ESAF Small Finance Bank Ltd Auditor Reports

ON RESTATED FINANCIAL

INFORMATION

The Board of Directors

ESAF Small Finance Bank Limited

Dear Sirs,

1. We have jointly examined (as appropriate, refer paragraph 5 below) the attached Restated Financial Information of ESAF Small Finance Bank Limited (the "Bank" or the "Issuer"), comprising the Restated Statements of Assets and Liabilities as at 31 March 2023, 2022 and 2021 the Restated Profit and Loss Accounts, the Restated Cash Flow Statements for the years ended 31 March 2023, 2022 and 2021, the Summary Statement of Significant Accounting Policies, and other explanatory information (collectively, the "Restated Financial Information"), as approved by the Board of Directors of the Bank at their meeting held on 8 June 2023 for the purpose of inclusion in the Draft Red Herring Prospectus ("DRHP") prepared by the Bank in connection with its proposed Initial Public Offer of equity shares ("IPO") prepared in terms of the requirements of:
1. Section 26 of Part I of Chapter III of the Companies Act, 2013, as amended (the "Act");
2. The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended ("ICDR Regulations"); and
3. The Guidance Note on Reports in Company Prospectuses (Revised 2019) issued by the Institute of Chartered Accountants of India ("ICAI"), as amended from time to time (the "Guidance Note").
2. The Banks management is responsible for the preparation of the Restated Financial Information which have been approved by the Board of Directors for the purpose of inclusion in the DRHP to be filed with Securities and Exchange Board of India in connection with the proposed IPO. The Restated Financial Information have been prepared by the management of the Bank on the basis of preparation stated in note 2.2 to the Restated Financial Information. The Board of Directors of the Bank are responsible for designing, implementing and maintaining adequate internal control relevant to the preparation and presentation of the Restated Financial Information. The Board of Directors are also responsible for identifying and ensuring that the Bank complies with the Act, ICDR Regulations and the Guidance Note.
3. We have jointly examined such Restated Financial Information taking into consideration:
1. The terms of reference and terms of our engagement agreed upon with you in accordance with our engagement letter dated 29 May 2023 in connection with the proposed IPO of equity shares of the Issuer;

Deloitte Haskins & Sells Abarna & Ananthan

2. The Guidance Note. The Guidance Note also requires that we comply with the ethical requirements of the Code of Ethics issued by the ICAI;
3. Concepts of test checks and materiality to obtain reasonable assurance based on verification of evidence supporting the Restated Financial Information; and
4. The requirements of Section 26 of the Act and the ICDR Regulations.

Our work was performed solely to assist you in meeting your responsibilities in relation to your compliance with the Act, the ICDR Regulations and the Guidance Note in connection with the IPO.

4. The Restated Financial Information have been compiled by the management from the audited financial statements as at and for the years ended 31 March 2023, 2022 and 2021, prepared by the Bank in accordance with the requirements prescribed under the Banking Regulation Act, 1949, the circulars and guidelines issued by RBI from time to time, accounting principles generally accepted in India including Accounting Standards prescribed under Section 133 of the Act, read with the Companies (Accounts) Rules, 2014 to the extent applicable and other relevant provisions of the Act and current practices prevailing within the banking industry in India, which have been approved by the Board of Directors at their meetings held on 10 May 2023, 10 May 2022 and 26 May 2021, respectively.
5. For the purpose of our joint examination, we have relied on:
1. Auditors report issued by us dated 10 May 2023 on the audited financial statements of the Bank as at and for the year ended 31 March 2023 as referred in Paragraph 4 above.
2. Auditors reports issued by Deloitte Haskins & Sells, the previous auditors of the Bank and who continue to be one of the joint auditors (the "Previous Auditors"), dated 10 May 2022 and 26 May 2021 on the audited financial statements of the Bank as at and for the years ended 31 March 2022 and 2021, respectively, as referred in Paragraph 4 above.

The auditors report on the financial statements of the Bank as at and for the year ended 31 March 2022 includes the following Emphasis of Matter paragraph:

"We draw attention to Note 18A.16 to the financial statements which describes that the potential impact of the continuing COVID 19 pandemic on the Banks results are dependent on future developments which are uncertain.

Our opinion is not modified in respect of this matter."

The auditors report on the financial statements of the Bank as at and for the year ended 31 March 2021 includes the following Emphasis of Matter paragraph:

"We draw attention to Note 18A.7(i) to the Financial Statements which fully describes that the Bank has recognized additional contingency provision on loans to reflect the continuing uncertainties arising from the COVID 19 pandemic. Such estimates are based on current facts and circumstances and may not necessarily reflect the future uncertainties and events arising from the full impact of the COVID 19 pandemic.

Our opinion is not modified in respect of this matter."

Deloitte Haskins & Sells Abarna & Ananthan

The audits of the financial statements of the Bank for the years ended March 31, 2022 and 2021 were conducted by the Previous Auditors. The Previous Auditors have examined the special purpose restated financial information as at and for the years ended March 31, 2022 and 2021 and accordingly reliance has been placed by Abarna & Ananthan, on the restated statement of assets and liabilities and the restated statement of profit and loss, restated statement of cash flows, the summary statement of significant accounting policies, and other explanatory information (collectively, the "Special Purpose Restated Financial Information") examined by the Previous Auditors for the said years. The examination report included for the said years is based solely on the report submitted by the Previous Auditors. The Previous Auditors have also confirmed that the Special Purpose Restated Financial Information:

1. have been prepared after incorporating adjustments for the changes in accounting policies, material errors and regrouping/reclassifications retrospectively in the financial years ended 31 March 2022 and 2021 to reflect the same accounting treatment as per the accounting policies and grouping/classifications followed as at and for the year ended 31 March 2023, as applicable;
2. do not require any adjustment for modification as there is no modification in the underlying audit reports. There are items relating to emphasis of matter (refer paragraphs 5(a) and 5(b) above), which do not require any adjustment to the Special Purpose Restated Financial Information; and
3. have been prepared in accordance with the Act, ICDR Regulations and the Guidance Note.

1. Based on our examination and according to the information and explanations given to us and also as per the reliance placed by Abarna & Ananthan on the examination reports submitted by the Previous Auditors, as mentioned in paragraphs 5, we report that the Restated Financial Information:
1. have been prepared after incorporating adjustments for the changes in accounting policies, material errors and regrouping/reclassifications retrospectively in the financial years ended 31 March 2022 and 2021 to reflect the same accounting treatment as per the accounting policies and grouping/classifications followed as at and for the year ended 31 March 2023, as applicable;
2. do not require any adjustment for modification as there is no modification in the underlying audit reports. There are items relating to emphasis of matter (refer paragraphs 5(a) and 5(b) above), which do not require any adjustment to the Restated Financial Information; and
3. have been prepared in accordance with the Act, ICDR Regulations and the Guidance Note.
2. Each of the joint auditors on its behalf confirms that they have complied with the relevant applicable requirements of the Standard on Quality Control (SQC) 1, Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements.
3. The Restated Financial Information do not reflect the effects of events that occurred subsequent to the respective date of the reports on the audited financial statements mentioned in paragraph 5 above.

Deloitte Haskins & Sells Abarna & Ananthan

4. This report should not in any way be construed as a reissuance or re-dating of any of the previous audit reports issued by us or the Previous Auditors, nor should this report be construed as a new opinion on any of the financial statements referred to herein.
5. We have no responsibility to update our report for events and circumstances occurring after the date of the report.
6. Our report is intended solely for use of the Board of Directors for inclusion in the DRHP to be filed with Securities and Exchange Board of India in connection with the proposed IPO. Our report should not be used, referred to, or distributed for any other purpose except with our prior consent in writing. Accordingly, we do not accept or assume any liability or any duty of care for any other purpose or to any other person to whom this report is shown or into whose hands it may come without our prior consent in writing.

For Deloitte Haskins & Sells Chartered Accountants (Firms Registration No. 117365W) G. K. Subramaniam Partner Membership No. 109839 (UDIN:23109839BGXQAF2365) Place: Mumbai Date: June 20, 2023

For Abarna & Ananthan Chartered Accountants (Firms Registration No.000003S) Mohan Rao G Partner Membership No. 203737 (UDIN: 23203737BGZDDZ4337) Place: Bengaluru Date: June 20, 2023