Performance Overview

During the financial year under review, the Bank
continued to witness steady growth in its business
operations, with deposits increasing to ' 25,850.16
crore and advances to ' 21,594.23 crore, reflecting
healthy expansion and improved deployment of
funds.

The Bank reported a significant reduction in losses,
with Net Loss declining to ' 166.40 crore from
' 521.39 crore in the previous year. This improvement
was supported by better cost management, calibrated
growth, and gradual stabilisation in operating
performance. The Bank's Total Income remained
broadly stable at ' 4,348.23 crore. Interest Income
for the Financial Year 2025-26 was ' 3,537.18 crore

as against ' 3,857.53 crore in the previous year,
reflecting changes in portfolio mix and prevailing
business conditions.

During the year, the Bank maintained its focus on
strengthening operational efficiency, improving
portfolio quality, and pursuing calibrated growth
across its business segments, which contributed to
the overall stabilisation in financial performance.

The Bank continued its focus on strengthening
portfolio quality and improving collection efficiency
during the year. As at March 31, 2026, the Gross
Non-Performing Assets (GNPA) stood at 5.41% as
compared to 6.87% in the previous year, while Net
Non-Performing Assets (NNPA) stood at 1.8% as
against 2.99% as at 31^st March, 2025.

The moderated movement in asset quality indicators
reflects the Bank's ongoing efforts towards portfolio
stabilisation, improved recovery mechanisms, and
disciplined underwriting practices, contributing to
improved operating performance.

The financial position and performance of the Bank
is given in the Management Discussion & Analysis
Report, which forms part of this Integrated Annual
Report.

The operating environment during the Financial
Year 2025-26 continued to remain challenging
across certain borrower segments, particularly in
the microfinance sector, leading to elevated credit
costs and moderation in profitability. In response,
the Bank continued to strengthen its risk governance
framework through focused monitoring of portfolio
quality, collection efficiency, prudent underwriting
practices and calibrated business growth, supported
by appropriate provisioning and balance sheet
strengthening measures.

2. OUR BUSINESS SEGMENTS

The Bank has identified our business segments,
segregating them into Treasury, Wholesale Banking,
Retail Banking and Other Banking Segments after
considering the internal business reporting system and
guidelines issued by the Reserve Bank of India through
its notification DBOD.No.BP.BC.81/ 21.01.018/ 2006¬
07 dated April 18, 2007 and Accounting Standard 17
(AS 17) - 'Segment Reporting'.

3. BUSINESS OVERVIEW

Micro Banking

The Micro Banking vertical of the Bank is designed
to provide comprehensive banking services to the
unbanked and underbanked segments, combining
credit and savings-oriented offerings through a
high-touch, doorstep delivery model. The business
is delivered through the Bank's Micro Banking
(MB) channel and a network of dedicated Business
Correspondents (BCs), enabling deeper customer
engagement and supporting their broader financial
needs.

During the Financial Year 2025-26, the Bank continued
to focus on strengthening its presence in underserved
segments through Micro Banking products. As on
March 31,2026, the Bank had 32,82,895 active Micro
Banking borrowers with a loan book outstanding of
' 8,746 crore. During the year, the Bank disbursed
loans aggregating to ' 7,163 crore under various Micro

Banking products, reflecting the Bank's sustained
commitment to inclusive financial growth.

The microfinance sector continued to witness phased
and evolving challenges during the year, with stress
persisting in select geographies and borrower
segments. In this context, the Bank adopted a
calibrated and disciplined approach, with tightening of
underwriting standards, strengthening of credit filters,
and implementation of enhanced guardrails in loan
origination to reinforce credit discipline and portfolio
resilience. The Bank also intensified customer
engagement and education initiatives to promote
responsible borrowing behaviour and improve credit
track record awareness.

The Bank undertook focused initiatives to improve
portfolio monitoring and collections, including
strengthened field-level controls, closer tracking
of early delinquency indicators, and tighter BC
performance oversight. Strategic actions were also
taken to optimise the operating model, including
transition of select portfolios to direct management
to reduce concentration risk and strengthen portfolio
oversight. Further, performance-linked incentive
structures were strengthened to encourage sustained
improvement in collections and portfolio outcomes.

As at 31^st March, 2026, the Gross NPA (GNPA) of the
Micro Banking portfolio stood at 13% from 12.7% as at
31^st March, 2025, and the Net NPA (NNPA) improved
to 4.37% from 5.81% in the previous year.

Retail Banking

The Bank continued to strengthen its retail banking
franchise during the Financial Year 2025-26,
supported by steady growth in deposits, expansion
of its distribution network, and continued focus on
portfolio diversification.

Liability Franchise

The Bank's retail liability base continued to grow
steadily during the year, with total deposits increasing
by 11.06% to ' 25,850 crore as on 31^st March, 2026.
Retail deposits accounted for approximately 92%
of the overall deposit base, reflecting the strength
of the Bank's granular franchise and diversified
funding profile. The Bank reported a net accretion of
' 2,574 crore during the year, supported by sustained
customer engagement across its expanding network.
The CASA base stood at ' 6,180.60 crore, with the
CASA ratio at 23.91% as compared to 24.84% in the
previous year. The marginal moderation in CASA was
aligned with the Bank's strategy of strengthening

overall deposit mobilisation in a competitive interest
rate environment, while maintaining a stable and
diversified funding profile.

The Bank's non-resident deposit base continued to
provide meaningful support to the liability franchise,
standing at ' 5,246 crore as on March 31,2026.

Distribution Network

The Bank continued to expand and strengthen its
distribution footprint, with a total of 804 banking
outlets as on March 31, 2026, including presence
across metro, urban, semi-urban and rural centres.
Approximately 25.74% of the outlets are located in
Unbanked Rural Centres (URCs), in line with regulatory
requirements and the Bank's commitment to financial
inclusion.

Asset Growth and Portfolio Mix

On the retail assets front, the Bank delivered
strong growth during the year, supported by a
strategic rebalancing of the asset mix towards
secured and quality lending segments. The
total retail and corporate loan portfolio grew to
' 13,680 crore, registering a year-on-year growth of
37.88%.

A key structural transformation during the year was
successful execution of the Bank's MARG strategy,
representing MSME, Agri, Retail and Gold loans. This
strategy reflects the Bank's deliberate and calibrated
shift from unsecured lending to a secured and
diversified portfolio with the objective of strengthening
the portfolio quality and supporting sustainable long¬
term growth. During the year, the share of secured
assets grew significantly to approximately 61% of gross
advances, as compared to 52.44% in the previous
year. This transition, achieved ahead of planned
timelines, reflects the Bank's focus on building a more
resilient, diversified and risk-calibrated asset base,
with reduced reliance on unsecured lending.

Segment Drivers

The shift in asset mix has been driven by continued
traction across secured lending segments, including
gold loans, MSME, agriculture, mobility and affordable
housing.

The gold loan portfolio continued to scale up during
the year, supported by strong customer demand and
improved turnaround time, while maintaining a low
delinquency profile and short tenor characteristics,
thereby contributing positively to portfolio quality and
earnings stability.

The mortgage segment demonstrated steady
progress, crossing the milestone of ' 1,000 crore,
while the mobility portfolio expanded beyond ' 600
crore, reflecting the Bank's continued focus on scaling
secured retail segments.

The Bank also continued to deepen its presence in
MSME lending, with a focus on granular and cash¬
flow aligned credit solutions, supporting the growth
requirements of small and medium enterprise
customers.

This calibrated shift towards secured lending,
supported by a stable and growing liability franchise,
has resulted in a more granular, diversified and
resilient balance sheet. The increasing share of
secured assets is contributing to improved portfolio
quality, enhanced earnings stability and reduced
credit risk, positioning the Bank for sustainable growth
going forward.

Treasury

The Bank's Treasury function plays a central role
in managing liquidity, investment portfolio and
balance sheet risks, while supporting overall
financial performance through prudent asset-liability
management practices. The Treasury continues to
focus on optimising returns within the Bank's risk
appetite, while maintaining adequate liquidity buffers
and ensuring regulatory compliance.

The Bank maintains a diversified portfolio of
investments, primarily in Government Securities, in
line with Statutory Liquidity Ratio (SLR) requirements.
The portfolio is classified under Held-to-Maturity
(HTM), Available-for-Sale (AFS) and Held-for-Trading
(HFT) categories, enabling the Bank to balance
earnings stability with flexibility to respond to market
movements. A significant portion of the portfolio
continues to be held under the HTM category,
providing stability against market volatility and
supporting consistent income generation.

As on March 31, 2026, the Bank's total investment
portfolio increased to ' 6,399.11 crore from ' 5,995.26
crore in the previous year, reflecting a growth of
6.74%. Treasury performance during the year was
supported by stable liquidity conditions and active
portfolio management, enabling the Bank to generate
investment income of ' 402.7 crore.

The Treasury function continues to operate in a
dynamic interest rate and liquidity environment,
requiring active management of interest rate risk and
funding costs. In this context, the Bank maintains a
prudent ALM (Asset-Liability Management) framework,

aligning the investment portfolio and funding profile
to support balance sheet stability and optimise net
interest income over the medium term. Effective ALM
practices are critical for managing liquidity, interest
rate and funding risks, and are a key contributor to
long-term profitability.

The Bank has also been strengthening its foreign
exchange business in line with its evolving customer
requirements. During the Financial Year 2025-26, the
Bank earned ' 1.8 crore from AD-II foreign exchange
operations. With the commencement of Authorised
Dealer Category-I (AD-I) operations from April 01,
2024, the Bank is well positioned to expand its foreign
exchange capabilities and enhance its offerings to
customers across retail and business segments.

The Treasury function remains focused on balance
sheet optimisation, liquidity management and risk
mitigation, while contributing to stable earnings and
supporting the Bank's overall growth strategy in a
dynamic market environment. During the year under
review, there was a relaxation of the PSL requirement
by RBI from 75% to 60%. On account of the same, the
Bank has done PSLC Sale and realised ' 127 crore
during Financial Year 2026 as against ' 56 crore
during Financial Year 2025.

4. IT INITIATIVES

Digital Strategy and Transformation

The Bank continues to strengthen its technology
capabilities under its ESAF 2.0 transformation-
StratoNext, a multi-year digital transformation
initiative aimed at modernising the Bank's technology
infrastructure, enhancing customer experience and
improving operational efficiency. The StratoNext
programme focuses on building a secure, scalable
and regulatory-compliant technology architecture,
while enabling greater agility, high availability and
sustained innovation across the Bank's operations.
Through this initiative, the Bank is progressively
transitioning towards a more digitally integrated, data-
driven and customer-centric operating model, with
investments in advanced infrastructure, cybersecurity
frameworks and platform integration to support
seamless service delivery and efficient business
operations.

Customer Experience and Digital Channels

The Bank continues to strengthen its digital ecosystem,

offering a wide range of customer touchpoints
including internet banking, mobile banking and digital
payment platforms.

ESAF Mithra App, designed to enhance accessibility
for Micro Banking customers, enables customers
to access real-time loan information, make digital
payments, raise service requests and locate branches
through a user-friendly interface. The application has
witnessed growing adoption with approximately 6.5
lakh users, and supports multiple regional languages,
improving digital accessibility across diverse customer
segments.

Digital channels continue to gain traction, with digital
transactions forming a substantial proportion of total
transactions, underscoring the growing adoption of
technology-enabled banking services.

In addition, WhatsApp Banking, digital alerts and
Customer Relationship Management (CRM) solutions
have been strengthened to improve customer
engagement, responsiveness and service delivery
across channels.

Process Automation and Lending Digitisation

The Bank has made significant progress in digitising
its lending lifecycle, particularly across Micro Banking
and retail segments. The adoption of e-signatures for
microloan disbursals and centralised digital credit
processing has enhanced operational efficiency and
standardisation.

Customer onboarding for microloans has been
largely digitised, supported by handheld devices and
digital documentation processes. The Bank has also
implemented vernacular loan documentation and
digital credit underwriting models based on bureau
inputs and customer analytics, improving accessibility
and credit assessment capabilities. The shift
towards cashless loan disbursements and electronic
documentation has reduced paper usage and
supported the Bank's sustainability objectives, while
improving turnaround time and customer experience.

Risk Management, Security and Infrastructure

The Bank maintains a strong focus on cybersecurity,
data protection and IT governance, ensuring resilience
of its technology infrastructure in line with regulatory
expectations. Technology initiatives are aligned with
the Bank's risk management and business continuity
frameworks, ensuring high system availability, data
integrity and secure delivery of services, while
supporting scalable growth. During the year under
review, the Bank developed its own Data Centre (DC)/
Disaster Recovery (DR) Centre as part of its StratoNext
Program.

5. CUSTOMER SERVICE QUALITY

The Bank continued to place strong emphasis on
enhancing customer experience and service quality,
with a focus on strengthening service standards,
improving grievance redressal mechanisms and
deepening customer engagement across all
touchpoints. Customer service remains a core
element of the Bank's strategy, supporting customer
retention, trust and long-term growth.

During the year, the Bank undertook multiple
initiatives to strengthen a customer-centric service
culture across its branch network and digital
channels. Structured service excellence programmes
and recognition frameworks played a key role in
reinforcing this approach. In this context, the Bank
successfully obtained ISO 9001:2015 recertification
for Customer Service Quality functions, reaffirming
its commitment to standardised processes and
continuous improvement.

Further, initiatives such as the "Mantra of Service"
programme, which showcases real-life examples of
exceptional service delivery across branches, and
the Customer Service Excellence Awards, helped
promote proactive service behaviour and strengthen
a customer-first mindset across the organisation.
The Bank also strengthened customer engagement
through HNI Customer Testimonials, reinforcing trust
and long-term relationship building.

Customer engagement was further enhanced
through structured feedback mechanisms and direct
outreach initiatives, including customer service calls
and periodic field visits, enabling the Bank to capture
real-time feedback and continuously refine service
delivery processes.

The Bank's grievance redressal framework, aligned
with regulatory requirements, continued to be
supported by structured mechanisms at both branch
and central levels. Regular Branch-level Customer
Service Committee Meetings (Sampark) and periodic
reviews enabled timely identification and resolution
of customer concerns, while improving coordination
across functions.

To further strengthen service quality, the Bank

deployed continuous monitoring mechanisms such as
Branch Mystery Calling, under which service standards
across branches are assessed across parameters
including customer handling, responsiveness and
product knowledge. These insights, along with
structured feedback and surveys, have contributed to
improved service delivery consistency.

The Bank also continued to focus on capability building
of its workforce, recognising its critical role in delivering
consistent service quality. Structured training
programmes covering service standards, compliance
and digital processes were conducted during the year,
including quarterly training programmes for Regional
and Cluster Heads, supported by internal learning
platforms and knowledge-sharing initiatives such as
"CX Guru".

In parallel, the Bank undertook multiple customer
awareness and financial literacy initiatives aimed at
strengthening responsible banking and digital safety
practices.

Key Customer Awareness Initiatives (2025-26):

• 31 customer awareness programmes conducted
across India

• Programmes aligned with RBI directives on digital
safety, grievance redressal and customer rights

• Financial literacy initiatives conducted in
collaboration with industry bodies including
MFIN

These initiatives have contributed to improving
customer awareness, digital security understanding
and overall financial capability, particularly in rural and
semi-urban markets.

Accessibility Initiatives

The Bank remains committed to providing inclusive
banking services and ensuring accessibility for
differently abled persons. In line with regulatory
expectations, the Bank periodically reviews the
facilities and services extended to differently abled
customers and undertakes appropriate measures to
enhance accessibility across its operations.

The Bank has implemented various initiatives to
support differently abled customers, including the
provision of ramp facilities at branches wherever
feasible. In locations where such infrastructure is not
feasible, doorstep banking services are provided to
ensure uninterrupted access to banking services.

The Bank has also enabled Talking ATMs to support
visually impaired customers in conducting transactions
independently. Further, Braille-enabled keypads and
instructions are made available at ATMs to facilitate
ease of use and improve accessibility.

6. COMPLIANCE FUNCTION

The Bank has an independent Compliance Function,
headed by a Chief Compliance Officer, responsible
for ensuring adherence to applicable regulatory and
statutory requirements across all business operations.
The Compliance Department operates within a
well-defined policy framework and plays a key role
in embedding a strong compliance culture across
the organisation. It is responsible for monitoring
compliance with regulatory guidelines, overseeing
statutory obligations and facilitating timely
dissemination of regulatory instructions across
business and support functions. The function also
supports the Bank through regulatory engagement,
policy review and assessment of new products
and processes to ensure alignment with applicable
regulatory requirements. It coordinates regulatory
submissions and facilitates responses to regulatory
inspections and supervisory observations.

The Bank follows a risk-based approach to compliance
management, supported by structured mechanisms
for identification, assessment and mitigation of
compliance risks. Continuous monitoring and review
processes are in place to ensure timely corrective
actions and enhance overall effectiveness of the
compliance framework.

The Bank's compliance architecture is designed
to support robust governance, ensure regulatory
alignment and mitigate compliance risks, thereby
reinforcing safe and sustainable business operations.

7. RISK MANAGEMENT

The Bank follows an integrated risk management
framework aimed at identifying, assessing, monitoring
and mitigating all material risks arising from its
business and operations. The framework is designed
to support sustainable growth while maintaining a
prudent risk profile and fostering a strong risk-aware
culture across the organisation.

Risk governance is overseen by the Board of Directors,
which approves risk management policies in line with
regulatory requirements and internal risk appetite.
The Risk Management Committee of the Board
(RMCB) provides strategic direction by reviewing risk

exposures, policies and procedures, and by ensuring
the effectiveness of the overall risk management
framework.

The Bank's risk management function is supported
by a dedicated Risk Management Department, which
implements approved policies and coordinates risk
management activities across the Bank. The function
is structured to manage key risk areas, including Credit
Risk, Operational Risk, Market Risk and Information &
Cybersecurity Risk, ensuring focused oversight of all
major risk streams.

At the executive level, specialised risk committees—
including the Credit Risk Management Committee,
Operational Risk Management Committee, Asset
Liability Management Committee, Information
Security Governance Committee and Outsourcing
and Vendor Assessment Committee—are responsible
for monitoring risk exposures, reviewing emerging
risks and initiating corrective actions where required.
These committees provide periodic updates on key
risk indicators, trends and incidents to the RMCB.

The Bank has adopted a risk-based and forward¬
looking approach to capital and risk management
through its Internal Capital Adequacy Assessment
Process (ICAAP), which enables identification and
assessment of material risks and ensures that capital
levels remain commensurate with the Bank's risk
profile and growth strategy, in line with regulatory
expectations. In addition, the Bank undertakes
periodic stress testing to assess the impact of adverse
scenarios and strengthen its preparedness to manage
emerging risks, thereby enhancing the resilience of its
balance sheet and operations.

Overall, the Bank's risk management framework
supports robust governance, proactive risk monitoring
and effective capital planning, enabling the Bank
to operate within its risk appetite while pursuing
sustainable growth.

8. HUMAN RESOURCES INITIATIVES

During the Financial Year 2025-26, the Bank
continued its focus on building a high-performance
and inclusive work environment, with emphasis on
employee development, engagement and capability
enhancement aligned to its overall strategic objectives.
The year was marked by significant progress in learning,
transformation and employee engagement initiatives,
supporting both organisational effectiveness and
employee growth.

As part of the Bank's broader digital transformation
journey, HR processes are being progressively
automated and digitised, including employee
lifecycle management and key processes such as
performance improvement, transfer and placement.
These initiatives are aimed at improving efficiency,
transparency and employee experience.

The Bank's efforts in leveraging technology for talent
acquisition were recognised through prestigious
external accolades, including the CII Award for "Best
HR Practices" and the ET HR Award for "Excellence in
Use of AI for Talent Acquisition".

Learning and Capability Building

The Bank continued to invest significantly in employee
development, conducting over 2.55 lakh man-hours of
training during the year. Learning and Development
initiatives were structured around key strategic
priorities to support enterprise-wide capability
building.

Training interventions focused on:

• Branch capability building, with emphasis on
sales productivity, operational excellence and
customer experience

• Induction and functional readiness, enabling
faster onboarding and productivity for new
employees

• Technical and process training, including
system adoption, audit readiness and operational
efficiency

• Risk, compliance and cyber awareness,

aligned with regulatory requirements

• Leadership development and culture¬
building programmes, supporting managerial
effectiveness and change readiness

Large-scale virtual training initiatives were also
conducted to ensure consistent knowledge
dissemination and policy alignment across the
organisation.

Driving High-Performance and Transformation

The Bank continued to promote a high-performance
culture through structured initiatives such as the
Internal Kaizen Competition, with a focus on
enhancing productivity and process efficiency across
functions. Productivity studies were also undertaken
to improve resource utilisation and operational
effectiveness.

Key transformation-focused learning initiatives
supported organisational change and digital adoption,
including flagship programmes such as:

• ESAF 2.0 - Go Live workshops

• Evolve 2.0 - Transformation training

initiatives

• Specialised capability programmes for
auditors and frontline staff

Employee Engagement and Well-being

The Bank continued to strengthen employee

engagement through structured initiatives aimed at
fostering a positive and inclusive workplace culture.
Employee engagement programmes focused on well¬
being, recognition and organisational connectedness,
with strong participation across the workforce.

Key initiatives included:

• Wellness programmes on mental and physical

health, including awareness sessions and

preventive health initiatives

• Employee recognition programmes aimed at
celebrating performance and engagement

• Organisation-wide outreach initiatives such as
"Dil Se Connect", enabling direct interaction with
employees to understand concerns and enhance
support

• Social and awareness initiatives, including road
safety campaigns and employee-led community
participation programmes

These initiatives have supported employee well-being,
strengthened organisational connect and reinforced a
positive workplace environment.

9. INFORMATION SECURITY AND CYBER SECURITY
RISK MANAGEMENT

The Bank continues to strengthen its information
security and cyber resilience framework in line with
evolving regulatory requirements and industry
best practices. The Bank has adopted a structured
cybersecurity approach based on globally recognised
frameworks, including the NIST Cybersecurity
Framework, to effectively manage technology and
cyber risks.

The Information Security function operates under
a dedicated division within the Risk Management
Department, led by the Chief Information Security
Officer (CISO), with overall oversight from the Chief Risk
Officer (CRO) and the Board of Directors. Governance
is further supported through the Information
Technology Strategy Committee of the Board and
the Executive Information Security Governance

Committee, which review the Bank's cybersecurity
posture, key risk indicators and critical incidents.

The Bank follows a structured cyber risk management
framework to identify, assess and mitigate risks across
applications, infrastructure and business processes.
Risk assessments are conducted periodically
and during key changes such as new system
implementations or upgrades, with defined mitigation
plans and continuous monitoring of residual risks.

The Bank has implemented a layered, defence-in¬
depth security architecture supported by centralised
monitoring and response mechanisms. A 24x7 Security
Operations Centre (SOC), enabled by advanced
monitoring tools, facilitates real-time threat detection
and incident response. The Bank is further enhancing
its capabilities through automation and advanced
intelligence-driven mechanisms to improve response
efficiency and strengthen threat management.

To strengthen its security posture, the Bank continues
to deploy advanced controls across its technology
environment, including network security, endpoint
protection, application security and email security
solutions. These measures provide protection against
evolving cyber threats and support secure digital
operations.

As part of its strategic transformation initiatives, the
Bank is implementing enhanced capabilities in areas
such as identity and access management, network
monitoring and anomaly detection, aimed at improving
access governance, proactive threat identification and
overall cyber resilience.

The Bank conducts regular Vulnerability Assessment
and Penetration Testing (VAPT), along with periodic
cyber drills and simulation exercises, to assess
preparedness and strengthen incident response
capabilities. In addition, robust data protection
measures, including encryption and monitoring
controls, are implemented to safeguard sensitive
information.

Operational resilience is supported through well-
defined Business Continuity Planning (BCP) and
Disaster Recovery (DR) frameworks, with periodic
testing to ensure readiness and minimise disruption
to critical operations.

The Bank is certified under ISO/IEC 27001 for
Information Security Management and PCI DSS for
payment security, and complies with applicable
regulatory guidelines issued by RBI and other
regulatory bodies.

10. BUSINESS CONTINUITY MANAGEMENT

The Bank has a Board-approved Business Continuity
Management (BCM) Policy, which is reviewed
periodically to ensure alignment with regulatory
requirements and evolving business needs. The Bank
follows a structured approach to ensure continuity of
critical operations in the event of disruptions.

As part of this framework, the Bank conducts periodic
Business Impact Analysis (BIA) to identify and prioritise
critical processes, systems and dependencies.
Based on this assessment, comprehensive Business
Continuity Plans (BCP) are maintained, incorporating
defined Recovery Time Objectives (RTO) and Recovery
Point Objectives (RPO) to minimise operational and
financial impact in the event of a disruption.

The Bank's BCP framework covers a wide range of
potential disruption scenarios, including technology
failures, network outages, cyber incidents and natural
disasters, and provides guidance on response and
recovery mechanisms across business functions,
including outsourced and business correspondent
operations.

To ensure preparedness, the Bank undertakes periodic
testing of business continuity and disaster recovery
arrangements, in line with regulatory expectations.
These exercises help assess the effectiveness of
response mechanisms and strengthen the Bank's
overall operational resilience.

The Bank has established executive-level crisis
management structures, including a Crisis
Management and Quick Response Team (CMQRT),
which is responsible for initiating immediate actions
and guiding business units during disruption situations
to ensure continuity of operations and protection of
assets.

In addition, a dedicated Cyber Crisis Management
Team (CCMT) is in place to manage cybersecurity
incidents, enabling coordinated response and
mitigation in situations where information systems or
data integrity may be compromised.

The Bank's BCM framework, supported by structured
governance, periodic testing and dedicated crisis
response mechanisms, ensures operational resilience
and continuity of critical services with minimal
disruption.

11. IMPLEMENTATION OF IND-AS

The Ministry of Finance, Government of India
("GOI"), had vide its press release dated 18^th January,
2016, outlined the roadmap for implementation of

International Financial Reporting Standards ("IFRS")
converged Indian Accounting Standards ("Ind AS") for
Scheduled Commercial Bank (excluding RRBs), NBFC
and Insurance companies. The RBI vide its circular
dated 22^nd March, 2019, deferred the implementation
of Ind AS for Scheduled Commercial Banks ("SCB") till
further notice, pending the consideration of some
recommended legislative amendments by GOI.
The RBI has not issued any further notification on
implementation of Ind AS for SCBs.

The Bank submits its Proforma Ind-AS financials on half
yearly basis to the RBI based on the GAP assessment
carried out by the Bank. The Bank is currently handling
the impact analysis and reporting offline by using excel
based models. However, the Bank is in the process of
implementing system solutions (Ind AS 109 and 116)
and hiring skilled resources to implement accounting.

12. TRANSFER TO RESERVES

As per the requirement of the regulations of Reserve
Bank of India, the Bank has transferred the following
amounts to various reserves during the Financial Year
2025-26:

13. DIVIDEND

In view of the loss incurred during the Financial Year
2025-26 and in line with the applicable regulatory
framework and the Bank's Dividend Distribution
Policy, the Board of Directors has not recommended
any dividend for the Financial Year 2025-26. The
Dividend Distribution Policy, in terms of Regulation
43A of the Securities and Exchange Board of India
(Listing Obligations and Disclosure Requirements)
Regulations, 2015 ("SEBI Listing Regulations") and as
reviewed and adopted by the Board of Directors of
the Bank, is available on the Bank's website athttps://
www.esaf.bank.in/wp-content/uploads/2025/09/
Policy-for-Dividend-Distribution.pdf.

14. CHANGE IN THE NATURE OF BUSINESS

There was no change in the nature of business of the
Bank during the Financial Year 2025-26.

15. CAPITAL AND DEBT STRUCTURE
Authorised Capital

In order to meet Bank's growth objectives, business
expansion plans and to further strengthen its capital
adequacy position, the Bank felt the need to have
adequate Authorised Capital in order to infuse
additional funds in the form of further capitalisation
and to generate long term resources by issuing
securities so as to maintain a comfortable Capital to
Risk Weighted Assets Ratio (CRAR) and to support the
Bank's future growth objectives.

Pursuant to approval of the Board of Directors of
the Bank at their meeting held on 20^th September,
2025, and in accordance with the consent of the
shareholders and other requisite approvals, the
Authorised Share Capital of the Bank was increased
from ' 600,00,00,000 (Rupees Six Hundred crore)
divided into 60,00,00,000 (Sixty crore) Equity Shares of
' 10 (Rupees Ten) each to ' 1000,00,00,000 (Rupees
One Thousand crore) divided into 100,00,00,000
(Hundred crore) Equity Shares of ' 10 (Rupees Ten)
each, by creation of additional 40,00,00,000 (Forty
crore) equity shares of ' 10 each and the consequent
alteration of its Memorandum of Association. Further,
Reserve Bank of India had vide its letter dated
13^th October, 2025, acknowledged the proposed
increase in Authorised Share Capital and consequent
amendment to be carried out in the Memorandum
of Association of the Bank, subject to compliance
with relevant statutes and circulars/ instructions/
guidelines issued by RBI from time to time.

As on 31^st March, 2026, Authorised Capital of the Bank
was ' 1000,00,00,000 (Rupees One Thousand crore)
divided into 100,00,00,000 (Hundred crore) Equity
Shares of ' 10 (Rupees Ten) each.

Paid Up Equity Share Capital

Allotment of Equity Shares pursuant to Exercise of
ESOPs.

During the Financial Year 2025-26, 2,35,161 equity
shares of ' 10 each were issued and allotted to the
eligible employees of the Bank on exercise of Options
granted under ESAF Small Finance Bank Employee
Stock Option Scheme 2019 ('ESOP 2019').

Consequent to the above, the total issued, subscribed
and paid-up share capital of the Bank as at 31 ^st
March, 2026, stands at ' 515,66,26,130/- (Rupees
Five Hundred and Fifteen crore Sixty Six lakh Twenty

Six Thousand One Hundred and Thirty) divided into
51,56,62,613 (Fifty One crore Fifty Six lakh Sixty Two
Thousand Six Hundred and Thirteen) Equity Shares
of ' 10 (Rupees Ten) each. The equity shares issued
under the above schemes rank pari-passu with the
existing equity shares of the Bank. Apart from the
above, the Bank did not raise any additional equity
share capital during the year.

Your Bank has not issued any equity shares with
differential voting rights.

The above fund raising was done to augment the Tier
II Capital of the Bank for strengthening the Bank's
capital adequacy and enhancing the Bank's long-term
resources. The Audit Committee of the Board ("ACB")
has reviewed and confirmed that the Bank has utilised
the said funds for the above-mentioned purposes.
During the Financial Year 2025-26, the Bank had
redeemed Rated, Listed, Redeemable, Unsecured
Basel III Compliant Tier II bonds in the form of Non¬
convertible Debentures aggregating to ' 40,00,00,000
(Rupees Forty crore).

16. CAPITAL ADEQUACY

Your Bank is subject to the Basel II Capital Adequacy
guidelines stipulated by the Reserve Bank of India.
The Capital Adequacy Ratio of the Bank is calculated

Debt Capital

Based on the shareholders' approval dated 14^th
August, 2024 to raise funds through private
placement of Unsecured, Rated, Redeemable Non¬
Convertible Debentures (NCDs), the Bank made
the following allotment of Listed, Rated, Taxable,
Unsecured, Transferable, Redeemable, Fully Paid Up,
Basel II Compliant Lower Tier II Subordinated Bonds
in the nature of Non-Convertible Debentures having a
face value of ' 1,00,000 (Rupees One lakh) during the
Financial Year 2025-26:
as per the standardized approach for credit risk. The
Capital Adequacy ratio of the bank as on 31^st March,
2026 is 22.22 %, as against the minimum requirement
of 15.00% stipulated by the Reserve Bank of India,
with Tier I Capital being 14.68% (of which, Common
Equity Tier 1 Capital is 14.23%) and Tier II Capital being
7.54%.

17. SUBSIDIARY, JOINT VENTURES AND ASSOCIATE
COMPANIES

The Bank does not have any subsidiary, joint ventures
and associate companies. Hence, the details of this
clause are not applicable to the Bank. Accordingly, the
Bank is also not required to formulate a specific policy
on dealing with material subsidiaries.

18. EMPLOYEE STOCK OPTION SCHEME

The Shareholders of the Bank, in the meeting held
on 03^rd January, 2020, had approved the ESAF Small
Finance Bank Employee Stock Option Plan 2019, by
way of a special resolution which also authorized
the Nomination, Remuneration and Compensation
Committee to grant up to 2,25,15,552 (Two crore
Twenty-Five lakh Fifteen Thousand Five Hundred and
Fifty-Two) Employee Stock Options to the employees,
in one or more tranches, from time to time.

The objective of the said scheme is to recognize the
contribution of the employees in formation of the
bank and to create the feeling of inclusiveness and
enable the employees to get a share in the value that
they help to create for the organization over a period
of time. The Bank strongly believes that an equity
component in the compensation goes a long way in
aligning the objectives of an individual with those of
the Bank. The objectives of ESOP 2019 are, among
others, to attract and retain employees with Employee
Stock Options as a compensation tool. Through ESOP
2019, the Bank intends to offer an opportunity of
sharing the value created with those employees who
have contributed or are expected to contribute to the
growth and development of the Bank.

Through the scheme, the Bank intends to grant
equity-based compensation to the employees in two
categories namely:

1) Loyalty Grant to reward eligible employees
for their contributions in the past tenure and
continued employment in the Bank, which is a
one-time grant and;

2) Performance Grant on the basis of employee's
annual appraisals for their future performance
and continuity of services.

20. SELECTION, APPOINTMENT AND REMUNERATION
OF DIRECTORS

In compliance with the provisions of the Banking
Regulation Act, 1949, the guidelines issued by
the Reserve Bank of India and Section 178 of the

The Nomination, Remuneration and Compensation
Committee has been entrusted with the responsibility
of administering the ESOP 2019 Scheme. As of 31^st
March, 2026, the Nomination Remuneration and
Compensation Committee of the Board granted
41,71,325 options as Loyalty Grant under the ESOP
2019 Scheme and 2,03,194 options as Performance
Grant under the ESOP 2019 Scheme, to the employees
identified under the implementation guidelines for
ESAF ESOP 2019 as per the terms of granting.

The aforesaid scheme is available on the website of
the Bank athttps://www.esaf.bank.in/wp-content/
uploads/7075/01/FSAF-Small-Finance-Bank-
Fmployee-Stock-Option-Plan-7019.pdf and are in
compliance with the SEBI (Share Based Employee
Benefits and Sweat Equity) Regulations, 2021 ("SEBI
(SBEB & SE) Regulations, 2021"), as applicable.

The relevant details of the aforesaid scheme, as
required under the SEBI (SBEB & SE) Regulations,
2021, are available on the Bank's website at https://
www.esaf.bank.in/investor-relation/?id = esop-
disclosures. These details, along with the certificate(s)
from the Secretarial Auditor, as required under the
SEBI (SBEB & SE) Regulations, 2021, stating that the
schemes have been implemented in accordance with
the SEBI (SBEB & SE) Regulations, 2021, as applicable
and also in accordance with the relevant resolution(s)
passed by the members, and will be placed before the
shareholders at the Annual General Meeting ("AGM")
and would be available for inspection by the members
during the AGM.

19. CREDIT RATING

Credit ratings assigned to various debt instruments of
the Bank during the Financial Year ended 31^st March,
2026 are as follows:

Companies Act, 2013, the Bank has formulated
and adopted a Nomination Policy for selection and
appointment/ re-appointment/ removal of Directors,
which is disclosed on our website (www.esaf.bank.
in). Through the said policy, the Bank has formulated

criteria for the appointment of directors, and based
on the said criteria, Nomination, Remuneration and
Compensation Committee of the Board (NRCCB) shall
conduct a due diligence process to determine the
suitability of every person who is being considered
for being appointed or re-appointed as a Director of
the Bank, based on the range of skills, experience,
expertise, qualifications, specialized knowledge etc. of
the candidate, and recommend his/ her appointment
to the Board. The Nomination, Remuneration and
Compensation Committee identifies potential
candidates from diverse backgrounds including, but
not limited to, Accountancy, Agriculture and Rural
Economy, Banking, Co-operation, Finance, Law,
Small Scale Industry, Economics, Human Resources,
Payment and Settlement Systems, Business
Management, Risk Management and Information
Technology, thus providing the Board with members
who have diverse knowledge, practical experience and
skills to serve the business interests of the Bank. Every
such person shall meet the 'fit and proper' criteria the
Reserve Bank of India may stipulate from time to time,
and accordingly, any appointment or re-appointment
of a Director shall be subject to prior approval by the
NRCCB of the Bank.

The key objectives of the Nomination Policy shall inter-
alia include the following:

• To guide the Board in relation to appointment,
re-appointment or removal of directors and lay
down a selection criterion for appointment of
directors.

• To ensure compliance with applicable laws, rules
and regulations including compliance to the 'Fit
and Proper criteria' of Directors at the time of
their appointment and on a continuous basis.

• To devise a policy on the size and composition
of the Board taking into account the available
and needed diversity and balance in terms of
experience, knowledge, skills and judgment of
the Directors.

During appointment/ re-appointment/ removal of
Directors of the Bank, your Bank has always ensured
that the provisions of the Companies Act, 2013,
Banking Regulation Act/ RBI Guidelines and directives
and guidelines of SEBI to the extent applicable are
adhered to. In all respects, your Bank has also kept
high standards and met the diversity, structure and
size compositions of the Board and its Committees as
prescribed in various statutes.

The NRCCB is responsible to the Board for leading

the succession planning process in respect of
appointments/ re-appointments in respect of
Directors, employees in the grade of Senior
Management and Key Managerial Personnel of the
Bank.

The Bank has accordingly obtained prescribed
declarations/ undertakings from the Directors as per
the guidelines of the Reserve Bank of India and the
same are placed before the Board of Directors for
its review and noting. An assessment on whether the
Directors fulfill the prescribed criteria is carried out
by the Nomination Remuneration and Compensation
Committee of the Board on an annual basis and also
at the time of their appointment or re-appointment.
Wherever necessary, the Nomination Remuneration
and Compensation Committee is authorized to :
engage the services of an External Consultant(s)/ '
expert in the field of succession planning, to identify
and assess the suitability of candidates for the post of \

j

a Director of the Bank. ;

The RBI, vide its circular no. RBI/DOR/2025-26/180 i
DOR.HGG.GOV.No.99/29.67.001/2025-26Reserve i
Bank of India (Small Finance Banks - Governance)
Directions, 2025 on Compensation Policy. In
accordance with the aforesaid RBI Circular, the Board
of the Bank has adopted a revised Compensation
Policy for its Whole-time Directors, Chief Executive
Officer of the Bank and other employees. The salient
feature of the Compensation Policy is as follows:

• To provide a fair and transparent structure that
helps the Bank to retain and acquire the talent
pool critical to building competitive advantage
and brand equity as a social bank focused
on social transformation and community
development.

The Nomination Policy is available in the website of
the Bank athttps://www.esaf.bank.in/wp-content/
uploads/2026/03/Nomination-Policy.pdf.

21. BOARD OF DIRECTORS

The composition of the Board of Directors of the
Bank is governed by the Companies Act, 2013,
the Banking Regulation Act, 1949 and SEBI Listing
Regulations and is in conformity with the same. As of
31 ^st March, 2026, the Board of Directors comprised
a combination of Eight directors out of which there
were Five Independent Directors including a Woman
Independent Director, One Non-Executive Director
and Two Executive Directors. The size of the Board

is commensurate with the size and business of the
Bank. The Board meets the criteria prescribed under
Section 10(A)(2) of the BR Act and the circulars issued
by the RBI from time to time. The Board mix provides
a combination of professionalism, knowledge,
experience and skills required in the banking industry
and also meets the criteria prescribed under the
Nomination Policy adopted by the Board.

Retirement of Director by Rotation

Section 152 of the Act provides that two-thirds of the
total number of directors are liable to retire by rotation
out of which one-third shall retire from office at every
Annual General Meeting. In terms of Section 149(13),
the provisions of retirement of Directors by rotation
shall not be applicable to Independent Directors and
an Independent Director shall not be included in the
total number of Directors liable to retire by rotation.
Shri. George Ittan Maramkandathil (DIN: 11193648),
Non-Executive Director of the Bank, who retires by
rotation as Director, at the conclusion of this Annual
General Meeting is proposed to be re-appointed and
has offered himself for re-appointment.

Change in Directors during the Financial Year
2025-26

• Retirement of Dr. Joseph Vadakkekara Antony
as the Non-Executive Director of the Bank

Dr. Joseph Vadakkekara Antony (DIN: 00181554),
Non-Executive Director of the Bank, retired from
his directorship on completion of his term on 17^th
November, 2025. The Board of Directors of the
Bank placed on record their appreciation for the
valuable contributions by Dr. Joseph Vadakkekara
Antony during his tenure as Director of the Bank.

• Retirement of Shri. Ravi Venkatraman as the
Non-Executive Independent Director of the
Bank

Shri. Ravi Venkatraman (DIN: 00307328), Non¬
Executive Independent Director of the Bank,
retired from his directorship on completion of
his term on 12^th December, 2025. The Board
of Directors of the Bank placed on record their
appreciation for the valuable contributions by
Shri. Ravi Venkatraman during his tenure as
Director of the Bank.

• Retirement of Shri. Ajayan Mangalath

Gopalakrishnan Nair as the Non-Executive
Nominee Director of the Bank

Shri. Ajayan Mangalath Gopalakrishnan Nair (DIN:
09782416), Non-Executive Nominee Director
of the Bank, retired from his directorship on
completion of his term on 12^th December,
2025. The Board of Directors of the Bank
placed on record their appreciation for the
valuable contributions by Shri. Ajayan Mangalath
Gopalakrishnan Nair during his tenure as
Director of the Bank.

• Retirement of Shri. John Samuel as the Non¬
Executive Nominee Director of the Bank

Shri. John Samuel (DIN: 07725212), Non¬
Executive Nominee Director of the Bank, retired
from his directorship on completion of his term
on 12^th December, 2025. The Board of Directors
of the Bank placed on record their appreciation
for the valuable contributions by Shri. John
Samuel during his tenure as Director of the Bank.

• Re-appointment of Ms. Kolasseril
Chandramohanan Ranjani as Non-Executive
Independent Director of the Bank

Based on the recommendations of the
Nomination Remuneration and Compensation
Committee of the Board and the Board of
Directors and the results of the Performance
Evaluation, the Shareholders through Postal
Ballot on 12^th December, 2025 approved the re¬
appointment of Ms. Kolasseril Chandramohanan
Ranjani (DIN: 01735529) as Non-Executive
Independent Director of the Bank for a period
of three consecutive years with effect from 13^th
December, 2025.

• Retirement of Shri. Ravimohan Periyakavil
Ramakrishnan as Part Time Chairman and
Non-Executive Independent Director of the
Bank

Shri. Ravimohan Periyakavil Ramakrishnan (DIN:
08534931), who was the Part Time Chairman and
Non-Executive Independent Director of the Bank,
retired from the directorship on completion of
his two terms of appointment on 20^th December,
2025. The Board of Directors of the Bank placed
on record their appreciation for the valuable
contributions by Shri. Ravimohan Periyakavil
Ramakrishnan during his tenure as the Director
of the Bank.

• Appointment of Shri. Karthikeyan Manickam
as Part Time Chairman and Non-Executive
Independent Director of the Bank

Based on the recommendations of the
Nomination Remuneration and Compensation
Committee of the Board and the Board of
Directors, the Shareholders through Postal
Ballot on 12^th December, 2025, approved the
appointment of Shri. Karthikeyan Manickam (DIN:
09450145) as a Non-Executive Independent
Director on the Board of the Bank for a period of
three consecutive years commencing from 21^st
December, 2025. He assumed as the Part-Time
Chairman of the Bank on 21^st December, 2025.

• Appointment of Shri. Ajay Sharma as Non¬
Executive Independent Director of the Bank
Based on the recommendations of the
Nomination Remuneration and Compensation
Committee of the Board and the Board of
Directors, the Shareholders through Postal
Ballot on 12^th December, 2025, approved the
appointment of Shri. Ajay Sharma as the Non¬
Executive Independent Director of the Bank, for
a period of three consecutive years with effect
from 21^st December, 2025.

• Retirement of Shri. Thomas Jacob Kalappila
as the Non-Executive Independent Director
of the Bank

Shri. Thomas Jacob Kalappila (DIN: 00812892),
Non-Executive Independent Director of the Bank,
retired from his directorship on completion of
his two terms on 09^th March, 2026. The Board
of Directors of the Bank placed on record their
appreciation for the valuable contributions by
Shri. Thomas Jacob Kalappila during his tenure
as Director of the Bank.

Familiarisation Programme

Complying with SEBI Listing Regulations, provisions
of the Companies Act, 2013 and the RBI guidelines,
Familiarization Programmes were conducted during
the Financial Year 2025-26 to give an overview and
introduction to the Independent Directors about the
Bank's business and operations.

Under this programme, newly appointed directors are
appraised of the organization structure, operational
overview, financial overview, board matters and
procedures, key risk issues and its mitigation strategy,
among others.

Further, all the newly appointed Board Members
undergo a face-to-face induction schedule where the
Bank's Management Team provides insights about the
affairs of their function and of the Bank as a whole.
The details of the familiarization programme imparted
to Independent Directors are available on the website
of the Bank athttps://www.esaf.bank.in/wp-content/
uploads/2026/05/Familiarisation-Programme-for-
Independent-Directors-1.pdf.

22. EVALUATION OF PERFORMANCE OF THE BOARD
OF DIRECTORS

In accordance with the provisions of Section 149(8)
read with Schedule IV, Section 178(2) of the Act,
Regulation 17 and other applicable Regulations of SEBI
Listing Regulations, and in consonance with Guidance
Note on Board Evaluation issued by the SEBI, the
Board has formulated a Performance Evaluation
Policy including a questionnaire for performance
evaluation of the Individual Directors, Committees of
the Board, Chairman, Managing Director and CEO and
the Board as a whole. The questionnaire designed for
the performance evaluation covering various aspects
of performance, including structure of the Board,
meetings of the Board, functions of the Board, role
and responsibilities of the Board, governance and
compliance, evaluation of risks, grievance redressal
for investors, conflict of interest, stakeholder value
and responsibility, relationship among directors,
director competency, Board procedures, processes,
functioning and effectiveness, was circulated to all
the directors of the Bank for the annual performance
evaluation. The appraisal of each of the Directors of
the Bank is done based on the evaluation conducted
with a set of pre-determined evaluation factors.

The performance evaluation of the Board of Directors,
Committees of the Board and individual Directors were
conducted during the Financial Year. The Board and
the Nomination, Remuneration and Compensation
Committee of the Board reviewed the performance of
the Individual Directors and noted that the results of
the performance evaluation indicated a high degree
of satisfaction among directors.

The Policy on Performance Evaluation of Board,
Sub-Committees of the Board and directors is
available on the website of the Bank athttps://www.
esaf.bank.in/wp-content/uploads/2025/02/Policy-
on-Performance-Evaluation-of-the-Board-Sub-
Committees-of-the-Board-and-the-Directors-of-the-
Bank.pdf.

23. CODE OF CONDUCT FOR DIRECTORS AND SENIOR
MANAGEMENT PERSONNEL

In accordance with Regulation 17(5) of SEBI LODR
Regulations, the Bank has adopted the Code of
Conduct for Directors and Senior Management
Personnel. The code of conduct sets forth the guiding
principles for orderly and fair conduct by Directors
and SMPs. All Directors and SMPs have affirmed the
compliance of the code for the Financial Year 2025¬
26 and a declaration to this effect signed by the
Managing Director and CEO forms part of Report on
Corporate Governance. The Bank's Code of Conduct
for Directors and SMPs is disclosed on the website
of the Bank athttps://www.esaf.bank.in/pdf/policies/
other-disclosures/Code-of-Conduct-for-Directors-
and-Senior-Management-v1.pdf

24. DECLARATION FROM INDEPENDENT DIRECTORS

The Board has received declarations from the
Independent Directors as required under Section
149(7) of the Companies Act, 2013, and the Board
is satisfied that the Independent Directors meet the
criteria of independence as mentioned in Section
149(6) of the Companies Act, 2013 and Regulation
16(1) (b) of SEBI Listing Regulations and that they have
complied with the code of conduct for independent
directors as prescribed under Schedule IV of the
Companies Act, 2013.

In the opinion of the Board, all the Independent
Directors meet the criteria with regards to integrity,
expertise and experience as required under applicable
laws.

All Independent Directors of the Bank have registered
themselves in the data bank as specified under
Section 150 of the Companies Act, 2013, read with
Rule 6 of Companies (Appointment and Qualifications
of Directors) Rules, 2014 and have qualified the
prescribed proficiency test. The Independent Directors

(not exempted under the Companies (Appointment
and Qualification of Directors) Fifth Amendment
Rules, 2020 as notified on 18^th December, 2020)
have qualified the online proficiency self-assessment
as required under the aforesaid rule within the
prescribed timeline.

The terms and conditions of appointment of
Independent Directors are available on the website of
the Bankhttps://www.esaf.bank.in/pdf/policies/other-
disclosures/Terms%70and%70conditions%70of%70
appointment%70of%70Independent-Directors.pdf.

25. DIRECTORS AND OFFICERS LIABILITY INSURANCE
POLICY

The Bank has a Directors and Officers Liability
Insurance Policy which protects Directors and Officers
of the Bank from any breach of fiduciary duty.

26. CORPORATE GOVERNANCE

The Bank is committed to achieving and adhering to
the highest standards of Corporate Governance and it
consistently benchmarks itself with the best practices
in this regard. A report on Corporate Governance for
the Financial Year 2025-26 has been annexed to the
Annual Report.

27. MEETINGS OF THE BOARD

The Board of Directors met Twelve (12) times during
the Financial Year 2025-26.

The meetings of the Board of Directors were convened
in accordance with applicable laws and standards and
the intervening gap between the said meetings did
not exceed 120 days. The details of Board Meetings
and details of attendance of each director have been
disclosed in the Corporate Governance Report which
forms part of the Annual Report of the Bank for the
Financial Year 2025-26. During the year, Dr. Vinod
Vijayalekshmi Vasudevan had sought leave of absence
from Two (2) meetings of the Board of Directors.

30. INTERNAL FINANCIAL CONTROLS

The Board of Directors confirms that your Bank has
laid down a set of standards, processes and structures
which enable it to implement internal financial controls
across the organisation with reference to Financial
Statements and that such controls are adequate
and are operating effectively. The Internal Financial
Control framework of the Bank ensures that:

• Internal Financial Controls are established for
critical and material processes handled by the
Bank.

• Draw up recommendations based on good
practices to develop or strengthen the internal
control systems.

• Ensure that, the IFCs are adequate and operating
effectively, by periodic review and testing.

• Periodic reporting of the status to the Audit
Committee of the Board.

• The existence and adequacy of IFCs is
demonstrated to various internal and external
stakeholders.

The Internal Audit Department of the Bank has tested
each of the controls and during the year under review,
there are no material or serious observations of
inefficiency or inadequacy of such controls.

31. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134(3) of the Companies Act,
2013, the Board of Directors hereby declare and
confirm to the best of their knowledge and belief that:

i) in the preparation of the annual accounts for
the year ended 31^st March, 2026, the applicable
accounting standards had been followed along
with proper explanation relating to material
departures;

ii) such accounting policies as specified in Schedule
III to the Financial Statements have been selected
and applied consistently and judgements and
estimates have been made that are reasonable
and prudent so as to give a true and fair view of
the state of affairs of the Bank as at 31^st March,
2026 and of the profit of the Bank for the year
ended on that date;

iii) proper and sufficient care has been taken for
maintenance of adequate accounting records in
accordance with the provisions of the Companies
Act, 2013 for safeguarding the assets of the Bank
and for preventing and detecting frauds and
other irregularities;

iv) annual accounts have been prepared on a going
concern basis;

v) internal financial controls to be followed by the
Bank were in place and that the same were
adequate and were operating effectively, and

vi) proper system to ensure compliance with the
provisions of all applicable laws was in place and
the same was adequate and operating effectively.

32. ENVIRONMENT SOCIAL AND GOVERNANCE
PRACTICES AND CORPORATE SOCIAL
RESPONSIBILITY

The Bank remains committed to integrating
Environmental, Social and Governance ("ESG")
principles into its strategy, operations and decision¬
making processes, with the objective of ensuring
sustainable growth while balancing the interests of
its stakeholders, including shareholders, employees,
customers, communities, regulators and the
environment.

During the year under review, the Bank continued
to strengthen its sustainability governance
framework through oversight by the Corporate
Social Responsibility and Sustainability Committee
of the Board, supported by the ESG Management
Committee and the Sustainability Council. The Bank
also undertook initiatives to embed SDG-linked ESG
metrics across key departments and reviewed its
sustainability-related policy framework to ensure
consistency, clarity and effective governance.

In line with regulatory guidance issued by the Reserve
Bank of India on assessment and management of
climate-related financial risks, the Bank initiated steps
to integrate climate-risk considerations into its overall
risk management framework. The Bank commenced a
climate-risk assessment project during the year, with
appropriate governance structures, internal oversight
mechanisms and defined milestones.

The Bank has received ISO 26000:2010 certification
for social responsibility, covering areas such
as community engagement and development,
environmental stewardship, human rights, labour
practices, consumer protection, fair operating
practices and organisational governance. Further,
the Bank's ESG score assigned by CareEdge ESG
Ratings was upgraded to 75.4, placing the Bank in the
CareEdge-ESG 1 category.

The Bank continued to undertake initiatives in
financial inclusion, livelihood promotion, education,
healthcare, water and sanitation, environmental
sustainability, diversity, equity and inclusion, and
community development. During the year, the Bank
conducted various ESG-focused awareness and
community engagement programmes, including
initiatives around environmental conservation,
financial literacy, responsible consumption, inclusive
banking and social banking. The Bank also observed

Corporate Social Responsibility

The Bank has adopted a Board-approved Corporate
Social Responsibility Policy in accordance with
Section 135 of the Companies Act, 2013, read with
the Companies (Corporate Social Responsibility
Policy) Rules, 2014, as amended from time to time.
The CSR Policy sets out the Bank's approach towards
undertaking CSR activities in areas including financial
inclusion, livelihood promotion, education, healthcare,
water and sanitation, environmental sustainability and
other activities specified under Schedule VII to the
Companies Act, 2013. The CSR Policy is available on
the Bank's website at https://www.esaf.bank.in/wp-
content/uploads/2025/08/CSR-Policy.pdf.

The Corporate Social Responsibility Committee of
the Board reviews and recommends the CSR Policy,
annual action plan, CSR projects, expenditure and
monitoring mechanism to the Board. Based on the
recommendations of the Committee, the Board
approved the CSR projects and CSR expenditure for
the financial year under review.

As a voluntary commitment towards inclusive and
sustainable development, the Bank allocates 5% of
its average net profits, computed in accordance with
Section 135 of the Companies Act, 2013, towards CSR
activities, as against the statutory requirement of 2%.
During the financial year 2025-26, the Bank
undertook CSR projects directly and / or through
eligible implementing agencies, in accordance with
Section 135 of the Companies Act, 2013 and the
thematic programmes such as Environment Week,
Balajyothi Week, Vayojyoti Week, Financial Literacy
Week and Banking on Values Week, aimed at engaging
employees, customers and communities across
different segments. These programmes supported
the Bank's broader objective of promoting sustainable
practices, financial inclusion, customer awareness
and values-based banking.

applicable CSR Rules. The Bank's CSR initiatives during
the year focused on financial inclusion, livelihood
promotion, education, healthcare, water and
sanitation, development of collective enterprises and
environmental sustainability.

For the Financial Year 2025-26, the Bank was
required to spend ' 2,34,82,404/- towards CSR
activities. Against this requirement, the Bank spent
' 5,87,00,000/- during the year. The unspent amount
of ' 4,51,32,000/-, relating to ongoing projects,
was transferred to the Unspent Corporate Social
Responsibility Account within the prescribed timeline,
in accordance with Section 135(6) of the Companies
Act, 2013.

The Annual Report on CSR Activities, containing the
composition of the CSR Committee, brief outline of the
CSR Policy, details of CSR projects, CSR expenditure,
unspent amount, implementing agencies and other
prescribed particulars, is annexed to this Report as
Annexure I.

33. BUSINESS RESPONSIBILITY AND SUSTAINABILITY
REPORT

During the year, the Bank continued to strengthen
its ESG framework through responsible governance
practices, sustainable banking initiatives, prudent
environmental management, financial inclusion,
women empowerment, community development,
employee well-being, and transparent sustainability
disclosures. Guided by its triple-bottom-line

philosophy, the Bank also advanced its Business
Responsibility and Sustainability Reporting (BRSR)
framework and ESG performance monitoring, ESG
governance framework through Board oversight,
implementation of its ESG Roadmap, reaffirming
its commitment to creating long-term value for all
stakeholders.

BRSR for Financial Year 2025-26 is a part of the
Annual Report of the Bank and is also available on the
Bank's website at https://www.esaf.bank.in/investor-
relation/?id=annual-reports.

34. DISCLOSURE UNDER THE SEXUAL HARASSMENT
OF WOMEN AT WORKPLACE (PREVENTION,
PROHIBITION AND REDRESSAL) ACT, 2013

The Bank continues with the belief of zero tolerance
towards sexual harassment in the workplace and
continues to uphold and maintain itself as a safe and
non-discriminatory organization. To achieve the same,
the Bank reinforces the understanding and awareness
of The Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013
("POSH"). The Bank has in place, a policy in line with the
requirements of the Sexual Harassment of Women at
Workplace (Prevention, Prohibition and Redressal)
Act, 2013 and an Internal Complaints Committee has
been set up for redressal of complaints. Any complaint
pertaining to sexual harassment is diligently reviewed
and investigated, and treated with great sensitivity.
The Internal Committee members have been trained
in handling and resolving complaints and have also
designed an online e-learning POSH Awareness
module, which covers the larger employee base.
During the Financial Year 2025-26, 4 (Four) complaints
were received and the same was disposed of. There
were no complaints pending for a period exceeding
ninety days.

Maternity Benefit Act, 1961

The Bank confirms compliance with the provisions
of the Maternity Benefit Act, 1961, to the extent
applicable to its employees.

35. OVERALL REMUNERATION

The information required pursuant to Section 197
read with Rule 5(1) of the Companies (Appointment
and Remuneration of Managerial Personnel) Rules,
2014, in respect of Directors / employees of the Bank,
is attached as Annexure II to this report.

36. WHISTLE BLOWER POLICY/ VIGIL MECHANISM

The Bank has implemented a vigil mechanism through
the adoption of a Whistle Blower and Protected
Disclosure Policy in compliance with the relevant
provisions of the Companies Act, 2013 and rules
thereunder. The Bank provides an opportunity to
employees, vendors and directors to raise concerns
relating to fraud, malpractice or any other activity
or event which is against the interest of the Bank
or society as a whole. The details of Whistle Blower
complaints received and subsequent action taken
and the functioning of the Whistle Blower mechanism
are reviewed periodically by the Audit Committee
of the Board. During the Financial Year 2025-26, 17
complaints were received under the Whistle Blower
Mechanism. The functioning of the mechanism is
reviewed by the Audit Committee from time to time.
No employee of the Bank has been denied access
to the Audit Committee for raising a whistle blower
complaint.

To demonstrate our commitment to combating
corruption, bribery, and money laundering, we
have implemented targeted initiatives across critical
domains such as the Prevention of Corruption
Act, Know Your Customer (KYC) and Anti-Money
Laundering (AML) regulations. These initiatives include
comprehensive training for our employees on anti¬
corruption, anti-bribery, and anti-money laundering
practices.

The policies are available on the official website of
the Bank athttps://www.esaf.bank.in/wp-content/
uploads/2025/04/Whistle-Blower-Policy-V-8.0.pdf
and https://www.esaf.bank.in/pdf/policies/KYC%20
AML%20CFT%20Policy%20Extracts.pdf

37. CODE OF CONDUCT TO REGULATE, MONITOR
AND REPORT INSIDER TRADING

The Bank has in place, a Policy for Monitoring Insider
Trading which inter alia acts as the Code of Conduct
to Regulate, Monitor and Report ("Code") insider
trading in the securities of the Bank and the Code
of Practices and Procedures for Fair Disclosure of
Unpublished Price Sensitive Information ("UPSI").
The Code, inter alia, prohibits dealing in securities by
insiders while in possession of UPSI. The said Code
has been amended, from time to time, to give effect
to the various notifications/circulars of the Securities
and Exchange Board of India ("SEBI") with respect to
the SEBI (Prohibition of Insider Trading) Regulations,
2015. The Policy for Monitoring of Insider Trading is
available on the Bank's website athttps://www.esaf.

bank.in/wp-content/uploads/707 5/07/Policy-for-
Monitoring-of-Insider-Trading.pdf.

38. STATUTORY AUDITORS

In accordance with the 'Guidelines for Appointment of
Statutory Central Auditors (SCAs)/Statutory Auditors
(SAs) of Commercial Banks (excluding RRBs), UCBs
and NBFCs (including HFCs)' dated April 27, 2021 ("RBI
Guidelines") issued by RBI, Banks shall appoint the
Statutory Auditors for a continuous period of three
(3) years, subject to the firms satisfying the eligibility
norms each year and the approval of RBI on an annual
basis.

Based on the approval of Reserve Bank of India vide
letter No. Ref CO.DOS.RPD.No. S503/ 08.61.005/2025-
26 dated 21^st April, 2025, the Shareholders of the
Bank in the 09^th Annual General Meeting held on 24^th
September, 2025 had appointed M/s. Sundaram &
Srinivasan, Chartered Accountants (Firm Registration
Number: 004207S) as the Joint Statutory Auditors of
the Bank for a period of three financial years who will
hold office from the conclusion of the 09^th Annual
General Meeting till the end of the 12^th Annual General
Meeting of the Bank, subject to the approval of the
Reserve Bank of India to be obtained by the Bank for
the Financial Year 2026-27 and Financial Year 2027¬

28. Since the asset size of the Bank is above the said
limit, the Bank is required to appoint Joint Statutory
Auditors and has presently appointed M/s. Kirtane
and Pandit LLP and M/s. Sundaram & Srinivasan,
as Joint Statutory Auditors, wherein M/s. Kirtane &
Pandit LLP will be completing their tenure of three
years upon conclusion of the ensuing Annual General
Meeting of the Bank and they will not be eligible to be
appointed further.

The Board at its meeting held on 27^th February, 2026
approved the eligibility of existing Statutory Auditors
M/s. Sundaram & Srinivasan, Chartered Accountants,
Mumbai, FRN 004207S for holding of office for the
2026-27 and appointment of new Statutory Auditors
by providing first preference to M/s. Rodi Dabir and
Co, Chartered Accountants, Nagpur, FRN108846W
for three years respectively, and has directed to seek
approval of Reserve Bank of India (RBI). In accordance
with the same, approval from RBI vide letter dated
03^rd May, 2026 was sought. RBI vide letter dated 12^th
May, 2026 accorded the approval for appointment of
M/s. Sundaram & Srinivasan, Chartered Accountants,
Mumbai, FRN 004207S and M/s. Rodi Dabir and Co,
Chartered Accountants, Nagpur, FRN108846W as the
joint statutory auditors of our Bank for 2026-27 for
their second and first year respectively.

Based on recommendation of Audit Committee of
the Bank and the approval of Reserve Bank of India
(RBI) vide their letter no. S1041/08.61.005/2026-27
dated 12^th May, 2026, the Board of Directors, subject
to approval of the Shareholders and prior approval
of the Reserve Bank of India (RBI) every year, had
proposed the appointment of M/s. Rodi Dabir and
Co, Chartered Accountants, Nagpur, FRN108846W as
Joint Statutory Auditors of the Bank from 2026-2027
for a period of 3 years . Accordingly, the proposal for
their appointment is being placed in the ensuing 10^th
Annual General Meeting.

The Statutory Auditors have confirmed their eligibility
under Section 141 of the Act and as per the guidelines
issued by RBI from time to time. Further, as required
under the relevant provisions of SEBI Listing
Regulations, the Statutory Auditors had also confirmed
that they had subjected themselves to the peer review
process of the Institute of Chartered Accountants of
India ("ICAI") and they hold a valid certificate issued by
the Peer Review Board of ICAI.

39. SECRETARIAL AUDITOR

Pursuant to the provisions of Section 204 of
the Companies Act, 2013, and the Companies
(Appointment and Remuneration of Managerial
Personnel) Rules, 2014 and Regulation 24A of SEBI
LODR Regulations, 2015, the shareholders of the
Bank in the 9^th Annual General Meeting held on
24^th September, 2025, had appointed M/s. SEP and
Associates, (Firm Registration No: P2019KE075600),
Company Secretaries, Ernakulam, as the Secretarial
Auditor of the Bank for conducting Secretarial Audit
for the Financial Year 2025-26 to 2029-2030, i.e., till
the conclusion of the 14^th Annual General Meeting of
the Bank.

The Secretarial Audit Report does not contain any
qualification, reservation or adverse remark and the
report for the Financial Year 2025-26 is enclosed
herewith as Annexure - III. The Bank has complied with
the Secretarial Standards i.e., SS-1 and SS-2, relating
to 'Meetings of the Board of Directors' and 'General
Meetings', respectively, as specified by the Institute
of Company Secretaries of India and notified by the
Ministry of Corporate Affairs under Section 118(10) of
the Companies Act, 2013.

In terms of the provisions of the SEBI Listing
Regulations, your Bank has submitted the Annual
Secretarial Compliance Report for FY 2025-26 to
the Stock Exchanges within the prescribed time
and the same is available on websites of BSE (www.
bseindia.com), NSE (www.nseindia.com) and on the
Bank's website at https://www.esaf.bank.in/investor-
relation/?id=secretarial-compliance-report

40. PARTICULARS OF CONTRACT OR ARRANGEMENTS
WITH RELATED PARTIES

During the year, your Bank has not entered into
any materially significant transaction with its related
parties, which could lead to a potential conflict of
interest between the Bank and these parties. All the
related party transactions that were entered into
during the year were on an arm's length basis and
in the ordinary course of business. Hence, pursuant
to Section 134(3)(h) of the Act read with Rule 8(2)
of the Companies (Accounts) Rules, 2014, there are
no related party transactions to be reported under
Section 188(1) of the Act and disclosure in Form AOC-
2 is not applicable to the Bank.

The Bank has a Board approved 'Related Party
Transaction Policy'. The same is available on the Bank's
website athttps://www.esaf.bank.in/wp-content/
uploads/2026/02/Related-Party-Transaction-Policy-1.
pdf.

41. ANNUAL RETURN

Pursuant to the provisions of Section 134(3) (a)
and Section 92(3) of the Act read with Rule 12(1) of
the Companies (Management and Administration)
Rules, 2014, the Annual Return of the Bank for
the Financial Year 2025-26 will be hosted on the
bank's website at https://www.esaf.bank.in/investor-
relation/?id=annual-return.

42. DETAILS IN RESPECT OF FRAUDS, IF ANY,
REPORTED BY AUDITORS:

There were no frauds reported by the Statutory
Auditors for the Financial Year 2025-26.

43. STATUTORY DISCLOSURES

None of the Directors of the Bank are disqualified as
per provisions of Section 164(2) of the Companies
Act, 2013. The Directors have made necessary
disclosures, as required under various provisions of
the Companies Act, 2013, Securities and Exchange
Board of India Regulations and guidelines of Reserve
Bank of India.

44. PARTICULARS REGARDING CONSERVATION
OF ENERGY, TECHNOLOGY ABSORPTION AND
FOREIGN EXCHANGE EARNINGS AND OUTGO
PURSUANT TO SECTION 134 (3) (Q) OF THE
COMPANIES ACT, 2013 READ WITH RULE 8(3) OF
THE COMPANIES (ACCOUNTS) RULES, 2014

i) Particulars relating to conservation of energy and
technology absorption are not material to banking
operations. However, the Bank continues to
undertake various initiatives aimed at improving
energy efficiency, optimising resource utilisation

and reducing its environmental footprint across
its offices, branches and operational locations.
Details of the same are available in the BRSR
section of the Integrated Annual Report for
2025-26 and is also available on the Bank's
website at https://www.esaf.bank.in/investor-
relation/?id=annual-reports.

The Bank has used information technology
extensively in its operations as detailed in the
para on 'Technology and Digitisation'.
ii) Foreign Exchange earnings and outgo are part
of the normal banking business of your Bank.
During the Financial Year 2025-26, the Bank had
foreign currency expenditure of ' 71,59,689.13/-
and foreign currency earnings of ' 14,38,028.98/-
during the period.

45. DETAILS OF APPLICATION MADE OR PROCEEDING
PENDING UNDER INSOLVENCY AND BANKRUPTCY
CODE 2016

During the year under review, there were no
applications made nor proceedings pending in the
name of the Bank under the Insolvency Bankruptcy
Code, 2016.

46. DETAILS OF DIFFERENCE BETWEEN VALUATION
AMOUNT ON ONE TIME SETTLEMENT AND
VALUATION WHILE AVAILING LOAN FROM
BANKS AND FINANCIAL INSTITUTIONS

During the year under review, the Bank has not
entered into any one-time settlement in respect
of loans taken from banks or financial institutions.
Accordingly, the disclosure of details of difference
between the valuation amount at the time of one-time
settlement and the valuation while availing such loans
is not applicable.

47. MATERIAL CHANGES AND COMMITMENTS
AFFECTING FINANCIAL POSITION OF THE BANK

There have been no material changes and
commitments between the end of the Financial Year
2025-26 and the date of this report, affecting the
financial position of the Bank.

48. EXPLANATIONS OR COMMENTS BY THE BOARD
ON EVERY QUALIFICATION, RESERVATION OR
ADVERSE REMARK OR DISCLAIMER MADE IN
THE STATUTORY AUDITOR'S REPORT OR IN THE
SECRETARIAL AUDIT REPORT

The Statutory Auditors' Report on the financial
statements of the Bank and the Secretarial Audit
Report for the financial year under review do not
contain any qualification, reservation or adverse
remark.

49. INFORMATION ABOUT THE FINANCIAL
PERFORMANCE/ FINANCIAL POSITION OF THE
SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE
COMPANIES

The Bank does not have any subsidiaries, associates
or joint venture companies.

50. DEPOSITS

Being a Banking Company, the disclosures required
as per Rule 8(5)(v) and (vi) of the Companies Accounts
Rules, 2014, read with Section 73 and 74 of the
Companies Act, 2013, are not applicable to your Bank.

51. LOANS / GUARANTEES / INVESTMENTS

Being a Banking Company, the provisions of Section
186 of the Companies Act, 2013 is not applicable.

52. COST RECORDS

The Bank is not required to maintain cost records
as specified by the Central Government under sub¬
section (1) of Section 148 of the Companies Act, 2013.

53. SIGNIFICANT AND MATERIAL ORDERS

In accordance with Rule 8(5)(vii) of the Companies
(Accounts) Rules, 2014, there have been no significant
and material orders passed by the regulators or
courts or tribunals impacting the going concern status
and the future operations of the Bank.

Acknowledgement

The Directors place on record their sincere
appreciation for the guidance and support received
from the Reserve Bank of India, Government of India,

54. DISPATCH OF ANNUAL REPORT

The MCA has issued General Circular No. 20/2020
dated 05^th May, 2020 read with other relevant
circulars, including General Circular No. 10/2022
dated 28^th December, 2022 and applicable circulars/
notifications issued by SEBI relaxing the requirement
of dispatching physical copies of the Annual Report
and the Notice convening the AGM to Shareholders.
Members who wish to have a physical copy may write
to the Company Secretary of the Bank at investor.
relations@esafbank.com or submit a written request
to the Registered Office of the Bank. In accordance
with the aforesaid circulars, the web link of the Annual
Report and the Notice convening the AGM of the Bank
is being sent in electronic mode only to members
whose e-mail address is registered with the Bank or
the Depository Participant(s). Those members, whose
email address is not registered with the Bank or with
their respective Depository Participant(s) and who
wish to receive the Notice of the AGM and the Annual
Report for the financial year ended 31^st March, 2026,
can get their email address registered by following the
steps as detailed in the Notice convening the AGM.
The Annual Reports of your Bank are available on the
Bank's website at https://www.esaf.bank.in/investor-
relation/?id=annual-reports.

other government and regulatory authorities, banks,
financial institutions and other stakeholders.

The Directors also acknowledge the continued support
and guidance received from M/s. ESAF Financial

Holdings Private Limited, the Corporate Promoter of
the Bank.

The Directors express their sincere gratitude to the
Bank's valued customers and clients for their continued

trust and patronage. The Board further places on
record its deep appreciation for the commitment,
dedication and contribution of all employees of the
Bank towards the growth and progress of the Bank.

For and on behalf of the Board of Directors

Sd/- Sd/-

Shri. Karthikeyan Manickam Dr. Kadambelil Paul Thomas

DIN:09450145 DIN:00199925

Chairman Managing Director and CEO

Date: 30^th April 2026
Place: Thrissur