1 CAPITAL1.1 Capital Infusion
During the year ended March 31, 2024, the Bank allotted 40,56,651 equity shares pursuant to the exercise of stock options under the approved Employee Stock Option Plan (ESOP) 2019. Further, the bank has granted 2,90,37,915 Fresh stock options to its eligible employees. Refer note 18(33) For further details.
During the year ended March 31, 2024, the eUFSL allotted 1,06,564 equity shares pursuant to the exercise of stock options under the approved Employee Stock Option Plan (ESOP) 2015 which are equivalent to 12,36,142 shares of Ujjivan Small Finance Bank having nominal value of ' 10 per share.
1.2 Capital Adequacy Ratio
The Bank computes its Capital Adequacy Ratio as per New Capital Adequacy Framework- BASEL-II and Operating Guidelines for Small Finance Banks (issued by RBI on October 06, 2016) and Basel III Capital regulations Under the New Capital Adequacy Framework and Operating Guidelines for Small Finance Banks issued on October 06, 2016, the Bank has to maintain a Minimum Total Capital of 15% of the Credit Risk Weighted Assets (Credit RWA) on an on-going basis. Out of the Minimum Total Capital, at least 7.5% shall be from Minimum Tier I Capital of which Common Equity Tier I capital shall be 6% and 1.50% from additional Tier I capital and remaining Tier II Capital shall be 7.5%. Further as per RBI's directions given in the circular DBR.NBD.No. 4502/16.13.218/2017-18, dated November 08, 2017, no separate risk charge has been calculated for Market Risk and Operational Risk for capital ratios.
1A Reserves and Surplus Statutory Reserve
The Bank has made an appropriation of ' 32,03,727 (Previous Year: ' 27,49,804) to the statutory reserve for the year ended March 31, 2024 out of profits, to the Statutory Reserve, pursuant to the requirements of Section 17 of the Banking Regulation Act, 1949 and RBI guidelines dated September 23, 2000. The Bank has taken over the Statutory Reserves of ' 14,32,831 in pursuant to the scheme of amalgamation as detailed in Note 18(41).
Capital Reserve
The Bank not made any appropriation From the Profit and Loss Account to the Capital Reserve during the year ended March 31, 2024 as well as for the previous year ended March 31, 2023.
Investment Fluctuation Reserve (IFR)
In accordance with RBI guidelines, Banks are required to create an IFR equivalent to 2% of their HFT and AFS Investment portfolios, within a period of three years starting fiscal 2019. Accordingly, during the year ended March 31, 2024, the Bank has made an appropriation of ' 43,737 ( Previous Year: 467,852)to IFR from the profit and loss account so as to reach to the figure of 2% of its HFT and AFS Investment portfolio.
Investment Reserve Account (IRA)
In accordance with RBI guidelines, Banks are required to create IRA to the extent of provisions created on account of depreciation in the 'AFS' or 'HFT' categories are found to be in excess of the required amount in any year, the excess shall be credited to the Profit & Loss Account and an equivalent amount (net of taxes, if any and net of transfer to Statutory Reserves as applicable to such excess provision) shall be appropriated to an Investment Reserve Account (IRA) in Schedule 2 - "Reserves & Surplus" under the head "Revenue and Other Reserves". During the Financial Year 2023-24, the Bank has written back ' Nil (Previous Year: 3,404 ) and transferred to IRA.
Share Premium
The Bank has taken over the securities premium account pertaining to UFSL(erstwhile holding company) amounting to ' 11,082,054 and adjusted ' 12,909,174 from the share premium during the year ended March 31,2024 in terms of the said Scheme as detailed in Note number 18(41) of financial statements. The same has resulted in net deduction from share premium of ' 1,827,120. Further, the bank based on a legal opinion, adjusted the stamp duty payable amounting to ' 250,000 in the said share premium account as per the relevant provisions of the Companies Act, 2013 (previous year ended March 31, 2023 the bank had adjusted the share issue expenses of ' 93,899 against the Share premium account).
Drawdown from Reserves
The Bank has not made a drawdown from the share premium during the year ended March 31, 2024 and March 31, 2023. For adjustment pursuant to the merger, please refer note. 18(41).
2.5 Non-Performing Non-SLR Investments
The Bank does not have any Non-Performing Non-SLR Investments as at March 31,2024 and March 31, 2023.
2.6 Sale and transfer of securities to/ from HTM Category
During the current and previous year, the value of sales and transfers of securities to / from HTM category excluding one time transfer of securities to / from HTM category with the approval of Board of Directors permitted to be undertaken by banks at the beginning of the accounting year, has not exceeded 5% of the book value of investments held in HTM category at the beginning of the year. Hence, specific disclosure on book value/market value and provisions if any, relating to such transfer is not required to be made.
3 DERIVATIVES/ EXCHANGE TRADED INTEREST DERIVATIVES/ RISK EXPOSURE IN DERIVATIVES
The Bank has not entered into any derivative instruments for trading / speculative purposes either in Foreign Exchange or domestic treasury operations. The Bank does not have any Forward Rate Agreement or Interest rate swaps.
4.3 Unsecured advances
The Bank has not extended any project advances where the collateral is an intangible asset such as a charge over rights, licenses, authorisations, etc. The Advances as at March 31, 2024 of ' 205,969,232 (PY. ' 144,854,546) disclosed in Schedule 9B (iii) are without any primary or collateral security.
4.4 Divergence in Asset Classification and Provisioning for NPAs
"RBI vide its circular DBR.BP.BC.No.63/21.04.018/2016-17 dated April 18, 2017 and Notification dated April 01, 2019, has directed banks shall make suitable disclosures, if either or both of the Following conditions are satisfied:
a) the additional provisioning for NPAs assessed by RBI exceeds 10% of the reported profit before provisions and contingencies for the reference period, and
b) the additional Gross NPAs identified by RBI exceed 15 per cent of the published incremental Gross NPAs for the reference period."
Based on the above, there was no reportable divergence in asset classification and provisioning for NPAs for the years ended March 31, 2024 and March 31, 2023.
4.5 a) Details of Financial Assets sold to Securitisation Company (SC) / Reconstruction Company (RC) for Asset
Reconstruction
The details of Securitisation to a special purpose vehicle is furnished in Schedule 18 (36). b) Details of Book Value of Investment in Security Receipts
During the current and previous year, the Bank has not made Investment in Security Receipts.
4.6 Details of NPA Purchase/Sold
During the current and previous year, there has been no purchase/ sale of non-performing financial assets from/ to other banks.
4.7 Intra-Group Exposure
During the current and previous year, the Bank does not have any Intra Group Exposure.
4.8 Disclosures Resolution of Stressed Assets
There were no accounts that have been restructured under prudential framework on resolution of stressed assets as per the circular no. RBI/2018-19/203 DBR.No.BP.BC.45/21.04.048/2018-19 dated June 07, 2019 during the year ended March 31, 2024. (March 31, 2023: Nil).
1) Working funds represent average of total assets as reported to RBI in Form X under Section 27 of the Banking Regulation Act, 1949 during the Year and assets of eUFSL.
2) Returns on assets are computed with reference to average working funds.
3) Business is defined as total of average of gross advances and deposits (net of inter-bank deposits and Certificate of Deposits).
4) Operating profit is net profit for the Year before provisions and contingencies and profit / (loss) on sale of building and other assets (net).
4) Classification of assets and liabilities under the different maturity buckets is based on the same estimates and assumptions as used by the Bank for compiling the return submitted to the RBI.
5) RBI vide its circular dated March 27, 2020 on 'COVID-19 Regulatory Package' permitted the Bank to grant a moratorium of three months on payment of all instalments falling due between March 1,2020 and May 31,2020. The Bank in line with the said circular has offered moratorium on the respective maturity buckets presented above. The Bank estimates that considerable portion of the cash flows impacted by the moratorium will be received within 1-3 years from the balance sheet date and the same has been factored in the above disclosure.
11.3 Details of Single Borrower Limit (SBL) / Group Borrower Limit (GBL) exceeded by the Bank:
During the current and previous year there are no instances of SBL/GBL limit exceeding the sanctioned limit or outstanding whichever is higher.
12 DISCLOSURE OF PENALTIES IMPOSED BY RBI Year ended March 31, 2024
During the FY 2023-24, RBI has not levied any penalty under the provisions of the (i) Banking Regulations Act 1949, (ii) Payment and Settlement Act, 2007 and (iii) Government Securities Act, 2006 (for bouncing of SGL) as per the Master Direction on Financial Statements - Presentation and Disclosures dated August 30, 2021. During the FY 2023-24, RBI levied an operational penalty of ' 240 for downtime in ATMs for more than 10 hours in a month, due to cash-out in such ATMs.
Year ended March 31, 2023
During the FY 2022-23, RBI has not levied any penalty under the provisions of the (i) Banking Regulations Act 1949, (ii) Payment and Settlement Act, 2007 and (iii) Government Securities Act, 2006 (for bouncing of SGL) as per the Master Direction on Financial Statements - Presentation and Disclosures dated August 30, 2021. During the FY 2023-24, RBI levied an operational penalty of ' 1780 for downtime in ATMs for more than 10 hours in a month, due to cash-out in such ATMs.
13 OVERSEAS ASSETS, NPAS AND REVENUE
The Bank does not have any overseas branches and hence the disclosure regarding overseas assets, NPAs and revenue is not applicable.
18 BANCASSURANCE BUSINESS
Commission income For the year ended March 31, 2024 includes fees of '1,113,670 (Previous Year: ' 435,917) in respect of insurance business.
19. LIQUIDITY COVERAGE RATIO (LCR)
The Bank adheres to RBI guidelines on Liquidity Coverage Ratio given in "Basel III Framework on Liquidity Standards - Liquidity Coverage Ratio (LCR), Liquidity Risk Monitoring Tools and the LCR Disclosure Standards" and "Operating Guidelines for Small Finance Banks".
19. (A) Qualitative disclosure around LCR
LCR is the ratio of unencumbered High Quality Liquid Assets (HQLA) to Net Cash Outflows over the next 30 calendar days. The liquidity management is centralised with treasury with active interactions between the Bank's Business Units .LCR measures the Bank's ability to manage and survive under combined idiosyncratic and market-wide liquidity stress condition that would result in accelerated withdrawal of deposits from retail as well wholesale depositors, partial loss of secured funding, increase in collateral requirements, unscheduled draw down of unused credit lines, etc. These stress conditions are captured as a part of the Net Cash Outflows. HQLA of the Bank consist of cash, unencumbered excess SLR, a portion of statutory SLR as allowed under the guidelines and cash balance with RBI in excess of statutory cash reserve requirements. Asset Liability Committee (ALCO) of the Bank is the primary governing body for Liquidity Risk Management. Treasury is entrusted with the responsibility of liquidity management within the Bank under the guidance of the ALCO. ALM Risk unit independently measures, monitors & reports Liquidity Risk as per the Regulatory and internal guidelines.
(a) The estimates of Future salary increases, considered in actuarial valuation, takes into account, inflation, seniority, promotions and other relevant factors, such as demand and supply in the employment market.
(b) During the current and previous year the Bank does not have unamortised gratuity and pension liability.
(c) Discount rate is based on the prevailing market yields of Indian Government Bonds as on the Balance Sheet date for the estimated term of the obligation.
(d) The Code on Wages, 2019 ("Code") and other connected legislations enacted by the Government of India envisages payment of wages (as defined) which is not less than 50% of all monthly remuneration paid to employees (as defined). The effective date of these legislations and the rules relevant thereto have not yet been notified by the Government of India. The current wages as a percentage to the remuneration for certain employees as per Company's salary structure is less than that envisaged in these legislations. As and when the legislations are notified, there may be an increase in the accrued gratuity liability of the employees of the Company. This possible additional liability has currently not been quantified.
22 SEGMENT REPORTING
In accordance with the guidelines issued by RBI & AS-17, the Bank has adopted Segment Reporting as under:
A) Treasury :
The Treasury Segment primarily consists of net interest earnings from the Bank's Investment portfolio, money market borrowing and lending, gains or losses on Investment operations and income from sale of PSLC.
B) Retail Banking:
The Retail Banking Segment serves retail customers through a branch network and other delivery channels. Retail Banking includes lending to and deposits from retail customers and identified earnings and expenses of the segment. This segment raises deposits from customers and provides loans and other services to customers. Revenues of the retail banking segment are derived from interest earned on retail loans, processing fees earned and other related incomes. Expenses of this segment primarily comprise interest expense on deposits & Borrowings, infrastructure and premises expenses for operating the branch network and other delivery channels, personnel costs, other direct overheads and allocated expenses.
As per the RBI Circular DOR.AUT.REC.12/22.01.001/2022-23 dated April 07, 2022, for the purpose of disclosure under Accounting Standard 17, Segment reporting, 'Digital Banking' has been identified as a sub-segment under Retail Banking by Reserve Bank of India (RBI). However, as the proposed Digital Banking Unit (DBU) of the Bank has not yet commenced operations and having regard to the discussions of the DBU Working Group formed by Indian Banks' Association (IBA) (which included representatives of banks and RBI), held on July 14, 2022, reporting of Digital Banking as a separate sub-segment of Retail Banking Segment will be implemented by the Bank based on the decision of the DBU Working Group.
C) Corporate/ Whole Sale Banking:
The Wholesale Banking Segment provides loans to Corporates and Financial Institutions. Revenues of the wholesale banking segment consist of interest earned on loans made to customers. The principal expenses of the segment consist of interest expense on funds borrowed from external sources and other internal segments, premises expenses, personnel costs, other direct overheads and allocated expenses of delivery channels, specialist product groups, processing units and support groups.
Tax paid in advance / tax deducted at source (net of provisions), Deferred Tax Assets and others which cannot be allocated to any segments, have been classified as unallocated assets.
Part B: Geographic Segment
The Bank operations are predominantly confirmed within one geographical segment (India) and accordingly, this is considered as the only secondary segment.
26.9 Provision for Long term contracts
The Bank has a process whereby periodically all long term contract are assessed For material Foreseeable losses. At the year end, the Bank has reviewed and ensured that no provision is required under any law / accounting standards on such long term contracts as on March 31, 2024 and March 31, 2023.
26.10 Credit default Swaps
The Bank has not entered into any credit default swap transactions during the current and previous year.
26.11 Credit card and debit card reward points
The Bank does not have credit card products, hence reward points are not applicable. Also, the Bank does not provide any reward points on debit card.
26.12 Off balance sheet SPVs sponsored
There are no off-balance sheet SPVs sponsored by the bank as at March 31, 2024, and at March 31,2023. Refer note 18(36) of the notes to accounts.
26.13 Details of factoring exposure
The factoring exposure of the Bank as at March 31,2024 and as at March 31, 2023 are Nil.
26.14 Country wise risk exposure
The Bank does not have any country wise Risk Exposure as at March 31, 2024 and as at March 31, 2023.
26.15 Unhedged foreign currency exposure
The Bank does not have any unhedged foreign country exposure as at March 31,2024 and as at March 31, 2023.
28 DISCLOSURES ON REMUNERATION:28.1 Qualitative Disclosures(A) Information relating to the composition and mandate of the Remuneration Committee.
Bank has constituted a Nomination and Remuneration Committee (NRC). The NRC comprises of five members where four are Independent Directors and one Non-Executive, Non-Independent Director. Mandate of the
Nomination and Remuneration Committee is to oversee the framing, review and implementation of the Bank's Compensation Policy and Nomination & Remuneration Policy for Whole Time Director/Chief Executive Officer/ Material Risk Takers and Control Function staff for ensuring effective alignment between remuneration and risks. The Committee also ensures that level and composition of remuneration is reasonable and sufficient,
SCHEDULE 18
relationship of remuneration to performance is clear and meets appropriate performance benchmarks. The Nomination and Remuneration Committee reviews Compensation policy and Nomination & Remuneration Policy of the Bank with a view to attract, retain and motivate employees.
(B) Information relating to the design and structure of remuneration processes and the key features and objectives of Compensation Policy and Nomination & Remuneration Policy
The Compensation Policy and Nomination & Remuneration Policy has been laid out keeping the following perspectives into considerations:
(a) Our Compensation principles should support us in achieving our mission of providing a full range of financial services to the economically active poor of India who are not adequately served (unserved and underserved) by financial institutions. Therein, this policy should support us to attract and retain talent and skills required to further the organisations purpose and ideology.
(b) The pay structure and amounts confirms and shall always conform to applicable Income Tax and other similar statutes.
(c) All practices of the Bank shall comply with applicable labour laws.
(d) The pay structure should be standardised for a level of employees.
(e) Elements eligible for tax exemption may be introduced at appropriate levels to enable employees take applicable tax breaks. Amounts related to certain benefits may undergo change due to change in grade/ roles/ function/ state/ region in the organisation.
(f) The compensation structure shall be easy to understand for all levels of employees.
(g) The compensation policy is designed to promote meritocracy in the organisation
i.e. other things being equal, performers in a given role are expected to earn more than his/her peer group.
(h) The directors are paid sitting fees as approved by the Board for attending the Board and Board Committee Meetings.
(C) Description of the ways in which current and future risks are taken into account in the remuneration processes. It should include the nature and type of the key measures used to take account of these risks.
(a) Structurally, the Control functions such as Credit, Risk and Vigilance are independent of the business functions and each other, thereby ensuring independent oversight from various aspects on the business functions.
(b) The Bank is in the process of
comprehensively measuring and reviewing material risks to which Bank is exposed to under IGAAP. The Bank also complies with Basel II requirements.
(D) Description of the ways in which the bank seeks to link performance during a performance measurement period with levels of remuneration.
(a) The compensation policy is designed to promote meritocracy in the organisation i.e. other things being equal, performers in a given role are expected to earn more than his/her peer group.
(b) The Bank shall, from time to time, benchmark its compensation against identified market participants to define its pay structure and pay levels.
(c) The merit increments will be finalised and approved by the NHRC year on year, basis organisation's budgets and accomplishments as well as market reality.
(d) The Bank believes in paying its employees
in an equitable and fair manner basis the incumbent's Role, Personal Profile (Education/Experience etc.) as well as Performance on the Job.
(e) Employees rated "Below Expectations" shall not be provided any increments, unless statutorily required.
(E) A discussion of the bank's policy on deferral and vesting of variable remuneration and a discussion of the bank's policy and criteria for adjusting deferred remuneration before vesting and after vesting.
The performance bonus pay-out shall be Annual. Discretion is typically applied related
to staggered pay-out in case large pay-outs, particularly for functions like Credit and Risk. Bonus is to be prorated for employees who have worked for part of the year at the Bank.
The Bank believes in the philosophy of collective ownership by its employees. Thus, Employee Stock Options of the eUFSL are distributed amongst employees basis their criticality and performance.
Typically, all Stock option schemes at the Bank vest in a staggered manner. Besides the statutory requirement of grant and 1 year vesting, the total set of options vest in various tranches for up to a period of 3 years.
Malus/ Clawback: In the event of negative contributions of the individual towards the achievements of the Banks objectives in any year, the deferred compensation should be subjected to Malus/Clawback arrangements. Similar provisions shall apply in case the individual is found guilty of any major non-compliance or misconduct issues.
(F) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other forms) that the Bank utilises and the rationale for using these different forms.
Variable Compensation at the Bank has the following distinct forms:
1. Statutory Bonus
2. Performance Pay:
a. Performance Bonus
b. Monthly Variable Pay
3. Rewards & Recognition
The policy has been laid out keeping the following perspectives into considerations:
The Variable pay structure and amounts shall always conform to applicable Income Tax statutes, Labour Laws, Regulatory Requirements, any other applicable statutes and prevalent market practice.
It is designed to promote meritocracy in the organisation i.e. other things being equal, performers in a given role are expected to earn more than his/her peer group.
Statutory Bonus: Statutory Bonus in India is paid as per Payment of Bonus Act, 1965. Performance Bonus: All employees who are not a part of any Monthly Variable Pay but part of the year end performance review will be covered under the Performance Bonus Plan of the Bank. However, the actual pay-out of performance bonus shall be paid only to employees who have met our performance criteria.
Sales Awards: Employees in the Sales function, directly responsible for revenue generation shall be covered under the Sales Award Scheme if meeting the criteria of the respective scheme. Typically some of the entry level roles and up to two levels of supervision thereof shall be covered by sales awards.
Rewards & Recognition: The Bank shall design schemes and practices from time to time to celebrate employees / departmental / organisational success. These celebrations may include offering tokens of appreciation to employees as defined in specific schemes. Fairness of application and transparency of communication shall be the hallmark of all such schemes. These will be subject to income tax laws, as applicable. Examples of such schemes may include: Long Service Awards (currently at one, three, five, ten and Fifteen yrs. of completion of service with the Bank), Portfolio Improvement Reward Scheme; Functional R&R Schemes; Organisational Rewards Schemes such as: Service Champion; Process Excellence; Customer Connect Awards; Above and Beyond; Recognition program for Liabilities Branches for Retail Deposits; Recognition program for Asset growth in Branches. The EDGE (Executive Development for Growth and Excellence) programme is aimed at identifying high performers and assessing their potential for future leadership roles at the Bank. A mix of behavioural assessments, blended training & development journey and IDPs are deployed to make the identified individuals (EDGE selects) ready for future leadership roles.
30 The Micro, Small and Medium Enterprises Development Act, 2006 that came into Force From October 02, 2006, provides for certain disclosures in respect of Micro, Small and Medium enterprises.
The Bank does not have pending dues to MSME suppliers as on March 31, 2024.
31 CORPORATE SOCIAL RESPONSIBILITY
As per Sec 135 (1) of the Companies Act "Every company having net worth of rupees five hundred Crores or more, or turnover of rupees one thousand Crores or more or a net profit of rupees five Crores or more during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director". Pursuant to this, Bank has duly constituted a Corporate Social Responsibility Committee.
Further, the section stipulates that the Company should spend, in every financial year, at least two per cent of the average net profits made during the three immediately preceding financial years and in pursuance of its Corporate Social Responsibility Policy.
of financial year in case of ongoing project and in other cases, transfer such unspent amount to a fund specified in Schedule VII within a period of 6 months from the end of financial year. Pursuant to this, for the financial year 2023-24, the Bank had transferred unspent CSR amount to a separate Bank Account. The Bank had unspent amount of ' 9,854 in Unspent CSR Account, for the financial year 2023-24. The aforementioned amount will be utilised/spent during the financial year 2024-25 towards the ongoing projects as approved by the CSR Committee. The amount of ' 53,379 includes ' 850 spent by the erstwhile Ujjivan Financial Services Private Limited merged with the Bank pursuant to the scheme of Amalgamation as detailed in Note 18(41).
33 SHARE-BASED PAYMENTS33 (A) Employee Share Option Plan(ESOP)33(A)(1) Details of the employee share option plan of the Bank
The Bank has share option scheme for employees (which includes the employees of the Holding Company) , being ESOP 2019.
Employee Stock Options (ESOPs): The ESOP 2019 is the scheme under which the Bank has issued options to the employees (which includes the employees of the Holding Company). The Bank has approved its ESOP Plan, 2019 in the Shareholders meeting held on March 29, 2019. During the yearended March 31, 2024, the Bank has granted 29,037,915 options under the ESOP 2019 to eligible employees . Also, during the year ended March 31, 2024, 4,423,928 options has been exercised and 10,658,473 options has been lapsed/cancelled. As on March 31, 2024 there are exercisable options of 25,297,478 which are vested and 77,350,994 options are yet to be vested.The lapsed / cancelled options are added back to the ESOP pool 2019 for future grants.
33(A)(2) Fair value of share options granted in the year
The weighted average Fair value of the share options granted during the FY 2022-23 is ' 18.56 ( PY-' 7.80 ). Options were calculated using Black and Scholes Model. Vested ESOPs can be exercised within five years from their corresponding dates of vesting. ESOPs vested can be exercised between date of vesting and on or before option expiry date. The term of the option is assumed to be the sum of a) duration till vesting; and b) the midpoint of the remaining exercise period from date of vesting, in absence of historical exercise pattern. Volatility of comparable Banks have been considered for the purposes of valuation.
33 (A) (7) Pursuant to the Scheme of Amalgamation (refer note 18(41) for further details), with respect to the stock options granted to eligible employees by the Transferor Company under its ESOP scheme which remains unexercised for 247,118 ESOPs as at March 31, 2024, upon coming into effect of this Scheme, the Bank shall issue stock options to such eligible employees taking into account the share exchange ratio and on the same terms and conditions. Accordingly, the relevant Committee of the Bank on May 13, 2024, has granted 2,866,569 options to such eligible employees under its Bank ESOP Scheme 2019.
The grant price and exercise price of the aforesaid options will be ' 33.20 and last date of exercise is June 27, 2024 in accordance to the Scheme of Amalgamation. These options have been appropriately considered for the purpose of calculating diluted earnings per share of the Bank.
35 The Bank received a notice on March 16, 2021, regarding non-remittance of statutory Provident Fund (PF) dues on the applicable wage components from February 2017 until March 2019 amounting to ' 227,040 . Bank has filed the initial responses to the PF Commissioner and contented that said notice does not have a stand based on definition of basic wages under EPF Act, 1952 and various case laws. However, due to COVID 19 pandemic, the hearing has been adjourned until further notice.
The bank has made a provision during the FY 2021-22 for an amount of ' 227,040 as a matter of prudence, which was treated as contingent liability for the FY 2020-21.
The Regional Provident Fund Commissioner (RPFC)-II, Bengaluru, in an inquiry held against the Bank under Section 7A of the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, passed an Order dated 09-08-2021 against the Bank, directing the Bank to remit provident fund contribution of INR 227,040,185/- on various allowances paid by the Bank to its employees during the period between February 2017 and March 2019. Against the said Order of the RPFC-II, the Bank preferred an appeal before the Central Government Industrial Tribunal (CGIT). However, since the position of the Presiding Officer in the CGIT is vacant, the Bank filed a writ petition before the Hon'ble High Court of Karnataka. The Hon'ble High Court has disposed of the matter quoting that the Appeal was initially preferred before the CGIT and also said that there will be an order of stay on RPFC-II Order to remit the provident fund amount (i.e., ' 227,040,185) till the appeal pending before CGIT is disposed.
39 MARKETING AND DISTRIBUTION
There are no fees/remuneration received in respect of the marketing and distribution function( excluding bancassurance business) undertaken by the bank for current year and previous year.
40 In the normal course of business of banking, the Bank has borrowed funds from certain institutions in refinance of certain advances granted by it or for utilisation for granting advances by it. In like manner, the Bank has advanced monies to certain NBFCs for granting loans by them to their customers. Read with this, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Bank to or in any other person(s) or entity(ies), including foreign entities ("Intermediaries") with the understanding, whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Bank (Ultimate Beneficiaries). The Bank has not received any fund from any party(s) (Funding Party) with the understanding that the Bank shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Bank ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
41 The Board of Directors of the Bank and erstwhile Ujjivan Financial Services Limited (UFSL) in their respective meetings held on October 14, 2022, have approved a scheme of amalgamation of UFSL with the Bank in terms of Sections 230 to 232 of the Companies Act, 2013 and other applicable laws including rules and regulations (Scheme). The Scheme was approved by the shareholders at the National Company Law Tribunal("NCLT") convened meeting of the equity shareholders of the Bank held on November 03, 2023. The NCLT, in accordance with Section 230 to 232 of the Companies Act, 2013 and rules thereunder, vide its order dated April 19, 2024, sanctioned the Scheme. Upon receipt of all approvals, the Bank filed form INC 28 (Intimation to ROC) with ROC on April 30, 2024 and accordingly, in terms of provisions of the Scheme, the 'Effective Date' of the Scheme is April 30, 2024. The Appointed Date under the said Scheme as approved by the NCLT is April 01, 2023. The amalgamation has been accounted under the "pooling of interest" method as prescribed in AS-14 "Accounting for Amalgamation". The outstanding balance between the UFSL and the Bank were eliminated as on April 01, 2023. All assets and liabilities of UFSL have been recognised by the Bank at the carrying amounts as on that date except for the
adjustments to bring about the uniformity in accounting policies as required under AS-14. The relevant Committee of the Board of the Bank vide its resolution dated May 06, 2024, has approved the allotment of 1,412,702,033 fully paid equity shares of ' 10/- each of Bank to the eligible shareholders of the erstwhile UFSL, who were holding equity shares of UFSL as on the Record date i.e., May 03, 2024, as per the share exchange ratio determined in the aforesaid Scheme i.e. 116 equity shares of the face value of ' 10/- each of Bank for every 10 equity shares of UFSL. The difference between fresh equity shares to be allotted as aforementioned and share capital of UFSL has been adjusted in the Share Premium Account, as per the terms of the Scheme.
Pursuant to the effect of the Scheme, the Committee has also taken on record the extinguishment of 1,440,036,800 equity shares and 200,000,000 preference shares of the Bank held by eUFSL.
Consequent to the aforesaid extinguishment of UFSL shares in the Bank and issue of equity shares to the shareholders of UFSL, the paid-up equity capital of the Bank is revised from ' 195,913 Lakhs to ' 193,180 Lakhs as on the record date. Further, since the preference capital of ' 20,000 Lakhs stands extinguished, the issued capital of the Bank is reduced from ' 215,913 Lakhs to ' 193,180 Lakhs. Furthermore, the authorised share capital of the Bank is ' 262,500 Lakhs divided into 2,625,000,000 equity shares of ' 10/- each as per terms of the Scheme. As of March 31, 2024, 1,412,702,033 shares are pending allotment. The allotment of the said shares to the entitled shareholders of eUFSL was approved by the Merger & Placement Committee of the Board of the Bank vide its resolution dated May 06, 2024, and the same was intimated to the Exchange on the same day. The allotment has been intimated to the Registrar of Companies on May 15, 2024, by submission of PAS 3 return. The corporate action regarding crediting shares to Demat account of shareholders of eUFSL is in process.
43 IMPLEMENTATION OF IFRS CONVERGED INDIAN ACCOUNTING STANDARDS (IND AS)
Reserve Bank of India (RBI) through press release RBI/2018-2019/146 DBR.BP.BC.No.29/21.07.001/2018-19, dated March 22, 2019, updated all Scheduled Commercial Banks that legislative amendments recommended by the RBI are under consideration of the Government of India. Accordingly, RBI had decided to defer the implementation of Ind AS till further notice. Bank is gearing itself to bring the necessary systems in place to facilitate the Proforma submission to RBI. With respect to various instructions from Ministry of Corporate Affairs and Reserve Bank of India (RBI), the actions taken by the Bank are as follows:
1. Bank is in the process of Implementing changes required in existing IT architecture and other processes to enable smooth transition to Ind AS.
2. As directed by RBI, the Bank is submitting half yearly Proforma Ind AS financial statements to RBI within the stipulated timelines.
3. Training to the employees is imparted in phased manner
4. The Bank will continue its preparedness towards adoption of Ind AS as per the regulatory requirement, and liaise with RBI and Industry Bodies on various aspects pertaining to Ind AS implementation.
44 COMPARATIVE FIGURES
Figures of the previous year have been regrouped/ reclassified wherever necessary to confirm to the current year's presentation. The financial information for the year ended March 31, 2024, include the operations of eUFSL for the period from April 01, 2023 to March 31, 2024 and hence not comparable with the corresponding periods of the previous year.
|