Bajaj Housing Finance Ltd

Your directors present the fifteenth Annual Report along with the financial statements for FY2023.

Company Overview

Bajaj Housing Finance Ltd. (‘BHFL' or ‘the Company') is registered with National Housing Bank (‘NHB') as a Housing Finance Company (‘HFC') engaged in the business of mortgage lending since 2017-18. It is a wholly-owned subsidiary of Bajaj Finance Limited (‘BFL'). The Company offers finance to individuals as well as corporate entities for the purchase and renovation of homes or commercial spaces. It also provides loans against property for business or personal needs. The Company also offers finance to developers engaged in the construction of residential and commercial properties as well as lease rental discounting to developers and high net-worth individuals.

In terms of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘SEBI Listing Regulations'), the Company is categorised as High Value Debt Listed entity. SEBI in its Board meeting dated 29 March 2023 extended the ‘comply or explain' period for the High Value Debt Listed Entities in respect of corporate governance provisions (i.e. regulation 16 to 27 of SEBI Listing Regulations) till 31 March 2024.

The Company has been classified in Upper Layer pursuant to the RBI Scale Based Regulations.

Financial Results

The key highlights of the financial results for FY2023 are given below:

( Rs in crore)

Due to rounding off, numbers presented in above table may not add up precisely to the totals provided.

Share Capital

On 7 April 2022, the Special Committee for Rights Issue constituted by the Board of Directors has allotted, on rights basis, 1,828,822,235 equity shares of face value of C 10 each at a premium of C 3.67 per equity share, aggregating to ~ C 2,500 crore, to Bajaj Finance Limited (the ‘Holding Company').

Pursuant to the said allotment, the total issued and paid-up capital of the Company as on 31 March 2023 stood at C 6,712.15 crore comprising of 6,712,155,564 equity shares of face value of C 10 each fully paid-up. During the year FY2023, the Company has not issued any convertible securities and there are no outstanding convertible securities as on 31 March 2023.

Dividend

Considering the capital-intensive nature of the business, the business plan of the Company and with a view to plough back the profits, your Board has not recommended dividend for consideration of the members at the ensuing Annual General Meeting (‘AGM') in order to build a strong base for its long-term growth.

Transfer to Reserve Fund

Under Section 29C of the National Housing Bank Act, 1987, Housing Finance Companies (‘HFCs') are required to transfer a sum not less than 20% of its net profit every year to reserve fund before declaration of any dividend. The Company has transferred a sum of C 252 crore to reserve fund, which is 20% of its net profit. Pursuant to provisions of Companies Act, 2013 (the ‘Act') read with relevant rules thereunder, the Company, being a HFC, is exempt from creating a debenture redemption reserve in respect of privately placed debentures including the requirement to invest up to 15% of the amount of debentures maturing during the next financial year. However, the Company maintains sufficient liquidity buffer to fulfil its obligations arising out of debentures. In case of secured debentures, an asset cover of at least 100% is maintained at all times.

Scale Based Regulations

The Reserve Bank of India issued a circular on "Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs" on 22 October 2021 (‘SBR Framework'). As per the SBR framework, based on size, activity and risk perceived, NBFCs are categorised into four layers, NBFC - Base Layer (NBFC-BL), NBFC - Middle Layer (NBFC-ML) and NBFC - Upper Layer (NBFC-UL) and NBFC - Top Layer (NBFC-TL). The RBI has categorised Bajaj Housing Finance Limited as an NBFC - Upper Layer (NBFC-UL) vide its press release dated 30 September 2022. The Company has put in place the necessary Board approved policies as required under the SBR framework.

Working Results of the Company

• Asset Under Management (AUM) as on 31 March 2023 was C 69,228 crore as compared to C 53,322 crore as on 31 March 2022, representing an increase of 30% over the previous year.

• Loan receivables as on 31 March 2023 was C 62,114 crore as compared to C 46,482 crore as on 31 March 2022, an increase of 34% over the previous year.

• Total income during FY2023 increased to C 5,665 crore from C 3,767 crore during FY2022 registering a growth of 50% over the previous year.

• Total operating cost to net interest income has decreased to 25.7% from 29.2% in FY2023.

• Impairment on financial instruments was C 124 crore. The Company holds management and macro-economic overlay of C 237 crore as on 31 March 2023.

• The Company ended FY2023 with a Gross NPA of 0.22% and Net NPA of 0.08% as against 0.31% and 0.14% respectively for the year FY2022.

• Profit before tax for FY2023 was C 1,700 crore as against C 960 crore for FY2022, an increase of 77% over the previous year.

• The profit after tax for FY2023 was C 1,258 crore as compared to C 710 crore for FY2022, an increase of 77% over the previous year. This is mainly due to the Company's healthy net interest margin, operating efficiencies and prudent risk management.

Operations

Details regarding the operations of the Company and its state of affairs are covered in the ‘Management Discussion and Analysis Report'.

Borrowings

The overall borrowing limit of the Company has been increased to C 1,00,000 crore by the members at their meeting held on 19 May 2023.

As on 31 March 2023, the borrowings of the Company stood at C 53,745.39 crore. During FY2023, the Company has issued non-convertible debenture (NCDs) to the tune of C 9,838 crore and redeemed NCDs to the tune of C 2,855.80 crore. Further, the Company has also issued Commercial Papers (CPs) to the tune of C 3,675 crore and redeemed CPs to the tune of C 7,325 crore.

As per the RBI Master Direction Non-Banking Financial Company Housing Finance Company (Reserve Bank) Directions, 2021, the Company was required to maintain Liquidity Coverage Ratio (LCR) of 60% from 1 December 2022 onwards. The LCR of the Company as on 31 March 2023 was 149.72%. The daily average LCR of the Company during the Q3 and Q4 FY2023 was at 101.32% and 129.15% respectively.

Subsidiaries, Associates and Joint Ventures

The Company does not have any subsidiary, associate or joint venture. Accordingly, the requirement of attaching form AOC-1 is not applicable to the Company.

SEBI vide its notification dated 7 September 2021 has amended SEBI Listing Regulations requiring High Value Debt Listed Companies (HVDs) to adopt a policy for determining material subsidiaries.

The Company's policy for determination of material subsidiary, as adopted by the Board of Directors, in conformity with regulation 16 of the SEBI Listing Regulations, can be accessed on the Company's website at https://www.bajajhousingfinance.in/documents/37350/53075/annexure_32_policy_for_determining_ material_subsidiaries.pdf Further, the net worth of the Company exceeds 10% of the consolidated net worth of the immediately preceding accounting year of both Bajaj Finance Ltd. (BFL) and Bajaj Finserv Ltd. (BFS); and therefore, it is classified as their material subsidiary.

Directors and Key Managerial Personnel (KMP)

As on 31 March 2023, the Board consisted of five Directors of whom two are Independent Directors. On 1 April 2023, two of the Independent Directors are also Independent Director on the Board of the holding company viz. BFL.

Dr. Arindam Bhattacharya (DIN: 01570746)

On recommendation of Nomination and Remuneration Committee (‘NRC'), the Board at its meeting held on 25 April 2022, approved the appointment of Dr. Arindam Bhattacharya as an Independent Director for a tenure of 5 consecutive years w.e.f. 1 May 2022.

The Board is of the opinion that Dr. Arindam Bhattacharya is a person of integrity, expertise, competent experience and proficiency to serve the Company as an Independent Director that can strengthen the overall composition of the Board.

Dr. Bhattacharya has successfully passed the online proficiency self-assessment test as required under the provisions of Rule 6(4) of the Companies (Appointment and Qualifications of Directors) Rules, 2014.

Atul Jain (DIN: 09561712)

On recommendation of the NRC, the Board at its meeting held on 25 April 2022 approved the appointment of Atul Jain, CEO of the Company as the Managing Director for a tenure of 5 consecutive years w.e.f. 1 May 2022.

Rajeev Jain (DIN: 01550158)

Rajeev Jain, who was re-appointed as Managing Director for a period of 3 years from 10 November 2019, demitted the office of Managing Director of the Company w.e.f. close of business hours on 30 April 2022. He, however, continues on the Board of the Company as Non-Executive Director and has been designated as Vice - Chairman w.e.f. 1 May 2022.

Jasmine Chaney (DIN: 07082359)

On recommendation of the NRC, the Board at its meeting held on 16 March 2023 approved the appointment of Jasmine Chaney as an Independent Director of the Company for a period of 5 consecutive years w.e.f. 1 April 2023. The same has been approved by members at their meeting dated 19 May 2023.

The Board is of the opinion that Jasmine Chaney is a person of integrity, expertise, competent experience and proficiency to serve the Company as an Independent Director.

Jasmine Chaney has also registered herself in the Independent Director's databank of Indian Institute of Corporate Affairs as required under Rule 6(1) of the Companies (Appointment and Qualification of Directors) Fifth Amendment Rules, 2019. She will be undertaking online proficiency self-assessment test within the prescribed timeframe.

Lila Poonawalla (DIN: 00074392)

Lila Poonawalla, Non-Executive Independent Director of the Company, upon completion of her term ceased to be a Director of the Company w.e.f. close of business hours on 21 January 2023. The Board places on record its sincere appreciation for the valuable contribution made by her during her tenure on the Board.

B. Directors liable for rotation:

Atul Jain, retires by rotation at the ensuing AGM, being eligible, offers himself for re-appointment. Brief details of Atul Jain, who is seeking re appointment, are given in the Notice of fifteenth AGM.

The members at their meeting dated 15 June 2022 approved re-categorisation of Sanjiv Bajaj as Director not liable to retire by rotation.

C. Key Managerial Personnel (KMP):

On relinquishment of office of the Managing Director, Rajeev Jain ceased to be the KMP of the Company w.e.f. close of business hours on 30 April 2022.

Shri Atul Jain, Managing Director was also appointed as KMP of the Company w.e.f. 1 May 2022. R Vijay, resigned as Company Secretary and ceased to be the KMP w.e.f. close of business hours on 30 April 2022.The Board at its meeting held on 25 April 2022, appointed Atul Patni as the Company Secretary and KMP of the Company w.e.f. 1 May 2022.

A brief profile of directors is available on the website of the Company athttps://www.bajajhousingfinance.in/ directors-board

Declaration by Independent Directors

The Independent Directors have submitted a declaration to the effect that they meet the criteria of independence as provided under Section 149(6) of the Act, Schedule IV read with Regulation 16 of the SEBI Listing Regulations as amended. They have also confirmed compliance with the provisions of rule 6(1)(b) of the Companies (Appointment and Qualifications of Directors) Rules, 2014, as amended, relating to inclusion of their name in the databank of Independent Directors.

The Board took on record the declaration and confirmation submitted by the Independent Directors regarding them meeting the prescribed criteria of independence, after undertaking due assessment of the veracity of the same in terms of the requirements of Regulation 25 of the SEBI Listing Regulations.

a) Policy on directors' appointment and remuneration

Pursuant to Section 178(3) of the Companies Act, 2013 and Regulation 19(4) read with Part D of Schedule II of the SEBI Listing Regulations, the Board has framed a remuneration policy. This policy, inter alia, provides: a) The criteria for determining qualifications, positive attributes and independence of directors; and b) Broad guidelines of compensation philosophy and structure for Non-Executive Directors, Key Managerial Personnel and other employees.

In view of detailed RBI Guidelines for NBFCs concerning compensation of Key Managerial Personnel and Senior Management, the Company has adopted a specific policy to this effect. Accordingly, this remuneration policy has to be read along with the specific policy adopted pursuant to RBI Guidelines as regards compensation of KMPs and SMPs. The aforesaid policy can be accessed at https://www.bajajhousingfinance.in/documents/37350/53075/ Remuneration+Policy+-+Companies+Act.pdf

b) Policy for Compensation of Key Managerial Personnel (KMP) and Senior Management (SMP) pursuant to RBI Guidelines

RBI has vide its circular dated 29 April 2022 issued Guidelines on Compensation of Key Managerial Personnel and Senior Management in NBFCs pursuant to Scale Based Regulatory Framework. Accordingly, the Board of Directors at their meeting held on 16 March 2023 based on the recommendation of Nomination and Remuneration Committee, adopted a policy exclusively governing compensation payable to KMPs and SMPs. This policy lays down detailed framework, inter alia, encompassing the following:

• Principles of Compensation

• Compensation Components

• Principles of Variable pay

• Deferral of Variable Pay

• Compensation for Control and Assurance Function Personnel

• Provisions for Malus and Clawback and circumstances under which application of Malus and Clawback is to be considered.

The aforesaid policy can be accessed at https://www.bajajhousingfinance.in/documents/37350/53075/ Remuneration+policy+-+RBI.pdf During FY2023, there were no pecuniary relationship/transactions of any of the Non-Executive Directors with the Company apart from their remuneration as directors.

Formal Annual Evaluation of the Performance of the Board, its Committees, Chairperson and Directors

Pursuant to Section 178 of the Act, the Board decided that the evaluation shall be carried out by the Board and the NRC shall only review its implementation and compliance.

Further as per Schedule IV of the Act and provisions of the SEBI Listing Regulations, the performance evaluation of Independent Directors shall be done by the entire Board of Directors excluding the director being evaluated, on the basis of performance and fulfilment of criteria of independence and their independence from management.

Based on the report of the performance evaluation, it shall be determined whether to extend or continue the term of appointment of Independent Director.

Accordingly, the Board has carried out an annual performance evaluation of its own performance, that of its Committees, Chairperson and Individual Directors.

The manner in which formal annual evaluation of performance was carried out by the Board for FY2023 basis the criteria for performance evaluation is given below:

• Based on the said criteria, a questionnaire-cum-rating sheet was deployed using an IT platform for seeking feedback of the directors with regards to the performance of the Board, its Committees, the Chairperson and individual directors.

• From the individual ratings received from the directors, a report on summary of ratings in respect of performance evaluation of the Board, its Committees, Chairperson and individual directors for the year 2022-23 and a consolidated report thereof was arrived at.

• The NRC reviewed the implementation and compliance of the performance evaluation at its meeting held on 15 March 2023.

• The report of performance evaluation so arrived at was then discussed and noted by the Board at its meeting held on 16 March 2023.

• Based on the report and evaluation, the NRC and Board at their respective meetings held on 15 March 2023 and 16 March 2023, determined that the appointment of all Independent Directors may continue.

• Details on the evaluation of Board, Non-Independent Directors and Chairperson of the Company as carried out by the Independent Directors at their separate meeting held on 15 March 2023 have been furnished in a separate paragraph elsewhere in this report.

• During FY2023, the process followed by the Company was reviewed by the NRC, which opined these to be in compliance with the applicable provisions and found it to be satisfactory.

Other than the Chairman of the Board and NRC, no other Director has access to the individual ratings given by Directors.

The performance evaluation criteria were reviewed by the NRC & Board and advised enhancement to the feedback mechanism by introducing few qualitative aspects to the criteria.

Meeting of Independent Directors

Pursuant to Section 149(8) read with Schedule IV of the Act, and Regulation 25(3) of SEBI Listing Regulations, the Independent Directors shall hold at least one meeting in a financial year without the presence of Non-Independent Directors and members of the management. The meeting of Independent Directors of the Company was held on 15 March 2023. Anami N Roy chaired the said meeting.

The Independent Directors at the meeting, inter alia:

• noted the report of performance evaluation of the Board & its committees for the year 2022-23. • reviewed the performance of Non-Independent Directors and the Board as a whole. • reviewed the performance of the Chairman of the Board taking into account the views of Executive Director; and • assessed the quality, quantity and timeliness of flow of information between the Company's Management and the Board that is necessary for the Board to effectively and reasonably perform their duties.

Number of Board Meetings

The Board met six times during FY2023 on 25 April 2022, 23 June 2022, 25 July 2022, 19 October 2022, 21 January 2023 and 16 March 2023. The gap between two consecutive meetings was less than one hundred and twenty days.

Directors' Responsibility Statement

The financial statements are prepared in accordance with the Indian Accounting Standards (Ind AS) under historical cost convention on accrual basis except for certain financial instruments, which are measured at fair values pursuant to the provisions of the Act and guidelines issued by SEBI/ RBI/ NHB. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy. These form a part of the notes to the financial statements.

In accordance with the provisions of Section 134(3)(c) of the Act, the Directors state that: i. in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; ii. they have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for FY2023; iii. they 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 Company and for preventing and detecting fraud and other irregularities; iv. they have prepared the annual accounts on a going concern basis; v. they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and vi. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.

Audit Committee

The Company has an Audit Committee fulfilling the requirements under the Act, RBI Master Direction Non-Banking Financial Company Housing Finance Company (Reserve Bank) Directions, 2021 ("RBI Regulations") and SEBI Listing Regulations.

The present composition of the Committee as approved by the Board at its meeting held on 16 March 2023 is as follows: Anami N Roy (Chairman), Dr. Arindam Bhattacharya, Rajeev Jain and Jasmine Chaney. The composition of Audit Committee is over and above the minimum requirement prescribed under the Act, SEBI Listing Regulations, and RBI Regulations of having a minimum of two-thirds of Independent Directors, including the Chairman. All members of the committee are Non-Executive Directors possessing financial literacy and expertise in accounting or financial management related matters.

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

The composition, brief terms of reference and attendance record of members are given in the Corporate Governance Report.

Nomination and Remuneration Committee

The Company has a Nomination and Remuneration Committee fulfilling the requirements prescribed under the Act, RBI Regulations and SEBI Listing Regulations.

The present composition of the Committee as approved by the Board at its meeting held on 21 January 2023 is as follows: Dr. Arindam Bhattacharya (Chairman), Anami N Roy and Rajeev Jain.

The composition, brief terms of reference and attendance record of members are given in the Corporate Governance Report.

Risk Management Committee

The Company has a Risk Management Committee fulfilling the requirements prescribed under the Act, RBI Regulations and SEBI Listing Regulations.

The present composition of the Committee as approved by the Board at its meeting held on 16 March 2023 is as follows: Dr. Arindam Bhattacharya (Chairman), Sanjiv Bajaj, Anami N Roy, Rajeev Jain, Atul Jain, Jasmine Chaney, Niraj Adiani, Gaurav Kalani, Vijay Solanki and Ajita Kakade.

The composition of Risk Management Committee is as per the requirement prescribed under the SEBI Listing Regulations, and the RBI Regulations. The Committee consist of ten members with majority of them being members of the Board of Directors, including an Independent Director. The Chairperson of the Committee is a member of the Board of Directors.

The Board of Directors have adopted a risk management policy for the Company under which management identifies and controls risks through a properly defined framework in terms of the aforesaid policy. During the year, the Board of Directors adopted Internal Capital Adequacy Assessment Process (ICAAP) pursuant to the RBI Scale Based regulations covering three major components as risk profile assessment, stress testing and capital planning.

The composition, brief terms of reference and attendance record of members are given in the Corporate Governance Report.

Particulars of Loans, Guarantees and Investments

The Company, being a housing finance company registered with the NHB and engaged in the business of providing loans in ordinary course of its business, is exempt from complying with the provisions of Section 186 of the Act with respect to loans. Accordingly, the disclosures pertaining to loans and guarantees given as required under the aforesaid section have not been made in this Report.

Information regarding investments made by the Company are detailed in the financial statements.

Material Changes and Commitments

There were no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year and the date of this report.

Conservation of Energy

Though the operations of the Company are not energy intensive, the Company implements various energy conservation measures across all its functions, verticals and value chain partners. Key initiatives of the Company include the following:

• Switching from conventional lighting system to LED lights at most of the branches in metro areas;

• Selecting and designing offices to facilitate maximum natural light utilisation; and

• Use of cloud based virtual servers to increase energy efficiency and data security.

Technology Absorption

The Company adopts latest and innovative technologies for acquisition and servicing. Its move to host entire enterprise IT ecosystem on cloud is leading to flexible architecture for its business applications, data warehousing and analytics, that is high performing, rapidly scalable, cost effective and highly secure. The Company has improvised its stack of web-based applications compatible across computing devices enabling mobility along with API gateways for seamless integration.

The Company has also improvised productivity in areas of business operations and customer service by leveraging robotic process automation and artificial intelligence.

Foreign Exchange Earnings and Outgo

During FY2023, the Company did not have any foreign exchange earnings in terms of actual inflow and the foreign exchange outgo in terms of actual outflow amounted toC 25.05 lakh.

Corporate Social Responsibility (CSR)

The CSR Committee comprises of three directors viz. Anami N Roy (Chairman), Sanjiv Bajaj and Rajeev Jain. Upon completion of term of Lila Poonawalla, she ceases to be a Director of the Company from close of business hours on 21 January 2023. The Board at its meeting dated 21 January 2023 inducted Anami N Roy as member and Chairman of the Committee w.e.f. 22 January 2023.

The CSR obligation of the Company for FY2023 is C 12.68 crore. As on 31 March 2023, the Company has fully spent the CSR obligation for FY2023.

Detailed information on CSR Policy, its salient features, CSR initiatives undertaken during the year, details pertaining to spent amount forms part of Annual Report on CSR activities.

The CSR policy has been hosted on the website of the Company and can be accessed at https://www. bajajhousingfinance.in/documents/37350/53075/csr_policy.pdf Further, the Chief Financial Officer has certified that the funds disbursed have been utilised for the purpose and in the manner approved by the Board for FY2023.

Annual Return

A copy of the annual return as provided under Section 92(3) of the Act, in the prescribed form, which will be filed with the Registrar of Companies/MCA, is hosted on the Company's website and can be accessed at https://www.bajajhousingfinance.in/annual-reports

Risk Management

The Board of Directors have adopted a risk management policy for the Company which provides for identification, assessment and control of risks which in the opinion of the Board may pose significant loss or threat to the Company.

Information on the development and implementation of a risk management policy for the Company including identification, assessment and control of elements of risk are given in the Management Discussion and Analysis Report. Further, there are no elements of risk which in the opinion of the Board threaten the existence of the Company.

The RBI, vide its circular dated 22 October 2020, reviewed the regulatory framework for HFCs wherein, all non-deposit taking HFCs with asset size of more than C 100 crore shall pursue liquidity risk management which, inter alia, should cover adherence to gap limits. The Board has approved a Liquidity Risk Management framework encompassing, inter alia, strategies and practices, internal controls, maturity profiling, liquidity coverage ratios and high-quality liquid assets.

The Board at their meeting held on 25 April 2022, has re-appointed Niraj Adiani as Chief Risk Officer for another term of 3 years from 1 July 2022 to 30 June 2025. Further, in terms of NHB Circular on Risk Management System Appointment of Chief Risk Officer dated 29 May 2019, the Committee also has an independent meeting with the Chief Risk Officer without the presence of management.

Chief Compliance Officer

Amit Yadav has been appointed as the Chief Compliance Officer (CCO) of the Company with effect from 1 April 2022. The Company has also adopted a Compliance Policy in terms of RBI circular dated 11 April 2022 on compliance function & role of CCO.

Significant and Material Orders passed by the Regulators and Courts

During FY2023, there were no significant or material orders passed by any regulator or court or tribunal impacting the going concern status or the Company's operations in future.

Internal Audit

Internal Audit function provides an independent view to Audit Committee on the quality and efficacy of the internal controls, governance systems and processes.

In line with the RBI's guidelines on Risk Based Internal Audit (RBIA), the Company has adopted a Risk Based Internal Audit policy.

Pursuant to RBIA framework, Internal Audit is aligned in such a manner that assurance is provided to the Audit Committee and Board of Directors on quality and effectiveness of the internal controls, and governance related systems and processes.

At the beginning of each financial year, an audit plan is rolled out after approval of the Audit Committee. The Audit Committee regularly reviews the internal audit reports along with the corrective and preventive actions thereon. Significant audit observations, corrective and preventive actions thereon are presented to the Audit Committee on a quarterly basis.

The Committee also has an independent meeting with the Internal Auditor without the presence of management.

Internal Financial Controls

The Company has in place adequate financial controls commensurate with its size, scale and complexity of operations with reference to its financial statements. These have been designed to provide reasonable assurance regarding recording and providing financial information, ensuring integrity in conducting business, accuracy and completeness in maintaining accounting records, prevention and detection of frauds and errors. The Audit Committee and Board reviewed the Internal Financial Controls and found them in order.

Information System Audit

In terms of the Information Technology Framework for the NBFC Sector, HFCs are required to have an information system audit at least once in a year. During the year under review, system audit was conducted by a CERT-in empanelled audit firm (KPMG). The areas audited were IT General Controls, Cyber Security Controls and Information Security Controls aligned with ISO 27001 and the regulatory framework applicable to the Company. Audit revealed no major observations. Necessary continuous improvement actions have been taken in line with the audit observations. ISO second surveillance audit was conducted by BSI during the year. There are no non-compliances reported and ISO certification is renewed.

Business Continuity and Cyber Security

To enable user to work from home in secure manner, the Company implemented VPN with auto connect. The Company also enabled remote access for identified partners to enable full resources for user support, cloud support, application maintenance and testing using privilege access management technology connecting to the Company servers. Cloud infrastructure has been built with DR capabilities and is capable of running applications during any disaster situation.

The Company's cloud first IT strategy helped it to manage the demand with elastic scalability and rapid provisioning while reducing total cost of ownership and turnaround time. The Company is aiming for 100% digitalisation with paperless environment. The Company's Cyber security strategy consists of a plan of actions designed to improve the security and resilience of cloud infrastructures and services. It is a high-level top-down approach to cyber security that establishes a range of organisation objectives and priorities that should be achieved in a specific timeframe. As a critical component in cyber security, the Company is working on improving awareness among employees using a learning platform.

Whistle-blower Policy/Vigil Mechanism

The Company has a whistle-blower policy encompassing vigil mechanism pursuant to the requirements of the Section 177(9) of the Act and Regulation 22 of the SEBI Listing Regulations and Regulation 9A of SEBI (Prohibition of Insider Trading) Regulations, 2015.

The whistle-blower framework has been introduced with an aim to provide employees, directors and value chain partners with a safe and confidential channel to share their adversely impacting operations of the Company. The policy/vigil mechanism enables directors, employees and value chain partners to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Company's code of conduct or ethics policy and leak or suspected leak of unpublished price sensitive information.

Concerns may be reported anonymously either through e-mail or through a ‘Confidential Feedback Mechanism', which is reviewed by a Whistle-Blower Committee comprising senior management from within and outside the organisation. The Audit Committee reviews the functioning of the vigil mechanism/whistle-blower policy once a year. It provides safeguards against victimisation of directors/employees/ value chain partners who avail the mechanism and allows for direct access to the Chairperson of the Audit Committee by writing to bhflacchairperson@bajajfinserv.in Policy has been hosted on the Company's website and can be accessed at https://www.bajajhousingfinance.in/ documents/37350/53075/Vigil+mechanism+policy.pdf Employees of the Company are required to undergo mandatory online learning module on code of conduct which includes whistle-blower policy and affirm that they have understood and are aware of vital aspects of the policy.

During FY2023, no person was denied access to the Audit Committee or its Chairperson under this policy and; four complaints were received under the vigil mechanism of the Company.

Corporate Governance

In terms of the SEBI Listing Regulations, a separate section titled ‘Report on Corporate Governance' has been included in this Annual Report, along with the Management Discussion and Analysis Report and General Shareholder Information.

The Managing Director and the Chief Financial Officer have certified to the Board in relation to the financial statements and other matters as specified in the SEBI Listing Regulations.

A certificate from Statutory Auditors of the Company regarding compliance of conditions of corporate governance is annexed to this Report.

Secretarial Standards

The Company has complied with the requirements prescribed under the Secretarial Standards on meetings of the Board of Directors (SS 1) and General Meetings (SS 2) read with the MCA Circulars.

Statutory auditors

The Company has formulated a Board approved statutory auditor policy in terms of the RBI circular dated 27 April 2021 on guidelines for appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs). The said policy can be accessed at https://www.bajajhousingfinance.in/documents/37350/53075/statutory_auditor_appointment_policy_clean. pdf In line with the RBI guidelines, the Board of Directors, based on the recommendation of the Audit Committee at its meeting held on 25 October 2021, approved appointment of M/s. Khandelwal Jain & Co. and M/s. G D Apte & Co. as joint statutory auditors of the Company for a consecutive period of three years.

Pursuant to the provisions of Section 139(8) of the Act, members of the Company have approved the appointment of M/s. Khandelwal Jain & Co. and M/s. G D Apte & Co. as Joint Statutory Auditors effective 16 November 2021 till conclusion of 14th AGM. The members at their meeting (14th AGM) dated 15 June 2022 approved the appointment of M/s. Khandelwal Jain & Co. and M/s. G D Apte & Co. as Joint Statutory Auditors for remaining term of two years till the conclusion of the 16th AGM to audit the accounts of the Company i.e. for the financial year ending 31 March 2023 and 31 March 2024.

The audit report by M/s. Khandelwal Jain & Co. and M/s. G D Apte & Co., for FY2023 is unmodified, i.e. it does not contain any qualification, reservation, adverse remark or disclaimer.

In terms of the Master Direction - Non Banking Financial Company - Housing Finance Company (Reserve Bank) Direction, 2021, Joint Statutory Auditors have submitted an additional report dated 25 April 2022 and 24 April 2023, for FY2022 & FY2023 respectively. There were no comments or adverse remarks in the said report.

Secretarial auditor

Pursuant to the provisions of Section 204 of the Act, the Board has appointed Shyamprasad D. Limaye, practicing company secretary (FCS No. 1587, CP No. 572), to undertake secretarial audit of the Company. A report from the secretarial auditor in the prescribed Form MR-3 for the year ended 31 March 2023 is annexed to this Report.

Pursuant to Regulation 24A (2) of SEBI Listing Regulations, a report on secretarial compliance for FY2023 has been issued by Shyamprasad D Limaye and the same has been submitted with the stock exchange within the prescribed timelines. The said report is available on the website of the Company.

There are no observations, reservations, qualifications or adverse remark in the said report. The auditors, i.e. Statutory Auditors and Secretarial Auditors, have not reported any matter under Section 143 (12) of the Act, and therefore, no detail is required to be disclosed under Section 134(3) (ca) of the Act.

Other Statutory Disclosures

• There is no change in the nature of business of the Company during FY2023.

• The provisions of Section 148 of the Act relating to cost accounts and cost audit are not applicable to the Company.

• During FY2023, no amount has remained unclaimed pursuant to debentures redeemed during the year.

• During FY2023, debentures of the Company were not suspended from trading on account of any corporate action or otherwise.

• Pursuant to Rule 2A of the Companies (Specification of Definitions Details) Rules, 2014, public companies which have not listed their equity shares on a recognised stock exchange but have listed their non-convertible debt securities issued on private placement basis in terms of SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, shall not be considered as listed company in terms of the Act. Hence, Section 197 (12) read with rules 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are not applicable.

• The Company being a non-deposit accepting housing finance company, the provisions relating to Chapter V of the Act, i.e. acceptance of deposit, are not applicable. The Board has also passed a resolution confirming non-acceptance of public deposits.

• The Company has no transaction that qualify under the contracts and arrangements with related parties referred in Section 188 (1) of the Act.

• For the details about the policy developed and implemented by the Company on CSR initiatives taken during the year, refer the Annual Report on CSR activities annexed to the Report.

• The Company has a policy on prevention of sexual harassment at the workplace. The Company has complied with the provisions relating to the constitution of Internal Complaints Committee under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The number of complaints received, disposed off and pending during FY2023 is given in the annexed ‘Corporate Governance Report'.

• The Company has not defaulted in repayment of loans from any banks and financial institutions.

• Neither any application was made, nor any proceeding is pending under the Insolvency and Bankruptcy Code, 2016 against the Company.

• During FY2023, there was no instance of one-time settlement with Banks or Financial Institutions.

• The Company has issued a formal letter of appointment to Independent Directors in the manner provided under the Act.

• The Company does not have any ESOP scheme. Being subsidiary of Bajaj Finance Limited, holding company and Bajaj Finserv Limited, ultimate holding company (herein after referred to as ‘holding companies'), employees of the Company are eligible for stock options of holding companies.

Acknowledgement

The Board places its gratitude and appreciation for the support and co operation from its members, the Reserve Bank of India, the National Housing Bank and other regulators, banks, financial institutions and trustees for debenture holders.

The Board also places on record its sincere appreciation for the commitment and hard work put in by the Management and the employees of the Company and thanks them for another excellent year of performance.

On behalf of the Board of directors