The Company’s accounting policies for its revenue streams are disclosed in detail under Note 4 above and is generated in India. For Critical accounting estimates, refer note 4.16 to the financial statements.

Disaggregation of Revenue

Disaggregation of revenue is not required as the Company’s primary business is to provide credit card facility and interest on loans which is governed by Ind AS 109.

Transaction price allocated to the remaining performance obligations

The Company applies practical expedient in Ind AS 115 and does not disclose information about remaining performance obligations wherein the Company has a right to consideration from customer in an amount that directly corresponds with the value to the customer of entity’s performance till date.

The Company’s remaining performance periods for its incentive arrangements with network partners contracts with customers for its payment network services are typically long-term in nature (typically ranging from 3-5 years). Consideration is variable based upon the number of transactions processed and volume activity on the cards. At March 31, 2023, the estimated aggregate consideration allocated to unsatisfied performance obligations for these other value-added services is ' 334.44 Crores which is expected to be recognised through financial year 2023 and later, (previous period was ' 118.26 Crores.)

Receivables from contracts with customers and contract balances

The following table provides information about receivables, contract assets, contract cost and contract liabilities from contract with customers

37 CAPITAL MANAGEMENT

Capital risk is the risk that the Company has insufficient capital resources to meet the minimum regulatory requirements to support its credit rating and to support its growth and strategic options. The Company’s capital plans are deployed with the objective of maintaining capital that is adequate in quantity and quality to support the Company’s risk profile, regulatory and business needs. Management/Asset Liability Management Committee [ALCO] is responsible for ensuring the effective management of capital risk. Capital risk is measured and monitored using limits set out in in relation to the capital and leverage, all of which are calculated in accordance with relevant regulatory requirements.

As contained in RBI Master Directions - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 (hereinafter referred to as “RBI Master Directions"), the Company is required to maintain a capital ratio consisting of Tier I and Tier II capital not less than 15 % of its aggregate risk weighted assets on-balance sheet and of risk adjusted value of off- balance sheet items. Out of this, Tier I capital shall not be less than 10%. The Board of Director's regularly monitors the maintenance of prescribed levels of Capital Risk Adjusted Ratio (CRAR).

The Company makes all efforts to comply with the above requirements. Further, the Company has complied with all externally imposed capital requirements and internal and external stress testing requirements.

The Board of Directors approved the Dividend distribution policy which is in line with the regulatory requirement and guidelines as prescribed by RBI from time to time. The policy focuses on the internal and external factors (which includes long term growth plan, cash flow position, auditors’ qualification, supervisory findings of RBI on divergence in classification and provisioning in Stage 3 assets, prevalent economic conditions and market practices etc) which the Board shall consider before declaring the dividend.

(C) Interim dividend on equity shares declared: During the year ended March 31, 2023, the Board of Directors have declared interim dividend of 25% (' 2.50 per equity share of the face value of ' 10.00) for the financial year 2022-23 in accordance with Section 123(3) of the Companies Act, 2013, as amended. (March 31,2022 - ' 2.50 per equity share of the face value of ' 10.00).

38.1 Financial risk management

Financial risk factors

The Company has exposure to the following types of risks from financial instruments:

• Market risk;

• Credit risk; and

• Liquidity risk;

The Company’s Board of Directors have overall responsibility for the establishment and oversight of the Company’s risk management framework. The Risk Management Committee manages the risk management framework and appetite. The Board of Directors has established the Enterprise Risk Management Committee (ERMC) which is responsible for approving and monitoring Company’s risk management framework. The risk management policies, processes and tools are reviewed regularly to reflect changes in market conditions and the Company’s activities.

38.1.1 Market risk

Market risk is the risk of loss of future earnings, to fair values or to future cash flows that may result from a change in variables such as changes in the interest rates, foreign currency exchange rates and other market changes that affect market risk sensitive instruments.

The Company uses a wide range of qualitative and quantitative tools to manage and monitor various types of market risks it is exposed to. Quantitative analysis such as net income sensitivities, stress tests etc. are used to monitor and manage company’s market risk appetite.

A. Interest risk

Interest rate risk is the risk of loss from fluctuations in the future cash flows or fair value of financial instruments because of changes in market interest rates.

Company's investments are categorized under HTM (Held to Maturity) category. Investments are done in Government securities (T-Bill/ G Sec) only, hence there is no credit risk involved. To monitor the interest rate risk, Treasury function monitors the modified duration of these investments on monthly basis and report the same to Enterprise Risk Management Committee through KRI reporting. Further, Company has fixed as well as floating rate borrowings to which it is exposed to interest rate risk as well as repricing risk at the time of re-borrowing.

Foreign Currency risk is the risk that the fair value or future cash flows of a financial instrument, denominated in currency other than functional currency, will fluctuate because of changes in foreign exchange rates. The Company is exposed to foreign currency risk on its borrowings, business development income and vendor payments denominated in foreign currency. Company has Board approved Foreign Exchange Risk Management Policy in place for monitoring the currency exchange risk.

The Company’s currency risk management policy lays down the appropriate systems and controls to identify, measure and monitors, the currency risk for reporting to the management. Parameters like hedging ratio, un- hedged exposure, exposure limit with banks etc. are continuously monitored as a part of currency risk management. Exchange rate exposures are managed within approved parameters using forward foreign exchange contracts. Foreign currency exposure under borrowings is fully hedged at the time of taking the loan itself.

Derivative financial instruments

The Company enters into derivative financial instruments such as foreign currency forward contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is a bank.

During the year, Company has designated certain foreign exchange forward contracts as cash flow hedges the movement in spot rates to mitigate the risk of foreign exchange exposure on underlying foreign currency exposures. Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items. If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting and any hedge ineffectiveness is calculated and accounted for in the statement of profit or loss at the time of the hedge relationship rebalancing.

38.1.2. Credit Risk

Credit risk is the risk of financial loss arising out of customer’s failing to meet their contractual obligations to the Company.

The Company has a board approved Credit Risk policy. The Chief Risk Officer (CRO) owns the policy.

Credit risk arises mainly from loans and advances to retail and corporate customers arising on account of facilitating credit card loans to customers. The Company also has exposure to credit risk arising from other financial assets such as cash and cash equivalents, other financial assets including fixed deposits with banks, other receivables from contracts with customers and contract assets etc.

Credit risk on cash and cash equivalents is limited as the Company generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. "

A. Credit risk management approach

Managing credit risk is the most important part of total risk management exercise. The CRO of the Company is responsible for the key policies and processes for managing credit risk, which include formulating credit policies and risk rating frameworks, guiding the Company’s appetite for credit risk exposures, undertaking independent reviews and objective assessment of credit risk, monitoring performance and management of portfolios. The principal objectives being maintaining a strong culture of responsible lending across the Company and robust risk policies and control frameworks, implementing and continually re-evaluating our risk appetite and ensuring there is adequate monitoring of credit risks, their costs and their mitigation.

The basic credit risk management would cover two key areas, viz., (a) customer selection & (b) customer management. These are governed by Board Approved Credit Policy and Collections Policy which is reviewed on a regular basis."

(a) Customer Selection

Key criterion for customer selection is in accordance with Board Approved Credit Policy, which defines, inter alia, type of customers, category, market segment, income criterion, KYC requirement, documentation etc. The Policy also spells out details of credit appraisal process, delegation structure. The customer selection process aims to ensure quality portfolio and lower delinquency.

(I) Retail Customer Selection process

All the fulfilled approved applications undergo a number of checks which include

• internal deduplication checks,

• fraud deduplication check

• scrutiny of KYC and income documents

• Sophisticated Machine Learning (ML) application models

• Bureau checks etc

For Credit limit is assigned basis ML models to estimate the debt and income of a customer

(II) Unsecured Corporate customer selection process

• For all unsecured corporate card exposures, SBI Cards conducts a detailed subjective assessment based on information taken from the corporate, bureau reports, third party credit assessment agencies like rating agencies and any publicly available information.

• To accurately assess the credit profile of a corporate, SBI Cards assesses the detailed financials, stock price performance (if listed) trends over the recent past. The critical parameters are collated as a credit proposal and approval is done by the credit committee.

• In general, we evaluate the business risks associated with the corporate and its industry, its financial profile, liquidity situation and financial flexibility. A peer comparison is also made between the corporate and other reputed companies from the same industry.

(III) Secured Corporate customer selection process

SBI Cards allows exposure to corporates against liquid securities (e.g. Fixed Deposit & Bank Guarantee). For all secured corporate card exposures, SBI Cards checks the bureau reports and a slightly shorter proposal is put before the approving authority (as per the delegation authority approved by the Board of Directors). The security is validated before any cards are issued.

(b) Customer Management

Customer management relates to credit controls once a card is issued, broadly consisting of:

i. Portfolio Monitoring

We perform continuous monitoring of the portfolio leveraging various capabilities including ML based behavior scores, bureau refresh, bureau alerts, payment behavior, transaction trends, and periodic update on income estimation

ii. Portfolio management

Portfolio management activities enable us to grow lower risk exposures while restricting high risk. We have robust capabilities around dynamic limit management, cross-sell of term loans, balance transfers. Account management capabilities including a robust blocking strategy, reinstatements, dispute management, and overlimit strategies

iii. Fraud control

Continuous monitoring of transactions and a risk-based approach is leveraged to identify instances of fraud like account takeover, unauthorized access. ML models are leveraged to identify potential frauds and proactively protect against the same

iv. Collection strategy

Customers who fail to pay their dues by the stipulated payment due dates, at various stages of delinquency come under the purview of collection and recovery strategies. The company has developed ML models to prioritize collection efforts and also guide the intensity of efforts across delinquency buckets. Hardship tools are leveraged to help resolve cases including settlements and restructuring. Post write-off, ML based segmentation is leveraged to prioritize efforts. For secured cards, liens on FDs / BGs are invoked "

B. Credit risk analysis

This section analyses Company’s credit risk split as follows;

(a) Exposure to credit risk - Analysis of overall exposure to credit risk before and after credit risk mitigation.

(b) Credit quality analysis - Analysis of overall loan portfolio by credit quality.

(c) Impairment - Analysis of non-performing / impaired loans.

(d) Credit risk mitigation - Analysis of collaterals held by client segment and collateral type.

Loans to customer includes loans secured by lien on Fixed deposits and Bank Guarantee held with third party banks. Secured loans account for 0.72% as at March 31, 2023, (1.13% as at March 31, 2022) of total loans.

Notes:

• Loans to customers which accounts for 90.7% of total exposure to credit risk, as at March 31, 2023, is segregated based on risk characteristics of the population to manage credit quality and measure impairment.

• Credit risk on cash and cash equivalents is limited as we generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies.

• Investments in Government Securities are measured at amortized cost and Investments in unquoted instruments are valued at Fair value as on balance sheet date and effect has been routed through Other Comprehensive Income to be in line with Ind AS guideline.

• Derivative instruments taken by the Company are from the same party (Parent company) from whom the Company has taken the underlying loan. Hence, default risk from counterparty is also being a financial institution with high credit rating is limited.

• Company follows simplified approach for recognition of impairment loss allowance on trade receivables/other financial assets wherein Company uses a provision matrix to determine the impairment loss allowance on the portfolio of receivables.

Credit concentration risk

Credit concentration risk may arise from a single large exposure to a counterparty Credit concentration risk may arise from a single large exposure to a counterparty or a group of connected counterparties, or from multiple exposures across the portfolio that are closely correlated.

Large exposure concentration risk is managed through concentration limits set by a counterparty or a group of connected counterparties based on control and economic dependence criteria

For concentrations that are material at a Company level, breaches and potential breaches are monitored by the respective governance committees and reported to the Risk Committee and CRO."

The Company follows the prescribed Regulatory Prudential Norms:

• Single Borrower Exposure limit - 25% of Tier I Capital of SBI Cards & Payment Services Ltd.

• Group Borrower Exposure limit - 40% of Tier I Capital of SBI Cards & Payment Services Ltd

In addition, there is also an internal capping on the single borrower exposure at ' 200 Cr.

(b) Credit quality analysis Credit grading

The Company classifies credit exposure basis risk characteristics into high/medium/low risk. The Company has in place a credit risk grading model (Internal rating model) which is supplemented by external data such as credit bureau scoring information, financials statements and payment history that reflects its estimates of probabilities of defaults of individual counterparties and it applies blocks(soft/hard) on accounts based on activity pattern of the borrower. A breakdown of loans by credit quality is given below.

Credit quality by client segment

An overall breakdown of loan portfolio by client segment is provided below differentiating between performing and non-performing loan book,

The Company segregates its credit risk exposure from loans & advances to customers as Stage 1 (Good), Stage 2 (Increased credit risk), Stage 3 (Impaired loans). The staging is done based on criteria specified in Ind AS 109 and other qualitative factors.

(c) Impairment

Collective measurement model (Retail and Corporate)

The estimation of credit exposure for risk management purposes is complex and requires the use of models, as the exposure varies with the change in market conditions, expected cash flows and the passage of time. The assessment of credit risk of a portfolio of assets entails further estimations as to likelihood of defaults occurring, of the associated loss ratios, collaterals and coverage ratio etc.

The Company measures credit risk using Probability of Default (PD), Exposure of Default (EAD), Loss Given Default (LGD). Ind-AS 109 outlines a three staged model for measurement of impairment based on changes in credit risk since initial recognition.

• A financial instrument that is not credit impaired on initial recognition is classified in 'Stage 1',

• If a significant increase in credit risk (SICR) is identified the financial instrument moves to 'Stage 2',

• If the financial instrument is credit-impaired, the financial instrument moves to 'Stage 3' category.

The Company uses multiple economic factors to measure the ECL on a forward looking basis.

Some of these factors include GDP growth rate, bank credit to specific sectors, wholesale price index (WPI), consumer price index (CPI), currency circulation. Correlations have been tested with past NPA trends.

Factors where management views the correlations to be acceptable are then used to assess the extent of impact on the portfolio. The RBI Financial Stability Report (FSR) is used as an indicator of future economic scenario. The impact of these scenarios is then transmitted back into our ECL model basis the factors with acceptable correlations which enables the Company to ensure that adverse future economic conditions are covered in the ECL.

The Company defines default or significant increase in credit risk (SICR) based on the following quantitative and qualitative criteria.

Definition of Default Quantitative criteria

The borrower is more than 90 days past due on its contractual payments.

Qualitative criteria

The borrower meets unlikeliness to pay criteria, which indicates that the borrower is in significant difficulty wherein a 'hard block' is applied on accounts and is blocked for further activity on meeting the following criteria;

• Arrangement to Pay

• Settlement

• Cardholder is deceased

• Restructured

Further, for any borrower to be upgraded from Stage 3, the entire overdue balance on all accounts, must be cleared. Definition of Significant increase in credit risk (SICR)

Quantitative criteria

The borrower is 30-90 past due on its contractual payments.

Qualitative criteria

When borrowers are classified as "high risk" or when the account is tagged as "over-limit" i.e. when borrowers are expected to/approach their credit limit it is considered as indicator of increased credit risk.

The default definition has been applied consistently to model the PD, LGD and EAD for measurement of ECL.

Measuring ECL- Explanation of inputs, assumptions and estimation techniques

ECL is measured on either a 12 month or lifetime basis depending on whether there is an increase in SICR since initial recognition. ECL is the discounted product of PD, LGD and EAD.

Estimation for retail accounts PD

Month on month (MOM) default rates were calculated for all vintages.

Post calculating MOM default rates, cumulative yearly PDs being calculated till lifetime.

• For Stage 1 accounts 1- year marginal PD were calculated.

• For Stage 2 accounts - Lifetime PDs were calculated

• For Stage 3 accounts a 100% PD was taken

The Company segments the entire portfolio into Retail Unsecured, Retail Secured, Corporate Unsecured and Corporate Secured, in line with the standard keeping each segment homogenous at the time of on-boarding. The Retail Unsecured segment PDs are further derived by evaluating the PDs at a sub-segment level basis credit history i.e. New to Credit (NTC), New to Credit Card (NTCC) and Carded. These sub-segmented PDs are then rolled up to arrive at the overall retail unsecured PD

LGD

All discounted recoveries net of collection costs is calculated segment wise against exposures to arrive at loss estimates. Discount rate being considered is the average yield rate across segments. LGD is floored at 0% and capped at 100%

EAD

Segment wise EAD is calculated using the below formula:

EAD = Balance Outstanding CCF*(Credit Limit - Balance Outstanding), where CCF is proportion of unutilized credit limit which is expected to be utilized till the time of default. CCF is applicable only for stage 1 accounts, as stage 2 and stage 3 accounts cannot utilize the unused credit limit. CCF % = Utilisation (t 12) - Utilisation (t) i.e. change of utilization rates over next 1 year, its being floored at 0%.

The Company recalibrates the components of ECL model at regular intervals using,

1. Available incremental and recent information

2. Assessing changes to its statistical techniques for estimation.

However, data of COVID impact, where resolution plan was implemented in line with RBI’s Resolution Framework for COVID-19-related Stress, is not consumed in the ECL model since, this scheme introduced a distortion in customer behavior. Such pool was largely provided using management overlays.

The Company revisits the inputs, assumptions used in measurement of ECL whenever there is a significant change, at least every quarter.

• Individual Measurement (Corporate)

The Company’s credit risk function segregates loans with specific risk characteristics based on trigger events identified using sufficient and credible information available from internal sources supplemented by external data.

Specific reserve may be created in following scenarios: -

• Rating of the corporate is downgraded significantly.

• Public news of default or fraud by the corporate or any group company with any lender.

• Adverse reporting in bureau with respect to the corporate or promoters (overdues with other lenders)

• Adverse public information on corporate or associated group.

• Significant Overdues of the corporate or group companies with SBI Card or SBI.

• If corporate exposure is backed by security, and there is a deterioration in the value of the underlying security.

38.1.3. Liquidity risk

Liquidity risk is the risk that the Company doesn’t have sufficient financial resources to meet its obligations as and when they fall due or will have to do so at an excessive cost. This risk arises from the mismatches in the timing of the cash flows which is inherent in all financing operations and can be affected by a range of company specific and market wide events. Therefore, Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Company has put in place an effective Asset Liability Management System, constituted an Asset Liability Management Committee (“ALCO") headed by Managing Director & CEO of the Company. The Company manages its liquidity risk through a mix of strategies, including forward-looking resource mobilization based on projected disbursements and maturing obligations. ALCO is responsible for managing the Company’s liquidity risk via a combination of policy formation, review and governance, analysis, stress testing, limit setting and monitoring. Company’s borrowing program is rated by CRISIL & ICRA. Short term rating is A1 and long-term rating is AAA/Stable by both the agencies. There has been no change in ratings from last 10 years. The maturity pattern of items of non-derivative financial assets and liabilities at undiscounted principal and interest cash flows are as under: "

43 LEASES

I. Short Term lease payments

For the operating lease agreements entered into by the Company which are considered as short team leases (lease term of less than 12 months period) under IND AS 116, right of use asset and lease liability has not been recognized during the year. Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Low-value assets comprise IT-equipment and small items of office furniture.

II. Variable lease payments

Under certain contracts, payments are variable in nature as it depends on number of man hours worked by non-full-time employee in a particular month. Variable lease payments are recognised in profit or loss in the period in which the condition that triggers those payments occurs.

The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotion & Other relevant factors, such as supply & demand in the employment market.

* Based on India’s standard mortality table with modification to reflect expected changes in mortality/ others.

The following tables summarize the components of net benefit expense recognized in the statement of profit and loss and the funded status and amounts recognized in the balance sheet for the gratuity plan. The present value of the defined benefit obligation and the related current service cost are measured using the Projected Unit Credit Method with actuarial valuations being carried out at each balance sheet date.

Sensitivity Analysis:

Gratuity is a lump sum plan and the cost of providing these benefits is typically less sensitive to small changes in demographic assumptions. The key actuarial assumptions to which the benefit obligation results are particularly sensitive to are discount rate and future salary escalation rate. The following table summarizes the change in defined benefit obligation and impact in percentage terms compared with the reported defined benefit obligation at the end of the reporting period arising on account of an increase or decrease in the reported assumption by 50 basis points.

i. Certain show cause notices relating to indirect taxes matters amounting to ' 3.13 Crores (previous period ' 0.42 Crores) and interest as applicable, have neither been acknowledged as claims nor acknowledged as contingent liabilities. Based on internal assessment and discussion with tax advisors, the Company is of the view that the possibility of any of these tax demands materializing is remote.

ii. In absence of any specific entry in the Indian Stamp Act, 1899 for amalgamation, which is open to interpretation of the stamp collector, the Company has filed an application dated June 30, 2019 for adjudication of the stamp duty. During the pendency of the adjudication application, it is difficult to provide an estimate of the actual stamp duty that would be leviable on the Company and therefore no provision has been made in the financial statements for the year ended March 31, 2023.

iii. Capital Commitments: Estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) amounted to ' 18.11 Crores as at March 31, 2023 (' 10.22 Crores as at March 31, 2022)

46 As per the best available information on records, Company does not have any transactions with the companies struck off under Section 248 of the Companies Act, 2013 or Section 560 of the Companies Act,1956 during the financial year 2022-23.

47 SEGMENT INFORMATION

There is only reportable segment (“Credit cards") an envisaged by Ind AS 108 Segment reporting, specified under section 133 of the Companies act 2013, read with Rule 7 of the Companies (Accounts) Rules 2014. Further, the economic environment is which the Company operates is significantly similar and not subject to materially different risk and rewards.

Accordingly, as the Company operates in a single business and geographical segment, the reporting requirement for primary and secondary disclosures prescribed by Ind AS 108 are not required to be given.

48 In respect of accounts receivables, the Company is regularly generating and dispatching customer statements on periodic interval wherever transactions or outstanding are there. In case of disputes with regard to billing, there is a process of resolution and adjustments are carried out on regular basis. Moreover, in respect of accounts payable, the Company has a process of receiving regular balance confirmation from its vendors. For the year end balances of account receivables and account payables, the management is of the opinion that adjustments, if any required through the above-mentioned process, will not have any material impact on the financials of the Company.

49 The Company deposited Goods and Service Tax [GST] on Interchange received by it in respect of VISA International transactions.

However, in February 2019, Company has received a declaration from VISA that Settlement of International Interchange is being done in INR as per approval of RBI obtained by VISA in 1995. On the basis of said declaration, the Company has obtained opinion from legal firm confirming that the same can be treated as receipt of consideration in convertible foreign exchange and consequently as export of service and therefore not chargeable to GST. The Company has accordingly decided to stop paying GST on International Interchange henceforth and decided to file a refund application for ' 4.51 Crores for the GST paid from July 2017 to March 2018 with GST authorities.

The said refund is subject to interpretation of law for which there is no precedence in the form of judgements/ departmental clarifications. In view of the above, the Company has provided for 100% provision against the refund claim to mitigate the uncertainty risk.

Further, on February 21, 2023, the refund claim filed by the Company has been rejected by the GST authorities. Company has filed a Writ Petition before the Hon’ble Punjab & Haryana High Court challenging the said rejection. The same came up for hearing on April 18, 2023. The bench vide Order dated April 18, 2023 has issued notice to the GST department and has directed them to file a reply.

50 The Company is a registered Corporate Insurance agent having license from Insurance Regulatory & Development Authority of India (IRDAI). The company is engaged in the sale of Life Insurance and Non-Life/General insurance products to its credit card customers. Commission income arising from selling of insurance product is recognised as Insurance commission income. Commission from sale are as under:

i) Life Insurance is ' 0.001 Crores in each FY 2022-23 and FY 2021-22.

ii) Non-life/General Insurance is ' 3.45 Crores in FY 2022-23 and ' 4.88 Crores in FY 2021-22.

52 The Company has revised the estimation model for Expected Credit Loss [ECL] on account of change in estimation, including forward looking macro-economic factors in probability of default of the credit card portfolio resulting to higher ECL of ' 24.92 Crores during the quarter and year ended March 31, 2023.

The company also revised the Management Overlay on the RBI RE accounts as the remaining portfolio has reduced substantially and performing in line with regular portfolio, resulting to lower ECL of ' 4.38 Crores during the quarter and year ended March 31, 2023.

53 During the period ended March 31,2023, the Company did not have any exceptional items or extraordinary items as defined under Ind AS 1, Presentation of Financial Statements.

57.1.2. Disclosure on Liquidity Coverage Ratio

Reserve Bank of India, through the Liquidity Risk Management Framework for Non-Banking Financial Companies, introduced Liquidity Coverage Ratio (LCR) with the objective that NBFC shall maintain a liquidity buffer in terms of LCR which will promote resilience of NBFCs to potential liquidity disruptions by ensuring that they have sufficient High Quality Liquid Asset (HQLA) to survive any acute liquidity stress scenario lasting for 30 days. HQLA means liquid assets that can be readily sold or immediately converted into cash at little or no loss of value or used as collateral to obtain funds in a range of stress scenarios. Liquidity management in the Company is driven by the Board approved Asset Liability Management (ALM) Policy. The Asset Liability Committee (ALCO) is a decision-making unit responsible for implementing the liquidity risk management strategy of the Company, formulating the Company’s funding strategies to ensure that the funding sources are well diversified and is consistent with the operational requirements of the Company and ensures adherence to the risk tolerance/limits set by the Board.

The LCR requirement were effective December 01, 2020, with the minimum HQLAs to be held being 50% of the LCR, progressively increase it by 10% / 15%, to reach up to the required level of 100% by December 01, 2024. From December 01, 2022, the minimum HQLAs to be held are at 70% of the LCR.

The LCR is calculated by dividing Stock of HQLA by total net cash outflows over the next 30 calendar days. Total net cash outflows over the next 30 days are equal to stressed outflows minus Minimum of stressed inflows or 75% of stressed outflows (wherein stressed outflows are 115% of outflows and stressed inflows are 75% of inflows).

The following table sets out the average of unweighted and weighted value of the LCR components of the Company calculated in accordance with RBI circular no RBI/2019-20/88 DOR.NBFC (PD) CC. No.102/03.10.001/2019-20 dated November 04, 2019. The average weighted and unweighted amounts are calculated taking simple averages of daily observations over the respective quarter, during the financial year 2022-23:

The main drivers of the LCR calculation in outflow over 30 days period is contractual borrowing obligations of the Company in the form of bank lines, commercial papers, debentures and term loans. Other contractual funding obligations consist of liabilities towards network partners, vendor payments and other liabilities. Further Company has used the behavioral study to take the impact of unused credit and liquidity facilities that Company has provided to its cardholders. Main driver of inflows is the repayments from the cardholders which are taken basis the past behavioral pattern observed. Other cash inflows consist of incomes accruals which Company expects to receive in next 30 days.

The average LCR of the Company for the three months ended March 31,2023 was 85.95% as against 79.06% for the previous year ended March 31, 2022. The LCR remains above the regulatory minimum requirement of 70%.

The average HQLA for the period ended March 31, 2023 was ' 2349.43 crores as against ' 1311.17 crores for the previous year ended March 31, 2022. The net cash outflow position has gone up by ' 1075.06 crores due to increase in next 30 days outflows and HQLA level has up by ' 1038.26 crores. HQLA comprises of Investment in Government Securities (62.87%), Investments in Treasury Bills (33.67%) and balances held in current account with Scheduled Commercial Banks (3.46%)

Management is of the view that the Company has sufficient liquidity cover to meet its likely future short-term requirements.

60.18.2 Disclosure of Penalties imposed by RBI and other regulators

No penalties have been imposed by any regulators during financial year 2022-23

60.18.3 Ratings assigned by credit rating agencies and migration of ratings during the year

The short-term debt rating of the Company is A1 by CRISIL and ICRA. Long-term debt rating is AAA / Stable by CRISIL and ICRA. There is no change in the rating during financial year 2022-23.

60.18.4 Revenue Recognition

There is no circumstance in which revenue recognition has been postponed pending the resolution of significant uncertainties.

60.18.5 Remuneration to Directors

During the year the Company has paid ' 1.18 Crores towards Directors fees, allowances and expenses.

Refer note 33

60.18.6 Net Profit or loss for the period, prior period items and change in accounting policies

There has been no change in the Significant Accounting policies followed during the financial year 2022-23 in comparison to the financial Year 2021-22. Further, there are no adjustment of prior period items during the financial year 2022-23.