Key Performance Highlights

On a Standalone basis, Loss After Tax of the Bank was
' 5,214 million in Financial Year 2024-25 compared to
Profit after tax of Rs. 4,256 million in Financial Year
2023-24. Interest Income of the Bank for the Financial
Year 2024-25 was ' 38,622 million as against ' 38,186
million in Financial Year 2023-24 marking a growth
of around 1.14%. Further, the Bank had Capital and
Reserves of ' 19,450 million as on March 31, 2025
(? 24,861 million as on March 31, 2024). The book
value per Equity Share was at ' 37.74 as on March
31, 2025 (? 48.29 as on March 31, 2024). Analysis of
the Bank's performance is covered in detail in the
Management Discussion and Analysis section of the
Annual Report.

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 18th April, 2007 and
Accounting Standard 17 (AS 17) - 'Segment Reporting'.

3. Business Overview

Micro Assets

The Micro Assets product vertical of the Bank is set
up with the objective of providing quality banking
services to the unbanked and underbanked through

doorstep banking services. In order to provide high-
touch customer service, the Micro Asset business of
the Bank is delivered through Micro Banking Channel
and through dedicated Business Correspondents
(BCs). Micro assets loans are given to individuals of a
group or to individuals without a group for any income
generation activity, to set up, expand their own or
their family members' micro or small businesses, or
meet any other household needs for improving the
quality of life.

During the Financial Year 2024-25, the Bank continued
to focus on expanding its outreach and deepening its
presence in the underserved and financially excluded
segments through its micro banking and allied lending
products. As on 31st March, 2025, the Bank had a total
of 32,88,736 active micro banking borrowers, with
a loan book outstanding of ' 88,566 million. During
the year, the Bank disbursed loans aggregating to
' 52,453 million under various microloan products,
demonstrating its continued commitment to
promoting inclusive financial growth.

The micro banking operations were expanded into new
geographies, including the states of Andhra Pradesh,
Telangana, and Sikkim, in addition to deepening reach
in the existing operational areas. This expansion
was supported by onboarding additional Business
Correspondents (BCs), enhancing last-mile delivery
and customer service capabilities.

The microfinance sector faced notable stress during
the Financial Year 2024-25, arising from regional over¬
leverage and localised disruptions, which impacted
borrower repayment behaviour in select geographies.
These challenges were further compounded by socio¬
political developments in certain states, leading to
elevated credit risk in specific pockets. In response,
and in alignment with the advisory framework issued
by the Microfinance Institutions Network (MFIN), the
Bank adopted a conservative approach to growth
in the micro banking segment. Guardrails were
introduced to enhance borrower-level assessment,
restrict exposure in stressed regions, and reinforce
ethical and compliant lending and collection practices.
As a result of these calibrated measures, the overall
size of the Bank's micro banking portfolio moderated
during the year, reflecting a deliberate and risk¬
conscious business strategy.

As a strategic step towards enhancing control over
operations and improving risk oversight, the Bank
decided during the year to directly manage a portion
of its microloan portfolio that was previously serviced

through one of its Business Correspondents. This
transition was primarily aimed at reducing the Bank's
concentration risk arising from reliance on a single
Business Correspondent and ensuring greater
resilience in field-level execution.

As part of this transition, 5,109 employees of the
Business Correspondent were seamlessly onboarded
into the Bank's rolls. The Bank ensured that the
transition was implemented in a structured manner to
avoid disruption to customer service, and to maintain
continuity in borrower engagement. Necessary
capacity-building efforts were undertaken to integrate
the workforce into the Bank's systems, processes, and
compliance framework, thereby aligning them with
organisational standards and expectations.

The Bank has undertaken corrective measures to
address delinquencies, including strengthening
its collection infrastructure, reinforcing risk-based
supervision, and calibrating sourcing in high-risk
geographies. These efforts are aimed at ensuring
sustained asset quality and responsible credit delivery
in line with regulatory expectations.

Retail Banking

The Bank continued to strengthen its position in
the retail banking segment during the Financial Year
2024-25, driven by consistent growth in deposits, a
robust branch expansion strategy, and focused asset
diversification. As on March 31,2025, the Bank's total
retail liability book stood at ' 2,32,764 million, with
a net accretion of ' 34,086 million in total deposits
during the year. The Bank achieved a year-on-year
growth of 17% in its retail liabilities portfolio, reflecting
continued trust and engagement from its growing
customer base.

The Bank's retail deposit franchise remains a key
strength, providing stability to the overall funding
profile. The CASA (Current Account and Savings
Account) ratio improved from 22.66% in Financial Year
2024 to 24.84% in Financial Year 2025, with a total
CASA book of ' 57,828 million as on March 31, 2025.
The CD (Credit-to-Deposit) ratio of the Bank remained
at a comfortable level, indicating prudent balance
sheet management and healthy liquidity coverage.
The Bank's non-resident deposit base stood at
' 49,740 million as of March 31, 2025, contributing
meaningfully to the overall liability position.

The Bank continued to expand its physical presence
across the country, with the total number of banking
outlets reaching 787 as on March 31,2025. During the
year, 34 new branches were opened, of which two (2)

outlets were established in Unbanked Rural Centres
(URCs). Out of the total 787 banking outlets, 200 are
located in URCs, 81 in metro centres, 164 in urban, 321
in semi-urban, and 21 in rural areas. Approximately
25.4% of the Bank's outlets are in URCs, aligning well
with the regulatory mandate of maintaining at least
25% presence in unbanked rural locations. The Bank
also maintained a strong ATM network, with 693 ATMs
as on March 31,2025, including a net addition of 81
ATMs during the year.

On the retail assets front, the Bank witnessed robust
and broad-based growth during the year, contributing
significantly to the expansion of the overall balance
sheet. The total retail and corporate loan portfolio grew
to ' 99,222 million as on March 31, 2025, registering
a year-on-year increase of 68.36%. The Bank followed
a conscious strategy of product diversification and
customer segment expansion, focusing on secured
and semi-secured asset classes.

Among the key drivers, the gold loan portfolio
recorded aggressive growth, supported by strong
operational execution, increased customer demand,
and competitive turn around time. The Bank scaled
up its gold loan operations across existing and
newly identified markets, enhancing both reach
and efficiency. This segment continues to offer low
delinquency levels and shorter tenor dynamics,
thereby supporting risk-adjusted returns.

In addition, the mortgage loan segment witnessed
healthy traction, backed by demand in self-occupied
and small-ticket housing segments across semi¬
urban and rural areas. The Bank also deepened its
presence in the MSME lending space, catering to
small and medium business owners through tailored
credit offerings aligned with their working capital
and expansion needs. These efforts collectively
contributed to a more granular and diversified retail
book, aligned with the Bank's prudent risk appetite
and long-term asset quality objectives.

Treasury

The Treasury Department is responsible for
maintaining the Statutory Liquidity Ratio (SLR) and
Cash Reserve Ratio (CRR) of the Bank, as well as
handling its investments in securities under different
market segments. Treasury also manages the balance
sheet liquidity and ensures compliance with statutory
requirements. It manages the treasury needs of
customers for a fee.

Our Bank maintains a portfolio of Government
Securities in line with the regulatory norms governing

the Statutory Liquidity Ratio (SLR). A significant portion
of these SLR securities are in 'Held-to-Maturity' (HTM)
category, while some are in 'Available for Sale' (AFS)
and "Held for Trading" (HFT) categories.

As on March 31, 2024, the total investment in
securities was ' 56,229 million, which increased
by 6.62% to ' 59,953 million as on March 31, 2025.
The Bank has generated income from investment of
' 5,334 million and ' 16 million from AD-II foreign
exchange activities for the Financial Year ended on
March 31,2025. The Bank was granted AD-1 License
for operating in foreign exchange markets vide license
FE.KOC.01/2023 dated April 20, 2023, and as per the
approval received from Reserve Bank of India. The
Bank started AD-1 operations from April 01,2024.

4. IT Initiatives

Technology-driven business model with a basket
of myriad products and customer friendly digital
technology platform

The Bank offers its customers a multitude of digital
products, including the internet banking portal, an
uncomplicated but effective mobile banking interface
for retail customers, SMS alerts, bill payments, and
RuPay branded ATM cum debit cards. All banking
and payment transactions, such as remittances and
utility payments, can be completed through these
platforms. The Bank's customers are also able to
register to savings accounts on a UPI-based mobile
applications. The Bank's account opening, and loan
underwriting processes have been digitalised by
using tablets, which brought down the turn around
time and offered better service to customers. CASA
accounts can be opened through tablets, which
enable doorstep services to customers.

By leveraging technology solutions, the Bank provides
customers with pre-generated kits immediately upon
account opening, enabling them to use the ATM
cum debit card provided with the pre-generated kits
without having to wait for the card to be activated
across channels, thereby resulting in increased
customer satisfaction. The Bank has crossed a
milestone in technology with the successful adoption
of e-signatures for microloan disbursals.

The Bank has a digitalised central credit-processing
unit for its microloans and has implemented all Micro
Banking Loan Documents in vernacular languages.
We have enabled a Digital Receipt Printing facility right
after collection is completed in the field. The customer
onboarding process has been predominantly

digitalised for its microloans. The Bank leverages
technology for underwriting and credit sanctioning for
its loan products based on inputs from credit bureaus
and/or the customer data analytics. The Bank has
implemented technology solutions that enable it to
ensure cashless disbursement of loans and electronic
signing for microloans, both of which have reduced
paperwork hence committing to the sustainability
commitments.

The Bank's collections mechanism has also been
digitalised with mobile applications and a payment
gateway through which the borrowers can repay
their loans. The Bank is continuously working towards
improving its customers' experience using technology
and has implemented a Customer Relationship
Management solution to better handle customer
requests. The Bank believes that such initiatives have
helped us improve our customer service and enable
delivery of services in a more cost-effective manner.
WhatsApp Banking became a simple platform to avail
a host of basic banking services, which is a faster,
convenient, and secure platform at the comfort
and safety from anywhere. Customers can also get
information on various products/ interest rates/
branch locations etc.

The Bank has enabled customer-facing channel
features like Electronic Payment Advice through
branches, Additional Mobile Banking registration
facility for international customers, Offline Account
statement feature in Corporate Internet Banking (CIB),
and additional SMS and e-mail notifications on both
successful and failed login attempts in CIB.

5. Customer Service Quality

The Bank is committed to becoming one of the leading
Social Banks in India by delivering superior customer
experiences. It has implemented a robust Grievance
Redressal Mechanism and Policy aligned with the
Reserve Bank of India guidelines, ensuring efficient
resolution of customer queries and complaints.
The Customer Service Quality department regularly
reports to the Board on grievance handling and
initiatives to enhance service standards. Multiple
customer communication channels have been
established, including a 24x7 toll-free call centre with
multi-language and IVR support, website grievance
links, branch-level support, an escalation matrix with
contact details, customer care emails, complaint
boxes, and registers. Periodic surveys are conducted
to gauge customer satisfaction across regions.
Various committees—such as the Branch-level

Customer Service Committee, Standing Committee
on Customer Service, and the Board-level Customer
Service Committee-review the effectiveness of
customer service across organisational levels.

Key achievements and initiatives during the Financial
Year 2024-2025 :

• ISO 9001:2015 recertification for Customer
Service Quality functions.

• Zero awards /penalties from the Banking
Ombudsman.

• The Head of Customer Service Quality - Shri.
Abiesh Jose- was awarded the Best CX Leader
of the Year in Digital Customer Experience
Conference and Awards 2024 by Gain Skills
Group.

• Awarded Best Small Finance Bank of the Year
in India Banking Summit and Awards 2024, by
Synnex India Group.

• Initiatives like the Customer Service Excellence
Awards to promote branch-level engagement.

• Implementation of the Five-S initiative for branch
transformation and service productivity.

• Initiatives to train and equip the customer-facing
staff using knowledge-building series like the CX
Guru emails.

• Field visits to micro banking customers to gather
feedback on various banking processes and
dipstick surveys to assess satisfaction levels.

• A year-long Customer Awareness Programme,
in line with RBI directives, covering topics such
as grievance redressal, digital banking, customer
rights, and safe banking practices, with specific
programmes conducted starting from January
and spanning across the calendar year 2025.

These initiatives reflect the Bank's ongoing efforts to
elevate customer satisfaction and service excellence.

6. Compliance Functions

The Bank has a dedicated independent Compliance
Department headed by a Chief Compliance Officer,
which operates as per a well-documented compliance
policy for ensuring regulatory / statutory compliance,
across all businesses and operations. The key functions
of the Compliance Department shall include ensuring
core compliance areas such as statutory, regulatory,
and other related mechanisms for dissemination
of regulatory prescriptions and guidelines amongst
respective functions and monitoring compliance
with regulatory guidelines, oversight of statutory

compliances, correspondence with the RBI, vetting
the guidelines/ circulars issued, new products, and
processes for compliance with regulatory guidelines,
vetting of Bank's Policies, coordinating and monitoring
submission of the RBI returns, coordinating collection
of inputs from various departments for the RBI
inspection and for rectification of the RBI inspection
irregularities etc. The Bank has a well-defined and
structured mechanism to assess the compliance
risk and monitor its mitigation measures thereby
ensuring the effectiveness of the compliance function
in managing the compliance risk.

7. Risk Management

The Bank follows a risk management approach
that involves identifying, assessing, and continually
monitoring different types of risks. The Bank's Board
of Directors oversees risk management governance,
approving policies updated in accordance with
regulatory guidelines and internal directives. The
Risk Management Committee of the Board (RMCB)
establishes and reviews processes and standards for
risk management functions. The Risk Management
Department coordinates bank-wide risk management
efforts, implementing approved policies and
procedures. It comprises five divisions managing
major risk streams: Credit risk, Operational risk,
Market risk, Information and Cybersecurity risk, and
Anti-Money Laundering and Transactional risks.

The Bank's executive-level risk management
committees, such as the Credit Risk Management
Committee, Operational Risk and Business Continuity
Management Committee, Market Risk and Asset
Liability Management Committee, Information
Security Governance Committee, and Outsourcing
and Vendor Assessment Committee, consistently
evaluate their respective risks and take preventive and
corrective actions as needed. The Committees report
significant risk events, risk levels, and trends to the Risk
Management Committee of the Board. The Chief Risk
Officer, who directly reports to the Managing Director
and CEO, oversees all risk management functions.
The Bank developed a robust Internal Capital
Adequacy Assessment Process to identify, assess,
and monitor material risks, ensuring capital adequacy
commensurate with the Bank's risk profile and growth
strategy and satisfying the regulatory norms. Periodic
stress testing is conducted to ensure that the Bank
can effectively manage and mitigate both existing and
emerging risks.

8. Human Resources Initiatives

The Bank considers its human capital as one of
its most valuable assets. A content, engaged, and
purpose-driven workforce is integral to delivering
the joy of banking to our customers and enabling the
Bank's strategic objectives.

During the year, the Bank undertook a strategic
initiative to bring a portion of its microloan portfolio
under direct management, which was previously
handled through a Business Correspondent. As
part of this initiative, 5,109 employees of a Business
Correspondent were successfully transitioned to the
Bank's rolls. This resulted in a significant expansion of
the Bank's workforce, increasing the total employee
strength to 12,520 as on March 31, 2025. The
transition was executed with careful planning to
ensure operational continuity, regulatory compliance,
and alignment with the Bank's culture and systems.
To support this large-scale integration and promote
alignment with the Bank's culture, policies, and
processes, the Bank launched a structured three-
phase orientation and training programme titled
"Unnati", conducted across multiple locations in
61 batches. The initiative enhanced transitioning
employees' understanding of banking products and
instilled a sense of belonging and shared purpose.
The Bank continued to nurture a high-performance and
value-driven culture. In Financial Year 2024-25, the HR
Department conducted an Employee Feedback Survey
to assess engagement levels and cultural alignment.
The Bank received an employee engagement score of
85.6%, and an Employee Net Sentiment (eNS) Score
of 39, which is widely considered excellent, indicating
high employee satisfaction and strong alignment with
the Bank's vision, mission and values.

In alignment with the principles of continuous
improvement, the Bank has adopted the Kaizen
framework across departments. The HR team
coordinated bank-wide participation in the Kaizen
Competition organised by the Kerala Productivity
Council on November 26-27, 2024. Six departments
of the Bank participated, and the Customer Service
Quality (CSQ) Department was honoured with the
Bronze Award for exemplary implementation of 5S
practices.

The Bank remains committed to the holistic well-being
of its employees. The HR Employee Engagement team
conducted a range of programmes that focused on life
experiences, recognition, health, and team bonding.
Notable initiatives included:

• Community Service and Social Impact:
Employees actively participated in the Wayanad
landslide rescue and relief efforts in 2024,
contributing both monetarily and through
volunteer work. Recruitment drives were also
conducted to support affected families, resulting
in employment offers to five fresh graduates.

• The Bank also organised donation drives
supporting destitute homes and old age homes
in Thrissur, with employees personally visiting 12
facilities and distributing essentials, creating a
profound and humane impact.

• Blood Donation Camps were organised across
multiple locations, reinforcing the Bank's social
responsibility ethos.

• Celebrating Employees: Through the "Wall
of Joy" displayed at all branches and offices,
the Bank commemorates milestones such as
birthdays, work anniversaries, marriages, and
achievements. Motherhood Hampers are gifted
to female employees welcoming new children,
celebrating parenthood as a shared joy.

• Employee engagement events, such as Fun Days,
interactive games, team-building activities, and
wellness programmes focusing on mental and
physical health, were conducted throughout the
year.

To foster a culture of learning and development,
the Bank continued to invest in capability building.
Through the ESAF Online Academy, employees
accessed topic-specific training sessions. The Bank
also maintains tie-ups with coaching institutes for
professional certification courses at concessional fees
and provides incentives for successful completions.
Senior staff are regularly nominated for advanced
training programmes offered by reputed financial
education institutions.

The Human Resources function is focused on building
an ecosystem that attracts, retains, and develops
talent to meet evolving business needs. The Bank is
committed to fostering a work environment where
employees are:

• Competent and committed

• Collaborative and customer-centric

• Content and continuously learning

• Contributing meaningfully to organisational goals
The HR function also ensures that performance
is continuously monitored and improved through

structured goal-setting and appraisal mechanisms. All
statutory, regulatory, and internal policy requirements
are adhered to in the administration of HR practices.
The Human Resources Department of the Bank has
been reassessed and certified to be in conformance
with ISO 9001:2015, reinforcing its commitment
to providing quality HR services and supporting
employees in their journey of continuous improvement
and performance excellence.

9. Information Security and Cyber Security Risk
Management

The Bank has established a dedicated Information
Security Division under its Risk Management
Department. This division is led by the Chief
Information Security Officer (CISO), who reports to the
Chief Risk Officer (CRO), with the CRO reporting to the
Bank's senior management. The Bank's Information
Security and Cyber Security Policies, approved by
the Board of Directors, provide a robust framework
for managing technology and cyber security risks.
Governance function is further strengthened by
the Information Technology Strategy Committee of
the Board and the Executive Information Security
Governance Committee.

The Bank is ISO/IEC 27001 certified for Information
Security Management for its internal banking systems
and related IT systems, PCI DSS certified for payment
card data protection reflecting its commitment to
global best practices and regulatory compliance.
The Security Operations Centre (SOC) operates 24/7,
enabling real time monitoring, threat detection and
rapid incident response. The Bank leverages advanced
monitoring tools and analytics to proactively manage
cybersecurity threats across its IT environment. To
promote a culture of cybersecurity awareness, the
Bank implements a comprehensive training and
awareness programmes that includes customers,
employees, vendors and business partners. This
includes periodic training sessions via digital learning
platforms, instructor-led programmes and regular
communication through internal and external
channels, including social media.

The Bank is committed to ensure the confidentiality,
integrity and availability of data across all stages - at
rest, in use, and in transit. Continuous efforts are made
to strengthen data privacy and security practices for
customers, employees, and stakeholders. By adhering
to the leading industry standards and engaging with
key regulatory bodies such as RBI, CERT-IN, IDRBT,

UIDAI, SEBI and CSITE, the Bank maintains its vigilance
against emerging cyber threats and ensures ongoing
compliance with all applicable regulations.

10. Business Continuity Management

The Bank has a Business Continuity Management
Policy, approved by the Board of Directors and
reviewed on an annual basis. The Bank conducts
Business Impact Analysis (BIA) annually and prepares
a Business Continuity Plan (BCP) Document, which
deals with the measures to manage any unplanned
disruption in services. The document identifies and
prioritises processes and systems and evaluates
the potential effects of natural and man-made
events or disasters on the IT and other services that
support business. It also analyses the potential loss
in transactions to the Bank in case of disruption,
Critical and Non- Critical applications, their Recovery
Point Objective (RPO) and Recovery Time Objective
(RTO). The BCP contains the details of key outsourcing
arrangements and BC arrangements, how to deal with
different business scenarios, certain situations like
power failure, Cyber-attacks, Hardware and Software
failures, Network failures, Natural disasters, etc.

The Bank has an executive level Crisis Management
and Quick Response Team (CMQRT), which is
responsible for initiating immediate actions in the
event of the occurrence of a crisis and to guide
business units/ Departments on steps to be taken
to protect the assets and to ensure continuity of
business. The CMQRT initiates remedial actions in
case of any breakdown or failure of critical systems,
occurrence of natural disasters or accidents or any
other events affecting business continuity.

The Bank also has an executive level Cyber Crisis
Management Team (CCMT). The CCMT would be
activated in case of a Cyber Security Crisis situation,
wherein security characters of information are
compromised as a result of failure of an IT system
or network of IT systems, due to technical reasons,
intentional acts or negligence, leading to consequences
that may threaten lives, financial position, the trust,
national security, and public confidence.

11. Implementation of Ind AS

The Ministry of Finance, Government of India
("GOI"), had vide its press release dated January 18,
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 March 22, 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
Ind AS accounting.

12. Transfer to Reserves

As per the requirement of the regulations of Reserve
Bank of India, the Bank has transferred the following
amount to various reserves during the Financial Year
2024-25:

13. Dividend

As there is no profit generated during the Financial

Year, no dividend is proposed to be declared.

14. Change in the Nature of Business

There was no change in the nature of business of the

Bank during the Financial Year 2024-25.

15. Capital and Debt Structure

a. Share Capital

There were no changes in the Authorised Capital
of the Bank during the Financial Year 2024-25.
During Financial Year 2025, the Bank issued
and allotted 6,47,594 equity shares of ' 10/-
each, pursuant to exercise of stock options by
employees of the Bank, under the Bank's
Employee Stock Option Scheme, 2019.
Consequent to the above, the total issued and
paid-up equity share capital ofthe Bank increased
from ' 5,14,77,98,580 to ' 5,15,42,74,520 as on
31 March, 2025. 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.

b. Debt Capital

During the Financial Year 2024-25, the Bank did
not raise any Debt Capital through Issue of Debt
securities under private placement basis.

16. Capital Adequacy

The 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
as per the standardised approach for credit risk. The
Capital Adequacy Ratio of the Bank as on March 31,
2025 is 21.84%, as against the minimum requirement
of 15.00% stipulated by the Reserve Bank of India.

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

In order to recognise the contribution of the
employees in the 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 organisation over a period of time,
the Bank has formulated ESAF Small Finance Bank
Employee Stock Option Plan 2019 (ESAF ESOP 2019)
by way of a special resolution which also authorised
the Nomination, Remuneration and Compensation
Committee to grant up to '2,25,15,552 (Two Crore
Twenty-Five Lakhs Fifteen Thousand Five Hundred and
Fifty-Two) Employee Stock Options to the employees,
in one or more tranches, from time to 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 ESAF ESOP 2019 are, among others, to
attract and retain employees with Employee Stock
Options as a compensation tool. Through ESAF 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.

The Nomination, Remuneration and Compensation
Committee has been entrusted with the responsibility
of administering the ESOP 2019 Scheme. As of
March 31, 2024, the Nomination Remuneration and
Compensation Committee of the Board granted
11,25,590 options as the first instalment of loyalty
grant under the ESOP 2019 Scheme, to the employees
identified under the implementation guidelines for
ESAF ESOP 2019 as per the terms of granting. During
the Financial Year 2024-25, Loyalty Grant to reward
eligible employees for their contributions in the past
tenure and continued employment in the Bank was
granted.

Disclosure as mandated under the provisions of
Regulation 14 of the SEBI (Share Based Employee
Benefits and Sweat Equity) Regulations, 2021 is as
follows:

A. Relevant disclosures in terms of the 'Guidance
note on accounting for employee share-
based payments' issued by ICAI or any other
relevant accounting standards as prescribed
from time to time.

Details have been provided in Part B - Other
Disclosure Note No. 8 of the Notes forming part
of financial statements for the year ended March
31, 2025 in the Bank's Annual Report 2024-25.
Annual Report of the Bank is available on the
Bank's website at https://www.esafbank.com/
investor-relation/?id=annual-reports

B. Diluted EPS on issue of shares pursuant
to all the schemes covered under the
regulations shall be disclosed in accordance
with 'Accounting Standard 20 - Earnings Per
Share' issued by ICAI or any other relevant
accounting standards as prescribed from
time to time.

There were 6,47,594 shares issued pursuant to
ESAF ESOP Plan 2019 during the Financial Year
2024-25.

C. Details related to Employee Stock Option
Plan (ESOP 2019):

1. A description of each ESOS that existed
at any time during the year, including the
general terms and conditions of each ESOS

ESAF Small Finance Bank- Employee Stock Option
Plan 2019 (ESOP 2019)

The Bank, pursuant to the resolutions passed
by the Board on December 23, 2019 and
Shareholders on January 03, 2020, adopted
the ESAF ESOP Plan 2019 with the objective to
attract, retain, and motivate the best available
talent by way of rewarding employee stock
options for their performance and to motivate
them to participate in the growth of the Bank,
besides creating long term wealth in their hands.
The ESOP grant is of two types (i) loyalty grant
and (ii) performance grant.

As on March 31, 2025, no options under
performance grant have been granted by the
Bank under the ESAF ESOP Plan 2019. The
Nomination and Remuneration Committee
of the Bank on June 28, 2021 granted loyalty
grant to its eligible employees. Post IPO of the
Bank, the ESAF ESOP Plan 2019 was ratified
and amended by the shareholders in the 07th
Annual General Meeting held on December
29, 2023. The ESOP 2019 has been framed
and implemented in compliance with the SEBI
(Share Based Employee Benefits) Regulations,
2014 now SEBI (Share Based Employee Benefits
and Sweat Equity) Regulations, 2021 ("SEBI
SBEB Regulations") relevant guidance notes
and accounting standards. The Nomination and
Remuneration Committee has been entrusted
with the responsibility of administering the ESOP
2019.

2. Method used to account for ESOS -Intrinsic
or fair value.

Fair value

3. Where the Bank opts for expensing of
the options using the intrinsic value of
the options, the difference between the

employee compensation cost so computed
and the employee compensation cost that
shall have been recognised if it had used the
fair value of the options shall be disclosed.
The impact of this difference on profits and
on EPS of the Bank shall also be disclosed.
Not applicable as fair value method was used.

(b) any other employee who receives a grant in any one year of option amounting to 5% or more of
option granted during that year:

Nil

(c) identified employees who were granted option, during any one year, equal to or exceeding 1% of the
issued capital (excluding outstanding warrants and conversions) of the Bank at the time of grant:

Nil

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
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.esafbank.
com). 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, specialised 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, the 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, the 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 authorised 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
a Director of the Bank.

The RBI, vide its circular no. DOR. Appt.
BC.No.23/29.67.001/2019-20 dated November 4th,
2019, has issued the Guidelines on Compensation
of Whole Time Directors / Chief Executive Officers /
Material Risk Takers and Control Function Staff of
Private Sector Banks 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 in social
transformation and community development.

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 March 31,2025, the
Board of Directors comprised a combination of Eleven
directors out of which there were six Independent
Directors including a Woman Independent Director,
two Non-Executive Nominee Directors, 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 mix provides
a combination of professionalism, knowledge and
experience 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.
Dr. Joseph Vadakkekara Antony (DIN: 00181554), 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
2024-25

• Appointment of Shri. George Kalaparambil
John as Executive Director (Whole-Time
Director) of the Bank

The Board of Directors in their meeting held on
May 18, 2024, in line with the approval received
from Reserve Bank of India ("RBI") dated May 16,
2024 had appointed Shri. George Kalaparambil
John (DIN: 00694646) as Additional Executive
Director of the Bank in terms of Section 152,160
and 203 of the Companies Act, 2013, with
effect from May 18, 2024, considering his vast
knowledge and experience in the field of Banking,
Finance, Agriculture and Rural Economy, Co¬
operation, Human Resources and Business
Management.

The Shareholders in the 08th Annual General
Meeting of the Bank held on August 14, 2024,

approved the appointment of Shri. George
Kalaparambil John as the Executive Director of
the Bank, who was appointed as an Executive
Director (Whole-Time Director), for a period of
three consecutive years with effect from May 18,
2024 up to May 17, 2027.

• Re-appointment of Dr. Kadambelil Paul
Thomas (DIN: 00199925) as the Managing
Director and CEO of the Bank and approval
of revision of remuneration

Dr. Kadambelil Paul Thomas (DIN: 00199925),
Managing Director and CEO of the Bank was
appointed for a period of three years with effect
from October 01, 2024, including the revision
in remuneration structure beginning from April
01, 2024 on the basis of the approval from the
Reserve Bank of India vide letter DoR. GOV. No.
S2250/ 29.44.005/ 2024-2025 dated July 16,
2024 and recommendation of the Nomination,
Remuneration and Compensation Committee of
the Board.

The Shareholders approved the re-appointment
of Dr. Kadambelil Paul Thomas as the Managing
Director and CEO of the Bank for a period of
three consecutive years with effect from October
01, 2024 including the revision in remuneration
structure beginning from April 01, 2024 in their
08th Annual General Meeting held on August 14,
2024.

• Re-appointment of Dr. Vinod Vijayalekshmi
Vasudevan (DIN: 02503201) as Non¬
Executive Independent Director of the Bank

The Board of Directors in their meeting held on
June 14, 2024, on recommendation from the
Nomination, Remuneration and Compensation
Committee of the Board (NRCCB) in the Meeting
dated May 06, 2024 had re-appointed Dr. Vinod
Vijayalekshmi Vasudevan (DIN: 02503201) as
Non-Executive Independent Director of the Bank
for a further term considering his experience,
expertise in various fields and his performance
as Non-Executive Independent Director of the
Bank.

The Shareholders in the 08th Annual General
Meeting of the Bank held on August 14, 2024,
approved the re-appointment of Dr. Vinod
Vijayalekshmi Vasudevan (DIN: 02503201) as
Non-Executive Independent Director of the Bank,
who shall not be liable to retire by rotation for

a period of three consecutive years with effect
from December 22, 2024.

Familiarisation Programme

Complying with SEBI Listing Regulations, provisions
of the Companies Act, 2013 and the RBI guidelines,
Familiarisation Programmes were conducted during
the Financial Year 2024-25 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 with the organisation 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 familiarisation programme imparted
to Independent Directors are available on the website
of the Bank at www.esafbank.com.

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 as a
whole shall be carried out by all the Directors;

• The performance evaluation of the Board

Committee(s) shall be carried out by the
members of each of the Committees;

• The performance evaluation of Managing
Director and CEO/ Executive Director shall be
done by all the Directors except the Managing
Director and CEO.

• The performance evaluation of Chairman of
the Bank is done by all the Directors except the
person being evaluated.

• The performance evaluation of Independent
Directors is done by all the Directors except the
person being evaluated.

• The performance evaluation of the Non-Executive
Director is done by all the Directors except the
person being evaluated.

The performance evaluation of the Board of Directors,
Committees of the Board and individual Directors
were conducted during the Financial Year 2024-25.
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.

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 2024¬
25 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.

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 December
18, 2020) have qualified the online proficiency self¬
assessment as required under aforesaid rule within
the prescribed timeline.

The terms and conditions of appointment of
Independent Directors are available on the website of
the Bank.

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 2024-25 has been annexed to the
Annual Report.

27. Meetings of the Board

The Board of Directors met Eleven (11) times during
the Financial Year 2024-25.

The meetings of the Board of Directors were convened
in accordance with applicable laws and standards and
the intervening gap between the said meetings was
not exceeding 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 2024-25. During the year, Shri. Vinod
Vijayalekshmi Vasudevan has sought leave of absence
from Two (2) Meetings and Shri. Gabriel John Samuel
had sought leave of absence from One (1) meeting of
the Board of Directors.

Note: High Value Fraud Monitoring Committee of the Board (HVFMCR) was dissolved and new committee named
Special Committee of the Board for Monitoring and Follow-up Cases of Frauds (SCRMF) was constituted by the Rank
on July 26, 2024.

Review Committee of the Board for Identification and Classification of Wilful Defaulters (RCBWD) was constituted by the
Rank on March 21,2025.

The details of composition, number of meetings held and date thereof and terms of reference of the above Committees
are available in the Corporate Governance Report which forms part of the Annual Report of the Rank for the Financial
Year 2024-25.

28. Meeting of Independent Directors

As per the requirement of the Section 149(8) read with Schedule IV of Act and Regulation 25 of SFRI Listing Regulations,
a meeting of the Independent Directors of the Rank is required to be held at least once a year in absence of Non¬
Independent Directors.

During the Financial Year 2024-25, the Independent Directors of the Rank met on March 29, 2025, chaired by Shri.
Thomas Jacob Kalappila and attended by all the Independent Directors of the Rank.

29. Key Managerial Personnel

The following officials of the Bank are the "Key Managerial Personnel" pursuant to the provisions of Section 203 of the
Companies Act, 2013:

In addition to the above, the Board of the Bank has designated the following senior officials of the Bank as Key Managerial
Personnel in terms of Section 2(51) of the Companies Act, 2013:

31. Directors' Responsibility Statement

Pursuant to Section 134(3) of the Companies Act,

2013, the Roard 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 March 31, 2025, 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 March 31,
2025 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 Rank
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

In accordance with Section 135 of the Companies
Act, 2013, read with the Companies (Corporate Social
Responsibility Policy) Rules, 2014, as modified from
time to time, the Bank has established the Corporate
Social Responsibility and Sustainability Committee of
the Board (CSRSCB).

Environment Social and Governance Practices

In the financial and banking industry, ESG has become
a critical area of focus and the Bank endeavours to

The Bank follows a social business strategy seeking
a Triple Bottom Line impact: People; Planet; and
Prosperity and believes that the social, environmental,
and economic outcomes of our business create
synergies that have an amplified impact on our
stakeholders. The legacy of a mission, fighting the
partiality of prosperity® (i.e., the drive for inclusion
of marginalised sections of society and the equity of
opportunities) led to the formation of our Bank. With a
vision to become India's leading social bank that offers
equal opportunities for the whole society, the Bank
has adopted various policies to implement our Triple
Bottom Line approach, including an Environmental,
Social and Governance ("ESG") policy. Pursuant to
the ESG policy, we are committed to (i) the protection
of the environment and ensuring sustainable
development, (ii) promoting financial inclusion and
gender equality through specialised financial services;

continually improve its ESG performance. There is a
robust ESG policy framework which articulates ESG
focus areas and provides guidance for ESG practices
such as corporate governance, environmental and
employee related initiatives, policy revisions and other
ESG related projects undertaken. ESG Management
Committee as well as CSR Management Committee
reviews the Sustainability vision, policies and
strategies. There is a Sustainability Council in the Bank,
comprising representatives from relevant functions
for the implementation of the framework. This council
plays a critical role in providing data on various ESG
parameters which is subsequently collated, analysed
and reported to the Head of Sustainable Banking.
The council is oriented and strengthened on various
aspects related to Environmental Performance
including ESG. The progress is also reported to the
CSRSCB and the Board periodically.

and (iii) establishing a governance framework to
ensure accountability, transparency and compliance
with internal and external ESG standards. The Bank
was awarded with Sustainability Champion Award
2024 by Net Zero Alliance. Our ESG grading scores
from CARE Advisory Research & Training Limited have
been favourable in the consecutive Financial Years
of 2023-24 and 2024-25. CARE Advisory Research &
Training Limited's ESG specialist team undertook the
ESG Grading of our Bank during October 22, 2024.
We received a rating of CareEdge ESG 2 (good), with
an overall score of 68.1 compared with the industry
average overall score of 59.8. The Bank has adopted a
four-year ESG Roadmap for 2023-27 as follows:

• Impacting 10 million (One Crore) Direct
Customers with any of many SDGs.

• Fostering Local Sustainable Economic Growth
through 1 million Joint Liability Groups.

• Fostering Food Security through financial services
to 5 million Farmers.

• Fostering Energy Security through 2,00,000
Renewable Energy Installations (1GW).

• Energy conservation and greater reliance to
renewable energy in operations in line with
government's net zero plan.

The Bank has received ISO 26000:2010 certification
during the Financial Year 2023-24. It is a recognition
for the Bank's range of inclusive financial services
for social and environmental resilience and returns
to individuals, professionals and businesses through
ethical practices and global standards. It is a
comprehensive certification on Social Responsibility,
covering seven core subjects:

• Community Engagement and Development

• Environmental Stewardship

• Human Rights

• Labour Practices

• Consumer Protection

• Fair Operating Practices

• Organisational Governance
Corporate Social Responsibility

The Bank has adopted a Board-approved CSR
policy in compliance with the requirements of the
Companies Act, 2013 and the Companies (Corporate
Social Responsibility) Rules, 2014. The Bank's CSR
focus areas are education, healthcare, sanitation and
livelihood development. The Bank has entered into
a Memorandum of Understanding dated December
20, 2021 with ESAF Foundation (formerly known as
Evangelical Social Action Forum), pursuant to which
ESAF Foundation provides services to the Bank for the
execution of CSR projects, including providing project
proposals, timelines and budgetary estimates for CSR
projects within the focus areas. The Memorandum
of Understanding is valid for a term of four years.
The Bank has also entered into an agreement with
Prachodhan Development Services dated August 29,
2022, pursuant to which it provides services to us for
the execution of certain CSR projects. The agreement
is valid for a term of four years.

The CSRSCB is in charge of reviewing and
recommending to the Board the Bank's numerous
CSR activities, including the status of the Bank's CSR
Projects. The Board has examined and approved
the CSR Policy, Projects, Project Expenditure,
and associated topics based on the CSRSCB's
recommendations. Following that, the Bank

ESAF Small Finance Bank

implemented the CSR Projects with Board approval.
The CSR Policy of the Bank is available on the Bank's
website: www.esafbank.com.

The Bank's CSR Projects and CSR Project Expenditure
for Fiscal Year 2024-25 are in accordance with the CSR
mandate as specified in Sections 134 and 135 ofthe Act
read with Schedule VII to the Act and the Companies
(Corporate Social Responsibility Policy) Rules, 2014, as
amended from time to time, and in accordance with
notifications issued by the Government of India from
time to time.

Every year, the Bank allocates 5% of its average net
profits, computed in accordance with the manner
as prescribed in the Section 135 of the Companies
Act, 2013, as against the requirement of 2%. During
the Financial Year 2024-25, the Bank has allocated
' 19,08,00,000 towards CSR expenditures, as against
the allocation of ' 12,25,00,000 for the Financial Year
2023-24. The CSR projects and programmes were
implemented directly and/ or through implementing
partner organisations with a proven track record of
implementing process-efficient CSR projects and/
or programmes that were scalable, sustainable,
outcome-driven, and committed to making a positive
societal impact in Fiscal Year 2024-25. Based on the
CSRSCB's review and recommendation, the Board
reviewed and approved all CSR Projects, CSR Project
Expenditure Payments and CSR Administration
Overhead Expenses, including the Unspent CSR
Project Expenditure Funds of Financial Year 2024-25,
which were transferred to the Unspent CSR Account
Financial Year 2024-25 on March 31,2025. The Annual
Report on CSR Activities, which is annexed to this
report as Annexure - I, contains a brief summary of the
CSR Policy, including an overview of the programmes
implemented, the makeup of the CSR Committee,
and CSR expenditure for the fiscal year under review.
This year, we have innovated a new CSR initiative of
industry academia integration by a new CSR project -
ESAF Chair for Business on Values at IRMA (Institute of
Rural Management Anand). This synergy to promote
value-based businesses will show forth long-term
impact. Similarly, another CSR innovation was the
establishment of Centre of Excellence in collective
enterprises that will nurture collective enterprises
starting from small JLGs to big FPOs.

33. Business Responsibility and Sustainability
Report

In May 2021, the SEBI made an amendment to
Regulation 34(2)(f) of the SEBI Listing Regulations,
by introducing enhanced disclosure requirements

regarding ESG parameters through a revised format
called the Business Responsibility and Sustainability
Report ("BRSR"). The Business Responsibility Report
has been replaced by BRSR, which is a more
comprehensive disclosure that can showcase ESG
performance with enhanced transparency, shifting
the focus to quantifiable metrics by providing essential
and voluntary indicators rather than qualitative and
subjective metrics. The Bank has published the BRSR
for the Financial Year 2024-25.

BRSR for Financial Year 2024-25 is a part of the Annual
Report of the Bank and is also available on the Bank's
website.

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 workplace and
continues to uphold and maintain itself as a safe and

non-discriminatory organisation. To achieve the same,
the Bank reinforces the understanding and awareness
of The Prevention of 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 Prevention of 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 2024-25, 4 (Four) complaints
were received and the same was disposed of. There
were no complaints pending for a period exceeding
ninety days.

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
raise concerns of employees, vendors and directors
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 2024-25, 7 (Seven)
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.

The policies are available on the official website of the
Bank. (www.esafbank.com)

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 viz., URL: https://www.
esafbank.com/policies/.

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. S2270/ 08-61- 005/
2023-24 dated June 23, 2023, the Shareholders of
the Bank in the 07th Annual General Meeting held
on December 29, 2023 had appointed M/s. Kirtane
and Pandit, Chartered Accountants (Firm Registration
Number: 105215W/ W100057) as the Joint Statutory
Auditors of the Bank for a period of three financial
years who will hold office from the conclusion of
the 07th Annual General Meeting till the end of the
10th 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 2024-25

and Financial Year 2025-26. 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.
Abarna and Ananthan, as Joint Statutory Auditors,
wherein M/s. Abarna and Ananthan 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 March 21, 2025
approved the eligibility of existing Statutory Auditors
M/s. Kirtane & Pandit LLP, Chartered Accountants,
Pune, FRN 105215W/W100057 for holding of office
for the 2025-26 and appointment of new Statutory
Auditors by providing first preference to M/S
Sundaram & Srinivasan, Chartered Accountants,
Mumbai, FRN 004207S 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 March 27, 2025 were
sought. RBI vide letter dated April 21, 2025 accorded
the approval for appointment of M/s. Kirtane & Pandit
LLP, Chartered Accountants, Pune, FRN 105215W/
W100057 and M/S Sundaram & Srinivasan, Chartered
Accountants, Mumbai, FRN 004207S as the joint
statutory auditors of our Bank for 2025-26 for their
third 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. Ref DOS.CO.RPD.
No.S503/08.61.005/2025-26 dated April 21, 2025,
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 Sundaram & Srinivasan, Chartered Accountants
as Joint Statutory Auditors of the Bank from FY 25-26
for a period of 3 years . Accordingly, the proposal for
their appointment is being placed in the ensuing 9th
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 Board of Directors
of the Bank in the meeting held on May 16, 2025,
has proposed the appointment of 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, till the
conclusion of the 14th Annual General Meeting of
the Bank, subject to the approval of shareholders..
The Secretarial Audit Report does not contain any
qualification, reservation or adverse remark and the
report for the Financial Year 2024-25 is enclosed
herewith as Annexure - II. The Bank has complied with
the Secretarial Standards 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.

40. Particulars of contract or arrangements with
Related Parties

During Financial Year 2024-25, all related party
transactions were entered in the ordinary course of
the business of the Bank and on an arm's length basis.
Accordingly, there were no transactions entered
during the fiscal year that fall under the scope of
Section 188(1) of the Companies Act, 2013, hence,
form AOC-2 is not applicable to the Bank.

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 2024-25 will be hosted on the Bank's
website at https://www.esafbank.com/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 2024-25.

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) The Bank has no activity relating to conservation
of energy or technology absorption.

ii) During the Financial Year 2024-25, the Bank had
foreign currency expenditure of ' 95,28,363/-
and ' 8,48,957.93/- of foreign currency earnings
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, there has been no
one-time settlement of loans taken from Banks and
Financial Institutions.

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
2024-25 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

There are no qualifications, reservations, adverse
remarks or disclaimers in the Auditor's Report and the
Secretarial Audit Report.

49. I nformation 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 the 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.

54. Dispatch of Annual Report

The MCA has issued General Circular No. 20/2020
dated May 05, 2020 read with other relevant
circulars, including General Circular No. 10/2022
dated December 28, 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 March 31, 2025,
can get their email address registered by following the
steps as detailed in the Notice convening the AGM.
The Annual Reports of the Bank are available on the
Bank's website viz., URL: https://www.esafbank.com/
report/esaf-small-finance-bank-annual-reports/.

55. Strictures and Penalties

The Denalties or strictures imDosed bv the regulators on the Bank is as follows:

Acknowledgement

The Directors are grateful to the Reserve Bank of India, other government and regulatory authorities, other Banks, and
financial institutions for their support and guidance. The Directors gratefully acknowledge the excellent relationship
with the Board of M/s. ESAF Financial Holdings Private Limited, Corporate Promoter of the Bank and their continued
guidance and support for executing various activities of the Bank. The Directors also place on record their sincere
thanks to the valued clients and customers for their patronage. The Board also expresses its deep sense of appreciation
to all employees of the Bank for their commitment and contribution to the growth of the Bank.

For and on behalf of the Board of Directors

Sd/- Sd/-

Ravimohan Periyakavil Ramakrishnan Kadambelil Paul Thomas

DIN: 08534931 DIN: 00199925

Chairman Managing Director & CEO

Date: May 16, 2025
Place: Thrissur