4.12 Accounting for Provisions contingent liabilities
and contingent assets
A contingent liability is a possible obligation that arises
from past events whose existence will be confirmed
by the occurrence or non-occurrence of one or more
uncertain future events beyond the control of the Bank
or a present obligation that is not recognized because
it is not probable that an outflow of resources will be
required to settle the obligation. A contingent liability
also arises in extremely rare cases where there is a
liability that cannot be recognized because it cannot
be measured reliably. The Bank does not recognize
a contingent liability but discloses its existence in the
financial statements.
In Accordance with AS 29, Provisions, Contingent
liabilities and contingent assets, the Bank creates a
provision when there is a present obligation as a result
of a past event that probably requires an outflow of
resources and a reliable estimate can be made of the
amount of the obligation. Provisions are reviewed at
each balance sheet date and adjusted to reflect the
current best estimate. If it is no longer probable that
an outflow of resources would be required to settle
the obligation, the provision is reversed.
Contingent assets are neither recognized nor
disclosed in the Financial statements
4.13 Leases
Leases where the lessor effectively retains substantially
all the risks and benefits of ownership of the leased
item are classified as operating lease. Operating lease
payments are recognised as an expense in the profit
and loss account on a straight line basis over the lease
term in accordance with AS 19 - Leases.
4.14 Transaction involving Foreign Exchange
All transactions in foreign currency are recognised
at the exchange rate prevailing on the date of the
transfer.
Foreign currency monetary items are reported using
the exchange rate prevailing at the Balance Sheet
date.
Non-monetary items which are measured in terms
of historical cost denominated in foreign currency
are reported using the exchange rate at the date of
transaction. Non-monetary items which are measured
at Fair Value or other similar value denominated in a
foreign currency are translated using the exchange
rate at the date when such value is determined.
Exchange differences arising on settlement of
monetary items or on reporting of such monetary
items at rates different from those at which they
were initially recorded during the year, or reported
in previous financial statements, are recognised as
income or expense in the period in which they arise.
Outstanding forward (other than deposit and
placement swaps) and spot foreign exchange
contracts outstanding at the Balance Sheet date
are revalued at rates notified by FEDAI for specified
maturities and at the interpolated rates of interim
maturities. In case of forward contracts of greater
maturities where exchange rates are not notified by
FEDAI, are revalued at the forward exchange rates
implied by the swap curves in respective currencies.
The forward profit or loss on the forward contracts
are discounted using discount rate and the resulting
profits or losses are recognised in the Profit and Loss
Account as per the regulations stipulated by the RBI.
Foreign exchange swaps "linked" to foreign currency
deposits and placements are translated at the
prevailing spot rate at the time of swap. The premium
or discount on the swap arising out of the difference
in the exchange rate of the swap date and the
maturity date of the underlying forward contract is
amortized over the period of the swap and the same
is recognised in the Profit and Loss Account.
Contingent liabilities on account of letters of credit,
bank guarantees and acceptances and endorsements
outstanding as at the Balance Sheet date denominated
in foreign currencies and other foreign exchange
contracts are translated at period end rates notified
by FEDAI.
4.15 Derivative Transactions
Derivative transactions Notional amounts of derivative
transactions comprising of swaps, futures and options
are disclosed as off Balance Sheet exposures. The
Bank recognizes all derivative contracts (other than
those designated as hedges) at fair value, on the date
on which the derivative contracts are entered into and
are re-measured at fair value as at the Balance Sheet
or reporting date. Derivatives are classified as assets
when the fair value is positive (positive marked to
market) or as liabilities when the fair value is negative
(negative marked to market). Changes in the fair value
of derivatives other than those designated as hedges
are recognised in the Profit and Loss Account.
Outstanding derivative transactions designated as
"Hedges" are accounted in accordance with hedging
instrument on an accrual basis over the life of the
underlying instrument. Option premium paid or
received is recognised in the Profit and Loss Account
on expiry of the option. Option contracts are marked
to market on every reporting date.
4.16 Employee Share Based Payments
The Employee Stock Option Scheme ('the Scheme')
provides for the grant of options to acquire equity
shares of the Bank to its employees.
The options/units granted shall vest as per their
vesting schedule and these may be exercised within
a specified period. The Bank follows the intrinsic value
method to account for its stock-based employee
compensation plans in respect of options granted
up to 29th December 2023. The intrinsic value being
the excess, if any, of the fair market price of the share
under ESOSs over the exercise price of the option
is recognised as deferred employee compensation
with a credit to Employee's Stock Option (Grant)
Outstanding account.
Effective 30th December, 2023, the fair value of
share-linked instruments on the date of grant for
all instruments granted after 31st March, 2021 is
recognised as an expense in accordance with the
RBI guidelines on Compensation of Whole Time
Directors/Chief Executive Officers/Material Risk
Takers and Control Function staff and in accordance
with the scheme approved by the Shareholders of
the Bank. The fair value of the stock-based employee
compensation is estimated on the date of grant using
Black-Scholes model.
The compensation cost is amortized on a straight-line
basis over the vesting period after adjusting estimated
forfeiture. Ultimately, the cost for all instruments
that vest is recognized. The compensation expense
is recognised in the Profit and Loss Account with a
corresponding credit to Employee's Stock Option
(Grant) Outstanding account. On exercise of the stock
options, corresponding balance in Employee's Stock
Option (Grant) Outstanding account is transferred to
Share Premium. In respect of the options which expire
unexercised, the balance standing to the credit of
Employee's Stock Option (Grant) Outstanding account
is transferred to General Reserve.
18. NOTES on accounts forming part of the financial statements for THE YEAR ENDED 31st march
2026
A. DISCLOSURES AS LAID DOWN BY RBI CIRCULARS:1. Regulatory Capital:
The Bank is subject to the Basel II Capital Adequacy guidelines (NCAF) stipulated by RBI. The Capital Adequacy Ratio
(CRAR) of the Bank is calculated as per the Standardized approach for Credit Risk.
As per RBI letter "DBR.NBD.No. 4502/16.13.218/2017-18" dated 08th November 2017, no separate capital charge is
prescribed for market and operational risk. The total Capital Adequacy ratio of the Bank at 31st March 2026 is 22.22%
(Previous year: 21.84%) against the regulatory requirement of 15.00% prescribed by RBI.
No Capital Conservation Buffer and Counter - Cyclical Capital Buffer is applicable on Small Finance Bank (SFB) as per
operating guidelines issued on SFB by RBI.
Qualitative disclosure around LCR
The Reserve Bank of India has prescribed monitoring of sufficiency of Bank's liquid assets using Basel III - Liquidity Coverage
Ratio (LCR). The LCR is aimed at measuring and promoting short-term resilience of Banks to potential liquidity disruptions
by ensuring maintenance of sufficient high quality liquid assets (HQLAs) to survive an acute stress scenario lasting for 30
days.
The LCR requirement has been introduced in a phased manner and the Bank is required to maintain minimum ratio of 100%
from 01st April 2021.
The ratio comprises of high quality liquid assets (HQLAs) as numerator and net cash outflows in 30 days as denominator.
HQLA has been divided into two parts i.e. Level 1 HQLA which comprises of primarily cash, excess CRR, SLR securities in
excess of minimum SLR requirement and a portion of mandatory SLR as permitted by RBI (under MSF) and Level 2 HQLA
which comprises of investments in highly rated non-financial corporate bonds and listed equity investments considered at
prescribed haircuts. Cash outflows are calculated by multiplying the outstanding balances of various categories or types
of liabilities by the outflow run-off rates and cash inflows are calculated by multiplying the outstanding balances of various
categories of contractual receivables by the rates at which they are expected to flow in.
The Bank monitors the LCR periodically and has maintained LCR well above the regulatory threshold. Average LCR for
Quarter ended 31st March 2026 is 122.62%(Previous Year: 140.02%).
Asset Liability Committee (ALCO) of the Bank is the primary governing body for Liquidity Risk Management. Treasury is
the central repository of funds within the Bank and is vested with the responsibility of managing liquidity risk within the
risk appetite of the Bank. Bank has incorporated Basel Liquidity Standards - LCR for liquidity risk. In computing the above
information, certain estimates and assumptions have been made by the Bank's management which have been relied upon
by auditors.
Qualitative Disclosure
As per the RBI guideline on Net Stable Funding Ratio (NSFR) dated 17th May 2018, the Bank is required to maintain the
NSFR on an ongoing basis. The minimum NSFR requirement set out in the RBI guideline effective 01st October 2021
is 100%. The Basel Committee on Banking Supervision (BCBS) had introduced the Net Stable Funding Ratio (NSFR)
to ensure resilience over a longer time horizon by requiring banks to fund their activities with more stable sources
of funding. NSFR is defined as the amount of Available Stable Funding relative to the amount of Required Stable
Funding. "Available Stable Funding" (ASF) is defined as the portion of capital and liabilities expected to be reliable over
the time horizon considered by NSFR, which extends to one year. The amount of "Required Stable Funding" (RSF) of a
specific institution is a function of the liquidity characteristics and residual maturities of the various assets held by the
institution as well as those of its off-balance sheet (OBS) exposures.
In computing the above information, certain estimates and assumptions have been made by Bank's management
which have been relied upon by the auditors.
3.9 Government Security Lending (GSL) transactions
The Bank doesn't undertake government securities lending transactions during FY 2025-26 and FY 2024-25. Hence the
disclosure pertaining to the same is not applicable.
3.10 The Bank implemented the RBI Master Direction - Classification, Valuation, and Operation of Investment Portfolio
of Commercial Banks (Directions), 2023, dated 12th September 2023. This directive is applicable to banks from
01st April 2024. Consequent to the transition provisions, the Bank has recognised net gain of ' 9.52 crore (net of
taxes) which has been credited to General Reserve as on 01st April 2024, on account of revision in the carrying value
of investments to the fair value as on such date. The impact of the revised framework for previous period FY 2023-24
is not ascertainable and assess the profit or loss from the investments included in other income for the year ended
31st March 2025, incomparable with the previous period (s)/year.
4.3 Resolution of stressed assets- Revised frame work
The Bank is having Nil loan account for resolution of stressed asset (revised framework) as on 31st March 2026 (Previous
year: Nil) as per the RBI Circular DBR.No. BP.BC.45/21.04.048/2018-19 dated 7th June 2019, as amended.
4.4. Divergence in asset Classification and provisioning
RBI vide circular no. DOR.ACC.REC.No.74/21.04.018/2022-23 dated 11th October 2022, has directed that banks shall
make suitable disclosures, wherever (a) the additional provisioning requirement assessed by RBI exceeds 5 percent
of the reported profit before provisions and contingencies for the reference period, or (b) the additional Gross NPA
identified by RBI exceeds 5 percent of the published incremental Gross NPA for the reference period, or both. There
are no reportable matters to the Bank for the years ended 31st March 2026 and 31st March 2025.
4.5. Disclosure of transfer of loan exposures
(i) During the years ended 31st March 2026 and 31st March 2025, the bank has not acquired/transferred any ""loans
not in default"" through assignment of loans.
(ii) Details of stressed loans transferred to Asset Reconstruction Company for the year ended 31st March 2026 is
given below.
The above table is complied based on frauds reported by the Bank in FMR return to RBI. Pursuant to RBI Master
directions on Fraud risk management dated 15th July 2024, the Bank has not considered digital frauds on account of
customer negligence post 14th August 2024 in the above disclosure.
*Provision is made net of recovery
4.8 Disclosure related to Project Finance
The Bank has not provided loans for project finance. Hence disclosure is not applicable for the years ended 31st March
2026 and 31st March 2025.
5.4. Unsecured Advances
During the years ended 31st March 2026 and 31st March 2025, the Bank has not extended any advances where the
collateral is an intangible asset such as a charge over rights, licenses, authorisations, etc. Hence the disclosure is not
applicable
5.5. Details of factoring exposure:
The factoring exposure of the Bank as at 31st March 2026 is Nil (Previous Year: Nil).
5.6. Intra Group Exposures
The Bank does not have any intra group exposures for the year ended 31st March 2026 and 31st March 2025.
Exposure is computed as per RBI Master Circular on Exposure Norms DBOD. No. Dir.BC.12/13.03.00/2015-16 dated
01st July 2015.
5.7. Unhedged foreign currency exposure
The Bank held ' 0.45 crore towards unhedged foreign currency exposure as on 31st March 2026 (Previous Year:
' 0.20 crore). The bank held no incremental capital on advances to borrowers with unhedged foreign currency as on
31st March 2026 (Previous Year: Nil).
5.8 The Bank has implemented new guidelines relating to Reserve Bank of India (Lending Against Gold and Silver Collateral)
Directions, 2025 w.e.f 01st April 2026. hence the disclosures pertaining to the same are not made.
7. Derivatives7.1 Details of any derivative portfolio
The Bank does not have any derivative portfolio. Hence the disclosure is not applicable.
7.2 Forward Rate agreement/Interest Rate Swap
The Bank has not entered into any Forward rate agreement/Interest rate swap contracts during Financial Years
2025-26 and 2024-25. Hence this disclosure is not applicable to the Bank.
7.3 Exchange Traded Interest Rate Derivatives
The Bank has not entered into any Exchange traded interest rate derivatives contracts during Financial Years 2025-26
and 2024-25. Hence this disclosure is not applicable to the Bank.
7.4 Disclosures on risk exposure in derivatives
A. Qualitative Disclosures
i. Structure and organization for management of risk in derivatives trading:
The Board of Directors, Risk Management Committee of Board (RMCB), Asset Liability Management
Committee(ALCO) and Risk Management department are entrusted with management of risk in derivative
transactions for trading and hedging. Bank's exposure to derivatives is limited to foreign exchange swaps
done for hedging its FCNR portfolio and trading portfolio. Policy for hedging is included in Foreign Exchange
policy of the Bank.
Bank has operations and Risk management functions- independent of dealing function. The Market Risk
division of Risk Management department is responsible for assessment, monitoring, measurement and
reporting of market risk and counterparty risk in foreign exchange swaps entered in to for trading and
hedging.
ii. Scope and nature of risk measurement, risk reporting and risk monitoring systems:
Market Risk division of Risk Management department monitors the Bank's exposures in FX spot and forwards
on daily basis via computing VaR, AGL etc. and reports to the Chief Risk Officer.
A report is submitted to Risk Management Committee of Board (RMCB) on periodic intervals.
iii. Policies for hedging and/or mitigating risk and strategies and processes for monitoring the
continuing effectiveness of hedges/mitigants:
Policy for hedging is included in Foreign Exchange policy of the Bank.
iv. Accounting policy for recording hedge and non-hedge transactions; recognition of income,
premiums and discounts; valuation of outstanding contracts; provisioning, collateral and credit
risk mitigation:
Notional amounts of derivative transactions comprising of swaps, futures and options are disclosed as off
Balance Sheet exposures. The Bank recognises all derivative contracts (other than those designated as
hedges) at fair value, on the date on which the derivative contracts are entered into and are re-measured at
fair value as at the Balance Sheet or reporting date. Derivatives are classified as assets when the fair value
is positive (positive marked to market) or as liabilities when the fair value is negative (negative marked to
market). Changes in the fair value of derivatives other than those designated as hedges are recognised in the
Profit and Loss Account.
Outstanding derivative transactions designated as "Hedges" are accounted in accordance with hedging
instrument on an accrual basis over the life of the underlying instrument. Option premium paid or received
is recognised in the Profit and Loss Account on expiry of the option. Option contracts are marked to market
on every reporting date.
B. Quantitative Disclosures
The Bank does not have any currency derivatives and Interest Rate derivatives. Hence disclosure is not applicable
for Financial years 2025-26 and 2024-25
8. Disclosures relating to Securitization
The Bank has not undertaken any Securitised transaction during the years ended 31st March 2026 and 31st March 2025
and no outstanding as on 31st March 2026 and 31st March 2025. Hence the disclosure is not applicable to the Bank.
9. Off Balance Sheet SPVs sponsored
There are no Off-Balance Sheet SPVs sponsored (which are required to be consolidated as per accounting norms)
during the years ended 31st March 2026 and 31st March 2025.
10. Transfer to Depositor Education and Awareness Fund (DEAF)
During the years ended 31st March 2026 and 31st March 2025, the bank was not required to transfer any amount to
Depositor Education and Awareness Fund.
12. Disclosure of penalties imposed by RBI
During the year ended 31st March 2026, the Reserve Bank of India had imposed a penalty under Banking Regulation
Act, 1949 for failure to adhere to
i) RBI Directions on " Customer Services in Bank" ' Nil (Previous Year: ' Nil).
ii) RBI Circular DCM (RMMT) No.S153/11.01.01/2021-22 dated 10th August 2021 and addendum dated 03rd January
2022 on cash out at ATM of more than ten hours in a month by the Bank of ' 0.001 crore (Previous Year: ' 0.002
crore).
13. Disclosure of Remuneration
A. Qualitative Disclosures:
a) Information relating to the composition and mandate of the Remuneration Committee:
The Nomination, Remuneration and Compensation committee (""NRC"") comprises of 3 independent
directors of the Bank as on 31st March 2026. Key mandate of the NRC is to oversee the implementation of the
compensation policy of the Bank. The scope and function of the NRC are in accordance with Section 178 of
the Companies Act 2013, Securities & Exchange Board of India Regulation 2015 and the guidelines issued by
Reserve Bank of India from time to time.
The composition of NRC as on 31st March 2026 is as follows:
- Prof. Biju Varkkey (Chairperson)
- Shri. Karthikeyan Manickam (Member)
- Ms. Kolasseril Chandramohanan Ranjani (Member)
b) Information relating to the design and structure of remuneration processes and the key features
and objectives of remuneration policy:
Objective of Banks' Compensation Policy is:
- to provide a fair and transparent structure that is designed to retain and attract the talent pool
- the compensation shall be adjusted for all types of risk and the outcomes shall be symmetric with risk
outcomes.
- to ensure that a sustained and rigorous compensation practice is followed.
- to ensure that a comprehensive and timely disclosure of information is made available to all stakeholders
to facilitate constructive engagement.
- Institutionalise a mechanism for the appointment/removal/resignation/evaluation of performance of
Directors.
- Perform such functions as are required to be performed by the Nomination and Remuneration
committee under the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021,
including the following:
(a) administering the ESOP plans;
(b) determining the eligibility of employees to participate under the ESOP plans;
(c) granting options to eligible employees and determining the date of grant;
(d) determining the number of options to be granted to an employee;
(e) determining the exercise price under the ESOP plans
c) Description of the ways in which current and future risks are taken into account in the
remuneration processes. It should include the nature and type of the key measures used to take
account of these risks:
Compensation is adjusted for all types of risk and the outcomes are symmetric with risk outcomes.
Compensation pay-out schedules is sensitive to the time horizon of risks. The mix of cash, equity and other
forms of compensation is consistent with risk alignment for each roles.
In order to manage current and future risk and allow a fair amount of time to measure and review both
quality and quantity of the delivered outcomes, the Bank has a policy to set apart a portion of the total
compensation of senior and middle management as variable.
In the event of negative contributions of the Bank and/or in the relevant line of business, disciplinary
proceedings initiated if any, in a year the deferred compensation will be subjected to 'malus' and 'clawback'
arrangements.
d) Description of the ways in which the Bank seeks to link performance during a performance
measurement period with levels of remuneration:
Individual performances are assessed in line with business/individual delivery of the Key Responsibility Areas
(KRAs), top priorities of business, budgets, and overall contribution to the organisation etc.
In linking the performance and level of remuneration, the job roles, levels, business budgets, risk factors,
achievement of individual KRAs are taken into consideration for taking decision in this regard.
Variable Pay for Whole time Directors/Managing Director/Material Risk Takers will have a minimum pay out
of 50% of the fixed pay and maximum pay out 300% of the Fixed pay, which will be determined based on the
level of responsibility. However, any bonus at the time of joining/sign on bonus will be limited only to the first
year and would be in the form of Employee Stock Options.
e) A discussion of the banks' policy on deferral and vesting of variable remuneration and a discussion
of the bank's policy and criteria for adjusting deferred remuneration before vesting and after
vesting:
For MD & CEO, WTDs, and other employees who are MRTs, deferral arrangements exist for the variable pay,
regardless of the quantum of pay. For such executives of the bank, a minimum of 60% of the total variable
pay is invariably be under deferral arrangements. Further, if cash component is part of variable pay, at least
50% of the cash bonus will be deferred.
However, in cases where the cash component of variable pay is under ' 25 lakh, deferral requirements is not
necessary.
The deferral period is a minimum of three years and would be applicable to both the cash and non-cash
components of the variable pay.
The deferral of the variable pay will be spread out over the course of the deferral period.
f) Description of the different forms of variable remuneration (i.e. cash, shares, ESOPs and other
forms) that the bank utilizes and the rationale for using these different forms:
Variable remuneration in the form of Cash or in the form ESOP is paid periodically.
The form of variable remuneration depends on the job level of individual, risk involved, the time horizon
for review of quality and longevity of the assignments performed. There is a proper balance between Fixed
Pay and Variable Pay. For Whole Time Directors (WTD) and the Managing Director/MRTs the proportion of
Variable pay to Fixed Pay should be consistent with the norms prescribed by Reserve Bank of India as given
below;
(i) The compensation should have minimum 50 percent variable pay component.
(ii) In case variable pay is up to 200% of the Fixed Pay, a minimum of 50% of the variable pay; and in case
variable pay is above 200%, a minimum of 67% of the variable pay should be via non-cash instruments.
(iii) The total variable pay shall be limited to a maximum of 300% of the fixed pay at a higher level of
responsibility.
14.6. Implementation of IFRS converged Indian Accounting Standards (INDAS)
The Bank submits its Proforma Ind-AS financials on half yearly basis to 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 (IndAS 109 and 116) and hiring skilled resources
to implement Ind-AS accounting.
14.7. Payment of DICGC Insurance Premium
The Bank had remitted DICGC Insurance premium within the timelines prescribed therein for the years ended 31st
March 2026 and 31st March 2025.
14.8. Unamortised Pension and Gratuity Liabilities
There are no unamortised pension and gratuity liabilities as at 31st March 2026 and 31st March 2025.
14.9 Letter of Comforts
The Bank has not issued any Letter of Comforts during years ended 31st March 2026 and 31st March 2025. Hence
corresponding disclosures are not made.
14.10 Green Deposits
The Bank has not raised any green deposits during years ended 31st March 2026 and 31st March 2025. Hence
corresponding disclosures are not made.
15. Details of Single Borrower Limit (SBL)/Group Borrower Limit (GBL) exceeded by the Bank
During the years ended 31st March 2026 and 31st March 2025, the Bank's credit exposure to single borrower and group
borrowers was within the prudential exposure limits prescribed by RBI.
16. The Bank is carrying an additional contingency provision on standard assets of ' 16.63 crore as on 31st March 2026
(' 44.67 crore as on 31st March 2025).
2. Segment Reporting:
Part A- Business Segments
The business of the Bank has been segregated into four Segments as per RBI guidelines: Treasury, Wholesale Banking,
Retail Banking and Other Banking Operations:
Segmental information is provided as per the MIS/reports available for internal reporting purposes, which includes
certain estimates and assumptions.
The methodology adopted in compiling and reporting the above information has been relied upon by the auditors.
The RBI vide its Circular dated 07th April 2022 on establishments of Digital Banking Units (DBUs) has prescribed reporting
of Digital Banking Segments as a sub segment of Retail Banking Segment (RBS). The Bank has not set up any DBU so
far and hence DBU has not been disclosed as a separate segment as per Accounting Standard 17 (Segment Reporting).
Part B - Geographical Segments
The business of the Bank is in India only. Accordingly, geographical segment is not applicable.
3. Lease Disclosures:
The Bank has taken premises under operating lease for period ranging from 11 months to 120 months. The lease
payments recognised in the profit and loss account is ' 97.89 crore (year ended 31st March 2025 - ' 85.71 crore).
The future minimum lease payments under non cancellable operating leases is given below
8. Employee Stock Option Scheme ("ESOS")
i) ESAF Small Finance Bank Employee Stock Option Plan 2019
The Bank, pursuant to the resolutions passed by the Board on 23rd December 2019 and Shareholders on 03rd
January 2020, adopted the ESAF ESOP Plan 2019, with an 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. The Bank granted options under loyalty grants in four tranches
as on 31st March 2026. As on 31st March 2026, no options under performance grant have been granted by the
Bank under the ESAF ESOP Plan 2019. Post IPO of the Bank, the ESAF ESOP Plan 2019 was ratified and amended
by the shareholders in the 7th Annual General Meeting held on 29th December 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. The details of the options granted under the ESAF ESOP
Plan 2019 as loyalty grant are as follows:
iii. Leave Encashment
The employees of the Bank are entitled to compensated absence. The employees can carry forward a portion of
the unutilized accrued compensated absence and utilize it in future periods or receive cash compensation during
service, retirement or termination of employment for the unutilized accrued compensated absence for a maximum
of 90 days. The Bank records an obligation for compensated absences in the period in which the employee renders
the services that increase this entitlement. The Bank measures the expected cost of compensated absence as the
additional amount that the Bank expects to pay as a result of the unused entitlement that has accumulated at the
balance sheet date based on actuarial valuations.
The Actuarial liability of compensated absences of accumulated privilege leave of the employees of the Bank is
given below:
The discount rate is based on the prevailing market yields of Government of India securities as at the Balance
Sheet date for the estimated term of the obligations.
The estimate of future salary increases, takes into account the inflation, seniority, promotion, increments and other
relevant factors. The above information is as certified by the actuary and relied upon by the auditors.
iv. Impact of new labour codes
Pursuant to the notification issued by the Ministry of Labour and Employment, the Code on Wages, 2019, the Code
on Social Security, 2020, the Industrial Relations Code, 2020 and the Occupational Safety, Health and Working
Conditions Code, 2020 (collectively referred to as the "New Labour Code") became effective from 21st November
2025. The Bank has reassessed its employee benefit obligations in accordance with the revised definition of
wages based on available information and evolving market data. Accordingly, an incremental liability on account
of past service cost in accordance with AS 15 - Employee Benefits amounting to ' 3.31 crore has been charged to
the Profit and Loss Account for the quarter and nine months ended 31st December 2025. The Bank continues to
monitor developments relating to the implementation of the New Labour Codes and will review its estimates and
assumptions on an ongoing basis.
As per Bank's CSR Policy upto 5% of the average net profit of the last 3 preceding years is allocated for CSR activities.
During the year the Bank has set aside 5% as CSR funds. (Previous year: 5%)
#amount spend/incurred during the year include ' 2.17 crore out of the unspend amount during the year ended
31st March 2025 (Previous Year:' 1.28 crore out of the unspend amount during the year ended 31st March 2024).
Aamount spend/incurred during the year include ' 5.57 crore out of the unspend amount during the year ended
31st March 2025 and during previous year include for ' 5.65 crore out of the unspend amount during the year ended
31st March 2024 out of the unspend amount during the said year.
Pursuant to Section 135(5) & 135 (6) of Companies Act,2013 read with Companies (Corporate Social Responsibility
Policy) Rules, 2014(Amended), Bank has transferred ' 4.51 crore (Previous Year: ' 7.39 crore) to the "Unspent CSR
Account" as on 31st March 2026 towards the Ongoing projects approved by the CSR Committee to be spent over the
next 3 years. The advance with the Implementing Agencies is ' 0.37 crore as at March 2026 (March 2025: ' 2.38 crore)
Nature of CSR activities:-
Children education, Sustainable village development, waste management, liveable city projects, community school
infrastructure, Krushak mitra for farmer and farmer collectives, Garshom projects for migrant labourers, Skill training
for rural artisans and rural youth, flood rehabilitation, sustainable development initiatives, Arogya Mithra - Health
Entrepreneurship development etc.
Refer Note B.7 of Schedule 18 for the related parties involved in activities relating to Corporate Social Responsibility.
11. Subordinated Debt and Perpetual Debt
a The Bank has an outstanding subordinated debt of ' 715 crore (As at 31st March 2025: ' 340 crore). This has
been considered as part of Tier 2 Capital for capital adequacy computation after subjecting to discounting in
accordance with RBI guidelines.
During the year ended 31st March 2026, the Bank raised a Subordinated debt of ' 415 crore by way of private
placement (Previous Year: ' Nil).
The Bank has on outstanding Perpetual Debt Instrument of ' 48 crore (As at 31st March 2025: ' 48 crore)
b. I nterest Expended-Others includes interest of ' 52.65 crore (Previous year: ' 44.59 crore) on Subordinated Debt
and includes interest of ' 6.24 crore (Previous Year: ' 6.24 crore) on perpetual Debt instrument.
15. The Bank has received few intimations from "suppliers" regarding their status under the Micro, Small and Medium
Enterprises Development Act, 2006. Based on the information received and available with the Bank, there are no
reported cases of delays in payments to micro and small enterprises or of interest payments due to delays in such
payments during the years ended 31st March 2026 and 31st March 2025. The above is based on information available
with the Bank and relied upon by the Auditors.
16. As a part of the normal banking business, the Bank grants loan and advances to its borrowers with permission to lend/
invest or provide guarantees/securities in other entities identified by such borrowers or on the basis of the security/
guarantee provided by the co-borrower. Similarly, the Bank may accept funds from its customers who may instruct the
bank to lend/invest/provide guarantee or security or the like against such deposits in other entities identified by such
customers. These transactions are part of the Bank's normal banking business, which is conducted after exercising
proper due diligence including adherence to Know Your Customer (KYC) guidelines.
Other than the nature of the transactions described above:
- No funds have been advanced or loaned or invested by the Bank to or in any other person(s) or entity(ies)
("intermediaries") with the understanding that the intermediary shall lend or invest in party identified by or on
behalf of the Bank (ultimate beneficiary).
- The Bank has not received any funds from any party(s) (funding party) with the understanding that the Bank shall
whether, directly or indirectly lend or invest in other persons or entities by or on behalf of that funding party
("ultimate beneficiaries") or provide any guarantee or security or the like on behalf of the ultimate beneficiary.
17. Dividend
Board of Directors has not proposed any dividend for financial years ended 31st March 2026 and 31st March 2025.
18. The Bank absorbed 5,109 trained employees of M/s. ESAF Swasraya Multi State Agro Co-operative Society Limited
("ESMACO") and paid compensation of ' 58 crore (inclusive of GST) being the value addition for sourcing and training
the staff which otherwise the Bank would have had to incur based on an independent external valuation for the year
ended 31st March 2025.
19. The comparative financial information for the Quarter and year ended 31st March 2025 included in the statement
have been audited by M/s. Abarna & Ananthan and M/s. Kirtane & Pandit LLP (one of the present joint auditors), who
expressed an unmodified opinion vide their audit report dated 16th May 2025.
20. Previous Year's figures
Previous year figures have been regrouped/reclassified wherever necessary to correspond with the current year's
classification/disclosure.
13. Description of Contingent Liabilities:
The Bank has contingent liability of
a) ' 0.50 crore (Previous Year: ' 0.46 crore) for claims against customer disputes and tax disputes.
b) ' 0.76 crore (Previous Year: ' 0.76 crore) for proprietary transactions/other Court matters.
c) ' 512.02 crore (Previous Year: ' 195.76 crore) against outstanding forward exchange contracts.
d) ' 1.23 crore (Previous Year: 1.62 crore) towards guarantees given on behalf of constituents in India.
14. The Bank has a process whereby periodically all long term contracts are assessed for material foreseeable losses. As
on 31st March 2026 and 31st March 2025, the Bank has reviewed such contracts and as per available information no
provision is required to be made under any law/accounting standards for material foreseeable losses on such long
term contracts in the books of account.
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