About Equitas Small Finance Bank Ltd

Equitas Small Finance Bank Limited was incorporated on June 21st, 1993 as V.A.P. Finance Private Limited and later renamed as Equitas Finance Private Limited in August, 2011. In 2011, Equitas Holdings Limited acquired the Company. The Company's name was subsequently changed to Equitas Finance Limited in September 2015 consequent to it becoming a Public Limited Company. Equitas Bank is one of the largest small finance banks in India. As a new-age bank in one of the fastest growing economies, it offers a bouquet of products and services to meet the needs of its customers - individuals with limited access to formal financing channels, Micro, Small & Medium Enterprises (MSMEs) and corporates. The Bank's firmly entrenched strategy focuses on providing credit to the unbanked and underbanked micro and small entrepreneurs, developing products to address growing aspirations at the bottom of the pyramid', fueled by granular deposits and value for money' banking relationships. The Bank's asset products are suited to a range of customers with varying profiles, which include provision of Small Business Loans (SBLs) comprising loan against property, housing loans, and agriculture loans to micro entrepreneurs, microfinance to joint liability groups predominantly comprising women, used and new commercial vehicle loans to drivers and micro entrepreneurs, MSE loans to proprietorship, and loans to non-banking financial companies (NBFCs). On the liability side, the Bank's target customers comprise mass and mass-affluent individuals to whom it offers current accounts, salary accounts, savings accounts, and a variety of deposit accounts. In addition, the Bank provides noncredit offerings comprising ATM-cum-debit cards, third party insurance, mutual fund products, and issuance of FASTag. Pursuant to a Scheme of Amalgamation approved by the Hon'ble High Court of Judicature at Madras, and upon fulfillment of all conditions specified under the said Scheme, Equitas Micro Finance Limited and Equitas Housing Finance Limited amalgamated with the Company, and the Company was renamed Equitas Small Finance Bank Limited (ESFBL). Consequent to the above amalgamation the microfinance and housing finance businesses of the erstwhile EMFL and EHFL were transferred to the Company effective September 2, 2016. ESFBL commenced its banking operations after the receipt of final banking license from the Reserve Bank of India on September 5, 2016. The Bank is engaged in retail banking business with focus on micro-finance, commercial vehicle finance, home finance, loan against-property finance,corporate finance, and providing financing solutions for individuals and micro and small enterprises (MSEs) that are underserved by formal financing channels while providing a comprehensive banking and digital platform for all. Banking Outlet comprises branches primarily focusing on garnering and servicing depositors and outlets that conducts lending operations for underbanked and unbanked. The Bank deployed 322 ATMs and cash recyclers at their banking outlets to save valuable time making the same as a pleasant experience. At present, the Bank operates from more than 853 locations across 15 States/Union Territories (including National Capital Territory) of the country. The Board of Directors of ESFBL and EHL in their respective Meetings held on January 31, 2019 and February 1, 2019 approved a Scheme of Arrangement between EHL, ESFBL and the respective shareholders contemplating issue and allotment by ESFBL of 89,20,62,982 fully paid-up equity shares for no cash consideration to the shareholders of EHL as of the Record Date set out in the Scheme and consequent reduction by ESFBL of Securities Premium Account, the revenue and other reserves and the surplus in Profit and Loss Account by an amount equal to the face value of the shares of ESFBL issued under the Scheme. The Bank in its Meeting held on December 6, 2019 approved issue of 4,74,58,239 Equity Shares of Rs 10 each at a price of Rs 52.68 per equity share (including a premium of Rs 42.68 per equity share) aggregating to Rs 250 crores, by private placement to IIFL AIF through its various funds for a stake of 4.51% in post-issue paid-up share capital of Bank. In the Board Meeting of the Bank held on 23 March 2020, following approvals were accorded, to make loans upto Rs 18000 Crore in ordinary course of business for Financial Year 2020-21; that subject to approval of shareholders, to borrow money upto an aggregate sum of Rs 27000 crore outstanding at any point of time and issue Certificate of Deposits (CoDs) in more than one tranches upto an amount not exceeding Rs 3,000 Crore. During FY 2020, transactions carried out through retail internet banking amounted to Rs. 3,802 crores. During the second half of 2020, the Bank raised Rs. 28,000 lakh through an Initial Public Offer (IPO) and got the equity shares on BSE Limited and National Stock Exchange of India Limited listed effective from November 2, 2020. The Board of Directors of Equitas Small Finance Bank Limited (ESFBL) and Equitas Holdings Limited (EHL) at their respective Meetings held on July 26, 2021 approved a Scheme of Amalgamation between EHL, ESFBL and their respective shareholders, contemplating amalgamation of EHL with ESFBL, which was designed to achieve the RBI licensing requirement of dilution of Promoter Shareholding in the Bank and Minimum Public Shareholding (MPS) requirements prescribed by SEBI Regulations. Subsequently, ESFBL achieved the MPS through a Qualified Institutions Placement (QIP) of its shares, in February 2022, after obtaining the necessary approvals which comprised issue of 10,26,31,087 equity shares of Rs. 10/ each at premium of Rs. 43.59 per share, aggregating to a fund raise of Rs. 550 crore utilised 100% for augmenting Tier 1 capital of the Bank during the year. As a result of this QIP, the Public Shareholding in the Bank increased from 18.70% to 25.37%, thereby complying with Minimum Public Shareholding (MPS) requirements prescribed by the SEBI Regulations. As a result, the Scheme was made effective from February 02, 2023. Pursuant to the effect of the scheme, 78,95,35,166 fully paid equity shares of Rs 10/- each were allotted to the eligible Equity shareholders of EHL as on the Record date i.e., February 03,2023 as per the share exchange ratio envisaged in the approved scheme i.e.,231 equity shares of Rs 10 each of ESFBL in respect of every 100 equity shares of Rs 10 each fully paid up held by them in EHL as consideration for transfer and vesting of undertaking of EHL in ESFBL in terms of the Scheme.

Equitas Small Finance Bank Ltd Chairman Speech

Dear stakeholders,

The financial year gone by was an eventful one. Advanced economies grappled with a plethora of challenges including an escalation in geopolitical conflict, constrained supply chains, historically high inflation, and instability in the banking system. Although India too encountered high inflation, the India government's focus on infrastructure- led growth, the balanced policy on import sourcing, and the Central Bank's proactive stance were the bulwarks. As we course through FY24, the Indian economy remains stable with improved corporate balance sheets and well-capitalised banks.

During FY23, the environment turned favourable, largely due the rebound in the economy as the pandemic receded. Our disbursements, collections, asset quality indicators, deposits, traction for newer products like affordable home loans, new commercial vehicle loans and user passenger car loans and Brand visibility improved. Advances grew by 35% YoY to '27,861 crore and deposits by 34% YoY to '25,381 crore. Small business loans (SBL) continued to grow at a rapid pace, with gross advances crossing '10,000 crore.

Our asset quality improved significantly, with GNPA at 2.60% (vs. 4.06% in FY22) and NNPA at 1.14% (vs. 2.37% in FY22), which speaks volumes about the resilience of our customer segments, as well as our proprietary credit assessment model. We have always been conservative about provisions, which is reflected in the further improvement in the provision coverage ratio (PCR) to 56.90% at the end of FY23 from

Equitas SFB's success story is not confined to spreadsheets, and operational and financial metrics. Our purpose as a bank extends far beyond mere transactions. That's why, aligned with our core values, we have embraced the 'Beyond Banking' philosophy with an unwavering commitment to making a lasting impact on the lives we touch.

42.73% at the end of FY22. The Bank remains well capitalised with total CRAR at 23.8%, significantly above the 15% regulatory requirement, to fuel the next phase of its growth journey. We also contained our cost of funds at 6.38%, despite a series of policy rate hikes by the RBI to rein in inflation.

In the coming years, we plan to build our consumer finance portfolio by foraying into credit cards and personal loans which will also further help increase stability through a diversified loan portfolio. Additionally, with the obtaining of the AD-1 license, we will work on offerings like forex cards, FCNR deposits, remittances, among others.

Before I delve deeper into our FY23 performance, it's important to address two key events which, I believe, have significant ramifications for the Bank's future. First, we completed the reverse merger of Equitas Holdings Limited with Equitas Small Finance Bank Limited. Apart from ending the anomaly of having two listed Companies with more or less the same asset base, the merger cleared the decks for Equitas Small Finance Bank to apply for a Universal Bank Licence once the guidelines for the same are issued. However, whatever be our nomenclature, our focus towards the unbanked and underbanked will remain unaltered. Inclusiveness in our view, is of trenchant significance if Equitas SFB were to remain a profitable and allweather edifice.

Second, recall that, in May 2022,

Mr. P.N. Vasudevan, MD & CEO, had expressed his desire to move on to engage in philanthropic work. This would have created a discontinuity in leadership and turbulence in your young and evolving institution. The Board was able to persuade him to stay on. His tenure has been recently extended by the RBI for another three years, effective from July 23, 2023 and I firmly believe this augurs well for Equitas SFB.

The prudent investments we have made on people, processes and technology have started to yield results, and will continue to play a pivotal role in enriching our customers' journeys in a seamless and efficient manner. As India continues on its path to realise its ambition of becoming a technology- driven and knowledge-based developed economy, we believe we are a proxy to the growth levers of inclusive development and last mile delivery.

Staying true to the founding vision of Equitas, we continued to dedicate our resources towards the society we serve, to unlock the full potential. Through Equitas Development Initiatives Trust (EDIT), our focused interventions across our chosen areas of education, training, rehabilitation, and health care have made a meaningful difference to the lives and livelihoods of millions to date. I'm also proud to report you that the work on setting up a hospital for on affordable cancer treatment is progressing on track, which would have usher in an era of new hope and optimism for many battling the menace of cancer.

That said, Equitas SFB's success story is not confined to spreadsheets, and operational and financial metrics. Our purpose as a bank extends far beyond mere transactions. That's why, aligned with our core values, we have embraced the 'Beyond Banking' philosophy with an unwavering commitment to making a lasting impact on the lives we touch. We listen, understand, and walk with our customers on their journeys, offering guidance and support at every step. We celebrate their triumphs, as if they were our own. And then we realise how their stories of positive change seamlessly become the real metrics of our success.

Before I conclude, I need to mention that my tenure as the Chairman of the Bank ends in April next year. It has been a pleasant and educative experience for me right from 2012, when I came in as the Chairman of Equitas Microfinance Company and stayed on to bask in the warmth of my relationship with Mr. Vasudevan and others in the Bank.

I am grateful to all of you and wish you all every happiness in life and every satisfaction in work as the future unravels. What Equitas is today has been possible only because of the faith you have reposed on us. As we move forward, we hope to reinforce this faith by continuously empowering our customers to realise their full potential.

Warm regards,

Arun Ramanathan

Part-Time Chairman and NonExecutive Independent Director

Equitas Small Finance Bank Ltd Company History

Equitas Small Finance Bank Limited was incorporated on June 21st, 1993 as V.A.P. Finance Private Limited and later renamed as Equitas Finance Private Limited in August, 2011. In 2011, Equitas Holdings Limited acquired the Company. The Company's name was subsequently changed to Equitas Finance Limited in September 2015 consequent to it becoming a Public Limited Company. Equitas Bank is one of the largest small finance banks in India. As a new-age bank in one of the fastest growing economies, it offers a bouquet of products and services to meet the needs of its customers - individuals with limited access to formal financing channels, Micro, Small & Medium Enterprises (MSMEs) and corporates. The Bank's firmly entrenched strategy focuses on providing credit to the unbanked and underbanked micro and small entrepreneurs, developing products to address growing aspirations at the bottom of the pyramid', fueled by granular deposits and value for money' banking relationships. The Bank's asset products are suited to a range of customers with varying profiles, which include provision of Small Business Loans (SBLs) comprising loan against property, housing loans, and agriculture loans to micro entrepreneurs, microfinance to joint liability groups predominantly comprising women, used and new commercial vehicle loans to drivers and micro entrepreneurs, MSE loans to proprietorship, and loans to non-banking financial companies (NBFCs). On the liability side, the Bank's target customers comprise mass and mass-affluent individuals to whom it offers current accounts, salary accounts, savings accounts, and a variety of deposit accounts. In addition, the Bank provides noncredit offerings comprising ATM-cum-debit cards, third party insurance, mutual fund products, and issuance of FASTag. Pursuant to a Scheme of Amalgamation approved by the Hon'ble High Court of Judicature at Madras, and upon fulfillment of all conditions specified under the said Scheme, Equitas Micro Finance Limited and Equitas Housing Finance Limited amalgamated with the Company, and the Company was renamed Equitas Small Finance Bank Limited (ESFBL). Consequent to the above amalgamation the microfinance and housing finance businesses of the erstwhile EMFL and EHFL were transferred to the Company effective September 2, 2016. ESFBL commenced its banking operations after the receipt of final banking license from the Reserve Bank of India on September 5, 2016. The Bank is engaged in retail banking business with focus on micro-finance, commercial vehicle finance, home finance, loan against-property finance,corporate finance, and providing financing solutions for individuals and micro and small enterprises (MSEs) that are underserved by formal financing channels while providing a comprehensive banking and digital platform for all. Banking Outlet comprises branches primarily focusing on garnering and servicing depositors and outlets that conducts lending operations for underbanked and unbanked. The Bank deployed 322 ATMs and cash recyclers at their banking outlets to save valuable time making the same as a pleasant experience. At present, the Bank operates from more than 853 locations across 15 States/Union Territories (including National Capital Territory) of the country. The Board of Directors of ESFBL and EHL in their respective Meetings held on January 31, 2019 and February 1, 2019 approved a Scheme of Arrangement between EHL, ESFBL and the respective shareholders contemplating issue and allotment by ESFBL of 89,20,62,982 fully paid-up equity shares for no cash consideration to the shareholders of EHL as of the Record Date set out in the Scheme and consequent reduction by ESFBL of Securities Premium Account, the revenue and other reserves and the surplus in Profit and Loss Account by an amount equal to the face value of the shares of ESFBL issued under the Scheme. The Bank in its Meeting held on December 6, 2019 approved issue of 4,74,58,239 Equity Shares of Rs 10 each at a price of Rs 52.68 per equity share (including a premium of Rs 42.68 per equity share) aggregating to Rs 250 crores, by private placement to IIFL AIF through its various funds for a stake of 4.51% in post-issue paid-up share capital of Bank. In the Board Meeting of the Bank held on 23 March 2020, following approvals were accorded, to make loans upto Rs 18000 Crore in ordinary course of business for Financial Year 2020-21; that subject to approval of shareholders, to borrow money upto an aggregate sum of Rs 27000 crore outstanding at any point of time and issue Certificate of Deposits (CoDs) in more than one tranches upto an amount not exceeding Rs 3,000 Crore. During FY 2020, transactions carried out through retail internet banking amounted to Rs. 3,802 crores. During the second half of 2020, the Bank raised Rs. 28,000 lakh through an Initial Public Offer (IPO) and got the equity shares on BSE Limited and National Stock Exchange of India Limited listed effective from November 2, 2020. The Board of Directors of Equitas Small Finance Bank Limited (ESFBL) and Equitas Holdings Limited (EHL) at their respective Meetings held on July 26, 2021 approved a Scheme of Amalgamation between EHL, ESFBL and their respective shareholders, contemplating amalgamation of EHL with ESFBL, which was designed to achieve the RBI licensing requirement of dilution of Promoter Shareholding in the Bank and Minimum Public Shareholding (MPS) requirements prescribed by SEBI Regulations. Subsequently, ESFBL achieved the MPS through a Qualified Institutions Placement (QIP) of its shares, in February 2022, after obtaining the necessary approvals which comprised issue of 10,26,31,087 equity shares of Rs. 10/ each at premium of Rs. 43.59 per share, aggregating to a fund raise of Rs. 550 crore utilised 100% for augmenting Tier 1 capital of the Bank during the year. As a result of this QIP, the Public Shareholding in the Bank increased from 18.70% to 25.37%, thereby complying with Minimum Public Shareholding (MPS) requirements prescribed by the SEBI Regulations. As a result, the Scheme was made effective from February 02, 2023. Pursuant to the effect of the scheme, 78,95,35,166 fully paid equity shares of Rs 10/- each were allotted to the eligible Equity shareholders of EHL as on the Record date i.e., February 03,2023 as per the share exchange ratio envisaged in the approved scheme i.e.,231 equity shares of Rs 10 each of ESFBL in respect of every 100 equity shares of Rs 10 each fully paid up held by them in EHL as consideration for transfer and vesting of undertaking of EHL in ESFBL in terms of the Scheme.

Equitas Small Finance Bank Ltd Directors Reports

To

The Members

Equitas Small Finance Bank limited

Your Directors have pleasure in presenting the Seventh Annual Report on the business and operations of the Bank, together with the audited Accounts of the Bank for the financial year ended March 31, 2023 (FY 2022-23).

1. Summary of Financial Performance

The summary of Bank's financial performance for the FY 2022-23 compared to the previous financial year 2021-22 is given below:

(' in lakhs)

2. Dividend

The Board of Directors at their meeting held on May 05, 2023, has recommended a dividend of Re.1/- per equity share (i.e., 10%) of face value '10/- each, subject to the approval of the Members at the ensuing Seventh Annual General Meeting (AGM). The Dividend, if approved by the Members would be paid to those Members whose name appears in the Register of Members as on the Record Date mentioned in the Notice convening the Seventh AGM.

In accordance with Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and the RBI guidelines, the Bank has formulated and adopted a Dividend Distribution Policy and the same is available on the website of the Bank Click here

3. Transfer to Reserves

As per the requirement of RBI Regulations, the Bank has transferred the following amounts to various reserves during the year ended March 31, 2023.

4. Deposits

Being a Bank, the disclosures relating to deposits as required under Rule 8(5)(v) and (vi) of the Companies (Accounts) Rules, 2014, read with Sections 73 and 74 of the Companies Act, 2013, are not applicable. The Bank receives and accepts deposits, the details of which are enumerated in the financial statements for FY 2022-23.

5. Capital Adequacy

The Capital Adequacy Ratio stood at 23.80% as on March 31, 2023 as against the minimum requirement of 15% stipulated by the Reserve Bank of India (RBI). The Net Worth of the Bank as on the said date was '5,15,794.77 Lakhs.

6. Material changes and commitments affecting the Financial Position of the Bank after the Balance Sheet date as at March 31, 2023

There were no material changes and commitments between the end of Financial Year 2022-23 and the date of this report, affecting the financial position of the Bank.

7. Information about Financial Performance / Financial Position of the Subsidiaries, Associates and Joint Venture Companies

The Bank does not have any Subsidiaries, Associates and Joint Venture Companies.

8. Operational highlights and state of the Bank's affairs

The details of operations and state of affairs are given in the Management Discussion and Analysis [MD&A] Report.

10. Management Discussion and Analysis, Report on Corporate Governance and Business Responsibility and Sustainability Report

The Management Discussion and Analysis Report as stipulated under Regulation 34(2)(e) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Report on Corporate Governance for FY 2022-23 along with General Shareholder Information and the Business Responsibility and Sustainability Report forms part of this annual report.

11. Corporate Social Responsibility (CSR)

The Bank has laid down a Corporate Social Responsibility (CSR) Policy, which is available on our website. click here

The Bank contributes the higher of 5% of its previous year net profits or 2% of average net profits made during the preceding three financial years to Equitas Development Initiatives Trust (EDIT) and Equitas Healthcare Foundation (EHF), registered Public Charitable Trusts for carrying out CSR activities on its behalf. A report is enclosed as Annexure A.

The Bank has constituted a CSR Committee, which:

a) Recommends to the Board an annual activity plan in line with the CSR policy and CSR contribution of the Bank for the year.

b) Monitors the implementation of the plan as approved.

c) Reviews and recommends changes to the policy from time to time.

12. Scheme of Amalgamation between Equitas Holdings Limited and Equitas Small Finance Bank Limited

The Board of Directors of Equitas Small Finance Bank Limited (ESFBL) and Equitas Holdings Limited (EHL) at their respective Meetings held on July 26, 2021 approved a Scheme of Amalgamation between EHL, ESFBL and their respective Shareholders, contemplating amalgamation of EHL with ESFBL under applicable provisions of the Companies Act, 2013. The Scheme was designed to achieve the RBI licensing requirement of dilution of promoter shareholding in the Bank and Minimum Public Shareholding (MPS) requirements prescribed by SEBI Regulations, in a manner that is in the best interests

and without being prejudicial to EHL, ESFBL, their respective Shareholders or any other stakeholders.

Subsequently, ESFBL achieved the MPS through a Qualified Institutions Placement (QIP) of its shares, in February 2022, after obtaining the necessary approvals. QIP comprised issue of 10,26,31,087 equity shares of '10/- each at premium of '43.59 per share, aggregating to a fund raise of '550 crores which was utilized 100% for augmenting the Tier 1 capital of the Bank during the year. 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.

Consequently, the aforesaid Scheme was revised to include the change in capital structure arising from QIP as well as the necessary change in objects of the Scheme. The Scheme, so revised was approved by the Boards of EHL and ESFBL in their respective Meetings held on March 21, 2022. The Scheme was filed with the Stock Exchanges and RBI for necessary approvals/ sanctions. The RBI vide its letter dated May 6, 2022 granted its conditional NOC to the Scheme and the No Observation letters towards the aforesaid scheme were received from the National Stock Exchange of India Limited (NSE Ltd) and BSE Limited on June 10, 2022.

Further, a joint application was filed by EHL and ESFBL with Hon'ble National Company Law Tribunal, Division Bench-II, (Chennai NCLT) on June 18, 2022 and the meetings of the equity shareholders and unsecured Creditors of EHL and the Bank and Depositors of the Bank holding deposits above ' 3 lakhs were convened on September 06, 2022 and September 07, 2022 respectively, in adherence with the Order passed by the Hon'ble National Company Law Tribunal on July 22, 2022.

Followed by the approval of the shareholders, creditors and depositors in the meetings as mentioned above, a joint petition was filed with the Chennai NCLT, wherein the NCLT had accorded its approval for the aforesaid Scheme vide its Order dated January 12, 2023. The Scheme became effective from February 02, 2023, upon filing the certified true copy of the NCLT order with Registrar of Companies, Chennai as ordered by NCLT.

Upon the effectiveness of the Scheme, EHL was dissolved without winding up and the Board of Directors of the Bank at its meeting held on February 08, 2023 approved the extinguishment of shares held by EHL and allotted equity shares to the EHL shareholders as on record date as consideration for

the transfer and vesting of undertaking in the Bank as per the terms of the Scheme.

The fractional entitlements arising out of the aforesaid allotment were dealt as per the terms of the scheme and the sale proceeds were distributed to the shareholders on March 21, 2023 and the report of Committee of Independent Directors and Audit Committee were filed with SEBI.

The aforesaid allotment in pursuance of the Scheme was made in demat form only, as per SEBI directives. The said allotment also comprised allotment of 2,99,336 fully paid-up equity shares of ESFBL to a suspense demat account, being held on behalf of the shareholders of EHL holding shares in physical form, as on the record date.

The Board of directors approved the balance sheet of the merged entity as on January 01^st, 2023 (Appointed date) on February 23, 2023.

Share Capital

During the year, there has been no change in the Authorized share capital of the Bank.

The Bank has allotted in aggregate 29,38,696 equity shares to employees of the Bank under the ESFB Employees Stock Option Scheme, 2019.

Extinguishment of Equity Shares held by Equitas Holdings Limited (EHL) in the Bank

Upon the effectiveness of the Scheme, EHL was dissolved without winding up and 93,39,43,363 (Ninety three Crores thirty nine lakhs forty three thousand three sixty three only) equity shares held by EHL in the Bank (erstwhile Promoter of the Bank) were cancelled and extinguished.

Allotment of Equity Shares to the eligible record date Shareholders of Equitas Holdings Limited

Pursuant to the effect of the scheme, 78,95,35,166 (Seventy eight crores ninety five lakhs thirty five thousand one hundred and sixty six only) fully paid equity shares of '10/- each were allotted to the eligible Equity shareholders of EHL as on the Record date i.e., February 03,2023 as per the share exchange ratio envisaged in the approved scheme i.e.,231 equity shares of '10 each of ESFBL in respect of every 100 equity shares of '10 each fully paid up held by them in EHL as consideration for transfer and vesting of undertaking of EHL in ESFBL in terms of the Scheme.

Consequently, the total issued and paid-up share capital of the Bank decreased to '1,110,55,81,540 (One thousand one hundred ten crores fifty five lakhs eighty one thousand five hundred and forty rupees only) comprising of 111,05,58,154 (One hundred and eleven crore five lakhs fifty eight thousand one hundred and fifty four only) equity shares with face value of '10 each.

Apart from the above, the Bank did not raise any additional equity share capital during the year.

13. Meetings of the Board

During the FY 2022-23, our Board met thirteen (13) times. The details of Meetings are given in the report on Corporate Governance. The maximum interval between any two Meetings did not exceed 120 days, as prescribed in the Companies Act 2013 & the relevant Rules made thereunder and the applicable SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Board Committees

The details pertaining to the Audit Committee and other Committees of the Board are provided in the Corporate Governance section forming part of this report. All the recommendations made by the Audit Committee during the year were accepted and implemented by the Board. During the year under review, there was no change in the composition of any of the committees.

14. Directors and Key Managerial Personnel (KMP)

As on the date of this Report, the Bank has ten Directors, out of which, there are nine Independent Directors including a Woman Independent Director.

Change in Directors & KMP

During the year, the appointment of Prof. Samir Kumar Barua (DIN: 00211077) and Ms. Geeta Dutta Goel (DIN: 02277155) as Independent Directors for a period of 5 years with effect from 27^th December, 2021 was approved by the Members at the Sixth Annual General Meeting held on 19^th July, 2022. Further, the re-appointment of Mr. Vasudevan P N (DIN: 01550885) as Managing Director & CEO for a period of 3 years with effect from 23^rd July, 2023 was approved at the Board meeting held on December 23, 2022, and approved by RBI vide its letter dated June 15, 2023, which is subject to the approval of Members.

The Members had approved the appointment of Mr. Murali Vaidyanathan (DIN: 09594986), Sr President & Country Head-Branch Banking-Liabilities and Mr. Rohit Gangadharrao Phadke (DIN: 07293524), Sr President-Retails Assets as Whole Time Directors of the Bank to be designated as Executive Directors to hold the office for a period of three years from date of approval from RBI or from such date and period as may be approved by RBI.

However, RBI vide its letter dated 11^th August, 2022 had agreed to the appointment of one Executive Director position although the Bank had requested for appointment of two Executive Directors for which the Members of the Bank had also accorded their approval. Considering the RBI's advice for one position, the Bank had decided to defer the matter for the present and consider the same at an appropriate time.

Directors liable to retire by rotation

Section 152 of the Companies Act, 2013 provides that two-thirds of the total number of Directors are liable to retire by rotation out of which one- third shall retire from office at every AGM. In terms of Section 149(13) of the Companies Act, 2013, the provisions of retirement of Directors by rotation shall not be applicable to Independent Directors and an Independent Director shall not be included in the total number of Directors liable to retire by rotation.

The Bank has only one Director viz., Mr. Vasudevan P N, MD & CEO liable to retire by rotation. Mr. Vasudevan P N will retire at the ensuing AGM of the Bank and being eligible, offers himself for re-appointment. The Nomination and Remuneration Committee and the Board of Directors recommend his re-appointment and the same has been placed for approval of the Members at the ensuing Annual General Meeting.

Familiarisation Programme

The Bank has familiarised the Independent Directors of the Bank of their roles and responsibilities in the Bank, nature of industry in which the Bank operates, business model of the Bank, etc. The details of the familiarisation programme imparted to Independent Directors are available on the website of the Bank click here

Key Managerial Personnel (KMP)

In terms of Section 203(1) read with Section 2(51) of the Act and Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Bank had the following KMPs as on March 31, 2023:

During the year, the Board at its meeting held on June 30, 2022, on the recommendation of the Nomination and Remuneration Committee had approved the appointment of Mr. Ramanathan N (Membership Number: A28366) as the Company Secretary and Compliance Officer of the Bank w.e.f July 1, 2022. Mr Sampathkumar KR, the erstwhile Company Secretary of the Bank had moved to another control function within the Bank by way of job rotation with effect from July 01, 2022.

15. Declaration from Independent Directors

The Board has received declarations from the Independent Directors as required under Section 149(7) of the Companies Act, 2013 and the Board is satisfied that the Independent Directors meet the criteria of independence as mentioned in Section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Independent Directors have complied with the Code for Independent Directors prescribed in Schedule IV of the Companies Act, 2013

Independent Directors have confirmed that they are not aware of any circumstance or situation, which exists or may be reasonably anticipated, that could impair or impact their ability to discharge their duties with an objective independent judgement and without any external influence. The Board has assessed the confirmations submitted by the Independent Directors and had taken the same on record. In the opinion of the Board, all the Independent Directors are independent of the Management.

16. Evaluation of performance of the Board and its committees

The performance of the Board, Committees of the Board, Chairman, Individual Directors & Key Managerial Personnel were evaluated on the basis of criteria as approved by the Board. All the Directors were provided the criteria for evaluation and forms, which were duly filled. The feedback from the Directors was consolidated and those relating to the Directors were shared with the respective Directors and feedback relating to the Committees and the Board were discussed with the respective Committees & Board.

17. Policy on Directors' appointment, remuneration and other details

Pursuant to the provisions of Section 178 of the Companies Act, 2013, the Bank has formulated and adopted Policy on selection of Directors and remuneration Policy, which is available in our website at click here

18. Directors' Responsibility Statement

The Board of Directors of the Bank, to the best of their knowledge and belief confirm that:

i) I n the preparation of the annual accounts for the year ended March 31, 2023, the applicable accounting standards have been followed along

with proper explanation relating to material departures,

ii) such accounting policies as specified in Schedule 17 to the Financial Statements have been selected and applied consistently and judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as at March 31, 2023 and of the profit of the Bank for the year ended on that date,

i ii) proper and sufficient care has been taken for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Bank and for preventing and detecting frauds and other irregularities,

iv) annual accounts have been prepared on a going concern basis,

v) internal financial controls to be followed by the Bank were laid down and that the same were adequate and were operating effectively, and

vi) proper systems to ensure compliance with the provisions of all applicable laws was in place and the same were adequate and operating effectively.

19. Overall Remuneration

Details of all elements of remuneration of Directors are given in the Corporate Governance Report. The Independent Directors of the Bank are not entitled to stock options. Details of remuneration as required under Section 197 (12) of the Companies Act, 2013 read with Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below.

i n accordance with Section 136 of the Companies Act, 2013, the report and accounts are being sent to the Members and others entitled thereto, excluding the statement prescribed under Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The aforesaid information is available for inspection at the Registered office of the Bank during the business hours on working days of the Bank. If any member is interested in obtaining a copy, such Member may write to the Company Secretary in this regard.

21. Whistle Blower Policy/ Vigil Mechanism

The Bank has adopted a Whistle Blower Policy and Vigil Mechanism in compliance with the relevant provisions of Companies Act, 2013 and Rules thereunder and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. This Policy provides an opportunity to address concerns of employees & Directors relating to fraud, malpractice or any other activity or event which is against the interest of the Bank or society as a whole. The Policy is available in the Bank's website, click here

During the year under review, the Bank received 'Five' complaints under the Whistle Blower Policy of the Bank. The functioning of the mechanism is reviewed by the Audit Committee from time to time. No personnel of the Bank has been denied access to the Audit Committee.

22. Ratings of Debt Instruments

The Bank had redeemed the debt instruments during the FY and the details of the same along with the ratings applicable for those debt instruments are disclosed in the Corporate Governance Report, which forms part of this Annual Report.

23 Auditors & their Report

Reserve Bank of India ("RBI") has on April 27, 2021, issued the Guidelines for Appointment of Statutory Central Auditors/Statutory Auditors of Commercial banks which are applicable from the FY 2021-22 ("RBI Guidelines"). The RBI Guidelines has capped the term of Statutory Auditors at three years, replacing the earlier cap of four years.

The Board of Directors of the Bank in their Meetings held on April 29, 2021 and June 01, 2021 had appointed M/s T R Chadha & Co LLP (TRC), Chartered Accountants and M/s Varma and Varma, Chartered Accountants, respectively as the Joint Statutory Auditors of the Bank. The said appointments were approved by the Members at the Fifth AGM held on August 12, 2021. The appointment was approved by RBI for FY 2021-22 vide its letter dated July 13, 2021. The tenure of M/s T R Chadha & Co LLP (TRC), Chartered Accountants, (Firm Registration No: 006711N/N500028) shall end at the conclusion of the ensuing Seventh AGM of the Bank.

As per the RBI guidelines, the appointment of Joint Statutory Auditors should be subject to annual approval from Reserve Bank of India. The Audit Committee of the Board had reviewed the performance of the Auditors during the financial year 2022-23 and their independence by taking note of the eligibility letters received from the Auditors stating that they continue to satisfy the criteria provided in Section 141 of the Companies Act, 2013 and RBI Regulations and their continuance, if approved, will be in accordance with the conditions prescribed under the Companies Act, 2013 and Rules thereunder as well as the applicable RBI Regulations and had accordingly recommended their continuance to the Board.

The Board of Directors of the Bank at its Meeting held on June 14, 2023 considered the recommendation of Audit Committee and approved the re-appointment of M/s Varma and Varma, Chartered Accountants, as one of the Joint Statutory Auditors for the FY 2023-24 as they continue to satisfy the eligibility Norms as per the RBI guidelines. Further, the Board of Directors at the aforesaid meeting, on the recommendation of the Audit Committee, considered and approved the appointment of M/s A S A & Associates LLP, Chartered Accountants, (Firm Registration No: 009571N/ N500006 as one of the Joint Statutory Auditor for the period from FY 2023-24 to FY 2025-2026 subject to approval of the Members at the ensuing Annual General Meeting. RBI has approved the aforesaid appointment vide letter dated July 07, 2023.

Auditors' Report:

There are no qualifications, reservations or adverse remarks made by the Joint Statutory Auditors of the

Bank, M/s. Varma & Varma, Chartered Accountants and M/s. T R Chadha & Co LLP, Chartered Accountants in their report on the financial statements for the FY 2022-23. Further, pursuant to Section 143(12) of the Companies Act, 2013, the Joint Statutory Auditors of the Bank have not reported any instances of frauds committed in the Bank by its officers or employees.

24. Details of Employee Stock Options Scheme (ESOS)

The Bank, pursuant to the resolutions passed by the Board and the Shareholders of the Bank on January 31, 2019, adopted the ESFB Employee Stock Option Scheme (ESOS), 2019 ("ESFB ESOP 2019"). The Bank has amended the ESFB ESOP 2019 pursuant to the resolutions of the Board and Shareholders of the Bank dated November 7, 2019 & November 22, 2019 respectively.

Post listing of Equity shares of the Bank, the ESFB ESOP 2019 was ratified by the Shareholders by way of special resolution dated February 08, 2021 as required by Regulation 12 of erstwhile SEBI (Share Based Employee Benefits) Regulations, 2014. Further, as recommended by the Nomination and Remuneration Committee of the Board, the Board of Directors at its Meeting held on January 28, 2022 had approved modifications to the ESFB ESOP 2019 aligning the scheme as per the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021.

As per the scheme approved, the Bank is entitled to grant an aggregate number of up to 11,00,00,000 options under ESFB ESOP 2019. The objective is to enable the Bank to attract and retain the best available talent to contribute and share in the growth of the Bank.

The Scheme is administered by the Nomination and Remuneration Committee constituted by the Board of Directors of the Bank. There were no material changes in the Employee Stock Option Scheme and the Scheme is in compliance with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021. A certificate from CS Dr. B Ravi, Managing

Partner, M/s B Ravi & Associates, Practicing Company Secretaries and the Secretarial Auditor of the Bank, that the Employee Stock Option Scheme has been implemented in accordance with SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 and is in accordance with the resolutions passed by the Members of the Bank is enclosed as Annexure B.

The disclosures as mandated under the provisions of Regulation 14 of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, is available in our website click here

The Scheme is administered by the Nomination and Remuneration Committee constituted by the Board of Directors of the Bank.

I nformation as required under Section 62 of the Companies Act, 2013 and Rule 12 of the Companies (Share Based Employee Benefits) and the (SEBI SBEB & SE) Regulations 2021:

Employee Wise details of the options granted to A) Key Managerial Personnel

B) any other employee who receives a Grant of options in any one year, of options amounting to 5% or more of options granted during that year - NIL

C) identified employees who were granted option, during any one year, equal to or exceeding 1%of the issued capital (excluding outstanding warrants and Conversions) of the Company at the time of Grant. - NIL

25. Secretarial Auditors

The Secretarial Audit Report issued by CS Dr. B Ravi, Managing Partner, M/s B Ravi & Associates (C.P. 3318) is enclosed as Annexure C. The Bank has complied with the applicable Secretarial Standards relating to 'Meetings of the Board of Directors' and 'General Meetings' during the year. There are no qualifications, reservations, adverse remarks or disclaimers made by the Secretarial Auditors.

26. I nformation as per Section 134 (3) (q) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014

26.1 During FY 2022-23, the Bank had no activity relating to Conservation of energy or technology absorption.

26.2 During FY 2022-2023, the total foreign exchange earned by the Bank was Nil and the total foreign exchange outgo was '375.32 lakhs.

27. Particulars of contracts or arrangements with Related Parties

All contracts / arrangements / transactions entered by the Bank during the Financial Year 2022-2023 with related parties were in its ordinary course of business and on an arm's length basis. During the year, the Bank had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Bank on materiality of related party transactions or which is required to be reported as per Section 188 and other applicable provisions, if any, of the Act read with the Rules made thereunder. The Policy on Related Party Transactions is available on the website of the Bank at click here

28. Risk Management

The Bank has formulated and adopted a robust Risk Management framework. The Bank has also constituted Risk Management Committee of the Board, which periodically reviews the risks faced by the Bank and the practices/ processes followed to manage them. Details of the same are covered in the MD&A report.

29. Internal Financial Controls

The Bank has clear delegation of authority and standard operating procedures, which are are in accordance with the approved policies of the Bank. These measures help in ensuring adequacy of internal financial controls commensurate with the nature and size of operations of the Bank. The Board also reviews the adequacy and effectiveness of the Bank's internal financial controls with reference to the financial statements. The procedures and internal controls provide reasonable assurance on the preparation of financial statements and the reliability of financial reporting. The Bank also ensures that the internal controls are operating effectively.

30. IND AS Implementation

I n 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.

31. Loans / Guarantees / Investments

Pursuant to Section 186 (11) of the Companies Act, 2013, the provisions of Section 186 of Companies Act, 2013, except sub-section (1), do not apply to a loan made, guarantee given or security provided by a Banking Company in the ordinary course of business. The particulars of investments made by the Bank are disclosed in Schedule 8 of the Financial Statements as per the applicable provisions of Banking Regulation Act, 1949.

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