Utkarsh Small Finance Bank Ltd. ನಿರ್ದೇಶಕರ ವರದಿ

Mar 31, 2026

The Board of Directors of Utkarsh Small Finance Bank Limited (“the Bank or Utkarsh SFBL”) presents the tenth (10^th) Annual Report along with the Audited Financial Statements of the Bank for the Financial Year ended March 31, 2026.

FINANCIAL HIGHLIGHTS

The financial highlights for the year under review are presented below:		(in Crores)
Particulars	FY 2025-26	FY 2024-25
Deposits	21,654	21,566
Investments (incl. Cash & balances with RBI and Banks)	9,235	8,395
Advances (Net)	18,070	18,716
Net Worth*	2,247	2,776
Net Interest Income	1,477	2,023
Other Income	431	600
Operating Income	1,908	2,623
Operating Expenses	1,851	1,616
Provisions and Contingencies (incl. taxes)	1,207	983
Net Profit	-1,151	24
Gross NPA Ratio	7.71%	9.43%
Net NPA Ratio	3.29%	4.84%
Capital Adequacy Ratio	17.71%	20.93%
Business# (Deposit plus Net Advance) per employee**	1.91	1.91
Transfer to Statutory Reserve	-	6
Transfer to Capital Reserve	23	7
Transfer to Investment Fluctuation Reserve	-23	14
Deduction during the year	-	-
Dividend for the year, Including Tax Thereon	-	55.02
Number of Branches	1,110	1,092
General Banking Branches	331	331
Micro Banking Branches	779	761
No. of Employees	18,400	19,779
*Net worth computed as per RBI guidelines #Business is the total of net advances and deposits (net of inter-bank deposits) **Ratio is based on average employee count

Key financial/operational highlights of the Bank for FY 2025-26 are as under:

¦ Total deposits increased to H21,654 Crore as on March 31, 2026, from H21,566 Crore as on March 31, 2025

¦ Net Advances decreased to H18,070 Crore as on March 31, 2026, from H18,716 Crore as on March 31, 2025

¦ Bank’s operating profit decreased to H56 Crore for FY26 from H1,007 Crore in FY25.

¦ The Bank reported annual loss of H1,151 Crore for FY26.

¦ On the asset quality, the Bank witnessed Net NPAs at 3.3% as on March 31, 2026 vs. 4.8% as on March 31, 2025.

¦ The Bank’s overall provision cover was at 59.3% as on March 31, 2026.

¦ The Bank’s capital plus reserves decreased to H2,776 Crore as on March 31, 2026 from H2,975 Crore as on March 31, 2025

¦ There are 1,110 Branches spread across 23 States and 4 Union Territories as on March 31, 2026

¦ During the FY 2025-26 the Bank raised ~H950 Crore through Rights issue in the month of November 2025.

BUSINESS OPERATIONS AND STATE OF AFFAIRS OF THE BANK

The detailed operational performance of the Bank during the year has been elaborated in the Management Discussion and Analysis Report which forms an integral part of this Annual Report.

The brief details on business operations during the financial year ended March 31, 2026 and state of affairs of the Bank as on March 31, 2026 are given below:

Liabilities

Network

The bank focuses on top 100 deposit centres across India with strong metro & urban focus, serving diverse retail segments. The bank operates 1,110 banking outlets in 27 states and UTs. While, the General Banking segment, managing 331 branches, drives deposit at urban and metro centres, the Micro Banking segment, with 779 branches, supports financial inclusion in rural areas. The network is supported by an infrastructure of 373 ATMs and 787 micro-ATMs for efficient access.

Offerings

The Bank continues to enhance its digital and fintech capabilities through both direct initiatives and strategic partnerships. The Bank has enabled instant onboarding

for term deposit accounts through video KYC on its website and via FinTech BC Partners. In addition, strategic fintech collaborations have strengthened the Bank’s digital distribution capabilities, allowing term deposit products to be offered seamlessly across partner platforms.

Innovative offerings have been introduced which includes Green PIN Generation through Website, Utkarsh Smart Business Account, Will Making Services, ITR Filing Services, 3-in-1 Account, NRI Savings and Fixed Deposits and Bharat Bill Payment System - Biller Operating Unit. The Bank also participates in the Aadhaar enabled payment system (AEPS) as both an issuer and acquirer, facilitating convenient cash withdrawals and access to micro-ATM services in rural and semi-urban regions.

Deposit Growth

FY25-26 has been the year of business consolidation with focus on overall business scalability, margin improvement and operational efficiency. As a result, the total deposit grew to H21,654 Crore as of March 31, 2026 marking a year-on-year (YoY) increase of 0.4%. CASA Retail Term deposits reached H17,916 Crore, led by 16.8% YoY growth. The Bank’s CASA Deposits grew by 10.6% YOY to H5,196 Crore, reaching a CASA ratio of 24.0% from 21.79% as on March 31, 2025.

(H in Crores)
Particulars	FY 2025-26	FY 2024-25
CASA Deposits	5,196	4,699
Retail Term Deposits	12,720	10,635
Bulk Term Deposits	3,738	6,232
Total Deposits	21,654	21,566
CASA Retail Term Deposits	17,916	15,334

Retail term deposits (RTD) emerged as a key driver, growing by 19.6% YoY to H12,720 Crore as of March 31, 2026. Under CASA, Current account registered YoY growth of 23.6% and Savings account registered YoY growth of 8.5%.

Key performance metrics saw notable improvements:

1. CASA Ratio: 24.0%

2. CASA RTD Ratio: Improved to 82.7%

3. Credit to Deposit (CD) Ratio: stood at 83.4%

4. Liquidity coverage ratio (LCR) stood at 175.1%.

Other retail and wholesale lending book

As a Small Finance Bank (SFB), the Bank, which is primarily focussed on micro banking products, has diversified its product offerings to its customers viz. retail loans, unsecured Business loans, personal loans, and secured loans such as loans against property, wholesale lending that includes short term and longterm loan facilities to small and medium enterprises (SMEs), mid and large corporate and institutional clients and gold loans. In addition, we offer housing loans with a focus on affordable housing.

Our micro banking and retail loan products are primarily aimed at customers who are not a part of the formal banking infrastructure.

Retail Loans:

(a) Micro Small & Medium Enterprises (MSME):

The Bank extends a diverse array of both secured and unsecured loans tailored to meet the needs of individuals and non-individual entities, including micro, small, and medium enterprises (MSMEs). We have curated specialized products with adaptable security prerequisites to enhance accessibility to credit for retail and MSME borrowers.

Throughout the fiscal year 2025-26, our retail assets loan portfolio demonstrated steady growth, expanding to H4,455.93 Crore, compared to H3,874.53 Crore in FY25. The modest increase in the MSME portfolio was due to Bank’s focus on consolidation of the business in the geography of its presence.

(b) Housing Loans (HL):

The Bank provides comprehensive home loan solutions to individuals seeking financing for the construction, purchase, repair, and renovation of homes. We meticulously assess our customers’ repayment capacity and tailor loan solutions accordingly.

As of March 31, 2026, our Housing Loan portfolio, managed by our Mortgage team across 62 branches, amounted to H989.55 Crore, marking year-on-year growth of 7.76% compared to H918.29 Crore as of March 31, 2025.

(c) Wheels

The Wheels business which was launched in October 2020 with 2 businesses i.e., Commercial Vehicles & Construction Equipment Loans being offered in Chandigarh, Delhi NCR, Jharkhand, Rajasthan, Uttar Pradesh, Uttarakhand & West Bengal regions from 15 branch outlets. As of March 31, 2026 these loans are offered from states of Bihar, Chandigarh, Delhi NCR, Haryana, Jharkhand, Madhya Pradesh, Punjab, Rajasthan, Uttar Pradesh, Uttarakhand & West Bengal from

46 branches. The Bank’s wheels loan portfolio de-grew to H 1,090.42 Crore.on March 31, 2026 from H 1,188.13 Crores as on March 31, 2025.

Book has de-grown in March 31, 2026 as compared to March 31, 2025 mainly due to heightened focus on Portfolio Management to control the delinquency in the portfolio. The Bank exited few locations where Portfolio was not performing as per expectation in order to improve the overall Wheels Portfolio Quality.

Wholesale Banking Business

The Wholesale lending vertical includes lending, deposits and other banking services provided to corporate customers of the Bank. The Bank’s Wholesale Lending book stood at H2,980.66 Crore as on March 31, 2026 compared to H2,239.73 Crore in March 31, 2025. The wholesale loan portfolio comprises lending to financial institutions (WSL FI), business banking loans extended to small corporates and TReDS Loans which acts as a receivable financing for MSMEs.

The Bank’s Wholesale Lending book stood at H2,980.66 Crore (H1,073.99 Crore for Business Banking, H1,602.41 Crore for NBFC and H304.26 Crores for TReDS) as on March 31, 2026 compared to H2,239.73 Crore (H902.72 Crore for Business Banking and H1,337.01 Crore for NBFC) as on March 31, 2025. The NBFC customers are being offered term loans for on-lending to their customers and overdraft for meeting their working capital requirement.

Business Correspondent (BC)

The strategy of the Bank is to build its asset portfolio through a combination approach.

1. Own Branches

2. Partnership Approach.

The partnership approach with a well-entrenched and networked individual/entity will help it gain significant presence in those markets of business interest. As on March 31, 2026, the Bank had total loan book aggregating to H1,218.24 Crore compared to H1,093.69 Crores in March 31, 2025. The portfolio comprised of JLG loans of H 403.00 Crore, Retail Assets secured loans of H 124.37 Crore, PL H 671.43 Crore and BL & SCF H 19.44 Crore contributing 33%, 10%, 55% and 2 % respectively of the total BC portfolio.

Micro Banking

Micro banking is widespread business which provides a comprehensive package of financial inclusion products and business development services to the underprivileged or low- income individuals or groups who have limited access to financial services. In micro banking, the Bank offers ‘Joint Liability Group’ (JLG) loans, Individual Loans, Business Loans, PM SVANidhi loans, PM Vishwakarma, and CM Yuva loans along with entire gamut of liabilities products through

MB branches. In addition, the Bank provides micro banking loans through Business Correspondent (BC) partners also.

The Bank provides group loans built on the peer-guarantee loan model (Joint Liability Group), which enables individuals to take collateral free loan in groups while promoting credit discipline. This is achieved through mutual support within the group, prudent financial conduct among the group and prompt repayment of their loans. By the end of FY26, JLG business through Micro Banking (MB) reached to H5,386 Crores. During the year, 18 new MB branches were opened in existing operational states.

During the year, the Bank introduced a new product, MBIL, positioned as an intermediate stage between JLG and MBBL to bridge the gap between both product while addressing client’s evolving individual financial needs. On the other hand, the micro-banking business loan segment along with micro banking individual loan reached to H2,022 Crores in FY26 from H910 Crores in FY25, reflecting a year-on-year increase of 122%. Micro Banking also offers PM SVANidhi loans tailored for street vendors and PM Vishwakarma to traditional artisans and craftspeople and CM Yuva loans for the young and budding entrepreneurs.

These financial products are designed to empower low-income and underprivileged individuals who traditionally have limited access to formal banking. The JLG portfolio through Business Correspondents reached to H403 Crores in FY26. The Bank has seven (7) Business Correspondents (JLG) which are operating in Ten (10) states covering 101 districts through 199 branches. As of March 31, 2026, the Bank had opened more than 26 lakh basic savings bank deposit accounts (BSBDA), aimed at offering appropriate savings and financial products to microfinance borrowers while encouraging a habit of saving.

In FY26, the Bank implemented several initiatives, some of them are, introduction of Micro Banking Individual Loan for existing JLG clients, launch of Micro Banking Business Loan for non-existing customers and facilitating acquisition of new clients, increase in first cycle loan ticket size.

CHANGE IN NATURE OF BUSINESS

During the year under review, there has been no change in

the nature of business of the Bank.

CAPITAL

There is no change in the authorized share capital of the

Bank.

In compliance with the provisions of Securities and

Exchange Board of India (Issue of Capital and Disclosure

Requirements) Regulations, 2018 (“SEBI (ICDR) Regulations”) and Section 62 of the Companies Act, 2013 (“Act”) and Rules made thereunder, the Bank issued and allotted 677,913,784 Equity Shares of face value of H 10 each to the existing shareholders and specific investors at an issue price of H 14 per Equity Share, which includes a premium of H 4 per Equity Share, aggregating to H 9,490,792,976.

Accordingly, the total issued, subscribed and paid-up share capital of the Bank as on March 31, 2026 stood at H17,795,236,840 /- comprising of 1,779,523,684 equity shares of H10 each.

Your Bank has not issued any Equity Shares with differential voting rights nor any sweat equity shares.

NON-CONVERTIBLE DEBENTURES

As on March 31, 2026, the total outstanding NonConvertible Debentures of the Bank aggregated to H500,00,00,000. All such debentures were issued on a private placement basis and are listed on BSE Limited.

During the year, 1,500 rated, unsecured, redeemable, taxable, transferable, listed, Basel III compliant Tier II Bonds (ISIN: INE735W08020), aggregating to H15,00,00,000, which was due for redemption on August 30, 2025, were redeemed in full.

REVERSE MERGER

During the year under review, the Bank continued to progress with the proposed Scheme of Amalgamation of Utkarsh CoreInvest Limited (“UCL”), the promoter, with the Bank. The Bank has received the necessary no objection from the Reserve Bank of India (RBI) and observation/ no objection letters from the stock exchanges. Pursuant thereto, a joint application was filed before the Hon’ble National Company Law Tribunal (NCLT), Allahabad Bench, Prayagraj.

In terms of the directions of the Hon’ble NCLT, meeting of shareholders and creditors were convened on March 28, 2026, wherein the Scheme was approved with the requisite majority. Further, a joint second motion petition was filed before the Hon’ble NCLT on April 05, 2026 seeking sanction of the Scheme, which as on the date of report is under consideration.

CAPITAL ADEQUACY RATIO

As of March 31, 2026, the capital adequacy ratio of the Bank stood at 17.7%.

CREDIT RATINGS

The details of all credit ratings obtained by the Bank for various instruments, including debt instruments outstanding as on March 31, 2026, are disclosed in the Report on Corporate Governance, annexed to this Report.

DIVIDEND

The Board of Directors did not recommend dividend for the financial year ended on March 31, 2026.

The Dividend Distribution Policy, in terms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI Listing Regulations”), is available on the Bank’s website viz., URL: https://www.utkarsh.bank.in/uploads/ template forty pdf/Dividend Distribution Policy.pdf

TRANSFER TO RESERVES

In accordance with the RBI regulations, the Bank had transferred the following amount to reserves for the financial year ended March 31, 2026:

Amount transferred to	Amount in H Crore
Statutory Reserve	-
Investment Fluctuation Reserve	(23)
Capital Reserve	23
Deduction due to fraud provision	-

NET WORTH

As on March 31, 2026, the Bank’s net worth was H2,247 Crore*

*as per RBI norms

MATERIAL CHANGES AND COMMITMENTS

There were no material changes and commitments affecting the financial position of the Bank which occurred between the end of the financial year i.e. March 31, 2026 and up to the date of this Report.

TRANSFER TO INVESTORS EDUCATION AND PROTECTION FUND

During the year under review, the Bank was not required to transfer any fund or Equity shares to the Investor Education and Protection Fund as per the provisions of Section 125 of the Act read with applicable rules framed thereunder, as amended from time to time.

Further, details of the unclaimed/un-encashed interest/ dividends lying in the unpaid dividend accounts as on end of the financial year and details of Nodal Officer for IEPF are provided on website of the Bank at www.nt.ka.rsh.bank.in

INTERNAL FINANCIAL CONTROL

The Bank has an Internal Control System commensurate with the size, scale and complexity of its operations. The Bank has an adequate and effective Internal Audit System,

covering on a continuous basis, the entire gamut of operations and services spanning all locations, business and functions. The Audit Committee monitors the Internal Audit System at regular intervals and directs necessary steps to further improve the Internal Control System. Proper internal financial controls are in place, and that the financial controls have been adequate and operating effectively.

EMPLOYEES STOCK OPTION PLAN (ESOP)

Employee Stock Options have been recognised as an effective instrument to attract talent and align the interest of employees with that of the Company, thereby providing an opportunity to the employees to share in the growth of the Company and to create long-term wealth in the hands of employees, thereby and acting as a retention tool.

In view of the above, the Bank had formulated “USFBL Employee Stock Option Plan 2020 (“ESOP Plan 2020”) for its employees. The ESOP details form part of Corporate Governance Report.

The details and disclosures as required under Regulation 14 of the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 (“SBEB & SE Regulations”) and circulars issued thereunder, have been uploaded on the Bank’s website at www.utkarsh.bank.in.

A certificate from the Secretarial Auditor of the Bank that the ESOP Plan has been implemented in accordance with the SBEB & SE Regulations and the same has been enclosed as “Annexure 1” to this report.

DEPOSITS

Being a banking company, the disclosures relating to deposits as required in accordance with Sections 73 and 74 of the Act read with Companies (Accounts) Rules, 2014 and other applicable provisions of the Act are not applicable to the Bank.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

In accordance with the provisions of the Act, the Banking Regulation Act, 1949 (“BR Act”) and Regulation 17 of the SEBI Listing Regulations, the Board of the Bank is duly constituted comprising of Executive, Non-Executive Directors, Independent Directors and Women Directors. The changes in the composition of the Board that took place during the period under review were carried out in compliance with the provisions of the Act, SEBI Listing Regulations and applicable RBI Regulations/ Guidelines.

CHANGES IN COMPOSITION OF THE BOARD Following changes took place in the Board Composition during the FY 2025-26:
Sr	Name of the Director	Type of Change	Effective Date	Remarks
1	Ms. Gauri Rushabh Shah (DIN: 06625227)	Appointment	June 01, 2025	Appointment as an Independent consecutive Director of the Bank for the term of 5 (five) consecutive years.
2	Dr. Kshatrapati Shivaji (DIN: 01185381)	Appointment	July 01, 2025	Appointment as an Independent Director and Part Time Chairman of the Bank, for the term of 5 (Five) and 3 (three) consecutive years respectively.
3	Dr. Ram Jass Yadav (DIN: 08911900)	Appointment	January 03, 2026	Appointment as an Non Executive Non Independent Director of the Bank for the term of 5 (five) consecutive years.
4	Mr. Anjani Kumar Srivastava (DIN: 07594445)	Appointment	May 09, 2026	Appointment as an Non Executive NonIndependent Director of the Bank for the term of 5 (five) consecutive years.
5	Mr. Parveen Kumar Gupta ((DIN: 02895343)	Re-appointment	September 01, 2026	Re-appointment as an Independent Director of the Bank for a second term of 3 (three) consecutive years.
6	Mr. Nagesh Dinkar Pinge (DIN: 00062900)	Cessation	July 19, 2025	Ceased to be Independent Director of the Bank due to completion of tenure.
7	Mr. Pramod Dubey (DIN: 10174154)	Cessation	December 31, 2025	Ceased to be Whole-time Director of the Bank due to resignation.
8	Mr. Muralidharan Rajamani (DIN: 01690363)	Cessation	March 02, 2026	Ceased to be Non-Executive NonIndependent Director of the Bank due to completion of tenure.
The Board placed on record its appreciation for the valuable services and support provided by Mr. Nagesh Dinkar Pinge, Mr. Muralidharan Rajamani and Mr. Pramod Kumar Dubey during their tenure as Directors of the Bank.

Re-appointment of Director retiring by rotation

In accordance with the provisions of Section 152 of the Act and the Articles of Association of the Bank, Dr. Ram Jass Yadav (DIN: 08911900), Non- Executive Non-Independent Director of the Bank retires by rotation at the ensuing Annual General Meeting (“AGM”) and being eligible, has offered himself for re-appointment. The re-appointment of Dr. RamJass Yadav is being put up for your approval at the ensuing AGM. The profile and particulars of experience, attributes, skills of Dr. Ram Jass Yadav together with his other directorships and committee memberships in terms of Regulation 36 of SEBI Listing Regulations and SS-2 issued by the Institute of Company Secretaries of India forms part of the Notice of the 10^th AGM.

KEY MANAGERIAL PERSONNEL

Pursuant to the provisions of Section 203 of the Act and Rule 8 of the Companies (Appointment and Remuneration

of Managerial Personnel) Rules, 2014, following officials of the Bank are the Key Managerial Personnel (“KMP”), as on the date of this Report:

1. Mr. Govind Singh, Managing Director & CEO

2. Mr. Sarju Simaria, Chief Financial Officer

3. Mr. Muthiah Ganapathy, Company Secretary & Compliance Officer

Mr. Pramod Kumar Dubey resigned from the services of the Bank with effect from close of business hours on December 31, 2025.

DECLARATION OF INDEPENDENCE

All Independent Directors (“IDs”) of the Bank have submitted a declaration that each of them meets the criteria of independence as provided in Section 149(6) of the Act read with Rules framed thereunder and Regulation 16(1)(b) of the SEBI Listing Regulations. There has been

no change in the circumstances affecting their status as IDs of the Bank. In the opinion of the Board, the IDs possess the requisite integrity, experience, expertise and proficiency required under all applicable laws and the policies of the Bank.

All IDs of the Bank have complied and affirmed to abide by Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014, as amended, with respect to enrolling their name in the online databank of Independent Directors maintained by Indian Institute of Corporate Affairs (“IICA”) and qualifying the online proficiency self-assessment test, as applicable.

NOMINATION AND REMUNERATION POLICY

The Bank pursuant to the provisions of Section 178(3) of the Act, Regulation 19 of SEBI Listing Regulations and RBI Requirements has formulated and adopted a Nomination and Remuneration Policy on directors’ appointment and remuneration and the criteria for determining qualification, positive attributes and independence of directors, which is available on the website of the Bank at https://www.utkarsh.hank.in/uploads/template._forty_ pdf/NRC_Policy.pdf

The details of remuneration paid to Executive and Nonexecutive Directors during the year forms part of the Corporate Governance report.

Compensation Policy for Non-Executive Directors

The Board of Directors of the Bank has formulated and adopted a comprehensive Compensation Policy for NonExecutive Directors (“NEDs”).

The remuneration payable to the NEDs, other than Parttime Non-Executive Chairman, is in accordance with the provisions of the Circular Dated April 26, 2021 and the Circular on Review of Fixed Remuneration granted to Non-Executive Directors dated February 09, 2024, issued by RBI which, inter alia, provides for payment of compensation to NEDs, other than the Chair of the Board, in the form of a fixed remuneration commensurate with an individual director’s responsibilities and demands on time and which is considered sufficient to attract qualified competent individuals, for an amount not exceeding H 30 lakh per annum, including any statutory modification or amendment or re-enactment thereof for the time being in force and the provisions of the Act.

The above mentioned policy is available on the Bank’s website at https://www.ntkarsh.bank.in/nploads/ template_forty_pdf/Non_Executive_Compensation_ Policy.pdf

The Non-Executive Independent Part-time Chairman of the Bank receives a fixed remuneration as recommended by the Board and approved by RBI and the members of the Bank, from time to time. This is in addition to payment of sitting fees, car with driver, as per applicable policy and reimbursement of expenses for official purposes / attending duties as a Chairman.

BOARD PERFORMANCE EVALUATION

In accordance with the provisions of the Act and SEBI Listing Regulations, the annual Performance Evaluation of the Board, its Committees, Part-time Chairperson and individual Directors has been carried out for the year under review. The performance evaluation was carried out internally through circulation of questionnaires covering various aspects of the performance of the Board and its Committees, including composition, roles and responsibilities, Board processes, quality and flow of information etc. The responses received to the questionnaires were placed before the Board and performance of Board as a whole including its Committees and individual Directors was found to be satisfactory.

NUMBER OF MEETINGS OF BOARD, ATTENDANCE AND CONSTITUTION OF VARIOUS COMMITTEES

During FY 2025-26, the Board met 12 (Twelve) times. The details of Board Meetings held during the year, attendance of Directors at the Meetings and constitution of various Committees of the Board are included separately in the Report on Corporate Governance.

RECOMMENDATIONS OF AUDIT COMMITTEE

During the FY 2025-26, there was no incidence, where the Board has not accepted any recommendations of the Audit Committee.

MEETING OF INDEPENDENT DIRECTORS

In accordance with Section 149(8) read with Schedule IV of Act and Regulation 25 of SEBI Listing Regulations, the Independent Directors of the Bank met 1 (once) on March 15, 2026, which was attended by all the Independent Directors of the Bank.

FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS

In accordance with Regulation 25(7) of the SEBI Listing Regulations and RBI guidelines, various training programmes were organized for the Board Members, which inter-alia covered topics related to corporate governance, generative artificial intelligence & risk management and overview of the fintech functions.

The details of familiarization programme for Independent Directors is available on the Bank’s website at https:// www.utkarsh.bank.in/investors

SUCCESSION PLANNING

The Bank has adopted Succession Planning Policy (the “policy”) for the Board, Key Managerial Personnel and Senior Leadership positions. The policy has been formulated for successful transition of the Board and other key executives and provides for the succession process viz. periodical screening, evaluation of suitable candidates on parameters such as knowledge, experience,

expertise, skill sets, conduct, age, qualifications under the relevant laws, adherence to ''fit & proper'' criteria and overall readiness to take up the role. Wherever necessary, services of external consultants / experts are also availed for scouting talent, internally and / or externally. The Policy on Succession Planning is made available on the Bank’s website at https://www.nt.karsh.bank.in/iiploads/ template_forty_pdf/Policy_on_Succession_Planning_ for_Board_and_Senior_Management.pdf.

STATUS OF IND AS IMPLEMENTATION

As per RBI circular RBI/2015-16/315 DBR.BP.BC. No.76/21.07.001/2015-16 dated February 11, 2016,

Implementation of Indian Accounting Standards (“Ind AS”), Banks are advised that scheduled commercial banks (excluding RRBs) shall follow the Indian Accounting Standards as notified under the Companies (Indian Accounting Standards) Rules, 2015, subject to any guidelines or directions issued by the RBI in this regard. Banks in India currently prepare their financial statements as per the guidelines issued by RBI, the Accounting Standards notified under Section 133 of the Act and generally accepted accounting principles in India (“Indian GAAP”).

In January 2016, the Ministry of Corporate Affairs issued the roadmap for implementation of new Indian Accounting Standards (Ind AS), which were based on convergence with the International Financial Reporting Standards (IFRS), for scheduled commercial Banks, insurance companies and non-banking financial companies (NBFCs). In March 2019, RBI deferred the implementation of Ind AS for Banks till further notice as the recommended legislative amendments were under consideration of Government of India.

The Banks are advised to follow the Indian Accounting Standards as notified under the Companies (Indian Accounting Standards) Rules, 2015. The Banks in India currently prepare their financial statements as per the guidelines issued by the RBI, the Accounting Standards notified under Section 133 of the Act and generally accepted accounting principles in India (Indian GAAP).

DIRECTORS’ RESPONSIBILITY STATEMENT

As per the requirements of Section 134(3)(c) of the Act, it is hereby confirmed that:

a. in the preparation of the annual accounts, the applicable accounting standards have been followed, and there is no material departure from the same;

b. the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as on March 31, 2026, and of the loss of the Bank for that period;

c. the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities;

d. the Directors have prepared the annual accounts on a going concern basis;

e. the Directors have laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and operating effectively; and

f. the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws, and that such systems were adequate and operating effectively.

ANNUAL RETURN

In accordance with the provision of Section 92 (3) of the Act, the Annual Return in the prescribed form MGT-7 is uploaded on Bank’s website at www.ntkarsh.bank.in/ investors.

AUDITORS Statutory Auditors

RBI, on April 27 2021, had issued guidelines for appointment of Statutory Central Auditors/Statutory Auditors of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs). As per the said guidelines statutory audit of entities with asset size of H15,000 Crore and above as at the end of previous year, should be conducted under joint audit of a minimum of two audit firms. The audit firms can be appointed as the Statutory Auditors (SA) of the Bank for a continuous period of 3 (three) years only and thereafter, reappointment in the same entity will be possible only after a cooling period of 6 (six) years. Further, prior approval of RBI for appointment/reappointment of SAs on an annual basis is required in terms of the above guidelines.

The Members of the Bank at the 9^th Annual General Meeting (“AGM”) held on August 22, 2025, had approved the appointment of M/s. M. M. Nissim & Co LLP, Chartered Accountants (FRN 107122W/W100672) and M/s KKC & Associates LLP, Chartered Accountants (FRN 105146W/ W100621) as the Joint Statutory Auditors of the Bank for a period of 3 (three) consecutive financial years to hold office till the conclusion of 12^th AGM of the Bank, subject to RBI on an annual basis. The Bank has approached RBI seeking approval for their appointment for FY 2026-27. The approval from the RBI is awaited as on the date of this Report.

The Statutory Audit of the Bank for the FY 2025-26 was conducted jointly by M/s. M. M. Nissim & Co LLP, Chartered Accountants (FRN 107122W/W100672) and M/s KKC & Associates LLP, Chartered Accountants (FRN

105146W/W100621). The Auditors’ Report forms an integral part of this Annual Report.

The observations made in the Auditor’s Report are selfexplanatory and therefore, do not call for any further comments under Section 134(3)(f) of the Act. The Auditor’s Report does not contain any qualifications, reservations or adverse remarks.

Secretarial Auditors

In compliance with the provisions of Section 204 of the Act and the rules framed thereunder, M/s. BNP & Associates, Company Secretaries, the Secretarial Auditors of the Bank, conducted the Secretarial Audit for the financial year ended March 31, 2026. There were no qualifications made by the Secretarial Auditors in their Report.

The Secretarial Audit Report for FY2025-26 is annexed as “Annexure 2” to this Report.

Cost Auditor

The provisions for maintenance of cost records as specified by the Central Government under Section 148(1) of the Act are not applicable to the Bank.

Internal Auditor

As per the provisions of Section 138 of the Act read with Rule 13 of the Companies (Accounts) Rules, 2014, the Internal Auditors report was presented to the Audit Committee on a quarterly basis. The scope, functioning, periodicity and methodology for conducting the Internal Audit have been formulated under the applicable RBI guidelines and in consultation with the Audit Committee.

COMPLIANCE WITH SECRETARIAL STANDARDS

During the year under review, the Bank has complied with the applicable Secretarial Standards on meetings of the Board of Directors (“SS-1”) and Secretarial Standard on General Meetings (“SS-2”) issued by the Institute of Company Secretaries of India.

CONSERVATION OF ENERGY

The Bank continues to prioritise energy efficiency as part of its sustainability and ESG commitments. The Bank has undertaken focused initiatives to optimise energy consumption across its operations through a combination of technology adoption, infrastructure upgrades, and employee awareness. Key measures include the installation of solar panels, energy-efficient LED and sensor-based lighting, optimisation of air-conditioning systems, and deployment of efficient electrical infrastructure in its corporate building at Varanasi. Digital transformation initiatives such as paperless banking, and virtual meetings have further reduced energy consumption. The Bank actively monitors electricity usage across locations and promotes responsible energy practices through regular awareness programs.

However, the Bank continues to focus on efficient energy usage and technology upgradation to enhance operational efficiency and customer service in a cost effective manner.

TECHNOLOGY

In an increasingly digital and customer-centric banking landscape, Information Technology continues to be a key strategic enabler for Utkarsh Small Finance Bank. During FY 2025-26, the Bank focused on strengthening & execution of core technology foundations, modernizing critical enterprise platforms, enhancing digital customer journeys, and embedding advanced technologies to support scalability, resilience, and regulatory compliance.

Key Technology Initiatives and Platform Transformation

During the year, the Bank undertook multiple large-scale technology initiatives aimed at improving operational efficiency, customer experience, and risk management:

¦ Payment Switch & ATM Modernization: The Bank successfully migrated its Debit Card and IMPS switching to a new, robust switch platform, resulting in significantly improved transaction throughput, stability, and scalability, and an enhanced overall customer experience. In parallel, the Bank’s ATM network was modernized through migration to new ATM machines, further strengthening service reliability and availability.

¦ Treasury & Financial Risk Systems: The Treasury Management System (TMS) was upgraded to support enhanced deal processing, regulatory reporting, and integrated risk monitoring. In parallel, the Bank migrated to a new Asset Liability Management (ALM) application, strengthening liquidity risk assessment and balance sheet management.

¦ Strengthening AML & Compliance Capabilities: A

new, advanced Anti-Money Laundering (AML) system was implemented, replacing the legacy application. The new platform enables stronger transaction monitoring, improved alert quality, enhanced regulatory reporting, and better scalability to support business growth.

¦ Credit & Recovery Digitization: The Bank implemented a Centralized NPA Management System, enabling end-to-end monitoring, recovery tracking, legal actions, and analytics for delinquent accounts, thereby improving recovery governance and effectiveness.

¦ Digital Lending & New Product Enablement: A Digital Gold Loan Platform was launched to provide a fully digitized, faster time-to-disbursement experience. Additionally, the Loan Origination System was enhanced to better support Micro Banking Individual Loan (MBIL) and Micro Banking Business Loan (MBBL) asset products, improving configurability, reporting, and operational controls.

Digital Channels & Customer Experience Enhancements

Significant investments were made to enhance digital touchpoints and improve customer convenience:

¦ WhatsApp Banking Services were upgraded with extended service coverage and improved response capabilities.

¦ Continuous improvements were made across Internet Banking and Mobile Banking platforms to enhance security, performance, and usability.

API, Middleware, and Low-Code Enablement

To support faster innovation and system integration, the Bank:

¦ Continued strengthening its API and Middleware platforms, enabling secure, scalable integration with fintech partners and internal systems.

¦ Introduced a Low Code / No Code development platform to accelerate internal application development, automate workflows, and reduce dependency on traditional development cycles.

Strategic Adoption of Artificial Intelligence

FY 2025-26 marked a significant milestone in the Bank’s journey toward Al-led transformation. Artificial Intelligence was adopted as a strategic initiative across multiple functions leveraging both generative AI and Agentic AI capabilities. AI adoption has been structured along with appropriate governance, security controls, and regulatory alignment, ensuring responsible and scalable implementation across the Bank.

Data Centre Modernization & Managed Infrastructure Services:

The Bank established a new on premises Data Centre and Disaster Recovery (DR) setup to support ongoing system modernization initiatives and strengthen infrastructure resilience. A leading industry partner was engaged for managed Data Centre services to ensure skilled operations, best in class practices, and service continuity.

Additionally, enterprise grade Backup solutions were implemented to ensure data availability, integrity, and rapid recovery, while advanced Endpoint Detection & Response (EDR) solutions were onboarded to strengthen cyber security, enable proactive threat detection, and protect critical systems from evolving cyber risks.

New Core Banking System (CBS)

The Bank continued to make measured progress on its enterprise-wide transformation initiatives relating to the Core Banking System (CBS) during FY 2025-26 and planned to go-live during the year. These programs are aimed at modernizing the Bank’s core technology landscape, improving system scalability and resilience, and enabling a consistent omni-channel customer experience. The

initiatives are being executed under strong governance with a phased approach to ensure business continuity and regulatory compliance throughout the transformation journey.

Outlook

The Bank remains committed to leveraging technology as a strategic differentiator. Investments made during FY 2025-26 have laid a strong foundation for future growth, operational excellence, and superior customer experience. The IT roadmap continues to prioritize modernization, resilience, digital innovation, and responsible adoption of emerging technologies.

Cyber Security Framework of the Bank

In an increasingly digital banking environment, cybersecurity remains a critical enabler of business growth, customer trust, and regulatory compliance at Utkarsh Small Finance Bank. The Bank’s cybersecurity strategy is closely aligned with its business objectives, ensuring secure digital expansion, operational resilience, and protection of customer assets/ information.

During FY 2025-26, the Bank significantly strengthened its cybersecurity posture through robust governance, advanced security controls, and proactive risk management, which includes:

¦ A comprehensive Governance, Risk, and Compliance (GRC) framework, reinforced by board-level oversight through the Information Security Committee, ensures structured risk identification, proactive mitigation, and continuous monitoring.

¦ The year was marked by notable achievements, including being honoured as “Cybersecurity Team of the Year” at the IBA CISO Summit 2025 and achieving a best-in-class BitSight Security Rating of 820/820, underscoring the Bank’s strong cyber maturity and minimal risk exposure.

¦ The Banks 24x7 Security Operations Center (SOC) continued to provide real-time monitoring and response to cyber threats, supported by advanced security technologies such as EDR, DLP, WAF, and threat intelligence integration, etc.

¦ Proactive risk management remained a key focus, with regular VAPT, Red Team Exercise, Risk Assessments, Attack Surface Monitoring and Breach Attack Simulations ensuring continuous evaluation and strengthening of security controls.

¦ Strong progress was also achieved in regulatory compliance, including ISO 27001:2022 certification, which is a testament to the Bank’s strengthened security framework and adherence to global best practices.

¦ The Bank further strengthened its resilience by adopting Cyber Risk Insurance, providing financial

protection against cyber incidents, including ransomware attacks, business disruptions, and regulatory liabilities.

¦ Significant investments were also made in cybersecurity awareness, including phishing simulations and organization-wide training programs, helping build a strong security-conscious culture.

This complement exists security controls by addressing residual risks and enhancing overall cyber preparedness.

FOREIGN EXCHANGE EARNINGS / OUTGO

During the year under review, the Bank has foreign exchange earnings of H 3.18 Crore. However, there was no foreign exchange outgo.

CODE OF CONDUCT

For a financial institution, transparency and the highest standards of corporate governance are important prerequisites for establishing a compliance-oriented bank. Towards this end, the Bank endeavours to ensure that all its activities are fairly aligned with the highest standards of personal and professional integrity and the highest level of ethical conduct.

The Bank has adopted a Code of Conduct and norms for the avoidance of conflict of interest, all the Senior Management officials, KMPs, Employees with loan sanctioning authority, employees directly related with sourcing/servicing corporate or wholesale banking relationships and employees directly involved in the procurement of goods and services, conduct duties according to the aforesaid Code of Conduct. Some of the areas that have been covered by the Code of Conduct are fairness of employment practices, protection of intellectual property, integrity, customer confidentiality and conflict of interest. The Bank’s Code of Conduct for Directors and Senior Management is hosted on the website of the Bank at CODE_OF_CONDUCT_FOR_THE_BOARD_ OF_DIRECTORS_AND_SENIOR_MANAGEMENT_ PERSONNEL.pdf. A declaration on compliance with code of conduct for FY 2025-26 forms part of corporate governance report.

Whistle Blower /Vigil Mechanism

Pursuant to the provisions of Section 177(9) of the Act read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014, the Bank has in place a Whistle Blower Policy / Vigil Mechanism. The policy provides a mechanism to enable directors and employees of the Bank to report genuine concerns relating to unethical behaviour, actual or suspected fraud, violation of the Bank’s code of conduct, or other irregularities, in a confidential and secure manner. The Whistle Blower Policy ensures adequate safeguards against victimisation of the individuals who avail themselves of the vigil mechanism.

The policy is hosted on the Bank’s website at https://www. utkarsh.bank.in/uploads/template_forty_pdf/Whistle_ Blower_Policy_Re.vise.d_13_12_2022.pdf

In addition, the Bank has also adopted a Vigilance Policy, which outlines the framework for prevention, detection, and handling of vigilance related matters, including risks arising from corruption, malpractices, fraud, and other misconduct, in accordance with applicable regulatory and statutory requirements.

VIGILANCE & SECURITY

The Bank has a Vigilance & Security Department for investigating frauds, bribery cases, and complaints, including complaints received under the whistle-blower policy of the Bank.

Vigilance & Security Department makes concerted efforts to curb fraud, forgery, and burglary incidents in the Bank with the help of new ideas, technology, previous experiences, and adopting preventive vigilance measures with appropriate tools.

CORPORATE SOCIAL RESPONSIBILTY

The Bank has a duly constituted CSR Committee in terms of the requirements of Section 135 of the Act read with the rules made thereunder. The details of the changes in the composition of the CSR Committee during the FY 202526 have been provided in the Corporate Governance Report which forms part of the Annual Report for the FY 2025-26. The Bank has formulated its CSR policy pursuant to Section 135(4) of the Act and the Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended, in accordance with the approach and direction given by the Board of the Bank, taking into account the recommendations of its CSR Committee, and including guiding principles for selection, implementation and monitoring of activities as well as formulation of the annual action plan.

The said Policy is available on the website of the Bank at https://www.utkarsh.bank.in/uploads/template forty pdf/Corporate Social Responsibility Policy.pdf. The detailed Annual Report on the CSR activities for the FY 2025-26 is annexed as “Annexure 3” to this Report.

PARTICULARS OF EMPLOYEES

The information in terms of Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as “Annexure 4” to this Report.

Further, the statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended, forms part of this Annual Report. In terms of section 136(1) of the Act, the Annual Report is being sent without this Annexure. The Annexure is available for inspection and any member interested in obtaining a copy

of the statement may write to the Company Secretary of the Bank at [email protected].

CORPORATE GOVERNANCE

The Bank’s activities are carried out in accordance with the good Corporate Governance practices and the Bank is constantly striving to make them better with time. The Bank believes that governance framework and good practices helps in creating right culture and in turn enhances long-term sustainable value for all its stakeholders.

Pursuant to Regulation 34 of the SEBI Listing Regulations, a ‘Report on Corporate Governance’ has been annexed to this Report along with the certificate issued by the Secretarial Auditor as “Annexure 5” of the Bank confirming compliance with the mandatory requirements relating to Corporate Governance under the SEBI Listing Regulations. The Report on Corporate Governance also contains certain disclosures required under the Act, including the details of the Board meetings held during the financial year ended March 31, 2026.

RISK MANAGEMENT POLICY

The details of Risk Management Policy & its framework are separately provided in the Management Discussion and Analysis Report.

LOANS, GUARANTEES AND INVESTMENTS

The particulars of investments made by the Bank are disclosed in notes to accounts forming part of financial statements.

During the year under review, no loans or guarantees were given or security provided on any loans or guarantees and hence, no disclosure is required to be made thereon.

RELATED PARTY TRANSCATION

There was no materially significant related party transaction entered between the Bank and its related parties.

All the contracts/arrangements/transactions entered by the Bank with the related parties during the FY 2025-26 were on arm’s length basis; accordingly, the disclosure of particulars of contracts/ arrangements entered into by the Bank with related parties referred to in sub-section (1) of section 188 of the Act in Form AOC-2 is not applicable.

The Policy on Related Party Transactions is available on the website of the Bank at https://www.utkarsh.bank.in/ uploads/template forty pdf/RPT and Arms Length Policy.pdf

REPORTING OF FRAUDS BY AUDITORS

During FY 2025-26, no instances of fraud committed in the Bank, by its officers or employees were reported by the Joint Statutory Auditors and Secretarial Auditor under

Section 143(12) of the Act, to the Audit Committee or the Board of Directors of the Bank.

BUSINESS RESPONSIBILITY ANDSUSTAINABILITY REPORT

In terms of Regulation 34(2)(f) of the SEBI Listing Regulations, as amended the Business Responsibility and Sustainability Report describing the initiatives taken by the Bank from an Environmental, Social and Governance perspective is presented in a separate section which forms an integral part of this Annual Report.

MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis Report for the year under review, as stipulated under Regulation 34 of the SEBI Listing Regulations is presented in a separate section which forms an integral part of this Annual Report.

SIGNIFICANT AND AN INTEGRAL MATERIAL ORDERS PASSED BY REGULATORS OR COURTS OR TRIBUNALS

During the year under review, no material orders have been passed by the Regulators/Courts/Tribunals which would impact the going concern status of the Bank and its future operations.

However, basis the receipt of the Shareholders approval of the Bank and UCL, Promoter on the Scheme of Amalgamation between the Promoter and Bank, a second motion petition was filed with the Hon’ble NCLT, Allahabad Bench, Prayagraj for final sanction of the Scheme.

The Bank has not made any application under the Insolvency and Bankruptcy Code, 2016 and no proceeding is pending under the said Code.

Further, no one time settlement was done with any Bank/ Financial Institution with respect to loans taken by the Bank, hence disclosure on the difference between amount of the valuation done at the time of one-time settlement and the valuation done while taking such loans is not applicable.

HOLDING, SUBSIDIARY & ASSOCIATE COMPANIES

The UCL is Promoter Company of the Bank. The Bank does not have subsidiary or associate company. Hence the details of sub-section (3) of section 129 read with rule 5 of Companies (Accounts) Rules, 2014 are not applicable to the Bank.

KNOW YOUR CUSTOMER / ANTI-MONEY LAUNDERING

The Bank complies with all requirements prescribed under the RBI Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines, as amended from time to time. The Bank’s KYC/AML Policy has been framed in line

with the RBI Master Direction - Know Your Customer (KYC) Directions, as applicable to Small Finance Banks, and the provisions of the Prevention of Money Laundering Act, 2002 (PMLA) and the rules made thereunder.

The Policy adopts a risk-based approach for the effective implementation of the AML framework across the Bank. The Bank complies with all applicable regulatory reporting requirements prescribed by the Financial Intelligence Unit - India (FIU IND).

The Bank has put in place a robust transaction monitoring mechanism in line with FIU IND and regulatory requirements. An automated transaction monitoring system is deployed, which is closely monitored by a centralised AML team to identify, review, and report suspicious transactions in a timely manner.

The Bank imparts regular training to its employees on KYC/AML compliance requirements to ensure awareness and effective implementation of regulatory guidelines. Senior officers and executives of the Bank also participate in periodic workshops and seminars organised by FIU IND, RBI, Indian Banks’ Association (IBA), and the National Institute of Bank Management (NIBM), with a view to enhancing awareness and strengthening compliance standards.

Recent amendments and changes notified under the PMLA and RBI guidelines have been duly incorporated into the Bank’s customer onboarding processes and internal policies. The Bank’s KYC/AML Policy is reviewed annually and placed before the Board of Directors for approval, taking into account all applicable regulatory amendments and supervisory expectations.

PREVENTION OF SEXUAL HARASSMENT

The Bank has formulated and adopted a Policy on Prevention of Sexual Harassment of Women at workplace. The Bank has complied with the provisions relating to the constitution of Internal Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. No complaints were pending with the Internal Complaints Committee for more than ninety days. The information as required pursuant to Rule 8 of Companies (Accounts) Rules, 2014 relating to complaints received, redressed and pending during FY 2025-26 forms part of the Corporate Governance Report.

The POSH Policy is periodically communicated to all employees and is available on the Bank’s website https:// www.utkarsh.bank/uploads/policy/Prevention_of_ Sexual_ Harassment_Policy.pdf

HUMAN RESOURCES AND TRAINING

At Utkarsh, our employees are at the core of everything we do. Our human resources framework is built to foster inclusive growth, transparency, and equity across the organisation. With a well-structured HR setup

encompassing recruitment, operations, training, and employee engagement-supported by a robust zonal structure—we ensure effective last-mile connectivity and responsiveness across regions.

Our technology-enabled HR services, including a mobile-based platform, provide employees with real-time access to key functions, enhancing efficiency and engagement. As of March 31, 2026, our workforce stands at 18,400 employees, reflecting our continued expansion and strong commitment to nurturing a collaborative, diverse, and growth-oriented workplace.

Learning and development remain a cornerstone of our people strategy, enabling employees to continuously build capabilities and progress in their careers. Through flagship programmes such as Utkarsh Aarambh, Utkarsh Pragati, Udaan, Saksham, and Manthan, we provide structured opportunities to develop functional expertise, leadership capabilities, and compliance awareness across levels.

In FY 2025-26, all the new joiners attended induction and taken through mandatory courses, and more than 10,000 existing employees engaged in developmental programs, reinforcing a strong culture of continuous learning. Initiatives like the Probationary Officer Program, Branch Baithaks, and our partnership with Institute of Professional Banking (IPB) and Baddi University ensure we cultivate talent aligned with our mission. Our focus also included virtual training and leadership workshops aimed at improving performance across sales, liabilities, and assets.

Our broader talent and capability initiatives further strengthen workforce effectiveness and retention. These include competition role-grade benchmarking, salary benchmarking, job norms rationalisation, succession planning, career portal utilisation, fortnightly zonal HR updates, and the “Know Your HR” initiative to enhance employee connect. Focused efforts such as diversity hiring, resource-level productivity and incentive optimisation, the rehire programme (Innings 2.0), and a retention grid for critical talent underscore our commitment to building a future-ready, resilient organisation.

As part of its ongoing commitment to building a future ready institution, the Bank continued to strengthen its talent management and leadership development agenda during the year. A key focus was on ensuring strong alignment of leadership mindsets and capabilities with the Bank’s long-term strategic priorities.

In this context, the Bank conducted a Senior Management Alignment Workshop, designed to bring leadership teams onto a common platform around the Bank’s vision, institutional growth agenda, and evolving business priorities. The workshop aimed to foster shared accountability, reinforce the desired organizational culture, and enable leaders to collectively steer the Bank through transformation while ensuring long term

sustainability. Building on the outcomes of the alignment workshop, the Bank initiated a series of targeted leadership and capability development interventions.

We promote employee well-being through structured engagement activities, comprehensive wellness initiatives, and robust recognition programs. From celebrating key milestones such as our 9^th anniversary, to honouring long-serving employees and recognising top performers, we consistently acknowledge the contributions of our people.

Platforms such as Utkarsh Samvaad and Sampark foster open dialogue by enabling direct interaction between employees and the Managing Director & CEO, as well as the Senior Leadership Team. These initiatives strengthen alignment, transparency, and connection across the organisation.

Our overarching objective is to engage, motivate, and retain talent by cultivating a supportive and inclusive work culture. Our POSH Policy, applicable to all employees and stakeholders, reinforces a zero-tolerance approach towards harassment and misconduct, ensuring a safe and respectful workplace. Collectively, these initiatives underscore our commitment to building a supportive, secure, and purpose-driven organisation.

COMPLIANCE ON MATERNITY BENEFIT ACT, 1961

The Bank is in compliance with the provisions of the Maternity Benefit Act, 1961.

BASEL III (PILLAR 3) DISCLOSURES

RBI Direction RBI/DOR/2025-26/182 DOR.CAP. REC.101/21-01-002/2025-26 dated November 28, 2025 (Updated as on March 10, 2026) on ‘Reserve Bank of India (Small Finance Banks - Prudential Norms on Capital Adequacy) Directions, 2025’ requires banks to make Pillar 3 disclosures, as applicable. These disclosures have not been subjected to audit or limited review. These disclosures are available on the Bank’s website at www. utkarsh.bank.in/basel-disclosures

Acknowledgement

The Directors of the Bank would like to place on record their gratitude towards the guidance and co-operation received from the RBI, SEBI, Stock exchanges, Ministry of Corporate Affairs and other Government and Regulatory Agencies. The Directors of the Bank would like to take this opportunity to express their appreciation for the hard work and dedicated efforts put in by the Bank’s employees and acknowledge the continued support of the members.

---

Mar 31, 2025

The Board of Directors of Utkarsh Small Finance Bank Limited
(the Bank or Utkarsh SFBL) is pleased to present the 9^th Annual
Report and the Audited Financial Statements of the Bank for the
Financial Year ended, March 31, 2025 with immense PRIDE* - our
guiding values.

Highlights of major achievements of the Bank:

¦ Total deposits increased to H21,566 crore as on March 31,
2025, from H17,473 crore as on March 31, 2024

¦ Net Advances increased to H18,716 crore as on March 31,
2025, from H16,365 crore as on March 31, 2024

¦ Bank’s operating profit increased to H1,007 crore for FY25
from H997 crore in FY24.

¦ The Bank reported annual profit of H24 crore for FY25.

¦ On the asset quality, Bank witnessed Net NPAs at 4.8% as on
March 31, 2025 vs. 0.03% as on March 31, 2024.

¦ Bank’s overall provision cover was at 51.2% as on March
31, 2025.

¦ The capital adequacy ratio of the Bank is 20.9% as on March
31, 2025.

¦ Bank’s capital plus reserves increased to H2,975 crore as on
March 31, 2025 from H2,973 crore as on March 31, 2024

¦ There are 1,092 Branches spread across 23 States and 4
Union Territories as on March 31, 2025

FINANCIAL PERFORMANCE

The financial highlights for the year under review are presented below:

(Amount in H crore)

Particulars	FY 24-25 Audited	FY 23-24 Audited	Change in %
Deposits	21,566	17,473	23%
Investments (incl. Cash & balances with RBI and Banks)	8,395	6,707	25%
Advances (Net)	18,716	16,365	14%
Net Worth*	2,776	2,722	2%
Net Interest Income	2,023	1,886	7%
Other Income	600	400	50%
Operating Income	2,623	2,286	15%
Operating Expenses	1,616	1,289	25%
Provisions and Contingencies (incl. taxes)	983	500	97%
Net Profit	24	498	(95%)
Gross NPA Ratio	9.43%	2.51%
Net NPA Ratio	4.84%	0.03%
Capital Adequacy Ratio	20.93%	22.57%
Business$ (Deposit plus Net Advance) per employee**	1.91	1.83
Transfer to Statutory Reserve		124.41
Transfer to Capital Reserve		-
Transfer to Investment Fluctuation Reserve		5.94
Deduction during the year	-	-
Dividend for the year, Including Tax Thereon	55.02	-
Number of Branches	1,092	888

Particulars	FY 24-25 Audited	FY 23-24 Audited	Change in %
General Banking Branches	331	276
Micro Banking Branches	761	612
No. of Employees	19,779	16,081

BUSINESS UPDATE AND STATE OF BANK’S
AFFAIRS

The details on the state of affairs and the business update of the
Bank are separately provided in the Management Discussion and
Analysis Report, which forms an integral part of the Annual Report
of the Bank. However, the summary of the Bank’s performance
has been covered hereunder:

Liabilities Business

The Liabilities franchise accelerated its momentum in building
sustainable franchise by delivering competitive blend of physical
reach and digital innovation. With a strong focus on financial
inclusion and deepening the retail deposits mix.

As on March 31,2025, total deposits stood at H21,566 Crore, driven
by CASA growth to H4,699 crore at 31.2% YoY and Retail Term
deposits to H10,635 at 33.5% YoY, and Bulk term deposit book
to H6,232 crore at 5.2% YoY Growth. CASA Ratio stood at 21.8%,
while CASA RTD formed 71.1% of total deposits - highlighting
deposits granularity

To scale outreach, the bank added 204 new branches (55 general
banking & 149 micro banking), taking total banking outlets to 1,092
across 23 states and 4UTs. ATM and Micro ATM presence rose to
1,129 terminals, with 190 new touchpoints rolled out - enhancing
access to services like cash deposits, withdrawals and green
pin generation.

In addition to strengthening the branch & ATM networks, the
Bank further augmented its digital banking channels such as net
banking, mobile banking, tab banking, digital onboarding, among
others. During this period, the Bank expanded its bouquet of
products and services to the customers including, NR Banking
(on pilot), RERA Accounts, WhatsApp Banking, Public Financial
Management System, E-ASBA, SPARSH (System for Pension
Administration) among others. These innovations reinforce bank’s
ambition to expand inclusive reach.

Assets Business

As a Small Finance Bank (SFB), the Bank, which is primarily
focussed on micro banking products, has diversified its product
offerings to its customers viz. retail loans, unsecured loans,
business loans, personal loans, and secured loans such as loans
against property wholesale lending that includes short term and
long-term loan facilities to small and medium enterprises (SMEs),
mid and large corporate and institutional clients and gold loans. In
addition, we offer housing loans with a focus on affordable housing.

Our micro banking and retail loan products are primarily aimed at
customers who are not a part of the formal banking infrastructure.

(A) Micro Banking

Micro banking is widespread business which provides a
comprehensive package of financial inclusion products and
business development services to the underprivileged or
low- income individuals or groups who have limited access
to financial services. In micro banking, the Bank offers ''Joint
Liability Group’ (JLG) loans and business loans along with
entire gamut of liabilities products through MB branches.
In addition, the Bank provides micro banking loans through
Business Correspondent (BC) partners also.

The Bank provides group loans built on the peer-guarantee
loan model (Joint Liability Group), which enables individuals
to take collateral free loan in groups while promoting credit
discipline. This is achieved through mutual support within
the group, prudent financial conduct among the group and
prompt repayment of their loans.

During FY25, JLG business through Micro Banking (MB)
recorded a de-growth of H1,884 crore and reached to H8,740
crore vis-a-vis the previous financial year mainly due to
industry headwinds. 149 new MB branches were opened in
existing operational states.

To meet the increasing fund requirement of customers who
have completed multiple loan cycles and are considered as
matured borrowers, the Bank kept expanding Micro Banking
business loans to other existing branches. The Bank provides
individual loans especially to those who have begun their
formal credit cycle under JLG.

The total portfolio of JLG (excluding BC), MBBL and PM
SVANIDHI stood at H9,650 crore as on March 31, 2025, with
a total base of more than 29 lakh clients consisting of active
loans through the branch network.

The JLG portfolio through Business Correspondents
reached to H446 crores in FY25. The Bank has seven (7)
Business Correspondents which are operating in nine (9)
states covering 83 districts through 162 branches.

Liabilities base under MB vertical stood at H439.65 crore as
of March 2025.

In FY25, the Bank implemented several initiatives in its
processes for JLG clients, some of them are SI mandate, less
cash module through FINO Payment Bank, e-Sign and e-KYC

through virtual ID, PAN card verification, Micro ATM geo
tagging, cash carry approval from BM, CB guardrails, Track-
OD application, Net-off disbursement, KFS implementation.
To facilitate digital collections from MB clients, Bank
implemented SMS- linked payment.

(B) Retail Loans:

(a) Micro Small & Medium Enterprises (MSME):

The Bank extends a diverse array of both secured
and unsecured loans tailored to meet the needs of
individuals and non-individual entities, including micro,
small, and medium enterprises (MSMEs). We have
curated specialized products with adaptable security
prerequisites to enhance accessibility to credit for retail
and MSME borrowers.

Throughout the fiscal year 24-25, our retail assets
loan portfolio demonstrated robust growth, expanding
by 52% year-on-year to H3875 crore, compared to
H2,557 crore in FY24. The expansion in our MSME loan
portfolio was propelled by the incorporation of new
service locations and the introduction of a wide range of
products to address diverse customer segments.

(b) Housing Loans (HL):

The Bank provides comprehensive home loan solutions
to individuals seeking financing for the construction,
purchase, repair, and renovation of homes. We
meticulously assess our customers’ repayment capacity
and tailor loan solutions accordingly.

As of March 31, 2025, our Housing Loan portfolio,
managed by our Mortgage team across 63 branches,
amounted to H918.29 crore, marking a significant year-
on-year growth of 36% compared to H676.59crore as of
March 31, 2024.

(c) Wheels

The Wheels business which was launched in October
2020 with 2 businesses i.e., Commercial Vehicles
& Construction Equipment Loans being offered in
Chandigarh, Delhi NCR, Jharkhand, Rajasthan, Uttar
Pradesh, Uttarakhand & West Bengal regions from
15 branch outlets. As of March 31, 2025 these loans
are offered from states of Bihar, Chandigarh, Delhi
NCR, Haryana, Jharkhand, Madhya Pradesh, Punjab,
Rajasthan, Uttar Pradesh, Uttarakhand & West Bengal
from 48 branches. The Bank’s wheels loan portfolio
grew to H1,179 crores as on March 31, 2025 from H926.77
crores as on March 31, 2024.

Book has grown by 21.39% in March 31, 2025 as
compared to March 31, 2024. Growth was driven by
addition in new locations and new product offerings in

Used CV & CE, Light Commercial Vehicles, and fast-
moving Construction Equipment like Backhoe loaders.

(C) Wholesale Banking Business

The Wholesale lending vertical includes lending, deposits
and other banking services provided to corporate customers
of the Bank.

(a) Wholesale Lending

The Bank’s Wholesale Lending-Business Banking, book
stood at H902.72 crore as on March 31, 2025 compared
to H595.73 crore in March 31, 2024. The Bank also offers
both fund based (WC & TL) & non-fund-based limits in
the form of bank guarantee to the customers through
BBG Wholesale Lending vertical.

The Bank’s Wholesale Lending book stood at H2,239.73
crore (H903 Crore for Business Banking and H1,337
crore for NBFC) as on March 31, 2025 compared to
H1,882.41 crore (H595.73 Crore for Business Banking and
H1,286.68 crore for NBFC) in March 31, 2024. The NBFC
customers are being offered term loans for on-lending to
their customers and overdraft for meeting their working
capital requirement.

(D) Business Correspondent (BC)

The strategy of the Bank is to build its asset portfolio through
a combination approach.

1. Own Branches

2. Partnership Approach.

The partnership approach with a well-entrenched and
networked individual/entity will help it gain significant
presence in those markets of business interest. As on
March 31, 2025 the Bank had total loan book aggregating
to H1,093.69 crore compared to H721.07 crores in March
31, 2024. The portfolio comprised of JLG loans of H446.20
crore, Retail Assets loans of H101.23 crore, PL H485.54,
and BL & SCF H60.72 contributing 41%, 9%, 44% and 6 %
respectively of the total portfolio

A. FINANCIAL DISCLOSURES

Capital Raising and Capital Adequacy Ratio

During the FY 24-25, the Bank raised Tier II Capital of
H200 crore & H105 crore in June 2024 & November
2024 respectively.

The Bank allotted 21,52,440 equity shares (of face value of
H10 each) pursuant to exercise undertaken by employees
(including Managing Director & CEO) of vested Employees
Stock Option Plan (ESOP).

Ratings

As at March 31, 2025

Nature of Instrument	Nature of Term	Credit Rating Agency	Credit Rating Assigned (At Present)	Credit Rating Assigned (Earlier)
Subordinated Debt Certificate of Deposit Subordinated Debt	Long term Short term Long term	ICRA ICRA CARE	[ICRA] A (Stable)* [ICRA] A1 CARE A (Stable) **	[ICRA] A (Positive) [ICRA] A1 CARE A (Positive)

Dividend

The Board of Directors did not recommend dividend for the
financial year ended on March 31, 2025.

Transfer to Reserves

In accordance with the RBI regulations, the Bank had
transferred the following amount to reserves during the
financial year ended March 31, 2025:

Amount transferred to	Amount in Hcrore
Statutory Reserve	5.93
Investment Fluctuation Reserve	13.53
Capital Reserve	6.67
Deduction due to fraud provision	-

Net Worth

As on March 31, 2025, the Bank’s net worth was H2775.84*
crore.

*as per RBI norms

Internal Control and Compliance

The Bank’s internal controls, policies and procedures are
adequate and are reviewed periodically by the Internal Audit
Department for all its business units. The Audit Committee
and Board reviews the effectiveness of the control as per the
regulatory requirements from time to time / regular intervals.

CORPORATE GOVERNANCE

Bank’s Philosophy

Corporate Governance report forming part of the Board’s
report for the year under review is attached separately as
Annexure A.

Constitution of the Board of Directors

The Board of Directors of the Bank are constituted in
accordance with the provisions of the Companies Act,
2013 (Act), Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations
2015, the Banking Regulation Act, 1949 (the BR Act, 1949)
and the Articles of Association. The Board consists of
eminent persons with considerable professional expertise
in business administration, audit, banking, payment &
settlement, compliance, account, finance, human resource,
risk, strategy, information technology etc. Their experience

and professional credentials helped the Bank to gain insights
for strategy formulation, monitoring control framework
and direction, and adding value to set a strong foundation,
enabling the overall growth objectives.

The composition of Board forms part of the corporate
governance report.

Further, the following changes had taken place during
FY 2024-25 and till the date of the report:

Z o r*	Name & DIN of Director	Nature of Change
1	Mr. Chandra	Cessation due to
	Shekhar Thanvi	Superannuation from SIDBI
	(DIN - 00563531)	w.e.f. September 20, 2024
2	Mr. Pramod Kumar	Appointed as a Whole-Time
	Dubey	Director for a period of 3 years
	(DIN - 10174154)	w.e.f. September 20, 2024 to September 19, 2027
3	Mr. Kajal Ghose	Cessation due to completion of
	(DIN - 07702190)	his 2 (two) consecutive term as an Independent Director w.e.f. January 16, 2025
4	Mr. Govind Singh (DIN: 02470880)	Re-appointed as the Managing Director & CEO for a further period of three years w.e.f. September 21, 2024 to September 20, 2027 (both days inclusive)
5	Mr. P K Gupta (DIN : 02895343)	Re-appointed as Part Time Non - Executive Chairman and Independent Director w.e.f October 12, 2024
6	Ms. Gauri Shah	Appointed as Additional
	(DIN : 06625227)	Director (Independent) for a period of 5 year w.e.f June 01, 2025 to May 31, 2030.

Further, in terms of Section 152 of the Companies Act,
2013, Mr. Muralidharan Rajamani, Non- Executive Non¬
Independent Director who retires by rotation this year,
meets the fit and proper criteria as provided for under the
RBI directions and as amended from time to time and being
eligible offers himself for re-appointment at the 9^th Annual
General Meeting (AGM).

Board Evaluation:

Pursuant to the provisions of the Companies Act 2013,
Securities Exchange Board of India (Listing Obligations and
Disclosure Requirements) Regulations, 2015 (SEBI LODR),
the Board has carried out annual performance evaluation of
its Committees, individual Directors and the Board as a whole.

The manner in which the evaluation was carried out is set out
in the Corporate Governance Report which forms part of the
Board report.

Certificate from Independent Company Secretary w.r.t.
compliance with Corporate Governance Norms under SEBI
LODR & Non-Disqualification of Directors is appended
herewith as Annexure B & C respectively.

Number of Meetings of Board

The details of the Board meetings and attendance of each
Director forms part of the Corporate Governance Report.

Committees of the Board

The details of the Board Committees viz. constitution, their
scope, number & date of meetings held during FY 24-25
and attendance thereof are disclosed in the Corporate
Governance Report.

Meeting of Independent Directors

In accordance with the Section 149(8) read with Schedule
IV of Act and Regulation 25 of SEBI Listing Regulations,
the Independent Directors of the Bank met 2 (twice) on
September 20, 2024 and March 22, 2025, which was
attended by all the Independent Directors of the Bank.

Familiarisation Programme for Independent
Directors

The Details of familiarisation programme carried out by the
Bank forms part of the Corporate Governance Report which
is available on the website of the Bank https://www.utkarsh.
bank/uploads/pdf/our-policy/template_ten/Policy-for-
familiarisation-Programme-for-Directors.pdf.

Declaration of Independence

In accordance with provisions of Sections 149(6) and 149(7)
of the Act, Schedule IV and Regulation 16(1)(b) and 25(8)
of the SEBI Listing Regulations, the Bank has received
necessary declarations/disclosures from all the Independent
Directors confirming that they meet and comply with the
criteria of independence.

Status of Ind AS Implementation

In January 2016, the Ministry of Corporate Affairs issued
the roadmap for implementation of new Indian Accounting
Standards (Ind AS), which were based on convergence with
the International Financial Reporting Standards (IFRS), for
scheduled commercial Banks, insurance companies and
non-banking financial companies (NBFCs). In March 2019,
RBI deferred the implementation of Ind AS for Banks till
further notice as the recommended legislative amendments
were under consideration of Government of India.

The Banks are advised to follow the Indian Accounting
Standards as notified under the Companies (Indian
Accounting Standards) Rules, 2015, . The Banks in India
currently prepare their financial statements as per the
guidelines issued by the RBI, the Accounting Standards
notified under Section 133 of the Act and generally accepted
accounting principles in India (Indian GAAP).

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 through excel based financial.
The Bank has implemented system solutions (IndAS 109 and
116).

B. STATUTORY DISCLOSURE

Annual Return

As required under the provisions of Sections 92(3) and 134(3)
(a) of the Companies Act, 2013 read with the rules framed
thereunder, the Annual Return of the Bank in the prescribed
Form MGT-7 for the year under review is available on the
website of the Bank https://www.utkarsh.bank/investors

Conservation of Energy and Technology
Absorption

The particulars to be disclosed under Section 134(3)(m)
of the Companies Act, 2013, relating to conservation of
energy and technology absorption does not apply to the
Bank. The Bank is constantly pursuing its goal in upgrading
technology to deliver quality service to its customers in a
cost-effective manner.

Foreign Exchange Earnings / Outgo

The Bank has foreign exchange earnings of H1.66 crore
during the financial year under review which includes cross
border settlements. During the year under review, there was
no foreign exchange outgo.

Whistle Blower Policy (Vigil Mechanism)

In compliance with the provisions of Section 177(9) of the Act
read with Rule 7 of the Companies (Meetings of Board and
its Powers) Rules, 2014 the Bank has formulated a whistle
blower policy/ vigil mechanism for directors and employees
to report any concerns. The said policy is available on Banks
website https://www.utkarsh.bank/uploads/template_forty_
pdf/Whistle_Blower_Policy_Revised_13_12_2022.pdf.

In addition to the above, the Bank has formulated a Vigilance
Policy for effectively managing the risks arising on account of
possible corruption, malpractices, and frauds.

Vigilance & Security

The Bank has a Vigilance & Security Department for
investigating frauds, bribery cases, and complaints, including
complaints received under the whistle-blower policy of
the Bank.

Vigilance & Security Department makes concerted efforts
to curb fraud, forgery, and burglary incidents in the Bank with
the help of new ideas, technology, previous experiences,

and adopting preventive vigilance measures with
appropriate tools.

Statutory Auditors

RBI, on April 27 2021, had issued guidelines for appointment of
Statutory Central Auditors/Statutory Auditors of Commercial
Banks (excluding RRBs), UCBs and NBFCs (including HFCs).
As per the said guidelines statutory audit of entities with asset
size of H15,000 crore and above as at the end of previous year,
should be conducted under joint audit of a minimum of two
audit firms. The audit firms can be appointed as the Statutory
Auditors (SA) of the Bank for a continuous period of 3 years
only and thereafter, reappointment in the same entity will be
possible only after a cooling period of six years. Further, prior
approval of RBI for appointment/reappointment of SAs on an
annual basis is required in terms of the above guidelines.

The Members of the Bank at the 8^th Annual General Meeting
(“AGM”) had approved the re-appointment of M/s Deloitte
Haskins & Sells, Chartered Accountants (FRN 117365W)
and M/s. Kirtane & Pandit, LLP, Chartered Accountants (FRN
105215W/ W100057) as the Joint Statutory Auditors of the
Bank to hold office till the conclusion of 9^th Annual General
Meeting of the Bank, being their third year as Joint Statutory
Auditors of the Bank.

The observation(s) made in the Auditor’s Report are self
explanatory and therefore, do not call for any further
comments under Section 134(3)(f) of the Act. The Auditor’s
Report does not contain any qualifications, reservations or
adverse remarks.

Based on recommendation of Audit Committee of the Bank
and the approval of Reserve Bank of India (RBI) vide their letter
no. Ref D0S.C0.RPD.No.S506/08.60.005/2025-26 dated
April 21, 2025, the Board of Directors, subject to approval of
the Shareholders and prior approval of the Reserve Bank
of India (RBI) every year, had proposed the appointment of
M/s M. M. NISSIM & CO LLP, Chartered Accountants and
M/s KKC & Associates LLP, Chartered Accountants as Joint
Statutory Auditors of the Bank from FY 25-26 for a period of
3 years . Accordingly, the proposal for their appointment is
being placed in the ensuing 9^th Annual General Meeting.

Secretarial Auditors

In accordance with the provisions of Section 204 and other
applicable provisions, if any, of the Companies Act, 2013
(“the Act”), read with Rule 9 of the Companies (Appointment

& Remuneration of Managerial Personnel) Rules, 2014,
(including any statutory modification(s) or re-enactment(s)
thereof, for the time being in force), and Regulation 24A of the
Securities and Exchange Board of India (Listing Obligations
and Disclosure Requirements) Regulations, 2015, and the
recommendation of the Audit Committee and the Board
of Directors, subject to the approval of the Shareholders,
proposed the appointment of M/s. BNP & Associates,
Company Secretaries (FRN P2014MH037400) as the
Secretarial Auditor of the Company for one term of 5 (five)
consecutive years and to hold office till conclusion of Annual
General Meeting for FY 2029-30.

Annual Secretarial Audit Report for FY 24-25 issued by
M/s BNP & Associates, Company Secretaries is appended
herewith as Annexure D.

Employees Stock Option Plan (ESOP)

During FY 24-25, the Shareholders vide Postal Ballot
resolution dated December 17, 2024 approved increase in
the limit of share pool of USFBL Employee Stock Option Plan
2020 to 1,15,00,893 and implementation of USFBL Employee
Stock Option 2024 - Scheme II (collectively called as ESOP
Plan).

Further, the details of ESOPs forms part of Corporate
Governance Report.

A certificate from the Secretarial Auditor of the Bank that
the ESOP Plan has been implemented in accordance with
the Securities and Exchange Board of India (Share Based
Employee Benefits and Sweat Equity) Regulations, 2021
(“SBEB & SE Regulations”) is attached as Annexure E.

Deposits

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

Particulars of Employees

The ratio of the remuneration of each Director to the
employees’ median remuneration and other details in terms
of sub-section 12 of Section 197 of Companies Act 2013
read with Rule 5(1) of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014, are
given below: -

(i) The ratio of the remuneration of each Director to the median remuneration of the employees of the Bank for the FY 24-25:

Name of Director	Designation	Remuneration (gross fixed salary)	Ratio
Mr. Parveen Kumar Gupta	Part time Non-Executive Chairman of the Board	13,40,548	4.6:1
Mr. Ajay Kumar Kapur	Independent Director	9,00,000	3.1:1
Ms. Kalpana Prakash Pandey	Independent Director	9,00,000	3.1:1
Mr. Kajal Ghose*	Independent Director	7,11,290.3	2.4:1

Name of Director	Designation	Remuneration (gross fixed salary)	Ratio
Mr. Muralidharan Rajamani	Non-Executive Non-Independent Director	9,00,000	3.1:1
Mr. Nagesh Dinkar Pinge	Independent Director	12,00,000	4.1:1
Mr. Govind Singh	Managing Director and Chief Executive Officer	2,41,33,036	101.5:1
Mr. Pramod Kumar Dubey	Whole Time Director	1,49,21,411	50.8:1

* Mr. Kajal Ghose ceased form the post of Director w.e.f January 16, 2025

Apart from sitting fees, the Bank also pays remuneration to Non-Executive Directors at H1,00,000 to Audit Committee Chairman
and H75,000 to other Non-Executive Directors. The part time Non-Executive Chairman of the Board is entitled to a monthly
remuneration, as approved by the RBI and the Shareholders of the Bank.

(ii) The percentage increase in remuneration of each Director, Chief Executive Officer, Chief Financial Officer, Company Secretary
for FY 24-25 are as follows:

Name of Director/KMP	Designation	Percentage (%) Increase
Mr. Parveen Kumar Gupta	Part time Non-Executive Chairman	25% Annual and 12% in FY24-25 as increment happened in the mid of the year, so he got increment for 6.11 month in this year.
Mr. Govind Singh	Managing Director and Chief Executive Officer	No increment
Mr. Pramod Kumar Dubey	Whole Time Director	No increment
Mr. Sarjukumar Praveen Simaria	Chief Financial Officer	No increment
Mr. Muthiah Ganapathy	Company Secretary & Compliance Officer	No increment

(iii) The percentage increase in the median remuneration of
employees in the financial year was NIL.

(iv) The number of permanent employees on the rolls of the
Bank, as on March 31, 2025 was 19,779 (includes 16,928
male employees and 2,851 female employees).

(v) Average increase in remuneration is NIL for managerial
personnel (Executive Directors including Managing
Director and Chief Executive Officer, Chief Financial
Officer, and Company Secretary) and employees other
than managerial personnel’s .

(vi) The key parameters for any variable component of
remuneration availed by the Directors are as specified in
the Remuneration Policy.

(vii) Remuneration is as per the remuneration policy of the
Bank. The Bank is in compliance with its Remuneration
Policy.

In terms of Section 136 of Companies Act 2013, the Annual
Report is being sent to the members, excluding the information
as required under Rule 5(2) as mentioned aforesaid and
the same is open for inspection at the Registered Office of
the Bank. A copy of this statement may be obtained by the
members by writing to the Company Secretary of the Bank at
[email protected].

Remuneration Policy

In terms of the provisions of the Act , Listing Regulations
and applicable provisions of the Banking Regulation Act,
1949, the Board on the recommendation of the Nomination

& Remuneration Committee (NRC), formulated a Policy
for payment of remuneration to Directors, Key Managerial
Personnel (KMPs) & Senior Management Officials.The
Policy is available on the website of the Bank at : https://www.
utkarsh.bank/uploads/template_forty_pdf/NRC_Policy.pdf

The details of remuneration paid to Executive and Non
executive Directors during the year forms part of the
Corporate Governance report.

Transfer to the Investor Education and Protection
Fund (“IEPF”)

In accordance with Section 124 and 125 of the Act read with
applicable rules, as amended, there was no unclaimed/
unpaid dividend or shares or interest liable to be transferred
to the IEPF during the FY 24-25.

Further, details of the unclaimed/un-encashed interest/
dividends lying in the unpaid dividend accounts as on end
of the financial year and details of Nodal Officer for IEPF
are provided on website of the Bank at https://www.utkarsh.
bank/uploads/pdf/disclosures/template_eleven/IEPF_2-
FY_23-24.pdf,

https://www.utkarsh.bank/uploads/pdf/disclosures/

template_eleven/IEPF_2_unclaimed_interest_

March_31_2023.pdf.

Other Statutory Disclosures:

¦ The Bank is in the list of Top 1000 listed entities of
India as per list published by the BSE Limited and
National Stock Exchange of India Limited basis the
market capitalization.

¦ During the year under review the Bank had increase
the Authorised Share Capital from H15,00,00,00,000/-
(Rupees One Thousand Five Hundred Crore) to
H20,00,00,00,000/- (Rupees Two Thousand Crore).

¦ The Bank has not changed its nature of business during
FY 24-25.

¦ Pursuant to Section 186(11) of the Companies Act, 2013,
loans made, guarantees given or securities provided
or acquisition of securities by a banking company in
the ordinary course of its business are exempted from
disclosure in the Annual Report.

¦ All related party transactions for FY 24-25 were on an
arm’s length basis and in the ordinary course of business
and accordingly, AOC - 2 is not applicable to the Bank.
The Bank has policy on related party which is available
at: https://www.utkarsh.bank/uploads/template_forty_
pdf/Related_Party_Transaction.pdf

¦ There were no significant/material orders passed by
the Regulators / a Court / Tribunal etc. during FY 24-25,
which would impact the going concern status of the
Bank and its future operations.

¦ There was no application made or any proceeding
pending under the Insolvency and Bankruptcy Code,
2016 (31 of 2016) during the year under review.

¦ The details of Risk Management Policy & its framework
are separately provided in the Management Discussion
and Analysis Report.

¦ The Bank is a subsidiary company of Utkarsh Coreinvest
Limited. The Bank does not have subsidiary or associate
company. Hence the details of sub-section (3) of section
129 read with rule 5 of Companies (Accounts) Rules,
2014 are not applicable to the Bank;

¦ During FY 24-25, the Board of Directors of the Bank and
the Utkarsh Coreinvest Limited (UCL) approved Scheme
of Amalgamation providing for Reverse Merger of UCL
with the Bank and accordingly, the Bank submitted
applications with RBI and Stock Exchanges seeking
their No Objection Certificate to the aforementioned
Scheme of Amalgamation. The Bank received RBI’s
NOC vide their letter dated January 02, 2025, However,
at the end of FY the application remained under
consideration of SEBI.

¦ The provisions for maintenance of cost records as
specified by the Central Government under sub-section
(1) of section 148 of the Companies Act, 2013 are not
applicable to the Bank.

¦ There are no adverse observations/qualifications
in the Statutory Auditors’ Report. Further, Pursuant
to Section 143(12) of the Companies Act, 2013, the
Statutory Auditors of the Bank have not reported any
instances of frauds committed in the Bank by its officers
or employees.

¦ All recommendations of the Audit Committee were approved by
the Board.

¦ Dividend distribution policy is available on the website of the Bank at
https://www.utkarsh.bank/uploads/template_forty_pdf/
Dividend_Distribution_Policy.pdf

¦ Proper internal financial controls are in place, and that the
financial controls have been adequate and operating effectively.

¦ There are no material changes and commitments, affecting
the financial position of the Bank that have occurred between the
end of the financial year of the Bank i.e. FY 24-25 and the date of the
Boards’ Report.

C. OTHER DISCLOSURES
Code of Conduct

For a financial institution, transparency and the highest
standards of corporate governance are important
prerequisites for establishing a compliance-oriented bank.
Towards this end, the Bank endeavours to ensure that all
its activities are fairly aligned with the highest standards
of personal and professional integrity and the highest
level of ethical conduct. The Bank has adopted a Code of
Conduct and norms for the avoidance of conflict of interest,
all the Senior Management officials, KMPs, Employees
with loan sanctioning authority, employees directly
related with sourcing/servicing corporate or wholesale
banking relationships and employees directly involved in
the procurement of goods and services, conduct duties
according to the aforesaid Code of Conduct. Some of the
areas that have been covered by the Code of Conduct are:
fairness of employment practices, protection of intellectual
property, integrity, customer confidentiality and conflict
of interest. The Bank’s Code of Conduct for Directors
and Senior Management is hosted on the website of the
Bank at https://www.utkarsh.bank/uploads/pdf/our-policy/
template_ten/CODE_OF_CONDUCT_FOR_THE_BOARD_
OF_DIRECTORS_AND_SENIOR_MANAGEMENT_
PERSONNEL.pdf.

A declaration on compliance with code of conduct for
FY 24-25 is appended herewith as Annexure F.

Corporate Social Responsibility (CSR)

In accordance with Section 135 of the Act, the Board of
Directors on the recommendation of CSR Committee had
approved the CSR Policy, which is available on the Bank’s
website https://wwwutkarsh.bank/uploads/template_forty_
pdf/Corporate_Social_Responsibility_Policy.pdf.

In line with the statutory requirements under the Companies
Act, 2013 and it’s CSR Policy, the Bank had undertaken
projects in the areas of financial literacy, health initiatives, skill
and entrepreneurship development programmes and other
philanthropic initiatives (supporting orphanages and care
centres for the elderly).

During the year under review, the Bank spent H7.72 crore
(including interest earned of H14.37 lakh) towards aforesaid
CSR projects and H92.22 lakh which was unspent was
transferred to “Utkarsh Small Finance Bank Limited Unspent

CSR Account FY 24-25“ with HDFC Bank Limited. Further
out of the previous unspent CSR amount of H1.88 crore for
FY 23-24, during the year an amount of H1.73 crore was spent
and H15.93 lakh is carried forward in “Utkarsh Small Finance
Bank Limited Unspent CSR Account FY 23-24 “ with HDFC
Bank Limited.

The required disclosure as per Rule 8 of Companies
(Corporate Social Responsibility Policy) Rules 2014 forms
part of this report as Annexure G.

Know Your Customer (KYC) / Anti-Money
Laundering (AML)

The Bank adheres to the RBI’s KYC / AML Guidelines
issued from time to time. The Bank’s KYC / AML Policy
has been prepared in accordance with the Prevention of
Money Laundering Act, 2002 (PMLA) and RBI / Indian
Banks’ Association (IBA) guidelines, amended from time to
time. The Bank complies with, various regulatory reporting
requirements, as set out by the Financial Intelligence Unit
(FIU) of the Government of India. The Bank has a transaction
monitoring mechanism in line with regulatory requirements
with an automated system solution, closely monitored by a
centralised AML team. The Bank’s employees are imparted
training on KYC / AML aspects regularly. Executives of the
Bank also attend periodic workshops/seminars organised by
FIU - IND, RBI, IBA and National Institute of Bank Management
(NIBM) to enhance their awareness in these aspects.
Recent changes as contained in the PMLA notifications
and RBI guidelines have been followed and embedded
in the customer acquisition processes of the Bank. The
Bank’s KYC/AML Policy was duly reviewed by the Board on
annual basis taking into account the various amendments to
guidelines / regulations.

Prevention of Sexual Harassment

The Bank has formulated and adopted a Policy on Prevention
of Sexual Harassment of Women at workplace. The Bank has
complied with the provisions relating to the constitution of
Internal Committee under the Sexual Harassment of Women
at Workplace (Prevention, Prohibition and Redressal) Act,
2013. The information relating to complaints received and
redressed during financial year 2024-25 is provided in the
Corporate Governance Report.

The POSH Policy is periodically communicated to all
employees and is available on the Bank’s website https://
www.utkarsh.bank/uploads/policy/Prevention_of_Sexual_
Harassment_Policy.pdf

Human Resources

The Bank’s Human Resources Policy (HR Policy) is aligned
for the achievement of the Bank’s vision and mission and
constant efforts are made to motivate its employees for
excellence in performance and at the same time endeavors to
provide a better work-life balance through various employee
welfare activities.

In its constant endeavor to promote learning and capacity
building of all its employees, the Bank utilised its “Learning
Management System (Utkarsh U-Leam)” to engage its
employees through continuous educational programs
delivered via e-modules and virtual classrooms.

Technology

In today’s rapidly evolving technological landscape, meeting
shifting customer expectations is paramount. Automation
and digitization are key enablers in leveraging technology to
address the unique needs and preferences of our customers,
thereby driving business growth.

As part of our digital transformation journey, the Bank has
launched several initiatives this year to provide seamless
access to our services. These include the introduction of
new secured credit card products, a personal loan platform,
Aadhaar Enabled Payment Systems (AEPS), and multiple
automation initiatives within our Micro Banking segment.
These efforts aim to expand our product offerings while
embedding robust operational controls into our systems.
Additionally, we introduced WhatsApp Banking to enhance
customer service accessibility.

We have also strengthened our technological capabilities
through collaborations with multiple fintech partners to
enhance our liability, asset, and card product portfolios.
Our Know Your Customer (KYC) process has been fortified
with the integration of Video KYC (VKYC), biometric
verification, and facial authentication. Furthermore, we
have upgraded existing products with features such as
cardless cash withdrawals at ATMs, eMandates for NACH,
and ASBA functionalities via Internet and Mobile Banking.
Enhancements to our Digi Onboarding platforms have
significantly improved customer acquisition turnaround
times (TAT). We have also enriched various features in our
existing business applications to improve product offerings
and customer service, while reinforcing operational controls
and efficiency.

In line with our unwavering commitment to innovation, we
have re-architected and refreshed our systems to enhance
scalability, reliability, and security. Strategic technology
acquisitions and investments in automation tools, analytics,
and machine learning have been made to boost operational
efficiency and risk management. Key focus areas include
API banking and middleware platforms, low-code/no-code
development platforms, cloud infrastructure, and extended
collaboration through Office 365. Several infrastructure-led
initiatives have been implemented to revamp and upgrade
platforms, thereby enhancing business-critical applications
to support increased business volumes.

We have also completed a comprehensive blueprint for our
Business Transformation project, which includes a detailed
review of existing products, operational processes, and our
current technology stack. This initiative is being led by a
specialized team known as the Transformation Management
Office (TMO), which oversees the Bank’s transformation

journey. The project is currently in the “Implementation”
phase, during which various internal systems, processes,
and applications are being modernized. As part of this
effort, the Bank has embarked on a major Core Banking
replacement project, transitioning to the Infosys Finacle Core
Banking platform.

Compliance with Secretarial Standards

The Bank has complied with the provisions of Secretarial
Standards specified by the Institute of Company Secretaries
of India and notified by the Ministry of Corporate Affairs under
Section 118(10) of the Companies Act, 2013.

Basis the Market Capitalization published by the BSE Limited
and National Stock Exchange of India Limited, the Bank is in
the Top 1000 listed entities.

The Business Responsibility and Sustainability Report
(“BRSR”) is annexed with Board’s Report as Annexure H
and disclosed on the website of the Bank at https://www.
utkarsh.bank/investors

Compliance with Maternity Benefit Act

The Bank has complied with the provisions of Maternity
Benefit Act, 1961

Basel III (Pillar 3) Disclosures

RBI Master Circular DBR.No.BP.BC.4/21.06.001/2015-16
dated July 01, 2015, on ''Prudential guideline on Capital
Adequacy and Market Discipline - New Capital Adequacy
Framework (NCAF)’ requires banks to make Pillar 3
disclosures, as applicable. These disclosures have not been
subjected to audit or limited review. These disclosures are
available on the Bank’s website at https://www.utkarsh.bank/

Prospects

FY25 has been a challenging year from financial performance
perspective for the Bank. The Bank reported annual profit
after tax of H23 crore in FY 24-25. The Bank’s JLG loan
portfolio registered degrowth but deposits registered
healthy business growth. The Directors are of the view that
there is an immense opportunity to cater to the unserved
and underserved sections of client base in the country,
particularly the area in which the Bank is currently operating.

Directors’ Responsibility Statement

As per the requirements of Section 134(3)(c) of the Act, the
Directors hereby confirm and declare that:

¦ In the preparation of the annual accounts for the financial
year ended March 31, 2025, the applicable accounting
standards have been followed, and there is no material
departure from the same;

¦ The Directors have selected such accounting policies
and applied them consistently and made judgments and
estimates that are reasonable and prudent so as to give
a true and fair view of the state of affairs of the Bank as on
March 31, 2025, and of the profit of the Bank for the year
ended March 31, 2025;

¦ The Directors have taken proper and sufficient care
for the maintenance of adequate accounting records
in accordance with the provisions of the Act for
safeguarding the assets of the Bank and for preventing
and detecting fraud and other irregularities.

¦ The Directors have prepared the annual accounts for
the financial year ended March 31, 2025 on a going
concern basis.

¦ The Directors had laid down internal financial controls to
be followed by the Bank and that such internal financial
controls are adequate and operating effectively.

¦ The Directors had devised proper systems to ensure
compliance with the provisions of all applicable
laws, and that such systems were adequate and
operating effectively.

Acknowledgement

The Board expresses its gratitude to the Central and State
Governments, Reserve Bank of India, Ministry of Corporate
Affairs, SEBI, NABARD, SIDBI, MUDRA, NHB and all other
Regulatory Authorities including Local Governing Bodies for
the continuous support and guidance provided to the Bank.

The Board appreciates the precious support provided by the
Auditors, Lawyers and Consultants. We place on record our
appreciation for the contribution made by our employees at
all levels. Our consistent growth has been made possible by
their hard work, solidarity cooperation, and support.

The Directors wish to place on record their gratitude to
Shareholders of the Bank for the confidence reposed by
them and thank all the clients, dealers, and other business
associates for their contribution to the Bank’s growth and for
extending their assistance and co-operation.

The Directors also express their gratitude to all stakeholders
and partners for extending their support.

For and on behalf of the Board of Directors

Parveen Kumar Gupta Govind Singh

Place: Mumbai Part Time Non-Executive Chairman and Independent Director Managing Director & CEO

Date: June 07, 2025 DIN - 02895343 DIN - 02470880

---

Mar 31, 2024

The Board of Directors of Utkarsh Small Finance Bank Limited (Bank or USFBL) is pleased to present the 8^th Annual Report and the Audited Financial Statements of the Bank for the Financial Year ended, March 31,2024

Our PRIDE - the guiding principle and values of the Bank, with an able leadership team, stood us in good stead and helped us tide over challenges.

FY23-24 has been the year where the Bank had reported the highest ever annual profit after tax of H498 crore. The Bank''s capital plus reserves position crossed a milestone of H2,900 crore at the end of FY23-2424 and Bank''s loan portfolio and deposits registered healthy business growth.

Key Performance Highlights:

Total deposits increased by 27% to H 17,473 crore as on March 31,2024, from H 13,710 crore as on March 31,2023 Net Advances increased by 25% to H 16,365 crore as on March 31,2024, from H 13,069 crore as on March 31,2023 The Bank''s operating profit increased by 19% to H 997 crore for FY23-2424 from H 838 crore in FY23-24.

The Bank reported highest ever annual profit of H 498 crore for FY23-24.

The Bank witnessed improvement in asset quality with reduction in Net NPAs to 0.03% as on March 31,2024 vs. 0.39% as on March 31,2023.

The Bank''s overall provision cover (including floating provision) was at 99% as on March 31,2024.

The capital adequacy ratio of the Bank is 22.57% as on March 31,2024.

The Bank''s capital plus reserves increased to H 2,973 crore as on March 31,2024 from H 2,000 crore as on March 31,2023 There are 888 Branches spread across 22 States and 4 Union Territories as on March 31,2024.

During the FY23-24, the Bank raised equity capital of H 500 crore in July 2023 through its Initial public offering. The Bank''s IPO witnessed a very good response from investors with overall subscription at more than 100 times.

FINANCIAL PERFORMANCE

The financial highlights for the year under review are presented below:

(Amount in Rs. Crores)
Particulars	FY 23-24 Audited	FY 22-23 Audited	Change in %
Deposits	17,472.60	13,710.14	27.44
Investments	3,679.47	2,859.42	28.68
Advances (Net)	16,364.81	13,068.77	25.22
Net Worth*	2,722.25	1,844.82	47.56
Net Interest Income	1,885.80	1,529.03	23.33
Other Income	400.40	299.31	33.78
Operating Income	2,286.20	1,828.34	25.04
Operating Expenses	1,288.94	990.01	30.19
Provisions and Contingencies	499.64	433.82	15.17
Net Profit	497.63	404.50	23.02
Gross NPA Ratio	2.51%	3.23%	(0.72)
Net NPA Ratio	0.03%	0.39%	(0.36)
Capital Adequacy Ratio	22.57%	20.64%	1.93
Business$ (Deposit plus Net Advance) per employee**	1.83	1.74

*Net worth computed as per RBI guidelines

$Business is the total of net advances and deposits (net of inter-bank deposits) "Ratio is based on average employee count

(Amount in H Crores)
Particulars	FY 23-24 Audited	FY 22-23 Audited	Change in %
Transfer to Statutory Reserve	124.41	101.13	23.02
Transfer to Capital Reserve	-	-	-
Transfer to Investment Fluctuation Reserve	5.94	(1.80)	(430.29)
Deduction during the year	-	(10.52)	(100.00)
Dividend for the year, Including Tax Thereon	-	-	-
Number of Branches	888	830	-
General Banking Branches	276	251	-
Micro Banking Branches	612	579	-
No. of Employees	16,081	15,424	-

BUSINESS UPDATE AND STATE OF BANK''S AFFAIRS

The details on the state of affairs and the business update of the Bank are separately provided in the Management Discussion and Analysis Report, which forms an integral part of the Annual Report of the Bank. However, the summary of the Bank''s performance has been covered hereunder:

Liabilities Business

The Liabilities Business of the Bank, garnered through branches and alternate channels such as internet, mobile banking and fintech partnerships aims to build a sustainable liabilities franchise with a mix of Retail and Institutional deposits. During FY 23-24 the Bank built a deposits portfolio and the aggregate deposits of the Bank at the end of the year stood at H 17,472.60 crore. While the total deposits of the Bank grew by 27% on YoY basis, the CASA deposit witnessed a growth of 25.09% (YoY). Further the share of CASA plus Retail Term Deposit (RTD) stood at 66.11% of total deposits.

During the period the Bank strategically focused on building a healthy and granular deposits profile. To further expand its outreach to a larger customer base, the Bank opened 25 General Banking (GB) branches during FY 23-24 including opening of branches in New States / UT''s thereby increasing the Bank''s GB branch network to 276 branches spread across 22 States and 04 Union Territories as on March 31,2024. The Bank continued to set-up its GB branches primarily in metropolitan and urban locations with a potential for sizeable deposits mobilisation. The Bank further expanded presence of its Micro ATMs thereby providing cost efficient systems of offering basic banking facilities such as cash deposit, cash withdrawal, green pin generation among others.

In addition to strengthening the branch & ATM networks, the Bank further augmented its digital banking channels such as net banking, mobile banking, tab banking, digital onboarding, among others. During the period the Bank also expanded its bouquet of products and services to the customers including Digital Fixed Deposits, etc.

Assets Business

As a Small Finance Bank (SFB), the Bank, which is primarily focussed on micro banking products, has diversified its product offerings to its customers viz. retail loans, unsecured loans, business loans, personal loans, and secured loans such as loans against property, wholesale lending that includes short term and long-term loan facilities to small and medium enterprises (SMEs), mid and large corporate and institutional clients and gold loans. In addition, the Bank offers housing loans with a focus on affordable housing. Our micro banking and retail loan products are primarily aimed at customers who are not a part of the formal banking infrastructure.

Micro Banking

Micro banking business is spread across 166 districts covering 13 states and provides a comprehensive package of financial inclusion products and business development services to the underprivileged or low-income individuals or groups who have limited access to financial services. In micro banking, the Bank offers ''Joint Liability Group'' (JLG) loans and business loans alongwith entire gamut of liabilities products through MB branches. In addition, the Bank provides micro banking loans through Business Correspondent (BC) partners.

The Bank provides group loans built on the peer-guarantee loan model (Joint Liability Group), which enables individuals to take loans without having to provide collateral or security on an individual basis while promoting credit discipline. This is achieved through mutual support within the group, prudent financial conduct among the group and prompt repayment of their loans.

During FY 23-24, JLG business through Micro Banking (MB) recorded a growth of 22.76% over the previous financial year. There were 33 new MB branches that were opened in FY 24.

In order to meet the increasing fund requirement of customers who have completed multiple loan cycles and are considered as matured borrowers, the Bank kept expanding Micro Banking business loans to eligible customers. The Bank provides individual loans especially to those who have begun their formal credit under JLG.

The total JLG portfolio of Micro Banking including MBBL and PMSvanidhi stood at H 11,312.86 crore as on March 31, 2024, with a total base of more than 30 lakh clients.

The JLG portfolio through Business Correspondents reached H 455.70 crore in FY 23-24. The Bank has Seven (7) Business Correspondents which are operating in nine (9) states covering 71 districts through 127 branches.

In FY 23-24, the Bank implemented several initiatives in its processes for JLG clients like e-signature and e-kyc which made the entire process paperless. AEPS was enabled at all the MB branches. To facilitate digital collections from MB clients, the Bank implemented SMS - linked payment, UPI and BBPS. The Bank also deployed Cash Management Services through third party to provide additional facility for payment of installments to its clients.

Retail Loans:

Micro Small & Medium Enterprises (MSME):

The Bank extends a diverse array of both secured and unsecured loans tailored to meet the needs of individuals and non-individual entities, including micro, small, and medium enterprises (MSMEs). We have curated specialized products with adaptable security prerequisites to enhance accessibility to credit for retail and MSME borrowers.

Throughout the fiscal year 23-24, our retail assets loan portfolio demonstrated robust growth, expanding by 67% year-on-year to H 2,556.99 crore, compared to H 1,534.09 crore in FY 22-23. The expansion in our MSME loan portfolio was propelled by the incorporation of new service locations and the introduction of a wide range of products to address diverse customer segments.

Housing Loans (HL):

The Bank provides comprehensive home loan solutions to individuals seeking financing for the construction, purchase, repair, and renovation of homes. We meticulously assess our customers'' repayment capacity and offer bespoke loan solutions accordingly.

As of March 31, 2024, our Housing Loan portfolio, managed by our Mortgage team across 56 branches, amounted to H 676.59 crore, marking a significant year-on-year growth of 30% compared to H 519.25 crore as of March 31,2023.

Wheels

The Wheels business was launched in Oct''2020 with products i.e. Commercial Vehicles & Construction Equipment Loans offered in Chandigarh, Delhi NCR, Jharkhand, Rajasthan, Uttarakhand, Uttar Pradesh & West Bengal regions from 15 branch outlets. As of March 31,2024 these loans are offered from states of Bihar, Chandigarh, Delhi NCR, Haryana, Jharkhand, Madhya Pradesh, Punjab, Rajasthan, Uttarakhand, Uttar Pradesh & West Bengal from 44 branches. The Bank''s wheels loan portfolio grew to H 944.44 crore as on March 31,2024 from H 560.36 crore as on March 31,2023.

The Loan book has grown by 69% from March 2023 to March 2024. Growth was driven by addition in new locations and new product offerings in Light & Intermediate Commercial Vehicles and fast moving Construction Equipment.

Wholesale Banking Business

The Wholesale lending vertical includes lending, and other banking services provided to corporate customers of the Bank.

The Bank''s Wholesale Lending book stood at H 1,882.41,crore as on March 31, 2024, compared to H 1,546.81 crore as on March 31,2023. The Wholesale banking business customers are being offered term loans for on-lending to their customers and overdraft for meeting their working capital requirement. In addition, it provides non fund based limits in the form of bank guarantee to the customers.

Business Correspondent (BC)

The strategy of the Bank is to build its Asset portfolio through a combination approach.

• Own Branches

• Partnership Approach.

The partnership approach with a well-entrenched and networked individual/entity will help it gain significant presence in those markets of business interest. As on March 31,2024 the Bank had a total loan book aggregating to ^721.07 crore, in JLG ^455.70 crore and Retail asset ^265.37 crore with JLG contribution of 63% and Retail asset of 37%. This portfolio is being managed by 16 active BC partners (including 7 BC partners for JLG).

The Bank is further focussing on strengthening and deepening its BC partnerships including fintech partnerships for Retail Assets loans.

FINANCIAL DISCLOSURESCapital Raising and Capital Adequacy Ratio

During FY 23-24, the Bank issued and allotted 20 crore Equity Shares (of face value of H 10 each) at an issue price of H 25 each through its Initial public offering.

The Bank also allotted 35,52,797 equity shares (of face value of H 10 each) pursuant to exercise of vested ESOPs to employees (including Managing Director & CEO).

Ratings

Nature of Instrument	Nature of Term	Credit Rating Agency	Credit Rating Assigned (At Present)	Revised on	Credit Rating Assigned (Earlier)
Subordinated Debt	Long term	ICRA	[ICRA] A (Stable)	June 04, 2024	[ICRA] A (Positive)
Certificate of Deposit	Short term	ICRA	[ICRA] A1	n.a.	[ICRA] A1
Subordinated Debt	Long term	CARE	CARE A (Stable)	September 20, 2023	CARE A (Positive)

The Bank''s certificate of deposits programme is rated, at the highest credit rating grade, [ICRA] A1 by ICRA Limited. As on March 31,2024, the Bank''s long term subordinated bonds were rated at A (Stable) rating by ICRA and CARE Ratings.

Dividend

The Board of Directors at their meeting held on April 26, 2024 recommended final dividend of H 0.50 per share (5%) on the equity share capital for the financial year ended on March 31,2024 subject to shareholders approval.

Transfer to Reserves

As required under RBI regulations, the Bank had transferred the following amount to reserves during the financial year ended March 31,2024:

Transfer to / (from)	Amount in J crores
Statutory Reserve	124.41
Investment Fluctuation Reserve	5.94
Capital Reserve	-
Deduction due to fraud provision	-

Net Worth

As on March 31,2024, the Bank''s net worth (Capital Reserves) was H 2,973 crore.

Internal Control and Compliance

The Bank''s internal controls, policies and procedures are adequate and are reviewed periodically by the Internal Audit Department for all its business units, The Audit Committee and Board reviews the effectiveness of the control as per the regulatory requirements from time to time / regular intervals,

CORPORATE GOVERNANCE Bank''s Philosophy

The Corporate Governance report forming part of the Board''s report for the year under review is attached separately as Annexure A,

Constitution of the Board of Directors

The Board of Directors of the Bank is constituted in accordance with the provisions of the Companies Act, 2013 (Act), Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 (SEBI LODR), the Banking Regulation Act, 1949 (the BR Act, 1949) and the Articles of Association, The Board consists of eminent persons with considerable professional expertise in business administration, audit, banking, payment & settlement, compliance, account, finance, human resource, risk, strategy, information technology etc, Their experience and professional credentials helped the Bank to gain insights for strategy formulation, monitoring control framework and direction, and adding value to set a strong foundation, enabling the overall growth objectives,

As on March 31,2024, the Board comprises of Eight (8) Directors consisting of - Seven (7) Non-Executive Directors, of which Five (5) are Independent Directors (including 1 woman Director), two (2) are Non-Executive Non-Independent Directors out of which one (1) is a Nominee Director; and one (1) Managing Director and Chief Executive Officer,

Further, in terms of Section 152 of the Companies Act, 2013, Mr, Muralidharan Rajamani, Non- Executive NonIndependent Director who retires by rotation this year, meets the fit and proper criteria as provided for under the RBI directions and as amended from time to time and being eligible offers himself for re-appointment at the 8^th Annual General Meeting (AGM),

Statement on Declaration from Independent Directors:

A declaration under section 149(6) & (7) of the Companies Act, 2013 has been obtained from each of the Independent Directors,

There was no change in the Board of Directors and Key Managerial Personnel during FY 23-24,

Committees of the Board of Directors

For effective decision-making, the Board acts through various Committees, which oversee specific operational or strategic matters falling within the ambit of the specific terms of reference of that Committee, The Board has constituted 12 such Committees, All the Board Committees have a specific charter, and these Committees monitor activities falling within their terms of reference, Additional details of the Board Committees, its composition, attendance, meetings held during the FY 23-24 etc, have been provided separately in Corporate Governance Report,

Board Evaluation:

The Board evaluation framework is designed in compliance with the requirements of the Companies Act, 2013 and Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR), The Board evaluation was conducted through a questionnaire designed containing qualitative & quantitative parameters, the manner in which the evaluation was carried out is set out in the Corporate Governance Report which forms part of this report,

Number of Meetings of the Board

During the period under review, thirteen (13) Board Meetings were held and the gap between the said meetings did not exceed the limit of 120 days as prescribed under the provisions of Companies Act and Rules made thereunder, Secretarial Standard-I Issued by the Institute of Company Secretaries of India and provisions of SEBI LODR, The dates of Board meetings and details of attendance of each Director have been disclosed in the Report on Corporate Governance annexed with Board''s Report as Annexure A

Meeting of Independent Directors

As per the requirement of Section 149(8) read with Schedule IV of Act and Regulation 25 of SEBI LODR, a meeting of the Independent Directors of the Bank is required to be held at least once a year in absence of non-independent directors,

Accordingly, the independent Directors of the Bank met 2 (twice) on July 7, 2023 and March 14, 2024, chaired by Mr. Parveen Kumar Gupta and attended by all the independent Directors of the Bank and discussed & reviewed inter alia below matters:

• Performance of Non-independent Directors, the Board of Directors as a whole, and Chairperson of the Bank.

• Assessed the quality, quantity, and timeliness of flow of information between the management of the Bank and the Board of Directors that is necessary for the Board of Directors to perform their duties effectively and reasonably.

• Assessed whether adequate time is spent by the Board/Committees on discussions on important issues.

• Reviewed the criteria for evaluation of performance of Board Committees.

Familiarisation Programme for Independent Directors

in accordance with Regulation 25(7) of SEBI LODR and RBI guidelines, the Bank conducts familiarisation programme for the independent Directors to enable them to familiarise with the Bank, its Management, Bank''s Business, and its operations for better understanding of their responsibilities, roles, and rights for effective contribution in sustainable growth of the Bank.

The Details of familiarisation programme policy is disclosed and on the website of the Bank under https://www.utkarsh. bank/uploads/pdf/our-policy/template ten/Policy-for-familiarisation-Programme-for-Directors.pdf.

Declaration of Independence

in accordance with provisions of Sections 149(6) and 149(7) of the Act, Schedule iV and Regulation 16(1)(b) and 25(8) of the SEBi LODR, the Bank has received necessary declarations/disclosures from all the independent Directors confirming that they meet and comply with the criteria of independence. All the independent Directors possesses requisite domain knowledge, experience, expertise, integrity, and proficiency as required under the Code applicable for independent Directors as stipulated under Schedule iV of the Act and in terms of policies of the Bank.

Corporate Social Responsibility (CSR)

in accordance with Section 135 of the Act, the Board of Directors on the recommendation of CSR Committee had approved the CSR Policy, which is available on the Company''s website

https://www.utkarsh.bank/uploads/template forty pdf/Corporate Social Responsibility Policy.pdf.

in line with the statutory requirements under the Companies Act, 2013 and it''s CSR Policy, the Company had undertaken projects in the areas of financial literacy, health initiatives, skill and entrepreneurship development progammes and other philanthropic initiatives (supporting orphanages and care centres for the elderly).

During the year under review, the Bank spent H 3.24 crore towards aforesaid CSR projects and H 1.88 crore which was unspent was transferred to "Utkarsh Small Finance Bank Limited Unspent CSR Account FY 2023-24 "with HDFC Bank Limited.

The required disclosure as per Rule 8 of Companies (Corporate Social Responsibility Policy) Rules 2014 is attached as Annexure B to this Report.

Secretarial Auditor and Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s BNP & Associates, Practicing Company Secretaries conducted the secretarial audit of the Bank for FY 23-24.

The Secretarial Auditor''s Report for the FY 23-24 does not contain any qualification, reservation, or adverse remark. Report of the Secretarial Auditor for the FY 23-24 in Form MR-3 is annexed to this report as Annexure C

Business Responsibility and Sustainability Report & Sustainability Initiatives

Basis the Market Capitalization as on March 31, 2024 published by the BSE Limited and National Stock Exchange of india Limited, the Bank is in the Top 1000 listed entities.

The Business Responsibility and Sustainability Report ("BRSR”) is annexed with Board''s Report as Annexure D and disclosed on the website of the Bank.

Status of Ind AS Implementation

As per the RBi circular RBi/2015-16/315 DBR.BP.BC.No.76/21.07.001/2015-16 dated February 11,2016 implementation of indian Accounting Standards (ind AS), the Banks are advised to follow the indian Accounting Standards as notified under the Companies (indian Accounting Standards) Rules, 2015, subject to any guideline or direction issued by the RBi in this regard. The Banks in india currently prepare their financial statements as per the guidelines issued by the RBi, the Accounting Standards notified under Section 133 of the Act and Generally Accepted Accounting Principles in india (indian GAAP). in January 2016, the Ministry of Corporate Affairs issued the roadmap for implementation of new

Indian Accounting Standards (Ind AS), which were based on convergence with the International Financial Reporting Standards (IFRS), for scheduled commercial Banks, insurance companies and non-banking financial companies (NBFCs). In March 2019, RBI deferred the implementation of Ind AS for Banks till further notice as the recommended legislative amendments were under consideration of Government of India.

The Bank had undertaken assessment of the I-GAAP & INDAS implementation & ensured its preparedness for Ind AS implementation under the oversight of a Management Level Committee Chaired by Managing Director & CEO alongwith CFO, CRO & other functional heads.

STATUTORY DISCLOSURE Annual Return

As required under the provisions of Sections 92(3) and 134(3)(a) of the Companies Act, 2013 read with the rules framed thereunder, the Annual Return of the Bank in the prescribed Form MGT-7 for the year under review is available on the website of the Bank at the following link: https://www.utkarsh.bank/investors

Conservation of Energy and Technology Absorption

The particulars to be disclosed under Section 134(3)(m) of the Companies Act, 2013, relating to conservation of energy and technology absorption does not apply to the Bank. The Bank is constantly pursuing its goal in upgrading technology to deliver quality service to its customers in a cost-effective manner.

Foreign Exchange Earnings / Outgo

The Bank has foreign exchange earnings of H 0.82 crore during the financial year under review which includes cross border settlements. There was no foreign exchange outgo during the financial year.

Whistle Blower Policy (Vigil Mechanism)

The Bank, as a part of its prudent practice, has established a Vigilance Department to develop and execute a comprehensive strategy to deal with instances of fraud and mismanagement, if any, and as a preventive mechanism with active oversight, ensure holistic and smooth operations of the Bank on an ongoing basis. The Department is adequately staffed and conducts investigations on matters related to frauds committed and references received through whistle blower complaints.

Pursuant to the provisions of Section 177(9) of the Companies Act, 2013 read with rules made thereunder and RBI Guidelines and other applicable laws, the Bank has established the Vigil Mechanism as part of the Whistle Blower Policy. This empowers the Directors and employees to report concerns about unethical behaviour, actual or suspected fraud or instances of leakage of Unpublished Price Sensitive Information (UPSI), misappropriation of assets or violation of the Bank''s Code of Conduct. Additionally, the Bank places zero tolerance for any incidents of doubtful integrity and corruption by employees. Towards this end, all employees are trained to maintain high standards of integrity in their work area.

The Whistle Blower policy is aimed at enabling the staff to escalate instances of doubtful integrity, mismanagement, abuse/misuse of power, undue influence/coercion exercised for indulging in undesirable practices, violation of the Bank''s Code of Conduct, ethics, and corruption. It also provides adequate safeguards against probable victimisation of directors/ employees who avail of this mechanism and allows direct access to the Chairperson of the Audit Committee of the Board, in appropriate or exceptional cases.

The Audit Committee of the Board (ACB) reviews the details of Whistle Blower complaints received, the subsequent action taken, and the functioning of the Whistle Blower mechanism periodically.

The Audit Committee of the Board oversees the Vigil Mechanism as well.

The Whistle Blower Policy is periodically communicated to the employees and the key highlights of the Policy are available on the Bank''s website at the following link:

https://www.utkarsh.bank/uploads/pdf/our-policy/template ten/Whistle Blower Policy%20 Final.pdfwherein the email and contact details of the Chairperson of Audit Committee of the Board are provided to enable complainants to reach out with their complaints under the Whistle Blower Policy.

In addition to the above, the Bank has formulated a Vigilance Policy for effectively managing the risks arising on account of possible corruption, malpractices, and frauds.

Vigilance & Security

The Bank has a Vigilance Department for investigating frauds, bribery cases, and complaints, including complaints received under the whistle-blower policy of the Bank.

Vigilance Department makes concerted efforts to reduce fraud, forgery, and burglary incidents in the Bank with the help of new ideas, technology, previous experiences, and adopting preventive vigilance measures with appropriate tools.

Statutory Auditors

RBI, on April 27, 2021 had issued guidelines for appointment of Statutory Central Auditors/Statutory Auditors of Commercial Banks excluding RRBs, UCBs and NBFCs (including HFCs). As per the said guidelines statutory audit of entities with asset size of H15,000 crore and above as at the end of previous year, should be conducted under Joint audit of a minimum of two audit firms. The audit firms can be appointed as the Statutory Auditors (SA) of the Bank for a continuous period of 3 years only and thereafter, reappointment in the same entity will be possible only after a cooling period of six years. Further, prior approval of RBI for appointment/reappointment of SAs on an annual basis is required in terms of the above guidelines.

Based on recommendation of Audit Committee of the Bank, the Board of Directors at its meeting dated March 14-16, 2024, had proposed the re-appointment of M/s. Deloitte Haskins and Sells, Chartered Accountants and M/s. Kirtane & Pandit LLP, Chartered Accountants as Joint Statutory Auditors of the Bank subject to approval of the Shareholders of the Bank and prior approval of the Reserve Bank of India (RBI). RBI vide their letter reference no. DOS.CO.RPD. No.S1519/08.60.005/2024-25 dated May 28, 2024 approved the appointment of M/s Deloitte Haskins & Sells, Chartered Accountants (FRN 117365W) and M/s. Kirtane & Pandit, LLP, Chartered Accountants (FRN 105215W) as the Joint Statutory Auditors for FY 24-25 subject to the firms fulfilling the eligibility criteria as prescribed by RBI. Accordingly, the proposal for their appointment would be placed in the ensuing 8^th Annual General Meeting.

Employees Stock Option Plan (ESOP)

The Shareholders of the Bank had approved USFBL Employee Stock Option Plan 2020 (ESOP Plan 2020)

During the year ended March 31,2024, the Bank has allotted 35,52,797 equity shares pursuant to the exercise of the vested options under the approved employee stock option scheme.

Under the ESOP Plan 2020, the Bank may grant upto 6,07,41,778 options under the ESOP Plan 2020.

The certificate from the Secretarial Auditor of the Bank that the scheme(s) has been implemented in accordance with these regulations and in accordance with the resolution of the company in the general meeting forms part of this report as Annexure - E.

Compliance certificate pursuant to Part F of Schedule - I of Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 forms part of this report as Annexure - F.

Deposits

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

Awards & Recognition

• Most Trusted BFSI Brands by Team Marksmen Daily - 2023-24

• Most Preferred Workplace 2023-2024 (BFSI Edition) By Marksmen Daily

• Employee Excellence 2023 by the Times Group - ET EDGE

• Best Tech Talent & Organization category in the Small Finance Bank segment by Indian Banks Association (IBA) in January 2024

• Mr. Alok Pathak was recognized as the Chief Risk Officer of the year at BSFI Convex by Gain Skills Media Company

• Credit Modeling & Risk Team of the Year Award at the India Credit Risk Summit & Awards

• APY Excellence Award - Q1,2023

• Best Emerging Business Partner by Volvo Eicher Commercial Vehicles (VECV) for Bihar - Q1,2023

• Best Customer Experience at 18^th Annual Summit and Awards by ASSOCHAM - 2023

• Best Customer Experience Strategy by India Customer Excellence (CX) Summit & Awards 2023

Particulars of Employees

The ratio of the remuneration of each Director to the employees'' median remuneration and other details in terms of sub-section 12 of Section 197 of Companies Act 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are given below: -

(i) the ratio of the remuneration of each Director to the median remuneration of the employees of the Bank for the FY 23-24:

Name of Director	Designation	Ratio
Mr. Parveen Kumar Gupta	Part time Non-Executive Chairman of the Board	4.7:1
Mr. Govind Singh	Managing Director and Chief Executive Officer	101.1:1

Apart from sitting fees, the Bank does not pay any remuneration to any Non-Executive Directors. The part time Non-Executive Chairman of the Board is entitled to a monthly remuneration, as approved by the RBI and the Shareholders of the Bank.

(ii) The percentage increase in remuneration of each Director, Chief Executive Officer, Chief Financial Officer, Company Secretary in the FY 23-24 are as follows:

Name of Director/KMP	Designation	Percentage (%) Increase
Mr. Parveen Kumar Gupta	Part time Non-Executive Chairman	No increment
Mr. Govind Singh	Managing Director and Chief Executive Officer	10% increment in fixed remuneration in FY23-24
Mr. Sarjukumar Pravin Simaria	Chief Financial Officer	17.67% increment in fixed remuneration in FY23-24
Mr. Muthiah Ganapathy	Company Secretary & Compliance Officer	10% increment in fixed remuneration in FY23-24

*As per RBI approval, there is increment of 10% in fixed remuneration of MD & CEO in FY 23-24 This is excluding variable remuneration of H 1.36 crore for FY22-23 approved in FY23-24.

The percentage increase in the median remuneration of employees in the financial year was 10.44%

(iii) The number of permanent employees on the rolls of the Bank, as on March 31,2024, was 16,081 (includes 13,777 male employees and 2,304 female employees).

(iv) Average percentile increase already made in the remuneration of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration.

(v) Average increase in remuneration is 10.42% for employees other than managerial personnel and 0.02% for managerial personnel (Executive Directors including Managing Director and Chief Executive Officer, Chief Financial Officer, and Company Secretary).

(vi) The key parameters for any variable component of remuneration availed by the Directors are as specified in the Remuneration Policy.

(vii) Affirmation that the remuneration is as per the remuneration policy of the Bank. The Bank is in compliance with its Remuneration Policy.

The statement containing particulars of employees as required under Section 197(12) of Companies Act 2013 read with Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this report. In terms of Section 136 of Companies Act 2013, the Annual Reports are being sent to the members, excluding the information as required under Rule 5(2) as mentioned aforesaid and the same is open for inspection at the Registered Office of the Bank. A copy of this statement may be obtained by the members by writing to the Company Secretary of the Bank at [email protected].

Remuneration Policy

Remuneration Policy for Directors

In terms of the provisions of Companies Act 2013, SEBI LODR and applicable provisions of the Banking Regulation Act, 1949, the Board on the recommendation of the Nomination & Remuneration Committee (NRC), formulated Remuneration Policy for the remuneration of Directors, Key Managerial Personnel (KMPs) & Senior Management Officials.

The Nomination and Remuneration Policy is available on the website of the Bank at the following link: https://www, utkarsh.bank/uploads/template forty pdf/NRC Policv.pdf

Remuneration of Executive Directors

The Board considered the recommendation of NRC and approved the revision in remuneration of Managing Director and Chief Executive Officer in their meeting held on June 09, 2023, subject to members and regulatory approvals. The Bank received RBI approval vide their letter dated October 06, 2023 and shareholders approval on September 23, 2023.

The remuneration payable to Managing Director and Chief Executive Officer is subject to prior approval of the RBI. Therefore, the remuneration or any revision in the remuneration is payable only after receipt of approval from RBI.

Remuneration of Part Time Non-Executive Chairman

The remuneration payable to the Part Time Non-Executive Chairman is subject to prior approval of RBI. Therefore, the remuneration or any revision in remuneration of the Part Time Non-Executive Chairman is payable only after receipt of approval from RBI.

Remuneration of Non-Executive Directors (NEDs)

The NEDs (excluding Nominee Directors of the Bank) are paid sitting fees for attending each meeting of the Board of Directors or any Committee thereof. The NEDs are also entitled to reimbursement of expenses for participation in the meetings of the Board and Committees thereof.

RBI vide Circular No. RBI/2023-24/121, DoR.HGG.GOV.REC.75/29.67.001/2023-24 dated February 09, 2024, issued Guidelines on Compensation of Non-Executive Directors of Private Sector Banks emphasizing that in order to enable banks to attract and retain professional Directors, it is essential that such Directors are appropriately compensated.

Pursuant to the aforesaid RBI Circular, the maximum amount that can be paid as commission was capped at H 30 lakh per Director, per annum. Also, Section 197 of Companies Act 2013 permits payment of profit-based commission to the Directors who are neither managing directors nor whole-time directors, not exceeding one percent (1%) of the net profits of the Bank, if there is a managing or whole-time director or manager; in any other case three per cent (3%) of the net profits.

During FY 23-24, the Bank has not paid any commission on profit or granted any stock options to NEDs. However, the Board of Directors at the recommendation of Nomination & Remuneration Committee at their respective meetings held on April 26, 2024 approved the proposal of payment of remuneration to NEDs (other than Part Time Non-Executive Chairman and Nominee Directors) subject to approval of shareholders. The Bank received shareholders approval on the proposal for payment of remuneration to NEDs vide resolution passed by remote E-voting on June 13, 2024.

Transfer to the Investor Education and Protection Fund ("IEPF”)

In accordance with Section 124 and 125 of the Companies Act, 2013 ("Act") read with applicable rules, as amended, there was no unclaimed/unpaid dividend or shares or interest liable to be transferred to the IEPF during the FY 23-24.

Further, details of the unclaimed/un-encashed interest/dividends lying in the unpaid dividend accounts as on end of the financial year are provided on website of the Bank at

https://www.utkarsh.bank/uploads/pdf/disclosures/template eleven/IEPF 2 unclaimed interest March 31 2023.pdf. Capital Structure & Fund Raising

The Bank during FY23-24 had completed the process of initial public offer and raised H 500 crore by issue of 20 crore equity shares which got listed on both BSE Limited (BSE) and National Stock Exchange of India Limited (NSE) on July 21,2023.

During the period under review, the Authorised Share Capital of the Bank is as follows:

1.30.00. 00.000 Equity shares of H 10 each

20.00. 00.000 Preference shares of H 10 each Issued, subscribed and Paid-up capital as on March 31,2024 1,09,94,57,460 Equity shares of H 10 each

Other Statutory Disclosures:

The Bank Is In the list of Top 1000 listed entitles of India as per list published by the BSE Limited and National Stock Exchange of India Limited basis the market capitalization as on March 31,2024.

The Bank has not changed its nature of business during FY 23-24.

Pursuant to Section 186(11) of the Companies Act, 2013, loans made, guarantees given or securities provided or acquisition of securities by a banking company in the ordinary course of its business are exempted from disclosure in the Annual Report.

All related party transactions that were entered into during FY 23-24 were on an arm''s length basis and in the ordinary course of business and accordingly, AOC - 2 Is not applicable to the Bank. There are no materially significant related party transactions entered into by the Bank with Directors, KMP or other designated persons, which may have a potential conflict with the interest of the Bank at large. The Bank has Related Party transactions policy in place for identification and monitoring of any potential related party transactions.

There were no significant/material orders passed by the Regulators / a Court / Tribunal etc. during FY 23-24, which would impact the going concern status of the Bank and its future operations. However, during the FY 23-24, SEBI vide their order dated September 20, 2023 imposed a monetary penalty of H 1,00,000/- on the Bank in the matter of NCDs of H 25 crore issue to Karvy Capital Limited.

There was no application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year under review.

The details of Risk Management Policy & its framework are separately provided in the Management Discussion and Analysis Report.

The Bank Is a subsidiary company of Utkarsh CoreInvest Limited. The Bank does not have subsidiary or associate company. Hence the details of sub-section (3) of section 129 read with rule 5 of Companies (Accounts) Rules, 2014 are not applicable to the Bank.

The provisions for maintenance of cost records as specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013 are not applicable to the Bank.

There are no adverse observations/qualifications in the Statutory Auditors'' Report. Further, pursuant to Section 143(12) of the Companies Act, 2013, the Statutory Auditors of the Bank have not reported any instances of frauds committed in the Bank by its officers or employees.

All recommendations of the Audit Committee were approved by the Board.

Proper internal financial controls are in place, and that the financial controls have been adequate and operating effectively.

There are no material changes and commitments, affecting the financial position of the Bank that have occurred between the end of the financial year of the Bank i.e. FY 23-24 and the date of the Boards'' Report

C. OTHER DISCLOSURES Code of Conduct

For a financial institution, transparency and the highest standards of corporate governance are important prerequisites for establishing a compliance-oriented bank. Towards this end, the Bank endeavours to ensure that all its activities are fairly aligned with the highest standards of personal and professional integrity and the highest level of ethical conduct. The Bank has adopted a Code of Conduct and norms for the avoidance of conflict of interest, all the Senior Management officials, KMPs, employees with loan sanctioning authority, employees directly related with sourcing/servicing corporate or wholesale banking relationships and employees directly involved in the procurement of goods and services, conduct duties according to the aforesaid Code of Conduct. Some of the areas that have been covered by the Code of Conduct are: fairness of employment practices, protection of intellectual property, integrity, customer confidentiality and conflict of interest. The Bank''s Code of Conduct for Directors and Senior Management Is hosted on the website of the Bank at

https://www.utkarsh.bank/uploads/pdf/ourpolicv/template ten/CODE OF CONDUCT FOR THE BOARD OF DIRECTORS AND SENIOR MANAGEMENT PERSONNEL.pdf.

Know Your Customer (KYC) / Anti-Money Laundering (AML)

The Bank adheres to the RBI''s KYC / AML Guidelines issued from time to time. The Bank''s KYC / AML Policy has been prepared in accordance with the Prevention of Money Laundering Act, 2002 (PMLA) and RBI / Indian Banks'' Association (IBA) guidelines, amended from time to time. The Bank complies with various regulatory reporting requirements, as set out by the Financial Intelligence Unit (FIU) of the Government of India. The Bank has a transaction monitoring mechanism in line with regulatory requirements with an automated system solution, closely monitored by a centralised AML team. The Bank''s employees are imparted training on KYC / AML aspects regularly. Executives of the Bank also attend periodic workshops/seminars organised by FIU - IND, RBI, IBA and National Institute of Bank Management (NIBM) to enhance their awareness in these aspects. Recent changes as contained in the PMLA notifications and RBI guidelines have been followed and embedded in the customer acquisition processes of the Bank. The Bank''s KYC/AML Policy is duly reviewed by the Board on annual basis taking into account the various amendments to guidelines / regulations.

Prevention of Sexual Harassment

The Bank is committed to create a safe environment where all employees are treated with respect and dignity. The Bank takes a strong stand and has zero-tolerance policy on the issue of sexual harassment at workplace. We follow all the guidelines prescribed under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and seek to protect women from sexual harassment at the place of work.

The Prevention of Sexual Harassment Policy (POSH Policy) at Utkarsh Small Finance Bank is gender neutral and is implemented for all employees and other stakeholders/ partners. Any complaint of sexual harassment made against any individual working within the Bank''s premises, including third-party vendors, is investigated in line with this POSH Policy.

The Internal Complaints Committee (ICC) of the Bank deals with all complaints relating to sexual harassment and has laid down the processes and guidelines pertaining to sexual harassment related complaints. The Bank does not tolerate any form of sexual harassment and all individuals of the Bank are responsible to ensure a workplace free of harassment.

POSH Policy is applicable to all employees (permanent/ fixed term/ on contract) of the Bank across the Board and is equally applicable to all genders, grades, and stakeholders of the groups.

The POSH Policy is periodically communicated to all employees and is available on the Bank''s website for information and compliance thereof.

https://www.utkarsh.bank/uploads/policv/Prevention of Sexual Harassment Policy.pdf

For FY 23-24, a total of 10 cases were reported under POSH. Out of 10 cases, 09 cases have been resolved and 01 cases are under investigation.

Human Resources

The Bank''s Human Resources Policy (HR Policy) is aligned for the achievement of the Bank''s vision and mission and constant efforts are made to motivate its employees for excellence in performance and at the same time endeavors to provide a better work-life balance through various employee welfare activities.

In its constant endeavours to promote learning and capacity building of all its employees, the Bank utilised its "Learning Management System (Utkarsh U-Learn)” to engage its employees through continuous educational programs delivered via e-modules and virtual classrooms.

Technology

In FY 23-24, our focus continued with our transformation agenda and delivering secured services to our customers. The IT intent remains towards making products user friendly and secure so that users can manage effortlessly.

For us, Information Technology is an important driver for improving the efficiency & productivity of the organization. This is a major differentiator, and the Bank is constantly working on enhancement of existing technology solutions and engaging with new technology / technology partners to achieve business growth.

Our digitization and automation journey mainly focus on two fundamental aspects. First, transforming the Bank through new platforms and customer experiences offered shall be the best-in-class products and services through our digital enhancements. Second, running the Bank efficiently by reinforcing our core technologies with enhanced performance and resilience at scale, to achieve organization vision and business growth.

The Bank continues strengthening IT horizon initiatives like cash less collection through QR code or through billdesk UPI or through Spice Money channel, Paperless banking experience by introducing e-Sign feature, Interoperable Cardless Cash withdrawal (ICCW) initiative, etc. Implemented Lead Management System (LeMS) to cater leads from multiple channels. Collection System for tracking loan repayments, Personal Loan Processing system on Salesforce platform, upgradation to new age Bank Website, etc. Along with these initiatives, the Bank implemented API Manger and Middleware platform to ensure centralized management of all API for smooth and secured integration within systems and FinTech. Enhanced Digital customer onboarding platform for current accounts and fixed deposits along with existing saving bank. Introduced Credit Card Product for the Bank. The Bank upgraded data centre Infrastructure with latest hardware. Further strengthened regulatory reporting systems like ADF, CIMS, Finnet 2.0, etc.

Utkarsh Small Finance Bank has received an award from Indian Banks Association (IBA) for Best Tech Talent & Organization category in the Small Finance Bank segment in January 2024.

As a Business Technology Transformation Project (AbhiVridhi), the Bank engaged with external consultant. The last financial year bank completed Transformation study to review existing product and Technology. This financial year, the Bank initiated "Design and Implementation” phase of Abhivridhi projects where cloud strategy for the Bank has been finalized and vendor evaluation initiated for identified applications / systems.

Compliance with Secretarial Standards

The Bank has complied with the provisions of Secretarial Standards specified by the Institute of Company Secretaries of India and notified by the Ministry of Corporate Affairs under Section 118(10) of the Companies Act, 2013. Completion of Settlement Proceedings with SEBI

During FY 23-24, the Bank completed prolonged settlement application w.r.t. SEBI LODR reporting non-compliances for prior period vide SEBI''s settlement order dated April 10, 2024. The Bank had paid settlement amount of H 1,24,23,600/- to SEBI on March 27, 2024 Basel III (Pillar 3) Disclosures:

RBI Master Circular DBR.No.BP.BC.4/21.06.001/2015-16 dated July 01, 2015, on ''Prudential guideline on Capital Adequacy and Market Discipline - New Capital Adequacy Framework (NCAF)'' requires banks to make Pillar 3 disclosures, as applicable. These disclosures have not been subjected to audit or limited review. These disclosures are available on the Bank''s website at https://www.utkarsh.bank/

Prospects

FY24 has been excellent year from financial performance perspective for the Bank. The Bank had reported highest ever annual profit after tax of H498 crore in FY 23-24. The Bank''s loan portfolio and deposits registered healthy business growth. The Directors are of the view that there is immense opportunity to cater to the unserved and underserved sections of client base in the country, particularly the area in which the Bank is currently operating. Directors'' Responsibility Statement

As per the requirements of Section 134(3)(c) of the Companies Act, 2013, the Directors hereby confirm and declare that:

In the preparation of the annual accounts for the financial year ended March 31,2024, the applicable accounting standards have been followed, and there is no material departure from the same.

The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as on March 31,2024, and of the profit of the Bank for the year ended March 31,2024.

The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities.

The Directors have prepared the annual accounts for the financial year ended March 31,2024 on a going concern basis.

The Directors had laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and operating effectively.

The Directors had devised proper systems to ensure compliance with the provisions of all applicable laws, and that such systems were adequate and operating effectively.

Acknowledgement

The Board expresses its gratitude to the Central and State Governments, Reserve Bank of India, Ministry of Corporate Affairs, SEBI, NABARD, SIDBI, MUDRA, NHB and all other Regulatory Authorities including Local Governing Bodies for the continuous support and guidance provided to the Bank.

The Board appreciates the precious support provided by the Auditors, Lawyers and Consultants. We place on record our appreciation for the contribution made by our employees at all levels. Our consistent growth has been made possible by their hard work, solidarity, cooperation, and support.

The Directors wish to place on record their gratitude to Shareholders of the Bank for the confidence reposed by them and thank all the clients, dealers, and other business associates for their contribution to the Bank''s growth and for extending their assistance and co-operation.

The Directors also express their gratitude to all stakeholders and partners for extending their support.

---

Mar 31, 2023

The Board of Directors of Utkarsh Small Finance Bank Limited (the Bank or USFBL) is pleased to present the 7th Annual Report and the Audited Financial Statements of the Bank with immense PRIDE* - our guiding values for the Financial Year ended, March 31, 2023.

Our PRIDE - the guiding principle and values of the Bank, with an able leadership team, stood us in good stead and helped us tide over these challenges.

FY23 has been year where the Bank had reported highest ever annual profit of >'' 400 crore. The Bank''s capital plus reserves position crossed milestone of '' 2,000 crore at the end of FY23 and Bank''s loan portfolio and deposits registered healthy business growth.

Highlights of major achievements of the Bank:

• Total deposits increased by 36.09% to '' 13,710.14 crore as on March 31, 2023, from '' 10,074.18 crore as on March 31, 2022

• Net Advances increased by 27.77% to '' 13,068.77 crore as on March 31, 2023, from '' 10,228.15 crore as on March 31, 2022

• Bank''s operating profit increased by 64% to 838.32 crore for FY23 from '' 511.93 crore in FY22.

• The Bank reported highest ever annual profit of '' 404.50 crore during FY23.

• Bank witnessed improvement in asset quality with reduction in Gross NPA & Net NPAs to 3.23% & 0.39% respectively as of March 31, 2023 vs. 6.10% & 2.31% respectively at March 31, 2022

• Bank''s provision coverage ratio was healthy at 88.29% as on March 31, 2023.

• The capital adequacy ratio of the Bank is 20.64% as on March 31, 2023.

• Bank''s capital plus reserves increased to '' 2,000.32 crore as on March 31, 2023 from '' 1,572.30 crore as on March 31, 2022

• There are 830 Branches spread across 22 States and 4 Union Territories as on March 31, 2023.

• The Bank expanded its presence to four additional States/UTs i.e. Goa, Jammu & Kashmir, Meghalaya & Puducherry during this year.

As the socio-economic and market scenario were not conducive, the Bank could not proceed with the initial public offer before the close of the financial year.

FINANCIAL PERFORMANCE

The financial highlights for the year under review are presented below:

(Amount in Rs. Crore)
Particulars	FY 22-23 Audited	FY 21-22 Audited	Change in %
Deposits	13,710.14	10,074.18	36.09%
Investments	2,859.42	2,347.92	21.79%
Advances (Net)	13,068.77	10,228.15	27.77%
Net Worth*	1,844.82	1,420.76	29.85%
Net Interest Income	1,529.03	1,060.85	44.13%
Other Income	299.31	184.83	61.93%
Net Total Income	1,828.34	1,245.68	46.77%
Operating Expenses	990.01	733.75	34.93%
Provisions and Contingencies	433.82	450.47	(3.70%)
Net Profit	404.50	61.46	558.14%
Gross NPA Ratio	3.23%	6.10%	(2.87%)
Net NPA Ratio	0.39%	2.31%	(1.92%)
Capital Adequacy Ratio	20.64%	21.59%	(0.95%)
Deposits	13,710.14	10,074.18	36.09%
Business (Deposit plus Net Advance) per employee	1.74	1.61
Business Per Branch	32.26	29.60
Particulars	FY 22-23 Audited	FY 21-22 Audited	Change in %
Transfer to Statutory Reserve	101.13	15.37	557.97%
Transfer to Capital Reserve	-	0.23	-
Transfer to Investment Fluctuation Reserve	(1.80)	(11.13)	(83.83%)
Deduction during the year	(10.52)	10.52	(200.00%)
Dividend for the year, Including Tax Thereon	-	-	-
Number of Branches
General Banking Branches	251	193
Micro Banking Branches	579	493
No. of Employees	15424	12,617
* Net worth computed as per RBI guidelines

BUSINESS UPDATE AND STATE OF BANK''S AFFAIRS

The details on the state of affairs and the business update of the Bank are separately provided in the Management Discussion and Analysis Report, which forms an integral part of the Annual Report of the Bank. However, the summary of the Bank''s performance has been covered hereunder:

Liabilities Business

The Liabilities Business of the Bank, garnered through branches and alternate channels such as internet and mobile banking and ATMs aims to build a sustainable liabilities franchise with a mix of Retail and Institutional deposits. During FY 2022-23 the Bank built a diversified deposits portfolio and the aggregate deposits of the Bank at the end of the year stood at '' 13,710.14 crores. While the total deposits of the Bank grew by 36.09% on YoY basis, the CASA deposit witnessed a growth of 27.09% (YoY). Further the share of CASA plus Retail Term Deposit (RTD) stood at 61.55% of total deposits.

During the period the Bank strategically focussed on building a healthy and granular deposits profile. To further expand its outreach to a larger customer base, the Bank opened 58 General Banking (GB) branches during FY 2022-23 including opening of branches in four New States / UT''s i.e. Puducherry, Jammu Kashmir, Meghalaya & Goa thereby increasing Bank''s GB branches presence to 251 locations spread across 22 States and 04 Union Territories as on March 31, 2023. The Bank continued to set-up its GB branches primarily in metropolitan and urban locations with a potential for sizeable deposits mobilisation. The Bank further expanded presence of its Micro ATMs thereby providing cost efficient systems of offering basic banking facilities such as cash deposit, cash withdrawal, green pin generation among others.

In addition to strengthening the branch & ATM networks, the Bank further augmented its digital banking channels such as net banking, mobile banking, tab banking, digital onboarding, among others.

Further to scaling up the retail deposits book, the Bank in addition is working towards broad basing its institutional deposit profile and Wholesale Liabilities in the Government & Institutional Business (GIB) segment. In FY 22-23 bank has on boarded 208 NTB Institutional CASA Accounts and also done the empanelment in Maharashtra for Salary & Pension Accounts and empanelment in Chhattisgarh for Deposits.

Assets Business

As a Small Finance Bank (SFB), the Bank, which is primarily focussed on micro banking products, has diversified its product offerings to its customers viz. retail loans, unsecured loans, business loans, personal loans, and secured loans such as loans against property, wholesale lending that includes short term and long-term loan facilities to small and medium enterprises (SMEs), mid and large corporate and institutional clients and gold loans. In addition, we offer housing loans with a focus on affordable housing. Our micro banking and retail loan products are primarily aimed at customers who are not a part of the formal banking infrastructure.

(A) Micro Banking

Micro banking business is spread across 159 districts covering 12 states and provides a comprehensive package of financial inclusion products and business development services to the underprivileged or low-income individuals or groups who have limited access to financial services. In micro banking the Bank offers ''Joint Liability Group'' (JLG) loans and business loans alongwith entire gamut of liabilities products through MB branches. In addition, the Bank provides micro banking loans through Business Correspondent (BC) partners also.

The Bank provides group loans built on the peer-guarantee loan model (Joint Liability Group), which enables individuals to take loans without having to provide collateral or security on an individual basis while promoting credit discipline. This is achieved through mutual support within the group, prudent financial conduct among the group and prompt repayment of their loans.

During FY 2022-23 JLG business through Micro Banking (MB) recorded a growth of 12.83% over the previous financial year. There were 86 new MB branches were opened in existing states.

In order to meet the increasing fund requirement of customers who have completed multiple loan cycles and are considered as matured borrowers, the Bank introduced the individual business loans. The Bank provides individual loans especially to those who have begun their formal credit under JLG.

The total JLG portfolio of Micro Banking including MBBL and PMSvanidhi stood at '' 9,215.58 crore as on March 31, 2023, with a total base of more than 26 lakh clients consisting of active loans through the branch network.

The JLG portfolio through Business Correspondents reached '' 251.18 crores in FY 2022-23. The Bank has Six (6) Business Correspondents who are operating in Six (6) states covering 54 districts through 92 branches.

Liabilities base under MB vertical stood at '' 359.81 crore as of March 2023.

The Bank has started distributing 3 new Third-Party Product through MB vertical i.e.

1) Daily Hospital Cash Benefits (DHCB) w.e.f. January 2022, the Bank has rolled out a pilot of DHCB in the states of Bihar & U.P. with 2 partners i.e., Aditya Birla General Insurance & Kotak General Insurance. Later on, Bank has rolled out this product in other states also like Rajasthan/Maharashtra/Odisha.

HospiCash (with riders) is a health insurance product wherein the customer is covered for hospitalisation expenses for upto 30 days. This works as wage loss cover as well for the insurer i.e., income protection for micro banking customers due to hospitalisation. Moreover, the policy covers the customer against unfortunate death or disability due to accident or illness.

HospiCash provides cash benefit in case an insured gets hospitalised. It is specifically designed to take care of the incidental expenses in case of hospitalisation and provides fixed benefit for each day of hospitalisation irrespective of the actual medical cost. As on March 23; the Bank has sold 3,34,365 polices (Premium Collected: '' 6.36 crores).

2) Tele-Medicine wef April 22 from Jharkhand state and later on added Madhya Pradesh & Uttrakhand also. As on March 23; we have enrolled 39,400 subscription with value of '' 1.18 crores.

3) Atal Pension Yojana (APY) is open to all saving bank account holders. The Bank acts as a point of presence and aggregator and enrolls subscribers through architecture of National Pension System.

The Bank started the pilot in September, 2021. The full-fledge launch of APY across all branches was done in the month of January 2022.

As on March-2023, the total subscriber base stood at 25,166 with the contribution of '' 42.66 lakh. The Bank carried out different contests of APY like - Beat the Best (9th May-30th June,22), Shine & Succeed (1st July-12th August,22), APY Citizen Choice''s (1st August - 30th September, 22), Leadership Pinnacle (2nd January - 14th March, 23) & APY Big Believers (15th February-31st March, 23).

With the total customer base of Joint Liability Group lending, which is over 26 lakh and ~10.5 lakh customers, between the age bracket of 21 to 40 years, the Bank is poised to offer the APY to all its customers with an inclination to provide social security to this customer segment.

(B) Retail Loans:

(a) Micro Small & Medium Enterprises (MSME):

The Bank offers a combination of secured and unsecured loans (business and personal loans) to individuals and non-individual entities, such as micro, small, and medium enterprises (MSME). The Bank has devised bespoke products with flexible security requirements to make credit more accessible to the retail and MSME borrowers.

During FY 2022-23, the retail assets loan book grew by 82.62% year-on-year to? 1,534.09 crore, from '' 840.04 crore in FY 2021-22. The key drivers for growth in MSME book were addition of new locations and introduction of new product variants.

(b) Housing Loans (HL):

The Bank offers home loan solutions to customers looking for construction, purchase, repair and renovation of homes through assessment of our customer''s repayment ability and offer bespoke loan solutions and offerings to customers.

As on March 31, 2023, the Bank offers HL done by Mortgage team through 45 branches with aggregate portfolio of '' 519 crore registering year-on-year growth of 45% compared to '' 359 crore as on March 31, 2022.

(c) Wheels

The Wheels business which was launched in Oct''2020 with 2 business i.e., Commercial Vehicles & Construction Equipment Loans is being offered in Uttar Pradesh, Delhi NCR, Rajasthan, West Bengal, Jharkhand, Uttarakhand & Chandigarh regions from 15 branch outlets. The Bank''s wheels loan portfolio grew from '' 212.16 crore in March 31, 2022 to '' 560.36 crore as on March 31, 2023 with 31 operational branches.

(c) Wholesale Banking Business

The Wholesale lending vertical includes lending, deposits and other banking services provided to corporate customers of the Bank.

(a) Wholesale Lending

The Bank''s BBG wholesale lending book as on March 31, 2023 stood at '' 367.99 crore compared to '' 80 crore in March 31, 2022. The Bank also offers both fund based (WC & TL) & non-fund-based limits in the form of bank guarantee to the customers through BBG Wholesale Lending vertical.

The Bank''s wholesale lending book as on March 31, 2023 stood at '' 1,546.81 crore ('' 367.99 crore for Non NBFC and '' 1,178.82 crore for NBFC) compared to '' 926.12 crore ('' 80 crore for non NBFC and '' 846.12 crore for NBFC) in March 31, 2022. The Bank also offers non-fund-based limits in the form of bank guarantee to the customers through Wholesale Lending vertical.

(d) Business Correspondent (BC)

The strategy of the Bank is to build its Asset portfolio through a combination approach.

1. Own Branches

2. Partnership Approach.

The partnership approach with a well-entrenched and networked individual/entity will help it gain significant presence in those markets of business interest. As on March 31, 2023 the Bank had total loan book aggregating to '' 372.84 crore compared to '' 224.42 crores in March 31, 2022. The portfolio comprised of JLG loans of '' 251.18 crore and Retail Assets loans of '' 83.91 crore, contributing 67.37% and 22.51% respectively of the total portfolio. This portfolio is being managed by 13 active BC partners (including 6 BC partners for JLG). The Bank is further focussing on strengthening and deepening its BC partnerships including fintech partnerships for Retail Assets loans.

A. FINANCIAL DISCLOSURESCapital Raising and Capital Adequacy Ratio

During the FY 22-23, the Bank issued and allotted 3,83,141 Equity Shares (of face value of '' 10 each) pursuant to exercise of vested ESOPs to employees (including Managing Director & CEO).

Ratings

Instruments	Ratings as on March 31, 2023	Rating Agency	Rating Description
Certificate of Deposit	[ICRA] A1	ICRA	Securities with this rating are considered to have very strong degree of safety regarding timely payment of financial obligations. Such securities carry lowest credit risk.
Tier 2 NCD (Sub-debt)	[ICRA] A (Positive); Upgraded to [ICRA]A (Stable) in April 2023	ICRA	Securities with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such securities carry low credit risk.
Tier 2 NCD (Sub-debt)	CARE A (Positive)	CARE	Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk.

The Bank''s certificate of deposits programme is rated, at the highest credit rating grade, [ICRA] A1 by ICRA Limited. As on March 31, 2023, the Bank''s long term subordinated bonds were rated at A (Positive) rating by ICRA and CARE Ratings. Subsequent to March 31, 2023, ICRA Limited has upgraded Bank''s credit rating for subordinated bonds by one notch to [ICRA]A (Stable) from [ICRA]A (Positive) in April 2023.

Dividend

The Board did not recommend dividend for the financial year ended on March 31, 2023.

Transfer to Reserves

As required under RBI regulations, the Bank had transferred the following amount to various reserves during the financial year ended March 31, 2023:

Amount transferred to	Amount in '' crore
Statutory Reserve	101.13
Investment Fluctuation Reserve	(1.80)
Capital Reserve	-
Deduction due to fraud provision	(10.52)

Net Worth

As on March 31, 2023, the Bank''s net worth stood at '' 1,844.82 crore (computed as per RBI guidelines). The net worth comprised of paid-up equity capital of '' 895.90 crore and free reserves of '' 1,098.43 crore excluding revaluation reserve, Intangible assets, and deductions of '' 149.52 crore.

Internal Control and Compliance

The Bank''s internal controls, policies and procedures are adequate and are reviewed periodically by the Internal Audit Department for all its business units. The Audit Committee and Board reviews the effectiveness of the control as per the regulatory requirements from time to time / regular intervals.

CORPORATE GOVERNANCE Bank''s Philosophy

Corporate Governance report forming part of the Board''s report for the year under review is attached separately as Annexure A.

Constitution of the Board of Directors

The Board of Directors of the Bank are constituted in accordance with the provisions of the Companies Act, 2013 (Act), Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015, the Banking Regulation Act, 1949 (the BR Act, 1949) and the Articles of Association. The Board consists of eminent persons with considerable professional expertise in business administration, audit, banking, payment & settlement, compliance, account, finance, human resource, risk, strategy, information technology and other related fields. Their experience and professional credentials helped the Bank to gain insights for strategy formulation, monitoring control framework and direction, and adding value to set a strong foundation, enabling the overall growth objectives.

As on March 31, 2023, the Board comprises of Eight (8) Directors consisting of - Seven (7) Non-Executive Directors, of which Five (5) are Independent Directors (including 1 woman Director), two (2) are Non-Executive Non-Independent Directors out of which one (1) is a Nominee Director; and one (1) Managing Director and Chief Executive Officer.

Further, in terms of Section 152 of the Companies Act, 2013, Mr. Chandra Shekhar Thanvi, Nominee Director (NonExecutive) who retires by rotation this year, meets the fit and proper criteria as provided for under the RBI directions and as amended from time to time and being eligible offers himself for re-appointment at the 7th Annual General Meeting (AGM).

Statement on Declaration from Independent Directors:

A declaration under section 149(6) & (7) of the Companies Act, 2013 has been obtained from each of the Independent Directors.

There was no change in the Board of Directors during FY 22-23. However, the following changes took place in the Key Managerial Personnel during FY 22-23 as given below:

Sr. No.	Name of the Director / KMP	Designation	Date of Appointment	Date of Cessation	Reason for cessation
1.	Mr. Mukund Barsagade	Chief Financial Officer	11.06.2018	22.09.2022	Better Prospects
2.	Mr. Sarjukumar Pravin Simaria	Chief Financial Officer	31.10.2022*	-	-

* Mr. Sarju Simaria joined the Bank w.e.f. September 30, 2022. He was appointed as Chief Financial Officer by the Board of Directors at their meeting held on October 31, 2022.

Committees of the Board of Directors

For effective decision-making, the Board acts through various Committees, which oversee specific operational or strategic matters falling within the ambit of the specific terms of reference of that Committee. The Board has constituted 13 such Committees. All the Board Committees have a specific charter, and these Committees monitor activities falling within their terms of reference. Additional details of the Board Committees, its composition, attendance, meetings held during the FY 22-23 etc. have been provided separately in Corporate Governance Report.

Board Evaluation:

In accordance with the Companies Act, 2013 (Act) and the framework for Board evaluation, the Nomination and Remuneration Committee and the Board of Directors had carried out, annual performance evaluation of the Board, its Committees and Directors individually. Further, a meeting of Independent Directors was held in accordance with the provisions of the Act.

A questionnaire was prepared for evaluation based on criteria which included providing strategic perspective, attendance, time devoted and preparedness for meeting, quality, quantity and timeliness of flow of information between the members of the Management, contributions at the meetings, effective decision - making ability, role and effectiveness of the Committee. The Directors completed the questionnaire and provided feedback on the functioning of the Board, its Committees and Directors individually and the same noted in the meetings of the Board of Directors.

STATUTORY DISCLOSURE Annual Return

As required under the provisions of Sections 92(3) and 134(3)(a) of the Companies Act, 2013 read with the rules framed thereunder, the Annual Return of the Bank in the prescribed Form MGT-7 for the year under review is available on the website of the Bank at the following link:

https://www.utkarsh.bank/investors

Conservation of Energy and Technology Absorption

The particulars to be disclosed under Section 134(3)(m) of the Companies Act, 2013, relating to conservation of energy and technology absorption does not apply to the Bank. The Bank is constantly pursuing its goal in upgrading technology to deliver quality service to its customers in a cost-effective manner.

Foreign Exchange Earnings / Outgo

The Bank has foreign exchange earnings of '' 0.68 crore during the financial year under review which includes cross border settlements. There was no foreign exchange outgo during the financial year.

Whistle Blower Policy (Vigil Mechanism)

The Bank, as a part of its prudent practice, has established a Vigilance Department to develop and execute a comprehensive strategy to deal with instances of fraud and mismanagement, if any, and as a preventive mechanism with active oversight, ensure holistic and smooth operations of the Bank on an ongoing basis. The Department is adequately staffed and conducts investigations on matters related to frauds committed and references received through whistle blower complaints.

Pursuant to the provisions of Section 177(9) of the Companies Act, 2013 read with rules made thereunder and RBI Guidelines and other applicable laws, the Bank has established the Vigil Mechanism as part of the Whistle Blower Policy. This empowers the Directors and employees to report concerns about unethical behaviour, actual or suspected fraud or instances of leakage of Unpublished Price Sensitive Information (UPSI), misappropriation of assets or violation of the Bank''s Code of Conduct. Additionally, the Bank places zero tolerance for any incidents of doubtful integrity and corruption by employees. Towards this end, all employees are trained to maintain high standards of integrity in their work area.

The Whistle Blower policy is aimed at enabling the staff to escalate instances of doubtful integrity, mismanagement, abuse/misuse of power, undue influence/coercion exercised for indulging in undesirable practices, violation of the Bank''s Code of Conduct, ethics, and corruption. It also provides adequate safeguards against probable victimisation of directors/ employees who avail of this mechanism and allows direct access to the Chairperson of the Audit Committee of the Board, in appropriate or exceptional cases.

The Audit Committee of the Board (ACB) reviews the details of Whistle Blower complaints received, the subsequent action taken, and the functioning of the Whistle Blower mechanism periodically.

The Audit Committee of the Board oversees the Vigil Mechanism as well.

The Whistle Blower Policy is periodically communicated to the employees and the key highlights of the Policy are available on the Bank''s website at the following link: https://www.utkarsh.bank/uploads/pdf/our-policy/ template_ten/Whistle_Blower_Policy_Final.pdf wherein the email and contact details of the Chairperson of Audit Committee of the Board are provided to enable complainants to reach out with their complaints under the Whistle Blower Policy.

In addition to the above, the Bank has formulated a Vigilance Policy for effectively managing the risks arising on account of possible corruption, malpractices, and frauds.

Vigilance & Security

The Bank has a Vigilance & Security Department for investigating frauds, bribery cases, and complaints, including complaints received under the whistle-blower policy of the Bank

Vigilance & Security Department makes concerted efforts to reduce fraud, forgery, and burglary incidents in the Bank with the help of new ideas, technology, previous experiences, and adopting preventive vigilance measures with appropriate tools.

Statutory Auditors

RBI, on April 27 2021, had issued guidelines for appointment of Statutory Central Auditors/Statutory Auditors of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs). As per the said guidelines statutory audit of entities with asset size of '' 15,000 crore and above as at the end of previous year, should be conducted under joint audit of a minimum of two audit firms. The audit firms can be appointed as the Statutory Auditors (SA) of the Bank for a continuous period of 3 years only and thereafter, reappointment in the same entity will be possible only after a cooling period of six years. Further, prior approval of RBI for appointment/reappointment of SAs on an annual basis is required in terms of the above guidelines.

Based on recommendation of Audit Committee of the Bank, the Board of Directors at its meeting dated March 20, 2023, had proposed the re-appointment of M/s. Deloitte Haskins and Sells, Chartered Accountants and M/s. Kirtane & Pandit LLP, Chartered Accountants as Joint Statutory Auditors of the Bank subject to approval of the Shareholders of the Bank and prior approval of the Reserve Bank of India (RBI). RBI vide their letter reference no. DOS.CO.RPD.No.S494/08.60.005/2023-24 dated April 21, 2023 approved the appointment of M/s Deloitte Haskins & Sells, Chartered Accountants (FRN 117365W) and M/s. Kirtane & Pandit, LLP, Chartered Accountants (FRN 105215W) as the Joint Statutory Auditors for FY 23-24 subject to the firms fulfilling the eligibility criteria as prescribed by RBI. Accordingly, the proposal for their appointment would be placed in the ensuing 7th Annual General Meeting.

Employees Stock Option Plan (ESOP)

The Shareholders of the Bank had approved:

• USFBL MD & CEO Employee Stock Option Plan 2020 (MD & CEO ESOP Plan)

• USFBL Employee Stock Option Plan 2020 (ESOP Plan 2020)

The Bank may grant upto 6,07,41,778 options under the ESOP Plan 2020.

Deposits

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

Awards & Recognition

• Recognised as "Paragon of Branding Excellence" and awarded for "Brand of the Year 2022" by Team Marksmen Daily and media partner India Today

• Ranked 46 under "The Next 500 Companies 2022" by Fortune India

• Recognition as one of the ''Promising Brands 2022'' by Economic Times

• The Bank has received award from PFRDA for qualifying the contest "Beat the Best & Be the Best (9th May, 22 to 30th June,22)" under APY

• The Bank received an award under special category from IBA for the Best ''IT Risk Management''.

• GRIHA Award was bestowed upon the Bank for the Integrated Water Management at Utkarsh Tower

• Ranked No .2 under the Small Finance Bank category by BT-KPMG Survey

Particulars of Employees

The ratio of the remuneration of each Director to the employees'' median remuneration and other details in terms of sub-section 12 of Section 197 of Companies Act 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are given below: -

(i) the ratio of the remuneration of each Director to the median remuneration of the employees of the Bank for the FY 22-23:-

Name of Director	Designation	Ratio
Mr. Parveen Kumar Gupta	Part time Non-Executive Chairman of the Board	5.1:1
Mr. Govind Singh	Managing Director and Chief Executive Officer	102.0:1

Apart from sitting fees, the Bank does not pay any remuneration to any Non-Executive Directors. The part time Non-Executive Chairman of the Board is entitled to a monthly remuneration, as approved by the RBI and the Shareholders of the Bank.

(ii) The percentage increase in remuneration of each Director, Chief Executive Officer, Chief Financial Officer, Company Secretary for FY 22-23 are as follows:

Name of Director/KMP	Designation	Percentage (%) Increase
Mr. Parveen Kumar Gupta	Part time Non-Executive Chairman	No increment
Mr. Govind Singh	Managing Director and Chief Executive Officer	No increment
Mr. Mukund Barsagade	Chief Financial Officer	No increment
Mr. Sarjukumar Pravin Simaria	Chief Financial Officer	No increment
Mr. Muthiah Ganapathy	Company Secretary & Compliance Officer	No increment
The percentage increase in the median remuneration of employees in the financial year was 7.21%.

(iii) The number of permanent employees on the rolls of the Bank, as on March 31, 2023 was 15,424 (includes 13,130 male employees and 2,294 female employees).

(iv) Average percentile increase already made in the remuneration of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration.

(v) Average increase in remuneration is 7.27% for employees other than managerial personnel and 0% for managerial personnel (Executive Directors including Managing Director and Chief Executive Officer, Chief Financial Officer, and Company Secretary).

(vi) The key parameters for any variable component of remuneration availed by the Directors are as specified in the Remuneration Policy.

(vii) Affirmation that the remuneration is as per the remuneration policy of the Bank. The Bank is in compliance with its Remuneration Policy.

The statement containing particulars of employees as required under Section 197(12) of Companies Act 2013 read with Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this report. In terms of Section 136 of Companies Act 2013, the Annual Reports are being sent to the members, excluding the information as required under Rule 5(2) as mentioned aforesaid and the same is open for inspection at the Registered Office of the Bank. A copy of this statement may be obtained by the members by writing to the Company Secretary of the Bank at [email protected].

Remuneration Policy Remuneration Policy for Directors

In terms of the provisions of Companies Act 2013, Listing Regulations and applicable provisions of the Banking Regulation Act, 1949, the Board on the recommendation of the Nomination & Remuneration Committee (NRC), formulated Remuneration Policy for the remuneration of Directors, Key Managerial Personnel (KMPs) & Senior Management Officials.

The Nomination and Remuneration Policy is available on the website of the Bank at the following link: https://www.utkarsh.bank/uploads/template_forty_pdf/NRC_Policy.pdf

Remuneration of Executive Directors

The Board considered the recommendation of NRC, and approved the remuneration of Managing Director and Chief Executive Officer, with or without modifications, subject to members and regulatory approvals.

The remuneration payable to Managing Director and Chief Executive Officer is subject to prior approval of the RBI. Therefore, the remuneration or any revision in the remuneration is payable only after receipt of approval from RBI.

Remuneration of part time Non-Executive Chairman

The remuneration payable to the part time Non-Executive Chairman is subject to prior approval of RBI. Therefore, the remuneration or any revision in remuneration of the part time Non-Executive Chairman is payable only after receipt of approval from RBI.

Remuneration of Non-Executive Directors (NEDs)

The NEDs (excluding Nominee Directors of the Bank) are paid sitting fees for attending each meeting of the Board of Directors or any Committee thereof. The NEDs are also entitled to reimbursement of expenses for participation in the meetings of the Board and Committees thereof.

RBI vide Circular No. DBR. No.BC.97/29.67.001/2014-15 dated June 1, 2015, issued Guidelines on Compensation of Non-Executive Directors of Private Sector Banks emphasising that in order to enable banks to attract and retain professional Directors, it is essential that such Directors are appropriately compensated.

Pursuant to the aforesaid RBI Circular, the maximum amount that can be paid as commission was capped at '' 20 lakh per Director, per annum. Also, Section 197 of Companies Act 2013 permits payment of profit-based commission to the Directors who are neither managing directors nor whole-time directors, not exceeding one percent (1%) of the net profits of the Bank, if there is a managing or whole-time director or manager; in any other case three per cent (3%) of the net profits.

During FY 22-23, the Bank has not paid any commission on profit or granted any stock options to NEDs.

Other Statutory Disclosures:

• The Bank has not changed its nature of business during FY 22-23.

• Tursuant to Section 186(11) of the Companies Act, 2013, loans made, guarantees given or securities provided or acquisition of securities by a banking company in the ordinary course of its business are exempted from disclosure in the Annual Report.

• All related party transactions that were entered into during FY 22-23 were on an arm''s length basis and in the ordinary course of business and accordingly, AOC - 2 is not applicable to the Bank. There are no materially significant related party transactions entered into by the Bank with Directors, KMP or other designated persons, which may have a potential conflict with the interest of the Bank at large. The Bank has a Related Party Transactions Policy in place for identification and monitoring of any potential related party transactions;

• There were no significant/material orders passed by the Regulators / a Court / Tribunal etc. during FY 22-23, which would impact the going concern status of the Bank and its future operations.

• There was no application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the year under review.

• The details of Risk Management Policy & its framework are separately provided in the Management Discussion and Analysis Report.

• T he Bank is a subsidiary company of Utkarsh CoreInvest Limited (erstwhile Utkarsh Micro Finance Limited). The Bank does not have subsidiary or associate company. Hence the details of sub-section (3) of section 129 read with rule 5 of Companies (Accounts) Rules, 2014 are not applicable to the Bank;

• T he provisions for maintenance of cost records as specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013 are not applicable to the Bank.

• There are no adverse observations/qualifications in the Statutory Auditors'' Report. Further, pursuant to Section 143(12) of the Companies Act, 2013, the Statutory Auditors of the Bank have not reported any instances of frauds committed in the Bank by its officers or employees.

• T ll recommendations of the Audit Committee were approved by the Board.

• T roper internal financial controls are in place, and that the financial controls have been adequate and operating effectively.

• T here are no material changes and commitments, affecting the financial position of the Bank that have occurred between the end of the financial year of the Bank i.e. FY 22-23 and the date of the Boards'' Report.

C. OTHER DISCLOSURES Code of Conduct

For a financial institution, transparency and the highest standards of corporate governance are important prerequisites for establishing a compliance-oriented bank. Towards this end, the Bank endeavours to ensure that all its activities are fairly aligned with the highest standards of personal and professional integrity and the highest level of ethical conduct. The Bank has adopted a Code of Conduct and norms for the avoidance of conflict of interest, all the Senior Management officials, KMPs, Employees with loan sanctioning authority, employees directly related with sourcing/servicing corporate or wholesale banking relationships and employees directly involved in the procurement of goods and services, conduct duties according to the aforesaid Code of Conduct. Some of the areas that have been covered by the Code of Conduct are: fairness of employment practices, protection of intellectual property, integrity, customer confidentiality and conflict of interest. The Bank''s Code of Conduct for Directors and Senior Management is hosted on the website of the Bank at https://www.utkarsh. bank/uploads/template_forty_pdf/CODE_OF_CONDUCT_FOR_THE_BOARD_OF_DIRECTOR_ S_AND_SENIOR_ MANAGEMENT_PERSONNEL.pdf.

Corporate Social Responsibility (CSR)

In accordance with Section 135 of the Act, the Board of Directors on the recommendation of CSR Committee had approved the CSR Policy which provided for the activities to be carried out.

The CSR Policy is available on the Company''s website https://www.utkarsh.bank/uploads/template_forty_pdf/ Corporate_Social_Responsibility_Policy.pdf.

In line with the statutory requirements under the Companies Act, 2013 and it''s CSR Policy, the Company had undertaken projects in the areas of financial literacy, health initiatives, skill and entrepreneurship development programmes and other philanthropic initiatives (supporting orphanages and care centres for the elderly).

During the year under review, the Company spent /contributed '' 3.24 crore towards aforesaid CSR projects.

The required disclosure as per Rule 8 of Companies (Corporate Social Responsibility Policy) Rules 2014 is attached as Annexure B to this Report.

Know Your Customer (KYC) / Anti-Money Laundering (AML)

The Bank adheres to the RBI''s KYC / AML Guidelines issued from time to time. The Bank''s KYC / AML Policy has been prepared in accordance with the Prevention of Money Laundering Act, 2002 (PMLA) and RBI / Indian Banks'' Association (IBA) guidelines, amended from time to time. The Bank complies with, various regulatory reporting requirements, as set out by the Financial Intelligence Unit (FIU) of the Government of India. The Bank has a transaction monitoring mechanism in line with regulatory requirements with an automated system solution, closely monitored by a centralised AML team. The Bank''s employees are imparted training on KYC / AML aspects regularly. Executives of the Bank also attend periodic workshops/seminars organised by FIU - IND, RBI, IBA and National Institute of Bank Management (NIBM) to enhance their awareness in these aspects. Recent changes as contained in the PMLA notifications and RBI guidelines have been followed and embedded in the customer acquisition processes of the Bank. The Bank''s KYC/AML Policy is duly reviewed by the Board on annual basis taking into account the various amendments to guidelines / regulations.

Prevention of Sexual Harassment

The Bank is committed to create a safe environment where all employees are treated with respect and dignity. The Bank takes a strong stand and has zero-tolerance policy on the issue of sexual harassment at workplace. We follow all the guidelines prescribed under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and seeks to protect women from sexual harassment at the place of work.

The Prevention of Sexual Harassment Policy (POSH Policy) at Utkarsh Small Finance Bank is gender neutral and is implemented for all employees and other stakeholders/ partners. Any complaint of sexual harassment made against any individual working within the Bank''s premises, including third-party vendors, is investigated in line with this POSH Policy.

The Internal Complaints Committee (ICC) of the Bank deals with all complaints relating to sexual harassment and has laid down the processes and guidelines pertaining to sexual harassment related complaints. The Bank does not tolerate any form of sexual harassment and all individuals of the Bank are responsible to ensure a workplace free of harassment.

POSH Policy is applicable to all employees (permanent/ fixed term/ on contract) of the Bank across the Board and is equally applicable to all genders, grades, and stakeholders of the groups.

The POSH Policy is periodically communicated to all employees and is available on the Bank''s website for information and compliance thereof.

https://www.utkarsh.bank/uploads/pdf/our-policy/template_ten/Prevention_of_Sexual_Harassment_Policy.pdf

For FY 22-23, total of 13 cases were reported under POSH. Out of 13 cases, 11 cases have been resolved and 2 cases are under investigation.

Human Resources

The Bank''s Human Resources Policy (HR Policy) is aligned for the achievement of the Bank''s vision and mission and constant efforts are made to motivate its employees for excellence in performance and at the same time endeavors to provide a better work-life balance through various employee welfare activities.

In its constant endeavor to promote learning and capacity building of all its employees, the Bank utilised its "Learning Management System (Utkarsh U-Learn)" to engage its employees through continuous educational programs delivered via e-modules and virtual classrooms.

Technology

Information Technology is an important driver for improving the efficiency & productivity of the organisation. This is a major differentiator for the bank and constantly working on enhancement of existing technology solutions and engaging with new technology / technology partners to achieve business growth.

While continuing, digitisation and automation journey, Bank has successfully implemented "UPI Lite" payment system. The Bank is the first Small Finance bank to implement this in Indian Banking domain. Cash-less collection through QR Code has been added to digitisation journey further i.e., this is an addition to cash-less disbursement of Joint Liability Group Loans. To make secured Mobile Banking Transactions of our customer, the Bank added feature of device binding in-line with regulator guidance. The feature of e-signature added to our mission toward go-green i.e., paperless transaction. We have enhanced our business applications like CBS, LMS, LOS, etc. with added features during the year to improve efficiency of end users along with new product features. Bank already started using Robotic Process Automation (RPA) for processes where manual duplicate work shall be automated with the help of software robot.

The feature of Microsoft Team / office 365 is being used extensively within organisations to improve internal communication & processes. Along with Data Center (DC) & Disaster Recovery (DR) centre, the bank has operationalize Near Data Recovery (NDR) centre to ensure quick availability of systems in case of any disaster. Data Lake platform are being integrated with CBS & other channels to centrally collate data from different applications and enable Data Analytic output.

Bank has engaged with external consultant and conducted entire Business Technology Transformation study to review existing product & technology and emerging technology in banking space. Bank had already prepared a blueprint of the transformation journey. Now, the bank is working on "Design" phase of the business processes and technology modernisation.

Secretarial Auditor, and Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, M/s S. N. Ananthasubramanian & Co., Practicing Company Secretaries conducted the secretarial audit of the Company for FY 22-23.

The Secretarial Auditor''s Report for the FY 22-23 does not contain any qualification, reservation, or adverse remark. Report of the Secretarial Auditor for the FY 22-23 in Form MR-3 is annexed to this report as Annexure C.

Compliance with Secretarial Standards

The Bank has complied with the provisions of Secretarial Standards specified by the Institute of Company Secretaries of India and notified by the Ministry of Corporate Affairs under Section 118(10) of the Companies Act, 2013.

Basel III (Pillar 3) Disclosures:

RBI Master Circular DBR.No.BP.BC.4/21.06.001/2015-16 dated July 01, 2015, on ''Prudential guideline on Capital Adequacy and Market Discipline - New Capital Adequacy Framework (NCAF)'' requires banks to make Pillar 3 disclosures, as applicable. These disclosures have not been subjected to audit or limited review. These disclosures are available on the Bank''s website at https://www.utkarsh.bank/.

Prospects

FY23 has been excellent year from financial performance perspective for the Bank. The Bank had reported highest ever annual profit of >''400 crore in FY23. Bank''s loan portfolio and deposits registered healthy business growth. The Directors are of the view that there is immense opportunity to cater to the unserved and underserved sections of client base in the country, particularly the area in which the Bank is currently operating.

Directors'' Responsibility Statement

As per the requirements of Section 134(3)(c) of the Companies Act, 2013, the Directors hereby confirm and declare that:

• In the preparation of the annual accounts for the financial year ended March 31, 2023, the applicable accounting standards have been followed, and there is no material departure from the same;

• The Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as on March 31, 2023, and of the profit of the Bank for the year ended March 31, 2023;

• The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities.

• The Directors have prepared the annual accounts for the financial year ended March 31, 2023 on a going concern basis.

• The Directors had laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and operating effectively.

• T he Directors had devised proper systems to ensure compliance with the provisions of all applicable laws, and that such systems were adequate and operating effectively.

Acknowledgement

The Board expresses its gratitude to the Central and State Governments, Reserve Bank of India, Ministry of Corporate Affairs, SEBI, NABARD, SIDBI, MUDRA, NHB and all other Regulatory Authorities including Local Governing Bodies for the continuous support and guidance provided to the Bank.

The Board appreciates the precious support provided by the Auditors, Lawyers and Consultants. We place on record our appreciation for the contribution made by our employees at all levels. Our consistent growth has been made possible by their hard work, solidarity, cooperation, and support.

The Directors wish to place on record their gratitude to Shareholders of the Bank for the confidence reposed by them and thank all the clients, dealers, and other business associates for their contribution to the Bank''s growth and for extending their assistance and co-operation.

The Directors also express their gratitude to all stakeholders and partners for extending their support.

For and on behalf of the Board of Directors

Sd/- Sd/-

Place: Mumbai Parveen Kumar Gupta Govind Singh

Date: April 28, 2023 Director Managing Director & CEO

DIN - 02895343 DIN - 02470880