the obligation at the reporting date. These
estimates are reviewed at each reporting
date and adjusted to reflect the current best
estimates.

A contingent liability is a possible obligation
that arises from past events whose existence
will be confirmed by the occurrence or non¬
occurrence of one or more uncertain future
events beyond the control of the Bank or
a present obligation that is not recognized
because it is not probable that an outflow
of resources will be required to settle the
obligation. A contingent liability also arises in
extremely rare cases where there is a liability
that cannot be recognized because it cannot
be measured reliably. The Bank does not
recognize a contingent liability but discloses
its existence in the financial statements.
Contingent assets are neither recognised
nor disclosed in the financial statements.

3.17. CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprises of
Cash in Hand and Balances with RBI and
Balances with Banks and Money at Call and
Short Notice. The same item are considered
as cash and cash equivalents in preparation
of Cash Flow Statement.

3.18. SHORT SALE TRANSACTIONS

In respect of the short sale transactions
in Central Government dated securities,
the short position is covered by outright
purchase of an equivalent amount of the
same security within a maximum period of
three months including the day of trade. The
short position is reflected as the amount
received on sale in a separate account and is
classified under ''Other Liabilities''. The short
position is marked to market and loss, if any,
is charged to the Profit and Loss account,
while gain, if any, is not recognised. Profit
or loss on settlement of the short position is
recognised in the Profit and Loss account.

3.19. REWARD POINTS

The Bank runs a loyalty program, which seeks
to recognize and reward customers based
on their relationship with the Bank. Under
the program, eligible customers are granted
loyalty points redeemable in future, subject

to certain conditions. The Bank estimates
the probable redemption of such loyalty/
reward points using an actuarial method at
the Balance Sheet date by employing an
independent actuary. Provision for the said
reward points is then made based on the
actuarial valuation report as furnished by the
said independent actuary.

As per paragraph 53 of Reserve Bank of India (Small Finance Banks - Classification, Valuation, and Operation
of Investment Portfolio) Directions, 2025 dated November 28, 2025, the Bank transferred an amount of '' 0.17
Crore (Previous year '' Nil) from AFS - Reserve to Capital Reserve.

(iii) Special reserve

As per the provisions under Section 36(1)(viii) of Income Tax Act, 1961, the specified entity is allowed the
deduction in respect of any special reserve created and maintained by it, i.e. an amount not exceeding
twenty per cent of the profits derived from eligible business computed under the head :Profits and gains of
business or profession: (before making any deduction under this clause). This would be applicable till the
aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of
the paid up share capital (excluding the amounts capitalized from reserves) of the entity. During the year,
the Bank has transferred an amount of '' 6.88 Crore (Previous year '' 724 Crore) to Special Reserve. There is
no drawdown from this reserve during FY 2025-26 and FY 2024-25.

(iv) Investment Reserve and Revenue Reserve

During the current year, the Bank has not transferred any amount to Revenue Reserves.

During the previous year ended March 31, 2025, the Bank has implemented the revised RBI norms for the
classification, valuation and operation of investment portfolio, which became applicable from April 01, 2024.
In accordance with the revised RBI norms and the Bank''s Board approved policy, the Bank has classified
its investment portfolio as on April 01, 2024 under the categories of held to maturity (HTM), available for
sale (AFS) and fair value through profit and loss (FVTPL) with held for trading (HFT) as a sub- category of
FVTPL, and from that date, measures and values the investment portfolio under the revised framework.

Consequently, the Bank has accounted net transition valuation gain of '' 2.66 Crore (net of tax) in Revenue
Reserve, resulting into net positive impact on networth of the Bank on transition. The Bank has also transferred
balance in Investment Reserve amounting to '' 4.08 Crore on the date of the transition to Revenue Reserve in
compliance with these directions.

(v) Investment Fluctuation Reserve

During the FY 2025-26, the bank has apportioned '' Nil (Previous year : '' 20.00 Crore) to Investment
Fluctuation Reserve, based on the value of investments in FVTPL (including HFT) and AFS category, to
protect against future increase in yield, in accordance with RBI guidelines.

(vi) Declaration of Dividends

The Board of Directors has not recommended any dividend for the Financial Year 2025-26 and Financial
Year 2024-25.

The Liquidity Coverage Ratio (LCR) is a global minimum standard for bank liquidity. It aims to ensure that bank
has a adequate stock of unencumbered high-quality liquid assets (HQLA) that can be converted into cash
immediately to meet its liquidity needs for a 30 calendar day time horizon under stress scenario.

The LCR is calculated by dividing the amount of high quality liquid unencumbered assets (HQLA) by the estimated
net outflows over 30 calendar day period. The net cash outflows are calculated by applying RBI prescribed
outflow factors to the various categories of liabilities (deposits, unsecured and secured wholesale borrowings),
as well as to undrawn commitments and derivatives-related exposures, after netting for cash inflows from assets
maturing within 30 days.

Liquidity management of the Bank is undertaken by the Treasury department under the supervision of the Asset
Liability Management Committee (ALCO) in accordance with the Board approved policies and ALCO approved
funding plans.

The mandated regulatory threshold, with appropriate cushion to ensure maintenance of adequate liquidity
buffers is as per the board approved ALM policy of the Bank. Risk Management Department computes the LCR
and monitors the same as per the Operating guidelines for small finance banks. The Bank has been submitting
LCR reports to RBI since December 2016.

Currently the Liquidity Coverage Ratio is significantly higher than minimum regulatory threshold. As part of
its liquidity management strategy, the Bank invests in Level I assets thus ensuring comfortable level of HQLA
at all times to address any kind of liquidity stress. The Bank follows the criteria laid down by the RBI for the
calculation of High Quality Liquid Assets (HQLA), gross outflows and inflows within the next 30-days period.
HQLA predominantly comprises of Government securities viz. Treasury Bills, Central and State Government
securities.

The Bank is primarily funded through long term borrowings viz. Refinances & Customer Deposits. The Risk
Management Department measures and monitors the liquidity profile of the Bank with reference to the Board
approved limits on a static as well as on a dynamic basis supplemented by monitoring of key liquidity parameters.
The Bank assesses the impact on short term liquidity covering business projections under normal as well as
varying market conditions.The LCR reports along with projections are placed before the Bank''s ALCO for periodic
review and guidance of the committee.

The LCR is calculated by dividing the amount of high quality liquid unencumbered assets (HQLA) by the estimated
net outflows over 30 calendar day period. The net cash outflows are calculated by applying RBI prescribed
outflow factors to the various categories of liabilities (deposits, unsecured and secured wholesale borrowings),
as well as to undrawn commitments and derivatives-related exposures, after netting for cash inflows from assets
maturing within 30 days.

Liquidity management of the Bank is undertaken by the Treasury department under the supervision of the Asset
Liability Management Committee (ALCO) in accordance with the Board approved policies and ALCO approved
funding plans.

The mandated regulatory threshold, with appropriate cushion to ensure maintenance of adequate liquidity
buffers is as per the board approved ALM policy of the Bank. Risk Management Department computes the LCR
and monitors the same as per the Operating guidelines for small finance banks. The Bank has been submitting
LCR reports to RBI since December 2016.

Currently the Liquidity Coverage Ratio is significantly higher than minimum regulatory threshold. As part of
its liquidity management strategy, the Bank invests in Level I assets thus ensuring comfortable level of HQLA
at all times to address any kind of liquidity stress. The Bank follows the criteria laid down by the RBI for the
calculation of High Quality Liquid Assets (HQLA), gross outflows and inflows within the next 30-days period.
HQLA predominantly comprises of Government securities viz. Treasury Bills, Central and State Government
securities.

The Bank is primarily funded through long term borrowings viz. Refinances & Customer Deposits. The Risk
Management Department measures and monitors the liquidity profile of the Bank with reference to the Board
approved limits on a static as well as on a dynamic basis supplemented by monitoring of key liquidity parameters.
The Bank assesses the impact on short term liquidity covering business projections under normal as well as
varying market conditions.The LCR reports along with projections are placed before the Bank''s ALCO for periodic
review and guidance of the committee.

The objective of NSFR is to ensure that the Bank maintains a stable funding profile in relation to the composition
of its assets and off-balance sheet activities. A sustainable funding structure is intended to reduce the probability
of erosion of the Bank''s liquidity position due to disruptions in the Bank''s regular sources of funding that
would increase the risk of its failure and potentially lead to broader systemic stress. The NSFR limits the Bank''s
overreliance on short-term wholesale funding, thus encouraging better assessment of funding risk across all on-
and off-balance sheet items while promoting funding stability.

The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding.
“Available stable funding" (ASF) is defined as the portion of capital and liabilities expected to be reliable over
the time horizon considered by the NSFR, which extends to one year. The amount of stable funding required
(“Required stable funding”) (RSF) of a Bank is a function of the liquidity characteristics and residual maturities of
its on-and off balance sheet exposures.

Liquidity management of the Bank is undertaken by the Treasury department under the supervision of the Asset
Liability Management Committee (ALCO) in accordance with the Board approved policies and ALCO approved
funding plans. The mandated regulatory threshold with appropriate cushion to ensure maintenance of adequate
liquidity buffers is as per the board approved ALM policy of the Bank. Risk Management Department computes
the NSFR and monitors the same as per the operating guidelines for small finance banks. The Bank has been
submitting NSFR reports to RBI since December 2021.Currently the Net Stable Funding Ratio is at a comfortable
level well above the prescribed regulatory limit of 100%. The NSFR reports are placed before the Bank''s ALCO for
periodic review and guidance of the committee.

In accordance with the RBI guidelines, Banks are required to make consolidated pillar III and Net Stable Funding
Ratio (NSFR) disclosures under the Basel III Framework. These disclosures are available on the Bank''s website
at the following link: https://ir.equitas.bank.in/reports-and-presentations/. These disclosures are not subjected to
audit by the Statutory auditors of the Bank.

The objective of NSFR is to ensure that the Bank maintains a stable funding profile in relation to the composition
of its assets and off-balance sheet activities. A sustainable funding structure is intended to reduce the probability
of erosion of the Bank''s liquidity position due to disruptions in the Bank''s regular sources of funding that
would increase the risk of its failure and potentially lead to broader systemic stress. The NSFR limits the Bank''s
overreliance on short-term wholesale funding, thus encouraging better assessment of funding risk across all on-
and off-balance sheet items while promoting funding stability.

The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding.
“Available stable funding” (ASF) is defined as the portion of capital and liabilities expected to be reliable over
the time horizon considered by the NSFR, which extends to one year. The amount of stable funding required
(“Required stable funding”) (RSF) of a Bank is a function of the liquidity characteristics and residual maturities of
its on-and off balance sheet exposures.

Liquidity management of the Bank is undertaken by the Treasury department under the supervision of the Asset
Liability Management Committee (ALCO) in accordance with the Board approved policies and ALCO approved
funding plans. The mandated regulatory threshold with appropriate cushion to ensure maintenance of adequate
liquidity buffers is as per the board approved ALM policy of the Bank. Risk Management Department computes
the NSFR and monitors the same as per the operating guidelines for small finance banks. The Bank has been
submitting NSFR reports to RBI since December 2021.Currently the Net Stable Funding Ratio is at a comfortable
level well above the prescribed regulatory limit of 100%. The NSFR reports are placed before the Bank''s ALCO for
periodic review and guidance of the committee.

g) Sale and transfer of securities to/from HTM category

During the current year, through Conversion/Switch of security/Buyback auctions conducted by RBI, Bank
had sold SLR securities from HTM category with Book Value '' 996.02 Crore and subscribed government
securities as per the RBI press release. The bank had sold HTM securities with book value of '' 832.22 Crore
through open market operations(OMO) and '' 718.94 crore through buyback conducted by RBI. The bank
had also made outright sale transaction from HTM category of Book Value '' 348.18 Crore. As on March 31,
2026, Book value of the investments held in the HTM category is '' 7,312.41 Crore and book value over market
value is '' 126.79 Crore.

During the previous year, through Conversion/Switch of security auctions conducted by RBI, Bank had sold
SLR securities from HTM category with book value '' 100.60 Crore and subscribed government securities
as per the RBI press release. The Bank had sold HTM securities having book value of '' 616.66 Crore through
open market operations(OMO) conducted by RBI. The Bank had also made outright sale transaction from
HTM category of book value '' 321.36 Crore. As on March 31, 2025, market value of the investments held in
the HTM category is '' 7,278.56 Crore and market value over book value is '' 58.21 Crore.

g) Unhedged foreign currency exposure

The Bank monitors the Unhedged Foreign Currency Exposure (UFCE) of its borrowers in accordance with
the Reserve Bank of India''s Credit Risk Management guidelines on UFCE, as applicable to Small Finance
Banks and as amended from time to time.

In line with regulatory requirements, the Bank has established a robust framework for the identification,
measurement, and ongoing monitoring of UFCE as an integral part of its overall credit risk management
process. The Bank obtains periodic information on foreign currency exposures from borrowers, after
excluding fully hedged exposures and natural hedges, wherever applicable. The risks arising from UFCE are
factored into the internal credit rating framework and the credit appraisal and approval process.

The Bank assesses the potential loss arising from UFCE by applying exchange rate volatility factors, based
on historical data, to the unhedged foreign currency exposure. The borrower''s capacity to absorb such
losses is evaluated by comparing the estimated potential loss with earnings before interest and depreciation
(EBID). Based on this assessment, exposures are classified into prescribed risk buckets, which determine the
applicable incremental provisioning and capital requirements, in line with RBI guidelines, as detailed below:

(b) Forward rate agreement/Interest rate swap : Nil(c) Exchange traded interest rate derivatives: Nil(d) Disclosures on risk exposure in derivativesI) Qualitative disclosures

(i) The bank has a Market Risk Management department which oversees the management of risk in derivatives
trading. The Head of Market Risk reports to the Chief Risk Officer

(ii) The bank has employed advanced Treasury and Risk management systems to measure and monitor risks
involved in derivatives exposures. The Top management of the bank is informed on the risk exposures on a
daily basis.

(iii) The Bank''s policies on Trading and Investments include derivatives as an instrument for hedging
and/or mitigating risk and strategies and processes for monitoring the continuing effectiveness of
hedges/mitigants.

(iv) The bank has an adequate accounting policy for recording hedge and non-hedge transactions; recognition
of income, premiums and discounts; valuation of outstanding contracts; provisioning, collateral, and credit
risk mitigation.

(v) The Bank did not have any long-term contracts including derivative contracts as at year end for which there
were any material foreseeable losses.

12 DISCLOSURE OF PENALTIES IMPOSED BY THE RESERVE BANK OF INDIA

(i) During the year ended March 31, 2026, there are no penalties imposed by the Reserve Bank of India under

the provisions of the

(i) Banking Regulation Act, 1949,

(ii) Payment and Settlement Systems Act, 2007, and

(iii) Government Securities Act, 2006 (for bouncing of SGL)

During the previous year ended March 31, 2025, RBI has imposed penalty of '' 65 lakhs on the Bank for

non-compliance as under:

a) The Bank levied foreclosure charges in 479 floating rate term loans sanctioned to individual borrowers for
purposes other than business in non-compliance with RBI Directions on prohibiting levy of Foreclosure
Charges/Pre-payment Penalty on Floating Rate Term Loans to individuals for non-business purposes
and

b) The Bank obtained collateral security for 2,027 agricultural loans upto '' 1.6 lakhs in non-compliance with
RBI Circular on ''Credit Flow to Agriculture - Collateral free agricultural loans'' prohibiting banks from
obtaining collateral for agricultural loans upto '' 1.6 lakhs.)

(ii) Bank has not defaulted on reverse repo-related transactions during the current year or the previous year.

13 DISCLOSURE ON REMUNERATIONa) Qualitative disclosures(a) Information relating to the composition and mandate of the Nomination and Remuneration
Committee.

The Nomination and Remuneration Committee is chaired by an Independent Director and comprises
of four (4) other Independent Directors. The functions of the committee include: recommendation of
appointment of Directors to the board, evaluation of performance of the Directors, approval of the policy
for remuneration payable to Directors, employees, including senior management and key management

personnel, framing guidelines for the Employee Stock Option Scheme (ESOP Scheme) and deciding on
the grant of stock options to the employees and Whole-Time Director/s of the Bank.

(b) Information relating to the design and structure of remuneration processes and the key features and
objectives of remuneration policy:

Remuneration Policy of the Bank covers remuneration payable for directors and employees of the Bank
and all aspects of the compensation structure such as fixed pay, perquisites, bonus, guaranteed pay,
severance package, stock, pension plan and gratuity.

The Bank believes in a sound compensation practice that ensures effective governance of compensation,
alignment of compensation with prudent risk taking and effective supervisory oversight and stakeholder
engagement. This policy is framed in accordance with the guidelines laid down by Reserve Bank of India
(RBI) vide their Circular Reference no DOR. Appt. BC. No. 23/ 29.67001/ 2019-20 dated November 4,
2019 and replaced with RBI Master Directions RBI/DoR/2025-26/204 DoR.SOG(SPE).REC.No.123/13-
04-001/2025-26 dated November 28, 2025 and as amended thereafter.

The remuneration payable to Managing Director (:MD:)/Chief Executive Officer (:CEO:) and Executive
Director (ED) shall be based on the scope and responsibility that goes with such positions, shall be
comparable to the compensation of similar profiles in similar organizations and would be performance
linked. From time to time, the NRC may fix a maximum ceiling on the fixed/variable component of
compensation, subject to the approval of Reserve Bank of India and shareholders.

The Non-Executive Directors (:NED:) including Independent Directors of the Bank shall be paid
remuneration as a percentage of the net profits of the Bank for the financial year as may be fixed by the
Board from time to time, calculated as per the provisions of the Companies Act, 2013 and subject to the
limits fixed by the Reserve Bank of India, from time to time.

Further, within the above ceiling, the remuneration payable to the Chairman of the Board upto two times
the amount payable to other Non-Executive Directors and Independent Directors and further subject to
approval of RBI and the remuneration payable to the Chairman of the Audit Committee upto 1.5 times
the amount payable to other Non-Executive Directors and Independent Directors.

NEDs are to be paid sitting fee for each meeting of the Board/ Committees of the Board attended by
them, as may be approved by the Board pursuant to provisions of Section 197 of the Companies Act, 2013
read with Section 35B (1) of the Banking Regulation Act 1949. NEDs including Independent Directors shall
be reimbursed any out of pocket expenses incurred by them while performing duties for the Bank.

For the other categories of staff, the compensation is structured taking into account all relevant factors
such as the level of the position, roles and responsibilities and the prevailing compensation structure in
the industry for the similar role.

(c) Description of the ways in which current and future risks are taken into account in the remuneration
processes.

The Board of Directors through the Nomination and Remuneration Committee (“NRC”) is responsible for
formulating and making the necessary amendments to the Remuneration Policy for the Directors, Key
Managerial Persons (“KMP”) and Senior Executives of the Bank from time to time. The NRC considers
different aspects like risk-return alignment, cost to income ratio and the like in framing the remuneration
policy and practice.

Performance parameters specified for the MD/ CEO also includes risk and control considerations such as
Asset quality, implementation of guidelines on Compliance Risk Assessment, reviewing and enhancing
controls of the operating risk processes of the Bank.

The variable remuneration payable to MD/CEO & other Material Risk Takers are subject to malus and
clawback clauses to address issues such as losses in subsequent years due to acts in a given performance
year, gross negligence, serious lapses in credit underwriting process, serious violations in AML / KYC,
frauds and misconducts.

Further, the KRA''s for Senior Executives of the Bank are clearly defined with adequate weightage given to
Risk, Compliance, Credit & Asset Quality to ensure risks are assessed and mitigated. KRA''s of Executives
working in control functions like Risk & Compliance are defined independent of buisness results and no
weightage is given for achievement of business parameters/ targets to ensure independent evaluation.

(d) Description of the ways in which the Bank seeks to link performance during a performance
measurement period with levels of remuneration

The Bank follows Annual Performance Review (12 months period) to link performance. Remuneration is
fixed based on the grade and merit rating for all the employees. Individual performances are assessed
in line with business or deliveries of the Key Result Areas (KRA), top priorities of business, budgets,
risk alignment etc. The Performance Appraisal system assigns a rating based on the achievement or
otherwise of the KRAs. The change in remuneration is largely dependent on the rating assigned.

(e) A discussion of the bank’s policy on deferral and vesting of variable remuneration and a discussion of
the Bank’s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

The Bank has ensured the remuneration for Material Risk Takers in line with the RBI circular dated
November 04, 2019 and repalced with RBI Master Directions RBI/DoR/2025-26/204 DoR.SOG(SPE).
REC.No.123/13-04-001/2025-26 dated November 28, 2025 and as amended thereafter. Accordingly, the
variable pay of identified MRTs is determined between 100% to 300% of fixed pay. This variable pay is
further divided into cash and ESOPs. Both the cash and ESOPs of the said MRTs is to be deferred over
a period of three year in line with the risk taken and as per relevant RBI approval received from time to
time. Each such MRT has performance measures aligned to risk measures and the vesting of variable
pay is also pro-rated till the end of the deferral period.

(f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms)
that the Bank utilizes and the rationale for using these different forms.

Employees of the Bank are eligible for variable pay in terms of both cash and ESOPs. At field level the
variable pay is linked to defined performance targets. Other roles may be given variable pay based on
their performance ratings. The variable pay amount varies depending on both the role of the individual as
well as his/her performance levels. For Senior Executives of the Bank due consideration is also given to
the overall performance of the Bank & respective Division / Function apart from individual performance
ratings.

Employees above defined grade are eligible for Employee Stock Options issued by the Bank as
determined by the Nomination and Remuneration Committee of the Bank. These options are granted
annually based on performance ratings and role of the individual. Junior employees in cases of consistent
exemplary performance are also granted options being part of High Achievers Club.

In very select instances, employees are offered options over a four year period, with a quarter of the
options vesting every year. The vesting of the options are dependent on continuity and performance of
the said individual.

A variable component may also be made available for specific employees as agreed and included as a
part of their respective compensation structure. Variable pay for MRTs have been explained in (e) earlier.
As on the reporting date, the Bank does not have any form of variable remuneration other than as stated
above. Thus, the various types of Variable Pay is aligned over both Short and Long term periods.

g) Implementation of IFRS converged Indian Accounting Standards (Ind AS)

In January 2016, the Ministry of Corporate Affairs issued the roadmap for implementation of new Indian
Accounting Standards (Ind AS), converged with International Financial Reporting Standards (IFRS), for
scheduled commercial banks, insurance companies and non-banking financial companies (NBFCs). On
Oct 7, 2025, the Reserve Bank of India (RBI) issued Draft directions titled ::Draft Reserve Bank of India
(Scheduled Commercial Banks & All India Financial Institutions - Asset Classification, Provisioning and Income
Recognition) Directions, 2025. Subsequently, on April 27, 2026, the RBI finalized guidelines introducing a
forward-looking Expected Credit Loss (ECL) framework for asset classification, effective April 1, 2027.

However, Small Finance Banks are currently excluded from the applicability of these directions. currently the
implementation of Ind AS for Small finance banks has been deferred by RBI till further notice pending the
consideration of some recommended legislative amendments by the Government of India. The Bank is in an
advanced stage of preparedness for implementation of Ind AS, as and when these are made applicable to
the Small Finance banks.

As required by the RBI guidelines, the accounts of the Bank are converted into Ind AS pro-forma format
and submitted to the RBI at periodic intervals. The Bank carries out the Expected Loss provisioning using
Probability of default (PD) and Loss given Default (LGD) by considering historical data for the purpose of
IND AS pro-forma reporting and product pricing. The Bank has put in a place a comprehensive Expected
Credit Loss Framework.

h) Payment of DICGC Insurance Premium

The Bank has paid the deposit insurance premium, as applicable, to DICGC within the prescribed regulatory
timelines during the Current year and Previous year.

involve the exchange of currencies at a predetermined price on a future date. The notional principal of
such contracts is disclosed here. These contracts are classified under the Banking Book and Trading
book and the accounting treatment of these contracts is carried out in accordance with the board
approved accounting policy.

iv. Other items for which the Bank is contingently liable:

These include:

a) Capital commitments

b) Amount transferred to the RBI under the Depositor Education and Awareness Fund (DEAF)

c) Investment purchases pending settlement

d) Credit enhancements provided by the Bank towards securitisation

m) Dues to Micro and Small Enterprises

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified
on the basis of information collected by the Management. Based on the information available with the Bank,
there are no overdue amounts payable to Micro and Small Enterprises as defined under the Micro, Small and
Medium Enterprises Development Act, 2006 as at the Balance Sheet date. Further, the Bank has not paid
any interest to any Micro and Small Enterprises during the current and previous year.

r) Portfolio-level information on the use of funds raised from green deposits :

The Bank has not accepted green deposits during the current financial year (Previous year : Nil)

15 EMPLOYEE BENEFITS (AS 15)Defined Contribution Plan
Provident Fund and NPS

The Bank makes Provident Fund contributions and NPS contributions to State administered fund for qualifying
employees. The Bank is required to contribute a specified percentage of the payroll costs to the Fund. The
Bank has recognised '' 89.57 Crore (Previous Year '' 74.18 Crore) towards Provident Fund contributions and
NPS contributions in the Profit and Loss Account. The contributions payable to the fund by the Bank is at rates
specified in the rules of the scheme.

Defined Benefit Plans
Gratuity

The Bank has a funded gratuity scheme for its employees and the Gratuity liability has been made based on the
actuarial valuation done as at the year end. The details of actuarial valuation as provided by the Independent
Actuary is as follows:

n) Details of Single Borrower Limit / Group Borrower Limit exceeded by the bank.

During the year, the Bank has not exceeded the prudential credit exposure limit as prescribed by the Reserve
Bank of India in respect of Single Borrower and Group Borrowers. (Previous year: Nil).

o) Letters of Comfort

The Bank has not issued any letters of comfort during the year.(Previous year: Nil).

p) No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any
other sources or kind of funds) by the Bank to or in any other person(s) or entity(ies), including foreign entities
(:Intermediaries:) with the understanding, whether recorded in writing or otherwise, that the Intermediary
shall lend or invest in party identified by or on behalf of the bank (Ultimate Beneficiaries). The Bank has not
received any fund from any party(ies) (Funding Party) with the understanding that the Bank shall whether,
directly or indirectly lend or invest in other persons or entities identified by or on behalf of the bank (:Ultimate
Beneficiaries:) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

16 DISCLOSURES- ACCOUNTING STANDARDS
Segment Reporting (AS 17)

The business of the Bank is divided into three segments: Treasury, Wholesale Banking and Retail Banking
business. These segments have been identified and reported taking into account the target customer profile,
the nature of products and services, the different risks and returns, and the guidelines prescribed by RBI.
Also, refer Schedule 173.15.

21 EMPLOYEES STOCK OPTION SCHEME
a) ESFB ESOP 2019

During the year ended 31st March 2020, the bank established a employee stock option scheme titled ESFB
Employees Stock Option Scheme, 2019 (ESFB ESOP 2019) effective from November 22, 2019. Under the
plan, the Bank was authorized to issue upto 11,00,00,000 options (including 33,487,873 options under Grant
1 issued as a replacement option for the Scheme under the Holding Company) to eligible employees of the
Bank and the erstwhile Holding Company. Each option entitles for apply and allotment of one fully paid
share on payment of exercise price during the exercise period.

As on March 31, 2026, 3,08,53,018 (previous year 2,77,90,401) (net of forfeitures and cancellation) options
were outstanding, which were granted at various exercise prices. The following are the outstanding options
as on March 31, 2026.

Volatility

Volatility is a measure of the amount by which a price has fluctuated or is expected to fluctuate during a period.
The measure of Volatility used in the Black -Scholes option pricing model is the annualized standard deviation of
the continuously compounded rates of return on the stock over a period of time.

c) Dividend Yield

Expected dividend yield has been calculated based on the dividend declared for 1 financial year prior to the date
of grant. The dividend yield has been derived by dividing the dividend per share by the market price per share
on the date of grant.

3.16. Provisions, Contingent Liabilities and
Contingent Assets

A provision is recognized when the Bank has a
present obligation as a result of past event, it is
probable that an outflow of resources embodying
economic benefits will be required to settle the
obligation and a reliable estimate can be made
of the amount of the obligation. Provisions are
not discounted to their present value and are
determined based on the best estimate required to
settle the obligation at the reporting date. These
estimates are reviewed at each reporting date and
adjusted to reflect the current best estimates.

A contingent liability is a possible obligation that
arises from past events whose existence will be
confirmed by the occurrence or non-occurrence of
one or more uncertain future events beyond the
control of the Bank or a present obligation that
is not recognized because it is not probable that
an outflow of resources will be required to settle
the obligation. A contingent liability also arises
in extremely rare cases where there is a liability
that cannot be recognized because it cannot be
measured reliably. The Bank does not recognize
a contingent liability but discloses its existence in
the financial statements. Contingent assets are
neither recognised nor disclosed in the financial
statements.

3.17. Cash and Cash Equivalents

Cash and cash equivalents comprises of Cash
in Hand and Balances with RBI and Balances
with Banks and Money at Call and Short Notice.
The same item are considered as cash and cash
equivalents in preparation of Cash Flow Statement.

*During the year ended March 31, 2025, the Bank has allotted 49,75,142 (Previous year: 2,43,29,125) equity shares pursuant to
the exercise of options by its employees in accordance with the ESFB ESOP Scheme.

lb) Draw down from Reserves:

The Bank has not drawn down any amount from its opening reserves during the year ended March 31, 2025 and March 31,
2024.

lc) Appropriations to reserve:

(i) Statutory reserve

As mandated by the Banking Regulation Act, 1949, all banking companies incorporated in India shall create a reserve fund,
out of the balance of profit of each year as disclosed in the profit and loss account and before any dividend is declared and
transfer a sum equivalent to not less than twenty five per cent of such profit. The Bank has transferred '' 36.76 Crore (Previous
year ''199.74 Crore) to Statutory Reserve for the year.

(ii) Capital Reserve

During the year, the Bank had appropriated '' 12.31 Crore (Previous Year '' 1.15 Crore), net of taxes and transfer to statutory
reserve, to the Capital Reserve, being the gain on sale of HTM Investments in accordance with RBI guidelines.

(iii) Special reserve

As per the provisions under Section 36(1)(viii) of Income Tax Act, 1961, the specified entity is allowed the deduction in respect
of any special reserve created and maintained by it, i.e. an amount not exceeding twenty per cent of the profits derived
from eligible business computed under the head "Profits and gains of business or profession" (before making any deduction
under this clause). This would be applicable till the aggregate of the amounts carried to such reserve account from time to
time exceeds twice the amount of the paid up share capital (excluding the amounts capitalized from reserves) of the entity.
During the year, the Bank has transferred an amount of '' 7.24 Crore (Previous year '' 19.46 Crore) to Special Reserve. There
is no drawdown from this reserve during FY 2024-25 and FY 2023-24.

(iv) Investment Reserve and Revenue Reserve

The Bank has implemented the revised RBI norms for the classification, valuation and operation of investment portfolio,
which became applicable from April 01, 2024. In accordance with the revised RBI norms and the Bank''s Board approved
policy, the Bank has classified its investment portfolio as on April 01, 2024 under the categories of held to maturity (HTM),
available for sale (AFS) and fair value through profit and loss (FVTPL) with held for trading (HFT) as a sub- category of FVTPL,
and from that date, measures and values the investment portfolio under the revised framework.

Consequently, the Bank has accounted net transition valuation gain of '' 2.66 Crore (net of tax) in Revenue Reserve, resulting
into net positive impact on networth of the Bank on transition. The Bank has also transferred balance in Investment Reserve
amounting to '' 4.08 Crore on the date of the transition to Revenue Reserve in compliance with these directions.

During the Previous year FY 2023-24, in accordance with Reserve Bank of India guidelines, reversal of excess depreciation on
Investments to the profit and loss account, net off taxes and transfer to Statutory reserve is transferred to investment reserve.
The total amount required to be transferred to the investment reserve in FY 2023-24 is '' 1.78 Crore.

(v) Investment Fluctuation Reserve

During the FY 2024-25, the bank has apportioned '' 20.00 Crore (Previous year: '' 127.50 Crore) to Investment Fluctuation
Reserve, based on the value of investments in FVTPL (including HFT) and AFS category, to protect against future increase in
yield, in accordance with RBI guidelines.

(vi) Declaration of Dividends

The Board of Directors at their meeting held on April 30, 2025 has not recommended any dividend for the Financial Year
2024-25.

During the year, the Bank paid a dividend of '' 1.00 per equity share amounting to '' 113.67 Crore pertaining to the year
ended March 31, 2024, which has been considered as an appropriation from the Profit and Loss Account during the year.

The Liquidity Coverage Ratio (LCR) is a global minimum standard for Bank liquidity. It aims to ensure that a Bank has a adequate
stock of unencumbered high-quality liquid assets (HQLA) that can be converted into cash immediately to meet its liquidity needs
for a 30 calendar day time horizon under stress scenario.

The LCR is calculated by dividing the amount of high quality liquid unencumbered assets (HQLA) by the estimated net outflows over
30 calendar day period. The net cash outflows are calculated by applying RBI prescribed outflow factors to the various categories
of liabilities (deposits, unsecured and secured wholesale borrowings), as well as to undrawn commitments and derivatives-related
exposures, after netting for cash inflows from assets maturing within 30 days.

Liquidity management of the Bank is undertaken by the Treasury department under the supervision of the Asset Liability
Management Committee (ALCO) in accordance with the Board approved policies and ALCO approved funding plans.

The mandated regulatory threshold with appropriate cushion to ensure maintenance of adequate liquidity buffers is as per the
Board approved ALM policy of the Bank. Risk Management Department computes the LCR and monitors the same as per the
operating guidelines for small finance banks. The Bank has been submitting LCR reports to RBI since December 2016.

Currently, the Liquidity Coverage Ratio is significantly higher than minimum regulatory threshold. As a part of its liquidity
management strategy, the Bank invests in Level I assets thus ensuring comfortable level of HQLA at all times to address any kind
of liquidity stress. The Bank follows the criteria laid down by the RBI for the calculation of High Quality Liquid Assets (HQLA), gross
outflows and inflows within the next 30-days period. HQLA predominantly comprises of Government securities viz. Treasury Bills,
Central and State Government securities.

The Bank is primarily funded through long term borrowings viz. Refinances & Customer Deposits. The Risk Management
Department measures and monitors the liquidity profile of the Bank with reference to the Board approved limits on a static as
well as on a dynamic basis supplemented by monitoring of key liquidity parameters. The Bank assesses the impact on short term
liquidity covering business projections under normal as well as varying market conditions. The LCR reports along with projections
are placed before the Bank''s ALCO for periodic review and guidance of the committee.

Liquidity management of the Bank is undertaken by the Treasury department under the supervision of the Asset Liability
Management Committee (ALCO) in accordance with the Board approved policies and ALCO approved funding plans.

The mandated regulatory threshold with appropriate cushion to ensure maintenance of adequate liquidity buffers is as per the
Board approved ALM policy of the Bank. Risk Management Department computes the LCR and monitors the same as per the
operating guidelines for small finance banks. The Bank has been submitting LCR reports to RBI since December 2016.

Currently, the Liquidity Coverage Ratio is significantly higher than minimum regulatory threshold. As a part of its liquidity
management strategy, the Bank invests in Level I assets thus ensuring comfortable level of HQLA at all times to address any kind
of liquidity stress. The Bank follows the criteria laid down by the RBI for the calculation of High Quality Liquid Assets (HQLA), gross
outflows and inflows within the next 30-days period. HQLA predominantly comprises of Government securities viz. Treasury Bills,
Central and State Government securities.

The Bank is primarily funded through long term borrowings viz. Refinances & Customer Deposits. The Risk Management
Department measures and monitors the liquidity profile of the Bank with reference to the Board approved limits on a static as
well as on a dynamic basis supplemented by monitoring of key liquidity parameters. The Bank assesses the impact on short term
liquidity covering business projections under normal as well as varying market conditions. The LCR reports along with projections
are placed before the Bank''s ALCO for periodic review and guidance of the committee.

The objective of NSFR is to ensure that the Bank maintains a stable funding profile in relation to the composition of its assets and
off-balance sheet activities. A sustainable funding structure is intended to reduce the probability of erosion of the Bank''s liquidity
position due to disruptions in the Bank''s regular sources of funding that would increase the risk of its failure and potentially lead
to broader systemic stress. The NSFR limits the Bank''s overreliance on short-term wholesale funding, thus encouraging better
assessment of funding risk across all on- and off-balance sheet items while promoting funding stability.

The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. "Available stable
funding" (ASF) is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the
NSFR, which extends to one year. The amount of stable funding required ("Required stable funding") (RSF) of a Bank is a function
of the liquidity characteristics and residual maturities of its on-and off balance sheet exposures.

Liquidity management of the Bank is undertaken by the Treasury department under the supervision of the Asset Liability Management
Committee (ALCO) in accordance with the Board approved policies and ALCO approved funding plans. The mandated regulatory
threshold with appropriate cushion to ensure maintenance of adequate liquidity buffers is as per the Board approved ALM policy
of the Bank. Risk Management Department computes the NSFR and monitors the same as per the operating guidelines for small
finance banks. The Bank has been submitting NSFR reports to RBI since December 2021. Currently, the Net Stable Funding Ratio
is at a comfortable level well above the prescribed regulatory limit of 100%. The NSFR reports are placed before the Bank''s ALCO
for periodic review and guidance of the committee.

The objective of NSFR is to ensure that the Bank maintains a stable funding profile in relation to the composition of its assets and
off-balance sheet activities. A sustainable funding structure is intended to reduce the probability of erosion of the Bank''s liquidity
position due to disruptions in the Bank''s regular sources of funding that would increase the risk of its failure and potentially lead
to broader systemic stress. The NSFR limits the Bank''s overreliance on short-term wholesale funding, thus encouraging better
assessment of funding risk across all on- and off-balance sheet items while promoting funding stability.

The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. "Available stable
funding" (ASF) is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the
NSFR, which extends to one year. The amount of stable funding required ("Required stable funding") (RSF) of a Bank is a function
of the liquidity characteristics and residual maturities of its on-and off balance sheet exposures.

Liquidity management of the Bank is undertaken by the Treasury department under the supervision of the Asset Liability Management
Committee (ALCO) in accordance with the Board approved policies and ALCO approved funding plans. The mandated regulatory
threshold with appropriate cushion to ensure maintenance of adequate liquidity buffers is as per the Board approved ALM policy
of the Bank. Risk Management Department computes the NSFR and monitors the same as per the operating guidelines for small
finance banks. The Bank has been submitting NSFR reports to RBI since December 2021. Currently, the Net Stable Funding Ratio
is at a comfortable level well above the prescribed regulatory limit of 100%. The NSFR reports are placed before the Bank''s ALCO
for periodic review and guidance of the committee.

In accordance with the RBI guidelines, Banks are required to make consolidated pillar III and Net Stable Funding Ratio (NSFR)
disclosures under the Basel III Framework. These disclosures are available on the Bank''s website at the following link: https://
ir.equitasbank.com/reports-and-presentations/. These disclosures are not subjected to audit by the Statutory auditors of the Bank.

**Personal loans includes Housing Loans, Loan Against Property and Loan Against Gold

The Bank has compiled and furnished the data for the purpose of this disclosure from its internal MIS system/reports.

c) Overseas assets, NPAs and revenue

The Bank does not have any overseas branches and hence the disclosure regarding overseas assets, NPAs and revenue is not
applicable (Previous Year: Nil).

d) Particulars of resolution plan and restructuring

The Bank has not done any restructuring of advances under "Prudential Framework for Resolution of Stressed Assets" issued
vide circular DBR.No.BPBC.45/21.04.048/2018-19 dated June 7, 2019.

e) Divergence in asset classification and provisioning

No disclosure on divergence in asset classification and provisioning for NPAs is required with respect to RBI''s supervisory
process for the year ended 31st March 2025 and 31st March 2024, based on the conditions mentioned in RBI circular No.
DOR. ACC.REC.No.74/21.04.018/2022-23 dated 11th October 2022.

Exposure represents the higher of the sanctioned or outstanding to Real estate sector.

"Includes exposure to Home Loans as well as Loan Against Property (incl Residential mortgages), other than those classified under
CRE-RH; inclusive of IBPC exposure as on March 31, 2025: "Nil" (Previous year: '' 500 crore)

**Commercial Real estate exposure classification is based on RBI circular DBOD.BP.BC.No. 42/08.12.015/2009-10 dated September
9, 2009 and includes. a) Exposure to Real Estate Builders/ Developers and b) Exposures where the primary source of cash flow,
i.e. more than 50% of cash flows, for repayment/recovery is from lease or rental payments and such assets are taken as security.

$Indirect exposure includes a) Non-SLR investment in HFCs & b) Loan to HFCs

#Priority sector loans excludes Securitized assets, if any, and IBPC and PSLCs

12 Disclosure of penalties imposed by the Reserve Bank of India

During the year ended March 31, 2025, RBI has imposed penalty of '' 65 lakhs on the Bank for non-compliance as under:

a) The Bank levied foreclosure charges in 479 floating rate term loans sanctioned to individual borrowers for purposes
other than business in non-compliance with RBI Directions on prohibiting levy of Foreclosure Charges/Pre-payment
Penalty on Floating Rate Term Loans to individuals for non-business purposes and

b) The Bank obtained collateral security for 2,027 agricultural loans upto '' 1.6 lakhs in non-compliance with RBI Circular on
''Credit Flow to Agriculture - Collateral free agricultural loans'' prohibiting Banks from obtaining collateral for agricultural
loans upto ''1.6 lakhs.

(Previous year: Nil)

13 Disclosure on remuneration

a) Qualitative disclosures

(a) Information relating to the composition and mandate of the Nomination and Remuneration Committee.

The Nomination and Remuneration Committee is chaired by an Independent Director and comprises of four (4) other
Independent Directors. The functions of the committee include: recommendation of appointment of Directors to
the Board, evaluation of performance of the Directors, approval of the policy for remuneration payable to Directors,
employees, including senior management and key management personnel, framing guidelines for the Employee Stock
Option Scheme (ESOP Scheme) and deciding on the grant of stock options to the employees and Whole Time Director/s
of the Bank.

(b) Information relating to the design and structure of remuneration processes and the key features and
objectives of remuneration policy:

Remuneration Policy of the Bank covers remuneration payable for directors and employees of the Bank and all aspects
of the compensation structure such as fixed pay, perquisites, bonus, guaranteed pay, severance package, stock, pension
plan and gratuity.

The Bank believes in a sound compensation practice that ensures effective governance of compensation, alignment of
compensation with prudent risk taking and effective supervisory oversight and stakeholder engagement. This policy is
framed in accordance with the guidelines laid down by Reserve Bank of India (RBI) vide their Circular Reference no DOR.
Appt. BC. No. 23/ 29.67.001/ 2019-20 dated November 4, 2019

The remuneration payable to Managing Director ("MD")/Chief Executive Officer ("CEO") and Executive Director ("ED")
shall be based on the scope and responsibility that goes with such positions, shall be comparable to the compensation
of similar profiles in similar organizations and would be performance linked. From time to time, the NRC may fix a
maximum ceiling on the fixed/variable component of compensation, subject to the approval of Reserve Bank of India
and shareholders.

The Non-Executive Directors ("NED") including Independent Directors of the Bank shall be paid remuneration as a
percentage of the net profits of the Bank for the financial year as may be fixed by the Board from time to time,
calculated as per the provisions of the Companies Act, 2013 and subject to the limits fixed by the Reserve Bank of India,
from time to time.

Further, within the above ceiling, the remuneration payable to the Chairman of the Board shall be two times the amount
payable to other Non-Executive Directors and Independent Directors and further subject to approval of RBI and the
remuneration payable to the Chairman of the Audit Committee shall be 1.5 times the amount payable to other Non¬
Executive Directors and Independent Directors.

NEDs are to be paid sitting fee for each meeting of the Board/ Committees of the Board attended by them, as may
be approved by the Board pursuant to provisions of Section 197 of the Companies Act, 2013 read with Section 35B
(1) of the Banking Regulation Act 1949. NEDs including Independent Directors shall be reimbursed any out of pocket
expenses incurred by them while performing duties for the Bank.

For the other categories of staff, the compensation is structured taking into account all relevant factors such as the level
of the position, roles and responsibilities and the prevailing compensation structure in the industry for the similar role.

(c) Description of the ways in which current and future risks are taken into account in the remuneration
processes.

The Board of Directors through the Nomination and Remuneration Committee ("NRC") is responsible for formulating
and making the necessary amendments to the Remuneration Policy for the Directors, Key Managerial Persons ("KMP")
and Senior Executives of the Bank from time to time. The NRC considers different aspects like risk-return alignment, cost
to income ratio and the like in framing the remuneration policy and practice.

Performance parameters specified for the MD/ CEO also includes risk and control considerations such as Asset quality,
implementation of guidelines on Compliance Risk Assessment, reviewing and enhancing controls of the operating risk
processes of the Bank, enhancing the efficacy of the process & Quality Assurance Department.

The variable remuneration payable to MD/CEO & other Material Risk Takers are subject to malus and clawback clauses
to address issues such as losses in subsequent years due to acts in a given performance year, gross negligence, serious
lapses in credit underwriting process, serious violations in AML/KYC, frauds and misconducts.

Further, the KRA''s for Senior Executives of the Bank are clearly defined with adequate weightage given to Risk,
Compliance, Credit & Asset Quality to ensure risks are assessed and mitigated. KRA''s of Executives working in control
functions like Risk & Compliance are defined independently and no weightage is given for achievement of business
parameters/ targets to ensure independent evaluation.

(d) Description of the ways in which the Bank seeks to link performance during a performance measurement
period with levels of remuneration

The Bank follows Annual Performance Review (12 months period) to link performance. Remuneration is fixed based on
the grade and merit rating for all the employees. Individual performances are assessed in line with business or deliveries
of the Key Result Areas (KRA), top priorities of business, budgets, risk alignment etc. The Performance Appraisal system
assigns a rating based on the achievement or otherwise of the KRAs. The change in remuneration is largely dependent
on the rating assigned.

(e) A discussion of the Bank''s policy on deferral and vesting of variable remuneration and a discussion of the
Bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

The Bank has ensured the remuneration for Material Risk Takers in line with the RBI circular dated November 4, 2019.
Accordingly, the variable pay of identified MRTs is determined between 100% to 300% of fixed pay. This variable
pay is further divided into cash and ESOPs. Both the cash and ESOPs of the said MRTs is to be deferred over a period
of three year in line with the risk taken and as per relevant RBI approval received from time to time. Each such MRT
has performance measures aligned to risk measures and the vesting of variable pay is also pro-rated till the end of the
deferral period.

(f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that
the Bank utilizes and the rationale for using these different forms.

Employees of the Bank are eligible for variable pay in terms of both cash and ESOPs. At field level the variable pay is
linked to defined performance targets. Other roles may be given variable pay based on their performance ratings. The
variable pay amount varies depending on both the role of the individual as well as his/her performance levels. For Senior
Executives of the Bank due consideration is also given to the overall performance of the Bank & respective Division/
Function apart from individual performance ratings.

Employees above defined grade are eligible for Employee Stock Options issued by the Bank as determined by the
Nomination and Remuneration Committee of the Bank. These options are granted annually based on performance
ratings and role of the individual. Junior employees in cases of consistent exemplary performance are also granted
options being part of High Achievers Club.

I n very select instances, employees are offered options over a four year period, with a quarter of the options vesting
every year. The vesting of the options are dependent on continuity and performance of the said individual.

A variable component may also be made available for specific employees as agreed and included as a part of their
respective compensation structure. Variable pay for MRTs have been explained in (e) earlier.

As on the reporting date, the Bank does not have any form of variable remuneration other than as stated above. Thus,
the various types of Variable Pay is aligned over both Short and Long term periods.

g) Implementation of IFRS converged Indian Accounting Standards (Ind AS)

In January 2016, the Ministry of Corporate Affairs issued the roadmap for implementation of new Indian Accounting Standards
(Ind AS), converged with International Financial Reporting Standards (IFRS), for scheduled commercial Banks, insurance companies
and non-banking financial companies (NBFCs). However, currently the implementation of Ind AS for Banks has been deferred by
RBI till further notice pending the consideration of some recommended legislative amendments by the Government of India. The
Bank is in an advanced stage of preparedness for implementation of Ind AS, as and when these are made applicable to the Indian
Banks

As required by the RBI guidelines, the accounts of the Bank are converted into Ind AS format and submitted to the RBI at periodic
intervals. The Bank carries out the Expected Loss provisioning using Probability of Default (PD) and Loss given Default (LGD) by
considering historical data for the purpose of Ind AS pro-forma reporting and product pricing. The Bank has put in a place a
comprehensive Expected Credit Loss Framework.

l) Description of Contingent liabilities

i. Claims against the Bank not acknowledged as debts:

Claims against the Bank not acknowledged as debts includes liability on account of Service tax, Goods and Service Tax and Income
Tax. The Bank is a party to various legal proceedings in the ordinary course of business which are contested by the Bank and are
therefore subjudice. The Bank does not expect the outcome of these proceedings to have a material adverse impact on the Bank''s
financial position.

ii. Guarantees given on behalf of constituents:

As a part of Banking activities, the Bank issues Letter of Guarantees on behalf of its customers, with a view to augment the
customer''s credit standing. Through these instruments, the Bank undertakes to make payments for its customers obligations
either directly or in case the customer fails to fulfill their financial or performance obligations.

iii. Other items for which the Bank is contingently liable:

These include:

a) Capital commitments

b) Amount transferred to the RBI under the Depositor Education and Awareness Fund (DEAF)

c) Investment purchases pending settlement

d) Credit enhancements provided by the Bank towards securitisation

m) Dues to Micro and Small Enterprises

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of
information collected by the Management. Based on the information available with the Bank, there are no overdue amounts
payable to Micro and Small Enterprises as defined under the Micro, Small and Medium Enterprises Development Act, 2006 as
at the Balance Sheet date. Further, the Bank has not paid any interest to any Micro and Small Enterprises during the current and
previous year.

*Amount pertains to Provision for Leave encashment '' 41.51 Crore (Previous year: '' 28.21 Crore), Provision for Gratuity '' 3.91
Crore (Previous year: '' 6.61 Crore) and Provision for Bonus and Others '' 7.96 Crore (Previous year: '' 7.29 Crore).

21 Employees Stock Option Scheme

a) Change in Accounting Policy:

The Bank was following the intrinsic value method to account for its stock based employee compensation plans (Employees other
than WTD/CEO/MRTs) and fair value method stock options using Black-Scholes model for all the options granted after March 31,
2021 to WTD/CEO/MRTs as required under RBI circular.

The Bank, having regard to the RBI advisory, had changed the accounting policy from intrinsic value method to fair value method
for all employee stock options granted after March 31, 2021 and consequently recognised fair value of options estimated using
Black-Scholes model, as compensation expense over the vesting period.

As a result, the Bank had additionally provided '' 29.21 Crore on March 31,2024 as employee stock options expenses and included
under operating expenses (employees cost).

b) ESFB ESOP 2019

During the year ended March 31, 2020, the bank established a employee stock option scheme titled ESFB Employees Stock
Option Scheme, 2019 (ESFB ESOP 2019) effective from November 22, 2019. Under the plan, the Bank was authorized to issue
upto 11,00,00,000 options (including 3,34,87,873 options under Grant 1 issued as a replacement option for the Scheme under
the Holding Company) to eligible employees of the Bank and the erstwhile Holding Company. Each option entitles for apply and
allotment of one fully paid share on payment of exercise price during the exercise period.

As on March 31, 2025, 2,77,90,401 (previous year 2,83,40,185) (net of forfeitures and cancellation) options were outstanding,
which were granted at various exercise prices. The following are the outstanding options as on March 31, 2025.

Volatility

Volatility is a measure of the amount by which a price has fluctuated or is expected to fluctuate during a period. The measure of
volatility used in the Black -Scholes option pricing model is the annualized standard deviation of the continuously compounded
rates of return on the stock over a period of time.

d) Dividend Yield

Expected dividend yield has been calculated based on the dividend declared for 1 financial year prior to the date of grant. The
dividend yield has been derived by dividing the dividend per share by the market price per share on the date of grant.

22 Prior period comparatives

Prior period comparatives have been reclassified/regrouped by the management, wherever necessary.

As per our report of even date

For ASA & Associates LLP, For Equitas Small Finance Bank Limited

Chartered Accountants

Firm Registration No.: 009571N/N500006

G N Ramaswami Anil Kumar Sharma Vasudevan PN Balaji Nuthalapadi

Partner Part time Chairman and Managing Director and Executive Director

Membership No: 202363 Independent Director Chief Executive Officer DIN:08198456

Place: Chennai DIN:08537123 DIN:01550885 Place: Chennai

Date: April 30, 2025 Place: Chennai Place: Chennai Date: April 30, 2025

Date: April 30, 2025 Date: April 30, 2025

For Suri & Co,

Chartered Accountants
Firm Registration No.: 004283S

Sanjeev Aditya M N Sridharan Ramanathan N

Partner Chief Financial Officer Company Secretary

Membership No: 229694 M.No:28366

Place: Mumbai Place: Chennai Place: Chennai

Date: April 30, 2025 Date: April 30, 2025 Date: April 30, 2025

3.17. Provisions, Contingent Liabilities and Contingent Assets

A provision is recognised when the Bank has a present obligation as a result of past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the reporting date. These estimates are reviewed at each reporting date and adjusted to reflect the current best estimates.

A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Bank or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in extremely rare cases where there is a liability that cannot be recognised because it cannot be measured reliably. The Bank does not recognise a contingent liability but discloses its existence in the financial statements. Contingent assets are neither recognised nor disclosed in the financial statements.

3.18. Cash and Cash Equivalents

Cash and cash equivalents comprises of Cash in Hand and Balances with RBI and Balances with Banks and Money at Call and Short Notice. Cash and cash equivalents for the purpose of cash flow statement comprise of Cash in Hand and Balances with RBI and Balances with Banks and Money at Call and Short Notice.

3.19. Short sale transactions

In respect of the short sale transactions in Central Government dated securities, the short position is covered by outright purchase of an equivalent amount of the same security within a maximum period of three months including the day of trade. The short position is reflected as the amount received on sale in a separate account and is classified under ''Other Liabilities''. The short position is marked to market and loss, if any, is charged to the Profit and Loss account, while gain, if any, is not recognised. Profit or loss on settlement of the short position is recognised in the Profit and Loss account.

3.20. Reward Points

The Bank runs a loyalty program, which seeks to recognise and reward customers based on their relationship with the Bank. Under the program, eligible customers are granted loyalty points redeemable in future, subject to certain conditions. The Bank estimates the probable redemption of such loyalty/reward points using an actuarial method at the Balance Sheet date by employing an independent actuary. Provision for the said reward points is then made based on the actuarial valuation report as furnished by the said independent actuary.

3.21. Share issue expenses

Share issue expenses are adjusted from Share Premium Account in terms of Section 52 of the Companies Act, 2013.

3.22. Corporate social responsibility

Expenditure towards corporate social responsibility, in accordance with Companies Act, 2013, is recognised in the Profit and Loss Account.

(a) The Bank, during the year ended March 31,2024 has allotted 2,43,29,125 (Previous year 29,38,696 ) equity shares of '' 10/-each, fully paid up, on exercise of options by its employees in accordance with the ESFB ESOP Scheme.

(b) As per the approved Scheme of amalgamation, 933,943,363 shares held by Equitas Holdings Limited are to be extinguished and 789,535,166 shares are to be allotted to the shareholders of Equitas Holdings Limited upon the scheme becoming effective. The Board of Directors on their meeting held on February 08, 2023 have approved allotment and extinguishment of shares. Accordingly, the effect of such adjustments are given as on Appointed date i.e. January 01, 2023.

1 b) Draw down from Reserves:

The Bank has not drawn down any amount from its opening reserves during the year ended March 31,2024 and March 31, 2023. Please refer note no.18.21 for amalgamation of Equitas Holdings Ltd with Bank.

1 c) Appropriations to reserve:

(i) Statutory reserve

As mandated by the Banking Regulation Act, 1949, all banking companies incorporated in India shall create a reserve fund, out of the balance of profit of each year as disclosed in the profit and loss account and before any dividend is declared and transfer a sum equivalent to not less than twenty five percent of such profit. The Bank has transferred '' 199.74 Crore (Previous year '' 143.40 Crore) to Statutory Reserve for the year.

(ii) Capital Reserve

During the year, the Bank had appropriated '' 1.15 Crore (Previous Year '' Nil ), net of taxes and transfer to statutory reserve, to the Capital Reserve, being the gain on sale of HTM Investments in accordance with RBI guidelines.

(iii) Special reserve

As per the provisions under Section 36(1)(viii) of Income Tax Act, 1961, the specified entity is allowed the deduction in respect of any special reserve created and maintained by it, i.e. an amount not exceeding twenty percent of the profits derived from eligible business computed under the head "Profits and gains of business or profession" (before making any deduction under this clause). This would be applicable till the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid up share capital (excluding the amounts capitalised from reserves) of the entity. During the year, the Bank has transferred an amount of '' 19.46 Crore (Previous year '' 12.02 Crore) to Special Reserve. There is no drawdown from this reserve during FY 2023-24 and FY 2022-23.

(iv) Investment Reserve

In accordance with Reserve Bank of India guidelines, reversal of excess depreciation on Investments to the profit and loss account, net off taxes and transfer to Statutory reserve is transferred to investment reserve. The total amount required to be transferred to the investment reserve in FY 2023-24 is '' 1.78 Crore (Previous year : Nil).

(v) Investment Fluctuation Reserve

During the FY 2023-24, the Bank has apportioned '' 127.50 Crore (Previous year : '' 38.08 Crore) to Investment Fluctuation Reserve, based on the value of investments in HFT and AFS category, to protect against future increase in yield, in accordance RBI guidelines.

(vi) Declaration of Dividends

The Board of Directors at their meeting held on April 24, 2024 proposed a dividend of '' 1.00 per share amounting to '' 113.49 Crore for the year ended March 31, 2024 (previous year: '' 1.00 per share amounting to '' 111.06 Crore) which is subject to shareholders approval in ensuing Annual General Meeting. In terms of revised Accounting Standard (AS) 4 ''Contingencies and Events occurring after the Balance sheet date'' as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank has not appropriated proposed dividend aggregating '' 113.49 Crore from Profit and Loss Account. However, the effect of the proposed dividend has been reckoned in determining Capital funds in the computation of capital adequacy ratio as at March 31,2024.

The objective of NSFR is to ensure that Banks maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities. A sustainable funding structure is intended to reduce the probability of erosion of a Bank''s liquidity position due to disruptions in a Bank''s regular sources of funding that would increase the risk of its failure and potentially lead to broader systemic stress. The NSFR limits overreliance on short-term wholesale funding, encourages better assessment of funding risk across all on- and off-balance sheet items, and promotes funding stability.

The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding "Available stable funding" (ASF) is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to one year. The amount of stable funding required ("Required stable funding") (RSF) of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by that institution as well as those of its off-balance sheet (OBS) exposures.

Liquidity management of the Bank is undertaken by the Treasury department under the central oversight of the Asset Liability Management Committee (ALCO) in accordance with the Board approved policies and ALCO approved funding plans. The

The objective of NSFR is to ensure that Banks maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities. A sustainable funding structure is intended to reduce the probability of erosion of a Bank''s liquidity position due to disruptions in a bank''s regular sources of funding that would increase the risk of its failure and potentially lead to broader systemic stress. The NSFR limits overreliance on short-term wholesale funding, encourages better assessment of funding risk across all on- and off-balance sheet items, and promotes funding stability.

The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. "Available stable funding" (ASF) is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to one year. The amount of stable funding required ("Required stable funding") (RSF) of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by that institution as well as those of its off-balance sheet (OBS) exposures.

Liquidity management of the Bank is undertaken by the Treasury department under the central oversight of the Asset Liability Management Committee (ALCO) in accordance with the Board approved policies and ALCO approved funding plans. The mandated regulatory threshold as per the transition plan is embedded in the Board approved ALM policy of the Bank, with appropriate cushion to ensure maintenance of adequate liquidity buffers. Risk Management Department computes the NSFR and monitors the same as per the operating guidelines for small finance banks. The Bank has been submitting NSFR reports to RBI from December 2021. Currently the Net Stable Funding Ratio is at optimal level compared with the prescribed regulatory limit of 100%. The Bank is consistently increasing the Available Stable Funds from stable customers which significantly increases NSFR. Periodical reports are placed before the Bank''s ALCO for perusal and review.

In accordance with the RBI guidelines, Banks are required to make Net Stable Funding Ratio (NSFR) disclosures under the Basel III Framework. These disclosures are available on the Bank''s website at the following link: https://ir.equitasbank.com/reports-and-presentations/. The quarterly disclosures are not subjected to audit by the Statutory auditors of the Bank.

(b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy:

Remuneration policy of the Bank covers remuneration payable for directors and employees of the Bank and all aspects of the compensation structure such as fixed pay, perquisites, bonus, guaranteed pay, severance package, stock, pension plan and gratuity.

The Bank believes in a sound compensation practice that ensures effective governance of compensation, alignment of compensation with prudent risk taking and effective supervisory oversight and stakeholder engagement. This policy is framed in accordance with the guidelines laid down by Reserve Bank of India (RBI) vide their circular reference no DOR. Appt. BC. No. 23/ 29.67.001/ 2019-20 dated November 04, 2019.

The remuneration payable to Managing Director ("MD")/Chief Executive Officer ("CEO") shall be based on the scope and responsibility that goes with such positions, shall be comparable to the compensation of MD/CEO of similar profiles in similar organisations and would be performance linked. From time to time, the NRC may fix a maximum ceiling on the fixed/variable component of compensation, subject to the approval of Reserve Bank of India and shareholders.

The Non-Executive Directors ("NED") including Independent Directors of the Bank shall be paid remuneration as a percentage of the net profits of the Bank for the financial year as may be fixed by the Board from time to time, calculated as per the provisions of the Companies Act, 2013 and subject to the limits fixed by the Reserve Bank of India, from time to time.

Further, within the above ceiling, the remuneration payable to the Chairman of the Board shall be two times the amount payable to other Non-Executive Directors and Independent Directors and further subject to approval of RBI and the remuneration payable to the Chairman of the Audit Committee shall be 1.5 times the amount payable to other NonExecutive Directors and Independent Directors.

NEDs are to be paid such sitting fee for each meeting of the Board/ Committees of the Board attended by them, as may be approved by the Board pursuant to provisions of Section 197 of the Companies Act, 2013 read with Section 35B (1) of the Banking Regulation Act 1949. NEDs including Independent Directors shall be reimbursed any out of pocket expenses incurred by them while performing duties for the Bank.

For the other categories of staff, the compensation is structured taking into account all relevant factors such as the level of the position, roles and responsibilities and the prevailing compensation structure in the industry for the similar role.

(c) Description of the ways in which current and future risks are taken into account in the remuneration processes.

The Board of Directors through the Nomination and Remuneration Committee ("NRC") is responsible for formulating and making the necessary amendments to the Remuneration Policy for the Directors, Key Managerial Persons ("KMP") and Senior Executives of the Bank from time to time. The NRC considers different aspects like risk-return alignment, cost to income ratio and the like in framing the remuneration policy and practice.

Performance parameters specified for the MD/ CEO also includes risk and control considerations such as Asset quality, implementation of guidelines on Compliance Risk Assessment, Reviewing And Enhancing Controls Of The Operating Risk Processes Of The Bank, Enhancing The Efficacy Of The Process & Quality Assurance Department.

The variable remuneration payable to MD/CEO & other Material Risk Takers are subject to relevant malus and clawback clauses to address issues such as losses in subsequent years due to acts in a given performance year, gross negligence, serious lapses in credit underwriting process, serious violations in AML / KYC, frauds and misconducts.

Further, the KRA''s for Senior Executives of the Bank are clearly defined with adequate weightage given to Risk, Compliance, Credit & Asset Quality to ensure risks are assessed and mitigated. KRA''s of Executives working in control functions like Risk & Compliance are defined independently and no weightage is given for achievement of business parameters/ targets to ensure independent evaluation.

(d) Description of the ways in which the Bank seeks to link performance during a performance measurement period with levels of remuneration

The Bank follows annual performance review (12 months period) to link performance. Remuneration is fixed based on the grade and merit rating for all the employees. Individual performances are assessed in line with business or deliveries of the Key Result Areas (KRA), top priorities of business, budgets, risk alignment etc. The performance appraisal system assigns a rating based on the achievement or otherwise of the KRAs. The change in remuneration is largely dependent on the rating assigned.

(e) A discussion of the Bank''s policy on deferral and vesting of variable remuneration and a discussion of the Bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

The Bank has ensured the remuneration for Material Risk Takers in line with the RBI circular dated November 04, 2019. Accordingly, the variable pay of identified MRTs is determined between 100% to 300% of fixed pay. This variable pay is further divided into cash and ESOPs. Both the cash and ESOPs of the said MRTs is to be deferred over a period of three year in line with the risk taken and as per relevant RBI approval received from time to time. Each such MRT has performance measures aligned to risk measures and the vesting of variable pay is also pro-rated till the end of the deferral period.

(f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the Bank utilises and the rationale for using these different forms.

Employees of the Bank are eligible for variable pay in terms of both cash and ESOPs. At field level the variable pay is linked to defined performance targets. Other roles may be given variable pay based on their performance ratings. The variable pay amount varies depending on both the role of the individual as well as his/her performance levels. For senior executives of the Bank due consideration is also given to the overall performance of the Bank & respective division / function apart from individual performance ratings.

Employees above defined grade are eligible for Employee Stock Options issued by the Bank as determined by the Nomination and Remuneration Committee of the Bank. These options are granted annually based on performance ratings and role of the individual. Junior employees in cases of consistent exemplary performance are also granted options being part of High Achievers Club.

In very select instances, employees are offered options over a four year period, with a quarter of the options vesting every year. The vesting of the options are dependent on continuity and performance of the said individual.

A variable component may also be made available for specific employees as agreed and included as a part of their respective compensation structure. Variable pay for MRTs have been explained in (e) earlier.

As on the reporting date, the Bank does not have any form of variable remuneration other than as stated above. Thus, the various types of variable pay is aligned over both short and long term periods.

g) Implementation of IFRS converged Indian Accounting Standards (Ind AS)

In January 2016, the Ministry of Corporate Affairs issued the roadmap for implementation of new Indian Accounting Standards (Ind AS), converged with International Financial Reporting Standards (IFRS), for scheduled commercial Banks, insurance companies and non-banking financial companies (NBFCs). However, currently the implementation of Ind AS for Banks has been deferred by RBI till further notice pending the consideration of some recommended legislative amendments by the Government of India. The Bank is in an advanced stage of preparedness for implementation of Ind AS, as and when these are made applicable to the Indian Banks.

As required by the RBI guidelines, the accounts of the Bank are converted into Ind AS format and submitted to the RBI at periodic intervals. The Bank has put in place Board approved policy on Expected Credit Loss (ECL) as per Indian Accounting Standards. The Bank carries out the expected loss provisioning using Probability of Default (PD) and Loss Given Default (LGD) framework by considering historical data. The Bank has identified an IT solution for Ind AS reporting and is currently in the process of implementing the solution.

l) Description of Contingent liabilities

i. Claims against the Bank not acknowledged as debts:

Claims against the Bank not acknowledged as debts includes liability on account of Service tax, Goods and Service Tax and Income Tax . The Bank is a party to various legal proceedings in the ordinary course of business which are contested by the Bank and are therefore subjudice. The Bank does not expect the outcome of these proceedings to have a material adverse impact on the Bank''s financial position.

ii. Guarantees given on behalf of constituents:

As a part of banking activities, the Bank issues Letter of Guarantees on behalf of its customers, with a view to augment the customer''s credit standing. Through these instruments, the Bank undertakes to make payments for its customers obligations either directly or in case the customer fails to fulfill their financial or performance obligations.

iii. Other items for which the Bank is contingently liable:

These include:

a) Capital commitments

b) Amount transferred to the RBI under the Depositor Education and Awareness Fund (DEAF)

c) Investment purchases pending settlement

d) Credit enhancements provided by the Bank towards assets securitisation

m) Dues to Micro, Small and Medium Enterprises

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. Based on the information available with the Bank, there are no overdue amounts payable to Micro and Small Enterprises as defined under the Micro, Small and Medium Enterprises Development Act, 2006 as at the Balance Sheet date. Further, the Bank has not paid any interest to any Micro and Small Enterprises during the current and previous year.

n) Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the Bank.

During the year, the Bank has not exceeded the prudential credit exposure limit as prescribed by the Reserve Bank of India in respect of Single Borrower and Group Borrowers. (Previous year: Nil).

o) Letters of Comfort

The Bank has not issued any letters of comfort during the year.(Previous year: Nil).

p) No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Bank to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Bank (Ultimate Beneficiaries). The Bank has not received any fund from any party(s) (Funding Party) with the understanding that the Bank shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Bank ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

r) Portfolio-level information on the use of funds raised from green deposits :

The Bank has not accepted green deposits during the current financial year (Previous year : Nil).

15 Employee Benefits (AS 15)

Defined Contribution Plan Provident Fund and NPS

The Bank makes Provident Fund contributions and NPS contributions to State administered fund for qualifying employees. The Bank is required to contribute a specified percentage of the payroll costs to the Fund. The Bank has recognised '' 63.56 Crore (Previous Year: '' 52.68 Crore) towards Provident Fund contributions and NPS contributions in the Profit and Loss Account. The contributions payable to the fund by the Bank is at rates specified in the rules of the scheme.

Defined Benefit Plans Gratuity

The Bank has a funded gratuity scheme for its employees and the Gratuity liability has been made based on the actuarial valuation done as at the year end. The details of actuarial valuation as provided by the Independent Actuary is as follows:

22 Employees Stock Option Scheme

a) Change in Accounting Policy:

The Bank was following the intrinsic value method to account for its stock based employee compensation plans (Employees other than WTD/CEO/MRTs) and fair value method stock options using Black-Scholes model for all the options granted after March 31, 2021 to WTD/CEO/MRTs as required under RBI circular.

The Bank, having regard to the RBI advisory, has changed the accounting policy from intrinsic value method to fair value method for all employee stock options granted after March 31, 2021 and consequently recognised fair value of options estimated using Black-Scholes model, as compensation expense over the vesting period.

As a result, the Bank has additionally provided '' 29.21 Crore on March 31,2024 as employee stock options expenses and included under operating expenses (employees cost).

b) ESFB ESOP 2019

During the year ended March 31, 2020, the Bank established a employee stock option scheme titled ESFB Employees Stock Option Scheme, 2019 (ESFB ESOP 2019) effective from November 22, 2019. Under the plan, the Bank was authorised to issue upto 110,000,000 options (including 33,487,873 options under Grant 1 issued as a replacement option for the Scheme under the Holding Company) to eligible employees of the Bank and the erstwhile Holding Company. Each option entitles for apply and allotment of one fully paid share on payment of exercise price during the exercise period.

Volatility

Volatility is a measure of the amount by which a price has fluctuated or is expected to fluctuate during a period. The measure of volatility used in the Black-Scholes option pricing model is the annualised standard deviation of the continuously compounded rates of return on the stock over a period of time.

d) Dividend Yield

Expected dividend yield has been calculated based on the dividend declared for 1 financial year prior to the date of grant. The dividend yield has been derived by dividing the dividend per share by the market price per share on the date of grant.

23 Prior period comparatives

Prior period comparatives have been reclassified / regrouped by the management, wherever necessary.

As per our report of even date

For Varma & Varma, For and on behalf of Board of Directors of Equitas Small Finance Bank Limited

Chartered Accountants Firm Registration No.: 004532S

P R Prasanna Varma Arun Ramanathan Vasudevan PN Arun Kumar Verma

Partner Chairman Managing Director and Director

Membership No: 025854 DIN:00308848 Chief Executive Officer DIN:03220124

Place: Chennai Place: Chennai DIN:01550885 Place: Chennai

Date: April 24, 2024 Date: April 24, 2024 Place: Chennai Date: April 24, 2024

Date: April 24, 2024

As per our report of even date

For ASA & Associates LLP,

Chartered Accountants

Firm Registration No.: 009571N / N500006

G N Ramaswami N Sridharan Ramanathan N

Partner Chief Financial Officer Company Secretary

Membership No: 202363 M.No:28366

Place: Chennai Place: Chennai Place: Chennai

Date: April 24, 2024 Date: April 24, 2024 Date: April 24, 2024

(a) As per the approved Scheme of amalgamation, 933,943,363 shares held by Equitas Holdings Limited are to be extinguished and 789,535,166 shares are to be allotted to the shareholders of Equitas Holdings Limited upon the scheme becoming effective. The Board of Directors on their meeting held on February 8, 2023 have approved allotment and extinguishment of shares. Accordingly, the effect of such adjustments are given as on Appointed date i.e. January 1, 2023.

(b) The Bank, during the year ended March 31,2023 has allotted 29,38,696 (Previous year 1,01,18,318 ) equity shares of H10/- each, fully paid up, on exercise of options by its employees and employees of the Holding company (Equitas Holdings Limited) in accordance with the ESFB ESOP Scheme.

(c) During the quarter/ year ended March 31, 2022, the Bank successfully completed Qualified Institutions Placement (QIP) of its shares comprising issue of 10,26,31,087 equity shares of ''.10/ each at premium of ''.43.59 per share, thereby raising ''.550 crore. The allotment was completed on February 19, 2022 and these equity shares of the Bank got listed on February 23, 2022 on National Stock Exchange (NSE) and BSE Ltd. As a result of this QIP, the public shareholding in the Bank increased from 18.70% to 25.37%, thereby complying with the Minimum Public Shareholding (MPS) requirements prescribed by SEBI Regulations.

1 b) Draw down from Reserves:

The Bank has not drawn down any amount from its opening reserves during the year ended March 31, 2023 and March 31, 2022. Please refer note no.18.21 for amalgamation of Equitas Holdings Ltd with ESFBL.

Share premium

During the current year 2022-23, the Bank has not drawn down any amount from Share Premium account as permitted under section 52 of the Companies Act 2013 . During the Previous year an amount of H11.14 crore being the expenditure in connection with issue of shares during the year has been drawn down from Share Premium account as permitted under section 52 of the Companies Act 2013.

1 c) Appropriations to reserve:

(i) Statutory reserve

As mandated by the Banking Regulation Act, 1949, all banking companies incorporated in India shall create a reserve fund, out of the balance of profit of each year as disclosed in the profit and loss account and before any dividend is declared and transfer a sum equivalent to not less than twenty five per cent of such profit. The Bank has transferred H143.40 Crore (Previous year H70.18 Crore) to Statutory Reserve for the year.

(ii) Capital Reserve

During the year, the Bank had appropriated '' Nil Crore (Previous Year H1.06 Crore), net of taxes and transfer to statutory reserve, to the Capital Reserve, being the gain on sale of HTM Investments in accordance with RBI guidelines.

(iii) Special reserve

As per the provisions under Section 36(1)(viii) of Income Tax Act, 1961, the specified entity is allowed the deduction in respect of any special reserve created and maintained by it, i.e. an amount not exceeding twenty per cent of the profits derived from eligible business computed under the head "Profits and gains of business or profession" (before making any deduction under this clause). This would be applicable till the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid up share capital (excluding the amounts capitalized from reserves) of the entity. During the year, the Bank has transferred an amount of H12.02 Crore (Previous year H9.68 Crore) to Special Reserve. There is no drawdown from this reserve during FY 2022-23 and FY 2021-22.

(iv) Investment Fluctuation Reserve

During the FY 2022-23, the bank has apportioned H38.08 Crore (Previous year : H1.25 Crore) to Investment Fluctuation Reserve, based on the value of investments in HFT and AFS category, to protect against future increase in yield, in accordance RBI guidelines.

(v) Declaration of Dividends

The Board of Directors at their meeting proposed a dividend of H1.00 per share amounting to H111.06 Crore for the year ended March 31, 2023 (previous year: '' Nil per share) which is subject to shareholders approval in ensuing Annual General Meeting. In terms of revised Accounting Standard (AS) 4 ''Contingencies and Events occurring after the Balance sheet date'' as notified by the Ministry of Corporate Affairs through amendments to Companies (Accounting Standards) Amendment Rules, 2016, the Bank has not appropriated proposed dividend aggregating H111.06 Crore from Profit and Loss Account. However, the effect of the proposed dividend has been reckoned in determining Capital funds in the computation of capital adequacy ratio as at March 31, 2023.

Considering the need to preserve capital to support growth and expansion, the Board did not recommend any dividend for the financial year ended March 31, 2022.

Qualitative disclosure around LCR

The Liquidity Coverage Ratio (LCR) is a global minimum standard for bank liquidity. It aims to ensure that a bank has a adequate stock of unencumbered high-quality liquid assets (HQLA) that can be converted into cash immediately to meet its liquidity needs for a 30 calendar day liquidity under stress scenario.

The LCR is calculated by dividing the amount of high quality liquid unencumbered assets (HQLA) by the estimated net outflows over 30 calendar day period. The net cash outflows are calculated by applying RBI prescribed outflow factors to the various categories of liabilities (deposits, unsecured and secured wholesale borrowings), as well as to undrawn commitments and derivatives-related exposures, partially offset by inflows from assets maturing within 30 days.

Liquidity management of the Bank is undertaken by the Treasury department under the central oversight of the Asset Liability Management Committee (ALCO) in accordance with the Board approved policies and ALCO approved funding plans.

The mandated regulatory threshold as per the transition plan is embedded in the board approved ALM policy of the Bank, with appropriate cushion to ensure maintenance of adequate liquidity buffers. Risk Management Department computes the LCR and monitors the same as per the Operating guidelines for small finance banks. The Bank has been submitting LCR reports to RBI from December 2016.

Currently the Liquidity Coverage Ratio is significantly higher than minimum regulatory threshold. As a strategy, the Bank is investing in Level I assets resulting in comfortable level of HQLA. The Bank follows the criteria laid down by the RBI for the calculation of High Quality Liquid Assets (HQLA), gross outflows and inflows within the next 30-days period. HQLA predominantly comprises of Government securities viz. Treasury Bills, Central and State Government securities.

The Bank is predominantly funded through long term borrowings viz. Refinances & Customer Deposits. All significant outflows and inflows are determined in accordance with the RBI guidelines and are included in the prescribed LCR computation. The Risk Management Department measures and monitors the liquidity profile of the Bank with reference to the Board approved limits on a static as well as on a dynamic basis by using the gap analysis technique supplemented by monitoring of key liquidity ratios. The Bank assesses the impact on short term liquidity gaps dynamically under various scenarios covering business projections under normal as well as varying market conditions. Periodical reports are placed before the Bank''s ALCO for perusal and review.

Qualitative disclosure around LCR

The Liquidity Coverage Ratio (LCR) is a global minimum standard for bank liquidity. It aims to ensure that a bank has a adequate stock of unencumbered high-quality liquid assets (HQLA) that can be converted into cash immediately to meet its liquidity needs for a 30 calendar day liquidity under stress scenario.

The LCR is calculated by dividing the amount of high quality liquid unencumbered assets (HQLA) by the estimated net outflows over 30 calendar day period. The net cash outflows are calculated by applying RBI prescribed outflow factors to the various categories of liabilities (deposits, unsecured and secured wholesale borrowings), as well as to undrawn commitments and derivatives-related exposures, partially offset by inflows from assets maturing within 30 days.

Liquidity management of the Bank is undertaken by the Treasury department under the central oversight of the Asset Liability Management Committee (ALCO) in accordance with the Board approved policies and ALCO approved funding plans.

The mandated regulatory threshold as per the transition plan is embedded in the board approved ALM policy of the Bank, with appropriate cushion to ensure maintenance of adequate liquidity buffers. Risk Management Department computes the LCR and monitors the same as per the Operating guidelines for small finance banks. The Bank has been submitting LCR reports to RBI from December 2016.

Currently the Liquidity Coverage Ratio is significantly higher than minimum regulatory threshold. As a strategy, the Bank is investing in Level I assets resulting in comfortable level of HQLA. The Bank follows the criteria laid down by the RBI for the calculation of High Quality Liquid Assets (HQLA), gross outflows and inflows within the next 30-days period. HQLA predominantly comprises of Government securities viz. Treasury Bills, Central and State Government securities.

The Bank is predominantly funded through long term borrowings viz. Refinances & Customer Deposits. All significant outflows and inflows are determined in accordance with the RBI guidelines and are included in the prescribed LCR computation. The Risk Management Department measures and monitors the liquidity profile of the Bank with reference to the Board approved limits on a static as well as on a dynamic basis by using the gap analysis technique supplemented by monitoring of key liquidity ratios. The Bank assesses the impact on short term liquidity gaps dynamically under various scenarios covering business projections under normal as well as varying market conditions. Periodical reports are placed before the Bank''s ALCO for perusal and review.

Qualitative disclosure around Net Stable Funding Ratio (NSFR) :

The objective of NSFR is to ensure that banks maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities. A sustainable funding structure is intended to reduce the probability of erosion of a bank''s liquidity position due to disruptions in a bank''s regular sources of funding that would increase the risk of its failure and potentially lead to broader systemic stress. The NSFR limits overreliance on short-term wholesale funding, encourages better assessment of funding risk across all on- and off-balance sheet items, and promotes funding stability.

The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. "Available stable funding" (ASF) is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to one year. The amount of stable funding required ("Required stable funding") (RSF) of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by that institution as well as those of its off-balance sheet (OBS) exposures.

Liquidity management of the Bank is undertaken by the Treasury department under the central oversight of the Asset Liability Management Committee (ALCO) in accordance with the Board approved policies and ALCO approved funding plans.The mandated regulatory threshold as per the transition plan is embedded in the board approved ALM policy of the Bank, with appropriate cushion to ensure maintenance of adequate liquidity buffers. Risk Management Department computes the NSFR and monitors the same as per the operating guidelines for small finance banks. The Bank has been submitting NSFR reports to RBI from December 2021.Currently the Net Stable Funding Ratio is at optimal level compared with the prescribed regulatory limit of 100%. The bank is consistently increasing the Available Stable Funds from stable customers which significantly increases NSFR. Periodical reports are placed before the Bank''s ALCO for perusal and review.

c) Sale and transfer of securities to / from HTM category

During the current year there were no sale of securities from HTM category. As on March 31, 2023, Market value of the investments held in the HTM category is H5,162.25 Crore and book value over market value is H151.95 Crore.

During the previous year, the Bank had sold SLR securities from HTM category through OMOs conducted by RBI and repurchase of government securities by GOI (Book Value - H275.09 Crore). As on March 31, 2022, Market value of the investments held in the HTM category is H3,667.29 Crore and book value over market value is H62.02 Crore.

c) Overseas assets, NPAs and revenue

The Bank does not have any overseas branches and hence the disclosure regarding overseas assets, NPAs and revenue is not applicable (Previous Year : Nil).

d) Particulars of resolution plan and restructuring

The Bank has not done any restructuring of advances under "Prudential Framework for Resolution of Stressed Assets'' issued vide circular DBR.No.BP.BC.45/21.04.048/2018-19 dated June 7, 2019.

e) Divergence in asset classification and provisioning

The Financial statement for the year ended March 31,2023 and March 31, 2022 have not been subjected to inspection by Reserve Bank of India as on the date of the financials and accordingly, the disclosure on divergence in Asset classification and provisioning as per RBI Circular: DBR.BP.BC.No. 63/21.04.018/2016-17 dated April 18, 2017 is not applicable.

f) Disclosure of transfer of loan exposures

(i) In respect of loans not in default that are transferred or acquired

During the year, there was no loan exposures transferred and no loan exposures acquired (Previous year: Nil)

(ii) In the case of stressed loans transferred or acquired

Details of stressed loans (classified as NPA) transferred during the year

Excludes other facilities to the borrowers which have not been restructured

(ii) There were 805 borrower accounts having an aggregate exposure of H45.59 crores to the Bank, where resolution plans had been Implemented under RBI''s Resolution Framework 1.0 dated August 6, 2020 and now modified under RBI''s Resolution Framework 2.0 dated May 5, 2021.

Exposure represents the higher of the sanctioned or outstanding to Real estate sector.

The above disclosure includes the IBPC exposure of H1,050 crore. (Previous year H570 crore) and includes a) Exposure to Home Loans, Loan against property against Residential mortgages other than classified under CRE-RH b)Exposure to Real Estate Builders/ Developers c)exposures where the primary source of cash flow, i.e. more than 50% of cash flows, for repayment / recovery is from lease or rental payments and such assets are taken as security and d) Indirect exposure to HFC.

Excludes other facilities to the borrowers which have not been restructured

(ii) There were 1,433 borrower accounts having an aggregate exposure of H94.93 crores to the Bank, where resolution plans had been Implemented under RBI''s Resolution Framework 1.0 dated August 6, 2020 and now modified under RBI''s Resolution Framework 2.0 dated May 5, 2021.

The bank continues to monitor and assess the impact of COVID-19 Pandemic on its operations and financials, including the possibility of higher defaults by customers. The bank has considered the information available upto the date of these results and have made adequate provisions in this regard to the extent required.

12 Disclosure of penalties imposed by the Reserve Bank of India

During the year ended March 31, 2023, RBI has not imposed any penalties on the Bank (Previous year : Nil)

13 Disclosure on remuneration

a) Qualitative disclosures

(a) Information relating to the composition and mandate of the Nomination and Remuneration Committee.

The Nomination and Remuneration Committee is chaired by an Independent Director and comprises of four (4) other Independent Directors. The functions of the committee include: recommendation of appointment of Directors to the board, evaluation of performance of the Directors, approval of the policy for remuneration payable to Directors, employees, including senior management and key management personnel, framing guidelines for the Employee Stock Option Scheme (ESOP Scheme) and deciding on the grant of stock options to the employees and Whole Time Director/s of the Bank.

(b) I nformation relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy:

Remuneration Policy of the Bank covers remuneration payable for directors and employees of the Bank and all aspects of the compensation structure such as fixed pay, perquisites, bonus, guaranteed pay, severance package, stock, pension plan and gratuity.

The Bank believes in a sound compensation practice that ensures effective governance of compensation, alignment of compensation with prudent risk taking and effective supervisory oversight and stakeholder engagement. This policy is framed in accordance with the guidelines laid down by Reserve Bank of India (RBI) vide their Circular Reference no DOR. Appt. BC. No. 23/ 29.67.001/ 2019-20 dated November 4, 2019

The remuneration payable to Managing Director ("MD")/Chief Executive Officer ("CEO") shall be based on the scope and responsibility that goes with such positions, shall be comparable to the compensation of MD/ CEO of similar profiles in similar organizations and would be performance linked. From time to time, the NRC may fix a maximum ceiling on the fixed/variable component of compensation, subject the approval of Reserve Bank of India and shareholders.

The Non-Executive Directors ("NED") including Independent Directors of the Bank shall be paid remuneration as a percentage of the net profits of the Bank for the financial year as may be fixed by the Board from time to time, calculated as per the provisions of the Companies Act, 2013 and subject to the limits fixed by the Reserve Bank of India, from time to time.

Further, within the above ceiling, the remuneration payable to the Chairman of the Board shall be two times the amount payable to other Non-Executive Directors and Independent Directors and further subject to approval of RBI and the remuneration payable to the Chairman of the Audit Committee shall be 1.5 times the amount payable to other Non-Executive Directors and Independent Directors.

NEDs are to be paid such sitting fee for each meeting of the Board/ Committees of the Board attended by them, as may be approved by the Board pursuant to provisions of Section 197 of the Companies Act, 2013 read with Section 35B (1) of the Banking Regulation Act 1949. NEDs including Independent Directors shall be reimbursed any out of pocket expenses incurred by them while performing duties for the Bank.

For the other categories of staff, the compensation is structured taking into account all relevant factors such as the level of the position, roles and responsibilities and the prevailing compensation structure in the industry for the similar role.

(c) Description of the ways in which current and future risks are taken into account in the remuneration processes.

The Board of Directors through the Nomination and Remuneration Committee (""NRC"") is responsible for formulating and making the necessary amendments to the Remuneration Policy for the Directors, Key Managerial Persons ("KMP") and Senior Executives of the Bank from time to time. The NRC considers different aspects like risk-return alignment, cost to income ratio and the like in framing the remuneration policy and practice.

Performance parameters specified for the MD/ CEO also includes risk and control considerations such as Asset quality, implementation of guidelines on Compliance Risk Assessment, Reviewing And Enhancing Controls Of The Operating Risk Processes Of The Bank, Enhancing The Efficacy Of The Process & Quality Assurance Department.

The variable remuneration payable to MD/CEO & other Material Risk Takers are subject to relevant malus and clawback clauses to address issues such as losses in subsequent years due to acts in a given performance year, gross negligence, serious lapses in credit underwriting process, serious violations in AML / KYC, frauds and misconducts.

Further, the KRA''s for Senior Executives of the Bank are clearly defined with adequate weightage given to Risk, Compliance, Credit & Asset Quality to ensure risks are assessed and mitigated. KRA''s of Executives working in control functions like Risk & Compliance are defined independently and no weightage is given for achievement of business parameters/ targets to ensure independent evaluation.

(d) Description of the ways in which the Bank seeks to link performance during a performance measurement period with levels of remuneration

The Bank follows Annual Performance Review (12 months period) to link performance. Remuneration is fixed based on the grade and merit rating for all the employees. Individual performances are assessed in line with business or deliveries of the Key Result Areas (KRA), top priorities of business, budgets, risk alignment etc. The Performance Appraisal system assigns a rating based on the achievement or otherwise of the KRAs. The change in remuneration is largely dependent on the rating assigned.

(e) A discussion of the bank''s policy on deferral and vesting of variable remuneration and a discussion of the Bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

The Bank has ensured the remuneration for Material Risk Takers in line with the RBI circular dated November 4, 2019. Accordingly, the variable pay of identified MRTs is determined between 100% to 300% of fixed pay. This variable pay is further divided into cash and ESOPs. Both the cash and ESOPs of the said MRTs is to be deferred over a period of three year in line with the risk taken and as per relevant RBI approval received from time to time. Each such MRT has performance measures aligned to risk measures and the vesting of variable pay is also pro-rated till the end of the deferral period.

(f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the Bank utilizes and the rationale for using these different forms.

Employees of the Bank are eligible for variable pay in terms of both cash and ESOPs. At field level the variable pay is linked to defined performance targets. Other roles may be given variable pay based on their performance ratings. The variable pay amount varies depending on both the role of the individual as well as

his/her performance levels. For Senior Executives of the Bank due consideration is also given to the overall performance of the Bank & respective Division / Function apart from individual performance ratings.

Employees above defined grade are eligible for Employee Stock Options issued by the Bank as determined by the Nomination and Remuneration Committee of the Bank. These options are granted annually based on performance ratings and role of the individual. Junior employees in cases of consistent exemplary performance are also granted options being part of High Achievers Club.

I n very select instances, employees are offered options over a four year period, with a quarter of the options vesting every year. The vesting of the options are dependent on continuity and performance of the said individual.

A variable component may also be made available for specific employees as agreed and included as a part of their respective compensation structure. Variable pay for MRTs have been explained in (e) earlier.

As on the reporting date, the Bank does not have any form of variable remuneration other than as stated above. Thus, the various types of Variable Pay is aligned over both Short and Long term periods.

l) Description of Contingent liabilities

i. Claims against the Bank not acknowledged as debts:

Claims against the Bank not acknowledged as debts includes liability on account of Service tax, Goods and Service Tax and Income Tax . The Bank is a party to various legal proceedings in the ordinary course of business which are contested by the Bank and are therefore subjudice. The Bank does not expect the outcome of these proceedings to have a material adverse impact on the Bank''s financial position.

ii. Guarantees given on behalf of constituents:

As a part of banking activities, the Bank issues Letter of Guarantees on behalf of its customers, with a view to augment the customer''s credit standing. Through these instruments, the Bank undertakes to make payments for its customers obligations either directly or in case the customer fails to fulfill their financial or performance obligations.

iii. Other items for which the Bank is contingently liable:

These include:

a) Capital commitments

b) Amount transferred to the RBI under the Depositor Education and Awareness Fund (DEAF)

c) Investment purchases pending settlement

m) Dues to Micro, Small and Medium Enterprises

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. Based on the information available with the Bank, there are no overdue amounts payable to Micro and Small Enterprises as defined under the Micro, Small and Medium Enterprises Development Act, 2006 as at the Balance Sheet date. Further, the Bank has not paid any interest to any Micro and Small Enterprises during the current and previous year.

n) Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the bank.

During the year, the Bank has not exceeded the prudential credit exposure limit as prescribed by the Reserve Bank of India in respect of Single Borrower and Group Borrowers. (Previous year: Nil).

o) Letters of Comfort

The Bank has not issued any letters of comfort during the year.(Previous year: Nil).

p) No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Bank to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the bank (Ultimate Beneficiaries). The Bank has not received any fund from any party(s) (Funding Party) with the understanding that the Bank shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the bank ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

15 Employee Benefits (AS 15)

Defined Contribution Plan Provident Fund

The Bank makes Provident Fund contributions to State administered fund for qualifying employees. The Bank is required to contribute a specified percentage of the payroll costs to the Fund. The Bank has recognised H52.68 Crore (Previous Year: H44.95 Crore) towards Provident Fund contributions in the Profit and Loss Account. The contributions payable to the fund by the Bank is at rates specified in the rules of the scheme.

21 Scheme of Amalgamation

The ''Scheme of Amalgamation'' of erstwhile Equitas Holdings Limited ("EHL") with Equitas Small Finance Bank Limited ("ESFBL") had been approved by the Reserve Bank of India, Stock Exchanges, the respective Shareholders, Depositors and Creditors of each entities, as applicable, and the National Company Law Tribunals (NCLT) Bench at Chennai.

As per the approval received from NCLT Chennai bench vide its order dated January 12, 2023, the appointed date for the scheme is January 1, 2023. The Scheme of Amalgamation has come in to force on January 1, 2023 (referred to as the date on which the scheme has come in to force).

As per the scheme,

(i) in consideration of the transfer and vesting of the undertaking of the Transferor Company (EHL), 231 (Two Hundred and Thirty One) fully paid Equity Shares of H10/- each of ESFBL for every 100 (One Hundred) fully paid Equity Shares of H10/- each of EHL, were issued, there by resulting in increase in the paid-up capital by H789.54 crore (78, 95, 35,166 equity shares of face value of H10 each fully paid), post the extinguishment of H933.94 crore (93,39,43,363 equity shares of face value of H10 each).

The Short fall as stated above of H894.71 Crore net of Surplus in Profit and Loss account of H16.45 Crore has been adjusted to balance in statement of Profit and Loss as disclosed in Schedule -2 IX.

Intercompany outstanding balances between EHL and the Bank have been cancelled on the appointed date as per the scheme of amalgamation.

22 Employees Stock Option Scheme a) Equitas ESOP Scheme 2015

Under the Equitas ESOP Scheme 2015, EHL stock options were granted to some of the eligible employees of the Bank.

The Hon''ble National Company Law Tribunal, Division Bench II, Chennai (NCLT) vide its Order dated 12.01.2023 had sanctioned the Scheme of Amalgamation of Equitas Holdings Limited (EHL) and Equitas Small Finance Bank Limited (ESFBL) and their respective shareholders ("the Scheme") and the Scheme was effective from February 02, 2023.

Upon effect of the Scheme stock options granted by EHL under EHL ESOP scheme 2015 were cancelled and 40,696 options were approved by Nomination and Remuneration Committee of the Bank under the ESFB Employees Stock Option Scheme, 2019, on February 8, 2023 to the option holders of EHL taking into account the Share Exchange Ratio (231 shares for every 100 shares held) on the same terms and conditions as prescribed in the approved Scheme.

b) ESFB ESOP 2019

During the year ended 31st March 2020, the bank established a employee stock option scheme titled ESFB Employees Stock Option Scheme, 2019 (ESFB ESOP 2019) effective from November 22, 2019. Under the plan, the Bank was authorized to issue upto 11,00,00,000 options (including 3,34,87,873 options under Grant 1 issued as a replacement option for

the Scheme under the Holding Company) to eligible employees of the Bank and the erstwhile Holding Company. Each option entitles for apply and allotment of one fully paid share on payment of exercise price during the exercise period.

As at March 31, 2023, 486,14,746 (previous year 377,39,487) (net of forfeitures and cancellation) options were outstanding, which were granted at various exercise prices. The following are the outstanding options as at March 31, 2023.

Volatility

Volatility is a measure of the amount by which a price has fluctuated or is expected to fluctuate during a period. The measure of Volatility used in the Black -Scholes option pricing model is the annualized standard deviation of the continuously compounded rates of return on the stock over a period of time.

c) Dividend Yield

Expected dividend yield has been calculated based on the dividend declared for 1 financial year prior to the date of grant. The dividend yield has been derived by dividing the dividend per share by the market price per share on the date of grant.

23 Prior period comparatives

Prior period comparatives have been reclassified / regrouped by the management, wherever necessary.

In computing the above information, certain assumptions have been made by management of the Bank which have been relied upon by the auditors and the same are used for submitting the regulatory returns. The actual outflows may be different than the above estimates as deposits rollover assumptions are not considered in the maturity profile on a conservative basis. Also the liquid assets in the form of Reverse Repo for '' 1,120 Crore as on March 31, 2022 with residual maturity upto 4 days (March 31, 2021 - '' 2,785 Crore with residual maturity upto 9 days ) were not included in the above disclosure.

Qualitative disclosure around LCR

The Liquidity Coverage Ratio (LCR) is a global minimum standard for bank liquidity. It aims to ensure that a bank has a adequate stock of unencumbered high-quality liquid assets (HQLA) that can be converted into cash immediately to meet its liquidity needs for a 30 calendar day liquidity under stress scenario.

The LCR is calculated by dividing the amount of high quality liquid unencumbered assets (HQLA) by the estimated net outflows over 30 calendar day period. The net cash outflows are calculated by applying RBI prescribed outflow factors to the various categories of liabilities (deposits, unsecured and secured wholesale borrowings), as well as to undrawn commitments and derivatives-related exposures, partially offset by inflows from assets maturing within 30 days.

Liquidity management of the Bank is undertaken by the Treasury department under the central oversight of the Asset Liability Management Committee (ALCO) in accordance with the Board approved policies and ALCO approved funding plans.

The mandated regulatory threshold as per the transition plan is embedded in the board approved ALM policy of the Bank, with appropriate cushion to ensure maintenance of adequate liquidity buffers. Risk Management Department computes the LCR and monitors the same as per the Operating guidelines for small finance banks. The Bank has been submitting LCR reports to RBI from December 2016.

Currently the Liquidity Coverage Ratio is significantly higher than minimum regulatory threshold. As a strategy, the Bank is investing in Level I assets resulting in comfortable level of HQLA. The Bank follows the criteria laid down by the RBI for the calculation of High Quality Liquid Assets (HQLA), gross outflows and inflows within the next 30-days period. HQLA predominantly comprises of Government securities viz. Treasury Bills, Central and State Government securities.

The Bank is predominantly funded through long term borrowings viz. Refinances & Customer Deposits. All significant outflows and inflows are determined in accordance with the RBI guidelines and are included in the prescribed LCR computation. The Risk Management Department measures and monitors the liquidity profile of the Bank with reference to the Board approved limits on a static as well as on a dynamic basis by using the gap analysis technique supplemented by monitoring of key liquidity ratios. The Bank assesses the impact on short term liquidity gaps dynamically under various scenarios covering business projections under normal as well as varying market conditions. Periodical reports are placed before the Bank''s ALCO for perusal and review.

Qualitative disclosure around LCR

The Liquidity Coverage Ratio (LCR) is a global minimum standard for bank liquidity. It aims to ensure that a bank has a adequate stock of unencumbered high-quality liquid assets (HQLA) that can be converted into cash immediately to meet its liquidity needs for a 30 calendar day liquidity under stress scenario.

The LCR is calculated by dividing the amount of high quality liquid unencumbered assets (HQLA) by the estimated net outflows over 30 calendar day period. The net cash outflows are calculated by applying RBI prescribed outflow factors to the various categories of liabilities (deposits, unsecured and secured wholesale borrowings), as well as to undrawn commitments and derivatives-related exposures, partially offset by inflows from assets maturing within 30 days.

Liquidity management of the Bank is undertaken by the Treasury department under the central oversight of the Asset Liability Management Committee (ALCO) in accordance with the Board approved policies and ALCO approved funding plans.

The mandated regulatory threshold as per the transition plan is embedded in the board approved ALM policy of the Bank, with appropriate cushion to ensure maintenance of adequate liquidity buffers. Risk Management Department computes the LCR and monitors the same as per the Operating guidelines for small finance banks. The Bank has been submitting LCR reports to RBI from December 2016.

Currently the Liquidity Coverage Ratio is significantly higher than minimum regulatory threshold. As a strategy, the Bank is investing in Level I assets resulting in comfortable level of HQLA. The Bank follows the criteria laid down by the RBI for the calculation of High Quality Liquid Assets (HQLA), gross outflows and inflows within the next 30-days period. HQLA predominantly comprises of Government securities viz. Treasury Bills, Central and State Government securities.

The Bank is predominantly funded through long term borrowings viz. Refinances & Customer Deposits. All significant outflows and inflows are determined in accordance with the RBI guidelines and are included in the prescribed LCR computation. The Risk Management Department measures and monitors the liquidity profile of the Bank with reference to the Board approved limits on a static as well as on a dynamic basis by using the gap analysis technique supplemented

Qualitative disclosure around Net Stable Funding Ratio (NSFR) :

The objective of NSFR is to ensure that banks maintain a stable funding profile in relation to the composition of their assets and off-balance sheet activities. A sustainable funding structure is intended to reduce the probability of erosion of a bank''s liquidity position due to disruptions in a bank''s regular sources of funding that would increase the risk of its failure and potentially lead to broader systemic stress. The NSFR limits overreliance on short-term wholesale funding, encourages better assessment of funding risk across all on- and off-balance sheet items, and promotes funding stability.

The NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. "Available stable funding" (ASF) is defined as the portion of capital and liabilities expected to be reliable over the time horizon considered by the NSFR, which extends to one year. The amount of stable funding required ("Required stable funding") (RSF) of a specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by that institution as well as those of its off-balance sheet (OBS) exposures.

Liquidity management of the Bank is undertaken by the Treasury department under the central oversight of the Asset Liability Management Committee (ALCO) in accordance with the Board approved policies and ALCO approved funding plans.The mandated regulatory threshold as per the transition plan is embedded in the board approved ALM policy of the Bank, with appropriate cushion to ensure maintenance of adequate liquidity buffers. Risk Management Department computes the NSFR and monitors the same as per the operating guidelines for small finance banks. The Bank has been submitting NSFR reports to RBI from December 2021.Currently the Net Stable Funding Ratio is at optimal level compared with the prescribed regulatory limit of 100%. The bank is consistently increasing the Available Stable Funds from stable customers which significantly increases NSFR. Periodical reports are placed before the Bank''s ALCO for perusal and review.

c) Sale and transfer of securities to / from HTM category

During the year, the Bank had sold SLR securities from HTM category through OMOs conducted by RBI and repurchase of government securities by GOI (Book Value - '' 275.09 Crore). As on March 31, 2022, Market value of the investments held in the HTM category is '' 3,667.29 Crore and book value over market value is '' 62.02 Crore.

During the previous year, the Bank had sold SLR securities from HTM category through direct selling in secondary market (Book Value - '' 681.33 Crore), OMOs conducted by RBI and re-purchase of government securities by GOI (Book Value - '' 1,144.70 Crore). As on March 31, 2021, Market value of the investments held in the HTM category is '' 3,042.37 Crore and the excess of book value over market value is '' 4.05 Crore.

The Bank had availed option provided by RBI vide press release dated 06-Nov-20 on repayment of Targeted Long Term Repo Operations borrowings. Consequently, associated Non-SLR securities (invested out of funds borrowed in TLTRO) of Book Value '' 123.59 Crore were shifted from HTM to AFS category in conformity with RBI guidelines.

d) Non - SLR investment portfolio

(i) Non-performing non-SLR investments

The Bank does not have Non Performing investment under Non-SLR investment as on March 31, 2022 and March 31, 2021.

Priority sector includes '' 2,450 Crore (Previous year '' 4,800 Crore), in respect of which the Bank has sold Priority Sector Lending Certificates (PSLC)

The Bank has compiled and furnished the data for the purpose of this disclosure from its internal MIS system / reports.

c) Overseas assets, NPAs and revenue

The Bank does not have any overseas branches and hence the disclosure regarding overseas assets, NPAs and revenue is not applicable (Previous Year : Nil).

d) Particulars of resolution plan and restructuring

The Bank has not done any restructuring of advances under "Prudential Framework for Resolution of Stressed Assets'' issued vide circular DBR.No.BP.BC.45/21.04.048/2018-19 dated June 7, 2019.

e) Divergence in asset classification and provisioning

The Financial statement for the year ended March 31,2021 and March 31, 2022 have not been subjected to inspection by Reserve Bank of India as on the date of the financials and accordingly, the disclosure on divergence in Asset classification and provisioning as per RBI Circular: DBR.BP.BC.No. 63/21.04.018/2016-17 dated April 18, 2017 is not applicable.

f) Disclosure of transfer of loan exposures

(i) In respect of loans not in default that are transferred or acquired

During the year, there was no loan exposures transferred and no loan exposures acquired (Previous year: Nil)

(ii) In the case of stressed loans transferred or acquired

During the year, there was no stressed loans transferred and no stressed loans acquired (Previous year: Nil)

Exposure represents the higher of the sanctioned or outstanding to Real estate sector.

The above disclosure includes the IBPC exposure of '' 570 crore. (Previous year '' 700 crore) and includes a) Exposure to Home Loans, Loan against property against Residential mortgages other than classified under CRE-RH b)Exposure to Real Estate Builders/ Developers c)exposures where the primary source of cash flow, i.e. more than 50% of cash flows, for repayment / recovery is from lease or rental payments and such assets are taken as security and d) Indirect exposure to HFC.

Commercial Real estate exposure classification is based on RBI circular DBOD.BP.BC.No. 42/08.12.015/2009-10 dated September 9, 2009.

12 Disclosure of penalties imposed by the Reserve Bank of India

During the year ended March 31, 2022, RBI has not imposed any penalties on the Bank (Previous year : Nil)

13 Disclosure on remunerationa) Qualitative disclosures

The Nomination and Remuneration Committee is chaired by an Independent Director and comprises of four (4) other Independent Directors.

(a) Remuneration Policy of the Bank covers remuneration payable for directors and employees of the Bank and all aspects of the compensation structure such as fixed pay, perquisites, bonus, guaranteed pay, severance package, stock, pension plan and gratuity.

The functions of the committee include: recommendation of appointment of Directors to the board, evaluation of performance of the Directors, approval of the policy for remuneration payable to the employees, including senior management and key management personnel, framing guidelines for the Employee Stock Option Scheme (ESOP Scheme) and deciding on the grant of stock options to the employees and Whole Time Directors of the Bank.

(b) Information relating to the design and structure of remuneration processes and the key features and objectives of remuneration policy:

The Bank believes in a sound compensation practice that ensures effective governance of compensation, alignment of compensation with prudent risk taking and effective supervisory oversight and stakeholder engagement. This policy is framed in accordance with the guidelines laid down by Reserve Bank of India (RBI) vide their Circular Reference no DOR. Appt. BC. No. 23/ 29.67.001/ 2019-20 dated November 4, 2019.

(c) Description of the ways in which current and future risks are taken into account in the remuneration processes.

The Board of Directors through the Nomination and Remuneration Committee ("NRC") shall be responsible for formulating and making the necessary amendments to the Remuneration Policy for the Directors, Key Managerial Persons (""KMP"") and Senior Executives of the Bank from time to time. The NRC may consider different aspects like risk-return alignment, cost to income ratio in framing the remuneration.

The Non-Executive Directors (""NED"") including Independent Directors of the Bank shall be paid remuneration as a percentage of the net profits of the Bank for the financial year as may be fixed by the Board from time to time, calculated as per the provisions of the Companies Act, 2013 and subject to the limits fixed by the Reserve Bank of India, from time to time.

Further, within the above ceiling, the remuneration payable to the Chairman of the Board shall be two times the amount payable to other Non-Executive Directors and Independent Directors and further subject to approval of RBI and the remuneration payable to the Chairman of the Audit Committee shall be 1.5 times the amount payable to other Non-Executive Directors and Independent Directors.

NEDs are to be paid such sitting fee for each meeting of the Board/ Committees of the Board attended by them, as may be approved by the Board pursuant to provisions of Section 197 of the Companies Act, 2013 read with Section 35B (1) of the Banking Regulation Act 1949. NEDs including Independent Directors shall be reimbursed any out of pocket expenses incurred by them while performing duties for the Bank.

The remuneration payable to Managing Director ("MD")/Chief Executive Officer ("CEO") shall be based on the scope and responsibility that goes with such positions, shall be comparable to the compensations of MD/CEO of similar profiles in similar organizations and would be performance linked. From time to time, the NRC may fix a maximum ceiling on the fixed/ variable component of compensation, subject the approval of Reserve Bank of India.

On November 22, 2019, the Board of the Bank approved an ESOP scheme for the Bank for eligible employees as determined from time to time by the NRC of the Bank.

For the other categories of staff, the compensation is structured taking into account all relevant factors such as the level of the position, roles and responsibilities and the prevailing compensation structure in the industry for the similar role.

(d) Description of the ways in which the Bank seeks to link performance during a performance measurement period with levels of remuneration.

The Bank follows Annual Performance Review (12 months period) to link performance. Remuneration is fixed based on the grade and

merit rating for all the employees. Individual performances are assessed in line with business or deliveries of the Key Result Areas (KRA), top priorities of business, budgets, risk alignment etc.

(e) A discussion of the bank''s policy on deferral and vesting of variable remuneration and a discussion of the Bank''s policy and criteria for adjusting deferred remuneration before vesting and after vesting.

The Bank has restructured the remuneration for Material Risk Takers in line with the RBI circular dated November 4, 2019. Accordingly, the variable pay of identified MRT was determined to be between 100% to 300% of fixed pay. This variable pay was further divided into cash and ESOPs. Both the cash and ESOPs of the said MRTs is to be deferred over a period of three year in line with the risk taken. Each such MRT has performance measures aligned to risk measures and the vesting of variable pay is also pro-rated till the end of the deferral period.

(f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the Bank utilizes and the rationale for using these different forms.

Employees of the Bank are eligible for variable pay in terms of both cash and ESOPs. At field level this is linked to defined performance targets. Other roles may be given variable pay based on their performance ratings. The variable pay amount varies depending on both the role of the individual as well as his/her performance levels.

Employees above defined grade are eligible for Employee Stock Options issued by the Bank determined by the Nomination and Remuneration Committee of the Bank. These options are granted annually based on performance ratings and role of the individual. Junior employees in cases of consistent exemplary performance are also granted options being part of High Achievers Club.

I n very select instances, employees are offered options over a four year period, with a quarter of the options vesting every year. The vesting of the options are dependent on continuity and performance of the said individual.

Variable pay for MRTs have been explained in (e) earlier.

A variable component may also be made available for specific employees as agreed and included as a part of their respective compensation structure.

As on the reporting date, the Bank does not have any form of variable remuneration other than as stated above. Employees above defined grade are eligible for Employee Stock Options issued by the Bank determined by the Nomination and Remuneration Committee of the Bank. In addition, some of the employees are holding stock options issued by the Holding company under the Holding Company''s Employee Stock Option scheme (Equitas ESOP Scheme 2015).

c) Marketing and Distribution

Banks does not have fees / remuneration received in respect of the marketing and distribution function (excluding bancassurance business).

d) Inter-bank participation with risk sharing

The aggregate amount of participation issued by the Bank and reduced from advances as per regulatory guidelines is '' 865 crore as on March 31, 2022 (Previous Year : '' 700 crore).

g) Implementation of IFRS converged Indian Accounting Standards (Ind AS)

The Bank is a subsidiary of Equitas Holdings Limited (EHL), a CIC-NBFC and the accounts of the Holding Company are presented as per the Indian Accounting Standards (Ind AS). The accounts of the Bank, being a subsidiary are required to be consolidated with the accounts of EHL, being the Holding Company as per the provisions of Companies Act, 2013. Since, the Bank being a material subsidiary of EHL, Bank''s financial statements are converted into Ind AS format for the purpose of Consolidation with EHL accounts. Also, as required by the RBI guidelines, the accounts of the Bank are submitted to the RBI in the Ind AS format at periodic intervals. The Financials prepared by the Bank under Ind AS for the purpose of consolidation of EHL accounts are reviewed/audited and approved by the Board of Directors of the Bank.

The Bank has put in place Board approved policy on Expected Credit Loss (ECL) as per Indian Accounting Standards. The Bank carries out the Expected loss provisioning using Probability of default (PD) and Loss given Default (LGD) framework by considering historical data. Currently, the ECL computation is manual and the Bank is in the process of automating the same

k) Contingent liabilities

Claims against the Bank not acknowledged as debts includes liability on account of Service tax, Goods and Service Tax, amount transferred to DEAF and other legal cases filed against the bank. The Bank is a party to various legal proceedings in the ordinary course of business which are contested by the Bank and are therefore subjudice. The Bank does not expect the outcome of these proceedings to have a material adverse impact on the Bank''s financial position.

As a part of banking activities, the Bank issues Letter of Guarantees on behalf of its customers, with a view to augment the customer''s credit standing. Through these instruments, the Bank undertakes to make payments for its customers obligations either directly or in case the customer fails to fulfill their financial or performance obligations.

l) Dues to Micro, Small and Medium Enterprises

Dues to Micro and Small Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. Based on the information available with the Bank, there are no overdue amounts payable to Micro and Small Enterprises as defined under the Micro, Small and Medium Enterprises Development Act, 2006 as at the Balance Sheet date. Further, the Bank has not paid any interest to any Micro and Small Enterprises during the current and previous year.

m) Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL) exceeded by the bank.

During the year, the Bank has not exceeded the prudential credit exposure limit as prescribed by the Reserve Bank of India in respect of Single Borrower and Group Borrowers. (Previous year: Nil).

n) Letters of Comfort

The Bank has not issued any letters of comfort during the year.(Previous year: Nil).

o) No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Bank to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the bank (Ultimate Beneficiaries). The Bank has not received any fund from any party(s) (Funding Party) with the understanding that the Bank shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the bank ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

15 Employee Benefits (AS 15)

Defined Contribution Plan Provident Fund

The Bank makes Provident Fund contributions to State administered fund for qualifying employees. The Bank is required to contribute a specified percentage of the payroll costs to the Fund. The Bank has recognised '' 44.95 crores (Previous Year: '' 38.27 Crore) towards Provident Fund contributions in the Profit and Loss Account. The contributions payable to the fund by the Bank is at rates specified in the rules of the scheme.

Notes:

a) The estimate of future salary increase takes into account inflation, seniority, promotion and other relevant factors. Further, the Management revisits the assumptions such as attrition rate, salary escalation etc., taking into account, the business conditions, various external/internal factors affecting the Bank.

b) Discount rate is based on the prevailing market yields of Indian Government Bonds as at the Balance Sheet date for the estimated term of the obligation.

During the year ended March 31, 2022, the Bank granted 81,61,946 options (Previous year 96,94,716 options ) to its employees and the employees of Equitas Holding Limited under the ESFB Employees Stock Option Scheme 2019. These options have dilutive impact on the earnings per share.

b) ESFB ESOP 2019

During the year ended 31st March 2020, the bank established a employee stock option scheme titled ESFB Employees Stock Option Scheme, 2019 (ESFB ESOP 2019) effective from November 22, 2019. Under the plan, the Bank was authorized to issue upto 110,000,000 options (including 33,487,873 options under Grant 1 issued as a replacement option for the Scheme under the Holding Company) to eligible employees of the Bank and the Holding Company. Each option entitles for apply and allotment of one fully paid share on payment of exercise price during the exercise period.

Volatility

Volatility is a measure of the amount by which a price has fluctuated or is expected to fluctuate during a period. The measure of Volatility used in the Black -Scholes option pricing model is the annualized standard deviation of the continuously compounded rates of return on the stock over a period of time.

c) Dividend Yield

Expected dividend yield has been calculated based on the dividend declared for 1 financial year prior to the date of grant. The dividend yield has been derived by dividing the dividend per share by the market price per share on the date of grant.

22 Prior period comparatives

Prior period comparatives have been reclassified / regrouped by the management, wherever necessary.