ESAF Small Finance Bank Ltd Management Discussions

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 29, 122, 157, 244 and 262, 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 25. The CRISIL MI&A Report is available on our Banks 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 Draft 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 260. 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 fiscal year and the closing balance as at the quarters end for all quarters in the relevant 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 27.

Overview

We are a small finance bank with a focus on unbanked and under-banked customer segments, especially in rural and semi- urban areas. 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%, which was the highest CAGR among our peers. (Source: CRISIL MI&A Report). 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%. Our Retail Deposits Ratio as of March 31, 2023 was 90.8%, which was the highest among our peers. (Source: CRISIL MI&A Report).

Our Promoters have a history of more than 27 years of primarily serving the unserved and underserved, with a focus on financial inclusion. 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.

Our main focus is on providing loans to customers in rural and semi-urban areas. As at March 31, 2023, our gross advances to our customers in rural and semi-urban areas (combined) accounted for 62.84% of our gross advances and 71.71% of our banking outlets were located in rural and semi-urban areas (combined).

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 Indias 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 Limiteds ESG specialist team undertook the ESG Grading of our Bank during May 2023.

We can trace our roots back to 1992, when Kadambelil Paul Thomas, our Managing Director and Chief Executive Officer, along with others, founded ESAF Foundation, a foundation focused on the development of microenterprises, community development, and community health development. ESAF Foundation started its micro loan activities in 1995. In 2006, Kadambelil Paul Thomas along with others acquired our Corporate Promoter. Thereafter, ESAF Foundation transferred its micro loan business undertaking to our Corporate Promoter in 2008 pursuant to a business transfer agreement dated March 31, 2008. Our Corporate Promoter was awarded NBFC-MFI status in 2014. Our Corporate Promoter transferred its business undertaking, comprising its lending and financing business, to our Bank on March 10, 2017 pursuant to a business transfer agreement dated February 22, 2017. We commenced our business as a small finance bank on March 10, 2017. For more details on our history and our major events and milestones, see "History and Certain Corporate Matters" on page 205.

Our asset products 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. The table below sets forth our AUM by product type and as a percentage of AUM as at the dates indicted.

AUM	As at March 31, 2023		As at March 31, 2022		As at March 31, 2021
	Amount (? in million)	% of AUM	Amount (? in million)	% of AUM	Amount (? in million)	% of AUM
Micro Loans	122,548.83	75.04	100,159.62	81.16	71,452.80	84.80
Retail loans	26,147.54	16.01	14,649.74	11.87	9,607.19	11.40
MSME loans	1,600.61	0.98	1,233.15	1.00	483.57	0.57
Loans to financial institutions	6,137.43	3.76	4,096.30	3.32	2,625.44	3.12
Agricultural loans	6,878.24	4.21	3,268.10	2.65	90.30	0.11
Total AUM	163,312.65	100.00	123,406.91	100.00	84,259.30	100.00

Our liability products comprise current accounts, savings accounts, term deposits and recurring deposits. As at March 31, 2023, we had 6.48 million deposit accounts. Our total deposits were ?146,656.25 million, ?128,150.72 million and ?89,994.26 million as at March 31, 2023, 2022 and 2021, respectively. We had the fourth highest deposits growth among our peers of 28% CAGR from March 31, 2021 to March 31, 2023. (Source: CRISIL MI&A Report). We believe that our focus on growing this business has helped us to quickly build a significant base of deposits, particularly Retail Deposits, which comprised 90.85% of our total deposits as at March 31, 2023. Among the compared SFBs, we had the highest share of Retail Deposits as a percentage of total deposits as at March 31, 2023. (Source: CRISIL MI&A Report).

We have an extensive network of 700 banking outlets (including 59 business correspondent-operated banking outlets), 743 customer service centres (which are operated by our business correspondents), 20 business correspondents, 2,023 banking agents, 481 business facilitators and 528 ATMs spread across 21 states and two union territories, serving 6.83 million customers as at March 31, 2023. 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. As at March 31, 2023, 2022 and 2021, our business correspondents sourced or serviced ?128,769.99 million,

?103,204.93 million and ?71,452.80 million of our AUM, respectively, which represented 78.85%, 83.63% and 84.80% of our total AUM, respectively, which was ?163,312.65 million, ?123,406.91 million and ?84,259.30 million as at those dates, respectively.

We have a strong 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. As at March 31, 2023, we have disbursed over 0.53 million loans using e-signatures, which showcases our commitment to digital advancement. 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, who has over 27 years of experience in the banking/microfinance industry in India. 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. We had 5,034 employees as at March 31, 2023.

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 162.

The table below sets forth our AUM, deposits and certain details of our business as the dates indicated.

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, ESMACOs 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 our Corporate Promoter, which in turn owns 62.46% of the Equity Shares of the Bank prior to the Offer.

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 March 31, 2023		As at March 31, 2022		As at March 31, 2021
	? in million	% of total gross advances	? in million	% of total gross advances	? in million	% of total gross advances
Gross advances sourced or serviced by business correspondents	106,638.60	75.53	101,104.45	83.35	71,343.55	84.78
Of which:
Gross advances sourced or serviced by ESMACO	87,773.07	62.17	91,131.33	75.12	63,217.49	75.12
Total gross advances	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 March 31, 2023		As at March 31, 2022		As at March 31, 2021
	? in million	% of total deposits	? in million	% of total deposits	? in million	% of total deposits
Deposits sourced or serviced by business correspondents	2,536.15	1.73	2,145.14	1.67	1,495.12	1.66
Of which:
Deposits sourced or serviced by ESMACO	2,247.74	1.53	1,828.12	1.43	1,264.76	1.41

Particulars	As at March 31, 2023		As at March 31, 2022		As at March 31, 2021
	? in million	% of total deposits	? in million	% of total deposits	? in million	% of total deposits
Total deposits	146,656.25	100.00	128,150.72	100.00	89,994.26	100.00

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 Fiscals indicated.

Particulars	Fiscal 2023		Fiscal 2022		Fiscal 2021
	? in million	% of Total Income	? in million	% of Total Income	? in million	% of Total Income
Business correspondent expenses	5,442.36	17.32	3,486.58	16.24	2,328.08	13.16
Of which:
Amount payable to ESMACO	4,155.52	13.23	2,925.20	13.62	1,950.30	11.03

Changes in Interest Rates

Interest rate changes have a significant impact on our profitability. Interest rates are sensitive to many factors, including the RBIs 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 Draft 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 Committees (MPCs) 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 Indias 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 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 RBIs 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
March 31, 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 is a table showing our Net Interest Income for the Fiscals indicated.

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:

1. our average interest-earning advances and the yield thereon;
2. our average interest-earning investments and the yield thereon; and
3. our average interest-earning balance with the RBI and other inter-bank funds and the yield thereon. Our interest expended is dependent on:

1. our average total deposits and the cost thereon; and
2. 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 244.

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 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 245.

Average Interest-Earning Advances and Yield on Average Interest-Earning Advances

The table below presents 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 fiscal years presented. Yield is a non-GAAP financial measure.

Advances (net of	Year ended March 31,
provisions)	2023			2022			2021
	Average Balance(1) [A]	Interest Earned [B]	Yield (%) [C=B/A]	Average Balance(1) [A]	Interest Earned [B]	Yield (%) [C=B/A]	Average Balance [A]	Interest Earned [B]	Yield (%) [C=B/A]
	(? 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 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 banks 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 borrowers 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 RBIs 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 March 31, 2023	As at March 31, 2022	As at March 31, 2021
	in percentages (%)
One-month	13.71	11.77	13.91
Three-month	13.80	11.88	14.00
Six-month	14.09	12.19	14.19
One-year	14.66	12.82	14.48

Our Yield on Average Interest-Earning Advances, which is a non-GAAP financial measure, was 20.87%, 18.46% and 20.14% for Fiscals 2023, 2022 and 2021, respectively. Our Yield on Average Interest-Earning Micro Loans, which is a non-GAAP financial measure, was 23.49%, 19.91% and 21.16% for Fiscals 2023, 2022 and 2021, respectively. Our Yield on Average Interest-Earning Other Loans, which is a non-GAAP financial measure, was 12.99%, 10.93% and 11.42% for Fiscals 2023, 2022 and 2021, respectively,

Average Interest-Earning Investments and Yield on Average Interest-Earning Investments

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.

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 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 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. For more details on our investments in securities, see "Selected Statistical Information – Investment Portfolio" on page 247.

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 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 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 customized 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 table below presents our average balances for deposits together with the related interest expended by category of deposits, resulting in the presentation of the cost for each fiscal year. Average balance is calculated as the average of the opening balance at the start of the relevant year and the closing balance as at quarter end for all quarters in the relevant year.

Particulars	Year ended March 31,
	2023			2022			2021
	(? in million, except percentages)
	Average Balance(1) [A]	Interest Expended [B]	Cost (%) [C=B/A]	Average Balance(1) [A]	Interest Expended [B]	Cost (%) [C=B/A]	Average Balance(1) [A]	Interest Expended [B]	Cost (%) [C=B/A]
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

Note:

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. CASA is a non-GAAP financial measure and is calculated as the sum of demand deposits and savings bank deposits.

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.

The Cost of Average Total Deposits, which is a non-GAAP financial measure, was 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 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 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 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 years indicated.

Particulars	Fiscal 2023	Fiscal 2022	Fiscal 2021
	(? in million, except percentages)
Average CASA (*) [A]	30,795.61	22,557.46	12,835.07
Average Total Deposits [B]	135,740.03	107,089.73	80,911.38
Average CASA to Average Total Deposits (*) [C=A/B] (%)	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 RBIs 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 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 255.

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 years ended March 31, 2023, 2022 and 2021, see "Risk Factors – If we are unable to control the level of gross NPAs in our portfolio effectively or if we are unable to improve our Provisioning Coverage Ratio, our business, financial condition, results of operations and cash flows could be adversely affected" on page 38.

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 327.

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 164.

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 table below sets 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 March 31, 2023		As at March 31, 2022		As at March 31, 2021
	? in million	% of total advances (net of provisions)	? in million	% of total advances (net of provisions	? in million	% of total advances (net 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 Governments 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 122.

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 327 and 41, 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 Banks 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 table below sets forth certain details of our operating expenses for the Fiscals indicated.

Particulars	Fiscal 2023		Fiscal 2022		Fiscal 2021
	? in million	% of Total Income	? in million	% of Total Income	? in million	% of Total 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 employees	2,779.98	8.85	2,321.37	10.81	1,877.84	10.62
Rent, taxes and lighting	748.01	2.38	600.21	2.79	420.39	2.38

Particulars	Fiscal 2023		Fiscal 2022		Fiscal 2021
	? in million	% of Total Income	? in million	% of Total Income	? in million	% of Total Income
Depreciation on Banks 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 48 and 182, 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 41.

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 table below shows our disbursements for Fiscals 2023, 2022 and 2021.

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 Courts 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 RBIs 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 ?132.40 million, ?660.60 million and ?404.00 million as at 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 RBIs 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 Courts 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 RBIs 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 Courts 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 308.

Effects of the Resolution Plans

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 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 customers 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 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 302.

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 164. 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 is a table showing the income from such products and services introduced since Fiscal 2018 and such income as a percentage of our total income for the period and fiscal years stated below.

Particulars	Fiscal 2023		Fiscal 2022		Fiscal 2021
	Income (? in million)	% of Total Income	Income (? in million)	% of Total Income	Income (? in million)	% of Total 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	195.62	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	4,306.56	13.70	1,935.05	9.01	1,014.27	5.74

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 186. 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.

RBIs ‘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 326.

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 327.

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 years ended March 31, 2023, 2022 and 2021.

The 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 Banks results are dependent on future developments which are uncertain. The Statutory Auditors opinion has not been modified in respect of this matter.

The Statutory Auditors have included an emphasis of matters in their audit report on our audited financial statements for Fiscal 2021, noting that 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 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 Banks 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.

Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to our Bank and the revenue can be reliably measured.

1. 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.
2. 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.
3. 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.
4. Dividend on Investments in shares and units of Mutual Funds are accounted when our Banks right to receive the dividend is established.
5. 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.
6. 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.
7. 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.
8. Guarantee commission is recognised on a straight-line basis over the period of contract.
9. Locker rent is recognised on realisation basis.
10. 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

1. 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.
1. Basis of Classification:
• 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.
1. 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.

2. 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.

3. 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.
1. 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.

2. 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:
1. net profit on sale of investments during the year or
2. 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 utilized by way of draw down, in accordance with the provisions of the Reserve Bank of India guidelines.

1. 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.
1. Transfer of Securities between Categories:

The transfer/shifting of securities between categories of investments is accounted in accordance with the RBI guidelines.

Advances

1. 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.
2. 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.
3. 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.
4. Non Performing Advances are written off as per our Banks policy. Amounts recovered against debts written off/technically written off are recognised in the Restated Profit and Loss account and included under "Other Income".
5. The Bank considers a restructured account as one where our Bank, for economic or legal reasons relating to the borrowers 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.
6. 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.
7. 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 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 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 (Tangible and Intangible)	Estimated useful life as assessed by the Bank (in years)	Estimated useful life specified under Schedule II 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 asset exceeds its recoverable amount which is the greater of the assets 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

1. 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 recognized as expense as and when the services are rendered. Our Bank has no liability for future provident fund benefits other than its fixed contribution.

2. Defined Benefit Plan:

Gratuity: Our Bank provides for Gratuity, covering employees in accordance with the Payment of Gratuity Act, 1972. Our Banks 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 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. 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 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.

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 Banks business has been segregated into Treasury, Wholesale Banking, Retail Banking Segments and other Banking Operations.

1. 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.
2. 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.
3. 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.
4. 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.
5. 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 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. Our Bank does not recognize a contingent liability but discloses its existence in the Restated Financial Information.
• 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 recognized 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 Employees 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 Employees 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).
• 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

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 (? in million)	% of Total Income	Amount (? in million)	% of Total Income
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	31,415.72	100.00	21,475.08	100.00
Expenditure:
Interest Expended	10,173.19	32.38	7,927.86	36.92
Operating Expenses	12,305.41	39.17	8,628.71	40.18
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

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 / (decrease) (%)
	(? in million)
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

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 primarily due to:
• 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.

• 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 163. 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 /(decrease) (%)
	(? in million)
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;

• 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 ?10,479.53 million of NPAs 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.

Particulars	Fiscal 2023	Fiscal 2022	Percentage increase /(decrease)(%)
	(? in million)
Payments to and provisions for employees	2,779.98	2,321.37	19.76
Rent, taxes and lighting	748.01	600.21	24.62
Printing and stationery	73.80	67.42	9.46
Advertisement and publicity	154.68	58.97	162.30
Depreciation on Banks Property	417.89	327.74	27.51
Directors fees, allowances and expenses	16.28	14.80	10.00
Auditors 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
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.

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
• 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.

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 /(decrease)(%)
	(? in million)
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(2) [C]	771.17	485.00(3)	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 ?256.60 million for Fiscal 2022 regarding additional contingency provisions for the potential impact of COVID-19, respectively.
3. Net write-back of provision for earlier years less ?20.00 million for Fiscal 2022.

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 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.

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 (? in million)	% of Total Income	Amount (? in million)	% of Total Income
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	21,475.08	100.00	17,684.21	100.00
Expenditure:
Interest Expended	7,927.86	36.92	7,195.82	40.69
Operating Expenses	8,628.71	40.18	6,318.55	35.73
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

Total Income

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 / (decrease) (%)
	(? in million)
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.
• 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.

• 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 163. 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 /(decrease) (%)
	(? in million)
Commission, exchange and brokerage	1,507.23	645.01	133.68
Profit on sale of investments (Net)	435.14	230.40	88.86
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 Banks 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.

Particulars	Fiscal 2022	Fiscal 2021	Percentage increase /(decrease)(%)
	(? in million)
Payments to and provisions for employees	2,321.37	1,877.84	23.62
Rent, taxes and lighting	600.21	420.39	42.77
Printing and stationery	67.42	52.91	27.42
Advertisement and publicity	58.97	27.10	117.60
Depreciation on Banks Property	327.74	285.73	14.70
Directors fees, allowances and expenses	14.80	14.04	5.41
Auditors 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
Total	8,628.71	6,318.55	36.56

Note:

(1) Includes business correspondent expense of ?3,486.58 million and ?2,328.08 million for the year ended March 31, 2022 and 2021, respectively.

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.
• 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.

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 /(decrease)(%)
	(? in million)
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(1) [C]	485.00(3)	602.48	(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 ?660.60 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 2022.

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.

Financial Condition

Statement of Assets and Liabilities

Our assets as at the period/year end are set out below:

Particulars	As at March 31,
	2023	2022	2021
	(? in million)
Cash and Balances with the Reserve Bank of India	7,395.48	13,006.68	16,180.72
Balance with Banks and Money at Call and Short Notice	275.01	2,112.36	2,010.54
Investments	48,885.28	40,702.98	19,320.69
Advances	139,243.31	116,370.05	81,675.86
Fixed Assets	1,879.27	1,594.75	1,385.12
Other Assets	4,558.22	3,288.82	2,813.59
Total Assets	202,236.57	177,075.64	123,386.52

Cash and Balances with the Reserve Bank of India

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.

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.

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.

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 of provisions)	As at March 31, 2023 (? in million)	% increase / (decrease) from March 31, 2022	As at March 31, 2022 (? in million)	% increase / (decrease) from March 31, 2021	As at March 31, 2021 (? in million)
Micro Loans(1)	98,751.17	5.70	93,429.52	35.39	69,006.54
Other Loans	40,492.14	76.50	22,940.53	81.07	12,669.32
Total	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.

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 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 Courts Orders" on page 327.

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 further 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.

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.

Capital and Liabilities

The table below sets forth our capital and liabilities as at the dates indicated:

Particulars	As at March 31,
	2023	2022	2021
	(? in million)
Capital	4,494.74	4,494.74	4,494.74

Particulars	As at March 31,
	2023	2022	2021
	(? in million)
Employee Stock Options Outstanding	58.75	48.06	–
Reserves and Surplus	12,596.55	9,573.22	9,025.90
Deposits	146,656.25	128,150.72	89,994.26
Borrowings	33,541.95	29,528.33	16,940.00
Other Liabilities and Provisions	4,888.33	5,280.57	2,931.62
Total	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 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.

Deposits

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 – Fast-growing Retail Deposit portfolio with low concentration risk" on page 160.

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, our Corporate Promoter was unable to accept deposits as per applicable laws in India. After acquiring the business of 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%. As at March 31, 2023, our Retail Deposits accounted for 90.85% 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%.

Borrowings

The following table sets forth details of our borrowings as at dates indicated.

Particulars	As at March 31,
	2023	2022	2021
	(? in million)
Borrowings in India:
Reserve Bank of India	6,740.00	6,960.00	1,460.00
Other banks	–	–	–
Other institutions and agencies	24,871.95	20,488.33	13,100.00
Subordinated debt	1,450.00	1,600.00	1,900.00
Perpetual debt instrument	480.00	480.00	480.00
Borrowings outside India	–	–	–
Total	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.

Other Liabilities and Provisions

The table below sets forth details of our other liabilities and provisions as at the dates indicated.

Particulars	As at March 31,
	2023	2022	2021
	(? in million)
Bills payable	49.67	36.48	26.26
Inter office adjustments (net)	–	–	–
Interest accrued	556.44	407.92	219.11
Provision for Standard Assets	896.57	2,177.65	1,241.42
Others (including provisions)	3,385.65	2,658.52	1,444.83
Total	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 ?660.60 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.

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.

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 year end indicated:

Particulars	Treasury		Wholesale Banking		Retail Banking		Other Banking Operations		Total
	Segment Revenue	Segment Results	Segment Revenue	Segment Results	Segment Revenue	Segment Results	Segment Revenue	Segment Results	Segment Revenue	Segment Results
	(? in million)
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

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 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

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 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

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 summarizes our statements of cash flows for the period and years presented:

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 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 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 ?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

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 March 31,
	2023		2022		2021
	Amount (? in million)	% of total liabilities	Amount (? in million)	% of total liabilities	Amount (? in million)	% of total 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 345.

Maturity Profile of our Borrowings and Deposits

For the maturity profile of our borrowings and deposits as at March 31, 2023, see "Selected Statistical Information – Asset Liability Gap" on page 250.

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 RBIs guidelines for assessing capital adequacy. Our subordinated debt was ?1,450.00 million,

?1,600.00 million and ?1,900.00 as at 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 March 31, 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 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 – 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 56.

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 and for the year ended March 31,
	2023	2022	2021
	(? in million)
Outstanding amount of IBPCs	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 and for the year ended March 31,
	2023	2022	2021
	(? in million)
Amount of NPAs sold to ARCs outstanding	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 and for the year ended March 31,
	2023	2022	2021
	(? in million)
Outstanding amount of Direct Assignments	45.17	100.48	109.25

Securitized Advances

Our securitized advances were nil, nil and nil as at 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:

Particulars	As at March 31,
	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	13.98	15.52	13.04
Acceptances, endorsements and other obligations	–	–	–
Other items for which the Bank is contingently liable	5.00	5.00	2.00
Contingent Liabilities	18.98	20.52	15.04

Capital Expenditures

Our capital expenditures are principally for fixed assets including furniture and fixtures. We incurred capital expenditures (additions to fixed assets including furniture and fixtures) of ?714.86 million, ?598.46 million and ?477.91 million for the Fiscals 2023, 2022 and 2021, respectively.

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 318. For a summary of these related party transactions, see "Offer Document Summary – Summary of related party transactions" on page 19.

Non-cancellable Operating Lease Obligations

The table below sets forth our non-cancellable operating lease obligations as at March 31, 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	4,297.74	576.72	2,861.68	859.34

Quantitative and Qualitative Disclosures about Market Risks

We did not have any transactions in derivative instruments for 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 – 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 RBI-mandated reserve requirements, we are also more structurally exposed to this risk than banks in many other countries" on pages 178 and 39.

Qualitative Factors

Unusual or Infrequent Events or Transactions

Except as described in this Draft 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.

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 321 and 29, 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 321 and 29, respectively. To our knowledge, except as discussed in this Draft 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 "Managements Discussion and Analysis of Financial Condition and Results of Operations" on pages 29, 157, and 319, respectively, to our knowledge 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 157, 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 ESMACO, a Promoter Group and Group Entity, and Lahanti, a Group Entity) have sourced the majority of our advances. All of our Business correspondents 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 321 and 31, 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 122, 48 and 182, respectively, for further information on our industry and competition.

Material Developments after March 31, 2023

We confirm that from March 31, 2023 till the date of this Draft 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.