Jana Small Finance Bank Ltd Management Discussions

INDUSTRY STRUCTURE, OPPORTUNITIES, OUTLOOK AND THREATS

The global economy has shown tremendous resilience despite steep rate hikes by global central banks after inflation spike. Though the growth has not got affected significantly but inflation came under control prompting market to price rate cuts aggressively in 2024 by central banks particularly Federal Reserve. But communication from Federal Reserve have warned market against this aggressive pricing of rate cuts which pushed the rates higher again. As growth is not getting affected despite steep rate hikes and the inflation is still not completely under control, Central Banks are patient to see through this cycle and not in hurry to cut rates, unless growth falters. Geo-Political development is keeping financial market cautious but so far they have remain largely unaffected. Effect of this on crude price is closely watched as this can be important trigger for global economy. Gold off late have appreciated sharply because of geo-political tension and buying interest of some central banks.

On domestic front GDP growth continue to be strong. The Second advance estimate released by National Statistical Office (NSO) for 2023-24 projected the growth at 7.6% making India the fastest growing country among large economies. On supply side gross value added (GVA) expanded by 6.9% in 2023-24. The manufacturing and services sectors turning out to be key drivers. Real GDP growth for Q3: 2023-24 is placed at 8.4%. Headline CPI inflation moderated to 5.3% in October 2023- February 2024 from an average of 5.5% in H1 2023-24. Food inflation continue to remain volatile. Core inflation has been steadily declining with a print of 3.4% in February 2024. This is a goldilocks situation for us having high growth with moderate inflation.

Banking industry continue to look healthy with robust credit growth nearing 20% for the industry. The deposit remain a challenge for banking industry with growth of 13.8%. A healthy growth in economy provide opportunity for Banks to grow their asset books, Under-pricing of risk in good times is a normal mistake which can be a risk. On liability side the deposit growth vis-a-vis credit demand remain a challenge. With healthy capital position, sound economy banks have opportunity to grow. Funding this growth and negative impact on economy due to global headwind can be a risk.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Net Interest Income has grown to 2,127.1 crores in FY24 vs 1,660.0 crores in FY23, up by 28.1% YoY. The Bank has earned a Net Profit before Tax (PBT) of 514.4 crores for the FY24, which has doubled from the FY23 PBT of 256.0 crores. Profit after tax (PAT) stood at 669.5 crores in FY24 as compared to 256 crores in FY23, registering a growth of 162% YoY. PAT for FY24 considers 155 crores of DTA recognized in Q4-FY24. Banks AUM Portfolio witnessed a jump of 24.9% from 19,808 crores in FY23 to 24,746 crores for the FY24. Our Secured AUM grew by 33% year-on-year basis and constituted to almost 60% of the AUM. Our Deposits stood at 22,571 crores which grew by 38% Y-o-Y. The Retail Deposits including CASA constituted to 61.0% of the overall deposits of the Bank. The Capital Adequacy Ratio ("CRAR") was 20.3% as at March 31, 2024 (March 31, 2023: 15.6%) well above statutory minimum requirement of 15%. Cost to Income ratio for the FY24 was 57.4% as compared to 56.2% for the FY23. There was a substantial improvement in Return on Assets for FY24 was at 2.37% compared to 1.13% in FY23, primarily driven by business growth coupled with improved asset quality. The number of banking outlets increased to 808 in March 2024 from 754 in March, 2023. Our asset quality has significantly improved, with GNPA at 2.0% (vs. 3.7% in FY23) and NNPA at 0.5% (vs. 2.5% in FY23).

Note:

1. IBPC and Securitization book is included for the purpose of GNPA/NNPA

2. PAT, ROA, ROE and Networth is after considering DTA of Rs. 155 crores for FY 24

Profit & Loss summary

Crores

Particulars	FY 2023-24	FY 2022-23
Net Interest Income	2,127.14	1,660.02
Other Income	671.01	624.86
Net Total Income	2,798.15	2,284.88
Operating Expenses	1,604.84	1,284.51
Operating Profit	1,193.31	1,000.37
Provisions and Contingencies	678.96	744.40
PBT	514.35	255.97
Provision for Tax	-155.19	0.00
PAT	669.54	255.97

Profitability: Profit After Tax (PAT) grew by 161.57% from 255.97 crore in FY 2022-23 to 669.54 crore in FY 2023-24.

Earnings: Our total income climbed by 26.60% from 3,699.88 crore in FY 2022–23 to 4,684.06 crore in FY 2023–24, due to a 30.51% increase in interest income. Our net interest income grew by 28.14% from 1,660.02 crore in FY 2022–23 to 2,127.14 crore in FY 2023–24, primarily due to a robust 30.13% growth in advances.

Net Interest Margin: Our Net Interest Margin has increased to 8.00% in FY 2023-24 from 7.84% in FY 2022-23.

Key ratios

The following table sets forth, for the periods indicated, the key financial ratios:

Particulars	FY 2023-24	FY 2022-23
Return on average equity (%)1	26.85%	16.70%
Return on average assets (%)2	2.37%	1.13%
Net interest margin (%)	8.00%	7.84%
Cost to income (%)3	57.35%	56.22%
Debt Equity Ratio	1.46	3.53
Provision coverage ratio4	73.70%	34.01%
Basic Earnings per share ()	90.85	47.47

1. Return on equity ratio is computed with reference to monthly average of total equity (including reserve & surplus).

2. Return on average assets is computed with reference to average working funds. Working funds represent the monthly average of total assets (excluding accumulated losses, if any) computed for reporting dates of Form X submitted to RBI under Section 27 of the Banking Regulation Act, 1949 for the current year.

3. Cost represents operating expense. Income represents net interest income and non-interest income.

4. Provision coverage ratio does not include technical write offs. Including technical write off, Provision coverage ratio is 96.90% (March 31, 2023: 88.89%)

Non – Interest Income

Crores

Particulars	FY 2023-24	FY 2022-23
Commission, exchange and brokerage	486.20	308.40
Profit on sale of Investments	9.26	2.96
Profit / (loss) on sale of land, buildings and other assets(net)	-0.58	-0.97
Miscellaneous Income	176.14	314.48
Of which:
Profit on Sale of Assets to ARC	85.31	186.59
PSLC income	51.63	49.52
Recoveries from written off accounts	36.21	70.65
Lease income	0.00	6.04

Crores

Particulars	FY 2023-24	FY 2022-23
Others	2.99	1.68
Total Non – Interest Income	671.01	624.86

Balance Sheet

Crores

Particulars	FY 2023-24	FY 2022-23
Liabilities
Capital	104.59	324.98
Reserves and Surplus	3,472.51	1,472.28
Deposits	22,571.25	16,334.02
Borrowings	5,211.46	6,277.46
Other Liabilities and Provisions	1,349.98	1,234.96
Total Liabilities	32,709.78	25,643.69
Assets
Cash and balances with RBI	1,025.59	1,010.94
Balances with banks and money at call and short notice	1,028.54	1,076.37
Investments	6,737.69	5,221.22
Advances	23,111.27	17,759.56
Fixed assets	141.59	127.75
Other assets	665.10	447.85
Total Assets	32,709.78	25,643.69

Deposits: Our deposits base grew by 38.19% to 22,571.25 crore in FY 23-24 from 16,334.02 crore in FY 2022-23.

Deposits

Crores

Particulars	FY 2023-24	FY 2022-23
I. Demand deposits
i. From banks	192.55	72.93
ii. From others	1055.96	639.46
II. Savings bank deposits	3,198.41	2,588.57
III. Term deposits
i. From banks	5,702.11	3,635.71
ii. From others	12,422.22	9,397.35
Total Deposits	22,571.25	16,334.02
From Banks	5,894.66	3,708.64
From others	16,676.59	12,625.38

Gross Advances

Crores

Sectors	FY 2023-24	FY 2022-23
Agriculture and Allied Activities	5,118.50	4,127.95
Industrial Sector	1,875.93	1,318.25
Service Sector	6,187.43	4,405.02
Retail Loans	10,293.72	8,149.51
Total	23,475.58	18,000.74

Non-Performing Assets

Crores

Particulars	FY 2023-24	FY 2022-23
Gross NPA	494.33	709.19
Gross NPA to Gross Advances	2.11%	3.94%
Net NPA	130.02	468.00
Net NPA to Net Advances	0.56%	2.64%

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

The fiscal year 2023-24 marked a remarkable era for our bank, characterized by a substantial 20% surge in our workforce. This growth underscores our commitment to nurturing a culture of excellence and innovation, attracting and retaining the best talents across the industry. Anchored in our well-established HR protocols, we endeavour to create an inclusive atmosphere where every employee feels respected, appreciated, and motivated to unleash their fullest potential.

	31 March 2024	31 March 2023
No. of Employees	21,800	18,184

The accomplishments of the past year also highlight the pivotal role of employees in not only driving the banks growth but also in shaping its culture and reputation in the industry. This alignment is key to building a cohesive workforce that is motivated by a shared purpose and committed to the banks long-term success.

The recognition from the World HR Congress, with awards for ‘Best Employer to Work For and the National Best Employer Brand, further underscores the effectiveness and impact of the banks human resources strategies. Such accolades are a testament to our unwavering commitment to excellence in people management practices and our proactive approach to fostering a supportive work environment. They serve as benchmarks for what the bank has achieved in terms of employer branding and setting high standards for employee engagement and satisfaction.

In the spirit of fostering growth and embracing innovation, Jana Bank has made a strategic move by integrating a significant number of fresh graduates and early-career professionals into its workforce. We take pride in the fact that nearly 30% of our workforce have started their corporate careers with Jana Bank. This initiative underlines the banks commitment to revitalizing its organizational ecosystem with youthful energy, fresh perspectives, and innovative ideas, essential for staying competitive and impactful in the rapidly evolving banking landscape.

The extensive on-boarding and training of 14,000+ new hires is a testament to Janas dedication to integrating employees seamlessly into its operations and culture. Such a rigorous program not only equips the workforce with necessary operational competencies but also fosters a sense of belonging and commitment to the companys values. This approach is critical for building a cohesive and capable team ready to tackle future challenges.

Understanding the importance of nurturing this new talent, Jana Bank has instituted comprehensive training and mentorship programs designed specifically to cater to the unique needs of fresh graduates and early-career professionals. This initiative aims to equip them with the necessary knowledge, skills, and understanding to excel in their roles and contribute effectively to the banks objectives.

The strategic integration of new talent, coupled with a robust framework for employee development, positions Jana Bank not just as a formidable player in the banking sector but as a forward-thinking institution that prioritizes the growth and advancement of its workforce. By continuing to invest in its employees, Jana Bank is setting the stage for innovation, leadership, and success in the years to come. During the year, the bank promoted and mobilised nearly 40% of its workforce giving them growth and learning opportunity within the bank.

Janas comprehensive training initiatives and commitment underline its strategic approach to workforce development, regulatory adherence, and organizational culture enhancement. By successfully training its employees in mandatory compliance, Jana not only meets regulatory standards but also instills ethical practices within its workforce. The commitment to IT security is equally significant, with 8,951 employees receiving specialized training to protect sensitive data and counter cyber threats effectively. This focus on security is crucial in todays digital age, where information breaches can have severe repercussions. During the fiscal year 2023-24, we made significant strides in our training initiatives, with 25000+ unique employees participating in various training programs.

Details of employees undergone training

Training Programs	No. of Employees
On-boarding & Induction	13,874
Functional Induction	13,215
Mandatory Compliance Training	15,014
Jana Excellence Training	874
Digital Payment Awareness	5,413

As we venture into the upcoming fiscal year, our focus remains on enhancing our people-led initiatives to support the banks strategic goals. Together, we move forward to another year of achievements and transformations, underpinned by the unwavering dedication and resilience of our esteemed workforce.

The strategic importance of diversity in Janas operations underscores a proactive adaptation to the evolving financial landscape, ensuring the organization remains competitive and innovative. The enhancement of a diverse workforce facilitates quicker adaptation to market shifts, anticipates trends more accurately, and meets the broad and varying needs of a diverse customer base. This diversity is not just a matter of corporate equity but a strategic imperative that directly contributes to Janas resilience and growth.

The overall increase in diversity to 12.4%, up by 17% from the previous financial year, is a testament to the ongoing effort to improve the diversity. This incremental progress, although seemingly modest, marks a significant stride towards achieving a more inclusive and varied workforce that mirrors the diversity of the society it serves. Its particularly noteworthy in branch banking, where the representation of women in positions in Branch Banking at 26% and Branch Operations ay 30% including in rural locations stands out, illustrating Janas commitment to not just attracting but also carving out suitable roles for women employees across locations.

At the beginning of the year, the bank had 18,184 employees and by the end of the year it reached to a count of 21,800 increasing the headcount by 20%. With the growth, the bank in line with Industry-faced challenge, witnessed attrition during the year. In our analysis, we understand that 32% of our workforce are early starters, and thus the attrition amongst this segment is high at 25% that impacts overall attrition. We recognise that this further necessitate a more comprehensive approach to address the challenge.

The bank was further able to re-hire 700+ employees during the year. The strategy of promoting a robust rehire culture through an alumni portal is particularly noteworthy. This approach not only helps in keeping the former employees engaged with the bank but also develops a strong sense of community and belongingness among them. By fostering such a culture, Jana Bank creates a continuous loop of engagement, where the alumni feel valued and remain connected to the organization beyond their tenure.

Our belief in establishing and nurturing strong ties between employees and leadership is exemplary and stands as a fundamental principle for achieving strategic alignment across all levels of the organization. The bank takes immense pride as the senior leadership commits itself to traveling each month to various branch locations, making themselves accessible and working along with the employees in field. Leadership being accessible and open to input from all levels of staff, sends a powerful message about the value placed on everyones contribution. This approach not only facilitates enhanced communication but also empowers employees by valuing their insights, thereby fostering a culture of mutual respect and trust. Such an environment is conducive to innovation and effective problem-solving, as people feel more comfortable and encouraged to voice their ideas and solutions. Furthermore, the cultivation of these relationships helps in breaking down hierarchical barriers, promoting a more collaborative and agile work environment.

Furthermore, the banks innovative approach on Family Connect Programs at each branch location, to involving employees families has amplified its commitment to work-life balance and holistic employee well-being. In the last fiscal year, 325 family connect events were planned which were attended by 11,024 employees and their families This strategy not only enhances loyalty and morale but also solidifies the banks reputation as a family-oriented and supportive employer. Recognizing that employees personal lives influence their work performance and satisfaction, Jana Bank smartly invests in building a strong and inclusive community that extends beyond the traditional workplace. Such initiatives are crucial in todays dynamic work environment where the lines between personal and professional lives are increasingly blurred.

Jana Banks focus on Rewards and Recognition alongside fostering connections with employees families underscores a deep-rooted appreciation for the human element. Near 25% of our employees, i.e. 4,838 were recognised across the bank, showcasing an impressive commitment to acknowledging individual and team contributions that serves as a tangible manifestation of the banks values. Such a remarkable number of recognitions sends a clear message about the banks dedication to uplifting its workforce and maintaining a high level of engagement and motivation among its employees.

Moreover, these family connect events serve as a strategic touchpoint to reinforce the banks values and mission with not just the employees but their families as well, creating a broader sense of belonging and loyalty. This approach is a testament to the banks understanding that a supportive work environment and a harmonious work-life balance are key drivers of employee retention and satisfaction.

Incorporating these strategic practices into the fabric of the banks way of working not only promotes a culture of continuous improvement and open communication but also significantly impacts the overall well-being, productivity, and commitment of employees.

In summary, the banks approach to building strong relationships with employees through personal engagement, comprehensive on boarding, and development initiatives, spearheaded by leadership and Human Resource, is a robust strategy for fostering a supportive, inclusive, and dynamic work environment. This not only aligns with the banks values but also positions it as an attractive employer capable of attracting and retaining the best talent in a competitive industry. Continuous assessment and adaptation of these strategies will ensure their sustained effectiveness and relevance, contributing significantly to the banks overall success and resilience.

SEGMENT–WISE OR PRODUCT-WISE PERFORMANCE For Liabilities:

Jana bank offers all forms of Liability accounts i.e. Savings, Current, Fixed and Recurring. Deposits form an integral part of any banking operation and building granularity in deposit building is of paramount experience

• In liabilities, we cater to all types of clients i.e.

o Individual : Senior Citizens, Non Resident Individuals (incl. OCI holders), Resident Individuals, Minors, etc.

o Non - individuals : Sole Proprietors, Private Limited company, Partnership company, Public Limited company, TASC, etc.

As on 31st March 24, Liability book growth details are as follows :

• CASA deposit grew by 35%

• TD deposits grew by 39%

• CASA ratio stands @ 20%

• In FY 24, we have added over 92,000 liability clients

• Within 2 months of launching HNI program, bank has on-boarded following nos. of clients : o Exclusive : 1500+ clients o Premier : 1700+ clients

Product	Mar-24	Mar-23	YTD Growth	Growth %
CASA BALANCE	4,447	3,301	1,146	35%
TD BALANCE	18,124	13,033	5,091	39%
Retail TD	9,328	8,166	1,162	14%
Bulk TD	8,796	4,867	3,929	81%
Total Deposits	22,571	16,334	6,237	38%

For Affordable Housing:

Indias affordable housing market holds immense potential for addressing the housing needs of its burgeoning population. Following a period of subdued growth in FY20 through FY22 primarily attributed to pandemic, Affordable Housing Finance Companies (AHFCs) experienced a resurgence in growth during FY23, expanding by 27% year-over-year. This growth trajectory is expected to continue, with CareEdge Ratings forecasting a 29% growth in FY24 and a further 30% in FY25 for AHFCs. The optimistic outlook for AHFCs is supported by several factors, including their relatively smaller base compared to traditional banking institutions and prime housing finance entities, their capacity to penetrate unorganized market segments, and their adept appraisal skills. These competencies enable AHFCs to effectively serve customers who may not meet the prime credit criteria.

Source: Care Ratings FY24-25

For MSME:

MSME sector plays a vital role by contributing significantly to economic growth and creating employment opportunities. India has 633.9 lakh micro, small and medium enterprises contributing to almost a third of countrys GDP. As of August 2023, MSMEs employed 12.36 crore people in India. The rural-urban distribution reveals that 51 per cent of MSMEs, totalling 324.9 lakh enterprises, are located in rural areas, while the remaining 49 per cent, comprising 309 lakh enterprises, are located in urban areas.

Source: MSME INDUSTRY OUTLOOK by Infomerics Ratings Credit Rating Agency (SEBI Registered/RBI Accredited)

We offer tailor made financial solutions business loans to assist MSME fulfilling their existing business needs as well as achieve their business goals and future expansions:

• Term Loans for Business Purpose

• Term Loans for Commercial Property Purchase

• Overdraft Facility for Daily Business Need

• Facility for purchase of Inventory

• Bank Guarantees

• Customized Current Accounts designed for MSME Need As on 31st March24

• AUM - Asset Book: Rs. 3,317 Crores (YTD Growth of 21 %)

• Liability book for MSME Customers : 161 Crores

For Two wheeler

The Indian two-wheeler sector represents more than just a market; it serves as a dynamic engine driving the nations progress. According to a recent TechSci Research report titled "India Two Wheeler Market - Industry Size, Share, Trends, Competition Forecast & Opportunities, 2029," this industry stood at a substantial USD 16.63 Billion in 2023 and is projected to grow with a commendable CAGR of 10.29% in the forecast period from 2024 to 2029.

The historical roots of the Indian two-wheeler industry run deep, with motorcycles and scooters being the cornerstone of personal mobility for decades. The two-wheeler market in India is witnessing a paradigm shift, fuelled by the rise of new-age start-ups such as Ola Electric and Ather Energy.

Jana Small Finance Bank provides loan for purchasing Two Wheeler/ Electric Two Wheeler to Existing & New to Bank Customers.

As of 31st March24 TW Portfolio book: - 487 Crores (YTD growth of 107%). For Microfinance

Jana Bank offers small ticket size loans (primarily MFI) to its customers through its Retail financial services vertical in the forms of Agri Group Loans, Group loans, Individual loans and Gold loans, these loans are offered to the customers who are unbanked/underbanked to bring them into the formal financial banking fold

1. Agri Group Loan: Loan offered to the group of customers under JLG model to customers involved in Agri/ agri allied activity in predominantly Rural/Semi Urban location

2. Group Loan: Loan offered to the group of customers under JLG model to customers in predominantly Urban/metro location

3. Individual Loan: Individual loans offered to a graduated customers who has taken a Group/Agri group loan once with the bank

4. Gold Loan: Loans offered against Gold as a collateral

Product	Mar-24	Mar-23	Growth
Group Loans	803	686	17%
Agricultural Loans	3,899	3,094	26%
Individual loans	5,299	4,982	6%
Total unsecured	10,004	8,763	14%
Gold Loans	290	225	29%

TPP Function:

Jana Bank is registered as corporate agent with IRDAI for solicitation of Insurance business. The Bank offers multiple products across Life & Non-Life Insurance to its asset as well as retail branch banking customers.

The Bank is currently tied up with 3 Life Insurance (ICICI Prudential Life, Bajaj Allianz Life & Kotak Life) and 2 Non-Life Insurance (ICICI Lombard & Bajaj Allianz General) partners. Solicitation of Insurance is restricted to Jana Banks customers and is purely on voluntary basis.

For Investment products, the bank has partnered with Axis securities for offering 3 in 1 a/c to its customer which is a combination of Savings, Demat & Trading a/c. The Bank has also started distribution of Mutual funds recently and have partnered with Axis AMC, IPRU AMC & SBI AMC for MF Distribution.

1. Credit Life Insurance: Credit Life Insurance product if offered to Banks loan customer across RFS, AHL & MHL, TW & MSE vertical.

2. Non-Life Group Insurance: The Bank also offers multiple Non-Life Insurance products like Hospicash Insurance, Credit linked health plans, Collateral policies etc to its loan customers.

3. Retail Life Insurance: Bank offers various categories of life insurance plans like Traditional, term, ULIPs, Guaranteed Benefits plan etc to its customer in Branch Banking. The solicitation is done by certified staff as per extant regulations and restricted to Jana Banks customer only.

4. Retail Non-Life Insurance: The Bank also offers various solutions to its Branch Banking customer across Non- Life Insurance which typically includes Health Policies, Motor Insurance, Fire Insurance, Travel Insurance, Liability Insurance etc.

Type	2022-23	2023-24	YTD Growth	Growth %
Credit Life	253.8	299.2	45.4	18%
Non-Life Group	38.7	56.4	17.7	46%
Retail Life	37.5	40.9	3.4	9%
Retail General	15.3	18	2.7	18%
Total	345.2	414.5	69.3	20%

 

Persistency	2022-23	2023-24	Growth%
LI Persistency	62%	72%	16%

 

Details	FY 2023-24
Count of 3 in 1 a/c opened	1653
MF AUM	~ 30 crs

For Payments & Cards :

Jana Bank offers various digital assets to the customers for their ongoing Payment and Investment needs. Various Payment products like UPI, IMPS, RTGS, NEFT, Card Payments, NACH are offered to the customers which facilitate the CASA and TD growth for the Bank. These products not only facilitate payments for Liability Business but also Collection for the Loan Business.

As of 31st March 2024, Annualised growth rates :

	Product	FY2023-24	FY2022-23	YTD Growth	Growth %
UPI	Volume	2,68,33,967	1,66,81,688	1,01,52,279	61%
	Value	4,612.95	2,616.71	1,996.24	76%
IMPS	Volume	13,49,742	10,99,081	2,50,661	23%
	Value	2,892.34	1,747.65	1,144.69	65%
RTGS	Volume	64,357	39,556	24,801	63%
	Value	10,143.74	6,889.08	3,254.67	47%
NEFT	Volume	3,68,290	4,79,065	-1,10,775	-23%
	Value	2,124.18	2,219.41	-95.23	-4%
NACH	Volume	75	14	61	436%
	Value	1.23	0.06	1.17	1872%
Cards	Volume	1,62,047	1,85,711	-23,664	-13%
	Value	86.80	90.67	-3.87	-4%
Total	Volume	2,87,78,478	1,84,85,115	1,02,93,363	56%
	Value	19,861.24	13,472.90	6,302	47%

Value Rs. in crores. Please note that the NEFT and Card transaction volumes have reduced as they have been overtaken by UPI and IMPS which are more preferred mode of payments.

• Jana Carded customer percentage is @ 75% in the last Financial year

• AEPS Off Us Issuance transactions volume for the month of Mar 24 was 18,619 amounting to Rs. 4.19 Crore

• Mobile Banking ranking on the Playstore was 4.6 as on Mar 24 (highest among the peer banks)

• YoY growth on Mobile Banking Activation is 59%

• Bank Merchant QR implementation were at 13,955 with 81% activation (atleast one transaction)

• Overall Digital Banking growth rate was at 79%

• PoS installed at Jana Bank Merchant Locations – 2200 +

• PoS transactions done till date at Jana Merchant locations are 21,226 and value is Rs. 7.27 crore

The Bank has set up a Business Correspondent (BC) Channel with an objective for greater financial inclusion and increasing the outreach of the banking sector to the underserved population who act as the Banks representative in Unbanked Rural Centre / unserved Banking location which helps facilitate financial services like Opening Bank accounts and helping in financial transaction like cash deposits / Cash withdrawal / fund transfers etc. The mentioned services empower the villagers to access Banking services at low cost.

As on 31st March, 2024 the Bank has engaged with 21 BC partners having 174 BC Agents spread across 12 states providing financial services to our Customers.

The Bank is live with AEPS issuance on the BC channel for services like Cash Deposit, Cash Withdrawal, Balance Enquiry, Mini Statement to facilitate customers banking transactions. JSFB is also working on initiatives like AEPS Acquiring to strengthen the BC channel and improving visibility.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Banks Internal Audit function provides independent assurance to the Board of Directors on an ongoing basis on the quality and effectiveness of its internal controls, risk management, governance, systems and processes. The internal audit function in the Bank has sufficient authority, stature, independence, resources and co-sourced specialised vendors, thereby enabling Internal Auditors to carry out their assignments with objectivity. The Banks Internal Audit Function works in close co-ordination with second line of defence i.e. Risk Management Department and Compliance Department.

Internal Audit department develops an annual Audit Plan using appropriate risk based methodology, including risks or control concerns identified by Management and the Audit Committee, and submits that plan to the Audit Committee for review and approval. The annual Audit Plan covers all the Banking outlets (including BCs), Central Functions, Information System (IS) and Credit Process based on the regulatory guidelines issued by the RBI, Guidance Note on Risk Based Internal Audit (2002) and Internal Audit Policy framed by the bank.

Information System (IS) Audit is also part of internal audit function. The scope of IS audit covers all information systems used by the Bank in related activities viz. system planning, organisation, acquisition/ development, implementation, delivery and support to end-users. The scope also covers monitoring of implementation in terms of its process effectiveness, input/output controls and accomplishments of system goals. All IS audits are carried out periodically by a team of CISA qualified auditors and external CERT-in empanelled firms.

Internal Audit team carries audit diligently as per the approved plan, highlights the concerns at appropriate levels and reviews necessary corrective actions and ensures continuous engagement with stakeholders including regulators, investors and management for all key issues identified concerning with improvement in policies, procedures or their compliance.

RISKS AND CONCERNS

Managing risk is fundamental to ensuring the sustainable performance and organisational stability. Jana Small Finance Bank ("the Bank") recognizes that risk management is integral to sound business practices and endeavours to ensure that risks are identified, assessed, measured (where possible) and managed in a timely manner.

Integrated Risk Management framework

The Bank adopts an integrated risk management approach in order to develop a comprehensive view of risks faced in its businesses. The Banks risk management framework aligns risk and capital management to business strategies, aims to protect its financial strength and reputation and ensures support to business activities for adding value to customers while creating sustainable shareholder value. The Bank has a risk management structure that augments its risk evaluation and management capabilities while allowing it to stay nimble to adapt to the changing business and regulatory environment in an efficient and effective manner. The Board of Directors is responsible for the governance of risks and approves the Banks risk management policies. To ensure a focused approach, the Board has delegated the responsibility to Risk Management Committee of the Board, which reviews the implementation of risk management policies and monitors the risk mitigation measures. The Bank has various executive-level Committees such as Executive Risk Management Committee (Executive RMC), Asset Liability Management Committee (ALCO), Product Risk Management Committee (PRC), Functional Operational Risk Management Committee (FORC), Zonal Risk Management Committee (ZRMC), Customer Service Committee and Information Security Committee, among others, which meet periodically to review the risks comprehensively in the respective areas. The Bank also has an independent risk management function headed by the Chief Risk Officer.

Executive RMC is given the responsibility for governing all the Banks risks through a rollup of all risks for Risk aggregation, addressing corrective actions and to govern the corrective actions. The chairperson of the executive RMC is the CEO while CRO is a member and the convenor. Bank manages risks through a comprehensive framework of functional and unit KRIs for granular Risk self-assessment; review of KRIs and incidents by zonal-level committees and function-level committees for all enterprise processes.

Monitoring of KRIs

The Bank has identified over 242 KRIs over 12 functional verticals to monitor risk as part of the Operational Risk Management Framework. The thresholds for the KRIs have been finalised in consultation with the stakeholders. The threshold breaches are monitored the by the zonal and functional level committees and aggregated to the Executive RMC for review and governance.

Incident reporting

Process gaps or unforeseen events resulting in operational risk are reported through an incident reporting process. These incidents are subsequently reviewed to identify the cause and take corrective action and preventive action, as applicable. The incident description, root-cause and corrective actions are presented to the Executive RMC for review and guidance to strengthen controls.

Outsourcing Risk

‘Outsourcing is defined as the Banks use of a third party (either an affiliated entity within the corporate group or an entity that is external to the corporate group) to perform certain activities on a continuing basis that would normally be undertaken by the Bank itself, now or in the future. Key activities undertaken for Outsourcing risk assessment include the following : onboarding risk assessment covering financial strength; review of outsourcing contracts by the legal team, reference checks from other principals using their services and review of internal controls and service quality and ongoing risk monitoring to ensure that the renewal and updation of contracts, review of performance and business continuity. Bank outsourcing Risk is governed by the Executive RMC.

Business Continuity Management (BCP)

Banks BCP framework aims to ensure continued service to customers during unforeseen adverse events. Banks BCP governance includes periodical Business Impact Analysis (BIA), BCP testing and outsourcing reviews to monitor its BCP preparedness on an ongoing basis. The Banks Business Continuity Plan is governed by Executive RMC. For IT and Information Security processes, there are well-defined BCP testing protocols along with roles and responsibilities for disaster recovery programs. For non-IT, BCP is tested through periodic drills conducted to test the effectiveness of alternatives and recovery plans. Bank outsourcing Risk is governed by the Executive RMC.

Credit Risk

The Bank has put in place prudent risk management practices to manage Credit risk, beginning with the development and monitoring of statistical scorecards to screen borrowers credit worthiness, sound collateral assessment practices, robust assessment of borrower limits through credit policies and underwriting practices, disbursal related controls, early warning reviews to detect early signs of stress, risk grading of borrowers after 6 months on books and monitoring of accounts, to make sure that the potential losses arising out of Credit Risk are minimised. In FY23, the Bank focussed on further strengthening its risk management framework and undertaken several measures to strengthen the processes. The Bank Product Risk Committees (PRCs) conduct an in-depth analysis of key portfolio segments to identify pockets of stress within sub-segments like geography, ticket size, and customer segment, among others, on a regular basis and based on the findings, actions were taken to ensure there is no dilution in the overall asset quality of the Bank. In addition, the Bank through the PRCs conducts regular assessments of the Credit Scorecards to make sure that the Scorecard are discriminating the customers credit worthiness effectively. The Early Warning Signal framework supports the monitoring of Large Borrowers by reviewing qualitative and quantitative metrics to judge signs of stress. The Banks provisioning policy is conservation. In the past, Bank has been proactive in taking additional provisions to account for signs of stress wherever observed in the Banks portfolios. Stress testing forms an integral part of risk monitoring. The Bank carries out periodic stress testing to measure the effect of COVID, demonetization as well as other economic developments, to gain insights on the impact of extreme situations on the Banks risk profile, and capital position.

Operational Risk Management

Operational Risk is "the risk of loss resulting from inadequate or failed internal processes, people, systems or from external events. It excludes Strategic and Reputational Risks but includes Legal Risk". Strategic and Reputational risks are second-order effects of Operational Risk. Legal risk includes, however, is not limited to, exposure to penalties, fines, punitive damages arising out of supervisory action, civil litigation damages, related legal costs and any private settlements. Bank has a framework of Functional Operational Risk Management Committee (FORC) chaired by the respective functional heads and Zonal Risk Management Committee (ZRMC) chaired by designated zonal heads to oversees the functioning, implementation, and maintenance of operational risk management activities in the respective functions and areas, The FORCs and the ZRMCs report to the Executive RMC.

ALM and Market Risk Management

Market Risk is defined as the possibility of loss to a Bank caused by changes in the market variables such as interest rates, credit spreads, equity prices, etc. The Treasury Middle Office(TMO) unit is responsible for identifying and escalating any risk, limit excesses on a timely basis. The unit is also responsible for establishing a comprehensive risk management policy to identify, measure and manage liquidity and interest rate risk. The TMO unit monitors the investment portfolio and the daily activities carried out by Treasury along with the set risk tolerance limits as per market risk policy such as VaR, PV01, and Modified Duration. The impact of interest rate risk on trading books is actively measured using trading book risk metrics like PV01, duration etc. The Bank assesses interest rate risk in the balance sheet from both earnings and economic perspectives. Liquidity risk is assessed from both structural and dynamic perspectives, and the Bank uses various approaches like the stock approach, cash flow approach and stress test approach to assess liquidity risk. The risk team monitors the broad liquidity profile of the Bank through the Liquidity Coverage Ratio, Net Stable Funding Ratio and Structural Liquidity Statement.

Information Security Risk

The Bank has a robust risk management framework in place to identify, assess and manage information security risks and has made significant progress in enhancing its information security governance through monitoring at the IT steering and Information Security Committees. The Information Security Management System, Information Technology Division is Certified on ISO/IEC 27001:2013 Standard by British Standard Institute (BSI)

The Banks information Security committee addresses information and cyber security-related risks. The function is governed by Board-approved policies on information security and cyber security. Bank carries out periodical awareness exercises to ensure employees are updated on information security practices. It has invested in strong technical and administrative controls to proactively prevent, detect, contain and respond to any suspicious activity. The Bank has deployed a layered security defence with the latest technology tools to defend and protect information and assets. These include but are not limited to next-gen firewalls, intrusion prevention systems and anti-DDoS, next-gen anti-malware, proactive defence through web application firewalls, periodic vulnerability and penetration testing, security architecture review and data security assessments. A security operation centre is in place which monitors alerts and anomalies 24x7 in the Banks perimeter and internal network and systems. The Bank has put in place controls to ensure that security controls are on par with the defined standards. It periodically conducts phishing awareness and simulation exercises. Further, the advisories and alerts from regulators and CERT-In are acted upon to strengthen the Banks cyber and information security. The Bank also regularly participates in cyber drills conducted by the Institute of Development and Research on Banking Technology (IDRBT).