) Marginal Cost of funds-based lending rate, other related regulations on interest rates and fair practice
code for lenders: The extant provisions applicable to scheduled commercial banks shall be applicable to
SFBs as well.

4. KYC requirements: At their discretion, SFBs may (like all other banks) decide not to take the wet signature while
opening accounts, and instead rely upon the electronic authentication/ confirmation of the terms and conditions of the
banking relationship or account relationship keeping in view their confidence in the legal validity of such
authentications or confirmations. However, all the extant regulations concerning KYC including those covering the
submission of information to Central KYC registry, and any subsequent instructions in this regard, as applicable to
commercial banks, would be applicable to SFBs.

Reserve Bank of India’s Master Direction on Priority Sector Lending – Small Finance Banks – Targets and Classification
dated September 04, 2020, updated as on October 20, 2022 (“Priority Sector Lending Regulations”)

The Priority Sector Lending Regulations have consolidated certain pertinent circulars pertaining to issued earlier, including the
‘Master Direction on Priority Sector Lending – Small Finance Banks – Targets and Classification’ dated July 29, 2019. The
Priority Sector Lending Regulations apply to every commercial bank and primary (urban) co-operative bank other than salary
earners’ bank licensed to operate in India by the RBI. In terms of these regulations, the sectors categorised as priority sectors
are agriculture, micro, small and medium enterprises (“MSME”), export credit, education, housing, social infrastructure,
renewable energy and other sectors. Further, the Priority Sector Lending Regulations requires SFBs to have a target of 75% for
PSL of their adjusted net bank credit or credit equivalent of off-balance sheet exposure. Further, for agriculture sector, micro
enterprises and advance to weaker sections, the targets are 18%, 7.5% and 12% of the adjusted net bank credit respectively.
The sub-target for small and marginal farmers is increased from 9.5% currently to reach 10% in phased manner by financial
year ending 2023-24 and weaker section target from 11.5% currently to reach 12% in phased manner by financial year ending
2023-24. In addition, certain other changes were made such as change in definition of MSME in line with Government of India
(GoI), Gazette Notifications S.O. 2347( E) dated June 16, 2021 and S.O. 2119 (E) dated June 26, 2020 read with circulars
RBI/2021-2022/63 FIDD.MSME & NFS.BC.No. 12/06.02.31/2021-22 and RBI/2020-2021/10 FIDD.MSME &
NFS.BC.No.3/06.02.31/2020-21 read with FIDD.MSME & NFS. BC. No.4 /06.02.31/2020-21 dated July 2, 2020, August 21,
2020 respectively on ‘Credit flow to Micro, Small and Medium Enterprises Sector’ and updated from time to time.

In pursuance to the press release on ‘On-Tap Liquidity Window for Contact-Intensive Sectors’ issued on June 4, 2021, the
Priority Sector Lending Regulations were further amended on June 11, 2021 to provide for a separate liquidity window of
₹15,000 crore with tenors of up to three years at the repo rate till March 31, 2022 has been opened for certain contact-intensive
sectors i.e., hotels and restaurants; tourism - travel agents, tour operators and adventure/heritage facilities; aviation ancillary
services - ground handling and supply chain; and other services that include private bus operators, car repair services, rent-a-
car service providers, event/conference organisers, spa clinics, and beauty parlours/saloons. Banks are expected to create a
separate COVID loan book under the scheme. Banks desirous of deploying their own resources without availing funds from
the RBI under the scheme for lending to the specified segments mentioned herein above will also be eligible for this incentive.
Pursuant to the amendment dated August 2, 2022 (updated as on October 20, 2022), loans not exceeding ₹2 lakhs provided by
the banks to the members of self-help groups/joint-liability groups for activities other than agriculture or MSME i.e., loans for
meeting social needs, construction or repair of house, construction of toilets or any viable common activity started by such
groups are eligible for priority sector classification.

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Reserve Bank of India’s Press Release ‘Statement on Developmental and Regulatory Policies’ dated October 9, 2020

The press release has now revised the limit for risk weight for regulatory retail portfolio to ₹7.5 from ₹5 crores, for individuals
and small businesses with turnover up to ₹50 crore, in respect of all fresh as well as incremental qualifying exposures. Further,
the RBI issued another circular – DOR.No.BP.BC.23/21.06.201/2020-21, dated October 12, 2020 clarified that the risk weight
of 75 per cent will apply to all fresh exposures and also to existing exposures where incremental exposure may be taken by the
banks up to the revised limit of ₹7.5 crore. The other exposures shall continue to attract the normal risk weights as per the extant
guidelines.

In respect of payment and settlement systems, the Real Time Gross Settlement System (“RTGS”) will be available 24x7 on all
days with effect from December 14, 2020.

Lastly, the RBI issued notification – DOR. No.BP.BC.24/08.12.015/2020-21, dated October 16, 2020 titled “Individual Housing
Loans – Rationalisation of Risk Weights” and Master Circular on Housing Finance dated April 03, 2023, to rationalise the risk
weights for all housing loans, irrespective of the amount, sanctioned on or after October 16, 2020 and up to March 31, 2023,
the risk weight shall be 35% if Loan To Value Ratio (“LTV”) is less than or equal to 80%, and 50% if LTV is above 80% but
less than or equal to 90%.

Reserve Bank of India’s Press Release ‘Statement on Developmental and Regulatory Policies’ dated February 5, 2021

As a measure during the peak of the COVID-19 pandemic, the cash reserve ratio (“CRR”) of all banks was reduced by 100
basis points to 3.0 per cent of net demand and time liabilities (“NDTL”) effective from the reporting fortnight beginning March
28, 2020 up to March 26, 2021. On a review of monetary and liquidity conditions, it has been decided to gradually restore the
CRR in two phases in a non-disruptive manner. Banks would now be required to maintain the CRR at 3.5 per cent of NDTL
effective from the reporting fortnight beginning March 27, 2021 and 4.0 per cent of NDTL effective from fortnight beginning
May 22, 2021 and further 4.5 per cent of NDTL effective from fortnight beginning May 21, 2022. Previously under the press
release dated March 27, 2020 ‘Statement on Developmental and Regulatory Policies’ banks were allowed to avail of funds
under the marginal standing facility by dipping into the Statutory Liquidity Ratio (“SLR”) up to an additional one per cent of
NDTL, i.e., cumulatively up to 3 per cent of NDTL. This facility, which was initially available up to June 30, 2020 was later
extended in phases up to March 31, 2021 and is now further extended up to September 30, 2021.

Pursuant to the notification dated February 5, 2021 ‘Basel III Framework on Liquidity Standards – Net Stable Funding Ratio
(“NSFR”)’, the implementation of NSFR by banks in India had been deferred to April 1, 2021. While banks are comfortably
placed on the liquidity front, in view of the continued stress on account of COVID-19, it has been decided to defer the
implementation of NSFR to October 1, 2021. Currently it is implemented and stipulated at 100%.

Pursuant to the notification dated January 6, 2022 ‘Basel III Framework on Liquidity Standards – Liquidity Coverage Ratio
(“LCR”), Liquidity Risk Monitoring Tools and LCR Disclosure Standards and Net Stable Funding ratio – Small Business
Customers’, the threshold limit for deposits and other extensions of funds made by non-financial small business customers has
been increased from ₹5 crore to ₹7.5 crore for the purpose of maintaining liquidity coverage ratio. This has been done with an
objective to align these guidelines with the Basel Committee on Banking Supervision standards and to enable the banks to
manage liquidity risk more effectively.

Pursuant to the notification dated April 17, 2020, as updated on April 18, 2022 ‘Basel III Framework on Liquidity Standards –
Liquidity Coverage Ratio’, the banks are permitted to reckon government securities as Level 1 High Quality Liquid Assets
(“HQLAs”) under Marginal Standing Facility (“MSF”) and Facility to Avail Liquidity for Liquidity Coverage Ratio
(“FALLCR”) within the mandatory SLR requirement up to 16% of their NDTL. Accordingly, the total HQLA carve out from
the mandatory SLR, which can be reckoned for meeting LCR requirement will be 18% of NDTL (i.e. 2% of MSF plus 16%
FALLCR).

Reserve Bank of India’s Compendium of Guidelines for Small Finance Banks – Financial Inclusion and Development dated
July 6, 2017

Considering the differentiated nature of business and financial focus of the SFBs and taking into account the important role that
SFBs can play in the supply of credit to micro and small enterprises, agriculture and banking services, the RBI issued a specific
compendium of guidelines for SFBs on areas relating to financial inclusion and development. SFBs are required to open at least
25% of its branches in unbanked rural centres. SFBs will have a target of 75% for priority sector lending of their adjusted net
bank credit. The identified priority sectors are agriculture, MSMEs, export credit, education, housing, social infrastructure,
renewable energy and certain categories of loans identified therein.

Press release issued by RBI on August 10, 2022 on digital lending and to implement the recommendations of the Working
Group on Digital Lending (“WGDL”)

The press release issued by RBI on August 10, 2022, aims to provide the regulatory stance of RBI on digital lending and to
implement the recommendations of the Working Group on digital lending (“WGDL”) including lending through online
platforms and mobile applications.

In terms of the Press Release, digital lenders are classified into three groups:

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a) Entities regulated by the RBI and permitted to carry out lending business;

b) Entities authorized to carry out lending as per other statutory/ regulatory provisions but not regulated by RBI;

c) Entities lending outside the purview of any statutory/ regulatory provisions.

All regulated entities, their lending service providers, digital lending apps of regulated entities, digital lending app of lending
service provider engaged by regulated entities are the ones covered under the ambit of the category (b) above. For the entities
in (c) above, the WGDL has suggested specific legislative and institutional interventions for consideration by the Central
Government to curb the illegitimate lending activity being carried out by such entities.

Certain requirements that are mandatorily required to be followed by regulated entities, their lending service provider, digital
lending apps of regulated entities, digital lending app of lending service provider engaged by regulated entities, are inter alia as
follows:

a) Customer Protection and Conduct Requirements;

b) Technology and Data Requirements; and

c) Regulatory Framework.

Guidelines on digital lending issued by RBI on September 2, 2022 (“Guidelines on Digital Lending”)

The guidelines issued by RBI on September 2, 2022 are applicable to digital lending extended by (a) all commercial banks, (b)
primary (urban) co-operative banks, state co-operative banks, district central co-operative banks and (c) non – banking financial
companies (including house finance companies).

The Guidelines on Digital Lending require, inter alia: (a) all loan disbursals and repayments to be executed only between the
bank accounts of the borrower and the regulated entity without any pass-through/ pool account of the loan service provider or
any third party; (b) all-inclusive costs of digital loans to be disclosed to the borrower; (c) a cooling-off period to be provided to
borrowers, during which the borrowers can exit digital loans by paying the principal and the proportionate costs without any
penalty; (d) the appointment of a nodal grievance redressal officer by loan service providers; and (e) reporting of loans to credit
information companies. Additionally, the Recommendations have noted some issues for further examination by the RBI, which
may be incorporated into the Guidelines on Digital Lending in the future.

In the Guidelines on Digital Lending, the RBI has also provided that regulated entities engaged in credit delivery through digital
lending will have time until November 30, 2022 to comply with the lending norms for repeat and top up loans to existing digital
lending customers.

Reserve Bank of India’s Guidelines on Compensation of Whole Time Directors/ Chief Executive Officers/ Material Risk
Takers and Control Function Staff dated November 4, 2019 (“RBI Compensation Guidelines”)

The Financial Stability Board brought out a set of Principles titled ‘The Financial Stability Board Principles for Sound
Compensation Practices, 2009’, dated April 2, 2009 (“FSB Principles”) and Implementation Standards titled ‘FSB Principles
for Sound Compensation Practices-Implementation Standards’, dated September 25, 2009 with an aim to ensure effective
governance of compensation, alignment of compensation with prudent risk taking and effective supervisory oversight and
stakeholder engagement in compensation. The FSB Principles have been endorsed by the G-20 countries and the Basel
Committee on Banking Supervision (“BCBS”) which has published remuneration related reports and disclosure requirements.
Pursuant to the stipulations in the reports and disclosure requirements published by BCBS, the RBI issued the RBI
Compensation Guidelines which are based on the FSB Principles and are applicable to all private sector banks (including small
finance banks) and foreign banks operating in India. In line with the FSB Principles banks are required to take steps to
implement certain guidelines by putting in place necessary policies/systems. These guidelines include, inter alia, formulation
of a compensation policy, constitution of nomination and remuneration committee, alignment of compensation of whole-time
directors / chief executive officers and material risk takers with prudent risk taking etc. All applications for approval of
appointment/re-appointment or approval of remuneration/revision in remuneration of whole-time directors/chief executive
officers shall be submitted to the RBI with the details as prescribed in the guidelines. These guidelines shall be applicable for
pay cycles beginning from/after April 1, 2020.

Further, pursuant to RBI clarification dated August 30, 2021 to the RBI Compensation Guidelines, it was clarified that share-
linked instruments are required to be fair valued on the date of grant using Black-Scholes model and a clarificatory language
was included to the guidelines in relation to the same. Additionally, pursuant to the Master Direction on Financial Statements -
Presentation and Disclosures dated August 30, 2021, banks are required to make disclosure on remuneration of Whole Time
Directors/ Chief Executive Officers/ Material Risk Takers on an annual basis at the minimum, in their Annual Financial
Statements in table or chart format for previous as well as the current reporting year. It was also clarified that private sector
banks are also required to disclose remuneration paid to the non -executive directors on an annual basis at the minimum, in
their annual financial statements.

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Reserve Bank of India’s Guidelines on Compensation of Non-executive Directors of Private Sector Banks dated June 1,
2015

The board of directors of a private sector bank, in consultation with its remuneration committee, is required to formulate and
adopt a comprehensive compensation policy for non-executive directors (other than part-time non-executive Chairman), subject
to the requirements prescribed under the Companies Act, 2013. The Board may, at its discretion, provide for in the policy,
payment of compensation in the form of profit related commission to the non-executive directors (other than the Part-time
Chairman), subject to bank making profits. Such compensation, however, shall not exceed ₹1.00 million per annum for each
non-executive director. In addition to the directors’ compensation, the bank may pay sitting fees to the non-executive directors
and reimburse their expenses for participation in the board and other meetings. Further, all private sector banks are required to
obtain prior approval of RBI for granting remuneration to the part-time non-executive Chairman under Section 10B(1A)(i) and
35B of the Banking Regulation Act. Pursuant to the Master Direction on Financial Statements - Presentation and Disclosures
dated August 30, 2021, the private sector banks are also required to disclose remuneration paid to the non-executive directors
on an annual basis at the minimum, in their annual financial statements.

Reserve Bank of India’s Master Direction on Financial Statements – Presentation and Disclosures dated August 30, 2021,
updated as on February 20, 2023 (“Presentation and Disclosure Directions”)

The Presentation and Disclosure Directions contain guidelines, instructions and directives on presentations and disclosures to
enable banks to have the instructions on presentation and disclosure in financial statements at a centralised place. The directions
specify the format of the balance sheet and profit and loss account, notes and instructions for compilation and mandatory
disclosures in financial statements to supplement other regulatory disclosures. All commercial banks are mandated to segregate
the credit entries outstanding for more than five years in the inter-branch account and transfer them to a separate blocked
account. The directions also provide for the treatment of accounts, reserve funds, unreconciled balances, and other outstanding
entries. Guidelines on specific issues with respect to accounting standards have been laid down inter alia with respect to revenue
recognition, change in foreign exchange rates, related party disclosures and segment reporting. All commercial banks are
required to make disclosure on remuneration of whole-time directors/ chief executive officers/ material risk takers on an annual
basis at the minimum, in their annual financial statements in table or chart format for previous as well as the current reporting
year.

Reserve Bank of India’s Master Circular - Mobile Banking Transactions in India- Operative Guidelines for Banks dated
July 1, 2016, updated as on November 12, 2021 (“Mobile Banking Transaction-Operative Guidelines”)

The Mobile Banking Transaction Operative Guidelines contains all rules, regulations and procedures prescribed to be followed
by banks for operationalizing mobile banking in India. Banks which are licensed, supervised and have physical presence in
India are permitted to offer mobile banking services after obtaining one-time RBI approval. Only banks who have implemented
core banking solutions are permitted to provide mobile banking services. Banks are required to put in place a system of
registration of customers for mobile banking. Further, to meet the objective of a nation-wide mobile banking framework,
facilitating inter-bank settlement, a robust clearing and settlement infrastructure operating on a 24x7 is mandated. Pending
creation of such a national infrastructure, bank and non-banking entities may enter into bilateral or multilateral arrangement for
inter-bank settlements, with express permission from the RBI, unless such arrangements have been authorized by the RBI under
the Payment and Settlement System Act, 2007.

Reserve Bank of India’s Master Direction on Digital Payment Security Controls, 2021 dated February 18, 2021 (“Digital
Payment Security Control Directions”)

The Digital Payment Security Control Directions are applicable to entities regulated by the RBI, specifically, scheduled
commercial banks (excluding regional rural banks), small finance banks, payment banks and credit card issuing NBFCs. The
Directions were issued in recognition of the pre-eminent role played by digital payment systems in India. RBI therefore found
it imperative to reinforce security controls around it. The Directions enable the abovementioned regulated entities to set up a
robust governance structure for payment systems by providing for common minimum standards of security controls for channels
including mobile banking, internet, card payments etc. It mandates the formulation of a policy for digital payment products and
services covering key aspects including risk management and mitigation measures, compliance with regulatory norms, customer
experience.

Reserve Bank of India’s Master Direction - Know Your Customer (KYC) Direction, 2016 dated February 25, 2016, updated
as on May 10, 2021 (“KYC Directions”)

KYC Directions are applicable to every entity regulated by RBI specifically, scheduled commercial banks, regional rural banks,
local area banks, primary (urban) co-operative banks, all India financial institutions, NBFCs, miscellaneous non-banking
companies and residuary non-banking companies, amongst others. In terms of the KYC Directions, every entity regulated
thereunder is required to formulate a KYC policy which is duly approved by the board of directors of such entity or a duly
constituted committee thereof. The KYC policy formulated in terms of the KYC Directions is required to include four key
elements, being customer acceptance policy, risk management, customer identification procedures and monitoring of
transactions. The KYC Directions also prescribe detailed instructions in relation to, inter alia, the due diligence of customers,
record management and reporting requirements (such as the details of the person designated by the board of directors as a
designated director etc.,) to Financial Intelligence Unit – India. The RBI, pursuant to a circular dated January 9, 2020 titled
Amendment to Master Direction (MD) on KYC read with the amended KYC Directions dated April 20, 2020, has provided
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that all regulated entities shall develop an application to enable a Video based Customer Identification Process (“V-CIP”) i.e.
digital KYC process at customer touchpoints, of their customers. As per Notification dated May 10, 2021, V-CIP is an alternate
method of customer identification through audio-visual interaction by an authorised official as prescribed. It also inserted
directions for Regulated entities to assess ‘Money Laundering’ and ‘Terrorist Financing’ risk for clients, transactions or delivery
channels, products, services etc. and take measures to mitigate the same on a risk-based approach. The outcome of this exercise
shall be put up to the Board or any committee of the Board formed in this regard and shall be made available to competent
authorities and self-regulating bodies.

Reserve Bank of India’s Master Circular on Prudential norms on income recognition, asset classification and provisioning
pertaining to advances dated April 1, 2023 (“Master Circular on Prudential Norms”)

The RBI, pursuant to its “Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning
Pertaining to Advances” issued on April 1, 2023, classifies NPAs into (i) sub-standard assets; (ii) doubtful assets; and (iii) loss
assets. Banks are required to establish appropriate internal systems (including technology enabled processes) for proper and
timely identification of NPAs and shall not take into account the availability of security or net worth of the borrower/guarantor
for the purpose of treating advance as an NPA or otherwise, except in the cases laid down in the Master Circular on Prudential
Norms. The circular also specifies provisioning requirements specific to the classification of the assets. By virtue of the “Master
Circular – Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances” dated
October 1, 2021, RBI has introduced an objective criterion for classification of assets of banks based on the period of non-
performance, availability and realisable value of the security.

In July 2005, the RBI issued guidelines on sales and purchases of NPAs between banks, financial institutions and NBFCs.
However, as per SFB Operating Guidelines, while SFBs are permitted to sell NPAs, they are not permitted to purchase NPAs.
These guidelines require that the board of directors of a bank must establish a policy for purchases and sales of NPAs. An asset
must have been classified as non-performing for at least two years by the seller bank to be eligible for sale. In October 2007,
the RBI issued guidelines regarding valuation of NPAs being put up for sale.

Reserve Bank of India’s Circular on Automation of Income Recognition, Asset Classification and Provisioning processes
in banks dated September 14, 2020

The RBI, pursuant to a circular dated August 4, 2011 advised banks, inter alia, to have appropriate IT system in place for
identification of NPAs and generation of related data/returns, both for regulatory reporting and bank’s own MIS requirements.
In order to ensure the completeness and integrity of the automated asset classification (classification of advances/investments
as NPA/NPI and their upgradation), provisioning calculation and income recognition processes, RBI under this circular advised
banks to put in place / upgrade their systems latest by June 30, 2021. The circular extends the “coverage” to automated IT based
systems, asset classification, calculation of provisioning requirements, income recognition/derecognition without any manual
intervention. The circular also provides exceptions where the banks may resort to manual interventions/ over-ride the system
based asset classification subject to the various conditions including two level authorisation, appropriate audit trials and
subjected to audit by concurrent and statutory auditors. Further, the bank is required to maintain logs of such manual
intervention/ over-rides for a minimum period of three years. Banks are allowed to draw up their own standard operating
procedure for system based NPA classification. The circular provides baseline requirements for the NPA classification and
banks are required to adhere to the instructions while designing and maintaining their system as a part of supervisory assessment.
In case of non-compliance with the instructions suitable supervisory/enforcement action can be initiated against the concerned
bank.

Reserve Bank of India’s (Prudential Framework for Resolution of Stressed Assets) Directions 2019 dated June 07, 2019
(“Framework for Resolution of Stressed Assets”)

The RBI laid down directions under the Framework for Resolution of Stressed Assets with a view to aid early recognition,
reporting and time bound resolution of stressed assets. The framework provided for entails a stage wise resolution plan which
includes (a) early identification and reporting of stress; (b) Implementation of resolution plan; (c) implementation conditions
for the resolution plan; (d) delayed implementation of resolution plan.

Stressed assets shall be recognised by incipient stress in loan accounts immediately or default, by classifying such assets as
special mention accounts which would further be categorised based on the number of days since the default has occurred.
Following this, the resolution plan formulated by the Board of the Bank would become applicable.

Reserve Bank of India’s Guidelines for ‘on tap’ Licensing of Small Finance Banks in the Private Sector dated December 5,
2019 (“On-Tap Licensing Guidelines”)

The RBI had, post review of the performance of existing small finance banks, issued the Draft Guidelines for ‘on tap’ Licensing
of Small Finance Banks in the Private Sector dated September 13, 2019, to encourage competition amongst small finance banks,
and subsequently, post consideration of responses received, issued the On-Tap Licensing Guidelines on December 5, 2019.
Pursuant to the On-Tap Licensing Guidelines, the following are eligible promoters: (i) resident individuals/ professionals
(Indian citizens), singly or jointly, each having at least 10 years of experience in banking and finance at a senior level; and (ii)
companies and societies in the private sector, that are owned and controlled by residents (as defined in FEMA Regulations, as
amended from time to time), and have a successful track record of running their businesses for at least a period of five years.
Further, existing NBFCs, micro finance institutions and local area banks in the private sector that are controlled by residents
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(as defined in FEMA Regulations, as amended from time to time), and have a successful track record of running their businesses
for at least a period of five years, can opt for conversion into SFBs after complying with applicable law. Promoters/promoter
groups should be ‘fit and proper’ with, amongst other things, past record of sound credentials and integrity, financial soundness,
a successful track record of professional experience or of running their business for at least a period of five years in order to be
eligible to promote SFB. The SFB is required to be registered as a public limited company under the Companies Act and
licensed under the Banking Regulation Act. The minimum net worth of such small finance banks shall be ₹1000 million from
the date of commencement of business. However, they will have to increase their minimum net worth to ₹2000 million within
five years from the date of commencement of business. Further, the SFB is required to maintain a paid-up voting equity capital
of ₹2,000 million, with certain exceptions, such as in case of SFBs which are transited from Primary (Urban) Co-operative
Banks (“UCBs”), or converted from NBFCs/MFIs etc., for which the requirement is separately set out.

Further, promoters are required to hold a minimum of 40% of the paid-up voting equity capital of the SFB, which shall be
locked-in for a period of five years from the date of commencement of business of the bank. Such shareholding is required to
be reduced to a maximum of 30% and 15% of the paid-up voting equity capital within 10 years and 15 years, respectively, from
the date of commencement of business of the SFB. Furthermore, SFBs are required to be mandatorily listed within three years
of reaching a net worth of ₹5,000 million. The SFB will be subject to all prudential norms and regulations of the RBI as
applicable to existing commercial banks.

Reserve Bank of India’s Circular on Risk Based Internal Audit (RBIA) Framework – Strengthening Governance
Arrangements dated January 07, 2021

Pursuant to the guidance note on Risk-Based Internal Audit dated December 27, 2002 issued by the RBI, under which it was
required to put in place a risk based internal audit (RBIA) system as part of their internal control framework that relies on a
well-defined policy for internal audit, functional independence with sufficient standing and authority within the bank, effective
channels of communication, adequate audit resources with sufficient professional competence, among others. In an effort to
stay with the evolving best practices, under this circular, banks are encouraged to adopt the International Internal Audit
standards, like those issued by the Basel Committee on Banking Supervision (BCBS) and the Institute of Internal Auditors
(IIA). To bring in uniformity to the approach of the Internal Audit Function, banks are advised to follow directions given on,
authority, stature and independence, competence, staff rotation, tenor for appointment of head of internal audit, reporting line
and remuneration. Lastly, the internal audit function shall not be outsourced. However, where required, experts, including
former employees, could be hired on contractual subject to the audit committee of the board being assured that such expertise
does not exist within the audit function of the bank.

Reserve Bank of India’s Master Direction – Call, Notice and Term Money Markets Directions, 2021, dated April 1, 2021,
updated as on June 25, 2021

The RBI issued master directions for participating in call, notice and term money markets on April 1, 2021. The directions are
applicable to banks as defined under the Banking Regulation Act. Under the directions, “banks” have been defined as banking
company (including a payment bank and a small finance bank) or a regional rural bank, a corresponding new bank or State
Bank of India or a cooperative bank as defined under the Banking Regulation Act. Under the directions, participants shall be
eligible to participate in the call, notice and term money markets, both as borrowers and lenders. The term “participants” have
been defined to include scheduled commercial banks (excluding local area banks), payment banks, small finance banks, regional
rural banks, state co-operative banks, district central co-operative banks and urban co-operative banks (hereinafter co-operative
banks), and primary dealers. Prudential limits for outstanding lending transaction shall be decided by the participants with the
approval of their board within the regulatory framework of the exposure norms prescribed by the Department of Regulation of
the RBI. Prudential limits for outstanding borrowing transactions for scheduled commercial banks have been specified as (i)
100% of capital funds, on a daily average basis in a reporting fortnight, (ii) 125% of capital funds on any given day for call and
notice money and internal board approved limit within the prudential limits for inter-bank liabilities, for term money. Further,
the directions also specify provisions for cancellation and termination of transaction, reporting requirements of call, notice and
term money transactions and the obligations of persons or agencies dealing in the call, notice and term money markets, including
eligible participants to provide information sought by the RBI.

Reserve Bank of India’s Circular on Corporate Governance in Banks - Appointment of Directors and Constitution of
Committees of the Board dated April 26, 2021

The RBI pursuant to issue of discussion paper on ‘Governance in Commercial Banks in India’ dated June 11, 2020, issued these
instructions with regards to the chair and meetings of the board, composition of certain committees of the board, age, tenure
and remuneration of directors, and appointment of the whole-time directors. The revised instructions are applicable to all the
private sector banks including small finance banks and wholly owned subsidiaries of foreign banks. As per the circular, the
chair of the board (‘Chair’) shall be an independent director and in the absence of Chair, the meetings of the board shall be
chaired by an independent director. The circular also specifies the composition of various committees of the board including
audit committee, risk management committee, and nomination and remuneration committee. The age and tenure and the
remuneration of non-executive directors and tenure of managing director, chief executive officer and whole-time directors have
also been provided. Further, to enable smooth transition to the revised requirements, banks are permitted to comply with these
instructions latest by October 1, 2021. Specifically (i) the chair of board who is not an independent director on the date of issue
of this circular is allowed to complete the current term as chair as already approved by the RBI and (ii) banks with MD & CEOs

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or WTDs who have already completed 12/15 years as MD & CEO or WTD, on the date these instructions coming to effect, are
allowed to complete their current term as already approved by the RBI.

In addition to sitting fees and expenses related to attending meetings of the board and its committees as per extant statutory
norms/ practices, the bank may provide for payment of compensation to non-executive directors in the form of a fixed
remuneration commensurate with an individual director’s responsibilities and demands on time and which are considered
sufficient to attract qualified competent individuals. However, such fixed remuneration for non-executive directors, other than
the Chair of the board, shall not exceed ₹2.00 million per annum.

Reserve Bank of India’s Guidelines for Appointment of Statutory Central Auditors (SCAs)/ Statutory Auditors (SAs) of
Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs) dated April 27, 2021 (“Guidelines on Auditors”)

The RBI issued the Guidelines on Auditors for appointment/re-appointment of SCAs/ SAs of the entities on April 27, 2021
superseding all the previous guidelines as annexed in the guidelines. The Guidelines on Auditors are applicable to commercial
banks (excluding RRBs), UCBs and NBFCs including HFCs for financial year 2021-22 and onwards. UCBs and NBFCs shall
have the flexibility to adopt the Guidelines on Auditors from second half of financial year 2021-22 in order to ensure that there
is no disruption. Under the Guidelines on Auditors, Commercial Banks and UCBs will be required to take prior approval of
RBI for the appointment of SCAs/ SAs on annual basis. It also specifies the maximum number of SCAs/ SAs to be appointed
by the board based on the asset size of the entity. Entities are required to appoint audit firms as it SCAs/ SAs fulfilling the
eligibility norms and independence of auditors requirements as prescribed under these directions. Other criteria’s including
eligibility for appointment based on the asset size of the entity being audited (as on March 31 of the previous year), professional
standards for discharge of audit responsibilities, tenure and rotation, and audit fees and expenses for SCAs/ SAs have been
provided. Each entity is required to formulate a board approved policy to be hosted on its official website/ public domain and
formulate necessary procedure thereunder to be followed for appointment of SCAs/ SAs.

Reserve Bank of India’s Circular on Government Agency Business Arrangement – Appointment of Scheduled Private Sector
Banks as Agency Banks of Reserve Bank of India dated May 10, 2021, updated as on December 15, 2021

The RBI issued a circular on appointment of scheduled private sector banks as agency banks of the RBI on December 15, 2021
in addition to the previous circular dated May 10, 2021. Pursuant to the circular, the scheduled payments banks and scheduled
small finance banks have been made eligible to conduct government agency business. Any payment bank or small finance bank
that intends to undertake the government agency business will be appointed as an agent of the RBI upon execution of an
agreement with RBI, provided that the overarching regulatory framework prescribed for these banks including the condition
that the concerned bank is not under Prompt Corrective Action framework or moratorium at the time of making the application
or signing of the agreement with RBI, is complied with.

Reserve Bank of India’s Guidelines on Authorised Dealer Category-I License Eligibility for Small Finance Banks dated
August 8, 2022

The RBI pursuant to issue of the ‘Guidelines for Licensing of Small Finance Banks in Private Sector’ dated November 27, 2014
and ‘Guidelines for ‘on-tap’ Licensing of Small Finance Banks in Private Sector’ dated December 5, 2019, issued that a small
finance bank can also become Authorised Dealer Category-II in foreign exchange business for its clients’ requirements. The
RBI issued the guideline on eligibility of SFBs for Authorised Dealer Category-I license with an objective of giving more
flexibility to SFBs to meet their customers’ foreign exchange business requirement. In terms of the guidelines, all the scheduled
SFBs, after completion of at least two years of operations as Authorised Dealer Category-II, will be eligible for Authorised
Dealer Category-I license, subject to compliance with the eligibility norms as prescribed in the guidelines including inter alia
that (i) the bank should have been included in the second schedule of the RBI Act, 1934; (ii) the bank should have a minimum
net worth of ₹500 crore and its CRAR should not be less than 15%; (iii) the net NPAs of the bank should not exceed 6% during
previous four quarters; and (iv) the bank should have made profits in the preceding two years; (v) the bank should not have
defaulted in maintenance of CRR/SLR during the previous two years; (vi) the bank should not have any major regulatory and
supervisory concerns; and (vii) should have a sound internal control system. The eligible SFBs are required to approach Foreign
Exchange Department, Central Office, Reserve Bank of India with their applications along with the supporting documents with
regard to their eligibility and requisite documents as prescribed in the guidelines.

Reserve Bank of India’s Master Direction - Classification, Valuation and Operation of Investment Portfolio of Commercial
Banks (Directions) dated August 25, 2021, updated as on December 8, 2022 (“Investment Portfolio Directions”)

The Investment Portfolio Directions requires banks to frame a comprehensive investment policy which shall include the broad
investment objectives to be achieved while undertaking investment transactions on their own investment account and on behalf
of clients, securities in which investments can be made by the bank, derivatives in which the bank shall deal, the authority to
put through deals, procedure for obtaining the sanction of the appropriate authority, procedure for putting through deals,
adherence to various prudential exposure limits, policy regarding dealings through brokers, systems for management of various
risks, and guidelines for valuation of the portfolio and the reporting systems to. The investment policy should strictly observe
the detailed instructions from the RBI regarding Separate Trading of Registered Interest and Principal Securities (STRIPS),
short sale in Central Government dated securities, government securities on ‘when issued’ basis, value free transfer of
government securities, transaction through subsidiary general ledger account, repo in government securities, retailing of
government securities, settlement of transactions in government securities, internal control systems, engagement of brokers and
audit, review and reporting. The entire investment portfolio of the bank is required to be classified in three categories – (i) held
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to maturity; (ii) available for sale; and (iii) held for trading and banks shall have the freedom to shift investments among
categories with the approval for their board of directors, once a year. Banks are required to undertake investment activities as
per the terms and conditions specified in the Investment Portfolio Directions.

RBI has issued the Master Direction - Classification, Valuation and Operation of Investment Portfolio of Commercial Banks,
2023 on September 12, 2023 (“Investment Portfolio Directions, 2023”) in view of the significant developments in the global
standards on classification, measurement and valuation of investments, the linkages with the capital adequacy framework as
well as progress in the domestic financial markets. The Investment Portfolio Directions, 2023 introduces the: (i) systematic
treatment of fair value gains and losses; (ii) a clearly identifiable trading book under held to maturity; (iii) removes the ceilings
on held to maturity; and (iv) detailed disclosures on the investment portfolio. The Investment Portfolio Directions, 2023 shall
be applicable from April 1, 2023, to all commercial banks excluding regional rural banks.

Reserve Bank of India’s Master Direction on Cash Reserve Ratio and Statutory Liquidity Ratio dated July 20, 2021, updated
as on April 6, 2022 (“CRR and SLR Directions”)

The RBI has issued the CRR and SLR Master Directions on July 20, 2021. The CRR and SLR Master Directions are applicable
to, amongst others, all scheduled commercial banks, small finance banks, payments banks and local area banks. In terms of the
CRR and SLR Master Direction, the maintenance of CRR shall be reported to RBI under the following statutory returns, in
form A return for scheduled commercial banks, regional rural banks, small finance banks, payments banks and local area
banks. The maintenance of SLR shall be reported to RBI under the following statutory returns, in form VIII Return for scheduled
commercial banks, small finance banks, payments banks and local area banks.

Reserve Bank of India’s Master Direction on Transfer of Loan Exposures dated September 24, 2021, updated as on
December 5, 2022 (“Master Direction on Transfer of Loan Exposures Directions”)

The RBI issued the Master Direction on Transfer of Loan Exposures Directions on September 24, 2021. The Master Direction
on Transfer of Loan Exposures Directions are applicable to all scheduled commercial banks, regional rural banks, primary
(urban) co-operative banks, state co-operative banks and district central co-operative banks, all India financial institutions
(NABARD, NHB, EXIM Bank & SIDBI), small finance banks and non-banking finance companies including housing finance
companies. The Master Direction on Transfer of Loan Exposures Directions lay down the conditions for transfer of loans,
including allowing transfer of loans by lenders to only certain permitted transferees. Further, the Master Direction on Transfer
of Loan Exposures Directions lay down some requirements on all loan transfers, namely (i) having a board approved policy;
(ii) transfer of economic interests without resulting in a change in underlying terms and conditions of the loan contract; (iii)
clearly delineated roles and responsibilities of the transferor and the transferee; (iv) no credit enhancement or liquidity facilities
in any form; (v) transferor cannot reacquire, except as a part of resolution plan under the Reserve Bank of India (Prudential
Framework for Resolution for Stressed Assets) Directions, 2019; (vi) immediate separation of the transferor from the risks and
rewards associated with loans; (vii) transferee to get right to transfer or dispose off the loans transferred; (viii) rights of obligors
not to be affected; and (ix) monitor on an ongoing basis and in a timely manner performance information on the loans acquired,
including through conducting periodic stress tests and sensitivity analyses, and take appropriate action required, if any.

Reserve Bank of India’s Master Direction on Securitization of Standard Assets dated September 24, 2021, updated as on
December 31, 2022 (“Master Direction on Securitization of Standard Assets Directions”)

The RBI issued the Master Direction on Securitization of Standard Assets Directions on September 24, 2021. The Master
Direction on Securitization of Standard Assets Directions will apply to all scheduled commercial banks, all-India term financial
institutions, small finance banks, and non-banking finance companies. Securitisation involves transactions where credit risk in
assets are redistributed by repackaging them into tradeable securities with different risk profiles which may give investors of
various classes access to exposures which they otherwise might be unable to access directly. The Master Direction on
Securitization of Standard Assets Directions aim to implement prudentially structured securitisation transactions to improve
risk distribution and liquidity of lenders in originating fresh loan exposures. Further, the Master Direction on Securitization of
Standard Assets Directions specify the Minimum Retention Requirement (“MRR”) for different asset classes. For underlying
loans with original maturity of 24 months or less, the MRR will be 5% of the book value of the loans being securitised. For
those with original maturity of more than 24 months as well as loans with bullet repayments, the MRR shall be 10% of the book
value of the loans being securitised. In the case of residential mortgage-backed securities, the MRR for the originator shall be
5% of the book value of the loans being securitised, irrespective of the original maturity. The Master Direction on Securitization
of Standard Assets Directions also specified that the minimum ticket size for issuance of securitisation notes shall be ₹10
million.

Reserve Bank of India’s Master Direction – Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in
Banking Companies) Directions, 2023 dated January 16, 2023 (“Master Directions on Acquisition”)

The RBI issued the Master Direction on Acquisition and Holding of Shares or Voting Rights in Banking Companies on January
16, 2023. The Master Directions on Acquisition will apply to all banking companies including local area banks, small finance
banks and payment banks operating in India. Any banking company intending to make an acquisition that will likely result in
major shareholding in a banking company is required to take prior approval of the RBI. Banking companies shall also
continuously monitor (a) its major shareholders, (b) applicants for whom comments have been provided and (c) applicants who
have been approved by the RBI to have major shareholding to ensure that they are ‘fit and proper’. The Master Directions on
Acquisition also requires a banking company to put in place a mechanism to obtain information on any change in significant
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beneficial owner or acquisition by a person to the extent of 10 per cent or more of paid-up equity share capital of the major
shareholder. Further, a mechanism shall be put in place to ensure that a major shareholder has obtained approval from the RBI.
Additionally, it requires that the banking company shall report the details within 14 days of completion of the allotment process.

Reserve Bank of India’s Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies dated
January 16, 2023 (“Guidelines on Acquisition”)

The Guidelines on Acquisition provide for the guidelines on the reporting requirements when any banking company intending
to make an acquisition that will likely result in major shareholding in a banking company that will require prior RBI approval.
Banking companies are required to make an application to the RBI in Form A and the applicant shall inform the banking
company of any change in the information in the Form A or any other development which may have a bearing on the ‘fit and
proper’ status. The Guidelines on Acquisition also prescribe limits on shareholding for promoter and non-promoter entities
along with a lock-in of the acquirer’s shares who holds 10 percent or more but less than 40 percent of the paid-up share capital
of the banking company for a period of five years from the date of completion of acquisition and in case of an acquirer who is
permitted to hold 40 percent or more of the paid-up share capital of the banking company, only 40 percent of the paid-up share
capital held by such acquirer shall remain under lock-in for the first five years from the date of completion of acquisition without
any encumbrances and an obligation to report details of any encumbrances on shares that are not locked-in. The Guidelines on
Acquisition also requires promoters of the banking companies to reduce their shareholding to 26% of the paid-up equity share
capital or voting rights after the completion of 15 years from the commencement of the business operations. During the period
prior to the completion of the 15 years, the promoters may be allowed to hold a higher percentage of shareholding as part of the
licensing conditions or as part of the shareholding dilution plan submitted by the banking companies and approved by the RBI
with such conditions as it deems fit. Further, it provides the ceiling on voting rights as well.

Reserve Bank of India’s Master Circular on Bank Finance to Non-Banking Financial Companies dated April 3, 2023.
(“Master Circular on Bank Finance to NBFCs”)

The RBI, pursuant to its Master Circular on Bank Finance to NBFCs dated April 1, 2022, specified the criteria for bank finance
to NBFCs registered with RBI, to NBFCs not requiring registration and factoring companies. The Master Circular on Bank
Finance to NBFCs will apply to all scheduled commercial banks. Further, the Master Circular on Bank Finance to NBFCs aims
to lay down the RBI's regulatory policy regarding financing of NBFCs by banks.

For bank finance to NBFCs registered with RBI, the ceiling on bank credit linked to net owned fund of NBFCs has been
withdrawn. Accordingly, banks may extend need based working capital facilities as well as term loans to all NBFCs registered
with RBI and engaged in infrastructure financing, equipment leasing, hire-purchase, loan, factoring and investment activities.
Banks may also extend finance to NBFCs against second-hand assets financed by them. Banks may also formulate suitable loan
policy with the approval of their boards of directors within the prudential guidelines and exposure norms prescribed by the RBI
to extend various kinds of credit facilities to NBFCs.

For NBFCs not requiring registration with RBI, banks may take their credit decisions on the basis of usual factors like the
purpose of credit, nature and quality of underlying assets, repayment capacity of borrowers as also risk perception, etc.

In relation to bank finance for factoring companies, banks can extend financial assistance to support the factoring business of
factoring companies, which comply with the following criteria, namely (i) companies that qualify as factoring companies and
carry out their business under the provisions of the Factoring Regulation Act, 2011; (ii) they derive at least 50 per cent of their
income from factoring activity; (iii) the receivables purchased / financed, irrespective of whether on 'with recourse' or 'without
recourse' basis, form at least 50 per cent of the assets of the factoring company; (iv) the assets / income referred to above would
not include the assets / income relating to any bill discounting facility extended by the factoring company; and (v) the financial
assistance extended by the factoring companies is secured by hypothecation or assignment of receivables in their favour.

The Recovery of Debts Due to Banks and Financial Institutions Act, 1993, as amended (“RDDBFI Act”)

The RDDBFI Act was enacted for adjudication of disputes pertaining to debts due to banks and financial institutions exceeding
₹2.00 million. The RDDBFI Act provides for the constitution of debt recovery tribunals before which banks and financial
institutions may file applications for recovery of debts. Further, no court or other authority, except the Supreme Court or a High
Court exercising jurisdiction under Articles 226 and 227 of the Constitution of India, shall have, or is entitled to exercise, any
jurisdiction, powers or authority in relation to the aforementioned matter. The tribunals may pass orders for directions including
inter- alia recovery of such dues by the bank as may be deemed fit along with a recovery certificate to such effect from the
presiding officer of the respective tribunal; attachment of the secured properties towards the dues to the bank: injunctive orders
restraining the debtors from alienating, transferring or disposing of such secured properties; appointment of receivers and/or
local commissioners with respect to such secured properties and distribution of proceeds from sale of such secured properties
towards dues. Pursuant to the recovery certificate being issued, the recovery officer of the respective debt recovery tribunal
shall effectuate the final orders of the debt recovery tribunal in the application. Unless such final orders of the debt recovery
tribunal have been passed with the consent of the parties to an application, an appeal may be filed against such final orders of
the debt recovery tribunal before the debt recovery appellate tribunal, which is the appellate authority constituted under the
RDDBFI Act.

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The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, as amended
(“SARFAESI Act”)

The SARFAESI Act governs securitization of financial assets in India. The SARFAESI Act provides that any securitization or
reconstruction company may acquire the financial assets of a bank or financial institution by either entering into an agreement
with such bank or financial institution for the transfer of such assets to the company or by issuing a debenture or bond or any
other security in the nature of the debenture, for consideration, as per such terms and conditions as may be mutually agreed
between them. The SARFAESI Act further provides that if the bank or financial institution is a lender in relation to any financial
assets acquired by the securitization/reconstruction company as stated above, then such company shall be deemed to be the
lender in relation to those financial assets. Further, upon such acquisition, all material contracts entered into by the bank or
financial institution, in relation to the financial assets, shall also get transferred in favour of the securitization/reconstruction
company. The SARFAESI Act also enables banks and notified financial institutions to enforce the underlying security of an
NPA without court intervention. Pursuant to an asset being classified as an NPA, the security interest can be enforced as per
the procedure laid down in the Security Interest Enforcement Rules, 2002.

The Repurchase Transactions (Repo) (Reserve Bank) Directions, 2018, dated July 24, 2018 (“Repo Directions”) amended
as on November 28, 2019

The Repo Directions are applicable to repurchase transactions undertaken on stock exchanges, electronic trading platforms
authorised by the RBI and over-the-counter market. The securities eligible for repurchase under the Repo Directions are
government securities, listed corporate bonds and debentures subject to the condition that no participant shall borrow against
the collateral of its own securities, or securities issued by a related entity, commercial papers, certificate of deposits, units of
Debt Exchange Traded Funds and other such securities of a local authority as prescribed by the Central Government. Eligible
participants include any regulated entity, listed corporate, unlisted company which has been issued special securities by the
Government of India, using only such special securities as collateral, All India Financial Institution viz. Exim Bank, NABARD,
NHB and SIDBI and any other entity approved by the Reserve Bank from time to time for this purpose. The Repo Directions
prescribes the eligibility criteria, roles and obligations, application procedure for authorisation and exit procedure for tri-party
agents. The Repo Directions provide that a repo shall be undertaken for a minimum period of one day and a maximum period
of one year.

The Banking Ombudsman Scheme, 2006, as amended up to July 1, 2017 and integrated Banking Ombudsman Scheme,
2021 (collectively, the “Ombudsman Scheme”)

The Ombudsman Scheme provides the extent and scope of the authority and functions of the Banking Ombudsman for redressal
of grievances against deficiency in banking services, concerning loans and advances and other specified matters. All scheduled
commercial banks, regional rural banks and scheduled primary co-operative banks are covered under the Ombudsman Scheme.
On July 1, 2017, the Ombudsman Scheme was amended to widen the scope of the scheme, inter alia, to deficiencies arising
out of sale of insurance/mutual fund/ other third party investment products by banks and now permitted customer to lodge a
complaint against the bank for non-adherence to RBI instructions with regard to mobile banking/electronic banking services.
The amended Ombudsman Scheme also provided for revised procedures for redressal of grievances by a complainant under the
Ombudsman Scheme and increased the pecuniary jurisdiction of the Banking Ombudsman. The Banking Ombudsman receives
and considers complaints relating to the deficiencies in banking or other services filed on the grounds mentioned in clause 8 of
the Ombudsman Scheme and facilitates their satisfaction or settlement by agreement or through conciliation and mediation
between the bank concerned and the aggrieved parties or by passing an Award in accordance with the Ombudsman Scheme.
Further, the Reserve Bank of India, being satisfied that it is in public interest to do so, and to make the alternate dispute redress
mechanism simpler and more responsive to the customers of entities regulated by it, integrated the three Ombudsman schemes
– (i) the Banking Ombudsman Scheme, 2006, as amended up to July 01, 2017; (ii) the Ombudsman Scheme for Non-Banking
Financial Companies, 2018; and (iii) the Ombudsman Scheme for Digital Transactions, 2019 into the Reserve Bank - Integrated
Ombudsman Scheme, 2021 (the Scheme) which covers all the financial institutions regulated by it.

Prevention of Money Laundering Act, 2002, as amended (“PMLA”)

In order to prevent money laundering activities, the PMLA was enacted which seeks to prevent money laundering and to provide
for confiscation of property derived from, or involved in money laundering, and for incidental matters connected therewith.
Section 12 of the PMLA casts certain obligations on, inter alia, banking companies in relation to preservation and reporting of
customer account information. The RBI has advised all banks to go through the provisions of the PMLA and the rules notified
thereunder and to take all steps considered necessary to ensure compliance with the requirements of Section 12 of the PMLA.

In view of transactions in virtual currencies, RBI pursuant to a notification - DOR. AML.REC 18 /14.01.001/2021-22 dated
May 31, 2021, titled “Customer Due Diligence for transactions in Virtual Currencies”, notified banks to continue carrying out
customer due diligence processes in line with regulations governing standards for KYC, Anti-Money Laundering, Combating
of Financing of Terrorism and obligations of regulated entities under PMLA in addition to ensuring compliance with FEMA
for overseas remittances.

Ministry of Finance circular dated October 23, 2020 in relation to scheme for grant of ex-gratia payment of difference
between compound interest and simple interest for six months to borrowers in specified loan accounts

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In view of the COVID-19 pandemic, the Ministry of Finance, Government of India has, pursuant to circular dated October 23,
2020, approved a scheme for grant of ex-gratia payment of difference between compound interest and simple interest by way
of reliefs for the six months period from March 1, 2020 to August 31, 2020, to borrowers in specified loan accounts (“Scheme”),
benefits of which would be routed through lending institutions. The Scheme is applicable to all lending institutions, including,
inter alia, banking companies, public sector banks, NBFCs and housing finance companies. Borrowers in the following
segments, who have loan accounts having sanctioned limits and outstanding amount not exceeding ₹2 crore as on February 29,
2020 shall be eligible under the Scheme, subject to certain conditions, namely (i) MSME loans; (ii) education loans; (iii) housing
loans; (iv) consumer durable loans; (v) credit card dues; (vi) automobile loans; (vii) personal loans of professionals; and (viii)
consumption loans. Under the Scheme, lending institutions can claim reimbursement in respect of the amounts credited to the
accounts of the eligible borrowers, in the manner set out under the operational guidelines of the Scheme.

Recommendations of the Internal Working Group to Review Extant Ownership Guidelines and Corporate Structure for
Indian Private Sector Banks dated November 26, 2021

The internal working group of the RBI, constituted to review the extant guidelines on ownership and corporate structure in
private sector banks, approved certain recommendations of the internal working group. The consequential amendments in the
respective circulars/ master directions/ licensing guidelines will be carried out and notified by the RBI in due course. However,
during the interregnum, all stakeholders may be guided by these decisions. The recommendations include: (i) an increase in the
cap of promoters’ stake in the long run in private sector banks from 15% to 26% of the paid-up voting equity share capital, for
the period post competition of the initial lock-in; (ii) removal of requirement for achievement of intermediate sub-targets for
dilution of the promoter shareholding post completion of the 5 year mandatory promoter lock-in period until completion of 15
years; (iii) cap of 10% for non-promoter shareholding held by natural persons and all non-financial institutions/entities and 15%
for non-promoter shareholding held by all categories of financial institutions/ entities, supranational institutions, public sector
undertakings or government; and (iv) benefit to be given to existing banks in case of relaxation of rules under new licensing
guidelines, however, if new rules are tougher, legacy banks should also confirm to new tighter regulations, subject to the
transition path being finalised in consultation with affected banks to ensure compliance with new norms in a non-disruptive
manner.

Asset Classification and Income Recognition following the expiry of Covid-19 regulatory package, dated April 7, 2021

The notification is pursuant to the Supreme Court of India has pronounced its judgement in the matter of Small Scale Industrial
Manufacturers Association vs UOI & Ors. (“Judgement”) and other connected matters on March 23, 2021. Commercial banks,
including small finance banks shall immediately put in place a Board-approved policy to refund/adjust the ‘interest on interest’
charged to the borrowers during the moratorium period, i.e. March 1, 2020 to August 31, 2020 in conformity with the
Judgement. The reliefs shall be applicable to all 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, in terms of the
‘COVID-19 regulatory packages’ dated March 27, 2020 (DOR.No.BP.BC.47/21.04.048/2019-20) and May 23, 2020
(DOR.No.BP.BC.71/21.04.048/2019-20). Lending institutions shall disclose the aggregate amount to be refunded/adjusted in
respect of their borrowers based on the above reliefs in their financial statements for the year ending March 31, 2021.With
respect to the asset classification, in order to comply with the Judgement, (i) in respect of accounts which were not granted any
moratorium in terms of the Covid19 Regulatory Package, asset classification shall be as per the criteria laid out in Master
Circular on Prudential Norms (given above) or other relevant instructions as applicable to the specific category of lending
institutions (IRAC Norms); (ii) in respect of accounts which were granted moratorium in terms of the Covid19 Regulatory
Package, the asset classification for the period from March 1, 2020 to August 31, 2020 shall be governed in terms of the circular
‘COVID19 Regulatory Package - Asset Classification and Provisioning’ dated April 17, 2020
(DOR.No.BP.BC.63/21.04.048/2019-20) read with the circular COVID-19 – Regulatory Package dated May 23, 2020
(DOR.No.BP.BC.71/21.04.048/2019-20). For the period commencing September 1, 2020, asset classification for all such
accounts shall be as per the applicable IRAC Norms.

Resolution Framework for COVID-19-related Stress – Financial Parameters – Revised timelines for compliance dated
August 6, 2021

Certain revisions were allowed by the RBI to lending institutions for finalising the resolution plans in respect of eligible
borrowers under Part B of the Annex to the Resolution Framework for Covid-19 related stress issued on August 6, 2020 by the
RBI. In view of the resurgence of the Covid-19 pandemic in 2021 and recognising the difficulties it may pose for the borrowers
in meeting the operational parameters, it has been decided to defer the target date for meeting the specified thresholds in respect
of the four operational parameters, viz. Total Debt / EBIDTA, Current Ratio, Debt Service Coverage Ratio and Average Debt
Service Coverage Ratio, to October 1, 2022. The target date for achieving the ratio Total Outside Liabilities / Adjusted Tangible
Net Worth, as crystallised in terms of the resolution plan, shall remain unchanged as March 31, 2022.

Resolution Framework – 2.0: Resolution of Covid-19 related stress of Individuals and Small Businesses, dated May 5, 2021,
as amended

The lending institutions, in light of Covid-19 are permitted to offer a limited window to individual borrowers and small
businesses to implement resolution plans in respect of their credit exposures while classifying the same as Standard. The
threshold for aggregate exposure concerning the resolution of advances to individuals and small business is ₹50 Crores as per
the RBI notification DOR.STR.REC.20/21.04.048/2021-22, dated June 4, 2021. The Resolution Framework 2.0 additionally

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permits lending institutions to review working capital sanctioned limits and / or drawing power based on reassessment of the
working capital cycle, reduction of margins etc. without it being termed or treated as restructuring. Further, disclosures and
credit reporting as prescribed hereunder need to be adhered to including quarterly financial statements, modified borrower
accounts, aggregate exposure of lending institutions and annual financial statements.

Master Direction – Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022, dated March
14, 2022 (the “Microfinance Loans Directions”)

The RBI issued the Microfinance Loans Directions in order to provide a uniform lending framework for all entities engaged in
microfinance lending. The Microfinance Loans Directions come into effect from April 01, 2022, subject to certain exceptions
as provided under the Microfinance Loans Directions.

The Microfinance Loans Directions are applicable to the following entities (“REs”):

(i) All commercial banks (including small finance banks, local area banks, and regional rural banks) excluding payment
banks;

(ii) All primary (urban) co-operative banks /state co-operative banks/district central co-operative banks; and

(iii) All non-banking financial companies (including microfinance institutions and housing finance companies).

Definition of Microfinance Loans

The directions define microfinance loan as a collateral-free loan given to a household having annual household income up to
₹300,000. For this purpose, the household shall mean an individual family unit, i.e., husband, wife and their unmarried children.
Further, all collateral-free loans, irrespective of end use and mode of application/ processing/ disbursal (either through physical
or digital channels), provided to low-income households, i.e., households having annual income up to ₹300,000, shall be
considered as microfinance loans.

Assessment of Household income

As per the Microfinance Loans Directions, each entity shall put in place a board-approved policy for assessment of household
income. Further, it prescribes that the SROs and other associations/ agencies may also develop a common framework based on
the indicative methodology and the REs may adopt/ modify this framework suitably as per their requirements with approval of
their boards. Each RE shall also mandatorily submit information regarding household income to the Credit Information
Companies (CICs).

Limit on Loan Repayment Obligations of a Household

The Directions provide that each entity shall have a board-approved policy regarding the limit on the outflows on account of
repayment of monthly loan obligations of a household as a percentage of the monthly household income, which shall be subject
to a limit of maximum 50% of the monthly household income. With respect to existing loans or which outflows on account of
repayment of monthly loan obligations of a household as a percentage of the monthly household income exceed the limit of
50%, shall be allowed to mature.

However, in such cases, no new loans shall be provided to these households till the prescribed limit of 50% is complied with.

Pricing of Loans

Each RE is required to have a board approved policy regarding pricing of microfinance loans which shall, inter alia, cover the
following: (i) a well-documented interest rate model/ approach for arriving at the all-inclusive interest rate; (ii) delineation of
the components of the interest rate such as cost of funds, risk premium and margin, etc. in terms of the quantum of each
component based on objective parameters; (iii) the range of spread of each component for a given category of borrowers; and
(iv) a ceiling on the interest rate and all other charges applicable to the microfinance loans. Further, each RE is required to
disclose such pricing related information to the prospective borrower in a standardized factsheet in the manner provided under
the Microfinance Loans Directions and the borrower shall not be charged any amount which is not explicitly mentioned in the
factsheet. Interest rates and other charges/ fees on microfinance loans should not be usurious and be subjected to supervisory
scrutiny by the RBI. In this regard, the REs shall also prominently display the minimum, maximum and average interest rates
charged on microfinance loans in all its offices, in the literature (information booklets/ pamphlets) issued by it and details on
its website. This information shall also be included in the supervisory returns and be subjected to supervisory scrutiny.

It is also provided that there shall be no pre-payment penalty on microfinance loans and penalty, if any, for delayed payment
shall be applied on the overdue amount and not on the entire loan amount. Further, any change in interest rate or any other
charge shall be informed to the borrower well in advance and these changes shall be effective only prospectively.

Guidelines on Conduct towards Microfinance Borrowers

The directions prescribe certain guidelines for the entities which among other things, include, that putting up a fair practices
code by the RE, a standard form of loan agreement for microfinance loan in the language understood by the borrower, issuance
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of non-credit products with full consent of borrowers, guidelines on training of staff, responsibilities for outsourced activities,
guidelines related to recovery of loans and engagement of recovery agents. Further, each RE shall provide a loan card to the
borrower which shall incorporate certain prescribed information including the effective interest rate.

Qualifying Asset Criteria

Under the Microfinance Loans Directions, the definition of ‘qualifying assets’ of NBFC-MFIs has now been aligned with the
definition of ‘microfinance loans’ given above. The minimum requirement of microfinance loans for NBFC-MFIs is also
revised to 75% of the total assets. Further, the maximum limit on microfinance loans for NBFCs other than the NBFC-MFIs
has been revised to 25% of the total assets.

Framework for acceptance of Green Deposits dated April 11, 2023 (“Green Deposit Circular”)

Pursuant to the Green Deposit Circular, the RBI has introduced framework to encourage acceptance of green deposits and
mobilization of resources towards green activities. Additionally, the Green Deposit Circular also requires the regulated entities
to put in place a comprehensive board-approved policy and financing framework to ensure effective allocation of green deposits.
The allocation of proceeds raised from green deposits shall strictly be done to specific activities prescribed within the regulations
as such allocation is subject to third-party verification

FOREIGN INVESTMENT LAWS

The foreign investment in our Bank is governed by, inter alia, the FEMA, as amended, the FEMA Regulations, the Consolidated
FDI Policy Circular of 2020 (“FDI Policy”) effective from October 15, 2020, issued and amended by way of press notes.

Foreign investment in private sector banks, carrying on activities approved for FDI, will be subject to the conditions specified
in the FDI Policy.

As per the FDI policy, the aggregate foreign investment in a private sector bank from all sources will be allowed up to a
maximum of 74% of the paid-up capital of the bank (automatic up to 49% and government approval route beyond 49% and up
to 74%). This 74% limit will include investment under the Portfolio Investment Scheme (PIS) by FPIs, NRIs. At all times, at
least 26% of the paid-up capital will have to be held by residents, except in regard to a wholly owned subsidiary of a foreign
bank.

In case of NRIs, individual holdings are restricted to 5% of the total paid-up capital both on a repatriation and a non-repatriation
basis and the aggregate limit cannot exceed 10% of the total paid-up capital both on a repatriation and a non-repatriation basis.
However, NRI holdings can be allowed up to 24% of the total paid-up capital both on a repatriation and a non-repatriation basis
subject to a special resolution to this effect passed by the banking company’s general body.

Further, in the case of FPIs, individual FPI holding is restricted to below 10% of the total paid-up capital of the company,
aggregate limit for all FPIs cannot exceed 24% of the total paid-up capital of the company, which can be raised to the sectoral
cap/statutory ceiling, as applicable, until March 31, 2020 (in case of private sector banks it can be raised up to 49% of the total
paid-up capital of the bank) through a resolution by its board of directors followed by a special resolution to that effect by its
General Body, and subject to prior intimation to RBI. In terms of the FEMA Regulations, for calculating the aggregate holding
of FPIs in a company, holding of all registered FPIs shall be included.

The aggregate limit for FPI investments shall be the sectoral caps applicable to our Bank (i.e. automatic up to 49% and
government route beyond 49% and up to 74%). All investments shall be subject to the guidelines prescribed for the banking
sector under the Banking Regulation Act and the RBI Act. The RBI guidelines relating to acquisition by purchase or otherwise
among others, shares of a private bank, if such acquisition results in any person owning or controlling 5% or more of the paid-
up capital or voting rights of the private bank will apply to non-residents as well. As per the Banking Regulation Act read with
the gazette notification DBR.PSBD. No. 1084/16.13.100/2016-17 dated July 21, 2016, there is a limit of 26% on voting rights
in respect of private sector banks, and this should be noted by potential investors.

Foreign Trade Policy (“Policy 2023”)

The GoI released the Policy 2023 which comes into effect from April 1, 2023, to promote exports and facilitate ease of doing
business for exporters. The Policy 2023 is based on four pillars: (i) Incentive Remission, (ii) Export promotion through
collaboration, (iii) Ease of doing business, and (iv) Emerging areas. The Policy 2023 moves away from an incentive regime to
a facilitative one, based on technology and principles of collaboration. It codifies implementation mechanisms in a paperless,
online environment. The Policy 2023 has also identified 4 new towns to the present 39 towns that have priority access to export
promotion funds and will also be able to avail common service provider benefits for export fulfillment. Further, exporter firms
with ‘status’ based on export performance will now be partners in capacity building initiatives. Additionally, the Policy 2023
aims to build partnerships with state government, places emphasis on the export control regime, relaxes import duty of raw
materials and has introduced provisions for merchanting trade.

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DATA PROTECTION AND PRIVACY LAWS

Digital Personal Data Protection Act, 2023 (“DPDP Act”)

DPDP Act has been enacted on August 11, 2023 to provide for the processing of digital personal data in a manner that recognised
both the rights of the individuals to protect their personal data and the need to process such personal data for lawful purposes
and for matters connected therewith or incidental thereto. The DPDP Act is applicable upon the processing of the digital
personal data: (i) within the territory of India where the personal data is collected in digital form or in non-digital form and
digitised subsequently; and (ii) outside the territory of India, if such processing is in connection with any activity related to
offering of goods or services to individuals to whom the personal data relates to (“Data Principals”), within the territory of
India. The DPDP Act is not applicable to (i) personal data processed by an individual for any personal or domestic purpose;
and (ii) personal data that is made or caused to be made publicly available by the Data Principal to whom such personal data
related or any other person who is under an obligation under any law for the time being in force in India to make such personal
data publicly available.

All data fiduciaries, determining the purpose and means of processing personal data, are mandated to provide an itemised notice
in plain and clear language containing a description of the personal data sought to be collected along with the purpose of
processing such data. The DPDP Act further provides that where consent is the basis of processing personal data, the Data
Principal providing the consent, may withdraw such consent at any time. Data Principals will have the right to demand the
erasure and correction of data collected by the data fiduciary. Any data processed prior to such withdrawal shall be considered
lawful.

The Bill introduces the concept of ‘deemed consent’ in instances where the Data Principal provides personal data (i) to the data
fiduciary voluntarily, (ii) for performance of function under any law, or service or benefit to the Data Principal, (iii) in
compliance with a judgment or order, (iv) responding to medical emergency involving threat to life or immediate threat to
health of the Data Principal or any other individual, (v) for provision of medical treatment or health services during an epidemic,
outbreak of diseases or any other public threat to public health, (vi) for taking measures to ensure safety during any disaster or
any breakdown of public order, (vii) for purposes related to employment including prevention of corporate espionage,
maintenance of confidentiality of trade secrets, intellectual property, classified information, recruitment, termination of
employee, or (viii) in public interest as defined in the DPDP Act.

It further imposes certain obligations on data fiduciaries including (i) implementation of technical and organisational measures
to ensure compliance, (ii) adopting reasonable security safeguards to prevent personal data breach, (iii) ensuring that personal
data processed is accurate and complete, (iv) informing the Data Protection Board of India (the “Data Protection Board”)
regarding any personal data breach, (v) deleting or removing personal data no longer in use or necessary for legal or business
purposes, (vi) publishing the business contact information of the data protection officer, (vii) implementing a grievance redressal
mechanism to redress grievances of Data Principal, and (viii) processing of data under a valid contract. The Bill provides for
the rights and duties to be complied with the Data Principals. The DPDP Act provides for exclusive jurisdiction of grievances
to the Data Protection Board, with a recourse to appeal before the Telecom Disputes Settlement and Appellate Tribunal
established under Section 14 of the Telecom Regulatory Authority of India Act, 1997 and alternate dispute resolution
mechanisms. Any form of non-compliance shall attract financial penalty as prescribed in Schedule I of the DPDP Act, not
exceeding rupees two hundred and fifty crore in each instance.

TAX LAWS

In addition to the aforementioned material legislations which are applicable to our Bank, some of the tax legislations that may
be applicable to the operations of our Bank include:

• Income Tax Act 1961, as amended by the Finance Act in respective years;

• Central Goods and Service Tax Act, 2017 and various state-wise legislations made thereunder;

• Indian Stamp Act, 1899 and various state-wise legislations made thereunder;

• State-wise legislations in relation to professional tax; and

• The Foreign Account Tax Compliance Act (FATCA).

LABOUR LAWS

In addition to the aforementioned material legislations which are applicable to our Bank, some of the labour legislations that
may be applicable to the operations of our Bank include:

• Contract Labour (Regulation and Abolition) Act, 1970;

• Payment of Wages Act, 1936;

• Payment of Bonus Act, 1965;

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• Employees’ State Insurance Act, 1948;

• Employees’ Provident Funds and Miscellaneous Provisions Act, 1952;

• Equal Remuneration Act, 1976;

• Payment of Gratuity Act, 1972;

• Minimum Wages Act, 1948;

• Industrial Disputes (Banking and Insurance Companies) Act, 1949;

• Employee’s Compensation Act, 1923;

• Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959;

• The Industrial Employment (Standing Orders) Act,1946;

• Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act and Rules, 2013;

• Maternity Benefit Act, 1961, the state-wise acts and rules made thereunder as amended; and

• Shops and Establishment Act 1963, the state-wise acts and rules made thereunder.

In order to rationalize and reform labour laws in India, the Government of India has framed four labour codes, namely:

a) The Industrial Relations Code, 2020 received the assent of the President of India on September 28, 2020 and it proposes
to subsume three existing legislations, namely, the Industrial Disputes Act, 1947, the Trade Unions Act, 1926 and the
Industrial Employment (Standing Orders) Act, 1946. The provisions of this code will be brought into force on a date
to be notified by the Central Government.

b) The Code on Wages, 2019 received the assent of the President of India on August 8, 2019 and proposes to subsume
four existing laws namely, the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus
Act, 1965 and the Equal Remuneration Act, 1976. The Central Government has notified certain provisions of the Code
on Wages, mainly in relation to the constitution of the advisory board and other provisions of this code will be brought
into force on a date to be notified by the Central Government.

c) The Occupational Safety, Health and Working Conditions Code, 2020 received the assent of the President of India on
September 28, 2020 and proposes to subsume certain existing legislations, including the Factories Act, 1948, the
Contract Labour (Regulation and Abolition) Act, 1970, the Inter-State Migrant Workmen (Regulation of Employment
and Conditions of Service) Act, 1979 and the Building and Other Construction Workers (Regulation of Employment
and Conditions of Service) Act, 1996. The provisions of this code will be brought into force on a date to be notified
by the Central Government.

d) The Code on Social Security, 2020 received the assent of the President of India on September 28, 2020 and it proposes
to subsume certain existing legislations including the Employee's Compensation Act, 1923, the Employees’ State
Insurance Act, 1948, the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, the Maternity Benefit
Act, 1961, the Payment of Gratuity Act, 1972, the Building and Other Construction Workers’ Welfare Cess Act, 1996
and the Unorganised Workers’ Social Security Act, 2008. Section 142 of the Code on Social Security, 2020 has been
brought into force from May 3, 2021 by the Ministry of Labour and Employment through a notification dated April
30, 2021 and other provisions of this code will be brought into force on a date to be notified by the Central Government.

OTHER LEGISLATIONS

In addition to the aforementioned material legislations, our Bank is governed by the provisions of the Companies Act, SEBI
Act, SCRA along with the rules, regulations and guidelines made thereunder and other key circulars and regulations as provided
below:

• Central KYC Registry Operating Guidelines 2016;

• Master Circular - Disclosure in Financial Statements - Notes to Accounts dated July 1, 2015;

• Master Circular - Know Your Customer (KYC) norms / Anti-Money Laundering (AML) standards / Combating of
Financing of Terrorism (CFT) / Obligation of banks under PMLA, 2002;

• Master Circular on Customer Service in Banks (2015);

• Master Direction - Reserve Bank of India (Interest Rate on Advances) Directions, 2016 (Updated as on June 10, 2021);

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• Master Direction - Reserve Bank of India (Interest Rate on Deposits) Directions, 2016 (Updated as on September 16,
2022);

• Master Direction on Frauds - Classification and Reporting by commercial banks and select FIs dated July 1, 2016
(updated as on July 3, 2017);

• Pension Fund Regulatory and Development Authority (Point of Presence) Regulations, 2018;

• Circular on Outsourcing of Financial Services – Responsibilities of regulated entities employing Recovery Agents,
dated August 12, 2022;

• Rationalisation of Branch Authorisation Policy- Revision of Guidelines (May 2017); and

• Unique Identification Authority of India (Authentication Division) circular number 1 of 2018, dated January 10, 2018
on Enhancing Privacy of Aadhar Holders – Implementation of Virtual ID, UID Token and Limited KYC, and other
applicable circulars.

Our Bank is also required to comply with Insurance Regulatory and Development Authority of India (Registration of Corporate
Agents) Regulations, 2015, Negotiable Instruments Act, 1881, Payment and Settlements Systems Act, 2007, Companies Act,
2013 and various intellectual property and environment protection related legislations and other applicable statutes, rules,
regulations, notifications, circular, policies and guidelines for its day-to-day operations.

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 HISTORY AND CERTAIN CORPORATE MATTERS

Our Promoter, ESAF Financial Holdings Private Limited, was granted the RBI In-Principle Approval to establish an SFB, on
October 7, 2015. Our Bank was incorporated as ‘ESAF Small Finance Bank Limited’ on May 5, 2016 at Thrissur, Kerala, as a
public limited company under the Companies Act, 2013, and was granted a certificate of incorporation by the RoC. Our Bank
was thereafter granted the RBI Final Approval vide license no. MUM:124, to carry on business as an SFB, on November 18,
2016.

Subsequently, ESAF Financial Holdings Private Limited transferred its business undertaking comprising of its lending and
financing business to our Bank pursuant to the Business Transfer Agreement dated February 22, 2017 (described in more detail
below). Our Bank commenced its business as an SFB on March 10, 2017. Our Bank became a scheduled bank pursuant to a
notification bearing no. DBR.NBD.(SFB-ESAF).No.4083/16.13.216/2018-19 dated November 12, 2018 issued by the RBI and
published in the gazette of India (Part III-Section 4) dated December 22 – December 28, 2018, as per which our Bank was
included in the second schedule to the RBI Act.

Changes in the Registered and Corporate Office

Except as disclosed below, there has been no change in the Registered and Corporate Office of our Bank since the date of
incorporation.

Date of change Details of change in the Registered and Corporate Office Reasons for
change
October 1, 2018 From Hepzibah Complex, Second Floor, No. X/109/M4, Mannuthy P.O., Thrissur 680 651, Kerala, Administrative
India to Building No. VII/83/8, ESAF Bhavan, Thrissur – Palakkad National Highway, Mannuthy convenience
P.O., Thrissur 680 651, Kerala, India

Main objects of our Bank

The main objects contained in our Memorandum of Association are as follows:

“1. To establish and carry on the business of banking that is to say to accept, for the purpose of lending or investment of
deposits of money from the depositors, repayable on demand or otherwise, and withdraws by cheque, draft, order or
otherwise in any part of India or outside India.

2. To undertake all banking activities of acceptance of deposits from the depositors and lending to the borrowers
including to small business units, small and marginal farmers, micro and small industries and unorganised sector
entities.

3. To undertake non-risk sharing financial services activities such as distribution of mutual fund units, insurance
products, pension products, etc.

4. To carry on the business of an authorised dealer in foreign exchange business in respect of the customer’s
requirements.

5. To carry on business of accepting deposits of money from the depositors, repayable on demand or otherwise, and
withdraws by cheque, draft, order or otherwise.

6. To carry on the business of:

a) borrowing, raising or taking up of money;

b) lending or advancing of money by way of a loan, overdraft or on cash credit or other accounts or in any other
manner whether without or on the security or movable or immovable properties, bills of exchange, hundies,
promissory notes, bills of lading, railway receipts, debentures, share warrants and other instruments whether
transferable or negotiable or not;

c) drawing, making, accepting, discounting, buying, selling, collecting and dealing in bills of exchange, hundies,
promissory notes, coupons, drafts, bills of lading, railway receipts, warrants, debentures, certificates, scrips
and other instruments and securities whether transferable or negotiable or not;

d) granting and issuing of letters of credits, travellers' cheques and circulars notes;

e) buying, selling and dealing in bullion and specie;

f) buying and selling of and dealing in foreign exchange including foreign bank notes;

g) acquiring, holding, issuing on commission, underwriting and dealing in stock, funds, shares, debentures,
debenture stock, bonds, obligations, securities and investments of all kinds;

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 h) purchasing and selling of bonds, scrips or other forms of securities on behalf of itself, its constituents or
others;

i) negotiating of loans and advances;

j) receiving of all kinds of bonds, scrips or valuables on deposit or for safe custody or otherwise;

k) providing of safe deposit vaults;

l) collecting and transmitting of money and all kinds of securities;

m) issuing credit cards, debit cards, prepaid instruments, smart card or any similar instruments and extending
any other credits;

n) acting as aggregators, as may be permitted by the Pension Fund Regulatory and Development Authority
("PFRDA"), in connection with the National Pension System of the PFRDA;

o) carrying on any other business specified in Section 6(1)(a) to (n) of the Banking Regulation Act, 1949, as
amended from time to time ("1949 Act"), and such other forms of business which the Central Government
has pursuant to Section 6(1 )(o) of 1949 Act specified or may from time to time specify by notification in the
official gazette or as may be permitted by Reserve Bank of India ("RBI") from time to time as a form of
business in which it would be lawful for a banking company to engage.

7. To carry on the business of merchant banking, investment banking, portfolio investment management, wealth
management and investment advisors; to form, constitute, promote, act as managing and issuing agents, prepare
projects and feasibility reports for and on behalf of any company, association, society, firm, individual and body
corporate.

8. To carry on the business of mutual fund distribution, equipment leasing and hire purchase.

9. To act as corporate agents for insurance products for life and general insurance including but not limited to health,
pension & employees benefit, fire, marine, cargo, marine hull, aviation, oil & energy, engineering, accident, liability,
motor vehicles, transit and other products and to carry on the business of insurance, reinsurance and risk management
as an insurance agent or otherwise as may be permitted under law.

10. To carry on the business of factoring by purchasing and selling debts receivables and claims including invoice
discounting and rendering bill collection, debt collection and other factoring services.

11. To carry on and transact the business of giving guarantees and counter guarantees and indemnities whether by
personal covenant or by mortgaging or charging all or any part of the undertaking, property or assets of the company,
both present and future wherever situate or in any other manner and in particular to guarantee the payment of any
principal moneys, interest or other moneys secured by or payable under debentures, bonds, debenture-stock,
mortgages, charges, contracts, obligations and securities, and the repayment of the capital moneys and the payment
of dividends in respect of stocks and shares or the performance of any such other obligations.

12. To carry on the business of setting up a payment and settlement system in accordance with the Payment and Settlement
Systems Act, 2007, and to support, provide informational and transactional facilities and solutions to consumers for
making payments for all goods and services.”

The main objects as contained in our Memorandum of Association enable our Bank to carry on the business presently being
carried out and proposed to be carried out by it.

Amendments to the Memorandum of Association

Set out below are the amendments to our Memorandum of Association in the last 10 years:

Date of Particulars
Shareholders’
resolution/ Effective
date
December 12, 2019 Clause V of the MoA was amended to reflect the increase in the authorized share capital of our Bank from
₹4,500,000,000 divided into 450,000,000 Equity Shares of ₹10 each to ₹6,000,000,000 divided into 600,000,000
Equity Shares of ₹10 each
June 13, 2018 Clause V of the MoA was amended to reflect the increase in the authorized share capital of our Bank from
₹3,500,000,000 divided into 350,000,000 Equity Shares of ₹10 each to ₹4,500,000,000 divided into 450,000,000
Equity Shares of ₹10 each
January 27, 2017 Clause V of the MoA was amended to reflect the increase in the authorized share capital of our Bank from
₹1,100,000,000 divided into 110,000,000 Equity Shares of ₹10 each to ₹3,500,000,000 divided into 350,000,000
Equity Shares of ₹10 each

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 Date of Particulars
Shareholders’
resolution/ Effective
date
May 17, 2016 Clause V of the MoA was amended to reflect the increase in the authorized share capital of our Bank from
₹1,000,000 divided into 100,000 Equity Shares of ₹10 each to ₹1,100,000,000 divided into 110,000,000 Equity
Shares of ₹10 each

Major events and milestones of our Bank

The table below sets forth some of the key events in the history of our Bank:

Calendar Year Event

2023 • Launched Rainbow Savings Account exclusively for the transgender community

• Opened 700th branch

• Authorized to deal in foreign exchange by the RBI by virtue of the Authorized Dealer – Category I license
issued by the RBI

• Launched WhatsApp Banking

• Implemented e-signature for Micro Loan disbursals

2022 • Crossed a customer base of 6.00 million

• Gold Loan Portfolio crossed 10,000 million

• Opened 150 unbanked rural centres

2021 • Banking business (advances and deposits) crossed over ₹150,000 million

2020 • Crossed 500 Branches in aggregate

2019 • Crossed 400 Branches in aggregate

• Banking business (advances and deposits) crossed over ₹100,000 million

2018 • Crossed 2.00 million borrowers

• Bank became a member of the Global Alliance for Banking on Values

• Received RBI approval for maintaining non-resident rupee account

• Inclusion of our Bank in the second schedule of the RBI Act

• Selected by the GoI for Atal Pension Yojana

• Crossed 100 Branches in aggregate

2017 • Commenced our banking operations

2016 • Received RBI Final Approval for commencement of banking operations

• Incorporation of our Bank

Key awards, accreditations and recognitions received by our Bank

Calendar Year Awards/Accreditations/Recognitions

2023 • ‘Excellence in Customer Service and Product Distribution’ Award at the Eastern India Micro Finance
Summit

• ‘Best Customer Experience Bank of the Year’ Award at the India Customer Excellence Summit and
Awards 2023

• ‘Innovative Bank of the Year’ Award at the India Banking Summit and Awards 2023 by Synnex Group

2022 • ‘Small Finance Bank of the Year’ certification at the IBS India Banking Summit and Awards 2022

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 Calendar Year Awards/Accreditations/Recognitions

• ‘Rising Category: Banking’ Award at the Prestigious Brand Asia Awards presented by BARC Herald
Global

• ‘Financial Inclusion by Small Finance Bank’ Award by HSBC

2021 • Semi Finalist at the SKOCH Award 2021 in the category ‘Financial, Digital Inclusion and Education’

• ‘Great Place to Work’ certification for March 2021- February 2022 by the Great Place to Work Institute,
India

• ISO 9001:2015 certification no. IN92405A valid from April 8, 2021 to April 7, 2024 by LMS Certification
Private Limited for our: (i) customer service quality initiatives; (ii) regulatory and statutory reporting of
the customer service quality department; (iii) customer grievance redressal mechanism; and (iv) customer
service call center monitoring.

2020 • ‘Global Sustainability Award 2020’ for outstanding achievements in sustainability management by the
Energy and Environment Foundation

2019 • Dhanam ‘Kerala Bank of The Year – 2019’ award

• ‘Banking Gold’ SKOCH Award for Access and Affordable Banking Services for Financially Underserved
Areas

• Diversity & Inclusion Excellence Awards 2019 – first runner up under the category ‘Best Employer for
Women (in Large Category)’ by ASSOCHAM India

• Best Performance Award 2018-19 under the SHG – Bank Linkage Programme by NABARD, Kerala
Regional Office

2018 • MSME Banking Excellence Awards ‘Special Jury Award for Serving MSMEs’ by Chamber of Indian
Micro Small & Medium Enterprises

• Finalist at the 9th European Microfinance Award ‘Inclusive Finance through Technology’ and recognition
for the Bank’s range of back and front end digital solutions for staff and clients alike

• Recognition for implementing outstanding initiatives in the category ‘Positive External Image Building’
by MFIN Microfinance Awards 2018: In Pursuit of Excellence

• Perform for Pride FY 2018-19 ‘Best Performing Branch - Kattapana’ under the Atal Pension Yojana by
PFRDA

• ‘Banking & Finance Gold’ SKOCH Award for Financial Inclusion for All

Time and cost over-runs

There have been no time and cost over-runs in the setting up of any of the establishments of our Bank or in respect of our
business operations.

Defaults or re-scheduling of borrowings

There have been no defaults or re-scheduling/ re-structuring in relation to borrowings availed by our Bank from any financial
institutions or banks.

Significant financial and strategic partners

As of the date of this Red Herring Prospectus, our Bank does not have any significant financial or strategic partners.

Launch of key products or services, entry into new geographies or exit from existing markets

For details of key products or services launched by our Bank, entry into new geographies or exit from existing markets, see
“Our Business” on page 190.

Details regarding material acquisitions or divestments of business/ undertakings, mergers, amalgamations or any
revaluation of assets, in the last ten years

Other than as disclosed below, our Bank has not acquired any business or undertaking and has not undertaken any merger,
amalgamation or revaluation of assets in the ten years preceding the date of this Red Herring Prospectus:

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Our Bank and ESAF Financial Holdings Private Limited have entered into the Business Transfer Agreement, pursuant to which
the business undertaking of ESAF Financial Holdings Private Limited comprising of its lending and financing business, was
transferred to our Bank. For further details, see “ – Key terms of other subsisting material agreements” on page 247.

Holding Company

As of the date of this Red Herring Prospectus, our Bank has no holding company.

Our Subsidiaries

As of the date of this Red Herring Prospectus, our Bank has no subsidiaries.

Joint Venture

As of the date of this Red Herring Prospectus, our Bank has no joint ventures.

Percentage of Shareholding and Corporate Structure

The chart below sets forth the shareholding and corporate structure of our Bank as of the date of this Red Herring Prospectus.

Shareholders’ agreements and other agreements

Key terms of subsisting shareholders’ agreements

Shareholders agreement dated July 27, 2018 entered into amongst PNB MetLife India Insurance Company Limited
(“PNB”), Bajaj Allianz Life, Muthoot Finance Limited (“Muthoot”), PI Ventures, our Promoters and our Bank, read along
with the deeds of adherence, each dated September 27, 2018, signed by ESMACO, ICICI Lombard General Insurance
Company Limited (“ICICI Lombard”), Yusuffali Musaliam Veettil Abdul Kader (“Yusuffali Kader” and collectively with
PNB, Bajaj Allianz Life, Muthoot, PI Ventures, ESMACO, ICICI Lombard and George Ittan Maramkandathil are referred
to as the “Investors”, and such shareholders agreement the “Bank SHA”), as amended by the waiver cum amendment
agreement dated July 7, 2023 (“SHA Amendment Agreement”)

Our Bank, our Promoters and the Investors have entered into the Bank SHA to govern their inter-se rights and obligations in
the Bank. Pursuant to the terms of the Bank SHA, the Investors are entitled to certain rights including inter-alia information
rights; anti-dilution rights; and pre-emptive rights until the completion of an initial public offer by the Bank. Further, pursuant
to the terms of the Bank SHA, Investors are not permitted to transfer or subscribe to Equity Shares in breach of the ceiling limit
on shareholding specified in the Master Direction – Ownership in Private Sector banks, Directions, 2016 dated May 12, 2016
and/or transfer or subscribe to Equity Shares which along with the shareholding of related parties, subsidiaries, associates,
affiliates etc. exceeds 4.99% of the total share capital of the Bank, unless permitted by the Bank, subject to receipt of requisite
approvals, including but not limited to RBI approval. Further, Investors and Promoters are subject to certain transfer restrictions.
Further, the Promoters are entitled to a right of first offer in case of transfer of Equity Shares by Investors and the Investors are
entitled to tag along rights in case of transfer of Equity Shares by the Promoters of the Bank. Pursuant to the Bank SHA, 30%
of the total Shares offered pursuant to the Offer are required to be reserved for an offer for sale of Equity Shares held by the
Investors and Promoters. Promoters are entitled to participate in the offer for sale within the reserved percentage in proportion
to their existing shareholding in our Bank, and Investors (holding less than 5%) will be entitled to offer within the reserved
percentage which should be 125% of their proportionate holding in the existing shareholding of our Bank. The Bank SHA will
terminate upon a shareholder ceasing to hold Equity Shares, or upon the occurrence of an event of default at the option of the
non-defaulting party, or with the mutual consent of the parties to the Bank SHA.
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The parties to the Bank SHA have entered into the SHA Amendment Agreement, which is effective from the date of the Draft
Red Herring Prospectus, and shall remain in effect until the earlier of: (i) the long stop date, i.e., the last date on which the
observations issued by the SEBI on this DRHP filed by the Bank in relation to the Offer are valid, or such extended cut-off date
for the Offer as may be mutually agreed in writing among the Parties, if the consummation of the Offer has not happened by
such date; (ii) consummation of the Offer; or (iii) the date on which the Board and the Investors jointly decide not to undertake
the Offer (“Term”). Pursuant to the SHA Amendment Agreement, each party has agreed to waive its rights in terms of the
financial statements, business plan and other information disclosure rights, under the Bank SHA from the date of filing of the
Draft Red Herring Prospectus until the expiry of the Term. However, parties are entitled to receive all financial information
pertaining to the Bank post listing which the Bank has disclosed to stock exchanges or otherwise made available in the public
domain, subject to the approval by shareholders by special resolution post listing and trading of the Equity Shares of our Bank.
Further, each Party has agreed to waive inter alia, its anti-dilution rights, transfer and exit rights (subject to compliance with
the exit provisions in connection with the Offer), for the duration of the Term. The Bank SHA will stand automatically
terminated upon consummation of the Offer i.e. date of receipt of final listing and trading approvals from the Stock Exchanges
for commencement of trading of the Equity Shares pursuant to the Offer. In the event that the Offer is not completed on or prior
to the long stop date, or if the Board and Investors jointly decide not to undertake the Offer, the SHA Amendment Agreement
shall stand immediately and automatically terminated with effect from the long stop date or the date on which the Board and
the Investors jointly decide not to undertake the IPO, without any further action by any Party and the provisions of the Bank
SHA shall be deemed to have been in force during the period between the execution date and the date of termination of the
SHA Amendment Agreement, without any break or interruption whatsoever.

There are no clauses in the Bank SHA as amended, that require an approval or intimation to RBI in terms of the Banking
Regulation Act, 1949 or any guidelines thereof. There are no special rights in the constitutional documents of the Bank based
on the Bank SHA which are required to be disclosed to the RBI in terms of the Banking Regulation Act or any guidelines
thereof.

Shareholders agreement dated December 23, 2019 entered into amongst ESAF Financial Holdings Private Limited,
Kadambelil Paul Thomas, George Thomas acting in his capacity as the trustee of ESAF Staff Welfare Trust (“Trust” ),
ESMACO, SIDBI Trustee Company Limited (“SIDBI Trustee”), Dia Vikas Capital Private Limited (“Dia Vikas” and
collectively with SIDBI Trustee and Dia Vikas referred to as “Investors in ESAF Financial Holdings Private Limited”)
(“EFHPL SHA”) as amended by the amendment agreement to the EFHPL SHA dated March 29, 2021 (“EFHPL SHA
Amendment Agreement”) and the letter amendment agreement dated June 26, 2023 (“Letter Amendment Agreement”)

ESAF Financial Holdings Private Limited, Kadambelil Paul Thomas, the Trust, ESMACO and the Investors in ESAF Financial
Holdings Private Limited have entered into the EFHPL SHA to govern their inter-se relationship, rights and obligations with
respect to their respective investments in ESAF Financial Holdings Private Limited and the operation, administration,
management and certain matters in connection therewith.

Pursuant to the terms of the EFHPL SHA, the parties to the EFHPL SHA have acknowledged that the Bank is required to
undertake an initial public offering which may include a pre-IPO placement of Equity Shares on or prior to March 31, 2022 and
have inter-alia provided their no objection to the Offer (including Pre-IPO Placement). ESAF Financial Holdings Private
Limited has agreed that upon successful completion of the Offer, ESAF Financial Holdings Private Limited shall: (i) undertake
a buy-back of its shares in accordance with applicable law from the amount received from the Offer for Sale of its Equity Shares
and such buy-back shall be computed in the manner set out in the EFHPL SHA; and (ii) file a suitable application before the
NCLT in accordance with the Companies Act, 2013 for cancellation and reduction of a certain portion of the share capital of
ESAF Financial Holdings Private Limited in consideration for which ESAF Financial Holdings Private Limited has agreed to
transfer Equity Shares that ESAF Financial Holdings Private Limited holds in the Bank to the Investors in ESAF Financial
Holdings Private Limited in such proportion as agreed to in the EFHPL SHA as per the formula set out therein. The reduction
of shares of ESAF Financial Holdings Private Limited and the transfer of its Equity Shares of the Bank to the Investors in ESAF
Financial Holdings Private Limited shall be subject to applicable laws and receipt of the order of the NCLT approving such
reduction of capital. Further, the transfer of Equity Shares of the Bank to Investors in ESAF Financial Holdings Private Limited
shall be subject to applicable law (including in compliance with the lock-in obligations prescribed under the SEBI ICDR
Regulations) and receipt of the order of the NCLT approving such reduction in capital. Separately, in the event that the Offer
is successfully completed but application for reduction of shares of ESAF Financial Holdings Private Limited is rejected by the
NCLT, the Bank may, in mutual agreement with Investors in ESAF Financial Holdings Private Limited, make an application
to the NCLT for reduction of shares in consideration of cash, in accordance with the Companies Act, 2013. In the event that
the Offer is not completed within the timeline prescribed under the EFHPL SHA the Investors in ESAF Financial Holdings
Private Limited are, amongst other things, entitled to exercise a put option and require ESAF Financial Holdings Private
Limited, Kadambelil Paul Thomas or ESMACO to buy-back or redeem or purchase the shares held by the Investors in ESAF
Financial Holdings Private Limited. Upon the occurrence of an event of default as set out in the EFHPL SHA, which are not
remedied within the prescribed time periods, the Investors in ESAF Financial Holdings Private Limited may be entitled to
transfer their shareholding to any third party without offering Kadambelil Paul Thomas a right of first refusal.

The parties to the EFHPL SHA have entered into the Letter Amendment Agreement to amend to provide that the Offer will be
completed on or prior to March 31, 2024 subject to all conditions mentioned therein being complied with.

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Key terms of other subsisting material agreements

Our Bank has not entered into any other subsisting material agreements, including with strategic partners, joint venture partners,
and/or financial partners, other than in the ordinary course of business.

Deed of assignment dated February 16, 2017 entered into between ESAF Financial Holdings Private Limited and ESAF
Enterprise Development Finance Limited (“EEDFL” and such deed of assignment be referred to as “Assignment Deed”)

ESAF Financial Holdings Private Limited and EEDFL entered into the Assignment Deed pursuant to the RBI In-Principle
Approval, which amongst other conditions, required that the lending activities of EEDFL be folded into the SFB before the date
of commencement of business of the SFB. Accordingly, pursuant to the Assignment Deed, EEDFL transferred its entire
portfolio of loan assets, and sold the loans and receivables as defined in the Assignment Deed, along with the underlying
securities to ESAF Financial Holdings Private Limited and exited such line of business completely; and ESAF Financial
Holdings Private Limited purchased the said loans and receivables along with the underlying securities on the terms and
conditions sets out in the Assignment Deed for a purchase consideration aggregating to ₹8.34 million.

Agreement to sell business undertaking dated February 22, 2017 entered into between ESAF Financial Holdings Private
Limited and our Bank (“Business Transfer Agreement”)

Upon receipt of the RBI Final Approval on November 18, 2016, our Promoter, ESAF Financial Holdings Private Limited,
entered into the Business Transfer Agreement with our Bank, pursuant to which the business undertaking of ESAF Financial
Holdings Private Limited comprising of the lending and financing business of ESAF Financial Holdings Private Limited
(“Business Undertaking”) together with, inter-alia, all the assets, liabilities, rights, title, interest, obligations, risks and rewards
relating to and arising out of the Business Undertaking was transferred to our Bank as a going concern on a slump sale basis
for a lump sum purchase consideration of ₹70.00 million on March 10, 2017 (“Transfer Date”). The purchase consideration
for the Business Undertaking has been discharged partly by way of cash (i.e., ₹20.00 million) and partly pursuant to the issue
of 4,901,960 Equity Shares by our Bank to ESAF Financial Holdings Private Limited at an aggregate issue price of ₹10.20 per
Equity Share, aggregating to ₹50.00 million. For further details, see “Capital Structure” on page 109.

Pursuant to the Business Transfer Agreement, the entire legal and beneficial ownership including all the gains and losses
accruing thereof, and the interest of ESAF Financial Holdings Private Limited in the Business Undertaking was transferred to
us with effect from the Transfer Date and our Bank is the full and undisputed owner of the Business Undertaking with effect
from the Transfer Date. However, all gains and losses accruing to the Business Undertaking up to and including the financial
closing date immediately preceding the Transfer Date will be accounted to ESAF Financial Holdings Private Limited.

Pursuant to the Business Transfer Agreement, all legal proceedings in relation to the Business Undertaking, pending as on the
Transfer Date or in respect of which, the cause of action had arisen on or prior to the Transfer Date, shall continue to be managed
by ESAF Financial Holdings Private Limited and all claims, liabilities, obligations etc., arising out of such legal proceedings
shall be borne by ESAF Financial Holdings Private Limited. Further, all legal proceedings in relation to the Business
Undertaking, in respect of which, the cause of action has arisen post the Transfer Date, shall be managed by our Bank and all
claims, liabilities, obligations etc., arising out of such legal proceedings shall be borne by our Bank. In terms of the Business
Transfer Agreement, ESAF Financial Holdings Private Limited is liable for all tax liabilities and entitled to all tax refunds
pertaining to the Business Undertaking which accrue to ESAF Financial Holdings Private Limited up to March 9, 2017,
(including such sums received by our Bank or ESAF Financial Holdings Private Limited post March 9, 2017). Further, our
Bank is liable for all tax liabilities and entitled to all tax refunds pertaining to the Business Undertaking which accrue to our
Bank, from (and including) March 10, 2017, in relation to the tax liabilities assumed by our Bank, including service tax.

Further, simultaneous with the transfer of the Business Undertaking, the employees of ESAF Financial Holdings Private
Limited along with connected costs and obligations, as of the financial closing date have been transferred to our Bank. Pursuant
to the Business Transfer Agreement, the employees of ESAF Financial Holdings Private Limited were transferred to our Bank
subject to vacancies and eligibility. In addition to the non-convertible debentures of ESAF Financial Holdings Private Limited
which were transferred to us, all the loans, securitization transactions, direct assignments, business correspondent arrangements
and other obligations and liabilities that form part of the Business Undertaking have been novated by ESAF Financial Holdings
Private Limited in our favour, and we have assumed all rights, obligations and liabilities in connection therewith. As per the
terms of the Business Transfer Agreement, we are liable to satisfy and discharge all transferred debts and liabilities pertaining
to or arising out of the Business Undertaking on or after the Transfer Date and to fulfil any pending contracts or engagements
pertaining to the Business Outstanding which are pending as on the Transfer Date. Pursuant to the Business Transfer Agreement,
ESAF Financial Holdings Private Limited has agreed to indemnify us from and against claims not forming part of the Business
Undertaking that are imposed on us, and we have agreed to indemnify ESAF Financial Holdings Private Limited from claims
relating to the Business Undertaking which are imposed upon it, on and after the Transfer Date.

Deposit transfer agreement dated March 7, 2017 entered into between ESMACO and our Bank (“Deposit Transfer
Agreement”)

ESMACO and our Bank entered into the Deposit Transfer Agreement pursuant to the RBI In-Principle Approval, which
amongst other conditions, required ESMACO to cease accepting any fresh deposits and transfer all deposits to our Bank before
the date of commencement of business of the Bank. Pursuant to the Deposit Transfer Agreement, ESMACO agreed to facilitate
the transfer its accounts and the outstanding deposit amount aggregating to ₹877.62 million, to our Bank on the closing date,
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i.e., March 10, 2017. In consideration of ESMACO facilitating such transfer, our Bank agreed to pay ESMACO a facilitation
fee of ₹100 per depositor or ₹50 million, whichever is lower.

Deed of assignment dated March 9, 2017 entered into between ESMACO and our Bank (“ESMACO DOA”)

ESMACO and our Bank entered into the ESMACO DOA pursuant to the RBI In-Principle Approval, which, amongst other
conditions, required ESMACO to fold and discontinue its lending activities. Pursuant to the ESMACO DOA, ESMACO agreed
to cease and exit the business of lending and has agreed to sell, assign, transfer, convey and release all loans and receivables
together with all the rights, benefits and interest under and in relation to the loan agreements to the Bank for a purchase
consideration aggregating to ₹309.98 million.

Subscription agreement dated July 27, 2018 entered into between our Bank and PNB MetLife India Insurance Company
Limited (“PNB”)

Pursuant to the subscription agreement entered into between our Bank and PNB, our Bank agreed to issue and allot, and PNB
agreed to subscribe to 18,717,244 Equity Shares for a consideration of ₹749.99 million. Our Bank issued such Equity Shares
to PNB on July 31, 2018. For further details, see “Capital Structure” on page 109.

Subscription agreement dated July 27, 2018 entered into between our Bank and Muthoot Finance Limited (“Muthoot”)

Pursuant to the subscription agreement entered into between our Bank and Muthoot, our Bank agreed to issue and allot, and
Muthoot agreed to subscribe to 18,717,244 Equity Shares for a consideration of ₹749.99 million. Our Bank issued such Equity
Shares to Muthoot on July 31, 2018. For further details, see “Capital Structure” on page 109.

Subscription agreement dated July 27, 2018 entered into between our Bank and Bajaj Allianz Life

Pursuant to the subscription agreement entered into between our Bank and Bajaj Allianz Life, our Bank agreed to issue and
allot, and Bajaj Allianz Life agreed to subscribe to 17,469,428 Equity Shares for a consideration of ₹699.99 million. Our Bank
issued such Equity Shares to Bajaj Allianz Life on July 31, 2018. For further details, see “Capital Structure” on page 109.

Subscription agreement dated July 27, 2018 entered into between our Bank and PI Ventures

Pursuant to the subscription agreement entered into between our Bank and PI Ventures, our Bank agreed to issue and allot, and
PI Ventures agreed to subscribe to 8,734,714 Equity Shares for a consideration of ₹349.99 million. Our Bank issued such Equity
Shares to PI Ventures on July 31, 2018. For further details, see “Capital Structure” on page 109.

Subscription agreement dated September 27, 2018 entered into between our Bank and ICICI Lombard General Insurance
Company Limited (“ICICI Lombard”)

Pursuant to the subscription agreement entered into between our Bank and ICICI Lombard, our Bank agreed to issue and allot,
and ICICI Lombard agreed to subscribe to 6,239,081 Equity Shares for a consideration of ₹249.99 million. Our Bank issued
such Equity Shares to ICICI Lombard on September 28, 2018. For further details, see “Capital Structure” on page 109.

Subscription agreement dated September 27, 2018 entered into between our Bank and ESMACO

Pursuant to the subscription agreement entered into between our Bank and ESMACO, our Bank agreed to issue and allot, and
ESMACO agreed to subscribe to 21,346,993 Equity Shares for a consideration of ₹855.37 million. Our Bank issued such Equity
Shares to ESMACO on September 28, 2018. For further details, see “Capital Structure” on page 109.

Subscription agreement dated September 27, 2018 entered into between our Bank and Yusuffali Musaliam Veettil Abdul
Kader (“Yusuffali Kader”)

Pursuant to the subscription agreement entered into between our Bank and Yusuffali Kader, our Bank agreed to issue and allot,
and Yusuffali Kader agreed to subscribe to 21,346,993 Equity Shares for a consideration of ₹855.37 million. Our Bank issued
such Equity Shares to Yusuffali Kader on September 28, 2018. For further details, see “Capital Structure” on page 109.

Trademark licensing agreement dated January 5, 2020 entered into between ESAF Foundation (formerly known as
“Evangelical Social Action Forum”) and our Bank (“Trademark Agreement”)

Under the Trademark Agreement, ESAF Foundation has granted our Bank an exclusive, irrevocable license and right to use the

trademarks , , , , “CREATING OPPORTUNITIES” and “FIGHTING THE

PARTIALITY OF PROSPERITY” which are registered trademarks of the ESAF Foundation under certain classes and “ESAF”
(word mark) (collectively “Trademarks”), exclusively in relation to the banking, financial services and insurance business
(“Business”), and including on all stationery, advertising, marketing, promotional materials and websites (“License”). Further,
ESAF Foundation has granted our Bank a non-exclusive license for the worldwide use of “ESAF” as part of our Bank’s trade
name/ corporate name. Additionally, for the better protection, promotion and enforcement of the ESAF brand and in view of
the fact that all activities related to the Business will be exclusively conducted by our Bank, ESAF Foundation permitted our

248
Bank to register the trademark “ESAF SMALL FINANCE BANK”, which is registered by the Bank under registration number
3459568 (“Bank TM”). Pursuant to the Trademark Agreement, ESAF Foundation has permitted our Bank to register in its
name, any trade name containing “ESAF” solely for the Business in class 36, subject to the written consent of the ESAF
Foundation prior to making an application in this regard. Our Bank has agreed to hold the Bank TM and any other mark
registered by it containing “ESAF” in trust for ESAF Foundation so long as the Trademark Agreement is in force.

The License is valid for a period of 15 years from January 5, 2020 (“Term”) or until such time it in terminated as per the
Trademark Agreement. The Trademark Agreement may be terminated with the mutual consent of ESAF Foundation and the
Bank, and shall stand automatically terminated: (a) in the event our Bank goes into liquidation (other than voluntary liquidation
for the purpose of reconstruction or amalgamation); or (b) upon revocation of the banking license of our Bank by the RBI.
Further, our Bank can terminate the Trademark Agreement upon providing prior written notice of one year to ESAF Foundation.
Upon expiry of the Term or termination of the Trademark Agreement, our Bank shall immediately, amongst other things: (i)
cancel the Bank TM and any other application/ registration for trademarks containing “ESAF”; (ii) discontinue the use of the
Trademarks, and dispose any material bearing or using the Trademarks; and (iii) change or procure to be changed its corporate
name and/or trading style in such a manner so as to delete “ESAF”.

The License granted is subject to the rights already enjoyed and granted to ESAF Financial Holdings Private Limited and
ESMACO to use the mark and the name “ESAF” in respect of their current business activities. ESAF Foundation and our Bank
have agreed that the consideration for the grant of License is 0.30% of the total income (calculated as the sum of interest earned
and other income) or 2.50% of the net profit of our Bank, whichever is less (exclusive of applicable indirect taxes), as recorded
in the audited financial statements of the respective financial year, payment of which will commence from April 1, 2020, and
shall be annually payable on September 30 of the subsequent financial year. The Trademark Agreement shall be subject to the
receipt of shareholders’ approval, in the first general meeting of the Bank held after successful listing and trading pursuant to
completion of the initial public offer by the Bank, with related parties not being permitted to vote.

Our Bank, its Promoters and each of the Selling Shareholders confirm that there are no other agreements and the clauses/
covenants which are material which need to be disclosed and that there are no other clauses/ covenants which are adverse/ pre-
judicial to the interest of the public shareholders. Further, there are no other agreements, deed of assignments, acquisition
agreements, shareholders agreement, inter-se agreements, agreements of like nature other than as disclosed in this Red Herring
Prospectus.

Arrangement or understanding with major Shareholders

For details on inter-se arrangements and arrangements between our Shareholders, see “Our Management - Arrangement or
understanding with major Shareholders, customers, suppliers or others” and “- Key terms of subsisting shareholders’
agreements” on pages 249 and 247, respectively.

Other Agreements

Our Bank, its Promoters and each of the Selling Shareholders confirm that except as disclosed in this Red Herring Prospectus,
there are no other inter-se agreements and the clauses/ covenants in the agreements governing the rights of Equity Shareholders
of our Bank, which are material, which need to be disclosed, and there are no other clauses/ covenants in the agreements
governing the rights of Equity Shareholders of our Bank which are adverse/ pre-judicial to the interest of the minority / public
shareholders of our Bank. Further, there are no other agreements, deed of assignments, acquisition agreements, shareholders
agreement, inter-se agreements, agreements of like nature in connection with the Equity shareholding of our Bank other than
as disclosed in this Red Herring Prospectus.

Agreements with Key Managerial Personnel, Senior Management Personnel, Directors, Promoters or any other employee

There are no agreements entered into by a Key Managerial Personnel or Senior Management Personnel or Director or Promoters
or any other employee of our Bank, either by themselves or on behalf of any other person, with any shareholder or any other
third party with regard to compensation or profit sharing in connection with dealings in the securities of our Bank.

Guarantees provided by the Promoter Selling Shareholder

As of the date of this Red Herring Prospectus, the Promoter Selling Shareholder has not given any guarantees to third parties.

About ESAF Foundation (formerly known as “Evangelical Social Action Forum”)

ESAF Foundation is a society registered under serial no. 109/1992 on March 11,1992, under the Travencore-Cochin Literary,
Scientific and Charitable Societies Registration Act, 1955. The name of ESAF Foundation changed from ‘Evangelical Social
Action Forum’ to ‘ESAF Foundation’ as per the bye law amendment filed on July 20, 2022 pursuant to the order dated April
22, 2022, passed by the High Court of Kerala in the writ petition filed by ESAF Foundation against the District Registrar
(General).

ESAF Foundation is governed by the society registrar under the Travencore-Cochin Literary, Scientific and Charitable Societies
Registration Act, 1955.

249
The governing board of ESAF Foundation is as follows:

1. Idicheria Ninan, President

2. R. Billy, Vice President

3. Mereena Paul, Secretary

4. Kadambelil Paul Thomas, Member

5. Saleena George, Member

6. Stanly Johns, Treasurer

7. Jacob Samuel, Member

8. George Thomas, Member

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 OUR MANAGEMENT

Board of Directors

In terms of the Articles of Association, our Bank is required to have not less than three Directors and not more than 15 Directors.
As on the date of this Red Herring Prospectus, our Board comprises of nine Directors including one Executive Director, one
Non-Executive Nominee Director of ESAF Financial Holdings Private Limited, one Non-Executive Nominee Director of
Kadambelil Paul Thomas, five Non-Executive Independent Directors and one Additional Non-Executive Independent Director.
Our Board comprises of one woman director. The composition of the Board of Directors and its committees is in compliance
with the corporate governance requirements under the Companies Act and the Listing Regulations.

The following table sets forth details regarding our Board of Directors as on the date of this Red Herring Prospectus:

S. Name, designation, address, occupation, nationality, term Age Other directorships

No. and DIN (years)

1. Ravimohan Periyakavil Ramakrishnan 65 • TP Renewable Microgrid Limited;

Designation: Part-Time Chairman and Non-Executive • Maithon Power Limited; and

Independent Director
• CARE Ratings (Africa) Private Limited
Address: Flat No. N 074, DLF New Town Heights, Seaport
Airport Road, Opposite Doordarshan Kendra, Kakkanad P.O.,
Ernakulam 682 030, Kerala

Occupation: Retired Banker

Date of birth: May 29, 1958

Nationality: Indian

Period and term: For a period of three years with effect from
December 21, 2022, i.e., until December 20, 2025, and is not
liable to retire by rotation

DIN: 08534931

2. Kadambelil Paul Thomas 60 • Thrissur Startup Incubation Council.

Designation: Managing Director and Chief Executive Officer

Address: Kadambelil House, Mannuthy P.O., Nettissery,

Thrissur 680 651, Kerala

Occupation: Service

Date of birth: May 21, 1963

Nationality: Indian

Period and term: For a period of three years with effect from
October 1, 2021, i.e., until September 30, 2024 and is not liable
to retire by rotation

DIN: 00199925

3. Thomas Jacob Kalappila 70 • Spotmarket Securities Private Limited;

Designation: Non-Executive Independent Director • Syncon Management Consultants Private

Limited; and
Address: Kalappilayil TC 5/2548(2), Krishna Gardens, Golf
Links Road, Kowdiar P O, Trivandrum 695 003, Kerala • Agappe Diagnostics Limited

Occupation: Practicing Chartered Accountant

Date of birth: June 13, 1953

Nationality: Indian

Period and term: For a period of three years with effect from
March 10, 2023, i.e., until March 9, 2026 and is not liable to
retire by rotation

251
 S. Name, designation, address, occupation, nationality, term Age Other directorships
No. and DIN (years)

DIN: 00812892

4. Vinod Vijayalekshmi Vasudevan 56 • Flytxt Mobile Solutions International, UAE;

Designation: Non-Executive Independent Director • Z3P Tech Fund; and

Address: TC 4/ 2483-1, Saket, Marappalam, UM Road, Pattom • Z3P Global, Mauritius

Palace P.O, Trivandrum 695 004, Kerala

Occupation: Group CEO, FLYTXT, Dubai and Amsterdam

Date of birth: May 25, 1967

Nationality: Indian

Period and term: For a period of three years with effect from
December 22, 2021, i.e., until December 21, 2024 and is not
liable to retire by rotation

DIN: 02503201

5. Ravi Venkatraman 64 • Adithya Birla ARC Limited;

Designation: Non-Executive Independent Director • Avanse Financial Services Limited;

Address: A/4, Plot No. NA-52, New Samrat Society, Andheri • Bajaj Finserv Mutual Fund Trustee Limited;
Kurla Road, Opp. Vishal Hall, Andheri East Mumbai 400 069,
Maharashtra • Kotak Mahindra General Insurance Limited;

Occupation: Business • Kotak Mahindra Prime Limited; and

Date of birth: July 2, 1959 • Sarvagam Solutions Private Limited
Nationality: Indian

Period and term: For a period of three years with effect from
December 13, 2022, i.e., until December 12, 2025 and is not
liable to retire by rotation

DIN: 00307328

6. Kolasseril Chandramohanan Ranjani 65 • SM Swasthman Foundation

Designation: Non-Executive Independent Director

Address: Kolasseril House, Neendoor, Vadakkekara, PIN 683

522, Paravur, Ernakulam 683 513, Kerala

Occupation: Business

Date of birth: May 9, 1958

Nationality: Indian

Period and term: For a period of three years with effect from
December 13, 2022, i.e., until December 12, 2025 and is not
liable to retire by rotation

DIN: 01735529

7. Biju Varkkey 57 • Konnect CSR Impactors Private Limited;

and
Designation: Additional Non-Executive Independent Director
• V Guard Industries Limited
Address: House No. 303, IIM Campus, Vastrapur, Ahmedabad
380 015, Gujarat

Occupation: Faculty, Human Resource Management Area in

Indian Institute of Management, Ahmedabad

252
 S. Name, designation, address, occupation, nationality, term Age Other directorships
No. and DIN (years)

Date of birth: December 22, 1965

Nationality: Indian

Period and term: With effect from August 11, 2023 and not
liable to retire by rotation^

DIN: 01298281

8. John Samuel* 68 Nil

Designation: Non-Executive Nominee Director

Address: A-6, MS Flats, Tilak Lane, Type 5, NDMC, New

Delhi, G.P. Central Delhi 110 001, Delhi

Occupation: Retired from Indian Postal Service

Date of birth: January 3, 1955

Nationality: Indian

Period and term: For a period of three years with effect from
December 13, 2022, i.e., until December 12, 2025 and is liable
to retire by rotation

DIN: 07725212

9. Ajayan Mangalath Gopalakrishnan Nair# 65 • ESAF Financial Holdings Private Limited

Designation: Non-Executive Nominee Director

Address: 50/261-C, Shivaganga, House No. 153, Road No. 4-

B, Behind Edapally St. George Church, Prashanthinagar,
Edapally S.O, Ernakulam 682 024, Kerala

Occupation: Private Service

Date of birth: May 30, 1958

Nationality: Indian

Period and term: For a period of three years with effect from
December 13, 2022, i.e., until December 12, 2025 and is liable
to retire by rotation

DIN: 09782416
*
Nominee of Kadambelil Paul Thomas
#
Nominee of ESAF Financial Holdings Private Limited
^
The appointment of Biju Varkkey to the Board will be regularised in the ensuing annual general meeting

Brief biographies of Directors

Ravimohan Periyakavil Ramakrishnan is the Part-Time Chairman and Non-Executive Independent Director of our Bank.
He holds a bachelor’s degree in science and master’s degree in science from Kerala University, and a master’s degree in business
administration from Birmingham University. He is a certified associate of the Indian Institute of Bankers. He was previously
employed as a chief general manager in the department of banking supervision of the RBI. He was previously a resident advisor,
financial sector supervision, International Monetary Fund, AFRITAC South, Mauritius.

Kadambelil Paul Thomas is the Managing Director and Chief Executive Officer of our Bank. He holds a master’s degree in
business administration from the Annamalai University. He was previously the chairman and managing director of ESAF
Financial Holdings Private Limited. He has also served as the founder secretary cum honorary executive director of Evangelical
Social Action Forum for over 25 years. He was also previously a director on the boards of Sanma Garments Private Limited,
Rhema Dairy Products India Private Limited, Rhema Milk Producer Company Limited, Lahanti Homes and Infrastructure
Private Limited, ESAF Health Care Services Private Limited, ESAF Swasraya Producers Company Limited, CEDAR Retail
Private Limited, ESAF Enterprise Development Finance Limited and CEDAR Livelihood Services Private Limited (Formerly
Cedar Agri Solutions Private Limited). Presently, he is the president of Kerala Association of Microfinance Institutions
Entrepreneurs. He was previously the chairman of Sa-Dhan, and the chairman of Confederation of Indian Industry – Kerala.
During Fiscal 2022, he received the Marketing Meister award, the Business Leader of the Year award, FE Pillar of the BFSI
253
Industry award, the APY Big Believers (ABB) 3.0 award from PFRDA for the best performing MD & CEO, the India Banking
Summit CEO of the Year Award, the Exemplary Diamond award from PFRDA, the CEO with HR orientation award at world
HRD congress, the APY Big Believers Exemplary Award of Par Excellence from PFRDA, and the APY Big Believers Award
of Excellence from PFRDA. He is on the board of directors of Thrissur Startup Incubation Council.

Thomas Jacob Kalappila is a Non-Executive Independent Director on the Board of our Bank. He holds a bachelor’s degree
in science from Kerala University. He is an associate member of the Institute of Chartered Accountants of India and holds a
diploma in information and systems audit from the Institute of Chartered Accountants of India. He is a partner of Thomas Jacob
& Co., a partnership firm and has 35 years of experience in statutory audit, internal and forensic audit of banks. He has
previously served as an independent director on the board of directors of South Indian Bank Limited and Malabar Cements
Limited.

Vinod Vijayalekshmi Vasudevan is a Non-Executive Independent Director on the Board of our Bank. He holds a bachelor’s
degree in technology (computer science and engineering), a master’s degree in technology (computer science and engineering),
and a doctorate of philosophy (computer science and engineering) from the Indian Institute of Technology, Kharagpur. He is
the group CEO of FLYTXT, Dubai and Amsterdam. He is currently on the board of directors of Flytxt Mobile Solutions
International, Z3P Tech Fund and Z3P Global, Mauritius.

Ravi Venkatraman is a Non-Executive Independent Director on the Board of our Bank. He has passed the final examination
held by the Institute of Chartered Accountants of India and the Institute of Cost and Works Accountants of India. He was the
former Executive Director and Chief Financial Officer of Mahindra and Mahindra Financial Services Limited. He is currently
on the board of directors of Bajaj Finserv Mutual Fund Trustee Limited, Kotak Mahindra General Insurance Company Limited,
Avanse Financial Services Limited, Kotak Mahindra Prime Limited, Sarvagram Solutions Private Limited, Aditya Birla AMC
Limited.

Kolasseril Chandramohanan Ranjani is a Non-Executive Independent Director on the Board of our Bank. She holds a
bachelor’s degree in science from University of Kerala and a master’s degree in bank management from Cochin University of
Science and Technology. She has held senior management positions with SIDBI, and has more than 21 years of experience in
Micro, Small and Medium Enterprises in India. She is currently on the board of directors of SM Swasthman Foundation.

Biju Varkkey is an Additional Non-Executive Independent Director on the Board of our Bank. He holds a bachelor’s degree
in science from Gandhiji University and a fellowship programme from National Institute of Bank Management, Pune. He is
also a faculty member at IIM Ahmedabad. He was on the board of directors of Bank of Baroda.

John Samuel is a Non-Executive Nominee Director on the Board of our Bank. He holds a master’s degree in business
administration from the Cochin University of Science and Technology and a master’s degree in commerce from Madurai
University. He is an associate of the Institute of Chartered Accountants of India. He was previously a Member of the Postal
Services Board and held the position of Chief Post Master General.

Ajayan Mangalath Gopalakrishnan Nair is a Non-Executive Nominee Director on the Board of our Bank. He holds a
bachelor’s degree in science (Horticulture) from the Kerala Agricultural University and is a certified associate of the Indian
Institute of Bankers. He was previously employed as the Executive Vice President of our Bank. He was previously the General
Manager of IT and CIO, General Manager of retail assets, General Manager of transaction banking, General Manager of Pune
Circle, Chief Compliance Officer and Deputy General Manager of Calicut Circle in Canara Bank. He is currently an additional
director on the board of directors of ESAF Financial Holdings Private Limited.

Relationship between our Directors

None of our Directors are related to each other.

Confirmations

None of our Directors is, or was a director of any listed company during the last five years preceding the date of this Red
Herring Prospectus, whose shares have been, or were suspended from being traded on any of the stock exchanges during the
term of their directorship in such company.

No consideration in cash or shares or otherwise has been paid or agreed to be paid to any of our Directors or to the firms or
companies in which they are interested by any person either to induce them to become or to help them qualify as a Director, or
otherwise for services rendered by them or by the firm or company in which they are interested, in connection with the
promotion or formation of our Bank.

None of our Directors is or was a director of any listed company which has been, or was delisted from any stock exchange
during the term of their directorship in such company.

Terms of appointment of Directors

1. Remuneration paid to the Executive Director: Kadambelil Paul Thomas was paid a total remuneration of ₹32.11
million during Fiscal 2023. In addition to the same, we have reimbursed entertainment expense of ₹1.00 million,

254
 reimbursement of medical expenses amounting to ₹0.14 million and employer contribution to provident fund
amounting to ₹1.44 million. The details of remuneration for Fiscal 2022 governing his re-appointment pursuant to the
contract of employment dated October 1, 2021 entered into between the Bank and Kadambelil Paul Thomas and as
approved by the RBI pursuant to its letter dated January 6, 2023 are stated below:

Particulars Remuneration
Fixed pay ₹18.80 million including perquisites
Variable pay ₹9.40 million*
*
In terms of the RBI Compensation Guidelines, the variable cash component of ₹9.40 million is bifurcated into: (i) upfront payment of ₹4.70
million; and (ii) deferred payment of ₹4.70 million, which will be vested equally over a period of three years after completion of one year for
the period to which it pertains.

Details of the remuneration paid to Kadambelil Paul Thomas (including arrears) for Fiscal 2023 is as follows:

Particulars Remuneration#

Total Compensation ₹32.11 million per annum (which includes perquisite relating to provident fund aggregating to ₹0.70 million
and use of company own car amounting to ₹0.40 million, arrear remuneration paid relating to prior year
amounting to ₹8.91 million and performance pay of ₹6.75 million). In addition to the same, we have
reimbursed entertainment expense of ₹1.00 million, reimbursement of medical expenses amounting to
₹0.14 million and employer contribution to provident fund amounting to ₹1.44 million
Other perquisites Other perquisites including but not limited to travelling and halting allowance, loan for acquiring or
constructing house for personal use up to five times annual salary and one-time monthly salary (festival
advance).
#
Our Bank has filed an application dated June 27, 2023 with the RBI for revision of the remuneration structure, basis the RBI Compensation
Guidelines. The revised remuneration that will be applicable for:
(i) FY 2022-23, subject to receipt of the RBI approval, shall be (i) a fixed pay of ₹22.20 million along with perquisites of (a) retiral/
superannuation benefits such as provident fund up to ₹1.80 million along with and gratuity as per the general norms applicable for
employees; (b) medical expenses reimbursement for self and dependents up to ₹0.40 million,(c) medical insurance coverage for self and
dependents up to ₹0.10 million; (d) reimbursement of entertainment expenditure of ₹1.00 million; (e) travelling and halting allowance;
(f) loan for acquiring or constructing house for personal use up to five times annual salary and one time monthly salary (festival
advance); and (ii) a variable cash component of up to ₹14.50 million. Subject to RBI approval, the revised remuneration will be effective
from April 1, 2022 to March 31, 2023; and
(ii) FY 2023-24, subject to receipt of the RBI approval, shall be (i) a fixed pay of ₹26.60 million along with perquisites of (a) retiral/
superannuation benefits such as provident fund up to ₹2.20 million along with and gratuity as per the general norms applicable for
employees; (b) medical expenses reimbursement for self and dependents up to ₹0.40 million; (c) medical insurance coverage for self
and dependents up to ₹0.10 million; (d) reimbursement of entertainment expenditure of ₹1.00 million; (e) travelling and halting
allowance; (f) loan for acquiring or constructing house for personal use up to five times annual salary and one time monthly salary
(festival advance); and (ii) a variable cash component of up to ₹21.10 million. Subject to RBI approval, the revised remuneration will
be effective from April 1, 2023 to March 31, 2024.

2. Remuneration and sitting fees paid to Non-Executive Independent Directors:

Pursuant to the Board resolution dated December 3, 2022, each Non-Executive Independent Director is entitled to
receive sitting fees of ₹0.06 million per meeting for attending meetings of the Board and sitting fees of ₹0.05 million
per meeting for attending meetings of committees of the Board, within the limits prescribed under the Companies Act,
2013, and the rules made thereunder.

The details of remuneration paid to our Non-Executive Independent Directors during Fiscal 2023 are as follows:

S. Name of Director Sitting fees paid (in ₹ million)

No.
1. Ravimohan Periyakavil Ramakrishnan 1.98
2. Joseph Vadakkekara Antony^ 1.95
3. Thomas Jacob Kalappila 1.58
4. Vinod Vijayalekshmi Vasudevan 1.02
5. Asha Morley* 0.86
6. Alex Parackal George** 0.86
7. Kolasseril Chandramohanan Ranjani 0.54
8. Ravi Venkatraman 0.54
9. Biju Varkkey*** Nil
*
Asha Morley ceased to be a director with effect from December 12, 2022.
**
Alex Parackal George ceased to be a director with effect from December 12, 2022.
***
Biju Varkkey was appointed with effect from August 11, 2023 and therefore was paid NIL remuneration in Fiscal 2023.
^
Joseph Vadakkera Anthony ceased to be a director with effect from August 16, 2023.

Further, details of remuneration governing the appointment of our Part-Time Chairman and Non-Executive
Independent Director pursuant to RBI letter dated September 19, 2022 are as follows:

Particulars Remuneration^

Perquisites Including the Bank’s car with driver and the cost of the vehicle

255
 ^ Excludes sitting fees and reimbursement of expenses related to attending meetings of the Board and committees of the Board as decided by
the Board from time to time for the meetings of the Board and the Board committees under the provisions of the Companies Act, 2013.

3. Remuneration paid to the Non-Executive Directors:

Pursuant to the Board resolution dated December 3, 2022, each Non-Executive Director is entitled to receive sitting
fees of ₹0.06 million per meeting for attending meetings of the Board and sitting fees of ₹0.05 million per meeting for
attending meetings of the committees of the Board within the limits prescribed under the Companies Act, 2013, and
the rules made thereunder. The details of remuneration paid to our Non-Executive Directors during Fiscal 2023 are as
follows:

S. Name of Director Sitting fees paid

No. (in ₹ million)
1. Chandanathil Pappachan Mohan* 0.88
2. Saneesh Singh** 0.23
3. Ajayan Mangalath Gopalakrishnan Nair 0.79
4. John Samuel 0.54
* Chandanathil Pappachan Mohan ceased to be a director with effect from October 31, 2022.
**
Saneesh Singh ceased to be a director with effect from July 26, 2022.

Arrangement or understanding with major Shareholders, customers, suppliers or others

Except for John Samuel and Ajayan Mangalath Gopalakrishnan Nair, who have been appointed as Non-Executive Nominee
Directors on our Board by Kadambelil Paul Thomas and ESAF Financial Holdings Private Limited respectively, there is no
arrangement or understanding with the major shareholders, customers, suppliers or others, pursuant to which any Director was
appointed as a director.

Shareholding of Directors in our Bank

As per our Articles of Association, our Directors are not required to hold any qualification shares.

None of our Directors hold any employee stock options of the Bank.

The Equity Shares held by our Directors are as set out below:

Sr. Name of the Director No. of Equity Shares Percentage of the pre-Offer Equity
No. Share Capital (%)
1. Kadambelil Paul Thomas 31,186,785 6.94
Total 31,186,785 6.94

Shareholding of Directors in our subsidiaries and associate companies

Our Bank does not have any subsidiaries or associate companies.

Appointment of relatives of our Directors to any office or place of profit

None of the relatives of our Directors currently hold any office or place of profit in our Bank, except Miriam Ann Philip, an
employee of our Bank, who is the daughter-in-law of Kadambelil Paul Thomas.

Interests of Directors

All Directors may be deemed to be interested to the extent of fees payable to them for attending meetings of our Board or a
Committee thereof as well as to the extent of other remuneration and reimbursement of expenses payable to them under our
Articles of Association, and to the extent of remuneration paid to them for services rendered as an officer or employee of our
Bank. Some of our Directors may hold positions in ESAF Financial Holdings Private Limited. In consideration for these
services, they are paid managerial remuneration in accordance with the provisions of applicable law.

The Directors may also be regarded as interested in the Equity Shares, if any, held by them, relatives or that may be subscribed
by or allotted to the companies, firms and trusts, in which they are interested as directors, members, partners, trustees and
promoters, pursuant to this Offer. All of our Directors may also be deemed to be interested to the extent of any dividend payable
to them and other distributions in respect to the Equity Shares held by them.

One of our Promoters, Managing Director and Chief Executive Officer, Kadambelil Paul Thomas is a board member of ESAF
Foundation (formerly known as “Evangelical Social Action Forum”), with whom our Bank has entered into the Trademark
Agreement and pursuant to which ESAF Foundation has granted our Bank an exclusive, irrevocable license and right to use
certain trademarks. For details, see “History and Certain Corporate Matters - Key terms of other subsisting material
agreements” on page 247.

Other than Kadambelil Paul Thomas who is one of our Promoters, Managing Director and Chief Executive Officer of our Bank,
none of our Directors have any interest in the promotion or formation of our Bank.

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None of our Directors have any interest in any property acquired or proposed to be acquired of the Bank or by the Bank.

No amount or benefit has been paid or given within the two preceding years or is intended to be paid or given to any of our
Directors except the normal remuneration for services rendered as Directors.

No loans have been availed by our Directors from our Bank.

None of the beneficiaries of loans, advances and sundry debtors are related to the Directors of our Bank.

None of the Directors is party to any bonus or profit-sharing plan of our Bank other than the performance linked incentives
given to each of the Directors.

Changes in the Board in the last three years

Name Date of Appointment/ Reason

Change/Cessation
Joseph Vadakkekara Antony August 16, 2023 Retirement as a Non-Executive Independent Director
Biju Varkkey August 11, 2023 Appointment as an Additional Non-Executive Independent
Director^
Thomas Jacob Kalappila March 10, 2023 Re-appointment as Non-Executive Independent Director
Ajayan Mangalath Gopalakrishnan Nair December 13, 2022 Appointment as a Non-Executive Nominee Director
John Samuel December 13, 2022 Appointment as a Non-Executive Nominee Director
Ravi Venkatraman December 13, 2022 Appointment as a Non-Executive Independent Director
Kolasseril Chandramohanan Ranjani December 13, 2022 Appointment as a Non-Executive Independent Director
Vinod Vijayalekshmi Vasudevan December 13, 2022 Change in designation to a Non-Executive Independent Director
Alex Parackal George December 12, 2022 Cessation as a Non-Executive Independent Director
Asha Morley December 12, 2022 Cessation as a Non-Executive Independent Director
Chandanathil Pappachan Mohan October 31, 2022 Cessation as a Non-Executive Nominee Director
Saneesh Singh July 26, 2022 Cessation as a Non-Executive Nominee Director#
Vinod Vijayalekshmi Vasudevan December 22, 2021 Appointment as an Additional Non-Executive Independent
Director
Saneesh Singh December 13, 2021 Re-appointment as a Non-Executive Nominee Director
Kadambelil Paul Thomas October 1, 2021 Re-appointment as the Managing Director and Chief Executive
Officer
Santhosh George May 26, 2021 Resignation as a Non-Executive Independent Director*
Santhosh George December 8, 2020 Appointment as a Non-Executive Independent Director
*
Santhosh George resigned as a Non-Executive Independent Director due to potential conflict of interest arising on account of a new assignment that he
was in the process of taking.
#
Cessation of Saneesh Singh as a Non-Executive Nominee Director on account of ceasing to be a nominee of ESAF Financial Holdings Private Limited
^
The appointment of Biju Varkkey to the Board will be regularised in the ensuing annual general meeting.

Borrowing Powers of the Board

Pursuant to a resolution passed by the Shareholders of our Bank on February 16, 2022, the Board is authorised to borrow from
time to time any sums of moneys on such terms and conditions as the Board may think fit which together with the moneys
already borrowed by the Bank (apart from temporary loans obtained or to be obtained from the Bank’s bankers in the ordinary
course of business), and which may exceed the aggregate of the paid-up capital of the Bank, for the time being and its free
reserves, provided that the total outstanding amount so borrowed by the Board including commercial papers shall not result in
a borrowing outstanding in excess of ₹50,000 million.

Pursuant to a resolution passed by the Shareholders of our Bank on February 16, 2022, the Board is authorised to offer, issue
and allot, from time to time in one or more tranches, unsecured, rated, redeemable non-convertible debentures until the
conclusion of the sixth annual general meeting, on a private placement basis, for an amount not in excess of ₹3,000 million.

Corporate Governance

The corporate governance provisions of the Listing Regulations will be applicable to us immediately upon the listing of the
Equity Shares on the Stock Exchanges. We are in compliance with the requirements of the applicable regulations, including the
Listing Regulations, the Companies Act and the SEBI ICDR Regulations, in respect of corporate governance including
constitution of the Board and committees thereof and formulation and adoption of policies. The corporate governance
framework is based on an effective independent Board, separation of the Board’s supervisory role from the executive
management team and constitution of the Board committees, as required under law.

Our Board has been constituted in compliance with the Companies Act, the Listing Regulations, guidelines issued by the RBI
from time to time, and in accordance with best practices in corporate governance. The Board of Directors functions either as a
full board or through various committees constituted to oversee specific operational areas. The executive management provides
the Board of Directors detailed reports on its performance periodically.

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The composition of our Board is also in compliance with the Banking Regulation Act, SFB Licensing Guidelines and conditions
stipulated by the RBI Final Approval and RBI In-Principle Approval. Further, pursuant to letters dated December 8, 2016,
March 9, 2017, May 30, 2017 for the constitution of our Board, the RBI:

a) approved the appointment of Kadambelil Paul Thomas as Managing Director and Chief Executive Officer for a period
of three years from the date of his taking charge, subject to the condition that he relinquishes his position on the board
of ESAF Financial Holdings Private Limited and submits an undertaking to divest his shareholding in ESAF Financial
Holdings Private Limited within a period of one year before taking charge as Managing Director and Chief Executive
Officer in compliance with Section 10B(4) of the Banking Regulation Act. Kadambelil Paul Thomas was unable to
comply with some of the conditions of the RBI letter and was directed by the RBI to step down from his position as
managing director and chief executive officer. Kadambelil Paul Thomas resigned from this position on June 2, 2018
and re-joined on October 1, 2018 with the approval of RBI letter dated October 1, 2018. For further details, see “Risk
Factors - We are dependent on our Key Managerial Personnel, Senior Management Personnel and other key
personnel, and the loss of, or our inability to attract or retain, such persons could adversely affect our business,
financial condition, results of operations and cash flows. The attrition rate of rate of Key Managerial Personnel and
Senior Management Personnel (combined) was nil, 15.38%, 16.67% and 9.90% for the three months period ended
June 30, 2023 and Fiscals 2023, 2022 and 2021, respectively” and “Outstanding Litigation and Material
Developments – Litigation against Kadambelil Paul Thomas” on pages 82 and 430, respectively;

b) approved the appointment of Asha Morley and Alex Parackal George;

c) approved the nomination of George Joseph as director on the Board, and approved the nomination of Assan Khan
Akbar as director on the Board for a period of four years from the date of his joining the Board;

d) approved the appointment of Joseph Vadakkekara Antony as a Non-Executive Independent Director on the Board; and

e) reiterated that the Bank shall ensure compliance with Sections 10A, 16 and 20 of the Banking Regulation, statutory
provisions including provisions of the Companies Act, 2013 and the instructions issued vide RBI circulars dated March
5, 1994 and July 1, 1994, respectively.

Subsequently, pursuant to RBI letter dated October 1, 2018, the RBI approved the appointment of Kadambelil Paul Thomas as
the Managing Director and Chief Executive Officer of our Bank for a period of three years from the date of his taking charge.
Pursuant to RBI letter dated July 20, 2021 the RBI approved the re-appointment of Kadambelil Paul Thomas as the Managing
Director and Chief Executive Officer of our Bank for a period of three years with effect from October 1, 2021.

Pursuant to RBI letter dated December 19, 2019, the RBI approved the appointment of Ravimohan Periyakavil Ramakrishnan
as the Part-Time Chairman and Non-Executive Independent Director of our Bank for a period of three years with effect from
December 21, 2019. Pursuant to RBI letter dated September 19, 2022, the RBI approved the re-appointment of Ravimohan
Periyakavil Ramakrishnan as the Part-Time Chairman of our Bank for a period of three years with effect from December 21,
2022.

Committees of the Board

Audit Committee

The members of the Audit Committee are:

1. Thomas Jacob Kalappila (Chairman);

2. Ravi Venkatraman (member);

3. Kolasseril Chandramohanan Ranjani (member); and

4. John Samuel (member).

The Audit Committee was constituted by a meeting of the Board of Directors held on December 13, 2016 and was last
reconstituted on August 11, 2023. The scope and function of the Audit Committee is in accordance with Section 177 of the
Companies Act, 2013, the Listing Regulations and the guidelines issued by the RBI from time to time. The terms of reference
of the Audit Committee include the following:

1. Review and monitor the accuracy and completeness of books of account, published financial statement including
disclosures and any public announcements related to the Bank’s financial performance and the auditor’s report.

2. Oversight of the Bank’s financial reporting process and the disclosure of its financial information to ensure that the
financial statement is correct, sufficient and credible.

3. Review the Bank’s internal financial controls and the internal controls and compliance systems.

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4. Recommending the appointment and removal of external auditor, fixation of audit fee and also approval for payment
for any other services.

5. Reviewing, with the management, the quarterly, half yearly financial statements before submission to the Board for
approval.

6. To oversee a vigil mechanism set up by the Bank under the provisions of the Companies Act, 2013, Companies
(Meetings of Board and its Powers) Rules, 2014 and the SEBI (Listing Obligations and Disclosure) Requirements,
2015.

7. With respect to internal audit function:

a. Review, approve and oversee implementation the annual audit plan and annual audit budget prior to the
beginning of each financial year proposed by the Head of Internal Audit. The annual audit plan shall include
the scope of the work, the branches to be covered, the areas and topics to be covered and any specific emphasis
on matters which the Committee may require.

b. Review and approve the remit of the internal audit function and ensure it has adequate resources, skills,
qualifications and appropriate access to information to enable it to perform its function effectively.

c. Examine the reporting arrangement and the level of seniority of the Head of Internal Audit.

d. Monitor the reporting of issues identified by internal auditors to the management and ensure that corrective
actions are being taken in a timely manner.

e. Review appointment, replacement, removal, performance, terms of appointment, annual compensation and
salary adjustment of the Head of Internal Audit.

f. Review the internal audit budget, resource plan, activities, and organizational structure of the internal audit
function with the Head of Internal Audit.

g. Review the effectiveness of the internal audit function, including conformance with applicable regulatory
requirements and industry standards.

h. Review results of thematic reviews, management audits and appointment of any co-sourcing auditors.

i. Ensure that IS Audit of internal systems and processes is conducted at least once in 2 years to assess the
operational risks faced by the Bank.

8. With respect to statutory auditors:

a. Ensure that appointment of statutory auditors is in compliance with Companies’ Act, 2013 requirements,
regulatory guidelines and other applicable laws. The Audit committee shall review Appointment of statutory
auditors and review of performance - both for domestic and overseas operations.

b. Oversee relationship with statutory auditors with respect to their remuneration for services, terms of
engagement, assessment of their independence and rotation of auditors.

c. Ensure that any concerns raised by the statutory auditors are addressed by the management and bring any
unaddressed concerns to the notice of the management.

d. Evaluate the scope of statutory audit and ensure that there are no limitations placed by the management on
the statutory auditors.

e. Review management letter(s) and other submissions by the statutory auditors and management response to
the findings and recommendations of the statutory auditors.

f. Study the issues raised by statutory auditors and raise appropriate flags to the management in case of repeated
issues.

g. Review and approve policy on supply of non-audit services by statutory auditors, taking into account any
relevant statutory requirements, regulatory guidelines and ethical guidance on the matter.

h. Approval of payment to statutory auditors for any other services rendered by the statutory auditors.

i. Review any difficulties encountered during the audit work including any restrictions on the scope of activities
or access to required information.

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9. With respect to compliance function:

a. Review the effectiveness of the system for monitoring and compliance with laws and regulations and the
results of management’s investigation and follow-up (including disciplinary action) of any instances of non-
compliance.

b. Review of Compliance Function of the Bank to ensure that an appropriate compliance policy is in place to
manage compliance risk and ensure that compliance issues are resolved effectively and expeditiously.

c. Review the findings of any examinations by regulatory agencies, and any audit observations.

d. Review the process for communicating the Code of Conduct to Bank personnel, and for monitoring
compliance therewith.

e. Obtain regular updates from management regarding compliance matters.

f. Reviewing Quarterly Compliance Report confirming adherence to all the applicable laws, rules, guidelines,
instructions and internal instructions/manuals.

10. Review the annual financial statements and auditors’ report with the management with particular reference to the
following:

a. Matters to be included in the directors’ responsibility statement.

b. Change in the accounting policies and practices, if any, with reasons for the same.

c. Major accounting entries involving estimates based on the exercise of judgment by management.

d. Significant adjustments made in the financial statements arising out of audit findings.

e. Compliance with listing and other legal and regulatory requirements relating to financial statements.

f. Disclosure of related party transactions.

g. Modified opinions in the draft audit report.

h. Qualifications if any in draft audit report.

i. The going concern assumption.

j. Compliance with applicable legal requirement concerning financial statements.

k. Compliance with accounting standards.

11. Assess if any major findings of the internal, statutory, or RBI audits point to the quality of the accounting process and
review if appropriate corrective action has been taken by the management.

12. To review the Vigilance Function of the Bank including review of frauds reported.

13. To review the frauds reported quarterly and annually.

14. Review the findings of any internal investigations by the internal auditors (or other agencies) into matters where there
is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter
to the Board.

15. Review and scrutinize matters including the inter-corporate loans and investments, transactions with related parties,
valuation of undertakings or assets of the Bank and end-use of funds raised through public offers such as public issue,
rights issue or preferential issue.

16. Review the system of storage and retrieval, display or printout of books of account maintained in electronic mode
during the required period under law.

17. Review with Senior Management of the Bank, overall anti-fraud programmes and controls in the Bank.

18. Look into the reasons for substantial defaults in the payment to depositors, debenture holders (if any), shareholders (in
case of non-payment of declared dividends) and creditors.

19. Confirm that an effective whistle blower policy is in place that protects the complainants and review implementation
of this policy.

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20. Recommend the appointment of the Chief Financial Officer and Head of Internal Audit after assessing the
qualifications, experience and background, etc. of the candidate.

21. Seek the statement of identified deviations from laid down policies. Study these deviations from financial and
procedural aspect to understand any significant need for change in policies.

22. Perform any other duties and responsibilities expressly delegated by the Board from time to time and provide the Board
with such assurance as it may require regarding the reliability of financial information.

23. Approval transactions with related parties of the Bank including investments.

24. Consider and comment on rationale, cost-benefits and impact of schemes involving merger, demerger, amalgamation
etc., on the Bank and its shareholders.

25. In relation to a monitoring agency appointed to monitor the utilization of proceeds of a public issue or right issue or
preferential issue or qualified institutions placements, the monitoring report of such agency shall be placed before the
Audit Committee on a quarterly basis, promptly upon its receipt.

The Audit Committee shall mandatorily review the following information:

1. management discussion and analysis of financial condition and results of operations;

2. management letters / letters of internal control weaknesses issued by the statutory auditors;

3. internal audit reports relating to internal control weaknesses;

4. the appointment, removal and terms of remuneration of the internal auditor shall be subject to review by the Audit
Committee; and

5. statement of deviations as and when becomes applicable:

a. quarterly statement of deviation(s) including report of monitoring agency, if applicable, submitted to stock
exchange(s) in terms of Regulation 32(1) of SEBI (LODR) Regulations, 2015.

b. annual statement of funds utilized for purposes other than those stated in the offer document/prospectus/notice
in terms of SEBI (LODR) Regulations, 2015.

The Chairman of the Committee shall attend the annual general meetings of the Bank to provide any clarification on matters
relating to audit.

The Audit Committee is required to meet at least six times in a year and not more than 120 days shall elapse between two
meetings under the terms of the Listing Regulations.

Nomination, Remuneration and Compensation Committee

The members of the Nomination, Remuneration and Compensation Committee are:

1. Biju Varkkey (Chairman);

2. Ravimohan Periyakavil Ramakrishnan (member);

3. Kolasseril Chandramohanan Ranjani (member); and

4. Ajayan Mangalath Gopalakrishnan Nair (member).

The Nomination, Remuneration and Compensation Committee was constituted by a meeting of the Board of Directors held on
December 13, 2016 and was last reconstituted on August 11, 2023. The scope and function of the Nomination, Remuneration
and Compensation Committee is in accordance with Section 178 of the Companies Act, 2013, guidelines issued by the RBI
from time to time, and the Listing Regulations. The terms of reference of the Nomination, Remuneration and Compensation
Committee include:

1. Put in place appropriate procedures for determining the suitability of persons qualified to become members of the
Board of Directors and formulate criteria based on qualification, experience, track record and integrity for appointment
of such Directors.

2. Recommend to the Board for appointment of directors if directors are found suitable as per defined criteria.

3. Recommend removal / reappointment of the directors and shall specify the manner for effective evaluation of
performance of Board, its committees and individual directors to be carried out either by the Board, by the Committee
or by an independent external agency and review its implementation and compliance.
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4. Assist the Board in formulation, review and implementation of the compensation policy related to specific
remuneration packages for directors, key management personnel and other employees including pension rights and
any other compensation payment.

5. Ensure that the remuneration for Managing Director and Chief Executive Officer and other senior management
personnel is in accordance with the Financial Stability Board principles before it is put up for regulatory approval.

6. Formulating criteria for evaluation of performance of independent directors and the Board of Directors.

7. Human Resources

a. Review and administer the implementation of policies and procedures with respect to performance,
evaluations, compensation, succession any other matters of Senior/ executive Management and also
recommendations respecting the salary ranges for employees and Senior/ executive Management.

b. Matters relating to issue of sweat equity shares, ESOP, etc. to the directors and senior/executive management.

c. Assist the Board in formulation and implementation of compensation policy which will lay down the
remuneration to directors and key management personnel and take inputs from the Risk Management
Committee of the Board to ensure balance between remuneration and risks. The mix of cash, equity and other
forms of compensation must be consistent with risk alignment.

d. Ensure that the compensation policy formulated for remuneration of directors and key managerial personnel
is reasonable, sufficient to attract, retain and motivate quality directors required to run the Bank.

e. Devise a policy in line with the Securities and Exchange Board of India (Listing Obligation and Disclosure
Requirements) Regulations, 2015 on Diversity of Board of Directors based on diversity of thought,
experience, knowledge, perspective and gender in the Board.

f. Identifying persons who are qualified to become part of the senior management and recommend to the board
of directors for their appointment and removal.

g. Matters pertaining to the extension or continuation of the term of appointment of independent director on the
basis of the report of performance evaluation of independent directors in line with the Securities and Exchange
Board of India (Listing Obligation and Disclosure Requirements) Regulations, 2015.

8. Appointment of Directors and their remuneration

a. Formulate comprehensive criteria for appointment of directors in terms of qualifications, positive attributes,
independence, professional experience, track record and integrity of the person.

b. For every appointment of an independent director, the Nomination and Remuneration Committee shall
evaluate the balance of skills, knowledge and experience on the Board and on the basis of such evaluation,
prepare a description of the role and capabilities required of an independent director. The person
recommended to the Board for appointment as an independent director shall have the capabilities identified
in such description. For the purpose of identifying suitable candidates, the Committee may:

• Use the services of an external agencies, if required.

• Consider candidates from a wide range of backgrounds, having due regard to diversity.

• Consider the time commitments of the candidates.

c. Consider all information about the Directors/ Managing Director and Chief Executive Officer / Whole time
Directors such as background details, past remuneration, recognition and awards, job profile and determine
if the directors meet the ‘fit and proper’ criteria.

d. Conduct appropriate due diligence and scrutinize the declarations made by probable candidates at the time of
appointment/ re-appointment of directors of the Board.

e. Hold Committee meetings on discussion of matters pertaining to the remuneration payable, including any
revision in remuneration payable to Managing Director and Chief Executive Officer, Directors and approve
such payments by passing resolution passed by the Committee after taking into account the financial position
of the Bank, trend in the industry, qualification, experience and past performance of the appointee.

f. Bring about objectivity in determining the remuneration package while striking the balance between the
interest of the Bank and the Shareholders.

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 g. Ensure that the compensation for Managing Director and Chief Executive Officer and key management
personnel is a mix of fixed and variable (incentive) pay for directors and key management personnel conforms
with the RBI Guidelines on Compensation of Whole Time Directors/ Chief Executive Officers/ Material Risk
takers and Control function staff, etc. dated November 04, 2019 and August 30, 2021 and other applicable
provisions.

h. Assist in defining the performance evaluation criteria for directors and other key management personnel and
ensure that relationship of remuneration to performance is clear and meets appropriate performance
benchmarks.

i. Analyse and ensure that the cost/ income ratio of the Bank supports the remuneration package consistent with
maintenance of sound capital adequacy ratio.

j. To represent the committee and answer queries of investors at the annual general meeting of the Bank.

k. Review annually its own performance and terms of reference to ensure effectiveness of its operations and
recommend changes, if any to the Board for approval.

l. Ensure that appropriate procedures are in place to assess Board Membership needs and Board effectiveness.

m. Ensure that the Bank has a detailed succession and management continuity plan for key positions.

9. Board

a. Make recommendations to the Board with respect to:

• Selection and nomination of qualified candidates as directors of the Board

• Appointment of other key management personnel and senior level executives who are one level
below the Whole Time Directors

• Board composition and size

• Re-appointment/ removal of existing directors

b. Present the minutes of the meetings of the Committee as approved by the Chairman of the Committee to be
noted and confirmed by the Board in its subsequent meeting.

Risk Management Committee

The members of the Risk Management Committee are:

1. Ravi Venkatraman (Chairman);

2. Ravimohan Periyakavil Ramakrishnan (member);

3. Kadambelil Paul Thomas (member);

4. Thomas Jacob Kalappila (member); and

5. Ajayan Mangalath Gopalakrishnan Nair (member).

The Risk Management Committee was constituted by our Board of Directors at their meeting held on December 13, 2016 and
was last reconstituted by the Board of Directors at their meeting held on December 3, 2022. The terms of reference of the Risk
Management Committee of our Bank include the following:

The Risk Management Committee shall also oversee the following functions:

1. Oversee risk management and obtain assurance that all the principal risks faced by the Bank have been identified and
are being appropriately managed.

2. Approve / recommend to the Board for its approval / review the policies, risk assessment models, strategies and
associated frameworks for the management of risk.

3. Approve and periodically review Bank’s overall risk appetite and set limits for all risks before submission to the Board.

4. Ensure appropriate risk organisation structure with authority and responsibility clearly defined, adequate staffing, and
the independence of Risk Management functions.

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5. Provide appropriate and prompt reporting to the Board of Directors, which would help the Board to have a detailed
understanding of the level of risk and steps taken for managing risks.

6. Review reports from management about the Bank’s risk management framework (i.e. principles, policies, strategies,
process and controls) and also discretions conferred on executive management, in order to oversee the effectiveness
of them.

7. Review and approve the Internal Capital Adequacy Assessment Process (ICAAP) document on a quarterly basis.

8. Review reports from management about changes in the factors relevant to the Bank’s projected strategy, business
performance or capital adequacy.

9. Determine prudential limits for individuals, groups, portfolios, geographies, sectors, industries and various other
exposures of the Bank, within the ceilings fixed by RBI and the Board.

10. Review reports from management about implications of new and emerging risks, legislative or regulatory initiatives
and changes, organisational change and major initiatives, in order to monitor them.

11. Review the Cyber Security Functions of the Bank on regular intervals.

12. Ensure adherence to the Board approved internal policy guidelines and also statutory and regulatory guidelines.

13. Review performance and set objectives for the Bank’s Chief Risk Officer and ensure he has unfettered access to the
Board.

14. Oversee statutory / regulatory reporting requirements related to risk management.

15. Monitor and review the capital adequacy computation with an understanding of methodology, systems and data and
ensure capital adequacy management with due regard to various risks impacting the balance sheet.

16. Approve the stress testing results, review the performance of product wise/geography wise /rating wise loan portfolio,
rating migration of accounts, collection/recovery in NPA accounts etc. and recommend / monitor the action plans and
corrective measures periodically.

17. Monitor and review the exposure limits set by the Board.

18. Monitor and review of non-compliance, limit breaches, audit / regulatory findings, and policy exceptions with respect
to risk management.

19. Review and confirm order/decisions for identification of wilful defaulters given by the Credit Risk Management
Committee.

20. Monitor the Bank’s credit risk profile, including risk trends and concentrations, loan impairment etc.

21. Determine /amend/review the functions of the Executive Level Committees from time to time.

22. To formulate a detailed risk management policy which shall include:

(i) A framework for identification of internal and external risks specifically faced by the Bank, in particular
including financial, operational, sectoral, sustainability (particularly, ESG related risks), information, cyber
security risks or any other risk as may be determined by the Committee.

(ii) Measures for risk mitigation including systems and processes for internal control of identified risks.

(iii) Business continuity plan.

23. To ensure that appropriate methodology, processes and systems are in place to monitor and evaluate risks associated
with the business of the Bank.

24. To monitor and oversee implementation of the risk management policy, including evaluating the adequacy of risk
management systems.

25. To periodically review the risk management policy, at least once in two years, including by considering the changing
industry dynamics and evolving complexity.

26. To keep the Board of Directors informed about the nature and content of its discussions, recommendations and actions
to be taken.

27. The appointment, removal and terms of remuneration of the Chief Risk Officer (if any) shall be subject to review by
the Risk Management Committee.
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28. To coordinate its activities with other committees, in instances where there is any overlap with activities of such
committees, as per the framework laid down by the board of directors.

29. In terms of the circular issued by the RBI vide no. DBR.BP.BC.No.65/21.04.103/2016-17 dated April 27, 2017, the
Committee shall meet the Chief Risk Officer on one to one basis without the presence of Managing Director & Chief
Executive Officer and Senior Management, at least on a quarterly basis.

Stakeholders’ Relationship Committee

The members of the Stakeholders’ Relationship Committee are:

1. Kolasseril Chandramohanan Ranjani (Chairman);

2. Kadambelil Paul Thomas (member);

3. Ravi Venkatraman (member); and

4. John Samuel (member).

The Stakeholders’ Relationship Committee was constituted by our Board of Directors at their meeting held on December 23,
2019 and was last reconstituted by the Board of Directors at their meeting held on June 22, 2023. The scope and function of the
Stakeholders’ Relationship Committee is in accordance with Section 178 of the Companies Act, 2013 and the Listing
Regulations. The terms of reference of the Stakeholders’ Relationship Committee are as follows:

1. To resolve the grievances of the security holders of the Bank including complaints related to transfer/transmission of
shares, non-receipt of annual report, non-receipt of declared dividends, issue of new/duplicate certificates, general
meetings etc. and assisting with quarterly reporting of such complaints;

2. To review of measures taken for effective exercise of voting rights by shareholders;

3. To review of adherence to the service standards adopted by the Bank in respect of various services being rendered by
the Registrar & Share Transfer Agent;

4. To review of the various measures and initiatives taken by the Bank for reducing the quantum of unclaimed dividends
and ensuring timely receipt of dividend warrants/annual reports/statutory notices by the shareholders of the Bank;

5. Carrying out such other functions as may be specified by the Board from time to time or specified/provided under the
Companies Act or Listing Regulations or by any other regulatory authority;

6. To approve, register, refuse to register transfer or transmission of shares and other securities and issue of duplicate
share certificates; and

7. To sub-divide or consolidate any share or other securities certificate(s) of the Bank.

Corporate Social Responsibility and Sustainability Committee

The members of the Corporate Social Responsibility and Sustainability Committee are:

1. John Samuel (Chairman);

2. Kadambelil Paul Thomas (member);

3. Kolasseril Chandramohanan Ranjani (member); and

4. Thomas Jacob Kalappila (member).

The Corporate Social Responsibility and Sustainability Committee was constituted as ‘Corporate Social Responsibility
Committee’ by our Board of Directors at their meeting held on August 17, 2017 and was renamed to Corporate Social
Responsibility and Sustainability Committee in the meeting held on June 29, 2021. The Committee was last reconstituted by
the Board of Directors at their meeting held on December 3, 2022. The terms of reference of the Corporate Social Responsibility
and Sustainability Committee of our Bank include the following:

1. Formulate and recommend to the Board of the Bank, a Corporate Social Responsibility (“CSR”) policy which shall
indicate the activities to be undertaken by the Bank in areas or subject, specified in Schedule VII of the Companies’
Act, 2013.

2. Recommend the amount of expenditure to be incurred on the activities provided for in the CSR policy.

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3. Implementing and Monitoring the effectiveness of the corporate social responsibility policy from time to time and
issuing necessary directions as required for proper implementation and timely completion of corporate social
responsibility programmes.

4. Identifying corporate social responsibility policy partners and corporate social responsibility policy programmes

5. Coordinating with the implementing agency in implementing programs and executing initiatives as per CSR policy of
the Bank.

6. Identifying and appointing the corporate social responsibility team of the Bank including corporate social
responsibility manager, wherever required.

7. Institute a transparent monitoring mechanism for implementation of the CSR projects or programs or activities
undertaken by the Bank.

8. Implementing and monitoring the effectiveness of the Environment, Social and Governance (ESG) Policy from time
to time and issuing necessary directions as required for proper implementation.

IPO Steering Committee

The members of the IPO Steering Committee are:

1. Ravimohan Periyakavil Ramakrishnan (Chairman);

2. Kadambelil Paul Thomas (member); and

3. Ravi Venkatraman (member).

The IPO Steering Committee was constituted by our Board of Directors on August 6, 2019 and was last reconstituted on August
11, 2023. The terms of reference of the IPO Steering Committee are as follows:

1. To make applications, seek clarifications, obtain approvals and seek exemptions from, where necessary, the RBI,
SEBI, the relevant registrar of companies and any other governmental or statutory authorities as may be required in
connection with the Offer and accept on behalf of the Board such conditions and modifications as may be prescribed
or imposed by any of them while granting such approvals, permissions and sanctions as may be required and wherever
necessary, incorporate such modifications/amendments as may be required in the draft red herring prospectus, the red
herring prospectus and the prospectus as applicable;

2. To finalize, settle, approve, adopt and file in consultation with the Promoter Selling Shareholder and BRLMs where
applicable, the draft red herring prospectus, the red herring prospectus, the prospectus, the abridged prospectus and
application forms, the preliminary and final international wrap and any amendments, supplements, notices, addenda
or corrigenda thereto, and take all such actions as may be necessary for the submission and filing of these documents
including incorporating such alterations/corrections/modifications as may be required by SEBI, the RoC or any other
relevant governmental and statutory authorities or in accordance with applicable laws;

3. To decide in consultation with the Selling Shareholders and the BRLMs on the Offer Price;

4. To decide in consultation with the Promoter Selling Shareholder and BRLMs, as applicable, the Offer size, timing,
pricing, Discount, Reservation and all the terms and conditions of the Offer, including the price band (including offer
price for anchor investors), bid period, discount (if any), reservation, determining the anchor investor portion and
allocating such number of Equity Shares to anchor investors in consultation with the BLRMs and to do all such acts
and things as may be necessary and expedient for, and incidental and ancillary to the Offer including to make any
amendments, modifications, variations or alterations in relation to the Offer in accordance with applicable laws;

5. To appoint, enter into and terminate arrangements with the BRLMs, underwriters to the Offer, syndicate members to
the Offer, brokers to the Offer, escrow collection bankers to the Offer, refund bankers to the Offer, registrars, legal
advisors, auditors and any other agencies or persons or intermediaries to the Offer and to negotiate, finalise and amend
the terms of their appointment, including but not limited to the execution of the mandate letter with the BRLMs and
negotiation, finalization, execution and, if required, amendment of the offer agreement with the BRLMs, in accordance
with the provisions of the SEBI regulations and other applicable laws;

6. To negotiate, finalise and settle and to execute and deliver or arrange the delivery of the draft red herring prospectus,
the red herring prospectus and the prospectus, offer agreement, syndicate agreement, underwriting agreement, share
escrow agreement, cash escrow agreement, agreements with the registrar to the Offer and all other documents, deeds,
agreements and instruments whatsoever with the registrar to the Offer, legal advisors, auditors, stock exchange(s),
BRLMs, any Selling Shareholders in the Offer and any other agencies/intermediaries in connection with the Offer with
the power to authorize one or more officers of the Bank to execute all or any of the aforesaid documents or any
amendments thereto as may be required or desirable in relation to the Offer;

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7. To seek, if required, the consent and/or waiver of the lenders of the Bank, customers, parties with whom the Bank has
entered into various commercial and other agreements, all concerned government and regulatory authorities in India
or outside India, and any other consents and/or waivers that may be required in relation to the Offer or any actions
connected therewith;

8. To open and operate bank accounts in terms of the escrow agreement and to authorize one or more officers of the Bank
to execute all documents/deeds as may be necessary in this regard;

9. To open and operate bank accounts of the Bank in terms of Section 40(3) of the Companies Act, as amended, or as
may be required by the regulations issued by SEBI and to authorize one or more officers of the Bank to execute all
documents/deeds as may be necessary in this regard;

10. To authorize and approve incurring of expenditure and payment of fees, commissions, brokerage, remuneration and
reimbursement of expenses in connection with the Offer;

11. To accept and appropriate the proceeds of the Offer in accordance with the applicable laws;

12. To approve code of conduct as may be considered necessary by the IPO Steering Committee or as required under
applicable laws, regulations or guidelines for the Board, officers of the Bank and other employees of the Bank;

13. To approve the implementation of any corporate governance requirements that may be considered necessary by the
Board or the IPO Steering Committee or as may be required under the applicable laws or the SEBI Listing Regulations,
as amended and listing agreements to be entered into by the Bank with the relevant stock exchanges, to the extent
allowed under law;

14. To issue receipts/allotment letters/confirmation of allotment notes either in physical or electronic mode representing
the underlying Equity Shares in the capital of the Bank with such features and attributes as may be required and to
provide for the tradability and free transferability thereof as per market practices and regulations, including listing on
one or more stock exchange(s), with power to authorize one or more officers of the Bank to sign all or any of the
aforestated documents;

15. To authorize and approve notices, advertisements in relation to the Offer in consultation with the Promoter Selling
Shareholder and relevant intermediaries appointed for the Offer;

16. To do all such acts, deeds, matters and things and execute all such other documents, etc., as maybe deemed necessary
or desirable for such purpose, including without limitation, to finalise the basis of allocation and to allot the shares to
the successful allottees as permissible in law, issue of allotment letters/confirmation of allotment notes, share
certificates in accordance with the relevant rules, in consultation with the Promoter Selling Shareholder and BRLMs;

17. To do all such acts, deeds and things as may be required to dematerialise the Equity Shares and to sign and/or modify,
as the case maybe, agreements and/or such other documents as may be required with the National Securities Depository
Limited, the Central Depository Services (India) Limited, registrar and transfer agents and such other agencies,
authorities or bodies as may be required in this connection and to authorize one or more officers of the Bank to execute
all or any of the aforestated documents;

18. To make applications for listing of the Equity Shares in one or more stock exchange(s) for listing of the Equity Shares
and to execute and to deliver or arrange the delivery of necessary documentation to the concerned stock exchange(s)
in connection with obtaining such listing including without limitation, entering into listing agreements and affixing
the common seal of the Bank where necessary;

19. To settle all questions, difficulties or doubts that may arise in regard to the Offer, including such issues or allotment,
terms of the IPO, utilisation of the IPO proceeds and matters incidental thereto as it may deem fit;;

20. To submit undertaking/certificates or provide clarifications to the SEBI, RoC and the relevant stock exchange(s) where
the Equity Shares are to be listed;

21. To negotiate, finalize, settle, execute and deliver any and all other documents or instruments and to do or cause to be
done any and all acts or things as the IPO Steering Committee may deem necessary, appropriate or advisable in order
to carry out the purposes and intent of this resolution or in connection with the Offer and any documents or instruments
so executed and delivered or acts and things done or caused to be done by the IPO Steering Committee shall be
conclusive evidence of the authority of the IPO Steering Committee in so doing;

22. To delegate any of its powers set out under 1 to 16 hereinabove, as may be deemed necessary and permissible under
applicable laws to the officials of the Bank;

23. To approve suitable policies on insider trading, whistle-blowing, risk management, and any other policies as may be
required under the Listing Regulations or any other applicable laws;

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24. To approve the list of ‘group of companies’ of the Bank, identified pursuant to the materiality policy adopted by the
Board, for the purposes of disclosure in the draft red herring prospectus, the red herring prospectus and the prospectus;

25. Deciding, negotiating and finalising the pricing and all other related matters regarding the Pre-IPO Placement,
including the execution of the relevant documents with the investors in consultation with the BRLMs and in accordance
with applicable laws;

26. Taking on record the approval of the Selling Shareholders for offering their Equity Shares in the Offer for Sale;

27. Authorizing of the maintenance of a register of holders of the Equity Shares; and

28. To withdraw the draft red herring prospectus or the red herring prospectus or to decide to not proceed with the Offer
at any stage in accordance with applicable laws and in consultation with the Promoter Selling Shareholder and BRLMs.

Other committees of our Bank

In addition to the committees mentioned in “ - Committees of the Board” on page 258, our Bank has constituted various other
committees at the Board level, namely, Management Committee, IT Strategy Committee, Customer Service Committee, High
Value Fraud Monitoring Committee and Human Resource Committee. Our Bank has also constituted executive committees,
such as but not limited to, Management Committee of Executives, Market Risk - Asset Liability Management Committee,
Credit Risk Management, Business Correspondent/ Business Facilitators Committee, Product and Process Committee,
Financial Inclusion Committee, Outsourcing Vendor Assessment Committee, Procurement Evaluation Committee, Project
Management Committee, IT Steering Committee of Executives and Executive Credit Committee to oversee and govern various
internal functions and activities of the Bank.

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Management Organisation Chart

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Key Managerial Personnel

The details of the Key Managerial Personnel of our Bank are as follows:

Kadambelil Paul Thomas is the Managing Director and Chief Executive Officer of our Bank. For details in relation to
Kadambelil Paul Thomas, see “- Brief Biographies of Directors” on page 253. For details of compensation paid to him, see
“Terms of Appointment of Directors” on page 254.

Gireesh C.P. is the Chief Financial Officer of our Bank. He holds a bachelor’s degree in science from Mahatma Gandhi
University. He is a fellow member of the Institute of Chartered Accountants of India and a certified associate of the Indian
Institute of Banking and Finance. He was previously the chief financial officer of South Indian Bank Limited. He joined as the
Chief Financial Officer of our Bank with effect from September 5, 2018. During Fiscal 2023, he received a remuneration of
₹5.48 million from our Bank.

Ranjith Raj P is the Company Secretary and Compliance Officer of our Bank. He holds a bachelor’s degree in commerce from
Calicut University. He is a company secretary and is an associate of the Institute of Company Secretaries of India. He was
previously employed as company secretary of ESAF Financial Holdings Private Limited. He joined as the Company Secretary
of our Bank with effect from March 29, 2017 and was appointed as the Compliance Officer of our Bank with effect from
December 11, 2019. During Fiscal 2023, he received a remuneration of ₹2.26 million from our Bank.

George Kalaparambil John is the Executive Vice President – IT and Operations of our Bank. He holds a bachelor’s degree
in commerce from Mahatma Gandhi University, a master’s degree in social work from Pune University, and a master’s degree
in business administration in Fintech from the Birla Institute of Technology & Science, Pilani. He was previously employed as
the general manager – operations of ESAF Financial Holdings Private Limited and was an associate director – central zone of
ESAF Foundation (formerly known as Evangelical Social Action Forum). He joined our Bank on March 10, 2017 and was
appointed as the Executive Vice President – Business of our Bank with effect from June 13, 2018. During Fiscal 2023, he
received a remuneration of ₹5.30 million from our Bank.

George Thomas is the Executive Vice President – Corporate Services of our Bank. He holds a master’s degree of science in
ecology and environment from Sikkim Manipal University. He was previously a senior agriculture officer (assistant director
agriculture) with the Department of Agriculture Development and Farmers’ Welfare, Wayanad district. He joined our Bank on
March 10, 2017 as an executive vice president and resigned on May 31, 2018. He subsequently re-joined our Bank and was
appointed as the Executive Vice President – Corporate Services of our Bank. His present term is valid for a period of 12 months
from June 1, 2023, renewable at the sole discretion of the Bank and subject to fulfilment of conditions stipulated by our Bank.
During Fiscal 2023, he received a remuneration of ₹4.85 million from our Bank.

Hari Velloor is the Executive Vice President - Network - 1 South of our Bank. He holds a bachelor’s degree in arts (history)
from University of Delhi and a master’s degree in arts (political science) from Madurai Kamaraj University. He was previously
a senior vice president of HDFC Bank. He was appointed as the Executive Vice President – Network - 1 (South) on June 1,
2022. His present term is with effect from June 1, 2023, and his term is valid for 12 months. During Fiscal 2023, he received a
remuneration of ₹4.93 million from our Bank.

Hemant Kumar Tamta is the Executive Vice President - Network - 2 Rest of India of our Bank. He holds a bachelor’s degree
in law from University of Delhi. He has completed a course in banking and finance from the National Institute of Bank
Management, Pune. He was previously an executive director of Bank of Maharashtra, Pune. He was also employed with Canara
Bank as a general manager. He was appointed as the Executive Vice President – Network - 2 Rest of India with effect from
August 1, 2022, and his term is valid for 12 months. During Fiscal 2023, he received a remuneration of ₹3.09 million from our
Bank.

E.A. Jacob is the Head – Vigilance and Chief of Internal Vigilance of our Bank. He holds a bachelor’s degree in science from
Kerala University. He was previously employed at M/s. South Indian Bank Limited and retired as a Deputy General Manager
in Audit Department bank’s head office. He was appointed as the Chief of Internal Vigilance with effect from September 30,
2021 and his term is valid for a period of three years. During Fiscal 2023, he received a remuneration of ₹1.45 million from our
Bank.

Sudev Kumar V is the Head – Compliance and Chief Compliance Officer of our Bank. He holds a bachelor’s degree in science
(agriculture) from Kerala Agriculture University and master’s degree in science (horticulture) form Kerala Agriculture
University. He has previously worked with Canara Bank. He was appointed as the Chief Compliance Officer with effect from
December 15, 2021 and his term is valid for a period of three years. During Fiscal 2023, he received a remuneration of ₹3.82
million from our Bank.

Wilson Cyriac is the Head – Risk Management and Chief Risk Officer of our Bank. He holds a bachelor’s degree in arts from
Kerala University and master’s degree in economics from Kerala University. He is a certified associate of the Indian Institute
of Bankers. He was previously employed as executive vice president – head risk and chief risk officer of the Federal Bank
Limited. He was appointed as the Head – Risk Management and Chief Risk Officer of our Bank with effect from November
30, 2021, and his term is valid for a period of three years. During Fiscal 2023, he received a remuneration of ₹2.48 million from
our Bank.

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Sivakumar P. is the Head – Internal Audit of our Bank. He holds a bachelor’s degree in commerce from Madras University.
He is a certified associate of the Indian Institute of Bankers. He was previously a general manager (internal audit) of State Bank
of India. He was appointed as the Head – Internal Audit of our Bank with effect from April 1, 2023 and his present term as the
Head – Internal Audit of our Bank is valid for a period of three years from April 1, 2023, renewable based on performance and
with mutual consent. During Fiscal 2023, he received a remuneration of ₹0.81 million from our Bank.

Senior Management Personnel

Except Gireesh C.P., Ranjith Raj P., George Kalaparambil John, George Thomas, Hari Velloor, Hemant Kumar Tamta, E.A.
Jacob, Sudev Kumar V, Wilson Cyriac and Sivakumar P., whose details are provided in “– Key Managerial Personnel” on page
270, there are no other Senior Management Personnel as on the date of this Red Herring Prospectus.

Relationship between our Key Managerial Personnel and Senior Management Personnel and other Key Managerial
Personnel and other Senior Management Personnel and Directors

None of the Key Managerial Personnel or Senior Management Personnel are related to each other or to the Directors.

Shareholding of Key Managerial Personnel and Senior Management Personnel

Other than Kadambelil Paul Thomas who holds 31,186,785 Equity Shares of our Bank, George Kalaparambil John who holds
one Equity Share on behalf of ESAF Financial Holdings Private Limited and Hari Velloor who holds 33,333 Equity Shares of
our Bank, none of our Key Managerial Personnel or Senior Management Personnel hold any Equity Shares in our Bank. Further,
George Thomas holds 1,000,000 Equity Shares of our Bank in the capacity as Chairman of ESAF Staff Welfare Trust, which
is the beneficial owner of these Equity Shares. Further, except for George Kalaparambil John, George Thomas and Ranjith Raj
P, none of our Key Managerial Personnel and Senior Management Personnel hold any employee stock options.

For details, please see “Capital Structure” on page 109.

Bonus or Profit-Sharing Plans of the Key Managerial Personnel and Senior Management Personnel

None of our Key Managerial Personnel and Senior Management Personnel is party to any bonus or profit-sharing plan of our
Bank, other than the performance linked incentives given to Key Managerial Personnel and Senior Management Personnel.

Status of Key Managerial Personnel and Senior Management Personnel

The terms of certain of our Key Managerial Personnel and Senior Management Personnel, namely, George Thomas, Hari
Velloor, Hemant Kumar Tamta, E.A. Jacob, Wilson Cyriac and Sivakumar P are on a contractual basis, and renewable subject
to the terms and conditions of their respective appointments. Other than the aforementioned Key Managerial Personnel and
Senior Management Personnel, all our Key Managerial Personnel and Senior Management Personnel are permanent employees
of our Bank.

Interests of Key Managerial Personnel and Senior Management Personnel

Our Key Managerial Personnel and Senior Management Personnel do not have any interest in our Bank other than to the extent
of the remuneration or benefits to which they are entitled as per their terms of appointment and reimbursement of expenses
incurred by them during the ordinary course of business and the shares held by the relatives of George Kalaparambil John,
Kadambelil Paul Thomas and George Thomas. Some of our Key Managerial Personnel and Senior Management Personnel may
also be deemed to be interested to the extent of any dividend payable to them and other distributions in respect of Equity Shares
held in the Bank, if any. For interests of Kadambelil Paul Thomas, see “Our Promoters and Promoter Group” on page 274.
Our Key Managerial Personnel and Senior Management Personnel may also be deemed to be interested to the extent of options
granted to them under the Employee Stock Option Scheme. For details, see “Capital Structure – ESAF ESOP Plan 2019” on
page 122. Additionally, George Kalaparambil John is a member of Prachodhan Development Services, a party with which our
Bank has entered into a contract/arrangement for implementing CSR activities. Further, George Kalaparambil John is a member
of ESAF Financial Holdings Private Limited, which holds 280,758,396 Equity Shares of our Bank. Furthermore, George
Thomas is interested in our Bank to the extent of benefits arising out of him being a shareholder in ESAF Financial Holdings
Private Limited, a shareholder in Prachodhan Development Services and the chairman of ESAF Staff Welfare Trust.

None of the Key Managerial Personnel and Senior Management Personnel have been paid any consideration of any nature by
our Bank, other than their remuneration.

One of our Promoters, Managing Director and Chief Executive Officer, Kadambelil Paul Thomas is a board member of ESAF
Foundation, with whom our Bank has entered into the Trademark Agreement and pursuant to which ESAF Foundation has
granted our Bank an exclusive, irrevocable license and right to use certain trademarks. For details, see “History and Certain
Corporate Matters - Key terms of other subsisting material agreements” on page 247.

There is no arrangement or understanding with the major shareholders, customers, suppliers or others, pursuant to which any
Key Managerial Personnel or Senior Management Personnel was selected as key managerial personnel or senior management
personnel.
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For details on the attrition rate of Key Managerial Personnel and Senior Management Personnel, see is “Risk Factors-We are
dependent on our Key Managerial Personnel, Senior Management Personnel and other key personnel, and the loss of, or our
inability to attract or retain, such persons could adversely affect our business, financial condition, results of operations and
cash flows. The attrition rate of rate of Key Managerial Personnel and Senior Management Personnel (combined) was nil for
the three months period ended June 30, 2023 and 2022, and 15.38%, 16.67%, 9.90% for Fiscals 2023, 2022 and 2021,
respectively” on page 82.

For details on the attrition rate of employees, see “Risk Factors- The attrition rate of our employees was 3.87% (not annualized),
5.66% (not annualized), 24.07%, 20.07%, 13.03% for the three months ended June 30, 2023 and 2022 and Fiscals 2023, 2022
and 2021, respectively. Our payments to and provisions for employees as a percentage of net interest income, which is defined
as interest earned minus interest expended, and other income (Operating Income) were 11.77%, 12.28%, 13.09%, 17.14% and
17.90% for the three months ended June 30, 2023 and 2022 and Fiscals 2023, 2022 and 2021, respectively. If the attrition rate
of our employees continues to increase, we may need to increase the compensation paid to employees in order to retain more
of our employees, which could have an adverse effect on our financial condition, results of operations and cash flows” on page
44.

Changes in the Key Managerial Personnel and Senior Management Personnel

The changes in the Key Managerial Personnel and Senior Management Personnel in the last three years are as follows:

Name Date of change Reason for change

George Thomas June 1, 2023 Re-appointed as Executive Vice President – Corporate Services
Hari Velloor June 1, 2023 Re-appointed as Executive Vice President – Network – 1 South
Sivakumar P April 1, 2023 Appointed as Head – Internal Audit
Antoo P.K. March 31, 2023 Cessation as Head – Internal Audit
Ajayan Mangalath Gopalakrishnan Nair November 30, 2022 Cessation as Executive Vice President – IT and Credit
George Kalaparambil John November 30, 2022 Change in designation to Executive Vice President – IT and
Operations
Hemant Kumar Tamta August 1, 2022 Appointed as Executive Vice President – Network - 2 Rest of
India
George Kalaparambil John June 9, 2022 Change in designation to Executive Vice President – Operations
and Digital
Ajayan Mangalath Gopalakrishnan Nair June 9, 2022 Change in designation to Executive Vice President – IT and
Credit
Hari Velloor June 1, 2022 Appointed as Executive Vice President – Network - 1 South
Dinesh Kallarackal December 15, 2021 Change in designation to Head – Legal
Sudev Kumar V December 15, 2021 Appointed as Head – Compliance and Chief Compliance Officer
Wilson Cyriac November 30, 2021 Appointed as Head – Risk Management and Chief Risk Officer
Mohanachandran K.R. November 30, 2021 Cessation as Head – Risk Management and Chief Risk Officer
E.A. Jacob September 30, 2021 Appointed as Head – Vigilance and Chief of Internal Vigilance
Dominic Joseph September 30, 2021 Cessation as Head – Vigilance and Chief Vigilance Officer
Dinesh Kallarackal June 1, 2021 Appointed as Head – Legal and Chief Compliance Officer

Service Contracts with Directors and Key Managerial Personnel and Senior Management Personnel

Other than statutory benefits upon termination of their employment in our Bank on retirement, no officer of our Bank, including
our Directors, the Key Managerial Personnel and Senior Management Personnel has entered into a service contract with our
Bank pursuant to which they are entitled to any benefits upon termination of employment.

Contingent and deferred compensation payable to our Director and Key Managerial Personnel and Senior Management
Personnel

There is no contingent or deferred compensation payable to our Directors, Key Managerial Personnel or Senior Management
Personnel, which does not form a part of their remuneration.

Payment or benefit to Key Managerial Personnel and Senior Management Personnel

Except as stated in this section and “Our Promoters and Promoter Group” on page 274 in respect of our Managing Director
and Chief Executive Officer, Kadambelil Paul Thomas, no non-salary amount or benefit has been paid or given to any of our
Bank’s officers including Key Managerial Personnel and Senior Management Personnel within the two preceding years or is
intended to be paid or given.

Employees stock option

For details of our employee stock options, see “Capital Structure” on page 109.

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Non-appearance in list of directors of struck off companies by the RoC or the MCA

Except Kolasseril Chandramohanan Ranjani, who was a director of Growing Outreach Services Private Limited which was
struck off based on a voluntary application by the company, we confirm that the names of the Directors of our Bank are not
appearing in the list of directors of struck-off companies by the RoC or the MCA.

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 OUR PROMOTERS AND PROMOTER GROUP

ESAF Financial Holdings Private Limited and Kadambelil Paul Thomas are the Promoters of our Bank. As on the date of this
Red Herring Prospectus, our Promoters collectively hold 311,945,181 Equity Shares equivalent to 69.40% of the pre-Offer
issued, subscribed and paid-up Equity Share capital of our Bank. ESAF Financial Holdings Private Limited holds 280,758,396
Equity Shares (which includes five Equity Shares held by nominees on behalf of ESAF Financial Holdings Private Limited)
equivalent to 62.46% of the pre-Offer issued, subscribed and paid-up Equity Share capital of our Bank. Kadambelil Paul
Thomas holds 31,186,785 Equity Shares equivalent to 6.94% of the pre-Offer issued, subscribed and paid-up Equity Share
capital of our Bank. For further details, see “Capital Structure” on page 109.

Kadambelil Paul Thomas

Kadambelil Paul Thomas (DIN: 00199925), born on May 21, 1963 and aged 60
years, is the Managing Director and Chief Executive Officer of our Bank. He is a
resident Indian national. For further details in respect of his personal address,
educational qualifications, experience in the business, positions/posts held in the
past, other directorships, special achievements, business and other financial
activities, see “Our Management” on page 251.

Kadambelil Paul Thomas holds 31,186,785 Equity Shares in our Bank, equivalent
to 6.94% of the pre-Offer issued, subscribed and paid-up Equity Share capital of
our Bank. Other than as disclosed in this section and “Our Management” on page
251, Kadambelil Paul Thomas is not involved in any other venture.

His permanent account number is AJPPK0458A.

Our Bank confirms that the permanent account number, bank account number(s),
passport number, Aadhaar card number and driving license number of Kadambelil
Paul Thomas, have been submitted to the Stock Exchanges at the time of filing
the Draft Red Herring Prospectus.

ESAF Financial Holdings Private Limited

Corporate Information

ESAF Financial Holdings Private Limited was originally incorporated as ‘Pinnai Finance and Investments Private Limited’ on
September 27, 1996 at Chennai, Tamil Nadu, India, as a private limited company under the Companies Act, 1956. The name
was subsequently changed to ‘ESAF Microfinance and Investments Private Limited’ and a fresh certificate of incorporation
consequent upon change of name was issued on March 21, 2007. The name of the company was thereafter changed to ‘ESAF
Financial Holdings Private Limited’ and a fresh certificate of incorporation consequent upon change of name was issued on
March 1, 2019.

The registered office of ESAF Financial Holdings Private Limited is located at X/109/M4, 2nd Floor, Hephzibah Complex,
Mannuthy- Palakkad NH, Mannuthy, Thrissur 680 651, Kerala, India.

Kadambelil Paul Thomas, along with several others, founded the ESAF Foundation (formerly known as “Evangelical Social
Action Forum”) in 1992, which started undertaking microfinance activities in 1995. Subsequently, in 2006, Kadambelil Paul
Thomas and others, including Mereena Paul, one of our Promoter Group members, acquired ESAF Financial Holdings Private
Limited. The microfinance business undertaking of ESAF Foundation was thereafter transferred by ESAF Foundation to ESAF
Financial Holdings Private Limited in 2008.

ESAF Financial Holdings Private Limited was granted NBFC-MFI status by the RBI on January 7, 2014. As per the RBI In-
Principle Approval and RBI Final Approval, ESAF Financial Holdings Private Limited has, pursuant to the Business Transfer
Agreement, sold its business undertaking comprising the lending and financing business undertaken as an NBFC-MFI and other
business activities incidental thereto, to our Bank. ESAF Financial Holdings Private Limited has thereafter surrendered its
registration as an NBFC-MFI and applied for registration as an NBFC Non-Deposit taking Systemically Important Core
Investment Company from the RBI. ESAF Financial Holdings Private Limited was granted certificate of registration bearing
number B-07-00652 by RBI dated February 26, 2020, for carrying out the business as an NBFC (Core Investment Company)
without accepting public deposits.

The main objects of ESAF Financial Holdings Private Limited are:

“1. To carry on the business, whether in India or outside, of making investments in group companies in the form of shares,
bonds, debentures, debts, loans or securities and providing guarantees, other form of collateral, or taking on other
contingent liabilities, on behalf of or for the benefit of, any group companies.

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2. To carry on financial activities, whether in India or outside, in the nature of investment in bank deposits, money market
instruments (including money market mutual funds and liquid mutual funds), government securities, and to carry on
such other activities as may be permitted and prescribed by the relevant statutory authorities for core investment
companies from time to time.

3. To carry on and undertake the business of lending money and to negotiate advance, deposit or loan, money or
securities to buy, sell, discount and deal in promissory notes, bills of exchange, hundies or other negotiable or
transferable securities or other documents to invest, guarantee or become liable for the payment of money or for the
performance of any obligation or to stand as surety and generally to transact all kinds of business of indemnity and
guarantee.

4. To render Financial Advisory Services, Investment Advisory Services and Management Consultancy Services.

5. To promote, establish and undertake financial ventures of all kinds, not included in the aforesaid, and to carry out the
said activities either on its own or in alliance with any other Person/Body/ Bodies Corporate incorporated in India or
Overseas either under the Strategic Alliance or Joint Venture or any other arrangement.”

Kadambelil Paul Thomas is the promoter of ESAF Financial Holdings Private Limited.

Board of directors

The board of directors of ESAF Financial Holdings Private Limited comprises of the following:

1. Mereena Paul

2. Ranganathan Varadarajan Dilip Kumar

3. Vikraman Ampalakkat

4. Saleena George

5. Abraham Thariyan

6. Emy Acha Paul

7. Ajayan Mangalath Gopalakrishnan Nair

8. Joy Joseph Cherayath Thekkuden

9. Mark Robert Daniels

Shareholding pattern

As on the date of this Red Herring Prospectus, the authorised share capital of ESAF Financial Holdings Private Limited is
₹2,500,000,000 divided into 190,000,000 equity shares of face value of ₹10 each and 6,000,000 preferences shares of face value
of ₹100 each. The issued and paid-up share capital of ESAF Financial Holdings Private Limited, as on the date of this Red
Herring Prospectus is ₹1,718,095,960 divided into 153,761,096 equity shares of face value of ₹10 each and 1,804,850
preference shares of face value of ₹100 each.

The shareholding pattern of the equity shares of face value of ₹10 each of ESAF Financial Holdings Private Limited as on the
date of this Red Herring Prospectus is as follows:

S. No. Name of shareholder Number of shares held Percentage of equity

shareholding (%)
1. ESMACO 97,616,607 63.49
2. Dia Vikas Capital Private Limited 30,730,000 19.99
3. SIDBI Trustee Company Ltd- A/C Samridhi Fund 17,176,230 11.17
4. George Thomas (in the capacity as the chairman of ESAF 5,640,600 3.67
Staff Welfare Trust)
5. CEDAR Retail 633,333 0.41
6. Kadambelil Pailee Thomas 253,180 0.16
7. Achamma Thomas 253,180 0.16
8. Raphael Parambi 200,000 0.13
9. Thomas Joseph 200,000 0.13
10. George Thomas 174,400 0.11
11. Alok Thomas Paul 87,500 0.06
12. Emy Acha Paul 87,500 0.06
13. Leo Samuel 56,666 0.04
14. Jacob Samuel 53,000 0.03

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 S. No. Name of shareholder Number of shares held Percentage of equity
shareholding (%)
15. Saleena George 40,000 0.03
16. Beena George 40,000 0.03
17. Sunny Thomas 40,000 0.03
18. Padmakumar K. 40,000 0.03
19. Rajesh Sreedharan Pillai 40,000 0.03
20. Kadambelil Paul Thomas 34,900 0.02
21. George K. John 30,000 0.02
22. Sibu K. A. 30,000 0.02
23. Leo Joseph 30,000 0.02
24. Sheena 20,000 0.01
25. Mercy Jimmy 20,000 0.01
26. Christudas K. V. 20,000 0.01
27. Azi Akbar 20,000 0.01
28. T. D. Jose 20,000 0.01
29. Sony V. Mathew 20,000 0.01
30. Jubilee Sherine George 20,000 0.01
31. Mereena Paul 15,000 0.01
32. Joseph Varghese 14,000 0.01
33. Elizabeth John 10,000 0.01
34. Idicheria Ninan 10,000 0.01
35. Soyi K. Elias 10,000 0.01
36. Jojy Koshy Varghese 10,000 0.01
37. Roy Alex 10,000 0.01
38. Jijo Kuriappan 10,000 0.01
39. Sam Thomas 10,000 0.01
40. Philip John 10,000 0.01
41. James Varghese 5,000 0.00
42. Cherian Mathew 5,000 0.00
43. E. Mathai 5,000 0.00
44. Jose Thomas 5,000 0.00
45. P. V. Jose 5,000 0.00
Total 153,761,096 100

ESAF Financial Holdings Private Limited has issued 1,804,850, 1% compulsorily convertible preference shares of face value
of ₹100 each as on the date of this Red Herring Prospectus. The shareholding pattern of these compulsorily convertible
preference shares is as follows:

S. No Name of shareholder Number of shares held Percentage of preference

shareholding (%)
1% compulsorily convertible preference shares
1. Dia Vikas Capital Private Limited 1,804,850 100
Total 1,804,850 100

Change in control

There has been no change in the control of ESAF Financial Holdings Private Limited in the last three years preceding the date
of this Red Herring Prospectus.

Our Bank confirms that the permanent account number, bank account number(s), company registration number and the address
of the registrar of companies where ESAF Financial Holdings Private Limited is registered, have been submitted to the Stock
Exchanges, at the time of filing the Draft Red Herring Prospectus.

Interests of our Promoters

Our Promoters are interested in our Bank to the extent they have promoted our Bank and to the extent: (i) of their shareholding
in the Bank and dividend payable, if any, and other distributions in respect of the Equity Shares held by them; (ii) that
Kadambelil Paul Thomas is the Managing Director and Chief Executive Officer of our Bank and received remuneration from
our Bank in this regard; (iii) loan against fixed deposit taken by ESAF Financial Holdings Private Limited; and (iv) that the
Promoters are also customers of our Bank and operate their savings accounts, current accounts and term deposits from our
Bank. For details, see “Capital Structure – Build-up of the shareholding of our Promoters in our Bank”, “Our Management –
Remuneration paid to the Executive Director”, and “Restated Financial Information – Related Party Transactions – Note 19-
B-7” on pages 115, 254 and 363, respectively. ESAF Financial Holdings Private Limited has subscribed to tier-2 subordinate
debt during Fiscal 2022 amounting to ₹200.00 million. Kadambelil Paul Thomas is a board member of the ESAF Foundation,
with whom our Bank has entered into the Trademark Agreement and pursuant to which ESAF Foundation has granted our Bank
an exclusive, irrevocable license and right to use certain trademarks. For details, see “History and Certain Corporate Matters -
Key terms of other subsisting material agreements” on page 247.

276
Further, Miriam Ann Philip, the daughter-in-law of Kadambelil Paul Thomas, is an employee of our Bank. For details, see “Our
Management – Appointment of relatives of our Directors to any office or place of profit” on page 256.

Our Promoters have no interest in any property acquired in the three years preceding the date of this Red Herring Prospectus or
proposed to be acquired by our Bank or in any transaction by our Bank for acquisition of land, construction of building or
supply of machinery.

No sum has been paid or agreed to be paid to any of our Promoters or to the firms or companies in which our Promoters are
interested as members in cash or shares or otherwise by any person, either to induce them to become or to qualify them, as
directors or promoters or otherwise for services rendered by our Promoters or by such firms or companies in connection with
the promotion or formation of our Bank.

Payment of benefits to our Promoter or our Promoter Group during the two years preceding the filing of this Red
Herring Prospectus

Except (i) lease rentals paid to Lahanti Homes in respect of the properties taken on lease from it by our Bank; (ii)
commission/fees paid to ESMACO for services as business correspondents of our Bank; (iii) amounts paid to ESMACO for
the corporate facility management services provided by it to our Bank; (iv) interest paid on deposits, perpetual debt instruments
and sub-debt to ESMACO; (v) amounts paid to ESMACO for agency banking services; (vi) remuneration paid to Kadambelil
Paul Thomas who is the Managing Director and Chief Executive Officer of our Bank as disclosed in “Our Management” and
“Restated Financial Information – Related Party Transactions – Note 19-B-7” on pages 251 and 363, respectively; (vii) gross
salary paid to Bosco Joseph who is in the employment of our Bank; and (viii) as disclosed in “Restated Financial Information
– Related Party Transactions – Note 19-B-7” on page 363, no amount or benefit has been paid or given to our Promoters or
Promoter Group during the two years preceding the filing of this Red Herring Prospectus nor is there any intention to pay or
give any amount or benefit to our Promoters or Promoter Group.

Material guarantees given by our Promoters to third parties with respect to Equity Shares of our Bank

Our Promoters have not given any material guarantees to third parties with respect to the Equity Shares of our Bank.

Companies or firms with which our Promoters have disassociated in the last three years

Our Promoters have not disassociated themselves from any company or firm in the three years immediately preceding the date
of this Red Herring Prospectus.

Our Promoter Group

Natural persons who are part of the Promoter Group other than Kadambelil Paul Thomas

The following natural persons form part of our Promoter Group as immediate relatives of Kadambelil Paul Thomas.

Name of relative Nature of relationship

Mereena Paul Wife of Kadambelil Paul Thomas
Kadambelil Pailee Thomas Father of Kadambelil Paul Thomas
Achamma Thomas Mother of Kadambelil Paul Thomas
Sunny Thomas Brother of Kadambelil Paul Thomas
Mercy Jimmy Sister of Kadambelil Paul Thomas
Beena George Sister of Kadambelil Paul Thomas
Alok Thomas Paul Son of Kadambelil Paul Thomas
Abhishek Joe Paul Son of Kadambelil Paul Thomas
Ashish Chris Paul Son of Kadambelil Paul Thomas
Emy Acha Paul Daughter of Kadambelil Paul Thomas
Leo Joseph Brother of spouse
Savio Joseph Brother of spouse
Benno Joseph Brother of spouse
Bosco Joseph Brother of spouse

Entities forming part of the Promoter Group other than ESAF Financial Holdings Private Limited

1. Dev Bhoomi Eco Tourism Private Limited;

2. ESMACO;

3. Hebron Gardens Private Limited;

4. JRK Marketing Private Limited;

5. Lahanti Homes and Infrastructure Private Limited (formerly ESAF Homes & Infrastructure Private Limited); and

277
6. Thrissur Startup Incubation Council.

Our Bank filed an application dated May 18, 2023 (“Exemption Application”) under Regulation 300(1)(c) of the SEBI ICDR
Regulations to SEBI seeking relaxation from disclosing Dia Vikas Capital Private Limited (“Dia Vikas”), a pure financial
investor in ESAF Financial Holdings Private Limited holding 19.99% of the paid-up equity share capital of ESAF Financial
Holdings Private Limited and also holding 1,804,850, 1% compulsorily convertible preference shares of face value of ₹100
each of ESAF Financial Holdings Private Limited, as a part of the “promoter group” of the Bank in accordance with the SEBI
ICDR Regulations on the following grounds: (i) under the first proviso to Regulation 2(1)(pp) of the SEBI ICDR Regulations,
a financial institution, scheduled bank, foreign portfolio investor other than individuals, corporate bodies and family offices,
mutual fund, venture capital fund, alternative investment fund, foreign venture capital investor, insurance company registered
with the IRDAI or any other category as specified by SEBI from time to time are not deemed to be part of the promoter group
merely by virtue of the fact that 20% or more of the equity share capital of the promoter of the issuer is held by such person or
entity. Our Bank sought such exemption on the grounds that a financial investor such as Dia Vikas should not be considered to
form part of promoter group of our Bank merely by virtue of holding more than 20% of the paid-up capital of ESAF Financial
Holdings Private Limited on a fully diluted basis; (ii) Dia Vikas has no control or special rights over the Bank either as a
shareholder of ESAF Financial Holdings Private Limited or by virtue of the EFHPL SHA or the charter documents of ESAF
Financial Holdings Private Limited; (iii) Dia Vikas has not held any shares in the Bank, or had any other rights in the Bank at
any point in the past, as a result of which, there has been no identifiable relation between the Bank and Dia Vikas at any point
of time; and (iv) Dia Vikas does not exercise any control or influence over the Bank, nor is Dia Vikas involved in the day-to-
day operations or administrative functions of the Bank. Our Bank pursuant to the Exemption Application sought exemption
from (i) naming Dia Vikas as promoter group in the Offer Documents; and (ii) providing any confirmations as required to be
provided by an issuer’s promoter group under the SEBI ICDR Regulations in respect of Dia Vikas in the Offer Documents. The
Exemption Application has been granted by SEBI by its approval letter dated June 23, 2023.

Other than being a shareholder of EFHPL, Dia Vikas is not associated with the Promoters, Promoter Group, Directors, Key
Managerial Personnel, Senior Management Personnel and Group Entities of the Bank or any of their relatives, as applicable.
The beneficial owners of Dia Vikas are not associated with the Promoters, Promoter Group, Directors, Key Managerial
Personnel, Senior Management Personnel and Group Entities of the Bank or any of their relatives, as applicable.

278
 DIVIDEND POLICY

The declaration and payment of dividends will be recommended by the Board of Directors and approved by the Shareholders,
at their discretion, subject to the provisions of the Banking Regulation Act and regulations made thereunder, the RBI Act and
the regulations and guidelines made thereunder, the Articles of Association and other applicable laws, including the Companies
Act, 2013. The dividend, if any, will depend on a number of factors, including but not limited to, the future expansion plans
and capital requirements, profit earned during the Fiscal, past dividend trends, liquidity and applicable taxes including optimal
capital adequacy ratio subject to regulatory minimum of total and Tier I capital adequacy ratio, additional regulatory
requirements of capital in near future cost of raising funds from alternate sources, reinvestment opportunities and any other
applicable criteria from the legal or regulatory framework applicable to our Bank. In addition, our ability to pay dividends may
be impacted by a number of factors, including restrictive covenants under loan or financing arrangements our Bank is currently
availing of or may enter into to finance our fund requirements for our business activities.

As per the Articles of Association, the Bank may pay dividend by cheque or warrant or ECS or RTGS or any other mode as
may be permissible under the Companies Act, 2013 or may send through post to the registered address of the member or person
entitled, or in the case of joint holders, to the registered address of the joint holders first named in the register.

Our Bank has not declared any dividends for the three months period ended June 30, 2023 and for the Fiscals 2023, 2022 and
2021. Further, our Bank has not declared any dividend from July 1, 2023 till the date of this Red Herring Prospectus. In terms
of Section 15 of the Banking Regulation Act, a banking company is permitted to declare dividends only upon all of its capitalised
expenses being written off. Our Bank has no formal dividend policy.

279
 SELECTED STATISTICAL INFORMATION

This section should be read together with “Our Business” on page 190, the Restated Financial Information in “Financial
Statements” on page 304 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on
page 372.

Demand deposits are current account deposits. Although we do not pay interest on demand deposits, demand deposits have
been included as interest-bearing liabilities in this section.

Yield and cost for the three months period ended June 30, 2023 and 2022 have not been annualized.

The following information is included for analytical purposes. Certain non-GAAP financial measures and certain other
statistical information relating to our operations and financial performance have been included in this section and elsewhere in
this Red Herring Prospectus. We compute and disclose such non-GAAP financial measures and such other statistical
information relating to our operations and financial performance as we consider such information to be useful measures of our
business and financial performance, and because such measures are frequently used by securities analysts, investors and others
to evaluate the operational performance of financial services businesses, many of which provide such non-GAAP financial
measures and other statistical and operational information when reporting their financial results. Such non-GAAP financial
measures and other statistical and operational information are not measures of operating performance or liquidity defined by
generally accepted accounting principles. These non-GAAP financial measures and other statistical and other information
relating to our operations and financial performance may not be computed on the basis of any standard methodology that is
applicable across the industry and therefore may not be comparable to financial measures and statistical information of similar
nomenclature that may be computed and presented by other banks in India or elsewhere. For more details, see “-Certain Non-
GAAP Financial Measures” on page 302.

Average Balance Sheet, Interest Earned/Expended and Yield/Cost

The tables below present our average balances for total interest-earning assets and total interest-bearing liabilities together with
the related interest earned and interest expended, resulting in the presentation of the yield and cost for the periods and fiscal
years presented.

Particulars Three months period ended June 30,

2023 2022
Average Interest Yield/ Average Interest Yield/
Balance(1) Earned(2)/ Cost(4)(9) (%) Balance(1) Earned(2)/ Cost(4)(9) (%)
[A] Expended(3) [C = B/A] [A] Expended(3) [C = B/A]
[B] [B]
(₹ in million, except percentages)
Interest-earning assets:
Advances 141,229.42 8,208.28 5.81% 116,340.40 6,179.56 5.31%
Investments 48,853.22 777.95 1.59% 44,499.26 679.14 1.53%
Others(5) 6.25 1.23 19.68% 5,916.25 44.43 0.75%
Total interest-earning
assets* 190,088.89 8,987.46 4.73% 166,755.91 6,903.13 4.14%
Non-interest-earning assets:
Fixed assets 1,875.91 - - 1,621.53 - -
Other assets(6) 13,133.18 - - 10,680.89 - -
Total non-interest-earning
assets 15,009.09 - - 12,302.42 - -
Total assets 205,097.98 - - 179,058.33 - -
Interest-bearing liabilities:
Deposits(7) 151,607.39 2,533.53 1.67% 131,364.09 1,994.18 1.52%
Borrowings(8) 30,466.61 599.40 1.97% 27,541.67 421.33 1.53%
Total interest-bearing
liabilities* 182,074.00 3,132.93 1.72% 158,905.76 2,415.51 1.52%
Non-interest-bearing liabilities:
Capital and reserves 17,741.10 - - 14,597.78 - -
Other liabilities(9) 5,282.88 - - 5,554.79 - -
Total non-interest-bearing
liabilities 23,023.98 - - 20,152.57 - -
Total liabilities 205,097.98 - - 179,058.33 - -

280
Particulars Year ended March 31,
2023 2022 2021
Average Interest Yield/ Average Interest Yield/ Average Interest Yield/
Balance(1) Earned(2)/ Cost(4) Balance(1) Earned(2)/ Cost(4) Balance(1) Earned(2)/ Cost(4) (%)
[A] Expended(3) (%) [A] Expended(3) (%) [A] Expended(3) [C = B/A]
[B] [C = [B] [C = [B]
B/A] B/A]
(₹ in million, except percentages)
Interest-earning assets:
Advances 121,335.33 25,320.45 20.87% 93,535.47 17,267.12 18.46% 73,170.11 14,735.06 20.14%
Investments 48,137.45 3,120.44 6.48% 30,264.71 1,883.08 6.22% 19,326.01 1,283.26 6.64%
Others(5) 2,620.25 95.70 3.65% 8,994.48 249.05 2.77% 10,182.48 393.41 3.86%
Total interest-
earning assets* 172,093.03 28,536.59 16.58% 132,794.66 19,399.25 14.61% 102,678.60 16,411.73 15.98%
Non-interest-earning assets:
Fixed assets 1,724.01 - - 1,436.63 - - 1,261.65 - -
Other assets(6) 11,439.75 - - 9,273.07 - - 6,366.50 - -
Total non-
interest-earning
assets 13,163.76 - - 10,709.70 - - 7,628.15 - -
Total assets 185,256.79 - - 143,504.36 - - 110,306.75 - -
Interest-bearing liabilities:
Deposits(7) 135,740.03 8,377.18 6.17% 107,089.73 6,788.46 6.34% 80,911.38 6,045.68 7.47%
Borrowings(8) 28,640.15 1,796.01 6.27% 18,797.17 1,139.40 6.06% 14,327.51 1,150.14 8.03%
Total interest-
bearing
liabilities* 164,380.18 10,173.19 6.19% 125,886.90 7,927.86 6.30% 95,238.89 7,195.82 7.56%
Non-interest-bearing liabilities:
Capital and
reserves 15,613.56 - - 13,281.70 - - 11,909.32 - -
Other liabilities 5,263.05 - - 4,335.76 - - 3,158.54 - -
Total non-
interest-bearing
liabilities 20,876.61 - - 17,617.46 - - 15,067.86 - -
Total liabilities 185,256.79 - - 143,504.36 - - 110,306.75 - -
Notes:
1. Average balances are calculated as the average of the opening balance at the start of the relevant period/fiscal year and the closing
balance as at quarter end for all quarters in the relevant period/fiscal year. The average balances of advances are advances net of
provisions for NPAs (“Interest-Earning Advances”), and average investments are net of depreciation or provision for investments, if
any.
2. Interest earned on advances comprises interest/discount on advances/bills (which includes interest spread on direct assignment and
interbank participation transactions. Interest earned on investments includes interest earned on government securities, treasury bills
and other securities. Interest earned on others includes interest on balances with banks in other deposits accounts and money at call
and short notice (“Interest-Earning Balance with Reserve Bank of India and other Inter-Bank Funds”).
3. Interest expended comprises interest expended on deposits and borrowings.
4. Yield/Cost on average balance is a non-GAAP financial measure and is calculated as interest earned/expended divided by the average
balance.
5. Comprises Interest-Earning Balance with the Reserve Bank of India and other Inter-Bank Funds.
6. Includes cash in hand, balance with the Reserve Bank of India in current accounts, balances with banks in current accounts and other
assets.
7. Comprises demand deposits, savings bank deposits and term deposits. We do not pay interest on demand deposits.
8. Borrowings include borrowing from the Reserve Bank of India, other banks, other institutions and agencies, subordinated debt and
perpetual debt instruments.
9. Not annualized.
* Non-GAAP financial measure.

Analysis of Changes in Interest Earned and Interest Expended by Volume and Rate

The following tables set forth, for the periods and fiscal years indicated, the analysis of the changes in our interest earned and
interest expended between average volume and changes in rates.

Particulars Three months period ended June 30, 2023 vs.

Three months period ended June 30, 2022
Net Changes in Change in Average Change in Average
Interest(1) Volume(2) Rate(3)
(₹ in million)
Interest earned:
Advances 2,028.72 1,321.61 707.11
Investments 98.81 66.62 32.19
Others (43.20) (44.33) 1.14
Total interest earned [A] 2,084.33 1,343.90 740.44

281
Particulars Three months period ended June 30, 2023 vs.
Three months period ended June 30, 2022
Net Changes in Change in Average Change in Average
Interest(1) Volume(2) Rate(3)
(₹ in million)
Interest expended:
Deposits(4) 539.35 307.70 231.66
Reserve Bank of India/Inter bank borrowings and others 178.07 44.75 133.32
Total interest expended [B] 717.42 352.45 364.98
Net Interest Income [A-B] 1,366.91 991.45 375.46

Particulars Year ended March 31, 2023 vs.

Year ended March 31, 2022
Net Changes in Change in Average Change in Average
Interest(1) Volume(2) Rate(3)
(₹ in million)
Interest earned:
Advances 8,053.33 5,132.00 2,921.33
Investments 1,237.36 1,112.05 125.31
Others (153.35) (176.50) 23.15
Total interest earned [A] 9,137.34 6,067.55 3,069.79
Interest expended:
Deposits(4) 1,588.72 1,816.15 (227.43)
Reserve Bank of India/Inter bank borrowings and others 656.61 596.64 59.97
Total interest expended [B] 2,245.33 2,412.79 (167.46)
Net Interest Income [A-B] 6,892.01 3,654.75 3,237.26

Particulars Year ended March 31, 2022 vs.

Year ended March 31, 2021
Net Changes in Change in Average Change in Average
Interest(1) Volume(2) Rate(3)
(₹ in million)
Interest earned:
Advances 2,532.06 4,101.59 (1,570.92)
Investments 599.82 726.33 (126.50)
Others (144.36) (45.85) (98.14)
Total interest earned [A] 2,987.52 4,782.08 (1,795.56)
Interest expended:
Deposits(4) 742.78 1,956.04 (1,213.26)
Reserve Bank of India/Inter bank borrowings and others (10.74) 358.80 (369.54)
Total interest expended [B] 732.04 2,314.84 (1,582.80)
Net Interest Income [A-B] 2,255.48 2,467.24 (212.76)
Notes:
1. The changes in interest earned, interest expended and Net Interest Income between periods/fiscal years have been reflected as attributed
either to volume or rate changes. For purposes of this table, changes that are due to both volume and rate have been allocated solely to
changes in rate.
2. Change in average volume is computed as the increase in average balances for the period/fiscal year multiplied by yield/cost for the
three months period ended June 30, 2023, Fiscal 2023 and Fiscal 2022, as the case may be.
3. Change in average rate represents the average balance for the three months period ended June 30, 2023, Fiscal 2023 and Fiscal 2022,
as the case may be, multiplied by change in rates during the respective period/fiscal year during the relevant period/fiscal year.
4. Comprises demand deposits, savings bank deposits and term deposits. We do not pay interest on demand deposits.

Yields, Spread, Cost of Funds and Net Interest Margin

The following table sets forth, for the periods and fiscal years indicated, the yields, spread and net interest margins on our
interest-earning assets and cost of funds on our interest-bearing liabilities.

Particulars Three months period ended June 30,

2023 2022
(₹ in million, except percentages)
Interest earned [A] 8,987.46 6,903.13
Of which:
Interest/discount earned on advances/bills [B] 8,208.28 6,179.56
Interest expended [C] 3,132.93 2,415.51
Net Interest Income(1)(*) [D] = [A]-[C] 5,854.53 4,487.62
Average Interest-Earning Advances(2) [E] 141,229.42 116,340.40
Average Total Interest-Earning Assets(3) [F] 190,088.89 166,755.91
Average Total Assets(4) [G] 205,097.98 179,058.33
Average Total Interest-Bearing Liabilities(5) [H] 182,074.00 158,905.76

282
Particulars Three months period ended June 30,
2023 2022
(₹ in million, except percentages)
Average Total Interest-Earning Assets as a percentage
of Average Total Interest-Bearing Liabilities(*) (%) [I] =
[F]/[H] 104.40 104.94
Average Interest-Earning Advances as a percentage of
Average Total Assets(*) (%) [J] = [E]/[G] 68.86 64.97
Average Total Interest-Earning Assets as a percentage
of Average Total Assets(*) (%) [K] = [F]/[G] 92.68 93.13
Average Total Interest-Bearing Liabilities as a
percentage of Average Total Assets(*) (%) [L] = [H]/[G] 88.77 88.75
Yield on Average Total Interest-Earning Assets(6) (11) (*)
(%) [M] = [A]/[F] 4.73 4.14
Yield on Average Interest-Earning Advances(7)(11) (*) (%)
[N] = [B]/[E] 5.81 5.31
Cost of Funds(8)(11)(*) (%) [O] = [C]/[H] 1.72 1.52
Spread(9) (11) (*) (%) [P] = [M]-[O] 3.01 2.62
Net Interest Margin(10) (11) (*) (%) [Q] = [D]/[F] 3.08 2.69

Particulars Year ended March 31,

2023 2022 2021
(₹ in million, except percentages)
Interest earned [A] 28,536.59 19,399.25 16,411.73
Of which:
Interest/discount earned on advances/bills [B] 25,320.45 17,267.12 14,735.06
Interest expended [C] 10,173.19 7,927.86 7,195.82
Net Interest Income(1)(*) [D] = [A]-[C] 18,363.40 11,471.39 9,215.91
Average Interest-Earning Advances(2) [E] 121,335.33 93,535.47 73,170.11
Average Total Interest-Earning Assets(3) [F] 172,093.03 132,794.66 102,678.60
Average Total Assets(4) [G] 185,256.79 143,504.36 110,306.75
Average Total Interest-Bearing Liabilities(5) [H] 164,380.18 125,886.90 95,238.89
Average Total Interest-Earning Assets as a percentage of
Average Total Interest-Bearing Liabilities(*) (%) [I] =
[F]/[H] 104.69 105.49 107.81
Average Interest-Earning Advances as a percentage of
Average Total Assets(*) (%) [J] = [E]/[G] 65.50 65.18 66.33
Average Total Interest-Earning Assets as a percentage of
Average Total Assets(*) (%) [K] = [F]/[G] 92.89 92.54 93.08
Average Total Interest-Bearing Liabilities as a
percentage of Average Total Assets(*) (%) [L] = [H]/[G] 88.73 87.72 86.34
Yield on Average Total Interest-Earning Assets(6)(*) (%)
[M] = [A]/[F] 16.58 14.61 15.98
Yield on Average Interest-Earning Advances(7)(*) (%)
[N] = [B]/[E] 20.87 18.46 20.14
Cost of Funds(8)(*) (%) [O] = [C]/[H] 6.19 6.30 7.56
Spread(9)(*) (%) [P] = [M]-[O] 10.39 8.31 8.42
Net Interest Margin(10)(*) (%) [Q] = [D]/[F] 10.67 8.64 8.98
Notes:
1. Net Interest Income, which is a non-GAAP financial measure, is interest earned minus interest expended (“Net Interest Income”).
2. Average Interest-Earning Advances are Interest-Earning Advances calculated on the basis of the average of the opening balance at the
start of the relevant period/fiscal year and the closing balance as at quarter end for all quarters in the relevant period/fiscal year
(“Average Interest-Earning Advances”).
3. Average Total Interest-Earning Assets are total interest-earning assets (comprising Interest-Earning Advances, interest earning
investments (comprising government securities, treasury bills and other interest earning securities) and Interest-Earning Balance with
the Reserve Bank of India and other Inter-Bank Funds) calculated on the basis of the average of the opening balance at the start of the
relevant period/fiscal year and the closing balance as at quarter end for all quarters in the relevant period/fiscal year (“Average Total
Interest-Earning Assets”).
4. Average Total Assets are total assets calculated on the basis of the average of the opening balance at the start of the relevant period/fiscal
year and the closing balance as at quarter end for all quarters in the relevant period/fiscal year (“Average Total Assets”).
5. Average Total Interest-Bearing Liabilities are total interest-bearing liabilities (comprising demand deposits, savings bank deposits, term
deposits and borrowings) calculated on the basis of the average of the opening balance at the start of the relevant period/fiscal year and
the closing balance as at quarter end for all quarters in the relevant period/fiscal year (“Average Total Interest-Bearing Liabilities”).
We do not pay interest on demand deposits.
6. Yield on Average Total Interest-Earning Assets, which is a non-GAAP financial measure, is calculated as the ratio of interest earned to
Average Total Interest-Earning Assets.
7. Yield on Average Interest-Earning Advances, which is a non-GAAP financial measure, is calculated as ratio of interest earned on
advances divided by Average Interest-Earning Advances.
8. Cost of Funds, which is a non-GAAP financial measure, is the ratio of interest expended to Average Total Interest-Bearing Liabilities
(“Cost of Funds”).

283
9. Spread, which is a non-GAAP financial measure, is the difference between Yield on Average Total Interest-Earning Assets and Cost of
Funds.
10. Net Interest Margin, which is a non-GAAP financial measure, is the ratio of Net Interest Income to Average Total Interest-Earning
Assets.
11. Not annualized.
(*) Non-GAAP financial measure.

Return on Equity and Assets and Other Financial Ratios

The following tables present selected financial ratios for the periods and fiscal years indicated.

Particulars Three months period ended June 30,

2023 2022
(₹ in million, except percentages)
Net Interest Income(*) [A] 5,854.53 4,487.62
Other income [B] 930.29 480.11
Operating Income(*) [C](1) = [A] + [B] 6,784.82 4,967.73
Operating expenses [D] 3,778.13 2,714.82
Operating expenses to Average AUM(*) (%) [E] = [D]/[W] 2.32 2.17
Operating expenses to Average Total Assets(*) [F] = [D]/[Q] 1.84 1.52
Cost to Income Ratio(2) (*) (%) [G] = [D]/[C] 55.69 54.65
Pre-provisioning Operating Profit (3) (*) [H] = [C] – [D] 3,006.69 2,252.91
Pre-provisioning Operating Profit to Average AUM(*) (%)
[I] = [H]/[W] 1.85 1.80
Pre-provisioning Operating Profit to Average Total Assets(*) (%) [J]
= [H]/[Q] 1.47 1.26
Provision towards and write-offs [K] 1,281.78 654.28
Provision /(write-back of provision) towards standard assets [L] (36.35) 158.13
Provisions for and Write-off of Advances(4) (*) [M] = [K] + [L] 1,245.43 812.41
Provisions for and Write-off of Advances to Average AUM (*) (%)
[N] = [M]/[W] 0.76 0.65
Provisions for and Write-off of Advances to Average Gross
Advances (*) (%) [O] = [M]/[V] 0.87 0.67
Net profit for the period [P] 1,299.64 1,059.66
Average Total Assets [Q] 205,097.98 179,058.33
Average Shareholders’ Funds(5) (*) [R] 17,741.10 14,597.78
Return on Equity(*) (%) [S]=[P]/[R] 7.33 7.26
Return on Assets(*) (%) [T]=[P]/[Q] 0.63 0.59
Average Shareholders’ Funds as a percentage of Average Total
Assets (6) (*) (%) [U] = [R]/[Q] 8.65 8.15
Average Gross Advances (7) [V] 142,808.40 120,283.28
Average AUM(8) (*) [W] 162,846.29 125,379.91

Particulars Year ended March 31,

2023 2022 2021
(₹ in million, except percentages)
Net Interest Income(*) [A] 18,363.40 11,471.39 9,215.91
Other income [B] 2,879.13 2,075.83 1,272.48
Operating Income(*) [C](1) = [A] + [B] 21,242.53 13,547.22 10,488.39
Operating expenses [D] 12,305.41 8,628.71 6,318.55
Operating expenses to Average AUM(*) (%) [E] = [D]/[W] 9.11 8.79 8.40
Operating expenses to Average Total Assets(*) [F] = [D]/[Q] 6.64 6.01 5.73
Cost to Income Ratio(2) (*) (%) [G] = [D]/[C] 57.93 63.69 60.24
Pre-provisioning Operating Profit (3) (*) [H] = [C] – [D] 8,937.12 4,918.51 4,169.84
Pre-provisioning Operating Profit to Average AUM(*) (%)
[I] = [H]/[W] 6.62 5.01 5.55
Pre-provisioning Operating Profit to Average Total Assets(*) (%) [J]
= [H]/[Q] 4.82 3.43 3.78
Provision towards NPAs and write-offs [K] 6,108.13 3,208.42 1,887.40
Provision /(write-back of provision) towards standard assets [L] (1,281.08) 936.22 925.52
Provisions for and Write-off of Advances(4) (*) [M] = [K] + [L] 4,827.05 4,144.64 2,812.92
Provisions for and Write-off of Advances to Average AUM (*) (%)
[N] = [M]/[W] 3.57 4.22 3.74
Provisions for and Write-off of Advances to Average Gross
Advances (*) (%) [O] = [M]/[V] 3.86 4.25 3.79
Net profit for the year [P] 3,023.33 547.32 1,053.96
Average Total Assets [Q] 185,256.79 143,504.36 110,306.75
Average Shareholders’ Funds(5) (*) [R] 15,613.56 13,281.70 11,909.32
Return on Equity(*) (%) [S]=[P]/[R] 19.36 4.12 8.85
Return on Assets(*) (%) [T]=[P]/[Q] 1.63 0.38 0.96

284
 Particulars Year ended March 31,
2023 2022 2021
(₹ in million, except percentages)
Average Shareholders’ Funds as a percentage of Average Total
Assets (6) (*) (%) [U] = [R]/[Q] 8.43 9.26 10.80
Average Gross Advances (7) [V] 125,150.37 97,610.72 74,278.07
Average AUM(8) (*) [W] 135,045.74 98,117.59 75,189.62
Notes:
1. Operating Income, which is a non-GAAP financial measure, is calculated as Net Interest Income (interest earned minus interest
expended) plus other income (“Operating Income”).
2. Cost to Income Ratio, which is a non-GAAP financial measure, is calculated as a ratio of operating expenses divided by Operating
Income (“Cost to Income Ratio”).
3. Pre-provisioning Operating Profit, which is a non-GAAP financial measure, is calculated as Operating Income minus operating
expenses (“Pre-provisioning Operating Profit”).
4. Provisions for and Write-off of Advances, which is a non-GAAP financial measure, is calculated as Provision towards NPAs and write-
offs plus Provision /(write-back of provision) towards standard assets (“Provisions for and Write-off of Advances”)
5. Average Shareholders’ Funds is capital and reserves and surplus calculated on the basis of the average of the opening balance at the
start of the relevant period/fiscal year and the closing balance as at quarter end for all quarters in the relevant period/fiscal year
(“Average Shareholders’ Funds”).
6. Average Shareholders’ Funds as a percentage of Average Total Assets, which is a non-GAAP financial measure, is calculated as Average
Shareholders’ Funds divided by Average Total Assets.
7. Average Gross Advances, which is a non-GAAP financial measure, is calculated on the basis of the average of the opening balance of
advances at the start of the relevant period/fiscal year and the closing balance as at quarter end for all quarters in the relevant
period/fiscal year (“Average Gross Advances”).
8. Average AUM, which is a non-GAAP financial measure, is calculated on the basis of the average AUM (gross advances plus advances
originated and transferred under securitisation, assignment and inter-bank participation certificates for which we continue to hold
collection responsibilities) of the opening balance at the start of the relevant period/fiscal year and the closing balance as at quarter
end for all quarters in the relevant period/fiscal year (“Average AUM”).
(*) Non-GAAP financial measure.

Investment Portfolio

The following tables set forth information related to our total net investment portfolio as at the dates indicated.

As at June 30, 2023

Book Value Held to Maturity Available for Sale Held for Trading

(₹ in million)
Government securities 47,687.86 32,399.03 13,427.63 1,861.20
Shares 122.58 - 122.58 -
Debentures and bonds - - - -
Others(1) 1,010.73 - 1,010.73 -
Total 48,821.17 32,399.03 14,560.94 1,861.20

As at March 31, 2023 As at March 31, 2022 As at March 31, 2021

Book Value Held to Available Held for Book Held to Available Held for Book Held to Available Held
Maturity for Sale Trading Value Maturity for Sale Trading Value Maturity for Sale for
Trading
(₹ in million)
Government 47,421.02 32,814.80 14,254.50 351.72 39,940.96 27,846.19 10,392.80 1,701.97 18,889.75 18,645.37 244.38 -
securities
Shares 116.62 - 116.62 - 153.93 - 153.94 - 81.67 - 81.67 -
Debentures - - - - - - - - - - - -
and bonds
Others(1) 1,347.64 - 1,347.64 - 608.09 - 608.08 - 349.27 - 349.27 -
Total 48,885.28 32,814.80 15,718.76 351.72 40,702.98 27,846.19 11,154.82 1,701.97 19,320.69 18,645.37 675.32 -
Note:
1. Others include investment in mutual funds, security receipts and certificate of deposits.

285
Residual Maturity Profile

Available for Sale

The following table sets forth, as at the date indicated, an analysis of the residual maturity profile of our investments in securities
classified as available for sale securities and their weighted average market yields.

As at June 30, 2023

Up to One Year One Year to up to Five Five to Ten Years More than Ten Years Total
Years
Amount Yield(1) Amount Yield(1) Amount Yield(1) Amount Yield(1) Amount Yield(1)
(₹ in (%) (₹ in (%) (₹ in (%) (₹ in (%) (₹ in (%)
million) million) million) million) million)
Government 4,415.87 5.22(2) 6,560.52 5.81 1,687.17 7.01 764.07 7.44 13,427.63 6.08
securities
Shares 122.58 N.A. - - - - - - 122.58 N.A.
Others 1,010.73 N.A. - - - - - - 1,010.73 N.A.
Total 5,549.18 5.22 6,650.52 5.81 1,687.17 7.01 764.07 7.44 14,560.94 6.08
Notes:
1. Yield is calculated and disclosed only for coupon-bearing instruments.
2. Yield on Government securities maturing up to one year is not applicable as these securities are Treasury Bills, which are discounted
instruments.
3. Provisions towards depreciation has been deducted from the cost of investments in securities.

Held to Maturity

The following table sets forth, as at the dated indicated, an analysis of the residual maturity profile of our investments in
securities classified as held to maturity securities and their weighted average market yields.

As at June 30, 2023

Up to One Year One Year to up to Five Five to Ten Years More than Ten Years Total
Years
Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield
(₹ in (%) (₹ in (%) (₹ in (%) (₹ in (%) (₹ in (%)
million) million) million) million) million)
Government
securities - - 5,584.34 7.42 11,322.47 6.63 15,492.22 6.66 32,399.03 6.78
Total - - 5,584.34 7.42 11,322.47 6.63 15,492.22 6.66 32,399.03 6.78
Note:
1. Provisions towards depreciation has been deducted from the cost of investments in securities.

Held for Trading

The following table sets forth an analysis of the residual maturity profile of our investments in securities classified as held for
trading securities and their weighted average market yields as at the dates indicated.

As at June 30, 2023

Up to One Year One Year to up to Five Five to Ten Years More than Ten Years Total
Years
Amount Yield (%) Amount Yield Amount Yield Amount Yield Amount Yield
(₹ in (₹ in (%) (₹ in (%) (₹ in (%) (₹ in (%)
million) million) million) million) million)
Government
securities - - 852.58 7.18 703.79 7.22 304.83 7.41 1,861.20 7.23
Total - - 852.58 7.18 703.79 7.22 304.83 7.41 1,861.20 7.23
Note:
1. Provisions towards depreciation has been deducted from the cost of investments in securities.

Deposits

Average Deposits, Interest Expended and Cost by Category

For a table setting forth average deposits, interest expended and cost by category, see “Management’s Discussion and Analysis
of Financial Condition and Results of Operations – Significant Factors Affecting Our Financial Condition, Results of
Operations and Cash Flows – Net Interest Income – Average Deposits and Cost of Average Deposits and Average Borrowings
and Cost of Average Borrowings” on page 377.

Category of Deposits

286
For a table setting forth deposits by categories of deposits and certain ratios thereof and the percentage change from the previous
year end, see “Our Business – Our Strengths – Growing Retail Deposits portfolio” on page 194.

Balance to Maturity for Bulk Deposits

The table below sets forth the balance to maturity profiles of our Bulk Deposits (single Rupee term deposits of ₹20.00 million
and above) as at June 30, 2023.

Particular As at June 30, 2023

Up to Three Over Three Over Six Months Over One Year Total
Months Months to Six to One Year
Months
(₹ in million)
Bulk Deposits 1,929.91 1,976.21 13,902.08 2,447.11 20,255.31

Deposits Based on the Location of Banking Outlets

The following table sets forth deposits and the percentage composition by the location of banking outlets as at the dates
indicated.

Particulars As at June 30 As at March 31,

2023 2023 2022 2021
Amount % of Total Amount % of Total Amount % of Total Amount % of Total
(₹ in million) (₹ in million) (₹ in million) (₹ in million)
Urban 55,328.91 35.34 57,452.99 39.18 50,548.06 39.44 34,423.13 38.25
Semi Urban 71,734.42 45.82 66,177.30 45.12 53,687.05 41.90 40,857.31 45.40
Rural 9,935.44 6.35 9,372.17 6.39 8,151.50 6.36 6,297.97 7.00
Metro 19,559.77 12.49 13,653.79 9.31 15,764.11 12.30 8,415.85 9.35
Total 156,558.54 100.00 146,656.25 100.00 128,150.72 100.00 89,994.26 100.00

Concentration of Deposits by Location of Banking Outlets by Region and State/Union Territory

The following table presents an analysis of our deposits by location of banking outlets by region and state/union territory as at
the dates indicated.

Geographical State / As at June 30, As at March 31,

Distribution Union 2023 2023 2022 2021
Territory Amount % of Total Amount % of Total Amount % of Total Amount % of Total
(₹ in (₹ in (₹ in (₹ in
million) million) million) million)
Eastern Bihar 283.12 0.18 215.87 0.15 215.64 0.17 75.92 0.08
Jharkhand 1,121.83 0.72 1,027.76 0.70 1,130.12 0.88 889.69 0.99
Odisha 649.67 0.41 628.86 0.43 734.26 0.57 341.27 0.38
West Bengal 579.23 0.37 512.79 0.35 327.22 0.26 281.53 0.31
Meghalaya 79.01 0.05 56.40 0.04 42.25 0.03 9.83 0.01
Tripura 0.01 * * * - - - -
Assam 333.24 0.21 188.05 0.13 157.70 0.12 31.17 0.04
Subtotal 3,046.11 1.94 2,629.73 1.80 2,607.19 2.03 1,629.41 1.81
Western Gujarat 287.30 0.18 216.13 0.15 116.52 0.09 74.77 0.08
Maharashtra 5,594.70 3.57 3,688.48 2.52 4,425.53 3.45 2,431.62 2.70
Subtotal 5,882.00 3.75 3,904.61 2.67 4,542.05 3.54 2,506.39 2.78
Northern Chhattisgarh 1,134.86 0.73 934.31 0.64 495.47 0.39 373.66 0.42
Delhi 6,942.60 4.44 4,984.76 3.40 5,710.08 4.45 2,445.08 2.72
Madhya
Pradesh 2,256.54 1.44 2,273.41 1.55 1,283.69 1.00 544.27 0.60
Rajasthan 144.96 0.09 159.84 0.11 242.40 0.19 41.91 0.05
Haryana 243.48 0.16 358.26 0.24 277.18 0.22 27.26 0.03
Uttar Pradesh 163.70 0.10 121.88 0.08 89.71 0.07 49.01 0.05
*
Uttarakhand 13.04 0.01 2.21 - - - -
Chandigarh 680.06 0.44 547.91 0.37 212.43 0.17 22.03 0.02
Subtotal 11,579.24 7.41 9,382.58 6.39 8,310.96 6.49 3,503.22 3.89
Southern Andhra
Pradesh 213.06 0.14 183.08 0.12 753.84 0.59 264.34 0.29
Telangana 387.20 0.25 228.11 0.15 74.23 0.06 14.86 0.02
Karnataka 4,755.05 3.04 2,521.70 1.72 2,658.96 2.07 1,672.12 1.86
Kerala 125,315.96 80.04 122,534,14 83.55 105,325.81 82.19 77,857.62 86.51
Puducherry 114.92 0.07 127.03 0.09 88.35 0.07 59.80 0.07
Tamil Nadu 5,265.00 3.36 5,145.27 3.51 3,789.33 2.96 2,486.50 2.76
Subtotal 136,051.19 86.90 130,739.33 89.14 112,690.52 87.94 82,355.24 91.51
Total deposits 156,558.54 100.00 146,656.25 100.00 128,150.72 100.00 89,994.26 100.00
287
Note:
* Below round off limit.

Concentration of Deposits by Depositor

The table below sets forth our deposits from our largest depositor and top 20 largest depositors and as a percentage of our total
deposits as at the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Amount % of total Amount % of total Amount % of total Amount % of total
(₹ in deposits (₹ in deposits (₹ in deposits (₹ in deposits
million) million) million) million)
Deposits from our largest
depositor 3,655.93 2.34 3,099.09 2.11 6,641.07 5.18 765.34 0.85
Deposits from our 20 largest
depositors 16,385.70 10.47 14,327.96 9.77 20,341.18 15.87 8,197.75 9.11
Total deposits 156,558.54 100.00 146,656.25 100.00 128,150.72 100.00 89,994.26 100.00

Borrowings

The following tables set forth, as at and for the periods and fiscal years indicated, information related to our borrowings, which
are comprised primarily of borrowings from banks, refinances and subordinated debt.

Particulars As at and for the three months period ended

June 30,
2023 2022
(₹ in million, except percentages)
Period-end balance 27,391.25 25,555.00
Average balance during the period (1) 30,466.60 27,541.67
Interest expended during the period 599.40 421.23
Cost of average borrowings (2) (4)(*) (%) 1.97 1.53
Average interest rate at period end (3) (%) 6.83 6.30

Particulars As at and for the year ended March 31,

2023 2022 2021
(₹ in million, except percentages)
Year-end balance 33,541.96 29,528.33 16,940.00
Average balance during the year(1) 28,640.15 18,797.17 14,327.51
Interest expended during the year 1,796.01 1,139.40 1,150.14
Cost of average borrowings (2) (*) (%) 6.19 6.06 8.03
Average interest rate at year end (3) (%) 6.93 5.80 8.13
Notes:
1. Average is calculated on the basis of the average of the opening balance at the start of the relevant period/fiscal year and the closing
balance as at quarter end for all quarters in the relevant period/fiscal year.
2. Cost of average borrowings, which is a non-GAAP financial measure, represents the ratio of interest expended on borrowings to average
borrowings calculated on the basis of the average of the opening balance at the start of the relevant period/fiscal year and the closing
balance as at quarter end for all quarters in the relevant period/fiscal year. All of the borrowings are interest-bearing.
3. Average interest per annum is calculated as the sum of interest rate of the borrowings multiplied by the closing balance of the borrowings
divided by the sum of closing balance of the borrowings.
4. Not annualized.
(*) Non-GAAP financial measure.

Sources of Funding

For a table setting forth our sources of funding, see “Management’s Discussion and Analysis of Financial Condition and Results
of Operations –Liquidity and Capital Resources – Sources of Funding” on page 411.

Interest Sensitivity Analysis

The following table sets forth the interest rate sensitivity analysis of certain items of assets and liabilities as June 30, 2023,
which is prepared/compiled based on guidelines provided by the RBI.

Particulars As at June 30, 2023

Up to Three Over Three Over One Year Over Five Years Total
Months Months to One to Five Years
Year
(₹ in million)
Cash and Balances with RBI 2,282.70 1,724.19 4,188.12 17.68 8,212.69
Balances with Other Banks 651.20 0.00 4.25 0.00 655.45
Investments 22,108.52 7,940.85 18,692.91 78.89 48,821.17

288
 Particulars As at June 30, 2023
Up to Three Over Three Over One Year Over Five Years Total
Months Months to One to Five Years
Year
(₹ in million)
Advances 16,803.49 67,973.37 56,133.91 2,304.77 1,43,215.54
Other Assets(1) 673.61 1,571.75 0.00 7,901.96 10,147.32
Total Assets 42,519.52 79,210.16 79,019.19 10,303.30 211,052.17
Capital and Reserves - 8,528.56 - 9,862.37 18,390.93
Borrowings 4,041.95 7,361.00 15,308.30 680.00 27,391.25
Deposits 12,955.98 41,753.61 1,01,420.93 428.02 1,56,558.54
Other Liabilities(2) 345.52 3,905.51 711.53 3,748.89 8,711.45
Total Liabilities 17,343.45 61,548.68 1,17,440.76 14,719.28 211,052.17
Notes:
1. Other assets include, among others, net inter-office adjustments, interest accrued, net tax paid in advance/tax deduced at source and net deferred tax
assets.
2. Other liabilities include bills payable, net inter-office adjustments, interest accrued, provisions for standard assets and others (including provisions).

Asset Liability Gap

The following table sets forth the maturity pattern of certain items of assets and liabilities as at June 30, 2023, which is
prepared/compiled based on guidelines provided by the RBI.

Particulars 1-30 Days 31 Days and More than 3 Over 6 Over 1 year Over 3 Over 5 Total
up to 3 Months and Months and and up to 3 Years and Years
Months up to 6 up to 1 year Years up to 5
Months Years
(₹ in million, except percentages)
Cash and Bank
Balance 2,691.61 242.29 238.04 1,486.15 4,185.18 7.19 17.68 8,868.14
Advances 3,716.31 13,087.19 19,573.80 48,399.57 52,672.96 3,460.94 2,304.77 143,215.54
Investments 20,172.95 1,935.58 1,307.69 6,633.15 18,666.42 26.49 78.89 48,821.17
Fixed Assets - - - - - - 1,872.56 1,872.56
Other Assets 449.07 224.53 224.53 1,347.22 - - 6,029.41 8,274.76
Total Assets 27,029.94 15,489.59 21,344.06 57,866.09 75,524.56 3,494.62 10,303.31 211,052.17
Capital &
Reserve - - - 8,528.56 - - 9,862.37 18,390.93
Deposits 7,136.99 5,818.99 5,764.53 35,989.08 101,277.19 143.74 428.02 156,558.54
Borrowings 1,029.95 3,012.00 2,037.00 5,324.00 15,308.30 - 680.00 27,391.25
Other Liabilities 284.71 60.81 60.81 3,844.70 711.53 - 3,748.89 8,711.45
Total Liabilities 8,451.65 8,891.80 7,862.34 53,686.34 117,297.02 143.74 14,719.28 211,052.17
Liquidity Gap 18,578.29 6,597.79 13,481.72 4,179.75 (41,772.46) 3,350.88 (4,415.97) 0.00
Cumulative
Liquidity Gap 18,578.29 25,176.08 38,657.80 42,837.55 1,065.09 4,415.97 0.00 0.00
Cumulative
Liabilities 8,451.65 17,343.45 25,205.79 78,892.14 196,189.16 196,332.90 211,052.18 211,052.18
Cumulative
Liquidity Gap as
a percentage of
Cumulative
Liabilities (%) 219.82% 145.16% 153.37% 54.30% 0.54% 2.25% 0.00% 0.00%
Note: Grouping of future Rupee cash flows in the above table is in accordance with the guidelines issued by RBI under its circular
PBOD.NO.BP.BC.38/21.04.098/2007. The numbers for certain line items in the above table are different from those appearing in the same
line item in the Restated Financial Information as the above table was prepared as per RBI guidelines, which require (a) perpetual bonds to
be considered as Capital, (b) the table to be prepared on a gross basis without the netting of certain items, such as provisions relating to tax,
prepaid taxes and advances set off, and (c) the accumulated profit for the three months period ended June 30, 2023 to be classified in other
liabilities.

Advances Under Management

Until the introduction of the RBI Regulatory Framework for Microfinance Loans Direction, 2022, we considered all of our
loans to individuals who were members of a sub-group to be Micro Loans and all such loans are shown as Micro Loans as at
and for the three months period ended June 30, 2022 and as at and for the years ended March 31, 2022 and 2021. Effective
from October 17, 2022, we segregated our Micro Loans into Microfinance Loans and Other Micro Loans.

Breakdown of AUM by gross advances and off-balance sheet advances

The table below sets forth the breakdown of our AUM by gross advances and off-balance sheet advances as the dates indicated.

289
 Particulars As at June 30, As at March 31, As at March 31, As at March 31,
2023 2023 2022 2021
(₹ in million)
Gross advances [A] 144,435.54 141,181.27 121,306.43 84,150.05
Off-balance sheet advances:
Inter-bank participation certificates [i] 17,900.00 12,000.00 2,000.00 -
Assigned advances [ii] 44.39 45.17 100.48 109.25
Advances sold to ARC for which our Bank is acting
as a collection agent [iii] 9,659.75 10,086.21 - -
Total off-balance sheet advances
[B = i + ii + iii] 27,604.14 22,131.38 2,100.48 109.25
AUM(*) [C = A + B] 172,039.68 163,312.65 123,406.91 84,259.30
Note:
(*) Non-GAAP financial measure.

AUM by Product Groups

For a table setting forth our AUM by product groups, see “Our Business – Overview” on page 190.

Disbursements

The tables below set forth our product-wise disbursements as well as their respective share for the period and fiscal years
indicated:

Product-wise Three months period ended June 30,

disbursements 2023 2022
Amount % of Total Amount % of Total
(₹ in million) (₹ in million)
Micro Loans 29,587.10 65.61 18,868.82 65.78
Of which:
Microfinance
Loans(1) 14,764.64 32.74 N.A. N.A.
Other Micro
Loans(1) 14,822.46 32.87 N.A. N.A.
Retail loans 12,208.64 27.07 7580.92 26.43
MSME loans 559.61 1.24 760.72 2.65
Loans to financial
institutions 762.5 1.69 250 0.87
Agricultural loans 1,975.55 4.38 1224.03 4.27
Total 45,093.40 100.00 28,684.49 100.00

Product-wise Year ended March 31,

disbursements 2023 2022 2021
Amount % of Total Amount % of Total Amount % of Total
(₹ in million) (₹ in million) (₹ in million)
Micro Loans 96,030.60 65.37 89,979.59 75.33 44,463.67 70.73
Of which:
Microfinance 76,703.83 52.21 N.A. N.A. N.A. N.A.
Loans(1)
Other Micro 19,326.77 13.16 N.A. N.A. N.A. N.A.
Loans(1)
Retail loans 38,458.38 26.18 21,228.75 17.77 15,917.17 25.32
MSME loans 5,360.12 3.65 4,998.37 4.18 2,391.12 3.80
Loans to financial 1,400.00 0.95 - - - -
institutions
Agricultural loans 5,657.41 3.85 3,245.49 2.72 91.78 0.15
Total 146,906.51 100.00 119,452.20 100.00 62,863.74 100.00

Product-wise Average Yields

The tables below set forth our product-wise average yields for the periods and fiscal years indicated.

Product-wise average yields (1)(2) Three months period ended June 30,
2023 2022
(in %)
Micro Loans 6.67 5.89
Of which:
Microfinance Loans 6.61 N.A.
Other Micro Loans 6.87 N.A.
Retail loans 3.30 2.70
290
 Product-wise average yields (1)(2) Three months period ended June 30,
2023 2022
(in %)
MSME loans 3.66 2.45
Loans to financial institutions 3.06 3.03
Agricultural loans 6.09 5.54
Total 5.81 5.31

Year ended March 31,

Product-wise average yields (1) 2023 2022 2021
(in %)
Micro Loans 22.71 18.98 20.83
Of which:
Microfinance Loans 23.54 N.A. N.A
Other Micro Loans 23.28 N.A. N.A
Retail loans 11.95 10.62 11.43
MSME loans 10.04 10.67 12.19
Loans to financial institutions 12.44 10.73 10.65
Agricultural loans 18.66 12.65 9.14
Total 20.23 17.69 19.84
Note:
(1) Average yield is calculated as interest/discount on advances/bills (which includes interest spread on direct assignment and interbank participation
transactions) during the year divided by the average of the opening balance of gross advances at the start of the relevant period/fiscal year and the
closing balance as at quarter end for all quarters in the relevant period/fiscal year.
(2) Not annualized.

Product-Wise Average Ticket Size of Loans Disbursed

The tables below present our product-wise average ticket size of loans disbursed for the periods and fiscal years indicated.

Product-wise average ticket size (1) Three months period ended June 30,
2023 2022
(in ₹)
Micro Loans 58,406.49 40,889.31
Of which:
Microfinance Loans 50,996.94 N.A.
Other Micro Loans 68,289.91 N.A.
Retail loans 135,532.63 111,054.66
MSME loans 326,684.93 573,694.13
Loans to Financial Institutions 108,928,571.43 250,000,000.00
Agricultural loans 57,423.73 55,223.48
Total 71,263.04 51,850.44

Product-wise average ticket size (1) Year ended March 31,

2023 2022 2021
(in ₹)
Micro Loans 50,999.21 41,983.86 30,795.75
Of which:
Microfinance Loans 47,523.99 N.A N.A
Other Micro Loans 71,852.09 N.A N.A
Retail loans 118,199.74 106,070.37 106,162.07
MSME loans 1,257,296.89 442,987.19 263,255.97
Loans to Financial Institutions 128,529,411.76 85,757,575.76 105,000,000.00
Agricultural loans 52,833.93 50,771.01 113,447.96
Total 63,501.99 49,489.25 39,397.76
Note:
(1) Average ticket size is calculated as total disbursements in a particular year divided by the number of loans disbursed in that particular year.

Product-wise Average Weighted Tenor

The table set forth below shows our product-wise average weighted tenor (in days) as at the dates indicated.

Product-wise average weighted tenor (1) As at June 30, As at March 31,

2023 2023 2022 2021
Micro Loans 2.30 2.29 2.25 2.12
Of which:
291
 Product-wise average weighted tenor (1) As at June 30, As at March 31,
2023 2023 2022 2021
Microfinance Loans 2.28 2.78 N.A N.A
Other Micro Loans 2.36 2.37 N.A N.A
Retail loans 2.63 2.65 3.01 2.73
MSME loans 2.75 2.74 2.51 2.94
Loans to financial institutions 2.81 2.82 2.75 2.69
Agricultural loans 2.36 2.37 2.47 3.04
Total 2.37 2.36 2.34 2.19
Note:
(1) Average weighted tenor is calculated as the original tenor of each loan product weighted by disbursements.

AUM of our Micro Loans in Terms of Collection Cycle

The table set forth below presents a breakup of our AUM of our Microfinance Loans and Other Micro Loans (combined) in
terms of collection cycle as at the dates indicated.

Collection As at As at March 31,

Cycles June 30, 2023 2023 2022 2021
Amount % of Total Amount % of Total Amount % of Total Amount % of Total
(₹ in million) (₹ in million) (₹ in million) (₹ in million)
Daily - - - - 43.69 0.04 - -
Weekly 66,722.27 55.31 67,763.79 55.30 61,829.12 60.03 49,297.09 69.00
Fortnightly 20,858.14 17.29 22,285.88 18.18 18,721.98 18.18 9,981.09 13.97
Monthly 33,055.65 27.40 32,499.16 26.52 22,398.64 21.75 12,166.26 17.03
Total 120,636.07 100.00 122,548.83 100.00 102,299.43 100.00 71,444.44 100.00

Regional Concentration of Gross Advances

The following table presents an analysis of our domestic gross advances by region and state/union territory based on the address
of the Branch where the customer is tagged as at the dates indicated. We had nil, nil, nil and nil foreign advances as at June 30,
2023 and March 31, 2023, 2022 and 2021, respectively.

Geographica State / Union As at As at March 31,

l Distribution Territory June 30, 2023 2023 2022 2021
Amount % of Total Amount % of Total Amount % of Total Amount % of Total
(₹ in (₹ in (₹ in (₹ in
million) million) million) million)
Eastern Assam 175.38 0.12 183.06 0.13 345.12 0.28 428.91 0.51
Bihar 1,126.90 0.78 1,212.52 0.86 1,356.91 1.12 1,028.66 1.22
Jharkhand 1,328.95 0.92 1,523.57 1.08 2,229.19 1.84 1,596.49 1.90
Odisha 1,318.89 0.91 1,196.24 0.85 528.49 0.44 162.76 0.19
West Bengal 2,513.31 1.74 2,050.12 1.45 1,061.63 0.88 391.65 0.47
Meghalaya 40.08 0.03 31.34 0.02 0.83 0.00 - -
Subtotal 6,503.51 4.50 6,196.85 4.39 5,522.17 4.55 3,608.47 4.29
Western Gujarat 1,189.42 0.82 1,173.84 0.83 229.57 0.19 257.55 0.31
Maharashtra 12,055.82 8.35 11,897.58 8.43 9,641.60 7.95 4,341.78 5.16
Subtotal 13,245.24 9.17 13,071.42 9.26 9,871.17 8.14 4,599.33 5.47
Northern Chhattisgarh 3,949.90 2.73 4,085.53 2.89 5,059.21 4.17 2,971.85 3.53
Delhi 2,286.46 1.58 2,085.19 1.48 841.39 0.69 576.13 0.68
Madhya
Pradesh 9,762.26 6.76 10,540.78 7.47 10,437.05 8.60 4,413.75 5.25
Haryana 995.17 0.69 854.20 0.61 98.35 0.08 - -
Chandigarh 79.02 0.05 75.00 0.05 82.86 0.07 50.00 0.06
Uttar Pradesh 1,108.42 0.77 1,174.08 0.83 252.19 0.21 402.15 0.48
Rajasthan 954.94 0.66 943.98 0.67 423.67 0.35 136.11 0.16
Subtotal 19,136.17 13.24 19,758.76 14.00 17,194.72 14.17 8,549.99 10.16
Southern Andhra
Pradesh 361.00 0.25 320.21 0.23 116.89 0.10 11.57 0.01
Telangana 293.11 0.20 277.92 0.20 60.68 0.05 109.59 0.13
Karnataka 9,427.26 6.53 9,047.79 6.41 4,938.63 4.07 3,000.36 3.57
Kerala 62,751.09 43.45 60,379.97 42.77 55,329.21 45.61 47,102.12 55.97
Puducherry 744.03 0.52 706.44 0.50 642.45 0.53 474.47 0.56
Tamil Nadu 31,974.13 22.14 31,421.90 22.26 27,630.51 22.78 16,694.15 19.84
Subtotal 105,550.62 73.09 102,154.23 72.37 88,718.37 73.14 67,392.26 80.09
Total gross advances 144,435.54 100.00 141,181.27 100.00 121,306.43 100.00 84,150.05 100.00

Gross Advances Based on Locations of Borrowers

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The following table sets forth our gross advances and the percentage composition by location of the borrower as at the dates
indicated.

Gross As at June 30, As at March 31,

Advances 2023 2023 2022 2021
Amount % of Total Amount % of Total Amount % of Total Amount % of Total
(₹ in million) (₹ in million) (₹ in million) (₹ in million)
Urban 32,364.59 22.41 31,901.92 22.60 25,229.66 20.80 15,953.01 18.96
Semi Urban 81,529.72 56.45 79,507.63 56.31 74,436.55 61.36 56,393.98 67.01
Rural 9,422.05 6.52 9,250.25 6.55 8,428.87 6.95 5,831.03 6.93
Metro 21,119.18 14.62 20,521.46 14.54 13,211.35 10.89 5,972.03 7.10
Total 144,435.54 100.00 141,181.27 100.00 121,306.43 100.00 84,150.05 100.00

Concentration of Advances and Credit Substitutes by Industry/Economic Activity

Pursuant to RBI guidelines, exposure ceilings are 15.00% of capital funds in the case of a single borrower and 40.00% in the
case of a borrower group. The single borrower exposure limit is extendable by another 5.00%, up to 20.00% of capital funds.
The borrower group exposure limit is extendable by another 10.00%, up to 50.00% of capital funds, provided that the additional
exposure is for the purpose of financing infrastructure projects. In addition, a bank may, in exceptional circumstances and with
the approval of its board of directors, consider increasing its exposure to a single borrower up to a maximum of an additional
5.00% of capital funds, subject to the borrower consenting to us making appropriate disclosure about the borrower in our annual
report. There are generally no restrictions in India on exposure to a particular industry. RBI norms specify exposure to capital
market, real estate, sensitive commodities listed by the RBI, venture capital funds, stockbrokers, financing for acquisition of
overseas entities, and credit to overseas joint ventures. For further information, see “Key Regulations and Policies” on page
221.

The following table sets forth our gross fund-loans outstanding categorized by borrower industry or economic activity as at the
dates indicated.

Subsector As at June, As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
2023
Amount % of Total Amount % of Total Amount % of Total Amount % of Total
(₹ in (₹ in (₹ in (₹ in
million) million) million) million)
Agriculture-Land
85.92 0.06
Development 42.56 0.03 87.94 0.07 114.35 0.14
Agri-Farm
1,327.22 0.92
Mechanisation 853.72 0.60 123.23 0.10 168.55 0.20
Animal Husbandry 41,382.60 28.65 39,283.13 27.82 26,732.25 22.04 23,246.85 27.62
Crop Loans 2.49 0 3.15 * 2,156.68 1.78 2,491.15 2.96
Fisheries 5,793.83 4.01 5,220.79 3.70 2,138.04 1.76 1,814.64 2.16
Other Agri 49,453.25 34.24 48,322.29 34.23 28,323.31 23.35 8,061.09 9.58
Poultry 2,399.49 1.66 2,730.10 1.93 2,397.39 1.98 1,588.62 1.89
Consumer Durables 65.27 0.05 203.38 0.14 1,105.63 0.91 897.72 1.06
Education 201.21 0.14 277.83 0.20 701.03 0.58 1,232.82 1.47
Housing 2,138.32 1.48 2,052.95 1.45 1,501.50 1.24 1,177.44 1.40
Micro Manufacturing &
Food Processing 7,660.09 5.3 6,827.71 4.84 8,498.18 7.01 9,474.43 11.26
Service 6,819.57 4.72 7,057.98 5.00 9,673.51 7.97 7,747.84 9.20
Trade 9,169.02 6.35 10,946.28 7.75 14,699.19 12.12 6,910.11 8.21
Personal and Others 17,937.26 12.42 17,359.40 12.31 23,168.55 19.10 19,224.44 22.85
Total 144,435.54 100.00 141,181.27 100.00 121,306.43 100.00 84,150.05 100.00
Note:
* Below round off limit.

Credit Exposure by Largest Borrowers

Particulars As at 30 June 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021

Amount % of Amount % of total Amount % of total Amount % of total

(₹ in total (₹ in Credit (₹ in Credit (₹ in Credit
million) Credit million) Exposure million) Exposure million) Exposure
Exposure
Total Credit Exposure to
the Bank’s largest
borrower 398.78 0.31 449.91 0.32 400.00 0.33 313.80 0.38
Total Credit Exposure to
the Bank’s 20 largest
borrowers 4,651.38 3.31 4,817.43 3.44 3,902.23 3.24 2,999.83 3.58

293
 Particulars As at 30 June 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021

Amount % of Amount % of total Amount % of total Amount % of total

(₹ in total (₹ in Credit (₹ in Credit (₹ in Credit
million) Credit million) Exposure million) Exposure million) Exposure
Exposure
Total Credit Exposure 145,388.66 100.00 140,099.25 100.00 120,572.85 100.00 83,691.47 100.00
Note: Credit Exposure is computed as per the RBI Master Circular on Exposure Norms - DBOD. No. Dir.BC.12/13.03.00/2015-
16 dated July 1, 2015.

Maturity and Interest Rate Sensitivity of Advances

The following table sets forth the interest rate sensitivity of our variable rates and fixed rates gross advances as at June 30,
2023.

Interest rate classification of Due in One Year or Due in One Year to Due after Five Years Total
advances by maturity Less Five Years
(₹ in million)
Variable rates 2,356.34 760.50 216.21 3,333.05
Fixed rates 82,420.52 55,373.41 3,308.56 141,102.49
Total 84,776.86 56,133.91 3,524.77 144,435.54

Priority Sector Lending

Small finance banks in India are required to lend, through advances or investment, 75.00% of their adjusted net bank credit
(“ANBC”) or credit equivalent amount of off-balance sheet exposures, whichever is higher, to specified sectors known as
“priority sectors”, subject to certain exemptions permitted by RBI from time to time. Priority sector advances include advances
to agriculture sector, micro and small enterprises, weaker sections, housing and education finance up to certain ceilings.

We are required to comply with the priority sector lending requirements on a quarterly basis. Any shortfall in the amount
required to be lent to the priority sectors is required to be deposited with the Rural Infrastructure Development Fund established
by NABARD or funds with other financial institutions as specified by the RBI, which generally provide for lower than market
interest rate. Therefore, if we are unable to meet the priority sector conditions requirements, it could have an adverse effect on
our results of operations.

The tables below set out our outstanding Priority Sector advances (as defined by the Government and the RBI) by sector and
as a percentage of our ANBC as at the dates indicated.

Particulars As at June 30, As at March 31,

2023 2023 2022 2021
Advances v% of Advances % of Advances % of Advances % of
(₹ in ANBC(1) (₹ in ANBC(1) (₹ in ANBC(1) (₹ in ANBC(1)
million) million) million) million)
Agricultural and
Allied Activities 95,443.37 80.03 79,955.15 65.91 52,458.84 62.34 37,485.27 56.74
Advances to Industry
Sector eligible as
Priority Sector
Lending 7,660.08 6.42 6,827.71 5.62 8,498.18 10.10 4,474.44 6.77
Services 16,586.21 13.91 18,610.10 15.34 16,015.00 19.03 4,657.95 7.05
Personal Loans 8,460.71 7.09 7,942.06 6.55 15,075.36 17.92 6,659.72 10.08
Gross advances to the
priority sector 128,150.37 107.45 113,335.02 93.42 92,047.38 109.39 53,277.38 80.64
Note:
(1) ANBC represents gross advances less bills re-discounted and other permissible reductions as per RBI guidelines and increased by bonds/debentures in
investments eligible by priority sectors.

Capital to Risk-Weighted Assets Ratios

We are subject to the Basel II Capital Adequacy guidelines - New Capital Adequacy Framework stipulated by the RBI. Our
Capital Adequacy Ratio is calculated as per the Standardized approach for Credit Risk. As per the RBI circular “DBR.NBD.No.
4502/16.13.218/2017-18” dated November 8, 2017, no separate capital charge is prescribed for market and operational risk.
We have also considered an additional Risk Weight of 25% on assets under lien for our “grandfathered” legacy borrowings as
per instructions received from the RBI. No Capital Conservation Buffer and Counter - Cyclical Capital Buffer is applicable on
a small finance bank as per operating guidelines issued on small finance bank by the RBI. The following table sets forth our
capital to risk-weighted assets ratios as at the dates indicated.

294
 Particulars As at June 30, As at March 31,
2023 2023 2022 2021
(₹ in million, except percentages)
Tier I Capital [A] 18,389.40 17,096.36 14,155.47 13,889.07
Of which:
Perpetual Debt Instruments 480.00 480.00 480.00 480.00
Tier II Capital [B] 1,559.19 1,617.25 2,166.21 1,737.39
Of which:
Subordinated Debt 450.00 530.00 810.00 890.00
Total Capital [C] = [A]+[B] 19,948.59 18,713.61 16,321.68 15,626.46
Total risk weighted assets 97,048.29 94,372.50 87,578.18 64,489.02
Tier I Capital (%) 18.95 18.12 16.16 21.54
Tier II Capital (%) 1.61 1.71 2.47 2.69
Total Capital Adequacy Ratio (%) 20.56 19.83 18.64 24.23

Non-Performing Advances

The following tables set forth details on our NPAs, advances, provisions, technical write-offs and Provision Coverage Ratio as
at the dates and for the periods/fiscal years indicated.
(₹ in million, except percentages)
Particulars As at and for the three months period ended June 30,
2023 2022
Opening balance of Gross NPAs at the beginning of the
period/year 3,516.90 9,495.94
Additions during the period/year 1,200.43 2,075.05
Less: Reductions during the period/year on account of recovery 73.51 214.82
Less: Reductions during the period/year on account of
upgradations 260.36 1,373.07
Less: Reductions during the period/year on account of write-
offs (including technical write-offs) 2,007.18 2,639.51
Less: Reductions during the period/year on account of sale of
NPAs to an asset reconstruction company - -
Gross NPAs at the end of period/year [A] 2,376.14 7,343.59
Total provision towards NPAs at the end of the period/year [B] 1,220.00 2,949.38
Net NPAs [C = A – B] 1,156.14 4,394.21
Gross Advances [D] 144,435.54 119,260.14
Net Advances [E = D – B] 143,215.54 116,310.76
Gross NPAs as a percentage of gross advances [F = A / D] (%) 1.65 6.16
Net NPAs as a percentage of net advances [G = C / E] (%) 0.81 3.78
Provision for standard assets(1) [H] 860.22 2,335.78
Total of provision towards NPAs and provision towards
standard assets(1) [I = B + H] 2,080.22 5,285.16
Total of provision towards NPAs and provision towards
standard assets held as percentage of gross advances (%) [J = I
/ D]* 1.44 4.43
Total provision towards NPAs held as percentage of gross
NPAs (%) [K = B / A]* 51.34 40.16
Outstanding balance of technical written-off accounts [L] 2,130.80 4,219.28
Provision Coverage Ratio [M = (B+L)/(A+L)] (%)(2) 74.35 62.00

Particulars As at and for the year ended March 31,

2023 2022 2021
Opening balance of Gross NPAs at the beginning of the
period/year 9,495.94 5,639.97 1,008.61
Additions during the period/year 7,190.49 6,424.56 4,734.65
Less: Reductions during the period/year on account of
recovery 294.61 210.14 23.84
Less: Reductions during the period/year on account of
upgradations 2,026.21 1,613.90 79.45
Less: Reductions during the period/year on account of write-
offs (including technical write-offs) 4,965.95 744.55 -
Less: Reductions during the period/year on account of sale of
NPAs to an asset reconstruction company 5,882.76 - -
Gross NPAs at the end of period/year [A] 3,516.90 9,495.94 5,639.97
Total provision towards NPAs at the end of the period/year [B] 1,937.96 4,936.38 2,474.19
Net NPAs [C = A – B] 1,578.94 4,559.56 3,165.78
Gross Advances [D] 141,181.27 121,306.43 84,150.05
Net Advances [E = D – B] 139,243.31 116,370.05 81,675.86
Gross NPAs as a percentage of gross advances [F = A / D] (%) 2.49 7.83 6.70

295
 Particulars As at and for the year ended March 31,
2023 2022 2021
Net NPAs as a percentage of net advances [G = C / E] (%) 1.13 3.92 3.88
Provision for standard assets(1) [H] 896.57 2,177.65 1,241.42
Total of provision towards NPAs and provision towards
standard assets(1) [I = B + H] 2,834.53 7,114.03 3,715.61
Total of provision towards NPAs and provision towards
standard assets held as percentage of gross advances (%) [J = I
/ D]* 2.01 5.86 4.41
Total provision towards NPAs held as percentage of gross
NPAs (%) [K = B / A]* 55.10 51.98 43.87
Outstanding balance of technical written-off accounts [L] 127.13 1,728.03 1,063.33
Provision Coverage Ratio [M = (B+L)/(A+L)] (%)(2) 56.67 59.38 52.77
Notes:
1. The COVID-19 pandemic has adversely affected the world economy, including India. The extent to which the COVID-19 pandemic will
continue to adversely affect our operations and asset quality will depend on the future developments, which are uncertain. Considering
the prevailing uncertainty over the business due to COVID-19 pandemic, we held provisions of ₹163.30 million, ₹132.40 million, ₹660.70
million and ₹404.00 million as at June 30, 2023 and March 31, 2023, 2022 and 2021, respectively, against the potential effect of COVID‐
19 as additional contingency provision on standard assets (other than provisions held for restructuring under COVID-19 norms). The
provisions we held were in excess of the RBI prescribed norms.
2. Provision Coverage Ratio is computed as a percentage of total provisions towards gross NPAs as at the dated indicated plus outstanding
balance of technical written off accounts as at the date indicated divided by the sum of gross NPAs plus outstanding balance of technical
written off accounts as at the date indicated.
* Non-GAAP financial measure.

Recognition of Non-Performing Advances

We classify our advances in accordance with the RBI guidelines. Under these guidelines, an advance is classified as non-
performing if any amount of interest or principal remains overdue for more than 90 days with respect to term loans. In respect
of overdraft and cash credit, an advance is classified as non-performing if the account remains out of order for a continuous
period of 90 days, and in respect of bills purchased and discounted if the account remains overdue for more than 90 days.

Substandard Advances

In accordance with RBI guidelines, a substandard advance is an advance that has remained non-performing for a period less
than or equal to 12 months.

Doubtful Advances

In accordance with RBI guidelines, a doubtful advance is an advance that has remained in the sub-standard category for a period
of 12 months. Further, these doubtful advances are to be classified into the following three categories, depending on the period
for which such advances have been classified as doubtful:

• Advances which have remained in the doubtful category for a period of up to one year;

• Advances which have remained in the doubtful category for a period of more than one year but less than three years;
and

• Advances which have remained in the doubtful category for a period of more than three years.

Loss Advances

In accordance with the RBI guidelines, a loss advance is an advance where loss has been identified by us or internal or external
auditors or the RBI at the time of inspection but the amount has not been written off / provided for wholly.

In cases of serious credit impairment, an advance is required to be immediately classified as doubtful or as a loss advance, as
appropriate. Further, erosion in the value of the security provided may also be considered significant when the realisable value
of the security is less than 50.00% of the value as assessed by us or as accepted by the RBI at the time of the last inspection of
the security, as the case may be. In such a case, the advance secured by such impaired security may immediately be classified
as doubtful and provisioning should be made as applicable to doubtful advance. If the realisable value of the security, as assessed
by us or approved valuers or by the RBI, is less than 10.00% of the outstanding in the borrower’s accounts, the existence of
security should be ignored and the advance should be immediately classified as a loss asset and it may be either written off or
fully provided for by us.

The table below sets forth our non-performing gross advances by category as well as our standard gross advances as at the dates
specified.

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 Gross Advances As at June 30, As at March 31,
2023 2023 2022 2021
(₹ in million)
Sub-standard advances 2,316.63 3,334.31 6,419.19 4,733.05
Doubtful advances - 145.11 3,076.75 906.92
Loss advances 59.51 37.48 - -
Gross NPAs 2,376.14 3,516.90 9,495.94 5,639.97
Standard advances 142,059.40 137,664.37 111,810.49 78,510.08
Gross Advances 144,435.54 141,181.27 121,306.43 84,150.05

Non-accrual Policy

Once a loan account is identified as non-performing, interest and other fees charged in the account, if uncollected, are reversed.
In accordance with RBI guidelines, interest realised on NPAs may be credited to a bank’s income account provided that such
credited interest is not out of fresh or additional credit facilities sanctioned to the borrower. The RBI has also stipulated that in
the absence of a clear agreement between us and the borrower for the purpose of appropriating recoveries in NPAs (i.e., towards
principal or interest due), banks should adopt an accounting principle and exercise the right of appropriation of recoveries in a
uniform and consistent manner.

In the case of NPAs where recoveries are effected, our policy is to appropriate the same against the demand of the customers.
If any of a borrower’s advances are classified as an NPA, all advances to such borrower are classified as NPAs. For more
information on the recognition and provisioning of NPAs, see the section “Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Significant Accounting Policies – Advances” on page 387.

Policy for Making Provisions for Non-Performing Advances

Our policy for making provisions for non-performing advances, which is in accordance with the RBI’s policy on provisioning,
described below:

Provisions for Standard Advances

In accordance with RBI guidelines, a general provision is made on all standard advances based on the category of advances
identified in the RBI’s guidelines.

Changes Implemented Pursuant to the RBI’s COVID-19 Relief Package

COVID-19 virus, a global pandemic, has adversely affected the world economy, including India’s economy. The extent to
which the COVID-19 pandemic will continue to adversely affect our operations and asset quality will depend on the future
developments, which are uncertain.

The RBI on March 27, 2020, April 17, 2020 and May 23, 2020, announced the ‘COVID-19 Regulatory Package’ on asset
classification and provisioning. In terms of these RBI guidelines, the lending institutions were permitted to grant an effective
moratorium of six months on payment of all instalments/interest as applicable, falling due between March 1, 2020 and August
31, 2020 (the “Moratorium Period”). As such, in respect of all accounts classified as standard as on February 29, 2020, even
if overdue, the Moratorium Period, wherever granted, was excluded by the lending institutions from the number of days past-
due for the purpose of asset classification under RBI’s Income Recognition and Asset Classification norms.

Considering the prevailing uncertainty over the business due to COVID-19 pandemic (including the second wave), we held
provisions of ₹163.30 million, ₹132.40 million, ₹660.70 million and ₹404.00 million as at June 30, 2023 and March 31, 2023,
March 31, 2022 and March 31, 2021, respectively, against the potential impact of COVID‐19 as additional contingency
provision on standard assets (other than provisions held for restructuring under COVID-19 norms). The provisions we held
were in excess of the RBI’s prescribed norms.

The Honourable Supreme Court in Gajendra Sharma v. Union of India & Anr vide its Interim order dated September 3, 2020
directed banks that the accounts that were not declared NPAs till August 31, 2020 shall not be declared NPAs till further orders.
On March 23, 2021, in Small Scale Industrial Manufactures Association v. Union of India and others, the Supreme Court
directed that the interim order granted on September 3, 2020 to not declare the accounts of borrowers as NPAs stands vacated.
As per the RBI’s notification dated April 7, 2021, for the period commencing September 1, 2020, asset classification for all
such accounts shall be as per the applicable RBI asset classification norms.

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Substandard Advances

The general provisioning requirement for substandard advances is 15.00% of the amount outstanding without making any
allowance for ECGC guarantee cover and securities available and in respect of “unsecured exposures” identified as
“substandard”, an additional provision of 10.00% of the amount outstanding (i.e., a total of 25.00% in the outstanding balance).

As at June 30, 2023, 75.15% of our advances (net of provisions) were unsecured. As per our Board approved policy, unsecured
loans that are classified as ‘substandard’ and ‘doubtful’ attract a total of 25.00% and 100.00% provisioning on the day of
slippages, respectively.

Accordingly, the provisioning on the substandard category, as approved by the Board, is as follows:

Period for which the advance has Provision requirement (%) (secured Provision requirement (%)
remained in ‘Substandard’ category loan) (unsecured loan)
On classification 15.00 25.00
After the end of Quarter 1 15.00 40.00
After the end of Quarter 2 15.00 60.00
After the end of Quarter 3 15.00 80.00

Doubtful Advances

The following provisions are made for doubtful advances.

Doubtful “up to one year” – 100.00% of the unsecured portion and 25.00% of the secured portion;

Doubtful “one to three years” – 100.00% of the unsecured portion and 40.00% of the secured portion; and

Doubtful “more than three years” – 100.00% of the unsecured portion and, 100.00% of the secured portion.

Loss Advances

Loss advances are provided for 100.00% or written off.

The above-mentioned provisions are the minimum provisions that have to be provided for non-performing advances in
accordance with the RBI’s policy. We provide for more than the stipulated rates if we feel that the credit deterioration of the
customer requires us to do so.

Floating Provisions

We do not carry any floating provisions in our books.

Analysis of Non-Performing Advances by Industry Sector

The tables below set forth our non-performing advances by the borrower’s industry or economic activity as at the dates
indicated.

Sector As at June 30, 2023

Gross NPA Provision % of NPA in Industry
(₹ in million) (₹ in million)
Agriculture-land development 3.68 1.92 0.15
Agri-farm mechanization 7.18 3.44 0.30
Animal husbandry 630.10 314.30 26.52
Crop loans 0.18 0.10 0.01
Fisheries 57.84 27.74 2.43
Other agricultural loan 541.72 269.05 22.80
Poultry 58.88 29.27 2.47
Consumer durables 11.33 6.10 0.48
Education 14.15 7.31 0.59
Housing 7.35 3.18 0.31
Micro manufacturing 220.48 111.73 9.28
Services 269.12 158.15 11.33
Trade 366.86 188.64 15.43
Other 38.84 22.28 1.65
Personal 148.43 76.79 6.25
Total 2,376.14 1,220.00 100.00

298
 Sector As at March 31,
2023 2022 2021
Gross Provision % of NPA Gross Provision % of NPA Gross Provision % of NPA
NPA (₹ in in NPA (₹ in in NPA (₹ in in
(₹ in million) Industry (₹ in million) Industry (₹ in million) Industry
million) million) million)
Agriculture-land
development 4.80 2.50 0.14 14.04 10.01 0.15 20.59 13.99 0.37
Agri-farm
mechanization 5.60 2.76 0.16 18.92 14.34 0.20 30.45 20.93 0.54
Animal husbandry 930.00 494.45 26.44 2,430.25 1,333.39 25.59 1,647.89 665.85 29.22
Crop loans 0.38 0.20 0.01 206.37 127.57 2.17 355.26 261.51 6.30
Fisheries 67.92 36.05 1.93 179.57 100.22 1.89 217.38 76.53 3.85
Other agricultural
loan 643.65 347.14 18.30 45.25 29.49 0.48 157.85 53.01 2.80
Poultry 83.26 43.89 2.37 204.86 108.81 2.16 115.89 49.02 2.05
Consumer
durables 23.75 12.44 0.68 77.46 52.80 0.82 87.56 37.30 1.55
Education 22.21 11.51 0.63 217.72 123.92 2.29 121.06 42.48 2.15
Housing 35.79 27.37 1.02 54.37 36.21 0.57 55.89 26.93 0.99
Micro
manufacturing 336.92 180.75 9.58 1,330.16 812.80 14.01 1,051.38 454.91 18.64
Services 412.87 243.28 11.74 1,071.25 630.21 11.28 737.73 308.88 13.08
Trade 510.99 265.14 14.53 875.70 475.16 9.22 481.50 218.29 8.54
Other 125.73 100.95 3.57 809.95 397.12 8.53 185.21 82.23 3.28
Personal 313.03 169.53 8.90 1,960.07 684.33 20.64 374.33 162.32 6.64
Total 3,516.90 1,937.96 100.00 9,495.94 4,936.38 100.00 5,639.97 2,474.19 100.00

Analysis of our NPA Portfolio by Category of Advance

The table below sets forth our non-performing advances by category of advance and as a percentage of gross advances as at the
dates indicated.

Particulars As at June 30, As at March 31,

2023 2023 2022 2021
Gross NPAs % of Gross Gross NPAs % of Gross Gross NPAs % of Gross Gross NPAs % of Gross
(₹ in Advances (₹ in Advances (₹ in Advances (₹ in Advances
million) million) million) million)
Microfinance
Loans(1) 2,066.00 1.43 3,141.60 2.23 9,254.16 7.63 5,329.90 6.33
Other Micro
Loans(1) 58.17 0.04 3.87 * - - - -
Retail loans 188.05 0.13 267.12 0.19 159.39 0.13 270.69 0.32
MSME and
corporate loans 22.84 0.02 49.43 0.04 41.86 0.03 - 0.00
Loans to
Financial
Institutions - - 39.38 0.03 39.38 0.03 39.38 0.05
Agricultural loans 41.08 0.03 15.50 0.01 1.15 0.00 - -
Total 2,376.14 1.65 3,516.90 2.49 9,495.94 7.83 5,639.97 6.70
Gross Advances 144,435.54 100.00 141,181.27 100.00 121,306.43 100.00 84,150.05 100.00
Note:
(1) Until the introduction of the RBI Regulatory Framework for Microfinance Loans Direction, 2022, we considered all of our loans to
individuals who were members of a sub-group to be micro loans and all such loans are shown as Microfinance Loans as at and for the
years ended March 31, 2022 and 2021. Effective from October 17, 2022, we segregated our micro loans into Microfinance Loans and
Other Micro Loans.
* Below round off limit.

Movement in our Provisions for NPAs

The table below sets forth the movement in our provision for NPAs for the periods and fiscal years indicated.

Provisions for NPAs As at and for the three months For the year
period ended June 30, ended March 31,
2023 2022 2023 2022 2021
(₹ in million)
Opening balance at the beginning of the
period/year 1,937.96 4,936.38 4,936.38 2,474.19 586.91
Additions during the period/year 1,433.03 1,303.27 7,355.97 3,815.32 1,944.55
Deductions during the period/year 2,150.99 3,290.27 10,354.39 1,353.13 57.27
Provisions at the close of the period/year 1,220.00 2,949.38 1,937.96 4,936.38 2,474.19
299
Upgradations of Loan Accounts Classified as NPAs

If arrears of interest and principal are paid by the borrower in the case of loan account classified as NPAs, the account will no
longer be treated as non-performing and be classified as a ‘standard’ account.

Restructuring of Advances

All of our loans where the repayment terms of existing advances have been revised in order to extend the repayment period
and/ or decrease the instalment amount and/ or decrease the interest rate as per the borrower’s request are marked as rescheduled
loans.

We consider a restructured account, if any, as one where we, for economic or legal reasons relating to the borrower’s financial
difficulty, grant to the borrower concessions that we would not otherwise consider. Restructuring would normally involve
modification of terms of the advance/ securities, which would generally include, among others, alteration of repayment period/
repayable amount/ the amount of instalments/ rate of interest (due to reasons other than competitive reasons). However,
extension in repayment tenure of a floating rate loan on reset of interest rate, so as to keep the equated monthly instalment
(“EMI”) unchanged, provided it is applied to a class of accounts uniformly, will not render the account to be classified as a
‘restructured account’. In other words, extension or deferment of EMIs to individual borrowers as against to an entire class,
would render the accounts to be classified as ‘restructured accounts’ except as permitted by the RBI.

Restructured accounts are classified as such by us only upon approval and implementation of the restructuring package.
Necessary provision for diminution in the fair value of the asset is made. Restructuring of an account, if any, is done at a
borrower level. This will result in immediate down-gradation of the loan, i.e., a standard loan will become sub-standard and
attract provisions as per the asset classification and subsequent provisioning norms. The NPAs, upon restructuring, would
continue to have the same asset classification as prior to restructuring and slip into further lower asset classification categories
as per extant asset classification norms with reference to the pre-restructuring repayment schedule. If such account classified
as NPA performs regularly, it will be upgraded after satisfactory performance during the ‘specified period’. Specified Period
means a period of one year from the commencement of the first payment of interest or principal, whichever is later, on the
credit facility with longest period of moratorium under the terms of restructuring package.

The erosion in the fair value of the advance is computed as the difference between the fair value of the loan before and after
restructuring. Fair value of the loan before restructuring is computed as the present value of cash flows representing the interest
at the existing rate charged on the advance before restructuring and the principal, discounted at the existing interest rate as on
the date of restructuring. Fair value of the loan after restructuring is computed as the present value of cash flows representing
the interest at the rate charged on the advance on restructuring and the principal, discounted at the existing interest rate on the
date of restructuring. If due to lack of expertise/ appropriate infrastructure, a bank finds it difficult to ensure computation of
diminution in the fair value of advances, as an alternative to the methodology prescribed above for computing the amount of
diminution in the fair value, banks will have the option of notionally computing the amount of diminution in the fair value and
providing therefore, at 5.00% of the total exposure, in respect of all restructured accounts where the total dues to bank(s) are
less than ₹10.00 million.

Additional finance approved under the resolution plan is treated as a ‘standard asset’ during the specified period, provided the
account performs satisfactorily during the specified period. If the restructured asset fails to perform satisfactorily during the
specified period or does not qualify for upgradation at the end of the specified period, the additional finance shall be placed in
the same asset classification category as the restructured debt.

On August 6, 2020, the RBI issued a circular that permitted lenders to implement a resolution plan (“Resolution Framework
1.0”), along with asset classification benefits, for eligible corporate and individual borrower segments. Lenders had to ensure
that the resolution facility was provided only to borrowers impacted by COVID-19. The resolution facility was applicable for
accounts classified as standard and not in default for more than 30 days as at March 1, 2020. The resolution plans had to be
finalized by December 31, 2020 and implemented within 180 days from the date of invocation. Restructuring of loans was also
allowed for MSMEs. The table below sets forth certain details of our advances under Resolution Framework 1.0 as at the dates
indicated.

Particulars As at June 30, As at March 31, As at March 31, As at March 31,

2023 2023 2022 2021
(₹ in million, except for percentages)
Gross advances under Resolution Framework
1.0 [A] 129.70 143.50 169.35 192.60
Gross advances [B] 144,435.54 141,181.27 121,306.43 84,150.05
Gross advances under Resolution Framework
1.0 as percentage of gross advances [C] = [A] /
[B] (%) 0.09 0.10 0.14 0.23
Gross standard advances under Resolution
Framework 1.0 117.29 95.57 121.86 181.63
Provision for gross standard advances under
Resolution Framework 1.0 17.93 9.23 11.75 17.33

300
 Particulars As at June 30, As at March 31, As at March 31, As at March 31,
2023 2023 2022 2021
(₹ in million, except for percentages)
Gross NPAs under Resolution Framework 1.0 12.40 47.93 47.49 10.97
Provision for NPAs under Resolution
Framework 1.0 2.39 4.42 27.20 3.75

On May 5, 2021, the RBI announced the resolution framework 2.0 (“Resolution Framework 2.0”) to protect individuals and
MSMEs from the adverse effect of the second wave of COVID-19. The Resolution Framework 2.0 was applicable for accounts
classified as ‘Standard’ as at March 31, 2021, wherein individuals and MSMEs having an aggregate loan exposure of up to
₹250 million who have not availed restructuring under any of the earlier restructuring frameworks and who were classified as
‘Standard’ as on March 31, 2021 were allowed to restructure their loans. Restructuring under the proposed framework was able
to be invoked up to September 30, 2021 and had to be finalised and implemented within 90 days after invocation of the
resolution process (with the last date to implement the restructuring for banks being December 31, 2021). The Resolution
Framework 2.0 included rescheduling of loan equated monthly instalments and the granting of a moratorium as per our Board-
approved policy. In accordance with Resolution Framework 2.0 and our Board approved policy, our Bank restructured loans
that were standard as at March 31, 2021. For the purpose of restructuring, the balance outstanding as at the date of restructuring
includes interest accrued as at such date, which is considered to be residual debt, and the equated monthly instalment is fixed
for such debt by extending the tenure of the loan, if required. Our Bank also provided initial holidays at the customer’s request
to start repaying their loan as per Resolution Framework 2.0. Our Bank restructured 706,061 accounts amounting to ₹16,735.77
million as per Resolution Framework 2.0. The table below sets forth certain details of our advances under Resolution
Framework 2.0 as at the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022
(₹ in million, except for percentages)
Gross advances under Resolution
Framework 2.0 [A] 562.00 1,110.31 9,115.67
Gross advances [B] 144,435.54 141,181.27 121,306.43
Gross advances under Resolution
Framework 2.0 as percentage of gross
advances [C] = [A] / [B] (%) 0.39 0.79 7.51
Gross standard advances under Resolution
Framework 2.0 4,75.72 868.33 5,515.25
Provision for gross standard advances under
Resolution Framework 2.0 72.44 130.73 850.47
Gross NPAs under Resolution Framework
2.0 86.28 241.98 3,600.42
Provision for NPAs under Resolution
Framework 2.0 49.09 92.68 929.88

For further details on loans restructured under Resolution Framework 1.0 and Resolution Framework 2.0, as per the disclosure
prepared in line with the RBI Master Direction on Financial Statements – Presentation and Disclosures dated August 30, 2021
(as amended), see “Financial Statements – Note 19 – Notes to Accounts Forming Part of Restated Financial Information –
Disclosures as Laid Down by RBI Circulars – Note 4.8 – Disclosure under Resolution framework for Covid-19 related stress”
on page 355.

Productivity Ratios

The following tables set forth certain information relating to our productivity ratios as at the dates and for the periods and fiscal
years indicated.

Particulars As at and for the three months period ended

June 30,
2023 2022
Number of banking outlets 700 576
Number of employees 5,160 3,868
Lending accounts (in million) 3.65 3.52
Deposit accounts (in million) 6.75 5.78
AUM (₹ in million) 172,039.68 127,352.96
AUM per banking outlet (₹ in million) 245.77 221.10
AUM per employee (₹ in million) 33.34 32.92
Disbursements (₹ in million) 45,093.40 28,684.49
Disbursements per banking outlet (₹ in million) 64.42 49.80
Disbursements per employee (₹ in million) 8.74 7.42
Deposits (₹ in million) 156,558.54 134,577.46
Deposits per banking outlet (₹ in million) 223.66 233.64
Deposits per employee (₹ in million) 30.34 34.79

301
 Particulars As at and for the year ended March 31,
2023 2022 2021
Number of banking outlets 700 575 550
Number of employees 5,034 4,141 3,803
Lending accounts (in million) 3.36 3.56 3.12
Deposit accounts (in million) 6.48 5.59 4.72
AUM (₹ in million) 163,312.65 123,406.91 84,259.30
AUM per banking outlet (₹ in million) 233.30 214.62 153.20
AUM per employee (₹ in million) 32.44 29.80 22.16
Disbursements (₹ in million) 146,906.51 119,452.20 62,863.74
Disbursements per banking outlet (₹ in million) 209.87 207.74 114.30
Disbursements per employee (₹ in million) 29.18 28.84 16.53
Deposits (₹ in million) 146,656.24 128,150.72 89,994.26
Deposits per banking outlet (₹ in million) 209.51 222.87 163.63
Deposits per employee (₹ in million) 29.13 30.95 23.66

Certain Non-GAAP Financial Measures

The body of generally accepted accounting principles is commonly referred to as “GAAP.” Our management believes that the
presentation of certain non-GAAP financial measures provides additional useful information to investors regarding our
performance and trends related to our results of operations. Accordingly, we believe that when non-GAAP financial information
is viewed together with GAAP financial information, investors are provided with a more meaningful understanding of our
ongoing operating performance and financial results.

We use a variety of financial and operational performance indicators to measure and analyse our operational performance from
period to period, and to manage its business. Our management also uses other information that may not be entirely financial in
nature, including statistical and other comparative information commonly used within the Indian banking industry to evaluate
our financial and operating performance. For these reasons, we have included certain non-GAAP financial measures in this
section and elsewhere in this Red Herring Prospectus, including, among others: Pre-Provisioning Operating Profit, Cost to
Income Ratio; Net Interest Income; Net Interest Margin; Yield on Average Interest-Earning Advances; Yield on Average
Interest-Earning Investments; Yield on Average Interest-Earning Balance with Reserve Bank of India and other Inter-Bank
Funds, Yield on Average Total Interest-Earning Assets; net worth; net asset value per Equity Share; return on net worth;
operating expenses to Net Interest Income; Operating Profit; return on equity; return on assets; Average Total Interest-Earning
Assets as a percentage of Average Total Interest-Bearing Liabilities; Average Interest-Earning Advances as a percentage of
Average Total Assets; Average Total Interest-Earning Assets as a percentage of Average Total Assets; Average Total Interest-
Bearing Liabilities as a percentage of Average Total Assets; Cost of Funds; spread; operating income; Average Shareholders’
Funds as a percentage of Average Total Assets; operating expenses to Average Total Assets; CASA to total deposits ratio; total
of provision towards NPAs and provision towards standard assets held as percentage of gross advances; total provision towards
NPAs held as a percentage of gross NPAs; provision made towards income tax as percentage of Net Profit Before Tax; earnings
before interest, tax, depreciation and amortisation (EBITDA); Cost of Average Borrowings; Cost of Average Interest-Bearing
Liabilities; Cost of Average Savings Bank Deposits; Cost of Average Term Deposits; Cost of Average Total Deposits and Cost
of Average CASA, as well as certain other metrics based on or derived from those non-GAAP financial measures. These
financial and operational performance indicators have limitations as analytical tools. These non-GAAP financial measures are
not calculated in accordance with Indian GAAP and, therefore, should not be viewed as substitutes for performance or
profitability measures under Indian GAAP. As a result, these financial and operational performance indicators should not be
considered in isolation from, or as a substitute for, analysis of our historical financial performance, as reported under Indian
GAAP and presented in our Restated Financial Information. Our use of these terms may vary from the use of similarly titled
measures by other banks due to potential inconsistences in the method of calculation and differences due to items subject to
interpretation and, as such, they may not be comparable to similar financial or performance indicators used by other banks or
financial institutions.

Sets forth below are the non-GAAP financial measures presented in this section and in other sections of the Draft Red Herring
Prospectus that are able to be reconciled to a directly comparable GAAP measure that have not already been reconciled to a
directly comparable GAAP measure in the tables above or in the tables in other sections of this Red Herring Prospectus.

Provision made Towards Income Tax as Percentage of Net Profit Before Tax

Particulars As at and for the three months period ended

June 30,
2023 2022
(₹ in million, except percentages)
Current tax expense [A] 452.50 415.00
Deferred tax [B] (14.68) (57.99)
Provision made towards income tax [C] = [A] + [B] 437.82 357.01
Net profit for the period [D] 1,299.64 1,059.66
Net Profit Before Tax [E] = [C]+[D] 1,737.46 1,416.67
Provision made towards income tax as percentage of Net Profit Before Tax
[F] = [C]/[E] (%) 25.20 25.20
302
 Particulars Year ended March 31,
2023 2022 2021
(₹ in million, except percentages)
Current tax expense [A] 771.17 485.00 602.48
Deferred tax [B] 265.94 (293.82) (242.70)
Provision made towards income tax [C] = [A] + [B] 1,037.12 191.18 359.78
Net profit for the year [D] 3,023.33 547.32 1,053.96
Net Profit Before Tax [E] = [C]+[D] 4,060.45 738.50 1,413.73
Provision made towards income tax as percentage of Net Profit Before Tax 25.54 25.89 25.45
[F] = [C]/[E] (%)

303
 SECTION V: FINANCIAL INFORMATION

FINANCIAL STATEMENTS

In accordance with the SEBI ICDR Regulations, the audited financial statements of our Bank as at and for the Financial Years
ended March 31, 2023, March 31, 2022 and March 31, 2021 prepared by our Bank in accordance with the provisions of Section
29 of the Banking Regulation Act 1949, accounting principles generally accepted in India including the Companies (Accounting
Standard) Rules 2006 (as amended) specified under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies
(Accounts) Rules, 2014 in so far as they apply to our Bank and circulars, guidelines and directions issued by Reserve Bank of
India from time to time (collectively, the “Audited Financial Statements”) are available on our website at
www.esafbank.com/investor-relations-info/.

Our Bank is providing a link to this website solely to comply with the requirements specified in the SEBI ICDR Regulations.
The Audited Financial Statements and the reports thereon do not constitute, (i) a part of this Red Herring Prospectus; or (ii) a
prospectus, a statement in lieu of a prospectus, an offering circular, an offering memorandum, an advertisement, an offer or a
solicitation of any offer or an offer document to purchase or sell any securities under the Companies Act, the SEBI ICDR
Regulations, or any other applicable law in India or elsewhere. The Audited Financial Statements and the reports thereon should
not be considered as part of information that any investor should consider subscribing for or purchase any securities of our
Bank and should not be relied upon or used as a basis for any investment decision. None of our Bank or any of its advisors, nor
the BRLMs, nor any of their respective employees, directors, affiliates, agents or representatives accept any liability whatsoever
for any loss, direct or indirect, arising from any information presented or contained in the Audited Financial Statements and the
reports thereon, or the opinions expressed therein.

The following pages set forth the Auditor’s Examination Report on the Restated Financial Information and the Restated
Financial Information.

(The remainder of this page has intentionally been left blank)

304
Deloitte Haskins & Sells Abarna & Ananthan
Chartered Accountants Chartered Accountants
19th Floor, Shapath-V 521, 3rd Main Rd, 2nd Phase
S.G. Highway 6th Block, Banashankari 3rd Stage
Ahmedabad – 380 015 Bengaluru,
Gujarat, India Karnataka – 560 085
Tel: +91 79 6682 7300
Fax: +91 79 6682 7400

INDEPENDENT AUDITOR’S EXAMINATION REPORT ON RESTATED FINANCIAL

INFORMATION

The Board of Directors

ESAF Small Finance Bank Limited

Dear Sirs,

1. We have jointly examined (as appropriate, refer paragraph 5 below) the attached Restated
Financial Information of ESAF Small Finance Bank Limited (the “Bank” or the “Issuer”),
comprising the Restated Statements of Assets and Liabilities as at 30 June 2023 and
2022, and as at 31 March 2023, 2022 and 2021, the Restated Profit and Loss Accounts,
the Restated Cash Flow Statements for the three months period ended 30 June 2023 and
2022, and for the years ended 31 March 2023, 2022 and 2021, the Summary Statement
of Significant Accounting Policies, and other explanatory information (collectively, the
“Restated Financial Information”), as approved by the Board of Directors of the Bank at
their meeting held on 17 October 2023 for the purpose of inclusion in the Red Herring
Prospectus (the “RHP”) and the Prospectus (collectively referred to as the “Offer
Documents”) to be prepared by the Bank in connection with its proposed Initial Public
Offer of equity shares (“IPO”) prepared in terms of the requirements of:

a) Section 26 of Part I of Chapter III of the Companies Act, 2013, as amended (the “Act");

b) The Securities and Exchange Board of India (Issue of Capital and Disclosure
Requirements) Regulations, 2018, as amended ("ICDR Regulations"); and

c) The Guidance Note on Reports in Company Prospectuses (Revised 2019) issued by the
Institute of Chartered Accountants of India (“ICAI”), as amended from time to time
(the “Guidance Note”).

2. The Bank’s management is responsible for the preparation of the Restated Financial
Information which have been approved by the Board of Directors for the purpose of
inclusion in the Offer Documents to be filed with Securities and Exchange Board of India
in connection with the proposed IPO. The Restated Financial Information have been
prepared by the management of the Bank on the basis of preparation stated in note 2 to
the Restated Financial Information. The Board of Directors of the Bank are responsible for
designing, implementing and maintaining adequate internal control relevant to the
preparation and presentation of the Restated Financial Information. The Board of Directors
are also responsible for identifying and ensuring that the Bank complies with the Act, ICDR
Regulations and the Guidance Note.

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Deloitte Haskins & Sells Abarna & Ananthan

3. We have jointly examined such Restated Financial Information taking into consideration:

a) The terms of reference and terms of our engagement agreed upon with you in
accordance with our engagement letter dated 29 May 2023, read with addendum on
29 September 2023 in connection with the proposed IPO of equity shares of the Issuer;

b) The Guidance Note also requires that we comply with the ethical requirements of the
Code of Ethics issued by the ICAI;

c) Concepts of test checks and materiality to obtain reasonable assurance based on

verification of evidence supporting the Restated Financial Information; and

d) The requirements of Section 26 of the Act and the ICDR Regulations.

Our work was performed solely to assist you in meeting your responsibilities in relation to
your compliance with the Act, the ICDR Regulations and the Guidance Note in connection
with the IPO.

4. These Restated Financial Information have been compiled by the management from:

a) the audited Special Purpose Interim Financial Statements as at and for three months
period ended 30 June 2023 and 2022, prepared by the Bank in accordance with the
recognition and measurement principles of Accounting Standards (AS) 25 ‘Interim
Financial Reporting’ prescribed under Section 133 of the Companies Act, 2013, read
with relevant rules issued thereunder and the other accounting principles generally
accepted in India in so far as they apply to banks, requirements prescribed under the
Third Schedule of the Banking Regulation Act, 1949, the circulars and guidelines issued
by RBI from time to time to the extent applicable and current practices prevailing
within the banking industry in India, which have been approved by the Board of
Directors at their meetings held on 11 August 2023 and 10 August 2022 respectively.

b) the audited financial statements as at and for the years ended 31 March 2023, 2022
and 2021, prepared by the Bank in accordance with the requirements prescribed under
the Banking Regulation Act, 1949, the circulars and guidelines issued by RBI from time
to time, accounting principles generally accepted in India including Accounting
Standards prescribed under Section 133 of the Act, read with the Companies
(Accounts) Rules, 2014 to the extent applicable and other relevant provisions of the
Act and current practices prevailing within the banking industry in India, which have
been approved by the Board of Directors at their meetings held on 10 May 2023, 10
May 2022, and 26 May 2021 respectively.

5. For the purpose of our joint examination, we have relied on:

a) Auditors’ report issued by us dated 11 August 2023 on the Special purpose Interim
Financial Statements of the Bank as at and for three months period ended 30 June
2023 as referred in Paragraph 4(a) above

b) Auditors’ report issued by us dated 10 May 2023 on the audited financial statements
of the Bank as at and for the year ended 31 March 2023 as referred in Paragraph 4(b)
above.

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Deloitte Haskins & Sells Abarna & Ananthan

c) Auditors’ reports issued by Deloitte Haskins & Sells, the previous auditors of the Bank
and who continue to be one of the joint auditors (the “Previous Auditors”), dated 23
August 2022 on the Special Purpose Interim Financial Statements of the Bank as at
and for three months period ended 30 June 2022 as referred in Paragraph 4(a) above

d) Auditors’ report issued by the Previous Auditors dated 10 May 2022 and 26 May 2021
on the audited financial statements of the Bank as at and for the years ended 31 March
2022 and 2021 respectively, as referred in Paragraph 4(b) above.

The auditors’ report on the financial statements of the Bank as at and for the year
ended 31 March 2022 includes the following Emphasis of Matter paragraph:

“We draw attention to Note 18A.16 to the Financial Statements which describes that
the potential impact of the continuing COVID 19 pandemic on the Bank’s results are
dependent on future developments which are uncertain.

Our opinion is not modified in respect of this matter.”

The auditors’ report on the financial statements of the Bank as at and for the year
ended 31 March 2021 includes the following Emphasis of Matter paragraph:

“We draw attention to Note 18A.7(i) to the Financial Statements which fully describes
that the Bank has recognized additional contingency provision on loans to reflect the
continuing uncertainties arising from the COVID 19 pandemic. Such estimates are
based on current facts and circumstances and may not necessarily reflect the future
uncertainties and events arising from the full impact of the COVID 19 pandemic.

Our opinion is not modified in respect of this matter.”

The audits of the Special Purpose Interim Financial Statements of the Bank for three
months period ended 30 June 2022 and the audits of the financial statements of the Bank
for the years ended 31 March 2022 and 2021 were conducted by the Previous Auditors.
The Previous Auditors have examined the special purpose restated financial information
as at and for three months period ended 30 June 2022 and as at and for the years ended
31 March 2022 and 2021 and accordingly reliance has been placed by Abarna & Ananthan,
on the restated statement of assets and liabilities and the restated statement of profit and
loss, restated statement of cash flows, the summary statement of significant accounting
policies, and other explanatory information (collectively, the “Special Purpose Restated
Financial Information”) examined by the Previous Auditors for the said period/years. The
examination report included for the said period/years is based solely on the report
submitted by the Previous Auditors. The Previous Auditors have also confirmed that the
Special Purpose Restated Financial Information:

a) have been prepared after incorporating adjustments for the changes in accounting
policies, material errors and regrouping/reclassifications retrospectively in three
months period ended 30 June 2022 and in the financial years ended 31 March 2022
and 2021 to reflect the same accounting treatment as per the accounting policies and
grouping/classifications followed as at and for three months period ended 30 June
2023, as applicable;

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Deloitte Haskins & Sells Abarna & Ananthan

b) do not require any adjustment for modification as there is no modification in the

underlying audit report. There are items relating to emphasis of matter (refer
paragraph 5(d) above), which do not require any adjustment to the Special Purpose
Restated Financial Information; and

c) have been prepared in accordance with the Act, ICDR Regulations and the Guidance
Note.

6. Based on our examination and according to the information and explanations given to us
and also as per the reliance placed by Abarna & Ananthan on the examination reports
submitted by the Previous Auditors, as mentioned in paragraphs 5, we report that the
Restated Financial Information:

a) have been prepared after incorporating adjustments for the changes in accounting
policies, material errors and regrouping/reclassifications retrospectively in three
months period ended 30 June 2022 and in the financial years ended 31 March 2023,
2022 and 2021 to reflect the same accounting treatment as per the accounting policies
and grouping/classifications followed as at and for three months period ended 30 June
2023, as applicable;

b) do not require any adjustment for modification as there is no modification in the

underlying audit reports. There are items relating to emphasis of matter (refer
paragraph 5(d) above), which do not require any adjustment to the Restated Financial
Information; and

c) have been prepared in accordance with the Act, ICDR Regulations and the Guidance
Note.

7. Each of the joint auditors on its behalf confirms that they have complied with the relevant
applicable requirements of the Standard on Quality Control (SQC) 1, Quality Control for
Firms that Perform Audits and Reviews of Historical Financial Information, and Other
Assurance and Related Services Engagements.

8. The Restated Financial Information do not reflect the effects of events that occurred
subsequent to the respective date of the reports on the audited financial statements
mentioned in paragraph 5 above.

9. This report should not in any way be construed as a reissuance or re-dating of any of the
previous audit reports issued by us or the Previous Auditors, nor should this report be
construed as a new opinion on any of the financial statements referred to herein.

10. We have no responsibility to update our report for events and circumstances occurring
after the date of the report.

11. Our report is intended solely for use of the Board of Directors for inclusion in the Offer
Documents to be filed with Securities and Exchange Board of India and the Registrar of

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Deloitte Haskins & Sells Abarna & Ananthan

Companies, Kerala at Ernakulam in connection with the proposed IPO. Our report should
not be used, referred to, or distributed for any other purpose except with our prior consent
in writing. Accordingly, we do not accept or assume any liability or any duty of care for
any other purpose or to any other person to whom this report is shown or into whose
hands it may come without our prior consent in writing.

For Deloitte Haskins & Sells For Abarna & Ananthan

Chartered Accountants Chartered Accountants
(Firm’s Registration No. 117365W) (Firm’s Registration No.000003S)

G. K. Subramaniam Mohan Rao G

Partner Partner
Membership No. 109839 Membership No. 203737
(UDIN: 23109839BGXQJQ5476) (UDIN: 23203737BGZDES8145)

Place: Mumbai Place: Bengaluru

Date: 17 October, 2023 Date: 17 October, 2023

309
ESAF SMALL FINANCE BANK LIMITED
RESTATED STATEMENT OF ASSETS AND LIABILITIES
Rs. in Million
Particulars Note As at As at As at As at As at
Reference 30 June 2023 30 June 2022 31 March 31 March 2022 31 March 2021
2023
CAPITAL AND LIABILITIES
Capital 3 4,494.74 4,494.74 4,494.74 4,494.74 4,494.74
Employee Stock Options Outstanding 58.10 63.31 58.75 48.06 -
Reserves and Surplus 4 13,896.19 10,632.88 12,596.55 9,573.22 9,025.90
Deposits 5 1,56,558.54 1,34,577.46 1,46,656.25 1,28,150.72 89,994.26
Borrowings 6 27,391.25 25,555.00 33,541.95 29,528.33 16,940.00
Other Liabilities and Provisions 7 5,560.59 5,717.62 4,888.33 5,280.57 2,931.62
Total 2,07,959.41 1,81,041.01 2,02,236.57 1,77,075.64 1,23,386.52
ASSETS
Cash and Balances with Reserve Bank of India 8 8,212.69 9,574.98 7,395.48 13,006.68 16,180.72
Balances with Banks and Money at Call and Short Notice 9 655.45 1,597.13 275.01 2,112.36 2,010.54
Investments 10 48,821.17 48,295.53 48,885.28 40,702.98 19,320.69
Advances 11 1,43,215.54 1,16,310.76 1,39,243.31 1,16,370.05 81,675.86
Fixed Assets 12 1,872.56 1,648.31 1,879.27 1,594.75 1,385.12
Other Assets 13 5,182.00 3,614.30 4,558.22 3,288.82 2,813.59
Total 2,07,959.41 1,81,041.01 2,02,236.57 1,77,075.64 1,23,386.52
Contingent Liabilities 14 19.03 18.98 18.98 20.52 15.04
Bills for collection - - - - -

Significant Accounting Policies and notes to accounts

2 & 19
forming part of Restated financial information

The accompanying Notes are an integral part of this Restated financial information.

In terms of our report attached

For Deloitte Haskins & Sells For and on behalf of the Board of Directors
Chartered Accountants
Firm's Registration Number: 117365W

G K Subramaniam P R Ravi Mohan Kadambelil Paul Thomas

Partner Chairman Managing Director & CEO
Membership No. : 109839 DIN:08534931 DIN: 00199925

Place : Mumbai
Date : 17 October 2023

For Abarna & Ananthan

Chartered Accountants
Firm's Registration Number: 000003S

Mohan Rao G. Gireesh C P Ranjith Raj P

Partner Chief Financial Officer Company Secretary
Membership No. : 203737

Place : Bengaluru Place : Mannuthy

Date : 17 October 2023 Date : 17 October 2023

310
ESAF SMALL FINANCE BANK LIMITED
RESTATED PROFIT AND LOSS ACCOUNT
Rs. in Million
Particulars Note
Year
Reference Three Months Three Months Year Year
Ended
Period ended 30 Period ended Ended Ended
31 March
June 2023 30 June 2022 31 March 2022 31 March 2021
2023

I. INCOME
Interest Earned 15 8,987.46 6,903.13 28,536.59 19,399.25 16,411.73
Other Income 16 930.29 480.11 2,879.13 2,075.83 1,272.48
Total 9,917.75 7,383.24 31,415.72 21,475.08 17,684.21
II. EXPENDITURE
Interest Expended 17 3,132.93 2,415.51 10,173.19 7,927.86 7,195.82
Operating Expenses 18 3,778.13 2,714.82 12,305.41 8,628.71 6,318.55
Provisions and Contingencies 1,707.05 1,193.25 5,913.79 4,371.19 3,115.88
Total 8,618.11 6,323.58 28,392.39 20,927.76 16,630.25
III. PROFIT
Net Profit for the period/year (I - II) 1,299.64 1,059.66 3,023.33 547.32 1,053.96
Add: Balance in Restated Profit and Loss Account
brought forward from Previous year 5,420.22 3,214.96 3,214.96 3,062.43 2,271.96
6,719.86 4,274.62 6,238.29 3,609.75 3,325.92
IV. APPROPRIATIONS
Transfer to Statutory Reserve - - 755.83 136.83 263.49
Transfer to Capital Reserve - - 2.76 37.29 -
Transfer to Investment Fluctuation Reserve Account - - 59.48 220.67 -
Balance carried over to Restated Statement of Assets and
Liabilities 6,719.86 4,274.62 5,420.22 3,214.96 3,062.43
Total 6,719.86 4,274.62 6,238.29 3,609.75 3,325.92
Earnings per share (Face Value of Rs.10/- each) (Rs.)
(Refer Note B.1 of Note 19)
Basic (Rs.) 2.89 2.36 6.73 1.22 2.46
Diluted (Rs.) 2.89 2.35 6.71 1.22 2.46
Significant Accounting Policies and notes to accounts
2 & 19
forming part of Restated financial information
The accompanying Notes are an integral part of this Restated financial information.

In terms of our report attached

For Deloitte Haskins & Sells For and on behalf of the Board of Directors
Chartered Accountants
Firm's Registration Number: 117365W

G K Subramaniam P R Ravi Mohan Kadambelil Paul Thomas

Partner Chairman Managing Director & CEO
Membership No. : 109839 DIN:08534931 DIN: 00199925

Place : Mumbai
Date : 17 October 2023

For Abarna & Ananthan

Chartered Accountants
Firm's Registration Number: 000003S

Mohan Rao G. Gireesh C P Ranjith Raj P

Partner Chief Financial Officer Company Secretary
Membership No. : 203737

Place : Bengaluru Place : Mannuthy

Date : 17 October 2023 Date : 17 October 2023

311
ESAF SMALL FINANCE BANK LIMITED
RESTATED CASH FLOW STATEMENT
Rs. In Million
Particulars Three Three Year Year
Year
Months Months Ended Ended
Ended
Period Period 31 March 31 March
31 March
ended 30 ended 30 2022 2021
2023
June 2023 June 2022
Cash Flows from Operating Activities
Net Profit before tax 1,737.46 1,416.68 4,060.45 738.50 1,413.73
Adjustments for:
Depreciation on Bank's property 122.69 100.98 417.89 327.74 285.73
Amortisation of Premium on HTM Investments 15.82 15.62 62.70 80.35 68.46
Profit on sale of investments (net) (62.14) (44.21) (156.35) (435.14) (230.40)
Profit/(Loss) on sale of Fixed Assets (0.27) 0.10 3.38 (0.06) 23.34
Provision for Non Performing Advances 1,289.22 652.50 6,157.91 3,206.75 1887.27
Provision for Standard Advances (36.35) 158.13 (1,281.08) 936.22 925.52
Expense on Employee Stock Option (0.65) 15.25 10.69 48.06 -
Provision for Depreciation on investments (52.26) 304.28 913.88 233.06 (11.44)
Provision/ (Reversal) for Other Contingencies 23.80 22.55 54.52 34.10 (57.07)
3,037.32 2,641.88 10,243.99 5,169.58 4,305.14
Adjustments for :-
(Increase)/ Decrease in Investments (other than HTM
Investments) (243.50) (4,986.02) (3,976.14) (11,979.40) 4,075.38
(Increase)/ Decrease in Advances (5,261.44) (593.21) (29,031.17) (37,900.94) (18,084.91)
(Increase)/ Decrease in Fixed Deposit with Banks (Original
Maturity greater than 3 months) - - - (2.94) 2,264.25
Increase in Other Assets (726.60) (543.20) (1,693.47) (497.39) (424.03)
Increase in Deposits 9,902.31 6,426.73 18,505.51 38,156.46 19,710.44
Increase/ (Decrease) in Other liabilities and provisions 607.08 219.94 834.32 1,378.63 521.25
Direct taxes (paid)/refund (257.28) (102.86) (613.04) (169.02) (1,093.07)
Net Cash Flows from/(used in) Operating Activities (A) 7,057.89 3,063.26 (5,730.00) (5,845.02) 11,274.45

Cash Flows Used in Investing Activities

Purchase of Fixed Assets (119.34) (154.67) (716.51) (540.14) (495.01)
Proceeds from Sale of Fixed Assets 3.62 0.02 10.72 2.83 1.89
(Increase)/ Decrease in Held to Maturity Investments 406.18 (2,882.21) (5,026.38) (9,281.16) (5,886.43)
Net Cash Flows from/(used in) Investing Activities (B) 290.46 (3,036.86) (5,732.17) (9,818.47) (6,379.55)

Cash Flows from Financing Activities

Proceeds from Issue of Share Capital (including Share Premium) - - - - 1,625.87

Increase/(Decrease) in Borrowings (6,150.70) (3,973.33) 4,013.62 12,588.33 4,906.83
Net Cash Flows from/(used in) Financing Activities (C) (6,150.70) (3,973.33) 4,013.62 12,588.33 6,532.70
Net Increase/(Decrease) in Cash and Cash Equivalents 1,197.65 (3,946.93) (7,448.55) (3,075.16) 11,427.60
(A+B+C)

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ESAF SMALL FINANCE BANK LIMITED
RESTATED CASH FLOW STATEMENT
Rs. In Million
Particulars Three Three Year Year
Year
Months Months Ended Ended
Ended
Period Period 31 March 31 March
31 March
ended 30 ended 30 2022 2021
2023
June 2023 June 2022
Cash and Cash Equivalents at the beginning of year 7,664.24 15,112.79 15,112.79 18,187.95 6,760.35
Cash and Cash Equivalents at the end of the period/ year 8,861.89 11,165.86 7,664.24 15,112.79 18,187.95
(refer note below)

Note:
Cash in Hand [Refer Note 8 (I)] 1,916.56 1,789.02 1,544.46 1,466.22 1,155.33
Balance with RBI in Current Account [Refer Note 8 (II) (i) ] 6,296.13 5,155.96 5,851.02 5,200.46 3,125.39
Balance with Banks in India in Current Account [Refer Note 9 I
(i) (a)] 649.20 490.88 268.76 356.11 2,007.23
Balance with Banks in India in Fixed Deposit - 100.00 - - -
Money at Call and Short Notice [Refer Note 9 (I)(ii) (a)] - 1,000.00 - 1,750.00 -
Balance with RBI in Other Account [Refer note 8 (II) (ii)] - 2,630.00 - 6,340.00 11,900.00
Cash and cash equivalents at the end of the period/ year 8,861.89 11,165.86 7,664.24 15,112.79 18,187.95
The above restated Cash Flow Statement has been prepared under the indirect method as set out in Accounting Standard (AS) 3 - Cash
Flow Statements specified under Section 133 of the Companies Act, 2013 read with the Companies (Account) Rules, 2014.
The accompanying Notes are an integral part of this Restated financial information.

In terms of our report attached

For Deloitte Haskins & Sells For and on behalf of the Board of Directors
Chartered Accountants
Firm's Registration Number: 117365W

G K Subramaniam P R Ravi Mohan Kadambelil Paul Thomas

Partner Chairman Managing Director & CEO
Membership No. : 109839 DIN:08534931 DIN: 00199925

Place : Mumbai
Date : 17 October 2023

For Abarna & Ananthan

Chartered Accountants
Firm's Registration Number: 000003S

Mohan Rao G. Gireesh C P Ranjith Raj P

Partner Chief Financial Officer Company Secretary
Membership No. : 203737
Place : Bengaluru Place : Mannuthy
Date : 17 October 2023 Date : 17 October 2023

313
ESAF SMALL FINANCE BANK LIMITED
NOTE 1 - Restated Statement of Material Adjustments, Regroupings and changes in Accounting polices

Appropriate adjustments have been made(read with Note 2.3.1) in the Restated Statement of Assets and Liabilities, Restated Profit
and Loss Account and Restated Cash Flow Statement in accordance with the requirements of the Securities and Exchange Board of
India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (as amended), by reclassification of the corresponding items
of income, expense, assets, liabilities and cash flows in order to bring them in line with the groupings and accounting policies as per
the Special purpose interim financial statements for the Quarter ended 30 June 2023.

Part A
i.Regroupings in Restated Statement of Assets and Liabilities and Restated Profit and Loss Account
i. for the year ended 31 March 2022
Rs. in Million
Particulars As per Audited Changes due to As per Restated
Financial Statements Regrouping Summary Statements

Assets and Liabilities *

Cash and Balances with Reserve Bank of India 6,666.68 6,340.00 13,006.68

Balances with Banks and Money at Call and Short Notice 8,452.36 (6,340.00) 2,112.36

ii. for the year ended 31 March 2021

Rs. in Million
Particulars As per Audited Changes due to As per Restated
Financial Statements Regrouping * Summary Statements

Assets and Liabilities *

Cash and Balances with Reserve Bank of India 4,280.72 11,900.00 16,180.72

Balances with Banks and Money at Call and Short Notice 13,910.54 (11,900.00) 2,010.54
Income and Expenditure **
Other income 1,261.04 11.44 1,272.48
Provisions and Contingencies 3,127.32 (11.44) 3,115.88
* regrouping is on account of change in classification of Lending under Reverse Repo (RBI) from Note 9 - Balances with Banks
and Money at Call and Short Notice to Note 8 - Cash and Balances with Reserve Bank of India as required by 'Master Direction on
Financial Statements - Presentation and Disclosure' issued by Reserve Bank of India dated 30 August 2021 (as updated).
** regrouping is on account of change in classification revaluation of profit & loss on investment from Provisions and Contingencies
to Other Income as required by 'Master Direction on Financial Statements - Presentation and Disclosure' issued by Reserve Bank of
India dated 30 August 2021 (as updated).

Part B. Regroupings in Restated Statement of Cash Flows - Nil

Other Adjustments
Adjustments for Audit Qualifications Nil
Other Material Adjustments Nil
Changes in Accounting Policy Nil
Tax Adjustments Nil

Part C
Non Adjusting Items
1. There are no qualifications in auditor's report for the three months period ended 30 June 2023 and 30 June 2022 and for the
financial years ended 31 March 2023, 31 March 2022 and 31 March 2021
2. Emphasis of matter paragraph in auditor's report on the financial statements for the year ended 31 March 2022:

The auditor’s report dated May 10, 2022 on the Financial Statements as at and for the year ended 31 March 2022 includes the
following Emphasis of Matter paragraph:
“We draw attention to Note 18A.16 to the Financial Statements which describes that the potential impact of the continuing COVID
19 pandemic on the Bank’s results are dependent on future developments which are uncertain. Our opinion is not modified in respect
of this matter".

3. Emphasis of matter paragraph in auditor's report on the financial statements for the year ended 31 March 2021:

The auditors’ report on the financial statements for the year ended 31 March, 2021 included following Emphasis of Matter
paragraph on:
"We draw attention to Note 18 A. 7(i) to the Financial Statement which fully describes that the Bank has recognized additional
contingency provision on loans to reflect the continuing uncertainties arising from the COVID 19 pandemic. Such estimates are
based on current facts and circumstances and may not necessarily reflect the future uncertainties and events arising from the full
impact of the COVID 19 pandemic. Our opinion is not modified in respect of this matter."
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ESAF SMALL FINANCE BANK LIMITED
NOTE 2 -SIGNIFICANT ACCOUNTING POLICIES APPENDED TO AND FORMING PART OF RESTATED FINANCIAL INFORMATION

1.Background
ESAF Small Finance Bank Limited (“the Bank”) is a public limited company incorporated on 5 May 2016 in India, after receiving in principal approval from the
Reserve Bank of India (“RBI”) to establish a small finance bank in the private sector under section 22 of the Banking Regulation Act, 1949 on 16 September 2015.
The Bank received the license from the Reserve Bank of India on 18 November 2016 and commenced its banking operations from 10 March 2017. As per RBI
Approval, the name of the Bank is included in the Second Schedule to the Reserve Bank of India Act, 1934 w.e.f 12 November 2018.The Bank provides micro,
retail and corporate banking, para banking activities such as debit card, third party financial product distribution, in addition to treasury and permitted foreign
exchange business.

2.Basis of Preparation
The restated financial information of the Bank comprise of the Restated Statements of Assets and Liabilities as at 30 June 2023, 30 June 2022, 31 March 2023,
2022 and 2021, the Restated Profit and Loss Accounts and Restated Cash Flow Statement for the three months period ended 30 June 2023 and 30 June 2022 and
years ended 31 March 2023, 2022 and 2021, and the Summary of Significant Accounting Policies and explanatory notes (collectively, the “Restated Financial
Information”). The Restated Financial Information is prepared by the management of the Bank for the purpose of inclusion in the red herring prospectus (“RHP”)
prepared by the Bank in connection with its proposed Initial Public Offer (“IPO”) in terms of the requirements of:

i. Section 26 of Part I of Chapter III of the Companies Act, 2013, as amended (the “Act”);
ii. The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended (the “ICDR Regulations”); and
iii. The Guidance Note on Reports on Company Prospectuses (Revised 2019) issued by the Institute of Chartered Accountants of India (“ICAI”), as amended (the
“Guidance Note”).

The
The Restated
Bank hadFinancial Information
earlier filed DRHP onhas06
been compiled
January byand
2020 the Management
24 July 2021from
withthe
theaudited financial
Securities statementsBoard
and Exchange as at and for the(the
of India years ended 31
“SEBI”) andMarch 2023, of
the Registrar
Companies (the “ROC”) which was time barred for the purpose of proposed IPO. Hence, the Bank filed a DRHP with the SEBI and ROC on 07 July 2023 in
connection with its proposed IPO. Currently the Bank is in the process of filing RHP and prospectus with the SEBI and the ROC and will include this restated
financial information in such RHP and prospectus.
The Restated Financial Information has been compiled by the management from:
a) the audited Special Purpose Interim Financial Statements as at and for three months period ended 30 June 2023 and 2022, prepared by the Bank in accordance
with the recognition and measurement principles of Accounting Standards (AS) 25 ‘Interim Financial Reporting’ prescribed under Section 133 of the Companies
Act, 2013, read with relevant rules issued thereunder and the other accounting principles generally accepted in India in so far as they apply to banks, requirements
prescribed under the Third Schedule of the Banking Regulation Act, 1949, the circulars and guidelines issued by RBI from time to time to the extent applicable and
current practices prevailing within the banking industry in India, which have been approved by the Board of Directors at their meetings held on 11 August 2023
and 10 August 2022 respectively.
b) the audited financial statements for each of the years ended 31 March 2023, 31 March 2022 and 31 March 2021 which have been approved by the Board of
Directors at their meetings held on 10 May 2023, 10 May 2022 and 26 May 2021 respectively. These audited financial statements for each of the years ended 31
March 2023, 2022 and 2021 have been prepared in accordance with the requirements prescribed under the Banking Regulation Act, 1949, the circulars and
guidelines issued by RBI from time to time, accounting principles generally accepted in India including Accounting Standards prescribed under Section 133 of the
Companies Act, 2013, read with the Companies (Accounts) Rules, 2014 to the extent applicable and other relevant provisions of the Companies Act, 2013 ("Act")
and current practices prevailing within the banking industry in India.
The Special Purpose Interim Financial Statements of the Bank as at and for three months period ended 30 June 2023 and 30 June 2022 and audited financial
statements for each of the years ended 31 March 2023, 2022 and 2021 have been prepared by the Bank for the purpose of preparation of the restated financial
information as required under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 as amended from time
to time ("ICDR Regulations") in connection with the proposed initial public offering of the Bank. As a result, the Special Purpose Interim Financial Statements
may not be suitable for any another purpose.
The Bank follows historical cost convention and accrual method of accounting in the preparation of the financial statements, except otherwise stated. The
accounting policies have been consistently applied by the Bank in preparation of the Restated Financial Information and are consistent with those adopted in the
preparation of financial statements for the three months period ended 30 June 2023 (read with Note 2.3.1 of Restated Financial Information).

The Restated Financial Information does not reflect the effects of events that occurred subsequent to the respective dates of the Board approval of financial
statements as at and for the three months period ended 30 June 2023 and 30 June 2022 and the years ended 31 March 2023, 2022 and 2021.
The Restated Financial Information:
a) have been prepared after incorporating adjustments for the changes in accounting policies, material errors and regrouping / reclassifications retrospectively in
the three months period ended 30 June 2022 and financial years ended 31 March 2023, 2022 and 2021 to reflect the same accounting treatment as per the
accounting policy and grouping/classifications followed as at and for the three months period ended 30 June 2023, as applicable.
b) do not require any adjustment for modification as there is no modification in the underlying audit reports.
i. The auditors’ report dated May 10, 2022 on the Financial Statements of the Bank as at and for the year ended 31 March 2022 includes the following Emphasis of
Matter paragraph:
“We draw attention to Note 18A.16 to the Financial Statements which describes that the potential impact of the continuing COVID 19 pandemic on the Bank’s
results are dependent on future developments which are uncertain.
Our opinion is not modified in respect of this matter.”
ii. The auditor’s report dated May 26, 2021 on the Financial Statements as at and for the year ended 31 March 2021 includes the following Emphasis of Matter
paragraph:
“We draw attention to Note 18A.7(i) to the Financial Statements which fully describes that the Bank has recognized additional contingency provision on loans to
reflect the continuing uncertainties arising from the COVID 19 pandemic. Such estimates are based on current facts and circumstances and may not necessarily
reflect the future uncertainties and events arising from the full impact of the COVID 19 pandemic
Our opinion is not modified with respect to this matter.”

The above emphasis of matter paragraphs do not require any adjustment to the Restated Financial Information.
These Restated Financial Information were approved by the Board of Directors on 17 October 2023.
The Restated Financial Information are presented in Indian Rupees "INR" or "Rs." and all values are stated as INR or Rs. millions, except when otherwise
indicated.
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3. Use of Estimation
The preparation of Restated Financial Information requires the management to make estimates and assumptions considered in the reported amounts of assets and
liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. The Bank’s
management believes that the estimates used in the preparation of the Restated Financial Information are prudent and reasonable. Actual results could differ from
this estimate. Any revision to accounting estimates are recognized prospectively in current and future periods.
4.Significant Accounting Policies
4.1 Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Bank and the revenue can be reliably measured.
i. Interest Income is recognized in the Restated Profit and Loss Account on accrual basis, except in the case of non-performing assets. Interest on non-performing
assets is recognized on realization basis as per the prudential norms issued by the RBI. Interest is not charged on the delayed remittances for the overdue period on
microloans.
ii. Profit or Loss on sale of investments is recognised in the Restated Profit and Loss Account. However, the profit on sale of investments in the ‘Held to Maturity’
category is appropriated (net of applicable taxes and amount required to be transferred to statutory reserve) to ‘Capital Reserve’.
iii Income on non-coupon bearing discounted instruments is recognized over the tenure of the instrument on a straight line basis. In case of coupon bearing
discounted instruments, discount income is recognized over the tenor of the instrument on yield basis.
iv Dividend on Investments in shares and units of Mutual Funds are accounted when the Bank's right to receive the dividend is established.
v Processing Fee/ upfront fee, handling charges and similar charges collected at the time of sanctioning or renewal of loan/ facility is recognised at the inception/
renewal of loan on upfront basis.
vi Other fees and Commission income (including commission income on third party products) are recognised when due, except in cases where the Bank is
uncertain of ultimate collection and in case of non performing assets.
vii Interest income on deposits with banks and other financial institutions are recognised on a time proportion accrual basis taking into account the amounts
outstanding and the rates applicable.
viii. Guarantee commission is recognised on a straight line basis over the period of contract.
ix. Locker rent is recognised on realisation basis.
x. For a securitization or direct assignment transaction, the Bank recognizes profit upon receipt of the funds and loss is recognized at the time of sale. The
unrealised gains, associated with expected future margin income is recognised in profit and loss account on receipt of cash, after absorbing losses, if any.
xi. Fees received on sale of priority sector lending certificates is considered as Miscellaneous income, while fees paid for purchase is expended as other expenditure
in accordance with the guidelines issued by RBI on the date of purchase/ sale on upfront basis.
4.2 Investments
i. Classification:
Investments are classified into three categories, viz Held to Maturity (“HTM”), Available for Sale (“AFS”) and held for Trading (“HFT”) at the time of purchase as
per guidelines issued by RBI.
However for disclosure in the Restated Statement of Assets and Liabilities, Investments in India are classified under six groups - Government Securities, Other
Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries / Joint Ventures and Others.
Purchase and sale transactions in securities are recorded under 'Settlement Date' accounting.
ii. Basis of classification:
Investments that the Bank intends to hold till maturity are classified as HTM category.
Investments that are held principally for resale within 90 days from the date of purchase are classified under HFT category.
Investments which are not classified in either of the above two categories are classified under AFS category.
iii. Acquisition Cost:
The Cost of investments is determined on the weighted average basis. Broken period interest in debt instruments and government securities is treated as a revenue
item. The transaction cost including brokerage, commission etc. paid at the time of acquisition of investments are charged to the Restated Profit and Loss Account.

iv. Disposal of investments:

Investments classified as HFT or AFS - Profit or loss on sale or redemption is recognised in the Restated Profit and Loss Account. Investments classified as HTM -
Profit on sale or redemption of investments is recognised in the Restated Profit and Loss Account and is appropriated to Capital Reserve after adjustments for tax
and transfer to Statutory Reserve. Loss on sale or redemption is recognised in the Restated Profit and Loss Account.

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v. Valuation:
HTM securities are carried at their acquisition cost. Any premium on acquisition of government securities are amortised over the remaining maturity of the security
on a straight line basis. Any diminution, other than temporary, in the value of such securities is provided for.
AFS and HFT securities are valued periodically as per RBI guidelines.
The market/ fair value for the purpose of periodical valuation of quoted investments included in the AFS and HFT categories is measured with respect to the market
price of the scrip as available from the trades/ quotes on the stock exchanges, SGL account transactions, price list of RBI or prices periodically declared by
Financial Benchmark India Pvt. Ltd. [FBIL], based on relevant RBI circular.
The valuation of non-SLR securities, other than those quoted on the stock exchanges, wherever linked to the YTM rates, shall be with a mark-up (reflecting
associated credit risk) over the YTM rates for government securities put out by FBIL. Securities are valued scrip wise and depreciation/appreciation aggregated for
each category. Net appreciation in each basket if any, being unrealised, is ignored, while net depreciation is provided for.

Treasury bills and Certificate of Deposits being discounted instruments, are valued at carrying cost.
Non Performing investments are identified and valued based on RBI guidelines.
vi. Repo Reverse Repo transactions
In accordance with the RBI guidelines repo and reverse repo transactions in Government securities are reflected as borrowing and lending transactions respectively.
Borrowing cost on repo transaction is accounted for as interest expense and revenue on reverse repo is accounted for as interest income.
vii. Investment Fluctuation Reserve ("IFR")
With a view to building up of adequate reserves to protect against increase in yields in accordance with RBI guideline, bank started to create an IFR with effect
from the Financial Year 2018-19.
Amount appropriated from Net Profit to IFR is not less than lower of the following:
(i) net profit on sale of investments during the period/ year or
(ii) net profit for the period/ year less mandatory appropriations, until the amount of IFR is at least 2 percent of the HFT and AFS portfolio, on a continuing basis.
The amount held in the IFR shall be utilized by way of draw down, in accordance with the provisions of the Reserve Bank of India guidelines

Viii. Short Sales

The short sale transactions in Central Government dated securities undertaken by the bank shall be accounted in the following manner in accordance with RBI
guidelines.
- The short position is categorised under HFT category and netted off from investments in Restated Statement of Assets and Liabilities.
- The short position is marked to market at periodical intervals and loss, if any, is charged to the Restated Profit and Loss Account while gain, if any, is ignored.
- Profit / Loss on settlement of the short position is recognised in the Restated Profit and Loss Account.

ix. Transfer of Securities between Categories:

The transfer/shifting of securities between categories of investments is accounted in accordance with the RBI guidelines.
4.3 Advances
i. Advances are classified into performing assets ("Standard") and non-performing assets ("NPA") as per the RBI guidelines and are stated net of unrealised
interest/charges in suspense for non performing advances and provisions made towards NPAs and principal portion of advance prepaid by customer, if any.
Interest/other charges on Non-performing advances is not recognised in Restated Profit and Loss Account and is transferred to an unrealised interest suspense
account till the actual realisation. Interest portion of advance prepaid by the customer is disclosed as other liability and recognised to restated profit and loss
account on due basis. Further, NPAs are classified into sub-standard, doubtful and loss assets based on the criteria stipulated by the RBI. Provisions for NPAs are
made at /or above the minimum required level in accordance with the provisioning policy adopted by the Bank and as per the guidelines and circulars of the RBI
on matters relating to prudential norms.
ii. Provision for standard advances is made as per the extant RBI guidelines. Additional Provision on standard assets is made as per the policy decided by the Board
.
iii. The Bank transfers advances through interbank participation with and without risk. In accordance with the RBI guidelines, in the case of participation with risk,
the aggregate amount of the participation issued by the Bank is reduced from advances and where the Bank is participating; the aggregate amount of participation
is classified under advances. In the case of participation without risk, the aggregate amount of participation issued by the Bank is classified under borrowings and
where the Bank is participating, the aggregate amount of participation is shown as due from banks under advances.

iv Non Performing Advances are written off as per the Bank's policy. Amounts recovered against debts written off/ technically written off are recognised in the
Restated Profit and Loss account and included under “Other Income”.
v. The Bank considers a restructured account as one where the Bank, for economic or legal reasons relating to the borrower’s financial difficulty, grants to the
borrower concessions that the Bank would not otherwise consider. Restructuring would normally involve modification of terms of the advances/ securities, which
would generally include, among others, alteration of repayment period/ repayable amount/ the amount of instalments/ rate of interest (due to reasons other than
competitive reasons). Restructured accounts are classified as such by the Bank only upon approval and implementation of the restructuring package. Necessary
provision for diminution in the fair value of a restructured account is made and classification thereof is as per the extant RBI guidelines, as amended from time to
time. In accordance with RBI guidelines on the prudential framework for restructure of stressed assets and the resolution framework for Covid 19 related stress, the
Bank in accordance with its Board approved policy, carried out one time restructuring of eligible borrowers. The asset classification and necessary provisions
thereon are done in accordance with the said RBI guidelines.

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vi. Priority Sector Lending Certificate (PSLC): The Bank enters into transactions for the sale and/ or purchase of priority sector lending certificates (PSLC). In case
of a sale transaction, the Bank sells the fulfillment of priority sector obligations and in the case of a purchase transaction, the Bank buys the fulfillment of priority
sector obligations through the RBI trading platform. There is no transfer of loan assets or risks. The fees received for the sale of PSLC is recorded as other income
and fees paid for purchase of PSLC is recorded as other expenditure in Restated profit and loss account.

vii. Securitisation Transaction and Direct Assignments:

The Bank transfers its loan receivables through Direct Assignment route as well as transfer to Special Purpose Vehicle (SPV).
The transferred loans and such securitised receivables are de-recognised as and when these are sold (true sale criteria being fully met) and the consideration has
been received by the Bank. Sales/ transfer that do not meet true sale criteria are accounted for as borrowings. For a securitization or direct assignment transaction,
the Bank recognizes profit upon receipt of that funds and loss is recognized at the time of sale.
The unrealised gains, associated with expected future margin income is recognised in profit and loss account on receipt of cash, after absorbing losses, if any.

On sale of stressed assets, if the sale is at a price below the net book value (i.e., funded outstanding less specific provisions held), the shortfall is charged to the
Restated Profit and Loss Account and if the sale is for a value higher than the net book value, the excess provision is credited to the Restated Profit and Loss
Account in the year when the sum of cash received by way of initial consideration and / or redemption or transfer of security receipts issued by SC / RC exceeds the
net book value of the loan at the time of transfer.
In respect of stressed assets sold under an asset securitisation, where the investment by the bank in security receipts (SRs) backed by the assets sold by it is more
than 10 percent of such SRs, provisions held are higher of the provisions required in terms of net asset value declared by the Securitisation Company (‘SC’) /
Reconstruction Company (‘RC’) and provisions as per the extant norms applicable to the underlying loans, notionally treating the book value of these SRs as the
corresponding stressed loans assuming the loans remained in the books of the Bank.
Investments in Pass Through Certificates (PTCs) issued by other Special Purpose Vehicles (SPVs), are accounted at acquisition cost and are classified as
investments. Loans bought through the direct assignment route which are classified as advances and are carried at acquisition cost unless it is more than the face
value, in which case the premium is amortised based on effective interest rate method.
4.4 Fixed Assets (Property Plant & Equipment and Intangible Assets) and Depreciation / Amortization
Fixed Assets have been stated at cost less accumulated depreciation and amortisation and adjusted for impairment, if any.
Cost includes cost of purchase inclusive of freight, duties, incidental expenses and all expenditure like site preparation, installation costs and professional fees
incurred on the asset before it is ready to put to use.
Gains or losses arising from the retirement or disposal of Fixed Assets are determined as the difference between the net disposal proceeds and the carrying amount
of assets and recognised as income or expense in the Restated Profit and Loss Account.
Depreciation is charged over the estimated useful life of the fixed asset on a straight-line basis. The management believes that the useful life of assets assessed by
the Bank, pursuant to the Companies Act, 2013, taking into account changes in environment, changes in technology, the utility and efficacy of the asset in use,
fairly reflects its estimate of useful lives of the fixed assets. The estimated useful lives of key fixed assets, based on technical evaluation done by the management
are given below:

Class of Asset (Tangible and Intangible) Estimated useful Estimated useful life
life as assessed specified under Schedule II
by the Bank (in years) of the Companies Act, 2013
(in years)
Office Equipment's 4-5 5
Computers 2- 3 3
Furniture & Fixtures 9-10 10
Motor Vehicles 2-5 8

Servers 5 6

An intangible asset is recognised only when its cost can be measured reliably and it is probable that the expected future economic benefits that are attributable to it
will flow to the Bank.
Intangible assets acquired separately are measured on initial recognition at cost. The cost of an intangible asset comprises its purchase price including after
deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working condition for its intended use following initial recognition.
Intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.
Intangible assets comprising of software is amortised on straight line basis over a period of 4 years, unless it has a shorter useful life.
For assets purchased/ sold during the year, depreciation is being provided on pro rata basis by the Bank.
Capital work-in-progress includes costs incurred towards creation of fixed assets that are not ready for their intended use and also includes advances paid to acquire
fixed assets.

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4.5 Impairment of Assets

The carrying amounts of assets are reviewed at each balance sheet date to determine if there is any indication of impairment based on internal/external factors. An
impairment loss is recognised wherever the carrying amount of an asset exceeds its recoverable amount which is the greater of the asset's net selling price and value
in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market
assessment of the time value of money and risks specific to the asset.
After impairment, depreciation is provided on the revised carrying amount of the asset over its remaining useful life.
4.6 Retirement and employee benefits
i. Short Term Employee Benefit
The undiscounted amount of short-term employee benefits which are expected to be paid in exchange for the services rendered by employees are recognised during
the year when the employee renders the service.
ii. Long Term Employee Benefit
a. Defined Contribution Plan:
Provident Fund: In accordance with law, all employees of the Bank are entitled to receive benefits under the provident fund, a defined contribution plan in which
both the employee and the Bank contribute monthly at a pre-determined rate. Contribution to provident fund are recognized as expense as and when the services are
rendered. The Bank has no liability for future provident fund benefits other than its fixed contribution.
b. Defined Benefit Plan:
Gratuity: The Bank provides for Gratuity, covering employees in accordance with the Payment of Gratuity Act, 1972. The Bank’s liability is actuarially determined
(using Projected Unit Credit Method) as at the Balance Sheet date. The actuarial gain or loss arising during the year is recognised in the Restated Profit and Loss
Account.

Compensated Absences: The Bank accrues the liability for compensated absences based on the actuarial valuation as at the Balance Sheet date conducted by an
independent actuary which includes assumptions about demographics, early retirement, salary increases, interest rates and leave utilisation. The net present value of
the Banks’ obligation is actuarially determined using the Projected Unit Credit Method as at the Balance Sheet date. Actuarial gains / losses are recognised in the
Restated Profit and Loss Account in the year in which they arise.
4.7 Share Issue expenses
Share issue expenses are adjusted from Share Premium Account as permitted by Section 52 of the Companies Act, 2013 on issue of underlying securities pending
which is recognised as "other assets" in the Restated Statement of Assets and Liabilities.
4.8 Income Taxes
Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to the tax authorities in accordance with the
Income Tax Act,1961. Deferred tax assets and liabilities are recognised for the future tax consequences of timing differences being the difference between the
taxable income and the accounting income that originate in one year and are capable of reversal in one or more subsequent year(s).

Deferred tax assets on account of timing differences are recognised only to the extent there is reasonable certainty that sufficient future taxable income will be
available against which such deferred tax assets can be realised. In case of carry forward losses and unabsorbed depreciation, under tax laws, the deferred tax assets
are recognised only to the extent there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which
such deferred tax assets can be realised.
At each reporting date, the Bank re-assesses unrecognized deferred tax assets. It recognizes unrecognized deferred tax asset to the extent that it has become
reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which such deferred tax assets can be
realized.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set-off current tax assets against current tax liabilities and the
deferred tax assets and deferred tax liabilities relate to the same taxable entity and the same taxation authority.
The carrying amount of deferred tax assets are reviewed at each reporting date. The Bank writes-down the carrying amount of deferred tax asset to the extent that it
is no longer reasonably certain or virtually certain, as the case may be, that sufficient future taxable income will be available against which deferred tax asset can be
realized. Any such write-down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient future taxable
income will be available.
Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted at the Restated Statement of Assets and
Liabilities date. Changes in deferred tax assets / liabilities on account of changes in enacted tax rates are given effect to in the Restated Profit and Loss Account in
the year of change.
4.9 Cash and Cash equivalents
Cash and cash equivalents include cash in hand, balances with RBI, balances with other banks and money at call and short notice with an original maturity of three
months or less (including the effect of changes in exchange rates on cash and cash equivalents in foreign currency).

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4.10 Segment Information

In accordance with guidelines issued by RBI and Accounting Standard 17 (AS-17) on “Segment Reporting”, the Banks’ business has been segregated into
Treasury, Wholesale Banking, Retail Banking Segments and other Banking Operations.
a) Treasury: The treasury segment revenue primarily consists of interest earnings on investments portfolio of the bank, gains or losses on investment operations and
earnings from foreign exchange business. The principal expenses of the segment consist of interest expense allocated on funds borrowed/ deposits received and
other expenses. Treasury segment liability also includes allocation of deposits received from customers.
b) Wholesale Banking: Wholesale Banking segment provides loans to corporate segment identified on the basis of RBI guidelines. Revenues of this segment
consist of interest earned on loans made to corporate customers and the charges/fees earned from other banking services. The principal expenses of the segment
consist of interest expense allocated on funds borrowed/deposits received and other expenses.
c) Retail banking: The Retail Banking segment provides loans to non-corporate customers identified on the basis of RBI guidelines and also includes deposits from
customers. Revenues of this segment consist of interest earned on loans made to non-corporate customers and the charges/fees earned from other banking services.
The principal expenses of the segment consist of interest expense allocated on funds borrowed/ deposits received and other expenses.
d) Other Banking Operations: This segment includes income from para banking activities such as debit cards, third party product distribution and associated costs.

Segment revenues consist of earnings from external customers and other allocated revenues. Segment expenses consist of allocated interest expenses, operating
expenses and provisions. Segment results are net of segment revenues and segment expenses.
Segment assets include assets related to segments and exclude tax related assets. Segment liabilities include liabilities related to the segment excluding net worth.

e) Unallocated: All items which are reckoned at an enterprise level are classified under this segment. This includes capital, reserves and other un allocable assets
and liabilities such as fixed assets, deferred tax, tax paid in advance and income tax provision etc.
Geographical Segment
Since the business operations of the Bank are primarily concentrated in India, the Bank is considered to operate only in the domestic segment.
4.11 Earnings Per Share
Basic earnings per share are calculated by dividing the net profit or loss for the period/ year attributable to equity shareholders (after deducting/adjusting for
attributable taxes) by the weighted average number of equity shares outstanding during the period/ year The weighted average number of equity shares outstanding
during the period/ year is adjusted for events of bonus issue, bonus element in a rights issue to existing shareholders and share split.

For the purpose of calculating diluted earnings per share, the net profit or loss for the period/ year attributable to equity shareholders and the weighted average
number of shares outstanding during the period/ year are adjusted for the effects of all dilutive potential equity shares. Diluted earnings per share reflect the
potential dilution that could occur if securities or other contracts to issue equity shares were exercised or converted during the period/ year.

4.12 Provisions and contingent assets/liabilities

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

The Bank 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. Provisions are reviewed at each Restated Statements of Assets and Liabilities date and adjusted to reflect the current best
estimate. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation as at the reporting date.
If it is no longer probable that an outflow of resources would be required to settle the obligation, the provision is reversed.

Contingent assets are neither recognized nor disclosed in the Restated Financial Information.

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4.13 Leases
Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item are classified as operating lease. Operating lease
payments are recognised as an expense in the Restated Profit and Loss Account on a straight line basis over the lease term in accordance with AS 19 - Leases.

4.14 Transactions involving Foreign Exchange

All transactions in foreign currency are recognised at the exchange rate prevailing on the date of the transfer.
Foreign currency monetary items are reported using the exchange rate prevailing at the Restated Statement of Assets and Liabilities date.
Non-monetary items which are measured in terms of historical cost denominated in foreign currency are reported using the exchange rate at the date of transaction.
Non-monetary items which are measured at Fair Value or other similar value denominated in a foreign currency are translated using the exchange rate at the date
when such value is determined.
Exchange differences arising on settlement of monetary items or on reporting of such monetary items at rates different from those at which they were initially
recorded during the year, or reported in previous financial statements, are recognised as income or expense in the year in which they arise.

4.15 Employee Share based payments

The Employee Stock Option Schemes (ESOSs) of the Bank are in accordance with Securities and Exchange Board of India (Share Based Employee Benefits)
Regulations, 2014. The Schemes provide for grant of options on equity shares to employees of the Bank to acquire the equity shares of the Bank that vest in a cliff
vesting or in a graded manner and that are to be exercised within a specified period.
In accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and the Guidance Note on Accounting for
Employee Share-based Payments, issued by The Institute of Chartered Accountants of India, the cost of equity-settled transactions is measured using the intrinsic
value method. The intrinsic value being the excess, if any, of the fair market price of the share under ESOSs over the exercise price of the option is recognised as
deferred employee compensation with a credit to Employee’s Stock Option (Grant) Outstanding account. The deferred employee compensation cost is amortised on
a straight-line basis over the vesting period of the option. The cumulative expense recognized for equity-settled transactions at each reporting date until the vesting
date reflects the extent to which the vesting period has expired and the number of equity instruments that are outstanding. Fair market value of an equity share, as
determined by a Category I Merchant Banker registered with SEBI, based on the Board Approved Financial Statements within one year prior to the date of Grant.

The options that do not vest because of failure to satisfy vesting condition are reversed by a credit to employee compensation expense, equal to the amortised
portion of value of lapsed portion. In respect of the options which expire unexercised the balance standing to the credit of Employee’s Stock Option (Grant)
Outstanding accounts is transferred to Restated Profit & Loss Account.

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NOTES FORMING PART OF THE RESTATED FINANCIAL INFORMATION
Rs. in Million
Particulars As at As at As at As at As at
30 June 2023 30 June 2022 31 March 31 March 2022 31 March 2021
2023
NOTE 3 - RESTATED STATEMENT OF CAPITAL
Authorised Capital
Number of Equity Shares (in Million) of Rs. 10/- each 600.00 600.00 600.00 600.00 600.00
Equity Share Capital (Authorised) 6,000.00 6,000.00 6,000.00 6,000.00 6,000.00
Issued, Subscribed and Paid up Capital #
Number of Equity Shares (in Million) 449.47 449.47 449.47 449.47 449.47
Face Value per Equity Share ( in Rs.) 10.00 10.00 10.00 10.00 10.00
Equity Share Capital 4494.74 4494.74 4,494.74 4,494.74 4,494.74
Total 4,494.74 4,494.74 4,494.74 4,494.74 4,494.74
NOTE 4 - RESTATED STATEMENT OF RESERVES AND SURPLUS
I. Statutory Reserve
Opening balance 1,927.23 1,171.40 1,171.40 1,034.57 771.08
Additions during the period/ year 755.83 136.83 263.49
1,927.23 1,171.40 1,927.23 1,171.40 1,034.57
II. Capital Reserves
(a) Revaluation Reserve
Opening balance - - - - -
Additions during the period/ year - - - - -
- - - - -
(b) Others
Opening balance 40.05 37.29 37.29 - -
Additions during the period/ year ^ - - 2.76 37.29 -
40.05 37.29 40.05 37.29 -
III. Share premium
Opening balance 4,887.63 4,887.63 4,887.63 4,887.63 3,478.54
Additions during the period/ year# - - - - 1,409.09
Less : Capital Raise expenses - - - - -
4,887.63 4,887.63 4,887.63 4,887.63 4,887.63
IV. Revenue and Other Reserves
Investment Fluctuation Reserve
Opening Balance 321.42 261.94 261.94 41.27 41.27
Additions during the period/ year - - 59.48 220.67 -
321.42 261.94 321.42 261.94 41.27

V. Balance in Restated Profit and Loss Account 6,719.86 4,274.62 5,420.22 3,214.96 3,062.43

Total (I to V) 13,896.19 10,632.88 12,596.55 9,573.22 9,025.90

# During the year ended 31 March 2021, the Bank has raised Tier I capital amounting to Rs.1,625.87 Million by way of private placement of 21.68 Million Equity
Shares having the face value of Rs.10/- each at an issue price of Rs.75/- per Equity Share.
^ The Bank appropriates net profit towards various reserved only at year end. Appropriations as required by RBI regulations for three month period ended 30 June
2023 would have been Rs. 324.91 Million towards statutory Reserve, Rs. 3.50 Million towards Capital Reserve and Rs. 7.03 Million towards Investment Flucation
Reserve and for the period ended 30 June 2022 would have been Rs. 264.92 Million towards statutory Reserve, Rs. Nil Thousands towards Capital Reserve and
Rs.89.72 Million towards Investment Flucation Reserve

322
ESAF SMALL FINANCE BANK LIMITED
NOTES FORMING PART OF THE RESTATED FINANCIAL INFORMATION
Rs. in Million
Particulars As at As at As at As at As at
30 June 2023 30 June 2022 31 March 31 March 2022 31 March 2021
2023
NOTE 5 - RESTATED STATEMENT OF DEPOSITS
A. I. Demand Deposits
i. From Banks 25.48 26.41 78.78 66.88 66.73
ii. From Others 2,347.26 1,859.89 2,558.75 2,131.03 1,465.11
2,372.74 1,886.30 2,637.53 2,197.91 1,531.84
II. Savings Bank Deposits 26,146.96 29,457.70 28,736.94 27,076.07 15,944.61

III. Term Deposits

i. From Banks 13,110.39 21,172.12 11,820.27 19,374.60 7,296.06
ii. From Others 1,14,928.45 82,061.34 1,03,461.51 79,502.14 65,221.75
1,28,038.84 1,03,233.46 1,15,281.78 98,876.74 72,517.81

Total (I to III) 1,56,558.54 1,34,577.46 1,46,656.25 1,28,150.72 89,994.26

B. I. Deposits of branches in India 1,56,558.54 1,34,577.46 1,46,656.25 1,28,150.72 89,994.26

II. Deposits of branches outside India - - - - -
Total ( I and II) 1,56,558.54 1,34,577.46 1,46,656.25 1,28,150.72 89,994.26

NOTE 6 - RESTATED STATEMENT OF BORROWINGS

I. Borrowings in India
i. Reserve Bank of India 5,530.00 6,960.00 6,740.00 6,960.00 1,460.00
ii. Other Banks - - - - -
iii. Other institutions and agencies 19,931.25 16,515.00 24,871.95 20,488.33 13,100.00
iv. Subordinated Debt 1,450.00 1,600.00 1,450.00 1,600.00 1,900.00
v. Perpetual Debt Instrument 480.00 480.00 480.00 480.00 480.00
27,391.25 25,555.00 33,541.95 29,528.33 16,940.00
II.Borrowings outside India - - -
Total (I and II) 27,391.25 25,555.00 33,541.95 29,528.33 16,940.00
Secured Borrowings included in I and II above 10,919.46 6,960.00 12,129.46 10,385.83 1,460.00
NOTE 7- RESTATED STATEMENT OF OTHER LIABILITIES AND
PROVISIONS
I. Bills Payable 32.91 27.13 49.67 36.48 26.26
II. Inter - office adjustments (Net) - - - - -
III. Interest accrued 594.22 538.34 556.44 407.92 219.11
IV. Provision for Standard Assets 860.22 2,335.78 896.57 2,177.65 1,241.42
V. Others (including Provisions) 4,073.24 2,816.37 3,385.65 2,658.52 1,444.83
Total (I to V) 5,560.59 5,717.62 4,888.33 5,280.57 2,931.62

323
ESAF SMALL FINANCE BANK LIMITED
NOTES FORMING PART OF THE RESTATED FINANCIAL INFORMATION
Rs. in Million
Particulars As at As at As at As at As at
30 June 2023 30 June 2022 31 March 31 March 2022 31 March 2021
2023
NOTE 8 - RESTATED STATEMENT OF CASH AND BALANCES
WITH RESERVE BANK OF INDIA
I. Cash in hand 1,916.56 1,789.02 1,544.46 1,466.22 1,155.33
II. Balance with Reserve Bank of India
i. in Current Accounts 6,296.13 5,155.96 5,851.02 5,200.46 3,125.39
ii. in Other Accounts - 2,630.00 - 6,340.00 11,900.00
Total (I and II) 8,212.69 9,574.98 7,395.48 13,006.68 16,180.72
NOTE 9 - RESTATED STATEMENT OF BALANCES WITH BANKS
AND MONEY AT CALL AND SHORT NOTICE
I. In India
i. Balances with Banks
a. in Current Accounts 649.20 490.88 268.76 356.11 2,007.23
b. in Other Deposit Accounts 6.25 106.25 6.25 6.25 3.31
Total 655.45 597.13 275.01 362.36 2,010.54
ii. Money at Call and Short Notice
a. With Banks - 1,000.00 - 1,750.00 -
b. With Other Institutions - - - - -
Total - 1,000.00 - 1,750.00 -
Total (I) 655.45 1,597.13 275.01 2,112.36 2,010.54

II. Outside India

i. in Current Accounts - - - - -
ii. in Other Deposit Accounts - - - - -
iii. Money at call and short notice - - - - -
Total (II) - - - - -

Total (I and II) 655.45 1,597.13 275.01 2,112.36 2,010.54

NOTE 10- RESTATED STATEMENT OF INVESTMENTS (NET OF

PROVISION)
I. Investments in India in :
i. Government Securities 47,687.86 47,934.15 47,421.02 39,940.96 18,889.75
ii. Other approved Securities - - - - -
iii. Shares 122.58 147.74 116.62 153.93 81.67
iv. Debentures and Bonds - - - - -
v. Subsidiaries/ Joint Ventures - - - - -
vi. Others [Certificate of Deposits (CDs), Mutual Funds,
Security Receipts (SRs) etc.] 1,010.73 213.64 1,347.64 608.09 349.27
Total (I) 48,821.17 48,295.53 48,885.28 40,702.98 19,320.69
II. Investments outside India - - -

Total (II) - - - - -

Total (I and II) 48,821.17 48,295.53 48,885.28 40,702.98 19,320.69

Gross Investments 49,788.91 48,705.92 49,905.27 40,942.93 19,327.57

Less: Depreciation/ Provision for Investments 967.74 410.39 1,019.99 239.95 6.88
Net Investments 48,821.17 48,295.53 48,885.28 40,702.98 19,320.69

324
ESAF SMALL FINANCE BANK LIMITED
NOTES FORMING PART OF THE RESTATED FINANCIAL INFORMATION
Rs. in Million
Particulars As at As at As at As at As at
30 June 2023 30 June 2022 31 March 31 March 2022 31 March 2021
2023
NOTE 11 - RESTATED STATEMENT OF ADVANCES (NET OF
PROVISIONS)
A. i. Bills purchased and discounted 276.05 308.47 427.18 254.29 89.44
ii. Cash credits, overdrafts and loans repayable on demand 2,280.43 1,342.96 2,051.14 1,207.81 762.87
iii. Term loans 1,40,659.06 1,14,659.33 1,36,764.99 1,14,907.95 80,823.55
Total 1,43,215.54 1,16,310.76 1,39,243.31 1,16,370.05 81,675.86

B. i. Secured by tangible assets (includes advances against book debts) 35,592.28 21,990.89 34,316.69 19,095.62 11,839.85
ii. Covered by Bank/Government guarantees - - - - -
iii. Unsecured 1,07,623.26 94,319.87 1,04,926.62 97,274.43 69,836.01
Total (A&B) (Net of Provisions) 1,43,215.54 1,16,310.76 1,39,243.31 1,16,370.05 81,675.86

C. I. Advances in India
i. Priority Sectors 1,26,949.42 98,690.80 1,11,500.64 87,215.57 50,889.74
ii. Public Sector - - - - -
iii. Banks - - - - -
iv. Others 16,266.12 17,619.96 27,742.67 29,154.48 30,786.12
Total (I) 1,43,215.54 1,16,310.76 1,39,243.31 1,16,370.05 81,675.86

II.Advances outside India

i. Due from Banks - - - - -
ii. Due from Others - - - - -
a) Bills purchased and discounted - - - - -
b) Syndicated Loans - - - - -
c) Others - - - - -
Total (II) - - - - -

Total ( C I and C II) 1,43,215.54 1,16,310.76 1,39,243.31 1,16,370.05 81,675.86

Particulars As at As at As at As at As at
30 June 2023 30 June 2022 31 March 31 March 2022 31 March 2021
2023
NOTE 12 - RESTATED STATEMENT OF FIXED ASSETS
I OWNED ASSETS
a. Other Fixed Assets
(including furniture and fixtures)
Gross Block
At the beginning of the year 3,350.08 2,672.88 2,672.88 2,086.93 1,657.95
Additions during the period/ year 120.21 154.73 714.86 598.46 477.91
Deductions during the period/ year 5.69 0.33 37.66 12.51 48.93
Closing Balance 3,464.60 2,827.28 3,350.08 2,672.88 2,086.93
Depreciation
As at the beginning of the year 1,473.18 1,078.86 1,078.86 760.86 498.83
Charge for the period/ year 122.69 100.98 417.89 327.74 285.73
Deductions during the period/ year 2.34 0.20 23.57 9.74 23.70
Depreciation to date 1,593.53 1,179.64 1,473.18 1,078.86 760.86
Net Block 1,871.07 1,647.64 1,876.90 1,594.02 1,326.07

II. Capital work in progress 1.49 0.67 2.37 0.73 59.05

Total (I and II) 1,872.56 1,648.31 1,879.27 1,594.75 1,385.12

325
ESAF SMALL FINANCE BANK LIMITED
NOTES FORMING PART OF THE RESTATED FINANCIAL INFORMATION
Rs. in Million
Particulars As at As at As at As at As at
30 June 2023 30 June 2022 31 March 31 March 2022 31 March 2021
2023
NOTE 13 - RESTATED STATEMENT OF OTHER ASSETS
I. Inter - office adjustments (net) - - - - -
II. Interest accrued 2,245.37 1,236.49 2,140.80 1,091.55 678.07
III. Tax paid in advance/Tax Deducted at source (Net of provision) - - 117.58 275.71 591.69
IV. Stationery and Stamps 0.52 0.61 0.45 0.53 1.02
V. Non-banking assets acquired in satisfaction of claims - - - - -
VI. Deferred tax asset (net) 398.86 708.11 384.18 650.12 356.30
VII. Others 2,537.25 1,669.09 1,915.21 1,270.91 1,186.51
Total (I to VII) 5,182.00 3,614.30 4,558.22 3,288.82 2,813.59

NOTE 14 - RESTATED STATEMENT OF CONTINGENT

LIABILITIES
I. Claims against the Bank not acknowledged as debts - - - - -
II. Liability on account of outstanding forward exchange contracts - - - - -
III. Guarantees given on behalf of constituents - in India 14.03 13.98 13.98 15.52 13.04
IV. Acceptances, endorsements and other obligations - - - - -
V. Other items for which the Bank is contingently liable 5.00 5.00 5.00 5.00 2.00
Total (I to V) 19.03 18.98 18.98 20.52 15.04

326
ESAF SMALL FINANCE BANK LIMITED
NOTES FORMING PART OF THE RESTATED FINANCIAL INFORMATION
Rs. in Million
Particulars Year Year Year
Three Months Three Months
Ended Ended Ended
Period ended 30 Period ended
31 March 31 March 2022 31 March 2021
June 2023 30 June 2022
2023
NOTE 15 - RESTATED STATEMENT OF INTEREST EARNED
I. Interest/discount on advances/bills 8,208.28 6,179.56 25,320.45 17,267.12 14,735.06
II. Income on investments 777.95 679.14 3,120.44 1,883.08 1,283.26
III.Interest on balances with Reserve Bank of India
and other inter-bank funds 1.23 44.43 95.70 249.05 393.41
IV. Others - - - - -
Total (I to IV) 8,987.46 6,903.13 28,536.59 19,399.25 16,411.73

NOTE 16 - RESTATED STATEMENT OF OTHER INCOME

I. Commission, exchange and brokerage 645.25 362.90 1,994.83 1,507.23 645.01
II. Profit on sale of investments (Net) 62.14 44.21 156.35 435.14 230.40
III. Profit / (Loss) on revaluation of investments (Net) 52.26 (304.28) (913.88) (233.06) 11.44
IV. Profit/ (Loss) on sale of land, buildings and other assets (Net) 0.27 (0.10) (3.38) 0.06 (23.34)
V. Profit on foreign exchange transactions (Net) 2.93 2.70 11.12 9.24 5.48
VI. Income earned by way of dividends etc. from companies 0.30 0.44 2.04 1.56 1.10
VII. Miscellaneous income* 167.14 374.24 1,632.05 355.66 402.39
Total (I to VII) 930.29 480.11 2,879.13 2,075.83 1,272.48
* includes Income from :
Recovery of written off Accounts 2.90 148.26 691.97 79.86 29.03
Cash received on sale of technical written off portfolio
(Refer para A. 4.6 (i) of Note 19) - - 380.90 - -
NOTE 17 - RESTATED STATEMENT OF INTEREST EXPENDED
I. Interest on deposits 2,533.53 1,994.18 8,377.18 6,788.46 6,045.68
II. Interest on Reserve Bank of India/Inter bank borrowings 72.17 74.84 330.07 204.16 79.20
III.Others 527.23 346.49 1,465.94 935.24 1,070.94
Total (I to III) 3,132.93 2,415.51 10,173.19 7,927.86 7,195.82

NOTE 18 - RESTATED STATEMENT OF OPERATING EXPENSES

I. Payments to and provisions for employees 798.73 609.96 2,779.98 2,321.37 1,877.84
II. Rent, taxes and lighting 199.06 166.87 748.01 600.21 420.39
III. Printing and stationery 18.31 14.52 73.80 67.42 52.91
IV. Advertisement and publicity 43.19 21.16 154.68 58.97 27.10
V. Depreciation on Bank's Property 122.69 100.98 417.89 327.74 285.73
VI. Directors' fees, allowances and expenses 4.53 4.20 16.28 14.80 14.04
VII. Auditors' fees and expenses 0.64 2.10 14.21 7.49 6.30
VIII. Law charges 6.56 1.46 10.41 4.33 2.61
IX. Postage, Telegrams, Telephones etc. 46.86 34.14 189.50 109.42 91.68
X. Repairs and maintenance 12.17 7.04 46.98 17.62 15.78
XI. Insurance 45.56 37.30 150.90 127.33 108.35
XII. Other expenditure * 2,479.83 1,715.09 7,702.77 4,972.01 3,415.82
Total (I to XII) 3,778.13 2,714.82 12,305.41 8,628.71 6,318.55
* includes expenditure towards Corporate Social Responsibility and Business Correspondent Expenses (refer table below)
Rs. in Million
Particulars Year Year Year
Three Months Three Months
Ended Ended Ended
Period ended 30 Period ended
31 March 31 March 2022 31 March 2021
June 2023 30 June 2022
2023
Corporate Social Responsibility (Refer Note B. 10 of Note - - 82.60 87.60 71.55
19)
Business Correspondent Expense 1,783.09 1,254.60 5,442.36 3,486.58 2,328.08

327
ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

A. DISCLOSURES AS LAID DOWN BY RBI CIRCULARS:

1. Regulatory Capital:
The Bank is subject to the Basel II Capital Adequacy guidelines (NCAF) stipulated by RBI. The Capital Adequacy Ratio (CRAR) of the Bank is calculated as per the Standardized approach for Credit Risk.
As per RBI circular “DBR.NBD.No. 4502/16.13.218/2017-18” dated 8 November 2017, no separate capital charge is prescribed for market and operational risk. The total Capital Adequacy ratio of the Bank at 30 June 2023
is 20.56%, 30 June 2022 is 20.31%, 31 March 2023 is 19.83%, 31 March 2022 is 18.64%, 31 March 2021 is 24.23% against the regulatory requirement of 15.00% prescribed by RBI.
No Capital Conservation Buffer and Counter - Cyclical Capital Buffer is applicable on Small Finance Bank (SFB) as per operating guidelines issued on SFB by RBI.
1.1. Composition of Regulatory Capital Rs. in Million

Particulars As at 30 June As at 30 June As at 31 March As at 31 March As at 31 March

2023 2022 2023 2022 2021
i)Common Equity Tier I Capital (CET1) 17,909.40 14,735.13 16,616.36 13,675.47 13,409.07
ii) Additional Tier 1 Capital 480.00 480.00 480.00 480.00 480.00
iii) Tier I Capital - A 18,389.40 15,215.13 17,096.36 14,155.47 13,889.07
iv) Tier II Capital - B 1,559.19 2,022.77 1,617.25 2,166.21 1,737.39
v) Total Capital (A)+(B) 19,948.59 17,237.90 18,713.61 16,321.68 15,626.46
vi) Total Risk Weighted Assets (RWAs) 97,048.29 84,868.20 94,372.50 87,578.18 64,489.02
Capital Ratios:
vii) CET I Capital (%) [CET 1 as a percentage of RWAs] 18.45% 17.36% 17.61% 15.62% 20.79%
viii) Tier I Capital (%) [Tier I Capital as a percentage of RWAs] 18.95% 17.93% 18.12% 16.16% 21.54%
ix) Tier II Capital (%) [Tier II Capital as a percentage of RWAs] 1.61% 2.38% 1.71% 2.47% 2.69%
x) Total CRAR % [Total Capital as a percentage of RWAs] 20.56% 20.31% 19.83% 18.64% 24.23%
xi) Leverage Ratio 8.84% 8.40% 8.45% 7.99% 11.26%
(xii) Percentage of the shareholding of the Government of India in Public Sector Banks NA NA NA NA NA
(xiii) Amount of paid up capital raised during the period/year (Including Share Premium) - - - - 1,625.87
(xiv) Amount of non- equity Tier I capital raised during the period/year - - - - -
(xv) Amount of Tier II Capital raised during the period/year of which
Basel III Compliant Subordinated debt Instruments - - - 200.00 -
1.2. Draw Down from Reserves
There has been no draw down from reserves as disclosed in Note 4
2. Asset Liability Management
2.1. Maturity Pattern of certain items of assets and liabilities
a.As at 30 June 2023: Rs. in Million
Particulars Day - 1 2-7 Days 8-14 Days 15-30 31 Days & up Over 2 Over 3 Over 6 Months Over 1 Year and Over 3 Year and Over 5 years Total
Days to 2 months months and Months and and up to 1 year up to 3 years up to 5 years
up to 3 up to 6
months months
Advances 123.89 743.26 867.14 1,982.03 6,543.59 6,543.59 19,573.80 48,399.57 52,672.96 3,460.94 2,304.77 1,43,215.54
Investments 19,819.60 - - 353.35 938.12 997.46 1,307.69 6,633.15 18,666.42 26.49 78.89 48,821.17
Deposits 1,236.54 2,272.52 1,710.77 1,917.16 3,744.72 2,074.27 5,764.53 35,989.08 1,01,277.19 143.74 428.02 1,56,558.54
Borrowings - 1,029.95 - - 1,095.00 1,917.00 2,037.00 5,324.00 15,308.30 - 680.00 27,391.25
Foreign Currency - - - - - - - - - - - -
Assets
Foreign Currency - - - - - - - - - - - -
Liabilities
b.As at 30 June 2022: Rs. in Million
Particulars Day - 1 2-7 Days 8-14 Days 15-30 31 Days & up Over 2 Over 3 Over 6 Months Over 1 Year and Over 3 Year and Over 5 years Total
Days to 2 months months and Months and and up to 1 year up to 3 years up to 5 years
up to 3 up to 6
months months
Advances 334.65 2,007.89 2,342.54 5,354.38 5,268.33 5,268.33 14,503.15 34,745.77 39,526.45 5,676.81 1,282.46 1,16,310.76
Investments 149.53 80.80 86.67 217.35 865.98 1,702.99 695.27 1,571.07 3,214.65 6,262.65 33,448.57 48,295.53
Deposits 1,067.17 2,407.05 2,579.26 6,520.29 6,381.96 8,387.06 19,822.29 34,000.79 52,385.75 500.78 525.06 1,34,577.46
Borrowings 0.00 0.00 0.00 0.00 970.00 1,750.00 1,217.50 4,922.50 16,015.00 0.00 680.00 25,555.00
Foreign Currency - - - - - - - - - - - -
Assets
Foreign Currency - - - - - - - - - - - -
Liabilities

328
ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

c.As at 31 March 2023: Rs. in Million

Particulars Day - 1 2-7 Days 8-14 Days 15-30 31 Days & up Over 2 Over 3 Over 6 Months Over 1 Year and Over 3 Year and Over 5 years Total
Days to 2 months months and Months and and up to 1 year up to 3 years up to 5 years
up to 3 up to 6
months months
Advances 68.13 408.78 476.91 1,090.09 5,004.34 5,004.34 15,926.16 55,482.42 42,303.55 7,528.78 5,949.81 1,39,243.31
Investments 20,464.71 - - 748.43 689.73 845.90 1,913.82 4,435.27 19,660.77 30.05 96.60 48,885.28
Deposits 1,398.85 4,779.39 2,654.32 3,808.01 3,509.37 2,454.42 6,032.12 21,340.89 1,00,034.50 152.90 491.48 1,46,656.25
Borrowings - 6,629.46 - - 386.70 1,164.50 2,928.69 4,657.40 17,095.20 - 680.00 33,541.95
Foreign Currency - - - - - - - - - - - -
Assets
Foreign Currency - - - - - - - - - - - -
d.As at 31 March 2022: Rs. in Million
Particulars Day - 1 2-7 Days 8-14 Days 15-30 31 Days & up Over 2 Over 3 Over 6 Months Over 1 Year and Over 3 Year and Over 5 years Total
Days to 2 months months and Months and and up to 1 year up to 3 years up to 5 years
up to 3 up to 6
months months
Advances 285.14 1,710.85 1,995.99 4,562.26 4,748.80 4,748.80 14,979.98 32,396.64 43,722.13 5,889.64 1,329.82 1,16,370.05
Investments 19.60 25.85 14.83 22.03 1,410.85 1,006.37 201.50 221.62 219.18 6,982.52 30,578.63 40,702.98
Deposits 1,382.48 3,235.12 3,023.66 5,244.46 7,423.09 7,690.75 22,060.62 41,173.33 35,586.44 798.05 532.72 1,28,150.72
Borrowings - 2,936.04 489.79 - - 547.50 2,720.00 4,922.50 16,832.50 400.00 680.00 29,528.33
Foreign Currency - - - - - - - - - - - -
Assets
Foreign Currency - - - - - - - - - - - -
Liabilities
e. As at 31 March 2021: Rs. in Million
Particulars Day - 1 2-7 Days 8-14 Days 15-30 31 Days & up Over 2 Over 3 Over 6 Months Over 1 Year and Over 3 Year and Over 5 years Total
Days to 2 months months and Months and and up to 1 year up to 3 years up to 5 years
up to 3 up to 6
months months
Advances 271.69 1,630.12 1,901.80 4,346.98 5,527.93 5,527.93 14,579.72 20,203.66 22,552.55 4,149.68 983.80 81,675.86
Investments 100.00 - - 249.27 - 81.67 - - - 2,021.19 16,868.56 19,320.69
Deposits 884.96 2,253.88 1,463.06 3,401.38 6,475.55 4,708.47 13,221.26 21,516.45 34,667.59 924.36 477.30 89,994.26
Borrowings - - 4,000.00 - - 585.00 2,225.00 2,197.50 6,202.50 1,250.00 480.00 16,940.00
Foreign Currency - - - - - - - - - - - -
Assets
Foreign Currency - - - - - - - - - - - -
Liabilities

In computing the above information, certain estimates and assumptions have been made by the Bank's Management for compiling the returns submitted to RBI, which has been relied upon by the auditors.

329
ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

2.2.Liquidity Coverage Ratio

a. Three Months period ended 30 June 2023 Rs. in Million
Three Month period ended
30 June 2023
Particulars Total Unwei- Total wei-
ghted Value ghted Value
(average) (average)
High Quality Liquid Assets (HQLA)
1 Total High Quality Liquid Assets (HQLA) - 33,634.07
Cash Outflows - -
2 Retail deposits and deposits from small business customers, of - -
which:
i Stable deposits 1,09,544.29 5,477.21
ii Less stable deposits 8,598.71 859.87
3 Unsecured wholesale funding, of which - -
i Operational deposits (all counterparties) - -
ii Non-operational deposits (all counterparties) - -
iii Unsecured debt 17,063.67 14,923.13
4 Secured wholesale funding - -
5 Additional requirements, of which - -
i Outflows related to derivative exposures and other - -
collateral requirements
ii Outflows related to loss of funding on debt products - -

iii Credit and Liquidity facilities 1,088.87 140.07

6 Other Contractual funding obligations 4,227.84 4,227.84
7 Other contingent funding obligations 14.00 0.42
Total Cash Outflows 25,628.54
Cash Inflows
8 Secured lending (e.g. reverse repos) - -
9 Inflows from fully performing exposures 6,550.66 3,275.33
10 Other cash inflows 88.24 88.24
Total Cash Inflows 6,638.90 3,363.57
11 Total HQLA (a) - 33,634.07
12 Total Net Cash outflows (b) 22,264.97
Liquidity Coverage Ratio (%) (a/b) 151.06%
The average weighted and unweighted amounts are calculated taking simple average based on daily observations for the period
b. Year ended 31 March 2023 Rs. in Million
Three Month period ended Three Month period ended 30 Three Month period ended 31 Three Month period ended 31
30 June 2022 September 2022 December 2022 March 2023
Particulars Total Unwei- Total wei- Total Unwei- Total wei- Total Unwei- Total wei- Total Unwei- Total wei-
ghted Value ghted Value ghted Value ghted Value ghted Value ghted Value ghted Value ghted Value
(average) (average) (average) (average) (average) (average) (average) (average)
High Quality Liquid Assets (HQLA)
1 Total High Quality Liquid Assets (HQLA) - 35,329.70 45,429.50 - 39,679.43 31,565.63
Cash Outflows
2 Retail deposits and deposits from small business customers, of
which:
i Stable deposits 83,053.90 4,152.70 90,442.59 4,522.13 96,370.11 4,818.51 1,00,708.90 5,035.45
ii Less stable deposits 10,597.00 1,059.70 5,429.97 543.00 9,608.40 960.80 10,545.90 1,054.59
3 Unsecured wholesale funding, of which
i Operational deposits (all counterparties) - - - - - - - -
ii Non-operational deposits (all counterparties) - - - - - - - -

iii Unsecured debt 26,461.40 24,484.20 31,026.69 24,239.96 23,565.68 21,380.15 18,600.69 16,730.88
4 Secured wholesale funding - -

5 Additional requirements, of which

i Outflows related to derivative exposures and other - - - - - - - -

collateral requirements
ii Outflows related to loss of funding on debt products - - - - - - - -

iii Credit and Liquidity facilities 455.60 83.50 651.29 113.92 948.03 244.71 1,010.65 173.58
6 Other Contractual funding obligations 1,767.80 1,767.80 3,020.56 3,020.56 4,447.56 4,447.56 3,661.60 3,661.60
7 Other contingent funding obligations 15.50 0.50 13.98 0.42 13.98 0.42 13.98 0.42
Total Cash Outflows 31,548.40 32,439.99 31,852.15 26,656.52
Cash Inflows
8 Secured lending (e.g. reverse repos) - -
9 Inflows from fully performing exposures 5,150.20 2,575.10 5,519.74 2,759.87 5,348.13 2,674.06 5,834.25 2,917.12
10 Other cash inflows 237.00 237.00 507.53 507.53 588.73 588.73 - -
Total Cash Inflows 5,387.20 2,812.10 6,027.27 3,267.40 5,936.86 3,262.79 5,834.25 2,917.12
11 Total HQLA (a) - 35,329.70 45,429.50 39,679.43 31,565.60
12 Total Net Cash outflows (b) 28,736.30 29,172.59 28,589.36 23,739.40
Liquidity Coverage Ratio (%) (a/b) 122.94% 155.73% 138.79% 132.97%
The average weighted and unweighted amounts are calculated taking simple average based on daily observations from the respective quarters.

330
ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

c. Year ended 31 March 2022 Rs. in Million

Three Month period ended Three Month period ended 30 Three Month period ended 30 Three Month period ended 31
30 June 2021 September 2021 December 2021 March 2022
Particulars Total Unwei- Total wei- Total Unwei- Total wei- Total Unwei- Total wei- Total Unwei- Total wei-
ghted Value ghted Value ghted Value ghted Value ghted Value ghted Value ghted Value ghted Value
(average) (average) (average) (average) (average) (average) (average) (average)

High Quality Liquid Assets (HQLA)

1 Total High Quality Liquid Assets (HQLA) - 30,524.50 - 30,741.50 - 30,959.50 - 33,271.00
Cash Outflows
2 Retail deposits and deposits from small business customers, of
which:
i Stable deposits 65,759.10 3,288.00 70,194.50 3,509.70 73,850.20 3,692.50 78,066.80 3,903.30
ii Less stable deposits 7,064.50 706.40 7,284.80 728.50 7,362.80 736.30 9,108.10 910.80
3 Unsecured wholesale funding, of which
i Operational deposits (all counterparties) - - - - - - - -
ii Non-operational deposits (all counterparties) - - - - - - - -

iii Unsecured debt 15,875.00 14,236.90 17,355.60 15,539.40 22,361.60 19,895.70 24,254.80 21,963.60
4 Secured wholesale funding - - - - - - - -

5 Additional requirements, of which

i Outflows related to derivative exposures and other - - - - - - - -

collateral requirements
ii Outflows related to loss of funding on debt products - - - - - - - -

iii Credit and Liquidity facilities 333.20 109.90 321.50 109.50 256.60 80.40 105.10 21.50
6 Other Contractual funding obligations 1,378.80 1,378.80 1,534.50 1,534.50 1,260.80 1,260.80 1,638.80 1,638.80
7 Other contingent funding obligations 13.00 0.40 13.00 0.40 12.50 0.40 14.10 0.40
Total Cash Outflows 19,720.40 21,422.00 25,666.10 28,438.40
Cash Inflows
8 Secured lending (e.g. reverse repos) - - - - - - - -
9 Inflows from fully performing exposures 5,843.70 2,921.80 4,627.60 2,313.80 4,422.80 2,211.40 4,717.70 2,358.90
10 Other cash inflows 115.70 115.70 116.20 116.20 75.00 75.00 416.70 416.70
Total Cash Inflows 5,959.40 3,037.50 4,743.80 2,430.00 4,497.80 2,286.40 5,134.40 2,775.60
11 Total HQLA (a) - 30,524.50 - 30,741.50 - 30,959.50 - 33,271.00
12 Total Net Cash outflows (b) 16,682.90 18,992.00 23,379.70 25,662.80
Liquidity Coverage Ratio (%) (a/b) 182.97% 161.87% 132.42% 129.65%
The average weighted and unweighted amounts are calculated taking simple average based on daily observations from the respective quarters.

331
ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

d. Year ended 31 March 2021 Rs. in Million

Three Month period ended Three Month period ended 30 Three Month period ended 30 Three Month period ended 31
30 June 2020 September 2020 December 2020 March 2021
Particulars Total Unwei- Total wei- Total Unwei- Total wei- Total Unwei- Total wei- Total Unwei- Total wei-
ghted Value ghted Value ghted Value ghted Value ghted Value ghted Value ghted Value ghted Value
(average) (average) (average) (average) (average) (average) (average) (average)

High Quality Liquid Assets (HQLA)

1 Total High Quality Liquid Assets (HQLA) - 19,645.80 - 24,520.90 - 31,057.90 - 27,731.90
Cash Outflows
2 Retail deposits and deposits from small business customers, of
which:
i Stable deposits 55,169.80 2,758.50 60,135.90 3,006.80 64,095.10 3,204.80 64,574.40 3,228.70
ii Less stable deposits 4,800.30 480.00 5,564.60 556.50 5,472.10 547.20 6,749.90 675.00
3 Unsecured wholesale funding, of which
i Operational deposits (all counterparties) - - - - - - - -
ii Non-operational deposits (all counterparties) - - - - - - - -
iii Unsecured debt 10,066.00 8,992.60 12,021.50 10,755.50 12,820.40 11,416.40 13,851.70 12,537.80
4 Secured wholesale funding - 0.30 - 42.00 - 0.30 - 0.10

5 Additional requirements, of which

i Outflows related to derivative exposures and other - - - - - - - -

collateral requirements
ii Outflows related to loss of funding on debt products - - - - - - - -

iii Credit and Liquidity facilities 292.80 107.70 296.80 108.00 307.50 108.70 330.10 110.60
6 Other Contractual funding obligations 1,270.20 1,270.20 1,491.90 1,491.90 1,745.70 1,745.70 2,413.80 2,413.80
7 Other contingent funding obligations 13.00 0.40 12.90 0.40 12.90 0.40 13.00 0.40
Total Cash Outflows 13,609.70 15,961.10 17,023.50 18,966.40
Cash Inflows
8 Secured lending (e.g. reverse repos) - - - - - - - -
9 Inflows from fully performing exposures - - 2,652.40 1,326.20 4,985.40 2,492.70 5,288.60 2,644.30
10 Other cash inflows 495.30 495.30 4,045.50 4,045.50 83.40 83.40 83.30 83.30
Total Cash Inflows 495.30 495.30 6,697.90 5,371.70 5,068.80 2,576.10 5,371.90 2,727.60
11 Total HQLA (a) - 19,645.80 - 24,520.90 - 31,057.90 - 27,731.90
12 Total Net Cash inflows (b) - 13,114.40 - 10,589.40 - 14,447.40 - 16,238.80
Liquidity Coverage Ratio (%) (a/b) 149.80% 231.56% 214.97% 170.78%
Average of all Quarters is simple average of monthly observations for the Quarter.

Qualitative disclosure around LCR

The Reserve Bank of India has prescribed monitoring of sufficiency of Bank’s liquid assets using Basel III – Liquidity Coverage Ratio (LCR). The LCR is aimed at measuring and promoting short-term resilience of Banks to
potential liquidity disruptions by ensuring maintenance of sufficient high quality liquid assets (HQLAs) to survive an acute stress scenario lasting for 30 days.
The LCR requirement has been introduced in a phased manner and the Bank is required to maintain minimum ratio of 100% from 1 April 2021.
The LCR requirement has been introduced in a phased manner with banks required to maintain minimum LCR of 60% till December 2017, 70% from January 2018 and the requirement is increased by 10% annually to 100%
by January 2021. However on account of COVID Outbreak and in terms of RBI Circular DOR.BP.BC.No.65/21.04.098/2019-20 dated April 17, 2020, banks were permitted to maintain 80% from the date of circular to 30
September 2020, 90% from 1 October 2020 to 31 March 2021 and 100% from 1 April 2021.
The ratio comprises of high quality liquid assets (HQLAs) as numerator and net cash outflows in 30 days as denominator. HQLA has been divided into two parts i.e. Level 1 HQLA which comprises of primarily cash, excess
CRR, SLR securities in excess of minimum SLR requirement and a portion of mandatory SLR as permitted by RBI (under MSF) and Level 2 HQLA which comprises of investments in highly rated non-financial corporate
bonds and listed equity investments considered at prescribed haircuts. Cash outflows are calculated by multiplying the outstanding balances of various categories or types of liabilities by the outflow run-off rates and cash
inflows are calculated by multiplying the outstanding balances of various categories of contractual receivables by the rates at which they are expected to flow in.
The Bank monitors the LCR periodically and has maintained LCR well above the regulatory threshold.As on 30 June 2023, 30 June 2022, 31 March 2023, 31 March 2022 and 31 March 2021, the average LCR stood at
151.06%, 122.94%, 132.97%, 129.65% and 170.78% respectively.
Asset Liability Committee (ALCO) of the Bank is the primary governing body for Liquidity Risk Management, Risk Management Department (RMD), Finance and Treasury. Treasury is the central repository of funds within
the Bank and is vested with the responsibility of managing liquidity risk within the risk appetite of the Bank. Bank has incorporated Basel Liquidity Standards - LCR for liquidity risk. In computing the above information,
certain estimates and assumptions have been made by the Bank's management which have been relied upon by auditors.

332
2.3 Net Stable Funding Ratio
As at 31 March 2022
Rs. in Million
Unweighted value by residual maturity Weighted
No Maturity < 6 months 6 months to < 1yr ≥ 1yr value
ASF Item
1 Capital: (2+3) 16,725.60 - - 1,450.00 18,175.60
2 Regulatory capital 16,725.60 - - 1,450.00 18,175.60
3 Other capital instruments - - - - -
4 Retail deposits and deposits from - 25,961.83 26,285.17 40,410.20 87,449.90
small business customers: (5+6)
5 Stable deposits - 21,372.59 25,094.20 20,102.06 63,970.37
6 Less stable deposits - 4,589.24 1,190.97 20,308.14 23,479.53
7 Wholesale funding: (8+9) - 5,869.59 19,555.14 15,982.50 28,694.86
8 Operational deposits - - - - -
9 Other wholesale funding - 5,869.59 19,555.14 15,982.50 28,694.86
10 Other liabilities: (11+12) 3,150.98 21,684.62 - - -
11 NSFR derivative liabilities - - - - -
12 All other liabilities and equity not 3,150.98 21,684.62 - - -
included in the above categories

13 Total ASF (1+4+7+10) 19,876.58 53,516.04 45,840.31 57,842.70 1,34,320.36

RSF Item
14 Total NSFR high-quality liquid assets 6,666.68 6,340.00 - 39,940.96 12,349.54
(HQLA)
15 Deposits held at other financial 362.36 - - - 181.18
institutions for operational purposes

16 Performing loans and securities: 146.23 35,376.04 32,396.64 36,793.64 64,184.73

(17+18+19+21+23)
17 Performing loans to financial - - - - -
institutions secured by Level 1 HQLA

18 Performing loans to financial - 2,371.12 78.87 - 395.10

institutions secured by non-Level 1
HQLA and unsecured performing
loans to financial institutions

19 Performing loans to non- financial - 33,003.80 32,314.53 34,916.23 62,337.99

corporate clients, loans to retail and
small business customers, and loans
to sovereigns, central banks and
PSEs, of which:

20 With a risk weight of less than or - - - - -

equal to 35% under the Basel II
Standardised Approach for credit risk

21 Performing residential mortgages, of - 1.12 3.24 1,877.41 1,327.34

which:
22 With a risk weight of less than or - - - - -
equal to 35% under the Basel II
Standardised Approach for credit risk

23 Securities that are not in default and 146.23 - - - 124.30

do not qualify as HQLA, including
exchange-traded equities

24 Other assets: (sum of rows 25 to 29) 9,464.64 - - 9,588.34 19,052.99

25 Physical traded commodities, - - - - -

including gold
26 Assets posted as initial margin for - - - - -
derivative contracts and contributions
to default funds of CCPs

27 NSFR derivative assets - - - - -

28 NSFR derivative liabilities before - - - - -
deduction of variation margin posted

29 All other assets not included in the 9,464.64 - - 9,588.34 19,052.99

above categories
30 Off-balance sheet items - - - - -
31 Total RSF (14+15+16+24+30) 16,639.91 41,716.04 32,396.64 86,322.94 95,768.44
32 Net Stable Funding Ratio (%) 140.26%

333
As at 31 December 2021
Rs. in Million
Unweighted value by residual maturity Weighted
No Maturity < 6 months 6 months to < 1yr ≥ 1yr value
ASF Item
1 Capital: (2+3) 16,184.22 - - 1,400.00 17,584.22
2 Regulatory capital 16,184.22 - - 1,400.00 17,584.22
3 Other capital instruments - - - - -
4 Retail deposits and deposits from - 21,427.44 25,185.57 42,112.76 84,587.46
small business customers: (5+6)
5 Stable deposits - 17,567.43 24,400.68 36,301.59 75,177.00
6 Less stable deposits - 3,860.01 784.89 5,811.17 9,410.46
7 Wholesale funding: (8+9) - 5,107.16 17,552.91 13,584.92 24,826.24
8 Operational deposits - - - - -
9 Other wholesale funding - 5,107.16 17,552.91 13,584.92 24,826.24
10 Other liabilities: (11+12) 2,624.70 10,129.88 - - -
11 NSFR derivative liabilities - - - - -
12 All other liabilities and equity not 2,624.70 10,129.88 - - -
included in the above categories

13 Total ASF (1+4+7+10) 18,808.92 36,664.48 42,738.48 57,097.68 1,26,997.92

RSF Item
14 Total NSFR high-quality liquid assets 5,819.79 6,700.00 - 35,526.90 8,749.86
(HQLA)
15 Deposits held at other financial 281.13 - - - 140.57
institutions for operational purposes

16 Performing loans and securities: 106.60 31,288.55 27,783.64 25,436.02 50,867.38

(17+18+19+21+23)
17 Performing loans to financial - - - - -
institutions secured by Level 1 HQLA

18 Performing loans to financial - 324.78 25.12 - 61.28

institutions secured by non-Level 1
HQLA and unsecured performing
loans to financial institutions

19 Performing loans to non- financial - 30,963.70 27,757.90 24,104.31 49,849.53

corporate clients, loans to retail and
small business customers, and loans
to sovereigns, central banks and
PSEs, of which:

20 With a risk weight of less than or - - - - -

equal to 35% under the Basel II
Standardised Approach for credit risk

21 Performing residential mortgages, of - 0.07 0.62 1,331.71 865.98

which:
22 With a risk weight of less than or - - - - -
equal to 35% under the Basel II
Standardised Approach for credit risk

23 Securities that are not in default and 106.60 - - - 90.59

do not qualify as HQLA, including
exchange-traded equities

24 Other assets: (sum of rows 25 to 29) 6,831.69 - - 15,535.22 22,366.94

25 Physical traded commodities, - - - - -

including gold
26 Assets posted as initial margin for - - - - -
derivative contracts and contributions
to default funds of CCPs

27 NSFR derivative assets - - - - -

28 NSFR derivative liabilities before - - - - -
deduction of variation margin posted

29 All other assets not included in the 6,831.69 - - 15,535.22 22,366.94

above categories
30 Off-balance sheet items - - - - -
31 Total RSF (14+15+16+24+30) 13,039.21 37,988.55 27,783.64 76,498.14 82,124.75
32 Net Stable Funding Ratio (%) 154.64%

334
Qualitative Disclosure
As per the RBI guideline on Net Stable Funding Ratio (NSFR) dated May 17, 2018, the Bank is required to maintain the NSFR on an
ongoing basis. The minimum NSFR requirement set out in the RBI guideline effective Oct 1, 2021 is 100%. The Basel Committee on
Banking Supervision (BCBS) had introduced the Net Stable Funding Ratio (NSFR) to ensure resilience over a longer time horizon by
requiring banks to fund their activities with more stable sources of funding. NSFR is defined as the amount of Available Stable Funding
relative to the amount of Required Stable Funding. “Available Stable Funding” (ASF) is defined as the portion of capital and liabilities
expected to be reliable over the time horizon considered by NSFR, which extends to one year. The amount of “Required Stable Funding”
(RSF) of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by the
institution as well as those of its off-balance sheet (OBS) exposures.
In computing the above information, certain estimates and assumptions have been made by Bank's management which have been relied
upon by the auditors.

2.3.1 Net Stable Funding Ratio is applicable effective from 01 December 2021, hence information period prior to December quarter of
FY 2021 is not provided.

335
As at 30 June 2022
Rs. in Million
Unweighted value by residual maturity Weighted value
No Maturity < 6 months 6 months to < 1yr ≥ 1yr
ASF Item
1 Capital: (2+3) 17,943.39 - - 1,450.00 19,393.39
2 Regulatory capital 17,943.39 - - 1,450.00 19,393.39
3 Other capital instruments - - - - -
4 Retail deposits and deposits from - 25,399.65 22,675.54 51,816.95 94,451.91
small business customers: (5+6)
5 Stable deposits - 18,278.86 21,495.72 26,302.19 64,018.08
6 Less stable deposits - 7,120.79 1,179.82 25,514.76 30,433.83
7 Wholesale funding: (8+9) - 6,165.41 16,261.09 14,765.00 25,978.24
8 Operational deposits - - - - -
9 Other wholesale funding - 6,165.41 16,261.09 14,765.00 25,978.24
10 Other liabilities: (11+12) 3,445.20 21,118.80 - - -
11 NSFR derivative liabilities - - - - -
12 All other liabilities and equity not 3,445.20 21,118.80 - - -
included in the above categories
13 Total ASF (1+4+7+10) 21,388.59 52,683.86 38,936.63 68,031.95 1,39,823.54
RSF Item
14 Total NSFR high-quality liquid assets 6,945.00 2,630.00 0.00 47,934.10 9,946.53
(HQLA)
15 Deposits held at other financial 497.12 - - - 248.57
institutions for operational purposes

16 Performing loans and securities: 134.98 36,278.74 34,745.77 34,380.48 64,270.44

(17+18+19+21+23)
17 Performing loans to financial - - - - -
institutions secured by Level 1
HQLA
18 Performing loans to financial - 1,201.21 102.10 - 231.20
institutions secured by non-Level 1
HQLA and unsecured performing
loans to financial institutions

19 Performing loans to non- financial - 35,077.53 34,643.60 33,583.26 63,406.31

corporate clients, loans to retail and
small business customers, and
loans to sovereigns, central banks
and PSEs, of which:
20 With a risk weight of less than or - - - - -
equal to 35% under the Basel II
Standardised Approach for credit
risk
21 Performing residential mortgages, of - - 0.07 797.22 518.20
which:
22 With a risk weight of less than or - - - - -
equal to 35% under the Basel II
Standardised Approach for credit
risk
23 Securities that are not in default and 134.98 - - - 114.73
do not qualify as HQLA, including
exchange-traded equities

24 Other assets: (sum of rows 25 to 29) 9,783.74 - - 7,711.03 17,494.77

25 Physical traded commodities, - - - - -

including gold
26 Assets posted as initial margin for - - - - -
derivative contracts and
contributions to default funds of
CCPs
27 NSFR derivative assets - - - - -
28 NSFR derivative liabilities before - - - - -
deduction of variation margin posted

29 All other assets not included in the 9,783.74 - - 7,711.03 17,494.77

above categories
30 Off-balance sheet items - - - - -
31 Total RSF (14+15+16+24+30) 17,360.84 38,908.74 34,745.77 90,025.61 91,960.31
32 Net Stable Funding Ratio (%) 152.05%
336
As at 30 September 2022
Rs. in Million
Unweighted value by residual maturity Weighted value
No Maturity < 6 months 6 months to < 1yr ≥ 1yr
ASF Item
1 Capital: (2+3) 18,171.94 - - 1,450.00 19,621.94
2 Regulatory capital 18,171.94 - - 1,450.00 19,621.94
3 Other capital instruments - - - - -
4 Retail deposits and deposits from - 24,842.39 13,742.52 69,453.71 1,03,058.76
small business customers: (5+6)
5 Stable deposits - 19,600.55 13,170.20 42,588.63 73,647.46
6 Less stable deposits - 5,241.84 572.32 26,865.08 29,411.30
7 Wholesale funding: (8+9) - 5,370.48 8,686.22 12,670.00 19,698.34
8 Operational deposits - - - - -
9 Other wholesale funding - 5,370.48 8,686.22 12,670.00 19,698.34
10 Other liabilities: (11+12) 3,500.60 24,593.55 - - -
11 NSFR derivative liabilities - - - - -
12 All other liabilities and equity not 3,500.60 24,593.55 - - -
included in the above categories
13 Total ASF (1+4+7+10) 21,672.54 54,806.42 22,428.74 83,573.71 1,42,379.04
RSF Item
14 Total NSFR high-quality liquid assets 6,829.96 1,250.00 - 52,632.69 13,092.04
(HQLA)
15 Deposits held at other financial 579.51 - - - 289.75
institutions for operational purposes

16 Performing loans and securities: 117.30 39,212.65 32,833.30 31,031.13 62,227.13

(17+18+19+21+23)
17 Performing loans to financial - - - - -
institutions secured by Level 1
HQLA
18 Performing loans to financial - 217.78 818.71 - 442.02
institutions secured by non-Level 1
HQLA and unsecured performing
loans to financial institutions

19 Performing loans to non- financial - 38,994.87 32,014.59 30,052.19 61,049.10

corporate clients, loans to retail and
small business customers, and
loans to sovereigns, central banks
and PSEs, of which:
20 With a risk weight of less than or - - - - -
equal to 35% under the Basel II
Standardised Approach for credit
risk
21 Performing residential mortgages, of - - - 978.94 636.31
which:
22 With a risk weight of less than or - - - - -
equal to 35% under the Basel II
Standardised Approach for credit
risk
23 Securities that are not in default and 117.30 - - - 99.70
do not qualify as HQLA, including
exchange-traded equities

24 Other assets: (sum of rows 25 to 29) 11,211.63 - - 6,783.22 17,994.87

25 Physical traded commodities, - - - - -

including gold
26 Assets posted as initial margin for - - - - -
derivative contracts and
contributions to default funds of
CCPs
27 NSFR derivative assets - - - - -
28 NSFR derivative liabilities before - - - - -
deduction of variation margin posted

29 All other assets not included in the 11,211.63 - - 6,783.22 17,994.87

above categories
30 Off-balance sheet items - - - - -
31 Total RSF (14+15+16+24+30) 18,738.40 40,462.65 32,833.30 90,447.04 93,603.79
32 Net Stable Funding Ratio (%) 152.11%
337
As at 31 December 2022
Rs. in Million
Unweighted value by residual maturity Weighted value
No Maturity < 6 months 6 months to < 1yr ≥ 1yr
ASF Item
1 Capital: (2+3) 18,200.42 - - 1,450.00 19,650.44
2 Regulatory capital 18,200.42 - - 1,450.00 19,650.44
3 Other capital instruments - - - - -
4 Retail deposits and deposits from - 20,839.23 9,165.25 85,477.94 1,11,296.32
small business customers: (5+6)
5 Stable deposits - 15,562.12 8,710.39 63,160.51 86,051.84
6 Less stable deposits - 5,277.11 454.86 22,317.43 25,244.48
7 Wholesale funding: (8+9) - 4,327.40 6,071.73 11,550.00 16,749.57
8 Operational deposits - - - - -
9 Other wholesale funding - 4,327.40 6,071.73 11,550.00 16,749.57
10 Other liabilities: (11+12) 3,126.52 23,240.71 - - -
11 NSFR derivative liabilities - - - - -
12 All other liabilities and equity not 3,126.52 23,240.71 - - -
included in the above categories
13 Total ASF (1+4+7+10) 21,326.94 48,407.34 15,236.98 98,477.94 1,47,696.33
RSF Item
14 Total NSFR high-quality liquid assets 6,697.52 - - 47,599.06 12,541.44
(HQLA)
15 Deposits held at other financial 410.37 - - - 205.19
institutions for operational purposes

16 Performing loans and securities: 115.63 38,638.80 37,690.04 35,675.14 68,269.86

(17+18+19+21+23)
17 Performing loans to financial - - - - -
institutions secured by Level 1
HQLA
18 Performing loans to financial - 271.18 1,213.64 - 647.50
institutions secured by non-Level 1
HQLA and unsecured performing
loans to financial institutions

19 Performing loans to non- financial - 38,367.62 36,476.40 34,566.11 66,803.20

corporate clients, loans to retail and
small business customers, and
loans to sovereigns, central banks
and PSEs, of which:
20 With a risk weight of less than or - - - - -
equal to 35% under the Basel II
Standardised Approach for credit
risk
21 Performing residential mortgages, of - - - 1,109.03 720.88
which:
22 With a risk weight of less than or - - - - -
equal to 35% under the Basel II
Standardised Approach for credit
risk
23 Securities that are not in default and 115.63 - - - 98.28
do not qualify as HQLA, including
exchange-traded equities

24 Other assets: (sum of rows 25 to 29) 11,065.43 - - 5,557.33 16,622.76

25 Physical traded commodities, - - - - -

including gold
26 Assets posted as initial margin for - - - - -
derivative contracts and
contributions to default funds of
CCPs
27 NSFR derivative assets - - - - -
28 NSFR derivative liabilities before - - - - -
deduction of variation margin posted

29 All other assets not included in the 11,065.43 - - 5,557.33 16,622.76

above categories
30 Off-balance sheet items - - - - -
31 Total RSF (14+15+16+24+30) 18,288.95 38,638.80 37,690.04 88,831.53 97,639.25
32 Net Stable Funding Ratio (%) 151.27%
338
As at 31 March 2023
Rs. in Million
Unweighted value by residual maturity Weighted value
No Maturity < 6 months 6 months to < 1yr ≥ 1yr

ASF Item
1 Capital: (2+3) 18,467.84 - - 1,450.00 19,917.84
2 Regulatory capital 18,467.84 - - 1,450.00 19,917.84
3 Other capital instruments - - - - -
4 Retail deposits and deposits from - 15,980.37 11,235.87 89,618.06 1,24,592.16
small business customers: (5+6)
5 Stable deposits - 7,902.11 11,235.87 65,553.39 1,16,436.08
6 Less stable deposits - 8,078.26 - 24,064.67 8,156.08
7 Wholesale funding: (8+9) - 5,743.06 13,101.73 26,620.40 25,267.60
8 Operational deposits - - - - -
9 Other wholesale funding - 5,743.06 13,101.73 26,620.40 25,267.60
10 Other liabilities: (11+12) 4,050.50 14,022.38 729.72 1,216.60 -
11 NSFR derivative liabilities - - - - -
12 All other liabilities and equity not 4,050.50 14,022.38 729.72 1,216.60 -
included in the above categories
13 Total ASF (1+4+7+10) 22,518.34 35,745.81 25,067.32 1,18,905.06 1,69,777.60
RSF Item
14 Total NSFR high-quality liquid assets 7,395.49 - - 47,421.02 14,775.59
(HQLA)
15 Deposits held at other financial 268.77 - - - 134.39
institutions for operational purposes

16 Performing loans and securities: 103.85 28,955.96 55,723.34 48,064.25 82,588.18

(17+18+19+21+23)
17 Performing loans to financial - - - - -
institutions secured by Level 1
HQLA
18 Performing loans to financial - 1,013.17 1,093.24 - 698.59
institutions secured by non-Level 1
HQLA and unsecured performing
loans to financial institutions

19 Performing loans to non- financial - 27,942.13 54,629.73 46,365.48 80,696.58

corporate clients, loans to retail and
small business customers, and
loans to sovereigns, central banks
and PSEs, of which:
20 With a risk weight of less than or - - - - -
equal to 35% under the Basel II
Standardised Approach for credit
risk
21 Performing residential mortgages, of - 0.66 0.37 1,698.77 1,104.74
which:
22 With a risk weight of less than or - - - - -
equal to 35% under the Basel II
Standardised Approach for credit
risk
23 Securities that are not in default and 103.85 - - - 88.27
do not qualify as HQLA, including
exchange-traded equities

24 Other assets: (sum of rows 25 to 29) 8,160.74 - - 6,143.23 14,303.99

25 Physical traded commodities, - - - - -

including gold
26 Assets posted as initial margin for - - - - -
derivative contracts and
contributions to default funds of
CCPs
27 NSFR derivative assets - - - - -
28 NSFR derivative liabilities before - - - - -
deduction of variation margin posted
29 All other assets not included in the 8,160.74 - - 6,143.23 14,303.99
above categories
30 Off-balance sheet items - - - - -
31 Total RSF (14+15+16+24+30) 15,928.85 28,955.96 55,723.34 1,01,628.50 1,11,802.15
32 Net Stable Funding Ratio (%) 151.86%

339
Qualitative Disclosure

As per the RBI guideline on Net Stable Funding Ratio (NSFR) dated May 17, 2018, the Bank is required to maintain the NSFR on an
ongoing basis. The minimum NSFR requirement set out in the RBI guideline effective October 1, 2021 is 100%. The Basel Committee on
Banking Supervision (BCBS) had introduced the Net Stable Funding Ratio (NSFR) to ensure resilience over a longer time horizon by
requiring banks to fund their activities with more stable sources of funding. NSFR is defined as the amount of Available Stable Funding
relative to the amount of Required Stable Funding. “Available Stable Funding” (ASF) is defined as the portion of capital and liabilities
expected to be reliable over the time horizon considered by NSFR, which extends to one year. The amount of “Required Stable Funding”
(RSF) of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by the
institution as well as those of its off-balance sheet (OBS) exposures.

In computing the above information, certain estimates and assumptions have been made by Bank's management which have been relied
upon by the auditors.

340
2.3 Net Stable Funding Ratio
As at 30 June 2023
Rs. in Million
Unweighted value by residual maturity Weighted value
No Maturity < 6 months 6 months to < ≥ 1yr
1yr

ASF Item
1 Capital: (2+3) 19,731.14 - - 1,450.00 21,181.13
2 Regulatory capital 19,731.14 - - 1,450.00 21,181.13
3 Other capital instruments - - - - -
4 Retail deposits and deposits from - 11,832.45 19,397.05 92,396.12 1,29,090.38
small business customers: (5+6)
5 Stable deposits - 6,573.21 19,397.05 70,724.56 1,23,063.92
6 Less stable deposits - 5,259.34 - 21,671.46 6,026.46
7 Wholesale funding: (8+9) - 10,167.30 21,218.35 22,503.24 27,477.23
8 Operational deposits - - - - -
9 Other wholesale funding - 10,167.30 21,218.35 22,503.24 27,477.23
10 Other liabilities: (11+12) 4,758.47 2,538.93 636.10 1,330.35 -
11 NSFR derivative liabilities - - -
12 All other liabilities and equity not 4,758.47 2,538.93 636.10 1,330.35 -
included in the above categories

13 Total ASF (1+4+7+10) 24,489.61 24,538.68 41,251.50 1,17,679.71 1,77,748.74

RSF Item
14 Total NSFR high-quality liquid 8,212.69 - 47,687.97 9,473.00
assets (HQLA)
15 Deposits held at other financial 649.20 - - - 324.60
institutions for operational
purposes
16 Performing loans and securities: 114.88 37,365.01 48,399.57 51,330.94 85,852.19
(17+18+19+21+23)
17 Performing loans to financial - - - - -
institutions secured by Level 1
HQLA
18 Performing loans to financial - 1,099.39 637.69 - 483.75
institutions secured by non-Level 1
HQLA and unsecured performing
loans to financial institutions

19 Performing loans to non- financial - 36,264.91 47,761.64 49,459.62 84,053.91

corporate clients, loans to retail
and small business customers,
and loans to sovereigns, central
banks and PSEs, of which:

20 With a risk weight of less than or - - - - -

equal to 35% under the Basel II
Standardised Approach for credit
risk
21 Performing residential mortgages, - 0.71 0.34 1,871.32 1,216.88
of which:
22 With a risk weight of less than or - - - - -
equal to 35% under the Basel II
Standardised Approach for credit
risk
23 Securities that are not in default 114.88 - - - 97.65
and do not qualify as HQLA,
including exchange-traded
equities
24 Other assets: (sum of rows 25 to 8,243.40 - - 5,955.83 14,199.25
29)
25 Physical traded commodities,
including gold
26 Assets posted as initial margin for
derivative contracts and
contributions to default funds of
CCPs
27 NSFR derivative assets
28 NSFR derivative liabilities before
deduction of variation margin
posted
29 All other assets not included in the 8,243.40 - - 5,955.83 14,199.25
above categories
30 Off-balance sheet items 1,174.88 58.46
31 Total RSF (14+15+16+24+30) 18,395.05 37,365.01 48,399.57 1,04,974.73 1,09,907.50
32 Net Stable Funding Ratio (%) 161.73%

341
ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

3. Investments
3.1 Composition of Investment Portfolio
a) As at 30 June 2023 Rs. in Million
Sl. No. Particulars Investments in India
Other Subsidiaries Total
Government Debentures and
approved Shares and/or joint Others Investments in
securities bonds
securities ventures India
I. Held to Maturity
Gross 32,399.03 - - - - - 32,399.03
Less: Provision for non performing investments (NPI) - - - - - - -
Net 32,399.03 - - - - - 32,399.03

II Available for sale

Gross 13,668.29 - 122.58 - - 1,725.33 15,516.20
Less: Provision for non performing investments (NPI) - - - - - - -
Less: Provision for depreciation 240.66 - - - - 714.60 955.26
Net 13,427.63 - 122.58 - - 1,010.73 14,560.94

III Held for Trading

Gross 1,873.68 - - - - - 1,873.68
Less: Provision for non performing investments (NPI) - - - - - - -
Less: Provision for depreciation 12.48 - - - - - 12.48
Net 1,861.20 - - - - - 1,861.20

IV Total Investments 47,941.00 - 122.58 - - 1,725.33 49,788.91

Less: Provision for non-performing investments - - - - - - -
Less: Provision for depreciation 253.14 - - - - 714.60 967.74
Net 47,687.86 - 122.58 - - 1,010.73 48,821.17
As on 30 June 2023, the bank does not have Investments outside India. Hence corresponding disclosures are not made
b) As at 30 June 2022 Rs. in Million
Sl. No. Particulars Investments in India
Other Subsidiaries Total
Government Debentures and
approved Shares and/or joint Others Investments in
securities bonds
securities ventures India
I. Held to Maturity
Gross 30,712.78 - - - - - 30,712.78
Less: Provision for non performing investments (NPI) - - - - - - -
Net 30,712.78 - - - - - 30,712.78

II Available for sale

Gross 15,850.25 - 174.99 - - 214.99 16,240.23
Less: Provision for non performing investments (NPI) - - - - - -
Less: Provision for depreciation 372.39 - 27.25 - - 1.35 400.99
Net 15,477.86 - 147.74 - - 213.64 15,839.24

III Held for Trading

Gross 1,752.91 - - - - - 1,752.91
Less: Provision for non performing investments (NPI) - - - - - - -
Less: Provision for depreciation 9.40 - - - - - 9.40
Net 1,743.51 - - - - - 1,743.51

IV Total Investments 48,315.94 - 174.99 - - 214.99 48,705.92

Less: Provision for non-performing investments - - - - - - -
Less: Provision for depreciation 381.79 - 27.25 - - 1.35 410.39
Net 47,934.15 - 147.74 - - 213.64 48,295.53
As on 30 June 2022, the bank does not have Investments outside India. Hence corresponding disclosures are not made
c) As at 31 March 2023 Rs. in Million
Sl. No. Particulars Investments in India
Other Subsidiaries Total
Government Debentures and
approved Shares and/or joint Others Investments in
securities bonds
securities ventures India
I. Held to Maturity
Gross 32,814.80 - - - - - 32,814.80
Less: Provision for non performing investments (NPI) - - - - - - -
Net 32,814.80 - - - - - 32,814.80

II Available for sale

Gross 14,545.03 - 131.21 - - 2062.24* 16,738.48
Less: Provision for non performing investments (NPI) - - - - - -
Less: Provision for depreciation 290.53 - 14.59 - - 714.60* 1,019.72
Net 14,254.50 - 116.62 - - 1,347.64 15,718.76

III Held for Trading

Gross 351.99 - - - - - 351.99
Less: Provision for non performing investments (NPI) - - - - - - -
Less: Provision for depreciation 0.27 - - - - - 0.27
Net 351.72 - - - - - 351.72

IV Total Investments 47,711.82 - 131.21 - - 2,062.24 49,905.27

Less: Provision for non-performing investments - - - - - - -
Less: Provision for depreciation 290.80 - 14.59 - - 714.60 1,019.99
Net 47,421.02 - 116.62 - - 1,347.64 48,885.28
As on 31 March 2023, the bank does not have Investments outside India. Hence corresponding disclosures are not made
* This includes Security Receipts issued by ARC on account of transfer of NPA and technical write off pool. Investments in SRs are valued at Nil/ fully provided for in the books of account on a prudent basis (Refer para A.
4.6 (i) of Note 19)

342
ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

d) As at 31 March 2022 Rs. in Million

Sl. No. Particulars Investments in India
Other Subsidiaries Total
Government Debentures and
approved Shares and/or joint Others Investments in
securities bonds
securities ventures India
I. Held to Maturity
Gross 27,846.19 - - - - - 27,846.19
Less: Provision for non performing investments (NPI) - - - - - - -
Net 27,846.19 - - - - - 27,846.19

II Available for sale

Gross 10,606.19 - 162.87 - - 608.26 11,377.32
Less: Provision for non performing investments (NPI) - - - - - - -
Less: Provision for depreciation 213.39 - 8.93 - - 0.18 222.50
Net 10,392.80 - 153.94 - - 608.08 11,154.82

III Held for Trading

Gross 1,719.42 - - - - - 1,719.42
Less: Provision for non performing investments (NPI) - - - - - - -
Less: Provision for depreciation 17.45 - - - - - 17.45
Net 1,701.97 - - - - - 1,701.97

IV Total Investments 40,171.80 - 162.87 - - 608.26 40,942.93

Less: Provision for non-performing investments - - - - - - -
Less: Provision for depreciation 230.84 - 8.93 - - 0.18 239.95
Net 39,940.96 - 153.94 - - 608.08 40,702.98
As on 31 March 2022, the bank does not have Investments outside India. Hence corresponding disclosures are not made

343
ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

e) As at 31 March 2021 Rs. in Million

Sl. No. Particulars Investments in India

Other Subsidiaries Total

Government Debentures and
approved Shares and/or joint Others Investments in
securities bonds
securities ventures India
I. Held to Maturity
Gross 18,645.37 - - - - - 18,645.37
Less: Provision for non performing investments (NPI) - - - - - - -
Net 18,645.37 - - - - - 18,645.37

II Available for sale

Gross 245.73 - 87.20 - - 349.27 682.20
Less: Provision for non performing investments (NPI) - - - - - - -
Less: Provision for depreciation 1.35 - 5.53 - - - 6.88
Net 244.38 - 81.67 - - 349.27 675.32

III Held for Trading

Gross - - - - - - -
Less: Provision for non performing investments (NPI) - - - - - - -
Less: Provision for depreciation - - - - - - -
Net - - - - - - -

IV Total Investments 18,891.10 - 87.20 - - 349.27 19,327.57

Less: Provision for non-performing investments - - - - - - -
Less: Provision for depreciation 1.35 - 5.53 - - - 6.88
Net 18,889.75 - 81.67 - - 349.27 19,320.69
As on 31 March 2021, the bank does not have Investments outside India. Hence corresponding disclosures are not made
3.2 Movement of Provisions for Depreciation and Investment Fluctuation Reserve : Rs. in Million
Particulars As at 30 June As at 30 June As at 31 March As at 31 March As at 31 March
2023 2022 2023 2022 2021
1 Movement of provisions held towards depreciation on investments
i. Opening Balance 1,019.99 239.95 239.95 6.88 18.32
ii. Add : Provisions made during the period/year 48.12 210.41 1,037.36 287.48 17.26
iii. Less : Write off/ Write back of excess provisions made during the period/year 100.37 39.97 257.32 54.41 28.70
iv. Closing Balance 967.74 410.39 1,019.99 239.95 6.88
2 Movement of Investment Fluctuation Reserve
i. Opening Balance 321.42 261.94 261.94 41.27 41.27
ii. Add : Amount transferred during the period/year - - 59.48 220.67 -
iii. Less : Drawdown - - - - -
iv. Closing Balance 321.42 261.94 321.42 261.94 41.27
3 Closing balance in IFR as a percentage of closing balance of Investments in AFS and HFT Category 1.96% 1.49% 2.00% 2.04% 6.11%
3.3. Sale/ transfer of securities to/from HTM category
During the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2023, 31 March 2022 and 31 March 2021 there was no sale/transfer of securities to/from HTM category in excess of 5% of
book value of investments held in HTM category at the beginning of the year
In accordance with the RBI guidelines, sales from, and transfers to / from, HTM category exclude the following from the 5% cap
a) one-time transfer of securities permitted to be undertaken by banks at the beginning of the accounting year with approval of the Board of Directors;
b) sales to the RBI under pre-announced open market operation auctions and the Government securities acquisition program;
c) additional shifting of securities explicitly permitted by the RBI from time to time;
d) direct sales from HTM for bringing down SLR holdings in the HTM category consequent to a downward revision in SLR investments by RBI.
e) repurchase of state development loans by respective state governments under buyback/ switch operations.
3.4. Disclosure in respect of Non-SLR Investment Portfolio:

a) Non-performing Non-SLR investments:

The Bank does not have any non performing non-SLR Investments during the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2023 , 31 March 2022 and 31 March 2021.

b) i. Issuer Composition of Non SLR Investments as at 30 June 2023 Rs. in Million

Sl.No Issuer Amount Extent of Extent of 'Below Investment Extent of 'Unrated' Securities Extent of 'Unlisted' Securities
Private placement grade' Securities
[1] [2] [3] 1 1 12 12
[4] [5] [6] [7]
1 PSUs 27.84 - - - -
2 FIs 0.99 - - - -
3 Banks 1,006.82 737.80 - - -
4 Private Corporates 72.66 7.70 - - 7.70
5 Subsidiaries / Joint ventures - - - - -
6 Others 739.60 714.60 - - 25.00
7 Provision held towards depreciation (714.60) - - - -

Total 1,133.31 1,460.10 - - 32.70

1
Amount reported under Columns 4,5,6 and 7 above are not mutually exclusive
2
Excludes Investments in Equity shares, Equity Oriented Mutual Funds, Certificate of Deposits and Security Receipts issued by ARCs registered with Reserve Bank in line with extant RBI guidelines

ii. Issuer Composition of Non SLR Investments as at 30 June 2022 Rs. in Million
Sl.No Issuer Amount Extent of Extent of 'Below Investment Extent of 'Unrated' Securities Extent of 'Unlisted' Securities
Private placement grade' Securities

[1] [2] [3] 1 1 12 12

[4] [5] [6] [7]
1 PSUs 28.47 - - - -
2 FIs 10.75 - - - -
3 Banks 118.94 99.50 - - -
4 Private Corporates 116.32 7.70 - - 7.70
5 Subsidiaries / Joint ventures - - - - -
6 Others 115.50 - - - 115.50
7 Provision held towards depreciation (28.60) - - - -

Total 361.38 107.20 - - 123.20

1
Amount reported under Columns 4,5,6 and 7 above are not mutually exclusive
2
Excludes Investments in Equity shares, Equity Oriented Mutual Funds, Certificate of Deposits and Security Receipts issued by ARCs registered with Reserve Bank in line with extant RBI guidelines

344
ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

iii. Issuer Composition of Non SLR Investments as at 31 March 2023 Rs. in Million
Sl.No Issuer Amount Extent of Extent of 'Below Investment Extent of 'Unrated' Securities Extent of 'Unlisted' Securities
Private placement grade' Securities

[1] [2] [3] 1 1 12 12

[4] [5] [6] [7]
1 PSUs 25.18 - - - -
2 FIs 5.04 - - - -
3 Banks 1,229.32 725.20 - - -
4 Private Corporates 87.77 7.70 - - 7.70
5 Subsidiaries / Joint ventures - - - - -

6 Others 846.14 714.60 - - 125.00

7 Provision held towards depreciation (729.19) - - - -

Total 1,464.26 1,447.50 - - 132.70

1
Amount reported under Columns 4,5,6 and 7 above are not mutually exclusive
2
Excludes Investments in Equity shares, Equity Oriented Mutual Funds, Certificate of Deposits and Security Receipts issued by ARCs registered with Reserve Bank in line with extant RBI guidelines

iv. Issuer Composition of Non SLR Investments as at 31 March 2022 Rs. in Million
Sl.No Issuer Amount Extent of Extent of 'Below Investment Extent of 'Unrated' Securities Extent of 'Unlisted' Securities
Private placement grade' Securities

[1] [2] [3] 1 1 12 12

[4] [5] [6] [7]
1 PSUs 12.99 - - - -
2 FIs - - - - -
3 Banks 623.10 - - - -
4 Private Corporates 121.04 7.70 - - 7.70
5 Subsidiaries / Joint ventures - - - - -

6 Others 13.99 - - - -
7 Provision held towards depreciation (9.11) - - - -

Total 762.01 7.70 - - 7.70

1
Amount reported under Columns 4,5,6 and 7 above are not mutually exclusive
2
Excludes Investments in Equity shares, Equity Oriented Mutual Funds and Certificate of Deposits in line with extant RBI guidelines

v. Issuer Composition of Non SLR Investments as at 31 March 2021 Rs. in Million

Sl.No Issuer Amount Extent of Extent of 'Below Investment Extent of 'Unrated' Securities Extent of 'Unlisted' Securities
Private placement grade' Securities

[1] [2] [3] [4] 1 [5] 1 [6] 1 2 [7] 1 2

1 PSUs - - - - -
2 FIs - - - - -
3 Banks 288.46 - - - -
4 Private Corporates - - - -
5 Subsidiaries / Joint ventures 48.01 7.70 - - 7.70

6 Others 100.00 - - - -
7 Provision held towards depreciation (5.53) - - - -

Total 430.94 7.70 - - 7.70

1
Amount reported under Columns 4,5,6 and 7 above are not mutually exclusive
2
Excludes Investments in Equity shares, Equity Oriented Mutual Funds and Certificate of Deposits in line with extant RBI guidelines

345
ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

3.5 Details of Repo /Reverse Repos including Liquidity Adjustment Facility (LAF) Transactions in (face value terms)
As at 30 June 2023 Rs. in Million
Particulars Minimum outstanding Maximum outstanding during Daily Average outstanding during Outstanding as on 30 June 2023
during the period the period the period *

Securities sold under repos

i. Government securities 5,500.00 16,148.94 12,030.79 6,500.00
ii. Corporate debt securities - - - -
iii. Any other securities - - - -
Securities purchased under reverse repos
i. Government securities - 630.00 72.53 -
ii. Corporate debt securities - - - -
iii. Any other securities - - - -
* daily average is considered for entire period including the days when outstanding were nil

As at 30 June 2022 Rs. in Million

Particulars Minimum outstanding Maximum outstanding during Daily Average outstanding during Outstanding as on 30 June 2022
during the period the period the period *

Securities sold under repos

i. Government securities 6,960.00 13,138.21 8,709.11 6,960.00
ii. Corporate debt securities - - - -
iii. Any other securities - - - -
Securities purchased under reverse repos
i. Government securities - 8,880.00 3,250.77 2,630.00
ii. Corporate debt securities - - - -
iii. Any other securities - - - -
* daily average is considered for entire period including the days when outstanding were nil

As at 31 March 2023 Rs. in Million

Particulars Minimum outstanding Maximum outstanding during Daily Average outstanding during Outstanding as on 31 March 2023
during the year the year the year *
Securities sold under repos
i. Government securities 6,960.00 17,991.46 10,195.55 10,889.46
ii. Corporate debt securities - - - -
iii. Any other securities - - - -
Securities purchased under reverse repos
i. Government securities - 9,880.00 2,057.76 -
ii. Corporate debt securities - - - -
iii. Any other securities - - - -
* daily average is considered for entire year including the days when outstanding were nil
As at 31 March 2022 Rs. in Million
Particulars Minimum outstanding Maximum outstanding during Daily Average outstanding during Outstanding as on 31 March 2022
during the year the year the year *

Securities sold under repos

i. Government securities 1,460.00 10,604.60 4,931.55 10,385.83
ii. Corporate debt securities - - - -
iii. Any other securities - - - -
Securities purchased under reverse repos
i. Government securities 500.00 12,700.00 6,899.67 6,340.00
ii. Corporate debt securities - - - -
iii. Any other securities - - - -
* daily average is considered for entire year including the days when outstanding were nil
As at 31 March 2021 Rs. in Million
Particulars Minimum outstanding Maximum outstanding during Daily Average outstanding during Outstanding as on 31 March 2021
during the year the year the year *

Securities sold under repos

i. Government securities 1,460.00 1,630.00 1,538.00 1,460.00
ii. Corporate debt securities - - - -
iii. Any other securities - - - -
Securities purchased under reverse repos
i. Government securities 2,700.00 13,150.00 8,289.50 11,900.00
ii. Corporate debt securities - - - -
iii. Any other securities - - - -
* daily average is considered for entire year including the days when outstanding were nil

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4. Asset Quality
4.1. Classification of Advances and Provision held
As at 30 June 2023 Rs. in Million
Particulars Standard Non-performing Total
Total Standard Sub- Doubtful Loss Total
Advances Standard NPA

Gross Standard Advances and NPAs

Opening Balance 1,37,664.37 3,334.31 145.11 37.48 3,516.90 1,41,181.27
Add: Additions during the period 1,200.43
Less: Reductions during the period* 2,341.19
Closing balance 1,42,059.40 2,316.63 - 59.51 2,376.14 1,44,435.54
* Reductions in Gross NPAs due to:
i) Recoveries (excluding recoveries made from upgraded accounts) 73.51
ii) Upgradations 260.36
iii)Technical / Prudential Write-offs 2,007.18
iv) Write-offs other than those under (iii) above 0.14

Provisions (excluding floating provisions)

Opening balance of provision held 896.57 1,755.37 145.11 37.48 1,937.96 2,834.53
Add: Fresh provisions made during the period 1,433.03
Less: Excess provision reversed/ written off loans# 2,150.99
Closing balance of provisions held 860.22 1,160.49 - 59.51 1,220.00 2,080.22
# includes provision utilised towards technical write off Rs. 2,007.20 Million
Net NPAs
Opening Balance 1,578.94 - - 1,578.94
Add: Fresh Additions during the period 720.12
Less: Reductions during the period 1,142.92
Closing balance 1,156.14 - - 1,156.14

Floating Provisions
Opening balance -
Add: Additional provisions during the period -
Less: Amount draw down during the period -
Closing balance of floating provisions -

Technical write- offs and the recoveries made thereon

Opening balance of Technical/ prudential write off accounts 127.13
Add: Technical/ prudential write off accounts during the period 2,007.18
Less: Recoveries made from previously technical/ prudential written off accounts during the 2.90
period
Less: sacrifice made from previously technical/ prudential written off accounts during the 0.61
period
Closing Balance 2,130.80

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As at 30 June 2022 Rs. in Million

Particulars Standard Non-performing Total
Total Standard Sub- Doubtful Loss Total
Advances Standard NPA

Gross Standard Advances and NPAs

Opening Balance 1,11,810.49 6,419.19 3,076.75 - 9,495.94 1,21,306.43
Add: Additions during the period 2,075.05
Less: Reductions during the period* 4,227.40
Closing balance 1,11,916.55 7,196.90 146.69 - 7,343.59 1,19,260.14
* Reductions in Gross NPAs due to:
i) Recoveries (excluding recoveries made from upgraded accounts) 214.82
ii) Upgradations 1,373.07
iii)Technical / Prudential Write-offs 2,639.51
iv) Write-offs other than those under (iii) above -
* includes provision utilised towards technical write off Rs. 744.60 Million. -

Provisions (excluding floating provisions)

Opening balance of provision held 2,177.65 1,859.63 3,076.75 - 4,936.38 7,114.03
Add: Fresh provisions made during the period 1,303.27
Less: Excess provision reversed/ written off loans# 3,290.27
Closing balance of provisions held 2,335.78 2,802.69 146.69 - 2,949.38 5,285.16
# includes provision utilised towards technical write off Rs. 2,639.50 Million
Net NPAs
Opening Balance 4,559.56 - - 4,559.56
Add: Fresh Additions during the period 1,551.66
Less: Reductions during the period 1,717.01
Closing balance 4,394.21 - - 4,394.21

Floating Provisions
Opening balance -
Add: Additional provisions during the period -
Less: Amount draw down during the period -
Closing balance of floating provisions -

Technical write- offs and the recoveries made thereon

Opening balance of Technical/ prudential write off accounts 1,728.03
Add: Technical/ prudential write off accounts during the period 2,639.51
Less: Recoveries made from previously technical/ prudential written off accounts during the 148.26
period
Less: sacrifice made from previously technical/ prudential written off accounts during the -
period
Closing Balance 4,219.28

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As at 31 March 2023 Rs. in Million

Particulars Standard Non-performing Total
Total Standard Sub- Doubtful Loss Total
Advances Standard NPA
Gross Standard Advances and NPAs
Opening Balance 1,11,810.49 6,419.19 3,076.75 - 9,495.94 1,21,306.43
Add: Additions during the year 7,190.49
Less: Reductions during the year * 13,169.53
Closing balance 1,37,664.37 3,334.31 145.11 37.48 3,516.90 1,41,181.27
* Reductions in Gross NPAs due to:
i) Recoveries (excluding recoveries made from upgraded accounts) 294.61
ii) Upgradations 2,026.21
iii)Technical / Prudential Write-offs 4,947.46
iv) Write-offs other than those under (iii) above 18.49
v) Sale of NPA to Asset Reconstruction company (ARC) 5,882.76

Provisions (excluding floating provisions)

Opening balance of provision held 2,177.65 1,859.63 3,076.75 - 4,936.38 7,114.03
Add: Fresh provisions made during the year 7,355.97
Less: Excess provision reversed/ written off loans# 10,354.39
Closing balance of provisions held 896.57 1,755.37 145.11 37.48 1,937.96 2,834.53
# includes provision utilised towards technical write off Rs. 4947.50 Million and Sale to
ARC Rs.4531.60 Million (Refer para A. 4.6 (i) of Note 19)
Net NPAs
Opening Balance 4,559.56 - - 4,559.56
Add: Fresh Additions during the year 2,886.54
Less: Reductions during the year 5,867.16
Closing balance 1,578.94 - - 1,578.94

Floating Provisions
Opening balance -
Add: Additional provisions during the year -
Less: Amount draw down during the year -
Closing balance of floating provisions -

Technical write- offs and the recoveries made thereon

Opening balance of Technical/ prudential write off accounts 1,728.03
Add: Technical/ prudential write off accounts during the year 4,947.46
Less: Recoveries made from previously technical/ prudential written off accounts during the 691.97
year
Less: sacrifice made from previously technical/ prudential written off accounts during the 989.62
year
Less: Sale of Technical/ prudential written off accounts to Asset Reconstruction company 4,866.77
(ARC)
Closing Balance 127.13

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As at 31 March 2022 Rs. in Million

Particulars Standard Non-performing Total
Total Standard Sub- Doubtful Loss Total
Advances Standard NPA

Gross Standard Advances and NPAs

Opening Balance 78,510.08 4,733.04 906.93 - 5,639.97 84,150.05
Add: Additions during the year 6,424.56
Less: Reductions during the year * 2,568.59
Closing balance 1,11,810.49 6,419.19 3,076.75 - 9,495.94 1,21,306.43
* Reductions in Gross NPAs due to:
i) Recoveries (excluding recoveries made from upgraded accounts) 210.14
ii) Upgradations 1,613.90
iii)Technical / Prudential Write-offs 744.55
iv) Write-offs other than those under (iii) above -
* includes provision utilised towards technical write off Rs. 744.60 Million
Provisions (excluding floating provisions)
Opening balance of provision held 1,241.42 1,567.26 906.93 - 2,474.19 3,715.61
Add: Fresh provisions made during the year 3,815.32
Less: Excess provision reversed/ written off loans# 1,353.13
Closing balance of provisions held 2,177.65 1,859.63 3,076.75 - 4,936.38 7,114.03
# includes provision utilised towards technical write off Rs. 744.60 Million.
Net NPAs
Opening Balance 3,165.78 - - 3,165.78
Add: Fresh Additions during the year 4,563.45
Less: Reductions during the year 3,169.67
Closing balance 4,559.56 - - 4,559.56

Floating Provisions
Opening balance -
Add: Additional provisions during the year -
Less: Amount draw down during the year -
Closing balance of floating provisions -

Technical write- offs and the recoveries made thereon

Opening balance of Technical/ prudential write off accounts 1,063.33
Add: Technical/ prudential write off accounts during the year 744.55
Less: Recoveries made from previously technical/ prudential written off accounts during the 79.85
year
Closing Balance 1,728.03

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As at 31 March 2021 Rs. in Million

Particulars Standard Non-performing Total
Total Standard Sub- Doubtful Loss Total
Advances Standard NPA
Gross Standard Advances and NPAs
Opening Balance 65,056.50 787.29 221.32 - 1,008.61 66,065.11
Add: Additions during the year 4,734.65
Less: Reductions during the year * 103.29
Closing balance 78,510.08 4,733.04 906.93 - 5,639.97 84,150.05
* Reductions in Gross NPAs due to:
i) Recoveries (excluding recoveries made from upgraded accounts) 23.84
ii) Upgradations 79.45
iii)Technical / Prudential Write-offs -
iv) Write-offs other than those under (iii) above -

Provisions(excluding floating provisions)

Opening balance of provision held 315.90 365.60 221.31 - 586.91 902.81
Add: Fresh provisions made during the year 1,944.55
Less: Excess provision reversed/ written off loans 57.27
Closing balance of provisions held 1,241.42 1,567.26 906.93 - 2,474.19 3,715.61

Net NPAs
Opening Balance 421.70 - - 421.70
Add: Fresh Additions during the year 3,167.38
Less: Reductions during the year 423.30
Closing balance 3,165.78 - - 3,165.78

Floating Provisions
Opening balance -
Add: Additional provisions during the year -
Less: Amount draw down during the year -
Closing balance of floating provisions -

Technical write- offs and the recoveries made thereon

Opening balance of Technical/ prudential write off accounts 1,091.97
Add: Technical/ prudential write off accounts during the year -
Less: Recoveries made from previously technical/ prudential written off accounts during the 28.64
year
Closing Balance 1,063.33

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NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

Asset Quality Ratios

Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Gross NPA to Gross Advances (%) 1.65% 6.16% 2.49% 7.83% 6.70%
Net NPA to Net advances (%) 0.81% 3.78% 1.13% 3.92% 3.88%
Provision Coverage ratio (%) 74.35% 62.00% 56.67% 59.38% 52.77%
4.2. Sector-wise Advances and Gross NPAs
Rs. in Million
SI. No Sector As at 30 June 2023
Gross Advances Gross NPAs Percentage of Gross NPAs to Gross Advances in that
A Priority Sector
1 Agricultural and Allied Activities 95,443.37 1,299.58 1.36%
2 Advances to Industries Sector eligible as Priority sector lending 7,660.08 220.48 2.88%
3 Services 16,586.21 635.98 3.83%
4 Personal Loans 8,460.71 188.91 2.23%
Sub-Total (A) 1,28,150.37 2,344.95 1.83%
B Non Priority Sector
1 Agricultural and Allied Activities 5,001.43 - -
2 Industry - - -
3 Services 5,974.14 - 0.00%
4 Personal loans 5,309.60 31.19 0.59%
Sub-Total (B) 16,285.17 31.19 0.19%

Total (A+B) 1,44,435.54 2,376.14 1.65%

The Bank has compiled the data for the purpose of this disclosure (from its internal MIS system and has been furnished by the management), which has been relied upon by the auditors.
Rs. in Million
SI. No Sector As at 30 June 2022
Gross Advances Gross NPAs Percentage of Gross NPAs to Gross Advances in that
A Priority Sector
1 Agricultural and Allied Activities 55,713.20 2,968.90 5.33%
2 Advances to Industries Sector eligible as Priority sector lending 7,544.59 850.83 11.28%
3 Services 24,970.24 1,355.75 5.43%
4 Personal Loans 13,316.11 2,041.26 15.33%
Sub-Total (A) 1,01,544.14 7,216.74 7.11%
B Non Priority Sector
1 Agricultural and Allied Activities 7,000.00 - -
2 Industry - - -
3 Services 295.14 - 0.00%
4 Personal loans 10,420.86 126.85 1.22%
Sub-Total (B) 17,716.00 126.85 0.72%

Total (A+B) 1,19,260.14 7,343.59 6.16%

The Bank has compiled the data for the purpose of this disclosure (from its internal MIS system and has been furnished by the management), which has been relied upon by the auditors.

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Rs. in Million
SI. No Sector As at 31 March 2023
Gross Advances Gross NPAs Percentage of Gross NPAs to Gross Advances in that
Sector
A Priority Sector
1 Agricultural and Allied Activities 79,955.15 1,735.43 2.17%
2 Advances to Industries Sector eligible as Priority sector lending 6,827.71 351.23 5.14%
3 Services 18,610.10 927.13 4.98%
4 Personal Loans 7,942.06 377.40 4.75%
Sub-Total (A) 1,13,335.02 3,391.19 2.99%
B Non Priority Sector
1 Agricultural and Allied Activities 16,500.60 - -
2 Industry - - -
3 Services 5,915.01 39.38 0.67%
4 Personal loans 5,430.64 86.33 1.59%
Sub-Total (B) 27,846.25 125.71 0.45%

Total (A+B) 1,41,181.27 3,516.90 2.49%

The Bank has compiled the data for the purpose of this disclosure (from its internal MIS system and has been furnished by the management), which has been relied upon by the auditors.
Rs. in Million
SI. No Sector As at 31 March 2022
Gross Advances Gross NPAs Percentage of Gross NPAs to Gross Advances in that
Sector
A Priority Sector
1 Agricultural and Allied Activities 52,458.84 3,735.52 7.12%
2 Advances to Industries Sector eligible as Priority sector lending 8,498.18 1,375.41 16.18%
3 Services 16,015.00 1,949.71 12.17%
4 Personal Loans 15,075.36 2,297.60 15.24%
Sub-Total (A) 92,047.38 9,358.24 10.17%
B Non Priority Sector
1 Agricultural and Allied Activities 9,500.00 - -
2 Industry - - -
3 Services 8,599.41 - -
4 Personal loans 11,159.64 137.70 1.23%
Sub-Total (B) 29,259.05 137.70 0.47%

Total (A+B) 1,21,306.43 9,495.94 7.83%

The Bank has compiled the data for the purpose of this disclosure (from its internal MIS system and has been furnished by the management), which has been relied upon by the auditors.

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NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

Rs. in Million
SI. No Sector As at 31 March 2021
Gross Advances Gross NPAs Percentage of Gross NPAs to Gross Advances in that
Sector
A Priority Sector
1 Agricultural and Allied Activities 37,485.27 2,546.53 6.79%
2 Advances to Industries Sector eligible as Priority sector lending 4,474.44 1,051.55 23.50%
3 Services 4,657.95 1,219.57 26.18%
4 Personal Loans 6,659.72 637.11 9.57%
Sub-Total (A) 53,277.38 5,454.76 10.24%
B Non Priority Sector
1 Agricultural and Allied Activities - - -
2 Industry 5,000.00 - -
3 Services 10,000.00 - -
4 Personal loans 15,872.67 185.21 1.17%
Sub-Total (B) 30,872.67 185.21 0.60%
Total (A+B) 84,150.05 5,639.97 6.70%
The Bank has compiled the data for the purpose of this disclosure (from its internal MIS system and has been furnished by the management), which has been relied upon by the auditors.

4.3. Overseas Assets, NPAs and Revenue:

The Bank does not have any overseas assets during the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2023, 31 March 2022 and 31 March 2021.
4.4 Resolution of stressed assets- Revised frame work
The Bank is having Nil loan account for resolution of stressed asset (revised framework) as on 30 June 2023, 30 June 2022, 31 March 2023, 31 March 2022 and 31 March 2021 as per the RBI Circular DBR.No.
BP.BC.45/21.04.048/ 2018-19 dated 7 June 2019, as amended.
4.5. Divergence in asset Classification and provisioning
RBI vide circular no. DOR.ACC.REC.No.74/21.04.018/2022-23 dated 11 October 2022, has directed that banks shall make suitable disclosures, wherever (a) the additional provisioning requirement assessed by RBI exceeds 5
percent of the reported profit before provisions and contingencies for the reference period, or (b) the additional Gross NPA identified by RBI exceeds 5 percent of the published incremental Gross NPA for the reference period,
or both. Based on the annual inspection conducted with respect to the Bank’s position as at 31 March 2022 there are no reportable matters under (a) and (b) of the above-mentioned circular during the three months period
ended 30 June 2023.
4.6. Disclosure of transfer of loan exposures
The Bank not done any transfer of stressed loans during the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2022 and 31 March 2021 Hence the disclosure is not applicable

i) Details of Stressed loans transfers are given below:

For the year ended 31 March 2023
Rs. in Million
Sl no. Particulars To Asset Reconstruction Company To Permitted Transferees To other
(ARC) transferees
1 No. of Accounts 4,17,648 - -
2 Aggregate principal outstanding of loans transferred * 10,749.53 - -
3 Weighted average residual tenure of loans transferred (in Years) # 0.83 - -
4 Net Book Value of Loans transferred (at the time of transfer) 1,351.18 - -
5 Aggregate Consideration 2,054.80 - -
6 Additional Consideration realised in respect of accounts transferred in earlier years - - -
* includes advances which had been technicaly written off and fully provided there off
# Not applicable to technically write off pool
The Bank has received Security Receipts (SRs) as part of the consideration for transfer of stress loans to ARC. The recovery ratings of the SRs would be obtained within 6 months as per relevant RBI guidelines. Investments in
SRs are valued at Nil/ fully provided for in the books of account on a prudent basis.
The Bank has recognised the other income to the extent of cash received, with respect to the technical written off portfolio amounting to Rs. 380.90 Million
The Bank has not transferred any stressed assets during the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2022 and 31 March 2021.
ii) The bank has not transferred any Special Mention Account (SMA) and loan not in default, except reported in (i) above during the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2022
and 31 March 2021
iii) The Bank has not acquired any loans not in defualt from other entities through assignment during the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2022 and 31 March 2021

iv) The Bank has not acquired any stressed loan during the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2022 and 31 March 2021

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NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

4.7. Fraud Accounts

Rs. in Million
Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Number of frauds reported 143 10 86 39 10

Amount involved in fraud (Rs. Million) 11.67 8.85 14.40 8.50 0.50
Amount of provision made for such frauds * 8.80 6.99 7.90 6.50 0.29
Amount of unmortised provision debited from 'other reserves' as at the end of the year/period - - - - -
*Provision is made net of recovery
4.8 Disclosure under Resolution framework for Covid-19 related stress
The RBI Circular is effective from Half year ended 30 September 2021 and as per the RBI guidelines, the disclosure is required only on half yearly basis. Hence the Disclosures are not made for the three months period ended
30 June 2023 and 30 June 2022 and year ended 31 March 2021.
For the year ended 31 March 2023
Details of resolution plan implemented under the Resolution Framework for COVID-19-related Stress as per RBI circular dated 6 August 2020 (Resolution Framework 1.0) and 5 May 2021 (Resolution framework 2.0) are
given below.
Rs. in Million
Particulars Exposure to accounts of (A) aggregate debt that of (A) amount written off during of (A) amount paid by the Exposure to accounts classified as
classified as standard slipped into NPA during the the half - year borrowers during the half year standard consequent to
consequent to half year ended 31 March implementation of resolution plan -
implementation of 2023 position as at the end of this half
resolution plan - year ended 31 March 2023
position as at the end
of the previous half
year ended 30
September 2022
(A)

Personal Loans 575.08 94.03 - 241.63 239.42

Corporate Persons - - - - -
Of Which MSMEs - - - - -
Others 1,964.33 235.96 - 1,163.30 565.07
Total 2,539.41 329.99 - 1,404.93 804.49

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NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

For the year ended 31 March 2022

Details of resolution plan implemented under the Resolution Framework for COVID-19-related Stress as per RBI circular dated 6 August 2020 (Resolution Framework 1.0) and 5 May 2021 (Resolution framework 2.0) are
given below.
Rs. in Million
Particulars Exposure to accounts of (A) aggregate debt that of (A) amount written off during of (A) amount paid by the Exposure to accounts classified as
classified as standard slipped into NPA during the the half - year borrowers during the half year standard consequent to
consequent to half year ended 31 March implementation of resolution plan -
implementation of 2022 position as at the end of this half
resolution plan - year ended 31 March 2022
position as at the end
of the previous half
year ended 30
September 2021
(A)

Personal Loans 3,558.32 1,006.44 - 1,470.45 1,081.43

Corporate Persons - - - - -
Of Which MSMEs - - - - -
Others 11,799.04 2,544.69 - 4,816.70 4,437.65
Total 15,357.36 3,551.13 - 6,287.15 5,519.08
5. Exposures
5.1. Exposure to Real Estate Sector: Rs. in Million
Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Direct exposure
i Residential Mortgages – 2,823.56 1,707.69 2,704.04 1,569.47 1,244.50
Lending fully secured by mortgages on residential property that is or will be occupied by the borrower or that is
rented;
of which individual Housing loans eligible for inclusion in priority sector advances 1,847.11 1,497.50 1,797.17 1,402.46 970.54
ii Commercial Real Estate - - - -
Lending secured by mortgages on commercial real estate’s (office buildings, retail space, multi-purpose commercial
premises, multi-family residential buildings, multi-tenanted commercial premises, industrial or warehouse space,
hotels, land acquisition, development and construction, etc.). Exposure also includes non-fund based (NFB) limits

iii Investments in Mortgage Backed Securities (MBS) and other securitized exposures

- Residential - - -
- Commercial Real Estate - - -
Indirect Exposure
Fund based and non-fund based exposures on National Housing Bank (NHB) and Housing Finance Companies 469.50 - 493.25 - -
(HFCs).
Total Exposure to Real Estate Sector 3,293.06 1,707.69 3,197.29 1,569.47 1,244.50

5.2. Exposure to Capital Market Rs. in Million

Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

i Direct investment in equity shares, convertible bonds, convertible debentures and units of equity-oriented mutual 97.74 165.64 112.90 176.87 187.20
funds the corpus of which is not exclusively invested in corporate debt;
ii Advances against shares / bonds / debentures or other securities or on clean basis to individuals for investment in - - - - -
shares (including IPOs / ESOPs), convertible bonds, convertible debentures, and units of equity-oriented mutual
funds;
iii Advances for any other purposes where shares or convertible bonds or convertible debentures or units of equity - - - - -
oriented mutual funds are taken as primary security;
iv Advances for any other purposes to the extent secured by the collateral security of shares or convertible bonds or - - - - -
convertible debentures or units of equity oriented mutual funds i.e. where the primary security other than shares /
convertible bonds / convertible debentures / units of equity oriented mutual funds does not fully cover the advances;

v Secured and unsecured advances to stockbrokers and guarantees issued on behalf of stockbrokers and market - - - - -
makers;
vi Loans sanctioned to corporates against the security of shares / bonds / debentures or other securities or on clean - - - - -
basis for meeting promoter’s contribution to the equity of new companies in anticipation of raising resources;

vii Bridge loans to companies against expected equity flows / issues; - - - - -

viii Underwriting commitments taken up by the banks in respect of primary issue of shares or convertible bonds or - - - - -
convertible debentures or units of equity oriented mutual funds;
ix Financing to stockbrokers for margin trading; - - - - -
x All exposures to Venture Capital Funds (both registered and unregistered) - - - - -
Total Exposure to Capital Market 97.74 165.64 112.90 176.87 187.20

5.3. Risk category wise country exposure

The Bank does not have any country exposure other than "home country" exposures and accordingly, no provision is maintained with regard to country risk exposure.
5.4. Unsecured Advances
During the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2023, 31 March 2022 and 31 March 2021 the Bank has not extended any advances where the collateral is an intangible asset
such as a charge over rights, licenses, authorisations, etc.
5.5. Details of factoring exposure:
The factoring exposure of the Bank is Nil as at 30 June 2023, 30 June 2022, 31 March 2023, 31 March 2022 and 31 March 2021.
5.6. Intra Group Exposures
The Bank does not have any intra group exposures for the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2023, 31 March 2022 and 31 March 2021. Exposure is computed as per RBI
Master Circular on Exposure Norms DBOD. No. Dir.BC.12/13.03.00/ 2015-16 dated July 1, 2015.
5.7. Unhedged foreign currency exposure
The Bank held Rs.2.00 Million and Rs.1.20 Million towards unhedged foreign currency exposure as on 30 June 2023 and 31 March 2023. The bank held no incremental capital on advances to borrowers with unhedged foreign
currency as on 30 June 2023 and 31 March 2023. The bank does not have any unhedged foreign currency as at 30 June 2022, 31 March 2022 and 31 March 2021.

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NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

6. Concentration of deposits, advances, exposures and NPAs

6.1. Concentration of deposits: Rs. in Million

Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Total deposits of twenty largest depositors 16,385.70 22,788.05 14,327.96 20,341.18 8,197.75
Percentage of deposits of twenty largest depositors to total deposits of the bank 10.47% 16.93% 9.77% 15.87% 9.11%

6.2 Concentration of advances: Rs. in Million

Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Total advances to twenty largest borrowers 4,651.38 3,783.32 4,817.43 3,902.23 2,999.83
Percentage of advances to twenty largest borrowers to total advances of the bank 3.24% 3.19% 3.44% 3.24% 3.58%
Note: Advance is computed as per the definition of Credit Exposure in RBI Master Circular on Exposure Norms DBOD. No. Dir.BC.12/13.03.00/2015-16 dated July1, 2015.

6.3. Concentration of exposures: Rs. in Million

Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Total exposure to twenty largest borrowers/customers 5,073.01 3,783.32 4,817.43 3,902.23 2999.83
Percentage of exposures to twenty largest borrowers/customers to total exposure of the bank on borrowers/customers 3.52% 3.19% 3.44% 3.23% 3.58%

Note: Exposure is computed as per the definition of Credit and Investment Exposure in RBI Master Circular on Exposure Norms DBOD. No. Dir.BC.12/13.03.00/ 2015-16 dated July 1, 2015.
The Bank has compiled the data for the purpose of disclosure in Note No. 6.1 to 6.3 from its internal MIS system and has been furnished by the management, which has been relied upon by the auditors.

6.4. Concentration of NPAs: Rs. in Million

Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Total Exposure to top twenty NPA Accounts 38.10 69.48 70.20 69.64 59.37
Total Exposure to top twenty NPA accounts to Gross NPA 1.60% 0.95% 2.00% 0.73% 1.05%
7. Derivatives
The Bank did not have any transactions in derivative instruments. Hence, the disclosure is not applicable with respect to forward rate agreement / interest rate swap, exchange traded interest rate derivatives, risk exposure in
derivatives and credit default swaps for the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2023, 31 March 2022 and 31 March 2021.

8. Disclosures relating to Securitization

The Bank has not undertaken any securitised transaction during the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2023, 31 March 2022 and 31 March 2021. Hence the disclosure is not
applicable to the bank.
9. Off Balance Sheet SPVs sponsored
There are no Off-Balance Sheet SPVs sponsored (which are required to be consolidated as per accounting norms) during the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2023, 31
March 2022, and 31 March 2021.
10. Transfer to Depositor Education and Awareness Fund (DEAF)
During the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2023, 31 March 2022 and 31 March 2021 the Bank was not required to transfer any amount to Depositor Education and
Awareness Fund.
11. Disclosure of Complaints
a. Customer Complaints
Sl.no. Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

(a) No. of complaints pending at the beginning of the Year 220 84 84 218 33
(b) No. of complaints received during the period/ year 2469 1858 7658 12894 7393
(c) No. of complaints disposed during the period/ year 2394 1854 7522 13028 7208
Of which, number of complaints rejected by the bank 2 0 2 1 0
(d) No. of complaints pending at the end of the period/ year 295 88 220 84 218
Customer Compaints above includes:
i. ATM transaction disputes relating to Banks customers on Banks ATM
Sl.no. Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

(a) No. of complaints pending at the beginning of the Year 2 1 1 12 -

(b) No. of complaints received during the period/ year 70 74 362 818 378
(c) No. of complaints disposed during the period/ year 71 73 361 829 366
Of which, number of complaints rejected by the bank - - - - -
(d) No. of complaints pending at the end of the period/ year 1 2 2 1 12
ii. ATM transaction disputes relating to Banks customers on other Banks ATM
Sl.no. Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

(a) No. of complaints pending at the beginning of the Year 38 38 38 101 6

(b) No. of complaints received during the period/ year 805 779 2,692 5,580 4,047
(c) No. of complaints disposed during the period/ year 804 795 2,692 5,643 3,952
Of which, number of complaints rejected by the bank - - - - -
(d) No. of complaints pending at the end of the period/ year 39 22 38 38 101

b. Maintainable complaints received by the bank from Office of Ombudsman

Sl.no. Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

(a) Number of maintainable complaints received by the bank from Office of Ombudsman 9 12 51 32 31
Of (a) , number of complaints resolved in favour of the bank by Office of Ombudsman 9 12 51 32 31
Of (a) , number of complaints resolved through conciliation/mediation/advisories issued by Office of Ombudsman - - - - -

Of (a) , number of complaints resolved after passing of Awards by Office of Ombudsman against - - - - -
(b) Number of Awards unimplemented within the stipulated time (other than those appealed) - - - - -

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C. Top five grounds of complaints received by the bank from customers

Three months period ended 30 June 2023

Grounds of complaints, (i.e. complaints relating Number of Number of complaints % increase/ decrease in the Number of complaints pending at Of 5, number of complaints
to) complaints pending received during the period number of complaints received the end of the period pending beyond 30 days
at the beginning of over the previous period ( 30
the year June 2022)
(1) (2) (3) (4) (5) (6)
ATM Cards/ Debit Cards 42 972 (3.76%) 49 -
Internet banking/ Mobile Banking/ Electronic 178 1,477 76.67% 245 5
banking
Account opening/difficulty in operation of accounts - 8 (11.10)% - -

Loans and advances - 7 133.33% - -

Others - 5 100.00% 1 -
Total 220 2,469 32.88% 295 5

Three months period ended 30 June 2022

Grounds of complaints, (i.e. complaints relating Number of Number of complaints % increase/ decrease in the Number of complaints pending at Of 5, number of complaints
to) complaints pending received during the year number of complaints received the end of the year pending beyond 30 days
at the beginning of over the previous year
the year
(1) (2) (3) (4) (5) (6)
ATM Cards/ Debit Cards 43 1,010 (7.33%) 36 -
Internet banking/ Mobile Banking/ Electronic 40 836 (35.84%) 52 -
banking
Account opening/difficulty in operation of accounts 1 9 125.00% - -

Loans and advances - 3 (40.00%) - -

Total 84 1,858 (22.77%) 88 -

Year ended 31 March 2023

Grounds of complaints, (i.e. complaints relating Number of Number of complaints % increase/ decrease in the Number of complaints pending at Of 5, number of complaints
to) complaints pending received during the year number of complaints received the end of the year pending beyond 30 days
at the beginning of over the previous year
the year

(1) (2) (3) (4) (5) (6)

ATM Cards/ Debit Cards 43 3,475 (51.06%) 42 -
Internet banking/ Mobile Banking/ Electronic 40 4,122 (28.25%) 178 -
banking
Account opening/difficulty in operation of accounts 1 28 21.74% - -

Loans and advances - 14 7.69% - -

Levy of charges without prior notice/excessive - 8 100.00% - -

charges/foreclosure charges
Others - 11 10.00% - -
Total 84 7,658 (40.61%) 220 -

Year ended 31 March 2022

Grounds of complaints, (i.e. complaints relating Number of Number of complaints % increase/ decrease in the Number of complaints pending at Of 5, number of complaints
to) complaints pending received during the year number of complaints received the end of the year pending beyond 30 days
at the beginning of over the previous year
the year
(1) (2) (3) (4) (5) (6)
ATM Cards/ Debit Cards 150 7,101 40.61% 43 -
Internet banking/ Mobile Banking/ Electronic 68 5,745 153.53% 40 1
banking
Account opening/difficulty in operation of accounts - 23 (59.65%) 1 -

Loans and advances - 13 (18.75%) - -

Para Banking - 2 100.00% - -
Others - 10 233.33% - -
Total 218 12,894 74.41% 84 1

Year ended 31 March 2021

Grounds of complaints, (i.e. complaints relating Number of Number of complaints % increase/ decrease in the Number of complaints pending at Of 5, number of complaints
to) complaints pending received during the year number of complaints received the end of the year pending beyond 30 days
at the beginning of over the previous year
the year
(1) (2) (3) (4) (5) (6)
ATM Cards/ Debit Cards 23 5,050 (2.13%) 150 2
Internet banking/ Mobile Banking/ Electronic 10 2,266 177.00% 68 -
banking
Account opening/difficulty in operation of accounts - 57 (8.06%) - -

Loans and advances - 16 (54.28%) - -

Cheques/drafts/bills - 1 100.00% - -
Others - 3 (76.90%) - -
Total 33 7,393 21.41% 218 2

The Bank has compiled the data for the purpose of this disclosure (from its internal MIS system and has been furnished by the management) which has been relied upon by the auditors.

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12. Disclosure of penalties imposed by RBI

During the three months ended 30 June 2023 and 30 June 2022 and year ended 31 March 2023, Reserve Bank of India imposed a penalty of Rs. 0.01 Million, Rs. 0.04 Million and Rs.0.06 Million on RBI Circular DCM
(RMMT) No.S153/11.01.01/2021-22 dated August 10, 2021 and addendum dated January 03, 2022 on cash out at ATM of more than ten hours in a month by the Bank under the provision of (i) Banking Regulation Act,
1949. During the years ended 31 March 2023 and 31 March 2022 no penalty has been imposed by Reserve Bank of India on the Bank under (ii) the provision of Payment and Settlement system act, 2007 and (iii) Government
Securities Act, 2006 (for bouncing of SGL).
No penalty has been imposed during years ended 31 March 2022 and 31 March 2021.
13. Disclosure of Remuneration
A. Qualitative Disclosures:
a) Information relating to the composition and mandate of the Remuneration Committee:
The Nomination, Remuneration and Compensation committee ("NRC") comprises of 5 directors, majority being independent directors of the Bank. Key mandate of the NRC is to oversee the overall design and operation of
the compensation policy of the Bank, formalising criteria for appointment of Directors based on qualification, experience, track record and integrity.
b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy:
Objective of Banks’ Compensation Policy is:
· to establish guidelines for the fair and equitable administration of salary and benefits in accordance with the policies of the Bank;
· to ensure effective governance of compensation and alignment of compensation practices with prudent risk taking;
· to have mechanisms in place for effective supervisory oversight and Board engagement in compensation. The remuneration process is aligned to the Bank’s Compensation Policy objectives.
c) Description of the ways in which current and future risks are taken into account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks:

In order to manage current and future risk and allow a fair amount of time to measure and review both quality and quantity of the delivered outcomes, the Bank has a policy to set apart a portion of the total compensation of
senior and middle management as variable.
In addition, remuneration process provides for ‘malus’ and ‘clawback’ option to take care of any disciplinary issue or future drop in performance of individual/ business/ Bank.
d) Description of the ways in which the Bank seeks to link performance during a performance measurement period with levels of remuneration:
All bonus (performance linked pay) pay-outs are capped at 70% of the fixed pay . The Head of Control functions will be evaluated independent of business results by the Chairman of the respective Board Committee and their
compensation and rewards will be approved by the Board NRC. The Bank does not have any guaranteed bonus as part of any contract with employees or any severance pay other than what is stipulated by Law; However, any
bonus at the time of joining/ sign on bonus will be limited only to the first year and would need to be approved by the Board NRC.
e) A discussion of the banks’ policy on deferral and vesting of variable remuneration and a discussion of the bank's policy and criteria for adjusting deferred remuneration before vesting and after vesting:

Nil
f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the bank utilizes and the rationale for using these different forms:
Variable remuneration in the form of Cash or in the form ESOP is paid periodically.
The form of variable remuneration depends on the job level of individual, risk involved, the time horizon for review of quality and longevity of the assignments performed.
B. Quantitative Disclosures

Sl No. Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

1 Number of meetings held by the Nomination and Remuneration Committee during the financial year and 1 1 5 9 7
remuneration paid to its members. Remuneration Remuneration Remuneration Remuneration Remuneration
paid:Rs. 0.30 paid:Rs. 0.20 paid:Rs. 0.90 paid:Rs. 1.80 paid:Rs. 1.30
Million Million Million Million Million
2 (i) Number of employees having received a variable remuneration awards during the financial year One (MD& CEO Nil Five ( MD& CEO Four (disclosure Four (disclosure
Deferred and one level covering MD& covering MD&
remuneration) below MD & CEO and one CEO and one
CEO.) level below.) level below.)

(ii) Number and total amount of sign in/ joining bonus made during the financial year Nil Nil Nil Nil Nil

(iii) Details of Severance pay, in addition to accrued benefits, if any Nil Nil Nil Nil Nil
3 i) Total amount of outstanding deferred remuneration, split into cash, shares and share linked instruments and other Remuneration Remuneration Remuneration Remuneration Nil
forms Payable in cash to Payable in cash to Payable in cash to Payable in cash to
MD& CEO as on MD& CEO as on MD& CEO as on MD& CEO as on
30-06-2023 30-06-2022 31-03-2023 31-03-2022-
Rs.4.20 Million Rs.4.10 Million Rs.6.90 Million Rs.6.15 Million

ii) Total amount of deferred remuneration paid out in the financial year Nil Nil 1.10 Million Nil Nil
4 Breakdown of amount of remuneration awards for the financial year to show fixed, variable, deferred and non Fixed Salary : Rs. Fixed Salary : Rs. Fixed Salary : Rs. Fixed Salary : Rs. Fixed Salary : Rs.
deferred 8.60 Million 6.10 Million 45.55 Million 25.92 Million 25.20 Million
Variable pay: Nil Variable pay: Nil Variable pay :Rs. Variable pay Variable pay : Rs.
Deferred Variable Deferred Variable 8.74 Million :Rs.8.04 Million 1.40 Million
Pay : Rs. 2.70 Pay : Rs. 2.10 Deferred Variable Deferred Variable Deferred Variable
Million Million Pay : Rs. 1.10 Pay : Rs. 6.15 Pay : Rs. Nil
Million Million

5 (i) Total amount of outstanding deferred remuneration and retained remuneration exposed to ex post explicit and /
or implicit adjustments.
Nil Nil Nil Nil Nil
ii) Total amount of reductions during the financial year due to ex post explicit adjustments
iii) the amount of reductions during the financial year due to ex post implicit adjustments
6 Number of Material Risk Takers (MRTs) identified 1 1 1 1 1
7 (i) Number of cases where malus has been exercised Nil Nil Nil Nil Nil
(ii) number of cases where clawback has been exercised
(iii) Number of cases where both malus and clawback have been exercised
8 The mean pay for the bank as a whole ( excluding sub- staff) and the deviation of the pay of each of its WTDs from The mean of the The mean of the The mean of the The mean of the The mean of the
the mean pay Pay of the Bank as Pay of the Bank as Pay of the Bank as Pay of the Bank Pay of the Bank
a whole is Rs. a whole is Rs. 0.50 a whole is Rs. 0.50 as a whole is Rs. as a whole is Rs.
0.50 Million as on Million as on 30 Million as on 31 0.51 Million as 0.50 Million as on
30 June 2023. June 2022. March 2023. on 31 March 31 March 2021.
The Ratio of the The Ratio of the The Ratio of the 2022. The Ratio of the
Remuneration of Remuneration of Remuneration of The Ratio of the Remuneration of
the Managing the Managing the Managing Remuneration of the Managing
Director to the Director to the Director to the the Managing Director to the
mean pay of the mean pay of the mean pay of the Director to the mean pay of the
Bank as a whole is Bank as a whole is Bank as a whole is mean pay of the Bank as a whole
52:1 as on 30 June 48:1 as on 30 June 52:1 as on 31 Bank as a whole is 51:1 as on 31
2023. For the 2022. For the March 2023. For is 48:1 as on 31 March 2021
purpose this purpose this the purpose this March 2022
calculation CTC calculation CTC of calculation CTC of
of the employees the employees is the employees is
is considered considered considered

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14. Other Disclosures

14.1. Business ratios / information:
Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Interest income as a percentage to working funds *~ 4.31% 3.84% 15.42% 13.75% 14.76%
Non interest income as a percentage of Working Funds*~ 0.45% 0.27% 1.56% 1.47% 1.13%
Cost of deposits &~ 1.69% 1.53% 6.24% 6.45% 7.50%
Net interest margin@@~ 3.02% 2.61% 10.44% 8.86% 8.97%
Operating profit # as a percentage of Working Funds*~ 1.44% 1.25% 4.83% 3.49% 3.74%
Return on assets ## *~ 0.62% 0.59% 1.63% 0.39% 0.95%
Business ^ (deposit plus advance) per employee (Rupees in Million)$ 55.60 53.57 54.35 54.35 43.20
Profit per employee $ (Rupees in Million) 0.30 0.20 0.60 0.13 0.28
~ Ratios of 30 June 2023 and 30 June 2022 are Not Annualised
* For the purpose of computing the ratio, Working Fund represents the average of total assets as reported in Form X to RBI under Section 27
of the Banking Regulation Act, 1949
& Cost of deposits is calculated as a percentage of Interest expense on deposits to Average deposits.
@@ Net interest Margin is calculated as percentage of Net Interest Income to Average Earning Assets. Average earning assets consist of Net Advances, Investments, Balances with other banks in Deposit Accounts and
Balances with Bank and Money at call and short notice. Average represents monthly average.
# For the purpose of this ratio, Operating profit is net profit for the period/ year before provisions and contingencies
## Return on Assets is computed as a percentage of Profit after tax to the working fund
$ For the purpose of computing the ratio, number of employees (excluding part-time employees) as on respective closing year end date is considered.
^ Business is sum of net advances and deposits as reported to the RBI under section 27 of the Banking Regulation Act, 1949. Interbank deposits are excluded for the purposes of computation of this ratio.

14.2. Bancassurance Business

Rs. in Million
Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Fees/remuneration received from Bancassurance business:

- For selling life insurance policies 74.38 31.10 180.53 133.83 75.66
- For selling non-life insurance policies 1.89 2.20 12.27 12.90 11.78
- For selling pension products 1.03 0.83 2.83 2.01 0.94
- For Mutual Fund business * * * * -
Total 77.30 34.13 195.63 148.74 88.38
* Amount is below Rs. 0.05 Million
14.3. Marketing and distribution
The Bank does not receive any fees/remuneration in respect of Marketing and Distribution function (excluding bancassurance business) during the three months period ended 30 June 2023 and 30 June 2022 and years ended 31
March 2023, 31 March 2022 and 31 March 2021.
14.4. Priority sector lending certificates
The amount of PSLCs (Category wise) sold/ purchased
Rs. in Million
Sl No. Type of PSLCs 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021
Purchase Sale Purchase Sale Purchase Sale Purchase Sale Purchase Sale
1 Agriculture - - - - - - - - - -
2 Micro enterprises - - - - - - - 8,500.00 - 10,000.00
3 General - - - - - - - - - 10,000.00
4 Small and Marginal Farmer - 5,000.00 - 7,000.00 - 16,500.00 - 9,500.00 - -
14.5 . Provisions and Contingencies
Breakup of “Provisions and Contingencies” (including write-offs; net of write-backs) shown under the head Expenditure in Profit and Loss Account:
Rs. in Million
Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Provision towards NPA / Write offs 1,281.78 654.28 6,108.13 3,208.42 1,887.40
Provision towards/(write back off of provision) Standard Assets # (36.35) 158.13 (1,281.08) 936.22 925.52
Provision made towards income tax
-Current Tax expense * 452.50 415.00 771.17 485.00 602.48
-Deferred Tax (14.68) (57.99) 265.94 (293.82) (242.70)
Other Provision and Contingencies 23.80 23.83 49.63 35.37 (56.82)
Total 1,707.05 1,193.25 5,913.79 4,371.19 3,115.88
* Net off reversal of provision for earlier years - Rs. 20.00 Million during the year ended 31 March 2021
# (Refer para 16 of Note 19)
14.6. Implementation of IFRS converged Indian Accounting Standards (INDAS)
As per RBI circular, RBI/2015-16/315 DBR.BP.BC No. 76/21.07.001/ 2015-16 dated 11 February 2016 implementation of Indian Accounting Standards (INDAS), the Banks are advised to follow the Indian accounting
standards as notified under the Companies (Indian Accounting Standards) Rules, 2015, subject to any guidelines or directions issued by the Reserve Bank in this regard. The Banks in India currently prepare their financial
statements as per the guidelines issued by the RBI, the Accounting standards notified under section 133 of the Companies Act, 2013 and generally accepted accounting principles in India (Indian GAAP). In January 2016, the
ministry of corporate affairs issued the road map for the implementation of new INDAS, which were based on convergence with the international financial reporting standards (IFRS), for Scheduled Commercial banks ,
Insurance Companies and Non Banking financial companies. In March 2019 RBI deferred the implementation of INDAS for Banks till further notice as the recommended legislative amendments were under consideration of
Government of India. The Bank had undertaken preliminary diagnostic analysis of the GAAP differences between Indian GAAP vis-a-vis INDAS and shall proceed for ensuring the compliance as per applicable requirement and
directions in this regard.

14.7. Payment of Deposit Insurance and Credit Guarantee Corporation ("DICGC") Insurance Premium (Refer para A. 4.6 (i) of Note 19)
Rs. in Million
Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

i) Payment of DICGC Insurance Premium (Including taxes) 95.58 77.13 161.53 125.65 98.95
ii) Arrears in payment of DICGC Premium Nil Nil Nil Nil Nil

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14.8. Unamortised Pension and Gratuity Liabilities

There are no unamortised pension and gratuity liabilities as at 30 June 2023, 30 June 2022, 31 March 2023, 31 March 2022 and 31 March 2021.
15. Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the Bank
During the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2023, 31 March 2022 and 31 March 2021 the Bank’s credit exposure to single borrower and group borrowers was within the
prudential exposure limits prescribed by RBI.
16. COVID -19 Provisioning
a) Three months period ended 30 June 2023
The Bank was carrying an additional contingency provision of Rs.132.40 Million as on 31 March 2023 and further made a provision of Rs.30.90 Million during the quarter end and consequently provision as at 30 June 2023
stands at Rs.163.30 Million.
b) Three months period ended 30 June 2022
India is emerging from the COVID-19 virus, a global pandemic that affected the world economy over the last two years. The extent to which any new wave of COVID-19 will impact the bank's results will depend on ongoing
as well as future developments, including, among other things, any new information concerning the severity of the COVID-19 pandemic, and any action to contain its spread or mitigate its impact whether government-
mandated or elected by us. The Bank continues to monitor the developments /impact arising from COVID-19 pandemic, including any new information concerning the severity of the COVID-19 pandemic, and any action to
contain its spread or mitigate its impact.Currently, while the number of covid cases have been reduced significantly and Government of India has withdrawn most of the COVID- 19 restrictions, the Bank continues to carry an
additional contingency provision of Rs. 1094.12 Million as at 30 June 2022.
c) Year ended 31 March 2023
During the year ended 31 March 2023 the impact of disruptions resulting from Covid 19 has eased substantially, however the Bank continues to monitor the developments/ ongoing impact resulting from Covid-19 Pandemic
and any action to contain its spread or mitigate its impact. The Bank was carrying an additional contingency provision of Rs. 660.70 Million as on 31 March 2022 and further made a provision of Rs. 134.20 Million during the
year, which has been utilised to the extent of Rs. 662.50 Million in the current year and consequently provision as at 31 March 2023 is Rs.132.40 Million.
d) Year ended 31 March 2022
The outbreak of COVID-19 pandemic across the globe and in India has contributed to a significant volatility in the financial markets and slowdown in the economic activities. Consequent to the outbreak of the COVID-19
pandemic, the Indian government announced a lockdown in March 2020. Subsequently, the national lockdown was lifted by the government, but regional restrictions continued to be implemented in areas, as India witnessed
two more waves of COVID -19 pandemic during the year ended 31 March 2022. Currently, while the number of covid cases have been reduced significantly and Government of India has withdrawn most of the COVID- 19
restrictions, the Bank continues to carry an additional contingency provision of Rs. 660.70 Million as at 31 March 2022 (March 2021 : Rs. 404.00 Million). The extent to which the COVID-19 pandemic including subsequent
waves, if any, may impact the Bank operations and asset quality will depend on the future developments, which are highly uncertain.
e) Year ended 31 March 2021
COVID-19 virus, a global pandemic has affected the world economy including India. The extent to which the COVID-19 pandemic including the current second wave witnessed in the country, will continue to impact the
Bank's operations and asset quality will depend on the future developments, which are uncertain.
The RBI on 27 March 2020, 17 April 2020 and 23 May 2020, announced 'COVID-19 Regulatory Package' on asset classification and provisioning. In terms of these RBI guidelines, the lending institutions have been permitted
to grant an effective moratorium of six months on payment of all instalments/interest as applicable, falling due between 1 March 2020 and 31 August 2020 ('moratorium period'). As such, in respect of all accounts classified as
standard as on 29 February 2020, even if overdue, the moratorium period, wherever granted, shall be excluded by the lending institutions from the number of days past-due for the purpose of asset classification under RBI's
Income Recognition and Asset Classification norms.
Considering the prevailing uncertainty over the business due to COVID 19 pandemic (including Second Wave), the Bank holds provisions of Rs 404.00 Million as at 31 March 2021 (31 March 2020: Rs. 44.08 Million)
against the potential impact of COVID‐19 as additional contigency provision on standard assets (other than provisions held for restructuring under COVID 19 norms) based on the information available at this point in time.
The provisions held by the Bank are in excess of the RBI prescribed norms.
The Honourable Supreme Court (SC) in PIL by Gajendra Sharma Vs Union of India & Anr vide its Interim order dated 3 September 2020 has directed Banks that the accounts which were not declared NPA till 31 August
2020 shall not be declared NPA till further orders, pending disposal of the case by Supreme Court. Pursuant to the order, the Bank had not classified any borrowal account which has not been declared as NPA as at 31 August
2020 as per the RBl Prudential norms on Income Recognition, Asset classification, provisioning and other related matters as Non-Performing Asset (NPA) after 31 August 2020. The interim order granted to not declare
accounts as NPA stood vacated on 23 March 2021 vlde the Judgement of the Hon'ble SC in the matter of Small Scale Industrial Manufacturers Association Vs. Union of India and Others and other connected matter. In
accordance with the instructions in paragraph 5 of the RBI circular dated 7 April 2021 issued In this connection, the Bank has continued with the asset classification of borrower accounts as per the extant RBI instructions/
IRAC norms.
Disclosure as per RBI Circular on DOR.No.BP.BC.63/21.04.048/2019-20 dated 17 April 2020
Rs. in Million
Particulars 31 March 2021

Respective amounts in SMA/overdue categories, where the moratorium/deferment was extended 3,719.60
Respective amount where asset classification benefits is extended 30,149.80
Provision made in terms of Para 5 of the Circular 88.20
Provisions adjusted during the respective accounting periods against slippages and the residual provisions -
Residual provisions as of 31 March 2021, in terms of Paragraph 6 of the Circular 88.20

17. Details of Non Performing Financial Assets Purchased

The Bank did not purchase any Non Performing Financial Assets during the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2023, 31 March 2022 and 31 March 2021.
18. Details of Special Mention Account (SMA) or Stressed Financial Assets Purchased
The Bank did not purchase any Special Mention Account (SMA) or Stressed Financial Assets during the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2023, 31 March 2022 and 31
March 2021.
19. Micro, Small and Medium Enterprises (MSME) sector – Restructuring of Advances
The Bank has restructured accounts in accordance with RBI Circular on 'Micro, Small and Medium Enterprises (MSME) sector — Restructuring of Advances' - DBR.No.BP.BC.100/21.04.048/2017-18 dated February 07,
2018, DBR.No.BP.BC.108/21.04.048/2017-18 dated June 06, 2018, DBR.No.BP.BC.18/21.04.048/2018-19 January 01, 2019, DOR.No.BP.BC.34/21.04.048/2019-20 dated February 11, 2020 and DOR.No.
BP.BC/4/21.04.048/2020-21 dated August 6, 2020.
Rs. in Million
As at As at As at As at As at
Particulars 30 June 30 June 2022 31 March 31 March 31 March 2021
2023 2023 2022
Number of Accounts Restructured 59 111 60 111 117
Amount 6.10 17.55 6.54 18.12 21.40

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ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION
B.OTHER DISCLOSURES:
1. Earnings per Equity Share: Rs. in Million
Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Net Profit attributable to equity Share holders(A) 1,299.64 1,059.66 3,023.33 547.32 1,053.96
Weighted average number of equity shares used in computation of basic earnings per share (B) (In
Million) 449.47 449.47 449.47 449.47 427.80
Add: Effect of dilution - Stock options granted to employees 0.77 0.84 0.78 0.64 -
Weighted average number of equity shares used in computation of diluted earnings per share (C)(In
Million) 450.24 450.31 450.25 450.11 427.80
Basic (Rs.)[A/B]# 2.89 2.36 6.73 1.22 2.46
Diluted (Rs.)[A/C]# 2.89 2.35 6.71 1.22 2.46
Nominal value per share (Rs.) 10.00 10.00 10.00 10.00 10.00
# Three months period ended not annualised
2. Segment Reporting:
Part A- Business Segments
The business of the Bank has been segregated into four Segments as per RBI guidelines : Treasury, Wholesale Banking, Retail Banking and Other Banking Operations:

Rs. in Million
30 June 2023
Particulars Treasury Wholesale Retail Banking Other Banking Operations Total
Banking
Segment Revenue 896.81 200.84 8,655.81 164.29 9,917.75

Segment Results 183.81 71.70 1,325.98 155.97 1,737.46

Income Tax Expenses 437.82
Net Profit 1,299.64
Segment Assets 56,403.91 6,232.07 1,43,052.01 - 2,05,687.99
Unallocated Assets 2,271.42
Total Assets 2,07,959.41

Segment Liabilities 40,392.29 24.85 1,45,020.01 - 1,85,437.15

Unallocated Liabilities 4,131.33

Share Capital and Reserves and Surplus 18,390.93
Total Liabilities 2,07,959.41

Rs. in Million
30 June 2022
Particulars Treasury Wholesale Retail Banking Other Banking Operations Total
Banking

Segment Revenue 466.65 118.12 6,690.05 108.42 7,383.24

Segment Results (173.58) 57.72 1,428.12 104.42 1,416.68

Income Tax Expenses 357.02
Net Profit 1,059.66
Segment Assets 58,303.54 3,830.81 1,16,550.24 - 1,78,684.59
Unallocated Assets 2,356.42
Total Assets 1,81,041.01

Segment Liabilities 39,485.06 15.16 1,23,533.49 - 1,63,033.71

Unallocated Liabilities 2,879.69

Share Capital and Reserves and Surplus 15,127.61
Total Liabilities 1,81,041.01

Rs. in Million
31 March 2023
Particulars Treasury Wholesale Retail Banking Other Banking Operations Total
Banking

Segment Revenue 2,471.94 576.71 27,870.56 496.51 31,415.72

Segment Results (276.48) 283.10 3,591.59 462.24 4,060.45

Income Tax Expenses 1,037.12
Net Profit 3,023.33
Segment Assets 55,783.55 6,608.74 1,37,463.25 - 1,99,855.54
Unallocated Assets 2,381.03
Total Assets 2,02,236.57

Segment Liabilities 38,108.67 26.43 1,43,565.78 - 1,81,700.88

Unallocated Liabilities 3,444.40

Share Capital and Reserves and Surplus 17,091.29

Total Liabilities 2,02,236.57
Rs. in Million
31 March 2022
Particulars Treasury Wholesale Retail Banking Other Banking Operations Total
Banking
Segment Revenue 2,342.22 344.11 18,427.24 361.51 21,475.08
Segment Results (61.32) 150.81 302.81 346.20 738.50
Income Tax Expenses 191.18
Net Profit 547.32
Segment Assets 55,039.09 4,097.58 1,15,418.39 - 1,74,555.06
Unallocated Assets 2,520.58
Total Assets - 1,77,075.64
Segment Liabilities 33,208.23 16.23 1,27,076.64 - 1,60,301.10
Unallocated Liabilities 2,706.58

Share Capital and Reserves and Surplus 14,067.96

Total Liabilities 1,77,075.64

362
ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION
Rs. in Million
31 March 2021
Particulars Treasury Wholesale Retail Banking Other Banking Operations Total
Banking
Segment Revenue 1,925.31 167.58 15,372.14 219.18 17,684.21
Segment Results 13.86 59.65 1,150.42 189.81 1,413.74
Income Tax Expenses 359.78
Net Profit 1,053.96
Segment Assets 36,640.62 2,588.40 81,824.39 - 1,21,053.41
Unallocated Assets 2,333.11
Total Assets - - 1,23,386.52
Segment Liabilities 24,889.14 10.34 83,521.57 - 1,08,421.05
Unallocated Liabilities - 1,444.83
Share Capital and Reserves and Surplus 13,520.64
Total Liabilities - - 1,23,386.52

Segmental information is provided as per the MIS/reports available for internal reporting purposes, which includes certain estimates and assumptions.
The methodology adopted in compiling and reporting the above information has been relied upon by the auditors.
The RBI vide its circular dated April 7, 2022 on establishment of Digital Banking Units (DBUs), has prescribed reporting of Digital Banking Segment as a sub-segment of Retail Banking
Segment. Indian Banks' Association (IBA) has formed DBU Working Group which include representatives of banks and RBI. The reporting of Digital Banking as a separate sub-segment of
Retail Banking Segment will be implemented by the Bank based on the decision of the DBU Working Group. The Bank has not formed any DBU as at 30 June 2023, 30 June 2022, 31 March
2023, 31 March 2022 and 31 March 2021 and is in the process of setting up DBUs in the future and hence the same has not been disclosed as a segment.

Part B - Geographical Segments

The business of the Bank is in India only. Accordingly, geographical segment is not applicable.
3. Lease Disclosures:
The Bank has taken premises under operating lease for period ranging from 11 months to 120 months. The lease expenses recognised in the profit and loss account during the three months period
ended 30 June 2023 Rs. 149.10 Million and 30 June 2023 Rs. 133.10 Million and years ended 31 March 2023 - Rs.601.26 Million, 31 March 2022 - Rs.499.14 Million and 31 March 2021 -
Rs. 350.64 Million.
The future minimum lease payments under non cancellable operating leases is given below
Rs. in Million
Particulars
30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

not later than one year 596.40 496.69 576.72 475.80 366.10
later than one year but not later than five years 2,888.59 2,242.22 2,861.68 2,156.20 1,731.30
later than five years 787.36 795.61 859.34 815.60 772.50
The terms of renewal and escalation clauses are those normally prevalent in similar agreements. There are no undue restrictions or onerous clauses in the agreements.

4. Deferred Taxes: Rs. in Million

Particulars As at 30 June As at 30 June As at 31 March As at 31 March As at 31 March
2023 2022 2023 2022 2021

Deferred Tax Asset

Provision for Employee Benefits 27.26 20.04 21.43 18.68 21.60
Provision for Standard assets 216.50 587.87 225.65 548.07 285.90
Fixed Assets : on differences between book balances and tax balance of fixed asset 58.07 38.27 47.66 29.61 23.00
Other Provisions 97.03 61.93 89.44 53.76 25.80
Deferred Tax Asset 398.86 708.11 384.18 650.12 356.30
5. Credit card reward points:
The Bank does not have credit card products. Hence reward points are not applicable.
6. Fixed Assets as per Note 12 include intangible assets relating to purchased software and system development expenditure which are as follows:

Rs. in Million
As at 30 June As at 30 June As at 31 March As at 31 March As at 31 March
Particulars
2023 2022 2023 2022 2021
Gross Block
st
At cost on 31 March of the preceding year 424.23 295.44 295.44 208.18 151.14
Additions during the period/ year 6.48 27.34 128.79 87.26 57.04
Deductions during the period/ year - - - - -
Total 430.71 322.78 424.23 295.44 208.18
Depreciation / Amortization
As at 31st March of the preceding year 215.86 159.72 159.72 126.12 90.51
Charge for the period/ year 26.39 15.59 56.14 33.60 35.61
Deductions during the period/ year - - -
Depreciation to date 242.25 175.31 215.86 159.72 126.12
Net Block 188.46 147.47 208.37 135.72 82.06

7. Related Party Disclosures:

Related Party # Nature of Relationship
ESAF Financial Holdings Private Limited ("erstwhile ESAF Microfinance and Significant Investor *
Investments Private Ltd.")("EFHL")
Cedar Retail Private Limited ("erstwhile ESAF Retail Private Ltd.") ("CEDAR Entities in which Key Managerial Person (KMP)is a member (shareholder)
Retail")
Lahanti Homes and Infrastructure (P) Ltd. [Erstwhile ESAF Homes and Entities in which KMP is a member (shareholder)
Infrastructure Private Ltd] ("Lahanti Homes")
ESAF Swasraya Producers Company Ltd. ("ESAF Producer Company") Entities in which KMP is a member (shareholder)
K. Paul Thomas Key Managerial Person (MD and CEO)
Mereena Paul Relative of KMP
Emy Acha Paul Relative of KMP
Alok Paul Thomas Relative of KMP
Abhishek Joe Paul Relative of KMP
Ashish Krish Paul Relative of KMP
Beena George Relative of KMP
ESAF Swasraya Multi State Agro Co operative Society Ltd. Enterprises over which KMP has significant influence through relative (Upto 13 March 2021)

Lahanti Last Mile Service Limited ("LLMS") Entities over which KMP has significant influence through relative (Upto 15 March 2021)

ESAF Foundation [erstwhile Evangelical Social Action Forum] Enterprises over which KMP has significant influence
Prachodhan Development services ("Prachodhan") Enterprises over which KMP has significant influence through relative
#Related parties are identified and disclosed as per Accounting Standard 18 - Related Party Disclosures specified under Section 133 of the Companies Act, 2013 read with the Companies
(Accounts) Rules, 2014.
*EFHL holds 62.46% of the equity share capital of the Bank during the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2023, 31 March 2022 and 31

March 2021. However, since the voting rights of any investor in Banks are restricted to 26% pursuant to the provisions of RBI guidelines, EFHL has been considered as Significant Investor.

363
ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION
During the financial year 2020-21 effective from 13 March 2021 Ms Mereena Paul and Mr Alok Thomas Paul (Relatives of MD&CEO) have resigned as Directors of ESAF Swasraya Multi
State Agro Cooperative Society Ltd (ESCO) Further effective from 24 January 2021 Ms Emy Acha Paul and Mr Sunny Thomas (Relatives of MD&CEO) have relinquished the Directorships as
well shareholding in Lahanti Lastmile Services Private Limited (LLMS) and Mr Samu John (Relative of MD&CEO) has resigned as director of LLMS on 15 March 2021. Resulting from the
above both ESCO and LLMS ceases to be related parties effective from 13 March 2021 and 15 March 2021 respectively. However, the normal business transactions with the said related parties
is disclosed for the full financial year 2020-21. Since the relationship does not exist as on the Restated Statement of Assets and Liabilities, closing balances of the said related parties are not
disclosed for the year ended 31 March 2021. During the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2023 and 31 March 2022 no disclosure has been
made for the said related parties.

Transactions during the period/ year with the Related Party

Rs. in Million
Nature of Transaction Related Party 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Liabilities

Term Deposit placed ESCO NA NA NA NA 90.00

ESAF Foundation - 1.50 31.50 6.10 -
LLMS NA NA NA NA 22.00
K. Paul Thomas 0.12 - - - 4.00
Emy Acha Paul 0.30 - 0.50 0.50 -
Alok Paul Thomas 0.10 - - - -
Beena George 0.03 - 1.05 0.20 0.10
Cedar Retail - - - 5.00 80.00
EFHL 5.00 - - 724.20 -

Term Deposit Matured EFHL - - 1,089.20 -

Cedar Retail - 5.00 5.00 - 117.50
K. Paul Thomas - - - 2.90 -
Beena George - - 0.10 0.10 0.20
ESAF Foundation - 3.00 13.00 3.60 -
Emy Acha Paul - - 0.50 0.70 -
LLMS NA NA NA NA 5.00

Transactions in Demand Deposit (net) ESCO NA NA NA NA 1.00

Cedar Retail 1.16 (21.27) 9.36 24.30 (10.10)
ESAF Foundation (0.20) * * * (0.90)
EFHL (9.33) (3.81) 9.88 0.40 (12.60)
LLMS NA NA NA NA 22.60
Lahanti Homes - - - (1.90) 1.90
Prachodan 0.57 (0.06) 0.10 0.10 0.40
ESAF Producer Company - 0.03 - - -

Transactions in Savings Deposit(net) K. Paul Thomas 1.76 1.91 1.39 2.80 (3.70)
Mereena Paul 1.00 0.40 0.81 3.50 (1.70)
ESCO NA NA NA NA (130.30)
Emy Acha Paul (0.80) (0.07) 0.88 0.10 0.10
Alok Paul Thomas (0.10) * 0.08 * *
ESAF Foundation (6.19) 3.60 13.79 29.50 8.50
Prachodhan 4.31 (4.19) (1.64) (4.80) 9.80
Abhishek Joe Paul - * * * *
Ashish Krish Paul - * * * *
Beena George 1.08 0.27 * (0.30) 0.20
ESAF Producer Company - - * (0.10) 0.20

Interest accrued and due on Deposits ESCO NA NA NA NA 27.50

Cedar Retail - 0.02 * 0.10 0.50
EFHL 0.77 0.56 2.26 49.40 52.10
ESAF Foundation 1.94 1.33 6.26 4.90 3.20
LLMS NA NA NA NA 2.40
K. Paul Thomas 0.18 0.17 0.67 0.80 0.70
Mereena Paul 0.10 0.06 0.27 0.10 0.10
Emy Acha Paul * 0.01 0.03 0.10 0.10
Alok Paul Thomas * * * * *
Abhishek Joe Paul - - * * *
Ashish Krish Paul - - * * *
Beena George * 0.02 0.09 * *
Prachodan 0.07 0.04 0.32 0.80 0.60

Interest Accrued & Payable on PDI ESCO NA NA NA NA 62.40

Interest Accrued & Payable on Sub Debt ESCO NA NA NA NA 95.40

Interest Accrued & Payable on Sub Debt EFHL 5.61 5.71 22.50 0.10 -

Issue of Equity Shares Mereena Paul - - - - 0.30

Emy Acha Paul - - - - 0.10
Alok Paul Thomas - - - - 0.10
Beena George - - - - 0.40
Share premium Mereena Paul - - - - 2.20
Emy Acha Paul - - - - 0.90
Alok Paul Thomas - - - - 0.90
Beena George - - - - 2.60
Issue of Sub debt EFHL - - - 200.00 -

Contingent Liability
Bank Guarantee (Given/ Closed) - - (1.50) 4.50 -

364
ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

Assets
Advances EFHL - - - 215.80 11.00
Beena George - - - - 1.40

Advances repaid Cedar Retail - - - - 10.30

EFHL - - - 324.00 -
Beena George - 0.30 - - 6.20

Rent Deposit repaid Paul Thomas - - - - 0.70

Expenses
Rent paid Lahanti Homes 6.03 6.03 24.12 21.00 21.00
ESAF Foundation 0.06 0.06 0.20 0.20 0.20

Interest paid on deposits ESCO NA NA NA NA 27.50

Cedar Retail - 0.02 * 0.10 0.50
EFHL 0.77 0.56 2.26 49.40 52.10
ESAF Foundation 1.94 1.33 6.26 4.90 3.20
LLMS NA NA NA NA 2.40
K. Paul Thomas 0.18 0.17 0.67 0.80 0.70
Mereena Paul 0.10 0.06 0.10 0.10 0.10
Emy Acha Paul * 0.01 0.10 0.10 0.10
Alok Paul Thomas * * * * *
Abhishek Joe Paul - - * * *
Ashish Krish Paul - - * * *
Beena George * 0.02 0.09 * *
Prachodan 0.07 0.04 0.32 0.80 0.60

Interest paid on PDI ESCO NA NA NA NA 62.40

Interest paid on Sub Debt ESCO NA NA NA NA 95.40

EFHL 5.61 5.71 22.50 0.10 -

BC Servicer Fee ESCO NA NA NA NA 1,950.30

LLMS NA NA NA NA 184.70

Corporate Facility Management service ESCO NA NA NA NA 124.60

charges
Remuneration and Sitting Fees K. Paul Thomas 6.58 2.33 31.30 24.50 14.10

Reimbursement of expenses K. Paul Thomas 0.04 0.22 2.30 - 1.20

Contribution towards Corporate - -

ESAF Foundation 42.50 87.60 32.60
Responsibility expense
Prachodan - - 30.10 - 39.00

Royalty Expense ESAF Foundation 32.43 25.00 84.95 14.36 26.85

Income
Interest received on Advances Cedar Retail - - - - *
Beena George - * - - 0.60
EFHL - - - 17.80 14.40
Figures in brackets indicate net outflow
* Amounts are below Rs. 0.05 Million
The remuneration to KMP does not include the provisions made for gratuity and leave benefits, as they are determined on an actuarial basis for the Bank as a whole.
Balance outstanding as at : Rs. in Million

KMP and Enterprises over which KMP/Relative of

Items/Related Party Significant Investor
KMP have control / significant influence

30 June 2023 30 June 2022 31 March 2023 30 June 2023 30 June 2022 31 March 2023

Liabilities
Term Deposits 40.07 35.00 35.00 41.60 18.85 45.80
Demand Deposit (Including Savings Deposits) 5.40 1.03 14.72 139.37 91.87 173.30
Equity Shares (Including share premium) 2,839.00 2,839.00 2,839.00 324.40 324.40 324.40
Borrowings 200.00 200.00 200.00 - - -
Other Liabilities 5.41 5.70 - 116.53 - 77.20

Contingent Liability
Bank Guarantee - - - 12.38 12.38 12.40
Assets
Advances - - - - 0.15 -
Others - - - - - -

KMP and Enterprises over which

Items/Related Party Significant Investor KMP/Relative of KMP have
control / significant influence
31 March 2022 31 March 2021 31 March 2022 31 March 2021

Liabilities
Term Deposits 35.00 352.60 25.50 20.53
Demand Deposit (Including Savings Deposits) 4.80 4.50 111.50 59.14
Equity Shares (Including share premium) 2,839.00 2,839.00 324.40 324.40
Borrowings 200.00 - - -
Other Liabilities 0.10 - - 27.63

Contingent Liability
Bank Guarantee - - 13.90 10.90
Assets
Advances - 90.40 - -
Others - 2.30 - -

365
ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

Maximum Balance outstanding during the period/ year Rs. in Million

KMP and Enterprises over which KMP/Relative of

Items/Related Party Significant Investor
KMP have control / significant influence

30 June 2023 30 June 2022 31 March 2023 30 June 2023 30 June 2022 31 March 2023

Liabilities
Term Deposits 40.07 35.00 35.90 42.31 26.10 45.80
Demand Deposit (Including Savings Deposits) 14.72 4.87 14.70 164.10 123.46 173.30
Equity Shares (Including share premium) 2,839.00 2,839.00 2,839.00 324.40 324.40 324.40
Borrowings 200.00 200.00 200.00 116.53 - -

Assets
Advances - - - - - -

KMP and Enterprises over which

Items/Related Party Significant Investor KMP/Relative of KMP have
control / significant influence

31 March 2022 31 March 2021 31 March 2022 31 March 2021

Liabilities
Term Deposits 352.60 352.60 26.70 20.60
Demand Deposit (Including Savings Deposits) 20.80 44.50 173.80 83.20
Equity Shares (Including share premium) 2,839.00 2,839.00 324.40 324.40
Borrowings 200.00 - - -

Assets
Advances 200.00 90.40 - 24.20

8.Employee Stock Option Scheme ("ESOS")

i) ESAF Small Finance Bank Employee Stock Option Plan 2019
The Bank, pursuant to the resolutions passed by the Board on December 23, 2019 and Shareholders on January 3, 2020, adopted the ESAF ESOP Plan 2019.The ESAF ESOP Plan 2019 has
been framed in compliance with the SEBI Regulations. The ESOP grant is of two types (i) loyalty grant and (ii) performance grant. As on 30 June 2023, 30 June 2022, 31 March 2023 and 31
March 2022 no options under performance grant have been granted by the Bank under the ESAF ESOP Plan 2019. The Nomination and Remuneration Committee of the Bank on June 28, 2021
granted loyalty grant to its eligible employees. The details of the options granted under the ESAF ESOP Plan 2019 as loyalty grant are as follows:

Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Outstanding at the beginning of the year 10,44,483 11,25,590 11,25,590 - NA

Surrendered during the period/ year - - - - NA
Granted during the period/ year - - - 11,25,590 NA
Exercised during the period/ year - - - - NA
Forfeited/ lapsed during the period/ year 11,632 - 81,107 - NA
Outstanding at the end of the period/ year 10,32,851 11,25,590 10,44,483 11,25,590 NA
Options exercisable 10,32,851 11,25,590 10,44,483 - NA

As per SEBI guidelines the accounting for ESOS can be done either under the ‘Intrinsic value basis’ or ‘Fair value basis’. As per the approval of shareholders, the Bank has adopted ‘Intrinsic
value method’ for accounting of ESOS.
In accordance with the SEBI Guidelines and the guidance note on “Accounting for Employee Share based payments” issued by the ICAI, the excess, if any, of the market price of the share
preceding the date of grant of the option under ESOS over the exercise price of the option is amortised on a straight line basis over the vesting period.

ii) Effect of Fair value method of accounting ESOP:

If “Fair Value Method” had been adopted based on “Black-Scholes pricing model” for pricing and accounting of options, net profit would be lower by by Rs. Nil, Rs. Nil , Rs.47.93 Million Rs.
12.36 Million , Rs. Nil and Rs, Nil for three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2022, 31 March 2021 and 31 March 2020 respectively . The
modified basic and diluted earnings per share for the year, had the Bank followed Fair Value Method of accounting for ESOS compensation cost would be as follows:

Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021
Basic earnings per share 2.89 2.36 6.72 1.22 NA
Diluted earnings per share 2.89 2.35 6.71 1.22 NA
iii) As per the RBI circular RBI/2021-22/9 OR.GOV.REC.44/29.67.001/2021-22 “Guidelines on Compensation of Whole Time Directors/ Chief Executive Officers/ Material Risk Takers and
Control Function staff – Clarification” dated 30 August 2021 (the “RBI Guidelines on Compensation”), the Bank has identified material risk taker and submitted to RBI. During the three months
period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2023, 31 March 2022 and 31 March 2021 no ESOP has been granted to the aforesaid eligible personnel, hence there is
no impact on the results for the three months period ended 30 June 2023 and 30 June 2022 and years ended 31 March 2023, 31 March 2022 and 31 March 2021 on account of fair valuation of
options in accordance with RBI guidelines on compensation to the key risk taker.

9.Employee Benefits
i. The Bank has recognized the following amounts in the Profit and Loss Account towards contributions to Provident Fund and Other Funds:
Rs. in Million
Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Provident Fund 27.41 22.24 97.93 85.57 70.84

ii. Gratuity
The gratuity plan provides a lump sum payment to vested employees at retirement or on termination of employment based on respective employee’s salary and years of employment with the Bank
subject to maximum of Rs.2.00 Million.
Reconciliation of opening and closing balance of present value of defined benefit obligation for gratuity benefits is given below.
Reconciliation of Defined Benefit Obligation (DBO) Rs. in Million
Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Present value of DBO at start of Year 134.88 110.52 110.52 84.17 56.95
Current Service Cost 9.74 8.21 34.21 28.69 32.26
Interest Cost 2.39 1.63 6.52 4.63 3.64
Benefits Paid (1.80) (2.02) (8.33) (2.59) (1.88)
Past Service Cost - - - - -
Actuarial (Gain)/Loss 4.67 (6.96) (8.04) (4.38) (6.80)
Present value of DBO at end of period/ year 149.88 111.38 134.88 110.52 84.17

366
ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

Reconciliation of Fair Value of Plan Assets Rs. in Million

Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Fair value of Plan assets at start of Year 129.19 105.64 105.64 58.28 41.90
Contributions by employer 5.68 - 24.68 44.97 15.04
Benefits Paid (1.80) (2.02) (8.33) (2.59) (1.88)
Expected return on plan assets 2.28 1.52 5.94 4.09 3.15
Actuarial Gain/(Loss) (0.08) 0.12 1.26 0.89 0.07
Fair value of Plan assets at end of period/ year 135.27 105.26 129.19 105.64 58.28
Actual Return on plan assets 2.20 1.64 7.20 4.98 3.22
Expected Employer Contributions for the coming period/ year 2.00 5.00 6.00 5.00 25.00

Expense recognized in the Profit and Loss account Rs. in Million

Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Current Service Cost 9.74 8.21 34.21 28.69 32.26

Interest Cost 2.39 1.63 6.52 4.63 3.64
Past Service Cost - - - - -
Expected return on plan assets (2.28) (1.52) (5.94) (4.09) (3.15)
Actuarial (Gain)/Loss 4.75 (7.08) (9.30) (5.27) (6.87)
Employer Expense/( Income) 14.60 1.24 25.49 23.96 25.88
Net Liability/(Asset) recognized in the Balance Sheet Rs. in Million
Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Present value of DBO 149.88 111.38 134.88 110.52 84.17

Fair value of plan assets 135.27 105.26 129.19 105.64 58.28
Net liability/(Asset) 14.61 6.12 5.69 4.88 25.89
Less: Unrecognized Past Service Cost - - - - -
Liability/(Asset) recognized in the Balance sheet 14.61 6.12 5.69 4.88 25.89

Category of Plan Assets

30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021
Particulars

Insurer managed fund 99.99% 99.90% 99.90% 99.90% 99.90%

Bank Balance 0.01% 0.10% 0.10% 0.10% 0.10%

Actuarial assumptions used

30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021
Particulars

Salary Growth Rate 7.5% p.a 7.5% p.a 7.5% p.a 7.5% p.a 7.5% p.a
Discount Rate 6.90% p.a 7.00% p.a 7.10% p.a 5.90% p.a 5.50% p.a
Withdrawal/Attrition Rate 20% p.a 20% p.a 20% p.a 20% p.a 20% p.a
Expected return on plan assets 7.10% 5.90% 5.9% p.a 5.5% p.a 6.40% p.a.
IALM 2012-14 IALM 2012-14 IALM 2012-14 IALM 2012-14 IALM 2012-14
Mortality Rate
(Ult) (Ult) (Ult) (Ult) (Ult)
Expected average remaining working lives of employees 4 Years 4 Years 4 Years 4 Years 4 Years

Experience adjustments Rs. in Million

As at 30 June As at 30 June As at 31 March As at 31 March As at 31 March
Particulars
2023 2022 2023 2022 2021
Defined benefit obligation 149.88 111.38 134.88 110.52 84.17
Fair value of Plan assets 135.27 105.26 129.19 105.64 58.28
Surplus / (Deficit) (14.61) (6.12) (5.69) (4.88) (25.89)
Experience adjustment on plan liabilities : (gain)/loss 3.15 (0.12) 0.69 (1.91) 6.80
Experience adjustment on plan assets : gain/(loss) 0.43 0.23 0.83 0.23 (0.33)
The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors which has been relied upon by the auditors.

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.
iii. Leave Encashment
The employees of the Bank are entitled to compensated absence. The employees can carry forward a portion of the unutilized accrued compensated absence and utilize it in future periods or
receive cash compensation at retirement or termination of employment for the unutilized accrued compensated absence for a maximum of 30 days. The Bank records an obligation for
compensated absences in the period in which the employee renders the services that increase this entitlement. The Bank measures the expected cost of compensated absence as the additional
amount that the Bank expects to pay as a result of the unused entitlement that has accumulated at the balance sheet date based on actuarial valuations.
The Actuarial liability of compensated absences of accumulated privilege leave of the employees of the Bank is given below:
Rs. in Million
30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021
Assumptions

Privilege leave 30 days 30 days 30 days 30 days 30 days

Sick leave 30 days 30 days 30 days 30 days 30 days
Discount rate (Privilege/ Sick leave) 6.90% 7.00% 7.10% 5.90% 5.50%
Salary escalation rate (Privilege/ Sick leave) 7.50% 7.50% 7.50% 7.50% 7.50%
Attrition Rate (Privilege/ Sick leave) 20% 20% 20% 20% 20%
Actuarial liability - Privilege leave 57.40 44.59 47.50 41.45 37.93
Charged in Profit and Loss account- Privilege Leave 9.90 3.14 6.00 3.52 12.98
Actuarial liability - Sick Leave 36.30 28.91 32.00 27.91 23.24
Charged in Profit and Loss account- Sick leave 4.30 1.00 4.10 4.67 1.37
The discount rate is based on the prevailing market yields of Government of India securities as at the respective year end date for the estimated term of the obligations.
The estimate of future salary increases, takes into account the inflation, seniority, promotion, increments and other relevant factors. The above information is as certified by the actuary and relied
upon by the auditors.

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ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

10. Corporate Social Responsibility (CSR)

Rs. in Million
Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

a) Gross Amount required to be spent, including deficit of previous year, as per the approval of CSR
commitee - - 129.9# 128.2# 71.60
b) Amount spent during the year
i) Construction / acquisition of any asset - - 29.7## 2.60 -
ii) Any other projects - - 39.5### 78.3## 31.00
Total - - 69.20 80.90 31.00
c) Short fall at the year end - - 60.70 47.30 40.60
d) Previous year short fall - - - - -

e) Reason for short fall -

- on going projects on going projects on going projects
# Gross amount required to be spent by the Bank during the year include Rs. 47.30 Million being the unspent amount for the Financial year ended 31 March 2023 (Financial year ended 31
March 2022 - Rs. 40.60 Million relating to March 2021 and Financial year ended 31 March 2021: Nil)
As per Bank's CSR Policy upto 5% of the average net profit of the last 3 preceeding years is allocated for CSR activities. During the year the Bank has set aside 5% as CSR funds. (Years ended
31 March 2022 and 2021 : 5%)
##amount spend/ incurred during the year include Rs. 26.70 Million out of the unspend amount during the year ended 31 March 2022 (Years ended 31 March 2022 and 31 March 2021: Nil).
###amount spend/ incurred during the year include Rs. 20.50 Million out of the unspend amount during the year ended 31 March 2022 ( Year ended 31 March 2022 - Rs. 40.60 Million related
to Financial year ended 31 March 2021 out of the unspend amount during the said year Year ended 31 March 2021: Nil).
The Bank has contributed the amount for CSR for the FY 22-23 only during the Second half of the year and disclosure for Three months period ended 30 June 2022 is not applicable. During
Three months period ended 30 June 2023, the Bank has not contributed any amount towards CSR. As a responsible bank, the Bank will fulfil the guidelines prescribed for the Corporate Social
Responsibility under the Companies Act, 2013 before the year ending 31 March 2024.
Nature of CSR activities during March 2023, March 2022 and March 2021 is given below:
Education, Sustainable village development, waste management, liveable city projects, community school infrastructure, Skill training for Rural Artisans and rural youth, flood rehabilitation,
covid 19 response program, Sustainable development initiatives, Health development etc.
Pursuant to Section135(5) & (6) of Companies Act,2013 read with Companies (Corporate Social Responsibility Policy) Rules,2014(Amended), Bank transferred Rs.58.00 Million in “Unspent
CSR Account” on 31 March 2023 for the CSR Ongoing projects for spending over the following 3 years period on ongoing CSR sub Committee projects (31 March 2022: Rs. 34.40 Million 31
March 2021: Nil). Amount paid to Implementing Agencies is Rs 2.70 Milion as at March 2023 (31 March 2022 : Rs 12.90 Million 31 March 2021: Rs. Nil)
Also refer Note B.7 of Note 19 for the related parties involved in activities relating to Corporate Social Responsibility.
11.Subordinated Debt and Perpetual Debt
a The Bank has an outstanding subordinated debt and Pepetual debt as follows: Rs. in Million
Particulars As at 30 June As at 30 June As at 31 March As at 31 March As at 31 March
2023 2022 2023 2022 2021
Subordinated Debt Outstanding 1,450.00 1,600.00 1,450.00 1,600.00 1,900.00
Perpetual Debt Outstanding 480.00 480.00 480.00 480.00 480.00

Rs. in Million
Particulars As at 30 June As at 30 June As at 31 March As at 31 March As at 31 March
2023 2022 2023 2022 2021

Subordinated Debt raised during the year - - - 200.00 -

Subordinated Debt paid during the year - - 150.00 500.00 -

b. Interest Expended-Others includes interest on Subordinated Debt Rs. in Million

Particulars Year Year Year
Three months Three months Ended Ended Ended
period ended period ended 30
31 March 2023 31 March 2022 31 March 2021
30 June 2023 June 2022

Interest on Subordinated Debt 40.40 45.63 182.90 223.30 245.25

Interest on Perpetual Debt 15.60 15.60 62.40 62.40 62.40
12. Details of payments of audit fees (Exclusive of Goods and Service Tax)
Rs. in Million
Particulars 30 June 2023 30 June 2022 31 March 2023 31 March 2022 31 March 2021

Statutory Audit fees 1.40 1.60 5.50 4.00 3.50

Other Attestation work 0.50 0.50 5.50 1.25 0.50
Other Certification - - 1.50 1.45 2.10
Certification fees relating to DRHP for the Proposed IPO and Other Documentation - - 1.00 4.50 4.00
Out of pocket expenses (Including IPO related services) 0.22 - 0.22 0.30 0.20
Total 2.12 2.10 13.72 11.50 10.30

368
ESAF SMALL FINANCE BANK LIMITED
NOTE 19 - NOTES TO ACCOUNTS FORMING PART OF RESTATED FINANCIAL INFORMATION

13.Description of Contingent Liabilities:

The Bank has contingent liability of Rs.5.0 Million as at 30 June 2023, Rs. 5.0 Million as at 30 June 2022, Rs. 5.0 Million as at 31 March 2023, Rs. 5.0 Million as at 31 March 2022 and Rs.
2.0 Million as at 31 March 2021 for securitization transactions, guarantee given to Pension Fund Regulatory Development Authority (PFRDA) and other Court matters and Rs. 14.03 Million as
at 30 June 2023, Rs. 13.98 Million as at 30 June 2022, Rs. 13.90 Million as at 31 March 2023, Rs. 15.52 Million as at 31 March 2022 and Rs. 13.04 Million as at 31 March 2021 towards
guarantees given on behalf of constituents in India.
14. The Bank has a process whereby periodically all long term contracts are assessed for material foreseeable losses. As at 30 June 2023, 30 June 2022, 31 March 2023,31 March 2022 and 31
March 2021 the Bank has reviewed and recorded adequate provision as required under any law /accounting standards for material foreseeable losses on such long term contracts in the books of
account and disclosed the same under the relevant notes in the Restated Financial Information.

15.The Bank has received few intimations from “suppliers” regarding their status under the Micro, Small and Medium Enterprises Development Act, 2006. Based on the information received and
available with the Bank, there are no reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such payments during the three months period
ended 30 June 2023 and 30 June 2022 and years ended 31 March 2023, 31 March 2022 and 31 March 2021. Further, there are no outstanding against those suppliers as on 30 June 2023, 30
June 2022, 31 March 2023, 31 March 2022 and 31 March 2021. The above is based on information available with the Bank and relied upon by the Auditors.

16.For the Years ended 31 March 2023 and 31 March 2022

As a part of the normal banking business, the Bank grants loan and advances to its borrowers with permission to lend/ invest or provide guarantees/ securities in other entities identified by such
borrowers or on the basis of the security/ guarantee provided by the co-borrower. Similarly, the Bank may accept funds from its customers who may instruct the bank to lend/ invest/ provide
guarantee or security or the like against such deposits in other entities identified by such customers. These transactions are part of the Bank’s normal banking business, which is conducted after
exercising proper due diligence including adherence to “Know Your customer” guidelines.
Other than the nature of the transactions described above:
- No funds have been advanced or loaned or invested by the Bank to or in any other person(s) or entity(ies) (“intermediaries”) with the understanding that the intermediary shall lend or invest in
party identified by or on behalf of the Bank (ultimate beneficiary).
- The Bank has not received any funds from any party(s) (funding party) with the understanding that the Bank shall whether, directly or indirectly lend or invest in other persons or entities by or
on behalf of the Bank (“ultimate beneficiaries”) or provide any guarantee or security or the like on behalf of the ultimate beneficiary
17. IPO Expenses
As on 30 June 2023, 30 June 2022, 31 March 2023, 31 March 2022 and 31 March 2021. the Bank has incurred expenses in connection with ongoing Initial Public Offer ("IPO"), which include
payments made to Merchant Bankers, Legal Counsel, Statutory Auditors and other incidental expenses amounting to Rs. 160.10 Million, Rs. 130.50 Million, Rs. 153.50 Million, Rs. 130.50
Million and Rs. 70.30 Million respectively. In accordance with the accounting policy approved by the Board, the provisions of the Companies Act, 2013 and Banking Regulation Act, 1949 the
Share Issue Expenses are eligible to be drawn from share premium account. As the process of IPO is still in progress the said expenses are included under "others" in other assets (Note 13[vii])of
the Restated Statement of Assets and Liabilities.

18. Comparitives
The comparitive financial information of the Bank for the three months period ended 30 June 2022 and years ended 31 March 2022 and 31 March 2021 included in the Statement have been
audited by one of the Joint auditor M/s. Deloitte Haskins & Sells (DHS) which expressed an unmodified opinion.
19. Previous Period/ Year's figures
Previous period/ year figures have been regrouped/reclassified wherever necessary to correspond with the current period's classification/disclosure.
For and on Behalf of Board of Directors

P R Ravi Mohan Kadambelil Paul Thomas

Chairman Managing Director & CEO
DIN:08534931 DIN: 00199925

Gireesh C P Ranjith Raj P

Chief Financial Officer Company Secretary

Place: Mannuthy
Date: 17 October 2023

369
 OTHER FINANCIAL INFORMATION

The accounting ratios required under Clause 11 of Part A of Schedule VI of the SEBI ICDR Regulations are given below:

Accounting Ratios and Certain Financial Measures

(₹ in million other than percentages number of shares and per share values)
Particulars As at and for As at for the As at and for As at and for As at and for
the three three months the year ended the year ended the year ended
months period period ended March 31, 2023 March 31, 2022 March 31, 2021
ended June 30, June 30, 2022
2023
Basic earnings per share (Refer Note (a)(i)
and (c) below) 2.89* 2.36* 6.73 1.22 2.46
Diluted earnings per share (Refer Note (a)(i)
and (c) below) 2.89* 2.35* 6.71 1.22 2.46
Net Worth (Refer Note (e) below) (A)
18,390.93 15,127.62 17,091.29 14,067.96 13,520.64
Return on Net Worth (Refer Note(a)(ii) and
(e) below) 7.07%(1) 7.00%(1) 17.69% 3.89% 7.80%
Number of Equity Shares (in millions) (B) 449.47 449.47 449.47 449.47 449.47
Net Asset Value per Equity Share (Refer
Note (a)(iii) below) (A/B) 40.92 33.66 38.03 31.30 30.08
EBITDA (Refer Note (b) and (f) below)(*) 2,459.55 1,938.99 6,274.35 2,205.64 2,849.61
* Not annualised

The figures disclosed in this section are derived from the Restated Financial Information
Notes
(a) Ratios have been computed as per the following formulas
(i) Basic/ diluted earnings per share = Net Profit for the period/year, as restated, attributable to equity shareholders
Weighted average number of Equity Shares outstanding during the year/ period
(ii) Return on Net Worth (%) = Net Profit for the period/year, as restated, attributable to equity shareholders
Net worth at the end of the year/ period
(iii) Net asset value per equity share = Net worth at the end of the year
Total number of Equity Shares outstanding at the end of the year/ period
(b) Earnings before interest, tax, depreciation and amortisation (EBITDA), which is a non-GAAP financial measure, has been arrived at by adding back
depreciation on Bank’s property, tax expense and Interest on Reserve Bank of India/Inter Bank Borrowings and Others.
(c) Earnings per share calculations are done in accordance with Accounting Standard 20 “Earnings Per Share” (“AS 20”) as notified under Section 133
of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules 2014.
(d) “Net worth” represents the aggregate value of the paid-up share capital and all reserves created out of the profits and securities premium account and
debit or credit balance of profit and loss account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous
expenditure not written off, as per the audited balance sheet, but does not include reserves created out of revaluation of assets, write-back of depreciation
and amalgamation.
(e) Reconciliation of net profit for the period/year to Net worth
(₹ in million other than percentages)
Particulars As at and for the As at for the three As at and for the year ended
three month month period March 31, March 31, March 31,
period ended June ended June 30, 2023 2022 2021
30, 2023 2022

Net Profit for the period/year (A) 1,299.64 1,059.66 3,023.33 547.32 1,053.96
Capital (B) 4,494.74 4,494.74 4,494.74 4,494.74 4,494.74
Reserves and Surplus
Statutory Reserve (C) 1,927.23 1,171.40 1,927.23 1,171.40 1,034.57
Share Premium (D) 4,887.63 4,887.63 4,887.63 4,887.63 4,887.63
Investment Fluctuation Reserve (E) 321.42 261.94 321.42 261.94 41.27
Capital Reserve (F) 40.05 37.29 40.05 37.29 -
Balance in Profit and Loss Account (G) 6,719.86 4,274.62 5,420.22 3,214.96 3,062.43
Net Worth H = (B+C+D+E+F+G) * 18,390.93 15,127.62 17,091.29 14,067.96 13,520.64
Return on Net Worth % (I=A/H) 7.07%(1) 7.00%(1) 17.69% 3.89% 7.80%
(1)
Not annualized.
(*) Non-Gaap financial measure
(f) EBITDA
(₹ in million other than percentages)
Particulars As at and for the As at for the three As at and for the year ended
three month month period March 31, March 31, March 31,
period ended June ended June 30, 2023 2022 2021
30, 2023 2022

Net Profit for the period/year (A) 1,299.64 1,059.66 3,023.33 547.32 1,053.96
Add:
Provision made towards current tax expense 452.50 415.00 771.17 485.00 602.48
(B)

370
 Particulars As at and for the As at for the three As at and for the year ended
three month month period March 31, March 31, March 31,
period ended June ended June 30, 2023 2022 2021
30, 2023 2022

Provision made towards deferred tax (C) (14.68) (57.99) 265.94 (293.82) (242.70)
Depreciation on Bank’s property (D) 122.69 100.98 417.89 327.74 285.73
Interest on Reserve Bank of India/inter bank 599.40 421.33 1,796.01 1,139.40 1,150.14
borrowings and others (E)
EBITDA (F=A+B+C+D+E)(*) 2,459.55 1,938.98 6,274.35 2,205.64 2,849.61
(*)
Non-GAAP financial measure
(g) Certain non-GAAP financial measures and certain other statistical information relating to our operations and financial performance have been included
in this section and elsewhere in this Red Herring Prospectus. We compute and disclose such non-GAAP financial measures and such other statistical
information relating to our operations and financial performance as we consider such information to be useful measures of our business and financial
performance, and because such measures are frequently used by securities analysts, investors and others to evaluate the operational performance of
financial services businesses, many of which provide such non-GAAP financial measures and other statistical and operational information when reporting
their financial results. Such non-GAAP measures and other statistical and operational information are not measures of operating performance or liquidity
defined by generally accepted accounting principles. These non-GAAP financial measures and other statistical and other information relating to our
operations and financial performance may not be computed on the basis of any standard methodology that is applicable across the industry and therefore
may not be comparable to financial measures and statistical information of similar nomenclature that may be computed and presented by other banks in
India or elsewhere. These non-GAAP financial measures and other statistical and operational information have been reconciled to their nearest GAAP
measure in this section.

RELATED PARTY TRANSACTIONS

For details of the related party transactions, as per the requirements under applicable Accounting Standards, i.e., AS 18 ‘Related
Party Disclosures’ issued by the Institute of Chartered Accountants of India, read with the SEBI ICDR Regulations during three
months periods ended June 30, 2023 and June 30, 2022 and Fiscals 2023, 2022 and 2021, see “Restated Financial Information
– Related Party Transactions – Note 19-B-7” on page 363.

371
 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

To obtain a complete understanding of our Bank, prospective investors should read this section in conjunction with “Risk
Factors”, “Industry Overview”, “Our Business”, “Selected Statistical Information”, and “Financial Statements” on pages 35,
155, 190, 280 and 304, respectively.

The industry and market data used in this section have been derived from the CRISIL MI&A Report prepared and released by
CRISIL MI&A and commissioned by and paid for by us in connection with the Offer pursuant to an agreement between us and
CRISIL MI&A dated August 17, 2022, as amended pursuant to an addendum dated March 13, 2023. For more details on the
CRISIL MI&A Report, see “Certain Conventions, Presentation of Financial, Industry and Market Data and Currency of
Presentation – Industry and Market Data” on page 31. The CRISIL MI&A Report is available on our Bank’s website at
www.esafbank.com/investor-relations-info/.

Certain non-GAAP financial measures and certain other statistical information relating to our operations and financial
performance have been included in this section and elsewhere in this Red Herring Prospectus. We compute and disclose such
non-GAAP financial measures and such other statistical information relating to our operations and financial performance as
we consider such information to be useful measures of our business and financial performance, and because such measures
are frequently used by securities analysts, investors and others to evaluate the operational performance of financial services
businesses, many of which provide such non-GAAP financial measures and other statistical and operational information when
reporting their financial results. Such non-GAAP financial measures and other statistical and operational information are not
measures of operating performance or liquidity defined by generally accepted accounting principles. These non-GAAP
financial measures and other statistical and other information relating to our operations and financial performance may not
be computed on the basis of any standard methodology that is applicable across the industry and therefore may not be
comparable to non-GAAP financial measures and statistical information of similar nomenclature that may be computed and
presented by other banks in India or elsewhere. For more details, see “Selected Statistical Information – Certain Non-GAAP
Financial Measures” on page 302. All information regarding cost and yield, which are non-GAAP financial measures, is based
on the average of the opening balance at the start of the relevant period/fiscal year and the closing balance as at the quarter’s
end for all quarters in the relevant period/fiscal year.

This section also contains forward-looking statements that involve risks and uncertainties. Our results could differ materially
from such forward-looking statements. For details, see “Forward-Looking Statements” on page 33.

Overview

For an overview of our business, see “Our Business – Overview” on page 190.

Significant Factors Affecting Our Financial Condition, Results of Operations and Cash Flows

Our financial condition, results of operations and cash flows have been, and are expected to be influenced by numerous factors.
The following factors are of particular importance.

Expansion of our Business

The expansion of our business has been a major factor in the growth of our AUM and deposits. As per the CRISIL MI&A
Report, we had the fourth highest deposit growth among our comparable peers over Fiscals 2021 to 2023 and the highest AUM
growth among comparable SFBs over Fiscals 2021 to 2023. We plan to continue expanding our business. For details, see “Our
Business – Our Strategies – Penetrate deeper into our existing geographies” on page 196.

The tables below set forth our AUM, deposits and certain details of our business as at the dates indicated.

Particulars As at June 30, 2023 As at June 30, 2022

Amount % increase Amount
AUM (₹ in million) 172,039.68 35.09 127,352.96
Deposits (₹ in million) 156,558.54 16.33 134,577.46
States and union territories combined
where our products are offered
(number) 23 – 23
Banking outlets (number) 700 21.53 576
Business correspondents (number) 22 22.22 18
Customer service centres (number) 767 13.29 677
Banking agents (number) 2,116 135.63 898
Business facilitators (number) 525 54.41 340
ATMs (number) 559 35.35 413

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 Particulars As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
Amount % increase Amount % increase Amount
AUM (₹ in million) 163,312.65 32.34 123,406.91 46.46 84,259.30
Deposits (₹ in million) 146,656.25 14.44 128,150.72 42.40 89,994.26
States and union territories combined
where our products are offered
(number) 23 – 23 9.52 21
Banking outlets (number) 700 21.74 575 4.55 550
Business correspondents (number) 20 42.86 14 16.67 12
Customer service centres (number) 743 52.57 487 62.33 300
Banking agents (number) 2,023 249.40 579 1,106.25 48
Business facilitators (number) 481 53.67 313 103.27 154
ATMs (number) 528 36.79 386 21.38 318

Performance of our Business Correspondents

Our results of operations and financial condition depend significantly on the performance of our business correspondents, in
particular, ESMACO’s performance.

Our business correspondent entities are responsible for sourcing and servicing of customers for Microfinance Loans and Other
Micro Loans (we do not do this ourselves). Our business correspondents also source customers for mortgage loans, vehicle
loans, MSME loans, agricultural loans and select deposit products. In addition, our business correspondents are responsible for
sourcing and servicing our banking agents. ESMACO has been acting as a business correspondent for us since we began our
operations. We have an agreement with ESMACO, which is valid until December 31, 2028. ESMACO owns 63.49% of the
equity shares in EFHPL, our corporate promoter, which in turn owns 62.46% of the Equity Shares of our Bank prior to the
Offer. ESMACO was a related party of our Bank until March 13, 2021.

Set forth below is a table showing our gross advances sourced or serviced by business correspondents, including gross advances
sourced or serviced by ESMACO and such amounts as a percentage of our gross advances as at the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
₹ in million % of total ₹ in million % of total ₹ in million % of total ₹ in million % of total
gross gross gross gross
advances advances advances advances
Gross advances sourced or
serviced by business
correspondents 107,959.47 74.75 106,638.60 75.53 101,104.45 83.35 71,343.55 84.78
Of which:
Gross advances sourced
or serviced by ESMACO 88,341.31 61.16 87,773.07 62.17 91,131.33 75.12 63,217.49 75.12
Total gross advances 144,435.54 100.00 141,181.27 100.00 121,306.43 100.00 84,150.05 100.00

Set forth below is a table showing our deposits sourced by business correspondents, including deposits sourced by ESMACO
and such amounts as a percentage of our deposits as at the dates indicated.

Particulars As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
₹ in million % of total ₹ in million % of total ₹ in million % of total ₹ in million % of total
deposits deposits deposits deposits
Deposits sourced or
serviced by business
correspondents 1,601.20 1.02 2,536.15 1.73 2,145.14 1.67 1,495.12 1.66
Of which:
Deposits sourced or
serviced by ESMACO 1,390.23 0.89 2,247.74 1.53 1,828.12 1.43 1,264.76 1.41
Total deposits 156,558.54 100.00 146,656.25 100.00 128,150.72 100.00 89,994.26 100.00

Set forth below is a table showing our income from advances sourced or serviced by business correspondents as well as other
income from customers sourced by business correspondents (income contributed by business correspondents) and such amounts
as a percentage of our total income for the periods and Fiscals indicated.

Particulars Three months period ended June 30, Year ended March 31,
2023 2022 2023 2022 2021
% of % of % of % of % of
₹ in total ₹ in total ₹ in total ₹ in total ₹ in total
million income million income million income million income million income
Income contributed
by business
correspondents 7,649.29 77.13 5,834.50 79.02 23,896.28 76.06 16,734.61 77.93 14,318.83 80.97
Total income 9,917.75 100.00 7,383.24 100.00 31,415.72 100.00 21,475.08 100.00 17,684.21 100.00

373
Set forth below is a table showing our business correspondents expenses, including amounts due to ESMACO, and such
amounts as a percentage of our total income for the periods and Fiscals indicated.

Particulars Three months period ended June 30, Year ended March 31,
2023 2022 2023 2022 2021
% of % of % of % of % of
₹ in total ₹ in total ₹ in total ₹ in total ₹ in total
million income million income million income million income million income
Business
correspondent
expenses 1,783.09 17.98 1,254.60 16.99 5,442.36 17.32 3,486.58 16.24 2,328.08 13.16
Of which:
Amount payable
to ESMACO 1,231.52 12.42 1,059.94 14.35 4,155.52 13.23 2,925.20 13.62 1,950.30 11.03
Total income 9,917.75 100.00 7,383.24 100.00 31,415.72 100.00 21,475.08 100.00 17,684.21 100.00

Particulars Three months period ended Year ended March 31,

June 30,
2023 2022 2023 2022 2021
(₹ in million, except percentages es)
Business correspondent expenses
[A] 1,783.09 1,254.60 5,442.36 3,486.58 2,328.08
Income contributed by business
correspondents [B] 7,649.29 5,834.50 23,896.28 16,734.61 14,318.83
Business correspondent
expenses as a percentage of
income contributed by business
correspondents [C = A/ B] 23.31 21.50 22.77 20.83 16.26

Changes in Interest Rates

Interest rate changes have a significant impact on our profitability. Interest rates are sensitive to many factors, including the
RBI’s monetary policy, de-regulation of the financial services sector in India, domestic and international economic and political
conditions and other factors.

Generally, an increase in interest rates tends to increase our interest earned as a result of higher Yield on Average Interest-
Earning Advances. However, such an increase can also adversely affect our Yield on Average Interest-Earning Advances as a
result of a decrease in the volume of advances due to reduced overall demand for advances. In addition, an increase in interest
rates affects our Cost of Average Borrowings and can adversely affect our profitability if we are unable to pass on our increased
funding costs to our customers. Finally, higher interest rates can increase the risk of default by our customers.

Conversely, a decrease in interest rates can reduce our interest earned as a result of lower yields on our advances. This reduction
in interest earned may eventually be offset by an increase in the volume of advances that we make due to increased demand for
our advances and/or a decrease in our Cost of Average Borrowings.

Inflation remains high in several key economies prompting central banks to continue with rate hikes. The US Federal Reserve
(Fed), Bank of England and European Central Bank (ECB) all hiked interest rates at their May 2023 policy meetings. However,
financial conditions in India eased in April 2023 after the Reserve Bank of India (RBI) paused on rate hikes in its monetary
policy, keeping the repo rates at 6.5%. (Source: CRISIL MI&A Report). While the RBI indicated its readiness to move if
inflation surprised on the upside, incoming headline inflation print, based on the consumer price index (CPI), eased to 5.7% in
March – below the Monetary Policy Committee’s (MPC’s) upper threshold of 6%. Moreover, bond yields eased significantly
as investors factored in a pause in rate hikes. (Source: CRISIL MI&A Report). FPIs increased their investment in the Indian
markets as global risk sentiment revived with the US banking turmoil staying largely under control. Equity markets also gained
amid the pause in rate hike and rising FPI inflows. External risks remain high because of the possible impact of elevated interest
rates in advanced economies on the leveraged market segments. (Source: CRISIL MI&A Report). However, CRISIL MI&A
expects India’s macroeconomic fundamentals to improve in Fiscal 2023, which should cushion its vulnerability to global
shocks. This, coupled with a pause on rate hikes by the RBI and US Federal Reserve, should limit tightening of domestic
financial conditions going ahead. (Source: CRISIL MI&A Report).

In Fiscal 2023, to tackle inflation, the RBI started increasing policy repo rate rating by 40 bps in May 2022 and 50 bps in June,
August and September 2022, 35 bps in December 2022 and 25 bps in February 2023, taking policy repo rate to 6.50%. (Source:
CRISIL MI&A Report).

The following table sets forth the RBI’s bank rate, the reverse repo rate and the repo rate as at the dates indicated:

As at Bank Rate (%) Reverse Repo Rate (%) Repo Rate (%)
March 31, 2021 4.25 3.35 4.00
March 31, 2022 4.25 3.35 4.00
374
 As at Bank Rate (%) Reverse Repo Rate (%) Repo Rate (%)
March 31, 2023 6.75 3.35 6.50
June 30, 2023 6.75 3.35 6.50
(Source: https://www.rbi.org.in/)

Net Interest Income

Our results of operations are substantially dependent upon the amount of our net interest income, which we define as interest
earned less interest expended (“Net Interest Income”). Our Net Interest Income increased by 24.47% from ₹9,215.91 million
for Fiscal 2021 to ₹11,471.39 million for Fiscal 2022 and increased by 60.08% to ₹18,363.40 million for Fiscal 2023. Set forth
below are the tables showing our Net Interest Income for the periods/Fiscals indicated.

Particulars Three months period ended Three months period ended

June 30, 2023 June 30, 2022
(₹ in million)
Interest earned [A] 8,987.46 6,903.13
Interest expended [B] 3,132.93 2,415.51
Net Interest Income [C] = [A] – [B] 5,854.53 4,487.62

Particulars Fiscal 2023 Fiscal 2022 Fiscal 2021

(₹ in million)
Interest earned [A] 28,536.59 19,399.25 16,411.73
Interest expended [B] 10,173.19 7,927.86 7,195.82
Net Interest Income [C] = [A] – [B] 18,363.40 11,471.39 9,215.91

Our interest income earned is dependent on:

(i) our average interest-earning advances and the yield thereon;

(ii) our average interest-earning investments and the yield thereon; and

(iii) our average interest-earning balance with the RBI and other inter-bank funds and the yield thereon.

Our interest expended is dependent on:

(i) our average total deposits and the cost thereon; and

(ii) our average borrowings and the cost thereon.

For a table setting forth our Average Interest-Earning Advances, Yield on Average Interest-Earning Advances, Average
Interest-Earning Investments, Yield on Average Interest-Earning Investments, Average Interest-Earning Balances with Reserve
Bank of India and other Inter-Bank Funds and the Yield on Average Interest-Earning Balances with Reserve Bank of India and
other Inter-Bank Funds, Average Deposits, Cost of Average Deposits, Average Borrowings and Cost of Average Borrowings
and the definitions of those terms, see “Selected Statistical Information – Average Balance Sheet, Interest Earned/Expended
and Yield/Cost” on page 280.

For a table setting forth the analysis of the changes in our interest earned and interest expended between average volume and
changes in rates for three months period ended June 30, 2023 compared to three months period ended June 30, 2022, Fiscal
2023 compared to Fiscal 2022 and Fiscal 2022 compared to Fiscal 2021, see “Selected Statistical Information – Analysis of
Changes in Interest Earned and Interest Expended by Volume and Rate” on page 281.

Average Interest-Earning Advances and Yield on Average Interest-Earning Advances

The tables below present our average balances of advances (net of provisions) for (a) Micro Loans (comprising Microfinance
Loans and Other Micro Loans), (b) retail loans, MSME loans, loans to financial institutions and agricultural loans combined
(collectively, “Other Loans”) and (c) total advances, together with the related interest earned, resulting in the presentation of
the yield for the periods/fiscal years presented. Yield is a non-GAAP financial measure.

Advances (net of Three months period ended Three months period ended
provisions) June 30, 2023 June 30, 2022
Average Interest Earned Yield (%) Average Interest Earned Yield (%)
Balance(1) [A] [B] [C=B/A](5) Balance(1) [A] [B] [C=B/A](5)
(₹ in million, except percentages)
Micro Loans(2)(3) 99,281.78 6,704.83 6.75 91,591.24 5,419.40 5.92
Other Loans(4) 41,947.64 1,503.45 3.58 24,749.16 760.16 3.07
Total Advances 141,229.42 8,208.28 5.81 116,340.40 6,179.56 5.31
Notes:

375
1. Average balances are calculated as the average of the opening balance at the start of the relevant period and the closing balance as at
quarter end for all quarters in the relevant period.
2. Our Micro Loans comprise Microfinance Loans and Other Micro Loans. Our Microfinance Loans and Other Micro Loans are provided
to individuals without being secured by collateral. In order to be given a loan, an individual must be part of a sub-group, which usually
comprises two to 10 people. One to five sub-groups combine to form a “sangam”. The sangam facilitates the repayment process and other
activities among the individuals by holding meetings at regular intervals with sangam members. Until the introduction of the RBI Regulatory
Framework for Microfinance Loans Direction, 2022, we considered all of our loans to individuals who were members of a sub-group to be
Micro Loans. Effective October 17, 2022, we segregated our Micro Loans into Microfinance Loans and Other Micro Loans.
3. Average Micro Loans are gross Micro Loans net of provisions for NPAs for Micro Loans calculated on the basis of the average of the
opening balance at the start of the relevant period and the closing balance as at the quarter end for all quarters in the relevant period
(“Average Interest-Earning Micro Loans”).
4. Average Other Loans (comprising (a) retail loans, (b) MSME loans, (c) loan to financial institutions and (d) agricultural loans) are gross
Other Loans net of provisions for NPAs for Other Loans calculated on the basis of the average of the opening balance at the start of the
relevant period and the closing balance as at the quarter end for all quarters in the relevant period (“Average Interest-Earning Other
Loans”).
5. Not annualised.

Advances (net of Fiscal 2023 Fiscal 2022 Fiscal 2021

provisions) Average Interest Yield (%) Average Interest Yield (%) Average Interest Yield (%)
Balance(1) Earned [C=B/A] Balance(1) Earned [C=B/A] Balance Earned [C=B/A]
[A] [B] [A] [B] [A] [B]
(₹ in million, except percentages)
Micro Loans(2)(3) 91,048.36 21,386.82 23.49 78,456.47 15,619.03 19.91 65,523.57 13,861.65 21.16
Other Loans(4) 30,286.97 3,933.63 12.99 15,079.00 1,648.09 10.93 7,646.54 873.41 11.42
Total Advances 121,335.33 25,320.45 20.87 93,535.47 17,267.12 18.46 73,170.11 14,735.06 20.14
Notes:
1. Average balances are calculated as the average of the opening balance at the start of the relevant fiscal year and the closing balance as at quarter end
for all quarters in the relevant fiscal year.
2. Our Micro Loans comprise Microfinance Loans and Other Micro Loans. Our Microfinance Loans and Other Micro Loans are provided to individuals
without being secured by collateral. In order to be given a loan, an individual must be part of a sub-group, which usually comprises two to 10 people. One to
five sub-groups combine to form a “sangam”. The sangam facilitates the repayment process and other activities among the individuals by holding meetings at
regular intervals with sangam members. Until the introduction of the RBI Regulatory Framework for Microfinance Loans Direction, 2022, we considered all
of our loans to individuals who were members of a sub-group to be Micro Loans. Effective October 17, 2022, we segregated our Micro Loans into Microfinance
Loans and Other Micro Loans.
3. Average Micro Loans are gross Micro Loans net of provisions for NPAs for Micro Loans calculated on the basis of the average of the opening balance at
the start of the relevant fiscal year and the closing balance as at the quarter end for all quarters in the relevant fiscal year (“Average Interest-Earning Micro
Loans”).
4. Average Other Loans (comprising (a) retail loans, (b) MSME loans, (c) loan to financial institutions and (d) agricultural loans) are gross Other Loans
net of provisions for NPAs for Other Loans calculated on the basis of the average of the opening balance at the start of the relevant fiscal year and the closing
balance as at the quarter end for all quarters in the relevant fiscal year (“Average Interest-Earning Other Loans”).

Our Average Interest-Earning Advances increased by 21.39% from ₹116,340.40 million for the three months period ended June
30, 2022 to ₹141,229.42 million for the three months period ended June 30, 2023. The Yield on Average Interest-Earning
Investments, which is a non-GAAP financial measure, was 5.81% and 5.31% for the three months period ended June 30, 2023
and 2022, respectively.

Our Average Interest-Earning Advances increased by 27.83% from ₹73,170.11 million for Fiscal 2021 to ₹93,535.47 million
for Fiscal 2022 and increased by 29.72% to ₹121,335.33 million for Fiscal 2023. Our Average Interest-Earning Micro Loans
increased by 19.74% from ₹65,523.57 million for Fiscal 2021 to ₹78,456.47 million for Fiscal 2022 and increased by 16.05%
to ₹91,048.36 million for Fiscal 2023. Our Average Interest-Earning Other Loans increased by 97.20% from ₹7,646.54 million
for Fiscal 2021 to ₹15,079.00 million for Fiscal 2022 and increased by 100.86% to ₹30,286.97 million for Fiscal 2023.

The interest rates on our Micro Loans are fixed. The interest rates we charge on our retail loans, MSME and corporate loans,
and agricultural loans are fixed or floating depending on the product.

With effect from April 1, 2016, RBI guidelines require bank loans in India to be priced by reference to the bank’s marginal cost
of funds-based lending rate (“MCLR”). The interest rates on our loans made on or after April 1, 2016 and on or before
September 30, 2019 were based on our MCLR. The RBI issued a circular on September 4, 2019 making it mandatory for banks
to link all floating rate personal or retail loans and floating rate loans to MSME borrowers to an external benchmark with effect
from October 1, 2019. Further, the RBI through its circular dated February 26, 2020 mandated that all new floating rate loans
to Medium Enterprises extended by banks from April 1, 2020 shall also be required to be linked to an external benchmark.
Banks are free to choose one of the several benchmarks indicated in the circular dated September 4, 2019. Banks are also free
to choose their spread over the benchmark rate, subject to the condition that the credit risk premium may undergo a change only
when a borrower’s credit assessment undergoes a substantial change, as agreed upon in the loan contract. The interest rate of
external benchmark linked floating rate loans is required to be reset at least once in three months. Our floating rate loans made
after September 30, 2019 are based on the RBI’s repo rate. Our fixed rate loans less than three years tenor are based on our
MCLR. Banks must review and publish their MCLR of different maturities every month. The table below sets forth our one-
month, three-month, six-month and one-year MCLR rates as at dates indicated:

MCLR As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
in percentages (%)
One-month 14.69 13.71 11.77 13.91
376
 MCLR As at June 30, 2023 As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
in percentages (%)
Three-month 14.73 13.80 11.88 14.00
Six-month 14.88 14.09 12.19 14.19
One-year 15.16 14.66 12.82 14.48

Our Yield on Average Interest-Earning Advances, which is a non-GAAP financial measure, was 5.81%, 5.31%, 20.87%,
18.46% and 20.14% for the three months period ended June 30, 2023 and 2022, Fiscals 2023, 2022 and 2021, respectively. Our
Yield on Average Interest-Earning Micro Loans, which is a non-GAAP financial measure, was 6.75%, 5.92%, 23.49%, 19.91%
and 21.16% for the three months period ended June 30, 2023, the three months period ended June 30, 2022, Fiscals 2023, 2022
and 2021, respectively. Our Yield on Average Interest-Earning Other Loans, which is a non-GAAP financial measure, was
3.58%, 3.07%, 12.99%, 10.93% and 11.42% for the three months period ended June 30, 2023, the three months period ended
June 30, 2022, Fiscals 2023, 2022 and 2021, respectively,

Average Interest-Earning Investments and Yield on Average Interest-Earning Investments

Our Average Interest-Earning Investments increased by 9.78% from ₹44,499.26 million for the three months period ended June
30, 2022 to ₹48,853.22 million for the three months period ended June 30, 2023. The Yield on Average Interest-Earning
Investments, which is a non-GAAP financial measure, was 1.59% and 1.53% for the three months period ended June 30, 2023
and 2022, respectively.

Our Average Interest-Earning Investments increased by 56.60% from ₹19,326.01 million for Fiscal 2021 to ₹30,264.71 million
for Fiscal 2022 and increased by 59.05% to ₹48,137.45 million for Fiscal 2023. The Yield on Average Interest-Earning
Investments, which is a non-GAAP financial measure, was 6.48%, 6.22% and 6.64% for Fiscals 2023, 2022 and 2021,
respectively.

All scheduled commercial banks (other than regional rural banks), including us, are required to comply with the statutory
reserve requirements prescribed by the RBI. Currently, scheduled commercial banks are required to maintain a CRR of 4.50%
of their demand and time liabilities with the RBI, on which no interest is paid. However, on account of the COVID-19 pandemic,
the RBI decreased the minimum CRR by 100 basis points to 3.00% with effect from the reporting fortnight beginning March
28, 2020 to March 26, 2021. The minimum CRR increased to 3.50% on March 27, 2021, further increased to 4.00% on May
22, 2021 and further increased to 4.50% on May 21, 2022.

Scheduled commercial banks are currently required to maintain a SLR equivalent to 18.00% of their net demand and time
liabilities to be invested in cash and Government or other RBI-approved securities. As our demand and time liabilities
(excluding inter-bank deposits) have been increasing, the amount of investments we have held to satisfy the SLR requirement
have increased.

Our Average Investments in Government securities increased by 8.10% from ₹44,243.87 million for the three months period
ended June 30, 2022 to ₹47,826.41 million for the three months period ended June 30, 2023. The Yield on Average Investments
in Government securities, which is a non-GAAP financial measure, was 1.58% and 1.52% for the three months period ended
June 30, 2023 and 2022, respectively.

Our Average Investments in Government securities increased by 66.61% from ₹17,875.09 million for Fiscal 2021 to ₹21,764.36
million for Fiscal 2022 and increased by 117.93% to ₹47,430.00 million for Fiscal 2023. The Yield on Average Investments in
Government securities, which is a non-GAAP financial measure, was 6.46%, 6.27% and 6.72% for Fiscals 2023, 2022 and
2021, respectively.

For more details on our investments in securities, see “Selected Statistical Information – Investment Portfolio” on page 285.

Average Interest-Earning Balances with Reserve Bank of India and other Inter-Bank Funds and the Yield on Average
Interest-Earning Balances with Reserve Bank of India and other Inter-Bank Funds

Our Average Interest-Earning Balances with Reserve Bank of India and other Inter-Bank Funds decreased by 99.89% from
₹5,916.25 million for the three months period ended June 30, 2022 to ₹6.25 million for the three months period ended June
30,2023. The Yield on Average Interest-Earning Balances with Reserve Bank of India and other Inter-Bank Funds, which is a
non-GAAP financial measure, was 19.84% and 0.75% for the three months period ended June 30, 2023 and 2022, respectively.

Our Average Interest-Earning Balances with Reserve Bank of India and other Inter-Bank Funds decreased by 11.67% from
₹10,182.48 million for the Fiscal 2021 to ₹8,994.48 million for Fiscal 2022 and decreased by 70.87% to ₹2,620.25 million for
Fiscal 2023. The Yield on Average Interest-Earning Balances with Reserve Bank of India and other Inter-Bank Funds, which
is a non-GAAP financial measure, was 3.65%, 2.77% and 3.86% for Fiscals 2023, 2022 and 2021, respectively.

Average Deposits and Cost of Average Deposits and Average Borrowings and Cost of Average Borrowings

Our interest-bearing liabilities are our savings bank deposits, term deposits and our borrowings. We do not pay interest on
demand deposits (current accounts). The cost of our interest-bearing liabilities depend on many external factors, including
competitive factors and developments in the Indian credit markets and, in particular, interest rate movements and the existence
377
of adequate liquidity in the inter-bank markets. Internal factors that can affect our Cost of Funds include changes in our credit
ratings, available credit limits and our ability to mobilise low-cost deposits, particularly from retail customers, and no cost
deposits in the form of current accounts.

Our primary source of funding is our relatively low-cost deposit base, which is primarily derived from retail depositors in India.
We currently enjoy a relatively low-cost deposit base achieved through targeted branch network expansion and customised
product offerings. Our target depositor base consists of individuals, including women, senior citizens, NRIs, HNIs, trust
associations, societies and clubs, children above 10 years, our staff, salaried employees of corporates, farmers and MSMEs.
Our distribution network, which includes our branch network, business correspondent-owned banking outlets, customer
services centres (which are operated by business correspondents), business correspondents and alternative delivery channels,
provides us with access to these depositors, which in turn allows us to maintain low-cost funding through customer deposits.

The tables below present our average balances for deposits together with the related interest expended by category of deposits,
resulting in the presentation of the cost for each period/fiscal year presented. The average balance is calculated as the average
of the opening balance at the start of the relevant period/fiscal year and the closing balance as at quarter end for all quarters in
the relevant period/fiscal year.

Particulars Three months period ended June 30, 2023 Three months period ended June 30, 2022
Average Interest Cost (%) Average Interest Cost (%)
Balance(1) [A] Expended [B] [C=B/A](3) Balance(1) [A] Expended [B] [C=B/A](3)
(₹ in million, except percentages)
Demand Deposits [A] 2,505.13 – – 2,042.11 – –
Savings Bank Deposits
[B] 27,441.95 323.92 1.18 28,266.88 382.10 1.35
CASA(2)
[C = A + B] 29,947.08 323.92 1.08 30,308.99 382.10 1.26
Term Deposits 121,660.31 2,209.61 1.82 101,055.10 1,612.08 1.60
Total Deposits 151,607.39 2,533.53 1.67 131,364.09 1,994.18 1.52
Notes:
(1) Average balances are calculated as the average of the opening balance at the start of the relevant period/fiscal year and the closing balance as at quarter
end for all quarters in the relevant period/fiscal year.
(2) CASA is a non-GAAP financial measure and is calculated as the sum of demand deposits and savings bank deposits.
(3) Not annualised.

Particulars Fiscal 2023 Fiscal 2022 Fiscal 2021

Average Interest Cost (%) Average Interest Cost (%) Average Interest Cost (%)
Balance(1) Expended [C=B/A] Balance(1) Expended [C=B/A] Balance(1) Expended [C=B/A]
[A] [B] [A] [B] [A] [B]
Demand
Deposits [A] 2,082.64 – – 1,496.80 – – 952.60 – –
Savings Bank
Deposits [B] 28,712.97 1,499.88 5.22 21,060.66 1,113.14 5.29 11,882.47 599.28 5.04
CASA(2)
[C = A + B] 30,795.61 1,499.88 4.87 22,557.46 1,113.14 4.93 12,835.07 599.28 4.67
Term Deposits 104,944.42 6,877.30 6.55 84,532.27 5,675.32 6.71 68,076.31 5,446.40 8.00
Total Deposits 135,740.03 8,377.18 6.17 107,089.73 6,788.46 6.34 80,911.38 6,045.68 7.47
Notes:
(1) Average balances are calculated as the average of the opening balance at the start of the relevant period/fiscal year and the closing balance as at quarter
end for all quarters in the relevant period/fiscal year.
(2) CASA is a non-GAAP financial measure and is calculated as the sum of demand deposits and savings bank deposits.
(3) Not annualised.

Our Average Total Deposits increased by 15.41% from ₹131,364.09 million for the three months period ended June 30, 2022
to ₹151,607.39 million for the three months period ended June 30, 2023. Our Average Demand Deposits increased by 22.67%
from ₹2,042.11 million for the three months period ended June 30, 2022 to ₹2,505.13 million for the three months period ended
June 30, 2023. Our Average Savings Deposits decreased by 2.92% from ₹28,266.88 million for the three months period ended
June 30, 2022 to ₹27,441.95 million for the three months period ended June 30,2023. Our Average CASA, which is a non-
GAAP financial measure, decreased by 1.19% from ₹30,308.99 million for the three months period ended June 30, 2022 to
₹29,947.08 million for the three months period ended June 30, 2023. Our Average Term Deposits increased by 20.39% from
₹101,055.10 million for the three months period ended June 30, 2022 to ₹121,660.31 million for the three months period ended
June 30, 2023.

Our Average Total Deposits increased by 32.35% from ₹80,911.38 million for Fiscal 2021, to ₹107,089.73 million for Fiscal
2022 and increased by 26.75% to ₹135,740.03 million for Fiscal 2023. Our Average Demand Deposits increased by 57.13%
from ₹952.60 million for Fiscal 2021 to ₹1,496.80 million for Fiscal 2022 and increased by 39.14% to ₹2,082.64 million for
Fiscal 2023. Our Average Savings Deposits increased by 77.24% from ₹11,882.47 million for Fiscal 2021 to ₹21,060.66 million
for Fiscal 2022 and increased by 36.33% to ₹28,712.97 million for Fiscal 2023. Our Average CASA, which is a non-GAAP
financial measure, increased by 75.75% from ₹12,835.07 million for Fiscal 2021 to ₹22,557.46 million for Fiscal 2022 and
increased by 36.52% to ₹30,795.61 million for Fiscal 2023. Our Average Term Deposits increased by 24.17% from ₹68,076.31
million for Fiscal 2021 to ₹84,532.27 million for Fiscal 2022 and increased by 24.15% to ₹104,994.42 million for Fiscal 2023.
378
The Cost of Average Total Deposits, which is a non-GAAP financial measure, was 1.67% and 1.52% for the three months
period ended June 30, 2023 and 2022, respectively, and 6.17%, 6.34% and 7.47% for Fiscals 2023, 2022, and 2021, respectively.
We do not pay interest on demand deposits (current accounts). The Cost of Average Savings Bank Deposits, which is a non-
GAAP financial measure, was 1.18% and 1.35% for the three months period ended June 30, 2023 and 2022, respectively, and
5.22%, 5.29% and 5.04% for Fiscals 2023, 2022 and 2021, respectively. Our Cost of Average Term Deposits, which is a non-
GAAP financial measure, was 1.82% and 1.60% for the three months period ended June 30, 2023 and 2022, respectively, and
6.55%, 6.71% and 8.00% for Fiscals 2023, 2022 and 2021, respectively. The Cost of Average CASA, which is a non-GAAP
financial measure, was 1.08% and 1.26% for the three months period ended June 30, 2023 and 2022, respectively, and 4.87%,
4.93% and 4.67% for Fiscals 2023, 2022 and 2021, respectively. While the Cost of Average Total Deposits has largely been
driven by interest rate movements, the Cost of Average Total Deposits is lower than it otherwise would have been but for the
increasing percentage of our Average CASA in relation to our Average Total Deposits. The table below sets forth the ratio of
our Average CASA to Average Total Deposits for the period/fiscal years indicated.

Particulars Three months period ended Year ended March 31,

June 30,
2023 2022 2023 2022 2021
(₹ in million, except percentages)
Average CASA (*) [A] 29,947.08 30,308.99 30,795.61 22,557.46 12,835.07
Average Total Deposits [B] 151,607.39 131,364.09 135,740.03 107,089.73 80,911.38
Average CASA to Average Total
Deposits (*) [C=A/B] (%) 19.75 23.07 22.69 21.06 15.86
Note:
(*) Non-GAAP financial measure.

To continue to source low-cost funding through CASA, we must provide customers with convenient banking services that
compensate them for the nil returns in the case of demand deposits and lower returns in the case of savings bank deposits.
However, the increasing sophistication of customers, competition for funding, increases in interest rates and changes to the
RBI’s liquidity and reserve requirements may increase the rates we have to pay on our savings bank deposits.

Our borrowings comprised borrowings from the Reserve Bank of India, institutional agencies, subordinated debt, borrowings
from other banks, perpetual debt instruments.

Our Average Borrowings increased by 10.62% from ₹27,541.67 million for the three months period ended June 30, 2022 to
₹30,466.61 million for the three months period ended June 30, 2023, which increase was primarily due to increases in refinance
borrowings from institutions from ₹16,515.00 million as on 30 June 2022 to ₹19,931.25 million as at 30 June 2023. The Cost
of Average Borrowings, which is a non-GAAP financial measure, was 1.97% and 1.53% for the three months period ended
June 30, 2023 and 2022, respectively. The Cost of Average Borrowings was largely been driven by interest rate movements.

Our Average Borrowings increased by 31.20% from ₹14,327.51 million for Fiscal 2021 to ₹18,797.17 million for Fiscal 2022,
which increase was primarily due to increase in refinance borrowings from other institutions by 56.40% from ₹13,100.00
million as at March 31, 2021 to ₹20,488.33 million as at March 31, 2022, and increased by 52.36% to ₹28,640.15 million for
Fiscal 2023, which increase was primarily due to the increase in borrowings from other institutions and agencies by 21.40%
from ₹20,488.33 million as at March 31, 2022 to ₹24,871.95 million as at March 31, 2023. The Cost of Average Borrowings,
which is a non-GAAP financial measure, was 6.27%, 6.06% and 8.03% for Fiscals 2023, 2022 and 2021, respectively. The
Cost of Average Borrowings has largely been driven by interest rate movements.

Non-Performing Advances and Provisioning Policies

Our ability to manage the credit quality of our loans, which we measure in part through NPAs, is a key driver of our results of
operations. In addition to requiring us to make a provision on standard assets, the RBI requires us to classify and, depending on
the duration of non-payment, make a provision on loans that become NPAs, which are further sub-classified as sub-standard,
doubtful and loss assets. For details, see “Selected Statistical Information – Non-Performing Advances” on page 295.

As the number of our loans that become NPAs increase, the credit quality of our loan portfolio decreases. For a table setting
forth details of our NPAs, advances, provisions, technical write-offs and Provision Coverage Ratio as at and for the
periods/years ended June 30, 2023, 2022, March 31, 2023, 2022 and 2021, see “Risk Factors – As at June 30, 2023 and March
31, 2023, 2022 and 2021, our gross non-performing advances (NPAs) as a percentage of gross advances were 1.65%, 2.49%,
7.83% and 6.70%, respectively, our gross NPAs less provisions for NPAs (“net NPAs”) as a percentage of our gross advances
less provisions for NPAs were 0.81%, 1.13%, 3.92% and 3.88%, respectively, and the percentage of (total provisions towards
gross NPAs as at the end of the period/fiscal year plus outstanding balance of technical written off accounts as at the end of
the period/fiscal year) divided by (the sum of gross NPAs plus outstanding balance of technical written off accounts as at the
end of the period/fiscal year) (“Provision Coverage Ratio”) was 74.35%, 56.67%, 59.38% and 52.77%, respectively. If we are
unable to control the level of gross NPAs in our portfolio effectively or if we are unable to improve our Provision Coverage
Ratio, our business, financial condition, results of operations and cash flows could be adversely affected” on page 56. As shown
in the table in the above referenced risk factor, our gross NPAs decreased by ₹5,979.04 million, or 62.96%, from ₹9,495.94
million as at March 31, 2022 to ₹3,516.90 million as at March 31, 2023. This decrease was primarily due to (i) the sale of NPAs
to an asset reconstruction company that resulted in reductions of ₹5,882.76 million in Fiscal 2023 compared to nil in Fiscal

379
2022, and (ii) an increase in reductions on account of write-offs (including technical write-offs) that resulted in reductions of
₹4,965.95 million in Fiscal 2023 compared to ₹744.55 million in Fiscal 2022. As shown in the table in the above referenced
risk factor, our net NPAs decreased by ₹2,980.62 million, or 65.37%, from ₹4,559.56 million as at March 31, 2022 to ₹1,578.94
million as at March 31, 2023. This decrease was primarily due to the decrease in gross NPAs, which was partially offset by a
₹2,998.42 million, or 60.74%, decrease in total provision towards NPAs at the end of the year from ₹4,936.38 million as at
March 31, 2022 to ₹1,937.96 million as at March 31, 2023. For details of the effects of the COVID-19 on our NPAs and
provisions, see “ – Significant Factors Affecting Our Financial Condition, Results of Operations and Cash Flows – Effects of
the COVID-19 Pandemic” on page 381.

We have put in place well documented procedures regarding credit approval and loan disbursement and have instituted ongoing
monitoring mechanisms in order to strengthen our credit quality. We have also implemented advanced analytics and automated
credit scoring solutions for credit evaluation. For an overview of our credit approval and loan disbursement processes for our
different types of loan products, see “Our Business – Asset Products” on page 198.

Our Micro Loans and some of our retail loans are unsecured and, as such, are at a higher credit risk than secured loans because
they are not supported by collateral. Since these advances are unsecured, in the event of defaults by such customers, our ability
to realise the amounts due to us would be restricted to initiating legal proceedings for recovery. The tables below set forth our
unsecured advances (net of provisions) and our unsecured advances (net of provisions) as a percentage of total advances (net
of provisions) as at the dates indicated.

Particulars As at June 30, 2023

₹ in million % of total advances (net of provisions)
Unsecured advances (net of provisions) 107,623.26 75.15
Total advances (net of provisions) 143,215.54 100.00

Particulars As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
₹ in million % of total ₹ in million % of total ₹ in million % of total
advances (net advances (net advances (net
of provisions) of provisions of provisions
Unsecured advances (net of provisions) 104,926.62 75.35 97,274.43 83.59 69,836.01 85.50
Total advances (net of provisions) 139,243.31 100.00 116,370.05 100.00 81,675.86 100.00

The Macroeconomic Environment in India

Our financial condition and results of operations, in the past, have been, and will continue to be, significantly affected by factors
influencing the Indian economy, which would include any downturn in the global economy. Any slowdown in economic growth
in India could adversely affect our ability to grow our asset portfolio, the quality of our assets and our ability to implement our
strategies. The Government’s monetary policy is heavily influenced by the condition of the Indian economy, and changes in
the monetary policy affect the interest rates of our advances and borrowings. The RBI responds to fluctuating levels of economic
growth, liquidity concerns and inflationary pressures in the economy by adjusting monetary policy. For a summary of the recent
macroeconomic environment in India, see “Industry Overview” on page 155.

In particular, the COVID-19 pandemic had an adverse effect on the macroeconomic environment in India and our business
financial condition, results of operations and cash flows. For details, see “– Significant Factors Affecting Our Financial
Condition, Results of Operations and Cash Flows – Effects of the COVID-19 Pandemic” and “Risk Factors – COVID-19 has
had and could continue to have an adverse effect on our business, financial condition, results of operations and cash flows” on
pages 381 and 63, respectively.

Operating Expenses

The amount of our operating expenses has a bearing on our profit before tax. Our material fixed operating expenses are: (i)
payments to and provisions for employees, (ii) rent, taxes and lighting and (iii) depreciation on Bank’s property. Our business
correspondent expenses are primarily variable in nature as we pay our business correspondents a variable fee based on
collections, which is the largest part of their compensation, and a fixed fee for the acquisition and maintenance of each customer.

The tables below set forth certain details of our operating expenses for the periods/Fiscals indicated.

Particulars Three months period ended Three months period ended

June 30, 2023 June 30, 2022
₹ in million % of Total Income ₹ in million % of Total Income
Operating expenses 3,778.13 38.09 2,714.82 36.77
Of which:
Other expenditure 2,479.83 (1) 25.00 1,715.09(2) 23.23
Payments to and provisions for
employees 798.73 8.05 609.96 8.26
Rent, taxes and lighting 199.06 2.01 166.87 2.26
Depreciation on Bank’s property 122.69 1.24 100.98 1.37

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Notes:
(1) For the three months period ended June 30, 2023, includes business correspondent expenses of ₹1,783.09 million, which represented 17.98% of our total
income.
(2) For the three months period ended June 30, 2022, includes business correspondent expenses of ₹1,254.60 million, which represented 16.99% of our total
income.

Particulars Fiscal 2023 Fiscal 2022 Fiscal 2021

₹ in million % of Total ₹ in million % of Total ₹ in million % of Total
Income Income Income
Operating expenses 12,305.41 39.17 8,628.71 40.18 6,318.55 35.73
Of which:
Other expenditure 7,702.77(1) 24.52 4,972.01(2) 23.15 3,415.82(3) 19.32
Payments to and provisions for 2,779.98 8.85 2,321.37 10.81 1,877.84 10.62
employees
Rent, taxes and lighting 748.01 2.38 600.21 2.79 420.39 2.38
Depreciation on Bank’s property 417.89 1.33 327.74 1.53 285.73 1.62
Notes:
(1) For Fiscal 2023, includes business correspondent expenses of ₹5,442.36 million, which represented 17.32% of our total income.
(2) For Fiscal 2022, includes business correspondent expenses of ₹3,486.58 million, which represented 16.24% of our total income.
(3) For Fiscal 2021, includes business correspondent expenses of ₹2,328.08 million, which represented 13.16% of our total income.

Competition

The Indian finance industry is intensely competitive. We face intense competition in all our principal products and services.
For more details, see “Risk Factors – The Indian finance industry is intensely competitive and if we are unable to compete
effectively, it would adversely affect our business, financial condition, results of operations and cash flows” and “Our Business
– Competition” on pages 70 and 216, respectively.

Effects of the COVID-19 Pandemic

The effects of COVID-19, including lockdowns and restrictions, led to significant disruptions for individuals and businesses,
including us, and adversely affected our operations and our business correspondents’ operations, including lending, collection
of loan repayments and the acceptance of deposits, thereby adversely affecting our financial condition, results of operations and
cash flows. For more details, see “Risk Factors – COVID-19 has had and could continue to have an adverse effect on our
business, financial condition, results of operations and cash flows” on page 63. The adverse effects of COVID-19, including
the lockdowns and restrictions, on some our borrowers meant that they were unable to repay the advances we had made to them
on time or at all. As a result, our gross NPAs increased by ₹3,855.97 million, or 68.37%, from ₹5,639.97 million as at March
31, 2021 to ₹9,495.94 million as at March 31, 2022. Our gross NPAs decreased by ₹5,979.04 million, or 62.96%, from
₹9,495.94 million as at March 31, 2022 to ₹3,516.90 million as at March 31, 2023. This decrease was primarily due to (i) the
sale of NPAs to an asset reconstruction company that resulted in reductions of ₹5,882.76 million in Fiscal 2023 compared to
nil in Fiscal 2022, and (ii) an increase in reductions on account of write-offs (including technical write-offs) that resulted in
reductions of ₹4,965.95 million in Fiscal 2023 compared to ₹744.55 million in Fiscal 2022.

Our Responses to the COVID-19 Pandemic

We have adopted a proactive approach in managing the effects of the COVID-19 pandemic on our business since its outbreak.
Crisis Management Committee meetings were convened on various dates to take stock of the situation. A quick response team
was formed for co-ordinating the Business Continuity Plan activity against the background of the nation-wide lockdown. Our
Risk Management Department prepared a Business Continuity Plan document dated March 19, 2020 for dealing with the
COVID-19 situation and it was circulated to all Branches and offices for implementation. The Business Continuity Plan
document dated March 19, 2020 covers, among other things: general work place measures; identification of critical functions,
roles and activities; employee absenteeism; work from home arrangements; rotation of duties; alternate plans for Branch
staffing; business continuity plans for critical functions such as IT and operations; method of conducting meetings; travel
restrictions; vendor management; infrastructure management; and internal and external communications. As a supplement to
the Business Continuity Plan document dated March 19, 2020, we prepared a Business Continuity Plan document dated August
10, 2020 and a Business Continuity Plan document dated April 19, 2021 to update the earlier documents in view of our
experience since then, considering the probable impact and continuous risks for our business and staff. We circulated these
documents to all Branches and offices for implementation.

The measures we adopted in response to the COVID-19 pandemic have been largely successful in ensuring business continuity
and none of our critical functions suffered any major disruptions. However, due to the nation-wide lockdown, the collection
and disbursement activities for Micro Loans were almost stopped entirely during April 2020 and were very limited in May
2020. Effective June 1, 2020, our business correspondents were able to begin operations again in most of the centres and hence
Micro Loan disbursements and collections began to improve. The tables below show our disbursements for the periods and
Fiscals 2023, 2022 and 2021.

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Particulars Three months period ended Three months period ended
June 30, 2023 June 30, 2022
(₹ in million)
Disbursements 45,093.40 28,684.49

Particulars Fiscal 2023 Fiscal 2022 Fiscal 2021

(₹ in million)
Disbursements 146,906.51 119,452.20 62,863.74

We launched three new loan products to assist our customers during the pandemic: (1) Income Generation Loan Top Up Loan;
(2) Pre-approved Loan; and (3) Utdhan Loan Series 3 – Covid Care Loan.

Effects of the Moratorium and the Supreme Court’s Orders

Pursuant to the ‘COVID-19 Regulatory Package’ on asset classification and provisioning, which was announced by the RBI on
March 27, 2020, April 17, 2020 and May 23, 2020, lending institutions, including us, were permitted to grant an effective
moratorium of six months on the payment of term loans falling due between March 1, 2020 and August 31, 2020. As such, in
respect of all accounts classified as standard as on February 29, 2020, even if overdue, the moratorium period, wherever granted,
were excluded by the lending institutions from the number of days past-due for the purpose of asset classification under RBI’s
income recognition and asset classification norms. We granted a full or partial moratorium on all payments falling due between
March 1, 2020 and August 31, 2020 to all eligible borrowers.

The RBI circulars in relation to the moratorium required us to make provisions of up to 10% on loans that are subject to
moratorium and that were overdue but standard as at February 29, 2020. Considering the prevailing uncertainty over our
business due to the COVID-19 pandemic, we had provisions of ₹163.30 million, ₹132.40 million, ₹660.70 million and ₹404.00
million as at June 30, 2023, March 31, 2023, March 31, 2022 and March 31, 2021, respectively, against the potential effect of
COVID‐19 as additional contingency provision on standard assets (other than provisions held for restructuring under COVID-
19 norms). These provisions were in excess of the RBI’s prescribed norms.

The Supreme Court of India in Gajendra Sharma v. Union of India & Anr vide its interim order dated September 3, 2020
directed banks that accounts that were not declared as NPAs as at August 31, 2020 shall not be declared as NPAs until further
orders, and the case was disposed vide the Supreme Court’s judgment dated November 27, 2020. The Supreme Court of India
in Small Scale Industrial Manufactures Associate (Regd.) v. Union of India and others vide a judgment dated March 23, 2021
directed that the interim order granted on September 3, 2020 to not declare the accounts of borrowers as NPAs stands vacated.
As per the RBI’s notification dated April 7, 2021, for the period commencing September 1, 2020, asset classification for all
such accounts shall be as per the applicable RBI asset classification norms.

On October 23, 2020, the Ministry of Finance, Government of India announced the scheme for grant of ex-gratia payment of
difference between compound interest and simple interest for six months to borrowers in specified loan accounts, which
mandates lending institutions, including our Bank, to make ex-gratia payments to borrowers with less than ₹20.00 million in
total borrowings at all lending institutions by crediting, on or before November 5, 2020, the difference between simple interest
and compound interest for the period between March 1, 2020 and August 31, 2020. Lending institutions could then make claims
for reimbursement from the Government on or before December 12, 2020, which we did. Our claim for such reimbursement
was ₹165.74 million for Fiscal 2021, which had not been paid as at March 31, 2021. We recovered ₹165.74 million of such
reimbursement in Fiscal 2022.

On March 23, 2021, in Small Scale Industrial Manufactures Association v. Union of India and others, the Supreme Court
directed that there shall not be any charge of interest on interest/compound interest/penal interest for the period during the
moratorium and any amount already recovered under the same head, namely, interest on interest/penal interest/compound
interest shall be refunded to the concerned borrowers and to be given credit/adjusted in the next instalment of the loan account.
In accordance with the instructions in the RBI circular dated April 7, 2021, we made a provision of ₹80.00 million for
refunding/adjusting in “interest on interest” to all borrowers in Fiscal 2021, including those who had availed of working capital
facilities, during the moratorium period, irrespective of whether the moratorium had been fully or partially availed, or not
availed, which provision was created by debiting interest income. The methodology for calculation of the amount of such
“interest on interest” was finalised by the Indian Banks Association (the “IBA”) in consultation with other industry
participants/bodies on April 19, 2021. In Fiscals 2023 and 2022, we refunded ₹72.31 million and ₹1.27 million of “interest on
interest”, respectively.

For information on the effect of the moratorium and the Supreme Court’s orders on our results of operations and financial
condition as at and for the year ended March 31, 2021 as per the disclosure prepared in line with the RBI Master Direction on
Financial Statements – Presentation and Disclosures dated August 30, 2021 (as amended), see “Financial Statements – Note 19
– Notes to Accounts Forming Part of Restated Financial Information – Disclosures as Laid Down by RBI Circulars – Note
16(c) – COVID-19 Provisioning – Year ended March 31, 2021” on page 361.

Effects of the Resolution Plans

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On August 6, 2020, the RBI issued a circular that permitted lenders to implement a resolution plan (“Resolution Framework
1.0”), along with asset classification benefits, for eligible corporate and individual borrower segments. Lenders had to ensure
that the resolution facility was provided only to borrowers impacted by COVID-19. The resolution facility was applicable for
accounts classified as standard and not in default for more than 30 days as at March 1, 2020. The resolution plans had to be
finalised by December 31, 2020 and implemented within 180 days from the date of invocation. Restructuring of loans was also
allowed for MSMEs. The tables below set forth certain details of our advances under Resolution Framework 1.0 as at the dates
indicated.

Particulars As at June 30, 2023

(₹ in million, except for percentages)
Gross advances under Resolution Framework 1.0 [A] 129.70
Gross advances [B] 144,435.54
Gross advances under Resolution Framework 1.0 as percentage of gross
advances [C] = [A] / [B] (%) 0.09

Particulars As at March 31, 2023 As at March 31, 2022 As at March 31, 2021
(₹ in million, except for percentages)
Gross advances under Resolution
Framework 1.0 [A] 143.50 169.35 192.60
Gross advances [B] 141,181.27 121,306.43 84,150.05
Gross advances under Resolution
Framework 1.0 as percentage of gross
advances [C] = [A] / [B] (%) 0.10 0.14 0.23

On May 5, 2021, the RBI announced the resolution framework 2.0 (“Resolution Framework 2.0”) to protect individuals and
MSMEs from the adverse effect of the second wave of COVID-19. The Resolution Framework 2.0 was applicable for accounts
classified as ‘Standard’ as at March 31, 2021, wherein individuals and MSMEs having an aggregate loan exposure of up to
₹250 million who have not availed restructuring under any of the earlier restructuring frameworks and who were classified as
‘Standard’ as on March 31, 2021 were allowed to restructure their loans. Restructuring under the proposed framework was able
to be invoked up to September 30, 2021 and had to be finalised and implemented within 90 days after invocation of the
resolution process (with the last date to implement the restructuring for banks being December 31, 2021). The Resolution
Framework 2.0 included rescheduling of loan equated monthly instalments and the granting of a moratorium as per our Board-
approved policy. In accordance with Resolution Framework 2.0 and our Board approved policy, our Bank restructured loans
that were standard as at March 31, 2021. For the purpose of restructuring, the balance outstanding as at the date of restructuring
includes interest accrued as at such date, which is considered to be residual debt, and the equated monthly instalment is fixed
for such debt by extending the tenure of the loan, if required. Our Bank also provided initial holidays at the customer’s request
to start repaying their loan as per Resolution Framework 2.0. Our Bank restructured 706,061 accounts amounting to ₹16,735.77
million as per Resolution Framework 2.0. The tables below set forth certain details of our advances under Resolution
Framework 2.0 as at the dates indicated.

Particulars As at June 30, 2023

(₹ in million, except for percentages)
Gross advances under Resolution Framework 2.0 [A] 562.00
Gross advances [B] 144,435.54
Gross advances under Resolution Framework 2.0 as percentage of gross advances [C] =
[A] / [B] (%) 0.39
Gross standard advances under Resolution Framework 2.0 4,75.72
Provision for gross standard advances under Resolution Framework 2.0 72.44
Gross NPAs under Resolution Framework 2.0 86.28
Provision for NPAs under Resolution Framework 2.0 49.09

Particulars As at March 31, 2023 As at March 31, 2022

(₹ in million, except for percentages)
Gross advances under Resolution Framework 2.0 [A] 1,110.31 9,115.67
Gross advances [B] 141,181.27 121,306.43
Gross advances under Resolution Framework 2.0 as percentage of gross advances [C] =
[A] / [B] (%) 0.79 7.51
Gross standard advances under Resolution Framework 2.0 868.33 5,515.25
Provision for gross standard advances under Resolution Framework 2.0 130.73 850.47
Gross NPAs under Resolution Framework 2.0 241.98 3,600.42
Provision for NPAs under Resolution Framework 2.0 92.68 929.88

For further details on loans restructured under Resolution Framework 1.0 and Resolution Framework 2.0, as per the disclosure
prepared in line with the RBI Master Direction on Financial Statements – Presentation and Disclosures dated August 30, 2021
(as amended) see “Financial Statements – Note 19 – Notes to Accounts Forming Part of Restated Financial Information –
Disclosures as Laid Down by RBI Circulars – Note 4.8 – Disclosure under Resolution framework for Covid-19 related stress”
on page 355.

383
Increase in Product Offerings

Prior to Fiscal 2018, all of our loans were Micro Loans. Since then, we have introduced retail advances, which includes gold
loans, vehicle loans, mortgage loans, MSME loans, loans to financial institutions and agricultural advances. For more details
on our recently introduced asset products, see “Our Business – Asset Products” on page 198. We began distributing third party
products in Fiscal 2019 when we started distributing the National Pension System, Atal Pension Yojna and third-party general
insurance products. In Fiscal 2020, we began distributing third-party life insurance products. In Fiscal 2020, we began offering
platinum debit cards, agricultural and MSME loans. In Fiscal 2021, we introduced Gold Loans and loans to financial institutions.
Set forth below are tables showing the income from such products and services introduced since Fiscal 2018 and such income
as a percentage of our total income for the periods and fiscal years stated below.

Particulars Three months period ended June 30, 2023 Three months period ended June 30, 2022
Income % of Total Income Income % of Total Income
(₹ in million) (₹ in million)
Retail loans 1,040.68 10.49 446.17 6.04
Of which:
Gold loans 726.27 7.32 301.51 4.08
MSME loans 36.65 0.37 27.88 0.38
Loans to financial institutions 200.84 2.03 118.12 1.60
Agricultural loans 398.40 4.02 196.42 2.66
Third-party products 77.30 0.78 34.13 0.46
Platinum debit cards 8.42 0.08 32.65 0.44
Total income from new products and
services 1,762.29 17.77 855.37 11.59
Total Income 9,917.75 100.00 7,383.24 100.00

Particulars Fiscal 2023 Fiscal 2022 Fiscal 2021

Income % of Total Income % of Total Income % of Total
(₹ in million) Income (₹ in million) Income (₹ in million) Income
Retail loans 2,554.68 8.13 1,165.25 5.43 716.92 4.06
Of which:
Gold loans 1,818.85 5.79 677.64 3.16 361.99 2.05
MSME loans 121.32 0.39 82.41 0.38 19.75 0.11
Loans to financial institutions 435.67 1.39 344.52 1.60 168.23 0.95
Agricultural loans 966.81 3.08 161.54 0.75 2.87 0.02
Third-party products 195.63 0.62 148.74 0.69 88.38 0.50
Platinum debit cards 32.46 0.10 32.65 0.15 18.12 0.10
Total income from new products and
services 4,306.56 13.70 1,935.05 9.01 1,014.27 5.74
Total Income 31,415.72 100.00 21,475.08 100.00 17,684.21 100.00

Changes in Laws, Rules and Regulations or the Introduction of New Laws, Rules and Regulations

We operate in a highly regulated industry and have to adhere to various laws, rules and regulations. For a description of the
material laws, rules and regulations applicable to us, see “Key Regulations and Policies” on page 221. Any changes in the
regulatory environment under which we operate could adversely affect our results of operations and financial condition. In
addition, changes in laws and the introduction of new laws applicable to all businesses in India could also adversely affect our
results of operation and financial condition. The following has affected our financial condition, results of operation and cash
flows.

RBI’s ‘COVID-19 Regulatory Package’ on Asset Classification

For details, see “– Significant Factors Affecting Our Financial Condition, Results of Operations and Cash Flows – Non-
Performing Advances and Provisioning Policies” on page 379.

Government Scheme and Supreme Court Ruling with Respect to Compound Interest during the Moratorium

For details, see “– Significant Factors Affecting Our Financial Condition, Results of Operations and Cash Flows – Effects of
the COVID-19 Pandemic” on page 381.

Auditors’ Qualifications, Reservations and Adverse Remarks

There are no reservations, qualifications or adverse remarks highlighted by the respective auditors in their audit reports on our
audited financial statements as at and for the three months period ended June 30, 2023 and 2022 and as at and for the years
ended March 31, 2023, 2022 and 2021.

The Previous Sole Statutory Auditors have included an emphasis of matters in their audit report on our audited financial
statements for Fiscal 2022, noting that the potential impact of the continuing COVID-19 pandemic on our Bank’s results are
384
dependent on future developments which are uncertain. The Previous Sole Statutory Auditors’ opinion has not been modified
in respect of this matter.

The Previous Sole Statutory Auditors have included an emphasis of matters in their audit report on our audited financial
statements for Fiscal 2021, noting that our Bank has recognised additional contingency provision on loans to reflect the
continuing uncertainties arising from the COVID-19 pandemic. Such estimates are based on current facts and circumstances
and may not necessarily reflect the future uncertainties and events arising from the full impact of the COVID-19 pandemic. The
Previous Sole Statutory Auditors’ opinion has not been modified in respect of this matter.

Significant Accounting Policies

The preparation of the Restated Financial Information requires our management to make estimates and assumptions considered
in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and
the reported income and expenses during the reporting period. Our Bank’s management believes that the estimates used in the
preparation of the Restated Financial Information are prudent and reasonable. Actual results could differ from this estimate.
Any revision to accounting estimates are recognised prospectively in current and future periods.

Revenue Recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to our Bank and the revenue can be
reliably measured.

(i) Interest Income is recognised in the Restated Profit and Loss Account on accrual basis, except in the case of non-
performing assets. Interest on non- performing assets is recognised on realization basis as per the prudential norms
issued by the RBI. Interest is not charged on the delayed remittances for the overdue period on microloans.

(ii) Profit or Loss on sale of investments is recognised in the Restated Profit and Loss Account. However, the profit on
sale of investments in the ‘Held to Maturity’ category is appropriated (net of applicable taxes and amount required to
be transferred to statutory reserve) to ‘Capital Reserve’.

(iii) Income on non-coupon bearing discounted instruments is recognised over the tenure of the instrument on a straight-
line basis. In case of coupon bearing discounted instruments, discount income is recognised over the tenor of the
instrument on yield basis.

(iv) Dividend on Investments in shares and units of Mutual Funds are accounted when our Bank’s right to receive the
dividend is established.

(v) Processing Fee/upfront fee, handling charges and similar charges collected at the time of sanctioning or renewal of
loan/facility is recognised at the inception/renewal of loan on upfront basis.

(vi) Other fees and Commission income (including commission income on third party products) are recognised when due,
except in cases where our Bank is uncertain of ultimate collection and in case of non performing assets.

(vii) Interest income on deposits with banks and other financial institutions are recognised on a time proportion accrual
basis taking into account the amounts outstanding and the rates applicable.

(viii) Guarantee commission is recognised on a straight-line basis over the period of contract.

(ix) Locker rent is recognised on realisation basis.

(x) Fees received on sale of priority sector lending certificates is considered as Miscellaneous income, while fees paid for
purchase is expended as other expenditure in accordance with the guidelines issued by RBI on the date of purchase/sale
on upfront basis.

Investments

i. Classification:

• Investments are classified into three categories, viz Held to Maturity (“HTM”), Available for Sale (“AFS”) and held
for Trading (“HFT”) at the time of purchase as per guidelines issued by RBI.

• However, for disclosure in the Restated Statement of Assets and Liabilities, Investments in India are classified under
six groups - Government Securities, Other Approved Securities, Shares, Debentures and Bonds, Investments in
Subsidiaries/Joint Ventures and Others.

• Purchase and sale transactions in securities are recorded under “Settlement Date” accounting.

ii. Basis of Classification:

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• Investments that our Bank intends to hold till maturity are classified as HTM category.

• Investments that are held principally for resale within 90 days from the date of purchase are classified under HFT
category.

• Investments which are not classified in either of the above two categories are classified under AFS category.

iii. Acquisition Cost:

The Cost of investments is determined on the weighted average basis. Broken period interest in debt instruments and
government securities is treated as a revenue item. The transaction cost including brokerage, commission etc. paid at
the time of acquisition of investments are charged to the Restated Profit and Loss Account.

iv. Disposal of Investments:

Investments classified as HFT or AFS - Profit or loss on sale or redemption is recognised in the Restated Profit and
Loss Account. Investments classified as HTM - Profit on sale or redemption of investments is recognised in the
Restated Profit and Loss Account and is appropriated to Capital Reserve after adjustments for tax and transfer to
Statutory Reserve. Loss on sale or redemption is recognised in the Restated Profit and Loss Account.

v. Valuation:

• HTM securities are carried at their acquisition cost. Any premium on acquisition of government securities are
amortised over the remaining maturity of the security on a straight line basis. Any diminution, other than temporary,
in the value of such securities is provided for.

• AFS and HFT securities are valued periodically as per RBI guidelines.

• The market/fair value for the purpose of periodical valuation of quoted investments included in the AFS and HFT
categories is measured with respect to the market price of the scrip as available from the trades/quotes on the stock
exchanges, SGL account transactions, price list of RBI or prices periodically declared by Financial Benchmark India
Pvt. Ltd. (“FBIL”), based on relevant RBI circular.

• The valuation of non-SLR securities, other than those quoted on the stock exchanges, wherever linked to the YTM
rates, shall be with a mark-up (reflecting associated credit risk) over the YTM rates for government securities put out
by FBIL. Securities are valued scrip wise and depreciation/appreciation aggregated for each category. Net appreciation
in each basket if any, being unrealised, is ignored, while net depreciation is provided for.

• Treasury bills and Certificate of Deposits being discounted instruments, are valued at carrying cost. Non Performing
investments are identified and valued based on RBI guidelines.

vi. Repo and Reverse Repo Transactions:

In accordance with the RBI guidelines repo and reverse repo transactions in Government securities are reflected as
borrowing and lending transactions respectively. Borrowing cost on repo transaction is accounted for as interest
expense and revenue on reverse repo is accounted for as interest income.

vii. Investment Fluctuation Reserve (“IFR”)

• With a view to building up of adequate reserves to protect against increase in yields in accordance with RBI guideline,
bank started to create an IFR with effect from the Financial Year 2018-19.

• Amount appropriated from Net Profit to IFR is not less than lower of the following:

i. net profit on sale of investments during the year or

ii. net profit for the year less mandatory appropriations, until the amount of IFR is at least 2 percent of
the HFT and AFS portfolio, on a continuing basis.

The amount held in the IFR shall be utilised by way of draw down, in accordance with the provisions of the Reserve
Bank of India guidelines.

viii. Short Sales

The short sale transactions in Central Government dated securities undertaken by the bank shall be accounted in the
following manner in accordance with RBI guidelines.

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• The short position is categorised under HFT category and netted off from investments in Restated Statement of Assets
and Liabilities.

• The short position is marked to market at periodical intervals and loss, if any, is charged to the Restated Profit and
Loss Account while gain, if any, is ignored.

• Profit/Loss on settlement of the short position is recognised in the Restated Profit and Loss Account.

ix. Transfer of Securities between Categories:

The transfer/shifting of securities between categories of investments is accounted in accordance with the RBI
guidelines.

Advances

(i) Advances are classified into performing assets (“Standard”) and non-performing assets (“NPA”) as per the RBI
guidelines and are stated net of unrealised interest/charges in suspense for non-performing advances and provisions
made towards NPAs and principal portion of advance prepaid by customer, if any. Interest/other charges on Non-
performing advances is not recognised in Restated Profit and Loss Account and is transferred to an unrealised interest
suspense account till the actual realisation. Interest portion of advance prepaid by the customer is disclosed as other
liability and recognised to profit and loss account on due basis. Further, NPAs are classified into sub-standard, doubtful
and loss assets based on the criteria stipulated by the RBI. Provisions for NPAs are made at/or above the minimum
required level in accordance with the provisioning policy adopted by our Bank and as per the guidelines and circulars
of the RBI on matters relating to prudential norms.

(ii) Provision for standard advances is made as per the extant RBI guidelines. Additional Provision on standard assets is
made as per the policy decided by the Board.

(iii) Our Bank transfers advances through interbank participation with and without risk. In accordance with the RBI
guidelines, in the case of participation with risk, the aggregate amount of the participation issued by our Bank is
reduced from advances and where our Bank is participating; the aggregate amount of participation is classified under
advances. In the case of participation without risk, the aggregate amount of participation issued by our Bank is
classified under borrowings and where our Bank is participating, the aggregate amount of participation is shown as
due from banks under advances.

(iv) Non Performing Advances are written off as per our Bank’s policy. Amounts recovered against debts written
off/technically written off are recognised in the Restated Profit and Loss account and included under “Other Income”.

(v) The Bank considers a restructured account as one where our Bank, for economic or legal reasons relating to the
borrower’s financial difficulty, grants to the borrower concessions that our Bank would not otherwise consider.
Restructuring would normally involve modification of terms of the advances/securities, which would generally include,
among others, alteration of repayment period/repayable amount/the amount of instalments/rate of interest (due to
reasons other than competitive reasons). Restructured accounts are classified as such by our Bank only upon approval
and implementation of the restructuring package. Necessary provision for diminution in the fair value of a restructured
account is made and classification thereof is as per the extant RBI guidelines, as amended from time to time. In
accordance with RBI guidelines on the prudential framework for restructure of stressed assets and the resolution
framework for COVID-19 related stress, our Bank in accordance with its Board approved policy, carried out one-time
restructuring of eligible borrowers. The asset classification and necessary provisions thereon are done in accordance
with the said RBI guidelines.

(vi) Priority Sector Lending Certificate (“PSLC”): Our Bank enters into transactions for the sale and/or purchase of PSLCs.
In case of a sale transaction, our Bank sells the fulfillment of priority sector obligations and in the case of a purchase
transaction, our Bank buys the fulfillment of priority sector obligations through the RBI trading platform. There is no
transfer of loan assets or risks. The fees received for the sale of PSLC is recorded as other income and fees paid for
purchase of PSLC is recorded as other expenditure in Restated profit and loss account.

(vii) Securitisation Transaction and Direct Assignments:

• Our Bank transfers its loan receivables through Direct Assignment route as well as transfer to Special Purpose Vehicle
(“SPV”).

• The transferred loans and such securitised receivables are de-recognised as and when these are sold (true sale criteria
being fully met) and the consideration has been received by the Bank. Sales/transfer that do not meet true sale criteria
are accounted for as borrowings. For a securitization or direct assignment transaction, the Bank recognises profit upon
receipt of that funds and loss is recognised at the time of sale.

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

• On sale of stressed assets, if the sale is at a price below the net book value (i.e., funded outstanding less specific
provisions held), the shortfall is charged to the Profit and Loss Account and if the sale is for a value higher than the
net book value, the excess provision is credited to the Profit and Loss Account in the year when the sum of cash
received by way of initial consideration and / or redemption or transfer of security receipts issued by SC / RC exceeds
the net book value of the loan at the time of transfer.

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

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

Fixed Assets (Property Plant & Equipment and Intangible Assets) and Depreciation / Amortization

• Fixed Assets have been stated at cost less accumulated depreciation and amortisation and adjusted for impairment, if
any.

• Cost includes cost of purchase inclusive of freight, duties, incidental expenses and all expenditure like site preparation,
installation costs and professional fees incurred on the asset before it is ready to put to use.

• Gains or losses arising from the retirement or disposal of Fixed Assets are determined as the difference between the
net disposal proceeds and the carrying amount of assets and recognised as income or expense in the Restated Profit
and Loss Account.

• Depreciation is charged over the estimated useful life of the fixed asset on a straight-line basis. The management
believes that the useful life of assets assessed by our Bank, pursuant to the Companies Act, 2013, taking into account
changes in environment, changes in technology, the utility and efficacy of the asset in use, fairly reflects its estimate
of useful lives of the fixed assets. The estimated useful lives of key fixed assets, based on technical evaluation done
by the management are given below:

Class of Asset Estimated useful Estimated useful life

(Tangible and Intangible) life as assessed specified under Schedule II
by the Bank (in years) of the Companies Act, 2013 (in years)
Office Equipment 4-5 5
Computers 2-3 3
Furniture & Fixtures 9-10 10
Motor Vehicles 2-5 8
Servers 5 6

• An intangible asset is recognised only when its cost can be measured reliably and it is probable that the expected future
economic benefits that are attributable to it will flow to our Bank.

• Intangible assets acquired separately are measured on initial recognition at cost. The cost of an intangible asset
comprises its purchase price including after deducting trade discounts and rebates, any directly attributable cost of
bringing the item to its working condition for its intended use following initial recognition. Intangible assets are carried
at cost less any accumulated amortisation and any accumulated impairment losses.

• Intangible assets comprising of software is amortised on straight line basis over a period of 4 years, unless it has a
shorter useful life.

• For assets purchased/ sold during the year, depreciation is being provided on pro rata basis by our Bank.

• Capital work-in-progress includes costs incurred towards creation of fixed assets that are not ready for their intended
use and also includes advances paid to acquire fixed assets.

Impairment of Assets

• The carrying amounts of assets are reviewed at each balance sheet date to determine if there is any indication of
impairment based on internal/external factors. An impairment loss is recognised wherever the carrying amount of an
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 asset exceeds its recoverable amount which is the greater of the asset’s net selling price and value in use. In assessing
the value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that
reflects current market assessment of the time value of money and risks specific to the asset.

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

Retirement and Employee Benefits

Short Term Employee Benefit

The undiscounted amount of short-term employee benefits which are expected to be paid in exchange for the services rendered
by employees are recognised during the year when the employee renders the service.

Long Term Employee Benefit

a. Defined Contribution Plan:

Provident Fund: In accordance with law, all employees of our Bank are entitled to receive benefits under the provident
fund, a defined contribution plan in which both the employee and our Bank contribute monthly at a pre-determined
rate. Contribution to provident fund is recognised as expense as and when the services are rendered. Our Bank has no
liability for future provident fund benefits other than its fixed contribution.

b. Defined Benefit Plan:

Gratuity: Our Bank provides for Gratuity, covering employees in accordance with the Payment of Gratuity Act, 1972.
Our Bank’s liability is actuarially determined (using Projected Unit Credit Method) at the Balance Sheet date. The
actuarial gain or loss arising during the year is recognised in the Restated Profit and Loss Account.

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

Share Issue Expenses

• Share issue expenses are adjusted from Share Premium Account as permitted by Section 52 of the Companies Act,
2013 on issue of underlying securities pending which is recognised as “other assets” in the Restated Statement of
Assets and Liabilities.

Income Taxes

• Tax expense comprises current and deferred tax. Current income-tax is measured at the amount expected to be paid to
the tax authorities in accordance with the Income Tax Act,1961. Deferred tax assets and liabilities are recognised for
the future tax consequences of timing differences being the difference between the taxable income and the accounting
income that originate in one year and are capable of reversal in one or more subsequent year(s).

• Deferred tax assets on account of timing differences are recognised only to the extent there is reasonable certainty that
sufficient future taxable income will be available against which such deferred tax assets can be realised. In case of
carry forward losses and unabsorbed depreciation, under tax laws, the deferred tax assets are recognised only to the
extent there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available
against which such deferred tax assets can be realised.

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

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

• The carrying amount of deferred tax assets are reviewed at each reporting date. Our Bank writes-down the carrying
amount of deferred tax asset to the extent that it is no longer reasonably certain or virtually certain, as the case may be,
that sufficient future taxable income will be available against which deferred tax asset can be realised. Any such write-
down is reversed to the extent that it becomes reasonably certain or virtually certain, as the case may be, that sufficient
future taxable income will be available.

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• Deferred tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively
enacted at the Restated Statement of Assets and Liabilities date. Changes in deferred tax assets/liabilities on account
of changes in enacted tax rates are given effect to in the Restated Profit and Loss Account in the year of change.

Cash and Cash Equivalents

• Cash and cash equivalents include cash in hand, balances with RBI, balances with other banks and money at call and
short notice with an original maturity of three months or less (including the effect of changes in exchange rates on
cash and cash equivalents in foreign currency).

Segment Information

In accordance with guidelines issued by RBI and Accounting Standard 17 (AS-17) on “Segment Reporting”, our Bank’s
business has been segregated into Treasury, Wholesale Banking, Retail Banking Segments and other Banking Operations.

a) Treasury: The treasury segment revenue primarily consists of interest earnings on investments portfolio of the bank,
gains or losses on investment operations and earnings from foreign exchange business. The principal expenses of the
segment consist of interest expense allocated on funds borrowed/deposits received and other expenses. Treasury
segment liability also includes allocation of deposits received from customers.

b) Wholesale Banking: Wholesale Banking segment provides loans to corporate segment identified on the basis of RBI
guidelines. Revenues of this segment consist of interest earned on loans made to corporate customers and the
charges/fees earned from other banking services. The principal expenses of the segment consist of interest expense
allocated on funds borrowed/deposits received and other expenses.

c) Retail Banking: The Retail Banking segment provides loans to non-corporate customers identified on the basis of RBI
guidelines and also includes deposits from customers. Revenues of this segment consist of interest earned on loans
made to non-corporate customers and the charges/fees earned from other banking services. The principal expenses of
the segment consist of interest expense allocated on funds borrowed/deposits received and other expenses.

d) Other Banking Operations: This segment includes income from para banking activities such as debit cards, third party
product distribution and associated costs. Segment revenues consist of earnings from external customers and other
allocated revenues. Segment expenses consist of allocated interest expenses, operating expenses and provisions.
Segment results are net of segment revenues and segment expenses. Segment assets include assets related to segments
and exclude tax related assets. Segment liabilities include liabilities related to the segment excluding net worth.

e) Unallocated: All items which are reckoned at an enterprise level are classified under this segment. This includes
capital, reserves and other un allocable assets and liabilities such as fixed assets, deferred tax, tax paid in advance and
income tax provision etc.

Geographical Segment

Since the business operations of our Bank are primarily concentrated in India, our Bank is considered to operate only in the
domestic segment.

Earnings Per Share

• Basic earnings per share are calculated by dividing the net profit or loss for the year attributable to equity shareholders
(after deducting/adjusting for attributable taxes) by the weighted average number of equity shares outstanding during
the year. The weighted average number of equity shares outstanding during the year is adjusted for events of bonus
issue, bonus element in a rights issue to existing shareholders and share split.

• For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity
shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all
dilutive potential equity shares. Diluted earnings per share reflect the potential dilution that could occur if securities
or other contracts to issue equity shares were exercised or converted during the year.

Provisions and Contingent Assets/Liabilities

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

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• Our Bank 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. Provisions are reviewed at
each Restated Statements of Assets and Liabilities date and adjusted to reflect the current best estimate. Provisions are
not discounted to their present value and are determined based on the best estimate required to settle the obligation as
at the reporting date. If it is no longer probable that an outflow of resources would be required to settle the obligation,
the provision is reversed.

• Contingent assets are neither recognised nor disclosed in the Restated Financial Information.

Leases

• Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased item are
classified as operating lease. Operating lease payments are recognised as an expense in the Restated Profit and Loss
Account on a straight-line basis over the lease term in accordance with AS 19 - Leases.

Transactions Involving Foreign Exchange

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

• Foreign currency monetary items are reported using the exchange rate prevailing at the Restated Statement of Assets
and Liabilities date.

• Non-monetary items which are measured in terms of historical cost denominated in foreign currency are reported using
the exchange rate at the date of transaction. Non-monetary items which are measured at Fair Value or other similar
value denominated in a foreign currency are translated using the exchange rate at the date when such value is
determined.

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

Employee Share Based Payments

• The Employee Stock Option Schemes (“ESOSs”) of our Bank are in accordance with SEBI SBEB & SE Regulations.
The Schemes provide for grant of options on equity shares to employees of our Bank to acquire the equity shares of
our Bank that vest in a cliff vesting or in a graded manner and that are to be exercised within a specified period.

• In accordance with SEBI SBEB & SE Regulations and the Guidance Note on Accounting for Employee Share-based
Payments, issued by The Institute of Chartered Accountants of India, the cost of equity-settled transactions is measured
using the intrinsic value method. The intrinsic value being the excess, if any, of the fair market price of the share under
ESOSs over the exercise price of the option is recognised as deferred employee compensation with a credit to
Employee’s Stock Option (grant) Outstanding account. The deferred employee compensation cost is amortised on a
straight-line basis over the vesting period of the option. The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and
the number of equity instruments that are outstanding. Fair market value of an equity share, as determined by a
Category I Merchant Banker registered with SEBI, based on the Board Approved Financial Statements within one
year prior to the date of Grant.

• The options that do not vest because of failure to satisfy vesting condition are reversed by a credit to employee
compensation expense, equal to the amortised portion of value of lapsed portion. In respect of the options which expire
unexercised the balance standing to the credit of Employee’s Stock Option (Grant) Outstanding accounts is transferred
to Restated Profit & Loss Account.

Changes in Significant Accounting Polices

There have been no changes in our significant accounting policies for all periods covered in the Restated Financial Information.

Components of our Profit and Loss Account

Income

• Our income consists of interest earned and other income.

• Interest earned comprises (a) interest or discounts on advances or bills, (b) income on investments and (c) interest on
balances with the Reserve Bank of India and other inter-bank funds. Our investments consist of (i) Government
securities, and (ii) others (which includes certificate of deposits and pass through certificates).

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• Our other income primarily comprises (a) commission, exchange and brokerage, (b) net profit on sale of investments,
and (c) miscellaneous income.

Expenditure

• Our total expenditure consists of (a) interest expended, (b) operating expenses and (c) provisions and contingencies.

• Our interest expended comprises (a) interest on deposits and (b) interest on Reserve Bank of India and other inter-
bank borrowing and (c) others.

• Our operating expenses primarily comprise (a) payments to and provisions for employees, and (b) other operating
expenses, including, among others, (i) expenses related to rent, taxes and lighting, (ii) depreciation on fixed assets,
(iii) repairs and maintenance, (iv) insurance, and (v) other expenditure, which includes business correspondent
expenses, which are the fees and commissions payable by us to our business correspondents.

Provisions and Contingencies

Our provisions and contingencies consist of (i) provision towards NPAs, (ii) provision towards standard assets, (iii) provisions
made towards taxes, and (iv) other provisions and contingencies, which includes provision for overdue rent deposits and sundry
receivable overdue for more than six months.

Results of Operations

Three months period ended June 30, 2023 compared to Three months period ended June 30, 2022

The following table sets forth a summary of our Restated Profit and Loss Account for the three months period ended June 30,
2023 and 2022:

Particulars For the three months period ended

June 30, 2023 June 30, 2022
Amount % of Total Amount % of Total
(₹ in million) Income (₹ in million) Income
Income:
Interest Earned 8,987.46 90.62 6,903.13 93.50
Other Income 930.29 9.38 480.11 6.50
Total Income [A] 9,917.75 100.00 7,383.24 100.00
Expenditure:
Interest Expended [B] 3,132.93 31.59 2,415.51 32.72
Operating Expenses [C] 3,778.13 38.09 2,714.82 36.77
Pre-provisioning Operating Profit(1)[D] = [A – B – C] 3,006.69 30.32 2,252.91 30.51
Provisions and Contingencies 1,707.05 17.21 1,193.25 16.16
Total Expenditure 8,618.11 86.90 6,323.58 85.66
Net profit for the period 1,299.64 13.10 1,059.66 14.35
Note:
(1) Pre-provisioning operating profit, which is a non-GAAP financial measure, is calculated as total income minus interest expended minus
operating expenses (“Pre-provisioning Operating Profit”).

Summary of Results of Operations

Our net profit for the period increased by ₹239.98 million, or 22.65%, to ₹1,299.64 million for the three months period ended
June 30, 2023 from ₹1,059.66 million for the three months period ended June 30, 2022. This increase was primarily due to an
increase in our interest earned by ₹2,084.33 million, or 30.19%, to ₹8,987.46 million for the three months period ended June
30, 2023 from ₹6,903.13 million for the three months period ended June 30, 2022, which was primarily due to an increase in
interest/discount on advances/bills by ₹2,028.72 million, or 32.83%, to ₹8,208.28 million for the three months period ended
June 30, 2023 from ₹6,179.56 million for the three months period ended June 30, 2022 on account of a ₹24,889.02 million, or
21.39%, increase in Average Interest-Earning Advances to ₹141,229.42 million for the three months period ended June 30,
2023 from ₹116,340.40 million for the three months period ended June 30, 2022.

Total Income

Our total income increased by ₹2,534.51 million, or 34.33%, to ₹9,917.75 million for the three months period ended June 30,
2023 from ₹7,383.24 million for three months period ended June 30, 2022 as a result of a ₹2,084.33 million, or 30.19%, increase
in interest earned to ₹8,987.46 million for the three months period ended June 30, 2023 from ₹6,903.13 million, and a ₹450.18
million, or 93.77%, increase in other income to ₹930.29 million for the three months period ended June 30, 2023 from ₹480.11
million for three months period ended June 30, 2022.

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Interest Earned

The table set forth below shows details in relation to our interest earned for the three months period ended June 30, 2023 and
2022.

Particulars For the three months period ended Percentage increase /

June 30, 2023 June 30, 2022 (decrease) (%)
(₹ in million, except percentages)
Interest/discount on advances/bills 8,208.28 6,179.56 32.83
Income on investments 777.95 679.14 14.55
Interest on balances with Reserve Bank of India and
other inter-bank funds 1.23 44.43 (97.23)
Total 8,987.46 6,903.13 30.19

Our interest earned increased by ₹2,084.33 million, or 30.19%, to ₹8,987.46 million for the three months period ended June 30,
2023 from ₹6,903.13 million for the three months period ended June 30, 2022. The primary reasons for this increase are
discussed below.

• Interest/discount on advances/bills increased by ₹2,028.72 million, or 32.83%, to ₹8,208.28 million for the three
months period ended June 30, 2023 from ₹6,179.56 million for the three months period ended June 30, 2022. The
increase in interest/discount on advances/bills was primarily due to:

o a ₹24,889.02 million, or 21.39%, increase in Average Interest-Earning Advances to ₹141,229.42 million for
the three months period ended June 30, 2023 from ₹116,340.40 million for the three months period ended
June 30, 2022, which increase was primarily due to a ₹7,690.54 million, or 8.40%, increase in Average
Interest-Earning Micro Loans to ₹99,282.78 million for the three months period ended June 30, 2023 from
₹91,591.24 million for the three months period ended June 30, 2022 and a ₹17,198.48 million, or 69.49%,
increase in Average Interest-Earning Other Loans to ₹41,947.64 million for the three months period ended
June 30, 2023 from ₹24,749.16 million for the three months period ended June 30, 2022; and

o an increase in the Yield on Average Interest-Earning Advances, which is a non-GAAP financial measure, to
5.81% for the three months period ended June 30, 2023 from 5.31% for the three months period ended June
30, 2022. The Yield on Average Interest-Earning Advances increased primarily due to the increase in interest
rates of the Micro Loans by around 84 basis points in the three months period ended June 30, 2023 compared
to the three months period ended June 30, 2022.

• Income from investments increased by ₹98.81 million, or 14.55%, to ₹777.95 million for the three months period
ended June 30, 2023 from ₹679.14 million for the three months period ended June 30, 2022. This increase was
primarily due to a ₹4,353.96 million, or 9.78%, increase in Average Interest-Earning Investments to ₹48,853.22
million for the three months period ended June 30, 2023 from ₹44,499.26 million for the three months period ended
June 30, 2022.

• Interest on balances with RBI and other inter-bank funds decreased by 97.23% to ₹1.23 million for the three months
period ended June 30, 2023 from ₹44.43 million for the three months period ended June 30, 2022. This decrease was
primarily due to a ₹5,910.00 million, or 99.89%, decrease in Average Interest-Earning Balances with RBI and other
Inter-Bank Funds to ₹6.25 million for the three months period ended June 30, 2023 from ₹5,916.25 million for the
three months period ended June 30, 2022.

Other Income

The table set forth below shows details in relation to our other income for the three months period ended June 30, 2023 and
2022.

Particulars For the three months period ended Percentage increase

June 30, 2023 June 30, 2022 /(decrease) (%)
(₹ in million, except percentages)
Commission, exchange and brokerage 645.25 362.90 77.80
Profit on sale of investments (net) 62.14 44.21 40.56
Profit on revaluation of investments (net) 52.26 (304.28) 117.17
Profit/(loss) on sale of land, buildings and other assets (net) 0.27 (0.10) 370.00
Profit on foreign exchange transactions (net) 2.93 2.70 8.52
Income earned by way of dividends etc. from companies 0.30 0.44 (31.82)
Miscellaneous income 167.14 374.24 (55.34)
Total 930.29 480.11 93.77

Our other income increased by ₹450.18 million, or 93.77%, to ₹930.29 million for the three months period ended June 30, 2023

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from ₹480.11 million for the three months period ended June 30, 2022. The primary reason for this increase was (i) an increase
in profit on revaluation of investments (Net) to ₹52.26 million for the three months period ended June 30, 2023 from a loss of
₹304.28 million for the three months period ended June 30, 2022; and (ii) a ₹282.35 million, or 77.80%, increase in income
from commission, exchange and brokerage fees to ₹645.25 million for the three months period ended June 30, 2023 from
₹362.90 million for the three months period ended June 30, 2022, which was mainly on account of an increase in processing
fees collected on Loans by ₹209.89 million, or 86.65%, to ₹452.13 million for the three months period ended June 30, 2023
from ₹242.24 million for the three months period ended June 30, 2022.

The above increases were partially offset by (a) a ₹207.10 million, or 55.34% decrease in miscellaneous income to ₹167.14
million for the three months period ended June 30, 2023 from ₹374.24 million for the three months period ended June 30, 2022;
and (b) a ₹0.14 million, or 31.82% decrease in income earned by way of dividends etc. from companies to ₹0.30 million for the
three months period ended June 30, 2023 from ₹0.44 million for the three months period ended June 30, 2022.

Total Expenditure

Our total expenditure increased by ₹2,294.53 million, or 36.29%, to ₹8,618.11 million for the three months period ended June
30, 2023 from ₹6,323.58 million for the three months period ended June 30, 2022. The primary reasons for this increase are
discussed below:

Interest Expended

Our interest expended increased by ₹717.42 million, or 29.70%, to ₹3,132.93 million for the three months period ended June
30, 2023 from ₹2,415.51 million for the three months period ended June 30, 2022. The primary reasons for this increase are
discussed below.

• Interest on deposits increased by ₹539.35 million, or 27.05%, to ₹2,533.53 million for the three months period ended
June 30, 2023 from ₹1,994.18 million for the three months period ended June 30, 2022, which was due to a 15.41%
increase in Average Interest-Bearing Deposits to ₹151,607.39 million for the three months period ended June 30, 2023
from ₹131,364.09 million for the three months period ended June 30, 2022, and also on account of the increase in the
Cost of Average Interest-Bearing Deposits, which is a non-GAAP financial measure, to 1.67% for the three months
period ended June 30, 2023 from 1.52% for the three months period ended June 30, 2022.

• Interest on Reserve Bank of India/inter-bank borrowings and others increased by ₹178.07 million, or 42.26%, to
₹599.40 million for the three months period ended June 30, 2023 from ₹421.33 million for the three months period
ended June 30, 2022. This was primarily due to an increase in the Average Borrowings by ₹2,924.94 million, or
10.62%, to ₹30,466.61 million for the three months period ended June 30, 2023 from ₹27,541.67 million for the three
months period ended June 30, 2022.

Operating Expenses

The table set forth below shows details in relation to our operating expenses for the three months period ended June 30, 2023
and 2022. Where applicable, the table set forth below shows details of related party transactions in relation to our operating
expenses.

Particulars For the three months period ended Percentage increase

June 30, 2023 June 30, 2022 /(decrease) (%)
(₹ in million, except percentages)
Payments to and provisions for employees 798.73 609.96 30.95
Of which: related party transactions(2) 6.58 2.33 182.40
Rent, taxes and lighting 199.06 166.87 19.29
Of which: related party transactions(3) 6.09 6.09 –
Printing and stationery 18.31 14.52 26.10
Advertisement and publicity 43.19 21.16 104.11
Depreciation on Bank’s property 122.69 100.98 21.50
Directors’ fees, allowances and expenses 4.53 4.20 7.86
Auditors’ fees and expenses 0.64 2.10 (69.52)
Law charges 6.56 1.46 349.32
Postage, telegrams, telephones etc. 46.86 34.14 37.26
Repairs and maintenance 12.17 7.04 72.87
Insurance 45.56 37.30 22.14
Other expenditure(1) 2,479.83 1,715.09 44.59
Of which: related party transactions(4) 32.47 25.22 28.75
Total 3,778.13 2,714.82 39.17
Notes:
(1) Includes business correspondent expense of ₹1,783.09 million and ₹1,254.60 million for the three months period ended June 30, 2023
and 2022, respectively, none of which was for related party transactions.
(2) Comprises remuneration and sitting fees paid/payable to Kadambelil Paul Thomas.
394
(3) Comprises rent paid/payable to Lahanti Homes and ESAF Foundation.
(4) Comprises reimbursement of expense paid/payable to Kadambelil Paul Thomas and Royalty expense paid/payable to ESAF Foundation.

Our operating expenses increased by ₹1,063.31 million, or 39.17%, to ₹3,778.13 million for the three months period ended
June 30, 2023 from ₹2,714.82 million for the three months period ended June 30, 2022. The primary reason for this increase
was that other expenditure increased by ₹764.74 million, or 44.59% to ₹2,479.83 million for the three months period ended
June 30, 2023 from ₹1,715.09 million for the three months period ended June 30, 2022, which was primarily due to a ₹528.49
million, or 42.12%, increase in our business correspondent expense to ₹1,783.09 million for the three months period ended June
30, 2023 from ₹1,254.60 million for Fiscal 2022, which was primarily due to an increase in the amount collected on loans
sourced through business correspondents by ₹1,320.87 million, or 1.24%, to ₹1,07,959.47 million for the three months period
ended June 30, 2023 from ₹106,638.60 million for the three months period ended June 30, 2022. Our business correspondent
expenses as a percentage of our total income from business correspondents were 17.98% and 16.99% for the three months
period ended June 30, 2023 and 2022, respectively.

Pre-provisioning Operating Profit

Our Pre-provisioning Operating Profit increased by ₹753.78 million, or 33.46%, to ₹3,006.69 million for the three months
period ended June 30, 2023 from ₹2,252.91 million for the three months period ended June 30, 2022. The increase was primarily
due to an increase in (i) our interest earned by ₹2,084.33 million, or 30.19%, to ₹8,987.46 million for the three months period
ended June 30, 2023 from ₹6,903.13 million for the three months period ended June 30, 2022 and (ii) our other income by
₹450.18 million, or 93.77%, to ₹930.29 million for the three months period ended June 30, 2023 from ₹480.11 million for the
three months period ended June 30, 2022, which increases were partially offset by an increase in (i) our operating expenses by
₹1,063.31 million, or 39.17%, to ₹3,778.13 million for the three months period ended June 30, 2023 from ₹2,714.82 million
for the three months period ended June 30, 2022; and (ii) our interest expended by ₹717.42 million, or 29.70%, to ₹3,132.93
million for the three months period ended June 30, 2023 from ₹2,415.51 million for the three months period ended June 30,
2022.

Provisions and Contingencies

The table set forth below shows details in relation to our provisions and contingencies for the three months period ended June
30, 2023 and 2022.

Particulars For the three months period ended Percentage increase

June 30, 2023 June 30, 2022 /(decrease) (%)
(₹ in million, except percentages)
Provision towards NPA/Write offs [A] 1,281.78 654.28 95.91
Provision towards/(write back of provision towards)
Standard Assets [B] (36.35) 158.13 N.C.
Provision made towards income tax:
Current tax expense [C] 452.50 415.00 9.04
Deferred tax charge /(credit) [D] (14.68) (57.99) N.C.
Total provision made towards income tax [E] = [C] +
[D] 437.82 357.02 22.63
Other Provision and Contingencies [F] 23.80 23.83 (0.13)
Total Provisions and Contingencies [G] = [A] + [B] +
[E] + [F] 1,707.05 1,193.25 43.06

Our provisions and contingencies increased by ₹513.80 million, or 43.06%, to ₹1,707.05 million for the three months period
ended June 30, 2023 from ₹1,193.25 million for the three months period ended June 30, 2022. The primary reasons for this
increase was that our provision towards NPA/write offs increased by ₹627.50 million, or 95.91%, to ₹1,281.78 million for the
three months period ended June 30, 2023 from ₹654.28 million for the three months period ended June 30, 2022, which increase
was primarily due to the incremental provision of ₹599.10 million we set aside during the three months period ended June 30,
2023.

The increase in provision towards NPA/write offs were partially offset by, among other things, a write back of provision towards
Standard Assets of ₹36.35 million for the three months period ended June 30, 2023 compared to provision towards Standard
Assets of ₹158.13 million for the three months period ended June 30, 2022. The write back of provision towards Standard
Assets of ₹36.35 million was primarily due to the reduction in our restructured portfolio and the Uthdan loan for which higher
standard asset provision was made as per our policy.

Net Profit for the Period

As a result of the above, our net profit for the period increased by ₹239.98 million, to ₹1,299.64 million for the three months
period ended June 30, 2023 from ₹1,059.66 million for the three months period ended June 30, 2022.

Earnings per Share for the Period

395
The table below sets out the calculations for our basic earnings per share for the three months period ended June 30, 2023 and
2022.

Particulars For the three months period ended

June 30, 2023 June 30, 2022
Net profit attributable to equity shareholders [A] (₹ in
million) 1,299.64 1,059.66
Weighted average number of Equity Shares used in
computation of basic earnings per share [B] (₹ in million) 449.47 449.47
Basic earnings per share [C] = [A]/[B] (₹) 2.89 2.36

Our basic earnings per share increased by ₹0.53, to ₹2.89 for the three months period ended June 30, 2023 from ₹2.36 for the
three months period ended June 30, 2022, which increase was due to the increase in our net profit for the period by ₹239.98
million, to ₹1,299.64 million for the three months period ended June 30, 2023 from ₹1,059.66 million for the three months
period ended June 30, 2022.

Fiscal 2023 Compared to Fiscal 2022

The following table sets forth a summary of our Restated Profit and Loss Account for Fiscals 2023 and 2022:

Particulars Fiscal 2023 Fiscal 2022

Amount % of Total Income Amount % of Total Income
(₹ in million) (₹ in million)
Income:
Interest Earned 28,536.59 90.84 19,399.25 90.33
Other Income 2,879.13 9.16 2,075.83 9.67
Total Income [A] 31,415.72 100.00 21,475.08 100.00
Expenditure:
Interest Expended [B] 10,173.19 32.38 7,927.86 36.92
Operating Expenses [C] 12,305.41 39.17 8,628.71 40.18
Pre-provisioning Operating Profit(1)
[D] = [A] – [B] – [C] 8,937.12 28.45 4,918.51 22.90
Provisions and Contingencies 5,913.79 18.82 4,371.19 20.35
Total Expenditure 28,392.39 90.37 20,927.76 97.45
Net Profit for the year 3,023.33 9.63 547.32 2.55
Note:
(1) Pre-provisioning Operating Profit, which is a non-GAAP financial measure, is calculated as total income minus interest expended minus
operating expenses.

Summary of Results of Operations

Our net profit for the year increased by ₹2,476.01 million, or 452.39%, to ₹3,023.33 million for Fiscal 2023 from ₹547.32
million for Fiscal 2022, primarily due to an increase in our interest earned by ₹9,137.34 million, or 47.10%, to ₹28,536.59
million for Fiscal 2023 from ₹19,399.25 million for Fiscal 2022, which was primarily due to an increase in interest/discount on
advances/bills by ₹8,053.33 million, or 46.64%, to ₹25,320.45 million for Fiscal 2023 from ₹17,267.12 million for Fiscal 2022
on account of a ₹27,799.86 million, or 29.72%, increase in Average Interest-Earning Advances to ₹121,335.33 million for
Fiscal 2023 from ₹93,535.47 million for Fiscal 2022.

Total Income

Our total income increased by ₹9,940.64 million, or 46.29%, to ₹31,415.72 million for Fiscal 2023 from ₹21,475.08 million
for Fiscal 2022 as a result of (i) a ₹9,137.34 million, or 47.10%, increase in interest earned to ₹28,536.59 million for Fiscal
2023 from ₹19,399.25 million for Fiscal 2022; and (ii) a ₹803.30 million, or 38.70%, increase in other income to ₹2,879.13
million for Fiscal 2023 from ₹2,075.83 million for Fiscal 2022.

Interest Earned

The table set forth below shows details in relation to our interest earned for Fiscals 2023 and 2022.

Particulars Fiscal 2023 Fiscal 2022 Percentage increase /

(₹ in million) (decrease) (%)
Interest/discount on advances/bills 25,320.45 17,267.12 46.64
Income on investments 3,120.44 1,883.08 65.71
Interest on balances with Reserve Bank
of India and other inter-bank funds 95.70 249.05 (61.57)
Total 28,536.59 19,399.25 47.10

396
Our interest earned increased by ₹9,137.34 million, or 47.10%, to ₹28,536.59 million for Fiscal 2023 from ₹19,399.25 million
for Fiscal 2022. The primary reasons for this increase are discussed below.

• Interest/discount on advances/bills increased by ₹8,053.33 million, or 46.64%, to ₹25,320.45 million for Fiscal 2023
from ₹17,267.12 million for Fiscal 2022. The increase in interest/discount on advances/bills was due to:

o a ₹27,799.86 million, or 29.72%, increase in Average Interest-Earning Advances to ₹121,335.33 million for
Fiscal 2023 from ₹93,535.47 million for Fiscal 2022, which increase was primarily due to a ₹12,591.88
million, or 16.05%, increase in Average Interest-Earning Micro Loans to ₹91,048.37 million for Fiscal 2023
from ₹78,456.47 million for Fiscal 2022 and a ₹15,207.97 million, or 100.86%, increase in Average Interest-
Earning Other Loans to ₹30,286.97 million for Fiscal 2023 from ₹15,079.00 million for Fiscal 2022.

o an increase in the Yield on Average Interest-Earning Advances, which is a non-GAAP financial measure, to
20.87% for Fiscal 2023 from 18.46% for Fiscal 2022. The Yield on Average Interest-Earning Advances,
which is a non-GAAP financial measure, increased primarily due to the decrease in gross NPAs to ₹3,516.90
million as at March 31, 2023 from ₹9,495.94 million as at March 31, 2022 (we do not book interest/discount
on advances/bills that are NPAs) and due to an increase in interest rates during the year as a result of the
increase in repo rates. One of our strategies is to continue to grow our Micro Loans while increasing our other
categories of advances both in absolute terms and as a percentage of total advances. For details, see “Our
Business – Our Strategies – Continue to grow our Micro Loans while increasing our other categories of
advances both in absolute terms and as a percentage of total advances” on page 196. The Yield on Average
Interest-Earning Micro Loans, which is a non-GAAP financial measure, increased to 23.49% for Fiscal 2023
from 19.91% for Fiscal 2022 and the Yield on Average Interest-Earning Other Loans, which is a non-GAAP
financial measure, increased to 12.99% for Fiscal 2023 from 10.93% for Fiscal 2022 due to the rising interest
rate environment.

• Income on investments increased by ₹1,237.36 million, or 65.71%, to ₹3,120.44 million for Fiscal 2023 from
₹1,883.08 million for Fiscal 2022. This increase was primarily due to the increase in our Average Interest-Earning
Investments by ₹17,872.74 million, or 59.05%, to ₹48,137.45 million for Fiscal 2023 from ₹30,264.71 million for
Fiscal 2022, and an increase in the Yield on Average Interest-Earning Investments, which is a non-GAAP financial
measure, to 6.48% for Fiscal 2023 from 6.22% for Fiscal 2022 in line with the rise in interest rates during the year.

• Interest on balances with RBI and other inter-bank funds decreased by 61.57% to ₹95.70 million for Fiscal 2023 from
₹249.05 million for Fiscal 2022. This decrease was primarily due to a decrease in our Average Interest-Earning
Balances, by a ₹6,374.23 million, or 70.87%, with RBI and other Inter-Bank Funds to ₹2,620.25 million for Fiscal
2023 from ₹8,994.48 million for Fiscal 2022, which was partially offset by increase in the Yield on Average Interest-
Earning Balances with RBI and other Inter-Bank Funds, which is a non-GAAP financial measure, to 3.65% for Fiscal
2023 from 2.77% for Fiscal 2022 in line with the increase in reverse repo rates during the year.

Other Income

The table set forth below shows details in relation to our other income for Fiscals 2023 and 2022.

Particulars Fiscal 2023 Fiscal 2022 Percentage increase

(₹ in million) /(decrease) (%)
Commission, exchange and brokerage 1,994.83 1,507.23 32.35
Profit on sale of investments (net) 156.35 435.14 (64.07)
Profit/(loss) on revaluation of investments
(net) (913.88) (233.06) (292.12)
Profit/(loss) on sale of land, buildings and
other assets (net) (3.38) 0.06 (5,733.33)
Profit on foreign exchange transactions
(net) 11.12 9.24 20.35
Income earned by way of dividends etc.
from companies 2.04 1.56 30.77
Miscellaneous income 1,632.05 355.66 358.88
Total 2,879.13 2,075.83 38.70

Our other income increased by ₹803.30 million, or 38.70%, to ₹2,879.13 million for Fiscal 2023 from ₹2,075.83 million for
Fiscal 2022. The primary reasons for this increase are as follows:

• the increase in miscellaneous income by ₹1,276.39 million, or 358.88% to ₹1,632.05 million for Fiscal 2023 from
₹356.66 million for Fiscal 2022, which was primarily due to (i) a ₹612.11 million, or 766.48%, increase in recovery
from written off accounts to ₹691.97 million for Fiscal 2023 from ₹79.85 million for Fiscal 2022, (ii) ₹380.90 million
cash received on the sale of technical written of portfolio for Fiscal 2023 from nil for Fiscal 2022 and (iii) by ₹86.42
million, or 50.46%, increase in fees received on the sale of priority sector lending certificates to ₹257.70 million for
Fiscal 2023 from ₹171.28 million for Fiscal 2022;

397
• the increase in commission, exchange and brokerage by a ₹487.60 million, or 32.35%, to ₹1,994.83 million for Fiscal
2023 from ₹1,507.23 million for Fiscal 2022, which was primarily due to a ₹336.89 million, or 31.07%, increase in
the processing fees on our loans to ₹1,421.19 million for Fiscal 2023 from ₹1,083.10 million for Fiscal 2022;

• the increase in our service charges collected from deposit customers by ₹67.87 million, or 55.21%, to ₹190.81 million
for Fiscal 2023 from ₹122.93 million for Fiscal 2022;

• the increase in our income on ATM transactions by ₹35.95 million, or 23.78%, to ₹187.17 million for Fiscal 2023
from ₹151.22 million for Fiscal 2022, which increase was due to a 36.79% increase in the number of our ATMs to
528 as at March 31, 2023 from 386 as at March 31, 2022.

The above increases were partially offset by a ₹680.82 million decrease in our income resulting from a mark to market loss of
₹913.88 million in our investment portfolio for Fiscal 2023 compared to our mark to market gain of ₹233.06 million for Fiscal
2022, which was mainly on account of the (i) increases in yields on Government securities, which led to the corresponding
depreciation of such securities; and (ii) 100.00% provision of ₹714.60 million that was made for security receipts due to the
sale of NPAs for ₹10,479.53 million to an asset reconstruction company.

Total Expenditure

Our total expenditure increased by ₹7,464.63 million, or 35.67%, to ₹28,392.39 million for Fiscal 2023 from ₹20,927.76 million
for Fiscal 2022. The primary reasons for this increase are discussed below:

Interest Expended

Our interest expended increased by ₹2,245.33 million, or 28.32%, to ₹10,173.19 million for Fiscal 2023 from ₹7,927.86 million
for Fiscal 2022. The primary reasons for this increase are discussed below.

• Interest on deposits increased by ₹1,588.72 million, or 23.40%, to ₹8,377.18 million for Fiscal 2023 from ₹6,788.46
million for Fiscal 2022, which was due to a 26.75% increase in Average Deposits to ₹135,740.03 million for Fiscal
2023 from ₹107,089.73 million for Fiscal 2022, which was partially offset by a decrease in the Cost of Average
Deposits, which is a non-GAAP financial measure, to 6.17% for Fiscal 2023 from 6.34% for Fiscal 2022.

• Interest on Reserve Bank of India/inter-bank borrowings and others increased by ₹656.61 million, or 57.63%, to
₹1,796.01 million for Fiscal 2023 from ₹1,139.40 million for Fiscal 2022. This increase was due to a ₹9,842.98 million,
or 52.36%, increase in Average Borrowings to ₹28,640.15 million for Fiscal 2023 from ₹18,797.17 million for Fiscal
2022 and an increase in the Cost of Average Borrowings, which is a non-GAAP financial measure, to 6.27% for Fiscal
2023 from 6.06% for Fiscal 2022.

Operating Expenses

The table below sets forth details in relation to our operating expenses for Fiscal 2023 and Fiscal 2022. Where applicable, the
table set forth below shows details of related party transactions in relation to our operating expenses.

Particulars Fiscal 2023 Fiscal 2022 Percentage increase

(₹ in million) /(decrease)(%)
Payments to and provisions for employees 2,779.98 2,321.37 19.76
Of which: related party transactions(2) 31.30 24.50 27.76
Rent, taxes and lighting 748.01 600.21 24.62
Of which: related party transactions(3) 24.32 21.20 14.72
Printing and stationery 73.80 67.42 9.46
Advertisement and publicity 154.68 58.97 162.30
Depreciation on Bank’s Property 417.89 327.74 27.51
Director’s fees, allowances and expenses 16.28 14.80 10.00
Auditor’s fees and expenses 14.21 7.49 89.72
Law charges 10.41 4.33 140.42
Postage, Telegrams, Telephones etc. 189.50 109.42 73.19
Repairs and maintenance 46.98 17.62 166.63
Insurance 150.90 127.33 18.51
Other expenditure(1) 7,702.77 4,972.01 54.92
Of which: related party transactions(4) 159.85 101.96 56.78
Total 12,305.41 8,628.71 42.61
Notes:
(1) Includes business correspondent expense of ₹5,442.36 million and ₹3,486.58 million for Fiscals 2023 and 2022, respectively, of which nil and nil
respectively, was for related party transactions. ESMACO and Lahanti, both of which act as business correspondents for us, ceased to be related parties of
our Bank effective March 13, 2021 and March 15, 2021, respectively.
(2) Comprises remuneration and sitting fees paid/payable to Kadambelil Paul Thomas.
(3) Comprises rent paid/payable to Lahanti Homes and ESAF Foundation.
(4) Comprises reimbursement of expense paid/payable to Kadambelil Paul Thomas, contribution towards corporate responsibility expense paid/payable to
ESAF Foundation and Prachodan, and royalty expense paid/payable to ESAF Foundation.

398
Our operating expenses increased by ₹3,676.70 million, or 42.61%, to ₹12,305.41 million for Fiscal 2023 from ₹8,628.71
million for Fiscal 2022. The primary reasons for this increase are discussed below.

• Other expenditure increased by ₹2,730.76 million, or 54.92% to ₹7,702.77 million for Fiscal 2023 from ₹4,972.01
million for Fiscal 2022, which was primarily due to a ₹1,955.78 million, or 56.09%, increase in our business
correspondent expense to ₹5,442.36 million for Fiscal 2023 from ₹3,486.58 million for Fiscal 2022, which was
primarily due to an increase in the amount collected on loans sourced through business correspondents by ₹63,036.25
million, or 210.86%, to ₹92,931.12 million for Fiscal 2023 from ₹29,894.87 million for Fiscal 2022. Our business
correspondent expenses as a percentage of our total income from business correspondents were 22.77% and 20.83%
for Fiscals 2023 and 2022, respectively.

• Payments to and provisions for employees increased by ₹458.61 million, or 19.76%, to ₹2,779.98 million for Fiscal
2023 from ₹2,321.37 million for Fiscal 2022, which was primarily due to a 21.56% increase in our number of
employees to 5,034 as at March 31, 2023 from 4,141 as at March 31, 2022 and salary increments given to employees.

• Rent, taxes and lighting increased by ₹147.80 million, or 24.62%, to ₹748.01 million for Fiscal 2023 from ₹600.21
million for Fiscal 2022, which was primarily due to a 12.85% increase in our number of Branches to 641 as at March
31, 2023 from 573 as at March 31, 2022 and also on account of additional space being leased for existing Branches to
facilitate building renovations as well as increases in rents for certain existing Branches.

Pre-provisioning Operating Profit

Our Pre-provisioning Operating Profit increased by ₹4,018.61 million, or 81.70%, to ₹8,937.12 million for Fiscal 2023 from
₹4,918.51 million for Fiscal 2022. The increase was primarily due to an increase in (i) our interest earned by ₹9,137.34 million,
or 47.10%, to ₹28,536.59 million for Fiscal 2023 from ₹19,399.25 million for Fiscal 2022 and (ii) our other income by ₹803.30
million, or 38.70%, to ₹2,879.13 million for Fiscal 2023 from ₹2,075.83 million for Fiscal 2022, which increases were partially
offset by an increase in our (i) operating expenses by ₹3,676.70 million, or 42.61%, to ₹12,305.41 million for Fiscal 2023 from
₹8,628.71 million for Fiscal 2022; and (ii) our interest expended by ₹2,245.33 million, or 28.32%, to ₹10,173.19 million for
Fiscal 2023 from ₹7,927.86 million for Fiscal 2022.

Provisions and Contingencies

The table set forth below shows details in relation to our provisions and contingencies for Fiscal 2023 and Fiscal 2022.

Particulars Fiscal 2023 Fiscal 2022 Percentage increase

(₹ in million) /(decrease)(%)
Provision towards NPA/Write offs [A] 6,108.13 3,208.42 90.38
Provision towards/(write-back of provision
towards) Standard Assets [B] (1,281.08)(1) 936.22(2) N.C.
Provision made towards income tax:
Current tax expense [C] 771.17 485.00 59.00
Deferred tax charge (credit) [D] 265.94 (293.82) 190.51
Total provision made towards income tax
[E] = [C] + [D] 1,037.12 191.18 442.48
Other Provision and Contingencies [F] 49.63 35.37 40.31
Total Provisions and Contingencies [G]
= [A] + [B] + [E] + [F] 5,913.79 4,371.19 35.29
Notes:
(1) Includes provision of ₹153.30 million for Fiscal 2023 regarding additional contingency provisions for SMA-2 advances.
(2) Includes provision of ₹256.70 million for Fiscal 2022 regarding additional contingency provisions for the potential impact of COVID-
19.

Our provisions and contingencies increased by ₹1,542.60 million, or 35.29%, to ₹5,913.79 million for Fiscal 2023 from
₹4,371.19 million for Fiscal 2022. The primary reasons for this increase are discussed below.

• Provision towards NPA/write offs increased by ₹2,899.71 million, or 90.38%, to ₹6,108.13 million for Fiscal 2023
from ₹3,208.42 million for Fiscal 2022. The primary reason for the increase in the provision towards NPA/write offs
was a ₹3,540.65 million, or 92.80%, increase in additions to provisions towards NPAs to ₹7,355.97 million for Fiscal
2023 from ₹3,815.32 million for Fiscal 2022, which was due to gross NPAs (before sale of NPAs to an asset
reconstruction company and write-offs (including technical write-offs) increasing to ₹14,347.12 million as at March
31, 2023 from ₹9,495.94 million as at March 31, 2022, which increase was primarily due to loans disbursed to
borrowers during the COVID-19 pandemic. The sale of NPAs to an asset reconstruction company was ₹5,882.76
million in Fiscal 2023 compared to nil in Fiscal 2022. Write-offs (including technical write-offs) were ₹4,965.95
million in Fiscal 2023 compared to ₹744.55 million in Fiscal 2022.

• Current tax expense increased by ₹286.17 million, or 59.00%, to ₹771.17 million for Fiscal 2023 from ₹485.00 million
for Fiscal 2022. The primary reasons for this increase was a 449.82% increase in our Net Profit Before Tax (net profit
for the year plus provisions made towards income tax) to ₹4,060.45 million for Fiscal 2023 from ₹738.50 million for
399
 Fiscal 2022. We had a deferred tax charge of ₹265.94 million for Fiscal 2023 compared to a deferred tax credit of
₹293.82 million for Fiscal 2022. Our deferred tax charge for Fiscal 2023 was primarily due to the write-back of
provisions for Standard Assets due to contingency for SMA-2 advances and the write-back of provisions for
restructured advances on account of recovery or the downgrading of advances to NPAs. Our deferred tax credit in
Fiscal 2022 was primarily due to provisions towards standard advances. As a result of the foregoing, our total provision
made towards income tax increased by ₹845.94 million, or 442.48%, to ₹1,037.12 million for Fiscal 2023 from ₹191.18
million for Fiscal 2022. Our total provisions made towards income tax as a percentage of Net Profit Before Tax were
25.54% and 25.89% for Fiscals 2023 and 2022, respectively, compared to the applicable corporate income tax of
25.17% (including applicable surcharges and cess) for both Fiscals 2023 and 2022.

The above increases were partially offset by the fact that we had had a write-back of provision towards Standard Assets of
₹1,281.08 million for Fiscal 2023 compared to a provision towards Standard Assets of ₹936.22 million for Fiscal 2022. The
write-back of provision towards Standard Assets of ₹1,281.08 million for Fiscal 2023 was primarily due to the write-back of
provisions for Standard Assets of ₹528.40 million made in response to the COVID-19 contingency, which subsequently abated
and the write-back of provisions for restructured advances on account of recovery or the downgrading of advances to NPAs of
₹722.20 million in Fiscal 2023.

Net Profit for the Year

As a result of the above, our net profit for the year increased by ₹2,476.01 million, or 452.39%, to ₹3,023.33 million for Fiscal
2023 from ₹547.32 million for Fiscal 2022.

Earnings per Share for the Year

The table below sets out the calculations for our earnings per share for Fiscals 2023 and 2022.

Particulars Fiscal 2023 Fiscal 2022

Net profit attributable to equity shareholders [A] (₹ in
million) 3,023.33 547.32
Weighted average number of Equity Shares used in
computation of basic earnings per share [B] (₹ in million) 449.47 449.47
Basic earnings per share [C] = [A]/[B] (₹) 6.73 1.22

Our basic earnings per share increased by ₹5.51 million, to ₹6.73 million for Fiscal 2023 from ₹1.22 million for Fiscal 2022,
which increase was primarily due to the increase in our net profit for the year by ₹2,476.01 million, to ₹3,023.33 million for
Fiscal 2023 from ₹547.32 million for Fiscal 2022.

Fiscal 2022 Compared to Fiscal 2021

The following table sets forth a summary of our Restated Profit and Loss Account for Fiscals 2022 and 2021:

Particulars Fiscal 2022 Fiscal 2021

Amount % of Total Income Amount % of Total Income
(₹ in million) (₹ in million)
Income:
Interest Earned 19,399.25 90.33 16,411.73 92.80
Other Income 2,075.83 9.67 1,272.48 7.20
Total Income [A] 21,475.08 100.00 17,684.21 100.00
Expenditure:
Interest Expended [B] 7,927.86 36.92 7,195.82 40.69
Operating Expenses [C] 8,628.71 40.18 6,318.55 35.73
Pre-provisioning Operating Profit(1) [D]
= [A] – [B] – [C] 4,918.51 22.90 4,169.84 23.58
Provisions and Contingencies 4,371.19 20.35 3,115.88 17.62
Total Expenditure 20,927.76 97.45 16,630.25 94.04
Net Profit for the year 547.32 2.55 1,053.96 5.96
Note:
(1) Pre-provisioning Operating Profit, which is a non-GAAP financial measure, is calculated as total income minus interest expended minus
operating expenses.

Summary of Results of Operations

Our net profit for the year decreased by ₹506.64 million, or 48.07%, to ₹547.32 million for Fiscal 2022 from ₹1,053.96 million
for Fiscal 2021 primarily due an increase in our operating expenses by ₹2,310.16 million, or 36.56%, to ₹8,628.71 million for
Fiscal 2022 from ₹6,318.55 million for Fiscal 2021, which was primarily on account of the increase in our other expenditure
by ₹1,556.19 million, or 45.56%, to ₹4,972.01 million for Fiscal 2022 from ₹3,415.82 million for Fiscal 2021.

Total Income
400
Our total income increased by ₹3,790.87 million, or 21.44%, to ₹21,475.08 million for Fiscal 2022 from ₹17,684.21 million
for Fiscal 2021 as a result of (i) a ₹2,987.52 million, or 18.20%, increase in interest earned to ₹19,399.25 million for Fiscal
2022 from ₹16,411.73 million for Fiscal 2021; and (ii) a ₹803.35 million, or 63.13%, increase in other income to ₹2,075.83
million for Fiscal 2022 from ₹1,272.48 million for Fiscal 2021.

Interest Earned

The table set forth below shows details in relation to our interest earned for Fiscals 2022 and 2021.

Particulars Fiscal 2022 Fiscal 2021 Percentage increase /

(₹ in million) (decrease) (%)
Interest/discount on advances/bills 17,267.12 14,735.06 17.18
Income on investments 1,883.08 1,283.26 46.74
Interest on balances with Reserve Bank of
India and other inter-bank funds 249.05 393.41 (36.69)
Total 19,399.25 16,411.73 18.20

Our interest earned increased by ₹2,987.52 million, or 18.20%, to ₹19,399.25 million for Fiscal 2022 from ₹16,411.73 million
for Fiscal 2021. The primary reasons for this increase are discussed below.

• Interest/discount on advances/bills increased by ₹2,532.06 million, or 17.18%, to ₹17,267.12 million for Fiscal 2022
from ₹14,735.06 million for Fiscal 2021.

o The increase in interest/discount on advances/bills was primarily due to a ₹20,365.36 million, or 27.83%,
increase in Average Interest-Earning Advances to ₹93,535.47 million for Fiscal 2022 from ₹73,170.11
million for Fiscal 2021, which increase was primarily due to a ₹12,932.90 million, or 19.74%, increase in
Average Interest-Earning Micro Loans to ₹78,456.47 million for Fiscal 2022 from ₹65,523.57 million for
Fiscal 2021 and a ₹7,432.46 million, or 97.20%, increase in Average Interest-Earning Other Loans to
₹15,079.00 million for Fiscal 2022 from ₹7,646.54 million for Fiscal 2021.

o The increase in Average Interest-Earning Advances was partially offset by a decrease in the Yield on Average
Interest-Earning Advances, which is a non-GAAP financial measure, to 18.46% for Fiscal 2022 from 20.14%
for Fiscal 2021. The Yield on Average Interest-Earning Advances decreased primarily due to the increase in
gross NPAs to ₹9,495.94 million as at March 31, 2022 from ₹5,639.97 million as at March 31, 2021 (we do
not book interest/discount on advances/bills that are NPAs) and due to a decrease in the percentage of Average
Interest-Earning Micro Loans (which have a higher yield than our other loans) in our Average Interest-
Earning Advances to 83.87% for Fiscal 2022 from 89.55% for Fiscal 2021. One of our strategies is to continue
to grow our Micro Loan business while increasing our other categories of advances both in absolute terms
and as a percentage of total advances. For details, see “Our Business–Our Strategies–Continue to grow our
Micro Loan business while increasing our other categories of advances both in absolute terms and as a
percentage of total advances” on page 196. The Yield on Average Interest-Earning Micro Loans, which is a
non-GAAP financial measure, decreased to 19.91% for Fiscal 2022 from 21.16% for Fiscal 2021 and the
Yield on Average Interest-Earning Other Loans, which is a non-GAAP financial measure, decreased to
10.93% for Fiscal 2022 from 11.42% for Fiscal 2021, which decreases were primarily due to increase in NPA
and non-recognition of interest thereon.

• Income from investments increased by ₹599.82 million, or 46.74%, to ₹1,883.08 million for Fiscal 2022 from
₹1,283.26 million for Fiscal 2021. This decrease was primarily due to the increase in our Average Interest-Earning
Investments by ₹10,938.70 million, or 56.60%, to ₹30,264.71 million for Fiscal 2022 from ₹19,326.01 million for
Fiscal 2021, which was partially offset by a decrease in the Yield on Average Interest-Earning Investments, which is
a non-GAAP financial measure, to 6.22% for Fiscal 2022 from 6.64% for Fiscal 2021.

• Interest on balances with RBI and other inter-bank funds decreased by 36.69% to ₹249.05 million for Fiscal 2022 from
₹393.41 million for Fiscal 2021. This decrease was due to the decrease in our Average Interest-Earning Balances with
RBI and other Inter-Bank Funds by ₹1,188.00 million, or 11.67%, to ₹8,994.48 million for Fiscal 2022 from
₹10,182.48 million for Fiscal 2021 and a decrease in the Yield on Average Interest-Earning Balances with RBI and
other Inter-Bank Funds, which is a non-GAAP financial measure, to 2.77% for Fiscal 2022 from 3.86% for Fiscal
2021.

Other Income

The table set forth below shows details in relation to our other income for Fiscals 2022 and 2021.

Particulars Fiscal 2022 Fiscal 2021 Percentage increase

(₹ in million) /(decrease) (%)
Commission, exchange and brokerage 1,507.23 645.01 133.68
Profit on sale of investments (net) 435.14 230.40 88.86

401
Particulars Fiscal 2022 Fiscal 2021 Percentage increase
(₹ in million) /(decrease) (%)
Profit/(loss) on revaluation of investments
(net) (233.06) 11.44 (2,137.24)
Profit/(loss) on sale of land, buildings and
other assets (net) 0.06 (23.34) 100.26
Profit on foreign exchange transactions (net) 9.24 5.48 68.61
Income earned by way of dividends etc. from
companies 1.56 1.10 41.82
Miscellaneous income 355.66 402.39 (11.61)
Total 2,075.83 1,272.48 63.13

Our other income increased by ₹803.35 million, or 63.13%, to ₹2,075.83 million for Fiscal 2022 from ₹1,272.48 million for
Fiscal 2021. The primary reasons for this increase are as follows:

• the increase in commission, exchange and brokerage by ₹862.22 million, or 133.68%, to ₹1,507.23 million for Fiscal
2022 from ₹645.01 million for Fiscal 2021, which was primarily due to the increase in the processing fees on our loans
by ₹647.76 million, or 148.38%, to ₹1,083.10 million for Fiscal 2022 from ₹435.68 million for Fiscal 2021;

• the increase in our service charges collected from deposit customers by ₹90.57 million, or 217.72%, to ₹122.93 million
for Fiscal 2022 from ₹36.13 million for Fiscal 2021; and

• the increase in our income on ATM transactions by ₹67.32 million, or 80.24%, from ₹83.90 million for Fiscal 2021 to
₹151.22 million for Fiscal 2022, which increase was due to a 21.38% increase in the number of our ATMs from 318
as at March 31, 2021 to 386 as at March 31, 2022 and also on account of the usage of our Bank’s ATM cards in other
Banks’ ATMs machine, which generated revenue for our Bank.

The above increases were partially offset by a ₹244.50 million decrease in our income resulting from provision for depreciation
on investments of ₹233.06 million to our investment portfolio for Fiscal 2022 as compared to a write back for depreciation on
investments of ₹11.44 million for Fiscal 2021, which was mainly on account of the rise in yields on Government securities,
which led to the corresponding depreciation of such securities.

Total Expenditure

Our total expenditure increased by ₹4,297.51 million, or 25.84%, to ₹20,927.76 million for Fiscal 2022 from ₹16,630.25 million
for Fiscal 2021. The primary reasons for this increase are discussed below:

Interest Expended

Our interest expended increased by ₹732.04 million, or 10.17%, to ₹7,927.86 million for Fiscal 2022 from ₹7,195.82 million
for Fiscal 2021. The primary reasons for this increase are discussed below.

• Interest on deposits increased by ₹742.78 million, or 12.29%, to ₹6,788.46 million for Fiscal 2022 from ₹6,045.68
million for Fiscal 2021, which was due to a 32.35% increase in Average Interest-Bearing Deposits to ₹107,089.73
million for Fiscal 2022 from ₹80,911.38 million for Fiscal 2021, which was partially offset by a decrease in the Cost
of Average Interest-Bearing Deposits, which is a non-GAAP financial measure, to 6.34% for Fiscal 2022 from 7.47%
for Fiscal 2021.

• Interest on Reserve Bank of India/inter-bank borrowings and others decreased by ₹10.74 million, or 0.93%, to
₹1,139.40 million for Fiscal 2022 from ₹1,150.14 million for Fiscal 2021. This was primarily due to a decrease in the
Cost of Average Borrowings, which is a non-GAAP financial measure, to 6.06% for Fiscal 2022 from 8.03% for Fiscal
2021, which was partially offset by a ₹4,469.66 million, or 31.20%, increase in Average Borrowings to ₹18,797.17
million for Fiscal 2022 from ₹14,327.51 million for Fiscal 2021.

Operating Expenses

The table below sets forth details in relation to our operating expenses for Fiscal 2022 and Fiscal 2021. Where applicable, the
table set forth below shows details of related party transactions in relation to our operating expenses.

Particulars Fiscal 2022 Fiscal 2021 Percentage increase

(₹ in million) /(decrease)(%)
Payments to and provisions for employees 2,321.37 1,877.84 23.62
Of which: related party transactions(2) 24.50 14.10 73.76
Rent, taxes and lighting 600.21 420.39 42.77
Of which: related party transactions(3) 21.20 21.20 –
Printing and stationery 67.42 52.91 27.42
Advertisement and publicity 58.97 27.10 117.60
Depreciation on Bank’s Property 327.74 285.73 14.70

402
Particulars Fiscal 2022 Fiscal 2021 Percentage increase
(₹ in million) /(decrease)(%)
Director’s fees, allowances and expenses 14.80 14.04 5.41
Auditor’s fees and expenses 7.49 6.30 18.89
Law charges 4.33 2.61 65.90
Postage, Telegrams, Telephones etc. 109.42 91.68 19.35
Repairs and maintenance 17.62 15.78 11.66
Insurance 127.33 108.35 17.52
Other expenditure(1) 4,972.01 3,415.82 45.56
Of which: related party transactions(4) 101.96 2,359.25 (95.67)
Total 8,628.71 6,318.55 36.56
Notes:
(1) Includes business correspondent expense of ₹3,486.58 million and ₹2,328.08 million for Fiscals 2022 and 2021, respectively, of which ₹184.70 million
and ₹1,950.30 million, respectively, was for related party transactions. ESMACO and Lahanti, both of which act as business correspondents for us, ceased to
be related parties of our Bank effective March 13, 2021 and March 15, 2021, respectively.
(2) Comprises remuneration and sitting fees paid/payable to Kadambelil Paul Thomas.
(3) Comprises rent paid/payable to Lahanti Homes and ESAF Foundation.
(4) Comprises reimbursement of expense paid/payable to Kadambelil Paul Thomas, contribution towards corporate responsibility expense paid/payable to
ESAF Foundation and Prachodan, royalty expense paid/payable to ESAF Foundation, business correspondent service fees paid/payable to ESCO and LLMS
and corporate facility management service paid/payable to ESCO.

Our operating expenses increased by ₹2,310.16 million, or 36.56%, to ₹8,628.71 million for Fiscal 2022 from ₹6,318.55 million
for Fiscal 2021. The primary reasons for this increase are discussed below.

• Other expenditure increased by ₹1,556.19 million, or 45.56%, to ₹4,972.01 million for Fiscal 2022 from ₹3,415.82
million for Fiscal 2021, which was primarily due to a ₹1,158.50 million, or 49.76%, increase in our business
correspondent expense to ₹3,486.58 million for Fiscal 2022 from ₹2,328.08 million for Fiscal 2021 which was due to
a ₹12,932.90 million, or 19.74%, increase in our Average Interest-Earning Micro Loans to ₹78,456.47 million for
Fiscal 2022 from ₹65,523.57 million for Fiscal 2021. Our business correspondent expenses as a percentage of our total
income from business correspondents were 20.83% and 16.26% for Fiscals 2022 and 2021, respectively.

• Payments to and provisions for employees increased by ₹443.53 million, or 23.62%, to ₹2,321.37 million for Fiscal
2022 from ₹1,877.84 million for Fiscal 2021, which was primarily due to a 8.88% increase in our number of employees
to 4,141 as at March 31, 2022 from 3,803 as at March 31, 2021 and increments given to employees.

• Rent, taxes and lighting increased by ₹179.82 million, or 42.77%, to ₹600.21 million for Fiscal 2022 from ₹420.39
million for Fiscal 2021, which was primarily due to the increase in rent payable in our lease agreements and a 5.45%
increase in our number of Branches to 573 as at March 31, 2022 from 550 as at March 31, 2021.

Pre-provisioning Operating Profit

Our Pre-provisioning Operating Profit increased by ₹748.67 million, or 17.95%, to ₹4,918.51 million for Fiscal 2022 from
₹4,169.84 million for Fiscal 2021. The increase was primarily due to an increase in (i) our interest earned by ₹2,987.52 million,
or 18.20%, to ₹19,399.25 million for Fiscal 2022 from ₹16,411.73 million for Fiscal 2021 and (ii) an increase in our other
income by ₹803.35 million, or 63.13%, to ₹2,075.83 million for Fiscal 2022 from ₹1,272.48 million for Fiscal 2021, which
increases were partially offset by an increase in our (i) operating expenses by ₹2,310.16 million, or 36.56%, to ₹8,628.71 million
for Fiscal 2022 from ₹6,318.55 million for Fiscal 2021; and (ii) interest expended by ₹732.04 million, or 10.17%, to ₹7,927.86
million for Fiscal 2022 from ₹7,195.82 million for Fiscal 2021.

Provisions and Contingencies

The table set forth below shows details in relation to our provisions and contingencies for Fiscal 2022 and Fiscal 2021.

Particulars Fiscal 2022 Fiscal 2021 Percentage increase

(₹ in million) /(decrease)(%)
Provision towards NPA/Write offs [A] 3,208.42 1,887.40 69.99
Provision towards Standard Assets [B] 936.22(1) 925.52(2) 1.16
Provision made towards income tax:
Current tax expense [C] 485.00 602.48(3) (19.50)
Deferred tax charge (credit) [D] (293.82) (242.70) 21.06
Total provision made towards income tax [E]
= [C] + [D] 191.18 359.78 46.86
Other Provision and Contingencies [F] 35.37 (56.82) 162.25
Total Provisions and Contingencies [G] =
[A] + [B] + [E] + [F] 4,371.19 3,115.88 40.29
Notes:
(1) Includes ₹256.70 million for Fiscal 2022 for provision against the potential impact of COVID-19.
(2) Includes ₹404.00 million for Fiscal 2021 for provision against the potential impact of COVID-19.
(3) Net write-back of provision for earlier years less ₹20.00 million for Fiscal 2021.

403
Our provisions and contingencies increased by ₹1,255.31 million, or 40.29%, to ₹4,371.19 million for Fiscal 2022 from
₹3,115.88 million for Fiscal 2021. The primary reasons for this increase are discussed below.

• Provision towards NPA/write offs increased by ₹1,321.02 million, or 69.99%, to ₹3,208.42 million for Fiscal 2022
from ₹1,887.40 million for Fiscal 2021. The primary reason for the increase in the provision towards NPA/write offs
was a ₹1,870.77 million, or 96.21%, increase in additions during the year to ₹3,815.32 million for Fiscal 2022 from
₹1,944.55 million for Fiscal 2021, which was due to gross NPAs increasing to ₹9,495.94 million as at March 31, 2022
from ₹5,639.97 million as at March 31, 2021, which increase was primarily due to cash flows disbursed to the
borrowers on account of the COVID-19 pandemic.

• Provision towards other provisions and contingencies increased by ₹92.19 million to ₹35.37 million for Fiscal 2022
compared to a write-back of ₹56.82 million for Fiscal 2021. The primary reasons for this increase were due to a write-
back of provision in Fiscal 2021 for wage arrears of ₹48.00 million and also a write-back of provision in Fiscal 2021
for pending claims from insurance companies on the demise of borrowers amounting to ₹6.90 million as compared to
the requirement of provision for pending claims from insurance companies on the demise of borrowers of ₹29.00
million during Fiscal 2022.

The above increases were partially offset by our provision made towards current tax expenses decreasing by ₹117.48 million,
or 19.50%, to ₹485.00 million for Fiscal 2022 from ₹602.48 million for Fiscal 2021. The primary reasons for this decrease was
a 47.76% decrease in our Net Profit Before Tax (net profit for the year plus provisions made towards income tax) to ₹738.50
million for Fiscal 2022 from ₹1,413.73 million for Fiscal 2021. In addition, we had a deferred tax credit of ₹293.82 million for
Fiscal 2022 compared to a deferred tax credit of ₹242.70 million for Fiscal 2021. Our deferred tax credits in Fiscals 2022 and
2021 were primarily due to provisions towards standard advances. As a result of the foregoing, our total provision made towards
income tax decreased by ₹168.60 million, or 46.86%, to ₹191.18 million for Fiscal 2022 from ₹359.78 million for Fiscal 2021.
Our total provisions made towards income tax as a percentage of Net Profit Before Tax were 25.89% and 25.45% for Fiscals
2022 and 2021, respectively, compared to the applicable corporate income tax of 25.17% (including applicable surcharges and
cess) for both Fiscals 2022 and 2021.

Net Profit for the Year

As a result of the above, our net profit for the year decreased by ₹506.64 million, or 48.07%, to ₹547.32 million for Fiscal 2022
from ₹1,053.96 million for Fiscal 2021.

Earnings per Share for the Year

The table below sets out the calculations for our earnings per share for Fiscals 2022 and 2021.

Particulars Fiscal 2022 Fiscal 2021

Net profit attributable to equity shareholders [A] (₹ in
million) 547.32 1,053.96
Weighted average number of Equity Shares used in
computation of basic earnings per share [B] (₹ in million) 449.47 427.80
Basic earnings per share [C] = [A]/[B] (₹) 1.22 2.46

Our basic earnings per share decreased by ₹1.24, to ₹1.22 for Fiscal 2022 from ₹2.46 for Fiscal 2021, which decrease was
primarily due to the decrease in our net profit for the year by ₹506.64 million, to ₹547.32 million for Fiscal 2022 from ₹1,053.96
million for Fiscal 2021.

Financial Condition

Statement of Assets and Liabilities

Our assets as at the period/year end are set out below:

Particulars As at June 30, As at March 31,

2023 2023 2022 2021
(₹ in million)
Cash and Balances with the Reserve Bank of India 8,212.69 7,395.48 13,006.68 16,180.72
Balance with Banks and Money at Call and Short Notice 655.45 275.01 2,112.36 2,010.54
Investments 48,821.17 48,885.28 40,702.98 19,320.69
Advances 143,215.54 139,243.31 116,370.05 81,675.86
Fixed Assets 1,872.56 1,879.27 1,594.75 1,385.12
Other Assets 5,182.00 4,558.22 3,288.82 2,813.59
Total Assets 207,959.41 202,236.57 177,075.64 123,386.52

Cash and Balances with the Reserve Bank of India

404
Cash and balances with the RBI decreased to ₹13,006.68 million as at March 31, 2022 from ₹16,180.72 million as at March 31,
2021 primarily due to a decrease in balances with the RBI in other accounts from ₹11,900.00 million as at March 31, 2021 to
₹6,340.00 million as at March 31, 2022 which was primarily due to higher excess liquidity parked with RBI in reverse repo
transactions during Fiscal 2021. Cash and balances with the RBI decreased further to ₹7,395.48 million as at March 31, 2023
primarily due to a decrease in balances with the RBI in other accounts from ₹6,340.00 million as at March 31, 2022 to nil as at
March 31, 2023 which was primarily due to higher excess liquidity parked with RBI in reverse repo transactions during Fiscal
2022. This decrease was partially offset by an increase in cash in hand, from ₹1,466.22 million as at March 31, 2022 to ₹1,544.46
million as at March 31, 2023. Cash and balances with the RBI increased to ₹8,212.69 million as at June 30, 2023 from ₹7,395.48
million as at March 31, 2023 primarily due to the increase in balances with RBI current account to ₹6,296.13 million as at June
30, 2023 from ₹5,851.02 million as at March 31, 2023.

Balances with Banks and Money at Call and Short Notice

Balances with banks and money at call and short notice increased to ₹2,112.36 million as at March 31, 2022 from ₹2,010.54
million as at March 31, 2021 primarily due to an increase in money at call and short notice to ₹1,750.00 million as at March 31,
2022 from nil as at March 31, 2021. This increase was partially offset by a decrease in balances with banks in current accounts
from ₹2,007.23 million as at March 31, 2021 to ₹356.11 million as at March 31, 2022. Balances with banks and money at call
and short notice decreased to ₹275.01 million as at March 31, 2023 primarily due to a decrease in money at call and short notice
to nil as at March 31, 2023 from ₹1,750.00 million as at March 31, 2022 and the decrease in balances with banks in current
accounts from ₹356.11 million as at March 31, 2022 to ₹268.76 million as at March 31, 2023. Balance with banks and money
at call and short notice increased to ₹655.45 million as at June 30, 2023 from ₹275.01 million as at March 31, 2023 primarily
due to the increase in balances with other banks in current account to ₹649.20 million as at June 30, 2023 from ₹268.76 million
as at March 31, 2023.

Investments

Our investments increased to ₹40,702.98 million as at March 31, 2022 from ₹19,320.69 million as at March 31, 2021 primarily
due to an increase in Government securities to ₹39,940.96 million as at March 31, 2022 from ₹18,889.75 million as at March
31, 2021 and an increase in others from ₹349.27 million as at March 31, 2021 to ₹608.09 million as at March 31, 2022. Our
investments further increased to ₹48,885.28 million as at March 31, 2023 primarily due to an increase in Government securities
to ₹47,421.02 million as at March 31, 2023 from ₹39,940.96 million as at March 31, 2022, and an increase in others from
₹608.09 million as at March 31, 2022 to ₹1,347.64 million as at March 31, 2023. Our investments decreased to ₹48,821.17
million as at June 30, 2023 from ₹48,885.28 million as at March 31, 2023 primarily due to the decrease in investments from
mutual funds and certificate of deposits to ₹1,725.32 million as at June 30, 2023 from ₹2,062.24 million as at March 31, 2023.

Advances

The table below sets forth our advances (net of provisions) by (i) Micro Loans (comprising our Microfinance Loans and Other
Micro Loans) and (ii) other loans (comprising (a) retail loans, (b) MSME loans, (c) loans to financial institutions and (d)
agricultural loans (collectively, “Other Loans”)) as at the dates indicated.

Advances (net As at June 30, % increase / As at March % increase / As at March % increase / As at March
of provisions) 2023 (decrease) 31, 2023 (decrease) 31, 2022 (decrease) 31, 2021
(₹ in million) from March (₹ in million) from March (₹ in million) from March (₹ in million)
31, 2023 31, 2022 31, 2021
Micro Loans(1) 99,812.39 1.07 98,751.17 5.70 93,429.52 35.39 69,006.54
Other Loans 43,403.15 7.19 40,492.14 76.50 22,940.53 81.07 12,669.32
Total 143,215.54 2.85 139,243.31 19.66 116,370.05 42.48 81,675.86
Note:
(1) Our Micro Loans comprise our Microfinance Loans and Other Micro Loans. Microfinance Loans and Other Micro Loans are provided
to individuals without being secured by collateral. In order to be given a loan, an individual must be part of a sub-group, which usually
comprises two to 10 people. One to five sub-groups combine to form a “sangam”. The sangam facilitates the repayment process and other
activities among the individuals by holding meetings at regular intervals with sangam members. Until the introduction of the RBI Regulatory
Framework for Microfinance Loans Direction, 2022, we considered all of our loans to individuals who were members of a sub-group to be
Micro Loans. Effective October 17, 2022, we segregated our Micro Loans into Microfinance Loans and Other Micro Loans.

Our advances (net of provisions) increased to ₹116,370.05 million as at March 31, 2022 from ₹81,675.86 million as at March
31, 2021, which increase was due to a ₹24,422.98 million, or 35.39%, increase in Micro Loans and a ₹10,721,21 million, or
81.07%, increase in Other Loans. Our advances (net of provisions) increased from ₹116,370.05 million as at March 31, 2022
to ₹139,243.31 million as at March 31, 2023, which increase was due to a ₹17,551.61 million, or 76.50%, increase in Other
Loans and a ₹5,321.64 million, or 5.70%, increase in Micro Loans. Our advances (net of provisions) increased from ₹139,243.31
million as at March 31, 2023 to ₹143,215.54 million as at June 30, 2023, which increase was due to a ₹1,061.22 million, or
1.07%, increase in Other Loans and a ₹2,911.01 million, or 7.19%, increase in Micro Loans.

Due to the nation-wide lockdown implemented in response to the COVID-19 pandemic, disbursement activities for all loans
were almost stopped entirely during the month of April and were severely curtailed in May 2020. Effective June 1, 2020, loan
disbursement activities started functioning again in most of the centres, except in those areas where the effect of COVID-19
was severe and the respective state governments imposed restrictions on various activities. For a table a showing our
405
disbursements for various months and periods, see “– Significant Factors Affecting Our Financial Condition, Results of
Operations and Cash Flows – Effects of the COVID-19 Pandemic – Effects of the Moratorium and the Supreme Court’s Orders”
on page 382.

Fixed Assets

Our fixed assets, which primarily comprise office equipment, computers, furniture & fixtures, motor vehicles and servers,
increased from ₹1,385.12 million as at March 31, 2021 to ₹1,594.75 million as at March 31, 2022, and increased to ₹1,879.27
million as at March 31, 2023. These increases were primarily due to the purchase of office equipment, computers, furniture &
fixtures for new banking outlets and purchase of IT assets/ software and other constructions at our corporate office. We had
550 Branches as at March 31, 2021, 573 Branches as at March 31, 2022 and 641 Branches as at March 31, 2023. Our fixed
assets decreased to ₹1,872.56 million as at June 30, 2023 from ₹1,879.27 million as at March 31, 2023, which decrease was
due to depreciation,

Other Assets

Our other assets primarily comprise: (1) interest accrued, (2) tax paid in advance / tax deducted at source (net of provision), (3)
deferred tax asset (net) and (4) others (e.g., GST input credit, security deposits, NEFT/RTGS settlement receivable and prepaid
expenses).

Our other assets increased to ₹3,288.82 million as at March 31, 2022 from ₹2,813.59 million as at March 31, 2021 due to an
increase in (i) interest accrued from ₹678.07 million as at March 31, 2021 to ₹1,091.55 million as at March 31, 2022 on account
of the increase in our investment in Government securities and the corresponding interest accrued thereon increasing from
₹282.55 million as at March 31, 2021 to ₹679.15 million as at March 31, 2022; and (ii) deferred tax asset (net) from ₹356.30
million as at March 31, 2021 to ₹650.12 million as at March 31, 2022, which was due to an increase in provision for standard
assets from ₹1,241.42 million as at March 31, 2021 to ₹2,177.65 million as at March 31, 2022. Our other assets increased
further to ₹4,558.22 million as at March 31, 2023 due to an increase in (i) interest accrued from ₹1,091.55 million as at March
31, 2022 to ₹2,140.80 million as at March 31, 2023 on account of the increase on interest accrued but not due on advances from
₹408.30 million for Fiscal 2022 to ₹1,368.59 million for Fiscal 2023; and (ii) others from ₹1,270.91 million as at March 31,
2022 to ₹1,915.21 million as at March 31, 2023 due to input credit under goods and service tax law of ₹960.67 million as at
March 31, 2023 as compared to ₹715.94 million at March 31, 2022 and receivables of amount collected by business
correspondents of ₹293.67 million as at March 31, 2023 as compared to ₹0.66 million at March 31, 2023. Our other assets
increased to ₹5,182.00 million as at June 30, 2023 from ₹4,558.22 million as at March 31, 2023 primarily due to the increase
in interest on interest accrued on investment or loans to ₹2,245.37 million as at June 30, 2023 from ₹2,140.80 million as at
March 31, 2023.

Capital and Liabilities

The table below sets forth our capital and liabilities as at the dates indicated:

Particulars As at June 30, As at March 31,

2023 2023 2022 2021
(₹ in million)
Capital 4,494.74 4,494.74 4,494.74 4,494.74
Employee Stock Options Outstanding 58.10 58.75 48.06 –
Reserves and Surplus 13,896.19 12,596.55 9,573.22 9,025.90
Deposits 156,558.54 146,656.25 128,150.72 89,994.26
Borrowings 27,391.25 33,541.95 29,528.33 16,940.00
Other Liabilities and Provisions 5,560.59 4,888.33 5,280.57 2,931.62
Total 207,959.41 202,236.57 177,075.64 123,386.52

Reserves and Surplus

Our reserves and surplus are influenced by changes in our share premium due to the issuances or cancellation of Equity Shares
and changes in our balance in profit and loss account due to the net profit or loss recorded for the applicable period or fiscal
year.

Our reserves and surplus increased from ₹9,025.90 million as at March 31, 2021 to ₹9,573.22 million as at March 31, 2022,
which increase was due to an increase in our balance in restated profit and loss account from ₹3,062.43 million as at March 31,
2021 to ₹3,214.96 million as at March 31, 2022. Our reserves and surplus increased further to ₹12,596.55 million as at March
31, 2023, which increase was due to an increase in our balance in restated profit and loss account from ₹3,214.96 million as at
March 31, 2022 to ₹5,420.22 million as at March 31, 2023. Our reserves and surplus increased from ₹12,596.55 million as at
March 31, 2023 to ₹13,896.19 million as at June 30, 2023 due to profit accumulated for the three months period ended June 30,
2023 amounting to ₹1,299.64 million.

Deposits

406
For a table setting forth deposits by categories of deposits and certain ratios thereof and the percentage change from the previous
year end, see “Our Business – Our Strengths – Growing Retail Deposits portfolio” on page 194.

We have been able to leverage the strength of the “ESAF” brand, which has been built over a period of more than 25 years, to
rapidly grow our deposit portfolio since we commenced operations. As per the CRISIL MI&A Report, we had the highest share
of Retail Deposits as a percentage of our total deposits as at March 31, 2023 among our compared peers. As an NBFC-MFI,
EFHPL, our corporate promoter, was unable to accept deposits as per applicable laws in India. After acquiring the business of
EFHPL, our corporate promoter, on March 10, 2017, we have placed a strong emphasis on increasing our Retail Deposits, as
they have lower rates of interest compared to Bulk Deposits. Our Retail Deposits, which is a non-GAAP financial measure,
have increased to ₹133,230.03 million as at March 31, 2023 from ₹87,963.84 million as at March 31, 2021, representing a
CAGR of 23.07%, and further increased to ₹139,772.67 million as at June 30, 2023, representing an increase of 4.91%. As at
June 30, 2023, our Retail Deposits accounted for 89.28% of our total deposits. CASA tends to provide a stable and low-cost
source of deposits compared to term deposits. Our CASA, which is a non-GAAP financial measure, increased to ₹31,374.47
million as at March 31, 2023 from ₹17,476.45 million as at March 31, 2021, representing a CAGR of 33.99%, and further
decreased to ₹28,519.70 million as at June 30, 2023, representing a decrease of 9.10%.

Borrowings

The following table sets forth details of our borrowings as at dates indicated.

Particulars As at June 30, As at March 31,

2023 2023 2022 2021
(₹ in million)
Borrowings in India:
Reserve Bank of India 5,530.00 6,740.00 6,960.00 1,460.00
Other banks – – – –
Other institutions and agencies 19,931.25 24,871.95 20,488.33 13,100.00
Subordinated debt 1,450.00 1,450.00 1,600.00 1,900.00
Perpetual debt instrument 480.00 480.00 480.00 480.00
Borrowings outside India – – – –
Total 27,391.25 33,541.95 29,528.33 16,940.00

Our borrowings increased from ₹16,940.00 million as at March 31, 2021 to ₹29,528.33 million as at March 31, 2022, which
increase primarily on account of an increase in borrowings in India from (i) other institutions and agencies from ₹13,100.00
million as at March 31, 2021 to ₹24,871.95 million as at March 31, 2022; and (ii) the Reserve Bank of India from ₹1,460.00
million as at March 31, 2021 to ₹6,960.00 million as at March 31, 2022.

Our borrowings increased from ₹29,528.33 million as at March 31, 2022 to ₹33,541.95 million as at March 31, 2023 on account
of an increase in borrowings in India from other institutions and agencies from ₹20,488.33 million as at March 31, 2022 to
₹24,640.15 million as at March 31, 2023, which was partially offset by the decrease in borrowings in India from the Reserve
Bank of India from ₹6,960.00 million as at March 31, 2022 to ₹6,740.00 million as at March 31, 2023.

Our borrowings decreased from ₹33,541.95 million as at March 31, 2023 to ₹27,391.25 million as at June 30, 2023 on account
of a decrease in borrowings in India from other institutions and agencies from ₹24,871.95 million as at March 31, 2023 to
₹19,931.25 million as at June 30, 2023, and a decrease in borrowings in India from the RBI from ₹6,740.00 million as at March
31, 2023 to ₹5,530.00 million as at June 30, 2023.

Other Liabilities and Provisions

The table below sets forth details of our other liabilities and provisions as at the dates indicated.

Particulars As at June 30, As at March 31,

2023 2023 2022 2021
(₹ in million)
Bills payable 32.91 49.67 36.48 26.26
Inter office adjustments (net) – – – –
Interest accrued 594.22 556.44 407.92 219.11
Provision for Standard Assets 860.22 896.57 2,177.65 1,241.42
Others (including provisions) 4,073.24 3,385.65 2,658.52 1,444.83
Total 5,560.59 4,888.33 5,280.57 2,931.62

Other liabilities and provisions increased from ₹2,931.62 million as at March 31, 2021 to ₹5,280.57 million as at March 31,
2022, which increase was primarily due to (i) a 84.00% increase in others (including provisions) from ₹1,444.83 million as at
March 31, 2021 to ₹2,658.52 million as at March 31, 2022, which was primarily due to income received in advance included
in others of ₹922.78 million as at March 31, 2022 compared with ₹210.35 million as at March 31, 2021; and (ii) a 75.42%
increase in provision for standard assets from ₹1,241.42 million as at March 31, 2021 to ₹2,177.65 million as at March 31,
2022, which included a provision of ₹660.70 million as at March 31, 2022 against the potential impact of COVID-19 compared
to ₹404.00 million for the same as at March 31, 2021.
407
Other liabilities and provisions decreased from ₹5,280.57 million as at March 31, 2022 to ₹4,888.33 million as at March 31,
2023, which decrease was primarily due to a 58.83% decrease in provision for standard assets from ₹2,177.65 million as at
March 31, 2022 to ₹896.57 million as at March 31, 2023, which decrease was primarily due to the write-back of provisions for
Standard Assets on account of the COVID-19 pandemic and the write-back of provisions for restructured advances on account
of recovery or the downgrading of advances to NPA. This decrease was partially offset by, among other things, a 27.35%
increase in others (including provisions) from ₹2,658.52 million as at March 31, 2022 to ₹3,385.65 million as at March 31,
2023, which increase was primarily due to the increase in recognition of accounts payable to an asset reconstruction company
of ₹422.29 million as at March 31, 2023 from nil as at March 31, 2022, which was a result of our bank selling certain
NPAs/advances to an asset reconstruction company and acting as collection agent for the same.

Other liabilities and provisions increased from ₹4,888.33 million as at March 31, 2023 to ₹5,560.59 million as at June 30, 2023,
which increase was primarily due to the increase in recognition of accounts payable to an asset reconstruction company from
₹422.29 million as at March 31, 2023 to ₹830.88 million as at June 30, 2023 and liability due to certain vendors for various
services received by our Bank from ₹1,057.11 million as at March 31, 2023 to ₹1,323.09 million as at June 30, 2023.

Our Business Segments

We have identified our business segments, segregating into Treasury, Wholesale Banking, Retail Banking and Other Banking
Segments after considering the internal business reporting system and guidelines issued by the RBI through its notification
DBOD.No.BP.BC.81/21.01.018/2006-07 dated April 18, 2007 and Accounting Standard 17 (AS 17) – ‘Segment Reporting’.
We operate in the following business segments:

• Treasury. The Treasury segment primarily consists of interest earnings on our investments portfolio, gains or losses
on investment operations and earnings from our foreign exchange business. The principal expenses of the segment
consist of interest expense allocated on funds borrowed/deposits received and other expenses. The segment also
includes allocation of deposits received from customers.

• Wholesale Banking. The Wholesale Banking segment provides loans to the corporate segment identified based on RBI
guidelines. Revenues from this segment consist of interest earned on loans made to corporate customers and the
charges/fees earned from other banking services. The principal expenses of the segment consist of interest expense
allocated on funds borrowed/deposits received and other expenses.

• Retail Banking. The Retail Banking segment provides loans to non-corporate customers identified based on RBI
guidelines and also include deposits from customers. Revenues of this segment consist of interest earned on loans
made to non-corporate customers and the charges/fees earned from other banking services. The principal expenses of
the segment consist of interest expense allocated on funds borrowed/deposits received and other expenses.

• Other Banking Operations. The Other Banking Operations segment includes income from para banking activities,
such as debit cards, third-party product distribution and associated costs.

Our segment results and segment revenue for each of our business segments are set forth in the table below for the periods and
Fiscals indicated:

Particulars Treasury Wholesale Banking Retail Banking Other Banking Total

Operations
Segment Segment Segment Segment Segment Segment Segment Segment Segment Segment
Revenue Results Revenue Results Revenue Results Revenue Results Revenue Results
(₹ in million)
Three
months
period
ended June
30, 2023 896.82 183.81 200.84 71.70 8,655.81 1,325.98 164.29 155.97 9,917.75 1,737.46
Three
months
period
ended June
30, 2022 466.65 (173.58) 118.12 57.72 6,690.05 1,428.12 108.42 104.42 7,383.24 1,416.68
Fiscal 2023 2,471.94 (276.48) 576.71 283.10 27,870.56 3,591.59 496.51 462.24 31,415.72 4,060.45
Fiscal 2022 2,342.22 (61.32) 344.11 150.81 18,427.24 302.81 361.51 346.20 21,475.08 738.50
Fiscal 2021 1,925.31 13.86 167.58 59.65 15,372.14 1,150.42 219.18 189.81 17,684.21 1,413.74

Treasury

Three months period ended June 30, 2023 Compared to Three months period ended June 30, 2022

The Treasury segment results increased by ₹357.39 million, or 205.89%, to ₹183.81 million for the three months period ended
June 30, 2023 from a loss of ₹173.58 million for the three months period ended June 30, 2022, which increase was primarily

408
due to (i) an increase in profit on revaluation of investments (net) to ₹52.26 million for the three months period ended June 30,
2023 from a loss of ₹304.28 million for the three months period ended June 30, 2022; and (ii) an increase in profit on sale of
investments from ₹44.21 million for the three months period ended June 30, 2022 to ₹62.41 million for the three months period
ended June 30, 2023.

Fiscal 2023 Compared to Fiscal 2022

The Treasury segment results decreased by ₹215.16 million, or 350.88%, to ₹(276.48) million for Fiscal 2023 from ₹(61.32)
million for Fiscal 2022, which decrease was primarily (i) on account of provision made for mark to market losses on government
securities as per the RBI guidelines, which resulted in an expense of ₹913.88 million being recognised during Fiscal 2023 as
compared to a write-back of provisions of ₹233.06 million during Fiscal 2022; and (ii) due to a decrease in the Average Interest-
Earning Balance with the Reserve Bank of India and other Inter-Bank Funds of ₹6,374.23 million, or 70.87%, to ₹2,620.05
million for Fiscal 2023 from ₹8,994.48 million for Fiscal 2022, which is partially offset by increase in the Yield on Interest-
Earning Balance with the Reserve Bank of India and other Inter-Bank Funds to 3.65% for Fiscal 2023 from 2.77% for Fiscal
2022.

Fiscal 2022 Compared to Fiscal 2021

The Treasury segment results decreased by ₹75.18 million, or 542.42%, to ₹(61.32) million for Fiscal 2022 from ₹13.86 million
for Fiscal 2021, which decrease was primarily (i) on account of provision made for mark to market losses on government
securities as per the RBI guidelines, which resulted in an expense of ₹233.06 million being recognised during Fiscal 2022 as
compared to a write-back of provisions of ₹11.44 million during Fiscal 2021; and (ii) due to a decrease in the Average Interest-
Earning Balance with the Reserve Bank of India and other Inter-Bank Funds of ₹1,188.00 million, or 11.67%, to ₹8,994.48
million for Fiscal 2022 from ₹10,182.48 million for Fiscal 2021 and the decrease in the Yield on Interest-Earning Balance with
the Reserve Bank of India and other Inter-Bank Funds to 2.77% for Fiscal 2022 from 3.86% for Fiscal 2021.

Wholesale Banking Operations

Three months period ended June 30, 2023 Compared to Three months period ended June 30, 2022

The Wholesale segment results increased by ₹13.98 million, or 24.22%, to ₹71.70 million for the three months period ended
June 30, 2023 from ₹57.72 million for the three months period ended June 30, 2022. This increase was primarily due to the
increase in wholesale segment assets from ₹3,830.81 million as at June 30, 2022 to ₹6,232.07 million as at June 30, 2023 and
an increase in our segment revenue from ₹118.12 million for three months period ended June 30, 2022 to ₹200.84 million for
the three months period ended June 30, 2023.

Fiscal 2023 Compared to Fiscal 2022

The Wholesale segment results increased by ₹132.29 million, or 87.65%, to ₹283.10 million for Fiscal 2023 from ₹150.81
million for Fiscal 2022. This increase was primarily due to a ₹232.60 million, or 67.59%, increase in segment revenue to
₹576.71 million for Fiscal 2023 from ₹344.11 million for Fiscal 2022.

Fiscal 2022 Compared to Fiscal 2021

The Wholesale segment results increased by ₹91.16 million, or 152.82%, to ₹150.81 million for Fiscal 2022 from ₹59.65 million
for Fiscal 2021. This increase was primarily due to a ₹176.53 million, or 105.34%, increase in segment revenue to ₹344.11
million for Fiscal 2022 from ₹167.58 million for Fiscal 2021.

Retail Banking

Three months period ended June 30, 2023 Compared to Three months period ended June 30, 2022

The Retail Banking segment results decreased by ₹102.14 million, or 7.15%, to ₹1,325.98 million for the three months period
ended June 30, 2023 from ₹1,428.12 million for the three months period ended June 30, 2022. This decrease was primarily due
to a ₹1,965.76 million, or 29.38%, increase in segment revenue to ₹8,655.81 million for three months period ended 30 June
2023 from ₹6,690.05 million for three months period ended 30 June 2022. The increase in revenue was partially offset by a
₹2,067.90 million, or 39.30%, increase in segment expenditure to ₹7,329.83 million for three months period ended 30 June
2023 from ₹5,261.93 million for three months period ended 30 June 2022.

Fiscal 2023 Compared to Fiscal 2022

The Retail Banking segment results increased by ₹3,387.78 million, or 1,662.22%, to ₹3,591.59 million for Fiscal 2023 from
₹302.81 million for Fiscal 2022, which increase was primarily due to a ₹9,443.32 million, or 51.25%, increase in segment
revenue to ₹27,870.56 million for Fiscal 2023 from ₹18,427.24 million for Fiscal 2022, which was primarily due to a 28.11%
increase in Average Interest-Earning Advances of the Retail Banking segment to ₹121,161.91 million for Fiscal 2023 from
₹94,573.77 million for Fiscal 2022 and also on account of increase in interest rates in Fiscal 2023. The increase in revenue was
partially offset by a ₹6,154.54 million, or 33.96%, increase in segment expenditure to ₹24,278.97 million for Fiscal 2023 from
₹18,124.43 million for Fiscal 2022, which was primarily due to a ₹692.35 million, or 16.59% increase in provision on Standard
409
Assets and provision on NPA/write-off (combined) of the Retail Banking segment to ₹4,866.48 million for Fiscal 2023 from
₹4,174.13 million for Fiscal 2022.

Fiscal 2022 Compared to Fiscal 2021

The Retail Banking segment results decreased by ₹847.61 million, or 73.68%, to ₹302.81 million for Fiscal 2022 from
₹1,150.42 million for Fiscal 2021, which decrease was primarily due to a ₹3,902.71 million, or 27.44%, increase in segment
expenditure to ₹18,124.43 million for Fiscal 2022 from ₹14,221.72 million for Fiscal 2021, which was primarily due to a
₹1,447.29 million, or 53.08% increase in provision on standard assets and provision on NPA/write-off (combined) of the Retail
Banking segment to ₹4,174.13 million for Fiscal 2022 from ₹2,726.84 million for Fiscal 2021. The increase in expenditure was
partially offset by a ₹3,055.10 million, or 19.87%, increase in segment revenue to ₹18,427.24 million for Fiscal 2022 from
₹15,372.14 million for Fiscal 2021, which was primarily due to a 29.83% increase in Average Interest-Earning Advances of
the Retail Banking segment to ₹94,573.77 million for Fiscal 2022 from ₹72,842.52 million for Fiscal 2021.

Other Banking Operations

Three Months Period ended June 30, 2023 Compared to Three Months Period ended June 30, 2022

The Other Banking Operations segment results increased by ₹51.55 million, or 49.37%, to ₹155.97 million for the three months
period ended June 30, 2023 from ₹104.42 million for the three months period ended June 30, 2022. This increase was primarily
due to a ₹55.87 million, or 51.53%, increase in segment revenue to ₹164.29 million for three months period ended June 30,
2022 from ₹108.29 million for three months period ended June 30, 2022.

Fiscal 2023 Compared to Fiscal 2022

The Other Banking Operations segment results increased by ₹116.04 million, or 33.52%, to ₹462.24 million for Fiscal 2023
from ₹346.20 million for Fiscal 2022. This increase was primarily due to a ₹135.00 million, or 37.34%, increase in segment
revenue to ₹496.51 million for Fiscal 2023 from ₹361.51 million for Fiscal 2022.

Fiscal 2022 Compared to Fiscal 2021

The Other Banking Operations segment results increased by ₹156.39 million, or 82.39%, to ₹346.20 million for Fiscal 2022
from ₹189.81 million for Fiscal 2021. This increase was primarily due to a ₹142.33 million, or 64.94%, increase in segment
revenue to ₹361.51 million for Fiscal 2022 from ₹219.18 million for Fiscal 2021.

Liquidity and Capital Resources

In the past, we have funded our liquidity and capital requirements primarily through shareholder capital and funds generated
from deposits, borrowings from other institutions, subordinated debt, borrowings from other banks and perpetual debt
instruments.

Cash Flows

The following table summarises our statements of cash flows for the periods and years presented:

Particulars Three months period ended June 30,

2023 2022
(₹ in million)
Net cash flow from / (used in) Operating Activities 7,057.89 3,063.26
Net cash flow from / (used in) Investing Activities 290.46 (3,036.86)
Net cash flow from / (used in) Financing Activities (6,150.70) (3,973.33)
Net increase / (decrease) in cash and cash equivalents 1,197.65 (3,946.93)

Particulars Year ended March 31,

2023 2022 2021
(₹ in million)
Net cash flow from / (used in) Operating Activities (5,730.00) (5,845.02) 11,274.45
Net cash flow from / (used in) Investing Activities (5,732.17) (9,818.47) (6,379.55)
Net cash flow from / (used in) Financing Activities 4,013.62 12,588.33 6,532.70
Net increase / (decrease) in cash and cash equivalents (7,448.55) (3,075.16) 11,427.60

Operating Activities

For the three months period ended June 30, 2023, our operating profit before working capital changes was ₹3,037.32 million
and our net cash from operating activities was ₹7,057.89 million. The difference was due to an increase in advances of ₹5,261,44
million, an increase in investments (other than HTM investments) of ₹243.50 million, an increase in other assets of ₹726.60

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million and direct taxes paid of ₹257.28 million, which was partially offset by an increase in deposits of ₹9,902.31 million and
an increase in other liabilities and provisions of ₹607.08 million.

For the three months period ended June 30, 2022, our operating profit before working capital changes was ₹2,641.88 million
and our net cash from operating activities was ₹3,063.26 million. The difference was due to an increase in advances of ₹593.21
million, an increase in investments (other than HTM investments) of ₹4,986.02 million, an increase in other assets of ₹543.20
million and direct taxes paid of ₹102.26 million, which was partially offset by an increase in deposits of ₹6,426.73 million and
an increase in other liabilities and provisions of ₹219.94 million.

For Fiscal 2023, our operating profit before working capital changes was ₹10,243.99 million and our net cash used in operating
activities was ₹5,730.00 million. The difference was due to an increase in advances of ₹29,031.17 million, an increase in
investments (other than HTM investments) of ₹3,976.14 million, an increase in other assets of ₹1,693.47 million and direct
taxes paid of ₹613.04 million, which was partially offset by an increase in deposits of ₹18,505.51 million and an increase in
other liabilities and provisions of ₹834.32 million.

For Fiscal 2022, our operating profit before working capital changes was ₹5,169.58 million and our net cash used in operating
activities was ₹5,845.02 million. The difference was due to an increase in advances of ₹37,900.94 million, an increase in
investments (other than HTM investments) of ₹11,979.40 million, an increase in other assets of ₹497.39 million and direct taxes
paid of ₹169.02 million, which was partially offset by an increase in deposits of ₹38,156.46 million and an increase in other
liabilities and provisions of ₹1,378.63 million.

For Fiscal 2021, our operating profit before working capital changes was ₹4,305.14 million and our net cash generated from
operating activities was ₹11,274.45 million. The difference was due to an increase in deposits of ₹19,710.44 million, a decrease
in investments (other than HTM investments) of ₹4,075.38 million, a decrease in fixed deposit with bank (original maturity
greater than three months) of ₹2,264.25 million and an increase in other liabilities and provisions of ₹521.25 million, which
was partially offset by an increase in advances of ₹18,084.91 million, direct taxes paid of ₹1,093.07 million and an increase in
other assets of ₹424.03 million.

Investing Activities

Net cash from investing activities was ₹290.46 million for the three months period ended June 30, 2023, which was primarily
due to a decrease in held to maturity investments of ₹406.18 million, which was partially offset by the purchase of fixed assets
amounting to ₹119.34 million.

Net cash used in investing activities was ₹3,036.86 million for the three months period ended June 30, 2022, which was
primarily due to an increase in held to maturity investments by ₹2,882.21 million, which was partially offset by the purchase
of fixed assets amounting to ₹154.67 million.

Net cash used in investing activities was ₹5,732.17 million for Fiscal 2023, which was primarily due to an increase in held to
maturity investments of ₹5,026.38 million and ₹716.51 million used for the purchase of fixed assets.

Net cash used in investing activities was ₹9,818.47 million for Fiscal 2022, which was primarily due to an increase in held to
maturity investments of ₹9,281.16 million and ₹540.14 million used for the purchase of fixed assets.

Net cash used in investing activities was ₹6,379.55 million for Fiscal 2021, which was primarily due to an increase in held to
maturity investments of ₹5,886.43 million and ₹495.01 million used for the purchase of fixed assets.

Financing Activities

Net cash used in financing activities was ₹6,150.70 million for the three months period ended June 30, 2023, which was due to
a decrease in our borrowings by ₹6,150.70 million.

Net cash used in financing activities was ₹3,973.33 million for the three months period ended June 30, 2022, which was due to
a decrease in our borrowings by ₹3,973.33 million.

Net cash from financing activities was ₹4,013.62 million for Fiscal 2023, which was due to an increase in borrowings of
₹4,013.62 million.

Net cash from financing activities was ₹12,588.33 million for Fiscal 2022, which was due to an increase in borrowings of
₹12,588.33 million.

Net cash from financing activities was ₹6,532.70 million for Fiscal 2021, which was due to an increase in borrowings of
₹4,906.83 million and proceeds from the issue of share capital (including share premium) of ₹1,625.87 million.

Sources of Funding

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Our primary source of funding is our relatively low-cost deposit base, which is primarily derived from retail depositors in India.
Other sources of funding comprise subordinated debt, perpetual debt instruments and borrowings from other banks/financial
institutions.

The following table sets forth the breakdown of our funding profile as at the dates indicated:

Particulars As at June 30, 2023

Amount % of total liabilities
(₹ in million)
Deposits 156,558.54 75.28
Borrowings 27,391.25 13.17
Shareholders’ funds(1) 18,390.93 8.84
Other liabilities and
provisions 5,560.59 2.67
Employee share option
outstanding 58.10 0.03
Total liabilities 207,959.41 100.00
Note:
(1) Shareholders’ funds = Capital + Reserves and Surplus.

Particulars As at March 31,

2023 2022 2021
Amount % of total Amount % of total Amount % of total
(₹ in million) liabilities (₹ in million) liabilities (₹ in million) liabilities
Deposits 146,656.25 72.52 128,150.72 72.37 89,994.26 72.94
Borrowings 33,541.95 16.58 29,528.33 16.68 16,940.00 13.73
Shareholders’ funds(1) 17,091.29 8.45 14,067.96 7.94 13,520.64 10.96
Other liabilities and
provisions 4,888.33 2.42 5,280.57 2.98 2,931.62 2.37
Employee share option
outstanding 58.75 0.03 48.06 0.03 – –
Total liabilities 202,236.57 100.00 177,075.64 100.00 123,386.52 100.00
Note:
(1) Shareholders’ funds = Capital + Reserves and Surplus.

For more details on our deposits, borrowings and shareholders’ funds as the dates in the table above, see “– Financial Condition
– Capital and Liabilities” on page 406.

Maturity Profile of our Borrowings and Deposits

For the maturity profile of our borrowings and deposits as at June 30, 2023, see “Selected Statistical Information – Asset
Liability Gap” on page 289.

Subordinated Debt

We obtain funds from the issuance of unsecured non-convertible subordinated debt securities, which qualify as Tier II risk-
based capital under the RBI’s guidelines for assessing capital adequacy. Our subordinated debt was ₹1,450.00 million,
₹1,450.00 million, ₹1,600.00 million and ₹1,900.00 as at June 30, 2023, March 31, 2023, 2022 and 2021, respectively. We took
over ₹650.00 million of subordinated debt as per the Business Transfer Agreement. This has been considered as part of Tier II
Capital for capital adequacy computation, subject to discounting in accordance with RBI guidelines. The following table sets
forth the details of our unsecured non-convertible subordinated debt securities outstanding as at June 30, 2023.

Date of Allotment Rate of Interest (%) Date of Redemption Amount

(₹ in million)
September 27, 2017 11.00 September 27, 2024 250.00
November 29, 2017 11.00 November 29, 2024 200.00
June 1, 2018 11.50 June 1, 2025 400.00
December 30, 2017 10.50 December 30, 2024 200.00
March 28, 2018 11.50 March 28, 2025 200.00
March 31, 2022 11.25 March 30, 2032 200.00

Perpetual Debt

We issued perpetual debt of ₹480.00 million with an interest rate of 13.00% per annum on June 27, 2018, which qualifies for
Tier I risk-based capital.

Restrictive Covenants

Some of the financing arrangements entered into by us include conditions that require us to obtain respective lenders’ consent
prior to carrying out certain activities and entering into certain transactions and they also provide the lender the right appoint a
412
nominee on the board of directors of our Bank or to send an observer, in the absence of the nominee to attend meetings of the
Board of Directors. Further, under certain financing agreements, we are required to maintain specific credit ratings and if we
fail to do so, it would result in an event of default. We are also required to maintain certain financial ratios and ensure compliance
with regulatory requirements, such as maintenance of capital adequacy ratio, qualifying asset norms and ensure positive net
worth. For more details, see “Risk Factors – As at September 30, 2023, June 30, 2023 and March 31, 2023, 2022 and 2021 our
aggregate outstanding borrowings were ₹24,419.30 million, ₹27,391.25 million, ₹33,541.95 million, ₹29,528.33 million and
₹16,940.00 million, respectively. We are required to comply with certain restrictive covenants under our financing agreements.
Any non-compliance may lead to, amongst others, accelerated repayment schedule, securitization of assets charged and
suspension of further drawdowns, which may adversely affect our business, financial condition, results of operations and cash
flows” on page 80.

We are currently in compliance with the financial covenants contained in our financing agreements.

Financial Instruments and Off-Balance Sheet Arrangements

Inter-Bank Participation Certificates

A bank missing its priority sector lending target is able to reach the target by buying inter-bank participation certificates
(“IBPCs”) issued by other banks that have already exceeded their regulatory targets for priority sector advances. In accordance
with the applicable RBI guidelines, in the case of participation with risk, the aggregate amount of the participation issued by
our Bank is reduced from our advances. However, we include the amount of these advances in our AUM. IBPCs with risk
sharing can be issued for 91-180 days and only in respect of advances classified as standard. During the term of an IBPC, we
recognise interest spread (i.e. difference between interest earned on such advances less the interest payable to the bank that we
transferred the IPBC to. At the end of the term of a IBPC, the advances we transferred via the IBPC are recognised in our
accounting records. The table below sets forth the outstanding amount of IBPCs as at the dates indicated.

Particulars As at June 30, As at March 31,

2023 2023 2022 2021
(₹ in million)
Outstanding amount of IBPCs 17,900 12,000 2,000 –

Sale of NPAs to Asset Reconstruction Companies

We have sold NPAs to asset reconstruction companies (“ARCs”). Advances sold to ARCs are reduced from our advances.
However, as we are paid fees by the ARCs to act as the collection agent for these advances, we include the amount of advances
that we are acting as collection agent for in our AUM. The table below sets forth the amount of advances outstanding as at the
date of the sale of advances to ARC for which our Bank acts as a collection agent for advances outstanding as on date with
respect to transfer of portfolio to ARC for which Bank is acting as collection agent.

Particulars As at June 30, As March 31,

2023 2023 2022 2021
(₹ in million)
Amount of NPAs sold to ARCs outstanding 9,659.75 10,086.21 – –

Direct Assignments

Our bank has undertaken direct assignment transactions in the past and acts as collection agent for the same. Such direct
assignment transactions are included in our AUM. The table below sets forth the outstanding amount of direct assignment as at
the dates indicated.

Particulars As at June 30, As at March 31,

2023 2023 2022 2021
(₹ in million)
Outstanding amount of Direct Assignments 44.39 45.17 100.48 109.25

Securitised Advances

Our securitised advances were nil, nil, nil and nil as at June 30, 2023, March 31, 2023, 2022 and 2021, respectively.

Contingent Liabilities

The components of our contingent liabilities as per AS 29 – ‘Provisions, Contingent Liabilities and Contingent Assets’ as at
the year-end / period end indicated are set forth below:

413
Particulars As at June 30, As at March 31,
2023 2023 2022 2021
(₹ in million)
Claims against the Bank not acknowledged
as debts – – – –
Liability on account of outstanding forward
exchange contracts – – – –
Guarantees given on behalf of constituents –
in India 14.03 13.98 15.52 13.04
Acceptances, endorsements and other
obligations – – – –
Other items for which the Bank is
contingently liable 5.00 5.00 5.00 2.00
Contingent Liabilities 19.03 18.98 20.52 15.04

Capital Expenditures

Our capital expenditures are principally for fixed assets including furniture and fixtures. The table below sets forth our capital
expenditures (additions to fixed assets including furniture and fixtures) for the periods and Fiscals indicated.

Particulars Three months Three months

period ended period ended
June 30, 2023 June 30, 2022 Fiscal 2023 Fiscal 2022 Fiscal 2021
(₹ in million)
Capital expenditures (additions to fixed assets
including furniture and fixtures) 120.21 154.73 714.86 598.46 477.91

Related Party Transactions

We have engaged in the past, and may engage in the future, in transactions with related parties. For details of our related party
transactions as per AS 18 – ‘Related Party Disclosures’ read with the SEBI ICDR Regulations, see “Other Financial
Information – Related Party Transactions” on page 371. For a summary of these related party transactions, see “Offer Document
Summary – Summary of related party transactions” on page 25.

Non-cancellable Operating Lease Obligations

The table below sets forth our non-cancellable operating lease obligations as at June 30, 2023 for payments due in the specified
periods.

Contractual Obligations Payments due by period

Total Less than 1 year 1 year to 5 years More than 5
years
(₹ in million)
Non-cancellable operating lease obligations 4,272.35 596.40 2,888.59 787.36

Quantitative and Qualitative Disclosures about Market Risks

We did not have any transactions in derivative instruments for the three months period ended June 30, 2023 and 2022 and
Fiscals 2023, 2022 and 2021. We are exposed to various types of market risks during the normal course of business such as
credit risk, interest rate risk, liquidity risk, operational risk and information security risk and cyber security risk. For details of
our qualitative disclosure about market risks, see “Our Business – Risk Management – Market Risk Management” and “Risk
Factors – The ratio of (interest earned minus interest expended) (“Net Interest Income”) to (total interest-earning assets
(comprising interest-earning advances, interest earning investments (comprising government securities, treasury bills and
other interest earning securities) and interest-earning Balance with the Reserve Bank of India and other Inter-Bank Funds)
calculated on the basis of the average of the opening balance at the start of the relevant period/fiscal year and the closing
balance as at quarter end for all quarters in the relevant period/fiscal year) (“Average Total Interest-Earning Assets”) was
3.08% (not annualized), 2.69% (not annualized), 10.67%, 8.64% and 8.98% for the three months period ended June 30, 2023
and 2022 and Fiscals 2023, 2022 and 2021, respectively. Volatility in interest rates could cause our Net Interest Margin to
decline and adversely affect our results of operations and cash flows. In addition, an increase in interest rates results in a
decrease in the value of our fixed income investments and as a result of the Reserve Bank of India (RBI) mandated reserve
requirements, we are also more structurally exposed to this risk than banks in many other countries” on pages 213 and 60,
respectively.

Qualitative Factors

Unusual or Infrequent Events or Transactions

Except as described in this Red Herring Prospectus, to our knowledge, there have been no unusual or infrequent events or
transactions that have in the past or may in the future affect our business operations or future financial performance.
414
Significant Economic Changes that Materially affect or are likely to affect Total Income

Our business has been subject, and we expect it to continue to be subject, to significant economic changes that materially affect
or are likely to affect our total income identified above in “– Significant Factors Affecting Our Financial Condition, Results of
Operations and Cash Flows” and the uncertainties described in “Risk Factors” on pages 372 and 35, respectively.

Known Trends or Uncertainties

Our business has been subject, and we expect it to continue to be subject, to significant economic changes arising from the
trends identified above in “– Significant Factors Affecting Our Financial Condition, Results of Operations and Cash Flows”
and the uncertainties described in “Risk Factors” on pages 372 and 35, respectively. Except as discussed in this Red Herring
Prospectus, there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on
our revenues or income from total income.

Future Relationship between Cost and Revenue

Other than as described in “Risk Factors”, “Our Business” and “Management’s Discussion and Analysis of Financial Condition
and Results of Operations” on pages 35, 190, and 372, respectively, there are no known factors that may adversely affect our
business, financial condition, results of operations and cash flows.

New Products or Business Segments

Other than as disclosed in this section and in “Our Business” on page 190, there are no new products or business segments that
have or are expected to have a material impact on our business, financial condition, results of operations and cash flows.

Dependence on a Few Customers or Suppliers

We depend on our business correspondents and in particular on ESMACO to source and service customers for our Micro Loans.
For more details, see “– Significant Factors Affecting Our Financial Condition, Results of Operations and Cash Flows –
Performance of our Business Correspondents” and “Risk Factors – Our business correspondents (which includes ESAF
Swasraya Multi-State Agro Co-operative Society Limited (ESMACO), a Promoter Group and Group Entity, and Lahanti
Lastmile Services Private Limited (Lahanti), a Group Entity) sourced or serviced 74.75%, 75.53%, 83.35% and 84.78% of our
gross advances as at June 30, 2023, and March 31, 2023, 2022 and 2021. Our income contributed by business correspondents
represented 77.13%, 79.02%, 76.06%, 77.93% and 80.97% of our total income for the three months period ended June 30,
2023 and 2022 and Fiscals 2023, 2022 and 2021, respectively. All of our business correspondents work for us on a non-
exclusive basis. If any of our business correspondents, and in particular ESMACO, prefer to promote our competitors’ loans
over our loans or the agreements between us and them are terminated or not renewed, it would adversely affect our business,
financial condition, results of operations and cash flows” on pages 373 and 45, respectively.

Seasonality of Business

Our business is not seasonal in nature.

Competitive Conditions

We operate in a competitive environment. See “Industry Overview”, “Risk Factors – The Indian finance industry is intensely
competitive and if we are unable to compete effectively it would adversely affect our business, financial condition, results of
operations and cash flows” and “Our Business – Competition” on pages 155, 70 and 216, respectively, for further information
on our industry and competition.

Material Developments after June 30, 2023

We confirm that from June 30, 2023 till the date of this Red Herring Prospectus that no developments have taken place or
circumstances arisen which have materially and adversely affected or are likely to affect, within the next 12 months: (a) our
trading, profitability, performance or prospects; (b) the value of our assets; or (c) our ability to pay our liabilities.

415
 CAPITALISATION STATEMENT

The following table sets forth our Bank’s capitalization as at June 30, 2023 derived from Restated Financial Information, and
as adjusted for the Offer. This table should be read in conjunction with the sections titled “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and “Risk Factors” on pages 372 and 35, respectively.
(₹ in million)
Particulars Pre-offer as at June 30, 2023 As adjusted for the proposed Offer
Borrowings (A) 27,391.25 [●]

Capital and Reserves and Surplus 18,390.93 [●]

Capital (B) 4,494.74 [●]

Reserves and surplus

1) Statutory reserves 1,927.23 [●]
2) Investment fluctuation reserve 321.42 [●]
3) Share Premium 4,887.63 [●]
4) Capital Reserve 40.05
5) Balance of profit and loss account 6,719.86 [●]
Reserves and surplus (C) 13,896.19 [●]

Capital and Reserves and Surplus (D=B+C) [●]

18,390.93
Borrowings/Capital and Reserves and Surplus (E = A/D) 1.49 [●]
Note: The corresponding post IPO capitalization data for each of the amounts given in the above table is not determinable at this stage pending the completion
of the Book Building process and hence the same have not been provided in the above statement.

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 FINANCIAL INDEBTEDNESS

Our Bank avails loans in the ordinary course of business for the purposes of onward lending, meeting working capital
requirements and for general corporate purposes. Further, in respect of the indebtedness that was transferred to our Bank
pursuant to the Business Transfer Agreement, our Bank has entered into certain novation agreements with ESAF Financial
Holdings Private Limited and various lenders, trustees or other parties.

Our Shareholders have authorised our Board to borrow such sums of money as may be required for the purpose of the business
of the Bank. For details regarding the borrowing powers of our Board, please see “Our Management – Borrowing Powers of
the Board” on page 257. For details on risks involved, see “Risk Factors – If we are unable to secure funding on acceptable
terms and at competitive rates when needed, it could have a material adverse effect on our business, financial condition, results
of operations and cash flows” on page 69.

Set forth below is a brief summary of our aggregate borrowings as at September 30, 2023:
(₹ in million)
Category of borrowing Sanctioned amount* Outstanding amount*
Refinance (unsecured)(1) 27,470.00 15,919.30
Subordinated NCDs (unsecured)(2) 2,300.00 2,300.00
Perpetual Debt Instrument(3) 480.00 480.00
Borrowings from Reserve Bank of India (secured)(4) 5,500.00 5,500.00
Borrowings under marginal standing facility (secured)(5) 220.00 220.00
Total 35,970.00 24,419.30
* As certified by A. John Moris & Co., Chartered Accountants pursuant to their certificate dated October 28, 2023
(1) Refinance borrowings obtained under refinance facility from NABARD, SIDBI and MUDRA.
(2) Subordinated NCDs represents NCDs eligible for Tier II Capital of the Bank.
(3) Includes non-convertible debentures eligible for Additional Tier 1 Capital of the Bank.
(4) Includes money market borrowings under LAF Repo with Reserve Bank of India under liquidity adjustment facility to manage short term and overnight
liquidity mismatches.
(5) Represents borrowings with Reserve Bank of India to manage short term and overnight liquidity requirements.

Principal terms of the subsisting borrowings of our Bank:

1. Interest: The interest rates for the various facilities availed by our Bank typically ranges from 4.00% per annum to
13.00% per annum. Further, for certain loans availed by our Bank, additional interest rates have been stipulated on the
occurrence of certain events such as payment related default, breach of terms and conditions etc.

Our Bank has (i) 200 rated, listed, redeemable, unsecured, Basel III compliant, Tier-II bonds in the form of NCDs of
face value of ₹1,000,000 each at a coupon rate of 10.50% per annum payable semi-annually; (ii) 200 rated, listed,
redeemable, unsecured, Basel III compliant, Tier-II bonds in the form of NCDs of face value of ₹1,000,000 each at a
coupon rate of 11.50% per annum payable semi-annually; (iii) 450 unsecured, subordinated, fully paid-up, redeemable,
Basel III compliant, Tier-II bonds in the form of NCDs of face value of ₹1,000,000 each at a coupon rate of 11.00%
per annum payable quarterly; (iv) 400 rated, listed, redeemable, unsecured, Basel III complaint, Tier-II bonds in the
form of NCDs of face value of ₹1,000,000 each at a coupon rate of 11.50% per annum payable semi-annually; (v) 480
unsecured, subordinated, fully paid-up, Basel III compliant, perpetual debt instruments in the form of NCDs of face
value of ₹1,000,000 each at a coupon rate of 13.00% per annum; (vi) 20 rated, unlisted, unsecured, redeemable, Basel
III complaint, Tier-II bonds in the form of NCDs of face value of ₹10,000,000 each at a coupon rate of 11.25% per
annum payable semi-annually; and (vii) 8,500 rated, listed, redeemable, taxable, unsecured, fully paid-up Basel II
compliant, Tier-II subordinated bonds in the form of NCDs of face value of ₹100,000 each at a coupon rate of 11.25%
per annum payable monthly. The listed NCDs of our Bank are listed on the debt segment of the BSE.

2. Tenor: The tenor of the facilities availed by our Bank typically ranges from three days to ten years. Further, the
maturity period in respect of the perpetual debt instruments issued by our Bank is perpetual.

3. Security: Borrowings under LAF Repo and marginal standing facility from Reserve Bank of India are secured by way
of collateral of investment on specified Government securities held under investments.

4. Prepayment: Certain facilities availed by our Bank have prepayment provisions which allow for prepayment of the
outstanding amount by serving notice to the lender or other relevant parties, and subject to payment of such prepayment
penalties as may be prescribed. These prepayment penalties as stipulated by the lender from time to time. Further, in
certain cases our Bank is restricted from prepaying amounts outstanding without the prior approval of the lender as
specified in the relevant agreements.

5. Re-payment: The repayment period for the facilities availed by our Bank typically ranges from three days to ten years.

6. Events of Default: Borrowing arrangements entered into by our Bank prescribe events of default, including among
others:

a) Failure or inability to pay amount on due dates;

417
 b) Failure to pay accrued interest;

c) Liquidation or dissolution of our Bank;

d) Cessation of business;

e) Breach of any financial covenant in the loan/facility agreement;

f) Failure to submit the list of end borrowers;

g) Failure to obtain, retain or comply with the operating license issued by RBI;

h) Violation of any term of the relevant agreement or any other borrowing arrangement; and

i) Any other event or circumstance that could have a material adverse effect on the lender.

This is an indicative list and there may be additional terms that may amount to an event of default under the various
borrowing arrangements entered into by our Bank.

7. Consequences of occurrence of events of default: In terms of the facility agreements and sanction letters, the
following, among others, are the consequences of occurrence of events of default, whereby the lenders may:

a) Terminate the agreements underlying facility;

b) Cancel the undrawn portion of the loan/facility;

c) Declare any or all amounts under the facility, either whole or in part, as immediately due and payable to the
lender;

d) Appoint a nominee director on the Board of Directors in accordance with the provisions of the Securities and
Exchange Board of India (Debenture Trustee) Regulations, 1993;

e) Impose of penal interest over and above the contracted rate on the amount in default; and

f) Accelerate repayments of the loan/ recall of the entire loan or any portion thereof along with interest and
enforce security interest.

8. Restrictive Covenants: The loans availed by our Bank contain certain restrictive covenants which require prior
approval of the lender, or prior intimation to be made to the lender, for certain specified events or corporate actions,
including:

a) Prepayment of loan availed;

b) Reorganisation or restructuring of the Bank; and

c) Change in terms of the NCDs.

This is an indicative list and there may be such other additional terms under the various borrowing arrangements entered into
by our Bank.

Details of the borrowings of our Bank

The details of the borrowings of our Bank are set forth below:

S. Lender Tenor of Interest Security Amount Amount outstanding

No. loan rate sanctioned as on September 30,
(₹ in million) 2023
(₹ in million)
1. National Bank for Agriculture 3 Years 6.10% - Unsecured
22,470.00 11,670.00
and Rural Development 8.60%
2. Small Industries Development 3 years 8.50%- Unsecured
3,000.00 2,583.30
Bank of India 8.60%
3. Micro Units Development & 3 years 8.50% Unsecured 1,666.00
Refinance Agency Ltd. 2,000.00

4. Subordinated debentures – 5 years 8 10.50% - Unsecured

various parties months - 11.50% 2,300.00 2,300.00
10 years
5. Perpetual debt Perpetual 13.00% Unsecured 480.00 480.00

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 S. Lender Tenor of Interest Security Amount Amount outstanding
No. loan rate sanctioned as on September 30,
(₹ in million) 2023
(₹ in million)
6. Repo borrowing – Reserve 3 years 4.00% Secured by investment in
Bank of India Government securities 5,500.00 5,500.00
earmarked for the borrowing
7. Borrowings under MSF 3 days 6.75% Secured by investment in
Government securities 220.00 220.00
earmarked for the borrowing
Total 35,970.00 24,419.30

For the purpose of the Offer, our Bank does not require any consents from its lenders, debenture holders and other parties under
the relevant facility documentations for undertaking activities relating to the Offer.

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 SECTION VI: LEGAL AND OTHER INFORMATION

OUTSTANDING LITIGATION AND MATERIAL DEVELOPMENTS

Except as disclosed in this section, there is no outstanding (i) criminal proceeding; (ii) action taken by regulatory or statutory
authorities; (iii) claim related to direct and indirect taxes (in a consolidated manner); and (iv) other pending litigation as
determined to be material as per the policy dated June 22, 2023, approved by the Board of Directors, in each case involving
our Bank, its Promoters and Directors (“Relevant Parties”). Further, except as disclosed in this section, there are no
disciplinary actions including penalties imposed by SEBI or the Stock Exchanges against our Promoters in the last five financial
years including any outstanding action. Further, there are no pending litigation involving our Group Entities which has a
material impact on our Bank.

For the purpose of material litigation in (iv) above, our Board has considered and adopted the following policy on materiality
with regard to outstanding litigation pursuant to the Board resolution dated June 22, 2023.

All outstanding litigation, including any litigation involving the Relevant Parties, other than criminal proceedings, actions by
regulatory authorities and statutory authorities, disciplinary action including penalty imposed by SEBI or stock exchanges
against the Promoters in the last five financial years including any outstanding action and tax matters (direct or indirect),
would be considered ‘material’ if: (i) the monetary amount of claim by or against the entity or person in any such pending
proceeding is in excess of 1.00% of the profit after tax of our Bank for the recent financial year, as per the latest Restated
Financial Information (i.e. ₹30.23 million); or (ii) where monetary liability is not quantifiable, the outcome of any such pending
proceedings may have a material bearing on the business, operations, performance, prospects or reputation of our Bank.

It is further clarified that our Bank has initiated recovery proceedings against several borrowers under the SARFAESI Act for
recovery of amounts due from them. Given that the underlying loans have been declared as NPAs by our Bank and adequate
provisions have been provided for in our Restated Financial Information, disclosures in respect of such matters (including
matters where the monetary amount of claim sought by our Bank is in excess of ₹30.23 million) have been made in a
consolidated manner.

Except as stated in this section, there are no outstanding material dues to creditors of our Bank. For this purpose, our Board
has pursuant to the Board resolution dated June 22, 2023, as amended by the Board resolution dated October 17, 2023,
considered and adopted a policy of materiality for identification of material outstanding dues to creditors. In terms of this
materiality policy, outstanding dues to any creditor of our Bank having monetary value which exceed 5.00% of the total trade
payables of our Bank as on the date of the latest Restated Financial Information of our Bank disclosed in the Offer Documents
(including for the stub period, if any), shall be considered as ‘material’. Accordingly, as on June 30, 2023, any outstanding
dues exceeding ₹66.26 million have been considered as material outstanding dues for the purposes of disclosure in this section.
For outstanding dues to any micro, small or medium enterprise, the disclosure shall be based on information available with
our Bank regarding the status of the creditor as defined under the Micro, Small and Medium Enterprises Development Act,
2006, as amended read with the rules and notifications thereunder, as has been relied upon by its statutory auditors.

It is clarified that for the purposes of the above, pre-litigation notices received by the Relevant Parties from third parties
(excluding those notices issued by statutory/regulatory/tax authorities or notices threatening criminal action) shall, unless
otherwise decided by our Board, not be considered as material until such time that the Relevant Parties, as applicable, is
impleaded as defendant in litigation proceedings before any judicial forum.

Litigation involving our Bank

Litigation against our Bank

Civil Litigation

As of the date of this Red Herring Prospectus, there are no material outstanding civil litigation against our Bank which involves
a monetary liability of ₹30.23 million or more, nor any outstanding litigation wherein monetary liability is not quantifiable,
whose outcome has a material bearing on the business, operations, performance, prospects or reputation of our Bank.

Criminal Litigation

Except as disclosed below, as of the date of this Red Herring Prospectus, there are no outstanding criminal litigation against
our Bank.

1. The C.E.N., Crime Police Station, Chamaraja Nagara (“Chamaraja Nagara Police Station”) registered a FIR no.
24/2023 dated April 21, 2023 against our Bank for offences punishable under Sections 406, 408, 409 and 420 of the
IPC and Section 109 of the Karnataka Co-operative Societies Act, 1959 in relation to production of gold ornaments
pledged by the members of the Primary Agricultural Land Co-operative Society of Chamarajanagar taluk, Maleyur
village, who are former customers of our Bank (“Pledged Ornaments”). Subsequently, the Chamaraja Nagara Police
Station issued a police notice dated September 11, 2023 (“Notice”) under Sections 91 and 102 of CrPC requesting
production of Pledged Ornaments. Our Bank filed a memorandum of writ petition dated September 12, 2023 (“Writ

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 Petition”) before the High Court of Karnataka at Bengaluru (“High Court”) against the State of Karnataka, the
Superintendent of Police, Chamaraja Nagara Police Station the Chamaraja Nagara Police Station and others
(collectively, the “Respondents”). In terms of the Writ Petition, our Bank alleged that the actions taken by the
Chamaraja Nagara Police Station was to seize the Pledged Ornaments through the Notice and prayed inter alia, to
quash the Notice and to issue a writ of mandamus or direct the Chamaraja Nagara Police Station not to proceed with
the Notice. The High Court pursuant to its order dated September 14, 2023 disposed the Writ Petition with a specific
direction to the Chamaraja Nagara Police Station not to insist upon seizure of the Pledged Ornaments and our Bank to
co-operate with the investigation and produce Pledged Ornaments for investigation, as and when the same is called by
the investigation officer. The matter is currently pending.

Actions Taken by Regulatory and Statutory Authorities

Except as disclosed below, as of the date of this Red Herring Prospectus, there are no pending actions by regulatory and statutory
authorities against our Bank:

1. Our Bank has received an inspection order dated July 27, 2018 from the office of the Assistant Labour Officer,
Thodupuzha (“ALO” and such order the “Order”) pursuant to the inspection of our Bank by the ALO on July 20,
2018, on the grounds that our Bank had, among other things, failed to (i) submit forms, registers and applications, and
(ii) maintain wage slips and registers as required under the provisions of the Kerala Shops and Commercial
Establishments Workers Welfare Fund Act, 2006 (“Kerala S&E Welfare Fund Act”), the Minimum Wages Act,
1948 (“MW Act”) and the Kerala Shops and Commercial Establishments Act, 1960 (“Kerala S&E Act”). In terms
of the Order, our Bank was required to rectify these defects and produce registers and records to the ALO within the
prescribed time, for inspection and verification. Our Bank vide its letter dated October 25, 2018 responded to the ALO
stating the provisions of the Kerala S&E Act are not applicable to our Bank as it is a banking company under the
Banking Regulation Act and requesting the ALO to discontinue further proceedings until further orders/intimation
from the Labour Commissioner of Kerala (“Commissioner”) pursuant to our application to the Commissioner for
getting exemption from the provisions of the Kerala S&E Welfare Fund Act. The ALO issued a show cause notice
dated November 22, 2018 on the grounds of non-compliance with the Order. Our Bank, through its representative,
made an oral submission before the ALO stating that the provisions of Kerala S&E Welfare Fund Act, MW Act and
Kerala S&E Act are not applicable to our Bank on the grounds that banks are excluded from registration requirements
under the provisions of these laws and as per oral confirmation received from the ALO, the submissions made by our
Bank were satisfactory. There has been no further written communication in this regard.

2. Our Bank has received a notice and an inspection order, each dated September 14, 2021 (“Notice I and Inspection
Order”) from the office of the Assistant Labour Inspector, Aruppukkottai (“ALI”) pursuant to the inspection of our
Bank conducted by ALI on September 6, 2021, on the grounds that our Bank had allegedly, inter alia, (i) violated
certain provisions of Rule 15 of the Tamil Nadu Shops and Establishment Rules, 1948 (“TN S&E Rules”); (ii) failed
to maintain salary registers, work arrangement and leave records under the requisite forms and display of notices under
the TN S&E Rules; (iii) failed to display list of festival holidays under the Tamil Nadu Industrial Establishments
(National and Festival Holidays) Rules, 1959 (“TN IE Rules”); (iv) failed to maintain a summary of the minimum
wage legislation, details of minimum wage rates and display of the name and address of the inspector as prescribed
under the Minimum Wages Act, 1948 (“Minimum Wages Act”) and Minimum Wages (Tamil Nadu) Rules, 1953
(“TN Minimum Wages Rules”); and (v) failed to maintain records under the prescribed form showing the rates of
pay paid to our male and female employees under the Equal Remuneration Act, 1976 and the rules made thereunder
(“Equal Remuneration Act”). Pursuant to its letter dated October 6, 2021, our Bank submitted, inter alia, to the ALI
that establishments under the RBI are exempted from the registration requirement under the Shops and Establishment
Act, 1947 and hence our Bank is not under the purview of the same for our Bank’s Branches in Tamil Nadu and
requested the ALI to exempt our Bank’s Aruppukottai branch from the shops and establishment norms. Further, our
Bank pursuant to its reply dated October 21, 2022 responded to the Notice I and Inspection Order submitted, inter
alia, that (i) banks being establishments regulated by the RBI, are exempted from the ambit of the Tamil Nadu Shops
and Establishment Act, 1947 (“TN S&E Act”) and therefore the TN S&E Rules enacted thereunder are not applicable
to our Bank; (ii) our Bank is in compliance with the provisions of TN S&E Act, despite our Bank being exempted
establishment under the TN S&E Act; (iii) the list of festival holidays has been duly displayed in the branch of our
Bank in accordance with the Tamil Nadu Industrial Establishments (National and Festival Holidays) Act, 1958 (“TN
IE Act”); and (iv) the payment of wages to employees of our Bank is in compliance with the TN Minimum Wages
Rules and the Equal Remuneration Act.

Subsequently, our Bank has received a notice dated November 12, 2021 (“Notice II”) from the ALI alleging that our
Bank had (i) not submitted the required form for authorisation and approval of five festive holidays to the ALI within
30 days from the commencement of the business establishment as required under Section 3 of the TN IE Act and Rule
3(1) and (2) of the TN IE Rules; (ii) failed to maintain a register of national and festive holidays as per the prescribed
form under Rule 7(1) of the TN IE Rules; and (iii) failed to display the list of national and festive holidays for the
calendar year 2021 in our Bank’s premises as required under Section 4 of the TN IE Act and Rule 5(2) of the TN IE
Rules. Our Bank received another notice dated November 12, 2021 (“Notice III”) from the ALI alleging that our Bank
is in non-compliance with certain provisions under the TN S&E Act and TN S&E Rules on the grounds, inter alia,
that our Bank had not (i) filed the requisite form showing advances, penalties and deductions for losses; (ii) filed the

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 requisite form showing the maintenance of a salary register for employees; and (iii) filed the requisite form showing
maintenance of work arrangement and leave register for employees. In terms of the Notice III, our Bank was directed
to provide an explanation as to why the matter should not be prosecuted in the Court of Criminal Arbitration.
Subsequently, our Bank received a notice dated November 12, 2021(“Notice IV”) from the ALI alleging, inter alia,
that (i) our Bank is not in compliance with Rule 22 of the TN Minimum Wages Rules, enacted under the Minimum
Wages Act and directed our Bank to produce a report in the required form containing details of minimum wage rates
along with the name and address of the inspector; and (ii) the response provided by our Bank pursuant to its letter
dated October 21, 2021, without submission of the rectification report are not satisfactory. In response to the Notice
II, Notice III and Notice IV, our Bank, pursuant to its letter dated January 5, 2022, paid a compounding fee of ₹0.01
million to the ALI and assured that our Bank will complete the shops and commercial establishment registration of
our Bank’s Aruppukkottai branch within 60 days. Subsequently, our Bank pursuant to its letter dated September 29,
2022, written to the ALI, Assistant Labour Office, Aruppukkottai, Tamil Nadu, for guidance on the process for the
shops and establishments registration under the TN S&E Act and TN S&E Rules. This matter is currently pending.

3. Our Bank has received various inspection notes, each dated February 17, 2023, from the Labour Inspector, Dhar
(“Labour Inspector”) under the Child and Adolescent (Prohibition and Regulation) Act, 1986, the Equal
Remuneration Act, 1976, the Minimum Wages Act, 1948 (“Minimum Wages Act”), the Payment of Bonus Act, 1965,
the Payment of Gratuity Act, 1972, the Madhya Pradesh Shops and Establishment Act, 1958 (“MP S&E Act”).
Further, pursuant to the inspection conducted by the Labour Inspector, our Bank received a show cause notice dated
April 4, 2023 (“SCN”) from the Labour Inspector, on the grounds that our Bank inter alia had allegedly (i) not
maintained the leave register in violation of Section 54, Rule 20(4) of the MP S&E Act; (ii) not displayed summary of
the MP S&E Act in the branch premises in violation of Section 54, Rule 20(7) of the MP S&E Act; and (iii) not kept
the form L related to dyeing and painting in the farm in violation of Section 31, Rule 15(1) of the MP S&E Act. Our
Bank vide its letter dated May 12, 2023 responded to the SCN and submitted to the Labour Inspector that (i) our Bank
is maintaining all records and registers as per the MP S&E Act and it is available for all the employees of our Bank;
(ii) our Bank displays the acts and rules mentioned in the SCNs in the branch premises with access to all the employees
of our Bank; and (iii) our Bank maintains the Minimum Wages Act in all the states and the salary, wages and arrears
are paid to its employees as per the Minimum Wages Act. This matter is currently pending.

4. Our Bank has received a notice dated November 16, 2022 (“Notice”) from the Office of the Regional Labour
Commissioner, Jaipur (“RLC”) in relation to the alleged industrial dispute between our Bank and one of our former
employee (collectively, the “Parties”). In terms of the Notice, the RLC requested the Parties to undergo a joint
discussion and further directed our Bank to appear on November 24, 2022 at its offices and submit a para-wise response
and certain documents, including (i) a copy of agreement/ settlement or award covering the demands raised in the
dispute; (ii) a copy of rules/regulations, by-laws, standing orders covered in the dispute in respect of each demand;
(iii) number of workmen in the establishment (category-wise); and (iv) a list of unions which are functioning in the
establishment along with certain details inter alia including its name, membership and registration number. One of
our Bank’s representative submitted the required details to the RLC, and this his matter is currently pending.

5. Our Bank has received a notice dated November 21, 2022 (“Notice”) from the Office of the Regional Labour
Commissioner, Jaipur (“RLC”) in relation to the alleged industrial dispute between our Bank and one of our former
employee (collectively, the “Parties”). In terms of the Notice, the RLC requested the Parties to undergo a joint
discussion and further directed our Bank to appear on November 24, 2022 at its offices and submit a para-wise response
and certain documents, including (a) a copy of agreement/ settlement or award covering the demands raised in the
dispute; (ii) a copy of rules/regulations, by-laws, standing orders covered in the dispute in respect of each demand;
(iii) number of workmen in the establishment (category-wise); and (iv) a list of unions which are functioning in the
establishment along with certain details inter alia including its name, membership and registration number. One of
our Bank’s representative submitted the required details to the RLC, and this his matter is currently pending.

Litigation by our Bank

Civil Litigation

1. Our Bank has filed a claim petition dated February 15, 2022 (“Petition”), before Mohanakrishnan K.V., Advocate,
Thrissur (“Arbitrator”) against Jumbo Finvest (India) Ltd. (“Respondent Company”), Ajay Kumar Singh, in his
capacity as the chairman and managing director of the Respondent Company and Siddharth Ajay Singh, in his capacity
as the managing director of the Respondent Company (Respondent Company, Ajay Kumar Singh and Siddharth Ajay
Singh shall collectively be referred as the “Respondents”) under the Arbitration and Conciliation Act, 1966. The
Respondent Company availed a short-term loan aggregating to ₹100.00 million from our Bank to be disbursed in two
tranches of ₹50.00 million each, and the individual respondents provided personal guarantees for such loan. Our Bank
disbursed the first tranche on July 12, 2019, upon executing the necessary loan documents and in accordance with the
terms and conditions of such loan documents including inter alia the term loan agreement, deed of hypothecation and
guarantee each dated July 1, 2019 (collectively, the “Loan Agreements”), pursuant to which the Respondents were
required to repay the loan amount with applicable interest to our Bank by way of monthly instalments. On failure of
the Respondents to regularly repay the instalments, our Bank, pursuant to its notice dated July 23, 2021 (“Notice”),
demanded the Respondents to pay the outstanding amount aggregating to ₹44.73 million within 14 days of receipt of

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 the Notice failing which our Bank will proceed with a legal action. Pursuant to its letter dated August 14, 2021, the
Respondent Company replied to the Notice stating inter alia that the delay in repayment is due to pressure on its
cashflows caused due to the COVID-19 pandemic and subsequent lockdowns. Despite several communications and
notices, the Respondents defaulted in repayment of the amount aggregating to ₹46.08 million as on October 30, 2021.
In terms of the Petition, it was alleged that the Respondents violated the terms and conditions of the Loan Agreements,
and since the said loan account was classified as a non-performing asset our Bank invoked the arbitration clause as set
out in the Loan Agreements. Pursuant to the Petition, our Bank prayed inter alia that an award may be passed by the
Arbitrator against the Respondents directing them to pay a sum of ₹46.08 million towards the outstanding loan with
interest thereon at the rate of 13.11% per annum, default interest at the rate of 2.00% per annum from October 30,
2021, till the date of realisation of the amount in full.

Subsequently, our Bank has filed an application dated September 18, 2023 (“Application”) before the Debts Recovery
Tribunal-II, Ernakulam (“DRT”) under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993 against the
Respondents. In terms of the Application, our Bank prayed before the DRT inter alia to pass (i) a final order directing
the Respondent to pay a sum of ₹57.39 million as on August 31, 2023 along with interest thereon at the rate of 13.11%
per annum with monthly rests and penal interest at the rate of 2.00% per annum from September 1, 2023, till the date
of realisation of the amount; and (ii) an order granting an interim injunction restraining the Respondents from
alienating/ transferring any of the assets of the Respondent, pending final decision of the Application without the
consent of the DRT. The matter is still pending.

Criminal Litigation

1. Pursuant to a complaint filed by our Bank on November 30, 2017 and December 22, 2017, our Bank has filed a private
complaint no. 1308/2018 before the Court of the Judicial Magistrate, First Class, Koyilandi (“JFM, Koyilandi”)
against a former employee of our Bank (“Accused”), on the grounds that the Accused committed criminal breach of
trust, falsification of accounts of our Bank and misappropriation of amounts belonging to our Bank and our customers,
for personal use and thereby committed offences punishable under Sections 408 and 477A of the IPC. The
misappropriated amount aggregates to ₹0.38 million. The Koyilandi police has also registered a FIR no. 0281/2018
dated May 4, 2018 against the Accused under Sections 408 and 477A of the IPC. The Koyilandi police has filed a
charge sheet no. 54/2020 dated January 29, 2020 against the Accused under Sections 408 and 477A of the IPC before
the JFM, Koyilandi and the matter is currently pending.

2. Our Bank has filed a complaint dated May 3, 2018 against a former employee of our Bank (“Accused”) before the
Cyber Cell, Thrissur on the grounds that the Accused, inter alia, (i) dishonestly misappropriated property belonging
to our Bank for his personal use; (ii) committed cheating; (iii) hacked into the computer resource of our Bank; (iv)
stole ATM cards from the Pattikkad branch of our Bank and misused the same for causing wrongful loss to our Bank;
and (v) committed criminal breach of trust; thereby committing offences punishable under Sections 405, 408, 420 of
the IPC and Sections 65 and 66 of the Information Technology Act, 2000. The Peechi police has also registered a FIR
no. 0371/2018 dated June 12, 2018 against the Accused under Sections 381 and 408 of the IPC and Sections 65 of the
Information Technology Act, 2000 on the grounds that the Accused cheated our Bank, misappropriated certain
properties belonging to our Bank, committed criminal breach of trust and stole ATM cards from the Pattikkad branch
of our Bank for personal use by hacking into the computer resource of our Bank. The misappropriated amounts
aggregated to ₹0.26 million. The police has filed a charge sheet no. 488/18 dated October 9, 2018 against the Accused
under Sections 201, 381 and 408 of the IPC and Section 65 of the Information Technology Act, 2000, before the
Judicial First Class Magistrate Court-III, Thrissur and the matter is currently pending.

3. Our Bank has filed a complaint dated May 10, 2019 against one of the gold loan borrowers of our Bank (“Accused”)
at the Mala Police Station, on the grounds that the gold jewellery pledged by the Accused with our Bank did not belong
to the Accused and was a stolen property, thereby committing cheating and criminal breach of trust to an extent of
₹0.85 million, in addition to the interest amount. The Mala police has also registered a FIR no. 0201/2021 dated March
16, 2021 against the Accused under Sections 415, 417 and 420 of the IPC on the grounds that the Accused inter alia
committed cheating and dishonestly induced delivery of property. The matter is currently under police investigation.

4. Our Bank has filed a petition no. 1531/2019 dated September 18, 2019 against a former employee of our Bank
(“Accused”), at the Panruti Police Station, on the grounds that the Accused misappropriated amounts aggregating to
₹0.69 million from the accounts of our Bank and absconded thereafter. Our Bank has also filed a private complaint
dated July 23, 2020 before the Judicial Magistrate Court, Panruti, against the Accused which was forwarded to the
Panruti Police Station for investigation. The Panruti police has also registered a FIR no. 2042/2020 dated September
8, 2020 against the Accused under Sections 403, 409, 420 of the IPC on the grounds that the Accused inter alia
committed breach of trust and embezzlement. Further, the Panruti police has filed a charge sheet no. FR-62/2023 dated
March 9, 2023 against the Accused under Sections 403, 409 and 420 of the IPC before the Court of Judicial Magistrate-
I, Panruti and the matter is currently pending.

5. Our Bank has filed a complaint dated December 7, 2019 against two two-wheeler dealers who availed loan from our
Bank (collectively, the “Accused”), at the Ranny Police Station, on the grounds that the Accused after availing loan
for their customers did not deliver the vehicles and misappropriated amounts aggregating to ₹0.14 million advanced
by our Bank and absconded thereafter. The Ranny police has also registered a FIR no. 1384/2019 dated December 16,
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 2019 against the Accused under Section 420 of the IPC on the grounds that the Accused committed cheating and
dishonestly induced delivery of property. The Ranny police submitted the final report no. 1559/2020 dated September
30, 2019 before the Judicial First Class Magistrate, Ranny against the Accused. The matter is currently pending.

6. Our Bank has filed a complaint dated April 20, 2020 against an unknown person (“Accused”) at the Awdhutwadi
Police Station, on the grounds that the Accused, with the intention of theft, tried to break the ATM machine of our
Bank located at Sheetal Plaza Jam Road, Yavatmal, but was unsuccessful. The Awdhutwadi police has registered a
FIR no. 0365/2020 dated April 22, 2020 against the Accused under Sections 379, 511 and 427 of the IPC. The matter
is currently under police investigation.

7. Our Bank has filed a complaint dated June 4, 2020 against an unknown person (“Accused”) at the Tirur Police Station,
on the grounds that the Accused attempted theft at the ATM premises of our Bank’s Tirur branch. The Tirur police
has also filed a FIR no. 0633/2020 dated June 4, 2020 before the Judicial First Class Magistrate, Tirur, against the
Accused under Sections 511 and 380 of the IPC on the grounds that the Accused attempted to commit theft. The matter
is currently under police investigation.

8. Our Bank has filed a complaint dated December 1, 2020 against an unknown person (“Accused”) at the
Pattiveeranpatti Police Station, on the grounds that the Accused attempted theft at the ATM counter of our Bank’s
Batlagundu branch and caused damages to our Bank’s property. The Pattiveeranpatti police has also registered a FIR
no. 995/2020 dated December 1, 2020 against the Accused under Sections 457 and 511 of the IPC on the grounds that
the Accused attempted to commit theft. The matter is currently under police investigation.

9. Our Bank has filed a complaint dated December 2, 2020 against a former employee of our Bank (“Accused”) at the
Kasaragod Police Station, on the grounds that the Accused fraudulently misappropriated amounts belonging to our
Bank aggregating to ₹0.05 million by forging the claimed bills under the pretext of business promotion, staff welfare,
office stationary, travel allowance etc. without incurring the same. The Kasaragod police has also filed a FIR no.
1310/2020 dated December 2, 2020 before the Chief Judicial Magistrate, Kasaragod (“CJM Kasaragod”) under
Sections 465, 468, 471 and 420 of the IPC on the grounds that the Accused inter alia committed cheating and forgery.
The Kasaragod police submitted the final report no. 708/2021 dated May 15, 2021 before the CJM Kasaragod against
the Accused. The matter is currently pending.

10. Our Bank has filed a complaint dated February 19, 2021 against one of the gold loan borrowers of our Bank
(“Accused”) at the Thrissur East Police Station, on the grounds that the Accused pledged spurious gold articles,
thereby causing loss to our Bank to an extent of ₹0.22 million, in addition to certain interest earned on such amount.
The Thrissur East police has also filed a FIR no. 0236/2021 dated February 22, 2021 before the Chief Judicial
Magistrate Court, Thrissur (“CJM, Thrissur”) against the Accused under Section 420 of the IPC on the grounds that
the Accused committed cheating. The Thrissur East police submitted the final report no. 441/2021 dated July 14, 2021
before the CJM, Thrissur against the Accused. Our Bank has filed a criminal miscellaneous petition dated January 20,
2023 under Section 451 of the CrPC before the CJM, Thrissur praying inter alia to release the recovered gold articles,
and to grant the permission to melt the spurious gold ornaments and sell the content to realise the loan amount. The
matter is currently pending.

11. Our Bank has filed a complaint dated July 2, 2021 against one of the gold loan borrowers of our Bank (“Accused”) at
the Mannuthy Police Station, on the grounds that the Accused pledged spurious gold articles, thereby defrauding our
Bank to an extent of ₹0.16 million, in addition to certain interest earned on such amount. The Mannuthy police has
also filed a FIR no. 0636/2021 dated July 3, 2021 before the Judicial First Class Magistrate Court-III, Thrissur (“JM,
Thrissur”) against the Accused under Sections 406 and 420 of the IPC. The Mannuthy police submitted the final
report no. 431/2021 dated December 29, 2021 before the JM, Thrissur against the Accused. The matter is currently
pending.

12. Our Bank has filed a complaint dated February 16, 2022 against two former employees of our Bank (collectively, the
“Accused”) at the Malappuram Police Station, on the grounds that the Accused committed forgery at Kodur branch
of our Bank by falsely opening a gold loan account in the name of a customer and creating a pledge of gold ornaments
by forging the signatures in our Bank’s registers and other related documents. The Malappuram police has also
registered a FIR no. 0123/2022 dated February 21, 2022 against the Accused under Sections 34, 420, 465, 468 and
471 of the IPC. The Accused filed a criminal miscellaneous petition before the High Court of Kerala, at Ernakulam
(“High Court”) for quashing the FIR. Meanwhile, the Malappuram police submitted the final report before the Judicial
First Class Magistrate Court, Malappuram (“JMFC, Malappuram”). The High Court pursuant to its order dated June
15, 2022 stated that since the final report in the matter has been submitted and cognizance thereon was taken by JMFC,
Malappuram, without prejudicing the right of the Accused to challenge the final report and the petition was dismissed
as infructuous. Subsequently, the Accused filed a criminal miscellaneous petition dated July 15, 2022 before the High
Court praying inter alia to quash the final report. The High Court pursuant to its order dated August 24, 2022 impleaded
our Bank as an additional respondent in the criminal miscellaneous petition dated July 15, 2022 and directed the
Accused to discharge the dues towards the gold loan and make necessary applications directed by our Bank to close
the gold loan amount and upon such payment being made by the Accused, our Bank shall close the gold loan account
and release the entire gold ornaments to the Accused. The matter is currently pending.

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13. Our Bank has filed a complaint dated July 14, 2021 against an unknown person (“Accused”) at the Badambadi Police
Station, Cuttack, on the grounds that the Accused was involved in a burglary incident that took place inside the ATM
of our Bank’s Cuttack branch. The Badambadi police has also registered a FIR no. 0194/2021 dated July 15, 2021
against the Accused under Section 457 of the IPC. The matter is currently under police investigation.

14. Our Bank has filed a complaint dated July 29, 2021 against one of the gold loan borrowers (“Accused”) of our Bank
at the Puthencruze Police Station, on the grounds that the Accused pledged spurious gold articles, thereby defrauding
our Bank to an extent of ₹0.09 million, in addition to certain interest earned on such amount. The Puthencruze police
has also filed a FIR no. 0914/2021 dated July 29, 2021 before the Judicial First Class Magistrate Court-I, Kolencherry
(“JMC, Kolencherry”) against the Accused under Sections 406 and 420 of the IPC. The Puthencruze police submitted
the final report no. 318/2021 before the JMC, Kolencherry. The matter is currently pending.

15. Our Bank has filed a complaint dated July 29, 2021 against one of the gold loan borrowers of our Bank (“Accused”)
at the Muvattupuzha Police Station, on the grounds that the Accused pledged spurious gold articles, thereby making
an unlawful gain by causing wrongful loss to our Bank to an extent of ₹0.19 million, in addition to certain interest
earned on such amount. The Muvattupuzha police has also filed a FIR no. 2814/2021 dated August 2, 2021 before the
Judicial First Class Magistrate Court, Muvattupuzha against the Accused under Section 420 of the IPC on the grounds
that the Accused committed cheating. The Muvattupuzha police has filed a charge sheet dated January 24, 2022 against
the Accused under Section 420 of the IPC before the Judicial First Class Magistrate Court, Muvattupuzha and the
matter is currently pending.

16. Our Bank has filed a complaint dated August 4, 2021 before the Thrissur City Police Commissioner and a complaint
December 10, 2021 at the Thrissur East Police Station against one of the gold loan borrowers of our Bank (“Accused”),
on the grounds that the Accused pledged spurious gold ornaments, thereby making an unlawful gain by causing
wrongful loss to our Bank to an extent of ₹0.21 million, in addition to certain interest earned on such amount. Our
Bank has also filed a private complaint dated January 17, 2022 before the Chief Judicial Magistrate Court, Trichur,
against the Accused which was forwarded to the Trichur East Police Station for investigation and report. The Thrissur
East police has filed a FIR no. 0208/2022 dated February 1, 2022 before the Chief Judicial Magistrate Court, Thrissur
(“CJMC, Thrissur”), against the Accused under Sections 34, 120B, 418, 420 and 465 of the IPC. The Thrissur East
police has filed a charge sheet no. 710/2022 dated April 26, 2022 against the Accused under Sections 34, 120(b), 420
and 465 of the IPC before the CJMC, Thrissur and the matter is currently pending.

17. Our Bank has filed a complaint dated August 27, 2021 against a former employee of our Bank (“Accused”) at the
Njarakkal Police Station, on the grounds that the Accused fraudulently misappropriated the gold loan accounts and
had illegally taken out the gold ornaments from the packets which have been audited by our Bank and replaced them
with imitation gold, thereby causing a loss to our Bank. The Njarakkal police has also filed a FIR no. 1077/2021 dated
August 27, 2021 before the Judicial First Class Magistrate Court, Njarakkal (“Court”) against the Accused under
Section 409 of the IPC. The Njarakkal police, pursuant to the investigation, recovered the gold ornaments
misappropriated by the Accused. Our Bank filed a claim petition dated October 6, 2021 under Section 451 of the CrPC
(“Petition”) before the Court for releasing the recovered gold ornaments and seeking permission from the Court to
return the same to the respective customers who pledged the seized gold ornaments with our Bank. The Court pursuant
to its order dated November 23, 2021 (“Order”) allowed the petition in part subject to certain conditions including
furnishing bank guarantee of ₹3.00 million as security and granted an interim custody to our Bank in respect of the
certain identified gold ornaments. Our Bank has filed a criminal miscellaneous petition dated March 21, 2022 under
Section 482 of the CrPC before the High Court of Kerala, at Ernakulam (“High Court of Kerala”) praying inter alia
to quash the Order to the extent it did not order release of the remaining gold ornaments. The High Court of Kerala
through its order dated October 16, 2023 allowed our Bank to submit a fresh application under Section 451 of CrPC
before the Court for releasing the remaining recovered gold ornaments. The matter is currently pending.

18. Our Bank has filed a complaint dated September 30, 2021 against one of the gold loan borrowers of our Bank
(“Accused”) at the Adoor Police Station, on the grounds that the Accused pledged fake gold ornaments with our Bank
and thereby unlawfully obtained a sum of ₹0.15 million. The Adoor police has also registered a FIR no. 1767/2021
dated October 1, 2021 against the Accused under Section 420 of the IPC on the grounds that the Accused committed
cheating. The police has filed a charge sheet no. 2931/2021 dated December 9, 2021 against the Accused under Section
420 of the IPC before the Judicial First Class Magistrate, Adoor (“JFCM, Adoor”). Subsequently, our Bank has filed
a criminal miscellaneous petition dated February 16, 2023 under Section 451 of the CrPC before the JFCM, Adoor
praying inter alia to release 51 grams of ornaments seized by the Adoor Police Station and grant permission to sell the
seized ornaments after melting the same. The matter is currently pending.

19. Our Bank has filed a complaint dated October 5, 2021 against two unknown persons (collectively, the “Accused”) at
the Nithiravilai Police Station, on the grounds that the Accused tried to break open the ATM machine and attempted
theft at Thoothur branch of our Bank. The Nithiravilai police has also registered a FIR no. 0240/2021 dated October
5, 2021 against the Accused under Sections 380, 457 and 511 of the IPC. The matter is currently under police
investigation.

20. Our Bank has filed a complaint dated October 11, 2021 against an unknown person (“Accused”) at the Kalmana Police
Station, on the grounds that the Accused, with the intention of theft, broke the ATM machine, CCTV camera and
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 damaged the ATM premises of our Bank’s Pardi-Nagpur branch. The Kalmana police has also registered a FIR no.
0797/2021 dated October 11, 2021 against the Accused under Sections 379, 427 and 511 of the IPC. The matter is
currently under police investigation.

21. Our Bank has filed two complaints, each dated October 12, 2021 and December 7, 2021 against one of the gold loan
borrowers (“Accused”) of our Bank at the East Police Station, Thrissur and before the Superintendent, East Police
Station, Thrissur, respectively, on the grounds that the Accused pledged spurious gold articles, thereby defrauding our
Bank to an extent of ₹0.17 million. Our Bank has also filed a private complaint no. 57/2022 dated January 3, 2022
before the Chief Judicial Magistrate, Thrissur (“CJM, Thrissur”) against the Accused which was forwarded to the
East Police Station, Thrissur for further investigation and report. The Thrissur East police has registered a FIR no.
0094/2022 dated January 10, 2022 before the CJM, Thrissur, against the Accused under Sections 34, 418, 420, and
465 of the IPC. The Thrissur City, Town East police has filed a charge sheet no. 1552/2022 against three gold loan
borrowers of our Bank under Sections 34, 406 and 420 of the IPC before the Judicial First Class Magistrate, Court No.
1, Thrissur and the matter is currently pending.

22. Our Bank has filed two complaints, each dated October 12, 2021 and December 7, 2021 against one of the gold loan
borrowers of our Bank (“Accused”) at the East Police Station, Thrissur and before the Superintendent, East Police
Station, Thrissur, respectively, on the grounds that the Accused pledged spurious gold ornaments, thereby defrauding
our Bank to an extent of ₹0.21 million. A private complaint no. 5445/2021 dated December 20, 2021 was filed before
the Chief Judicial Magistrate, Thrissur (“CJM, Thrissur”) against the Accused which was forwarded to the East
Police Station, Thrissur for further investigation and report. The Thrissur East police Station has also filed a FIR no.
0053/2022 dated January 6, 2022 before the CJM, Thrissur, against the Accused under Sections 34, 418, 420, and 465
of the IPC. The Thrissur City, Town East police has filed a charge sheet no. 1076/2022 dated June 28, 2022 against
the Accused under Sections 418, 420 and 465 of the IPC before the CJM, Thrissur and the matter is currently pending.

23. The Nasrullaganj police has registered a FIR no. 0316/2022 dated May 13, 2022 against an unknown person
(“Accused”) under Sections 379 and 511 of the IPC on the grounds that the Accused attempted to break open the ATM
installed at our Bank’s Nasrullaganj branch. The matter is currently under police investigation.

24. Our Bank has filed a complaint dated June 20, 2021 against an unknown person (“Accused”) at the Vythiri Police
Station, on the grounds that the Accused attempted theft at the ATM premises of our Bank’s Kunnathidavaka, Vythiri
branch. The Vythiri police has also submitted a FIR no. 0255/2022 dated June 20, 2022 against the Accused under
Sections 380, 457 and 511 of the IPC before the Judicial First Class Magistrate, Kalpetta. The matter is currently under
police investigation.

25. Our Bank has filed a complaint dated June 22, 2022 against certain former employees of our Bank (collectively, the
“Accused”) before the Commissioner of Police, Commissioner office, Tirunelveli, on the grounds that the Accused
persons sanctioned gold loans to certain customers by pledging spurious gold ornaments and misappropriated such
loan amounts. Pursuant to the complaint, it was further stated that the Accused misappropriated the entries in the
system of our Bank by entering wrong entries and forged the loan documents, thereby defrauding our Bank to an extent
of ₹6.99 million. The Tirunelveli City police has also registered a FIR no. 12/2022 dated July 30, 2022 against the
Accused under Sections 406, 409, 417, 418 and 420 of the IPC. Our Bank has filed a writ petition dated July 15, 2022
before the High Court of Madras, Madurai Bench (“High Court”) against the Commissioner of Police, Tirunelveli
City and others on the grounds that the police has not taken any action to trigger the investigation even after registering
the FIR and prayed before the High Court to issue an order or direction in the nature of writ of mandamus directing
the police to take necessary actions based on the complaint filed by our Bank. Subsequently, our Bank filed a
memorandum of criminal original petition dated September 24, 2023 (“Criminal Petition”) before the High Court
praying inter alia to direct Tirunelveli City police to file a final report. The High Court pursuant to its order dated
September 27, 2023 (“Order”) disposed the Criminal Petition and directed the police to expedite the investigation and
file the final report within two months from the date of receipt of copy of the Order. The matter is currently pending.

26. Our branch manager reported attempt of theft by an unknown person (“Accused”) trying to break open the ATM
premises of our Bank’s Valancherry branch at the Valancherry Police Station. The Valancherry police has filed a FIR
no. 0394/2022 dated July 5, 2022 before the Judicial First Class Magistrate Court-I, Tirur, against the Accused under
Sections 380 and 511 of the IPC. The matter is currently under police investigation.

27. Our Bank has filed a complaint dated October 21, 2021 against an unknown person (“Accused”) at the APMC Police
Station, Vashi, on the grounds that the Accused attempted theft at the ATM premises of our Bank’s Vashi branch. The
APMC police has also prepared a non-cognizable offence information report no. 1507/2021 dated October 21, 2021
against the Accused under Section 427 of the IPC. The matter is currently under police investigation.

28. Our Bank has filed a complaint dated March 10, 2021 against an unknown person (“Accused”) at the Butibori Police
Station, on the grounds that the Accused caused damage to the ATM machine installed at our Bank’s Butibori branch.
The Butibori police has also prepared a non-cognizable offence information report no. 0100/2021 dated March 10,
2021 against the Accused under Section 427 of the IPC. The matter is currently under police investigation.

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29. Our Bank has filed a complaint dated June 21, 2022 against three unknown persons (collectively, the “Accused”) at
the APMC Police Station, Vashi, on the grounds that the Accused attempted theft and damaged the CCTV camera
installed at our Bank’s Vashi branch. The APMC police has also prepared a non-cognizable offence information report
no. 0798/2022 dated June 21, 2022 against the Accused under Section 427 of the IPC. The matter is currently under
police investigation.

30. Our Bank has filed a complaint dated April 1, 2022 against a lorry vehicle driver (“Accused”) at the Changaramkulam
Police Station, on the grounds that the Accused hit on the display board of our Bank and severely damaged the same.
The Changaramkulam police has also filed a FIR no. 0206/2022 dated April 12, 2022 before the Court of Chief Judicial
Magistrate, Ponnani, against the Accused under Section 279 of the IPC. The matter is currently pending.

31. Our Bank has filed a complaint dated March 2, 2022 against one of the gold loan borrowers of our Bank (“Accused”)
at the Changanassery Police Station, on the grounds that the Accused pledged spurious gold articles, thereby making
an unlawful gain by causing unlawful loss to our Bank to an extent of ₹0.09 million, in addition to certain interest
earned on such amount. The Changanassery police has also filed a FIR no. 0563/2022 dated March 12, 2022 before
the Judicial First Class Magistrate Court, Changanassery (“JFCM, Changanassery”), against the Accused under
Section 420 of the IPC. The Changanassery police has filed a charge sheet no. 590/2022 dated March 18, 2022 against
the Accused under Section 420 of the IPC before the JFCM, Changanassery and the matter is currently pending.

32. Our Bank has filed a complaint dated April 11, 2022 against an unknown person (“Accused”) at the Dumka Town
Police Station, on the grounds that the Accused attempted theft at the ATM premises of our Bank’s Dumka branch.
The Dumka Town police has also registered a FIR no. 0109/2022 dated April 11, 2022 against the Accused under
Sections 379, 427 and 511 of the IPC. The matter is currently under police investigation.

33. Our branch manager reported an attempt of theft by an unknown person (“Accused”) at the ATM premises of our
Bank’s Warud branch at the Warud Police Station. The Warud police has registered a FIR no. 0326/2022 dated May
11, 2022 against the Accused under Sections 379, 427 and 511 of the IPC. The matter is currently under police
investigation.

34. Our Bank has filed a complaint dated October 8, 2022 against an unknown person (“Accused”) at the Nanjangud
Police Station, on the grounds that the Accused attempted theft and stole the DVR tape of CCTV camera installed at
our Bank’s Nanjangud branch. The Nanjangud Police Station has also registered a FIR no. 0220/2022 dated October
8, 2022 against the Accused under Sections 380 and 457 of the IPC. The matter is currently under police investigation.

35. Our Bank has filed a complaint dated October 19, 2022 against one of the gold loan borrowers of our Bank (“Accused”)
at the Kondotty Police Station, on the grounds that the Accused pledged spurious gold articles, thereby making an
unlawful gain by causing wrongful loss to our Bank aggregating to an amount of ₹0.21 million. Our Bank has also
filed a private complaint dated January 30, 2023 before the Judicial First Class Magistrate Court, Malappuram
(“JFCM, Malappuram”) against the Accused which was forwarded to the Kondotty Police Station for investigation.
The Kondotty police has also filed a FIR no. 0158/2023 dated February 7, 2023 against the Accused under Sections
406, 420 and 465 of the IPC. Further, the Kondotty police has filed a charge sheet no. 230/23 dated March 7, 2023
against the Accused under Section 420 of the IPC before the JFCM, Malappuram. The matter is currently pending.

36. Our Bank has filed a complaint dated October 19, 2022 against one of the gold loan borrowers of our Bank (“Accused”)
at the Kondotty Police Station, on the grounds that the Accused pledged spurious gold articles, thereby making an
unlawful gain by causing wrongful loss to our Bank aggregating to an amount of ₹0.09 million. Our Bank has also
filed a private complaint dated February 2, 2023 before the Judicial First Class Magistrate Court, Malappuram
(“JFCM, Malappuram”) against the Accused which was forwarded to the Kondotty Police Station for investigation.
The Kondotty police has also filed a FIR no. 0157/2023 dated February 7, 2023 against the Accused under Sections
406, 420 and 465 of the IPC. Further, the Kondotty police has filed a charge sheet no. 229/23 dated March 7, 2023
against the Accused under Section 420 of the IPC before the JFCM, Malappuram. The matter is currently pending.

37. Our branch manager reported an attempt of theft by an unknown person (“Accused”) at the premises of our Bank’s
Kurkheda branch at the Kurkheda Police Station. The Kurkheda police has also registered a FIR no. 0143/2022 dated
October 28, 2022 against the Accused under Sections 380, 457 and 511 of the IPC. The matter is currently under police
investigation.

38. Our Bank has filed a complaint dated December 16, 2022 against a former employee of our Bank (“Accused”) at the
Mannuthy Police Station, on the grounds that the Accused fraudulently misappropriated the gold loan accounts and
illegally transferred money causing a loss to our Bank aggregating to an amount of ₹0.32 million (“Amount”). The
Mannuthy police has also filed a FIR no. 1004/2022 dated December 19, 2022 before the Judicial First Class Magistrate
Court-III, Thrissur (“JFCM, Thrissur”) against the Accused under Sections 409 and 420 of the IPC. The Accused
filed an anticipatory bail application dated February 1, 2023 before the High Court. Subsequently, the High Court of
Kerala at Ernakulam (“High Court”) pursuant to its order dated February 28, 2023 directed our Bank to furnish the
details of person from whose account the Accused has withdrawn and transferred the Amount. Our Bank pursuant to
the affidavit dated March 3, 2023 submitted the required details before the High Court. Pursuant to its order dated
March 6, 2023, the High Court granted anticipatory bail to the Accused with direction to cooperate in the investigation.
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 The Mannuthy police has filed a charge sheet no. 169/2023 dated March 30, 2023 against the Accused under Sections
409 and 420 read with Section 34 of the IPC before the JFCM, Thrissur and the matter is currently pending.

39. Our Bank has filed a complaint dated January 2, 2023 against an unknown person (“Accused”) at the Kalmana Police
Station, on the grounds that the Accused attempted theft at the premises of our Bank’s Kalmana branch. The Kalmana
police has also registered a FIR no. 0002/2023 dated January 2, 2023 against the Accused under Sections 380, 427 and
511 of the IPC. The matter is currently under police investigation.

40. Our Bank has filed a complaint dated January 12, 2023 against an unknown person (“Accused”) at the Kambalakkad
Police Station, on the grounds that the Accused attempted theft at the ATM premises of our Bank’s Kottathara
Pallikkunnu branch. The Kambalakkad police has also registered a FIR no. 0012/2023 dated January 12, 2023 against
the Accused under Sections 380, 427, 457 and 511 of the IPC. The matter is currently under police investigation.

41. Our Bank has filed a complaint dated March 17, 2023 against an unknown person (“Accused”) at the Koramangala
Police Station, on the grounds that the Accused attempted theft at the ATM premises of our Bank’s Koramangala
branch. The Koramangala police has also filed a FIR no. 0060/2023 dated March 17, 2023 before the 41 st Additional
Chief Metropolitan Magistrate Court, Bangalore against the Accused under Sections 380 and 511 of the IPC. The
matter is currently pending.

42. Our Bank has filed a complaint dated April 5, 2023 against an unknown person (“Accused”) at the Cyber Crime Police
Station, Thrissur, on the grounds that the Accused by fraudulently representing himself as an employee of our Bank
collected one time passwords from three customers of our Bank and pre-closed the fixed and recurring deposits of
these customers. These amounts were later transferred by the Accused to various accounts maintained outside of our
Bank causing wrongful loss to our Bank to an extent of ₹0.42 million. The Cyber Crime police has also filed a FIR
no. 0017/2023 dated April 10, 2023 before the Chief Judicial Magistrate Court, Thrissur against the Accused under
Section 420 of the IPC and Section 66D of the Information Technology (Amendment) Act, 2008. The matter is
currently pending.

43. Our Bank has filed a complaint dated May 17, 2023 against four gold loan borrowers of our Bank (collectively, the
“Accused”) at the Warora Police Station, on the grounds that the Accused pledged spurious gold articles, thereby
making an unlawful gain by causing wrongful loss to our Bank to an extent of ₹5.45 million. The Warora police has
also registered a FIR no. 0385/2023 dated May 20, 2023 against the Accused under Sections 120-B, 417, 420, 467 and
468 of the IPC. Further, the Warora police has filed a charge sheet dated September 15, 2023 against the Accused
under Sections 129(B), 417, 420, 467 and 468 of the IPC before the Court of Judicial Magistrate First Class, Warora.
The matter is currently pending.

44. Our Bank has filed a complaint dated May 23, 2023 against an unknown person (“Accused”) at the Thiruvalla Police
Station, on the grounds that the Accused damaged the ATM installed at the premises of our Bank’s Thiruvalla branch.
The Thiruvalla police has also filed a FIR no. 0647/2023 dated May 24, 2023 against the Accused under Sections 427
and 447 of the IPC. The matter is currently under police investigation.

45. Our Bank has filed a complaint dated June 23, 2021 against two unknown persons (“Accused”) at the Kovilpalayam
Police Station, on the grounds that the Accused attempted theft at the ATM premises of our Bank’s Vellanaipatti
branch. The Kovilpalayam police has also filed a FIR no. 448/2021 dated June 23, 2021 against the Accused under
Sections 380, 457 and 511 of the IPC. The matter is currently under police investigation.

46. Our Bank basis an oral complaint filed a FIR no. 1529/2023 dated June 20, 2023 before the Judicial First Class
Magistrate Court-I, Thrissur against a person (“Accused”) under Sections 286 and 426 of the IPC and Section
9(B)(1)(b) of the Indian Explosives Act, 1884, as amended on the grounds that the Accused threw unidentified
explosive substance into the ATM premises of our Bank’s Patturaikkal branch. The matter is currently pending.

47. Our Bank has filed a complaint dated May 19, 2023 against a former employee of our Bank (“Accused”) at the Tirur
Police Station, on the grounds that the Accused fraudulently misappropriated the pledged gold in the custody of our
Bank to make wrongful gains by persuading a subordinate staff of our Bank to pledge the misappropriated gold in his
name. The Tirur police has also filed a FIR no. 0837/2023 dated June 20, 2023 before the Judicial First Class Magistrate
Court-I, Tirur under Sections 409 and 420 of the IPC. The matter is currently pending.

48. Our Bank has filed a complaint dated September 25, 2023 against one of the customers of our Bank (“First Accused”)
and Max Value Credits and Investments Limited (“Second Accused”, and collectively, the “Accused”) at the
Mundakkayam Police Station, in connection with gold loan takeover availed from our Bank by the First Accused by
pledging spurious gold with the Second Accused thereby making an unlawful gain by causing wrongful loss to our
Bank to an extent of ₹0.24 million. The Mundakkayam police has also registered a FIR no. 1305/2023 dated September
28, 2023 against the Accused under Sections 34, 406 and 420 of the IPC before the Judicial First Class Magistrate
Court-I, Kanjirapally. The matter is currently pending.

49. Our Bank has filed a complaint dated October 19, 2023 against two unknown persons (“Accused”) at the Ahmednagar
Police Station, on the grounds of fraudulently installing a device on the ATM dispenser at the ATM premises of our

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 Bank’s Ahmedabad branch. The Ahmednagar police has also filed a FIR no. 1522/2023 dated October 19, 2023 against
the Accused under Section 420 of the IPC. The matter is currently under police investigation.

There are 729 cases filed by our Bank pending before various forums across the country for alleged violation of Section 138 of
Negotiable Instruments Act, 1881 and CrPC, for recovery of amounts due to our Bank for which cheques issued in favour of
our Bank by our customers/debtors have been dishonoured. The total pecuniary value involved in all these matters aggregates
to ₹54.45 million.

There are 85 police complaints filed by our Bank against its employees and unknown persons in relation to alleged violations
arising in the ordinary course of business operations of our Bank, including, among others, cases filed under the IPC alleging
criminal breach of trust, cheating, forgery, misappropriation of money and involved in embezzlement of money etc.

Further, there are also certain instances of frauds committed by the employees of our business correspondents against our Bank.
While our Bank accounts for the losses suffered by it in respect of these frauds, the legal action in relation to these frauds are
initiated by the relevant business correspondent. Further, our Bank recovers the losses suffered by it from the relevant business
correspondent.

Recovery proceedings under the SARFAESI Act

In addition to the matters above, our Bank is presently involved in 105 matters in relation to recovery of amounts under the
Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (“SARFAESI Act”).
Our Bank has filed notices in 105 matters for enforcement of security interest under Sections 13 and 14 of the SARFAESI Act,
to exercise the right over secured assets for recovery of amounts due from various borrowers of our Bank (“Borrowers”),
whose accounts have been classified as non-performing assets, due to default in repayments. The total pecuniary value involved
in such matters aggregates to ₹56.89 million, of which the monetary claims in no matter is above ₹30.23 million. The matters
are currently pending at various stages.

Litigation involving our Promoters

Pursuant to the Business Transfer Agreement, the business undertaking of ESAF Financial Holdings Private Limited
comprising its lending and financing business together with inter-alia, all the assets, liabilities, rights, title, interest, obligations,
risks and rewards relating to and arising out of the business undertaking was transferred to our Bank on March 10, 2017.
Further, as agreed to between our Bank and ESAF Financial Holdings Private Limited, all legal proceedings in relation to the
said business undertaking, pending as on the transfer date i.e., March 10, 2017 or in respect of which, the cause of action had
arisen on or prior to the transfer date i.e., March 10, 2017, shall continue to be managed by ESAF Financial Holdings Private
Limited and that all claims, liabilities, obligations etc., arising out of such legal proceedings shall be borne by ESAF Financial
Holdings Private Limited. Further, all legal proceedings in relation to the said business undertaking, in respect of which, the
cause of action has arisen post the transfer date i.e., March 10, 2017, shall be managed by our Bank and all claims, liabilities,
obligations etc., arising out of such legal proceedings shall be borne by our Bank. Further, in terms of the Business Transfer
Agreement, ESAF Financial Holdings Private Limited is liable for all tax liabilities and is entitled to all tax refunds pertaining
to the business undertaking which accrue to ESAF Financial Holdings Private Limited up to March 9, 2017, (including such
sums received by our Bank or ESAF Financial Holdings Private Limited post March 9, 2017). Further, as agreed between our
Bank and ESAF Financial Holdings Private Limited, our Bank is liable for all tax liabilities and is entitled to all tax refunds
pertaining to the business undertaking which accrue to our Bank, from (and including) March 10, 2017, in relation to the tax
liabilities assumed by our Bank, including service tax.

Litigation against ESAF Financial Holdings Private Limited

Civil Litigation

As of the date of this Red Herring Prospectus, there are no material outstanding civil litigation against ESAF Financial Holdings
Private Limited which involves a monetary liability of ₹30.23 million or more, nor any outstanding litigation wherein monetary
liability is not quantifiable, whose outcome has a material bearing on the business, operations, performance, prospects or
reputation of our Bank.

Criminal Litigation

As of the date of this Red Herring Prospectus, there are no outstanding criminal litigation against ESAF Financial Holdings
Private Limited.

Actions Taken by Regulatory and Statutory Authorities

Except as mentioned below, as of the date of this Red Herring Prospectus, there are no pending actions by regulatory and
statutory authorities against ESAF Financial Holdings Private Limited.

1. The Deputy Director, Employees’ State Insurance Corporation (“ESIC”), passed an order dated May 14, 2018 under
Section 45A of the Employees’ State Insurance Act, 1948, as amended (“ESI Act”) on grounds of insufficiency of
contribution to the extent that contribution was not paid under the head ‘performance incentive’ by ESAF Financial
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 Holdings Private Limited and directed ESAF Financial Holdings Private Limited to pay contribution aggregating to
₹1.65 million in respect of its employees. ESAF Financial Holdings Private Limited responded to such order through
its letter dated May 17, 2018, inter alia, (i) praying for an order that ESAF Financial Holdings Private Limited is not
liable to pay the contribution on performance incentive; (ii) stating that contribution has been paid by ESAF Financial
Holdings Private Limited in respect of the wages paid to its employees; and (iii) clarifying that it had not considered
performance incentive for payment of contribution as it is not a regular payment and varies from employee to employee
depending on factors such as performance of sales etc. ESAF Financial Holdings Private Limited also filed an appeal
dated June 21, 2018 under Section 45AA of the ESI Act, before the Additional Commissioner and Regional Director,
ESIC (“Appellate Authority”) for setting aside the order of the Deputy Director, ESIC. However, the Appellate
Authority through its order dated September 28, 2018 upheld the order passed by the Deputy Director, ESIC and
directed ESAF Financial Holdings Private Limited to pay ₹1.24 million as balance contribution due from ESAF
Financial Holdings Private Limited, after appropriating ₹0.41 million paid in respect of the appeal, within 15 days of
receipt of its order. Pursuant to this, ESAF Financial Holdings Private Limited filed a petition before the Employees
Insurance Court, Thrissur (“EIC”) praying for, inter alia, (i) setting aside of the orders passed by the Deputy Director,
ESIC and the Appellate Authority, (ii) a declaration that ESAF Financial Holdings Private Limited was not liable to
pay the amount of contribution, and (iii) a stay on all further proceedings pursuant to the order of the Appellate
Authority. The EIC by its order dated November 15, 2018 granted an interim stay on the order passed by the Appellate
Authority subject to payment of ₹0.12 million by way of a demand draft in favour of the ESIC and submission of proof
of payment on or before February 25, 2019. The same was complied with by ESAF Financial Holdings Private Limited.
Subsequently, the Deputy Director, ESIC filed an application dated November 21, 2018 before the Recovery Officer,
ESIC, for recovery of contribution under Section 45C to 45I of the ESI Act from ESAF Financial Holdings Private
Limited, aggregating ₹2.21 million. Thereafter, the Recovery Officer, ESIC issued a notice dated December 3, 2018
to ESAF Financial Holdings Private Limited in Form No. ESI CP 2 for recovery of ₹2.21 million from ESAF Financial
Holdings Private Limited. ESAF Financial Holdings Private Limited by its letter dated December 28, 2018 responded
to the letter from the Deputy Director, ESIC stating that it has obtained a stay order from the EIC. The matter is
currently pending.

2. There have been past instances of delays in the submission of compliance certificates as required under Pension Fund
Regulatory and Development Authority (Aggregators) Regulations, 2015. Pursuant to the audit and inspection for FY
2016-2017 issued by the external auditor appointed by national pension system (“NPS”) Trust and the subsequent
letters issued by the NPS Trust, ESAF Financial Holdings Private Limited and our Bank were directed to amongst
other things compensate 1,771 subscribers for the delay in uploading the subscriber contribution file (“SCF”) and
transferring funds to the trustee bank. Accordingly, ESAF Financial Holdings Private Limited was required to
compensate its NPS subscribers for an amount aggregating to ₹142,470. Pursuant to letter dated January 2, 2020,
ESAF Financial Holdings Private Limited has communicated to the NPS Trust that out of the total compensation
amount of ₹142,470 payable to 1,771 subscribers, a compensation amount of ₹134,600, pertaining to 1,686 subscribers
has been paid by ESAF Financial Holdings Private Limited and that the balance amount of ₹7,870 pertaining to 85
subscribers has not been paid owing to technical difficulties, i.e. completion of 60 years of age of certain subscribers
or completion of withdrawal process by certain subscribers. Accordingly, ESAF Financial Holdings Private Limited
has sought guidance from the NPS Trust on how to complete this process. Based on the approval from the NPS Trust
and pursuant to letter dated July 28, 2020, ESAF Financial Holdings Private Limited has communicated to the PFRDA
that out of the balance amount of ₹7,870 pertaining to 85 subscribers, a compensation amount of ₹5,860 pertaining to
60 subscribers has been transferred but withdrawal was not processed. Subsequently, pursuant to letter dated March
24, 2021, ESAF Financial Holdings Private Limited has communicated to the NPS Trust that the remaining
compensation amount of ₹2,010 pertaining to 25 subscribers has been transferred and withdrawal process has also
been completed. There is no written communication from PFRDA in this regard.

Disciplinary action

There are no disciplinary actions including penalty imposed by SEBI or stock exchanges against ESAF Financial Holdings
Private Limited in the last five financial years including outstanding actions.

Litigation by ESAF Financial Holdings Private Limited

Civil Litigation

As of the date of this Red Herring Prospectus, there are no material outstanding civil litigation instituted by ESAF Financial
Holdings Private Limited which involves a monetary liability of ₹30.23 million or more, nor any outstanding litigation wherein
monetary liability is not quantifiable, whose outcome has a material bearing on the business, operations, performance, prospects
or reputation of our Bank.

Criminal Litigation

As of the date of this Red Herring Prospectus, there are no outstanding criminal litigation instituted by ESAF Financial Holdings
Private Limited.

Litigation against Kadambelil Paul Thomas

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Civil Litigation

As of the date of this Red Herring Prospectus, there are no material outstanding civil litigation against Kadambelil Paul Thomas
which involves a monetary liability of ₹30.23 million or more, nor any outstanding litigation wherein monetary liability is not
quantifiable, whose outcome has a material bearing on the business, operations, performance, prospects or reputation of our
Bank.

Criminal Litigation

As of the date of this Red Herring Prospectus, there are no outstanding criminal litigation against Kadambelil Paul Thomas.

Actions Taken by Regulatory and Statutory Authorities

As of the date of this Red Herring Prospectus, there are no pending actions by regulatory and statutory authorities against
Kadambelil Paul Thomas.

Disciplinary action

As of the date of this Red Herring Prospectus, there are no disciplinary actions including penalty imposed by SEBI or stock
exchanges against Kadambelil Paul Thomas in the last five financial years including outstanding actions. However, certain
directions have been issued by the RBI to our Bank in respect of the office of Kadambelil Paul Thomas as set out below:

Pursuant to RBI letter dated May 28, 2018 read with RBI letter dated March 9, 2017, Kadambelil Paul Thomas was required to
divest his shareholding in ESAF Financial Holdings Private Limited within a period of one year, i.e., March 8, 2018, before
taking charge as Managing Director and Chief Executive Officer in compliance with Section 10B(4) of the Banking Regulation
Act. While Kadambelil Paul Thomas transferred majority of his shareholding in ESAF Financial Holdings Private Limited on
February 22, 2018, the balance equity share holding, which was issued to him as sweat equity was subject to a three-year lock-
in period from allotment, i.e., up to September 28, 2018, and accordingly, could not be transferred within the aforementioned
timeline. As a result, Kadambelil Paul Thomas was directed by the RBI to step down from his position of Managing Director
and Chief Executive Officer. Kadambelil Paul Thomas resigned from his position of Managing Director and Chief Executive
Officer on June 2, 2018 and re-joined on October 1, 2018 with the approval of the RBI dated October 1, 2018, post divesture
of his shareholding in ESAF Financial Holdings Private Limited in compliance with the letters issued by the RBI.

Litigation by Kadambelil Paul Thomas

Civil Litigation

As of the date of this Red Herring Prospectus, there are no material outstanding civil litigation instituted by Kadambelil Paul
Thomas which involves a monetary liability of ₹30.23 million or more, nor any outstanding litigation wherein monetary liability
is not quantifiable, whose outcome has a material bearing on the business, operations, performance, prospects or reputation of
our Bank.

Criminal Litigation

As of the date of this Red Herring Prospectus, there are no outstanding criminal litigation instituted by Kadambelil Paul Thomas.

Litigation involving our Directors

Litigation against our Directors

Civil Litigation

As of the date of this Red Herring Prospectus, there are no material outstanding civil litigation against any of our Directors
which involve a monetary liability of ₹30.23 million or more, nor any outstanding litigation wherein monetary liability is not
quantifiable, whose outcome has a material bearing on the business, operations, performance, prospects or reputation of our
Bank.

Criminal Litigation

As of the date of this Red Herring Prospectus, there are no outstanding criminal litigation against any of our Directors.

Actions Taken by Regulatory and Statutory Authorities

As of the date of this Red Herring Prospectus, there are no pending actions by regulatory and statutory authorities against any
of our Directors.

However, certain directions have been issued by the RBI to our Bank in respect of the office of our Managing Director and
Chief Executive Officer, Kadambelil Paul Thomas. For further details, see “- Litigation against Kadambelil Paul Thomas –
Disciplinary action” on page 431.
431
Litigation by our Directors

Civil Litigation

As of the date of this Red Herring Prospectus, there are no material outstanding civil litigation instituted by any of
our Directors which involves a monetary liability of ₹30.23 million or more, nor any outstanding litigation wherein
monetary liability is not quantifiable, whose outcome has a material bearing on the business, operations,
performance, prospects or reputation of our Bank.

Criminal Litigation

As of the date of this Red Herring Prospectus, there are no outstanding criminal litigation instituted by any of our
Directors.

Litigation involving our Group Entities

As of the date of this Red Herring Prospectus, there are no outstanding litigation involving our Group Entities which
has a material impact on our Bank.

Tax Claims

Except as disclosed below, there are no claims related to direct and indirect taxes, involving our Bank, Directors
and Promoters.

Nature of case Number of cases Amount involved (₹ in

million)*
Bank
Direct Tax 10 271.14
Indirect Tax 3 17.53
Directors
Direct Tax Nil Nil
Indirect Tax Nil Nil
Promoters
ESAF Financial Holdings Private Limited
Direct Tax 3 19.66
Indirect Tax 6 249.95
Kadambelil Paul Thomas
Direct Tax Nil Nil
Indirect Tax Nil Nil
* To the extent ascertainable and quantifiable

Description of certain tax matters involving our Bank and ESAF Financial Holdings Private Limited, above
the materiality threshold

Matters involving our Bank

Service tax matters

1. The office of the Commissioner of Central Tax and Central Excise (Audit), Kochi had issued a show cause
notice dated February 17, 2021 (“SCN”) to our Bank on the grounds that our Bank had, allegedly,
contravened certain provisions of the Finance Act, 1994 (“Finance Act”) and CENVAT Credit Rules, 2004
(“CENVAT Rules”). In terms of the SCN, our Bank was required to show cause as to why (i) an amount
aggregating to ₹11.34 million not paid on taxable income received under “gain on securitisation” and “gain
on assignment” for the period 2016-17 and 2017-18 (upto June); (ii) an amount aggregating to ₹0.03 million
not paid on income received as pass book charges, account register charges and miscellaneous charges for
the period 2016-17 and 2017-18 (upto June); (iii) an amount aggregating to ₹0.34 million being CENVAT
credit of service tax irregularly taken and utilized in the month of May 2017, should not be demanded and
recovered; (iv) ₹885 paid by cash towards Swachh Bharath Cess (“SB Cess”) should not be appropriated
against the SB Cess demanded; (v) interest at the appropriate rate on the amounts demanded under (ii) and
(iii) above should not be demanded and recovered under Section 75 of the Finance Act read with Rule
14(1)(ii) of the CENVAT Rules; (vi) ₹0.13 million paid by cash towards SB Cess and Krishi Kalyan Cess
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 (“KK Cess”) should not be appropriated against the interest demanded; (vii) penalties under the provisions
of the Finance Act read CENVAT Rules should not be imposed; and (viii) ₹0.13 million paid by cash
towards penalty on service tax, SB Cess and KK Cess should not be appropriated against the penalty
proposed to be imposed. Our Bank pursuant to its letter dated May 24, 2021 responded to the SCN denying
the alleged contraventions and praying, inter alia, for the proceedings initiated against it pursuant to the
SCN, to be dropped. This matter is currently pending.

Direct tax matters

1. The Assessment Unit, Income Tax Department (“Assessment Unit”) had issued an assessment order dated
September 22, 2022 (“Assessment Order”) under Section 143(3) read with Section 144B of the IT Act. In
terms of the Assessment Order, our Bank filed its return of income for the assessment year (“AY”) 2020-
21 on February 6, 2021 admitting a total income of ₹2,839.70 million and subsequently the matter was
selected for scrutiny under computer aided scrutiny system. As per the Assessment Order, it was alleged
that our Bank under-reported the income to the Assessment Unit (i) made an addition of ₹0.27 million in
relation to disallowance under Section 14A read with Rule 8D of the IT Act; (ii) disallowed and added back
the reverse entry of ₹54.83 million in computation on account of the deferred tax; (iii) disallowed the
depreciation claimed on investment aggregating to ₹18.32 million under Section 37 of the IT Act; and (iv)
disallowed an amount aggregating to ₹491.51 million under Section 36(1)(vii) of the IT Act in lieu of
claiming provisioning for non-performing assets, and separately initiated penalty proceedings under Section
270A(1) of the IT Act for under-reporting of income. A demand notice and notice for penalty, each dated
September 22, 2022 has been issued by Assessment Unit under Sections 156 and 274 read with Section 270
A of the IT Act, respectively, to our Bank demanding our Bank to pay a sum aggregating to ₹217.99 million
and to show cause as to why an order imposing penalty under Section 270A of the IT Act should not be
passed. This matter is currently pending.

Matters involving ESAF Financial Holdings Private Limited

Service tax matters

1. The Principal Commissioner, Central Tax and Central Excise, Kochi (“Principal Commissioner”) had
issued a show cause notice dated November 8, 2017 to ESAF Financial Holdings Private Limited on the
grounds that ESAF Financial Holdings Private Limited had, allegedly, contravened certain provisions of
the Finance Act, 1994 (“Finance Act”) read with the Service Tax Rules, 1994 (“Service Tax Rules”), to
the extent that ESAF Financial Holdings Private Limited, inter alia, (i) did not obtain service tax registration
under the category “other taxable services”; (ii) failed to pay service tax on the gain on securitisation/
interest spread on securitisation/ income from assignment for the Financial Years 2012-13 to 2015-2016;
and (iii) did not assess the tax due on the service of “other taxable services” and had not filed the requisite
form filings in that regard with the intent to evade payment of tax. As per the show cause notice, the
aforementioned alleged contraventions resulted in evasion of service tax of ₹67.64 million by ESAF
Financial Holdings Private Limited. ESAF Financial Holdings Private Limited responded to the show cause
notice through its letter dated March 6, 2018, before the Principal Commissioner of Central Tax and Central
Excise, Kochi, (“Commissioner”), and prayed for the proceedings initiated against it, to be dropped. The
Commissioner of Central GST and Central Excise, Kozikode, by its order dated July 26, 2018 dropped all
the proceedings proposed in the show cause notice and disposed the show cause notice issued by the
Principal Commissioner. Against this order, the Principal Commissioner filed an appeal dated December
10, 2018 before the Customs Excise and Service Tax Appellate Tribunal, Bengaluru. ESAF Financial
Holdings Private Limited also filed cross objections to the appeal on April 29, 2019. This matter is currently
pending.

2. The office of the Commissioner, Central Tax and Central Excise, Kochi had issued a show cause notice
dated January 10, 2022 to ESAF Financial Holdings Private Limited on the grounds that ESAF Financial
Holdings Private Limited had, allegedly contravened certain provisions of the Finance Act, 1994 (“Finance
Act”) read with the Service Tax Rules, 1994 (“Service Tax Rules”), to the extent that ESAF Financial
Holdings Private Limited, inter alia, (i) failed to pay service tax on the consideration received by it in
respect of the taxable services provided towards the servicing of securitised loans for the financial year
2016-17; (ii) did not endorse the category of ‘other taxable services’ in their service tax registration; and
(iii) did not assess the tax due on the taxable service provided with the intent to evade payment of service
tax. It was alleged that ESAF Financial Holdings Private Limited had intentionally shown the considerations
received towards the services provided by way of servicing of portfolios under the head “gains on
securitization/interest spread on securitization of loan/income from assignment” in its balance sheet so as
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 to mislead the tax department and evade payment of service tax. As per the show cause notice, the
aforementioned alleged contraventions resulted in evasion of service tax of ₹75.60 million by ESAF
Financial Holdings Private Limited which is payable along with the interest and penalties at the appropriate
rates for the period by which such payment has been delayed as prescribed under Section 75 of the Finance
Act and applicable Service Tax Rules. ESAF Financial Holdings Private Limited responded to the show
cause notice through its letter dated June 20, 2022 denying the alleged contraventions and praying, inter
alia, for the proceedings initiated against it, to be dropped. This matter is currently pending.

3. The Commissioner Central Tax and Central Excise (Audit), Cochin (“Commissioner”) had issued a show
cause notice dated January 14, 2022 to ESAF Financial Holdings Private Limited on the grounds that ESAF
Financial Holdings Private Limited had, allegedly contravened certain provisions of the Finance Act, 1994
(“Finance Act”) read with the Service Tax Rules, 1994 (“Service Tax Rules”) and CENVAT Credit Rules,
2004 (“CENVAT Rules”). In terms of the show cause notice, ESAF Financial Holdings Private Limited
was inter alia required to show cause as to why (i) best judgement assessment should not be resorted to for
assessment of value of taxable services provided towards setting up of our Bank and the amount aggregating
to ₹53.26 million under Section 67 of the Finance Act read with Rule 3 of Service (Determination of value)
Rules, 2006; (ii) an amount aggregating to ₹62.26 million being the service tax not paid by ESAF Financial
Holdings Private Limited; (iii) ineligible CENVAT credit availed and utilized aggregating to ₹17.73
million; (iv) an amount aggregating to ₹0.22 million being an interest not/ short paid by ESAF Financial
Holdings Private Limited on delayed payment of service tax and cess; (v) interest at the appropriate rate on
the service tax, cess short/not paid and CENVAT credit payable under (ii) and (iii) above should not be
charged and recovered; (vi) late fee of 0.006 million, should not be charged and recovered under the
provisions of Finance Act read with Service Tax Rules and CENVAT Rules; and (vii) penalties under the
provisions of the Finance Act read with the Service Tax Rules and CENVAT Rules should not be imposed.
ESAF Financial Holdings Private Limited responded to the show cause notice through its letter dated April
8, 2022 before the Commissioner, submitting inter alia that there was no failure on the part of ESAF
Financial Holdings Private Limited to assess the tax liability and praying for the proceedings initiated
against it, to be dropped. This matter is currently pending.

Outstanding dues to Creditors

As at June 30, 2023, the total number of creditors of our Bank was 536 and the total outstanding dues to these
creditors by our Bank was ₹1,325.18 million. Our Bank owes an amount of ₹259.89 million to micro, small and
medium enterprises (“MSMEs”) as defined under the Micro, Small and Medium Enterprises Development Act,
2006.

As per the materiality policy, creditors of our Bank to whom an amount exceeding 5.00% (i.e. ₹66.26 million) of
the total dues owed to creditors as on June 30, 2023, were considered ‘material’ creditors. As at June 30, 2023, there
are three material creditors to whom our Bank owes an aggregate amount of ₹720.88 million. The details pertaining
to outstanding over-dues towards our material creditors, along with their names and amount involved in respect of
each material creditor, are available on the website of our Bank at https://www.esafbank.com/investor-relations-
info/. It is clarified that such details available on our website do not form a part of this Red Herring Prospectus and
investors should not make any investment decision based on information available on the website of our Bank.
Anyone placing reliance on any other source of information, including our Bank’s website, would be doing so at
their own risk.

Details of outstanding dues owed to MSMEs and other creditors as at June 30, 2023 is set out below:

Types of Creditors Number of Amount involved (₹ in

creditors million)
Micro, Small and Medium Enterprises 92 259.89
Material creditors 3 720.88
Other creditors 441 344.41
Total Outstanding Dues 536 1,325.18

Material Developments

We confirm that from June 30, 2023 till the date of this Red Herring Prospectus, no developments have taken place
or circumstances arisen which have materially and adversely affected or are likely to affect, within the next 12

434
months: (a) our trading, profitability, performance or prospects; (b) the value of our assets; or (c) our ability to pay
our liabilities.

435
 GOVERNMENT AND OTHER APPROVALS

Our Bank is in possession of all approvals which are considered material and necessary for the purpose of undertaking its
business activities. Set out below, is an indicative list of approvals obtained by our Bank. In view of these key approvals, our
Bank can undertake this Offer and its business activities. In addition, certain of our key approvals may expire in the ordinary
course of business and our Bank has either already made an application to the appropriate authorities for renewal of such key
approvals or is in the process of making such renewal applications. For further details in connection with the regulatory and
legal framework within which we operate, see “Key Regulations and Policies” on page 221.

I. Incorporation details

1. Certificate of incorporation dated May 5, 2016 issued to our Bank, under the name ESAF Small Finance Bank
Limited by the RoC.

2. The CIN of our Bank is U65990KL2016PLC045669.

II. Approvals in relation to the Offer

For details regarding the approvals and authorisations obtained by our Bank in relation to the Offer, see “Other
Regulatory and Statutory Disclosures - Authority for the Offer” and “The Offer” on pages 441 and 95, respectively.

III. Key approvals in relation to our Bank

Regulatory approvals for setting up a small finance bank (“SFB”)

1. The RBI pursuant to the RBI In-Principle Approval granted ESAF Financial Holdings Private Limited in-
principle approval to establish an SFB in the private sector under Section 22 of the Banking Regulation Act,
subject to ESAF Financial Holdings Private Limited completing all the relevant formalities within the validity
period of eighteen months from the date of approval, to the satisfaction of RBI.

2. The RBI pursuant to the RBI Final Approval, issued to our Bank, license no. ‘MUM:124’, to carry on the
SFB business in terms of Section 22 of the Banking Regulation Act.

3. The RBI has, pursuant to a letter dated December 27, 2018, intimated the Bank of its inclusion in the second
schedule to the RBI Act, 1934, vide its notification dated November 12, 2018, published in the Gazette of
India dated December 22, 2018 to December 28, 2018.

Regulatory approvals for carrying on business activities as a small finance bank (“SFB”)

1. As of June 30, 2023, we have an aggregate of 700 Branches. The RBI has, pursuant to various letters,
permitted our Bank to open 700 Branches. The RBI has, pursuant to the notification ‘Guidelines for Licensing
of Small Finance Banks in Private Sector’ dated November 27, 2014 – Modifications to existing norms’ dated
March 28, 2020, granted general permission to all existing SFBs to open banking outlets subject to adherence
to unbanked rural centre norms as per RBI circular on ‘Rationalisation of Branch Authorisation Policy -
Revision of Guidelines’ dated May 18, 2017, as amended from time to time.

2. The RBI has, pursuant to a letter dated November 30, 2016, granted our Bank approval to participate in the
Centralised Payment Systems viz. RTGS, NEFT and NECS.

3. The RBI has, pursuant to a letter dated January 30, 2017, granted our Bank membership of RTGS System in
the ‘Type A’ category and a RTGS Settlement Account in the name of our Bank has been opened at the
banking department, Mumbai. The intra-day liquidity limit sanctioned to our Bank is ₹1,100 million.

4. The RBI has, pursuant to a letter dated January 6, 2017, intimated us of the opening of our principal current
account with the RBI in the name of our Bank.

5. The RBI has, pursuant to a letter dated January 31, 2017, intimated us of the opening of our subsidiary general
ledger account in the name of our Bank.

6. The RBI has, pursuant to an email dated January 25, 2017, allotted primary IFSC ESMF0000001, to our
Bank.

7. The RBI has, pursuant to a letter dated May 9, 2018, granted our Bank permission to set up one administrative
office at Thrissur, Kerala.

8. The RBI has, pursuant to a letter dated November 18, 2019, granted our Bank permission to set up two
administrative offices at Thrissur, Kerala.

436
9. The RBI pursuant to a letter dated February 5, 2018, informed us that our Bank has been admitted as a member
of Bankers’ Clearing House at New Delhi for the purposes of participating, with effect from February 6,
2018, in the cheque truncation system (“CTS”) clearing at Bankers’ Clearing House at New Delhi.

10. The RBI pursuant to a letter dated March 21, 2017, informed us that our Bank has been admitted as a member
of Western Grid Bankers’ Clearing House.

11. The RBI pursuant to a letter dated March 23, 2017, informed us that our Bank has been admitted as a direct
member of Bankers’ Clearing House at Chennai.

12. The RBI through various letters has allotted the MICR code to 700 Banking Branches of our Bank.

13. The RBI has, pursuant to a letter dated December 9, 2016, granted our Bank approval to commence and
operate mobile banking services, with flexible channels for registration with customers.

14. The RBI has, pursuant to an email dated April 9, 2020, granted our Bank approval to undertake the business
of depository participant.

15. The Central KYC Registry has, pursuant to an email dated December 27, 2017, confirmed the registration of
our Bank in the Central KYC registry.

16. The RBI has pursuant to its letter dated April 20, 2023, authorised our Bank as an Authorized Dealer –
Category I.

17. The Foreign Exchange Department, RBI has, pursuant to certificate dated April 17, 2017, authorised our
Bank as an Authorized Dealer – Category II, and by amendment on February 14, 2019, changed the registered
office address and approved the undertaking of forex business at 54 additional Branches of our Bank.

18. The RBI has, pursuant to a letter dated May 30, 2018, granted our Bank approval to open non-resident rupee
accounts in 31 Branches.

19. The RBI has, pursuant to a letter dated February 22, 2019, granted our Bank approval to open non-resident
rupee accounts in 69 Branches.

20. The RBI has, pursuant to a letter dated January 20, 2020, granted our Bank approval to open non-resident
rupee accounts in 42 Branches.

21. The RBI has, pursuant to an email dated October 26, 2018, granted registration to our Bank as a reporting
entity.

22. The NPCI has granted our Bank access to the NACH platform.

23. The RBI has, pursuant to a letter dated December 22, 2016, granted the INFINET membership to our Bank.

24. The CCIL has, pursuant to a letter dated March 25, 2019, granted our Bank membership to the CCIL’s Repo
Dealing Segment.

25. The Deposit Insurance and Credit Guarantee Corporation has, pursuant to a letter dated April 3, 2017, granted
our Bank registration as an insured bank in terms of the Deposit Insurance and Credit Guarantee Corporation
Act, 1961.

26. Clearcorp Dealing Systems (India) Limited has, pursuant to a letter dated December 27, 2018, granted our
Bank membership of RBI’s NDS-Call system.

27. Clearcorp Dealing Systems (India) Limited has, pursuant to a letter dated January 8, 2019, granted our Bank
membership of RBI’s NDS-OM system.

28. The RBI has, pursuant to a letter dated August 2, 2019 granted our Bank a no-objection for referring our
customers for installation of point of sale/electronic data capture machine and related services under a referral
arrangement.

29. The RBI has issued a three digit Basic Statistical Return – BSR Code 209, to our Bank.

30. The IRDAI has, issued a certificate of registration to our Bank to act as a Category Corporate Agent
(Composite) with effect from January 18, 2018, and renewed certificate of registration effective from January
18, 2021.

31. The NSDL has, pursuant to an email dated March 7, 2019, granted our Bank registration to the Central Record
Keeping Agency.
437
32. Our Bank has been in compliance with the Foreign Account Tax Compliance Act, 2010, pursuant to
registration dated January 23, 2019.

33. The RBI has, pursuant to a letter dated December 5, 2017, issued a no-objection certificate to undertake the
activity of distribution of insurance products and pension products on a non-risk sharing basis without any
commitment of own funds.

34. The RBI has, pursuant to a letter dated December 5, 2017, issued a no-objection certificate to undertake the
distribution of pension products on a non-risk sharing basis without any commitment of own funds.

35. The PFRDA has, pursuant to a certificate dated September 14, 2018, granted our Bank registration as a point
of presence under the PFRDA Act, 2013 and PFRDA (Point of Presence) Regulations, 2018 to transact in
pension schemes and/ or under the National Pension Scheme.

36. The RBI has, pursuant to an email dated November 20, 2018, allotted Depositor Education and Awareness
Fund code 2159 to our Bank.

37. The Financial Intelligence Unit, India has granted our Bank registration as a reporting entity.

38. The NPCI has, pursuant to a letter of authority dated February 2, 2017, granted our Bank membership for
certain services under the Aadhaar Enabled Payment System.

39. The UIDAI has, pursuant to the email dated January 9, 2020, granted our Bank registration as an Enrolment
Agency (Aadhar Seva Kendra).

40. The FIMMDA has, pursuant to a letter dated January 24, 2017, approved our membership in the FIMMDA.
The said membership, being an annual subscription, is renewed by our Bank at the beginning of each
Financial Year.

41. The Indian Banks’ Association has, pursuant to a letter dated May 2, 2017, granted our Bank membership of
the Indian Banks’ Association with effect from May 2, 2017 as an ‘Ordinary Member’.

42. The RBI has, pursuant to a letter dated September 2, 2021 granted our Bank approval to open non-resident
rupee accounts in 175 Branches.

43. The RBI has, pursuant to a letter dated June 20, 2022 granted our Bank approval to open non-resident rupee
accounts in 149 Branches.

44. SEBI, has pursuant to a certificate dated June 28, 2022 granted a certificated of registration as participant to
our Bank with registration no. IN-DP-697-2022 in terms of Section 12(1A) of the SEBI Act, 1992 and the
Depositories Act, 1996.

Tax related approvals

1. The permanent account number of our Bank is AAECE2619Q.

2. The tax deduction account number of our Bank is CHNE02409B.

3. The GST registration number of our Bank is 32AAECE2619Q1ZH, for the state of Kerala.

4. Our Bank has applied for registrations in the normal course of business for its Branches across various states
in India under the applicable profession tax legislations.

Labour related approvals

Our Bank has obtained registrations under various employee and labour related laws including the Employees’
Provident Funds and Miscellaneous Provisions Act, 1952, the Contract Labour (Regulations and Abolition Act), 1970,
the relevant shops and establishment legislations and we have obtained no objection certificates for certain of our
Branches including our material branch located in Purnia in the state of Bihar and our branch located in Kawardha in
the state of Chhattisgarh, to undertake business from the local authority.

Our Bank has, by a letter dated September 29, 2022, written to the Assistant Labour Inspector, Assistant Labour Office,
Aruppukkottai, Tamil Nadu, for guidance on the process for the shops and establishments registration under the Tamil
Nadu Shops and Establishment Act, 1947, pursuant to the legal proceeding pending before the Assistant Labour
Inspector, Aruppukkottai. For details, see, “Outstanding Litigation and Material Development - Litigation involving
our Bank - Litigation against our Bank - Actions Taken by Regulatory and Statutory Authorities” on page 421.

438
IV. Key approvals obtained for the material Branches of our Bank

Our Bank has obtained registrations in the normal course of business for its Branches across various states in India
including authorised dealer certificates issued by RBI, trade licenses issued by relevant municipal authorities under
applicable laws, and registration under the Employees Provident Fund and Miscellaneous Provisions Act, 1952. Except
as disclosed below, our Bank has obtained goods and services tax registrations with the relevant authorities for our
Branches in the states of Kerala, Jharkhand, New Delhi, Madhya Pradesh, Uttar Pradesh, Haryana, Chhattisgarh, West
Bengal, Bihar, Meghalaya, Tamil Nadu, Maharashtra, Karnataka, Andhra Pradesh, Telangana, Assam, Gujarat,
Rajasthan, Odisha, Chandigarh, Puducherry, Tripura and Uttarakhand. Certain approvals may lapse in their normal
course and our Bank has either made an application to the appropriate authorities for renewal of such registration or is
in the process of making such applications.

For further details in respect of approvals in relation to our material Branches, see “ – Pending Applications”, “ –
Approvals for which renewal applications have been made” and “ – Approvals for which renewal applications/
applications have not been made” on page 439 each.

V. Pending Applications

Except as disclosed below, as on the date of this Red Herring Prospectus, there are no pending applications for
approvals applied for but not received by our Bank:

1. Application dated March 3, 2022 to the RBI for the request for empanelment of our Bank as agency bank of
the RBI to conduct government agency business under the RBI notification CO.DGBA.GBD.No.S1112/42-
01-033/2021-2022 dated December 15, 2021, as updated;

2. Application for the shops and establishments license for certain of our Branches in Bihar, Chhattisgarh,
Odisha, Uttar Pradesh, Madhya Pradesh and Jharkhand;

3. Application to add our material Branch located in Udaipur as an additional place of business in the GST
registration certificate for the state of Tripura;

4. Application to add our material business correspondent operated banking outlets located in Bijawar,
Shujalpur, Tarapur, Narsinghgarh and Siwani in the respective GST registration certificate for the states of
Madhya Pradesh and Haryana; and

5. Applications for certain Branches and business correspondent operated banking outlets as an additional place
of business in their respective State GST registration certificates.

VI. Approvals for which renewal applications have been made

Nil

VII. Approvals for which renewal applications / applications have not been made

Except as disclosed below, as on the date of this Red Herring Prospectus, there are no approvals for which renewal
applications/ applications have not been made:

1. Application for the shops and establishments license for our material branch located in Udaipur in the state
of Tripura;

2. Application for shops and establishment licenses for 10 Branches located in the states and union territories of
New Delhi, Rajasthan, Tripura, Uttar Pradesh, West Bengal, Chhattisgarh, and Assam; and

3. Application for professional tax registrations for our Branches falling under the states of Tripura and
Uttarakhand.

VIII. Approvals expiring in the next three months from the date of this Red Herring Prospectus

The list of material approvals in relation to our material branches and registration as a Category Corporate Agent with
IRDAI, required to be obtained by our Bank which has a validity and are expiring in the next three months from the
date of filing of this Red Herring Prospectus is provided below:

Sr.
Name of branch/ approval Nature of branch Expiry/renewal date
No.
Shops and establishments registrations
1. Balaramapuram BCOBO December 31, 2023
2. Kanichar BCOBO December 31, 2023
3. Hyderabad - SR Nagar Banking Outlet December 31, 2023

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 4. Nalhati Banking Outlet January 1, 2024
Others
1. Registration as Category Corporate Agent – IRDAI SFB level January 17, 2024

IX. Intellectual property

Our Bank has two trademark registrations for our corporate logos, i.e., and under class 36 of the
Trade Marks Act, 1999. Further, our Bank has one trademark registration for the device ‘ESAF Small Finance Bank’
under Class 36 of the Trade Marks Act, 1999, which is valid up to January 17, 2027.

We have also entered into a license agreement dated January 5, 2020 with ESAF Foundation (“Trademark
Agreement”), pursuant to which we have been granted a license to use certain trademarks registered in the name of
the ESAF Foundation, for our business activities, as set out in the table below:

S. No. Trademark/domain name/device Application Application date Applicant Validity

number

1. ESAF 3459570 January 17, 2017 ESAF Foundation January 17, 2027

2. ESAF 1657304 February 23, 2008 ESAF Foundation February 23, 2028

3. Creating Opportunities 3459573 January 17, 2017 ESAF Foundation January 17, 2027

4. 3459572 January 17, 2017 ESAF Foundation January 17, 2027

5. 3459571 January 17, 2017 ESAF Foundation January 17, 2027

6. Fighting the partiality of prosperity 3459575 January 17, 2017 ESAF Foundation January 17, 2027

Pursuant to the Trademark Agreement, we have also been granted a license to use the following trademark:

S. No. Trademark/ word mark Application Application date Applicant Validity

number
1. ESAF (word mark)* 2710339 April 1, 2014 ESAF Foundation NA*
* This application has been opposed. Our Bank is using the “ESAF” (word mark) under class 36, which has not been opposed.

For further details, see “Risk Factors – If we fail to successfully enforce our intellectual property rights or are unable
to renew our trademark licencing agreement our business, results of operations and cash flows would be adversely
affected” and “History and Certain Corporate Matters – Key terms of other subsisting material agreements” on pages
68 and 247, respectively.

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 OTHER REGULATORY AND STATUTORY DISCLOSURES

Authority for the Offer

The Offer has been authorized by our Board of Directors pursuant to a resolution passed on June 22, 2023. The Fresh Issue has
been authorized by our Shareholders pursuant to a special resolution passed at the EGM held on June 29, 2023 in terms of
Section 62(1)(c) of the Companies Act, 2013. The Board of Directors has revised the Offer for Sale portion pursuant to its
resolution dated July 7, 2023 and subsequently, the IPO Steering Committee revised the Offer for Sale portion and took on
record the revised Offer size pursuant to its resolution dated October 18, 2023. The IPO Steering Committee revised the Fresh
Issue portion and took on record the revised Offer size pursuant to its resolution dated October 27, 2023. The Board has pursuant
to its resolutions dated June 22, 2023 and July 7, 2023 and the IPO Steering Committee has pursuant to its resolution dated
October 18, 2023 taken on record approval for the Offer for Sale for the Offered Shares by the Selling Shareholders.The Draft
Red Herring Prospectus has been approved by our Board pursuant to a resolution passed on July 7, 2023.

This Red Herring Prospectus has been approved by our Board pursuant to a resolution passed on October 28, 2023.

The Offer for Sale has been authorised by each of the Selling Shareholders as follows:

Sr. Name of the Selling Shareholder Number of Offered Shares Date of consent letter Date of corporate
No. action/board
resolution/power of
attorney
Promoter Selling Shareholder
1. ESAF Financial Holdings Private [●] Equity Shares aggregating up to July 5, 2023 and October June 2, 2023
Limited ₹492.60 million 18, 2023
Other Selling Shareholders
2. PNB MetLife [●] Equity Shares aggregating up to July 5, 2023 November 9, 2020
₹126.70 million
3. Bajaj Allianz Life [●] Equity Shares aggregating up to July 5, 2023 December 6, 2011
₹103.70 million

In-principle listing approvals

Our Bank has received in-principle approvals from the BSE and the NSE for the listing of the Equity Shares pursuant to letters
each dated September 7, 2023.

Pursuant to RBI In Principle Approval and RBI Final Approval, the Equity Shares of our Bank are mandatorily required to be
listed within a period of three years from reaching a net worth of ₹5,000 million.

Prohibition by SEBI or other Governmental Authorities

Our Bank is in compliance with the conditions specified in Regulation 5 of the SEBI ICDR Regulations, to the extent applicable.

Our Bank, our Promoters, the members of the Promoter Group, our Directors, and each of the Selling Shareholders, the persons
in control of the Bank and the persons in control of our Promoters are not prohibited from accessing the capital market or
debarred from buying, selling or dealing in securities under any order or direction passed by SEBI or any securities market
regulator in any other jurisdiction or any other authority/court.

None of the companies with which our Promoters, Directors or persons in control of our Bank are associated with as promoters,
directors or persons in control have been debarred from accessing capital markets under any order or direction passed by SEBI
or any other authorities.

None of our Directors are associated with securities market related business, in any manner and there is no outstanding actions initiated by
SEBI against our Directors in the five years preceding the date of this Red Herring Prospectus.

Our Bank, Promoters or Directors have not been declared as Wilful Defaulters or a Fraudulent Borrowers.

Kadambelil Paul Thomas or Directors have not been declared as fugitive economic offenders under Section 12 of the Fugitive Economic
Offenders Act, 2018.

Confirmation under Companies (Significant Beneficial Owners) Rules, 2018

Our Bank, Kadambelil Paul Thomas, ESAF Financial Holdings Private Limited, members of the Promoter Group, and each of the Selling
Shareholders severally and not jointly confirm that they are in compliance with the Companies (Significant Beneficial Owners) Rules, 2018,
to the extent in force and applicable to each of them, as on the date of this Red Herring Prospectus.

Eligibility for the Offer

Our Bank is eligible for the Offer in accordance with the eligibility criteria provided in Regulation 6(1) of the SEBI ICDR
Regulations, and is in compliance with the conditions specified therein in the following manner:
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• Our Bank has net tangible assets of at least ₹30 million, calculated on a restated and consolidated basis, in each of the
preceding three full years (of 12 months each), of which not more than 50% are held in monetary assets;

• Our Bank has an average operating profit of at least ₹150 million, calculated on a restated and consolidated basis,
during the preceding three years (of 12 months each), with operating profit in each of these preceding three years;

• Our Bank has a net worth of at least ₹10 million in each of the preceding three full years (of 12 months each), calculated
on a restated and consolidated basis; and

• Our Bank has not changed its name in the last one year.

Our Bank’s operating profit, net worth, net tangible assets, and monetary assets as a percentage of our net tangible assets,
operating profits and net worth derived from the Restated Financial Information included in this Red Herring Prospectus as at,
and for the last three Financial Years are set forth below:

As per Restated Financial Information

(in ₹ million, except % data)

Particulars (Restated Basis) As at
March 31, 2023 March 31, 2022 March 31, 2021
Restated net tangible assets (Note 1) (A) 200,593.95 173,981.65 121,636.44
Restated monetary assets (Note 2) (B) 7,670.49 15,119.04 18,191.26
% of Restated monetary assets to restated net 3.82% 8.69% 14.96%
tangible assets (B/A)
Operating profit (Note 3) 4,060.44 738.50 1,413.74
Net worth (Note 4) 16,937.79 13,937.46 13,450.34
Notes:
Note 1: “Net Tangible Assets” mean the sum of all net assets (net of provision on non-performing advances, provision on tax, provision for depreciation on
Fixed Assets and Investments) of the Bank excluding intangible assets as defined in Accounting Standard 26 (AS 26), deferred tax assets as defined in
Accounting Standard 22 (AS 22) as prescribed under Section 133 of the Companies Act, 2013 and standard asset provision which are not netted off in the
restated statement of assets and liabilities.
Note 2: For the purpose of the above computation, “Monetary Assets” is computed by adding “Note 8: Restated statement of Cash and Balances with Reserve
Bank of India” and Note 9: Restated statement of Balances with Banks and Money at Call and Short Notice" of the Restated Financial Information.
Note 3: For the purpose of the above computation, “Operating Profit” is determined by deducting interest expended, operating expenses and provisions and
contingencies (including provision for tax), from Interest earned and other income reported by the Bank as per the Restated Profit and Loss Account for the
respective years.
Note 4: “Net worth” means the aggregate value of the paid-up share capital and all reserves created out of the profits and share premium account and credit
balance of profit and loss account, after deducting the aggregate value of the accumulated losses, deferred expenditure and miscellaneous expenditure not
written off, as per the Restated Statement of Assets and Liabilities, but does not include reserves created out of revaluation of assets, write-back of depreciation
and amalgamation.

Our Bank confirms that it is also in compliance with the conditions specified in Regulation 7(1) of the SEBI ICDR Regulations,
to the extent applicable, and will ensure compliance with the conditions specified in Regulation 7(2) of the SEBI ICDR
Regulations, to the extent applicable.

Each Selling Shareholder severally and not jointly confirms, that the Equity Shares being offered by such Selling Shareholder
in the Offer have been held by such Selling Shareholder for a period of at least one year prior to the filing of this Red Herring
Prospectus with SEBI and are eligible for sale in the offer in accordance with Regulation 8 of the SEBI ICDR Regulations.

Our Bank shall not make an Allotment if the number or prospective allottees is less than one thousand in accordance with
Regulation 49(1) of the SEBI ICDR Regulations.

DISCLAIMER CLAUSE OF SEBI

IT IS TO BE DISTINCTLY UNDERSTOOD THAT SUBMISSION OF THE DRAFT RED HERRING PROSPECTUS

TO THE SEBI SHOULD NOT, IN ANY WAY, BE DEEMED OR CONSTRUED THAT THE SAME HAS BEEN
CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY EITHER FOR THE
FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH THE OFFER IS PROPOSED TO
BE MADE OR FOR THE CORRECTNESS OF THE STATEMENTS MADE OR OPINIONS EXPRESSED IN THE
DRAFT RED HERRING PROSPECTUS. THE BOOK RUNNING LEAD MANAGERS, BEING ICICI SECURITIES
LIMITED, DAM CAPITAL ADVISORS LIMITED, AND NUVAMA WEALTH MANAGEMENT LIMITED
(FORMERLY KNOWN AS EDELWEISS SECURITIES LIMITED) (“BRLMs”), HAVE CERTIFIED THAT THE
DISCLOSURES MADE IN THE DRAFT RED HERRING PROSPECTUS ARE GENERALLY ADEQUATE AND
ARE IN CONFORMITY WITH THE SEBI ICDR REGULATIONS. THIS REQUIREMENT IS TO FACILITATE
INVESTORS TO TAKE AN INFORMED DECISION FOR MAKING AN INVESTMENT IN THE PROPOSED
OFFER.

IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE BANK IS PRIMARILY RESPONSIBLE
FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT INFORMATION IN THE
DRAFT RED HERRING PROSPECTUS, THE BRLMs ARE EXPECTED TO EXERCISE DUE DILIGENCE TO

442
ENSURE THAT THE BANK DISCHARGES ITS RESPONSIBILITIES ADEQUATELY IN THIS BEHALF AND
TOWARDS THIS PURPOSE, THE BRLMs HAVE FURNISHED TO SEBI, A DUE DILIGENCE CERTIFICATE
DATED JULY 7, 2023 IN THE FORMAT PRESCRIBED UNDER SCHEDULE V(A) OF THE SEBI ICDR
REGULATIONS.

THE FILING OF THE DRAFT RED HERRING PROSPECTUS AND THIS RED HERRING PROSPECTUS DOES
NOT, HOWEVER, ABSOLVE THE BANK FROM ANY LIABILITIES UNDER THE COMPANIES ACT, 2013, OR
FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY AND/OR OTHER CLEARANCES AS MAY
BE REQUIRED FOR THE PURPOSE OF THE PROPOSED OFFER. SEBI FURTHER RESERVES THE RIGHT TO
TAKE UP AT ANY POINT OF TIME, WITH THE BOOK RUNNING LEAD MANAGERS, ANY IRREGULARITIES
OR LAPSES IN THE DRAFT RED HERRING PROSPECTUS.

All legal requirements pertaining to this Offer have been complied with at the time of filing of this Red Herring Prospectus
with the Registrar of Companies in terms of Section 32 of the Companies Act, 2013, and the Prospectus with the Registrar of
Companies in terms of Sections 26, 30, 32, 33(1) and 33(2) of the Companies Act, 2013.

Disclaimer clause of RBI

A license authorizing the Bank to carry on small finance bank business has been obtained from the Reserve Bank of India in
terms of Section 22 of the Banking Regulation Act, 1949. It must be distinctly understood, however, that in issuing the license,
the Reserve Bank of India does not undertake any responsibility for the financial soundness of the Bank or for the correctness
of any of the statements made or opinion expressed in this connection.

Disclaimer from our Bank, our Directors, each of the Selling Shareholders and BRLMs

Our Bank, our Directors, each of the Selling Shareholders and the BRLMs accept no responsibility for statements made
otherwise than in this Red Herring Prospectus or in the advertisements or any other material issued by or at our instance and
anyone placing reliance on any other source of information, including our Bank’s website www.esafbank.com, or the respective
websites of ESAF Financial Holdings Private Limited or any affiliate of our Bank would be doing so at his or her own risk.

The BRLMs accept no responsibility, save to the limited extent as provided in the Offer Agreement and as will be provided for
in the Underwriting Agreement.

All information shall be made available by our Bank, each of the Selling Shareholders, severally and not jointly (to the extent
that the information pertains to such Selling Shareholder and its respective portions of the Offered Shares through the Offer
Documents) and the BRLMs to the investors and the public at large and no selective or additional information would be made
available for a section of the investors in any manner whatsoever, including at road show presentations, in research or sales
reports, at the Bidding Centres or elsewhere.

Bidders will be required to confirm and will be deemed to have represented to our Bank, each of the Selling Shareholders, the
Underwriters, the BRLMs and their respective directors, partners, designated partners, officers, agents, affiliates, and
representatives that they are eligible under all applicable laws, rules, regulations, guidelines and approvals to acquire the Equity
Shares and will not issue, sell, pledge, or transfer the Equity Shares to any person who is not eligible under any applicable laws,
rules, regulations, guidelines and approvals to acquire the Equity Shares. Our Bank, each of the Selling Shareholders, the
Underwriters, the BRLMs and their respective directors, partners, designated partners, officers, agents, affiliates, and
representatives accept no responsibility or liability for advising any investor on whether such investor is eligible to acquire the
Equity Shares.

The BRLMs and their respective associates and affiliates in their capacity as principals or agents may engage in transactions
with, and perform services for, our Bank, our Promoters, members of the Promoter Group, each of the Selling Shareholders,
their respective directors, officers, agents, group companies, affiliates or associates or third parties in the ordinary course of
business and have engaged, or may in the future engage, in commercial banking and investment banking transactions with our
Bank, the Promoters, members of the Promoter Group, each of the Selling Shareholders, and their respective directors, officers,
agents, group companies, affiliates or associates or third parties, for which they have received, and may in the future receive,
compensation.

Disclaimer in respect of Jurisdiction

Any dispute arising out of this Offer will be subject to the jurisdiction of appropriate court(s) in Mumbai only.

Bidders eligible under Indian law to participate in the Offer

This Offer is being made in India to persons resident in India (including Indian nationals resident in India who are competent
to contract under the Indian Contract Act, 1872, HUFs, companies, other corporate bodies and societies registered under the
applicable laws in India and authorised to invest in equity shares, domestic Mutual Funds, registered with the SEBI, public
financial institutions as specified under Section 2(72) of the Companies Act, 2013 scheduled commercial banks, permitted
national investment funds, NBFC-SIs, Indian financial institutions, commercial banks, regional rural banks, co-operative banks

443
(subject to permission from the RBI), or trusts under applicable trust law and who are authorised under their constitution to
hold and invest in equity shares, multilateral and bilateral development financial institutions, state industrial development
corporations, insurance companies registered with IRDAI, permitted provident funds (subject to applicable law) and pension
funds, National Investment Fund, permitted insurance companies and pension funds, permitted insurance funds set up and
managed by army, navy or air force of Union of India, insurance funds set up and managed by the Department of Posts, GoI,
systemically important NBFCs registered with the RBI) and permitted Non-Residents including FPIs and Eligible NRIs, VCFs
and AIFs and other eligible foreign investors, if any, provided that they are eligible under all applicable laws and regulations to
purchase the Equity Shares.

In terms of the Banking Regulation Act read with Reserve Bank of India (acquisition and holding of shares or voting rights in
banking companies) Directions, 2023 and guidelines thereunder, as updated, no person (along with his relatives, associate
enterprises or persons acting in concert with such person) can acquire or hold 5% or more of the total paid-up share capital of
our Bank, or be entitled to exercise 5% or more of the total voting rights of our Bank, without prior approval of the RBI. For
details, see “Key Regulations and Policies” and “Offer Procedure” on pages 221 and 471, respectively.

Bidders are advised to ensure that any Bid from them does not exceed investment limits or the maximum number of
Equity Shares that can be held by them under applicable law. Further, each Bidder where required must agree in the
Allotment Advice that such Bidder will not sell or transfer any Equity Shares or any economic interest therein, including
any off-shore derivative instruments, such as participatory notes, issued against the Equity Shares or any similar
security, other than in accordance with applicable laws.

Selling and Transfer Restrictions

The Equity Shares offered in the Offer have not been and will not be registered, listed or otherwise qualified in any jurisdiction
except India and may not be offered or sold to persons outside of India except in compliance with the applicable laws of each
such jurisdiction. Any person into whose possession this Red Herring Prospectus comes is required to inform himself or herself
about, and to observe, any such restrictions.

This Red Herring Prospectus does not constitute an offer to sell or an invitation to subscribe to Equity Shares offered hereby,
in any jurisdiction, including in India, to any person to whom it is unlawful to make an offer or invitation in such jurisdiction.
Invitations to subscribe to or purchase the Equity Shares in the Offer will be made only pursuant to this Red Herring Prospectus
if the recipient is in India or the preliminary offering memorandum for the Offer, which comprises this Red Herring Prospectus
and the preliminary international wrap for the Offer, if the recipient is outside India.

No person outside India is eligible to Bid for Equity Shares in the Offer unless that person has received the preliminary
offering memorandum for the Offer, which contains the selling restrictions for the Offer outside India.

No action has been, or will be taken to permit a public offering in any jurisdiction where action would be required for that
purpose, except that this Red Herring Prospectus has been filed with SEBI for its observations. Accordingly, the Equity Shares
represented hereby may not be offered or sold, directly or indirectly, and this Red Herring Prospectus may not be distributed,
in any jurisdiction, except in accordance with the legal requirements applicable in such jurisdiction. Neither the delivery of this
Red Herring Prospectus nor the offer of the Offered Shares shall, under any circumstances, create any implication that there
has been no change in the affairs of our Bank or the Selling Shareholders since the date of this Red Herring Prospectus or that
the information contained herein is correct as of any time subsequent to this date.

Eligibility and Transfer Restrictions

The Equity Shares offered in the Offer have not been and will not be registered, listed or otherwise qualified in any jurisdiction
except India and may not be offered or sold to persons outside of India except in compliance with the applicable laws of each
such jurisdiction. In particular, the Equity Shares offered in the Offer have not been and will not be registered under the U.S.
Securities Act or the laws of any state of the United States and may not be offered or sold in the United States, except pursuant
to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and applicable
state securities laws. Accordingly, such Equity Shares are being offered and sold (i) outside the United States in offshore
transactions in reliance on Regulation S under the U.S. Securities Act; and (ii) to persons reasonably believed to be “qualified
institutional buyers” (as defined in Rule 144A (“Rule 144A”) under the U.S. Securities Act), pursuant to Section 4(a)(2) of the
U.S. Securities Act with respect to our Bank and Rule 144A with respect to each of the Selling Shareholders.

Each purchaser of the Equity Shares in the Offer who does not receive a copy of the preliminary offering memorandum
for the Offer shall be deemed to:

• Represent and warrant to our Bank, the Selling Shareholders, the BRLMs and the Syndicate Members that it was
outside the United States (as defined in Regulation S) at the time the offer of the Equity Shares was made to it and it
was outside the United States (as defined in Regulation S) when its buy order for the Equity Shares was originated.

• Represent and warrant to our Bank, the Selling Shareholders, the BRLMs and the Syndicate Members that it did not
purchase the Equity Shares as a result of any “directed selling efforts” (as defined in Regulation S).

444
• Represent and warrant to our Bank, the Selling Shareholders, the BRLMs and the Syndicate Members that it bought
the Equity Shares for investment purposes and not with a view to the distribution thereof. If in the future it decides to
resell or otherwise transfer any of the Equity Shares, it agrees that it will not offer, sell or otherwise transfer the Equity
Shares except in a transaction complying with Rule 903 or Rule 904 of Regulation S or pursuant to any other available
exemption from registration under the U.S. Securities Act.

• Represent and warrant to our Bank, the Selling Shareholders, the BRLMs and the Syndicate Members that if it acquired
any of the Equity Shares as fiduciary or agent for one or more investor accounts, it has sole investment discretion with
respect to each such account and that it has full power to make the foregoing representations, warranties,
acknowledgements and agreements on behalf of each such account.

• Represents and warrant to our Bank, the Selling Shareholders, the BRLMs and the Syndicate Members that if it
acquired any of the Equity Shares for one or more managed accounts, that it was authorized in writing by each such
managed account to subscribe to the Equity Shares for each managed account and to make (and it hereby makes) the
representations, warranties, acknowledgements and agreements herein for and on behalf of each such account, reading
the reference to “it” to include such accounts.

• Agree to indemnify and hold the Bank, the Selling Shareholders, the BRLMs and the Syndicate Members harmless
from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in
connection with any breach of these representations, warranties or agreements. It agrees that the indemnity set forth in
this paragraph shall survive the resale of the Equity Shares.

• Acknowledge that our Bank, the Selling Shareholders, the BRLMs, the Syndicate Members and others will rely upon
the truth and accuracy of the foregoing representations, warranties, acknowledgements and agreements.

References above to “it” in the case of individuals means “he” or “she”, as the case may be.

Disclaimer Clause of BSE Limited

As required, a copy of the Draft Red Herring Prospectus was submitted to BSE. The disclaimer clause as intimated by BSE to
our Bank, post scrutiny of the Draft Red Herring Prospectus is as set forth below:

“BSE Limited (“the Exchange”) has given vide its letter dated September 7, 2023, permission to this Company to use the
Exchange’s name in this offer document as one of the stock exchanges on which this company’s securities are proposed to be
listed. The Exchange has scrutinized this offer document for its limited internal purpose of deciding on the matter of granting
the aforesaid permission to this Company. The Exchange does not in any manner:

a) warrant, certify or endorse the correctness or completeness of any of the contents of this offer documents; or

b) warrant that this Company’s securities will be listed or will continue to be listed on the Exchange; or

c) take any responsibility for the financial or other soundness of this Company, its promoters, its management or any
scheme or project of this Company.

and it should not for any reason be deemed or construed that this offer document has been cleared or approved by the Exchange.
Every person who desires to apply for or otherwise acquires any securities of this Company may do so pursuant to independent
inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which
may be suffered by such person consequent to or in connection with such subscription/ acquisition whether by reason of
anything stated or omitted to be stated herein or for any other reason whatsoever.”

Disclaimer Clause of National Stock Exchange of India Limited

As required, a copy of the Draft Red Herring Prospectus was submitted to NSE. The disclaimer clause as intimated by NSE to
our Bank, post scrutiny of the Draft Red Herring Prospectus is set forth below:

“As required, a copy of this Offer Document has been submitted to National Stock Exchange of India Limited (hereinafter
referred to as NSE). NSE has given vide its letter Ref.: NSE/LIST/2513 dated September 07, 2023, permission to the Issuer to
use the Exchange’s name in this Offer Document as one of the Stock Exchanges on which this Issuer’s securities are proposed
to be listed. The Exchange has scrutinized this draft offer document for its limited internal purpose of deciding on the matter of
granting the aforesaid permission to this Issuer. It is to be distinctly understood that the aforesaid permission given by NSE
should not in any way be deemed or construed that the offer document has been cleared or approved by NSE; nor does it in
any manner warrant, certify or endorse the correctness or completeness of any of the contents of this offer document; nor does
it warrant that this Issuer’s securities will be listed or will continue to be listed on the Exchange; nor does it take any
responsibility for the financial or other soundness of this Issuer, its promoters, its management or any scheme or project of this
Issuer.

445
Every person who desires to apply for or otherwise acquire any securities of this Issuer may do so pursuant to independent
inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever by reason of any loss which
may be suffered by such person consequent to or in connection with such subscription /acquisition whether by reason of
anything stated or omitted to be stated herein or any other reason whatsoever.”

Listing

The Equity Shares issued pursuant to this Red Herring Prospectus and the Prospectus are proposed to be listed on the BSE and
the NSE. Applications will be made to the Stock Exchanges for obtaining permission for listing and trading of the Equity
Shares. BSE will be the Designated Stock Exchange with which the Basis of Allotment will be finalised.

If the permission to deal in and for an official quotation of the Equity Shares is not granted by the Stock Exchanges, our Bank
shall forthwith repay, without interest, all monies received from the applicants in pursuance of this Red Herring Prospectus in
accordance with applicable law.

Consents

Consents in writing of each the Selling Shareholders, our Directors, our Company Secretary and Compliance Officer, Legal
Counsel to our Bank, Bankers to our Bank, the BRLMs, the Registrar to the Offer, CRISIL MI&A and A. John Moris & Co.,
independent chartered accountant; and consents in writing of the Syndicate Members, the Banker(s) to the Offer/ Escrow
Collection Bank(s)/ Public Offer Account Bank/ Refund Bank(s), Sponsor Banks, the Share Escrow Agent to act in their
respective capacities, will be obtained and filed along with a copy of this Red Herring Prospectus with the RoC as required
under Sections 26 and 32 of the Companies Act. Further, consents obtained above have not been withdrawn as on the date of
this Red Herring Prospectus.

Experts to the Offer

Except as stated below, our Bank has not obtained any expert opinions:

Our Bank has received written consent dated October 25, 2023 from our Joint Statutory Auditors namely, Deloitte Haskins &
Sells, Chartered Accountants, and Abarna & Ananthan, Chartered Accountants to include their names in this Red Herring
Prospectus, as required under Section 26(5) of the Companies Act, 2013, read with the SEBI ICDR Regulations, and as
“experts” as defined under Section 2(38) of the Companies Act, 2013, to the extent and in their capacity as auditors, in respect
of the examination report dated October 17, 2023 issued by them on our Restated Financial Information, and the statement of
special tax benefits dated October 25, 2023 included in this Red Herring Prospectus and such consents have not been withdrawn
as on the date of this Red Herring Prospectus. However, the term “experts” and the consents thereof shall not be construed to
mean “experts” or consents within the meaning as defined under the U.S. Securities Act.

Our Bank has received written consent dated October 17, 2023 from A. John Moris & Co., independent chartered accountants,
holding a valid peer review certificate from ICAI, to include their name in this Red Herring Prospectus, as required under
Section 26(5) of the Companies Act, 2013, read with the SEBI ICDR Regulations, and as an “expert” as defined under Section
2(38) of the Companies Act in respect of the certificates issued by them in their capacity as an independent chartered accountant
to our Bank. However, the term “expert” and the consent thereof shall not be construed to mean an “expert” or consent within
the meaning as defined under the U.S. Securities Act.

Particulars regarding capital issues by our Bank and listed group companies, subsidiaries or associate entity during the
last three years

Except as disclosed in “Capital Structure – Share Capital History of our Bank” on page 109, our Bank has not made any capital
issues during the three years preceding the date of this Red Herring Prospectus.

None of our Group Entities are listed on any stock exchange. Our Bank does not have any subsidiary or associate entity.

Commission and Brokerage paid on previous issues of the Equity Shares in the last five years

Since this is the initial public issue of Equity Shares, no sum has been paid or has been payable as commission or brokerage for
subscribing to or procuring or agreeing to procure subscription for any of the Equity Shares in the last five years preceding the
date of this Red Herring Prospectus.

Performance vis-à-vis objects – Public/ rights issue of our Bank

Our Bank has not undertaken any public or rights issue in the five years preceding the date of this Red Herring Prospectus.

Performance vis-à-vis objects – Public/ rights issue of the listed subsidiaries/listed Promoters of our Bank

As on the date of this Red Herring Prospectus, ESAF Financial Holdings Private Limited is not listed on any stock exchange.
Our Bank does not have any subsidiaries.

446
Price information of past issues handled by the BRLMs

A. ICICI

1. Price information of past issues handled by ICICI

S. Issue name Issue size Issue price Listing date Opening price +/- % change in closing +/- % change in closing +/- % change in closing
No. (₹ in million) (in ₹) on listing date price, [+/- % change in price, [+/- % change in price, [+/- % change in
(in ₹) closing benchmark]- 30th closing benchmark]- 90th closing benchmark]- 180th
calendar days from listing calendar days from listing calendar days from listing
1. Five Star Business Finance +29.72%, [+1.24%] +19.20%, [-1.19%] +11.72%, [+0.24%]
15,885.12 474.00 November 21, 2022 468.80
Limited^^
2. Archean Chemical Industries
14,623.05 407.00 November 21, 2022 450.00 +25.42%, [+1.24%] +56.87%, [-1.19%] +32.68%, [+0.24%]
Limited^^
3. Landmark Cars Limited^ 5,520.00 506.00(1) December 23, 2022 471.30 +22.83%, [+1.30%] +1.16%, [-2.72%] +35.06%, [+5.82%]
4. KFIN Technologies Limited^^ 15,000.00 366.00 December 29, 2022 367.00 -13.55%, [-3.22%] -24.56%, [-6.81%] -4.48%, [+2.75%]
5. Utkarsh Small Finance Bank
5,000.00 25.00 July 21, 2023 40.00 +92.80%,[-2.20%] +119.00%, [-0.37%] NA*
Limited^^
6. SBFC Finance Limited^^ 10,250.00 57.00(2) August 16, 2023 82.00 +51.75%, [+3.28%] NA* NA*
7. Jupiter Lifeline Hospitals
8,690.76 735.00 September 18, 2023 973.00 +42.27%, [-1.60%] NA* NA*
Limited^^
8. Zaggle Prepaid Ocean Services
5,633.77 164.00 September 22, 2023 164.00 +30.95%, [-0.67%] NA* NA*
Limited^^
9. Signatureglobal (India) 7,300.00 385.00 September 27, 2023 444.00
+35.79%, [-4.36%] NA* NA*
Limited^^
10. JSW Infrastructure Limited^ 28,000.00 119.00 October 3, 2023 143.00 NA* NA* NA*
*Data not available
^BSE as designated stock exchange
^^NSE as designated stock exchange
(1) Discount of Rs. 48 per equity share offered to eligible employees. All calculations are based on Issue Price of Rs. 506.00 per equity share.
(2) Discount of Rs. 2 per equity share offered to eligible employees. All calculations are based on Issue Price of Rs. 57.00 per equity share.

2. Summary statement of price information of past issues handled by ICICI

Financial Total Total funds raised Nos. of IPOs trading at discount – as Nos. of IPOs trading at premium – Nos. of IPOs trading at discount - as Nos. of IPOs trading at premium –
Year no. of (₹ millions) on 30th calendar days from listing as on 30th calendar days from listing on 180th calendar days from listing as on 180th calendar days from
IPOs date date date listing date
Over 50% Between Less than Over 50% Between Less than Over 50% Between Less than Over 50% Between Less than
25% - 50% 25% 25%-50% 25% 25%-50% 25% 25%-50% 25%
2023-24* 6 64,874.53 - - - 2 3 - - - - - - -
2022-23 9 2,95,341.82 - 1 3 - 3 2 - 1 1 - 5 2
2021-22 26 7,43,520.19 - 3 6 6 4 7 3 4 5 5 4 5
* This data covers issues up to YTD
Notes:
1. Data is sourced either from www.nseindia.com or www.bseindia.com, as per the designated stock exchange disclosed by the respective Issuer Company.
2. Similarly, benchmark index considered is “NIFTY 50” where NSE is the designated stock exchange and “S&P BSE SENSEX” where BSE is the designated stock exchange, as disclosed by the respective Issuer Company.
3. 30th, 90th, 180th calendar day from listed day have been taken as listing day plus 29, 89 and 179 calendar days, except wherever 30th, 90th, 180th calendar day is a holiday, in which case we have considered the closing data of the
previous trading day

447
B. DAM Capital

1. Price information of past issues (during current financial year and two financial years preceding the current financial year) handled by DAM Capital

S. Issue name Issue size Issue price Listing date Opening price +/- % change in closing +/- % change in closing +/- % change in closing
No. (₹ in million) (in ₹) on listing date price, [+/- % change in price, [+/- % change in price, [+/- % change in
(in ₹) closing benchmark]- 30th closing benchmark]- 90th closing benchmark]- 180th
calendar days from listing calendar days from listing calendar days from listing
1. JSW Infrastructure Limited(2) 28,000.00 119.00 October 3, 2023 143.00 Not applicable Not applicable Not applicable
2. 7,750.00 142.00 September 28, 2023 130.00 -11.06%, Not applicable Not applicable
Yatra Online Limited(2)
[-2.63%]
3. 4,907.83 441.00 September 11, 2023 460.05 +20.12%, Not applicable Not applicable
Rishabh Instruments Limited(1)
[-1.53%]
4. 8,650.00 436.00 April 18, 2023 436.00 -10.09%, +59.45%, +21.32%,
Avalon Technologies Limited(1)
[+2.95%] [+10.78%] [+11.84%]
5. 8,356.08 577.00 December 12, 2022 575.00 -5.11%, -7.38%, -0.60%,
Uniparts India Limited(2)
[-3.24%] [-4.82%] [+0.80%]
6. Inox Green Energy Services 7,400.00 65.00 November 23, 2022 60.50 -30.77%, -32.77%, -26.85%,
Limited(2) [-1.11%] [-1.33%] [+0.36%]
7. Kaynes Technology India 8,578.20 587.00 November 22, 2022 778.00 +19.79%, +48.24%, +102.18%,
Limited(1) [-0.25%] [-1.64%] [-0.22%]
8. Syrma SGS Technology 8,401.26 220.00 August 26, 2022 262.00 +31.11%, +29.20%, +20.66%,
Limited(2) [-1.25%] [+4.55%] [+3.13%]
9. CMS Info Systems Limited(2) 11,000.00 216.00 December 31, 2021 218.50 +21.99%, +25.35%, +3.75%,
[-1.81%] [+0.74%] [-8.71%]
10. Metro Brands Limited(2) 13,675.05 500.00 December 22, 2021 436.00 +21.77%, +14.57%, +7.93%,
[+4.45%] [+0.64%] [-9.78%]
Source: www.nseindia.com and www.bseindia.com
(1) NSE was the designated stock exchange for the said issue.
(2) BSE was the designated stock exchange for the said issue.
Notes:
(a) Issue size derived from prospectus / basis of allotment advertisement, as applicable
(b) Price on NSE or BSE is considered for the above calculations as per the designated stock exchange disclosed by the respective issuer at the time of the issue, as applicable
(c) % of change in closing price on 30th / 90th / 180th calendar day from listing day is calculated vs issue price. % change in closing benchmark index is calculated based on closing index on listing day vs closing index on 30th/ 90th /
180th calendar day from listing day.
(d) Wherever 30th/ 90th / 180th calendar day from listing day is a holiday, the closing data of the previous trading day has been considered.
(e) The Nifty 50 or S&P BSE SENSEX index is considered as the benchmark index as per the designated stock exchange disclosed by the respective issuer at the time of the issue, as applicable
(f) Not applicable – Period not completed

2. Summary statement of price information of past issues (during current financial year and two financial years preceding the current financial year) handled by DAM Capital

Financial Total no. Total funds Nos. of IPOs trading at discount – as Nos. of IPOs trading at premium – as Nos. of IPOs trading at discount – as onNos. of IPOs trading at premium – as on
Year of IPOs raised on 30th calendar days from listing date on 30th calendar days from listing date 180th calendar days from listing date 180th calendar days from listing date
(₹ millions) Over 50% Between Less than Over 50% Between Less than Over 50% Between Less than Over 50% Between Less than
25% - 50% 25% 25%-50% 25% 25%-50% 25% 25%-50% 25%
2023-24 4 49,307.83 - - 2 - - 1 - - - - - 1
2022-23 4 32,735.54 - 1 1 - 1 1 - 1 1 1 - 1
2021-22 8 136,678.74 - - 4 2 - 2 - 2 2 - 1 3

448
Source: www.nseindia.com and www.bseindia.com
Notes:
a. The information is as on the date of this offer document
b. The information for each of the financial years is based on issues listed during such financial year.
c. Since 30 or 180 calendar days from listing date has not elapsed for few issues, hence data for same is not available.

C. Nuvama

1. Price information of past issues handled by Nuvama

S. **Issue Name Issue Size Issue price (₹) Listing Date Opening Price on +/- % change in +/- % change in closing +/- % change in closing
No. (₹ million) # Listing Date closing price, [+/- % price, [+/- % change in price, [+/- % change in
(in ₹) change in closing closing benchmark]- closing benchmark]-
benchmark]- 30th 90th calendar days from 180th calendar days from
calendar days from listing listing
listing
1. Sai Silks (Kalamandir) 12,009.98 222.00 September 27, 2023 230.10 8.09% [-4.49%] NA NA
Limited
2. Jupiter Life Line Hospitals 8,690.76 735.00 September 18, 2023 973.00 42.27% [-1.60% ] NA NA
Limited
3. TVS Supply Chain Solutions
8,800.00 197.00 August 23, 2023 207.05 8.71% [1.53% ] NA NA
Limited
4. Inox Green Energy Services
7400.00 65.00 November 23, 2022 60.50 -30.77% [-1.11%] -32.77% [-1.33%] -26.85% [0.36%]
Limited
5. Five Star Business Finance
15934.49 474.00 November 21, 2022 468.80 29.72% [1.24%] 19.20% [-1.19%] 11.72% [0.24%]
Limited
6. DCX Systems Limited 5000.00 207.00 November 11, 2022 286.25 17.10% [0.63%] -12.56% [-1.83%] -12.32% [-0.05%]
7. Vedant Fashions Limited 31,491.95 866.00 February 16, 2022 935.00 3.99% [-0.20%] 14.53% [-8.54%] 37.67% [2.17%]
8. MedPlus Health Services
13,982.95 796.00@ December 23, 2021 1,015.00 53.22% [3.00%] 23.06% [1.18%] -6.55% [-9.98%]
Limited
9. Tarsons Products Limited 10,234.74 662.00$ November 26, 2021 700.00 -4.16% [0.03%] -4.46% [0.22%] 0.20% [-5.35%]
10. S. J. S. Enterprises Limited 8,000.00 542.00 November 15, 2021 542.00 -24.99% [-4.33%] -29.33% [-4.06%] -30.67% [-12.85%]
Source: www.nseindia.com and www.bseindia.com
$Tarsons Products Limited - A discount of ₹ 61 per equity share was offered to eligible employees bidding in the employee reservation portion. All calculations are based on the offer price of ₹662 per equity share.
@
MedPlus Health Services Limited - A discount of ₹ 78 per equity share was offered to eligible employees bidding in the employee reservation portion. All calculations are based on the offer price of ₹796 per equity share.
#As per Prospectus
**Pursuant to order passed by Hon’ble National Company Law Tribunal, Mumbai Bench dated April 27, 2023, the merchant banking business of Edelweiss Financial Services Limited (“Edelweiss”) has demerged and now transferred to
Nuvama Wealth Management Limited (“Nuvama”) and therefore the said merchant banking business is part of Nuvama.
Notes
1. Based on date of listing.
2. % of change in closing price on 30th / 90th / 180th calendar day from listing day is calculated vs issue price. % change in closing benchmark index is calculated based on closing index on listing day vs closing index on 30th/ 90th / 180th
calendar day from listing day.
3. Wherever 30th/ 90th / 180th calendar day from listing day is a holiday, the closing data of the previous trading day has been considered.
4. Designated Stock Exchange as disclosed by the respective Issuer at the time of the issue has been considered for disclosing the price information and benchmark index.
5. Not Applicable. – Period not completed
6. Disclosure in Table-1 restricted to 10 issues.

2. Summary statement of price information of past issues handled by Nuvama

449
Financial Total Total funds raised Nos. of IPOs trading at discount – as Nos. of IPOs trading at premium – as Nos. of IPOs trading at discount - as Nos. of IPOs trading at premium – as
Year no. of (₹ millions) on 30th calendar days from listing on 30th calendar days from listing on 180th calendar days from listing on 180th calendar days from listing
IPOs date date date date
Over 50% Between Less than Over 50% Between Less than Over 50% Between Less than Over 50% Between Less than
25% - 50% 25% 25%-50% 25% 25%-50% 25% 25%-50% 25%
2023-24* 3 29,500.74 - - - - 1 2 - - - - - -
2022-23 3 28,334.49 - 1 - - 1 1 - 1 1 - - 1
2021-22 9 2,31,182.63 - - 3 1 2 3 - 1 2 2 1 3
The information is as on the date of the document
1. Based on date of listing.
2. Wherever 30th and 180th calendar day from listing day is a holiday, the closing data of the previous trading day has been considered.
3. Designated Stock Exchange as disclosed by the respective Issuer at the time of the issue has been considered for disclosing the price information and benchmark index.
*For the financial year 2023-24, 3 issues have completed 30 calendar days and none have completed 180 calendar days.
#
As per Prospectus

450
Track record of the Book Running Lead Managers

For details regarding the track record of the BRLMs, as specified in circular reference CIR/MIRSD/1/2012 dated January 10,
2012 issued by SEBI, see the websites of the BRLMs, as set forth in the table below:

S. No. Name of the BRLM Website

1. ICICI Securities Limited www.icicisecurities.com
2. DAM Capital Advisors Limited www.damcapital.in
3. Nuvama Wealth Management Limited (formerly known as Edelweiss Securities Limited) www.nuvama.com

Stock Market Data of Equity Shares

This being an initial public offer of Equity Shares of our Bank, the Equity Shares are not listed on any stock exchange as on the
date of this Red Herring Prospectus, and accordingly, no stock market data is available for the Equity Shares.

Mechanism for Redressal of Investor Grievances

The Registrar Agreement provides for retention of records with the Registrar to the Offer for a minimum period of at least eight
years from the date of listing and commencement of trading of the Equity Shares on the Stock Exchanges, in order to enable
the investors to approach the Registrar to the Offer for redressal of their grievances.

All Offer related grievances other than those of the Anchor Investors may be addressed to the Registrar to the Offer with a copy
to the relevant Designated Intermediary to whom the ASBA Form was submitted. The Bidder should give full details such as
name of the sole or first Bidder, Bid cum Application Form number, Bidder DP ID, Client ID, UPI ID, PAN, date of the
submission of ASBA Form, address of the Bidder, number of the Equity Shares applied for the name and address of the
Designated Intermediary where the Bid cum Application Form was submitted by the Bidder and ASBA Account number (for
Bidders other than UPI Bidders bidding through the UPI Mechanism) in which the amount equivalent to the Bid Amount was
blocked or the UPI ID in case of UPI Bidders using the UPI Mechanism.

All grievances relating to Bids submitted with Registered Brokers, may be addressed to the Stock Exchanges, with a copy to
the Registrar to the Offer. Further, Bidders shall also enclose a copy of the Acknowledgment Slip received from the Designated
Intermediaries in addition to the information mentioned hereinabove.

Our Bank, the BRLMs and the Registrar to the Offer accept no responsibility for errors, omissions, commission or any acts of
the SCSBs or Designated Intermediaries including any defaults in complying with its obligations under applicable SEBI ICDR
Regulations.

Investors can contact our Company Secretary and Compliance Officer and/or the Registrar to the Offer in case of any pre-Offer
or post-Offer related problems such as non-receipt of letters of Allotment, non-credit of Allotted Equity Shares in the respective
beneficiary account, non-receipt of refund intimations and non-receipt of funds by electronic mode. For all Offer related queries
and for redressal of complaints, Bidders may also write to the BRLMs or the Registrar to the Offer, in the manner provided
below. Further, the Bidder shall also enclose a copy of the Acknowledgment Slip or provide the acknowledgement number duly
received from the concerned Designated Intermediary in addition to the information mentioned hereinabove. The Registrar to
the Offer shall obtain the required information from the SCSBs and Sponsor Banks for addressing any clarifications or
grievances of ASBA Bidders. For offer related grievances, investors may contact Book Running Lead Managers, details of
which are given in “General Information” on page 101.

Anchor Investors are required to address all grievances in relation to the Offer to the BRLMs.

In terms of SEBI circular SEBI/HO/CFD/PoD-2/P/CIR/2023/0094 dated June 21, 2023 and subject to applicable law, any
ASBA Bidder whose Bid has not been considered for Allotment, due to failure on the part of any SCSB, shall have the option
to seek redressal of the same by the concerned SCSB within three months of the date of listing of the Equity Shares. SCSBs are
required to resolve these complaints within 15 days, failing which the concerned SCSB would have to pay interest at the rate
of 15% per annum for any delay beyond this period of 15 days. Further, the Bidders shall be compensated by the SCSBs at the
rate higher of ₹100 or 15% per annum of the application amount in the events of delayed or withdrawal of applications, blocking
of multiple amounts for the same UPI application, blocking of more amount than the application amount, delayed unblocking
of amounts for non-allotted/partially-allotted applications for the stipulated period. In an event there is a delay in redressal of
the investor grievances in relation to unblocking of amounts beyond the date of receipt of the complaint, the Book Running
Lead Managers shall compensate the investors at the rate higher of ₹100 per day or 15% per annum of the application amount
from the date of which the investor grievance is received by the BRLMs or Registrar until the date on which the blocked
amounts are unblocked. Further, in terms of UPI Circulars, the payment of processing fees to the SCSBs shall be undertaken
pursuant to an application made by the SCSBs to the BRLMs, and such application shall be made only after (i) unblocking of
application amounts for each application received by the SCSB has been fully completed, and (ii) applicable compensation
relating to investor complaints has been paid by the SCSB.

Disposal of Investor Grievances by our Bank

451
The Bank has obtained authentication on the SCORES and shall comply with the SEBI circular
SEBI/HO/OIAE/IGRD/P/CIR/2022/0150 dated November 7, 2022 in relation to redressal of investor grievances through
SCORES.

Our Bank has also appointed Ranjith Raj P, Company Secretary of our Bank, as the Compliance Officer for the Offer. For
details, see “General Information – Company Secretary and Compliance Officer” on page 101.

Our Bank has constituted a Stakeholders’ Relationship Committee comprising Kolasseril Chandramohanan Ranjani,
Kadambelil Paul Thomas, Ravi Venkatraman and John Samuel, as members. For details, see “Our Management” on page 251.

Our Group Entities are not listed on any stock exchange.

Our Bank estimates that the average time required by our Bank or the Registrar to the Offer, or the relevant Designated
Intermediary or the SCSB in case of ASBA Bidders, for the redressal of routine investor grievances shall be 10 Working Days
from the date of receipt of the complaint. In case of non-routine complaints and complaints where external agencies are
involved, our Bank will seek to redress these complaints as expeditiously as possible.

Our Bank has not received investor complaints during the period of three years preceding the date of this Red Herring
Prospectus, hence no investor complaint in relation to our Bank is pending as on the date of filing of this Red Herring Prospectus.

Exemption from complying with any provisions of securities laws, if any, granted by SEBI

Our Bank filed an application dated May 18, 2023 (“Exemption Application”) under Regulation 300(1)(c) of the SEBI ICDR
Regulations to SEBI seeking relaxation from disclosing Dia Vikas Capital Private Limited (“Dia Vikas”), a pure financial
investor in ESAF Financial Holdings Private Limited holding 19.99% of the paid-up equity share capital of ESAF Financial
Holdings Private Limited and also holding 1,804,850, 1% compulsorily convertible preference shares of face value of ₹100
each of ESAF Financial Holdings Private Limited, as a part of the “promoter group” of the Bank in accordance with the SEBI
ICDR Regulations on the following grounds: (i) under the first proviso to Regulation 2(1)(pp) of the SEBI ICDR Regulations,
a financial institution, scheduled bank, foreign portfolio investor other than individuals, corporate bodies and family offices,
mutual fund, venture capital fund, alternative investment fund, foreign venture capital investor, insurance company registered
with the IRDAI or any other category as specified by SEBI from time to time are not deemed to be part of the promoter group
merely by virtue of the fact that 20% or more of the equity share capital of the promoter of the issuer is held by such person or
entity. Our Bank sought such exemption on the grounds that a financial investor such as Dia Vikas should not be considered to
form part of promoter group of our Bank merely by virtue of holding more than 20% of the paid-up capital of ESAF Financial
Holdings Private Limited on a fully diluted basis; (ii) Dia Vikas has no control or special rights over the Bank either as a
shareholder of ESAF Financial Holdings Private Limited or by virtue of the EFHPL SHA or the charter documents of ESAF
Financial Holdings Private Limited; (iii) Dia Vikas has not held any shares in the Bank, or had any other rights in the Bank at
any point in the past, as a result of which, there has been no identifiable relation between the Bank and Dia Vikas at any point
of time; and (iv) Dia Vikas does not exercise any control or influence over the Bank, nor is Dia Vikas involved in the day-to-
day operations or administrative functions of the Bank. Our Bank pursuant to the Exemption Application sought exemption
from (i) naming Dia Vikas as promoter group in the Offer Documents; and (ii) providing any confirmations as required to be
provided by an issuer’s promoter group under the SEBI ICDR Regulations in respect of Dia Vikas in the Offer Documents. The
Exemption Application has been granted by SEBI by its approval letter dated June 23, 2023.

Correspondences from the RBI

Further, our Bank has received a letter dated June 9, 2023 (“RBI Letter”) from the RBI regarding the non- adherence to
licensing condition relating to the listing of Equity Shares of our Bank under the provisions of the SFB Licensing Guidelines.
By virtue of the RBI Letter, our Bank has been directed to file the draft red herring prospectus with SEBI by June 30, 2023 and
complete the listing process of our Equity Shares by November 30, 2023. In response to the RBI Letter, our Bank through its
letter dated June 13, 2023, inter-alia, submitted that (i) our Bank is currently in process of preparing the draft red herring
prospectus to be filed with the SEBI; and (ii) our Bank will aim to file the draft red herring prospectus within the prescribed
timeline of June 30, 2023 with an outer timeline of July 15, 2023 accounting for unexpected delays on external dependencies,
if any.

452
 OUR GROUP ENTITIES

In terms of the SEBI ICDR Regulations and pursuant to the resolution passed by our Board at its meeting held on October 17,
2023, group entities of our Bank shall include (i) the companies (other than ESAF Financial Holdings Private Limited) with
which there were related party transactions as per the Restated Financial Information of our Bank read with “Restated Financial
Information – Related Party Transactions – Note 19-B-7” on page 363, during any of the last three financial years; (ii) the
companies forming part of the promoter group (other than ESAF Financial Holdings Private Limited) with whom our Bank has
entered into one or more transactions during the last completed financial year and the most recent period included in the restated
financial information, if any, which individually or cumulatively exceeds 10% of the total revenue of our Bank for that financial
year as per the Restated Financial Information; or (iii) such other entities as deemed material by our Board.

Accordingly, in terms of the policy adopted by our Board for determining group entities, our Board has identified the following
entities as the group entities of our Bank (“Group Entities”):

1. ESAF Swasraya Multi-State Agro Co-operative Society Limited;

2. CEDAR Retail Private Limited (formerly ESAF Retail Private Limited);

3. Lahanti Lastmile Services Private Limited;

4. Lahanti Homes and Infrastructure Private Limited (formerly ESAF Homes and Infrastructure Private Limited);

5. Prachodhan Development Services; and

6. ESAF Swasraya Producers Company Limited.

Details of our Group Entities

Details of our top five Group Entities

1. ESAF Swasraya Multi-State Agro Co-operative Society Limited (“ESMACO”)

Registered Office

The registration number of ESMACO is MSCS/CR/442/2011. The registered office of ESMACO is situated at 1st
floor, JSR Square Building, Ollukkara P.O., Kalathode, Thrissur 680 655, Kerala, India.

Financial Performance

In accordance with the SEBI ICDR Regulations, the details of the reserves (excluding revaluation reserves), sales,
profit after tax, basic earnings per share, diluted earnings per share and net asset value per share derived from the
audited standalone financial statements of ESMACO for the financial years ended March 31, 2021, 2022 and 2023 are
available on the website of ESMACO at www.esafcooperative.in/downloads/ESAF%20Co-
operative%20Annual%20Report%202020-21.pdf, www.esafcooperative.in/downloads/ESAF%20Co-
operative%20Annual%20Report%202021-22.pdf and https://www.esafcooperative.in/downloads/ESAF Co-operative
Annual Report 2022-23.pdf.

It is clarified that such details available in relation to ESMACO on its website do not form a part of this Red Herring
Prospectus. Anyone placing reliance on any other source of information, would be doing so at their own risk. The link
above has been provided solely to comply with the requirements of the SEBI ICDR Regulations.

2. CEDAR Retail Private Limited (formerly ESAF Retail Private Limited) (“CEDAR Retail”)

Registered Office

The registered office of CEDAR Retail is situated at 7/732/ 9 -11, Green Tower, Mannuthy - Nadathara Road,
Pattalakunnu, Thrissur 680 651, Kerala, India.

Financial Performance

In accordance with the SEBI ICDR Regulations, the details of the reserves (excluding revaluation reserves), sales,
profit after tax, basic earnings per share, diluted earnings per share and net asset value per share derived from the
audited standalone financial statements of CEDAR Retail for the financial years ended March 31, 2021, 2022 and
2023 are available on the website of CEDAR Retail at https://cedarretail.in/public-disclosures/.

It is clarified that such details available in relation to CEDAR Retail on its website do not form a part of this Red
Herring Prospectus. Anyone placing reliance on any other source of information, would be doing so at their own risk.
The link above has been provided solely to comply with the requirements of the SEBI ICDR Regulations.

453
3. Lahanti Lastmile Services Private Limited (“Lahanti”)

Registered Office

The registered office of Lahanti is situated at 7/732/14, 2 nd Floor, Green Tower, Mannuthy - Nadathara Road,
Mannuthy Thrissur 680 651, Kerala, India.

Financial Performance

In accordance with the SEBI ICDR Regulations, the details of the reserves (excluding revaluation reserves), sales,
profit after tax, basic earnings per share, diluted earnings per share and net asset value per share derived from the
audited standalone financial statements of Lahanti for the financial years ended March 31, 2021, 2022 and 2023 are
available on the website of Lahanti at www.lahantilastmile.in/mandatory-disclosure.html.

It is clarified that such details available in relation to Lahanti on its website do not form a part of this Red Herring
Prospectus. Anyone placing reliance on any other source of information, would be doing so at their own risk. The link
above has been provided solely to comply with the requirements of the SEBI ICDR Regulations.

4. Lahanti Homes and Infrastructure Private Limited (formerly ESAF Homes and Infrastructure Private Limited)
(“Lahanti Homes”)

Registered Office

The registered office of Lahanti Homes is situated at Second Floor, Hephzibah Complex Mannuthy P.O. Thrissur 680
651, Kerala, India.

Financial Performance

In accordance with the SEBI ICDR Regulations, the details of the reserves (excluding revaluation reserves), sales,
profit after tax, basic earnings per share, diluted earnings per share and net asset value per share derived from the
audited standalone financial statements of Lahanti Homes for the financial years ended March 31, 2021, 2022 and
2023 are available on the website of our Bank at www.esafbank.com/investor-relations-info/.

It is clarified that such details available in relation to Lahanti Homes on our website do not form a part of this Red
Herring Prospectus. Anyone placing reliance on any other source of information, would be doing so at their own risk.
The link above has been provided solely to comply with the requirements of the SEBI ICDR Regulations.

5. Prachodhan Development Services (“Prachodhan”)

Registered Office

The registered office of Prachodhan is situated at House No. 631/B/A, Koradi Road, Mankapur Square, Nagpur 440
030, Maharashtra, India.

Financial Performance

In accordance with the SEBI ICDR Regulations, the details of the reserves (excluding revaluation reserves), sales,
profit after tax, basic earnings per share, diluted earnings per share and net asset value per share derived from the
audited standalone financial statements of Prachodhan for the financial years ended March 31, 2021, 2022 and 2023
are available on the website of our Bank at www.esafbank.com/investor-relations-info/.

It is clarified that such details available in relation to Prachodhan on our website do not form a part of this Red Herring
Prospectus. Anyone placing reliance on any other source of information, would be doing so at their own risk. The link
above has been provided solely to comply with the requirements of the SEBI ICDR Regulations.

Details of our other Group Entities:

6. ESAF Swasraya Producers Company Limited (“ESAF Swasraya Producers”)

Registered Office

The registered office of ESAF Swasraya Producers is situated at TC/10/121/1, Santhi Nagar Ollukkara Mannuthy
Thrissur 680 651, Kerala, India.

Nature and extent of interest of our Group Entities

a. In the promotion of our Bank

Our Group Entities do not have any interest in the promotion of our Bank.
454
b. In the properties acquired by our Bank or proposed to be acquired by our Bank in the preceding three years before
filing this Red Herring Prospectus

Our Group Entities are not interested in the properties acquired by our Bank in the three years preceding the filing of
this Red Herring Prospectus or proposed to be acquired by our Bank.

However, our Bank and Lahanti Homes have entered into a deed of lease dated April 1, 2017 for leasing of office
space for our Registered and Corporate Office.

c. In transactions for acquisition of land, construction of building and supply of machinery entered into with our
Bank

None of our Group Entities are interested in any transactions for the acquisition of land, construction of building or
supply of machinery.

Common Pursuits between our Group Entities and our Bank

As of the date of this Red Herring Prospectus, there are no common pursuits between our Group Entities and our Bank.
However, some of our group entities have certain business interests in our Bank. For details, see “ – Business interest of our
Group Entities in our Bank” on page 456.

Related Business Transactions within the Group and significance on the financial performance of our Bank

Except, (i) lease rentals paid to Lahanti Homes in respect of our Registered and Corporate Office taken on lease from it by our
Bank; (ii) commission/fees paid to ESMACO and Lahanti for their services asbusiness correspondents of our Bank; (iii)
amounts paid to ESMACO in respect of the corporate facility management services provided by it to our Bank; (iv) amount
paid to Prachodhan for corporate social responsibility expenses; (v) amounts paid to ESMACO for agency banking services;
and (vii) other transactions disclosed in the section “Restated Financial Information – Related Party Transactions – Note 19-
B-7” on page 363, there are no other related business transactions with the Group Entities other than in the ordinary course of
business.

Group Entities Nature of related Date since Transaction value*

business when the Three months period For the year ended
transaction services are ended
provided June 30, June 30, March 31, March 31, March 31,
2023 2022 2023 2022 2021
ESMACO Commission/fees March 10, 1,231.52 1,038.47 4,155.52 2,925.20 1,950.30
paid for services as 2017
business
correspondents of
our Bank
ESMACO Amounts paid in March 10, 34.37 40.94 162.10 134.70 124.60
respect of the 2017
corporate facility
management services
provided to our Bank
ESMACO Agency banking March 10, 0.95 1.86 7.18 2.8 0.00
services 2017
Lahanti Homes Lease rentals paid to April 1, 2017 6.03 6.03 24.12 21.00 21.00
in respect of our
Registered and
Corporate Office
taken on lease from it
by our Bank
Lahanti Commission/fees March 2, 2019 118.18 88.71 372.17 265.61 184.75
paid for services as
business
correspondents of
our Bank
Prachodhan Amounts paid in November 15, Nil Nil 30.10 Nil 39.00
respect of the CSR 2019
services provided to
our Bank
Notes:
(1) The above table does not include interest paid on deposits, as this is an activity in the regular course of our business and we have not entered into any
special agreements for the same. .
(2) Please note that ESMACO and Lahanti ceased to be a related party effective from March 13, 2021 and March 15, 2021, respectively.
*Payment is not in excess of the market rate. For details of the related party transactions, see “Restated Financial Information- Related Party Transactions –
Note 19-B-7” on page 363.

455
Business interest of our Group Entities in our Bank

Except for (i) provision of services as business correspondents of our Bank by ESMACO and Lahanti, (ii) corporate facility
management services provided by ESMACO, (iii) lease rentals paid to Lahanti Homes in respect of our Registered and
Corporate Office taken on lease from it by our Bank, and (iv) corporate social responsibility services provided by Prachodhan,
our Group Entities have no business interest in our Bank other than in the ordinary course of business. For further details see
“Restated Financial Information – Related Party Transactions – Note 19-B-7” on page 363.

Group Entities Nature of related Date since Transaction value*

business transaction when the Three months period For the year ended
services are ended
provided June 30, June 30, March 31, March 31, March 31,
2023 2022 2023 2022 2021
ESMACO Provision of services March 10, 1,231.52 1,038.47 4,155.52 2,925.20 1,950.30
as business 2017
correspondents of our
Bank
ESMACO Corporate facility March 10, 34.37 40.94 162.1 134.7 121.58
management services 2017
Lahanti Homes Lease rentals paid to in April 1, 2017 6.03 6.03 24.12 21.00 21.00
respect of our
Registered and
Corporate Office taken
on lease from it by our
Bank
Lahanti Commission/fees paid March 2, 118.18 88.71 372.17 265.61 184.75
for services as business 2019
correspondents of our
Bank
Prachodhan CSR services November Nil Nil 30.10 Nil 39.00
15, 2019
Notes:
Please note that ESMACO and Lahanti ceased to be a related party effective from March 13, 2021 and March 15, 2021, respectively.
*Payment is not in excess of the market rate. For details of the related party transactions, see “Restated Financial Information - Related Party Transactions
– Note 19-B-7” on page 363.

Litigation

Our Group Entities are not party to any pending litigation which will have material impact on our Bank.

Other confirmations

The equity shares of our Group Entities are not listed on any stock exchange and our Group Entities have not made any public
or rights issue of securities in the preceding three years.

456
 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following is a general description of certain material United States federal income tax consequences to U.S. Holders (as
defined below) under present law of an investment in the Equity Shares. This summary applies only to investors that hold the
Equity Shares as capital assets (generally, property held for investment). This discussion does not cover all aspects of U.S.
federal income taxation that may be relevant to, or the actual tax effect that any of the matters described herein will have on,
the acquisition, ownership or disposition of Equity Shares by particular investors, and does not address state, local, foreign or
other tax laws. This discussion is based on the tax laws of the United States as in effect on the date of this Red Herring Prospectus
and on U.S. Treasury regulations in effect or, in some cases, proposed, as of the date of this Red Herring Prospectus, as well as
judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject
to change, which change could apply retroactively and could affect the tax consequences described below.

The following discussion does not address alternative minimum tax considerations or state, local, non-United States or other
tax laws, or the tax consequences to any particular investor or to persons in special tax situations such as:

• banks;

• certain financial institutions;

• insurance companies;

• dealers in stocks, securities, currencies or notional principal contracts;

• U.S. expatriates and former long-term residents of the United States;

• regulated investment companies and real estate investment trusts;

• tax-exempt entities;

• U.S. Holders that have a functional currency other than the U.S. dollar;

• persons holding Equity Shares as part of a straddle, hedging, conversion or integrated transaction;

• persons that actually or constructively own 10% or more of (1) our Bank’s voting stock or (2) the total value of all
classes of stock of our Bank;

• persons who acquired Equity Shares pursuant to the exercise of any employee share option or otherwise as
consideration; or

• persons holding Equity Shares through partnerships or other pass-through entities.

Treasury Regulations may in some circumstances prohibit a U.S. Holder from claiming a foreign tax credit with respect to
certain non-U.S. taxes that are not creditable under applicable income tax treaties (the “Foreign Tax Credit Regulations”).
Accordingly, if you are not eligible for benefits under the Convention Between the Government of the United States of America
and the Government of the Republic of India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
Respect to Taxes on Income (the “U.S.-India Treaty”), you should consult your tax advisor regarding the credibility or
deductibility of any Indian taxes imposed on dividends on, or disposition of, the Equity Shares. The discussions below regarding
the credibility of Indian taxes do not address the foreign tax credit consequences to you if you are not eligible for the benefits
of the U.S.-India Treaty.

INVESTORS SHOULD CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSIDERATIONS
APPLICABLE TO THEM RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE RIGHTS
AND EQUITY SHARES, INCLUDING THE APPLICABILITY OF U.S. FEDERAL, STATE AND LOCAL TAX
LAWS OR NON-U.S. TAX LAWS, ANY CHANGES IN APPLICABLE TAX LAWS AND ANY PENDING OR
PROPOSED LEGISLATION OR REGULATIONS.

For purposes of this summary, a “U.S. Holder” is a beneficial owner of Equity Shares that is for United States federal income
tax purposes,

• an individual who is a citizen or resident of the United States;

• a corporation organised under the laws of the United States, any state thereof or the District of Columbia;

• an estate whose income is subject to United States federal income taxation regardless of its source; or

457
• a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more
U.S. persons for all substantial decisions of the trust, or (2) has a valid election in effect under the applicable U.S.
Treasury regulations to be treated as a U.S. person.

If a partnership (including for this purpose any entity treated as a partnership for United States federal income tax purposes)
holds Equity Shares, the U.S. tax treatment of a partner in the partnership generally will depend on the partner’s status and the
activities of the partnership. Prospective purchasers that are partnerships or partners in such a partnership should consult their
own tax advisers concerning the U.S. federal income tax consequences of the acquisition, ownership and disposition of Equity
Shares by the partnership.

Taxation of Distributions on the Equity Shares

Subject to the Passive Foreign Investment Company Rules discussed below, the gross amount of distributions to you with
respect to the Equity Shares generally will be included in your gross income in the year received as foreign source ordinary
dividend income, but only to the extent that the distribution is paid out of our Bank’s current or accumulated earnings and
profits (as determined under United States federal income tax principles). To the extent that the amount of the distribution
exceeds our Bank’s current and accumulated earnings and profits, it will be treated first as a tax-free return of your tax basis in
your Equity Shares, and to the extent the amount of the distribution exceeds your tax basis, the excess will be taxed as capital
gain. However, our Bank does not intend to calculate its earnings and profits under United States federal income tax principles.
Therefore, a U.S. Holder should expect that a distribution will generally be taxed as a dividend even if that distribution would
otherwise be treated as a non-taxable return of capital or as capital gain under the rules described above.

Subject to applicable limitations, with respect to non-corporate U.S. Holders (including individual U.S. Holders), dividends
may constitute “qualified dividend income” that is taxed at the lower applicable capital gains rate provided that (1) our Bank is
not a PFIC (as discussed above) for either the taxable year in which the dividend is paid or the preceding taxable year, (2) such
dividend is paid on Equity Shares that have been held by you for at least 61 days during the 121-day period beginning 60 days
before the ex-dividend date, and (3) our Bank is eligible for the benefits of the U.S.-India Treaty.

The amount of any distribution paid by our Bank in a currency other than U.S. dollars (a “foreign currency”) will be equal to
the U.S. dollar value of such foreign currency on the date such distribution is received by the U.S. Holder, regardless of whether
the payment is in fact converted into U.S. dollars at that time. If the foreign currency so received is converted into U.S. dollars
on the date of receipt, a U.S. Holder generally will not recognise foreign currency gain or loss on such conversion. If the foreign
currency so received is not converted into U.S. dollars on the date of receipt, a U.S. Holder will have a basis in the foreign
currency equal to its U.S. dollar value on the date of receipt. Gain or loss, if any, realised on the subsequent sale or other
disposition of such foreign currency will generally be U.S. source ordinary income or loss. The amount of any distribution of
property other than cash will be the fair market value of such property on the date of distribution.

For foreign tax credit purposes, dividends received with respect to the Equity Shares generally will be treated as foreign source
income. A U.S. Holder will be entitled, subject to generally applicable limitations and conditions, to claim a U.S. foreign tax
credit in respect of any Indian taxes withheld on dividends received on the Equity Shares. U.S. Holders who do not elect to
claim a credit for any foreign income taxes paid or accrued during the taxable year may instead claim a deduction of such taxes.
If a U.S. Holder is eligible for benefits under the U.S.-India Treaty or otherwise is entitled to a refund for the taxes withheld,
such holder will not be entitled to a foreign tax credit or deduction for the amount of any non-U.S. taxes withheld in excess of
the maximum rate under the U.S.-India Treaty or for the taxes with respect to which such holder can obtain a refund from the
Indian taxing authorities. The rules relating to computing foreign tax credits or deducting foreign taxes are complex, and U.S.
Holders are urged to consult their own tax advisers regarding the availability of foreign tax credits in their particular situation.

Taxation of a Disposition of Equity Shares

Subject to the Passive Foreign Investment Company rules discussed below, you generally will recognise capital gain or loss on
any sale or other taxable disposition of Equity Shares purchased in the Issue equal to the difference between the U.S. dollar
value of the amount realised for the Equity Shares and your tax basis (in U.S. dollars) in the Equity Shares. If you are a non-
corporate U.S. Holder (including an individual U.S. Holder) who has held the Equity Shares for more than one year, capital
gain on a disposition of the Equity Shares generally will be eligible for reduced federal income tax rates. The deductibility of
capital losses is subject to limitations. Any such gain or loss that you recognise generally will be treated as U.S. source income
or loss for foreign tax credit limitation purposes.

Under the U.S.-India Treaty, India may generally tax capital gains in accordance with the provisions of its domestic law. U.S.
Holders should consult their Indian tax advisors concerning the Indian tax consequences of capital gains arising from the sale
or other disposition of their Equity Shares. If Indian tax is imposed on a U.S. Holder’s capital gain on the sale or other disposition
of Equity Shares, the amount of any tax collected through withholding will be included in the amount realized and a foreign tax
credit may be available for U.S. federal income tax purposes with respect to such Indian tax. U.S. Holders should consult their
U.S. tax advisors concerning the U.S. tax treatment of any such Indian tax.

A U.S. Holder that receives foreign currency from the sale or disposition of Equity Shares generally will realise an amount
equal to the U.S. dollar value of such foreign currency on the date of sale or disposition or, if such U.S. Holder is a cash basis
or electing accrual basis taxpayer and the Equity Shares are treated as being traded on an “established securities market” for
458
this purpose, the settlement date. If the Equity Shares are so treated and the foreign currency received is converted into U.S.
dollars on the settlement date, a cash basis or electing accrual basis U.S. Holder will not recognise foreign currency gain or loss
on the conversion. If the foreign currency received is not converted into U.S. dollars on the settlement date, the U.S. Holder
will have a basis in the foreign currency equal to its U.S. dollar value on the settlement date. Gain or loss, if any, realised on
the subsequent conversion or other disposition of such foreign currency will generally be U.S. source ordinary income or loss.

Passive Foreign Investment Company Rules

A non-U.S. corporation is a PFIC in any taxable year in which, after taking into account certain look-through rules, either (i) at
least 75 percent of its gross income is passive income or (ii) at least 50 percent of the average value (determined on a quarterly
basis) of its assets is attributable to assets that produce or are held to produce passive income. In general, a non-U.S. corporation
is considered to be a passive foreign investment company, or a PFIC, for any taxable year if either:

• at least 75% of its gross income is passive income, or

• at least 50% of its assets (based on an average of the quarterly values of the assets during a taxable year) is attributable
to assets that produce or are held for the production of passive income.

Passive income for this purpose generally includes, among other things, dividends, interest, rents, royalties, gains from
commodities and securities transactions, and gains from assets that produce passive income. Cash is generally a passive asset.
However, under proposed U.S. Treasury regulations, on which taxpayers may rely, an amount of cash held in a non-interest
bearing financial account that is held for the present needs of an active trade or business and is no greater than the amount
necessary to cover operating expenses incurred in the ordinary course of the trade or business and reasonably expected to be
paid within 90 days is generally not treated as a passive asset. Goodwill is active to the extent attributable to activities that
produce or are intended to produce active income. In general, income earned in the active conduct of a banking business by a
non-U.S. corporation is not passive income. To qualify as a foreign bank that is engaged in the active conduct of a banking
business, a bank must satisfy certain requirements regarding its licensing and activities. For the purposes of determining whether
a company is a PFIC, a company will be treated as owning its proportionate share of the assets and earning its proportionate
share of the income of any other corporation in which it owns, directly or indirectly, 25% or more (by value) of the stock.

Based on the preceding taxable year and the expected composition of our Bank’s income and assets, our Bank expects that it
will not be treated as a PFIC in the preceding taxable year, the current taxable year and the foreseeable future taxable years,
However, our Bank’s possible status as a PFIC must be determined for each year and cannot be determined until the end of
each taxable year. Because this determination is made annually at the end of each taxable year and is dependent upon a number
of factors, some of which are beyond our Bank’s control, including the amount and nature of our Bank’s income, as well as on
the market valuation of our Bank’s assets, including Equity Shares, and because certain aspects of the PFIC rules are not entirely
certain, there can be no assurance that our Bank will be not a PFIC in its current taxable year or in future taxable years or that
the IRS will agree with our conclusion regarding our Bank’s PFIC status.

If our Bank is a PFIC at any time during a U.S. Holder’s holding period of the Equity Shares, such U.S. Holder will be subject
to either the regular PFIC rules (the “Regular PFIC Rules”) or, if a “mark-to-market” election is available and made, the
special mark-to-market PFIC rules (the “Mark-To-Market Rules”), both of which are described below. U.S. Holders cannot
make a “qualified electing fund” election (which is a special election applicable to certain PFICs) because our Bank does not
intend to provide the information required under the qualified electing fund rules.

If a corporation is a PFIC for any taxable year during which a U.S. Holder holds shares in the corporation, then the corporation
generally will continue to be treated as a PFIC with respect to the holder’s shares, even if the corporation no longer satisfies
either the passive income or passive asset tests described above, unless the U.S. Holder terminates this deemed PFIC status by
electing to recognize gain, which will be taxed under the Regular PFIC Rules described below as if such shares had been sold
on the last day of the last taxable year for which the corporation was a PFIC.

Regular PFIC Rules

Under the Regular PFIC Rules, U.S. Holders of Equity Shares would be subject to special rules and a variety of potentially
adverse tax consequences under the Internal Revenue Code of 1986, as amended. Under those rules, (a) any gain realised on a
sale or other disposition of the Equity Shares and any “excess distribution” (generally the excess amount of any distribution
during a taxable year in which distributions to the U.S. Holder on the Equity Shares exceed 125% of the average annual
distributions the U.S. Holder received on the Equity Shares during the preceding three taxable years or, if shorter, the U.S.
Holder’s holding period for the Equity Shares) would be treated as realised rateably over the U.S. Holder’s holding period for
the Equity Shares, (b) the amount allocated to the taxable year in which the gain or excess distribution is realised and to taxable
years before the first day on which our Bank became a PFIC would be treated as ordinary income (and not as capital gain), (c)
the amount allocated to each prior year in which our Bank was a PFIC would be subject to U.S. federal income tax at the highest
rate in effect for that year and (d) the interest charge generally applicable to underpayments of U.S. federal income tax would
be imposed in respect of the tax attributable to each prior year in which our Bank was a PFIC. If, at any time, our Bank had
non-U.S. subsidiaries that were classified as PFICs, the U.S. Holder could incur liability for the deferred tax and interest charge
described above if either (1) our Bank received a distribution from, or disposed of all or part of our Bank’s interest in, a lower-
tier PFIC or (2) the U.S. Holder disposed of all or part of its Equity Shares.
459
Mark-to-Market Rules

Under the Mark-to-Market Rules, a U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-
market election with respect to such stock to elect out of the Regular PFIC Rules discussed above. If you make a valid mark-
to-market election for the Equity Shares, you will include in income each year an amount equal to the excess, if any, of the fair
market value of the Equity Shares as of the close of your taxable year over your adjusted basis in such Equity Shares. You are
allowed a deduction for the excess, if any, of the adjusted basis of the Equity Shares over their fair market value as of the close
of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the Equity Shares
included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as
gain on the actual sale or other disposition of the Equity Shares, are treated as ordinary income. Ordinary loss treatment also
applies to the deductible portion of any mark-to-market loss on the Equity Shares, as well as to any loss realised on the actual
sale or disposition of the Equity Shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains
previously included for such Equity Shares. Your basis in the Equity Shares will be adjusted to reflect any such income or loss
amounts. If you make such an election, the tax rules that apply to distributions by corporations that are not PFICs generally
would apply to distributions by our Bank, except that the lower applicable capital gains rate with respect to qualified dividend
income (discussed above) would not apply.

The mark-to-market election is available only for “marketable stock”, which is stock that is traded in other than de minimis
quantities on at least 15 days during each calendar quarter on a qualified exchange or other market, as defined in the applicable
U.S. Treasury regulations. Under applicable U.S. Treasury regulations, a “qualified exchange” includes a foreign exchange that
is regulated by a governmental authority in the jurisdiction in which the exchange is located and in respect of which certain
other requirements are met. If either of the Stock Exchanges is a qualified exchange and the Equity Shares are considered to be
regularly traded on such stock exchange, U.S. Holders should be eligible to make a mark-to-market election with respect to the
Equity Shares.

Prospective U.S. Holders are urged to consult their own tax advisers about the consequences of holding the Equity Shares if we
are considered a PFIC in any taxable year, including the availability of the mark -to-market election, and whether making the
election would be advisable in their particular circumstances.

Medicare Tax

A United States person that is an individual, estate or a trust that does not fall into a special class of trusts that is exempt from
such tax, will be subject to a 3.8% surtax on the lesser of (1) such person’s “net investment income” for the relevant taxable
year and (2) the excess of such person’s modified adjusted gross income for the taxable year over a certain threshold (which in
the case of an individual will be between US$125,000 and US$250,000, depending on the individual’s circumstances). A United
States person’s net investment income will generally include its dividend income and its net gains from the disposition of Equity
Shares, unless such dividend income or net gains are derived in the ordinary course of the conduct of a trade or business (other
than a trade or business that consists of certain passive or trading activities).

Information Reporting and Backup Withholding

Dividend payments with respect to Equity Shares and proceeds from the sale, exchange or redemption of Equity Shares may
be subject to information reporting to the Internal Revenue Service and possible U.S. backup withholding. Backup withholding
will not apply, however, to a U.S. Holder who furnishes a correct taxpayer identification number and makes any other required
certification or who is otherwise exempt from backup withholding. U.S. Holders who are required to establish their exempt
status generally must provide such certification on Internal Revenue Service Form W-9. U.S. Holders should consult their tax
advisors regarding the application of the U.S. information reporting and backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against your United
States federal income tax liability, and you may obtain a refund of any excess amounts withheld under the backup withholding
rules by timely filing the appropriate claim for refund with the Internal Revenue Service and furnishing any required
information.

U.S. Holders that hold Equity Shares in any year in which our Bank is a PFIC may be required to file Internal Revenue Service
Form 8621 regarding distributions received on the Equity Shares and any gain realised on the disposition of the Equity Shares.
In addition, U.S. Holders may be required to file additional information with respect to their ownership of Equity Shares.

Foreign Account Tax Compliance Act (“FATCA”)

U.S. return disclosure obligations (and related penalties) apply to U.S. Holders that hold certain specified foreign financial
assets in excess of US$50,000. The definition of specified foreign financial assets includes not only financial accounts
maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or
security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty
other than a U.S. person and any interest in a foreign entity. U.S. Holders may be subject to these reporting requirements unless
their Equity Shares are held in an account at a U.S. domestic financial institution. Penalties for failure to file certain of these
information returns are substantial. U.S. Holders should consult their own tax advisors regarding the potential application of
the FATCA rules to their Equity Shares.

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 SECTION VII: OFFER INFORMATION

TERMS OF THE OFFER

The Equity Shares being offered and Allotted pursuant to the Offer shall be subject to the provisions of the Companies Act, the
SEBI ICDR Regulations, SCRA, SCRR, the Banking Regulation Act, the SFB Licensing Guidelines, the MoA, AoA, Listing
Regulations, RBI Final Approval, RBI In-Principle Approval, the terms of the Draft Red Herring Prospectus, this Red Herring
Prospectus, the Prospectus, the Abridged Prospectus, Bid cum Application Form, the Revision Form, the CAN and terms and
conditions as may be incorporated in the Allotment Advice and other documents or certificates that may be executed in respect
of the Offer. The Equity Shares shall also be subject to laws as applicable, guidelines, rules, notifications and regulations
relating to the issue of capital and listing and trading of securities issued from time to time by SEBI, GoI, the Stock Exchanges,
the RBI, RoC and/or other authorities, as in force on the date of the Offer and to the extent applicable or such other conditions
as may be prescribed by the SEBI, the RBI, GoI, the Stock Exchanges, the RoC and/or any other authorities to the extent
applicable or such other conditions as maybe prescribed by such governmental and/or regulatory authority while granting its
approval for the Offer.

The Offer

The Offer comprises a Fresh Issue and an Offer for Sale.

Expenses for the Offer shall be shared amongst our Bank and each of the Selling Shareholders in the manner specified in
“Objects of the Offer – Offer Expenses” on page 127.

Ranking of Equity Shares

The Equity Shares being issued, offered and Allotted in the Offer shall rank pari passu with the existing Equity Shares in all
respects including dividends and other corporate benefits, if any, declared by our Bank after the date of Allotment. For further
details, see “Description of Equity Shares and Terms of Articles of Association” on page 491.

Mode of Payment of Dividend

Our Bank shall pay dividends, if declared, to the Shareholders in accordance with the provisions of the Companies Act, 2013,
the Memorandum and Articles of Association and provisions of the Listing Regulations and any other guidelines or directions
which may be issued by the Government in this regard. Dividends, if any, declared by our Bank after the date of Allotment
(including pursuant to the Allotment of Equity Shares), will be payable to the Allottees, for the entire year, in accordance with
applicable laws. For further details, in relation to dividends, see “Dividend Policy” and “Description of Equity Shares and
Terms of Articles of Association” on pages 279 and 491, respectively.

Face Value, Offer Price, Floor Price and Price Band

The face value of each Equity Share is ₹10 and the Floor Price is ₹[●] per Equity Share and the Cap Price is ₹[●] per Equity
Share. The Anchor Investor Offer Price is ₹[●] per Equity Share.

The Price Band and the minimum Bid Lot size for the Offer will be decided by our Bank and the Promoter Selling Shareholder,
in consultation with the BRLMs, and advertised in all editions of The Financial Express, an English national daily newspaper,
all editions of Jansatta, a Hindi national daily newspaper and Thrissur edition of the Malayalam daily newspaper Mangalam
(Malayalam being the regional language of Kerala, where our Registered and Corporate Office is located), each with wide
circulation, respectively, at least two Working Days prior to the Bid/Offer Opening Date, and shall be made available to the
Stock Exchanges for the purpose of uploading the same on their respective websites. The Price Band, along with the relevant
financial ratios calculated at the Floor Price and at the Cap Price, shall be pre-filled in the Bid cum Application Forms available
on the respective websites of the Stock Exchanges. The Offer Price shall be determined by our Bank and the Selling Shareholder
in consultation with the BRLM, after the Bid/Offer Closing Date, on the basis of assessment of market demand for the Equity
Shares offered by way of Book Building Process.

At any given point of time, there shall be only one denomination for the Equity Shares.

Compliance with Disclosure and Accounting Norms

Our Bank shall comply with all disclosure and accounting norms as specified by the SEBI from time to time.

Rights of the Equity Shareholders

Subject to applicable laws, rules, regulations and guidelines and the Articles of Association, our equity Shareholders shall have
the following rights:

• Right to receive dividends, if declared;

• Right to attend general meetings and exercise voting rights, unless prohibited by law;

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• Right to vote on a poll either in person or by proxy or e-voting, in accordance with the provisions of the Companies
Act;

• Right to receive offers for rights shares and be allotted bonus shares, if announced;

• Right to receive surplus on liquidation, subject to any statutory and preferential claims being satisfied;

• Right of free transferability, subject to applicable laws including any RBI rules and regulations; and

• Such other rights, as may be available to a shareholder of a listed public company (being an SFB) under the Companies
Act, Banking Regulation Act, the Listing Regulations, as applicable, the Memorandum of Association and the Articles
of Association and other applicable laws.

For a detailed description of the main provisions of the Articles of Association relating to voting rights, dividend, forfeiture and
lien, transfer, transmission and/or consolidation/splitting, see “Description of Equity Shares and Terms of Articles of
Association” on page 491.

Allotment only in dematerialised form

Pursuant to Section 29 of the Companies Act, 2013 and the SEBI ICDR Regulations, the Equity Shares shall be Allotted only
in dematerialised form. As per the SEBI ICDR Regulations and the Listing Regulations, the trading of the Equity Shares shall
only be in dematerialised form on the Stock Exchanges. In this context, two agreements have been entered into amongst our
Bank, the respective Depositories and Registrar to the Offer:

• Tripartite agreement dated March 31, 2017 amongst our Bank, NSDL and Registrar to the Offer.

• Tripartite agreement dated January 20, 2017 amongst our Bank, CDSL and Registrar to the Offer.

Employee Discount

Employee discount, if any, will be offered to Eligible Employees bidding in the Employee Reservation Portion respectively.
Eligible Employees bidding in the Employee Reservation Portion respectively at a price within the Price Band can make
payment based on, Bid Amount net of Employee Discount, at the time of making a Bid. Eligible Employees bidding in the
Employee Reservation Portion at the Cut-Off Price have to ensure payment at the Cap Price, less Employee Discount, at the
time of making a Bid.

Market Lot and Trading Lot

Since trading of the Equity Shares on the Stock Exchanges is in dematerialised form, consequent to which, the tradable lot is
one Equity Share. Allotment in this Offer will be only in dematerialised and electronic form in multiples of one Equity Share
subject to a minimum Allotment of [●] Equity Shares. For the method of Basis of Allotment, see “Offer Procedure” on page
471.

Joint Holders

Subject to the provisions of the Articles of Association, where two or more persons are registered as the holders of the Equity
Shares, they will be deemed to hold such Equity Shares as joint tenants with benefits of survivorship.

Period of operation of subscription list

See “– Bid/Offer Programme” on page 463.

Nomination facility to investors

In accordance with Section 72 of the Companies Act, 2013, read with the Companies (Share Capital and Debentures) Rules,
2014, as amended, the sole Bidder, or the first Bidder along with other joint Bidders, may nominate any one person in whom,
in the event of the death of sole Bidder or in case of joint Bidders, death of all the Bidders, as the case may be, the Equity Shares
Allotted, if any, shall vest to the exclusion of the other persons, unless the nomination is varied or cancelled in the prescribed
manner. A person, being a nominee, entitled to the Equity Shares by reason of the death of the original holder(s), shall be
entitled to the same advantages to which he or she would be entitled if he or she were the registered holder of the Equity
Share(s). Where the nominee is a minor, the holder(s) may make a nomination to appoint, in the prescribed manner, any person
to become entitled to Equity Share(s) in the event of his or her death during the minority. A nomination shall stand rescinded
upon a sale/transfer/alienation of Equity Share(s) by the person nominating. A nomination may be cancelled or varied by
nominating any other person in place of the present nominee, by the holder of the Equity Shares who has made the nomination,
by giving a notice of such cancellation or variation to our Bank in the prescribed form. A buyer will be entitled to make a fresh
nomination/ cancel nomination in the manner prescribed. Fresh nomination can be made only on the prescribed form available
on request at our Registered and Corporate Office or to the registrar and transfer agents of our Bank.

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 Any person who becomes a nominee by virtue of the provisions of Section 72 of the Companies Act, 2013 shall upon the
production of such evidence as may be required by the Board, elect either:

a) to register himself or herself as the holder of the Equity Shares; or

b) to make such transfer of the Equity Shares, as the deceased holder could have made.

Further, our Board may at any time give notice requiring any nominee to choose either to be registered himself or herself or to
transfer the Equity Shares, and if the notice is not complied with within a period of 90 days, the Board may thereafter withhold
payment of all dividends, bonuses or other monies payable in respect of the Equity Shares, until the requirements of the notice
have been complied with.

Since the Allotment of Equity Shares in the Offer will be made only in dematerialised mode, there is no need to make a separate
nomination with our Bank. Nominations registered with respective Depository Participant of the Bidder would prevail. If the
Bidder wants to change the nomination, they are requested to inform their respective Depository Participant.

Our Bank shall comply with such disclosure and accounting norms as may be specified by SEBI from time to time.

Bid/Offer Programme

BID/OFFER OPENS ON FRIDAY, NOVEMBER 3, 2023

BID/OFFER CLOSES ON TUESDAY, NOVEMBER 7,
2023(1)
(1) The UPI mandate end time and date shall be at 5:00 p.m. on Bid/Offer Closing Date.

An indicative timetable in respect of the Offer is set out below:

Event Indicative Date

Bid/Offer Closing Date Tuesday, November 7, 2023
Finalisation of Basis of Allotment with the Designated Stock Exchange On or about Friday, November 10, 2023
Initiation of refunds (if any, for Anchor Investors)/unblocking of funds from ASBA Account* On or about Monday, November 13,
2023
Credit of Equity Shares to demat accounts of allottees On or about Wednesday, November 15,
2023
Commencement of trading of the Equity Shares on the Stock Exchanges On or about Thursday, November 16,
2023
* In case of (i) any delay in unblocking of amounts in the ASBA Accounts (including amounts blocked through the UPI Mechanism) exceeding four Working
Days from the Bid/Offer Closing Date, for cancelled / withdrawn / deleted ASBA Forms, the Bidder shall be compensated at a uniform rate of ₹100 per
day or 15% per annum of the Bid Amount, whichever is higher from the date. On which the request for cancellation/ withdrawal/ deletion is placed in
the Stock Exchanges bidding platform until the date on which the amounts are unblocked (ii) any blocking of multiple amounts for the same ASBA Form
(for amounts blocked through the UPI Mechanism), the Bidder shall be compensated at a uniform rate ₹100 per day or 15% per annum of the total
cumulative blocked amount except the original application amount, whichever is higher from the date on which such multiple amounts were blocked till
the date of actual unblock; (iii) any blocking of amounts more than the Bid Amount, the Bidder shall be compensated at a uniform rate of ₹100 per day
or 15% per annum of the difference in amount, whichever is higher from the date on which such excess amounts were blocked till the date of actual
unblock; (iv) any delay in unblocking of non-allotted/ partially allotted Bids, exceeding four Working Days from the Bid/Offer Closing Date, the Bidder
shall be compensated at a uniform rate of ₹100 per day or 15% per annum of the Bid Amount, whichever is higher for the entire duration of delay
exceeding four Working Days from the Bid/Offer Closing Date by the SCSB responsible for causing such delay in unblocking. The BRLMs shall, in their
sole discretion, identify and fix the liability on such intermediary or entity responsible for such delay in unblocking. The BRLMs shall be liable for
compensating the Bidder at a uniform rate of ₹100 per day or 15% per annum of the Bid Amount, whichever is higher, in addition to the compensation
paid by the SCSB responsible for causing delay, from the date of receipt of the investor grievance until the date on which the blocked amounts are
unblocked. For the avoidance of doubt, the provisions of the SEBI circular no. SEBI/HO/CFD/DIL2/CIR/P/2021/2480/1/M dated March 16, 2021, as
amended pursuant to SEBI circular no: SEBI/HO/CFD/DIL2/P/CIR/2021/570 dated June 2, 2021 and SEBI circular no.
SEBI/HO/CFD/DIL2/CIR/P/2022/51 dated April 20, 2022, read with SEBI master circular no. SEBI/HO/CFD/PoD-2/P/CIR/2023/00094 dated June 21,
2023, shall be deemed to be incorporated in the agreements to be entered into by and between the Bank and the relevant intermediaries, to the extent
applicable.
The processing fees for applications made by UPI Bidders using the UPI Mechanism may be released to the remitter banks (SCSBs) only after such banks
provide a written confirmation on compliance with SEBI circular no: SEBI/HO/CFD/DIL2/P/CIR/2021/570 dated June 2, 2021 read with SEBI circular
no. SEBI/HO/CFD/DIL2/CIR/P/2021/2480/1/M dated March 16, 2021 read with SEBI circular no: SEBI/HO/CFD/DIL2/CIR/P/2022/51 dated April 20,
2022 and SEBI circular no. SEBI/HO/CFD/DIL2/P/CIR/2022/75 dated May 30, 2022.

The above timetable, other than the Bid/Offer Closing Date, is indicative and does not constitute any obligation or
liability on our Bank, the Selling Shareholders or the BRLMs.

Whilst our Bank shall ensure that all steps for the completion of the necessary formalities for the listing and the
commencement of trading of the Equity Shares on the Stock Exchanges are taken within six Working Days of the
Bid/Offer Closing Date, or such other period as may be prescribed by the SEBI, the timetable may be changed due to
various factors, such as extension of the Bid/Offer Period by our Bank and the Promoter Selling Shareholder, in
consultation with the BRLMs, revision of the Price Band or any delay in receiving the final listing and trading approval
from the Stock Exchanges. The commencement of trading of the Equity Shares will be entirely at the discretion of the
Stock Exchanges and in accordance with the applicable laws. Each of the Selling Shareholders, severally and not jointly,
confirm that they shall extend such reasonable support and co-operation required by our Bank and the BRLMs for
completion of the necessary formalities for listing and commencement of trading of the Equity Shares at the Stock

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Exchanges within six Working Days from the Bid/Offer Closing Date or within such other period as may be prescribed
by SEBI..

The Registrar to the Offer shall submit the details of cancelled/withdrawn/deleted applications to the SCSB’s on daily
basis within 60 minutes of the Bid closure time from the Bid/ Offer Opening Date till the Bid/Offer Closing Date by
obtaining the same from the Stock Exchanges. The SCSB’s shall unblock such applications by the closing hours of the
Working Day and submit the confirmation to the BRLMs and the RTA on a daily basis as per the format prescribed in
SEBI circular no. SEBI/HO/CFD/DIL2/CIR/P/2021/2480/1/M dated March 16, 2021.

To avoid duplication, the facility of re-initiation provided to Syndicate Members shall preferably be allowed only once per
bid/batch and as deemed fit by the Stock Exchanges, after closure of the time for uploading Bids.

For avoidance of doubt, it is clarified that Bids not uploaded on the electronic bidding system or in respect of which full Bid
Amount is not blocked by SCSBs or not blocked under the UPI Mechanism in the relevant ASBA Account, as the case may be,
will be rejected.

In terms of the UPI Circulars, in relation to the Offer, the BRLMs will be required to submit reports of compliance with timelines
and activities prescribed by SEBI in connection with the allotment and listing procedure within six Working Days from the
Bid/Offer Closing Date, identifying non-adherence to timelines and processes and an analysis of entities responsible for the
delay and the reasons associated with it.

Submission of Bids (other than Bids from Anchor Investors):

Bid/Offer Period (except the Bid/Offer Closing Date)

Submission and Revision in Bids Only between 10.00 a.m. and 5.00 p.m. IST
Bid/Offer Closing Date
Submission and Revision in Bids Only between 10.00 a.m. and 3.00 p.m. IST
* UPI mandate end time and date shall be at 5.00 pm on Bid/Offer Closing Date.

On the Bid/ Offer Closing Date, the Bids shall be uploaded until:

(i) 4.00 p.m. IST in case of Bids by QIBs and Non-Institutional Bidders, and

(ii) until 5.00 p.m. IST or such extended time as permitted by the Stock Exchanges, in case of Bids by RIBs and Eligible
Employees Bidding in the Employee Reservation Portion.

On Bid/Offer Closing Date, extension of time may be granted by Stock Exchanges only for uploading Bids received by RIBs
and Eligible Employees Bidding in the Employee Reservation Portion after taking into account the total number of Bids received
and as reported by the BRLMs to the Stock Exchanges.

It is clarified that Bids not uploaded on the electronic bidding system or in respect of which the full Bid Amount is not
blocked by SCSBs would be rejected.

Due to limitation of time available for uploading the Bids on the Bid/ Offer Closing Date, Bidders are advised to submit their
Bids one day prior to the Bid/ Offer Closing Date and, in any case, no later than 1.00 p.m. (Indian Standard Time) on the Bid/
Offer Closing Date. Bidders are cautioned that, in the event a large number of Bids are received on the Bid/ Offer Closing Date,
as is typically experienced in public offerings in India, it may lead to some Bids not being uploaded due to lack of sufficient
time to upload. Such Bids that cannot be uploaded on the electronic bidding system will not be considered for allocation under
this Offer. Bids and any revision in Bids will be accepted only during Working Days during the Bid/Offer Period. Investors
may please note that as per letter no. List/SMD/SM/2006 dated July 3, 2006 and letter no. NSE/IPO/25101- 6 dated July 6,
2006 issued by BSE and NSE respectively. Bids and any revision in Bids shall not be accepted on Saturdays and public holidays
as declared by the Stock Exchanges. Bids by ASBA Bidders shall be uploaded by the relevant Designated Intermediary in the
electronic system to be provided by the Stock Exchanges. The Designated Intermediaries shall modify select fields uploaded in
the Stock Exchange Platform during the Bid/Offer Period till 5.00 pm on the Bid/Offer Closing Date after which the Stock
Exchange(s) send the bid information to the Registrar to the Offer for further processing.

Neither our Bank, nor the Selling Shareholders, nor any member of the Syndicate is liable for any failure in uploading or
downloading the Bids due to faults in any software / hardware system or otherwise; or blocking of application amount by
SCSBs on receipt of instructions from the Sponsor Banks due to any errors, omissions, or otherwise non-compliance by various
parties involved in, or any other fault, malfunctioning or breakdown in the UPI Mechanism

Our Bank and the Promoter Selling Shareholder in consultation with the BRLMs, reserve the right to revise the Price Band
during the Bid/ Offer Period in accordance with the SEBI ICDR Regulations. The Floor Price will not be less than the face
value of the Equity Shares. In all circumstances, the Cap Price shall be less than or equal to 120% of the Floor Price provided
that the Cap Price shall be at least 105% of the Floor Price. The revision in the Price Band shall not exceed 20% on either side,
i.e., the Floor Price can move up or down to the extent of 20% of the Floor Price and the Cap Price will be revised accordingly.

464
In case of revision in the Price Band, the Bid/ Offer Period shall be extended for at least three additional Working Days
after such revision of the Price Band, subject to the Bid/ Offer Period not exceeding 10 Working Days. In cases of force
majeure, banking strike or similar circumstances, our Bank and the Promoter Selling Shareholder in consultation with
the BRLMs, for reasons to be recorded in writing, extend the Bid/ Offer Period for a minimum of three Working Days,
subject to the Bid/ Offer Period not exceeding 10 Working Days. Any revision in Price Band, and the revised Bid/ Offer
Period, if applicable, shall be widely disseminated by notification to the Stock Exchanges, by issuing a press release and
also by indicating the change on the websites of the BRLMs terminals of the Syndicate Members and by intimation to
the Designated Intermediaries. In case of revision of price band, the Bid Lot shall remain the same. In case of discrepancy
in data entered in the electronic book vis-vis data contained in the physical Bid cum Application Form, for a particular Bidder,
the details as per the Bid file received from the Stock Exchanges shall be taken as the final data for the purpose of Allotment.

Minimum Subscription

If our Bank does not receive (i) the minimum subscription of 90% of the Fresh Issue; and (ii) a minimum subscription in the
Offer equivalent to at least 10% post-Offer paid-up equity share capital of our Bank (the minimum number of securities as
specified under Rule 19(2)(b) of the SCRR), including through devolvement of Underwriters, if any, in accordance with
applicable laws, or if the subscription level falls below the thresholds mentioned above after the Bid/Offer Closing Date, on
account of withdrawal of applications or after technical rejections; or after technical rejections; or if the listing or trading
permission is not obtained from the Stock Exchanges for the securities so offered pursuant to this Red Herring Prospectus and
the Prospectus; or if the subscription level falls below the threshold under Rule 19(2)(b) of the SCRR mentioned above after
the Bid/Offer Closing Date, our Bank shall forthwith refund the entire subscription amount received, in accordance with
applicable law including the SEBI circular bearing no. SEBI/HO/CFD/PoD-2/P/CIR/2023/00094 dated June 21, 2023. If there
is a delay beyond four days after our Bank and every Director of our Bank who is an officer in default, to the extent applicable,
shall pay interest at the rate of 15% per annum prescribed under applicable law.

The requirement for minimum subscription is not applicable to the Offer for Sale. In the event of an under subscription in the
Offer, subject to receiving the minimum subscription requirement of 90% of the Fresh Issue, and compliance with Rule 19(2)(b)
of the SCRR, the Allotment for the valid Bids will be made in the first instance towards subscription for 90% of the Fresh Issue.
Subject to any balance valid Bids in the Offer, the Allotment for the balance valid Bids will be made towards the Equity Shares
offered by the Selling Shareholders (in proportion of the Offered Shares offered by each Selling Shareholder), followed by the
balance Fresh Issue portion.

Each of the Selling Shareholders shall, severally and not jointly, reimburse, in proportion to their respective Offered Shares,
any expenses and interest incurred by our Bank on behalf of the Selling Shareholders for any delays in making refunds as
required under the Companies Act and any other applicable law, provided that no Selling Shareholders shall be responsible or
liable for payment of such expenses or interest, unless such delay is solely and directly attributable to an act or omission of such
Selling Shareholder.

Further, in terms of Regulation 49(1) of the SEBI ICDR Regulations, our Bank shall ensure that the number of Bidders to whom
the Equity Shares will be Allotted will be not less than 1,000 failing which the entire application money shall be unblocked in
the respective ASBA Accounts of the Bidders. In case of any delay, if any, in unblocking the ASBA Accounts within such
timelines as prescribed under applicable laws, the Selling Shareholder and our Bank shall be liable to pay interest on the
application money in accordance with applicable laws.

Arrangements for disposal of odd lots

There are no arrangements for disposal of odd lots since our Equity Shares will be traded in dematerialised form only and
market lot for our Equity Shares will be one Equity Share.

Option to receive Equity Shares in dematerialised form

Allotment of Equity Shares to successful Bidders will only be in the dematerialised form. Bidders will not have the option of
Allotment of the Equity Shares in physical form. The Equity Shares on Allotment will be traded only in the dematerialised
segment of the Stock Exchanges. However, Allotees may get the Equity Shares rematerialized subsequent to Allotment of the
Equity Shares in the Offer, subject to applicable laws.

New Financial Instruments

Our Bank is not issuing any new financial instruments through this Offer.

Restrictions, if any on transfer and transmission of Equity Shares

Except for lock-in of the pre-Offer capital of our Bank, lock-in of the Promoters’ minimum contribution and the Anchor Investor
lock-in in the Offer as provided in “Capital Structure” on page 109 and except as provided under the Banking Regulation Act
and the rules and regulations made thereunder and the Articles of Association as detailed in “Description of Equity Shares and
Terms of Articles of Association” on page 491, there are no restrictions on transfers of Equity Shares. Further, there are no

465
restrictions on transmission of any shares/debentures of our Bank and on their consolidation or splitting, except as provided in
the Articles of Association.

In accordance with Section 12B of the Banking Regulation Act read with Reserve Bank of India (acquisition and holding of
shares or voting rights in banking companies) Directions, 2023 and guidelines thereunder, no person (along with his relatives,
associate enterprises or persons acting in concert with such person) can acquire or hold 5% or more of the total paid-up share
capital of our Bank, or be entitled to exercise 5% or more of the total voting rights of our Bank, without prior approval of the
RBI. For further details, see “Key Regulations and Policies” and “Offer Procedure” on pages 221 and 471, respectively.

Withdrawal of the Offer

Our Bank and each of the Selling Shareholders, in consultation with the BRLMs, reserves the right not to proceed with the
Fresh Issue and each Selling Shareholder, severally and not jointly, reserves the right not to proceed with the Offer for Sale, in
whole or in part thereof, to the extent of their respective portion of the Offered Shares, after the Bid/ Offer Opening Date but
before the Allotment. In such an event, our Bank would issue a public notice in the same newspapers in which the pre-Offer
advertisements were published, within two days of the Bid/ Offer Closing Date or such other time as may be prescribed by
SEBI, providing reasons for not proceeding with the Offer and inform the Stock Exchanges promptly in this regard. The
BRLMs, through the Registrar to the Offer, shall notify the SCSBs and the Sponsor Banks (in case of UPI Bidders), to unblock
the bank accounts of the ASBA Bidders within one Working Day from the date of receipt of such notification and also inform
the Bankers to the Offer to process refunds to the Anchor Investors, as the case may be.

If our Bank and the Promoter Selling Shareholder, in consultation with the BRLMs withdraws the Offer after the Bid/ Offer
Closing Date and thereafter determines that it will proceed with an issue of the Equity Shares, our Bank shall file a fresh draft
red herring prospectus with SEBI. Notwithstanding the foregoing, this Offer is also subject to obtaining (i) the final listing and
trading approvals of the Stock Exchanges, which our Bank shall apply for after Allotment and within six Working Days of the
Bid/Offer Closing Date or such other time period as prescribed under applicable law; and (ii) the final RoC approval of the
Prospectus after it is filed and/or submitted with the RoC.

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 OFFER STRUCTURE

The Offer is up to [●] Equity Shares for cash at a price of ₹[●] per Equity Share (including a premium of ₹[●] per Equity Share)
aggregating up to ₹ 4,630.00 million comprising a Fresh Issue of up to [●] Equity Shares aggregating up to ₹ 3,907.00 million
by our Bank and an Offer for Sale of up to [●] Equity Shares aggregating up to ₹723.00 million, comprising up to [●] Equity
Shares aggregating up to ₹492.60 million by the Promoter Selling Shareholder, up to [●] Equity Shares aggregating up to
₹126.70 million by PNB MetLife and up to [●] Equity Shares aggregating up to ₹103.70 million by Bajaj Allianz Life in the
Offer.

The face value of the Equity Shares is ₹10 each.

The Offer includes a reservation of up to [●] Equity Shares, aggregating up to ₹125.00 million, for subscription by Eligible
Employees. The Employee Reservation Portion shall not exceed 5% of our post-Offer paid-up equity share capital. The Offer
less the Employee Reservation Portion is the Net Offer.

The Offer and Net Offer shall constitute [●]% and [●]% of the post-Offer paid-up Equity Share capital of our Bank.

The Offer is being made through the Book Building Process.

Particulars Eligible Employees# QIBs(1) Non-Institutional Retail Individual

Bidders Bidders

Number of Equity Shares Up to [●] Equity Shares## Not more than [●] Equity Not less than [●] Equity Not less than [●] Equity
available for Allotment/ Shares Shares available for Shares available for
allocation (2) allocation or Net Offer less allocation or Net Offer
allocation to QIB Bidders less allocation to QIB
and Retail Individual Bidders and Non-
Bidders Institutional Bidders

Percentage of Offer Size The Employee Not more than 50% of the Not less than 15% of the Not less than 35% of the
available for Allotment/ Reservation Portion shall Net Offer shall be Allotted Net Offer or the Offer less Net Offer or the Offer less
allocation constitute up to [●]% of to QIBs. However, up to allocation to QIB Bidders allocation to QIBs and
the post-Offer paid-up 5% of the Net QIB Portion and RIBs will be available Non-Institutional Bidders
Equity Share capital of our (excluding Anchor for allocation subject to the
Bank Investor Portion) will be following (a) one third of
available for allocation such portion shall be
proportionately to Mutual reserved for allocation to
Funds only. Mutual Funds Bidders with application
participating in the Mutual size of more than ₹0.20
Fund Portion will also be million up to ₹1.00
eligible for allocation in million; and (b) two third
the remaining Net QIB of such portion shall be
Portion. The unsubscribed reserved for Bidders with
portion in the Mutual Fund application size of more
Portion will be available than ₹1.00 million,
for allocation to QIBs in provided that the
the remaining Net QIB unsubscribed portion in
Portion either of such sub-
categories may be
allocated to Bidders in the
other sub-category of Non-
Institutional Bidders in
accordance with the SEBI
ICDR Regulations, subject
to valid Bids being
received at or above the
Offer Price

Basis of Allotment/ Proportionate#; unless the Proportionate as follows The Equity Shares Allotment to each Retail
allocation if respective Employee Reservation (excluding the Anchor available for allocation to Individual Bidder shall not
category is Portion is Investor Portion): Bidders in the Non- be less than the minimum
oversubscribed undersubscribed, the value Institutional Portion shall Bid lot, subject to
of allocation to an Eligible (a) up to [●] Equity be subject to the following: availability of Equity
Employee shall not exceed Shares shall be Shares in the Retail
₹0.20 million (net of the available for (1) One-third of the Non- Portion and the remaining
Employee Discount). In allocated on a Institutional Portion available Equity Shares if
the event of proportionate basis to shall be available for any, shall be on a
undersubscription in the Mutual Funds only; allocation to Bidders proportionate, basis. For
Employee Reservation and with an application details, see “Offer
Portion, the unsubscribed size more than ₹0.20 Procedure” on page 471.
portion may be allocated, (b) [●] Equity Shares million up to ₹1.00
on a proportionate basis, to shall be Allotted on a million; and (b) Two-
467
 Particulars Eligible Employees# QIBs(1) Non-Institutional Retail Individual
Bidders Bidders

Eligible Employees for a proportionate basis to third of the Non-

value exceeding ₹0.20 all QIBs, including Institutional Portion
million, subject to total Mutual Funds shall be available for
Allotment to an Eligible receiving allocation allocation to Bidders
Employee not exceeding as per (a) above. with an application
₹0.50 million size of more than
Up to 60% of the QIB ₹1.00 million.
Portion Equity Shares may
be allocated on a Provided that the
discretionary basis to unsubscribed portion in
Anchor Investors of which either of these two sub-
one-third shall be available categories of Non-
for allocation to domestic Institutional Portion may
Mutual Funds only, be allocated to the Bidders
subject to valid Bid in the other sub-category of
received from domestic Non-Institutional Portion
Mutual Funds at or above in accordance with SEBI
the Anchor Investor ICDR Regulations
Allocation Price
The allotment of specified
securities to each Non-
Institutional Bidder shall
not be less than ₹0.20
million, subject to
availability of Equity
Shares in the Non-
Institutional Portion, and
the remaining available
Equity Shares, if any, shall
be Allotted on a
proportionate basis in
accordance with the SEBI
ICDR Regulations.

Minimum Bid [●] Equity Shares Such number of Equity Such number of Equity [●] Equity Shares
Shares and in multiples of Shares and in multiples of
[●] Equity Shares such that [●] Equity Shares such that
the Bid Amount exceeds the Bid Amount exceeds
₹0.20 million ₹0.20 million

Maximum Bid Such number of Equity Such number of Equity Such number of Equity Such number of Equity
Shares in multiples of [●] Shares in multiples of [●] Shares in multiples of [●] Shares in multiples of [●]
Equity Shares, so that the Equity Shares so that the Equity Shares so that the Equity Shares so that the
maximum Bid Amount by Bid does not exceed the Bid does not exceed the Bid Amount does not
each Eligible Employee in size of the Offer size of the Offer (excluding exceed ₹0.20 million
Eligible Employee Portion (excluding the Anchor the QIB Portion), subject
does not exceed ₹0.50 Investor Portion), subject to applicable limits,
million, less Employee to applicable limits, applicable to each Bidder
Discount, if any applicable to each Bidder

Mode of Allotment Compulsorily in dematerialised form

Bid Lot [●] Equity Shares and in multiples of [●] Equity Shares thereafter

Allotment Lot A minimum of [●] Equity Shares and thereafter in multiples of one Equity Share thereafter

Trading Lot One Equity Share

Who can apply(3) (4) Eligible Employees Public financial Resident Indian Resident Indian
institutions as specified in individuals, Eligible NRIs, individuals, Eligible NRIs
Section 2(72) of the HUFs (in the name of the and HUFs (in the name of
Companies Act, scheduled karta), companies, Karta)
commercial banks, Mutual corporate bodies, scientific
Funds, FPIs (other than institutions societies and
individuals, corporate trusts, and FPIs who are
bodies and family offices), individuals, corporate
VCFs, AIFs, FVCIs bodies and family offices
registered with SEBI, and registered with SEBI
multilateral and bilateral
development financial

468
 Particulars Eligible Employees# QIBs(1) Non-Institutional Retail Individual
Bidders Bidders

institutions, state industrial

development corporation,
insurance companies
registered with IRDAI,
provident funds (subject to
applicable law) with
minimum corpus of ₹250
million, pension funds
with minimum corpus of
₹250 million, registered
with the Pension Fund
Regulatory and
Development Authority
established under sub-
section (1) of section 3 of
the Pension Fund
Regulatory and
Development Authority
Act, 2013, National
Investment Fund set up by
the GoI through resolution
F. No.2/3/2005-DD-II
dated November 23, 2005,
the insurance funds set up
and managed by army,
navy or air force of the
Union of India, insurance
funds set up and managed
by the Department of
Posts, India and
Systemically Important
NBFCs in accordance with
applicable laws.

Terms of Payment In case of Anchor Investors: Full Bid Amount shall be payable by the Anchor Investors at the time of
submission of their Bids(3)

In case of all other Bidders: Full Bid Amount shall be blocked in the bank account of the ASBA Bidder (other
than Anchor Investors) or by the Sponsor Bank(s) through the UPI Mechanism (for RIBs or individual investors
bidding under the Non – Institutional Portion for an amount of more than ₹0.20 million and up to ₹0.50 million,
using the UPI Mechanism) that is specified in the ASBA Form at the time of submission of the ASBA Form

Mode of Bidding* ASBA only (including the ASBA only (excluding the ASBA only (including the ASBA only (including the
UPI Mechanism) UPI Mechanism) except UPI Mechanism for Bids UPI Mechanism)
for Anchor Investors up to ₹0.50 million)
*
SEBI vide its circular no. SEBI/HO/CFD/DIL2/P/CIR/2022/75 dated May 30, 2022, has mandated that ASBA applications in public issues shall be
processed only after the application monies are blocked in the investor’s bank accounts. Accordingly, Stock Exchanges shall, for all categories of investors
viz. Retail, QIB, NIB and other reserved categories and also for all modes through which the applications are processed, accept the ASBA applications
in their electronic book building platform only with a mandatory confirmation on the application monies blocked.
##
Eligible Employees Bidding in the Employee Reservation Portion can Bid up to a Bid Amount of ₹0.50 million. However, a Bid by an Eligible Employee
in the Employee Reservation Portion will be considered for allocation, in the first instance, for a Bid Amount of up to ₹0.20 million. In the event of under-
subscription in the Employee Reservation Portion the unsubscribed portion will be available for allocation and Allotment, proportionately to all Eligible
Employees who have Bid in excess of ₹0.20 million, subject to the maximum value of Allotment made to such Eligible Employee not exceeding ₹0.50
million (net of the Employee Discount). An Eligible Employee Bidding in the Employee Reservation Portion can also Bid in the Net Offer and such Bids
will not be treated as multiple Bids subject to applicable limits. Eligible Employee can also apply under Retail Portion. However, Bids by Eligible
Employees in the Employee Reservation Portion and in the Non-Institutional Portion shall be treated as multiple Bids, only if Eligible Employee has
made an application of more than ₹2,00,000 (net of Employee Discount) in the Employee reservation portion. The undersubscribed portion, if any, in the
Employee Reservation Portion shall be added back to the Net Offer. In case of under-subscription in the Net Offer, spill-over to the extent of such under-
subscription shall be permitted from the Employee Reservation Portion. For further details, please see “Terms of the Offer” on page 461.
##
Our Bank and the Promoter Selling Shareholder may, in consultation with the BRLMs, offer a discount of up to [●]% to the Offer Price (equivalent of
₹[●] per Equity Share) to Eligible Employees Bidding in the Employee Reservation Portion, subject to necessary approvals as may be required, and
which shall be announced at least two Working Days prior to the Bid / Offer Opening Date.
(1)
Our Bank and the Promoter Selling Shareholder may, in consultation with the BRLMs, allocate up to 60% of the QIB Portion to Anchor Investors at the
Anchor Investor Offer Price on a discretionary, subject to there being (i) a maximum of two Anchor Investors, where allocation in the Anchor Investor
Portion is up to ₹100 million, (ii) minimum of two and maximum of 15 Anchor Investors, where the allocation under the Anchor Investor Portion is more
than ₹100 million but up to ₹2,500 million under the Anchor Investor Portion, subject to a minimum Allotment of ₹50.00 million per Anchor Investor,
and (iii) in case of allocation above ₹2,500.00 million under the Anchor Investor Portion, a minimum of five such investors and a maximum of 15 Anchor
Investors for allocation up to ₹2,500.00 million, and an additional 10 Anchor Investors for every additional ₹2,500 million or part thereof will be
permitted, subject to minimum allotment of ₹50.00 million per Anchor Investor. An Anchor Investor will make a minimum Bid of such number of Equity
Shares, that the Bid Amount is at least ₹100.00 million. One-third of the Anchor Investor Portion shall be reserved for domestic Mutual Funds, subject
to valid Bids being received from domestic Mutual Funds at or above the price Anchor Investor Allocation Price. In the event of under-subscription or

469
 non-Allotment in the Anchor Investor Portion, the balance Equity Shares in the Anchor Investor Portion shall be added to the Net QIB Portion. For
details, see “Offer Structure” on page 467.
(2)
Subject to valid Bids being received at or above the Offer Price. This is an Offer in terms of Rule 19(2)(b) of the SCRR in compliance with Regulation
6(1) of the SEBI ICDR Regulations.
(3)
Full Bid Amount shall be payable by the Anchor Investors at the time of submission of the Anchor Investor Application Forms, provided that any difference
between the price at which Equity Shares are allocated to the Anchor Investors and the Anchor Investor Offer Price, shall be payable by the Anchor
Investor Pay-in Date as mentioned in the CAN.
(4)
In case of joint Bids, the Bid cum Application Form should contain only the name of the first Bidder whose name should also appear as the first holder of
the beneficiary account held in joint names. The signature of only such first Bidder is required in the Bid cum Application Form and such first Bidder will
be deemed to have signed on behalf of the joint holders. The Bank reserves the right to reject, in its absolute discretion, all or any multiple Bids in any or
all categories.

Bids by FPIs with certain structures as described under “Offer Procedure – Bids by FPIs” on page 478 and having same PAN
may be collated and identified as a single Bid in the Bidding process. The Equity Shares Allocated and Allotted to such
successful Bidders (with same PAN) may be proportionately distributed.

Eligible Employees Bidding in the Employee Reservation Portion at a price within the Price Band can make payment based on
Bid Amount, at the time of making a Bid. Eligible Employees Bidding in the Employee Reservation Portion at the Cut-Off
Price have to ensure payment at the Cap Price, at the time of making a Bid.

In terms of the Banking Regulation Act read with Reserve Bank of India (acquisition and holding of shares or voting rights in
banking companies) Directions, 2023 and guidelines thereunder, no person either by himself or acting in concert with any other
person can acquire, directly or indirectly, or hold 5% or more of the total paid-up share capital of our Bank, or be entitled to
exercise 5% or more of the total voting rights of our Bank, without prior approval of the RBI. Accordingly, it is the responsibility
of each Bidder to seek RBI approval, if the Bids submitted by such Bidder for such number of Equity Shares as may result in
the shareholding of a Bidder (along with his relatives, associate enterprises or persons acting in concert with such Bidder)
(“Other Persons”) aggregate to 5% or more of the post-Offer paid-up share capital of our Bank. It may be noted that in the
event an approval from RBI is not obtained by any Bidder, it shall not be Allotted 5% or more of the post-Offer paid-up share
capital of our Bank.

An ‘associate enterprise’ has the same meaning assigned to it in Explanation 1(a) to Section 12B of Banking Regulation Act,
1949. A ‘person acting in concert’ has the same meaning as stated in Explanation 1(c) to Section 12B of Banking Regulation
Act, 1949. A ‘relative’ has the same meaning as defined in Section 2(77) of the Companies Act, 2013 and rules made thereunder.

470
 OFFER PROCEDURE

All Bidders should read the General Information Document, which highlights the key rules, processes and procedures
applicable to public issues in general in accordance with the provisions of the Companies Act, the SCRA, the SCRR and the
SEBI ICDR Regulations which is part of the Abridged Prospectus accompanying the Bid cum Application Form. The General
Information Document is available on the websites of the Stock Exchanges and the BRLMs. Please refer to the relevant
provisions of the General Information Document which are applicable to the Offer especially in relation to the process for Bids
by UPI Bidders through the UPI Mechanism. The Bidders should note that the details and process provided in the General
Information Document should be read along with this section.

Additionally, all Bidders may refer to the General Information Document for information in relation to (i) category of investors
eligible to participate in the Offer; (ii) maximum and minimum Bid size; (iii) price discovery and allocation; (iv) payment
instructions for ASBA Bidders/applicant; (v) issuance of CAN and allotment in the Offer; (vi) general instructions (limited to
instructions for completing the Bid cum Application Form); (vii) submission of Bid cum Application Form; (viii) other
instructions (limited to joint bids in cases of individual, multiple bids and instances when an application would be rejected on
technical grounds); (ix) applicable provisions of the Companies Act, 2013 relating to punishment for fictitious applications;
(x) mode of making refunds; (xi) Designated Date; (xii) interest in case of delay in allotment or refund; and (xiii) disposal of
applications and electronic registration of Bids.

SEBI through the UPI Circulars has introduced an alternate payment mechanism using Unified Payments Interface (“UPI”)
and consequent reduction in timelines for listing in a phased manner. UPI has been introduced in a phased manner as a payment
mechanism in addition to ASBA for applications by Retail Individual Bidders through intermediaries from January 1, 2019, the
UPI Mechanism for RIBs applying through Designated Intermediaries was made effective along with the existing process and
existing timeline of T+6 days. (“UPI Phase I”) until June 30, 2019.

Subsequently, for applications by RIBs through Designated Intermediaries, the process of physical movement of forms from
Designated Intermediaries to SCSBs for blocking of funds has been discontinued and RIBs submitting their ASBA Forms
through Designated Intermediaries (other than SCSBs) can only use the UPI Mechanism with existing timeline of T+6 days
until further notice by SEBI vide its circular no. SEBI/HO/CFD/DIL2/CIR/P/2020/50 dated March 30, 2020, (“UPI Phase
II”). The final reduced timeline of T+3 days may be made effective using the UPI Mechanism for applications by UPI Bidders
(“UPI Phase III”), and modalities of the implementation of UPI Phase III was notified by SEBI vide its circular no.
SEBI/HO/CFD/TPD1/CIR/P/2023/140 dated August 9, 2023 and made effective on a voluntary basis for public issues opening
on or after September 1, 2023 and on a mandatory basis for public issues opening on or after December 1, 2023.

The Offer will be undertaken pursuant to the processes and procedures under UPI Phase II, subject to the timing of the Offer
and any circulars, clarification or notification issued by the SEBI from time to time, including any circular, clarification or
notification which may be issued by SEBI. Further, SEBI vide its circular no. SEBI/HO/CFD/DIL2/CIR/P/2021/2480/1/M dated
March 16, 2021, SEBI circular no. SEBI/HO/CFD/DIL2/P/CIR/2021/570 dated June 2, 2021, SEBI circular no.
SEBI/HO/CFD/DIL2/P/CIR/P/2022/45 dated April 5, 2022, and SEBI circular no. SEBI/HO/CFD/DIL2/CIR/P/2022/51 dated
April 20, 2022 and SEBI circular no. SEBI/HO/CFD/DIL2/P/CIR/2022/75 dated May 30, 2022 has introduced certain
additional measures for streamlining the process of initial public offers and redressing investor grievances. Subsequently, vide
the SEBI RTA Master Circular, consolidated the aforementioned circulars to the extent relevant for RTAs, and rescinded these
circulars. The provisions of these circulars, as amended, are deemed to form part of this Red Herring Prospectus. The
provisions of the circular issued by the NSE having reference no. 25/2022 dated August 3, 2022, and the circular issued by
BSE having reference no. 20220803-40 dated August 3, 2022 are also deemed to form part of this Red Herring Prospectus.
Further, the processing fees for applications made by Retail Individual Bidders using the UPI Mechanism may be released to
the remitter banks (SCSBs) only after such banks provide a written confirmation on compliance with SEBI Circular No:
SEBI/HO/CFD/DIL2/P/CIR/2021/570 dated June 2, 2021, read with SEBI Circular No:
SEBI/HO/CFD/DIL2/CIR/P/2021/2480/1/M dated March 16, 2021.

In case of any delay in unblocking of amounts in the ASBA Accounts (including amounts blocked through the UPI Mechanism)
exceeding four Working Days from the Bid/Offer Closing Date, in accordance with the SEBI master circular no.
SEBI/HO/CFD/PoD-2/P/CIR/2023/00094 dated June 21, 2023, the Bidder shall be compensated at a uniform rate of ₹100 per
day for the entire duration of delay exceeding four Working Days from the Bid/Offer Closing Date by the intermediary
responsible for causing such delay in unblocking. The BRLMs shall, in their sole discretion, identify and fix the liability on such
intermediary or entity responsible for such delay in unblocking. Further, SEBI vide its master circular no. SEBI/HO/CFD/PoD-
2/P/CIR/2023/00094 dated June 21, 2023, has reduced the timelines for refund of Application money to four days.

The BRLMs shall be the nodal entity for any issues arising out of public issuance process.

Our Bank, each of the Selling Shareholders and the BRLMs do not accept any responsibility for the completeness and accuracy
of the information stated in this section and are not liable for any amendment, modification or change in the applicable law
which may occur after the date of this Red Herring Prospectus. Bidders are advised to make their independent investigations
and ensure that their Bids are submitted in accordance with applicable laws and do not exceed the investment limits or
maximum number of the Equity Shares that can be held by them under applicable law or as specified in this Red Herring
Prospectus and the Prospectus.

471
Further, our Bank, the Selling Shareholders and the members of the Syndicate do not accept any responsibility for any adverse
occurrences consequent to the implementation of the UPI Mechanism for application in the Offer.

Book Building Procedure

The Offer is being made in terms of Rule 19(2)(b) of the SCRR read with Regulation 31 of the SEBI ICDR Regulations through
the Book Building Process in accordance with Regulation 6(1) of the SEBI ICDR Regulations wherein not more than 50% of
the Net Offer shall be allocated on a proportionate basis to QIBs, provided that our Bank and the Promoter Selling Shareholder
may, in consultation with the BRLMs, allocate up to 60% of the QIB Portion to Anchor Investors on a discretionary basis in
accordance with the SEBI ICDR Regulations, of which one-third shall be reserved for domestic Mutual Funds, subject to valid
Bids being received from domestic Mutual Funds at or above the Anchor Investor Allocation Price. In the event of under-
subscription, or non-allotment in the Anchor Investor Portion, the balance Equity Shares shall be added to the Net QIB Portion.
Further, 5% of the Net QIB Portion shall be available for allocation on a proportionate basis only to Mutual Funds, and the
remainder of the Net QIB Portion shall be available for allocation on a proportionate basis to all QIBs (other than Anchor
Investors), including Mutual Funds, subject to valid Bids being received at or above the Offer Price. Further, subject to
availability of Equity Shares in the respective categories, not less than 15% of the Net Offer shall be available for allocation to
Non-Institutional Bidders out of which (a) one third of such portion shall be reserved for Non-Institutional Bidders with
application size exceeding ₹0.20 million and up to ₹1.00 million; and (b) two third of such portion shall be reserved for Non-
Institutional Bidders with Bid size of more than ₹1.00 million, provided that the unsubscribed portion in either of such sub-
categories may be allocated to Non-Institutional Bidders in the other sub-category of Non-Institutional Bidders and not less
than 35% of the Net Offer shall be available for allocation to Retail Individual Bidders in accordance with the SEBI ICDR
Regulations, subject to valid Bids being received at or above the Offer Price. Further, up to [●] Equity Shares, aggregating up
to ₹125.00 million shall be made available for allocation on a proportionate basis only to Eligible Employees Bidding in the
Employee Reservation Portion, subject to valid Bids being received at or above the Offer Price, if any. The Employee
Reservation Portion shall not exceed 5% of our post-Offer paid-up equity share capital subject to valid Bids being received at
or above the Offer Price, net of Employee Discount, if any.

Under-subscription, if any, in any category, except in the QIB Portion, would be allowed to be met with spill over from any
other category or combination of categories of Bidders, as applicable, at the discretion of our Bank and the Promoter Selling
Shareholder, in consultation with the BRLMs and the Designated Stock Exchange subject to receipt of valid Bids received at
or above the Offer Price. Under-subscription, if any, in the QIB Portion, would not be allowed to be met with spill-over from
any other category or a combination of categories. In case of an undersubscription in the Offer, the Equity Shares proposed for
sale by the Selling Shareholder shall be in proportion to the Offered Shares by such Selling Shareholders.

In accordance with Rule 19(2)(b) of the SCRR, the Offer and the Net Offer will constitute at least [●]% and [●]%, respectively
of the post Offer paid-up Equity Share capital of our Bank.

The Equity Shares, on Allotment, shall be traded only in the dematerialised segment of the Stock Exchanges.

Bidders should note that the Equity Shares will be Allotted to all successful Bidders only in dematerialised form. The
Bid cum Application Forms which do not have the details of the Bidders’ depository account, including DP ID, Client
ID, PAN and UPI ID (for UPI Bidders Bidding through the UPI Mechanism), as applicable, shall be treated as
incomplete and will be rejected. Bidders will not have the option of being Allotted Equity Shares in physical form.
However, they may get the Equity Shares rematerialised subsequent to Allotment of the Equity Shares in the Offer,
subject to compliance with applicable law.

Phased implementation of UPI Mechanism

SEBI has issued the UPI Circulars in relation to streamlining the process of public issue of inter alia, equity shares. Pursuant
to the UPI Circulars, the UPI Mechanism has been introduced in a phased manner as a payment mechanism (in addition to
mechanism of blocking funds in the account maintained with SCSBs under ASBA) for applications by RIBs through Designated
Intermediaries with the objective to reduce the time duration from public issue closure to listing from six Working Days to up
to three Working Days. Considering the time required for making necessary changes to the systems and to ensure complete and
smooth transition to the UPI payment mechanism, the UPI Circulars have introduced and implemented the UPI Mechanism in
three phases in the following manner:

Phase I: This phase was applicable from January 1, 2019 until March 31, 2019 or floating of five main board public issues,
whichever was later. Subsequently, the timeline for implementation of Phase I was extended till June 30, 2019. Under this
phase, a RIB had the option to submit the ASBA Form with any of the Designated Intermediary and use his/ her UPI ID for the
purpose of blocking of funds. The time duration from public issue closure to listing continued to be six Working Days.

Phase II: This phase has become applicable from July 1, 2019. Under this phase, submission of the ASBA Form without UPI
by RIBs to Designated Intermediaries (other than SCSBs) for blocking of funds will be discontinued. However, the time
duration from public issue closure to listing would continue to be six Working Days during this phase. SEBI vide its circular
no. SEBI/HO/CFD/DCR2/CIR/P/2019/133 dated November 8, 2019 extended the timeline for implementation of UPI Phase II
till March 31, 2020. Further, pursuant to SEBI circular dated March 30, 2020, this phase has been extended till further notice.

472
Phase III: In this phase, the time duration from public issue closure to listing has been reduced to three Working Days. This
phase has become applicable on a voluntary basis for all issues opening on or after September 1, 2023 and on a mandatory basis
for all issues opening on or after December 1, 2023, vide SEBI circular bearing number SEBI/HO/CFD/TPD1/CIR/P/2023/140
dated August 9, 2023 (“T+3 Notification”).

The processing fees for applications made by UPI Bidders may be released to the SCSBs only after such banks provide a written
confirmation on compliance with SEBI circular SEBI/HO/CFD/DIL2/CIR/P/2021/2480/1/M dated March 16, 2021 read with
SEBI circular SEBI/HO/CFD/DIL2/P/CIR/2021/570 dated June 02, 2021 and such payment of processing fees to the SCSBs
shall be made in compliance with SEBI circular SEBI/HO/CFD/DIL2/CIR/P/2022/51 dated April 20, 2022. NPCI vide circular
reference no. NPCI/UPI/OC No. 127/ 2021-22 dated December 09, 2021, inter alia, has enhanced the per transaction limit in
UPI from more than ₹0.20 million to ₹0.50 million for UPI based ASBA in initial public offerings.

All SCSBs offering facility of making application in public issues shall also provide facility to make application using UPI.
Our Bank will be required to appoint certain of the SCSBs as sponsor banks to act as a conduit between the Stock Exchanges
and NPCI in order to facilitate collection of requests and / or payment instructions of the UPI Bidders using the UPI.

SEBI through its circular (SEBI/HO/CFD/DIL2/CIR/P/2022/45) dated April 5, 2022, has prescribed that all individual investors
applying in initial public offerings opening on or after May 1, 2022, where the application amount is up to ₹0.50 million, shall
use UPI. Individual investors bidding under the Non-Institutional Portion bidding for more than ₹0.20 million and up to ₹0.50
million, using the UPI Mechanism, shall provide their UPI ID in the Bid-cum-Application Form for bidding through Syndicate,
sub-syndicate members, Registered Brokers, RTAs or CDPs, or online using the facility of linked online trading, demat and
bank account (3 in 1 type accounts), provided by certain brokers.

Further, in terms of the UPI Circulars, the payment of processing fees to the SCSBs shall be undertaken pursuant to an
application made by the SCSBs to the BRLMs, and such application shall be made only after (i) unblocking of application
amounts for each application received by the SCSB has been fully completed, and (ii) applicable compensation relating to
investor complaints has been paid by the SCSB.

The Offer will be made under UPI Phase II of the UPI Circular under voluntary basis, unless UPI Phase III of the UPI Circular
becomes mandatory and applicable on or prior to the Bid/Offer Opening Date. If the Offer is made under UPI Phase III of the
UPI Circular, the same will be advertised in all editions of The Financial Express, an English national daily newspaper, all
editions of Jansatta, a Hindi national daily newspaper and Thrissur edition of the Malayalam daily newspaper, Mangalam
(Malayalam being the regional language of Kerala, where our Registered and Corporate Office is located), each with wide
circulation, respectively, on or prior to the Bid/ Offer Opening Date and such advertisement shall also be made available to the
Stock Exchanges for the purpose of uploading on their websites.

For further details, refer to the General Information Document available on the websites of the Stock Exchanges and the
BRLMs.

Bid cum Application Form

Copies of the Bid cum Application Form (other than for Anchor Investors) and the Abridged Prospectus will be available with
the Designated Intermediaries at the Bidding Centres, and our Registered and Corporate Office. An electronic copy of the Bid
cum Application Form will also be available for download on the websites of NSE (www.nseindia.com) and BSE
(www.bseindia.com) at least one day prior to the Bid/Offer Opening Date.

For Anchor Investors, the Bid cum Application Forms will be available at the offices of the BRLMs.

ASBA Bidders shall mandatorily participate in the Offer only through the ASBA process. Anchor Investors are not permitted
to participate in the Offer through the ASBA process. The UPI Bidders can additionally Bid through the UPI Mechanism.

UPI Bidders bidding using the UPI Mechanism must provide the valid UPI ID in the relevant space provided in the Bid cum
Application Form and the Bid cum Application Forms that do not contain the UPI ID are liable to be rejected.

ASBA Bidders (other than UPI Bidders using the UPI Mechanism) must provide bank account details and authorisation to
block funds in their respective ASBA Accounts in the relevant space provided in the ASBA Form and the ASBA Forms that
do not contain such details are liable to be rejected.

Retail Individual Bidders submitting their Bid cum Application Form to any Designated Intermediary (other than SCSBs) shall
be required to Bid using the UPI Mechanism and must provide the UPI ID in the relevant space provided in the Bid cum
Application Form. Bids submitted by Retail Individual Bidders with any Designated Intermediary (other than SCSBs) without
mentioning the UPI ID are liable to be rejected. Retail Individual Bidders Bidding using the UPI Mechanism may also apply
through the SCSBs and mobile applications using the UPI handles as provided on the website of SEBI.

ASBA Bidders shall ensure that the Bids are made on ASBA Forms bearing the stamp of the Designated Intermediary, submitted
at the Bidding Centres only (except in case of electronic ASBA Forms) and the ASBA Forms not bearing such specified stamp
are liable to be rejected. UPI Bidders using UPI Mechanism, may submit their ASBA Forms, including details of their UPI IDs,

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 with the Syndicate, Sub-Syndicate members, Registered Brokers, RTAs or CDPs. RIBs authorising an SCSB to block the Bid
Amount in the ASBA Account may submit their ASBA Forms with the SCSBs (except UPI Bidders using the UPI Mechanism).
ASBA Bidders must ensure that the ASBA Account has sufficient credit balance such that an amount equivalent to the full Bid
Amount can be blocked by the SCSB or the Sponsor Banks, as applicable, at the time of submitting the Bid pursuant to SEBI
circular no. SEBI/HO/CFD/DIL2/P/CIR/2022/75 dated May 30, 2022, all the ASBA applications in Public Issues shall be
processed only after the application monies are blocked in the investor’s bank accounts. Stock Exchanges shall accept the
ASBA applications in their electronic book building platform only with a mandatory confirmation on the application monies
blocked. The circular shall be applicable for all categories of investors viz. Retail, QIB and NIB and also for all modes through
which the applications are processed.

The prescribed colour of the Bid cum Application Form for the various categories is as follows:

Category Colour of Bid cum

Application Form*
Resident Indians, including resident QIBs, Non-Institutional Bidders, Retail Individual Bidders and Eligible NRIs White
applying on a non-repatriation basis
Non-Residents including Eligible NRIs, FVCIs, FPIs and registered bilateral and multilateral development Blue
financial institutions applying on a repatriation basis
Anchor Investors White
Eligible Employees Bidding in the Employee Reservation Portion Pink
*
Excluding electronic Bid cum Application Forms
Notes:
(1) Electronic Bid cum Application forms and the Abridged Prospectus will also be available for download on the websites of the Stock Exchanges
(www.nseindia.com and www.bseindia.com).
(2) Bid cum Application Forms for Anchor Investors shall be available at the offices of the BRLMs.
(3) Bid cum Application Forms for Eligible Employees shall be available at the Registered Office of the Bank.

In case of ASBA Forms, the relevant Designated Intermediaries shall capture and upload the relevant bid details (including UPI
ID in case of ASBA Forms under the UPI Mechanism) in the electronic bidding system of the Stock Exchanges. For UPI
Bidders using UPI Mechanism, the Stock Exchanges shall share the Bid details (including UPI ID) with the Sponsor Banks on
a continuous basis to enable the Sponsor Banks to initiate UPI Mandate Request to UPI Bidders for blocking of funds. For
ASBA Forms (other than UPI Bidders using the UPI Mechanism) Designated Intermediaries (other than SCSBs) shall submit/
deliver the ASBA Forms to the respective SCSB where the Bidder has an ASBA bank account and shall not submit it to any
non-SCSB bank or any Escrow Collection Bank.

For UPI Bidders using the UPI Mechanism, the Stock Exchanges shall share the Bid details (including UPI ID) with the Sponsor
Bank(s) on a continuous basis to enable the Sponsor Bank(s) to initiate UPI Mandate Request to UPI Bidders for blocking of
funds. The Sponsor Banks shall initiate request for blocking of funds through NPCI to UPI Bidders, who shall accept the UPI
Mandate Request for blocking of funds on their respective mobile applications associated with UPI ID linked bank account. In
accordance with BSE Circular No: 20220803-40 and NSE Circular No: 25/2022, each dated August 3, 2022, for all pending
UPI Mandate Requests, the Sponsor Bank shall initiate requests for blocking of funds in the ASBA Accounts of relevant Bidders
with a confirmation cut-off time of 5:00 pm on the Bid/ Offer Closing Date (“Cut-Off Time”). Accordingly, UPI Bidders
bidding using through the UPI Mechanism should accept UPI mandate requests for blocking of funds prior to the Cut-Off Time
and all pending UPI mandate requests at the Cut-Off Time shall lapse. For ensuring timely information to investors, SCSBs
shall send SMS alerts as specified in SEBI circular no. SEBI/HO/CFD/DIL2/CIR/P/2021/2480/1/M dated March 16, 2021, as
amended pursuant to SEBI circular no. SEBI/HO/CFD/DIL2/P/CIR/2021/570 dated June 2, 2021, SEBI Circular No:
SEBI/HO/CFD/DIL2/CIR/P/2022/51 dated April 20, 2022 and SEBI/HO/CFD/DIL2/P/CIR/2022/75 dated May 30, 2022. The
NPCI shall maintain an audit trail for every bid entered in the Stock Exchanges bidding platform, and the liability to compensate
UPI Bidders (using the UPI Mechanism) in case of failed transactions shall be with the concerned entity (i.e., the Sponsor
Banks, NPCI or the bankers to an Offer) at whose end the lifecycle of the transaction has come to a halt. The NPCI shall share
the audit trail of all disputed transactions/ investor complaints to the Sponsor Banks and the bankers to an Offer.

The Sponsor Banks will undertake a reconciliation of Bid responses received from Stock Exchanges and sent to NPCI and will
also ensure that all the responses received from NPCI are sent to the Stock Exchanges platform with detailed error code and
description, if any. Further, the Sponsor Banks will undertake reconciliation of all Bid requests and responses throughout their
lifecycle on daily basis and share reports with the BRLMs in the format and within the timelines as specified under the UPI
Circulars. Sponsor Banks and issuer banks shall download UPI settlement files and raw data files from the NPCI portal after
every settlement cycle and do a three-way reconciliation with Banks UPI switch data, CBS data and UPI raw data. NPCI is to
coordinate with issuer banks and Sponsor Banks on a continuous basis.

Pursuant to NSE circular dated August 3, 2022 with reference no. 25/2022, the following is applicable to all initial public offers
opening on or after September 1, 2022:

a. Cut-off time for acceptance of UPI Mandate shall be up to 5:00 pm on the initial public offer closure date and existing
process of UPI bid entry by syndicate members, registrars to the offer and depository participants shall continue till further
notice.

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b. There shall be no T+1 mismatch modification session for PAN-DP mismatch and bank/ location code on T+1 day for
already uploaded bids. The dedicated window provided for mismatch modification on T+1 day shall be discontinued.

c. Bid entry and modification/ cancellation (if any) shall be allowed in parallel to the regular bidding period up to 5:00 pm
on the initial public offer closure day.

d. Exchanges shall display initial public offer demand details on its website and for UPI bids the demand shall include/
consider UPI bids only with latest status as RC 100 – Black Request Accepted by Investor/ Client, based on responses/
status received from the Sponsor Banks.

In terms of the Banking Regulation Act and the SFB Licensing Guidelines read with the Reserve Bank of India (acquisition
and holding of shares or voting rights in banking companies) Directions, 2023 and guidelines thereunder, no person either by
himself, or acting in concert with any other person can acquire, directly or indirectly, or hold 5% or more of the total paid-up
share capital of our Bank, or be entitled to exercise 5% or more of the total voting rights of our Bank, without prior approval of
the RBI. Accordingly, it is the responsibility of each Bidder to seek RBI approval, if the Bids submitted by such Bidder for
such number of Equity Shares as may result in the shareholding of a Bidder (along with his relatives, associate enterprises or
persons acting in concert with such Bidder) (“Other Persons”) aggregate to 5% or more of the post-Offer paid-up share capital
of our Bank. It may be noted that in the event an approval from the RBI is not obtained by any Bidder, it shall not be Allotted
5% or more of the post-Offer paid-up share capital of our Bank.

Our Bank, the BRLMs and the Registrar to the Offer will rely strictly and solely on the RBI approvals received from Bidders
for making any Allotment of Equity Shares to such Bidders and to the Other Persons, if any, that results in such Bidder, either
individually or on an aggregate basis with the Other Persons associated with such Bidder, holding Equity Shares equal to or in
excess of 5% of the post-Offer paid-up share capital of our Bank thereafter, after considering their existing aggregate
shareholding in our Bank, if any. Our Bank, the Registrar to the Offer and BRLMs will not be responsible for identifying the
Other Persons associated with any Bidder, or for the consequences of any Bidder and the Other Persons holding Equity Shares,
which together with their existing shareholding amount to 5% or more of the post-Offer paid-up share capital of our Bank
pursuant to the Allotment made without a valid and subsisting RBI approval.

Accordingly, in case of Bids for such number of Equity Shares, as may result in the shareholding of a Bidder (along with
his relatives, associate enterprises or persons acting in concert with such person) exceeding 5% or more of the total paid-
up share capital of our Bank, such Bidder is required to submit the approval obtained from the RBI with the Registrar
to the Offer, at least two Working Days prior to the finalisation of the Basis of Allotment. In case of failure by such
Bidder to submit the approval obtained from the RBI within the above time period, our Bank may Allot maximum
number of Equity Shares, as adjusted for the Bid Lot (and in case of over-subscription in the Offer, after making
applicable proportionate allocation for the Equity Shares Bid for), that will limit the aggregate shareholding of the
Bidder (along with his relatives, associate enterprises or persons acting in concert with such person and including
existing shareholding, if any) to less than 5% of the post-Offer paid-up Equity Share capital of our Bank.

A clearly legible copy of the RBI approval in the name(s) of the Bidders together with the application submitted for
obtaining such RBI approval must be submitted by the Bidders with the Bid cum Application Form as well as to the
Registrar to the Offer at least two Working Days prior to the finalisation of the Basis of Allotment. Such RBI approval
should clearly mention the name(s) of the entities which propose to Bid in the Offer, the aggregate shareholding of the
Bidder and the Other Persons in the pre-Offer paid-up share capital of our Bank and the maximum permitted holding
of Equity Shares by the Other Persons. All Allotments to such Bidders and the Other Persons, shall be in accordance
with and subject to the conditions contained in such RBI approval.

Electronic registration of Bids

a) The Designated Intermediary may register the Bids using the online facilities of the Stock Exchanges. The Designated
Intermediaries can also set up facilities for off-line electronic registration of Bids, subject to the condition that they
may subsequently upload the off-line data file into the on-line facilities for Book Building on a regular basis before
the closure of the Offer.

b) On the Bid/Offer Closing Date, the Designated Intermediaries may upload the Bids till such time as may be permitted
by the Stock Exchanges and as disclosed in this Red Herring Prospectus.

c) Only Bids that are uploaded on the Stock Exchanges Platform are considered for allocation/Allotment. The Designated
Intermediaries shall modify select fields uploaded in the Stock Exchange Platform during the Bid/ Offer Period till
5.00 pm on the Bid/Offer Closing Date after which the Stock Exchange(s) send the bid information to the Registrar to
the Offer for further processing.

The Sponsor Banks shall host a web portal for intermediaries (closed user group) from the date of Bid/ Offer Opening Date till
the date of listing of the Equity Shares with details of statistics of mandate blocks/ unblocks, performance of apps and UPI
handles, down-time/network latency (if any) across intermediaries and any such processes having an impact/ bearing on the
Offer bidding process.

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Participation by Promoters and members of the Promoter Group of the Bank, the BRLMs and the Syndicate Members

The BRLMs and the Syndicate Members shall not be allowed to purchase Equity Shares in this Offer in any manner, except
towards fulfilling their underwriting obligations. However, the respective associates and affiliates of the BRLMs and the
Syndicate Members may Bid for Equity Shares in the Offer, either in the QIB Portion or in the Non-Institutional Portion as may
be applicable to such Bidders, where the allocation is on a proportionate basis and such subscription may be on their own
account or on behalf of their clients. All categories of investors, including associates or affiliates of the BRLMs and Syndicate
Members, shall be treated equally for the purpose of allocation to be made on a proportionate basis.

Except for Mutual Funds, AIFs or FPIs other than individuals, corporate bodies and family offices, sponsored by entities which
are associates of the BRLMs or pension fund sponsored by entities which are associate of the BRLMs, insurance companies
promoted by entities which are associates of the BRLMs, no BRLMs or its respective associates can apply in the Offer under
the Anchor Investor Portion.

Further, an Anchor Investor shall be deemed to be an associate of the BRLMs, if: (a) either of them controls, directly or
indirectly through its subsidiary or holding company, not less than 15% of the voting rights in the other; or (b) either of them,
directly or indirectly, by itself or in combination with other persons, exercises control over the other; or (c) there is a common
director, excluding a nominee director, amongst the Anchor Investor and the BRLMs.

The Promoters and members of the Promoter Group, the Promoter will not participate in the Offer, except participation of our
Promoter in the Offer for Sale.

Bids by Mutual Funds

With respect to Bids by Mutual Funds, a certified copy of their SEBI registration certificate must be lodged along with the Bid
cum Application Form. Failing this, our Bank and the Promoter Selling Shareholder, in consultation with the BRLMs, reserve
the right to reject any Bid without assigning any reason thereof.

Bids made by asset management companies or custodians of Mutual Funds shall specifically state names of the concerned
schemes for which such Bids are made.

In case of a Mutual Fund, a separate Bid can be made in respect of each scheme of the Mutual Fund registered with SEBI and
such Bids in respect of more than one scheme of the Mutual Fund will not be treated as multiple Bids provided that the Bids
clearly indicate the scheme concerned for which the Bid has been made.

No Mutual Fund scheme shall invest more than 10% of its net asset value in equity shares or equity related instruments of any
single company provided that the limit of 10% shall not be applicable for investments in case of index funds or sector or industry
specific schemes. No Mutual Fund under all its schemes should own more than 10% of any company’s paid-up share capital
carrying voting rights.

Further, the Banking Regulation Act requires any person to seek prior approval of the RBI to acquire or agree to acquire,
directly or indirectly, shares or voting rights of a bank, by itself or with persons acting in concert, wherein such acquisition
(taken together with shares or voting rights held by such person or associate enterprise or persons acting in concert with the
concerned person) results in aggregate shareholding of such person to be 5% or more of the paid-up capital of a bank or entitles
him to exercise 5% or more of the voting rights in a bank. For details, see “Key Regulations and Policies” on page 221.

Bids by Eligible Employees

The Bid must be for a minimum of [●] Equity Shares and in multiples of [●] Equity Shares thereafter so as to ensure that the
Bid Amount payable by the Eligible Employee does not exceed ₹0.50 million (net the Employee Discount).

However, the initial allocation to an Eligible Employee in the Employee Reservation Portion shall not exceed ₹0.20 million.
Allotment in the Employee Reservation Portion will be as detailed in the section “Offer Structure” on page 467.

However, Allotments to Eligible Employees in excess of ₹0.20 million shall be considered on a proportionate basis, in the event
of under-subscription in the Employee Reservation Portion, subject to the total Allotment to an Eligible Employee not exceeding
₹0.50 million. Subsequent under-subscription, if any, in the Employee Reservation Portion shall be added back to the Net Offer.

Eligible Employees Bidding in the Employee Reservation Portion may Bid at the Cut-off Price.

Bids under the Employee Reservation Portion by Eligible Employees shall be:

(i) Made only in the prescribed Bid cum Application Form or Revision Form (i.e. Pink colour form).

(ii) Only Eligible Employees (excluding such other persons not eligible under applicable laws, rules, regulations and
guidelines) would be eligible to apply in this Offer under the Employee Reservation Portion.

(iii) In case of joint bids, the sole bidder or the first bidder shall be the Eligible Employee.

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(iv) Bids by Eligible Employees may be made at Cut-off Price.

(v) Only those Bids, which are received at or above the Offer Price (net the Employee Discount) would be considered for
allocation under this portion.

(vi) The Bids must be for a minimum of [●] Equity Shares and in multiples of [●] Equity Shares thereafter so as to ensure
that the Bid Amount payable by the Eligible Employee subject to a maximum Bid Amount of ₹0.50 million (net the
Employee Discount).

(vii) Eligible Employees bidding in the Employee Reservation Portion can Bid through the UPI mechanism

(viii) If the aggregate demand in this portion is less than or equal to [●] Equity Shares at or above the Offer Price, full
allocation shall be made to the Eligible Employees to the extent of their demand.

(ix) Bids by Eligible Employees in the Employee Reservation Portion and in the Net Offer portion shall not be treated as
multiple Bids. Our Bank reserves the right to reject, in its absolute discretion, all or any multiple Bids in any or all
categories.

(x) Eligible Employees should mention their employee number at the relevant place in the Bid cum Application Form or
Revision Form.

(xi) As per the SEBI circular SEBI/HO/CFD/DIL2/CIR/P/2022/45 dated April 5, 2022, Eligible Employees bidding in the
Employee Reservation Portion can Bid through the UPI Mechanism.

In the event of under-subscription in the Employee Reservation Portion, the unsubscribed portion will be available for allocation
and Allotment, proportionately to all Eligible Employees who have Bid in excess of ₹0.20 million, subject to the maximum
value of Allotment made to such Eligible Employee not exceeding ₹0.50 million (net of Employee Discount).

If the aggregate demand in this portion is greater than [●] Equity Shares at or above the Offer Price, the allocation shall be made
on a proportionate basis. For the method of proportionate basis of Allotment, see “Offer Procedure” on page 471.

Bids by Eligible NRIs

Eligible NRIs may obtain copies of Bid cum Application Form from the Designated Intermediaries. Only Bids accompanied
by payment in Indian Rupees or freely convertible foreign exchange will be considered for Allotment. Eligible NRI Bidders
bidding on a repatriation basis by using the Non-Resident Forms should authorize their respective SCSB or confirm or accept
the UPI Mandate Request (in case of UPI Bidders bidding through the UPI Mechanism) to block their Non- Resident External
NRE Account (including UPI ID, if activated), or Foreign Currency Non-Resident (“FCNR”) Accounts, and eligible NRI
Bidders bidding on a non-repatriation basis by using Resident Forms should authorize their respective SCSB confirm or accept
the UPI mandate request (in case of UPI Bidders using the UPI Mechanism) to block their NRO Account for the full Bid
Amount, at the time of the submission of the Bid cum Application Form. NRIs applying in the Offer through the UPI Mechanism
are advised to enquire with the relevant bank, whether their account is UPI linked, prior to submitting a Bid cum Application
Form.

Eligible NRIs bidding on non-repatriation basis are advised to use the Bid cum Application Form for residents (white in colour).
Eligible NRIs bidding on a repatriation basis are advised to use the Bid cum Application Form meant for Non-Residents (blue
in colour).

In accordance with the FDI Policy, the total holding by any individual NRI, on a repatriation or non-repatriation basis, shall not
exceed 5% of the total paid-up equity capital on a fully diluted basis or shall not exceed 5% of the paid-up value of each series
of debentures or preference shares or share warrants issued by an Indian company and the total holdings of all NRIs and OCIs
put together, on a repatriation or non-repatriation basis, shall not exceed 10% of the total paid-up equity capital on a fully diluted
basis or shall not exceed 10% of the paid-up value of each series of debentures or preference shares or share warrant. Provided
that the aggregate ceiling of 10% may be raised to 24% if a special resolution to that effect is passed by the general body of the
Indian company.

Our Bank has, pursuant to a Board resolution dated June 29, 2021 and Shareholders resolution dated July 12, 2021, has increased
the limit of investment of NRIs to up to 24% of the paid-up equity share capital of the Bank, provided that the shareholding of
each NRI in the Bank shall not exceed 5% of the equity share capital or such other limit as may be stipulated by the RBI.

Bids by HUFs

Bids by Hindu Undivided Families or HUFs, should be made in the individual name of the Karta. The Bidder/Applicant should
specify that the Bid is being made in the name of the HUF in the Bid cum Application Form/Application Form as follows:
“Name of sole or first Bidder/Applicant: XYZ Hindu Undivided Family applying through XYZ, where XYZ is the name of the
Karta”. Bids/Applications by HUFs will be considered at par with Bids/Applications from individuals.

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For details of investment by NRIs, see “Restrictions on Foreign Ownership of Indian Securities” on page 490. Participation of
Eligible NRIs shall be subject to FEMA Regulations.

Bids by FPIs

In terms of the SEBI FPI Regulations, the investment in Equity Shares by a single FPI or an investor group (which means
multiple entities registered as FPIs and directly or indirectly having common ownership of more than 50% or common control)
must be below 10% of our post-Offer equity share capital. Further, in terms of the FEMA Non-Debt Instruments Rules, the
total holding by each FPI or an investor group shall be below 10% of the total paid-up equity share capital of our Bank and the
total holdings of all FPIs put together can be up to the sectoral cap applicable to the sector in which our Bank operates (i.e., up
to 74%), as prescribed under the FEMA Non-Debt Instruments Rules.

With effect from April 1, 2020, the aggregate limit for FPI investments shall be the sectoral caps applicable to our Bank (i.e.,
automatic up to 49% and government route beyond 49% and up to 74%).

In case the total holding of an FPI increases beyond 10% of the total paid-up equity share capital, on a fully diluted basis or
10% or more of the paid-up value of any series of debentures or preference shares or share warrants issued that may be issued
by our Bank, the total investment made by the FPI will be re-classified as FDI subject to the conditions as specified by SEBI
and the RBI in this regard and our Bank and the investor will be required to comply with applicable reporting requirements.

In case of Bids made by FPIs, a certified copy of the certificate of registration issued under the SEBI FPI Regulations is required
to be attached to the Bid cum Application Form, failing which our Bank and the Promoter Selling Shareholder, in consultation
with the Book Running Lead Managers, reserves the right to reject any Bid without assigning any reason. FPIs who wish to
participate in the Offer are advised to use the Bid cum Application Form for Non-Residents (blue in colour).

To ensure compliance with the above requirement, SEBI has, pursuant to its circular dated July 13, 2018, directed that at the
time of finalisation of the Basis of Allotment, the Registrar shall (i) use the PAN issued by the Income Tax Department of India
for checking compliance for a single FPI; and (ii) obtain validation from Depositories for the FPIs who have invested in the
Offer to ensure there is no breach of the investment limit, within the timelines for issue procedure, as prescribed by SEBI from
time to time.

Subject to compliance with all applicable Indian laws, rules, regulations, guidelines and approvals in terms of Regulation 21 of
the SEBI FPI Regulations, an FPI, may issue, subscribe to or otherwise deal in offshore derivative instruments (as defined under
the SEBI FPI Regulations as any instrument, by whatever name called, which is issued overseas by a FPI against securities held
by it in India, as its underlying) directly or indirectly, only in the event (i) such offshore derivative instruments are issued only
by persons registered as Category I FPIs; (ii) such offshore derivative instruments are issued only to persons eligible for
registration as Category I FPIs; (iii) such offshore derivative instruments are issued after compliance with ‘know your customer’
norms; and (iv) such other conditions as may be specified by SEBI from time to time.

An FPI issuing offshore derivate instruments is also required to ensure that any transfer of offshore derivative instrument is
made by, or on behalf of it subject to, inter alia, the following conditions:

(a) such offshore derivative instruments are transferred to persons subject to fulfilment of the criteria provided under
Regulation 21(1) of the SEBI FPI Regulations; and

(b) prior consent of the FPI is obtained for such transfer, except when the persons to whom the offshore derivative
instruments are to be transferred to are pre-approved by the FPI.

Bids by FPIs submitted under the multiple investment managers structure with the same PAN but with different beneficiary
account numbers, Client ID and DP ID including the following cases may not be treated as multiple Bids:

• FPIs which utilise the multi investment manager structure;

• Offshore derivative instruments which have obtained separate FPI registration for ODI and proprietary derivative
investments;

• Sub funds or separate class of investors with segregated portfolio who obtain separate FPI registration;

• FPI registrations granted at investment strategy level/sub fund level where a collective investment scheme or fund has
multiple investment strategies/sub-funds with identifiable differences and managed by a single investment manager;

• Multiple branches in different jurisdictions of foreign bank registered as FPIs;

• Government and Government related investors registered as Category 1 FPIs; and

• Entities registered as collective investment scheme having multiple share classes.

The FPIs who wish to participate in the Offer are advised to use the Bid cum Application Form for non-residents.
478
Further, Bids received from FPIs bearing the same PAN will be treated as multiple Bids and are liable to be rejected, except for
Bids from FPIs that utilize the multiple investment manager structure in accordance with the Operational Guidelines for Foreign
Portfolio Investors and Designated Depository Participants which were issued in November 2019 to facilitate implementation
of SEBI FPI Regulations (such structure “MIM Structure”), provided such Bids have been made with different beneficiary
account numbers, Client IDs and DP IDs. Accordingly, it should be noted that multiple Bids received from FPIs, who do not
utilize the MIM Structure, and bear the same PAN, are liable to be rejected. In order to ensure valid Bids, FPIs making multiple
Bids using the same PAN, and with different beneficiary account numbers, Client IDs and DP IDs, are required to provide a
confirmation along with each of their Bid cum Application Forms that the relevant FPIs are making multiple Bids utilize the
MIM Structure and indicate the names of their respective investment managers in such confirmation. In the absence of such
confirmation from the relevant FPIs, such multiple Bids will be rejected.

For further details, see “Restrictions on Foreign Ownership of Indian Securities” on page 490.

All non-resident investors should note that refunds (in case of Anchor Investors), dividends and other distributions, if
any, will be payable in Indian Rupees only and net of bank charges and commission.

Bids by SEBI registered VCFs, AIFs and FVCIs

The SEBI VCF Regulations and the SEBI FVCI Regulations prescribe, among other things, the investment restrictions on VCFs
and FVCIs registered with SEBI. While the SEBI VCF Regulations have since been repealed, the funds registered as VCFs
under the SEBI VCF Regulations continue to be regulated by such regulations till the existing fund or scheme managed by the
fund is wound up. The holding in any company by any individual VCF or FVCIs registered with SEBI should not exceed 25%
of the corpus of the VCF of FVCI. Further, VCFs and FVCIs can invest only up to 33.33% of the investible funds in various
prescribed instruments, including in public offering.

Further, the SEBI AIF Regulations prescribe, among other things, the investment restrictions on AIFs. Category I and II AIFs
cannot invest more than 25% of the investible funds in one investee company. A category III AIF cannot invest more than 10%
of the investible funds in one investee company. A VCF registered as a category I AIF, as defined in the SEBI AIF Regulations,
cannot invest more than one-third of its investible funds, by way of subscription to an initial public offering of a venture capital
undertaking. Additionally, the VCFs which have not re-registered as an AIF under the SEBI AIF Regulations shall continue to
be regulated by the SEBI VCF Regulations until the existing fund or scheme managed by the fund is wound up.

All non-resident investors should note that refunds (in case of Anchor Investors), dividends and other distributions, if
any, will be payable in Indian Rupees only and net of bank charges and commission.

Our Bank, the Selling Shareholders or the BRLMs will not be responsible for loss, if any, incurred by the Bidder on account of
conversion of foreign currency

Bids by limited liability partnerships

In case of Bids made by limited liability partnerships registered under the Limited Liability Partnership Act, 2008, a certified
copy of certificate of registration issued under the Limited Liability Partnership Act, 2008, must be attached to the Bid cum
Application Form. Failing this, our Bank and the Promoter Selling Shareholder, in consultation with the BRLMs reserves the
right to reject any Bid without assigning any reason thereof.

Bids by banking companies

In case of Bids made by banking companies registered with RBI, certified copies of: (i) the certificate of registration issued by
RBI, and (ii) the approval of such banking company’s investment committee are required to be attached to the Bid cum
Application Form, failing which our Bank and the Promoter Selling Shareholder, in consultation with the BRLMs reserve the
right to reject any Bid without assigning any reason.

The investment limit for banking companies in another banking company as per the Banking Regulation Act, and the Master
Direction Reserve Bank of India (Financial Services provided by Banks) Directions, 2016, as amended (the “Financial Services
Directions”), as updated, is 10% of the paid-up share capital of the investee company, not being its subsidiary engaged in non-
financial services or 10% of the bank’s own paid-up share capital and reserve, whichever is lower. However, a banking company
would be permitted to invest in excess of 10% but not exceeding 30% of the paid-up share capital of such investee company if
(i) the investee company is engaged in non-financial activities permitted for banks in terms of Section 6(1) of the Banking
Regulation Act, or (ii) the additional acquisition is through restructuring of debt/corporate debt restructuring/strategic debt
restructuring, or to protect the bank’s interest on loans/investments made to a company. The bank is required to submit a time-
bound action plan for disposal of such shares within a specified period to the RBI. A banking company would require a prior
approval of the RBI to inter alia make (i) investment in a subsidiary and a financial services company that is not a subsidiary
(with certain exceptions prescribed under 5(b)(i) of the Financial Services Directions), and (ii) investment in a non-financial
services company in excess of 10% of such investee company’s paid-up share capital as stated in 5(a)(v)(c)(i) of the Financial
Services Directions. Further, the aggregate investment by a banking company in subsidiaries and other entities engaged in
financial and non-financial services company cannot exceed 20% of the investee company’s paid-up share capital and reserves.

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In terms of the Master Circular on Basel III Capital Regulations dated July 1, 2014, as amended (i) a bank’s investment in the
capital instruments issued by banking, financial and insurance entities should not exceed 10% of its capital funds; (ii) banks
should not acquire any fresh stake in a bank’s equity shares, if by such acquisition, the investing bank’s holding exceeds 5% of
the investee bank’s equity capital; (iii) equity investment by a bank in a subsidiary company, financial services company,
financial institution, stock and other exchanges should not exceed 10% of the bank’s paid-up share capital and reserves; (iv)
equity investment by a bank in companies engaged in non-financial services activities would be subject to a limit of 10% of the
investee company’s paid up share capital or 10% of the bank’s paid up share capital and reserves, whichever is less; and (v) a
banking company is restricted from holding shares in any company, whether as pledgee, mortgagee or absolute owner, of an
amount exceeding 30% of the paid-up share capital of that company or 30% of its own paid-up share capital and reserves,
whichever is less.

For details in relation to the investment limits under Master Direction – Ownership in Private Sector Banks, Directions, 2016,
see “Key Regulations and Policies” on page 221.

Bids by SCSBs

SCSBs participating in the Offer are required to comply with applicable law including the terms of the SEBI circulars (Nos.
CIR/CFD/DIL/12/2012 and CIR/CFD/DIL/1/2013) dated September 13, 2012 and January 2, 2013, respectively. Such SCSBs
are required to ensure that for making applications on their own account using ASBA, they should have a separate account in
their own name with any other SEBI registered SCSBs. Further, such account shall be used solely for the purpose of making
application in public issues and clear demarcated funds should be available in such account for such Bids.

Bids by insurance companies

In case of Bids made by insurance companies registered with the IRDAI, a certified copy of certificate of registration issued by
IRDAI must be attached to the Bid cum Application Form. Failing this, our Bank and the Promoter Selling Shareholder, in
consultation with the BRLMs reserve the right to reject any Bid without assigning any reason thereof.

The exposure norms for insurers, prescribed under the Insurance Regulatory and Development Authority of India (Investment)
Regulations, 2016, as amended, are broadly set forth below:

(a) equity shares of a company: the lower of 10%* of the outstanding equity shares (face value) or 10% of the respective
fund in case of life insurer or 10% of investment assets in case of general insurer or reinsurer;

(b) the entire group of the investee company: not more than 15% of the respective fund in case of a life insurer or 15% of
investment assets in case of a general insurer or reinsurer or 15% of the investment assets in all companies belonging
to the group, whichever is lower; and

(c) the industry sector in which the investee company operates: not more than 15% of the fund of a life insurer or a general
insurer or a reinsurer or 15% of the investment asset, whichever is lower.

The maximum exposure limit, in the case of an investment in equity shares, cannot exceed the lower of an amount of 10% of
the investment assets of a life insurer or general insurer and the amount calculated under (a), (b) and (c) above, as the case may
be.

* The above limit of 10% shall stand substituted as 15% of outstanding equity shares (face value) for insurance companies
with investment assets of ₹2,500,000 million or more and 12% of outstanding equity shares (face value) for insurers with
investment assets of ₹500,000 million or more but less than ₹2,500,000 million.

Insurance companies participating in this Offer shall comply with all applicable regulations, guidelines and circulars issued by
IRDAI from time to time.

Bids by provident funds/pension funds

In case of Bids made by provident funds/pension funds, subject to applicable laws, with minimum corpus of ₹250 million,
registered with the Pension Fund Regulatory and Development Authority established under sub-section (1) of section 3 of the
Pension Fund Regulatory and Development Authority Act, 2013, a certified copy of a certificate from a chartered accountant
certifying the corpus of the provident fund/pension fund must be attached to the Bid cum Application Form. Failing this, our
Bank and the Promoter Selling Shareholder, in consultation with the BRLMs reserves the right to reject any Bid, without
assigning any reason thereof.

Bids under power of attorney

In case of Bids made pursuant to a power of attorney or by limited companies, corporate bodies, registered societies, FPIs,
Mutual Funds, insurance companies, insurance funds set up by the army, navy or air force of the India, insurance funds set up
by the Department of Posts, India or the National Investment Fund and provident funds with a minimum corpus of ₹250 million
(subject to applicable law) and pension funds with a minimum corpus of ₹250 million, registered with the Pension Fund
Regulatory and
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Development Authority established under sub-section (1) of section 3 of the Pension Fund Regulatory and Development
Authority Act (in each case, subject to applicable law and in accordance with their respective constitutional documents), a
certified copy of the power of attorney or the relevant resolution or authority, as the case may be, along with a certified copy of
the memorandum of association and articles of association and/or bye laws must be lodged along with the Bid cum Application
Form. Failing this, our Bank and the Promoter Selling Shareholder, in consultation with the BRLMs reserve the right to accept
or reject any Bid in whole or in part, in either case, without assigning any reason thereof.

Our Bank and the Promoter Selling Shareholder, in consultation with the BRLMs in their absolute discretion, reserve the right
to relax the above condition of simultaneous lodging of the power of attorney along with the Bid cum Application Form subject
to the terms and conditions that our Bank and the Promoter Selling Shareholder, in consultation with the BRLMs may deem fit.

Bids by Systemically Important Non-Banking Financial Companies

In case of Bids made by Systemically Important NBFCs registered with RBI, certified copies of: (i) the certificate of registration
issued by RBI, (ii) certified copy of its last audited financial statements on a standalone basis and a net worth certificate from
its statutory auditor, and (iii) such other approval as may be required by the Systemically Important NBFCs, are required to be
attached to the Bid cum Application Form. Failing this, our Bank and the Promoter Selling Shareholder, in consultation with
the BRLMs, reserves the right to reject any Bid without assigning any reason thereof. Systemically Important NBFCs
participating in the Offer shall comply with all applicable regulations, guidelines and circulars issued by RBI from time to time.

The investment limit for Systemically Important NBFCs shall be as prescribed by RBI from time to time.

Bids by Anchor Investors

In accordance with the SEBI Regulations, the key terms for participation by Anchor Investors are provided below:

(1) Anchor Investor Application Forms will be made available for the Anchor Investor Portion at the offices of the
BRLMs.

(2) The Bid must be for a minimum of such number of Equity Shares so that the Bid Amount exceeds ₹100 million. A
Bid cannot be submitted for over 60% of the QIB Portion. In case of a Mutual Fund, separate Bids by individual
schemes of a Mutual Fund will be aggregated to determine the minimum application size of ₹100 million.

(3) One-third of the Anchor Investor Portion will be reserved for allocation to domestic Mutual Funds.

(4) Bidding for Anchor Investors will open one Working Day before the Bid/ Offer Opening Date.

(5) Our Bank and the Promoter Selling Shareholder, in consultation with the BRLMs will finalize allocation to the Anchor
Investors on a discretionary basis, provided that the minimum number of Allottees in the Anchor Investor Portion will
not be less than: (a) maximum of two Anchor Investors, where allocation under the Anchor Investor Portion is up to
₹100 million; (b) minimum of two and maximum of 15 Anchor Investors, where the allocation under the Anchor
Investor Portion is more than ₹100 million but up to ₹2,500 million, subject to a minimum Allotment of ₹50 million
per Anchor Investor; and (c) in case of allocation above ₹2,500 million under the Anchor Investor Portion, a minimum
of five such investors and a maximum of 15 Anchor Investors for allocation up to ₹2,500 million, and an additional
10 Anchor Investors for every additional ₹2,500 million, subject to minimum Allotment of ₹50 million per Anchor
Investor.

(6) Allocation to Anchor Investors will be completed on the anchor investor bidding date. The number of Equity Shares
allocated to Anchor Investors and the price at which the allocation will be made available in the public domain by the
BRLMs before the Bid/ Offer Opening Date, through intimation to the Stock Exchanges.

(7) Anchor Investors cannot withdraw or lower the size of their Bids at any stage after submission of the Bid.

(8) If the Offer Price is greater than the Anchor Investor Allocation Price, the additional amount being the difference
between the Offer Price and the Anchor Investor Allocation Price will be payable by the Anchor Investors on the
Anchor Investor Pay-in Date specified in the CAN. If the Offer Price is lower than the Anchor Investor Allocation
Price, Allotment to successful Anchor Investors will be at the higher price, i.e., the Anchor Investor Offer Price.

(9) 50% Equity Shares Allotted to Anchor Investors in the Anchor Investor Portion shall be locked in for a period of 90
days from the date of Allotment and the remaining 50% shall be locked-in for a period of 30 days from the date of
Allotment.

(10) Neither the (a) the BRLMs(s) or any associate of the BRLMs (other than mutual funds sponsored by entities which
are associate of the BRLMs or insurance companies promoted by entities which are associate of the BRLMs or
Alternate Investment Funds (AIFs) sponsored by the entities which are associates of the BRLMs or FPIs, other than
individuals, corporate bodies and family offices, sponsored by the entities which are associate of the BRLMs) nor (b)
the Promoters, Promoter Group or any person related to the Promoters or members of the Promoter Group shall apply
under the Anchor Investors category.
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(11) Bids made by QIBs under both the Anchor Investor Portion and the QIB Portion will not be considered multiple Bids.

For more information, please read the General Information Document and “Restrictions on Foreign Ownership of Indian
Securities” on page 490.

The above information is given for the benefit of the Bidders. Our Bank, each of the Selling Shareholders and the
BRLMs are not liable for any amendments or modification or changes in applicable laws or regulations, which may
occur after the date of the Draft Red Herring Prospectus. Bidders are advised to make their independent investigations
and ensure that any single Bid from them does not exceed the applicable investment limits or maximum number of the
Equity Shares that can be held by them under applicable law or regulation or as specified in the Draft Red Herring
Prospectus, this Red Herring Prospectus and the Prospectus.

In accordance with existing regulations issued by the RBI, OCBs cannot participate in this Offer.

Information for Bidders

The relevant Designated Intermediary will enter a maximum of three Bids at different price levels opted in the Bid cum
Application Form and such options are not considered as multiple Bids. It is the Bidder’s responsibility to obtain the
Acknowledgment Slip from the relevant Designated Intermediary. The registration of the Bid by the Designated Intermediary
does not guarantee that the Equity Shares shall be allocated/Allotted. Such Acknowledgement Slip will be non-negotiable and
by itself will not create any obligation of any kind. When a Bidder revises his or her Bid, he /she shall surrender the earlier
Acknowledgement Slip and may request for a revised Acknowledgment Slip from the relevant Designated Intermediary as
proof of his or her having revised the previous Bid. In relation to electronic registration of Bids, the permission given by the
Stock Exchanges to use their network and software of the electronic bidding system should not in any way be deemed or
construed to mean that the compliance with various statutory and other requirements by our Bank, the Selling Shareholders,
and/or the BRLMs are cleared or approved by the Stock Exchanges; nor does it in any manner warrant, certify or endorse the
correctness or completeness of compliance with the statutory and other requirements, nor does it take any responsibility for the
financial or other soundness of our Bank, the management or any scheme or project of our Bank; nor does it in any manner
warrant, certify or endorse the correctness or completeness of any of the contents of this Red Herring Prospectus; nor does it
warrant that the Equity Shares will be listed or will continue to be listed on the Stock Exchanges.

General Instructions

Please note that QIBs and Non-Institutional Bidders are not permitted to withdraw their Bid(s) or lower the size of their Bid(s)
(in terms of quantity of Equity Shares or the Bid Amount) at any stage. UPI Bidders can revise their Bid(s) during the Bid/
Offer Period and withdraw their Bid(s) until Bid/ Offer Closing Date. Anchor Investors are not allowed to withdraw or lower
the size of their Bids after the Anchor Investor bidding date.

Do’s:

1. Check if you are eligible to apply as per the terms of this Red Herring Prospectus and under applicable law, rules,
regulations, guidelines and approvals. All Bidders (other than Anchor Investors) should submit their Bids through the
ASBA process only;

2. Ensure that you have Bid within the Price Band;

3. Ensure that the PAN is linked with Aadhaar in compliance with Central Bureau of Direct Taxes notification dated
February 13, 2020 and press release dated June 25, 2021, September 17, 2021 and March 28, 2023 and any subsequent
press releases in this regard;

4. Read all the instructions carefully and complete the Bid cum Application Form, as the case may be, in the prescribed
form;

5. Ensure that you (other than in the case of Anchor Investors) have mentioned the correct ASBA Account number if you
are not a UPI Bidder bidding using the UPI Mechanism in the Bid cum Application Form and if you are a UPI Bidder
using the UPI Mechanism ensure that you have mentioned the correct UPI ID (with maximum length of 45 characters
including the handle), in the Bid cum Application Form;

6. Ensure that your Bid cum Application Form bearing the stamp of a Designated Intermediary is submitted to the
Designated Intermediary at the Bidding Centre (except electronic Bids) within the prescribed time;

7. Ensure that you have funds equal to the Bid Amount in the ASBA Account maintained with the SCSB, before
submitting the ASBA Form under the ASBA process to any of the Designated Intermediaries;

8. If you are an ASBA Bidder and the first applicant is not the ASBA Account holder (or the UPI-linked bank account
holder, as the case may be), ensure that the Bid cum Application Form is signed by the ASBA Account Holder (or the
UPI-linked bank account holder, as the case may be). Ensure that you have mentioned the correct bank account number
in the Bid cum Application Form;
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9. Ensure that you request for and receive a stamped acknowledgement in the form of a counterfoil or by specifying the
application number for all your Bid options as proof of registration of the Bid cum Application Form for all your Bid
options from the concerned Designated Intermediary;

10. Ensure that the name(s) given in the Bid cum Application Form is/are exactly the same as the name(s) in which the
beneficiary account is held with the Depository Participant. In case of joint Bids, the Bid cum Application Form should
contain only the name of the First Bidder whose name should also appear as the first holder of the beneficiary account
held in joint names. Ensure that the signature of the First Bidder is included in the Bid cum Application Forms;

11. UPI Bidders bidding in the Offer to ensure that they shall use only their own ASBA Account or only their own bank
account linked UPI ID to make an application in the Offer and not ASBA Account or bank account linked UPI ID of
any third party;

12. Ensure that you submit the revised Bids to the same Designated Intermediary, through whom the original Bid was
placed and obtain a revised acknowledgement;

13. Ensure that you have correctly signed the authorisation/undertaking box in the Bid cum Application Form or have
otherwise provided an authorisation to the SCSB or Sponsor Banks, as applicable, via the electronic mode, for blocking
funds in the ASBA Account equivalent to the Bid Amount mentioned in the Bid cum Application Form, as the case
may be, at the time of submission of the Bid. In case of UPI Bidders submitting their Bids and participating in the
Offer through the UPI Mechanism, ensure that you authorise the UPI Mandate Request raised by the Sponsor Banks
for blocking of funds equivalent to Bid Amount and subsequent debit of funds in case of Allotment;

14. Except for Bids (i) on behalf of the Central or State Governments and the officials appointed by the courts, who, in
terms of the SEBI circular no. MRD/Dop/Cir-20/2008 dated June 30, 2008, may be exempt from specifying their PAN
for transacting in the securities market, (ii) submitted by investors who are exempt from the requirement of
obtaining/specifying their PAN for transacting in the securities market, and (iii) Bids by persons resident in the state
of Sikkim, who, in terms of a SEBI circular MRD/DoP/Dep/Cir-09/06 dated July 20, 2006, may be exempted from
specifying their PAN for transacting in the securities market, all Bidders should mention their PAN allotted under the
IT Act. The exemption for the Central or the State Government and officials appointed by the courts and for investors
residing in the State of Sikkim is subject to (a) the Demographic Details received from the respective depositories
confirming the exemption granted to the beneficiary owner by a suitable description in the PAN field and the
beneficiary account remaining in “active status”; and (b) in the case of residents of Sikkim, the address as per the
Demographic Details evidencing the same. All other applications in which PAN is not mentioned will be rejected;

15. Ensure that the Demographic Details are updated, true and correct in all respects;

16. Ensure that thumb impressions and signatures other than in the languages specified in the Eighth Schedule to the
Constitution of India are attested by a Magistrate or a Notary Public or a Special Executive Magistrate under official
seal;

17. Ensure that the category and the investor status is indicated in the Bid cum Application Form;

18. Ensure that in case of Bids under power of attorney or by limited companies, corporates, trust, etc., relevant documents,
including a copy of the power of attorney are submitted;

19. Ensure that Bids submitted by any person resident outside India is in compliance with applicable foreign and Indian
laws;

20. Ensure that the Bidder’s depository account is active, the correct DP ID, Client ID, the PAN, UPI ID, if applicable,
are mentioned in their Bid cum Application Form and that the name of the Bidder, the DP ID, Client ID, the PAN and
UPI ID, if applicable, entered into the online IPO system of the Stock Exchanges by the relevant Designated
Intermediary, as applicable, matches with the name, DP ID, Client ID, PAN and UPI ID, if applicable, available in the
Depository database;

21. Ensure that when applying in the Offer using UPI, the name of your SCSB appears in the list of SCSBs displayed on
the SEBI website which are live on UPI. Further, also ensure that the name of the app and the UPI handle being used
for making the application is also appearing in Annexure ‘A’ to the SEBI circular no.
SEBI/HO/CFD/DIL2/CIR/P/2019/85 dated July 26, 2019;

22. UPI Bidders who wish to revise their Bids using the UPI Mechanism, should submit the revised Bid with the
Designated Intermediaries, pursuant to which UPI Bidders should ensure acceptance of the UPI Mandate Request
received from the Sponsor Banks to authorise blocking of funds equivalent to the revised Bid Amount in the UPI
Bidder’s ASBA Account;

23. UPI Bidders should ensure that you have accepted the UPI Mandate Request received from the Sponsor Banks prior
to 5:00 pm on the Bid/Offer Closing Date;

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24. UPI Bidders shall ensure that details of the Bid are reviewed and verified by opening the attachment in the UPI
Mandate Request and then proceed to authorize the UPI Mandate Request using his/her UPI PIN. Upon the
authorization of the mandate using his/her UPI PIN, a UPI Bidder may be deemed to have verified the attachment
containing the application details of the UPI Bidder in the UPI Mandate Request and have agreed to block the entire
Bid Amount and authorized the Sponsor Banks to block the Bid Amount mentioned in the Bid cum Application Form
in his/her ASBA Account;

25. The ASBA bidders shall ensure that bids above ₹0.50 million, are uploaded only by the SCSBs;

26. UPI Bidders Bidding using the UPI Mechanism should mention valid UPI ID of only the Bidder (in case of single
account) and of the first Bidder (in case of joint account) in the Bid cum Application Form;

27. Ensure that Anchor Investors submit their Bid cum Application Forms only to the BRLMs;

28. FPIs making MIM Bids using the same PAN, and different beneficiary account numbers, Client IDs and DP IDs, are
required to submit a confirmation that their Bids are under the MIM structure and indicate the name of their investment
managers in such confirmation which shall be submitted along with each of their Bid cum Application Forms. In the
absence of such confirmation from the relevant FPIs, such MIM Bids shall be rejected;

29. UPI Bidders Bidding using the UPI Mechanism, who have revised their Bids subsequent to making the initial Bid,
should also approve the revised UPI Mandate Request generated by the Sponsor Banks to authorize blocking of funds
equivalent to the revised Bid Amount in his/her account and subsequent debit of funds in case of allotment in a timely
manner; and

30. Ensure that while bidding through a Designated Intermediary, the Bid cum Application Form (other than for Anchor
Investors and UPI Bidders bidding using the UPI Mechanism) is submitted to a Designated Intermediary in a Bidding
Centre and that the SCSB where the ASBA Account, as specified in the ASBA Form, is maintained has named at least
one branch at that location for the Designated Intermediary to deposit ASBA Forms (a list of such branches is available
on the website of SEBI at www.sebi.gov.in).

The Bid cum Application Form is liable to be rejected if the above instructions, as applicable, are not complied with.

Don’ts:

1. Do not Bid for lower than the minimum Bid size;

2. Do not Bid for a Bid Amount exceeding ₹0.50 million (for Bids by UPI Bidders);

3. Do not pay the Bid Amount in cheques, demand drafts or by cash, money order, postal order or by stock invest;

4. Do not send Bid cum Application Forms by post; instead submit the same to the Designated Intermediary only;

5. Do not Bid at Cut-off Price (for Bids by QIBs and Non-Institutional Bidders);

6. Do not instruct your respective banks to release the funds blocked in the ASBA Account under the ASBA process;

7. Do not submit the Bid for an amount more than funds available in your ASBA account.

8. Do not submit Bids on plain paper or on incomplete or illegible Bid cum Application Forms or on Bid cum Application
Forms in a colour prescribed for another category of a Bidder;

9. In case of ASBA Bidders, do not submit more than one ASBA Forms per ASBA Account;

10. If you are a UPI Bidder and are using UPI mechanism, do not submit more than one ASBA Form for each UPI ID;

11. Anchor Investors should not Bid through the ASBA process;

12. Do not submit the ASBA Forms to any Designated Intermediary that is not authorised to collect the relevant ASBA
Forms or to our Bank;

13. Do not Bid on a physical Bid cum Application Form that does not have the stamp of the relevant Designated
Intermediary;

14. Do not submit the General Index Register (GIR) number instead of the PAN;

15. Do not submit incorrect details of the DP ID, Client ID, PAN and UPI ID, if applicable, or provide details for a
beneficiary account which is suspended or for which details cannot be verified by the Registrar to the Offer;

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16. Do not submit a Bid in case you are not eligible to acquire Equity Shares under applicable law or your relevant
constitutional documents or otherwise;

17. Do not Bid if you are not competent to contract under the Indian Contract Act, 1872 (other than minors having valid
depository accounts as per Demographic Details provided by the depository);

18. Do not submit a Bid/revise a Bid Amount, with a price less than the Floor Price or higher than the Cap Price;

19. Do not submit your Bid after 3.00 pm on the Bid/Offer Closing Date;

20. If you are a QIB, do not submit your Bid after 3:00 pm on the QIB Bid/Offer Closing Date;

21. Do not Bid on another ASBA Form after you have submitted a Bid to any of the Designated Intermediaries;

22. Do not Bid for Equity Shares in excess of what is specified for each category;

23. In case of ASBA Bidders (other than 3 in 1 Bids) Syndicate Members shall ensure that they do not upload any bids
above ₹0.50 million;

24. Do not fill up the Bid cum Application Form such that the Equity Shares Bid for, exceeds the Offer size and/or
investment limit or maximum number of the Equity Shares that can be held under applicable laws or regulations or
maximum amount permissible under applicable laws or regulations, or under the terms of this Red Herring Prospectus;

25. Do not submit the Bid without ensuring that funds equivalent to the entire Bid Amount are available for blocking in
the relevant ASBA Account or in the case of UPI Bidders bidding using the UPI Mechanism, in the UPI-linked bank
account where funds for making the Bid are available;

26. Do not withdraw your Bid or lower the size of your Bid (in terms of quantity of the Equity Shares or the Bid Amount)
at any stage, if you are a QIB or a Non-Institutional Bidder, Retail Individual Bidders or Eligible Employees Bidding
in the Employee Reservation Portion can revise or withdraw their Bids on or before the Bid/Offer Closing Date;

27. Do not submit Bids to a Designated Intermediary at a location other than the Bidding Centres;

28. If you are a UPI Bidder which is submitting the ASBA Form with any of the Designated Intermediaries and using your
UPI ID for the purpose of blocking of funds, do not use any third party bank account or third party linked bank account
UPI ID;

29. Do not Bid if you are an OCB;

30. Do not Bid for a Bid Amount exceeding ₹0.20 million (for Bids by Retail Individual Bidders) and ₹0.50 million for
Bids by Eligible Employees Bidding in the Employee Reservation Portion (net of Employee Discount);

31. Do not link the UPI ID with a bank account maintained with a bank that is not UPI 2.0 certified by the NPCI in case
of Bids submitted by UPI Bidders using the UPI Mechanism;

32. Do not submit more than one Bid cum Application Form for each UPI ID in case of UPI Bidders bidding using the
UPI Mechanism;

33. Do not submit a Bid cum Application Form with a third party UPI ID or using a third party bank account (in case of
Bids submitted by UPI Bidders using the UPI Mechanism); and

34. UPI Bidders bidding through the UPI Mechanism using the incorrect UPI handle or using a bank account of an SCSB
or a bank which is not mentioned in the list provided in the SEBI website is liable to be rejected.

The Bid cum Application Form is liable to be rejected if the above instructions, as applicable, are not complied with.

Grounds for Technical Rejection

In addition to the grounds for rejection of Bids on technical grounds as provided in the GID, Bidders are requested to note that
Bids could be rejected on the following additional technical grounds:

1. Bids submitted without instruction to the SCSBs to block the entire Bid Amount;

2. Bids which do not contain details of the Bid Amount and the bank account or UPI ID (for UPI Bidders using the UPI
Mechanism) details in the ASBA Form;

3. Bids submitted on a plain paper;

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4. Bids submitted by UPI Bidders using the UPI Mechanism through an SCSBs and/or using a mobile application or UPI
handle, not listed on the website of SEBI;

5. Bids under the UPI Mechanism submitted by UPI Bidders using third party bank accounts or using a third party linked
bank account UPI ID (subject to availability of information regarding third party account from Sponsor Banks);

6. ASBA Form by the RIBs using third party bank accounts or using third party linked bank account UPI IDs;

7. ASBA Form submitted to a Designated Intermediary does not bear the stamp of the Designated Intermediary;

8. Bids submitted without the signature of the First Bidder or sole Bidder;

9. The ASBA Form not being signed by the account holders, if the account holder is different from the Bidder;

10. Bids by persons for whom PAN details have not been verified and whose beneficiary accounts are “suspended for
credit” in terms of SEBI circular CIR/MRD/DP/ 22 /2010 dated July 29, 2010;

11. Bids by OCBs GIR number furnished instead of PAN;

12. Bids by RIBs with Bid Amount of a value of more than ₹200,000;

13. Bids by Eligible Employees under the Employee Reservation Portion with Bid Amount of a value of more than
₹500,000 (net of Employee discount, if any);

14. Bids by persons who are not eligible to acquire Equity Shares in terms of all applicable laws, rules, regulations,
guidelines and approvals;

15. Bids accompanied by stock invest, cheque(s), demand draft(s), money order, postal order or cash; and

16. Bids uploaded by QIBs after 4.00 pm on the QIB Bid/ Offer Closing Date and by Non-Institutional Bidders uploaded
after 4.00 p.m. on the Bid/ Offer Closing Date, and Bids by RIBs and Eligible Employee bidding under Eligible
Employee Portion uploaded after 5.00 p.m. on the Bid/ Offer Closing Date, unless extended by the Stock Exchanges.

Further, in case of any pre-Offer or post Offer related issues regarding share certificates/demat credit/refund orders/unblocking
etc., investors shall reach out the Company Secretary and Compliance Officer. For details of Company Secretary and
Compliance Officer, see “General Information” on page 101.

For helpline details of the Book Running Lead Managers pursuant to the SEBI/HO.CFD.DIL2/CIR/P/2021/2480/1/M dated
March 16, 2021, see “General Information” on page 101.

Further, helpline details of the BRLMs pursuant to the SEBI/HO/CFD/DIL2/CIR/P/2021/2480/1/M dated March 16, 2021 are
set forth in the table below:

Sr. Name of BRLM E-mail Telephone

No.
1. ICICI Securities Limited esafsfb.ipo@icicisecurities.com +91 22 6807 7100
2. DAM Capital Advisors Limited esaf.ipo@damcapital.in +91 22 4202 2500
3. Nuvama Wealth Management Limited (formerly ESAF@nuvama.com +91 22 4009 4400
known as Edelweiss Securities Limited)

Names of entities responsible for finalising the basis of allotment in a fair and proper manner

The authorised employees of the Designated Stock Exchange, along with the BRLMs and the Registrar, shall ensure that the
Basis of Allotment is finalised in a fair and proper manner in accordance with the procedure specified in SEBI ICDR
Regulations.

Method of allotment as may be prescribed by SEBI from time to time

Our Bank will not make any allotment in excess of the Equity Shares through this Red Herring Prospectus and the Prospectus,
except in case of oversubscription for the purpose of rounding off to make allotment, in consultation with the Designated Stock
Exchange. Further, upon oversubscription, an allotment of not more than one per cent of the Offer may be made for the purpose
of making allotment in minimum lots.

The Allotment of Equity Shares to Bidders other than to the Retail Individual Bidders, Non-Institutional Bidders and Anchor
Investors shall be on a proportionate basis within the respective investor categories and the number of securities allotted shall
be rounded off to the nearest integer, subject to minimum allotment being equal to the minimum application size as determined
and disclosed.

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The Allotment of Equity Shares to each Retail Individual Bidders shall not be less than the minimum bid lot, subject to the
availability of shares in Retail Individual Bidders Portion, and the remaining available Equity Shares, if any, shall be allotted
on a proportionate basis.

Not less than 15% of the Net Offer shall be available for allocation to Non-Institutional Bidders. The Equity Shares available
for allocation to Non-Institutional Bidders under the Non-Institutional Portion, shall be subject to the following: (i) one-third
of the portion available to Non-Institutional Bidders shall be reserved for applicants with an application size of more than ₹0.20
million and up to ₹1.00 million, and (ii) two-third of the portion available to Non-Institutional Bidders shall be reserved for
applicants with an application size of more than ₹1.00 million, provided that the unsubscribed portion in either of the
aforementioned sub-categories may be allocated to applicants in the other sub-category of Non-Institutional Bidders. The
Allotment to each Non-Institutional Bidder shall not be less than the minimum application size, subject to the availability of
Equity Shares in the Non-Institutional Portion, and the remaining Equity Shares, if any, shall be allotted on a proportionate
basis.

Payment into Escrow Account(s) for Anchor Investors

Our Bank and the Promoter Selling Shareholder, in consultation with the BRLMs, in their absolute discretion, will decide the
list of Anchor Investors to whom the CAN will be sent, pursuant to which the details of the Equity Shares allocated to them in
their respective names will be notified to such Anchor Investors. Anchor Investors are not permitted to Bid in the Offer through
the ASBA process. Instead, Anchor Investors should transfer the Bid Amount (through direct credit, RTGS, NACH or NEFT).
For Anchor Investors, the payment instruments for payment into the Escrow Account(s) should be drawn in favour of:

(a) In case of resident Anchor Investors: “ESAF SMALL FINANCE BANK LIMITED – ANCHOR R”

(b) In case of non-resident Anchor Investors: “ESAF SMALL FINANCE BANK LIMITED – ANCHOR NR”

Anchor Investors should note that the escrow mechanism is not prescribed by SEBI and has been established as an arrangement
between our Bank, each of the Selling Shareholders and the Syndicate, the Escrow Collection Bank and the Registrar to the
Offer to facilitate collections of Bid amounts from Anchor Investors.

Pre-Offer Advertisement

Subject to Section 30 of the Companies Act, 2013, our Bank shall, after filing this Red Herring Prospectus with the RoC, publish
a pre-Offer advertisement, in the form prescribed by the SEBI ICDR Regulations, in all editions of The Financial Express, an
English national daily newspaper, all editions of Jansatta, a Hindi national daily newspaper, and Thrissur edition of the
Malayalam daily newspaper, Mangalam (Malayalam being the regional language of Kerala, where our Registered and Corporate
Office is located), each with wide circulation, respectively.

In the pre-Offer advertisement, we shall state the Bid/Offer Opening Date and the Bid/ Offer Closing Date. This advertisement,
subject to the provisions of Section 30 of the Companies Act, 2013, shall be in the format prescribed in Part A of Schedule X
of the SEBI ICDR Regulations.

Allotment Advertisement

Our Bank, the BRLMs and the Registrar shall publish an advertisement in relation to Allotment before commencement of
trading, disclosing the date of commencement of trading of the Equity Shares, in all editions of The Financial Express, an
English national daily newspaper, all editions of Jansatta, a Hindi national daily newspaper, and Thrissur edition of the
Malayalam daily newspaper, Mangalam (Malayalam being the regional language of Kerala, where our Registered and Corporate
Office is located), each with wide circulation, respectively.

Signing of the Underwriting Agreement and Filing with the RoC

(a) Our Bank, each of the Selling Shareholders and the Syndicate intend to enter into an Underwriting Agreement on or
immediately after the finalisation of the Offer Price but prior to the filing of Prospectus.

(b) After signing the Underwriting Agreement, an updated Red Herring Prospectus will be filed with the RoC in
accordance with applicable law, which then would be termed as the ‘Prospectus’. The Prospectus will contain details
of the Offer Price, the Anchor Investor Offer Price, Offer size, and underwriting arrangements and will be complete
in all material respects.

Depository Arrangements

The Allotment of the Equity Shares in the Offer shall be only in a dematerialised form, (i.e., not in the form of physical
certificates but be fungible and be represented by the statement issued through the electronic mode). For more information, see
“Terms of the Offer” on page 461.

Undertakings by our Bank

487
Our Bank undertakes the following:

• adequate arrangements shall be made to collect all Bid cum Application Forms submitted by Bidders (including
Anchor Investor Application Form from Anchor Investors);

• the complaints received in respect of the Offer shall be attended to by our Bank expeditiously and satisfactorily;

• all steps for completion of the necessary formalities for listing and commencement of trading at all the Stock
Exchanges where the Equity Shares are proposed to be listed shall be taken within six Working Days of the Bid/Offer
Closing Date or such other period as may be prescribed by SEBI;

• if Allotment is not made within the prescribed time period under applicable law, the entire subscription amount
received will be refunded/unblocked within the time prescribed under applicable law. If there is delay beyond the
prescribed time, our Bank shall pay interest prescribed under the Companies Act, 2013, the SEBI ICDR Regulations
and applicable law for the delayed period;

• the funds required for making refunds/unblocking (to the extent applicable) as per the mode(s) disclosed shall be made
available to the Registrar to the Offer by our Bank

• where refunds (to the extent applicable) are made through electronic transfer of funds, a suitable communication shall
be sent to the unsuccessful Bidder within six Working Days from the Bid/ Offer Closing Date or such other prescribed
under applicable law, giving details of the bank where refunds shall be credited along with amount and expected date
of electronic credit of refund;

• where release of block on the application amount for unsuccessful bidders or part of the application amount in case of
proportionate allotment, a suitable communication shall be sent to the applicants;

• Except for Equity Shares that may be allotted pursuant to the conversion of vested employee stock options, if any
granted under the ESAF ESOP Plan 2019, the sweat equity shares which may be allotted to the Managing Director
and Chief Executive Officer, subject to approval from the RBI as disclosed in “Our Management – Terms of
appointment of Directors – Remuneration paid to the Executive Director” on page 254, and the Equity Shares allotted
pursuant to the Offer, no further issue of the Equity Shares shall be made till the Equity Shares offered through this
Red Herring Prospectus are listed or until the Bid monies are unblocked in ASBA Account/refunded on account of
non-listing, under-subscription, etc.

Undertakings by each of the Selling Shareholders

Each Selling Shareholder undertakes severally and not jointly confirms as applicable in respect of itself as a Selling Shareholder
and its respective portion of the Equity Shares offered by it in the Offer for Sale that:

• It is the legal and beneficial owner of the Offered Shares, and holds clear and marketable title to such Equity Shares;

• the Equity Shares offered for sale by each of the Selling Shareholders in the Offer are eligible for being offered in the
Offer for Sale in terms of Regulation 8 of the SEBI ICDR Regulations;

• the Equity Shares being offered for sale by each of the Selling Shareholders pursuant to the Offer are free and clear of
any pre-emptive rights, liens, mortgages, charges, pledge, security interest, defects, claim, trust or any other
encumbrances or transfer restriction and shall be in dematerialised form at the time of transfer;

• it shall deposit its Equity Shares offered for sale in the Offer in an escrow demat in accordance with the share escrow
agreement to be executed between the parties to such share escrow agreement;

• that it shall provide such reasonable assistance to our Bank and the BRLMs in redressal of such investor grievances
that pertain to the Equity Shares held by it and being offered pursuant to the Offer;

• it shall provide such reasonable cooperation to our Bank in relation to their respective portion of the Equity Shares
offered by it in the Offer for Sale for the completion of the necessary formalities for listing and commencement of
trading at the Stock Exchange;

• it shall not have recourse to the proceeds of the Offer until final approval for trading of the Equity Shares from the
Stock Exchanges has been received; and

• it is not debarred or prohibited from accessing the capital markets or restrained from buying, selling or dealing in
securities under any order or direction passed by the SEBI or any securities market regulator in any other jurisdiction
or any authority or court

488
The decisions with respect to the Price Band, the minimum Bid Lot, revision of Price Band will be taken by our Bank and the
Promoter Selling Shareholder, in consultation with the BRLMs. The Offer Price will be decided by our Bank and the Selling
Shareholders, in consultation with the BRLMs, on the Pricing Date in accordance with the Book Building Process and this Red
Herring Prospectus.

Only the statements and undertakings in relation to each of the Selling Shareholders and their portion of the Equity Shares
offered in the Offer for Sale which are specifically “confirmed” or “undertaken” by each of the Selling Shareholders in this Red
Herring Prospectus, shall be deemed to be “statements and undertakings specifically confirmed or undertaken” by each of the
Selling Shareholders severally and not jointly. All other statements and/ or undertakings in this Red Herring Prospectus shall
be statements and undertakings made by our Bank even if the same relate to any one or more of the Selling Shareholders.

The filing of this Red Herring Prospectus also does not absolve the Selling Shareholders from any liabilities to the extent of the
statements specifically made or confirmed by themselves in respect of themselves and of their respective Offered Shares, under
Section 34 or Section 36 of Companies Act, 2013.

Utilisation of Offer Proceeds

Our Board of Directors certifies and declares that:

• all monies received out of the Fresh Issue shall be credited/transferred to a separate bank account other than the bank
account referred to in sub-section (3) of Section 40 of the Companies Act, 2013;

• details of all monies utilised out of the Offer shall be disclosed, and continue to be disclosed till the time any part of
the Fresh Issue proceeds remains unutilised, under an appropriate head in the balance sheet of our Bank indicating the
purpose for which such monies have been utilised; and

• details of all unutilised monies out of the Fresh Issue, if any shall be disclosed under an appropriate separate head in
the balance sheet indicating the form in which such unutilised monies have been invested. The Bank and each of the
Selling Shareholders, severally and not jointly, specifically confirm and declare that all monies received out of the
Offer shall be transferred to a separate bank account other than the bank account referred to in sub-section 3 of Section
40 of the Companies Act, 2013.

Impersonation

Attention of the Bidders is specifically drawn to the provisions of sub-section (1) of Section 38 of the Companies Act, 2013
which is reproduced below:

“Any person who—

(a) makes or abets making of an application in a fictitious name to a company for acquiring, or subscribing for, its
securities; or

(b) makes or abets making of multiple applications to a company in different names or in different combinations of his
name or surname for acquiring or subscribing for its securities; or

(c) otherwise induces directly or indirectly a company to allot, or register any transfer of, securities to him, or to any
other person in a fictitious name,

shall be liable for action under Section 447.”

The liability prescribed under Section 447 of the Companies Act, 2013 for fraud involving an amount of at least ₹1 million or
1% of the turnover of the company, whichever is lower, includes imprisonment for a term which shall not be less than six
months extending up to 10 years and fine of an amount not less than the amount involved in the fraud, extending up to three
times such amount (provided that where the fraud involves public interest, such term shall not be less than three years.) Further,
where the fraud involves an amount less than ₹1 million or one per cent of the turnover of the company, whichever is lower,
and does not involve public interest, any person guilty of such fraud shall be punishable with imprisonment for a term which
may extend to five years or with fine which may extend to ₹5 million or with both.

489
 RESTRICTIONS ON FOREIGN OWNERSHIP OF INDIAN SECURITIES

Foreign investment in Indian securities is regulated through the Industrial Policy, 1991 of the Government of India and FEMA.
While the Industrial Policy, 1991 prescribes the limits and the conditions subject to which foreign investment can be made in
different sectors of the Indian economy, FEMA regulates the precise manner in which such investment may be made. Under
the Industrial Policy, unless specifically restricted, foreign investment is freely permitted in all sectors of the Indian economy
up to any extent and without any prior approvals, but the foreign investor is required to follow certain prescribed procedures
for making such investment. The RBI and the concerned ministries/departments are responsible for granting approval for
foreign investment. The Government has from time to time made policy pronouncements on FDI through press notes and press
releases. The DPIIT, issued the FDI Policy, which, with effect from October 15, 2020, subsumes and supersedes all press notes,
press releases, clarifications, circulars issued by the DPIIT, which were in force as on October 15, 2020. The FDI Policy will
be valid and remain in force until superseded in totality or in part thereof.

The transfer of shares between an Indian resident and a non-resident does not require the prior approval of the RBI, provided
that (i) the activities of the investee company are under the automatic route under the FDI Policy and transfer does not attract
the provisions of the Takeover Regulations; (ii) the non-resident shareholding is within the sectoral limits under the FDI policy;
and (iii) the pricing is in accordance with the guidelines prescribed by the SEBI/RBI.

As per the existing policy of the Government of India, OCBs cannot participate in this Offer. For further details, see “Offer
Procedure” on page 471.

On October 17, 2019, Ministry of Finance, Department of Economic Affairs, had notified the FEMA NDI Rules, which had
replaced the Foreign Exchange Management (Transfer and Issue of Security by a Person Resident Outside India) Regulations
2017. Foreign investment in this Offer shall be on the basis of the FEMA NDI Rules. Further, in accordance with Press Note
No. 3 (2020 Series), dated April 17, 2020 issued by the DPIIT and the FEMA Non-Debt Instruments Rules, any investment,
subscription, purchase or sale of equity instruments by entities of a country which shares land border with India or where the
beneficial owner of an investment into India is situated in or is a citizen of any such country, will require prior approval of the
Government of India, as prescribed in the FDI Policy and the FEMA Non-Debt Instruments Rules. Further, in the event of
transfer of ownership of any existing or future foreign direct investment in an entity in India, directly or indirectly, resulting in
the beneficial ownership falling within the aforesaid restriction/ purview, such subsequent ownership of any existing or future
foreign direct investment in an entity in India, directly or indirectly, resulting in the beneficial ownership falling within the
aforesaid restriction/purview, such subsequent change in the beneficial ownership will also require approval of the Government
of India. Each Bidder should seek independent legal advice about its ability to participate in the Offer. In the event such prior
approval of the Government of India is required, and such approval has been obtained, the Bidder shall intimate our Bank and
the Registrar in writing about such approval along with a copy thereof within the Bid/ Offer Period. Further, in the event of
transfer of ownership of any existing or future foreign direct investment in an entity in India, directly or indirectly, resulting in
the beneficial ownership falling within the aforesaid restriction / purview, such subsequent change in the beneficial ownership
will also require approval of the Government of India. Pursuant to the Foreign Exchange Management (Non-debt Instruments)
(Fourth Amendment) Rules, 2020 issued on December 8, 2020, a multilateral bank or fund, of which India is a member, shall
not be treated as an entity of a particular country nor shall any country be treated as the beneficial owner of the investments of
such bank of fund in India.

Foreign Investment Laws

The foreign investment in our Bank is governed by, inter alia, the FEMA, as amended, the FEMA Regulations, the FDI Policy
issued and amended by way of press notes.

In terms of the FDI Policy, FEMA Regulations and SFB Licensing Guidelines, the aggregate foreign investment in an SFB is
allowed up to a maximum of 74% of the paid-up capital of the SFB (automatic up to 49% and approval route beyond 49% up
to 74%). At all times, at least 26% of the paid-up capital will have to be held by residents.

The above information is given for the benefit of the Bidders. Our Bank and the BRLMs are not liable for any
amendments or modification or changes in applicable laws or regulations, which may occur after the date of this Red
Herring Prospectus. Bidders are advised to make their independent investigations and ensure that the number of Equity
Shares Bid for do not exceed the applicable limits under laws or regulations.

490
 SECTION VIII: DESCRIPTION OF EQUITY SHARES AND TERMS OF ARTICLES OF ASSOCIATION

Capitalized terms used in this section have the meanings that have been given to such terms in the Articles of Association of
our Bank. Pursuant to the SEBI ICDR Regulations, the main provisions of the Articles of Association of our Bank are detailed
below.

Authorised share capital

The authorized share capital of ESAF Small Finance Bank Limited (the “Bank”) shall be such as given in Clause V of the
Memorandum from time to time, with the power to increase or reduce the capital and to issue any part of its capital original or
increased with or without any priority or special privilege, subject to the provisions of the 1949 Act, the Act, the Guidelines or
any other rules under Applicable Law.

Alteration of capital

The Bank shall have the power to increase or reduce the authorised capital and to issue any part of its capital original or increased
with or without any priority or special privilege subject to compliance with the 1949 Act, the Act, the Guidelines or any other
rules under Applicable Law, or subject to any postponement of rights or to any conditions or restrictions so that unless the
conditions of issue otherwise prescribe such issue shall be subject to the provisions herein contained.

The Bank in its General Meeting may, from time to time, increase the capital by the creation of new shares of such amount as
may be deemed expedient.

Subject to the provisions of Section 43 of the Act and Section 12 of the 1949 Act and the Guidelines, the new shares shall be
issued upon such terms and conditions and with such rights and privileges as the Bank in General Meeting shall prescribe, and
in particular, such shares may be issued, subject to the 1949 Act and circulars that may be issued by the RBI from time to time,
with a special or qualified right to dividend and in the distribution of assets of the Bank.

Any issue of shares which results in a Person (by himself or acting in concert with any other Person) acquiring 5% or more of
the paid-up Equity Share capital or voting rights of the Bank shall be made with prior approval of the RBI.

Power to sub- divide and consolidate

The Bank may, by ordinary resolution, from time to time, subject to Section 61 of the Act, alter the conditions of Memorandum
as follows:

a. Consolidate and divide all or any its share capital into shares of larger amount than its existing shares;

b. Convert all or any one its fully paid-up shares into stock, and reconvert that stock into fully paid-up shares of any
denomination;

c. Sub- divide its existing shares or any of them into shares of smaller amount than is fixed by Memorandum. However,
while undertaking the sub-division, the proportion between the amount paid and the amount unpaid on each reduced
share shall be the same as it was in the case of the share from which the reduced share is derived; and

d. Cancel shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be
taken by any person, and diminish the amount of its share capital by the amount of the shares so cancelled

Allotment of shares

Subject to the provisions of the Act, 1949 Act and these Articles the shares in the capital of the Bank for the time being shall
be under the control of the Directors who may issue, allot or otherwise dispose of the same or any of them to such persons, in
such proportion and on such terms and conditions and either at a premium or at par or at a discount and at such times as they
may from time to time think fit and proper, and with full power with the sanction of the Bank in General Meeting, to give to
any person the option or right to call for or be allotted shares of any class of the Bank either at par or at premium such option
being exercisable at such time and for such consideration as the Directors think fit and may issue and allot shares in the capital
of the Bank on payment in full or part of any property sold and transferred or for any services rendered to the Bank in the
conduct of its business and any shares which may be so allotted may be issued as fully paid-up or partly paid-up shares, as the
case may be. Provided that the option or right to call for shares shall not be given to any person or persons without the sanction
of the Bank in the General Meeting.

Forfeiture and lien

If any Member fails to pay any call or instalment of a call on or before the day appointed for the payment of the same or any
such extension thereof as aforesaid, the Board may, at any time thereafter if the call or instalment remains unpaid, give notice
to him requiring him to pay the same together with any interest that may have accrued and all expenses that may have been
incurred by the Bank by reason of such non-payment. The provisions of forfeiture shall apply in the case of non- payment of

491
any sum which, by the terms of issue of a share, becomes payable at a fixed time, whether on account of the nominal value of
the share or by way of premium, as if the same had been payable by virtue of a call duly made and notified.

The Bank shall have no lien on its fully paid-up shares.

The Bank shall have a first and paramount lien (i) on every share to the extent of all moneys called or payable at a fixed time
in respect of such shares and (ii) on all shares/ debentures (not being fully paid-up) standing registered in the name of a single
person, for all monies presently payable by him or his estate to the Bank.

Shares

When at any time the Bank proposes to increase the subscribed capital of the Bank by the issue of new shares, then subject to
any decision which may be taken by the Bank in General Meeting, such new shares shall be offered to such persons as specified
in the Act and these Articles.

Nothing in this Article shall apply to the increase of the subscribed capital of the Bank caused by the exercise of an option as a
term attached to the debentures issued or loans raised by the Bank to convert such debentures or loans into shares of the Bank
or subscribe to shares of the Bank in accordance with the provisions of the 1949 Act and guidelines issued by the RBI from
time to time. Provided that the terms of issue of such debentures or loan containing such an option have been approved before
the issue of such debentures or the raising of loan by a special resolution passed by the Bank in a General Meeting.

Subject to the provisions of the Act, 1949 Act and these Articles the shares in the capital of the Bank for the time being
(including any shares forming a part of any increased capital of the Bank) shall be under the control of the Directors who may
issue, allot or otherwise dispose of the same or any of them to such persons, in such proportion and on such terms and conditions
and either at a premium or at par (and subject to compliance with Applicable Law) at a discount and at such times as they may
from time to time think fit and proper, and with full power with the sanction of the Bank in General Meeting, to give to any
person the option or right to call for or be allotted shares of any class of the Bank either at par or at premium during such time
and for such consideration as the Directors think fit and may allot shares in the capital of the Bank on payment in full or part of
any property sold and transferred or for any services rendered to the Bank in the conduct of its business and any shares which
may be so allotted may be issued as fully paid-up or partly paid-up shares, as the case may be. Provided that the option or right
to call for shares shall not be given to any person or persons without the sanction of the Bank in the General Meeting.

Any application signed by the applicant for shares in the Bank, followed by an allotment of any shares therein, shall on
acceptance of the shares by him within the meaning of these Articles; and every person who thus or otherwise accepts any
shares and whose name is on the Register shall, for the purposes of the Act and these Articles, be a Member of the Bank.

Every Member, or his heirs, executors or administrator shall pay to the Bank the portion of the capital represented by his share
or shares which may, for the time being remain unpaid thereof, in such amounts, at such time or times and in such manner as
the Board of Directors shall from time to time, in accordance with these Articles, require or fix for the payment thereof.

The Bank shall cause to be kept a Register of Members, an index of Members, a register of debenture holders and an index of
debenture holders in accordance with Section 88 of the Act.

Subject to Section 89 of the Act and save as herein otherwise provided, the Bank shall be entitled to treat the person whose
name appears on the Register of Members as the holder of any share as the absolute owner thereof.

Certificate

The certificates of title to shares shall be issued under the Companies (Share Capital and Debentures) Rules, 2014 and other
relevant provisions under Applicable Law.

Unless where the shares are issued in dematerialised form, every Member or allottee of shares shall be entitled, without payment,
to receive within 2 months after incorporation, in case of subscribers to the Memorandum or within 2 months from the date of
allotment or within 1 month after the application for the registration of transfer, transmission, subdivision, consolidation or
renewal of any of its shares or within such other period as the conditions of issue shall be provided:

(a) One certificate for all his shares without payment of any charge; or

(b) Several certificates, each for one or more of his shares, upon payment of twenty rupees for each certificate after the
first.

On listing of the shares of the Bank on a recognised stock exchange, the share certificates shall be generally issued in marketable
lots and where share certificates are issued in lots other than marketable lots, subdivision, and consolidation of share certificates
into marketable lots shall be done by the Bank free of charge.

Every certificate shall specify the name of the person in whose favour it is issued. Every share shall be under the Seal of the
Bank and signed by two Directors or by a Director and the Company Secretary and shall specify the number and distinctive
numbers of shares in respect of which it is issued and amount paid-up thereon.
492
No certificate of any share or shares shall be issued either in exchange for those which are sub-divided or consolidated or where
the pages on the reverse for recording transfers have been duly utilized, unless the certificate in lieu of which it is issued is
surrendered to the Bank. Duplicate share certificates may be issued in lieu of those that are lost or destroyed or in replacement
of those which are defaced, torn, old, decrepit, worn out or if there be no further space on the back for endorsement of transfer,
with the prior consent of the Board and on such reasonable terms, as the Board may think fit. The Bank shall make entry of
such share certificates issued in the register of renewed and duplicate share certificates in such manner and within such
timeframe prescribed in the Act.

In respect of any share or shares held jointly by several persons, the Bank shall not be bound to issue more than one share
certificate. The certificates of shares registered in the names of two or more persons shall be delivered to any one of such
persons named in the Register, which shall be sufficient delivery to all such holders.

The provisions above shall mutatis mutandis apply to debentures of the Bank.

Transfer and transmission of shares

No transfer shall be registered unless a proper instrument of transfer has been delivered to the Bank. Every such instrument of
transfer shall be duly stamped and executed both by the transferor and transferee and duly attested. The instrument of transfer
of any share shall be in the prescribed form and in accordance with the requirements of Section 56 of the Act. The transferor
shall be deemed to remain as the holder of such share until the name of the transferee shall have been entered in the Register in
respect thereof.

The Board may decline to recognise any instrument of transfer unless: (a) the instrument of transfer is in the form as prescribed
under Section 56 and in the rules made under sub-section (1) of Section 56; (b) the instrument of transfer is accompanied by
the certificate of the shares to which it relates, and such other evidence as the Board may reasonably require to show the right
of the transferor to make the transfer; and (c) the instrument of transfer is in respect of only one class of shares.

Any issue / acquisition of shares which results in a person holding (by himself or acting in concert with any other person) 5%
or more of the paid-up Equity Share capital or voting rights of the Bank shall be made only with prior approval of RBI. No
person/ group of persons shall acquire or agree to acquire directly or indirectly by himself or acting in concert with any other
person, any shares of the Bank or voting rights therein, in contravention of the provisions of the 1949 Act or the Guidelines.

If the Board of Directors refuses to register a transfer of any shares, they shall, within 30 days from the date on which the
transfer was lodged with the Bank, send to the transferee and the transferor or person giving intimation of such transmission,
notice of the refusal along with the reasons for refusal

The legal heir, nominee, executors or administrators of a deceased Member shall be the only persons recognised by the Bank
as having any title to his share except in cases of joint holders, in which case the surviving holder or holders or the executors
or administrators of the last surviving holders shall be the only persons entitled to be so recognised; but nothing herein contained
shall release the estate of a deceased joint holder from any liability in respect of any share jointly held by him. The Bank shall
not be bound to recognise such executor or administrator, unless he shall have obtained probate or letters of administration or
other legal representation, as the case may be, from a competent court in India. Provided nevertheless that in cases, which the
Board in its discretion considers to be special cases and in such cases only, it shall be lawful for the Board to dispense with the
production of probates or letters of administration or such other legal representations upon such terms as to indemnity,
publication of notice or otherwise as the Board may deem fit.

Every transmission of a share shall be verified in such manner as the Board of Directors may require and the Bank may refuse
to register any such transmission until the same be so verified or until or unless an indemnity be given to the Bank with regard
to such registration which the Directors at their discretion shall consider sufficient, provided nevertheless that there shall not
be any obligation of the Bank or the Board of Directors to accept any indemnity.

The provisions of these Articles shall mutatis mutandis apply to the transfer of debentures and other securities of the Bank or
transmission thereof by operation of law.

Buyback

Subject to the provisions of Section 68 to 70 of the Act, provisions of 1949 Act and guidelines issued by the RBI from time to
time, FEMA and any other Applicable Law for the time being in force, the Bank may purchase its own shares or specified
securities in such manner as may be prescribed.

Borrowing powers

The Board of Directors may, from time to time, by a resolution passed at a meeting of the Board, borrow money for the purposes
of the Bank. Subject to the provisions of the Act, the 1949 Act and guidelines issued by the RBI from time to time, and these
Articles, the Board may raise or secure the repayment of such sum or sums in such manner and upon such terms and conditions
in all respects as they think fit. Provided that the Board of Directors shall not borrow money except with the approval of the
Bank in General Meeting by special resolution, where money to be borrowed together with the money already borrowed by the

493
Bank, apart from temporary loans obtained in its ordinary course of business and except as otherwise provided hereafter, shall
exceed the aggregate of the paid-up capital of the Bank and its free reserves or limits as set under the Act.

Provided that nothing contained herein above shall apply to: (i) any sums of money borrowed by the Bank from any other
banking companies or from the RBI, or any other scheduled banks established by or under any law for the time being in force;
and (ii) acceptance by the Bank in the ordinary course of business of deposits of money from the public, repayable on demand
or otherwise and withdrawable by cheque, draft, order or otherwise.

Issue of Bonus Shares

The Bank may issue fully paid-up bonus shares to its Members in accordance with the provisions of Section 63 of the Act, 1949
Act and Applicable Laws subject to such terms and conditions as may be prescribed from time to time.

General Meetings

General Meeting means either an extraordinary general meeting or Annual General Meeting of the Bank’s shareholders.

Meetings of Directors

The Directors may meet together at a Board for the dispatch of business from time to time, and at least 4 such meetings shall
be held in every year with a time gap of not more than 120 days. The Directors may adjourn and otherwise regulate their
meetings and proceedings as they may think fit. Notice of every meeting of the Board of Directors shall be given in writing to
every Director at his usual address in India and, in the case of any Director residing abroad, such notice shall also be given by
fax to such Director’s fax number abroad or sent by electronic mail. A notice of the Board meeting may also be served
electronically.

Subject to Section 174 of the Act, the quorum for a meeting of the Board of Directors shall be 1/3 rd of its total strength, or two
Directors, whichever is higher, provided that where at any time the number of interested Directors exceeds or is equal to 2/3 rd
of the total strength of the number of the remaining Directors, that is to say, the number of Directors who are not interested and
present at the meeting being not less than two, shall be the quorum during such time. Subject to the Act, participation of the
Directors by video conferencing or by other audio visual means shall also be counted for the purposes of quorum. If a meeting
of the Board cannot be held for want of quorum, then the meeting shall stand adjourned to such day, time and place as the
Director or Directors present at the meeting may fix.

A meeting of the Board for the time being at which a quorum is present shall be competent to exercise all authority, powers and
discretions which by or under the Act or the Articles of the Bank are for the time being vested in or exercisable by the Board
of Directors generally.

The Board of Directors may constitute such committees of Directors as may be required under the Act or 1949 Act or other
Applicable Laws as may be applicable from time to time. The Directors may subject to the provisions of the Act and the 1949
Act, delegate any of their powers to committees consisting of such member or members of their body as they think fit and they
may from time to time revoke such delegation. Any committee so formed shall in the exercise of the powers so delegated,
conform to any regulations that may from time to time be imposed on it by the Directors.

The Bank shall cause minutes of the proceedings of every meeting of the Board of Directors and of every committee of the
Board to be recorded in accordance with the relevant provisions of Section 118 of the Act, within 30 days of the conclusion of
every such meeting and the minutes shall contain the matters specified in the said section.

The Bank shall maintain such registers, books and documents as may be required under the Act and 1949 Act.

Managing Director

Subject to requisite approval from RBI and other Applicable Laws, a Managing Director may be appointed by the Board for
such term, at such remuneration and upon such conditions as it may think fit and may be removed by means of a resolution of
the Board.

A Managing Director whose term of office has come to an end, either by reason of his resignation or by reason of expiry of the
period of his office, shall, subject to the approval of the RBI, continue in office until his successor assumes office. Further, a
Managing Director shall not, while he continues to hold that office, be subject to retirement by rotation under the Act or these
Articles but he shall, subject to the provisions of any contracts between him and the Bank, be subject to the same provisions as
to resignation and removal as the other Directors of the Bank and he shall ipso facto immediately cease to be a Managing
Director if he ceases to hold the office of Director for any cause.

Subject to the superintendence, control and direction of the Board of Directors, the Board may from time to time entrust to and
confer upon a Managing Director, save as prohibited in the Act and other Applicable Laws, such of the powers exercisable
under these presents by the Directors as they may think fit and may confer such powers for such time and to be exercised for
such objects and purposes and upon such terms and conditions and with such restrictions as they think fit expedient and they
may subject to the provisions of the Act, other Applicable Laws and these Articles confer such powers, either collaterally with
494
or to the exclusion of or in substitution for all or any of the powers of the Directors in that behalf, and may from time to time
revoke, withdraw, alter or vary all or any of such powers.

Appointment of Directors

(a) Until otherwise determined by the General Meeting, the number of Directors on the Board of the Bank shall not be
less than 3 (three) or more than 15 (fifteen). Majority of the Board members shall be Independent Directors.

(b) Majority of the Board of Directors shall include persons with professional and other experience as required under the
1949 Act. The Bank shall appoint such number of Independent Directors and woman Director as may be required
under the Act, 1949 Act or any other Applicable Law for the time being in force. Subject to Sections 152, 160 and
other applicable provisions of the Act and 1949 Act, one third of the total number of Directors of the Bank may be
non-retiring Directors.

(c) Subject to the provisions of the Securities and Exchange Board of India (Debenture Trustee) Regulations, 1993 and
Applicable Laws, if it is provided by any trust deed, securing or otherwise, in connection with any issue of debentures
of the Bank, that any person or persons shall have powers to nominate a Director of the Bank, then in the case of any
and every such issue of debentures, the person or persons having such power may exercise, such power from time to
time and appoint a Director accordingly. Any Director so appointed is herein referred to as a “Debenture Director”. A
Debenture Director may be removed from office at any time by the person or persons in whom for the time being is
vested the power under which he was appointed and another Director may be appointed in his place. A Debenture
Director shall not be bound to hold any qualification shares nor shall he be liable to retire by rotation.

Extra-ordinary general meeting

The Board may, whenever it thinks fit, call an Extra- Ordinary General Meeting.

Votes of Members

Subject to the provisions of the Act, votes may be given either personally or by an attorney or by Proxy or, in the case of a body
corporate, by a representative duly authorised under Section 113 of the Act. A Member may exercise his vote at a meeting by
electronic means in accordance with Section 108 and shall vote only once.

Subject to any rights or restrictions for the time being attached to any class or classes of shares, (i) on a show of hands, every
Member present in person shall have one vote; and (ii) on a poll, the voting rights of Members shall be in proportion to his
share in paid-up equity share capital. Provided however that the voting rights shall be subject to the restrictions imposed under
Section 12 of the 1949 Act.

A body corporate (whether a company within the meaning of the Act or not) may if it is duly authorised by a resolution of its
directors or other governing body, appoint a person to act as its representative at any meeting in accordance with the provisions
of Section 113 of the Act. The production at the meeting of a copy of such resolution duly signed by one Director of such body
corporate or by a Member of its governing body and certified by him as being a true copy of the resolution shall on production
at the meeting be accepted by the Bank as sufficient evidence of the validity of his appointment.

Any Member of the Bank entitled to attend and vote at a meeting of the Bank shall be entitled to appoint any other person
(whether a Member or not) as his Proxy to attend and vote instead of himself, but a Proxy so appointed shall not have any right
to speak at the meeting.

No Member shall be entitled to vote at any General Meeting either personally or by Proxy or as Proxy for another Member or
be reckoned in a quorum while any call or other sum shall be due and payable to the Bank in respect of any of the shares of
such Member or in respect of any shares on which the Bank has or had exercised any right of lien.

Dividend

No dividend shall be declared or paid by the Bank for any Financial Year, unless requirement of Sections 15, 17 and other
applicable provisions, if any, of the 1949 Act are complied with.

Subject to the provisions of Section 123 of the Act, the Board may from time to time pay interim dividends as they deem fit
and justified by the profits of the Bank.

The Bank may in General Meeting subject to Sections 123 and other applicable provisions of the Act and 1949 Act, declare
dividends, to be paid to Members according to their respective right but no dividend shall exceed the amount recommended by
the Board of Directors. No dividend shall be paid otherwise than out of profits of the year or any other undistributed profits or
otherwise than in accordance with the provisions of Sections 123 of the Act or any other law for the time being in force and no
dividend shall carry interest as against the Bank unless required by law. All dividends shall be apportioned and paid
proportionately to the amounts paid or credited as paid on the shares during any portion or portions of the period in respect of
which the dividend is paid but if any share is issued on terms providing that it shall rank for dividends as from a particular date
such shares shall rank for dividend accordingly.
495
Unpaid or Unclaimed Dividend

Unclaimed / unpaid dividend shall not be forfeited by the Board before the claim becomes barred by law. However, if it remains
unclaimed / unpaid for a period beyond that specified under the Act, the same shall be transferred to the Investor Education and
Protection Fund under Section 125 of the Act.

Where a dividend has been declared by the Bank but has not been paid or claimed within 30 days from the date of the declaration,
the Bank shall, within 7 days from the date of expiry of the said period of 30 days, transfer the total amount of dividend which
remains unpaid / unclaimed to a special account to be opened by the Bank in that behalf in any Scheduled Bank to be called
“Unpaid Dividend Account of ESAF Small Finance Bank Limited.” And all the other provisions of Sections 123 and 124 of
the Act in respect of any such unpaid dividend or any part thereof shall be applicable, observed, performed and complied with.

No dividend shall be payable except in cash; Provided that nothing in this Article shall be deemed to prohibit the capitalisation
of profits of the Bank for the purpose of issuing fully paid-up bonus shares or paying up any amount for the time being unpaid
on any shares held by the Members of the Bank.

No dividend shall bear interest against the Bank.

Winding Up

Subject to the provisions of 1949 Act and the Act and the rules made thereunder:

(1) If the Bank shall be wound up, the liquidator may, with the sanction of a shareholders resolution as necessary and any
other sanction required by the Act, divide amongst the Members, in specie or kind, the whole or any part of the assets
of the Bank, whether they shall consist of property of the same kind or not.

(2) For the purpose aforesaid, the liquidator may set such value as he deems fair upon any property to be divided as
aforesaid and may determine how such division shall be carried out as among the Members or different classes of
Members.

(3) The liquidator may, with the like sanction, vest the whole or any part of such assets in trustees upon such trusts for the
benefit of the contributories if he considers necessary, but so that no Member shall be compelled to accept any shares
or other securities whereon there is any liability.

Indemnity

Every officer or agent for the time being of the Bank shall be indemnified out of the funds of the Bank against any liability
incurred by him in defending any proceedings, whether civil or criminal, in which judgment is given in his favour or in which
he is acquitted or in connection with any application under Section 463 of the Act in which relief is granted to him by the Court
or the Tribunal.

Subject to the provisions of Section 197 of the Act, no Director, Managing Director & CEO or whole time Director or other
officer of the Bank shall be liable for the acts, receipts, neglects or defaults of any other Director or officer or for joining in any
respect of other act for conformity or for any loss or expenses happening to the Bank through the insufficiency or deficiency of
title to any property acquired by order of the Directors in or upon which any of the moneys of the Bank shall be invested or for
any loss or damage arising from the bankruptcy, insolvency or tortuous act of any person, company or corporation with whom
any moneys, securities or effects shall be entrusted or deposited or for any loss occasioned by any error of judgment, omission
or default or oversight on his part or for any other loss or damage or misfortune whatever which shall happen in the execution
of the duties of his office or in relation thereto unless the same happens through his own dishonesty.

496
 SECTION IX: OTHER INFORMATION

MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION

The copies of the following contracts which have been entered or are to be entered into by our Bank (not being contracts entered
into in the ordinary course of business carried on by our Bank or contracts entered into more than two years before the date of
this Red Herring Prospectus) which are or may be deemed material will be attached to the copy of this Red Herring Prospectus
which will be filed with the RoC and are also available at the following weblink www.esafbank.com/investor-relations-info/.
Copies of the contracts and also the documents for inspection referred to hereunder, may be inspected at the Registered and
Corporate Office between 10 a.m. and 5 p.m. on all Working Days from date of this Red Herring Prospectus until the Bid/ Offer
Closing Date.

A. Material Contracts for the Offer

1. Offer Agreement dated July 7, 2023, as amended pursuant to amendment agreement dated October 18, 2023,
entered into amongst our Bank, the Selling Shareholders and the BRLMs.

2. Registrar Agreement dated July 7, 2023 entered into amongst our Bank, the Selling Shareholders and the
Registrar to the Offer.

3. Cash Escrow and Sponsor Bank Agreement dated October 28, 2023 entered into amongst our Bank, the
Selling Shareholders, the Registrar to the Offer, the BRLMs, the Syndicate Members, the Escrow Collection
Bank(s), Sponsor Banks, Public Offer Account Bank and the Refund Bank.

4. Share Escrow Agreement dated October 28, 2023 entered into amongst the Selling Shareholders, our Bank
and the Share Escrow Agent.

5. Syndicate Agreement dated October 28, 2023 entered into amongst our Bank, the Selling Shareholders, the
BRLMs, the Registrar to the Offer and Syndicate Members.

6. Underwriting Agreement dated [●] to be entered into amongst our Bank, the Selling Shareholders and the
Underwriters.

B. Material Documents

1. Certified copies of the updated Memorandum and Articles of Association of our Bank as amended from time
to time.

2. Certificate of incorporation dated May 5, 2016 issued by the RoC to our Bank, in the name of ESAF Small
Finance Bank Limited.

3. RBI letter dated October 7, 2015 bearing no. DBR.PSBD.NBC(SFB-ESAF). No. 4917/16.13.216/2015-16,
pursuant to which the RBI granted ESAF Financial Holdings Private Limited an in-principal approval to
establish an SFB in the private sector under Section 22 of the Banking Regulation Act.

4. RBI letter dated November 18, 2016 bearing no. DBR.NBD(SFB-ESAF) No. 5654/16.13.216/2016-17,
pursuant to which the RBI granted license no. MUM:124 to our Bank to carry on the SFB business in terms
of Section 22 of the Banking Regulation Act.

5. RBI letter bearing no. DBR.No.Ret.BC.16/12.06.152/2018-19 dated December 27, 2018 with respect to the
inclusion of our Bank in the second schedule of the RBI Act.

6. RBI letter bearing no. Ref DOS. ARG. NoAS-10/08.61.005/2019-20 dated May 8, 2020 approving the
appointment of Deloitte Haskins & Sells, Chartered Accountants as the Statutory Auditors of our Bank for
the Fiscal 2021.

7. RBI letter bearing no. Ref Co. DOS.RPD.No. S2635/08-61-005/2022-23 dated July 22, 2022 approving the
appointment of Deloitte Haskins & Sells, Chartered Accountants and Abarna & Ananthan, Chartered
Accountants as the joint Statutory Auditors of our Bank for the Fiscal 2022.

8. RBI letter bearing no. DBR. Appt. No. 10346/29.44.005/2016-17 dated March 9 2017 approving the
appointment of the Directors on the Board.

9. RBI letter bearing no DoR Appt. No. 4898/29.44.005/2019-20 dated December 19, 2019 approving the
appointment of our Part-Time Chairman.

10. RBI letter bearing no. DBR. Appt. No. 2655/29.44.005/2018-19 dated October 1, 2018 approving the
appointment of Kadambelil Paul Thomas as our Managing Director and Chief Executive Officer.

497
11. RBI letter bearing no. DBR. Appt. No. 6532/29.44.005/2016-17 dated December 8, 2016 approving the
constitution of our Board, read with RBI letter bearing no. DBR. Appt. No. 10346/29/44.005/2016-17 dated
March 9, 2017, RBI letter bearing no. DBR. Appt. No. 14103/29.44.005/2016-17 dated May 30, 2017 and
RBI letter bearing no. DBR. Appt. No. 10611/29.44.005/29.44.005/2017-18 dated May 28, 2018.

12. RBI letter bearing no. DBR.PSBD.NBC.(SFB-ESAF).No.11089/16.13.216/2015-16 dated March 3, 2016

approving the Memorandum of Association and Articles of Association of our Bank.

13. RBI letter bearing no. DBR.NBD3403/16.02.005/2019-20 dated October 31, 2019 approving the amendment
to our Memorandum of Association to increase the authorised share capital of our Bank.

14. RBI letter dated May 18, 2021 with respect to Remuneration of MD&CEO for FY 2020-21.

15. RBI letter dated July 28, 2022 with respect to Remuneration of MD&CEO, ESAF Small Finance Bank
Limited for FY 2020-21.

16. RBI letter dated March 15, 2022 with respect to Section 35B of Banking Regulation Act, 1949: Remuneration
of MD&CEO, ESAF Small Finance Bank Limited for FY 2020-21.

17. RBI letter dated January 12, 2022 with respect to Section 35B of Banking Regulation Act, 1949:
Remuneration of MD&CEO, ESAF Small Finance Bank Limited for FY 2020-21.

18. Contract of employment dated October 1, 2021 entered into between the Bank and Kadambelil Paul Thomas.

19. Shareholders agreement dated July 27, 2018 entered into amongst PNB MetLife India Insurance Company
Limited, Bajaj Allianz Life, Muthoot Finance Limited, PI Ventures, our Promoters and our Bank, read along
with the deeds of adherence, each dated September 27, 2018, signed by ESMACO, ICICI Lombard General
Insurance Company Limited, Yusuffali Musaliam Veettil Abdul Kader, as amended by the waiver cum
amendment agreement dated July 7, 2023.

20. Shareholders agreement dated December 23, 2019 entered into amongst ESAF Financial Holdings Private
Limited, Kadambelil Paul Thomas, George Thomas acting in his capacity as the trustee of ESAF Staff
Welfare Trust, ESMACO, SIDBI Trustee Company Limited, Dia Vikas Capital Private Limited as amended
by the amendment agreement to EFHPL SHA dated March 29, 2021 and the letter amendment agreement
dated June 26, 2023.

21. Deed of assignment dated February 16, 2017 entered into between ESAF Financial Holdings Private Limited
and ESAF Enterprise Development Finance Limited.

22. Deposit transfer agreement dated March 7, 2017 entered into between ESMACO and our Bank.

23. Deed of assignment dated March 9, 2017 entered into between ESMACO and our Bank.

24. Trademark licensing agreement dated January 5, 2020 entered into between Evangelical Social Action Forum
and our Bank.

25. Agreement to sell business undertaking dated February 22, 2017 entered into between ESAF Financial
Holdings Private Limited and our Bank.

26. Purchase price allocation report dated March 10, 2017 issued by Tas & Co, Chartered Accountants LLP.

27. Subscription agreement dated July 27, 2018 entered into between our Bank and PNB MetLife India Insurance
Company Limited.

28. Subscription agreement dated July 27, 2018 entered into between our Bank and Muthoot Finance Limited.

29. Subscription agreement dated July 27, 2018 entered into between our Bank and Bajaj Allianz Life Insurance
Company Limited.

30. Subscription agreement dated July 27, 2018 entered into between our Bank and PI Ventures LLP.

31. Subscription agreement dated September 27, 2018 entered into between our Bank and ICICI Lombard
General Insurance Company Limited.

32. Subscription agreement dated September 27, 2018 entered into between our Bank and ESMACO.

33. Subscription agreement dated September 27, 2018 entered into between our Bank and Yusuffali Musaliam
Veettil Abdul Kader.

498
34. Deed of assignment dated February 16, 2017 entered into between EFHPL and ESAF Enterprise
Development Finance Limited.

35. Resolutions of the Board of Directors authorising the Offer dated June 22, 2023.

36. Resolution of the Board of Directors dated July 7, 2023 revising the Offer for Sale portion.

37. Resolution of IPO Steering Committee dated October 18, 2023 revising the Offer for Sale portion and taking
on record the revised Offer size.

38. Resolution of the IPO Steering Committee dated October 27, 2023 revising the Fresh Issue portion and taking
on record the revised Offer size.

39. Shareholders’ resolution dated June 29, 2023, approving the Fresh Issue in relation to the Offer and other
related matters.

40. Resolutions of the Board dated June 22, 2023 and July 7, 2023 and resolution of the IPO Steering Committee
dated October 18, 2023 taking on record approval for the Offer for Sale for the Offered Shares by the Selling
Shareholders.

41. Copies of the annual reports of our Bank for the Fiscals 2023, 2022 and 2021.

42. The examination report dated October 17, 2023 from the Joint Statutory Auditors, on our Bank’s Restated
Financial Information, included in this Red Herring Prospectus.

43. The Restated Financial Information.

44. Certificate dated October 17, 2023 issued by A. John Moris & Co. certifying key performance indicators of
the Bank.

45. Resolution dated October 17, 2023 passed by the Audit Committee approving the key performance indicators
for disclosure.

46. The statement of special tax benefits dated October 25, 2023, from the Joint Statutory Auditors.

47. Board resolutions/ authorisations and consents from the Selling Shareholders as disclosed in “Other
Regulatory and Statutory Disclosures” on page 441.

48. Written consent of the Directors, the BRLMs, the Syndicate Members, Legal Counsel to our Bank as to Indian
Law, Selling Shareholders, Bankers to the Bank, Registrar to the Offer, Escrow Collection Bank, Public Offer
Account Bank, Refund Bank, Sponsor Banks, Company Secretary and Compliance Officer as referred to in
their specific capacities.

49. Written consent dated October 25, 2023 from our Joint Statutory Auditors namely, Deloitte Haskins & Sells,
Chartered Accountants and Abarna & Ananthan, Chartered Accountants, to include its name in this Red
Herring Prospectus, as required under Section 26(5) of the Companies Act, 2013, read with SEBI ICDR
Regulations, and as an “expert” as defined under Section 2(38) of the Companies Act, 2013, to the extent and
in their capacity as an auditor, in respect of the examination report dated October 17, 2023 issued by it on our
Restated Financial Information, and the statement of special tax benefits dated October 25, 2023 included in
this Red Herring Prospectus and such consent has not been withdrawn as on the date of this Red Herring
Prospectus. However, the term “expert” and the consent thereof shall not be construed to mean an “expert”
or consent within the meaning as defined under the U.S. Securities Act.

50. Written consent dated October 17, 2023 from A. John Moris & Co., independent chartered accountants,
holding a valid peer review certificate from ICAI, to include their name in this Red Herring Prospectus, as
required under Section 26(5) of the Companies Act, 2013, read with the SEBI ICDR Regulations, as an
“expert” as defined under Section 2(38) of the Companies Act in respect of the certificates issued by them in
their capacity as an independent chartered accountant to our Bank. However, the term “expert” and the
consent thereof shall not be construed to mean an “expert” or consent within the meaning as defined under
the U.S. Securities Act.

51. CRISIL MI&A consent letter dated October 25, 2023 for the CRISIL MI&A Report.

52. The report titled “Industry Report on Small Finance Banks in India” dated September 2023, issued by CRISIL
MI&A, which has been commissioned by and paid for by our Bank pursuant to an agreement with CRISIL
MI&A dated August 17, 2022, as amended pursuant to an addendum dated March 13, 2023, exclusively for
the purposes of the Offer which is available at the website of our Bank at www.esafbank.com/investor-
relations-info/.

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 53. Board resolution dated July 7, 2023 approving the Draft Red Herring Prospectus.

54. Board resolution dated October 28, 2023 approving this Red Herring Prospectus.

55. Due diligence certificate dated July 7, 2023 addressed to SEBI from the BRLMs.

56. In principle listing approvals each dated September 7, 2023 issued by BSE and NSE, respectively.

57. SEBI interim observations letter bearing reference number SEBI/HO/CFD/DIL2/OW/P/2023/30507/1 dated
July 28, 2023.

58. SEBI final observations letter bearing reference number SEBI/HO/CFD/RAC-DIL2/P/OW/2023/41604/1

dated October 9, 2023.

59. Tripartite agreement dated March 31, 2017 between our Bank, NSDL and the Registrar to the Offer.

60. Tripartite agreement dated January 20, 2017, between our Bank, CDSL and the Registrar to the Offer.

61. Exemption Application dated May 18, 2023 submitted to SEBI under Regulation 300(1)(c) of the SEBI ICDR
Regulations.

62. SEBI approval letter to the Exemption Application bearing reference number SEBI/CFD/RAC-
DL1/2023/25682 dated June 23, 2023.

63. Letter dated June 28, 2023 issued by the Bank containing details of observations in relation to the annual
financial inspection for the previous three financial years issued by the RBI under Section 35 of Banking
Regulation Act, 1949.

Any of the contracts or documents mentioned in this Red Herring Prospectus may be amended or modified at any time if so
required in the interest of our Bank or if required by the other parties, without notice to the shareholders subject to compliance
of the provisions contained in the Companies Act and other applicable laws.

500
 DECLARATION

I hereby certify and declare that all relevant provisions of the Companies Act and the guidelines/regulations/rules issued by the
Government of India or the rules, guidelines or regulations issued by SEBI, established under Section 3 of the SEBI Act, as the
case may be, have been complied with and no statement made in this Red Herring Prospectus is contrary to the provisions of
the Companies Act, the SCRA, the SCRR, the SEBI Act, each as amended or the rules made or guidelines or regulations issued
thereunder, as the case may be. I further certify that all disclosures and statements in this Red Herring Prospectus are true and
correct.

SIGNED BY THE DIRECTOR OF OUR BANK

________________________________________
Ravimohan Periyakavil Ramakrishnan
Part-Time Chairman and Non-Executive Independent Director

Place: Accra, Ghana

Date: October 28, 2023

501
 DECLARATION

I hereby certify and declare that all relevant provisions of the Companies Act and the guidelines/regulations/rules issued by the
Government of India or the rules, guidelines or regulations issued by SEBI, established under Section 3 of the SEBI Act, as the
case may be, have been complied with and no statement made in this Red Herring Prospectus is contrary to the provisions of
the Companies Act, the SCRA, the SCRR, the SEBI Act, each as amended or the rules made or guidelines or regulations issued
thereunder, as the case may be. I further certify that all disclosures and statements in this Red Herring Prospectus are true and
correct.

SIGNED BY THE DIRECTOR OF OUR BANK

________________________________________
Kadambelil Paul Thomas
Managing Director and Chief Executive Officer

Place: Thrissur, India

Date: October 28, 2023

502
 DECLARATION

I hereby certify and declare that all relevant provisions of the Companies Act and the guidelines/regulations/rules issued by the
Government of India or the rules, guidelines or regulations issued by SEBI, established under Section 3 of the SEBI Act, as the
case may be, have been complied with and no statement made in this Red Herring Prospectus is contrary to the provisions of
the Companies Act, the SCRA, the SCRR, the SEBI Act, each as amended or the rules made or guidelines or regulations issued
thereunder, as the case may be. I further certify that all disclosures and statements in this Red Herring Prospectus are true and
correct.

SIGNED BY THE DIRECTOR OF OUR BANK

________________________________________
Thomas Jacob Kalappila
Non-Executive Independent Director

Place: London, United Kingdom

Date: October 28, 2023

503
 DECLARATION

I hereby certify and declare that all relevant provisions of the Companies Act and the guidelines/regulations/rules issued by the
Government of India or the rules, guidelines or regulations issued by SEBI, established under Section 3 of the SEBI Act, as the
case may be, have been complied with and no statement made in this Red Herring Prospectus is contrary to the provisions of
the Companies Act, the SCRA, the SCRR, the SEBI Act, each as amended or the rules made or guidelines or regulations issued
thereunder, as the case may be. I further certify that all disclosures and statements in this Red Herring Prospectus are true and
correct.

SIGNED BY THE DIRECTOR OF OUR BANK

________________________________________
Vinod Vijayalekshmi Vasudevan
Non-Executive Independent Director

Place: Dubai, UAE

Date: October 28, 2023

504
 DECLARATION

I hereby certify and declare that all relevant provisions of the Companies Act and the guidelines/regulations/rules issued by the
Government of India or the rules, guidelines or regulations issued by SEBI, established under Section 3 of the SEBI Act, as the
case may be, have been complied with and no statement made in this Red Herring Prospectus is contrary to the provisions of
the Companies Act, the SCRA, the SCRR, the SEBI Act, each as amended or the rules made or guidelines or regulations issued
thereunder, as the case may be. I further certify that all disclosures and statements in this Red Herring Prospectus are true and
correct.

SIGNED BY THE DIRECTOR OF OUR BANK

________________________________________
Ravi Venkatraman
Non-Executive Independent Director

Place: Mumbai, India

Date: October 28, 2023

505
 DECLARATION

I hereby certify and declare that all relevant provisions of the Companies Act and the guidelines/regulations/rules issued by the
Government of India or the rules, guidelines or regulations issued by SEBI, established under Section 3 of the SEBI Act, as the
case may be, have been complied with and no statement made in this Red Herring Prospectus is contrary to the provisions of
the Companies Act, the SCRA, the SCRR, the SEBI Act, each as amended or the rules made or guidelines or regulations issued
thereunder, as the case may be. I further certify that all disclosures and statements in this Red Herring Prospectus are true and
correct.

SIGNED BY THE DIRECTOR OF OUR BANK

________________________________________
Kolasseril Chandramohanan Ranjani
Non-Executive Independent Director

Place: New Delhi, India

Date: October 28, 2023

506
 DECLARATION

I hereby certify and declare that all relevant provisions of the Companies Act and the guidelines/regulations/rules issued by the
Government of India or the rules, guidelines or regulations issued by SEBI, established under Section 3 of the SEBI Act, as the
case may be, have been complied with and no statement made in this Red Herring Prospectus is contrary to the provisions of
the Companies Act, the SCRA, the SCRR, the SEBI Act, each as amended or the rules made or guidelines or regulations issued
thereunder, as the case may be. I further certify that all disclosures and statements in this Red Herring Prospectus are true and
correct.

SIGNED BY THE DIRECTOR OF OUR BANK

________________________________________
Biju Varkkey
Additional Non-Executive Independent Director

Place: Ahmedabad, India

Date: October 28, 2023

507
 DECLARATION

I hereby certify and declare that all relevant provisions of the Companies Act and the guidelines/regulations/rules issued by the
Government of India or the rules, guidelines or regulations issued by SEBI, established under Section 3 of the SEBI Act, as the
case may be, have been complied with and no statement made in this Red Herring Prospectus is contrary to the provisions of
the Companies Act, the SCRA, the SCRR, the SEBI Act, each as amended or the rules made or guidelines or regulations issued
thereunder, as the case may be. I further certify that all disclosures and statements in this Red Herring Prospectus are true and
correct.

SIGNED BY THE DIRECTOR OF OUR BANK

________________________________________
John Samuel
Non-Executive Nominee Director

Place: New Delhi, India

Date: October 28, 2023

508
 DECLARATION

I hereby certify and declare that all relevant provisions of the Companies Act and the guidelines/regulations/rules issued by the
Government of India or the rules, guidelines or regulations issued by SEBI, established under Section 3 of the SEBI Act, as the
case may be, have been complied with and no statement made in this Red Herring Prospectus is contrary to the provisions of
the Companies Act, the SCRA, the SCRR, the SEBI Act, each as amended or the rules made or guidelines or regulations issued
thereunder, as the case may be. I further certify that all disclosures and statements in this Red Herring Prospectus are true and
correct.

SIGNED BY THE DIRECTOR OF OUR BANK

________________________________________
Ajayan Mangalath Gopalakrishnan Nair
Non-Executive Nominee Director

Place: Ernakulam, India

Date: October 28, 2023

509
 DECLARATION

I hereby certify and declare that all relevant provisions of the Companies Act and the guidelines/regulations/rules issued by the
Government of India or the rules, guidelines or regulations issued by SEBI, established under Section 3 of the SEBI Act, as the
case may be, have been complied with and no statement made in this Red Herring Prospectus is contrary to the provisions of
the Companies Act, the SCRA, the SCRR, the SEBI Act, each as amended, and or the rules made or guidelines or regulations
issued thereunder, as the case may be. I further certify that all the disclosures and statements in this Red Herring Prospectus are
true and correct.

SIGNED BY THE CHIEF FINANCIAL OFFICER OF OUR BANK

________________________________________
Gireesh C. P
Chief Financial Officer

Place: Thrissur, India

Date: October 28, 2023

510
 DECLARATION BY SELLING SHAREHOLDER

The undersigned Selling Shareholder hereby confirms that all statements, disclosures and undertakings made or confirmed by
it in this Red Herring Prospectus about or in relation to itself, as one of the Selling Shareholders and its portion of the Offered
Shares, are true and correct. The undersigned Selling Shareholder assumes no responsibility for any other statements,
disclosures and undertakings, including any statements, disclosures and undertakings, made by, or relating to the Bank or any
other Selling Shareholder or any person(s) in this Red Herring Prospectus.

______________________________________________
Signed for and on behalf of ESAF Financial Holdings Private Limited

Name: Mereena Paul

Designation: Chairperson and Managing Director

Place: Thrissur, India

Date: October 28, 2023

511
 DECLARATION BY SELLING SHAREHOLDER

The undersigned Selling Shareholder hereby confirms that all statements, disclosures and undertakings made or confirmed by
it in this Red Herring Prospectus about or in relation to itself, as one of the Selling Shareholders and its portion of the Offered
Shares, are true and correct. The undersigned Selling Shareholder assumes no responsibility for any other statements,
disclosures and undertakings, including any statements, disclosures and undertakings, made by, or relating to the Bank or any
other Selling Shareholder or any person(s) in this Red Herring Prospectus.

______________________________________________
Signed for and on behalf of PNB MetLife India Insurance Company Limited

Name: Sanjay Kumar

Designation: Chief Investment Officer

Place: Mumbai, India

Date: October 28, 2023

512
 DECLARATION BY SELLING SHAREHOLDER

The undersigned Selling Shareholder hereby confirms that all statements, disclosures and undertakings made or confirmed by
it in this Red Herring Prospectus about or in relation to itself, as one of the Selling Shareholders and its portion of the Offered
Shares, are true and correct. The undersigned Selling Shareholder assumes no responsibility for any other statements,
disclosures and undertakings, including any statements, disclosures and undertakings, made by, or relating to the Bank or any
other Selling Shareholder or any person(s) in this Red Herring Prospectus.

______________________________________________
Signed for and on behalf of Bajaj Allianz Life Insurance Company Limited

Name: Sampath B Reddy

Designation: Chief Investment Officer

Place: Pune, India

Date: October 28, 2023

513