Accounting Policies of Northern Arc Capital Ltd. Company

Mar 31, 2025

3 Summary of material accounting policies

a. Revenue from contracts with customers

The Company recognises revenue from contracts with
customers (other than financial assets to which Ind AS
109 ''Financial instruments'' is applicable) based on a
comprehensive assessment model as set out in Ind AS 115
''Revenue from contracts with customers''. The Company
identifies contract(s) with a customer and its performance
obligations under the contract, determines the transaction
price and its allocation to the performance obligations in
the contract and recognises revenue only on satisfactory
completion of performance obligations. Revenue is measured
at transaction price i.e. the amount of consideration to
which the Company expects to be entitled in exchange for
transferring promised goods or services to the customer,
excluding amounts collected on behalf of third parties. The
Company consider the terms of the contract and its customary
business practices to determine the transaction price.

The Company recognises revenue from contracts with
customers based on a five step model as set out in Ind AS 115 :

Step 1: Identify contract(s) with a customer: A contract is
defined as an agreement between two or more parties that
creates enforceable rights and obligations and sets out the
criteria for every contract that must be met.

Step 2: Identify performance obligations in the contract:
A performance obligation is a promise in a contract with a
customer to transfer a good or service to the customer.

Step 3: Determine the transaction price: The transaction
price is the amount of consideration to which the Company

expects to be entitled in exchange for transferring promised
goods or services to a customer, excluding amounts collected
on behalf of third parties.

Step 4: Allocate the transaction price to the performance
obligations in the contract: For a contract that has more
than one performance obligation, the Company allocates
the transaction price to each performance obligation in an
amount that depicts the amount of consideration to which
the Company expects to be entitled in exchange for satisfying
each performance obligation.

Step 5: Recognise revenue when (or as) the Company
satisfies a performance obligation.

Trade Receivables

A receivable is recognised if an amount of consideration that
is unconditional (i.e., only the passage of time is required
before payment of the consideration is due). Refer to
accounting policies of financial assets in section 3c financial
assets and liabilities.

Recognition of interest income on loans

Under Ind AS 109, interest income is recorded using
the effective interest rate (EIR) method for all financial
instruments measured at amortised cost. The EIR is the
rate that exactly discounts estimated future cash receipts
through the expected life of the financial instrument or, when
appropriate, a shorter period, to the net carrying amount of
the financial asset.

The EIR (and therefore, the amortised cost of the asset)
is calculated by taking into account any fees and costs that
are an integral part of the EIR. The Company recognises
interest income using a rate of return that represents the best
estimate of a constant rate of return over the expected life of
the financial instrument.

If expectations regarding the cash flows on the financial asset
are revised for reasons other than credit risk, the adjustment
is booked as a positive or negative adjustment to the carrying
amount of the asset in the balance sheet with an increase or
reduction in interest income. The adjustment is subsequently
amortised through interest income in the statement of
profit and loss.

The Company calculates interest income by applying the EIR
to the gross carrying amount of financial assets other than
credit-impaired assets.

When a financial asset becomes credit-impaired, the
Company calculates interest income by applying the effective

interest rate to the net amortised cost of the financial
asset. If the financial asset cures and is no longer credit-
impaired, the Company reverts to calculating interest income
on a gross basis.

Revenue recognition for different heads of income is as under:

i. Interest income on deposits

Interest income on deposits is recognised on a time
proportionate basis using the effective interest rate.

ii. Fees and commission income

Fees and commission income such as guarantee
commission, professional fee, service income etc. are
recognised on an accrual basis in accordance with term
of the contract with customer.

iii. Dividend income

Dividend income (including from FVOCI investments)
is recognised when the Company''s right to receive
the payment is established, it is probable that the
economic benefits associated with the dividend will
flow to the Company and the amount of the dividend
can be measured reliably. This is generally when the
shareholders approve the dividend

iv Other income

All items of other income is recognized on an accrual
basis, when there is no uncertainty in the ultimate
realisation / collection.

b. Financial instruments - initial recognition
Date of recognition

Debt securities issued are initially recognised when they
are originated. All other financial assets (exluding trade
receivables which are recognised at transaction price)
and financial liabilities are initially recognised when the
Company becomes a party to the contractual provisions of
the instrument.

Initial measurement of financial instruments

The classification of financial instruments at initial
recognition depends on their contractual terms and the
business model for managing the instruments. Financial
instruments are initially measured at their fair value, except
in the case of financial assets and financial liabilities recorded
at FVTPL, transaction costs are added to, or subtracted
from this amount.

Measurement categories of financial assets and liabilities

The Company classifies all of its financial assets based on
the business model for managing the assets and the asset''s
contractual terms, measured at either:

i) Amortised cost

ii) Fair value through other comprehensive
income (''FVOCI'')

iii) Fair value through profit and loss (''FVTPL'')

c. Financial assets and liabilities

A. Financial assets

Business model assessment

The Company determines its business model at the level
that best reflects how it manages groups of financial
assets to achieve its business objective.

The Company''s business model is not assessed on an
instrument-by-instrument basis, but at a higher level
of aggregated portfolios and is based on observable
factors such as:

a) How the performance of the business model and
the financial assets held within that business
model are evaluated and reported to the
Company''s key management personnel.

b) The risks that affect the performance of the
business model (and the financial assets held
within that business model) and, in particular, the
way those risks are managed.

c) How managers of the business are compensated
(for example, whether the compensation is based
on the fair value of the assets managed or on the
contractual cash flows collected).

d) The expected frequency, value and timing
of sales are also important aspects of the
Company''s assessment.

The business model assessment is based on reasonably
expected scenarios without taking ''worst case'' or ''stress
case'' scenarios into account. If cash flows after initial
recognition are realised in a way that is different from
the Company''s original expectations, the Company does
not change the classification of the remaining financial
assets held in that business model, but incorporates
such information when assessing newly originated or
newly purchased financial assets going forward.

Sole Payments of Principal and Interest (SPPI) test

As a second step of its classification process, the
Company assesses the contractual terms of financial
assets to identify whether they meet SPPI test.
''Principal'' for the purpose of this test is defined as the
fair value of the financial asset at initial recognition and
may change over the life of a financial asset (for example,
if there are repayments of principal or amortisation of
the premium/ discount). The most significant elements
of interest within a lending arrangement are typically
the consideration for the time value of money and
credit risk. To make the SPPI assessment, the Company
applies judgement and considers relevant factors such
as the period for which the interest rate is set.

In contrast, contractual terms that introduce a more
than de minimis exposure to risks or volatility in the
contractual cash flows that are unrelated to a basic
lending arrangement do not give rise to contractual
cash flows that are solely payments of principal and
interest on the amount outstanding. In such cases, the
financial asset is required to be measured at FVTPL.

Accordingly, financial assets are measured as follows:

i. Financial assets carried at amortised cost (AC)

A financial asset is measured at amortised cost if
it is held within a business model whose objective
is to hold the asset in order to collect contractual
cash flows and the contractual terms of the
financial asset give rise on specified dates to cash
flows that are solely payments of principal and
interest on the principal amount outstanding.
Bank balances, Loans, Trade receivables and
other financial investments that meet the above
conditions are measured at amortised cost

ii. Financial assets at fair value through other
comprehensive income (FVOCI)

A financial asset is measured at FVOCI if it is
held within a business model whose objective is
achieved by both collecting contractual cash flows
and selling financial assets and the contractual
terms of the financial asset give rise on specified
dates to cash flows that are solely payments
of principal and interest on the principal
amount outstanding.

iii. Financial assets at fair value through profit or
loss (FVTPL)

A financial asset which is not classified in any
of the above categories is measured at FVTPL.
Subsequent changes in fair value are recognised
in the statement of profit and loss.

The Company records investments in Alternative
investment funds (AIF), mutual funds and market
linked debentures at FVTPL

iv Investment in equity instruments

The Company measures all equity investments
at fair value through profit or loss except, for
investment in subsidiaries subject to impairment
if any at the end of each reporting period. Cost of
investment represents amount paid for acquisition
of the investment. For investment in associate
the Company measures accounts it at cost or in
accordance with Ind AS 109, financial instruments.

B. Financial liability

i. Initial recognition and measurement

All financial liabilities are measured at amortised
cost except for financial guarantees, and derivative
financial liabilities. Transaction costs that are
directly attributable to the acquisition or issue
of financial liability, which are not at fair value
through profit or loss, are adjusted to the fair
value on initial recognition.

ii Subsequent measurement

Financial liabilities are carried at amortized cost
using the effective interest rate method.

Debt securities and other borrowed funds

After initial measurement, debt issued and other
borrowed funds are subsequently measured at
amortised cost. Amortised cost is calculated by
taking into account any discount or premium on
issue funds, and costs that are an integral part of
the instrument.

The Company issues certain non-convertible
debentures, the return of which is linked to
performance of specified indices over the
period of the debenture. Such debentures have a
component of an embedded derivative which is
fair valued at a reporting date. The resultant ''net
unrealised loss or gain'' on the fair valuation of

these embedded derivatives is recognised in the
statement of profit and loss. The debt component
of such debentures is measured at amortised cost
using yield to maturity basis.

Embedded derivatives

A derivative embedded in a hybrid contract, with a
financial liability or non-financial host, is separated
from the host and accounted for as a separate
derivative if: the economic characteristics and
risks are not closely related to the host; a separate
instrument with the same terms as the embedded
derivative would meet the definition of a derivative;
and the hybrid contract is not measured at fair
value through profit or loss. Embedded derivatives
are measured at fair value with changes in fair
value recognised in profit or loss. Reassessment
only occurs if there is either a change in the terms
of the contract that significantly modifies the
cash flows that would otherwise be required or a
reclassification of a financial asset out of the fair
value through profit or loss category.

Derecognition of financial assets and liabilities

a. Derecognition of financial assets due to substantial
modification of terms and conditions

The Company derecognises a financial asset when the
terms and conditions have been renegotiated to the extent
that, substantially, it becomes a new financial asset, with
the difference recognised as a derecognition gain or loss,
to the extent that an impairment loss has not already
been recorded. The newly recognised financial assets are
classified as Stage 1 for ECL measurement purposes.

If the modification is such that the instrument would no
longer meet the SPPI criterion. If the modification does
not result in cash flows that are substantially different,
the modification does not result in derecognition.
Based on the change in cash flows discounted at the
original EIR, the Company records a modification gain
or loss, to the extent that an impairment loss has not
already been recorded.

b. Derecognition of financial instruments other than
due to substantial modification

i. Financial Assets

A financial asset (or, where applicable, a part
of a financial asset or part of a group of similar
financial assets) is derecognised when the
contractual rights to the cash flows from the

financial asset expires or it transfers the rights to
receive the contractual cash flows in a transaction
in which substantially all of the risks and rewards
of ownership of the financial asset are transferred
or in which the Company neither transfers nor
retains substantially all of the risks and rewards
of ownership and it does not retain control of the
financial asset.

On derecognition of a financial asset in its entirety,
the difference between the carrying amount
(measured at the date of derecognition) and
the consideration received (including any new
asset obtained less any new liability assumed) is
recognised in the statement of profit and loss.

Accordingly, gain on sale or derecognition of
assigned portfolio are recorded upfront in the
statement of profit and loss as per Ind AS 109.
Also, the Company recognises servicing income as
a percentage of interest spread over tenure of loan
in cases where it retains the obligation to service
the transferred financial asset.

When the Company has neither transferred nor
retained substantially all the risks and rewards
and has retained control of the asset, the asset
continues to be recognised only to the extent
of the Company''s continuing involvement, in
which case, the Company also recognises an
associated liability. The transferred asset and
the associated liability are measured on a basis
that reflects the rights and obligations that the
Company has retained.

Continuing involvement that takes the form of a
guarantee over the transferred asset is measured
at the lower of the original carrying amount of the
asset and the maximum amount of consideration
the Company could be required to pay.

ii. Financial Liability

A financial liability is derecognised when the
obligation under the liability is discharged,
cancelled or expires. Where an existing financial
liability is replaced by another from the same
lender on substantially different terms, or the
terms of an existing liability are substantially
modified, such an exchange or modification is
treated as a derecognition of the original liability
and the recognition of a new liability. The difference

between the carrying value of the original financial
liability and the consideration paid is recognised
in the statement of profit and loss.

e. Impairment of financial assets

A. Overview of Expected Credit Loss (''ECL'') principles

In accordance with Ind AS 109, the Company uses ECL
model, for evaluating impairment of financial assets
other than those measured at fair value through profit
and loss (FVTPL). The ECL allowance is based on the
credit losses expected to arise over the life of the asset
(the lifetime expected credit loss or LTECL), unless
there has been no significant increase in credit risk
since origination, in which case, the allowance is based
on the 12 months’ expected credit loss (12mECL).
The 12mECL is the portion of LTECLs that represent
the ECLs that result from default events on a financial
instrument that are possible within the 12 months
after the reporting date. When estimating LTECLs for
undrawn loan commitments, the Company estimates
the expected portion of the loan commitment that will
be drawn down over its expected life. The ECL is then
based on the present value of the expected shortfalls in
cash flows if the loan is drawn down.

Expected credit losses are measured through a loss
allowance at an amount equal to:

i) The 12-months expected credit losses (expected
credit losses that result from those default events
on the financial instrument that are possible
within 12 months after the reporting date); or

ii) Lifetime expected credit losses (expected credit
losses that result from all possible default events
over the life of the financial instrument)

Both LTECLs and 12mECLs are calculated on either
an individual basis or a collective basis, depending
on the nature of the underlying portfolio of
financial instruments

Based on the above, the Company categorises its
financial assets into Stage 1, Stage 2 and Stage 3, as
described below:

Stage 1:

When financial assets are first recognised, the Company
recognises an allowance based on 12 months ECL.
Stage 1 financial assets includes those financial assets
where there is no significant credit risk observed and

also includes facilities where the credit risk has been
improved and the financial asset has been reclassified
from stage 2 or stage 3.

Stage 2:

When a financial asset has shown a significant
increase in credit risk since origination, the Company
records an allowance for the life time ECL. Stage 2
financial assets also includes facilities where the credit
risk has improved and the financial asset has been
reclassified from stage 3.

Stage 3:

Financial assets considered credit impaired are the
financial assets which are past due for more than 90 days.
The Company records an allowance for life time ECL.

B. Calculation of ECLs

The mechanics of ECL calculations are outlined below
and the key elements are, as follows:

PD:

Probability of Default ("PD") is an estimate of the
likelihood of default over a given time horizon. A
default may only happen at a certain time over the
assessed period, if the facility has not been previously
derecognised and is still in the portfolio.

EAD:

Exposure at Default ("EAD") is an estimate of the
exposure at a future default date, taking into account
expected changes in the exposure after the reporting
date, including repayments of principal and interest, ,
whether scheduled by contract or otherwise, expected
drawdowns on committed facilities, and accrued
interest from missed payments.

LGD:

Loss Given Default ("LGD") is an estimate of the loss
arising in the case where a default occurs at a given time.
It is based on the difference between the contractual
cash flows due and those that the lender would expect to
receive, including from the realisation of any collateral.
It is usually expressed as a percentage of the EAD

The Company has calculated PD, EAD and LGD to
determine impairment loss on the portfolio of financial
assets and discounted at an approximation to the EIR.
At every reporting date, the above calculated PDs, EAD
and LGDs are reviewed and changes in the forward
looking estimates are analysed.

Impairment losses and releases are accounted for and
disclosed separately from modification losses or gains
that are accounted for as an adjustment of the financial
asset''s gross carrying value.

The mechanics ofthe ECL methodare summarisedbelow:
Stage 1:

The 12 months ECL is calculated as the portion of
LTECLs that represent the ECLs that result from default
events on a financial instrument that are possible within
the 12 months after the reporting date. The Company
calculates the 12 months ECL allowance based on the
expectation of a default occurring in the 12 months
following the reporting date. These expected 12-months
default probabilities are applied to a forecast EAD and
multiplied by the expected LGD and discounted by an
approximation to the original EIR.

Stage 2:

When a financial asset has shown a significant increase
in credit risk since origination, the Company records an
allowance for the LTECLs. The mechanics are similar to
those explained above, but PDs and LGDs are estimated
over the lifetime of the instrument. The expected
cash shortfalls are discounted by an approximation to
the original EIR.

Significant increase in credit risk

The Company monitors all financial assets that are subject
to the impairment requirements to assess whether there
has been a significant increase in credit risk since initial
recognition. If there has been a significant increase in
credit risk the Company will measure the loss allowance
based on lifetime rather than 12mECLs.

In assessing whether the credit risk on a financial
instrument has increased significantly since initial
recognition, the Company compares the risk of a
default occurring on the financial instrument at the
reporting date based on the remaining maturity of the
instrument with the risk of a default occurring that was
anticipated for the remaining maturity at the current
reporting date when the financial instrument was first
recognised. In making this assessment, the Company
considers both quantitative and qualitative information
that is reasonable and supportable, including historical
experience and forward-looking information that is
available without undue cost or effort, based on the
Company''s historical experience and expert credit
assessment including forward looking information.

Stage 3:

For financial assets considered credit-impaired, the
Company recognises the lifetime expected credit losses
for these financial assets. The method is similar to that
for Stage 2 assets, with the PD set at 100%.

Credit-impaired financial assets

A financial asset is ''credit-impaired'' when one or more
events that have a detrimental impact on the estimated
future cash flows of the financial asset have occurred.
Credit-impaired financial assets are referred to as
Stage 3 assets. Evidence of credit-impairment includes
observable data about the following events:

a. significant financial difficulty of the borrower;

b. a breach of contract such as a default or
past due event;

c. the lender of the borrower, for economic
or contractual reasons relating to the
borrower''s financial

d. difficulty, having granted to the borrower
a concession that the lender would not
otherwise consider;

e. the disappearance of an active market for a
security because of financial difficulties; or

f. the purchase of a financial asset at a deep discount
that reflects the incurred credit losses.

It may not be possible to identify a single discrete event—
instead, the combined effect of several events may have
caused financial assets to become credit-impaired. The
Company assesses whether debt instruments that are
financial assets measured at amortised cost are credit-
impaired at each reporting date.

A loan is considered credit-impaired when a concession
is granted to the borrower due to a deterioration in the
borrower''s financial condition, unless there is evidence that
as a result of granting the concession the risk of not receiving
the contractual cash flows has reduced significantly and
there are no other indicators of impairment. For financial
assets where concessions are contemplated but not
granted the asset is deemed credit impaired when there
is observable evidence of credit-impairment including
meeting the definition of default. The definition of default
includes unlikeliness to pay indicators and a back- stop if
amounts are overdue for 90 days or more.

Further, in line with the requirements of Ind-AS 109 read
with circular on implementation of Indian Accounting
Standards dated March 13, 2020 issued by the Reserve
Bank of India, the company is guided by the definition of
default / credit impaired used for regulatory purposes
for the purpose of accounting.

Loan commitments

When estimating LTECLs for undrawn loan
commitments, the Company estimates the expected
portion of the loan commitment that will be drawn
down over its expected life. The ECL is then based on
the present value of the expected shortfalls in cash
flows if the loan is drawn down, based on a probability¬
weighting of the four scenarios. The expected cash
shortfalls are discounted at an approximation to the
expected EIR on the loan.

Financial guarantee contracts

The Company''s liability under each guarantee is
measured at the higher of the amount initially
recognised less cumulative amortisation recognised in
the statement of profit and loss, and the ECL provision.
For this purpose, the Company estimates ECLs based on
the present value of the expected payments to reimburse
the holder for a credit loss that it incurs. The shortfalls
are discounted by the risk-adjusted interest rate
relevant to the exposure. The ECLs related to financial
guarantee contracts are recognised within Provisions.

C. Financial Assets measured at FVOCI

The ECLs for financial assets measured at FVOCI do not
reduce the carrying amount of these financial assets in
the balance sheet, which remains at fair value. Instead,
an amount equal to the allowance that would arise if the
assets were measured at amortised cost is recognised
in OCI as an accumulated impairment amount, with a
corresponding charge to profit or loss. The accumulated
loss recognised in OCI is recycled to the profit and loss
upon derecognition of the assets.

D. Forward looking information

In its ECL models, the Company relies on forward
looking macro parameters such as consumer spending
and interest rates to estimate the impact on probability
of the default at a given point of time.

The inputs and models used for calculating ECLs may
not always capture all characteristics of the market
at the date of the financial statements. To reflect this,

qualitative adjustments or overlays are occasionally
made as temporary adjustments when such differences
are significantly material.

f. Write-offs

The gross carrying amount of a financial asset is written-
off when there is no reasonable expectation of recovering
the asset. If the amount to be written off is greater than the
accumulated loss allowance, the difference is first treated
as an addition to the allowance that is then applied against
the gross carrying amount. Any subsequent recoveries are
credited to impairment on financial instruments in the
statement of profit and loss.

g. Determination of fair value

Fair value is the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of
whether that price is directly observable or estimated using
another valuation technique. In estimating the fair value of
an asset or a liability, the Company has taken into account
the characteristics of the asset or liability as if market
participants would take those characteristics into account
when pricing the asset or liability at the measurement date.
The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability
takes place either:

In the principal market for the asset or liability, or

? In the absence of a principal market, in the most
advantageous market for the asset or liability

The principal or the most advantageous market must be
accessible by the Company.

In addition, for financial reporting purposes, fair value
measurements are categorised into Level 1, 2, or 3
based on the degree to which the inputs to the fair value
measurements are observable and the significance of the
inputs to the fair value measurement in its entirety, which are
described as follows:

Level 1 financial instruments: Those where the inputs used
in the valuation are unadjusted quoted prices from active
markets for identical assets or liabilities that the Company
has access to at the measurement date. The Company
considers markets as active only if there are sufficient trading
activities with regards to the volume and liquidity of the
identical assets or liabilities and when there are binding and
exercisable price quotes available on the balance sheet date;

Level 2 financial instruments: Those where the inputs that
are used for valuation and are significant, are derived from
directly or indirectly observable market data available
over the entire period of the instrument''s life. Such inputs
include quoted prices for similar assets or liabilities in active
markets, quoted prices for identical instruments in inactive
markets and observable inputs other than quoted prices such
as interest rates and yield curves, implied volatilities, and
credit spreads; and

Level 3 financial instruments -Those that include one
or more unobservable input that is significant to the
measurement as whole.

For assets and liabilities that are recognised in the financial
statements on a recurring basis, the Company determines
whether transfers have occurred between levels in the
hierarchy by re assessing categorisation (based on the lowest
level input that is significant to the fair value measurement as
a whole) at the end of each reporting period.

The Company periodically reviews its valuation techniques
including the adopted methodologies and model calibrations.
However, the base models may not fully capture all factors
relevant to the valuation of the Company''s financial
instruments. Therefore, the Company applies various
techniques to estimate the credit risk associated with its
financial instruments measured at fair value, which include
a portfolio-based approach that estimates the expected
net exposure per counterparty over the full lifetime of the
individual assets, in order to reflect the credit risk of the
individual counterparties for financial instruments.

A fair value measurement of a non-financial asset takes into
account a market participant''s ability to generate economic
benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the
asset in its highest and best use.

h. Foreign currency transactions

Transactions in foreign currencies are translated into the
functional currency of the Company, at the exchange rates at
the dates of the transactions or an average rate if the average
rate approximates the actual rate at the date of the transaction.

Monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the
exchange rate at the reporting date. Non-monetary assets and
liabilities that are measured at fair value in a foreign currency
are translated into the functional currency at the exchange
rate when the fair value was determined. Non-monetary
assets and liabilities that are measured based on historical

cost in a foreign currency are translated at the exchange
rate at the date of the transaction. Exchange differences are
recognized in profit or loss.

i. Property, plant and equipment

i. Recognition and measurement

Items of property, plant and equipment are measured
at cost, which includes capitalised borrowing costs,
less accumulated depreciation and accumulated
impairment losses, if any.

Cost of an item of property, plant and equipment
comprises its purchase price, including import duties
and non-refundable purchase taxes, after deducting
trade discounts and rebates, any directly attributable
cost of bringing the item to its working condition for
its intended use and estimated costs of dismantling and
removing the item and restoring the site on which it is
located. If significant parts of an item of property, plant
and equipment have different useful lives, then they are
accounted for as separate items (major components) of
property, plant and equipment.

Any gain or loss on disposal of an item of property, plant
and equipment is recognised in profit or loss.

ii. Subsequent expenditure

Subsequent expenditure is capitalised only if it is
probable that the future economic benefits associated
with the expenditure will flow to the Company.

iii. Depreciation

Depreciation is calculated on cost of items of property,
plant and equipment less their estimated residual
values over their estimated useful lives using the written
down value method, and is generally recognised in the
statement of profit and loss.

The Company follows estimated useful lives which are
given under Part C of the Schedule II of the Companies
Act, 2013. The estimated useful lives of items of
property, plant and equipment are as follows:

Leasehold improvements are depreciated over the
remaining period of lease or estimated useful life of the
assets, whichever is lower.

Depreciation on additions (disposals) is provided on a
pro-rata basis i.e. from (upto) the date on which asset is
ready for use (disposed of).

Property plant and equipment is derecognised on disposal
or when no future economic benefits are expected from
its use. Any gain or loss arising on derecognition of
the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset)
is recognised in other income / expense in the statement
of profit and loss in the year the asset is derecognised.
The date of disposal of an item of property, plant and
equipment is the date the recipient obtains control of that
item in accordance with the requirements for determining
when a performance obligation is satisfied in Ind AS 115.

The residual values, useful lives and methods of
depreciation of property, plant and equipment are
reviewed at each financial year end and adjusted
prospectively, if appropriate

Intangible assets

i. Intangible assets

Intangible assets including those acquired by
the Company are initially measured at cost. Such
intangible assets are subsequently measured at cost
less accumulated amortisation and any accumulated
impairment losses.

ii. Subsequent expenditure

Subsequent expenditure is capitalised only when it
increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure,
including expenditure on internally generated goodwill
and brands, is recognised in profit or loss as incurred.

iii. Internally generated: Research and development

Expenditure on research activities is recognised in
profit or loss as incurred

Developing expenditure is capitalised as part of the cost
of the resulting intangible asset only if the expenditure
can be measured reliably, the product is technically
and commercially feasible, future economic benefits
are probable, and the Company intends to and has
sufficient resources to complete development and to
use the asset. Otherwise, it is recognised in profit or

loss as incurred. Subsequent to initial recognition, the
asset is measured at cost less accumulated amortisation
and any accumulated impairment losses. During
the period of development, the asset is tested for
impairment annually

iv. Amortisation

Amortisation is calculated to write off the cost of
intangible assets less their estimated residual values
over their estimated useful lives using the straight
line method, and is included in depreciation and
amortisation in statement of profit and loss.

Amortisation method, useful lives and residual values
are reviewed at the end of each financial year and
adjusted if appropriate.

v. Derecognition

An intangible asset is derecognised upon disposal (i.e.,
at the date the recipient obtains control) or when no
future economic benefits are expected from its use or
disposal. Any gain or loss arising upon derecognition of
the asset (calculated as the difference between the net
disposal proceeds and the carrying amount of the asset)
is included in the restated statement of profit and loss.
when the asset is derecognised

Employee benefits

i. Post-employment benefits
Defined contribution plan

The Company''s contribution to provident fund are
considered as defined contribution plan and are
charged as an expense as they fall due based on the
amount of contribution required to be made and when
the services are rendered by the employees.

Defined benefit plans
Gratuity

A defined benefit plan is a post-employment benefit plan
other than a defined contribution plan. The Company''s
net obligation in respect of defined benefit plans is
calculated separately for each plan by estimating the
amount of future benefit that employees have earned in
the current and prior periods, discounting that amount
and deducting the fair value of any plan assets.

The calculation of defined benefit obligation is performed
annually by a qualified actuary using the projected
unit credit method. When the calculation results in a
potential asset for the Company, the recognised asset
is limited to the present value of economic benefits
available in the form of any future refunds from the
plan or reductions in future contributions to the plan
(''the asset ceiling''). In order to calculate the present
value of economic benefits, consideration is given to any
minimum funding requirements.

Remeasurements of the net defined benefit liability,
which comprise actuarial gains and losses and the
effect of the asset ceiling (if any, excluding interest), are
recognised in OCI. The Company determines the net
interest expense (income) on the net defined benefit
liability (asset) for the period by applying the discount
rate used to measure the defined benefit obligation at the
beginning of the annual period to the then-net defined
benefit liability (asset), taking into account any changes
in the net defined benefit liability (asset) during the
period as a result of contributions and benefit payments.
Net interest expense and other expenses related to
defined benefit plans are recognised in profit or loss.

When the benefits of a plan are changed or when a plan
is curtailed, the resulting change in benefit that relates
to past service (''past service cost'' or ''past service
gain'') or the gain or loss on curtailment is recognised
immediately in profit or loss. The Company recognises
gains and losses on the settlement of a defined benefit
plan when the settlement occurs.

ii. Other long-term employee benefits
Compensated absences

The employees can carry forward a portion of the
unutilised accrued compensated absences and utilise it
in future service periods or receive cash compensation
on termination of employment. Since the compensated
absences do not fall due wholly within twelve months
after the end of such period, the benefit is classified as
a long-term employee benefit. The Company records
an obligation for such compensated absences in the
period in which the employee renders the services that
increase this entitlement. The obligation is measured
on the basis of independent actuarial valuation using
the projected unit credit method.

iii. Short-term employee benefits

The undiscounted amount of short-term employee
benefits expected to be paid in exchange for the

services rendered by employees are recognized during
the year when the employees render the service.
These benefits include performance incentive and
compensated absences which are expected to occur
within twelve months after the end of the year in which
the employee renders the related service. The cost of
such compensated absences is accounted as under :

(a) in case of accumulated compensated absences,
when employees render the services
that increase their entitlement of future
compensated absences; and

(b) in case of non-accumulating compensated
absences, when the absences occur.

iv. Share based payment

The grant date fair value of equity settled share based
payment awards granted to employees is recognised as
an employee expense, with a corresponding increase in
equity, over the period that the employees unconditionally
become entitled to the awards. The amount recognised as
expense is based on the estimate of the number of awards
for which the related service and non-market vesting
conditions are expected to be met, such that the amount
ultimately recognised as an expense is based on the
number of awards that do meet the related service and
non-market vesting conditions at the vesting date.

Equity Settled Plan:

The cost of equity-settled transactions is determined by
the fair value at the date when the grant is made using
an appropriate valuation model. Further details are
given in Note 40.

That cost is recognised, together with a corresponding
increase in share-based payment (SBP) reserves in equity,
over the period in which the performance and/or service
conditions are fulfilled in employee benefits expense.
The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired
and the Company''s best estimate of the number of equity
instruments that will ultimately vest. The expense or
credit in the restated statement of profit and loss for a
period represents the movement in cumulative expense
recognised as at the beginning and end of that period and
is recognised in employee benefits expense.

Service and non-market performance conditions are
not taken into account when determining the grant date
fair value of awards, but the likelihood of the conditions
being met is assessed as part of the Company''s best
estimate of the number of equity instruments that
will ultimately vest. Market performance conditions
are reflected within the grant date fair value. Any
other conditions attached to an award, but without an
associated service requirement, are considered to be
non-vesting conditions. Non-vesting conditions are
reflected in the fair value of an award and lead to an
immediate expensing of an award unless there are also
service and/or performance conditions.

No expense is recognised for awards that do not
ultimately vest because non-market performance
and/or service conditions have not been met. Where
awards include a market or non-vesting condition,
the transactions are treated as vested irrespective
of whether the market or non-vesting condition is
satisfied, provided that all other performance and/or
service conditions are satisfied.

When the terms of an equity-settled award are modified,
the minimum expense recognised is the grant date fair
value of the unmodified award, provided the original
vesting terms of the award are met. An additional
expense, measured as at the date of modification, is
recognised for any modification that increases the total
fair value of the share-based payment transaction, or is
otherwise beneficial to the employee. Where an award
is cancelled by the entity or by the counterparty, any
remaining element of the fair value of the award is
expensed immediately through profit or loss.

The dilutive effect of outstanding options is reflected as
additional share dilution in the computation of diluted
earnings per share.

---

Mar 31, 2024

3 Summary of material accounting policies

a. Revenue from contracts with customers

The Company recognises revenue from contracts with customers (other than financial assets to which Ind AS 109 ''Financial instruments'' is applicable) based on a comprehensive assessment model as set out in Ind AS 115 ''Revenue from contracts with customers''. The Company identifies contract(s) with a customer and its performance obligations under the contract, determines the transaction price and its allocation to the performance obligations

in the contract and recognises revenue only on satisfactory completion of performance obligations. Revenue is measured at transaction price i.e. the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to the customer, excluding amounts collected on behalf of third parties. The Company consider the terms of the contract and its customary business practices to determine the transaction price.

The Company recognises revenue from contracts with customers based on a five step model as set out in Ind AS 115:

Step 1: Identify contract(s) with a customer: A contract is defined as an agreement between two or more parties that creates enforceable rights and obligations and sets out the criteria for every contract that must be met.

Step 2: Identify performance obligations in the contract: A performance obligation is a promise in a contract with a customer to transfer a good or service to the customer.

Step 3: Determine the transaction price: The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

Step 4: Allocate the transaction price to the performance obligations in the contract: For a contract that has more than one performance obligation, the Company allocates the transaction price to each performance obligation in an amount that depicts the amount of consideration to which the Company expects to be entitled in exchange for satisfying each performance obligation.

Step 5: Recognise revenue when (or as) the Company satisfies a performance obligation.

Trade Receivables

A receivable is recognised if an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Refer to accounting policies of financial assets in section 3.c Financial Assets and Liabilities.

Recognition of interest income on loans

Under Ind AS 109, interest income is recorded using the effective interest rate (EIR) method for all financial instruments measured at amortised cost. The EIR is the rate that exactly discounts estimated future cash receipts through the

expected life of the financial instrument or, when appropriate, a shorter period, to the net carrying amount of the financial asset.

The EIR (and therefore, the amortised cost of the asset) is calculated by taking into account any fees and costs that are an integral part of the EIR. The Company recognises interest income using a rate of return that represents the best estimate of a constant rate of return over the expected life of the financial instrument.

I f expectations regarding the cash flows on the financial asset are revised for reasons other than credit risk, the adjustment is booked as a positive or negative adjustment to the carrying amount of the asset in the balance sheet with an increase or reduction in interest income. The adjustment is subsequently amortised through interest income in the statement of profit and loss.

The Company calculates interest income by applying the EIR to the gross carrying amount of financial assets other than credit-impaired assets.

When a financial asset becomes credit-impaired, the Company calculates interest income by applying the effective interest rate to the net amortised cost of the financial asset. If the financial asset cures and is no longer credit-impaired, the Company reverts to calculating interest income on a gross basis.

Revenue recognition for different heads of income is as under:

i. Interest income on deposits

Interest income on deposits is recognised on a time proportionate basis using the effective interest rate.

ii. Fees and commission income

Fees and commission income such as guarantee commission, professional fee, service income etc. are recognised on an accrual basis in accordance with term of the contract with customer.

iii. Dividend income

Dividend income (including from FVOCI investments) is recognised when the Company''s right to receive the payment is established, it is probable that the economic benefits associated with the dividend will flow to the Company and the amount of the dividend can be measured reliably. This is generally when the shareholders approve the dividend

iv. Other income

All items of other income is recognised on an accrual basis, when there is no uncertainty in the ultimate realisation/collection.

b. Financial instruments - initial recognition Date of recognition

Debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Company becomes a party to the contractual provisions of the instrument.

Initial measurement of financial instruments

The classification of financial instruments at initial recognition depends on their contractual terms and the business model for managing the instruments. Financial instruments are initially measured at their fair value, except in the case of financial assets and financial liabilities recorded at FVTPL, transaction costs are added to, or subtracted from this amount.

Measurement categories of financial assets and liabilities

The Company classifies all of its financial assets based on the business model for managing the assets and the asset''s contractual terms, measured at either:

i) Amortised cost

ii) Fair value through other comprehensive income (''FVOCI'')

iii) Fair value through profit and loss (''FVTPL'')

c. Financial assets and liabilities

A. Financial assets

Business model assessment

The Company determines its business model at the level that best reflects how it manages groups of financial assets to achieve its business objective.

The Company''s business model is not assessed on an instrument-by-instrument basis, but at a higher level of aggregated portfolios and is based on observable factors such as:

a) How the performance of the business model and the financial assets held within that business model are evaluated and reported to the Company''s key management personnel.

b) The risks that affect the performance of the business model (and the financial assets

held within that business model) and, in particular, the way those risks are managed.

c) How managers of the business are compensated (for example, whether the compensation is based on the fair value of the assets managed or on the contractual cash flows collected).

d) The expected frequency, value and timing of sales are also important aspects of the Company''s assessment.

The business model assessment is based on reasonably expected scenarios without taking ''worst case'' or ''stress case'' scenarios into account. If cash flows after initial recognition are realised in a way that is different from the Company''s original expectations, the Company does not change the classification of the remaining financial assets held in that business model, but incorporates such information when assessing newly originated or newly purchased financial assets going forward.

Sole Payments of Principal and Interest (SPPI) test

As a second step of its classification process, the Company assesses the contractual terms of financial assets to identify whether they meet SPPI test. ''Principal'' for the purpose of this test is defined as the fair value of the financial asset at initial recognition and may change over the life of a financial asset (for example, if there are repayments of principal or amortisation of the premium/discount). The most significant elements of interest within a lending arrangement are typically the consideration for the time value of money and credit risk. To make the SPPI assessment, the Company applies judgement and considers relevant factors such as the period for which the interest rate is set.

I n contrast, contractual terms that introduce a more than de minimis exposure to risks or volatility in the contractual cash flows that are unrelated to a basic lending arrangement do not give rise to contractual cash flows that are solely payments of principal and interest on the amount outstanding. In such cases, the financial asset is required to be measured at FVTPL.

Accordingly, financial assets are measured as follows:

i. Financial assets carried at amortised cost (AC)

A financial asset is measured at amortised cost if it is held within a business model whose objective is to hold the asset in order

to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Bank balances, Loans, Trade receivables and other financial investments that meet the above conditions are measured at amortised cost

ii. Financial assets at fair value through other comprehensive income (FVOCI)

A financial asset is measured at FVOCI if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

iii. Financial assets at fair value through profit or loss (FVTPL)

A financial asset which is not classified in any of the above categories is measured at FVTPL. Subsequent changes in fair value are recognised in the statement of profit and loss.

The Company records investments in Alternative investment funds (AIF), mutual funds and market linked debentures at FVTPL

iv. Investment in equity instruments

The Company measures all equity investments at fair value through profit or loss except, for Investment in subsidiaries and associates are recognised at cost, subject to impairment if any at the end of each reporting period. Cost of investment represents amount paid for acquisition of the investment.

B. Financial liability

i. Initial recognition and measurement

All financial liabilities are measured at amortised cost except for financial guarantees, and derivative financial liabilities. Transaction costs that are directly attributable to the acquisition or issue of financial liability, which are not at fair value through profit or loss, are adjusted to the fair value on initial recognition.

ii. Subsequent measurement

Financial liabilities are carried at amortised cost using the effective interest rate method.

Debt securities and other borrowed funds

After initial measurement, debt issued and other borrowed funds are subsequently measured at amortised cost. Amortised cost is calculated by taking into account any discount or premium on issue funds, and costs that are an integral part of the instrument.

The Company issues certain nonconvertible debentures, the return of which is linked to performance of specified indices over the period of the debenture. Such debentures have a component of an embedded derivative which is fair valued at a reporting date. The resultant ''net unrealised loss or gain'' on the fair valuation of these embedded derivatives is recognised in the statement of profit and loss. The debt component of such debentures is measured at amortised cost using yield to maturity basis.

Embedded derivatives

A derivative embedded in a hybrid contract, with a financial liability or non-financial host, is separated from the host and accounted for as a separate derivative if: the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss category.

d. Derecognition of financial assets and liabilities

a. Derecognition of financial assets due to substantial modification of terms and conditions

The Company derecognises a financial asset when the terms and conditions have been renegotiated to the extent that, substantially, it becomes a new financial asset, with the difference recognised as

a derecognition gain or loss, to the extent that an impairment loss has not already been recorded. The newly recognised financial assets are classified as Stage 1 for ECL measurement purposes.

If the modification is such that the instrument would no longer meet the SPPI criterion. If the modification does not result in cash flows that are substantially different, the modification does not result in derecognition. Based on the change in cash flows discounted at the original EIR, the Company records a modification gain or loss, to the extent that an impairment loss has not already been recorded.

b. Derecognition of financial instruments other than due to substantial modification

i. Financial Assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when the contractual rights to the cash flows from the financial asset expires or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

On derecognition of a financial asset in its entirety, the difference between the carrying amount (measured at the date of derecognition) and the consideration received (including any new asset obtained less any new liability assumed) is recognised in the statement of profit and loss.

Accordingly, gain on sale or derecognition of assigned portfolio are recorded upfront in the statement of profit and loss as per Ind AS 109. Also, the Company recognises servicing income as a percentage of interest spread over tenure of loan in cases where it retains the obligation to service the transferred financial asset.

When the Company has neither transferred nor retained substantially all the risks and rewards and has retained control of the asset, the asset continues to be recognised only to the extent of the Company''s continuing involvement, in which case, the Company also recognises an associated liability. The transferred asset and the

associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration the Company could be required to pay.

ii. Financial Liability

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference between the carrying value of the original financial liability and the consideration paid is recognised in the statement of profit and loss.

e. Impairment of financial assets

A. Overview of Expected Credit Loss (''ECL'') principles

In accordance with Ind AS 109, the Company uses ECL model, for evaluating impairment of financial assets other than those measured at fair value through profit and loss (FVTPL). The ECL allowance is based on the credit losses expected to arise over the life of the asset (the lifetime expected credit loss or LTECL), unless there has been no significant increase in credit risk since origination, in which case, the allowance is based on the 12 months'' expected credit loss (12mECL). The 12mECL is the portion of LTECLs that represent the ECLs that result from default events on a financial instrument that are possible within the 12 months after the reporting date. When estimating LTECLs for undrawn loan commitments, the Company estimates the expected portion of the loan commitment that will be drawn down over its expected life. The ECL is then based on the present value of the expected shortfalls in cash flows if the loan is drawn down.

Expected credit losses are measured through a loss allowance at an amount equal to:

i) The 12-months expected credit losses (expected credit losses that result from those default events on the financial instrument that are possible within 12 months after the reporting date); or

ii) Lifetime expected credit losses (expected credit losses that result from all possible default events over the life of the financial instrument)

Both LTECLs and 12mECLs are calculated on either an individual basis or a collective basis, depending on the nature of the underlying portfolio of financial instruments

Based on the above, the Company categorises its financial assets into Stage 1, Stage 2 and Stage 3, as described below:

Stage 1:

When financial assets are first recognised, the Company recognises an allowance based on 12 months ECL. Stage 1 financial assets includes those financial assets where there is no significant credit risk observed and also includes facilities where the credit risk has been improved and the financial asset has been reclassified from stage 2 or stage 3.

Stage 2:

When a financial asset has shown a significant increase in credit risk since origination, the Company records an allowance for the life time ECL. Stage 2 financial assets also includes facilities where the credit risk has improved and the financial asset has been reclassified from stage 3.

Stage 3:

Financial assets considered credit impaired are the financial assets which are past due for more than 90 days. The Company records an allowance for life time ECL.

B. Calculation of ECLs

The mechanics of ECL calculations are outlined below and the key elements are, as follows:

PD:

Probability of Default ("PD") is an estimate of the likelihood of default over a given time horizon. A default may only happen at a certain time over the assessed period, if the facility has not been previously derecognised and is still in the portfolio.

EAD:

Exposure at Default ("EAD") is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after the reporting date, i n cl u di ng repaym ents of pri n ci pal an d interest, whether scheduled by contract or otherwise, expected drawdowns on committed facilities, and accrued interest from missed payments.

LGD:

Loss Given Default ("LGD") is an estimate of the loss arising in the case where a default occurs at a given time. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, including from the realisation of any collateral. It is usually expressed as a percentage of the EAD

The Company has calculated PD, EAD and LGD to determine impairment loss on the portfolio of financial assets and discounted at an approximation to the EIR. At every reporting date, the above calculated PDs, EAD and LGDs are reviewed and changes in the forward looking estimates are analysed.

Impairment losses and releases are accounted for and disclosed separately from modification losses or gains that are accounted for as an adjustment of the financial asset''s gross carrying value.

The m echani cs of the ECL m ethod are summarised below:

Stage 1:

The 12 months ECL is calculated as the portion of LTECLs that represent the ECLs that result from default events on a financial instrument that are possible within the 12 months after the reporting date. The Company calculates the 12 months ECL allowance based on the expectation of a default occurring in the 12 months following the reporting date. These expected 12-months default probabilities are applied to a forecast EAD and multiplied by the expected LGD and discounted by an approximation to the original EIR.

Stage 2:

When a fi nancial asset has shown a significant increase in credit risk since

origination, the Company records an allowance for the LTECLs. The mechanics are similar to those explained above, but PDs and LGDs are estimated over the lifetime of the instrument. The expected cash shortfalls are discounted by an approximation to the original EIR.

Significant increase in credit risk

The Company monitors all financial assets that are subject to the impairment requirements to assess whether there has been a significant increase in credit risk since initial recognition. If there has been a significant increase in credit risk the Company will measure the loss allowance based on lifetime rather than 12mECLs.

In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Company compares the risk of a default occurring on the financial instrument at the reporting date based on the remaining maturity of the instrument with the risk of a default occurring that was anticipated for the remaining maturity at the current reporting date when the financial instrument was first recognised. In making this assessment, the Company considers both quantitative and qualitative information that is reasonable and supportable, including historical experience and forward-looking information that is available without undue cost or effort, based on the Company''s historical experience and expert credit assessment including forward looking information.

Stage 3:

For financial assets considered credit-impaired, the Company recognises the lifetime expected credit losses for these financial assets. The method is similar to that for Stage 2 assets, with the PD set at 100%.

Credit-impaired financial assets

A financial asset is ''credit-impaired'' when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Credit-impaired financial assets are referred to as Stage 3 assets. Evidence of credit-impairment includes observable data about the following events:

a. significant financial difficulty of the borrower;

b. a breach of contract such as a default or past due event;

c. the lender of the borrower, for economic or contractual reasons relating to the borrower''s financial

d. difficulty, having granted to the borrower a concession that the lender would not otherwise consider;

e. the disappearance of an active market for a security because of financial difficulties; or

f. the purchase of a financial asset at a deep discount that reflects the incurred credit losses.

I t may not be possible to identify a single discrete event—instead, the combined effect of several events may have caused financial assets to become credit-impaired. The Company assesses whether debt instruments that are financial assets measured at amortised cost are credit-impaired at each reporting date.

A loan is considered credit-impaired when a concession is granted to the borrower due to a deterioration in the borrower''s financial condition, unless there is evidence that as a result of granting the concession the risk of not receiving the contractual cash flows has reduced significantly and there are no other indicators of impairment. For financial assets where concessions are contemplated but not granted the asset is deemed credit impaired when there is observable evidence of credit-impairment including meeting the definition of default. The definition of default includes unlikeliness to pay indicators and a back- stop if amounts are overdue for 90 days or more.

Further, in line with the requirements of Ind-AS 109 read with circular on implementation of Indian Accounting Standards dated March 13, 2020 issued by the Reserve Bank of India, the company is guided by the definition of default/ credit impaired used for regulatory purposes for the purpose of accounting.

Loan commitments

When estimating LTECLs for undrawn loan commitments, the Company estimates the expected portion of the loan commitment that will be drawn down over its expected life. The ECL is then based on the present value of the expected shortfalls in cash flows if the loan is drawn down, based on a probability-weighting of the four scenarios. The expected cash shortfalls are discounted at an approximation to the expected EIR on the loan.

Financial guarantee contracts

The Company''s liability under each guarantee is measured at the higher of the amount initially recognised less cumulative amortisation recognised in the statement of profit and loss, and the ECL provision. For this purpose, the Company estimates ECLs based on the present value of the expected payments to reimburse the holder for a credit loss that it incurs. The shortfalls are discounted by the risk-adjusted interest rate relevant to the exposure. The ECLs related to financial guarantee contracts are recognised within Provisions.

C. Financial Assets measured at FVOCI

The ECLs for financial assets measured at FVOCI do not reduce the carrying amount of these financial assets in the balance sheet, which remains at fair value. Instead, an amount equal to the allowance that would arise if the assets were measured at amortised cost is recognised in OCI as an accumulated impairment amount, with a corresponding charge to profit or loss. The accumulated loss recognised in OCI is recycled to the profit and loss upon derecognition of the assets.

D. Forward looking information

I n its ECL models, the Company relies on forward looking macro parameters such as consumer spending and interest rates to estimate the impact on probability of the default at a given point of time.

The inputs and models used for calculating ECLs may not always capture all characteristics of the market at the date of the financial statements. To reflect this, qualitative adjustments or overlays are occasionally made as temporary adjustments when such differences are significantly material.

f. Write-offs

The gross carrying amount of a financial asset

is written-off when there is no reasonable

expectation of recovering the asset. If the

amount to be written off is greater than the accumulated loss allowance, the difference is first treated as an addition to the allowance that is then applied against the gross carrying amount. Any subsequent recoveries are credited to impairment on financial instruments in the statement of profit and loss.

g. Determination of fair value

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Company has taken into account the characteristics of the asset or liability as if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• In the principal market for the asset or liability, or

• In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Company.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2, or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

Level 1 financial instruments: Those where the inputs used in the valuation are unadjusted quoted prices from active markets for identical assets or liabilities that the Company has access to at the measurement date. The Company considers markets as active only if there are sufficient trading activities with regards to the volume and liquidity of the identical assets or liabilities and when there are binding and exercisable price quotes available on the balance sheet date;

Level 2 financial instruments: Those where the inputs that are used for valuation and are significant, are derived from directly or indirectly observable market data available over the entire period of the instrument''s life. Such inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for

identical instruments in inactive markets and observable inputs other than quoted prices such as interest rates and yield curves, implied volatilities, and credit spreads; and

Level 3 financial instruments -Those that include one or more unobservable input that is significant to the measurement as whole.

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

The Company periodically reviews its valuation techniques including the adopted methodologies and model calibrations. However, the base models may not fully capture all factors relevant to the valuation of the Company''s financial instruments. Therefore, the Company applies various techniques to estimate the credit risk associated with its financial instruments measured at fair value, which include a portfolio-based approach that estimates the expected net exposure per counterparty over the full lifetime of the individual assets, in order to reflect the credit risk of the individual counterparties for financial instruments.

A fair value measurement of a non-financial asset takes into account a market participant''s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

h. Foreign currency transactions

Transactions in foreign currencies are translated into the functional currency of the Company, at the exchange rates at the dates of the transactions or an average rate if the average rate approximates the actual rate at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary assets and liabilities that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date

of the transaction. Exchange differences are

recognised in profit or loss.

i. Property, plant and equipment

i. Recognition and measurement

Items of property, plant and equipment are measured at cost, which includes capitalised borrowing costs, less accumulated depreciation and accumulated impairment losses, if any.

Cost of an item of property, plant and equipment comprises its purchase price, including import duties and nonrefundable purchase taxes, after deducting trade discounts and rebates, any directly attributable cost of bringing the item to its working condition for its intended use and estimated costs of dismantling and removing the item and restoring the site on which it is located. If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment.

Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss.

ii. Subsequent expenditure

Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Company.

iii. Depreciation

Depreciation is calculated on cost of items of property, plant and equipment less their estimated residual values over their estimated useful lives using the written down value method, and is generally recognised in the statement of profit and loss.

The Company follows estimated useful lives which are given under Part C of the Schedule II of the Companies Act, 2013. The estimated useful lives of items of property, plant and equipment are as follows:

Leasehold improvements are depreciated over the remaining period of lease or estimated useful life of the assets, whichever is lower.

Depreciation on additions (disposals) is provided on a pro-rata basis i.e. from (upto) the date on which asset is ready for use (disposed of).

Property plant and equipment is derecognised on disposal or when no future economic benefits are expected from its use. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is recognised in other income/expense in the statement of profit and loss in the year the asset is derecognised. The date of disposal of an item of property, plant and equipment is the date the recipient obtains control of that item in accordance with the requirements for determining when a performance obligation is satisfied in Ind AS 115.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

j. Intangible assets

i. Intangible assets

Intangible assets including those acquired by the Company are initially measured at cost. Such intangible assets are subsequently measured at cost less accumulated amortisation and any accumulated impairment losses.

ii. Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

iii. Internally generated: Research and development

Expenditure on research activities is recognised in profit or loss as incurred

Developing expenditure is capitalised as part of the cost of the resulting intangible asset only if the expenditure can be measured reliably, the product is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use the asset.

Otherwise, it is recognised in profit or loss as incurred. Subsequent to initial recognition, the asset is measured at cost less accumulated amortisation and any accumulated impairment losses. During the period of development, the asset is tested for impairment annually.

iv. Amortisation

Amortisation is calculated to write off the cost of intangible assets less their estimated residual values over their estimated useful lives using the straight line method, and is included in depreciation and amortisation in statement of profit and loss.

Amortisation method, useful lives and residual values are reviewed at the end of each financial year and adjusted if appropriate.

v. Derecognition

An intangible asset is derecognised upon disposal (i.e., at the date the recipient obtains control) or when no future economic benefits are expected from its use or disposal. Any gain or loss arising upon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the restated statement of profit and loss when the asset is derecognised.

k. Employee benefits

i. Post-employment benefits

Defined contribution plan

The Company''s contribution to provident fund are considered as defined contribution plan and are charged as an expense as they fall due based on the amount of contribution required to be made and when the services are rendered by the employees.

Defined benefit plans Gratuity

A defined benefit plan is a postemployment benefit plan other than a defined contribution plan. The Company''s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in the current and prior periods, discounting that

amount and deducting the fair value of any plan assets.

The calculation of defined benefit obligation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a potential asset for the Company, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan (''the asset ceiling''). In order to calculate the present value of economic benefits, consideration is given to any minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses and the effect of the asset ceiling (if any, excluding interest), are recognised in OCI. The Company determines the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the then-net defined benefit liability (asset), taking into account any changes in the net defined benefit liability (asset) during the period as a result of contributions and benefit payments. Net interest expense and other expenses related to defined benefit plans are recognised in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service (''past service cost'' or ''past service gain'') or the gain or loss on curtailment is recognised immediately in profit or loss. The Company recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.

ii. Other long-term employee benefits

Compensated absences

The employees can carry forward a portion of the unutilised accrued compensated absences and utilise it in future service periods or receive cash compensation on termination of employment. Since the compensated absences do not fall due wholly within twelve months after the end of such period, the benefit is classified as a long-term employee benefit. The Company records an obligation for such compensated absences in the period in which the employee renders the services that increase this entitlement. The obligation

is measured on the basis of independent actuarial valuation using the projected unit credit method.

iii. Short-term employee benefits

The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees are recognised during the year when the employees render the service. These benefits include performance incentive and compensated absences which are expected to occur within twelve months after the end of the year in which the employee renders the related service. The cost of such compensated absences is accounted as under:

(a) i n case of accumulated compensated absences, when employees render the services that increase their entitlement of future compensated absences; and

(b) in case of non-accumulating compensated absences, when the absences occur.

iv. Share based payment

The grant date fair value of equity settled share based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised as expense is based on the estimate of the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market vesting conditions at the vesting date.

Equity Settled Plan:

The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate valuation model. Further details are given in Note 41.

That cost is recognised, together with a corresponding increase in share-based payment (SBP) reserves in equity, over the period in which the performance and/or service conditions are fulfilled in employee benefits expense. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date

reflects the extent to which the vesting period has expired and the Company''s best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the restated statement of profit and loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period and is recognised in employee benefits expense.

Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Company''s best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be nonvesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.

No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the market or nonvesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

When the terms of an equity-settled award are modified, the minimum expense recognised is the grant date fair value of the unmodified award, provided the original vesting terms of the award are met. An additional expense, measured as at the date of modification, is recognised for any modification that increases the total fair value of the share-based payment transaction, or is otherwise beneficial to the employee. Where an award is cancelled by the entity or by the counterparty, any remaining element of the fair value of the award is expensed immediately through profit or loss.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.