2.2. Material Accounting Policy

a. Property, plant and equipment (PPE)

PPE is recognised when it is probable that future economic benefits associated with the item will flow to the Company and
the cost of the item can be measured reliably. PPE are stated at cost of acquisition, less accumulated depreciation and
accumulated impairment losses, if any. Direct costs are capitalised until the assets are ready for use and include freight,
duties, taxes and expenses incidental to acquisition and installation.

Subsequent expenditure related to an item of PPE is added to its book value only if they increase the future benefits from
the existing asset beyond its previously assessed standard of performance.

For transition to Ind AS, the Company has elected to adopt as deemed cost, the opening written down value as per Previous
GAAP on the transition date of April 1, 2017.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected
to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property,
plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and
is recognised in the Statement of Profit and Loss.

Depreciation is provided on written down value method ('WDV') over the estimated useful lives of the assets specified in
Schedule II of the Companies Act, 2013. Individual assets costing up to ^ 5,000 are fully depreciated in the year of acquisition.
The estimated useful lives of Property, Plant and Equipment are as stated below:

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

Depreciation on impaired PPE asset is provided on the revised carrying amount of the asset over its remaining useful life.

Property, Plant and Equipment not ready for the intended use on the date of Balance sheet are disclosed as “Capital Work-
in-progress” and carried at cost.

b. Intangible Assets

Intangible assets are recognised when it is probable that the future economic benefits that are attributable to the assets will
flow to the enterprise and the cost of the asset can be measured reliably. Intangible assets are stated at acquisition cost,
net of accumulated amortisation and accumulated impairment losses, if any.

Intangible Assets i.e. computer software are amortized on a straight line basis over the estimated useful life of 1 year to 5
years.

Amortisation on impaired intangible asset is provided on the revised carrying amount of the asset over its remaining useful
life.

An intangible asset is derecognised on disposal, or when no future economic benefits are expected from use or disposal.
Gains or losses arising from the retirement or disposal of an intangible asset are determined as the difference between the
disposal proceeds and the carrying amount of the asset and are recognised as income or expense in the Statement of Profit
and Loss.

Intangible assets not ready for the intended use on the date of Balance sheet are disclosed as “Intangible assets under
developments”.

The method of amortisation, useful life are reviewed at the end of accounting year with the effect of changes in the estimate
being accounted for on a prospective basis.

c. Assets held for Sale

Assets are classified as held for sale if their carrying amount is intended to be recovered principally through a sale (rather
than through continuing use) when the asset is available for immediate sale in its present condition subject only to terms
that are usual and customary for sale of such asset and the sale is highly probable and is expected to qualify for recognition
as a completed sale within one year from the date of classification.

The Company repossess properties or other assets to settle outstanding recoverable and the surplus (if any) post auction is
refunded to the obligors. These assets are physically acquired by the company under SARFAESI Act, 2002 and where sale is
highly probable have been classified as Assets Held for Sale, as their carrying amounts will be recovered principally through
a sale of asset. In accordance with Ind AS 105, the company is committed to sell these assets. Assets classified as held for
sale are measured at lower of their carrying amount and fair value less costs to sell.

d. Impairment of Assets other than financials assets

The Company assesses at each Balance Sheet date whether there is any indication that an asset other than financial asset
may be impaired. If such indication exists, the PPE, intangible assets and investment property are tested for impairment so
as to determine the impairment loss, if any.

Impairment loss is recognised when the carrying amount of an asset exceeds its recoverable amount.

Recoverable amount is the higher of fair value less costs of disposal and value in use.

If recoverable amount of an asset is estimated to be less than its carrying amount, such deficit is recognised immediately
in the Statement of Profit and Loss as impairment loss and the carrying amount of the asset is reduced to its recoverable
amount.

When an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of

its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is
recognised immediately in the Statement of Profit and Loss.

e. Financial Instruments

(i) Recognition

Financial assets and financial liabilities are recognized when an entity becomes a party to the contractual provisions of
the instrument. Purchase and sale of financial assets are recognised on the trade date, which is the date on which the
Company becomes a party to the contractual provisions of the instrument.

(ii) Initial measurement

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at Fair Value through Profit or Loss (FVTPL)) are added to or deducted from the fair value of the
financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to
the acquisition of financial assets or financial liabilities at Fair Value through Profit or Loss are recognised immediately
in Statement of Profit and Loss.

In addition, on initial recognition, the Company may irrevocably designate a financial asset that otherwise meets the
requirements to be measured at amortised cost or at FVTOCI or at FVTPL if doing so eliminates or significantly reduces
accounting mismatch that would otherwise arise.

(iii) Financial Assets

A. Classification of Financial Assets and Subsequent Measurement

On initial recognition, a financial asset is classified to be measured at -

- Amortised cost; or

- Fair Value through Other Comprehensive Income (FVTOCI); or

- Fair Value through Profit or Loss (FVTPL)

All recognised financial assets that are within the scope of Ind AS 109 are required to be subsequently measured
at amortised cost or fair value on the basis of the entity’s business model for managing the financial assets and
the contractual cash flow characteristics of the financial assets. Debt instruments that are held within a business
model whose objective is to collect the contractual cash flows, and that have contractual terms of financial
assets give rise specify date to cash flows that are solely payments of principal and interest on the principal
amount outstanding (SPPI), are subsequently measured at amortised cost.

A debt instrument is classified as FVTOCI only if it meets both of the following conditions and is not recognised at
FVTPL:

• The asset is held within a business model whose objective is achieved by both collecting contractual cash
flows and selling financial assets; and

• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.

The Company determines its business model at the level that best reflects how it manages a group of financial
assets to achieve its business objective and is not assessed on instrument to instrument basis, but at a higher
level of aggregated portfolios. At initial recognition of a financial asset, the Company determines whether newly
recognised financial assets are part of an existing business model or whether they reflect a new business model.

Debt instruments included within the FVTOCI category are measured initially as well as at each reporting date
at fair value. Fair value movements are recognised in the Other Comprehensive Income (OCI). However, the
Company recognises interest income & impairment losses in the Statement of Profit and Loss. On derecognition
of the asset, cumulative gain or loss previously recognised in OCI is reclassified from equity to Statement of Profit
and Loss. Interest earned whilst holding FVTOCI debt instrument is reported as interest income using the EIR
method.

All equity investments in scope of Ind AS 109 are measured at fair value are classified as at FVTPL. The Company
may make an irrevocable election to present certain equity investments measured at fair value through other
comprehensive income. The Company makes such election on an instrument-by-instrument basis. The classification
is made on initial recognition and is irrevocable. If the Company decides to classify an equity instrument as at
FVTOCI, then all fair value changes on the instrument, excluding dividends, are recognised in the OCI. There is
no recycling of the amounts from OCI to Statement of Profit and Loss, even on sale of investment. However, on
sale/disposal the Company may transfer the cumulative gain or loss within equity.

Equity instruments included within the FVTPL category are measured at fair value with all changes recognised in
the Statement of Profit and Loss.

All other financial assets are classified as measured at FVTPL.

Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains and losses
arising on re-measurement recognised in Statement of Profit and Loss.

B. Derecognition of Financial Assets

The Company derecognises a financial asset when the contractual rights to the cash flows from the financial
asset expire, or when it transfers the financial asset and/or substantially all the risks and rewards of ownership
of the asset to another party. If the Company neither transfers nor retains substantially all the risks and rewards
of ownership and continues to control the transferred asset, the Company recognises its retained interest in the
asset and an associated liability for amounts it may have to pay. If the Company transfers the financial assets but
retains substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues
to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

On derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and
the sum of the consideration received and receivable and the cumulative gain/loss that had been recognised in
OCI and accumulated in equity is recognised in the Statement of Profit and Loss, with the exception of equity
investment designated as measured at FVTOCI, where the cumulative gain/loss previously recognised in OCI is not
subsequently reclassified to the Statement of Profit and Loss.

C. Modification of contractual cash flows

A modification of a financial asset occurs when the contractual terms governing the cash flows of a financial
asset are renegotiated or otherwise modified between initial recognition and maturity of the financial asset. A
modification affects the amount and/or timing of the contractual cash flows either immediately or at a future
date. In addition, the introduction or adjustment of existing covenants of an existing loan would constitute a
modification even if these new or adjusted covenants do not yet affect the cash flows immediately but may affect
the cash flows depending on whether the covenant is or is not met (e.g. a change to the increase in the interest
rate that arises when covenants are breached).

When a financial asset is modified, the Company assesses whether this modification results in derecognition. In
accordance with the Company’s policy, a modification results in derecognition when it gives rise to substantially
different terms.

When the contractual cash flows of a financial asset are renegotiated or otherwise modified, and the renegotiation
or modification does not result in the derecognition of that financial asset, the Company recalculates the gross
carrying amount of the financial asset and shall recognise a modification gain or loss in profit or loss. The gross
carrying amount of the financial asset shall be recalculated as at the present value of the renegotiated or
modified contractual cash flows that are discounted at the financial asset’s original effective interest rate (or
credit-adjusted effective interest rate for purchased or originated credit-impaired financial assets) or, when
applicable, the revised effective interest rate.

D. Reclassification of Financial Assets

The Company determines classification of financial assets and liabilities on initial recognition. After initial
recognition, no reclassification is made for financial assets which are equity instruments and financial liabilities.
For financial assets which are debt instruments, a reclassification is made only if there is a change in the business
model for managing those assets. Changes to the business model are expected to be infrequent. The Company’s
management determines change in the business model as a result of external or internal changes which are
significant to the Company’s operations. Such changes are evident to external parties. A change in the business
model occurs when the Company either begins or ceases to perform an activity that is significant to its operations.
If the Company reclassifies financial assets, it applies the reclassification prospectively from the reclassification
date which is the first day of the immediately next reporting period following the change in business model.
The Company does not restate any previously recognised gains, losses (including impairment gains or losses) or
interest.

E. Impairment of Financial Assets

Company recognizes loss allowances using the Expected Credit Loss (“ECL”) model for the financial assets which
are not fair valued through profit and loss as per board approved policy. The Company uses expected credit loss
(“ECL”) allowance for financial assets, which are not individually significant, and comprise of a large number of
homogeneous assets that have similar characteristics.

(i) Measurement of Impairment

The expected credit loss is a product of exposure at default, probability of default and loss given default.
The Company has used past data to observe actual defaults for potential credit losses. The estimates from
the above sources have been adjusted with forward looking inputs from anticipated change in future macro¬
economic conditions.

ECL is required to be measured through a loss allowance at an amount equal to:

• 12-month ECL, i.e. ECL that results from those default events on the financial instrument that are
possible within 12 months after the reporting date; or

• full lifetime ECL, i.e. lifetime ECL that result from all possible default events over the life of the
financial instrument.

A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on that financial
instrument has increased significantly since initial recognition. For all other financial instruments, ECLs are
measured at an amount equal to the 12-month ECL.

The company has established a policy to perform an assessment at the end of each reporting period whether
a financial instrument’s credit risk has increased significantly since initial recognition by considering the
change in the risk of default occurring over the remaining life of the financial instruments.

Based on the above process, the company categorises its loans into Stage 1, Stage 2 and Stage 3 as described
below:

Stage 1: When loans are first recognised, the Company recognises an allowance based on 12 month ECL.
Stage 1 loans also include facilities where the credit risk has improved and the loan has been reclassified
from Stage 2 to Stage 1.

Stage 2: When a loan has shown an increase in credit risk since origination, the Company records an
allowance for the life time expected credit losses. Stage 2 loans also include facilities, where the credit
risk has improved and the loan has been reclassified from Stage 3 to Stage 2.

Stage 3: When loans shows significant increase in credit risk and/or are considered credit-impaired, the
company records an allowance for the life time expected credit losses.

The Company measures ECL on an individual basis, or on a collective basis for portfolios of loans that share
similar economic risk characteristics. This expected credit loss is computed based on a provision matrix
which takes into account historical credit loss experience and adjusted for forward-looking information.

Key elements of ECL computation are outlined below:

• Exposure at Default (EAD) is an estimate of the exposure at a reporting date, including repayments
of principal and interest, whether scheduled by contract or otherwise, expected drawdowns on
committed facilities.

• Probability of default (“PD”) is an estimate of the likelihood that customer will default over a given
time horizon. A default may only happen at a certain time over the assessed period, PD is calculated
based on default summary of past years using historical analysis.

• Loss given default (“LGD”) estimates the loss which Company incurs post customer default. It is
computed using as value of collateral and it is usually expressed as a percentage of the Exposure at
default (“EAD”).

(ii) Significant increase in credit risk

The Company monitors all financial assets and loan commitments that are subject to the impairment
requirements to assess whether there has been a significant increase in credit risk since initial recognition.

In assessing whether the credit risk on a financial instrument has increased significantly since initial
recognition, the Company compares the risk of a default occurring on the financial instrument at the
reporting date based on the remaining maturity of the instrument with the risk of a default occurring that
was anticipated for the remaining maturity at the current reporting date when the financial instrument
was first recognised. In making this assessment, the Company considers both quantitative and qualitative
information that is reasonable and supportable, including historical experience and forward-looking
information that is available without undue cost or effort, based on the Company’s expert credit assessment.

(iii) Credit impaired financial assets

A financial asset is ‘credit impaired’ when one or more events that have a detrimental impact on the estimated
future cash flows of the financial asset have occurred. Credit-impaired financial assets are referred to as Stage
3 assets. Evidence of credit-impairment includes observable data about the following events:

• significant financial difficulty of the borrower or issuer;

• a breach of contract such as a default or past due event;

• the lender of the borrower, for economic or contractual reasons relating to the borrower’s financial
difficulty, having granted to the borrower a concession that the lender would not otherwise consider;

• the disappearance of an active market for a security because of financial difficulties; or

A loan is considered credit-impaired when a concession is granted to the borrower due to a deterioration in
the borrower’s financial condition, unless there is evidence that as a result of granting the concession the
risk of not receiving the contractual cash flows has reduced significantly and there are no other indicators
of impairment.

(iv) Definition of default

The definition of default is used in measuring the amount of ECL and in the determination of whether the
loss allowance is based on 12-month or lifetime ECL.

Default considered for computation of ECL is based on both qualitative and quantitative indicators such
as overdue status and non-payment on another obligation of the same counterparty are key inputs in this
analysis.

F. Write-off

Loans and debt securities are written off when the Company has no reasonable expectations of recovering the
financial asset (either in its entirety or a portion of it). This is the case when the Company determines that
the borrower does not have assets or sources of income that could generate sufficient cash flows to repay
the amounts subject to the write-off. A write-off constitutes a derecognition event. The Company may apply
enforcement activities to financial assets written off. Recoveries resulting from the Company’s enforcement
activities will result in impairment gains.

(iv) Financial Liabilities and Equity Instruments

A. Classification as debt or equity

Debt and equity instruments issued by the Company are classified as either financial liabilities or as equity in
accordance with the substance of the contractual arrangements and the definitions of a financial liability and an
equity instrument.

B. Equity Instrument

An instrument that evidences a residual interest in the assets of an entity after deducting all of its liabilities is an
equity instrument. Equity instruments issued are recognised at the proceeds received, net of direct issue costs.

C. Financial liabilities

All financial liabilities are subsequently measured at amortised cost using the effective interest rate method or
at FVTPL.

Financial liabilities are classified as at FVTPL when the financial liability is held for trading or it is designated as
at FVTPL.

Financial liabilities that are not held-for-trading and are not designated as at FVTPL are measured at amortised cost
at the end of subsequent accounting periods. The carrying amounts of financial liabilities that are subsequently
measured at amortised cost are determined based on the effective interest method.

D. Derecognition of financial liabilities

The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged,
cancelled or have expired. An exchange between the Company and the lender of debt instruments with
substantially different terms is accounted for as an extinguishment of the original financial liability and the
recognition of a new financial liability. The difference between the carrying amount of the financial liability
derecognised and the consideration paid and payable is recognised in profit or loss.

(v) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet only if there is
an enforceable legal right to offset the recognised amounts with an intention to settle on a net basis or to realise the
assets and settle the liabilities simultaneously.

Employee Benefits

(i) Defined contribution plan

Defined contribution plans include contributions to Provident Fund, Employees’ Pension Scheme and Employee State
Insurance Scheme, recognized as employee benefit expenses in the Statement of Profit and Loss based on the amount
of contribution as and when the services are received from the employees.

(ii) Defined benefit plans

For defined benefit retirement plans such as Gratuity plan and compensated absences, the cost of providing benefits
is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at the end of each
reporting date.

Defined benefit costs are categorised as follows:

• service cost (including current service cost, past service cost, as well as gains and losses on curtailments and
settlements);

• net interest expense or income; and

• re-measurement

The Company presents the first two components of defined benefit costs in Standalone Statement of profit and loss in
the line item ‘Employee benefits expenses’. Curtailment gains and losses are accounted for as past service costs.

Re-measurement, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable)
and the return on plan assets (excluding interest), is reflected immediately in the Balance Sheet with a charge or
credit recognised in other comprehensive income in the year in which they occur. Re-measurement recognised in other
comprehensive income is reflected immediately in retained earnings and will not be reclassified to profit or loss.

Past service cost is recognised in profit or loss in the year of a plan amendment or when the Company recognises
corresponding restructuring cost whichever is earlier.

For the purpose of gratuity, the Company has obtained a qualifying group gratuity insurance policy from Life Insurance
Corporation of India. The fair value of the plan assets is reduced from the gross obligation under the defined benefit
plans to recognise the obligation on a net basis.

(iii) Short-term and long-term employee benefits

Employee benefits falling due wholly within twelve months of rendering the service are classified as short term employee
benefits and are expensed in the period in which the employee renders the related service. Liabilities recognised in
respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid
in exchange for the related service.

Liabilities recognised in respect of long-term employee benefits are measured at the present value of the estimated
future cash outflows expected to be made by the Company in respect of services provided by employees up to the
reporting date.