4. SIGNIFICANT ACCOUNTING POLICIES
4.1 Revenue Recognition

Interest income is recognised in the profit and loss
account on an accrual basis, except in the case of interest
on non-performing assets, which is recognised as income
on realisation, as per the income recognition and asset
classification norms of RBI. Accrual of income shall also
be suspended on certain other loans, including projects
under implementation where the implementation has been
significantly delayed and in the opinion of the management
significant uncertainties exist as to the final financial closure
and/ or date of completion of the project.

The Bank shall not charge and take to income account
interest on any NPA. This will apply to Government
guaranteed accounts also. However, interest on advances
against Term Deposits, National Savings Certificates (NSCs),
Indira Vikas Patras (IVPs), Kisan Vikas Patras (KVPs) and
Life policies is taken to income account on the due date,
provided adequate margin is available in the accounts.

Profit or Loss on sale of investments is recognised in the Profit
and Loss Account. However, the profit on sale of investments

in 'Held to Maturity' category is appropriated (net of
applicable taxes and amount required to be transferred to
statutory reserve) to 'Capital Reserve Account'.

Income from hire purchase operations is accrued by applying
the interest rate implicit on outstanding investments.

Income from leases is calculated by applying the interest
rate implicit in the lease to the net investment outstanding

on the lease over the primary lease period.

Income on discounted instruments is recognised over the

tenure of the instrument on a straight line basis.

Interest Income on PTC and Loan purchase through
assignment are recognised on a constant yield basis.

Dividend is accounted on an when the right to receive the

dividend is established.

Loan processing fees is accounted for upfront when it
becomes due.

Fees other than loan processing fees received as a
compensation of future interest sacrifice are amortised
over the remaining period of the facility.

Compromise on settlement is accounted on receipt of
settlement money.

Arranger's fee is accrued proportionately where more than
75% of the total amount of finance has been arranged.

Guarantee / Letter of credit (LC) commission is recognised
over the period of the guarantee / LC.

Annual/renewal fee on credit cards and debit cards is
recognised upfront.

Locker Rent recognised on Straight Line Method basis over

the period of Contract

All fees from deposit accounts are accounted for as and
when they are due and realised.

Income from sale of Priority Sector Lending certificate
(PSLC) is recognised in the Profit & Loss Account during

the quarter on an equated basis from the quarter in which
the sale has occurred and the remaining amount will be
recognised in the Profit & Loss Account over the remaining

quarters of that financial year.

Appropriation of recovery in NPAs and prudential
written off accounts:

Any recoveries in NPA accounts and prudential written

off accounts will be first appropriated to fees/charges
outstanding, if any, then interest outstanding and then
principal outstanding except in those cases where bank has
specific agreement with the borrower w.r.t appropriation
of recoveries.

The sale oF NPA and technically written off portFolio is
accounted as per guidelines prescribed by RBI :

i. When the Bank sells its financial assets to Securitisation
Company (SC)/Reconstruction Company (RC), the

same is removed from the books.

ii. If the sale is at a price below the net book value (NBV)
(i.e., book value less provisions held), the shortfall

is debited to the profit and loss account in the year
of sale.

iii. I f the sale is for a value higher than the NBV, the
excess provision is reversed in the year the amounts
are received, as permitted by the RBI.

All other fees are accounted for as and when they
become due.

4.2. Investments

Classification, valuation and operation of investment
portfolio is carried out in accordance with the revised
framework as detailed in the Reserve Bank of India
(Classification, Valuation and Operation of Investment
Portfolio of Commercial Banks) Directions, 2023 ("RBI
Directions") applicable from April 01,2024, to all Commercial
Banks excluding Regional Rural Banks.

A) Classification

Investments shall be classified into three categories, viz.

Held to Maturity ('HTM'), Available for Sale ('AFS') and Fair
Value through Profit and Loss ('FVTPL'). Held for Trading
('HFT') shall be a separate investment subcategory within
FVTPL. The category of the investment shall be decided
by the bank before or at the time of acquisition and for
reclassification, Bank shall need to obtain approval from the
Board of Directors for reclassification between categories
((viz. HTM, AFS and FVTPL (includes FVTPL (HFT) and FVTPL
(Non-HFT)). Further, reclassification shall also require the
prior approval of the Department of Supervision (DoS), RBI.

Investments are accounted for on settlement date basis
except for equity shares which are accounted for on
trade date.

• Securities that meet the Solely Payment of Principal and
Interest ('SPPI') criterion and are acquired with the intention
and objective of holding it till maturity, i.e., the financial
assets are held with the objective to collect the contractual
cash flows shall be classified under HTM.

• Securities that meet the SPPI criterion and are acquired with
the objective of both (a) collecting contractual cash flows
and (b) selling securities shall be classified under AFS. These
includes securities held for ALM.

• Investments, which are not classified in the above two
categories, shall be classified as "Fair Value through Profit
and Loss (FVTPL)".

B) Initial Recognition:

At initial recognition, bank shall measure all investments at
fair value. Bank shall presume acquisition cost to be the fair
value unless the facts and circumstances suggest otherwise.
Cost of investment excludes broken period interest paid
on acquisition of investments. Brokerage and commission
paid at the time of acquisition are charged to Profit and
Loss Account. Cost of investments is determined on the
weighted average cost basis. Any discount or premium on
the acquisition of debt securities under AFS, FVPTL & HTM
shall be amortised over the remaining life of the instrument.

C) Valuation & Subsequent Measurement:

Investments classified under the 'AFS' and 'HFT' categories

are fair valued periodically as per RBI guidelines.

The fair valuation gains and losses across all performing
investments held under AFS shall be aggregated. The net
appreciation or depreciation shall be directly credited or
debited to a reserve named 'AFS Reserve' without routing
through the Profi t & Loss Account. Upon sale or maturity of
a debt instrument in AFS category, the accumulated gain/
loss for that security in the AFS Reserve are transferred
from the AFS Reserve and recognised in the Profit and
Loss Account. I n the case of equity instruments designated
under AFS at the time of initial recognition, any gain or loss
on sale of such investments shall not be transferred from
AFS-Reserve to the Profit and Loss Account. Instead, such
gain or loss shall be transferred from AFS-Reserve to the
Capital Reserve.

The securities held in FVTPL shall be fair valued and the
net gain or loss arising on such valuation shall be directly
credited or debited to the Profit and Loss Account.

The market/fair value for the purpose of periodical valuation
of quoted investments included in the 'AFS' and 'FVTPL'

categories is the market price of the security available from
trades/quotes on the recognised stock exchanges, price

list of RBI or prices declared by Financial Benchmarks India
Pvt. Ltd. (FBIL), periodically. Other unquoted fixed income
securities, including Pass through Certificate wherever
linked to the Yield-to-Maturity (YTM) rates, is computed
based on residual maturity with a mark-up (applicable to
the issuer) over the YTM rates for GOI securities of similar
maturities published by FIMMDA/FBIL as directed by RBI.

Unquoted equity shares are valued at the break-up value,
if the latest balance sheet is available or at ?1 as per
RBI guidelines.

Discounted instruments like Treasury Bills, Certificate of

Deposits, Commercial Papers are valued at carrying cost.

Investments categorised under HTM are carried at
acquisition cost, or at amortised cost if acquired at a
discount or premium over the face value. Such discount
or premium is amortised over the remaining period to
maturity of the relevant security on a straight-line basis.
Where in the opinion of management, a diminution, other
than temporary in the value of investments classified under
HTM has taken place, suitable provisions are made. Any
profit or loss on the sale of investments in HTM shall be
recognised in the Profit and Loss Account. The profit on
sale of an investments in HTM shall be appropriated below
the line from the Profit and Loss Account to the 'Capital
Reserve Account'. The amount so appropriated shall be
net of taxes and the amount required to be transferred to
Statutory Reserve.

Security receipts issued by the asset reconstruction
companies are valued in accordance with the guidelines
applicable to such instruments, prescribed by RBI
from time to time at the end of each reporting period.
Accordingly, in cases where the cash flows from security
receipts issued by the asset reconstruction companies
are limited to the actual realisation of the financial assets
assigned to the instruments in the concerned scheme, the
Bank reckons the net asset value obtained from the asset
reconstruction company from time to time, for valuation of
such investments at each reporting period end.

D) Repurchase (Repo) and reverse repurchase transactions:

Repurchase ('repo') and reverse repurchase ('reverse
repo') transactions including liquidity adjustment facility
(with RBI) shall be accounted for as borrowing and lending
transactions. Accordingly, securities given as collateral
under an agreement to repurchase them continue to be
held under the investment account of the Bank and the
Bank would continue to accrue the coupon/discount on the
security duri ng the repo period. Also, the Bank conti nues to
value the securities sold under repo as per the investment
classification of the security. The difference between the
clean price of the first leg and clean price of the second leg

shall be recognised as interest income/expense over the

period of the transaction in the profit and loss account.

E) Short Sales:

In accordance with the RBI guidelines, the Bank undertakes
short sale transactions in Central Government dated
securities. Such short positions are categorised under HFT
category. These positions are marked-to-market along with
the other securities under HFT portfolio and the resultant
mark-to-market gains/losses are accounted for as per the
relevant RBI guidelines as stated above.

F) Investment Fluctuation Reserve:

The amount transferred to IFR will be lower of the following
(i) net profit on sale of investments during the year or (ii)

net profit for the year, less mandatory appropriations, until
the amount of IFR is at least 2 percent of the AFS and FVTPL
including HFT portfolio, on a continuing basis.

G) Non-Performing Investment

Non-performing investments are identified and

depreciation / provision are made thereon based on RBI
guidelines. The depreciation / provision on such non¬
performing investments are not set off against the
appreciation in respect of other performing securities.
Interest on non-performing investments is not recognised
in the Profit & Loss Account until received.

H) Transition and Repeal Provisions

At the time of transition to these RBI Directions (i.e., on
April 01, 2024), banks shall;

a. Reclassify their investment portfolio as at March 31,
2024, as per the directions laid down in Chapter III of
these Directions;

b. The balance in provision for depreciation, as at
March 31, 2024, shall be reversed into the Revenue/
General Reserve;

c. The balances in Investment Reserve Account (IRA),

if any, as of March 31, 2024, shall be transferred to
the Revenue/ General Reserve if the bank meets the
minimum regulatory requirements of IFR. If the bank
does not meet the minimum IFR requirements, the

balances in IRA shall be transferred to IFR;

d. In respect of HTM the acquisition cost adjusted for

any premium/ discount amortised between date of
acquisition and March 31,2024, shall be the revised
carrying value. The difference between the revised

carrying value and the previous carrying value shall
be adjusted in any Revenue/General Reserve;

e. In respect of FVTPL the fair value as at March 31, 2024
shall be the revised carrying value The difference
between the revised carrying value and the previous
carrying value shall be adjusted in any Revenue/
General Reserves;

f. In respect of AFS the fair value of the investment as at
March 31, 2024 shall be the revised carrying value. The
difference between the revised carrying value and the
previous carrying value shall be adjusted in AFS Reserve

4.3 Loans /Advances and Provisions thereon

Advances are classified into performing and non-performing
advances ('NPAs') as per the RBI guidelines and Stressed
Asset Management & Recovery (SAMR) policy of the bank
and are stated net of specific provisions made towards
NPAs. Further, NPAs are classified into sub-standard,
doubtful and loss assets based on the criteria stipulated
by the RBI. Provisions for NPAs are made for sub-standard
and doubtful assets at rates as prescribed by the RBI.

The Bank has a policy of deferment of instalments for micro
(EEB) loan borrowers in case the group meetings have
been suspended and the same has not been considered as
overdue for the purpose of NPA classification.

Amounts recovered against debts written off in earlier
years are recognised in the profit and loss account as credit
to Miscellaneous Income under the head 'Other Income'

The Bank maintains general provision on standard advances
as prescribed by RBI. In case of micro (EEB & SBAL) lending
portfolio, general provision on standard advances will be
maintained by Bank at 1% comprising 0.25% as per the
minimum provisioning requirement by RBI and 0.75% as
additional provision. Provision made against standard
assets is included in "Other liabilities & provisions".

In case of non-performing micro (EEB & SBAL) lending

portfolio, where 30 days have elapsed from the completion
of loan tenure, the Bank is making 100% provision.

Non-performing loans, which have been fully provided for, are

written off when the prospect of recovery is considered remote
as per the management estimate in compliance with the
stressed assets management and recovery policy of the Bank.

Restructured assets are classified and provided for in
accordance with the guidelines issued by RBI from time to time.

For entities with Unhedged Foreign Currency Exposure
('UFCE'), provision is made in accordance with the guidelines
issued by RBI, which requires to ascertain the amount of
UFCE, estimate the extent of likely loss and estimate the
riskiness of unhedged position. This provision is classified
under Schedule 5 - Other Liabilities in the Balance Sheet.

Further, Incremental capital is maintained in respect of
borrower counter parties in the highest risk category, in
line with stipulations by RBI.

4.4 Inter Bank Participation Certificate

The Bank enters into Inter Bank Participation with risk sharing
as issuing Bank and the aggregate amount of participation
are reduced form the aggregate advance outstanding.

Gain on IBPC is the excess of income earned on the

participation pool and interest paid to the issuing Bank and
is recognised on accrual basis.

4.5 Tangible Assets

All tangible fixed assets are stated at historical cost less
accumulated depreciation and impairment loss, if any. Cost
comprises the purchase price and any attributable cost of
bringing the asset to its working condition for its intended use.

Asset under development as at the balance sheet date are
shown as Capital Work in Progress. Advance paid towards
such development are shown as capital advance.

Any subsequent expenses is capitalised only when it increases
the future economic benefit / functioning capability.

4.6 Intangible Assets

Intangible assets acquired separately are measured on
initial recognition at cost. Following initial recognition,
intangible assets are carried at cost less accumulated
amortisation and accumulated impairment loss, if any.

4.7 Depreciation and Amortisation

Depreciation is charged over the estimated useful life of a
fixed asset on a straight-line basis. The useful lives of the
groups of fixed assets are given below:

Items costing less than ?5,000/- shall be fully depreciated

in the year of purchase.

as at March 31, 2025

Assets purchased and sold during the year shall be
depreciated on the basis of actual number of days the asset
has been put to use.

In case of revision in the estimated useful life of assets

any unamortised depreciation shall be amortised over the
remaining useful life of the assets.

4.8 Impairment

The carrying amounts of assets are reviewed at each
balance sheet date to determine if there is any indication
of impairment based on internal/externa! factors. An
impairment loss is recognised wherever the carrying
amount of an asset exceeds its recoverable amount which
is the greater of the asset's net selling price and value in
use. In assessing the value in use, the estimated future cash
flows are discounted to their present value using pre-tax
discount rate that reflects current market assessment of
the time value of money and risks specific to the asset.

After impairment, depreciation is provided on the revised
carrying amount of the asset over its remaining useful life.

4.9 Foreign Currency transactions

All transactions in foreign currency are recognised at the
exchange rate prevailing on the date of the transaction.

Monetary assets and liabilities in foreign currency are
translated at the Balance Sheet date at the closing rates
of exchange notified by the Foreign Exchange Dealers'
Association of India ('FEDAI') and the resulting gains or
losses are recognised in the Profit and Loss account.

Non-monetary items which are measured in terms of

historical cost denominated in a foreign currency, are
reported using the exchange rate at the date of transaction.
Non-monetary items, which are measured at fair value or
others similar valuation denominated in a foreign currency,
are translated using the exchange rate at the date when
such value was determined.

Foreign currency income and expenditure items of domestic

operations are translated at the exchange rates prevailing
on the date of the transaction.

Foreign exchange spot and forward contracts outstanding
as at the Balance Sheet date and held for trading, are
revalued at the closing spot and forward rates respectively
as notified by FEDAI and at interpolated rates for contracts
of interim maturities.

Contingent liabilities at the Balance Sheet date on account
of outstanding forward foreign exchange contracts,
guarantees, acceptances, endorsements and other
obligations denominated in a foreign currency are stated
at the closing rates of exchange notified by the FEDAI.

4.10 Employee Stock Option Scheme (ESOS)

In case of Employee stock option plan, measurement and
disclosure of the employee share based payment plans is
done in accordance with Securities and Exchange Board
of India (Share Based Employee Benefits) Regulations,
2014 and the Guidance Note on Accounting for Employee
Share-based Payments, issued by the Institute of
Chartered Accountants of India. The cost of equity-settled
transactions shall be measured using the intrinsic value
method for options granted till March 31, 2021. For options
granted to all employees after March 31, 2021, the fair value
on the date of grant of such instruments is recognised
as an expense in accordance with the RBI guidelines on
Compensation of Whole-Time Directors / Chief Executive
Officers / Material Risk Takers and Control Function staff.
The fair value of the stock-based employee compensation is
estimated on the date of grant using Black-Scholes model.
The cumulative compensation expense is recognised with
a corresponding increase in the 'stock options outstanding
account' in reserve for equity-settled transactions at each
reporting date until the vesting date reflecting the extent
to which the vesting period has expired and the Bank's
best estimate of the number of equity instruments that
will ultimately vest. The expense or credit recognised in
the statement of profit and loss for a period represents
the movement in cumulative expense recognised as at the
beginning and end of that period and shall be recognised
in employee benefits expense. ESOP cost is recognised in
Profit and Loss Statement on the basis of number of days
of vesting period.

4.11 Retirement and employee benefits

Retirement benefit in the form of provident fund is a

defined contribution scheme. The Bank has no obligation,
other than the contribution payable to the provident fund.
The Bank recognises contribution payable to the provident
fund scheme as expenditure, when an employee renders the

related service. If the contribution payable to the scheme for
service received before the balance sheet date exceeds the
contribution already paid, the deficit payable to the scheme
is recognised as a liability after deducting the contribution
already paid. If the contribution already paid exceeds the
contribution due for services received before the balance
sheet date, then excess is recognised as an asset.

Gratuity liability is a defined benefit obligation and is
provided for on the basis of an actuarial valuation on
projected unit credit method made at the end of each
financial year.

The Bank provides for compensated absences based on
actuarial valuation conducted by an independent actuary.

Actuarial gains/losses are immediately taken to the profit
and loss account and are not deferred.

4.12 Income Taxes

Tax expenses comprises current and deferred tax. Current

income tax is measured at the amount expected to be
paid to the tax authorities in accordance with the Income
Tax Act, 1961 and in compliance with AS 22 "Accounting

for Taxation Income". Deferred income taxes reflects the
impact of current year timing differences between taxable
income and accounting income for the year and reversal of
timing differences of earlier years.

Deferred Tax is measured based on the tax rates and the tax
laws enacted or substantively enacted at the balance sheet
date. Deferred tax assets are recognised only to the extent
that there is reasonable certainty that sufficient future
taxable income will be available against which such deferred
tax assets can be realised. If the Bank has carried forward
unabsorbed depreciation and tax losses, all deferred tax
assets is recognised only to the extent that there is a virtual
certainty supported by convincing evidence that sufficient
taxable income will be available in future against which
such deferred tax assets can be realised.

At each reporting date, the Bank re-assesses unrecognised
deferred tax assets. It recognises unrecognised deferred
tax assets to the extent that it has become reasonably
certain or virtually certain, as the case may be, that sufficient
future taxable income will be available against which such
deferred tax assets can be realised.

Deferred Tax liability is created on amount transferred to
special reserve under section 36(i)(viii) of the Income Tax
Act, 1961 as per the RBI guidelines.

The carrying amounts of deferred tax assets are reviewed
at each balance sheet date. The Bank writes down the
carrying amount of deferred tax assets to the extent
that it is no longer reasonably certain or virtually certain
as the case may be, that sufficient future taxable income
will be available against which deferred tax asset can be
realised. Any such write down is reversed to the extent
that it becomes reasonably certain or virtually certain, as
the case may be that sufficient future taxable income will
be available.

4.13 Non-banking assets

Non-banking assets (NBAs) acquired in satisfaction of
claims are valued at the market value on a distress sale
basis or value of loan, whichever is lower. Further, the Bank
creates provision on these assets as per the extant RBI
guidelines or specific RBI directions.

4.14 Earnings per Share

Basic earnings per share is calculated by dividing the net
profit or loss after tax for the period attributable to equity
shareholders by the weighted average number of equity
shares outstanding during the year.

Diluted earnings per share reflect the potential dilution

that could occur if contracts to issue equity shares were
exercised or converted during the year. Diluted earnings

per equity share is computed using the net profit or loss
for the period attributable to equity shareholders and the
weighted average number of shares outstanding during the
period are adjusted for the effects of all dilutive potential
equity shares.