Fino Payments Bank Ltd

Dear Members,

Your Board of Directors are pleased to present the Eighth (8^th) Annual Report of Fino Payments Bank Limited ("Bank") covering business and operations together with the Audited Financial Statements for the financial year ended March 31, 2024.

FINANCIAL HIGHLIGHTS

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

BUSINESS OPERATIONS AND STATE OF AFFAIRS OF THE BANK

The brief details of the business operations and state of affairs of the Bank during financial year ended March 31, 2024 are given below:

1. Throughput grew by a whopping 40.58% year-on-year basis in FY24.

2. The Bank processed 211.03 Crore + transactions in FY24, a 74.85% growth compared to the previous year (Almost 1% of those who walk-in to transact eventually commence a relationship with the Bank).

3. Digital throughput grew exponentially by 170.75% to touch nearly 36.98% of overall throughput in FY24 at Rs.1,32,575.90 Crore.

4. The Bank opened approx. 0.32 Crore current and savings accounts of customers in FY24, of which 98.62% + were subscription based accounts.

5. The Bank delivered a robust ROE of 14.74% in FY 24.

6. Merchant network went up by 28.20%, the Bank's physical outreach reached to 0.18 Crore + banking points in FY 24.

Further, the total revenue of the Bank was Rs.1,478.38 Crore for the year ended March 31, 2024 as compared to Rs.1,229.91 Crore in previous financial year. The Bank's Profit after tax stood at Rs.86.22 Crore for the year ended March 31, 2024 as compared to Rs.65.08 Crore in previous financial year.

Your Bank is a public limited company and is registered with Reserve Bank of India ("RBI") to carry on the business of Payments Bank in India. The Bank became the Scheduled Bank with effect from January 01, 2021 vide Notification DoR.NBD. No.2138/16.03.005/2020-21 dated January 01, 2021 and published in the Gazette of India (Part III - Section 4) dated February 13 - February 19, 2021 and continues to comply with all the applicable regulations prescribed by RBI, from time to time.

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

CHANGE IN NATURE OF BUSINESS

During the year under review, there has been no change in nature of business of the Bank.

However, the Board at its meeting held on July 28, 2023 approved the proposal for transition of the Bank into a Small Finance Bank ("SFB") subject to fulfilling all the necessary requirements and obtaining the necessary statutory / regulatory approvals.

Accordingly, the Bank has filed an application for transition into SFB with the RBI. Approval of RBI is awaited.

The Bank believes that it has the expertise, technology and team to cater to additional dimensions of the banking sector and contribute further towards the Government led initiatives of financial inclusion.

CREDIT RATING

The details of credit rating as on March 31, 2024 along with its outlook are given hereunder:

ICRA Limited has re-affirmed credit rating of [ICRA] BBB+ (Stable) and [ICRA] A2+, for Long-term and short-term overdraft facilities of the Bank, respectively, vide its press-release dated April 30, 2024.

DIVIDEND

In accordance with Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended ("SEBI Listing Regulations"), the Bank has formulated a Dividend Distribution Policy, which ensures a fair balance between rewarding its Members and retaining enough capital for the Bank's future growth and expansion plan. The Dividend Distribution Policy is available on the Bank's website at https://web4.finobank.com/investors/corporate- governance#code-policies

The Bank is in growing stage and on account of brought forward losses of previous years of Rs.191.96 Crore and keeping in view of required funds to support its future growth, your Directors do not recommend any dividend for the financial year ended March 31, 2024.

TRANSFER TO RESERVES

The Bank has appropriated Rs.21.56 Crore towards Statutory Reserves for the financial year ended March 31, 2024.

CAPITAL STRUCTURE

During the year under review, the authorised share capital of the Bank was increased from Rs.85,00,00,000/- (Rupees Eighty Five Crore Only) divided into 8,50,00,000 (Eight Crore and Fifty Lakhs) Equity Shares of face value of Rs.10/- (Rupees Ten Only) each to Rs.90,00,00,000/- (Rupees Ninety Crore only) divided into 9,00,00,000 (Nine Crore) Equity Shares of face value of Rs.10/- (Rupees Ten Only) each by creation of additional 50,00,000 (Fifty Lakhs) Equity Shares having face value of Rs.10/- (Rupees Ten Only) each aggregating to Rs.5,00,00,000 (Rupees Five Crore only) ranking pari-passu with the existing equity shares of the Bank.

During the year under review, the Bank has not raised any capital, therefore the issued, subscribed and paid up share capital of the Bank as on March 31, 2024 was Rs.83,21,43,020/- (Rupees Eighty Three Crore Twenty One Lakhs Forty Three Thousand Twenty Only) comprising of 8,32,14,302 (Eight Crore Thirty Two Lakh Fourteen Thousand Three Hundred and Two) Equity Shares of face value of Rs.10/- (Rupees Ten Only) each.

CAPITAL ADEQUACY RATIO

Your Bank has a strong capital adequacy ratio. As on March 31, 2024, the Capital to Risk Assets Ratio ("CRAR") of your Bank was 74.50% which is well above the minimum requirement of 15% CRAR prescribed by the RBI.

Out of the above, Tier I capital adequacy ratio stood at 70.05% and Tier II capital adequacy ratio stood at 4.45%.

i. ACQUISITION OF 7.98% STAKE IN PAYSPRINT PRIVATE LIMITED

Pursuant to the approval of the Board and the Share Subscription and Shareholders' Agreement executed by the Bank with PaySprint Private Limited ("PaySprint") to acquire upto 12.19% equity shares of PaySprint in two tranches, the Bank has invested Rs.2.5 Crore representing 7.98% of paid up capital of PaySprint i.e. first tranche of the proposed investment. The second tranche of remaining investment upto Rs.1.5 Crore representing 4.21% of paid up capital of PaySprint is subject to RBI approval, as applicable, and at the sole discretion of the Bank.

The investment is in continuation to several in-house initiatives by the Bank that are already underway towards building a digital ecosystem for its customers as part of its Fino 2.0 journey. This investment will further strengthen your Bank product portfolio into Application Programming Interface (API) for business-to-business (B2B) integration. The Bank intends to develop API stacks in the following sectors: 1) Financial 2) Banking 3) Payment 4) Collection 5) Insurance 6) Lending 7) Investment 8) Travel 9) Verification and 10) Health Care API stacks.

ii. PROPOSAL FOR GROUP CORPORATE RESTRUCTURING

The Bank had received a letter dated July 28, 2023 from Fino PayTech Limited ("FPL"), the Holding Company of the Bank, regarding a group corporate restructuring proposal. In view of the said letter, your Board has constituted Business & Corporate Restructuring Committee ("BCRC") to explore the possibility of group corporate restructuring and evaluate the implications and other considerations of the same.

The corporate restructuring proposal, as and when approved by the Board, remains subject to approvals and consents as may be required from the regulators, statutory bodies and relevant stakeholders under applicable law.

UTILIZATION OF NET PROCEEDS FROM THE FRESH ISSUE IN INITIAL PUBLIC OFFER ("IPO")

The net proceeds from the fresh issue in the IPO were utilised towards the objects stated in the Red Herring Prospectus dated October 22, 2021 i.e. towards augmenting its Tier - I capital base to meet its future capital requirements. Further, the proceeds from the Fresh Issue were also used towards meeting the expenses in relation to the IPO. The Bank on a quarterly basis affirms that there is no deviation in utilisation of the issue proceeds from the object stated in offer documents and submits to Stock Exchanges in compliance with the SEBI Listing Regulations.

The Bank would require additional Tier-I capital for penetration of business/ services in uncovered/ sparsely covered areas, modernization to technology (banking) platform to handle business in line with large volumes on account of growing business development of customer oriented banking/ financial products, activities to generate awareness of Bank's products and services among targeted population and country, keeping sufficient capital meeting the regulatory/ compliance requirements to operate as a Payments Bank. This future need for capital will be met through internal accruals as well as proceeds of the issue.

EMPLOYEES STOCK OPTION SCHEMES ("ESOS")

The Bank has formulated and implemented Fino Payments Bank Limited - Employees Stock Option Policy, 2020 ("ESOP 2020") and Fino Payments Bank Limited - Employees Stock Option Policy, 2023 ("ESOP 2023") with a view to attract, retain, incentivize and motivate employees of the Bank by way of rewarding their performance and promoting their increased participation in the overall corporate growth and profitability. The ESOP 2020 has been amended from time to time in view of regulatory changes/ business requirements. None of these amendments were prejudicial to the interest of the employees.

The Nomination and Remuneration Committee which also acts as a Compensation Committee ("NRC") of the Board is entrusted with the responsibility of implementation and administration of the ESOP 2020 and ESOP 2023.

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.finobank.com under the ‘Investors' section. The Equity Shares, if issued, under ESOP 2020 and ESOP 2023 shall rank pari-passu with the existing equity shares of the Bank.

Further, disclosure as per the ‘Guidance Note on Accounting for Employee Share-based Payments' issued by the Institute of Chartered Accountants of India, are disclosed in the Notes to the

Financial Statements of the Bank for the financial year ended March 31, 2024, which forms integral part of this Annual Report.

The ESOP 2020 and ESOP 2023 are in compliance with the SBEB & SE Regulations. A certificate from the Secretarial Auditor of the Bank that the ESOP 2020 and ESOP 2023 have been implemented in accordance with the SBEB & SE Regulations and in accordance with the resolutions passed by the members of the Bank, shall be placed at the 8^th Annual General Meeting ("AGM") of the Bank.

MATERIAL CHANGES AND COMMITMENTS

Apart from the details given in this Report, there were no material changes or commitments affecting the financial position of the Bank which have occurred between the end of the financial year i.e. March 31, 2024 and up to the date of this Report.

TRANSFER TO INVESTOR 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 Companies Act, 2013 ("Act") read with applicable rules framed thereunder, as amended from time to time.

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

As on March 31, 2024, the composition of the Board was in compliance with the provisions of the Act, the SEBI Listing Regulations and the Guidelines for Licensing of "Payments Banks" dated November 27, 2014 issued by the RBI and the Articles of Association of the Bank.

During the year under review, the Bank as a matter of good governance practice has reconstituted its Board Committees to align with the RBI Circular No. RBI/2021- 22/24DOR.GOV. REC.8/29.67.001/2021-22 dated April 26, 2021 on Corporate Governance in Banks - Appointment of Directors and Constitution of Committees of the Board.

The Board of the Bank is duly constituted with an optimum combination of Executive and Non-Executive Directors including 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.

In terms of the requirement of the SEBI Listing Regulations, the Board has identified core skills, expertise and competencies of the Directors in the context of the Bank's businesses for effective functioning. The list of key skills, expertise and core competencies of the Board of Directors is detailed in the Corporate Governance Report.

In the opinion of the Board, all the directors as well as the directors appointed / re-appointed during the year possess the requisite qualifications, experience and expertise and hold high standards of integrity.

In terms of SEBI Listing Regulations, the Bank has received Certificate from M/s. DM & Associates Company Secretaries LLP, Practicing Company Secretaries, the Secretarial Auditor of the Bank that none of the Directors on the Board of the Bank have been debarred or disqualified from being appointed or continuing as a Director of any Company by the Securities and Exchange Board of India/ Ministry of Corporate Affairs or any such other statutory authority. The said certificate is enclosed as Annexure - A to the Corporate Governance Report.

Appointment/re-appointment of Directors made during financial year 2023-24 and till the date of this report

Based on the recommendation of the NRC, the Board and the shareholders (as applicable), approved the following appointment/ re-appointment during FY 2023-24 and till the date of this report:

1. Mr. Pankaj Kumar (DIN: 07245781) was appointed by the Board as a Non-Executive Nominee Director with effect from April 11, 2023, not liable to retire by rotation, subject to approval of Members. The Members approved the appointment of Mr. Pankaj Kumar as a Non-Executive Nominee Director of the Bank with effect from April 11, 2023, not liable to retire by rotation, through postal ballot by passing an ordinary resolution.

2. Mr. Rajat Kumar Jain (DIN: 00046053), Independent Director was appointed as the Part-time Chairperson of the Bank subject to the approval of RBI. Further, RBI vide its letter dated November 24, 2023 has approved the appointment of Mr. Rajat Kumar Jain as a Part-Time Chairperson of the Bank w.e.f. November 24, 2023 till November 01, 2025.

3. Mrs. Anita Sudhir Pai (DIN: 07651059) was appointed by the Board as an Additional Director in the capacity of Independent Director with effect from January 11, 2024. The Members approved the appointment of Mrs. Anita Sudhir Pai as an Independent Director of the Bank for a term of five consecutive years commencing from January 11, 2024 up to January 10, 2029 (both days inclusive) through postal ballot by passing a special resolution.

4. Mrs. Neeta Mukerji (DIN: 00056010) was appointed by the Board as an Additional Director in the capacity of Independent Director with effect from March 05, 2024. The Members approved the appointment of Mrs. Neeta Mukerji as an Independent Director of the Bank for a term of five consecutive years commencing from March 05, 2024 up to March 04, 2029 (both days inclusive) through postal ballot by passing a special resolution.

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, Mr. Rishi Gupta (DIN:01433190), Managing Director & CEO of the Bank retires by rotation at the ensuing AGM and being eligible, has offered himself for re-appointment. The resolution seeking the re-appointment of

Mr. Rishi Gupta forms part of the Notice convening the ensuing 8^th AGM.

The profile and particulars of experience, attributes, skills of Mr. Rishi Gupta together with his other directorships and committee memberships in terms of Regulation 36 of SEBI Listing Regulations and Secretarial Standard on General Meetings ("SS-2") issued by the Institute of Company Secretaries of India have been disclosed in the annexure to the Notice of the AGM.

Cessation of Directors during the financial year 2023-24 and till the date of this report

Mr. Prakash Kulathu Iyer was appointed as an Independent Director of the Bank for a period of five years with effect from June 01, 2022. Mr. Prakash Kulathu Iyer resigned as an Independent Director of the Bank w.e.f. June 30, 2023.

Mr. Suresh Kumar Jain was appointed as an Independent Director of the Bank for a period of five years with effect from January 16, 2019. Mr. Suresh Kumar Jain ceased to be Independent Director of the Bank w.e.f. January 15, 2024 upon completion of his tenure.

The Board placed on record its appreciation for the valuable services and support provided by Mr. Prakash Kulathu Iyer and Mr. Suresh Kumar Jain during their tenure as Independent Directors of the Bank.

Key Managerial Personnel

As on the date of this report, the following officials of the Bank are the ‘Key Managerial Personnel' pursuant to the provisions of Section 203 of the Act:

Mr. Rishi Gupta

Managing Director & CEO

Mr. Ketan Merchant

Chief Financial Officer

Mr. Basavraj Loni

Company Secretary & Compliance Officer

During the year under review, there has been no change in the Directors and Key Managerial Personnel of the Bank other than those disclosed above.

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 (Creation and Maintenance of Databank of Persons Offering to become Independent Directors) 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.

POLICY ON APPOINTMENT AND REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

In accordance with the provisions of Section 178(3) of the Act read with rules made thereunder, SEBI Listing Regulations and applicable RBI guidelines, the Board of Directors has formulated and adopted a comprehensive Compensation Policy which inter-alia covers criteria for appointment and remuneration of its Directors, Key Managerial Personnel, Material Risk Takers, Senior Management Personnel and other Employees of the Bank.

The proposals for appointment of Directors are submitted to the NRC along with requisite documents/disclosures received in the prescribed format from proposed candidates as Director. The NRC carries out the fit and proper assessment after ascertaining the veracity of documents submitted, experience and qualifications required for the post and if deems fit, recommend the profile of proposed candidate for appointment to Board for its approval. The NRC and the Board ensures that the remuneration to be paid to the proposed appointee is in accordance with the compensation policy of the Bank and applicable RBI guidelines issued in this regard. During the financial year 2023-24, the Board reviewed the Compensation Policy, which regulates the appointment and remuneration of Directors, Key Managerial Personnel, Material Risk Takers, Senior Management Personnel and other employees of the Bank. The terms of reference of the NRC, objectives of Compensation Policy including other details have been detailed in Corporate Governance Report annexed to the Board's Report.

Remuneration of Directors, Key Managerial Personnel, Material Risk Takers and Senior Management Personnel are reviewed by the NRC and approved by the Board in accordance with the applicable laws. The Compensation Policy of the Bank is available on the Bank's website at https://web4. finobank.com/investors/corporate-governance#code-policies

BOARD PERFORMANCE EVALUATION

In accordance with the provisions of the Act, SEBI Listing Regulations and RBI guidelines, the Annual Performance Evaluation of the Board, its Committees, Part-time Chairperson, Managing Director & CEO and each Director has been carried out for the year under review. The details of evaluation process of the Board, its Committees, Part-time Chairperson, Managing Director & CEO and individual Directors have been disclosed in the Corporate Governance Report forming part of this Annual Report.

The policy on the Board's Evaluation framework is made available on the Bank's website at https://web4.finobank.com/investors/ corporate-governance#code-policies

SUCCESSION PLANNING

Pursuant to the recommendation of NRC, the Board has framed a Policy on Succession Planning at the Board and Senior Management levels. The Policy is periodically reviewed by the NRC and the Board. The Board composition and the desired skill sets/ areas of expertise at the Board level are continuously reviewed and vacancies, if any, are reviewed in advance through a systematic due diligence process.

Succession planning at Senior Management levels, including business and assurance functions, is continuously reviewed to ensure continuity and depth of leadership at two levels below the Managing Director & CEO. Successors are identified prior to the Senior Management positions falling vacant, to ensure a smooth and seamless transition. In event of any unexpected occurrence in respect of any member in the senior management team, the next person as per the organisation chart and hierarchy shall take interim charge of the position subject to the approval of the NRC, pending a regular appointment in terms of the succession plan. The Policy on Succession Planning is made available on the Bank's website at https://web4.finobank.com/investors/corporate- governance#code-policies

FAMILIARISATION PROGRAMME

The details about Familiarisation Programme carried out by the Bank have been disclosed in the Corporate Governance Report forming part of this Annual Report.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c) of the Act, it is hereby confirmed that:

a. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

b. the Directors had 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 that period;

c. the Directors had 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 had prepared the annual accounts on a going concern basis;

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

f. 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.

CODE OF CONDUCT FOR DIRECTORS INCLUDING INDEPENDENT DIRECTORS AND SENIOR MANAGEMENT PERSONNEL

The Board of the Bank has adopted a Code of Conduct for the Directors and Senior Management Personnel ("SMPs") of the Bank in compliance of Regulation 17(5) of the SEBI Listing Regulations which sets forth the guiding principles for orderly and fair conduct by Board and SMPs.

For the financial year 2023-24, all the Board members and SMPs have affirmed the compliance with the Code and a declaration to this effect signed by the Managing Director & CEO forms part of Corporate Governance Report annexed to the Board's Report forming part of this Annual Report. The Code of Conduct for Directors and SMPs is disclosed on the Bank's website at https://web4.finobank.com/ investors/corporate-governance#code-policies

MEETINGS OF THE BOARD AND COMMITTEES

In compliance with the statutory requirements, the Bank has seven mandatory Committees viz. Audit Committee, Nomination & Remuneration Committee, Corporate Social Responsibility Committee, Risk & Asset Liability Management Committee, Stakeholders Relationship Committee, IT Strategy Committee and Customer Service Committee. The Bank also has three operating/ special purpose committees for better administration viz. Committee of Directors (Operations), Strategic Investment Committee and Business & Corporate Restructuring Committee.

All the recommendations made by all Board Committees, including the Audit Committee, were accepted by the Board.

A detailed update on the composition, governance and terms of reference of Board committees, attendance of Directors at Board and Committee meetings held during financial year 2023-24 is provided in the Corporate Governance Report annexed to the Board's Report forming part of this Annual Report.

Statutory Central Auditors and their Report

M/s. A P Sanzgiri & Co, Chartered Accountants (ICAI Firm Registration Number: 116293W) the Statutory Central Auditors of the Bank have conducted Statutory Audit of the Financial Statements of the Bank for financial year ended March 31, 2024. The Notes referred in the Auditors' Report are self-explanatory.

There are no qualifications or reservations or adverse remark or disclaimers given by Statutory Central Auditors. The Auditors' Report forms an integral part of this Annual Report. The total fees paid to the Statutory Central Auditors of the Bank for the financial year ended March 31, 2024 is disclosed in the Note No. 60 to Financial Statements for the financial year ended March 31, 2024 forming part of this Annual Report.

M/s. A P Sanzgiri & Co, Chartered Accountants were re-appointed as the Statutory Central Auditors in the 7^th AGM for a period of two (2) years until the conclusion of the 9^th AGM of the Bank to be held in the year 2025, subject to the approval of the RBI on annual basis. Accordingly, RBI vide its letter dated July 19, 2024 has approved the re-appointment of M/s. A P Sanzgiri & Co., Chartered Accountants as the Statutory Central Auditors of the Bank for FY 2024-25.

The Statutory Central Auditors have confirmed that they satisfy the independence criteria and other eligibility norms required under the applicable laws and the Code of Ethics issued by the Institute of Chartered Accountants of India.

Secretarial Auditors and their Report

In compliance with the provisions of Section 204 of the Act and the rules framed thereunder, M/s. DM & Associates Company Secretaries LLP, the Secretarial Auditors of the Bank undertook the Secretarial

Audit for the financial year ended March 31, 2024. There were no qualifications made by the Secretarial Auditors in their Report.

The Secretarial Audit Report for financial year 2023-24 is annexed as Annexure-I to the Board's Report.

Cost Auditor

During the year under review, 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 and the Bank was not required to appoint Cost Auditor.

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 presented their report to the Audit Committee on a quarterly basis. The scope, functioning, periodicity and methodology for conducting the Internal Audit have been formulated in consultation with the Audit Committee.

REPORTING OF FRAUDS

During the year under review, M/s. A P Sanzgiri & Co., Statutory Central Auditors of the Bank, has reported the details of fraud under Section 143(12) of the Act, wherein it was mentioned that there are 21 complaints received amounting to Rs.25.27 Crore of which individually there were 7 cases which were over Rs.1 Crore each aggregating to Rs.20.94 Crore. The Statutory Central Auditors have reported the same to the Central Government under Section 143(12) of the Act read with circular no. NF-25013/2/2023 dated June 26, 2023 issued by National Financial Reporting Authority, Government of India ("NFRA").

Further, during the year under review, the Secretarial Auditors of the Bank has not reported any instances of fraud committed in the Bank by its officers or its employees.

INTERNAL CONTROLS AND THEIR ADEQUACY

The Bank has an Internal Control System commensurate with the size, scale and complexity of its operations. Internal Audit Control System ensures that the regular internal audits are conducted at both the branches and other functional areas. The findings are then taken up by the Audit Committee along with management response for suitable action. 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.

LOANS, GUARANTEES AND INVESTMENTS

The particulars of investments made by the Bank are disclosed in Note No. 2 of notes to account.

There were no loan made, guarantee given or security provided and hence, no disclosure was required to be made herein this regard.

RELATED PARTY TRANSACTIONS

All the Related Party Transactions ("RPTs") that were entered into during the financial year were on an arm's length basis and were in ordinary course of business. Transactions entered into by the Bank with related parties in the normal course of its business were placed before the Audit Committee of the Board ("ACB"). Prior omnibus/ specific approval were also obtained from the ACB for the RPTs which are repetitive in nature as well as for the normal banking transactions which cannot be foreseen. A statement giving details of all RPTs, entered pursuant to the omnibus approval so granted, was placed before the ACB for its review on a quarterly basis.

The Bank has not entered into any material financial or commercial transactions with any related parties as per AS-18 and the SEBI Listing Regulations that may have potential conflict with the interest of the Bank at large.

In terms of Regulation 23(9) of the SEBI Listing Regulations, the Bank submits the disclosure of RPTs in a prescribed format, on a half yearly basis to the Stock Exchanges and updated its website accordingly.

There were no material transactions with related parties, which were not in the ordinary course of the business nor were there any transactions which were not on an arm's length basis. Hence, pursuant to Section 134(3)(h) of the Act, read with Rule 8(2) of the Companies (Accounts) Rules, 2014, there are no RPTs to be reported under Section 188(1) of the Act. Hence, Form AOC-2 is not applicable to the Bank.

Pursuant to the provisions of the Act and the Rules made thereunder, SEBI Listing Regulations, the Bank has in place a Board approved policy on related party transactions.

The said policy is also uploaded on the Bank's website at https:// web4.finobank.com/investors/corporate-governance#code- policies

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION & FOREIGN EXCHANGE EARNINGS AND OUTGO

Your Bank is committed to maintain a balance between growth and optimal utilisation of resources. Your Bank is also focused towards undertaking initiatives for absorption of technology with conservation of energy.

A. Research & Development

During the year under review, the Bank had conducted various in-house development activities in the following areas. The focus was mainly on creating generic plug & play interfaces for various transactions so that these can not only be consumed by Bank, but also can be extended to its Partners and Merchants.

a. Teller / Merchant Application

Added value to existing applications by adding new products and enhancing existing products on Web Teller and Feet on Street. Also enabled the same for Merchant on Web and Mobile.

b. API Banking & Integrations

Considering large flow of payment services clients, the Bank has developed white label approach for on- boarding payment services clients. With this approach, plugging-in new payment services client has been

easy and faster. The Bank has also created Application Programming Interface ("API") and Software Development Kit for Aadhar Enabled Payment Services ("AEPS")/Micro ATM/Domestic Money Transfer/Cash Management Services transactions. These API's are used by Bank's Partners to integrate and initiate transactions from their own platform.

c. Extending Current Account & Saving Account

i. Implementation of subscription base products

ii. The Bank is implementing VKYC base merchant/ customer on-boarding.

iii. CASA+, this is an auto sweep extended account in Partner bank.

d. Analytics

After rollout of SAS, the Bank has now extended the same to profiling customer as well as merchants. This will enhance product offering to customer and performance of merchants. The Bank endeavors to enhance it further for cross sell.

e. Other systems implemented

The Bank is implementing Gyankosh (Knowledge Management System), drop chatbot, Inventory system & Customer Relationship Management.

The Bank's system has integrated with ClaverTap to extend its communication with merchant and customer.

Rewards points and re-admission system for merchant.

RPA - Automation implemented for Cash-In and account data verification unit activity.

ii. Self-Channels

With Digital focus, the Bank is working on implementing self-channels to enhance user experience and convenience.

a. Cash Bazar

Considering a cash demand and shortage in the field, the Bank has implemented "On-Demand" cash platform for rural area.

b. Multilingual

To increase usability, the Bank has upgraded Fino- pay platform with "Hindi" support. Going ahead it can be extended to other regional languages.

iii. Application Security

The Bank has further enhanced security for applications so as to reduce frauds implemented below security patches to applications:

> Strengthening security of applications

> Implementing EMV certification on all acquiring devices so as to support chip-based transactions.

> Dynamic key implementation

> Secured Socket Layer pinning

B. Future Readiness

Considering future load of transactions, the Bank is continuously taking steps to improve scaling capacity of its applications. Below approach is followed to achieve the same:

> Benchmarking existing application capacity by doing load testing.

> Reducing transaction hops to implement straight through transaction processing for high throughput transactions.

> Segregating critical transactions from non-financial ones so as to create a control, based on priority of transactions.

> Enhancing process so as to reduce TAT on transactions like 15-minute account activation.

i. Security

> Implementation of a 24 x 7 Security Operations Center (SOC)

> DLP (Data Leak Prevention) system deployed.

> MDM (Mobile Device Management) systems deployed for Mobile devices security.

ii. Production systems

Periodic reviews of Servers, Storage and Networks and implement the required augmentation of capacities (CPU, Memory, Storage).

Network optimizations were carried out to strengthen security and performance.

Server consolidation was done for optimization and better management. Half yearly IT DR Drills completed successfully.

C. Technology absorption

a. All Bank applications are primarily using CBS (Core Banking system) provided by "FIS" (FIS Payments and Solutions India Private Limited).

b. For digital signing of documents, the Bank is using digital signing system.

c. DMS (Document Management Server) workflows are implemented using robotic process automation.

The aforesaid Technologies have been absorbed by the Bank to the extent possible.

D. Foreign Exchange Earnings and Outgo

During the year under review, there were no foreign exchange earnings, however, there was foreign exchange outgo of H0.97 Crore.

RISK MANAGEMENT

The Bank being a Payments Bank is required to largely follow/ implement directives issued by RBI for scheduled commercial banks in addition to those forming part of the operating guidelines meant for Payments Banks. Accordingly, the Bank has adopted risk management process to identify, assess, monitor and manage risks

in its day-to-day activities/functions through the effective use of processes, information and technology.

The Risk Management Process is monitored under Risk Management Policies and the delegation matrix as approved by the Board. The Board is supported by the management team, Board committees and Board delegated executive level committees as part of the risk governance framework. The Board has an oversight of the management's efforts to balance growth and prudent risk management, while creating value for stakeholders.

Pursuant to RBI Regulations, the Bank has constituted a Risk & Asset Liability Management ("RALM") Committee of the Board and as mandated by the regulatory provisions, the Bank has appointed Chief Risk Officer, who administers the risk associated key verticals through dedicated divisions i.e., Market Risk, Operational Risk, Fraud Risk and other Risks under the aegis of the Board approved risk management policies and in accordance with the approval and responsibility delegation matrix.

The details of the RALM Committee and its terms of reference are disclosed in the Corporate Governance Report annexed to the Board's Report.

The risk management framework within the Bank is a layered structure and broadly consists of the following aspects for effective risk management across the Bank:

(a) Operational Risk Management

Your Bank is exposed to significant operational risk (for instance, risks arising due to use of technology, introduction of new products/services, processes, channels like mobile, internet banking, cash handling, etc.). Bank's operational risk management policies provide guidance on operational risk management issues and serves as a one-point reference and creates awareness among all employees within the Bank. The policies set out the broad parameters for identification of various operational risks that the Bank is exposed to, on an ongoing basis and to put in place systems and procedures to mitigate such risks.

For the effective management of operational risk, the Bank has constituted Operational Risk Management Committee ("ORMC") an Executive Committee that supports the RALM Committee. The main functions of the ORMC are to monitor and ensure appropriateness of operational risk management and recommend suitable control measures for mitigating the same besides monitoring thereof.

Your Bank also outsources certain functions / activities to third parties subject to compliance with RBI guidelines. These functions/activities and associated issues are being overseen by the Outsourcing Committee, an Executive Committee that supports the RALM Committee.

(b) Market Risk, Liquidity and Asset Liability Management

Your Bank is significantly exposed to Market risk, i.e. possibility of loss caused by changes in the market variables in addition to liquidity and mismatches in asset liability. Your Bank has put in place a Board approved Market Risk Management, ALCO & Investment policies aligned with RBI regulations and

operating guidelines governing Payments Banks and Executive level Committees, viz. Investment and Market Risk Committee and ALCO, that supports the RALM Committee in dealing with the day-to-day affairs, associated issues/concerns, if any, in a comprehensive manner.

(c) IT Risk Management

The Bank has put in place an adequate perimeter level security protection devices, internal data protection solutions, 24x7 monitored Security Operations Centre ("SOC"). Various security solutions such as threat monitoring and subscription to other global solutions are put in place to monitor and act on any critical alerts. However, cyber threats are evolving and various types of attacks are executed such as ‘Zero Day' and many new variants of malware attacks. Any of the new variant attacks may impact the network or data protection. To mitigate such risks on the technology stack, adequate security crisis management processes are in place as per regulatory requirements and internal processes. Further, the Bank has pool of technical resources, which is prone to attrition. To mitigate that the Bank has set of hiring and training process with multiple technology streams.

For the effective management of IT Risk, the Bank has constituted Information Security Risk Committee ("ISRC") as an Executive Committee that supports the IT Strategy Committee dealing with the day-to-day affairs, associated issues/concerns, if any, in a comprehensive manner.

(d) Reputation Risk Management

Your Bank as part of Internal Capital Adequacy Assessment Process under Pillar 2 of Base-l, has identified Reputation Risk as one of the Pillar 2 risks and evaluated it in terms of its sources, risk level and mitigation in place.

(e) Compliance Risk Management

The compliance risk is the risk of failure (or perceived failure) by the Bank to comply with applicable laws, regulations, guidelines and standards, leading to damage to the reputation of the Bank, legal or regulatory sanctions, or financial loss. Your Bank has a Compliance Policy to ensure the highest standards of compliance. A dedicated team of subject matter experts works to ensure active compliance risk management and monitoring. The team also advises on regulatory matters. The focus is on identifying and reducing risk by rigorously testing products and putting in place robust internal policies. Internal policies are reviewed and updated periodically as per agreed frequency or based on market actions or regulatory guidelines/actions.

For the effective management of Compliance Risk, the Bank has constituted Committee of Executive ("COE") as an Executive Committee that supports the Audit Committee dealing with the day-to-day affairs, associated issues/concerns, if any, in a comprehensive manner.

CORPORATE SOCIAL RESPONSIBILITY

The Bank has in place a Corporate Social Responsibility ("CSR") policy and constituted CSR Committee in accordance with the provisions of Section 135 of the Act read with rules framed thereunder and Schedule VII to the Act. The CSR policy outlines the Bank's philosophy to play a positive role in the community at large and consider the environmental and social impact of business decisions in which it operates.

The key areas identified by the Bank include eradicating hunger, promoting health care, promoting primary education, skill development and protection of the environment.

In terms of the provisions of the Act, for financial year 2023-24, the Bank has spent H0.88 Crore (including the set off of the excess amount spent by the Bank in the previous financial year) based on its commitment to CSR programs.

The Annual Report on CSR activities as prescribed under the Act and rules framed thereunder is annexed as Annexure - II to the Board's Report.

The details of the CSR Committee and its terms of reference are disclosed in the Corporate Governance Report annexed to the Board's Report forming part of this Annual Report.

The CSR Policy is available on Bank's website at https://web4. finobank.com/investors/corporate-governance#code-policies

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

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 2023-24 is provided in the Report on Corporate Governance, forming part of this Annual Report.

HOLDING, SUBSIDIARY & ASSOCIATE COMPANIES

The Bank does not have any subsidiary, joint venture or associate Company. The details of Holding Company are given below:

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 https://web4.finobank.com/investors/ financials#annual-report

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. The Bank adheres to the Corporate Governance requirements set out by the Securities and Exchange Board of India ("SEBI")/ Ministry of Corporate Affairs ("MCA")/RBI. The Corporate Governance Report for financial year 2023-24 along with a certificate issued by M/s. DM & Associates Company Secretaries LLP, confirming the compliance to applicable requirements related to Corporate Governance as stipulated under the SEBI Listing Regulations is annexed to the Board's Report.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY 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 Report.

DISCLOSURE OF AGREEMENTS BINDING THE BANK

In terms of Regulation 30A(2) of the SEBI Listing Regulations, agreements specified in clause 5A of paragraph A of Part A of Schedule III of SEBI Listing Regulations, along with its salient features, are available at the website of the Bank at www.finobank. com.

COMPLIANCE WITH SECRETARIAL STANDARDS

During the year under review, the Bank has complied with the applicable Secretarial Standard 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.

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 guideline or direction 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 MCA issued the roadmap for implementation of new Ind AS, which were based on convergence with the International Financial Reporting Standards (IFRS), for scheduled commercial banks, insurance companies and nonbanking 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 preliminary diagnostic analysis of the GAAP differences between Indian GAAP vis-a-vis Ind AS and shall proceed for ensuring the compliance as per applicable requirements and directions in this regard.

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 - III to the Board's 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 and will be made available to any Member on request as prescribed therein. The aforesaid statement 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 cs@finobank.com

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 Report.

VIGIL MECHANISM / WHISTLE BLOWER

The Bank has implemented a Whistle Blower Policy in compliance with the provisions of the Act and SEBI Listing Regulations. Pursuant to this policy, the Whistle Blowers can raise concerns relating to reportable matters (as defined in the policy) such as breach of Fino Payments Bank's Code of Conduct, employee misconduct, fraud, illegal unethical imprudent behaviour, leakage of Unpublished Price Sensitive Information, corruption, safety and misappropriation or misuse of Bank's funds/ assets etc.

Further, the mechanism adopted by the Bank encourages the Whistle Blower to report genuine concerns or grievances and provides for adequate safeguards against victimization of Whistle Blower to those who avail such mechanism and also provides for direct access to the Chairperson of the Audit Committee.

The Audit Committee reviews the functioning of the Vigil Mechanism from time to time. None of the Whistle Blowers has been denied access to the Audit Committee. The Whistle Blower Policy is available on the Bank's website at https://web4.finobank. com/investors/corporate-governance#code-policies.

SIGNIFICANT AND 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.

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.

ACKNOWLEDGEMENT AND APPRECIATION

The Board of Directors of your Bank would like to place on record its sincere gratitude for the guidance and co-operation received from the RBI, MCA, SEBI, Stock Exchanges, Registrar and Transfer Agent, Depositories and other statutory and regulatory authorities and thank all the stakeholders of the Bank including its investors, customers, merchants, bankers, shareholders, vendors, registrars and all other valued partners for their continued support.

The Board would like to express its appreciation for the sincere and dedicated efforts put in by all the employees of the Bank, exhibiting strong professionalism, teamwork and initiatives, to reinforce its customer centric reputation and look forward to their continued contribution in building this Bank into a great institution.