Utkarsh Small Finance Bank Ltd

Dear members,

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

Highlights of major achievements of the Bank:

Total deposits increased to H 21,566 crore as on March 31, 2025, from H17,473 crore as on March 31, 2024

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

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

The Bank reported annual profit of H24 crore for FY25.

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

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

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

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

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

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

(Amount in H crore)

*Net worth computed as per RBI guidelines $Business is the total of net advances and deposits (net of inter-bank deposits) **Ratio is based on average employee count

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

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

As on March 31, 2025, total deposits stood at H21,566 Crore, driven by CASA growth to H4,699 crore at 31.2% YoY and Retail Term deposits to H 10,635 at 33.5% YoY, and Bulk term deposit book to H6,232 crore at 5.2% YoY Growth. CASA Ratio stood at 21.8%, while CASA + RTD formed 71.1% of total deposits highlighting deposits granularity.

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

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

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

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

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

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

During FY25, JLG business through Micro Banking (MB) recorded a de-growth of H 1,884 crore and reached to H8,740 crore vis-?-vis the previous financial year mainly due to industry headwinds. 149 new MB branches were opened in existing operational states.

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

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

The JLG portfolio through Business Correspondents reached to H 446 crores in FY25. The Bank has seven (7) Business Correspondents which are operating in nine (9) states covering 83 districts through 162 branches.

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

In FY25, the Bank implemented several initiatives in its processes for JLG clients, some of them are SI mandate, less cash module through FINO Payment Bank, e-Sign and e-KYC through virtual ID, PAN card verification, Micro ATM geo tagging, cash carry approval from BM, CB guardrails, Track-OD application, Net-off disbursement, KFS implementation. To facilitate digital collections from MB clients, Bank implemented SMS- linked payment.

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

Throughout the fiscal year 24-25, our retail assets loan portfolio demonstrated robust growth, expanding by 52% year-on-year to H 3875 crore, compared to H2,557 crore in FY24. The expansion in our MSME loan portfolio was propelled by the incorporation of new service locations and the introduction of a wide range of products to address diverse customer segments.

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

As of March 31, 2025, our Housing Loan portfolio, managed by our Mortgage team across 63 branches, amounted to H918.29 crore, marking a significant year-on-year growth of 36% compared to H 676.59crore as of March 31, 2024.

The Wheels business which was launched in October 2020 with 2 businesses i.e., Commercial Vehicles

& Construction Equipment Loans being offered in Chandigarh, Delhi NCR, Jharkhand, Rajasthan, Uttar Pradesh, Uttarakhand & West Bengal regions from 15 branch outlets. As of March 31, 2025 these loans are offered from states of Bihar, Chandigarh, Delhi NCR, Haryana, Jharkhand, Madhya Pradesh, Punjab, Rajasthan, Uttar Pradesh, Uttarakhand & West Bengal from 48 branches. The Bank's wheels loan portfolio grew to H 1,179 crores as on March 31, 2025 from H926.77 crores as on March 31, 2024.

Book has grown by 21.39% in March 31, 2025 as compared to March 31, 2024. Growth was driven by addition in new locations and new product offerings in Used CV & CE, Light Commercial Vehicles, and fast-moving Construction Equipment like Backhoe loaders.

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

The Bank's Wholesale Lending-Business Banking, book stood at H 902.72 crore as on March 31, 2025 compared to H595.73 crore in March 31, 2024. The Bank also offers both fund based (WC & TL) & non-fund-based limits in the form of bank guarantee to the customers through BBG Wholesale Lending vertical.

The Bank's Wholesale Lending book stood at H 2,239.73 crore (H 903 Crore for Business Banking and H 1,337 crore for NBFC) as on March 31, 2025 compared to H1,882.41 crore (H 595.73 Crore for Business Banking and H1,286.68 crore for NBFC) in March 31, 2024. The NBFC customers are being offered term loans for on-lending to their customers and overdraft for meeting their working capital requirement.

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

1. Own Branches

2. Partnership Approach.

The partnership approach with a well-entrenched and networked individual/entity will help it gain significant presence in those markets of business interest. As on March 31, 2025 the Bank had total loan book aggregating to H1,093.69 crore compared to H721.07 crores in March 31, 2024. The portfolio comprised of JLG loans of H446.20 crore, Retail Assets loans of H 101.23 crore, PL H 485.54, and BL & SCF H 60.72 contributing 41%, 9%, 44% and 6 % respectively of the total portfolio

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

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

* On May 22, 2025, rating reaffirmed, and outlook revised to Negative from Stable. **On June 12, 2025, rating reaffirmed, and outlook revised to Negative from Stable.

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

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

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

*as per RBI norms

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

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

Annexure A.

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

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

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

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

Pursuant to the provisions of the Companies Act 2013, Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR), the Board has carried out annual performance evaluation of its Committees, individual Directors and the Board as a whole. The manner in which the evaluation was carried out is set out in the Corporate Governance Report which forms part of the Board report.

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

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

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

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

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

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

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

The Banks are advised to follow the Indian Accounting Standards as notified under the Companies (Indian Accounting Standards) Rules, 2015, . The Banks in India currently prepare their financial statements as per the guidelines issued by the RBI, the Accounting Standards notified under Section 133 of the Act and generally accepted accounting principles in India (Indian GAAP). The Bank submits its Proforma Ind-AS financials on half yearly basis to RBI based on the GAP assessment carried out by the Bank. The Bank is currently handling the impact analysis and reporting offline through excel based financial. The Bank has implemented system solutions (IndAS 109 and 116).

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

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

The Bank has foreign exchange earnings of H 1.66 crore during the financial year under review which includes cross border settlements. During the year under review, there was no foreign exchange outgo.

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

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

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

RBI, on April 27 2021, had issued guidelines for appointment of Statutory Central Auditors/Statutory Auditors of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs). As per the said guidelines statutory audit of entities with asset size of H15,000 crore and above as at the end of previous year, should be conducted under joint audit of a minimum of two audit firms. The audit firms can be appointed as the Statutory Auditors (SA) of the Bank for a continuous period of 3 years only and thereafter, reappointment in the same entity will be possible only after a cooling period of six years. Further, prior approval of RBI for appointment/reappointment of SAs on an annual basis is required in terms of the above guidelines. The Members of the Bank at the 8th Annual General Meeting (“AGM”) had approved the re-appointment of M/s Deloitte Haskins & Sells, Chartered Accountants (FRN 117365W) and M/s. Kirtane & Pandit, LLP, Chartered Accountants (FRN 105215W/ W100057) as the Joint Statutory Auditors of the Bank to hold office till the conclusion of 9th Annual General Meeting of the Bank, being their third year as Joint Statutory Auditors of the Bank.

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

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

In accordance with the provisions of Section 204 and other applicable provisions, if any, of the Companies Act, 2013 (“the Act”), read with Rule 9 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014, (including any statutory modification(s) or re-enactment(s) thereof, for the time being in force), and Regulation 24A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, and the recommendation of the Audit Committee and the Board of Directors, subject to the approval of the Shareholders, proposed the appointment of M/s. BNP & Associates, Company Secretaries (FRN P2014MH037400) as the Secretarial Auditor of the Company for one term of 5 (five) consecutive years and to hold office till conclusion of Annual General Meeting for FY 2029-30.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(vii) Remuneration is as per the remuneration policy of the Bank. The Bank is in compliance with its Remuneration Policy. In terms of Section 136 of Companies Act 2013, the Annual Report is being sent to the members, excluding the information as required under Rule 5(2) as mentioned aforesaid and the same is open for inspection at the Registered Office of the Bank. A copy of this statement may be obtained by the members by writing to the Company Secretary of the Bank at secretarial.usfb@utkarsh.bank.

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

& Remuneration Committee (NRC), formulated a Policy for payment of remuneration to Directors, Key Managerial Personnel (KMPs) & Senior Management Officials.The Policy is available on the website of the Bank at : https://www. utkarsh.bank/uploads/template_forty_pdf/NRC_Policy.pdf The details of remuneration paid to Executive and Non executive Directors during the year forms part of the Corporate Governance report.

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

Further, details of the unclaimed/un-encashed interest/ dividends lying in the unpaid dividend accounts as on end of the financial year and details of Nodal Officer for IEPF are provided on website of the Bank at https://www.utkarsh. bank/uploads/pdf/disclosures/template_eleven/IEPF_2-FY_23-24.pdf, https://www.utkarsh.bank/uploads/pdf/disclosures/ t e m p l a t e _ e l e v e n / I E P F _2 _ u n c l a i m e d _ i n t e r e s t _ March_31 _2023.pdf.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

For a financial institution, transparency and the highest standards of corporate governance are important prerequisites for establishing a compliance-oriented bank. Towards this end, the Bank endeavours to ensure that all its activities are fairly aligned with the highest standards of personal and professional integrity and the highest level of ethical conduct. The Bank has adopted a Code of Conduct and norms for the avoidance of conflict of interest, all the Senior Management officials, KMPs, Employees with loan sanctioning authority, employees directly related with sourcing/servicing corporate or wholesale banking relationships and employees directly involved in the procurement of goods and services, conduct duties according to the aforesaid Code of Conduct. Some of the areas that have been covered by the Code of Conduct are: fairness of employment practices, protection of intellectual property, integrity, customer confidentiality and conflict of interest. The Bank's Code of Conduct for Directors and Senior Management is hosted on the website of the Bank at https://www.utkarsh.bank/uploads/pdf/our-policy/ template_ten/CODE_OF_CONDUCT_FOR_THE_BOARD_ O F _ D I R ECTO R S _ A N D _ S E N I O R _ M A N AG E M E N T _ PERSONNEL.pdf.

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

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

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

During the year under review, the Bank spent H7.72 crore (including interest earned of H 14.37 lakh) towards aforesaid CSR projects and H92.22 lakh which was unspent was transferred to “Utkarsh Small Finance Bank Limited Unspent

CSR Account FY 24-25“ with HDFC Bank Limited. Further out of the previous unspent CSR amount of H 1.88 crore for FY 23-24, during the year an amount of H1.73 crore was spent and H15.93 lakh is carried forward in “Utkarsh Small Finance Bank Limited Unspent CSR Account FY 23-24 “ with HDFC Bank Limited.

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

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

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

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

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

In its constant endeavor to promote learning and capacity building of all its employees, the Bank utilised its “Learning

Management System (Utkarsh U-Learn)” to engage its employees through continuous educational programs delivered via e-modules and virtual classrooms.

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

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

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

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

We have also completed a comprehensive blueprint for our Business Transformation project, which includes a detailed review of existing products, operational processes, and our current technology stack. This initiative is being led by a specialized team known as the Transformation Management Office (TMO), which oversees the Bank's transformation journey. The project is currently in the “Implementation” phase, during which various internal systems, processes, and applications are being modernized. As part of this effort, the Bank has embarked on a major Core Banking replacement project, transitioning to the Infosys Finacle Core Banking platform.

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

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

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

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

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

FY25 has been a challenging year from financial performance perspective for the Bank. The Bank reported annual profit after tax of H 23 crore in FY 24-25. The Bank's JLG loan portfolio registered degrowth but deposits registered healthy business growth. The Directors are of the view that there is an immense opportunity to cater to the unserved and underserved sections of client base in the country, particularly the area in which the Bank is currently operating.

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

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

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

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

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

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

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

The Board expresses its gratitude to the Central and State Governments, Reserve Bank of India, Ministry of Corporate Affairs, SEBI, NABARD, SIDBI, MUDRA, NHB and all other Regulatory Authorities including Local Governing Bodies for the continuous support and guidance provided to the Bank. The Board appreciates the precious support provided by the Auditors, Lawyers and Consultants. We place on record our appreciation for the contribution made by our employees at all levels. Our consistent growth has been made possible by their hard work, solidarity, cooperation, and support.

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

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