1 GENERAL INFORMATION

Aye Finance Limited (“AFL” or "the Company”) was incorporated to carry on the business of a finance company focused on providing loans to micro scale micro, small and medium enterprises (“MSMEs”) across India. We offer a range of business loans for working capital and business expansion needs, against hypothecation of working assets or against security of property to customers across manufacturing, trading, service and allied agriculture sectors. On November 27, 2015, the Company received a certificate of registration from the Reserve Bank of India vide registration no. B-14.03323 under Section 45-IA of the Reserve Bank of India Act, 1934 to carry on the business of a Non-Banking Financial Company (NBFC) without acceptance of public deposits. The Company is a Middle Layer Non-Banking Financlal Company (NBFC-ML), registered with the Reserve bank of lndia {""the RBI""). Accordingly, all provisions of the Reserve Bank of India Act, 1934 and all directions, guidelines or instructions of the Reserve Bank of India that have been issued from time to time and are in force and as applicable to a Non deposit taking Non-Banking Financial Company are applicable to the Company. The registered office of the Company is situated at Delhi.

The Company has issued debentures on a private placement basis and the said securities are listed with BSE Limited on Debt market segment. Pursuant to resolutions dated October 16,2024 and October 17,2024 passed by our Board and our Shareholders respectively, the name of our Company was changed to ''Aye Finance Limited''. A fresh certificate of incorporation dated December 10,2024 was issued by the ROC consequent to our Company''s conversion into a public limited company. Further the Company’s equity shares were listed on the National Stock Exchange of India Limited (NSE) and BSE Limited on February 16,2026.

2 MATERIAL ACCOUNTING POLICIES:

2.1 Statement of compliance:

The financial statements have been prepared in accordance with the provisions of the Companies Act, 2013 and the Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 (as amended from time to time) issued by Ministry of Corporate

2 MATERIAL ACCOUNTING POLICIES:

2.4 Revenue recognition:

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured and there exists reasonable certainty of its recovery. Revenue is measured at the fair value of the consideration received or receivable as reduced for estimated customer credits and other similar allowances.

(a) Interest income EIR method

Under Ind AS 109, interest income is recorded using the effective interest rate method for all financial instruments measured at amortised cost and financial instrument measured at fair value through other comprehensive income (''FVOCI'') and fair value through profit and loss (FVTPL). The EIR is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset. For financial assets at FVTPL transaction costs are recognised in profit or loss at initial recognition.

The EIR (and therefore, the amortised cost of the asset) is calculated by taking into account any discount or premium on acquisition, fees and costs that are an integral part of the EIR. The Company recognises interest income using a rate of return that represents the best estimate of a constant rate of return over the expected life of the financial instrument.

The interest income is calculated by applying the EIR to the gross carrying amount of non-credit impaired financial assets (i.e. at the amortised cost of the financial asset before adjusting for any expected credit loss allowance). For credit-impaired financial assets the interest income is recorded as and when realised.

If expectations regarding the cash flows on the financial asset are revised for reasons other than credit risk, the adjustment is booked as a positive or negative adjustment to the carrying amount of the asset in the

balance sheet with an increase or reduction in interest income. The adjustment is subsequently amortised through Interest income in the statement of profit and loss.

(b) Net gain on fair value changes

Any differences between the fair values of the financial assets classified as fair value through the profit or loss, held by the Company on the balance sheet date is recognised as an unrealised gain/loss in the statement of profit and loss.

(c) Net gain / (loss) on de recognition of financial instruments under amortised cost category

Gains arising out of direct assignment transactions comprise the difference between the interest on the loan portfolio and the applicable rate at which the direct assignment is entered into with the assignee, also known as the right of Excess Interest Spread (EIS). The future EIS basis the scheduled cash flows, on execution of the transaction, discounted at the applicable rate entered into with the assignee is recorded upfront in statement of profit and loss.

Income from direct assignment transaction represents the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset de-recognised) and consideration received (including any new asset obtained less any new liability).

(d) Other operational revenue:

Other operational revenue represents income earned from the activities incidental to the business and is recognised when the right to receive the income is established as per the terms of the contract. This includes cheque bouncing charges, late payment charges and prepayment charges etc. which are recorded as and when realised.

The Company recognises revenue from contracts with customers based on a five-step model as set out in IndAS 115:

Step 1: Identify contract(s) with a customer: A contract is defined as an agreement between two or more parties that creates

enforceable rights and obligations and sets out the criteria for every contract that must be met.

Step 2: Identify performance obligations in the contract: A performance obligation is a promise in a contract with a customer to transfer a good or service to the customer.

Step 3: Determine the transaction price: The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

Step 4: Allocate the transaction price to the performance obligations in the contract: For a contract that has more than one performance obligation, the Company allocates the transaction price to each performance obligation in an amount that depicts the amount of consideration to which the Company expects to be entitled in exchange for satisfying each performance obligation.

Step 5: Recognise revenue when (or as) the Company satisfies a performance obligation. Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services.

Income from other financial charges including cheque bouncing charges, foreclosure charges are collected from loan customers for early payment/closure of loan and are recognised on realisation.

(e) Insurance claims:

I nsurance claims are accounted for on the basis of claims admitted/expected to be admitted and to the extent that the amount recoverable can be measured reliably and it is reasonable to expect ultimate collection.

2.5 Leases:

The Company evaluates each contract or

arrangement, whether it qualifies as lease as

defined under Ind AS 116

The Company as a lessee

The Company’s lease asset classes primarily consist of leases for its various office spaces. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.

At the date of commencement of the lease, the Company recognizes a right-of-use asset (“ROU”) and a corresponding lease liability for all lease arrangements in which it is a lessee. The company has not exercised the exemption to exclude short term leases or low value leases.

Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.

The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.

Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.

The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates pertaining to the company. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option.

Lease liability and ROU asset have been separately presented in the balance sheet and lease payments have been classified as financing cash flows.

2.6 Employee benefits:

Employee benefits include provident fund, employee state insurance scheme, gratuity fund and compensated absences.

(a) Short 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 shortterm employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

(b) Post employment benefits:

(i) Defined contribution plan

The Company''s contribution to Employee Provident Fund, Employee State Insurance Scheme and Labour Welfare Fund under the relevant Acts are considered as defined contribution plans and are charged as an expense based on the amount of contribution required to be made and when services are rendered by the employees.

(ii) Defined benefit plan

Benefits payable to eligible employees of the Company with respect to gratuity, a defined benefit plan is accounted for on the basis of an actuarial valuation as at the balance sheet date. In accordance with the Payment of Gratuity Act,

1972, the plan provides for lump sum payments to vested employees on retirement, death while in service or on termination of employment in an amount equivalent to 15 days basic salary for each completed year of service. Vesting occurs upon completion of five years of service. The present value of such obligation is determined by the projected unit credit method and adjusted for past service cost and fair value of plan assets as at the balance sheet date through which the obligations are to be settled. The resultant actuarial gain or loss on change in present value of the defined benefit obligation is reflected immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur.

(c) Long-term employee benefits

Compensated absences with respect to leave encashment benefits payable to employees of the Company while in service, on retirement, death while in service or on termination of employment with respect to accumulated leaves outstanding at the year end are accounted for on the basis of an actuarial valuation as at the balance sheet date. The defined benefit obligation is calculated annually by an actuary using the projected unit credit method.

(d) Termination benefits

Termination benefits such as compensation under employee separation schemes are recognised as expense when the Company’s offer of the termination benefit is accepted or when the Company recognises the related restructuring costs whichever is earlier.

2.7 Taxation:

I ncome tax expense represents the sum of the

tax currently payable and deferred tax.

(a) Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profit before tax’ as reported in the statement of profit and loss because of items of income or expense that are taxable or

the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

(c) Current tax and deferred tax for the year

Current tax and deferred tax are recognised in statement of profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively.

2.8 Property, plant and equipment:

(a) Property, plant and equipment

Property, plant and equipment is stated at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into the location and condition necessary for it to be capable of operating in the manner intended by management, the initial estimate of any decommissioning obligation, if any, and, for assets that necessarily take a substantial period of time to get ready for their intended use, finance costs. Cost includes import duties and any non-refundable taxes on such purchase, after deducting rebates and trade discounts and is inclusive of freight, duties, taxes and other incidental expenses. All cost are capitalized which are directly attributable to bringing assets to the condition and location essential for it to operate in a manner as intended by the management. In respect of assets due for capitalization, where final bills/claims are to be received/passed, the capitalisation is based on the engineering estimates. Final adjustments, for costs and depreciation are made retrospectively in the year of ascertainment of actual cost and finalisation of claim.

Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future economic benefits / functioning capability from / of such assets.

Capital work in progress includes the cost of property plant and equipment that are not yet ready for their intended use and the cost of assets not put to use before the Balance Sheet date.

(b) Depreciation and amortisation

Depreciation is calculated on cost of items of property, plant and equipment less their estimated residual values over their estimated useful lives using the written down value method, and is generally recognised in the statement of profit and loss. The Company follows estimated useful lives which are given under Part C of the Schedule II of the Companies Act, 2013. Leasehold improvements are amortised over the period of lease.

Depreciation on addition to property, plant and equipment is provided on pro-rata basis from the date the assets is acquired/ installed. Depreciation on sale/deduction from property, plant and equipment is provided for up to the date of sale deduction and discernment as the case may be.

The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. In respect of assets whose useful lives has been revised, the unamortized depreciable amount is charged over the revised remaining useful lives of the assets.

(c) Derecognition of property, plant and equipment

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 recognised in profit or loss.

2.9 Intangible assets:

(a) Recognition and measurement

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortization and accumulated impairment losses. Amortization is recognized on a written down basis over their estimated useful lives. The estimated useful life and amortization method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses. Subsequent expenditure incurred on assets put to use is capitalised only when it increases the future economic benefits / functioning capability from / of such assets.

(b) Derecognition of Intangible assets

An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.

(c) Useful lives of intangible assets

Estimated useful lives of the intangible asset for the current and comparative periods are as follows:

Computer software: 3 years

Intangible Assets which are under development as at the balance sheet date.

2.10 Impairment of non financial assets:

At the end of each reporting period, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-

generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less costs of disposal and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If recoverable amount of an asset (or cash generating unit) 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 (or cash generating unit) is reduced to its recoverable amount.

An assessment is made annually as to see if there are any indications that impairment losses recognized earlier may no longer exist or may have come down. The impairment loss is reversed, if there has been a change in the estimates used to determine the asset’s recoverable amount since the previous impairment loss was recognized. If it is so, the carrying amount of the asset is increased to the lower of its recoverable amount and the carrying amount that have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. After a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life. Reversals of Impairment loss are recognized in the Statement of Profit and Loss.

2.11 Provisions, contingent liabilities and contingent assets:

(a) Provisions

Provisions are recognized when the company has a present obligation (legal or constructive) as a result of a past event, it is

probable that the company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

Provision is measured using the cash flows estimated to settle the present obligation and when the effect of time value of money is material, the carrying amount of the provision is the present value of those cash flows. Reimbursement expected in respect of expenditure required to settle a provision is recognised only when it is virtually certain that the reimbursement will be received.

(b) Contingent liabilities

Contingent liabilities are disclosed when there is a possible obligation arising from past events, the existence of which will be confirmed only by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that arises from past events where it is either not probable that an outflow of resources will be required to settle or a reliable estimate of the amount cannot be made.

(c) Contingent assets

Contingent assets are not recognized in the financial statements, however they are disclosed when an inflow of economic benefits is probable.

2.12 Share-based payment arrangements:

The stock options granted to employees pursuant to the Company’s Stock Options Plan, are measured at the fair value of the options at the grant date in accordance with IND AS 102, Share-based payments. The fair value of the options is treated as discount and accounted as employee compensation cost over the vesting period on a straight-line basis. The amount recognised as expense in each year is arrived at based on the number of grants expected to vest. If a grant lapses after the vesting period, the cumulative discount recognised as expense in respect of such grant is transferred to the general reserve within equity.

The company has constituted an Employee Stock Option Plan 2016. The Plan provides for grant of options to employees of the Company

to acquire equity shares of the Company that vest in a graded manner and that are to be exercised within a specified period.

The company has constituted an Employee Stock Option Plan 2020. The company has transferred all the ungranted options under Employee Stock Option Plan 2016 to Employee Stock Option Plan 2020 while options granted under the Employee Stock Option Plan 2016 continue to be governed by the conditions of Employee Stock Option Plan 2016.

The company has constituted an Employee Stock Option Plan 2024. The Plan provides for grant of options to employees of the Company to acquire equity shares of the Company that vest in a graded manner and that are to be exercised within a specified period.

All plans provide for grant of options to employees of the Company to acquire equity shares of the Company that vest in a graded manner and that are to be exercised within a specified period.

2.13 Financial instruments:

Financial assets and financial liabilities are recognised when the company becomes a party to the contractual provisions of the instrument.

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) 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 recognized immediately in profit or loss.

(a) Financial assets

Initial recognition and measurement

All financial assets are recognized initially at fair value and transaction costs that are attributable to the acquisition of the financial asset are adjusted to the fair value on initial recognition.

Subsequent measurement

For the purpose of Subsequent measurement, the Company classifies financial assets in following categories:

(i) Financial assets at amortized cost

(ii) Financial assets at fair value through other comprehensive income (FVTOCI)

(iii) Financial assets at fair value through profit or loss (FVTPL)

Financial assets shall be measured at amortized cost if both of the following conditions are met:

(i) The asset is held within a business model whose objective is to hold assets for collecting contractual cash flows, and

(ii) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.

A financial asset shall be measured at fair value through other comprehensive income if both of the following conditions are met:

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

(ii) Contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest (SPPI) on the principal amount outstanding.

All financial assets not classified as measured at amortized cost or FVTOCI as described above are measured at FVTPL

Subsequent measurement of financial assets

Financial assets at amortised cost are subsequently measured at amortised cost using effective interest method. The amortised cost is reduced by impairment

losses. Interest income, foreign exchange gains and losses and impairment are recognised in Statement of profit and loss. Any gain and loss on derecognition is recognised in statement of profit and loss.

Financial investment at FVOCI are subsequently measured at fair value. Interest income under effective interest method, foreign exchange gains and losses and impairment are recognised in Statement of profit and loss. Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to statement of profit and loss.

Financial assets at FVTPL are subsequently measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in statement of profit and loss.

All other equity investments are measured at fair value, with value changes recognised in Profit and loss, except for those equity investments for which the company has elected to present the changes in fair value through OCI.

De-recognition of financial assets

The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the financial asset. The Company considers control to be transferred if and only if, the transferee has the practical ability to sell the asset in its entirety to an unrelated third party and is able to exercise that ability unilaterally and without imposing additional restrictions on the transfer. When the Company has neither transferred nor retained substantially all the risks and rewards and has retained control of the asset, the asset continues to be recognised only to the extent of the Company''s continuing involvement, in which case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.

(b) Financial liabilities

Initial recognition and measurement

All financial liabilities are recognized initially at fair value and transaction costs that are attributable to the acquisition of the financial liabilities are adjusted to the fair value on initial recognition.

Subsequent measurement

Subsequent to initial recognition, all liabilities are measured at amortized cost using the effective interest method except for derivatives, financial liabilities designated for measurement at FVTPL which are measured at fair value.

De-recognition of financial liabilities

A financial liabilities is de-recognized when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the statement of profit and loss.

Offsetting of financial instruments

A financial asset and a financial liability is offset and presented on net basis in the balance sheet when there is a current legally enforceable right to set-off the recognised amounts and it is intended to either settle on net basis or to realise the asset and settle the liability simultaneously.

Reclassification of financial assets and liabilities

The Company doesn’t reclassify its financial assets and liabilities subsequent to their initial recognition.

Modification of financial assets and financial liabilities Financial assets

The Company evaluates whether the cash flows from a financial asset are modified and the modified asset is substantially different. If the cash flows are substantially different,

then the contractual rights to cash flows from the original financial asset are deemed to have expired. In this case, the original financial asset is derecognised and a new financial asset is recognised at fair value.

In case the cash flows of the modified asset carried at amortised cost are not substantially different, then the modification does not result in derecognition of the financial asset. In this case, the Company recalculates the gross carrying amount of the financial asset as the present value of the renegotiated or modified contractual cash flows that are discounted at the financial asset''s original effective interest rate and recognises the amount arising from adjusting the gross carrying amount as modification gain or loss in statement of profit and loss. Any costs or fees incurred adjust the carrying amount of the modified financial asset and are amortised over the remaining term of the modified financial asset. If such a modification is carried out because of financial difficulties of the borrower, then the gain or loss is presented together with impairment losses. In other cases, it is presented as interest income.

Financial liabilities

The Company derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The difference between the carrying amount of the financial liability extinguished and the new financial liability with modified terms is recognised in statement of profit and loss.

2.14 Impairment of financial instruments:

In accordance with Ind-AS 109, the Company applies Expected Credit Loss (ECL) model for measurement and recognition of impairment loss for financial assets other than those measured through profit and loss (FVTPL).

(a) Expected credit losses are measured through a loss allowance at an amount equal to:

The 12-months expected credit losses (expected credit losses that result from those

default events on the financial instrument that are possible within 12 months after the reporting date); or

Full lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument)

Both LTECLs (Lifetime expected Credit losses) and 12 months ECLs are calculated on collective basis.

(b) Based on the above, 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 months ECL. Stage 1 loans includes those loans where there is no significant increase in credit risk observed and also includes facilities where the credit risk has been improved and the loan has been reclassified from stage 2 or stage 3.

Stage 2

When a loan has shown a significant increase in credit risk since origination, the Company records an allowance for the life time ECL. Stage 2 loans also includes facilities where the credit risk has improved and the loan has been reclassified from stage 3 and facilities where the credit risk has been increased due to restructuring and loan has been reclassified from stage 1.

Stage 3

Loans considered credit impaired are the loans which are past due for more than 90 days. The Company records an allowance for life time ECL.

Definition of Default

The Company considers a financial instrument as defaulted and considered it as Stage 3 (credit-impaired) for ECL calculations in all cases, when the borrower becomes more than 90 days past due on its contractual payments.

Significant increase in credit risk

The Company continuously monitors all assets subject to ECLs. In order to determine whether an instrument or a portfolio of instruments is subject to 12mECL or LTECL, the Company assesses whether there has been a significant increase in credit risk since initial recognition. The Company considers an exposure to have significantly increased in credit risk when contractual payments are more than 30 days past due.

(c) Calculation of ECLs

The mechanics of ECL calculations are outlined below and the key elements are, as follows:

Probability of Default (PD)

Probability of Default (PD) is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio.

Exposure at Default (EAD)

Exposure at Default (EAD) is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date.

Loss Given Default (LGD)

Loss Given Default (LGD) is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realisation of any collateral. It is usually expressed as a percentage of the EAD.

The Company has calculated PD, EAD and LGD to determine impairment loss on the portfolio of loans. At every reporting date, the above calculated PDs, EAD and LGDs are reviewed and changes in the forward looking estimates are analysed.

Forward looking information

While estimating the expected credit losses, the Company reviews macro-economic developments occurring in the economy and market it operates in. On a periodic basis, the

company analyses if there is any relationship between key economic trends like GDP, Unemployment rates, Benchmark rates set by the Reserve Bank of India, inflation etc. with the estimate of PD, LGD determined by the Company based on its internal data. While the internal estimates of PD, LGD rates by the Company may not be always reflective of such relationships, temporary overlays are embedded in the methodology to reflect such macro-economic trends reasonably.

The mechanics of the ECL method are summarised below:

Stage 1

The 12 months ECL is calculated as the portion of LTECLs that represent the ECLs that result from default events on a financial instrument that are possible within the 12 months after the reporting date. The Company calculates the 12 months ECL allowance based on the expectation of a default occurring in the 12 months following the reporting date. These expected 12-months default probabilities are applied to the EAD and multiplied by the expected LGD.

Stage 2

When a loan has shown a significant increase in credit risk since origination, the Company records an allowance for the LTECLs. The mechanics are similar to those explained above, but PDs and LGDs are estimated over the lifetime of the instrument.

Stage 3 / Regulatory Stage 3

For loans considered credit-impaired, the Company recognises the lifetime expected credit losses for these loans. The method is similar to that for Stage 2 assets, with the PD set at 100%.

(d) Loss allowances for ECL are presented in the statement of financial position as follows:

(i) for financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets;

(ii) for debt instruments measured at FVTOCI: no loss allowance is recognised in Balance Sheet as the carrying amount is at fair value.

(e) Write offs

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 writeoff 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.

2.15 Derivative financial instruments

The Company enters into derivative financial instruments, primarily foreign exchange forward contracts, currency swaps and interest rate swaps, to manage its borrowing exposure to foreign exchange and interest rate risks. Derivatives embedded in non-derivative host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts and the host contracts are not measured at FVTPL. Derivatives are initially recognised at fair value at the date the contracts are entered into and are subsequently remeasured to their fair value at the end of each reporting period. The resulting gain/loss is recognised in statement of profit and loss.

Hedge accounting

The Company makes use of derivative instruments to manage exposures to interest rate and foreign currency. In order to manage particular risks, the Company applies hedge accounting for transactions that meet specified criteria.

Hedges that meet the criteria for hedge accounting are accounted for, as described below:

Fair value hedges the exposure to changes in the fair value of a recognised asset or liability, or an identified portion of such an asset, liability,

that is attributable to a particular risk and could affect profit or loss.

For designated and qualifying fair value hedges, the cumulative change in the fair value of a hedging derivative is recognised in the statement of profit and loss in net gain/(loss) on fair value changes. Meanwhile, the cumulative change in the fair value of the hedged item attributable to the risk hedged is recorded as part of the carrying value of the hedged item in the balance sheet and is also recognised in the statement of profit and loss in net gain/(loss) on fair value changes.

2.16 Fair value measurement

Fair value is the price at the measurement date, at which an asset can be sold or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. The Company’s accounting policies require, measurement of certain financial / non-financial assets and liabilities at fair values (either on a recurring or non-recurring basis). Also, the fair values of financial instruments measured at amortized cost are required to be disclosed in the said financial statements. The Company is required to classify the fair valuation method of the financial / non-financial assets and liabilities, either measured or disclosed at fair value in the financial statements, using a three level fair-value-hierarchy which reflects the significance of inputs used in the measurement). Accordingly, the Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy described as follows:

(a) Level 1 financial instruments

Those where the inputs used in the valuation are unadjusted quoted prices from active markets for identical assets or liabilities that the Company has access to at the measurement date. The Company considers markets as active only if there are sufficient trading activities with regards to the volume

and liquidity of the identical assets or liabilities and when there are binding and exercisable price quotes available on the balance sheet date.

(b) Level 2 financial instruments

Those where the inputs that are used for valuation and are significant, are derived from directly or indirectly observable market data available over the entire period of the instrument’s life.

(c) Level 3 financial instruments

Include one or more unobservable input where there is little market activity for the asset/liability at the measurement date that is significant to the measurement as a whole.

2.17 Significant management judgements in applying accounting policies and estimation uncertainty

The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Company’s accounting policy. This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally assessed. Detailed information about each of these estimates and judgements is included in relevant notes together with information about the basis of calculation for each affected line item in the financial statements.

The following are significant management estimation/uncertainty and judgement in applying the accounting policies of the Company that have the most significant effect on the financial statements:

Defined benefit obligation

Management estimates of these obligation is based on a number of critical underlying assumptions such as standard rates of inflation, mortality, discount rate and anticipation of future salary increases. Variation in these assumptions may significantly impact the defined benefit obligation amount and the annual defined benefit expenses.

Business model assessment

Classification and measurement of financial assets depends on the results of business model and the solely payments of principal and interest ("SPPI") test. The Company determines the business model at a level that reflects how groups of financial assets are managed together to achieve a particular business objective. This assessment includes judgement reflecting all relevant evidence including how the performance of the assets is evaluated and their performance measured, the risks that affect the performance of the assets and how these are managed and how the managers of the assets are compensated. The Company monitors financial assets measured at amortised cost that are derecognised prior to their maturity to understand the reason for their disposal and whether the reasons are consistent with the objective of the business for which the asset was held. Monitoring is part of the Company’s continuous assessment of whether the business model for which the remaining financial assets are held continues to be appropriate and if it is not appropriate whether there has been a change in business model and so a prospective change to the classification of those assets.

Fair value of financial instruments :

The fair value of financial instruments is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions (i.e. an exit price) regardless of whether that price is directly observable or estimated using another valuation technique. When the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of valuation models. The inputs to these models are taken from observable markets where possible, but where this is not feasible, estimation is required in establishing fair values.

Effective Interest Rate (EIR) method :

The Company recognizes interest income / expense using a rate of return that represents the best estimate of a constant rate of return over the expected life of the loans given /

taken. This estimation, by nature, requires an element of judgement regarding the expected behaviour and life-cycle of the instruments, as well as expected changes to other fee income/expense that are integral parts of the instrument.

Recognition of deferred tax assets

The extent to which deferred tax assets can be recognized is based on an assessment of the probability of the Company’s future taxable income against which the deferred tax assets can be utilized.

Property, plant and equipment

Measurement of useful life and residual values of property, plant and equipment and useful life of intangible assets.

Evaluation of indicators for impairment of assets

The evaluation of applicability of indicators of impairment of assets requires assessment of several external and internal factors which could result in deterioration of recoverable amount of the assets.

Contingent liabilities

At each balance sheet date basis the management judgment, changes in facts and legal aspects, the Company assesses the requirement of provisions against the outstanding contingent liabilities. However the actual future outcome may be different from this judgement.

2.17 Significant management judgements in applying accounting policies and estimation uncertainty Impairment of financial assets

At each balance sheet date, based on historical default rates observed over expected life, the management assesses the expected credit losses on outstanding receivables and advances. The Company’s expected credit loss ("ECL") calculations are outputs of complex models with a number of underlying assumptions regarding the choice of variable inputs and their interdependencies.

These estimates and judgements are based on historical experience and other factors, including expectations of future events that

may have a financial impact on the Company and that are believed to be reasonable under the circumstances. Management believes that the estimates used in preparation of the standalone financial statements are prudent and reasonable.

Determination of lease term

Ind AS 116 Leases requires lessee to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Company makes assessment on the expected lease term on lease by lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of lease and the importance of the underlying to the Company’s operations taking into account the location of the underlying asset and the availability of the suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances.

Discount rate for lease liability

The discount rate is generally based on the incremental borrowing rate specific to the lease being evaluated or for a portfolio of leases with similar characteristics. And discount rate of security deposits is generally based on the SBI deposit rate at the time of deposit.

Fair value of share-based payments

Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which depends on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model including the expected life of the share option or appreciation right, volatility and dividend yield and making assumptions about them. For the measurement of the fair value of equity-settled transactions with employees at the grant date, the Company uses a Black-Scholes model.

| 2 | MATERIAL ACCOUNTING POLICIES:

2.1 Statement of compliance:

The financial statements have been prepared in
accordance with the provisions of the Companies
Act, 2013 and the Indian Accounting Standards (Ind
AS) notified under the Companies (Indian Accounting
Standards) Rules, 2015 (as amended from time to time)
issued by Ministry of Corporate Affairs in exercise of
the powers conferred by section 133 of Companies
Act, 2013, (the ''Act''), other relevant provisions of the

Act. In addition, the guidance notes/announcements
issued by the Institute of Chartered Accountants of
India (ICAI) are also applied except where compliance
with other statutory promulgations require a different
treatment. Any directions issued by the RBI or other
regulators are implemented as and when they become
applicable.

2.2 Basis of preparation:

The financial statements have been prepared on a
going concern basis the historical cost basis except
for certain financial instruments that are measured at
fair values at the end of each reporting period.

2.3 Presentation of financial statements:

The financial statements have been prepared in
accordance with Indian Accounting Standards
(Ind AS) as per the Companies (Indian Accounting
Standards) Rules, 2015 as amended from time to
time and notified under section 133 of the Companies
Act, 2013 (the Act) along with other relevant
provisions of the Act and the Master Direction -
Non-Banking Financial Company - Systemically
Important Non-Deposit taking Company and Deposit
taking Company (Reserve Bank) Directions, 2020 , as
amended (''the NBFC Master Directions'') issued by
RBI. The financial statements have been prepared on
a going concern basis.

The Company uses accrual basis of accounting except
in case of significant uncertainties. The financial
statements are presented in Indian Rupees (?) and all
values are rounded to the Crores up to two decimals,
except when otherwise indicated. The regulatory
disclosures as required by RBI Master Directions to be
included as a part of the Notes to Accounts are also
prepared as per the Ind AS financial statements.

The Company presents its balance sheet in order of
liquidity. Financial assets and financial liabilities are
generally reported gross in the balance sheet. They are
only offset and reported net when, in addition to having
an unconditional legally enforceable right to offset the
recognised amounts without being contingent on a
future event, the parties also intend to settle on a net
basis in all of the following circumstances:

(a) The normal course of business

(b) The event of default

(c) The event of insolvency or bankruptcy of the
Group and / or its counterparties

2.4 Revenue recognition:

Revenue is recognised to the extent that it is probable
that the economic benefits will flow to the Company
and the revenue can be reliably measured and there
exists reasonable certainty of its recovery. Revenue
is measured at the fair value of the consideration
received or receivable as reduced for estimated
customer credits and other similar allowances.

(a) Interest income
EIR method

Under Ind AS 109, interest income is recorded
using the effective interest rate method for all
financial instruments measured at amortised cost
and financial instrument measured at fair value
through other comprehensive income (''FVOCI'')
and fair value through profit and loss (FVTPL). The
EIR is the rate that exactly discounts estimated
future cash receipts through the expected life
of the financial instrument or, when appropriate,
a shorter period, to the net carrying amount of
the financial asset. For financial assets at FVTPL
transaction costs are recognised in profit or loss
at initial recognition.

The EIR (and therefore, the amortised cost of the
asset) is calculated by taking into account any
discount or premium on acquisition, fees and
costs that are an integral part of the EIR. The
Company recognises interest income using a rate
of return that represents the best estimate of a
constant rate of return over the expected life of
the financial instrument.

The interest income is calculated by applying the
EIR to the gross carrying amount of non-credit
impaired financial assets (i.e. at the amortised
cost of the financial asset before adjusting for
any expected credit loss allowance). For credit-
impaired financial assets the interest income is
recorded as and when realised.

If expectations regarding the cash flows on the
financial asset are revised for reasons other than
credit risk, the adjustment is booked as a positive
or negative adjustment to the carrying amount of
the asset in the balance sheet with an increase
or reduction in interest income. The adjustment is
subsequently amortised through Interest income
in the statement of profit and loss.

(b) Net gain on fair value changes

Any differences between the fair values of the
financial assets classified as fair value through
the profit or loss, held by the Company on the
balance sheet date is recognised as an unrealized
gain/loss in the statement of profit and loss and
the realized gain on derecognition of financial
instrument classified at fair value through profit
or loss is recognised as a realized gain/loss in the
statement of profit and loss.

(c) Net gain / (loss) on de recognition of financial
instruments under amortised cost category

Gains arising out of direct assignment
transactions comprise the difference between the
interest on the loan portfolio and the applicable
rate at which the direct assignment is entered
into with the assignee, also known as the right
of Excess Interest Spread (EIS). The future EIS
basis the scheduled cash flows, on execution of
the transaction, discounted at the applicable rate
entered into with the assignee is recorded upfront
in statement of profit and loss.

Income from direct assignment transaction
represents the difference between the
carrying amount of the asset (or the carrying
amount allocated to the portion of the asset
de-recognised) and consideration received
(including any new asset obtained less any
new liability).

(d) Other operational revenue:

Other operational revenue represents income
earned from the activities incidental to the
business and is recognised when the right to
receive the income is established as per the terms
of the contract. This includes cheque bouncing
charges, late payment charges and prepayment
charges etc. which are recorded as and when
realised.

The Company recognises revenue from contracts
with customers based on a five-step model as
set out in IndAS 115:

Step 1: Identify contract(s) with a customer: A
contract is defined as an agreement between two
or more parties that creates enforceable rights
and obligations and sets out the criteria for every
contract that must be met.

Step 2: Identify performance obligations in the
contract: A performance obligation is a promise
in a contract with a customer to transfer a good
or service to the customer.

Step 3: Determine the transaction price: The
transaction price is the amount of consideration
to which the Company expects to be entitled
in exchange for transferring promised goods
or services to a customer, excluding amounts
collected on behalf of third parties.

Step 4: Allocate the transaction price to the
performance obligations in the contract: For a
contract that has more than one performance
obligation, the Company allocates the transaction
price to each performance obligation in an amount
that depicts the amount of consideration to which
the Company expects to be entitled in exchange
for satisfying each performance obligation.

Step 5: Recognise revenue when (or as) the
Company satisfies a performance obligation.

Revenue from contracts with customers is
recognised when control of the goods or services
are transferred to the customer at an amount that
reflects the consideration to which the Company
expects to be entitled in exchange for those
goods or services.

Income from other financial charges including
cheque bouncing charges, foreclosure charges
are collected from loan customers for early
payment/closure of loan and are recognised on
realisation.

(e) Insurance claims:

Insurance claims are accounted for on the basis
of claims admitted/expected to be admitted and
to the extent that the amount recoverable can be
measured reliably and it is reasonable to expect
ultimate collection.

2.5 Leases:

The Company evaluates each contract or arrangement,
whether it qualifies as lease as defined under Ind AS
116

The Company as a lessee

The Company''s lease asset classes primarily consist
of leases for its various office spaces. The Company
assesses whether a contract contains a lease, at
inception of a contract. A contract is, or contains, a
lease if the contract conveys the right to control the use

of an identified asset for a period of time in exchange
for consideration. To assess whether a contract
conveys the right to control the use of an identified
asset, the Company assesses whether: (i) the contract
involves the use of an identified asset (ii) the Company
has substantially all of the economic benefits from use
of the asset through the period of the lease and (iii) the
Company has the right to direct the use of the asset.

At the date of commencement of the lease, the
Company recognises a right-of-use asset ("ROU") and a
corresponding lease liability for all lease arrangements
in which it is a lessee. The Company has not exercised
the exemption to exclude short term leases or low
value leases.

Certain lease arrangements includes the options to
extend or terminate the lease before the end of the
lease term. ROU assets and lease liabilities includes
these options when it is reasonably certain that they
will be exercised.

The right-of-use assets are initially recognised at cost,
which comprises the initial amount of the lease liability
adjusted for any lease payments made at or prior to the
commencement date of the lease plus any initial direct
costs less any lease incentives. They are subsequently
measured at cost less accumulated depreciation and
impairment losses.

Right-of-use assets are depreciated from the
commencement date on a straight-line basis over
the shorter of the lease term and useful life of the
underlying asset. Right of use assets are evaluated
for recoverability whenever events or changes in
circumstances indicate that their carrying amounts
may not be recoverable. For the purpose of impairment
testing, the recoverable amount (i.e. the higher of the
fair value less cost to sell and the value-in-use) is
determined on an individual asset basis unless the
asset does not generate cash flows that are largely
independent of those from other assets. In such cases,
the recoverable amount is determined for the Cash
Generating Unit (CGU) to which the asset belongs.

The lease liability is initially measured at amortised
cost at the present value of the future lease payments.
The lease payments are discounted using the interest
rate implicit in the lease or, if not readily determinable,
using the incremental borrowing rates pertaining to
the Company. Lease liabilities are remeasured with
a corresponding adjustment to the related right of
use asset if the Company changes its assessment if
whether it will exercise an extension or a termination
option.

Lease liability and ROU asset have been separately
presented in the balance sheet and lease payments
have been classified as financing cash flows.

2.6 Employee benefits:

Employee benefits include provident fund, employee
state insurance scheme, gratuity fund and
compensated absences.

(a) Short 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.

(b) Post employment benefits:

(i) Defined contribution plan

The Company''s contribution to Employee
Provident Fund, Employee State Insurance
Scheme and Labour Welfare Fund under
the relevant Acts are considered as defined
contribution plans and are charged as an
expense based on the amount of contribution
required to be made and when services are
rendered by the employees.

(ii) Defined benefit plan

Benefits payable to eligible employees of
the Company with respect to gratuity, a
defined benefit plan is accounted for on
the basis of an actuarial valuation as at
the balance sheet date. In accordance with
the Payment of Gratuity Act, 1972, the plan
provides for lump sum payments to vested
employees on retirement, death while in
service or on termination of employment
in an amount equivalent to 15 days basic
salary for each completed year of service.
Vesting occurs upon completion of five
years of service. The present value of such
obligation is determined by the projected
unit credit method and adjusted for past
service cost and fair value of plan assets as
at the balance sheet date through which the
obligations are to be settled. The resultant
actuarial gain or loss on change in present
value of the defined benefit obligation is

reflected immediately in the balance sheet
with a charge or credit recognised in other
comprehensive income in the period in
which they occur.

(c) Long-term employee benefits

Compensated absences with respect to leave
encashment benefits payable to employees of the
Company while in service, on retirement, death
while in service or on termination of employment
with respect to accumulated leaves outstanding
at the year end are accounted for on the basis
of an actuarial valuation as at the balance sheet
date. The defined benefit obligation is calculated
annually by an actuary using the projected unit
credit method.

(d) Termination benefits

Termination benefits such as compensation
under employee separation schemes are
recognised as expense when the Company''s offer
of the termination benefit is accepted or when the
Company recognises the related restructuring
costs whichever is earlier.

2.7 Taxation:

Income tax expense represents the sum of the tax

currently payable and deferred tax.

(a) Current tax

The tax currently payable is based on taxable
profit for the year. Taxable profit differs from ''profit
before tax'' as reported in the statement of profit
and loss because of items of income or expense
that are taxable or deductible in other years and
items that are never taxable or deductible. The
Company''s current tax is calculated using tax
rates that have been enacted or substantively
enacted by the end of the reporting period and
is measured in accordance with Income tax
Act, 1961, Income Computation and Disclosure
Standards and other applicable tax laws.

Current tax assets and liabilities are offset only if
there is a legally enforceable right to set off the
recognised amounts, and it is intended to realise
the asset and settle the liability on a net basis or
simultaneously.

(b) Deferred tax

Deferred tax is recognised on temporary
differences between the carrying amounts of
assets and liabilities in the financial statements
and the corresponding tax bases used in the

computation of taxable profit. Deferred tax
liabilities are generally recognised for all taxable
temporary differences. Deferred tax assets are
generally recognised for all deductible temporary
differences to the extent that it is probable that
taxable profits will be available against which
those deductible temporary differences can be
utilised. Such deferred tax assets and liabilities
are not recognised if the temporary difference
arises from the initial recognition (other than in
a business combination) of assets and liabilities
in a transaction that affects neither the taxable
profit nor the accounting profit.

The carrying amount of deferred tax assets is
reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to
allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured
at the tax rates that are expected to apply in the
period in which the liability is settled or the asset
realised, based on tax rates (and tax laws) that
have been enacted or substantively enacted by
the end of the reporting period.

The measurement of deferred tax liabilities and
assets reflects the tax consequences that would
follow from the manner in which the Company
expects, at the end of the reporting period, to
recover or settle the carrying amount of its assets
and liabilities.

Deferred tax assets and deferred tax liabilities are
offset if a legally enforceable right exists to set off
current tax assets against current tax liabilities
and the deferred taxes relate to the same taxable
entity and the same taxation authority.

(c) Current tax and deferred tax for the year

Current tax and deferred tax are recognised in
statement of profit or loss, except when they
relate to items that are recognised in other
comprehensive income or directly in equity, in
which case, the current and deferred tax are also
recognised in other comprehensive income or
directly in equity respectively.

2.8 Property, plant and equipment:

(a) Property, plant and equipment

Property, plant and equipment is stated at cost,
less accumulated depreciation and accumulated
impairment losses. The initial cost of an asset

comprises its purchase price or construction
cost, any costs directly attributable to bringing
the asset into the location and condition
necessary for it to be capable of operating in
the manner intended by management, the initial
estimate of any decommissioning obligation,
if any, and, for assets that necessarily take a
substantial period of time to get ready for their
intended use, finance costs. Cost includes import
duties and any non-refundable taxes on such
purchase, after deducting rebates and trade
discounts and is inclusive of freight, duties,
taxes and other incidental expenses. All cost
are capitalized which are directly attributable
to bringing assets to the condition and location
essential for it to operate in a manner as intended
by the management. In respect of assets due for
capitalization, where final bills/claims are to be
received/passed, the capitalisation is based on
the engineering estimates. Final adjustments, for
costs and depreciation are made retrospectively
in the year of ascertainment of actual cost and
finalisation of claim.

Subsequent expenditure incurred on assets put
to use is capitalised only when it increases the
future economic benefits / functioning capability
from / of such assets.

Capital work in progress includes the cost of
property plant and equipment that are not yet
ready for their intended use and the cost of assets
not put to use before the Balance Sheet date.

(b) Depreciation and amortisation

Depreciation is calculated on cost of items
of property, plant and equipment less their
estimated residual values over their estimated
useful lives using the written down value method,
and is generally recognised in the statement of
profit and loss. The Company follows estimated
useful lives which are given under Part C of
the Schedule II of the Companies Act, 2013.
Leasehold improvements are amortised over the
period of lease.

Depreciation on addition to property, plant
and equipment is provided on pro-rata basis
from the date the assets is acquired/installed.
Depreciation on sale/deduction from property,
plant and equipment is provided for up to the date
of sale deduction and discernment as the case
may be.

The estimated useful life and amortization
method are reviewed at the end of each reporting
period, with the effect of any changes in estimate
being accounted for on a prospective basis. In
respect of assets whose useful lives has been
revised, the unamortised depreciable amount is
charged over the revised remaining useful lives of
the assets.

(c) Derecognition of property, plant and equipment

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 recognised in
profit or loss.

2.9 Intangible assets:

(a) Recognition and measurement

Intangible assets with finite useful lives that
are acquired separately are carried at cost less
accumulated amortization and accumulated
impairment losses. Amortization is recognised on
a written down basis over their estimated useful
lives. The estimated useful life and amortization
method are reviewed at the end of each reporting
period, with the effect of any changes in estimate
being accounted for on a prospective basis.
Intangible assets with indefinite useful lives that
are acquired separately are carried at cost less
accumulated impairment losses. Subsequent
expenditure incurred on assets put to use is
capitalised only when it increases the future
economic benefits / functioning capability from /
of such assets.

(b) Derecognition of Intangible assets

An intangible asset is derecognised on disposal,
or when no future economic benefits are expected
from use or disposal. Gains or losses arising from
derecognition of an intangible asset, measured
as the difference between the net disposal
proceeds and the carrying amount of the asset,
are recognised in profit or loss when the asset is
derecognised.

(c) Useful lives of intangible assets

Estimated useful lives of the intangible asset
for the current and comparative periods are as
follows:

Computer software: 3 years

(d) Intangible Assets under development which are
under development as at the balance sheet date.

2.10 Impairment of non financial assets

At the end of each reporting period, the Company reviews
the carrying amounts of its tangible and intangible
assets to determine whether there is any indication
that those assets have suffered an impairment loss. If
any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent
of the impairment loss (if any). When it is not possible
to estimate the recoverable amount of an individual
asset, the Company estimates the recoverable amount
of the cash-generating unit to which the asset belongs.
When a reasonable and consistent basis of allocation
can be identified, corporate assets are also allocated
to individual cash-generating units, or otherwise they
are allocated to the smallest group of cash-generating
units for which a reasonable and consistent allocation
basis can be identified.

Recoverable amount is the higher of fair value less
costs of disposal and value in use. In assessing value
in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that
reflects current market assessments of the time value
of money and the risks specific to the asset for which
the estimates of future cash flows have not been
adjusted.

If recoverable amount of an asset (or cash generating
unit) 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 (or cash generating unit) is
reduced to its recoverable amount.

An assessment is made annually as to see if there are
any indications that impairment losses recognised
earlier may no longer exist or may have come down.
The impairment loss is reversed, if there has been a
change in the estimates used to determine the asset''s
recoverable amount since the previous impairment
loss was recognised. If it is so, the carrying amount of
the asset is increased to the lower of its recoverable
amount and the carrying amount that have been
determined, net of depreciation, had no impairment
loss been recognised for the asset in prior years. After
a reversal, the depreciation charge is adjusted in future
periods to allocate the asset''s revised carrying amount,
less any residual value, on a systematic basis over its
remaining useful life. Reversals of Impairment loss are
recognised in the Statement of Profit and Loss.

2 MATERIAL ACCOUNTING POLICIES:

2.1 Statement of compliance:

The financial statements have been prepared in
accordance with the provisions of the Companies
Act, 2013 and the Indian Accounting Standards (Ind
AS) notified under the Companies (Indian Accounting
Standards) Rules, 2015 (as amended from time to time)
issued by Ministry of Corporate Affairs in exercise of
the powers conferred by section 133 of Companies
Act, 2013, (the ''Act''), other relevant provisions of the
Act. In addition, the guidance notes/announcements
issued by the Institute of Chartered Accountants of
India (ICAI) are also applied except where compliance
with other statutory promulgations require a different
treatment. Any directions issued by the RBI or other
regulators are implemented as and when they become
applicable.

2.2 Basis of preparation:

The financial statements have been prepared on a
going concern basis the historical cost basis except
for certain financial instruments that are measured at
fair values at the end of each reporting period.

2.3 Presentation of financial statements:

The financial statements have been prepared in
accordance with Indian Accounting Standards
(Ind AS) as per the Companies (Indian Accounting
Standards) Rules, 2015 as amended from time to time
and notified under section 133 of the Companies Act,
2013 (the Act) along with other relevant provisions
of the Act and the Master Direction - Non-Banking
Financial Company - Systemically Important Non¬
Deposit taking Company and Deposit taking Company
(Reserve Bank) Directions, 2020 , as amended (''the
NBFC Master Directions'') issued by RBI. The financial
statements have been prepared on a going concern
basis.

The Company uses accrual basis of accounting
except in case of significant uncertainties. The
financial statements are presented in Indian Rupees
(INR) and all values are rounded to the crore, except
when otherwise indicated. The regulatory disclosures
as required by RBI Master Directions to be included as
a part of the Notes to Accounts are also prepared as
per the Ind AS financial statements.

The Company presents its balance sheet in order of
liquidity. Financial assets and financial liabilities are
generally reported gross in the balance sheet. They are
only offset and reported net when, in addition to having
an unconditional legally enforceable right to offset the
recognised amounts without being contingent on a
future event, the parties also intend to settle on a net
basis in all of the following circumstances:

(a) The normal course of business

(b) The event of default

(c) The event of insolvency or bankruptcy of the
Group and / or its counterparties

2.4 Revenue recognition:

Revenue is recognised to the extent that it is probable
that the economic benefits will flow to the Company
and the revenue can be reliably measured and there
exists reasonable certainty of its recovery. Revenue
is measured at the fair value of the consideration

received or receivable as reduced for estimated

customer credits and other similar allowances.

(a) Interest income
EIR method

Under Ind AS 109, interest income is recorded
using the effective interest rate method for all
financial instruments measured at amortised
cost and financial instrument measured at fair
value through other comprehensive income
(''FVOCI'') and fair value through profit and loss
(FVTPL). The EIR is the rate that exactly discounts
estimated future cash receipts through the
expected life of the financial instrument or,
when appropriate, a shorter period, to the net
carrying amount of the financial asset. For
financial assets at FVTPL transaction costs are
recognised in profit or loss at initial recognition.

The EIR (and therefore, the amortised cost of the
asset) is calculated by taking into account any
discount or premium on acquisition, fees and
costs that are an integral part of the EIR. The
Company recognises interest income using a
rate of return that represents the best estimate
of a constant rate of return over the expected life
of the financial instrument.

The interest income is calculated by applying the
EIR to the gross carrying amount of non-credit
impaired financial assets (i.e. at the amortised
cost of the financial asset before adjusting for
any expected credit loss allowance). For credit-
impaired financial assets the interest income is
recorded as and when realised.

If expectations regarding the cash flows on the
financial asset are revised for reasons other than
credit risk, the adjustment is booked as a positive
or negative adjustment to the carrying amount of
the asset in the balance sheet with an increase or
reduction in interest income. The adjustment is
subsequently amortised through Interest income
in the statement of profit and loss.

(b) Net gain or fair value changes

Any differences between the fair values of
the financial assets classified as fair value
through the profit or loss, held by the Company
on the balance sheet date is recognised as an
unrealised gain/loss in the statement of profit
and loss.

(c) Net gain / (loss) on de recognition of financial
instruments under amortised cost category

Gains arising out of direct assignment
transactions comprise the difference between
the interest on the loan portfolio and the
applicable rate at which the direct assignment
is entered into with the assignee, also known
as the right of Excess Interest Spread (EIS). The
future EIS basis the scheduled cash flows, on
execution of the transaction, discounted at the
applicable rate entered into with the assignee is
recorded upfront in statement of profit and loss.

Income from direct assignment transaction
represents the difference between the carrying
amount of the asset (or the carrying amount
allocated to the portion of the asset de¬
recognised) and consideration received (including
any new asset obtained less any new liability).

(d) Other operational revenue:

Other operational revenue represents income
earned from the activities incidental to the
business and is recognised when the right to
receive the income is established as per the
terms of the contract. This includes cheque
bouncing charges, late payment charges and
prepayment charges etc. which are recorded as
and when realised.

The Company recognises revenue from
contracts with customers based on a five-step
model as set out in IndAS 115:

Step 1: Identify contract(s) with a customer: A
contract is defined as an agreement between
two or more parties that creates enforceable
rights and obligations and sets out the criteria
for every contract that must be met.

Step 2: Identify performance obligations in the
contract: A performance obligation is a promise
in a contract with a customer to transfer a good
or service to the customer.

Step 3: Determine the transaction price: The
transaction price is the amount of consideration
to which the Company expects to be entitled
in exchange for transferring promised goods
or services to a customer, excluding amounts
collected on behalf of third parties.

Step 4: Allocate the transaction price to the
performance obligations in the contract: For a

contract that has more than one performance
obligation, the Company allocates the transaction
price to each performance obligation in an
amount that depicts the amount of consideration
to which the Company expects to be entitled
in exchange for satisfying each performance
obligation.

Step 5: Recognise revenue when (or as) the
Company satisfies a performance obligation.

Revenue from contracts with customers is
recognised when control of the goods or services
are transferred to the customer at an amount
that reflects the consideration to which the
Company expects to be entitled in exchange for
those goods or services.

Income from other financial charges including
cheque bouncing charges, foreclosure charges
are collected from loan customers for early
payment/closure of loan and are recognised on
realisation.

(e) Insurance claims:

Insurance claims are accounted for on the basis
of claims admitted/expected to be admitted and
to the extent that the amount recoverable can be
measured reliably and it is reasonable to expect
ultimate collection.

2.5 Leases:

The Company evaluates each contract or arrangement,
whether it qualifies as lease as defined under Ind AS
116

The Company as a lessee

The Company''s lease asset classes primarily consist
of leases for its various office spaces. The Company
assesses whether a contract contains a lease, at
inception of a contract. A contract is, or contains,
a lease if the contract conveys the right to control
the use of an identified asset for a period of time in
exchange for consideration. To assess whether a
contract conveys the right to control the use of an
identified asset, the Company assesses whether: (i)
the contract involves the use of an identified asset (ii)
the Company has substantially all of the economic
benefits from use of the asset through the period of
the lease and (iii) the Company has the right to direct
the use of the asset.

At the date of commencement of the lease, the
Company recognises a right-of-use asset ("ROU")

and a corresponding lease liability for all lease
arrangements in which it is a lessee. The Company
has not exercised the exemption to exclude short term
leases or low value leases.

Certain lease arrangements includes the options to
extend or terminate the lease before the end of the
lease term. ROU assets and lease liabilities includes
these options when it is reasonably certain that they
will be exercised.

The right-of-use assets are initially recognised at
cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or
prior to the commencement date of the lease plus
any initial direct costs less any lease incentives. They
are subsequently measured at cost less accumulated
depreciation and impairment losses.

Right-of-use assets are depreciated from the
commencement date on a straight-line basis over
the shorter of the lease term and useful life of the
underlying asset. Right of use assets are evaluated
for recoverability whenever events or changes in
circumstances indicate that their carrying amounts
may not be recoverable. For the purpose of
impairment testing, the recoverable amount (i.e. the
higher of the fair value less cost to sell and the value-
in-use) is determined on an individual asset basis
unless the asset does not generate cash flows that
are largely independent of those from other assets.
In such cases, the recoverable amount is determined
for the Cash Generating Unit (CGU) to which the asset
belongs.

The lease liability is initially measured at amortised
cost at the present value of the future lease payments.
The lease payments are discounted using the interest
rate implicit in the lease or, if not readily determinable,
using the incremental borrowing rates pertaining to
the Company. Lease liabilities are remeasured with
a corresponding adjustment to the related right of
use asset if the Company changes its assessment if
whether it will exercise an extension or a termination
option.

Lease liability and ROU asset have been separately
presented in the balance sheet and lease payments
have been classified as financing cash flows.

2.6 Employee benefits:

Employee benefits include provident fund, employee
state insurance scheme, gratuity fund and
compensated absences.

(a Short 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.

(b) Post employment benefits:

(i) Defined contribution plan

The Company''s contribution to
Employee Provident Fund, Employee
State Insurance Scheme and Labour
Welfare Fund under the relevant Acts
are considered as defined contribution
plans and are charged as an expense
based on the amount of contribution
required to be made and when services
are rendered by the employees.

(ii) Defined benefit plan

Benefits payable to eligible employees
of the Company with respect to
gratuity, a defined benefit plan is
accounted for on the basis of an
actuarial valuation as at the balance
sheet date. In accordance with
the Payment of Gratuity Act, 1972,
the plan provides for lump sum
payments to vested employees on
retirement, death while in service
or on termination of employment
in an amount equivalent to 15 days
basic salary for each completed
year of service. Vesting occurs upon
completion of five years of service.
The present value of such obligation is
determined by the projected unit credit
method and adjusted for past service
cost and fair value of plan assets as at
the balance sheet date through which
the obligations are to be settled.
The resultant actuarial gain or loss
on change in present value of the
defined benefit obligation is reflected
immediately in the balance sheet with
a charge or credit recognised in other
comprehensive income in the period
in which they occur.

(c) Long-term employee benefits

Compensated absences with respect to
leave encashment benefits payable to
employees of the Company while in service,
on retirement, death while in service or on
termination of employment with respect
to accumulated leaves outstanding at the
year end are accounted for on the basis
of an actuarial valuation as at the balance
sheet date. The defined benefit obligation
is calculated annually by an actuary using
the projected unit credit method.

(d) Termination benefits

Termination benefits such as
compensation under employee separation
schemes are recognised as expense when
the Company''s offer of the termination
benefit is accepted or when the Company
recognises the related restructuring costs
whichever is earlier.

2.7 Taxation:

Income tax expense represents the sum of the tax

currently payable and deferred tax.

(a) Current tax

The tax currently payable is based on taxable
profit for the year. Taxable profit differs from
''profit before tax'' as reported in the statement
of profit and loss because of items of income
or expense that are taxable or deductible in
other years and items that are never taxable
or deductible. The Company''s current tax
is calculated using tax rates that have been
enacted or substantively enacted by the end
of the reporting period and is measured in
accordance with Income tax Act, 1961, Income
Computation and Disclosure Standards and
other applicable tax laws.

Current tax assets and liabilities are offset only
if there is a legally enforceable right to set off the
recognised amounts, and it is intended to realise
the asset and settle the liability on a net basis or
simultaneously.

(b) Deferred tax

Deferred tax is recognised on temporary
differences between the carrying amounts of
assets and liabilities in the financial statements
and the corresponding tax bases used in the
computation of taxable profit. Deferred tax

liabilities are generally recognised for all taxable
temporary differences. Deferred tax assets are
generally recognised for all deductible temporary
differences to the extent that it is probable that
taxable profits will be available against which
those deductible temporary differences can be
utilised. Such deferred tax assets and liabilities
are not recognised if the temporary difference
arises from the initial recognition (other than in
a business combination) of assets and liabilities
in a transaction that affects neither the taxable
profit nor the accounting profit.

The carrying amount of deferred tax assets is
reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to
allow all or part of the asset to be recovered.

Deferred tax liabilities and assets are measured
at the tax rates that are expected to apply in the
period in which the liability is settled or the asset
realised, based on tax rates (and tax laws) that
have been enacted or substantively enacted by
the end of the reporting period.

The measurement of deferred tax liabilities and
assets reflects the tax consequences that would
follow from the manner in which the Company
expects, at the end of the reporting period, to
recover or settle the carrying amount of its
assets and liabilities.

Deferred tax assets and deferred tax liabilities
are offset if a legally enforceable right exists
to set off current tax assets against current
tax liabilities and the deferred taxes relate to
the same taxable entity and the same taxation
authority.

(c) Current tax and deferred tax for the year

Current tax and deferred tax are recognised in
statement of profit or loss, except when they
relate to items that are recognised in other
comprehensive income or directly in equity, in
which case, the current and deferred tax are also
recognised in other comprehensive income or
directly in equity respectively.

2.8 Property, plant and equipment:

(a) Property, plant and equipment

Property, plant and equipment is stated at cost,
less accumulated depreciation and accumulated
impairment losses. The initial cost of an asset

comprises its purchase price or construction
cost, any costs directly attributable to bringing
the asset into the location and condition
necessary for it to be capable of operating in
the manner intended by management, the initial
estimate of any decommissioning obligation,
if any, and, for assets that necessarily take a
substantial period of time to get ready for their
intended use, finance costs. Cost includes
import duties and any non-refundable taxes
on such purchase, after deducting rebates and
trade discounts and is inclusive of freight, duties,
taxes and other incidental expenses. All cost
are capitalised which are directly attributable
to bringing assets to the condition and location
essential for it to operate in a manner as intended
by the management. In respect of assets due for
capitalisation, where final bills/claims are to be
received/passed, the capitalisation is based on
the engineering estimates. Final adjustments, for
costs and depreciation are made retrospectively
in the year of ascertainment of actual cost and
finalisation of claim.

Subsequent expenditure incurred on assets put
to use is capitalised only when it increases the
future economic benefits / functioning capability
from / of such assets.

Capital work in progress includes the cost of
property plant and equipment that are not yet
ready for their intended use and the cost of assets
not put to use before the Balance Sheet date.

(b) Depreciation and amortisation

Depreciation is calculated on cost of items
of property, plant and equipment less their
estimated residual values over their estimated
useful lives using the written down value method,
and is generally recognised in the statement of
profit and loss. The Company follows estimated
useful lives which are given under Part C of
the Schedule II of the Companies Act, 2013.
Leasehold improvements are amortised over the
period of lease.

Depreciation on addition to property, plant
and equipment is provided on pro-rata basis
from the date the assets is acquired/installed.
Depreciation on sale/deduction from property,
plant and equipment is provided for up to the
date of sale deduction and discernment as the
case may be.

The estimated useful life and amortisation
method are reviewed at the end of each reporting
period, with the effect of any changes in estimate
being accounted for on a prospective basis. In
respect of assets whose useful lives has been
revised, the unamortised depreciable amount is
charged over the revised remaining useful lives
of the assets.

(c) Derecognition of property, plant and equipment

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 recognised
in profit or loss.

2.9 Intangible assets:

(a) Recognition and measurement

Intangible assets with finite useful lives that
are acquired separately are carried at cost less
accumulated amortisation and accumulated
impairment losses. Amortisation is recognised
on a written down basis over their estimated
useful lives. The estimated useful life and
amortisation method are reviewed at the end
of each reporting period, with the effect of
any changes in estimate being accounted
for on a prospective basis. Intangible assets
with indefinite useful lives that are acquired
separately are carried at cost less accumulated
impairment losses. Subsequent expenditure
incurred on assets put to use is capitalised only
when it increases the future economic benefits /
functioning capability from / of such assets.

(b) Derecognition of Intangible assets

An intangible asset is derecognised on disposal,
or when no future economic benefits are
expected from use or disposal. Gains or losses
arising from derecognition of an intangible
asset, measured as the difference between the
net disposal proceeds and the carrying amount
of the asset, are recognised in profit or loss
when the asset is derecognised.

(c) Useful lives of intangible assets

Estimated useful lives of the intangible asset
for the current and comparative periods are as
follows:

Computer software: 3 years

(d) Intangible Assets under development which are
under development as at the balance sheet date.

2.10 Impairment of non financial assets

At the end of each reporting period, the Company
reviews the carrying amounts of its tangible and
intangible assets to determine whether there is
any indication that those assets have suffered an
impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated in
order to determine the extent of the impairment
loss (if any). When it is not possible to estimate
the recoverable amount of an individual asset,
the Company estimates the recoverable amount
of the cash-generating unit to which the asset
belongs. When a reasonable and consistent basis
of allocation can be identified, corporate assets are
also allocated to individual cash-generating units, or
otherwise they are allocated to the smallest group of
cash-generating units for which a reasonable and
consistent allocation basis can be identified.

Recoverable amount is the higher of fair value less
costs of disposal and value in use. In assessing value
in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate
that reflects current market assessments of the time
value of money and the risks specific to the asset for
which the estimates of future cash flows have not
been adjusted.

If recoverable amount of an asset (or cash generating
unit) 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 (or cash generating
unit) is reduced to its recoverable amount.

An assessment is made annually as to see if there are
any indications that impairment losses recognised
earlier may no longer exist or may have come
down. The impairment loss is reversed, if there has
been a change in the estimates used to determine
the asset''s recoverable amount since the previous
impairment loss was recognised. If it is so, the
carrying amount of the asset is increased to the lower
of its recoverable amount and the carrying amount
that have been determined, net of depreciation, had
no impairment loss been recognised for the asset in
prior years. After a reversal, the depreciation charge
is adjusted in future periods to allocate the asset''s
revised carrying amount, less any residual value,
on a systematic basis over its remaining useful life.

Reversals of Impairment loss are recognised in the
Statement of Profit and Loss.