INDEPENDENT AUDITORS' REPORT

To

The Members of

ESAF SMALL FINANCE BANK LIMITED

Report on the Audit of the Financial Statements
Opinion

We have audited the accompanying financial statements of ESAF SMALL FINANCE BANK LIMITED ("the Bank"), which
comprise the Balance Sheet as at March 31,2023, Profit and Loss Account, the Cash Flow Statement for the year then
ended, and a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial
statements give the information required by the Banking Regulation Act, 1949 and the Companies Act, 2013 ("the
Act") in the manner so required and give a true and fair view in conformity with the Accounting Standards prescribed
under section 133 of the Act ("Accounting Standards") as applicable to banks and other accounting principles generally
accepted in India, of the state of affairs of the Bank as at March 31, 2023, its profit and its cash flows for the year
ended on that date.

Basis for Opinion

We conducted our audit of the financial statements in accordance with the Standards on Auditing (SAs) specified under
section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor's Responsibility
for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with the
Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements
that are relevant to our audit of the financial statements under the provisions of the Act and the Rules made thereunder,
and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of
Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit
opinion on the financial statements.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
financial statements of the current period. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have determined the matters described below to be the key audit matters to be communicated in our report.

Information Other than the Financial Statements and Auditor's Report Thereon

• The Bank's Board of Directors is responsible for the preparation of the other information. The other information
comprises the Chairman's Statement, the Directors Report including annexures to the Directors report included in
the Annual Report but does not include the financial statements and our auditors report thereon and the Basel II
Disclosures under New Capital Adequacy Framework (Basel II Disclosures). The Director's report is expected to be
made available to us after the date of this auditor's report.

• Our opinion on the financial statements does not
cover the other information and Basel II Disclosures
and we do not and will not express any form of
assurance conclusion thereon.

• In connection with our audit of the financial
statements, our responsibility is to read the other
information identified above when it becomes
available and, in doing so, consider whether the
other information is materially inconsistent with the
financial statements, or our knowledge obtained
during the course of our audit or otherwise appears
to be materially misstated.

• When we read the other information identified above,
if we conclude that there is a material misstatement
therein, we are required to communicate the matter
to those charged with governance as required under
SA 720 'The Auditor's responsibilities Relating to
Other Information'

Responsibilities of Management and Those
Charged with Governance for the Financial
Statements

The Bank's Board of Directors is responsible for the
matters stated in section 134(5) of the Act with respect
to the preparation of these financial statements that
gives a true and fair view of the financial position,
financial performance and cash flows of the Bank in
accordance with the provisions of Section 29 of the
Banking Regulation Act, 1949, Accounting Standards
and other accounting principles generally accepted in
India and the circulars, guidelines and the directions
issued by the Reserve Bank of India, from time to time.
This responsibility also includes maintenance of adequate
accounting records in accordance with the provisions of
the Act for safeguarding the assets of the Bank and for
preventing and detecting frauds and other irregularities;
selection and application of appropriate accounting
policies; making judgments and estimates that are
reasonable and prudent; and design, implementation and
maintenance of adequate internal financial controls, that
were operating effectively for ensuring the accuracy and
completeness of the accounting records, relevant to the
preparation and presentation of the financial statement
that give a true and fair view and is free from material
misstatement, whether due to fraud or error.

In preparing the financial statements, management is
responsible for assessing the Bank's ability to continue as
a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of
accounting unless the Board of Directors either intends
to liquidate the Bank or to cease operations, or has no
realistic alternative but to do so.

The Bank's Board of Directors are also responsible for
overseeing the Bank's financial reporting process.

Auditor's Responsibility for the Audit of the
Financial Statements

Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with SAs will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
financial statements.

As part of an audit in accordance with SAs, we exercise
professional judgment and maintain professional
skepticism throughout the audit. We also:

• Identify and assess the risks of material
misstatement of the financial statements, whether
due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from
fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of
internal control.

• Obtain an understanding of internal financial
control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances.
Under section 143(3)(i) of the Act, we are also
responsible for expressing our opinion on whether
the Bank has adequate internal financial controls
with reference to financial statements in place and
the operating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting estimates
and related disclosures made by the management.

• Conclude on the appropriateness of management's
use of the going concern basis of accounting and,
based on the audit evidence obtained, whether
a material uncertainty exists related to events
or conditions that may cast significant doubt on
the Bank's ability to continue as a going concern.
If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor's
report to the related disclosures in the financial
statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of
our auditor's report. However, future events or
conditions may cause the Bank to cease to continue
as a going concern.

• Evaluate the overall presentation, structure and
content of the financial statements, including the
disclosures, and whether the financial statements
represent the underlying transactions and events in
a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the
financial statements that, individually or in aggregate,
makes it probable that the economic decisions of
a reasonably knowledgeable user of the financial
statements may be influenced. We consider quantitative
materiality and qualitative factors in (i) planning the
scope of our audit work and in evaluating the results of
our work; and (ii) evaluating the effect of any identified
misstatements in the financial statements.

We communicate with those charged with governance
regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including
any significant deficiencies in internal control that we
identify during our audit.

We also provide those charged with governance with
a statement that we have complied with relevant
ethical requirements regarding independence, and to
communicate with them all relationships and other
matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.

From the matters communicated with those charged with
governance, we determine those matters that were of
most significance in the audit of the financial statements
of the current period and are therefore the key audit
matters. We describe these matters in our auditor's report
unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in
our report because the adverse consequences of doing
so would reasonably be expected to outweigh the public
interest benefits of such communication.

Other Matter

The comparative financial information of the Bank for
the previous reporting periods included in the Financial
Statements have been audited by Deloitte Haskins & Sells,
Chartered Accountants, one of the joint statutory auditors
of the Bank, who have expressed an unmodified opinion.
Accordingly, Abarna & Ananthan, Chartered Accountants,
do not express any opinion on the comparative figures.

Our Opinion on the Financial Statements is not modified
in respect of this matter.

Report on Other Legal and Regulatory
Requirements

1. As required by Section 143(3) of the Act and Section
30(3) of the Banking Regulation Act, 1949, based on
our Audit, we report that:

a) We have sought and obtained all the
information and explanations which to the best
of our knowledge and belief were necessary for
the purposes of our audit and found them to
be satisfactory.

b) In our opinion, the transactions of the Bank
which have come to our notice have been within
the powers of the bank.

c) As explained in the paragraph 2 below, the
financial accounting system of the Bank is
centralised and, therefore, accounting returns
are not required to be submitted by branches.

d) In our opinion, proper books of account as
required by law have been kept by the Bank
so far as it appears from our examination
of those books.

e) The Balance Sheet, Profit and Loss Account and
the Cash Flow Statement dealt with by this Report
are in agreement with the books of account.

f) In our opinion, the aforesaid financial
statements comply with the Accounting
Standards specified under Section 133 of the Act
as applicable to the Banks.

g) On the basis of the written representations
received from the directors and taken on record
by the Board of Directors, none of the directors
is disqualified as on March 31, 2023 from being
appointed as a director in terms of Section
164(2) of the Act.

h) With respect to the adequacy of the internal
financial controls with reference to financial
statements of the Bank and the operating
effectiveness of such controls, refer to our
separate Report in "Annexure A". Our report
expresses an unmodified opinion on the
adequacy and operating effectiveness of the
Bank's internal financial controls with reference
to financial statements.

i) With respect to the other matters to be included
in the Auditor's Report in accordance with the
requirements of section 197(16) of the Act, as
amended, in our opinion and to the best of our
information and according to the explanations
given to us, the entity being a banking
company, section 197 of the Act related to the
managerial remuneration is not applicable
by virtue of Section 35B(2A) of the Banking
Regulation Act, 1949.

j) With respect to the other matters to be included
in the Auditor's Report in accordance with Rule
11 of the Companies (Audit and Auditors) Rules,

2014, as amended in our opinion and to the
best of our information and according to the
explanations given to us:

i. The Bank has disclosed the impact
of pending litigations on its financial
position as at the yearend in its financial
statements - Refer Schedule 12 to the
financial statements;

ii. The Bank did not have any long-term
contracts including derivative contracts as
at the yearend for which there were any
material foreseeable losses.

iii. There were no amounts which were
required to be transferred to the Investor
Education and Protection Fund by the Bank.

iv. (a) The Management has represented

that, to the best of it's knowledge
and belief, as disclosed in Note
B.16 of Schedule 18 to the financial
statements no funds have been
advanced or loaned or invested
(either from borrowed funds or share
premium or any other sources or kind
of funds) by the Bank to or in any
other person(s) or entity(ies), including
foreign entities ("Intermediaries"),
with the understanding, whether
recorded in writing or otherwise,
that the Intermediary shall, directly
or indirectly lend or invest in other
persons or entities identified in any
manner whatsoever by or on behalf
of the Bank ("Ultimate Beneficiaries")
or provide any guarantee, security
or the like on behalf of the
Ultimate Beneficiaries.

(b) The Management has represented,
that, to the best of it's knowledge
and belief, as disclosed in Note
B.16 of Schedule 18 to the financial
statements, no funds have been
received by the Bank from any person(s)

or entity(ies), including foreign
entities ("Funding Parties"), with the
understanding, whether recorded in
writing or otherwise, that the Bank
shall, directly or indirectly, lend or
invest in other persons or entities
identified in any manner whatsoever
by or on behalf of the Funding Party
("Ultimate Beneficiaries") or provide
any guarantee, security or the like on
behalf of the Ultimate Beneficiaries.

(c) Based on the audit procedures
performed that have been considered
reasonable and appropriate in the
circumstances, nothing has come
to our notice that has caused us to
believe that the representations under
sub-clause (i) and (ii) of Rule 11(e),
as provided under (a) and (b) above,
contain any material misstatement.

v. The Bank has not declared or paid any
dividend during the year and has not
proposed final dividend for the year.

vi. Proviso to Rule 3(1) of the Companies
(Accounts) Rules, 2014 for maintaining
books of account using accounting software
which has a feature of recording audit
trail (edit log) facility is applicable to the
Bank w.e.f. April 1, 2023, and accordingly,
reporting under Rule 11(g) of Companies
(Audit and Auditors) Rules, 2014 is not
applicable for the financial year ended
March 31, 2023.

2. We report that during the course of our audit
we have visited and performed select relevant
procedures at 24 branches. Since the Bank considers
its key operations to be automated, with the key
applications largely integrated to the Core Banking
System, it does not require its branches to submit
any financial returns. Accordingly, our audit is carried
out centrally at Head Office based on the records and
data required for the purpose of Audit being made
available to us.

For Deloitte Haskins & Sells For Abarna & Ananthan

Chartered Accountants Chartered Accountants

(Firm Registration No. 117365W) (Firm Registration No. 000003S)

G. K. Subramaniam Mohan Rao G.

Partner Partner

Membership No. 109839 Membership No. 203737

UDIN: 23109839BGXPXR8925 UDIN: 23203737BGZDDX2771

Place: Mannuthy Place: Bengaluru

Date: May 10, 2023 Date: May 10, 2023