About Suryoday Small Finance Bank Ltd

The Bank was originally incorporated as Suryoday Micro Finance Private Limited at Chennai, Tamil Nadu, as a private limited company under the Companies Act, 1956 pursuant to the certificate of incorporation dated 10 November 2008 issued by the Assistant Registrar of Companies, Tamil Nadu, Andaman and Nicobar Islands at Chennai. Subsequently, our Bank was converted into a public limited company and the name of our Bank was changed to Suryoday Micro Finance Limited, and a fresh certificate of incorporation dated 16 June 2015 was issued by the RoC. Our Bank was granted the in-principle and final approval to establish a small finance bank ('SFB') by the RBI, pursuant to its letters dated 07 October 2015 and 26 August 2016, respectively. Pursuant to our Bank being established as an SFB, the name of our Bank was changed to Suryoday Small Finance Bank Limited and a fresh certificate of incorporation was issued by the RoC on 13 January 13, 2017. The Bank commenced its business with effect from 23 January 2017 and was included in the second schedule to the RBI Act pursuant to a notification dated 24 July 2017 issued by the RBI and published in the Gazette of India on 02 September 2017. The bank has a wide presence across 13 states and UTs across India through its 556 banking outlets, with a strong presence in Maharashtra, Tamilnadu and Odisha. The Bank is primarily engaged in extending micro credit to economically weaker women who are otherwise unable to access finance from the mainstream banking channels. The Bank broadly follows the Grameen model with suitable adaptations using the Joint Liability Groups (JLG) framework, where each member of the group guarantees the loan repayment of the other members of the group. The Bank also provides finance for mortgage loans, commercial vehicles, loans to micro, small and medium enterprises and loans to Non-banking finance companies (NBFCs). During the FY2016,the Company raised Rs 746 Crore by way of debt facilities from various lenders and Rs 72 Crores by way of loan portfolio securitization. The Company has issued 43,95,907 equity shares by way of rights issue in July 2015. The capital was raised to ensure adequate capital to support growth and expansion, including enhancing the Company's solvency and capital adequacy ratio and for general corporate purposes. The Company issued and allotted 10,00,000 equity shares to Mr. R. Baskar Babu on a preferential basis. The same was approved by the members of the Company at their Extraordinary General Meeting held on 24 December 2015. During the FY2017, 255,60,469 equity shares of the face value of Rs. 10/- each were allotted by way of Rights issues, Private Placement issues and Preferential Allotment issues in various tranches bringing in a total inflow of Rs. 289.27 crore. The bank has raised Rs 501.29 crore by way of debt facilities from various lenders and Rs. 261.28 crores by way of loan portfolio buys outs/securitization during the Financial Year 2016-2017. During the year 2017-18, 31,00,000 equity shares of Rs. 10/- each were allotted by way of preferential issue. The Bank has 28 fully operational bank branches as of June 2018 including conversion of 2 micro finance lending outlets into banking outlets in addition to 213 micro finance lending focused outlets. The Bank also has onsite ATMs at almost all branches. The Gross Loan Portfolio at Rs 2920 crore showed a year-on-year increase of 76% whereas the Total deposits grew by 113% from Rs 750 crore as at Mar 2018 to Rs 1593 crore as at March 2019 with retail deposits accounting for almost 50% share. The AUM grew by 71% to Rs 3,003 crore, with 20% of this contributed by Affordable Home Loans, Commercial Vehicle Finance, and SME & NBFC funding. The number of banking outlets increased from 241 in March 2018 to 382 in March 2019 comprising of 211 asset centres and 171 other outlets (including 68 URCs). During the FY2020,the bank has issued 4500000 equity shares through private placement pursuant to shareholder's approval aggregating to Rs 63 crore. The Gross Loan Portfolio at Rs 3,742 crore (excluding the impact of write-off) grew by 26% over that of the previous year and the total deposits at Rs 2,849 crore grew by 79% over that of the previous year. The number of banking outlets increased from 382 in March 2019 to 477 in March 2020 including 133 Unbanked Rural Centres. During the second quarter of FY21 ended 30 Septernber 2020, the Bank issued 23,90,020 equity shares through private placernent pursuant to shareholder's approval aggregating to Rs 62.14 crore. The Bank also issued unsecured, subordinated non-convenible debentures for Rs 100 crore during the quarter ended 30 Septernber 2020. During the year ended 31 March 2021, the Bank successtully completed lnitial public offer (lPo) and got listed on 26 March 2021 on Natiohal stock Exchange (NSEJ and BSE Ltd.

Suryoday Small Finance Bank Ltd Chairman Speech

It gives me immense pleasure to present to you Suryoday's Annual Report for FY23. The year in review saw us focus on quality growth as evident from our sound and purpose-driven performance.

The year FY23 began with a rise in geo-political instabilities and the impending war situation further dampened the global macro-economic scenario. Despite this, the 1st full year post pandemic witnessed the Indian economy's steady growth and resilience with India's economic growth being largely insulated from global shocks.

In FY23, the Indian economy was one of the fastest growing economies, in real terms. With a rebound seen on all fronts, the Indian economy performed well with GDP growth at 7.2%. The credit growth in the Banking sector reflects the growth journey. Time and again, the Indian banking system has demonstrated its resilience while addressing global challenges. According to RBI's Financial Stability Report, the Indian banking system is robust, fortified by a multi-year low level of non-performing loans and adequate level of capital and liquidity buffers.

In the recent past, deposit growth was more stable as compared to credit growth. However, in FY23, led by buoyant demand for credit growth, the CD ratio for SCBs stood at 75.8% as against 72.4% reported in FY22. Healthier balance sheets, sustained broad-based momentum of credit growth across all sectors of the economy. As per RBI's data, bank credit grew by 15% year-on-year (y-o-y) basis in the fiscal ended March 2023 on account of the lower base of the previous year and higher demand for funds with economic activity picking up.

For Small Finance banks, FY23 was the year of rebound after a muted FY22. The listed Small Finance banks put up a stellar performance during the year reporting an overall growth of about 30% in their portfolio.

Performance Review

FY23 was a year of reset for Suryoday, wherein we maintained a razor-sharp focus on quality growth resulting in steady and turnaround performance during the year. The business growth was achieved with a mix of expanded branch networks and deeper penetration in the existing branches. As of March 31, 2023, our branch network stood at 577, of which 95 branches are deposit-focussed, 324 branches are asset-focussed, the remaining 158, being rural outlets.

Signalling a turnaround in terms of profitability, we reported a profit of Rs. 77.7 Crores in FY23 against a loss of Rs. 93 Crores reported in FY22. This recovery reflects our concerted efforts to enhance operational efficiency, optimise our asset quality addressing stressed asset portfolio and improve overall financial performance.

Our inclusive finance and related lines of business demonstrated a remarkable growth almost at the pre-pandemic levels. Our retail assets business grew significantly at around 41%.

On the deposit franchise front, we continued to focus on retail granular deposit growth, wherein 50% of our retail deposits accounted for amounts less than Rs. 5 Lakhs, and 86% of our retail deposits were related to amounts less than Rs. 50 Lakhs.

Our disbursements grew by 44.1% to Rs. 5,083 Crores from a level of Rs. 3,528 Crores during the previous year, on the back of increased demand, business activities reaching the pre-pandemic levels with strong momentum across businesses. Our inclusive finance business, which serves the unbanked and underbanked population, disbursed over Rs. 3,500 Crores constituting around 69% of the total disbursements undertaken during the year.

The Bank has had significant increase in its customer base that reflects the success of our customer-centric approach and our ability to attract new customers, by catering to evolving financial needs.

The customer base of the Bank has witnessed a substantial growth to about 23.1 Lakhs, an increase of 19.9% Y-o-Y signalling our way to cater to banking needs of 1% of the total Indian households.

We have achieved significant improvement in our asset quality with a sharp reduction in Gross Non-Performing Assets to a level of 3.1% in FY23 from 11.8% in FY22 and the Net NPA dropping to 1.5% in FY23 from 5.9% in FY22.

Our Provision Coverage Ratio (excluding technical write-offs) stood at 51.5%, marginally lower than 55.6% in FY22.

Our collection efficiencies have improved steadily across all lines of businesses with the economy nearing pre-pandemic levels. Our overall collection efficiency inclusive of recovery of overdue advances stood at 102.2% during the current fiscal.

Our core earnings have improved 27.7% Y-o-Y, with Net Interest Income increasing to a level of Rs. 746.6 Crores during the year as against Rs. 584.5 Crores last year.

The year witnessed a rise in interest rates with Repo rates being raised by 2.5% in the course of the year. However, the Bank was able to maintain its cost of funds, which stood at 6.7%, marginally lower than 7.0% in the corresponding period last year. Similarly, the Bank has been able to marginally improve its cost-to-income ratio to 60% versus 60.9% in FY22.

We continue to be well capitalised with our capital adequacy ratio currently standing at 33.7%, comprising of Tier I capital at 30.8% and Tier II capital at 2.9% respectively.

Improving Efficiencies

We have strategic internal control measures in place to improve processes and overall efficiencies for better and improved customer service. We remain committed to setting the highest standards of Corporate Governance by adhering to the Industry's Best practices and requirements.

We continue to invest in technology, to aid our customer service process and digitise processes for seamless customer servicing. During the year, we migrated to Finacle Core Banking Solution, implementing it in record time. We continue to invest in analytical tools to help us cross-sell and upsell, while enhancing the quality of our customer journey.

Our empowered human capital whom we consider as our Brand Ambassador, has ensured excellence in delivering efficient customer service.

Undertaking in-depth and incisive analysis, has helped us maintain a robust risk management mechanism, enhancing our ability to ensure asset quality and take preventive action in a timely manner.

The Bank continues to be driven by its purpose of creating and developing a financially inclusive ecosystem and accordingly continues to maintain a consistent focus on the unbanked and underbanked population.

We are leveraging our Inclusive Finance Banking outlets to offer relevant products beyond basic microfinance loans. Additionally, we have strategically partnered with our Business Correspondents to expand our network to newer geographies to help our customers make a foray into the mainstream financial system.

We have been undertaking various CSR initiatives to empower the marginalised sections of society and to help create a sustainable environment.

The Way Ahead

The recent banking crisis in US and Europe has sent shockwaves across the global banking fraternity. However, the Indian banks are well placed as compared to their US and European counterparts. Additionally, the Government of India and RBI continue their efforts to strengthening the banking ecosystem and fostering a stable financial environment.

The Bank shall continue with its prudent approach across the twin pillars of (a) being well capitalised to support future growth as well as (b) maintaining sufficient liquidity levels.

We continue to remain focussed on serving the underbanked and unbanked segment with a vision to be able to serve at least 1.0% of Indian households by 2026.

I take this opportunity to thank all our stakeholders including our customers, business partners/associates, employees and shareholders for their unwavering support and trust in us.

We are committed to delivering robust performance, so as to become "The Bank of Choice," for our customers as well as for creating long term value for our shareholders.

Best wishes,

RAMACHANDRAN R.

Chairman

Suryoday Small Finance Bank Ltd Company History

The Bank was originally incorporated as Suryoday Micro Finance Private Limited at Chennai, Tamil Nadu, as a private limited company under the Companies Act, 1956 pursuant to the certificate of incorporation dated 10 November 2008 issued by the Assistant Registrar of Companies, Tamil Nadu, Andaman and Nicobar Islands at Chennai. Subsequently, our Bank was converted into a public limited company and the name of our Bank was changed to Suryoday Micro Finance Limited, and a fresh certificate of incorporation dated 16 June 2015 was issued by the RoC. Our Bank was granted the in-principle and final approval to establish a small finance bank ('SFB') by the RBI, pursuant to its letters dated 07 October 2015 and 26 August 2016, respectively. Pursuant to our Bank being established as an SFB, the name of our Bank was changed to Suryoday Small Finance Bank Limited and a fresh certificate of incorporation was issued by the RoC on 13 January 13, 2017. The Bank commenced its business with effect from 23 January 2017 and was included in the second schedule to the RBI Act pursuant to a notification dated 24 July 2017 issued by the RBI and published in the Gazette of India on 02 September 2017. The bank has a wide presence across 13 states and UTs across India through its 556 banking outlets, with a strong presence in Maharashtra, Tamilnadu and Odisha. The Bank is primarily engaged in extending micro credit to economically weaker women who are otherwise unable to access finance from the mainstream banking channels. The Bank broadly follows the Grameen model with suitable adaptations using the Joint Liability Groups (JLG) framework, where each member of the group guarantees the loan repayment of the other members of the group. The Bank also provides finance for mortgage loans, commercial vehicles, loans to micro, small and medium enterprises and loans to Non-banking finance companies (NBFCs). During the FY2016,the Company raised Rs 746 Crore by way of debt facilities from various lenders and Rs 72 Crores by way of loan portfolio securitization. The Company has issued 43,95,907 equity shares by way of rights issue in July 2015. The capital was raised to ensure adequate capital to support growth and expansion, including enhancing the Company's solvency and capital adequacy ratio and for general corporate purposes. The Company issued and allotted 10,00,000 equity shares to Mr. R. Baskar Babu on a preferential basis. The same was approved by the members of the Company at their Extraordinary General Meeting held on 24 December 2015. During the FY2017, 255,60,469 equity shares of the face value of Rs. 10/- each were allotted by way of Rights issues, Private Placement issues and Preferential Allotment issues in various tranches bringing in a total inflow of Rs. 289.27 crore. The bank has raised Rs 501.29 crore by way of debt facilities from various lenders and Rs. 261.28 crores by way of loan portfolio buys outs/securitization during the Financial Year 2016-2017. During the year 2017-18, 31,00,000 equity shares of Rs. 10/- each were allotted by way of preferential issue. The Bank has 28 fully operational bank branches as of June 2018 including conversion of 2 micro finance lending outlets into banking outlets in addition to 213 micro finance lending focused outlets. The Bank also has onsite ATMs at almost all branches. The Gross Loan Portfolio at Rs 2920 crore showed a year-on-year increase of 76% whereas the Total deposits grew by 113% from Rs 750 crore as at Mar 2018 to Rs 1593 crore as at March 2019 with retail deposits accounting for almost 50% share. The AUM grew by 71% to Rs 3,003 crore, with 20% of this contributed by Affordable Home Loans, Commercial Vehicle Finance, and SME & NBFC funding. The number of banking outlets increased from 241 in March 2018 to 382 in March 2019 comprising of 211 asset centres and 171 other outlets (including 68 URCs). During the FY2020,the bank has issued 4500000 equity shares through private placement pursuant to shareholder's approval aggregating to Rs 63 crore. The Gross Loan Portfolio at Rs 3,742 crore (excluding the impact of write-off) grew by 26% over that of the previous year and the total deposits at Rs 2,849 crore grew by 79% over that of the previous year. The number of banking outlets increased from 382 in March 2019 to 477 in March 2020 including 133 Unbanked Rural Centres. During the second quarter of FY21 ended 30 Septernber 2020, the Bank issued 23,90,020 equity shares through private placernent pursuant to shareholder's approval aggregating to Rs 62.14 crore. The Bank also issued unsecured, subordinated non-convenible debentures for Rs 100 crore during the quarter ended 30 Septernber 2020. During the year ended 31 March 2021, the Bank successtully completed lnitial public offer (lPo) and got listed on 26 March 2021 on Natiohal stock Exchange (NSEJ and BSE Ltd.

Suryoday Small Finance Bank Ltd Directors Reports

Dear Members,

Your Board of Directors ( "Board") present the Fifteenth Annual Report on the business and operations of the Bank together with the Audited Financial Statements of the Bank for the financial year ("FY") ended March 31, 2023.

FINANCIAL HIGHLIGHTS

The Bank's performance during the FY ended March 31,2023 as compared to the previous FY is summarized below:

(Rs in Crores)

*Excluding ARC and Net of Provision

OVERVIEW OF OPERATIONS

The Net Interest Income of the Bank for the year was Rs. 746.6 Crores as compared to Rs. 584.5 Crores in the previous year. The Bank has achieved a Profit of Rs. 77.7 Crores for the year ended March 31, 2023, a significant improvement from the loss of Rs. 93.0 Crores in the year ended March 31, 2022. The Bank has a year-on-year basis growth of Rs. 170.7 Crores in terms of profit.

The Gross Loan Portfolio witnessed a jump of 20.8% to Rs. 6,114 Crores and there was a substantial rise in deposits by 34.2% to Rs. 5,167 Crores. The retail deposits including CASA constituted 73.1% of the overall deposits of the Bank.

The Capital Adequacy Ratio ("CRAR") was 33.7% as at March 31,2023 (March 31,2022: 37.9%) as compared to the statutory minimum required 15%.

Cost to Income ratio for the year ended March 31, 2023 was 60.0% as compared to 60.9% for the previous year. There was a substantial improvement in Return on Assets from -1.29% in FY22 to 0.87% in FY23 primarily driven by business growth coupled with improved asset quality.

The number of banking outlets increased from 565 in March, 2022 to 577 in March, 2023 including 158 Unbanked Rural Centres.

The Bank was able to completely recover from the aftershocks of the COVID-19 outbreak and lockdown. GNPA and NNPA were back to pre-covid levels. There was an increase in disbursements by more than Rs. 1,500 Crores on a Y-o-Y basis. Additionally, even the Net Interest Income ("NII") witnessed a strong growth of 27.8% on a Y-o-Y basis.

Customer- related initiatives

The Bank offers a suite of deposit and loan products catering to various customer segments. During the year under review, the Bank introduced the following products and collaborations:

Digital Tie-Ups

• Partnerships with three Payment Banks to offer their customers sweep account facilities and fixed deposits.

Women Savings Account

• Launched Women's Savings Account product with added benefits and better returns on savings account.

DIVIDEND

Considering the need to preserve capital to support growth and expansion, the Board of Directors did not recommend a dividend payout for the FY ended March 31, 2023.

TRANSFER TO RESERVES

As per requirement of RBI regulations, the Bank has transferred the following amounts to various reserves during FY ended March 31, 2023:

CHANGE IN NATURE OF BUSINESS

There has been no change in the nature of business of the Bank during the year under review.

SHARE CAPITAL Authorised capital:

During the year under review, there was no change in the Authorised Share Capital of the Bank and as at March 31, 2023, the Authorized Share Capital stood at Rs. 125,00,00,000 (Rupees One hundred and twenty-five Crores) divided into 12,50,00,000 (Twelve Crores fifty lakh) equity shares of Rs. 10 (Rupees Ten) each.

Paid up Capital:

During the year under review, there was no change in the Paid-up Capital of the Bank and as at March 31, 2023, the Paid-up Capital stood at Rs. 106,15,87,490 (Rupees One hundred six Crores fifteen lakh eighty-seven thousand four hundred and ninety only) divided into 10,61,58,749 (Ten Crores sixty one lakh fifty eight thousand seven hundred and forty nine) equity shares of Rs. 10 (Rupees Ten) each.

During the year, the Bank has not issued any equity shares with differential voting rights.

DEBT INSTRUMENTS

As at March 31,2023, the Bank had one series of Debentures issued on Private placement basis consisting of 1000 Nos. of 12.5% Rated, Listed, Unsecured, Subordinated, Redeemable Lower Tier II Bonds in the form of Non-Convertible Debentures having face value of Rs. 10 Lakhs each, amounting to Rs. 100 Crore which are listed on BSE Limited.

CREDIT RATINGS OF VARIOUS INSTRUMENTS

The ratings assigned by ICRA/ and CRISIL for various instruments are:

CAPITAL ADEQUACY RATIO

• As per operating guidelines for Small Finance banks, the Bank is required to maintain a minimum Capital Adequacy Ratio (CRAR) of 15% with minimum Common Equity Tier I (CET I) of 6%.

• As at March 31, 2023, the Capital Adequacy Ratio of the Bank stood at 33.7%, well above the regulatory minimum requirement of 15%. Tier I ratio of the Bank stood at 30.8% well above regulatory requirement of 6% and Tier II capital was at 2.9%.

PERFORMANCE AND FINANCIAL POSITION OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES

The Bank did not have any subsidiary, associate or joint venture company during the FY 2022-23. Accordingly, no statement is required to be reported in Form AOC-1.

ANNUAL RETURN

The Annual Return as mandated under the provisions of Section 92(3) read with Section 134(3) of the Companies Act, 2013 ("the Act") in prescribed Form MGT-7 is available on the website of the Bank and the same can be accessed at https://www.suryodaybank. com/shareholders-meeting-agm-view-23-24/MGT-7- Annual-Return-Financial-Year-2022-23.pdf

BOARD OF DIRECTORS

The composition of the Board is governed by the provisions of the Act, the Banking Regulation Act, 1949 (the "BR Act"), the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations"), other applicable laws and the Articles of Association of the Bank. As on March 31, 2023, the Board of the Bank had eight Directors, of which six were Independent Directors, one Non-Executive Non-Independent Director and one Managing Director & Chief Executive Officer ("Managing Director & CEO").

The certificate pursuant to Regulation 34(3) and sub-clause

(i) of Clause 10 of Part C of Schedule V of the SEBI Listing Regulations for the FY ended on March 31, 2023 from Mr. Tushar Shridharani, Practicing Company Secretary, (FCS 2690 / COP 2190) confirming that none of the Directors on the Board of the Bank have been debarred or disqualified from being appointed or continuing as Directors of the Bank, is attached as Annexure 1 to this Report.

During the year under review:

(i) Mrs. Meena Hemchandra (DIN:05337181) Independent Director, has resigned from the position of an Independent Director of the Bank w.e.f. May 23, 2022.

(ii) Dr. Mandeep Maitra (DIN:06937451) has been appointed as Non-Executive Independent Director for a period of five years effective from July 28, 2022 to July 27, 2027, at the Fourteenth (14th) Annual General Meeting ("AGM") of the Bank held on August 26, 2022.

(iii) Mr. Ranjit Jayant Shah (DIN 00088405), Investor Director, was re-appointed at the Fourteenth (14th) AGM of the Bank held on August 26, 2022, and is liable to retire by rotation.

(iv) Mr. Aleem Remtula (DIN:02872107), Investor Director, has resigned from the position of Director w.e.f. September 01, 2022.

(v) Mr. Jyotin Kantilal Mehta (DIN:00033518) was re-appointed as Non-Executive Independent Director of the Bank for a period of three (3) years effective from August 31, 2022 to hold office upto August 30, 2025 at the 14th AGM held on August 26, 2022. Further, in accordance with the provisions of BR Act, the tenure of total 8 years of Mr. Jyotin Kantilal Mehta as a Director on the Board of the Bank would be completed on February 12, 2025 considering his original date of appointment as February 13, 2017. Accordingly, he would hold office as an Independent Director of the Bank upto February 12, 2025.

(vi) The Bank has received approval from the Reserve Bank of India ("RBI") on December 26, 2022 vide RBI letter No. DoR.GOV.No.S6124/29.44.006/2022-23, for re-appointment of Mr. Baskar Babu Ramachandran (DIN:02303132), as the Managing Director & CEO of the Bank, for a further period of three (3) years effective from January 23, 2023, to January 22, 2026.

(vii) Mr. Ranjit Jayant Shah (DIN: 00088405), Non-Executive Non-Independent Director, being liable to retire by rotation at the ensuing AGM of the Bank, and being eligible, has offered himself for re-appointment. The Board of Directors at their meeting held on July 26, 2023, basis the recommendation of the Nomination and Remuneration Committee, has recommended the re-appointment of Mr. Ranjit Jayant Shah as Non-Executive Investor Director, liable to retire by rotation.

KEY MANAGERIAL PERSONNEL

As of March 31, 2023, Mr. Baskar Babu Ramachandran, Managing Director & CEO, Mr. Kanishka Chaudhary, Chief Financial Officer and Mr. Krishna Kant Chaturvedi, Company Secretary & Compliance Officer were the Key Managerial Personnel of the Bank in terms of Section 203(1) of the Act and Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Ms. Geeta Krishnan ceased to be Company Secretary & Compliance Officer of the Bank with effect from close of business hours on April 30, 2022 on account of her superannuation and Mr. Krishna Kant Chaturvedi was appointed as Company Secretary & Compliance Officer of the Bank with effect from May 2, 2022.

MEETINGS OF THE BOARD OF DIRECTORS/ COMMITTEES OF THE BOARD

During the year under review, Nineteen (19) Meetings of the Board of Directors were held and the gap between any two meetings were well within the statutorily permissible limits. The details of meetings of the Board and Board Committees together with the attendance are detailed in the Corporate Governance Report.

STATEMENT ON DECLARATION BY INDEPENDENT DIRECTORS

All the Independent Directors have submitted the required declarations that they meet the criteria of Independence as laid down under Section 149(6) of the Act and Regulation 16(1)(b) and Regulation 25(8) of the SEBI Listing Regulations. The Board had assessed the veracity of the confirmations submitted by the Independent Directors, as required under Regulation 25(9) of the SEBI Listing Regulations.

In the opinion of the Board, all the Independent Directors are independent of the Management.

During the year, there has been no change in the circumstances affecting their status as Independent Directors of the Bank and they are not debarred from holding the office of Director under any SEBI Order or any other such authority.

STATEMENT REGARDING OPINION OF THE BOARD WITH REGARD TO INTEGRITY, EXPERTISE AND EXPERIENCE (INCLUDING THE PROFICIENCY) OF THE INDEPENDENT DIRECTORS APPOINTED DURING THE YEAR

In the opinion of the Board, the Independent Directors are persons of integrity and possess the requisite experience, expertise and proficiency required under all applicable laws and the policies of the Bank.

POLICY ON APPOINTMENT AND REMUNERATION OF DIRECTORS, KEY MANAGERIAL PERSONNEL AND SENIOR MANAGEMENT

As per the provisions of sub-section (3) of Section 178 of the Act, the Bank has a Policy on appointment of Directors and Senior Management employees which includes formulating criteria for determining qualifications, attributes and independence of a Director. This Policy has been disclosed on the Bank's website at:- https://www.suryodaybank.com/ assets/pdf/policies/Suryoday Policy on Appointment of Directors and Senior Managerial Personnel FY22-23 1.0.pdf.

The Board has, in accordance with the RBI guidelines on compensation, formulated the Compensation Policy which became effective in FY 2020-21. The Compensation Policy institutes a mechanism for alignment of compensation of Whole-time Directors, Chief Executive Officer, Material Risk Takers, Control Function Staff and other Senior Managerial Personnel with the extent of risks taken. The Policy also establishes standards of compensation including fixed and variable, which are in alignment with the applicable rules and regulations including the RBI guidelines in this regard and which is based on the trends and practices of remuneration prevailing in the banking industry. The remuneration of Whole-time Directors, Material Risk Takers, Key Managerial Personnel and Senior Management is governed by the Compensation Policy of the Bank. This Policy has been disclosed on the Bank's website at:- https://www.suryodaybank.com/assets/pdf/policies/ Compensation-Policy.pdf.

The Non-Executive Directors including Independent Directors are paid remuneration by way of sitting fees for attending the meetings of the Board and its Committees, which is determined by the Board based on applicable regulatory provisions. Further, expenses incurred by them for attending meetings of the Board and Committees, if any, are reimbursed at actuals.

PERFORMANCE EVALUATION OF THE BOARD

Pursuant to the provisions of Section 178(2) read with Schedule IV of the Act and Regulation 19 of SEBI Listing Regulations and SEBI Guidance Note on the Board Evaluation dated January 05, 2017 and as per the performance evaluation framework approved by the Nomination & Remuneration Committee ("NRC") and also concurred by the Board, the Bank has carried out the performance evaluation of the Directors including Chairman, Managing Director & CEO, Board Level Committees and Board as a whole for the FY 2022-23.

The criteria for the performance evaluation of the

Board include various aspects, such as structure, meetings, appointments, agenda, discussions, roles and responsibilities, evaluation of risks, strategy, governance and compliance, conflict of interest, etc. Further, the criteria for performance evaluation of the Board Committees include various aspects, such as, mandate and composition, effectiveness, meetings, agenda, minutes, discussion and dissent, independence, etc.

The criteria for the performance evaluation of the

Directors include various aspects, such as, knowledge and competence, skill sets, expertise, integrity, functioning, contribution towards Board deliberations & decision-making process, attendance, teamwork, corporate governance, etc., and in case of Independent Directors, additional parameters include fulfilment of the criteria of independence, integrity and their independence from the management.

All Directors provided their responses to the questionnaires based on the aforesaid criteria. Further, at a separate meeting of the Independent Directors, the performance of non-independent Directors and the performance of the Board as a whole were reviewed based on the abovementioned criteria. The report on Board Evaluation was placed before the NRC and Board. The Chairman of the Board and the Chairperson of the NRC and an Independent Director who chaired the meeting of the Independent Directors took the lead in the process of evaluation and shared the feedback to the Board. The Board deliberated upon the outcome of the evaluation report and found the performance of the Board as a whole, the Board Committees, the Chairman, the Managing Director & CEO and other individual Directors to be satisfactory.

FAMILIARISATION PROGRAMMES FOR INDEPENDENT DIRECTORS

The details of the familiarisation programme(s) for the Independent Directors of the Bank have been provided separately in the Report on Corporate Governance forms part of the Annual Report.

EMPLOYEES STOCK OPTION SCHEME AND OPTIONS GRANTED DURING FY 2022-23

Presently, the Bank is having two ESOP Schemes i.e., 1) Employee Stock Option Scheme 2016 2) Suryoday ESOP Scheme-2019.

The applicable disclosure with regard to Employee Stock Option granted during FY 2022-23 is provided in Annexure 2 to this report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Pursuant to Section 186(11) of the Act, loans made, guarantees given, securities provided or acquisition of securities by a banking company in the ordinary course of its business are exempted from the disclosure requirement under Section 134(3)(g) of the said Act. Details of Investments are given in Schedule 8 to the Financial Statements forms part of the Annual Report.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTY

During the year under review, there were no contracts or arrangements with related parties as referred to under Section 188(1) of the Act.

RISK MANAGEMENT FRAMEWORK

The Bank is exposed to various risks which broadly fall under one or more of the categories of Credit Risk, Market Risk, Liquidity Risk, Operational Risk and Information and Cyber Security Risk etc. The Chief Risk Officer of the Bank is in charge of the risk management functions under the oversight of the Risk Management Committee of the Board ("RMCB"). The Bank has a robust framework for risk management in the form of regular review of products and processes by the Compliance team, periodic internal audit of processes and operations, regular review of risk policies and periodic reporting to the RMCB and the Board. The RMCB overviews the nature of the relevant risks, impact thereof on the business of the Bank, implementation of the risk management policies and processes and reviewing of these Policies.

INTERNAL FINANCIAL CONTROLS (IFC) WITH REFERENCE TO THE FINANCIAL STATEMENTS

The Board has reviewed the adequacy and effectiveness of the Bank's internal financial controls with reference to its financial statements. During the year under review, there were no material or serious observations with respect to the inefficiency or inadequacy of such controls.

MATERIAL CHANGES AND COMMITMENTS, AFFECTING THE FINANCIAL POSITION OF THE BANK

There are no material changes and commitments, affecting the financial position of the Bank subsequent to the close of the FY 2022-23.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to Section 134(3)(c) read with Section 134(5) of the Act, the Board of Directors of the Bank hereby confirms that:

a. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b. they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as on March 31,2023 and of the profit of the Bank for the year ended on that date;

c. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

d. the annual accounts are prepared on a going- concern basis;

e. the requisite internal financial controls followed by the Bank are adequate and were operating effectively;

f. proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and were operating effectively.

MANAGEMENT DISCUSSION & ANALYSIS

The Report on Management Discussion & Analysis for FY 2022-23, as stipulated in SEBI Listing Regulations forms part of the Annual Report.

CORPORATE GOVERNANCE

The Bank is committed to establishing and adhering to the best Corporate Governance practices in accordance with the rules and regulations applicable to the Bank. The Report on Corporate Governance along with the Certificate issued by Mr. Tushar Shridharani, Secretarial Auditors of the Bank confirming compliance with the Corporate Governance requirements under Regulation 34 and other applicable provisions of the SEBI Listing Regulations forms part of the Annual Report.

CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES

During the year under review, the Bank undertook a major part of its CSR initiatives through an implementing agency viz. Suryoday Foundation. The CSR activities undertaken during the year were Financial Literacy programs, Women Empowerment, Rural Livelihoods, environment and community engagement programs. The details of CSR activities in FY 2022-23 including those of ongoing projects are mentioned in the prescribed format and attached as Annexure 3 to this Report.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

In terms of Regulation 34(2)(f) of the SEBI Listing Regulations, the top 1000 listed companies based on their market capitalisation as on March 31, every fiscal year, are mandatorily required to submit a Business Responsibility and Sustainability Report ("BRSR") on the environmental, social and governance disclosures as part of their Annual Report. The said Report describing the initiatives undertaken by the Bank from environmental, social and governance perspective has been uploaded on the website of the Bank and the same can be accessed at https://www.suryodaybank.com/shareholders-meeting-

agm-view-23-24/Business-Responsibility-Report-2022-23.pdf.

As stipulated in SEBI Listing Regulations, the Business Responsibility and Sustainability Report describing the initiatives undertaken by the Bank from environmental, social and governance perspective is forms part of the Annual Report.

STATUTORY AUDITORS AND THEIR REPORT

M/s. Walker Chandiok & Co LLP; Chartered Accountants (FRN 001076N/ N500013), were appointed as Statutory Auditors of the Bank with the approval of the RBI at the Thirteenth AGM held on September 20, 2021 to hold office from the conclusion of the Thirteenth AGM until the conclusion of the Sixteenth AGM of the Bank for the audit of the accounts of the Bank for FY 2021-22 to FY 2023-24, subject to approval of the RBI for re-appointment on annual basis.

The Report, given by the Statutory Auditors on the financial statements of the Bank for the FY ended on March 31, 2023, forms part of the Annual Report. There has been no qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report. Also, no offence of fraud was reported by the Auditors of the Bank under Section 143(12) of the Act.

As per para 6.1 of the RBI Circular No. RBI/2021-22/25 Ref. No.DoS.CO.ARG/SEC.01/08.91.001/ 2021-22 dt. April 27, 2021, the Committee of the Board shall monitor and assess the independence of the Auditors and conflict of interest position in terms of relevant regulatory provisions, standards and best practices. Accordingly, the Audit Committee and the Board of Directors at their meetings held on May 15, 2023 have reviewed the performance of the Statutory Auditors and found the same to be satisfactory and that they were acting independently without conflict of interest with the management.

Further, as per para 3.1 of the said RBI Circular, the Bank is required to take prior approval of the RBI for their continuation on an annual basis. Accordingly, the Bank has sought and received approval from the RBI for continuation of M/s. Walker Chandiok & Co LLP, Chartered Accountants (FRN 001076N/ N500013), as Statutory Auditors to the Bank for FY 2022-23.

SECRETARIAL AUDITORS AND THEIR REPORT

Pursuant to the provisions of Section 204 of the Act, the Board has appointed Mr. Tushar Shridharani, Practising Company Secretary (C.P. 2190) as Secretarial Auditor to conduct Secretarial Audit of the Bank for FY 2022-23. The Secretarial Audit Report for FY 2022-23 is annexed to this Directors' Report as Annexure 4. The report is self-explanatory and does not contain any qualification, reservation or adverse remark.

The Bank has complied with the prescribed Secretarial Standards on meetings of the Board and its Committees (SS-1) and General Meetings (SS-2) issued by the Institute of Company Secretaries of India for the FY ended March 31, 2023.

INFORMATION UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Bank has adopted a Policy for Prevention of Sexual Harassment ("POSH Policy") at the workplace under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee ("ICC") has been constituted in compliance with the provisions of the Act and the POSH Policy to review, investigate and take suitable action on complaints. An Appellate Committee has also been constituted under the Policy before whom a complainant who is not satisfied with the decision of the ICC can prefer an appeal.

Details of complaints received and resolved by the ICC during the FY 2022-23 are as follows:

During the year, there were no appeals filed under the said Policy.

DIVERGENCE IN ASSET CLASSIFICATION AND PROVISIONING FOR NPAs

No disclosure on divergence in asset classification and provisioning for NPAs is required with respect to RBI's supervisory process for the year ended March 31, 2023 in terms of the requirements prescribed in RBI circular.

VIGIL MECHANISM/ WHISTLE BLOWER POLICY

The Bank has in place a Whistle Blower Policy which has been formulated as part of corporate governance norms and transparency where employees, customers and other stakeholders of the Bank including Non-Governmental Organizations ("NGOs") are encouraged to voice genuine concerns of grievances about unprofessional conduct without the fear of reprisal to the person raising the concern

The Policy provides a framework to promote responsible and secure whistle blowing with respect to any breach or violation of the Bank's Code of Conduct on any matter.

Please refer https://www.suryodaybank.com/assets/pdf/ policies/Suryoday Whistle Blower Policy FY22 23 1.0.pdf for text of the Policy. The functioning of the Whistle Blower mechanism is subject to review by the Audit Committee.

During the year under review, no complaints were received under this Policy.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year, the Bank did not undertake any activity relating to conservation of energy or technology absorption.

There was foreign exchange outgo of Rs. 26,76,718. Further, there were no earnings in foreign exchange.

DEPOSITS

Being a banking company, the disclosures relating to deposits as required as per Rule 8(5)(v) & (vi) of the Companies (Accounts) Rules, 2014, read with Section 73 to 76 of the Act are not applicable to the Bank.

MAINTENANCE OF COST RECORDS

The cost records as specified by the Central Government under Section 148(1) of the Act, are not applicable to the Bank.

DETAILS IN RESPECT OF FRAUDS, IF ANY, REPORTED BY AUDITORS

During the year under review, no frauds have been reported by the Statutory Auditors or the Secretarial Auditors under Section 143(12) of the Act.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNAL

There are no significant or material orders passed by the Regulators or Courts or Tribunal which would impact the going concern status of the Bank or its future operations.

AWARDS AND RECOGNITIONS:

During the year under review, the Bank was recognised in various ways/by several institutes. Some of the key awards won by the Bank are listed below:

• Best end to end security in BFSI by Quantic India - Business Media Company.

• Transformation Excellence - Core Banking Transformation - Infosys Finacle Innovation Awards 2023.

• Best Security Practices Small Finance Bank - India CISO Summit & Awards 2023.

PARTICULARS OF EMPLOYEES

The statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this report. In terms of Section 136 of the Act, the same would be available for inspection during working hours at the Registered Office of the Bank. A copy of this statement may be obtained by the Members by writing to the Company Secretary of the Bank.

The ratio of the remuneration of each Director and employees of the Bank as required under the provisions of Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are forming part of this report as Annexure 5.

ACKNOWLEDGEMENTS

The Board of Directors of your Bank would like to place on record their sincere gratitude for the guidance and co-operation received from the RBI, SEBI, Stock Exchanges, Depositories and other statutory and regulatory authorities and thank all the stakeholders of the Bank including the investors, customers, bankers, shareholders, debenture holders, vendors, trustees, Registrars and all other valued partners for their continued support. The Board also would like to express their appreciation for the sincere and dedicated efforts put in by all the employees of the Bank at all levels during the challenging situation faced during the year and look forward to their continued contribution in building this 'Bank of Smiles' into a world class organization.

For and on behalf of the Board

Suryoday Small Finance Bank Ltd Company Background

Suryoday Small Finance Bank Ltd Company Management

Suryoday Small Finance Bank Ltd Listing Information

Suryoday Small Finance Bank Ltd Finished Product