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AU Small Finance Bank Ltd.

BSE: 540611 Sector: Financials
BSE 00:00 | 16 Jul 635.10 1.05






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OPEN 637.65
VOLUME 13497
52-Week high 746.95
52-Week low 496.40
P/E 62.02
Mkt Cap.(Rs cr) 18,420
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 637.65
CLOSE 634.05
VOLUME 13497
52-Week high 746.95
52-Week low 496.40
P/E 62.02
Mkt Cap.(Rs cr) 18,420
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

AU Small Finance Bank Ltd. (AUBANK) - Director Report

Company director report


The Members


Your Directors are pleased to present the 22nd Annual Report on the performance of yourCompany for the

financial year ended 31st March 2017 along with the Audited Financial Statementsincluding Consolidated Financial Statements Auditor's Report and Secretarial Auditor'sReport thereon.

Results of operations

The Summarized Financial Performance of your Company for the Financial Year (FY) ended2016-17 is as follows:

Key Performance Highlights (' in Cr.)
Particulars 1 2015-16
Total Revenue 1387.44 1015.48
Total Expenditure 908.66 684.31
Profit Before Depreciation & Tax 478.78 331.17
Exceptional Items* 670.35 -
Depreciation 5.78 8.52
Current Tax 310.48 115.08
Deferred Tax 6.43 -3.8
Adjustment of tax relating to earlier 4.46 -0.25
Profit after Tax 821.98 211.62
Transfer to Statutory Reserve 164.40 42.32
EPS (' per share)
Basic (' per share) 30.18 8.00
Diluted (' per share) 29.61 7.95

There has been an increase in revenue of

the Company in FY 2016-17 which stood at ' 1387.44 Cr with a growth of 36.63% over thetotal revenue of ' 1015.48 Cr for FY 2015-16. Your company maintained consistent growthover the last few years with right strategic steps including introduction of new productlines and expansion to newer geographies.

• Profit after tax stood at ' 821.98 Cr for FY 201617 from ' 211.62 Cr showingY-o-Y growth of 288.42% considering exceptional items over that of FY 2015-16.

• *Above exceptional item included the profit on sale of shares of AavasFinanciers Limited

(formerly known as Au Housing Finance Limited) Index Money LLP (formerly known asIndex Money Limited) M Power Micro Finance Private Limited and Au Insurance BrokingServices Private Limited of ' 516.9 Cr. (net of the expenses incurred in connection withsuch sale and net of tax) for the financial year ended 31st March 2017.

Other Operational Performance Highlights: Disbursements

Your Company achieved a disbursement figure of? 6730.46 Cr. for the FY 2016-17 ascompared to ' 5619.23 Cr. for FY 2015-16 registering a growth of 20%. The credit offtakefor loan products remained healthy during the year.

This became possible with commitment to offer a bouquet of customized loan products toa wide spectrum of customers expansion of business to newer geographies and increasedpenetration in rural areas. Alternate distribution channels customer connect schemesreferral schemes reinforcement of customer faith on AU Brand and distribution verticalalso supported in achieving good loan disbursement numbers beyond what were envisaged forFY 2016-17.

Assets Under Management

During the period under review the net loan book size grew to ' 10733.86 Cr. at theend of FY 2016-17 as compared to ' 8221.29 Cr. at the end of FY 2015-16 registering agrowth of 31%.

Lending operations

The demand for products offered by your Company

remained healthy during the year with growth predominantly in MSME loan products inrural and semi urban areas. Expansion of business in Madhya Pradesh Gujarat and otherstates and reaching out to more customers ensured that we continue to grow our loan booksat healthy rate on consistent basis.

Non-performing assets

The net Non-Performing Assets (NPA) as on 31st March 2017 was 1.22% vis-a-vis 0.80% ason 31st March 2016 There was also change of NPA classification norms from 150+ DPD to120+ DPD during the year under review in view of applicable RBI guidelines for NBFCs anddespite increase in loan book size the asset quality remained under control.

Company's Strategy transformation

Your Company is prominent retail focused finance company primarily serving low andmiddle income individuals and businesses that have limited or no access to formal bankingand finance channels.

As an NBFC Au FINANCIERS (INDIA) LIMITED built a successful track record of servingunderbanked and unbanked customers in rural and emerging areas of north west and centralIndia and supported them to realise their personal and business aspirations by offeringVehicle MSME & SME Loans.

As on 31st March 2017 your company was carrying out its business operations through301 branches spread across 10 states and one union territory in India with significantpresence in the states of Rajasthan Gujarat Maharashtra and Madhya Pradesh and employed8515 personnel serving 556887 Loan Account customers.

Small Finance Bank

Your Company received Banking license from the RBI to set up a 'Small Finance Bank'("SFB") on 20th December 2016. Thereafter your Company changed its name from"AU FINANCIERS (INDIA) LIMITED" to "AU SMALL FINANCE BANK LIMITED" on13th April 2017 your company commenced Banking Business as Small Finance Bank on 19thApril 2017.

As a bank your company intend to expand and strengthen business model to offer adiverse suite of banking products and services by leveraging our asset based lendingstrengths existing customer base and cost efficient technology driven branch operatingmodel to create a successful new SFB. Your company believes that our transition into SFBhas offered us significant growth potential and we aim to be a retail focused preferredtrusted SFB offering integrated and tailored solutions to customers.

On Banking platform primary objective would be to make banking simple easy andaccessible to provide employment opportunities to contribute in financial inclusionmaintain and grow our asset quality.

Your Company has adopted a strategy of contiguous expansion across regions and YourBanking Business is firmly integrated with our business strategies approach & targetmarket and customer segment enabling us to create shared stakeholder value both in thenear and long-term future and we shall continue to focus on executing the promised plansmotivating our teams

under right leaders with a mission to build AUSFB an admired retail franchise withcollective entrepreneurial approach backed by future ready tech friendly platform for ourcustomers.

Secondary Sale

During the period of review one of the important condition to apply for the finallicense for Small Finance Bank was to bring down the Foreign Equity to 49% (which wasearlier close to 64%) as stipulated by RBI in its InPrinciple Approval dated 7th October2015. Transaction involved selling of 15.7% of shareholding on fully diluted basis fromForeign Investors to Domestic Investors consisting of Domestic Institutional InvestorsHNIs and Employees of the Company for ' 751 Crores and complied with conditionsstipulated by RBI.

Subsidiaries Associates &Joint Venture Companies (including major change withSubsidiaries & associates in reference to RBI Guidelines)

During the year company divested its stake from its subsidiary companies viz. IndexMoney Limited Au Housing Finance Limited and its associate companies viz. M Power MicroFinance Private Limited Au Insurance Broking Services Private Limited in compliance ofconditions laid down by the Reserve Bank of India in its in-principle approval letterdated 07th October 2015 and in its correspondences thereafter.

Brief Summary of Divestment
Name of company Nature of interest at the time Stake Sale Date of divestment
Index Money LLP (formerly Known as Index Money Limited) Subsidiary


17thjune 2016
Aavas Financiers Limited

(formerly Known as Au Housing Finance Limited)



23rd June 2016
M Power Micro Finance Associate 08th September
Private Limited Company 2016
Au Insurance Broking Associate 08th December
Services Private Limited Company 2016

Since above companies were subsidiaries and associate for the part of FY 2016-17 astatement containing the salient features of the financial statement of our subsidiaries& associates in the prescribed format AOC 1 is appended as Annexure I to this report.

During the year under review your Company has divested its stake in its subsidiariesand associates and the aggregate profit on sale of these investments has been disclosed infinancial statements.

The details of divestments by your Company during the year are as follows:

Divestment of stake in Aavas Financiers Limited (Formerly known as "AU HousingFinance Limited") wholly owned Subsidiary ofyour Company

Your Company had received in-principle approval to establish a SFB from RBI on 7thOctober 2015 wherein it was stipulated to merge Aavas Financiers Limited with yourCompany. Further byway of RBI Letter dated 18th January 2016 our Company had obtainedno-objection from RBI to divest stake in Aavas Financiers Limited. Pursuant to AavasFinanciers Limited SPA your Company sold 33773484 equity shares of Aavas FinanciersLimited to Lake District Holdings Limited Kedaara Capital Alternative Investment Fund -Kedaara Capital AIF 1 Partners Group Private Equity Master Fund LLC and Partner GroupESCL Limited for an aggregate consideration of? 828.35 Cr. Obtaining RBI approval for thedivestment was a condition precedent to the execution of the transaction in the AavasFinanciers Limited SPA. Pursuant to RBI letter dated 6th April 2016 final approval fordivestment of 90.10% stake in Aavas Financiers Limited was obtained by your Company.

Divestment ofstake in Index Money LLP (Formerly known as "Index MoneyLimited") wholly owned subsidiary of your Company

Your Company had received in-principle approval to establish a SFB from RBI on 7thOctober 2015 wherein it was stipulated to merge Index Money LLP with your Company. YourCompany by way of RBI Letter dated 18th January 2016 had obtained no-objection from RBIto divest stake in Index Money LLP and stake sale was successfully completed in year underreview.

Divestment ofstake in M power Micro Finance Pvt. Limited

Your Company has divested 29.53% of the outstanding equity shares of M Power MicroFinance Private Limited on 08th September 2016 and it is no more associate of yourCompany in compliance of conditions stipulated by RBI to set up Small Finance Bank.

Divestment of stake in Au Insurance Broking Services Private Limited

26% of the outstanding equity shares of Au Insurance Broking Services Private Limitedwas transferred on 08th December 2016 and it is no more associate ofyour Company in termsof stipulations to set up Small Finance Bank.

In view of above divestments there was partial stake sale in Aavas Financiers Limited& M Power Micro Finance Private Limited and complete stake sale in Index Money Limitedand Au Insurance Broking Services Private Limited during FY 2016-17 and your company hadno subsidiaries & associates as on 31st March 2017.

Consolidated Financial Statements - FY 2016-17

Pursuant to sub-section (3) of Section 129 of the Companies Act 2013 Company prepareda consolidated financial statement including its subsidiaries & associates Companieswhich shall be laid before the ensuing Annual General Meeting along with the FinancialStatement under sub-section (2) of section 129 i.e. Standalone Financial Statements and incompliance of other applicable sections of Companies Act 2013 and rules thereunder andunder applicable accounting standards.

Appropriations/Transfer to reserves

Your Company proposes to transfer '164.40 Cr. of the net

profits to statutory reserve created under Section 45 IC of the Reserve Bank of IndiaAct 1934 and Company does not propose to transfer any amount to general reserves.


Your Company converted into a small finance bank and owing to increased expenditure forIT software & hardware branch expansions infrastructure and Branding expenses itwill be prudent for the Company to conserve resources for being used in transformation ofBanking business. Hence Board does not propose to declare any dividend for the year ended31st March 2017.

Share capital

During the period under review several key corporate actions were carried out whereinchanges in share capital took place and your company reclassified its unissued sharecapital increased its authorised share capital issued bonus shares converted warrantsinto equity shares and cancelled the unsubscribed portion of issued capital under thereview.

Reclassification of unissued portion ofAuthorised Capital

During the period under review company's Authorised Share Capital of ' 970000000/-(Rupees Ninety-Seven Crores Only) was divided into 78150000 (Seven Crore Eighty OneLakh and Fifty Thousand) Equity Shares of ' 10/-(Rupee Ten Only) each and 1885000(Eighteen Lakh Eighty Five Thousand) Compulsory Convertible Preference Shares of ' 100/-(Rupee One Hundred Only) each which was reclassified by shifting the unissued part ofpreference

share capital as mentioned above into the Equity Share

Capital of the Company as a result of which the authorized capital changed to '970000000/- (Rupees Ninety-Seven Crores Only) which was divided into 97000000 (NineCrore Seventy Lakh Equity Shares of ' 10/- Each..

Increased Authorised Share Capital

Keeping growth objectives mind and in view of proposed bonus issue it was imperativeto increase the authorised Share Capital of the Company and Therefore authorised capitalof the was increased from ' 970000000/- (Rupees Ninety Seven Crores Only) to '3500000000/- (Rupees Three Hundred and Fifty Crores Only) during year under review.

Bonus Shares

In view of the strong financial performance profits were capitalized in benefit of theshareholders and Company issued 228625755 (Twenty Two Crore Eighty Six Lakhs TwentyFive Thousand and Seven Hundred and Fifty Five Only) bonus equity shares duly approved bythe shareholders at their meeting dated 10th October 2016 Equity Shares of '10/- (Rupeesten only) each and 5 (Five) equity share for every 1 (One) existing equity share held bythe Members were issued as bonus shares.

Allotment of Equity Shares on conversion ofShare Warrants

During the year company allotted equity shares on conversion share of Warrants in thefollowing manner:

Company issued 1644399 (Sixteen Lakh Forty-Four Thousand Three Hundred Ninety Nine)warrants which were converted & allotted into equal nos. of equity shares to Mr.Sanjay Agarwal Key Person as approved by the shareholders at their meeting dated 10thJune 2016 and 9900000 (Ninety-Nine Lakhs) equity shares were allotted on conversion ofwarrants to KMPs out of which 9000000 (Ninety Lakh) Equity shares were allotted to Mr.Sanjay Agarwal - MD 750000 (Seven Lakh & Fifty Thousand) Equity Shares wereallotted to Mr. Uttam Tibrewal - WTD and 150000 (One Lakh Fifty Thousand) Equity Shareswere allotted to Mr. Deepakjain - CFO on 03rd January 2017 which was approved byShareholders at their meeting dated 10th October 2016.

Cancellation ofUnsubscribed Issued Capital

During the year company cancelled unsubscribed issued capital for 13061 (ThirteenThousand and Sixty One) equity shares. These Equity Shares were originally approved byBoard of Directors on 28th March 2014 for allotment to the proposed subscribers and thesaid

shareholders did not subscribe to the said shares within the stipulated time as per theCompanies Act. Therefore in compliance of applicable laws cancellation of said shareswas approved at shareholders meeting dated 25th February 2017 to streamline the issuedsubscribed and paid up share Capital of the Company.

After above corporate actions in FY2016-17 Company's authorized capital stood at?3500000000/-(RupeesThree Hundred and Fifty Crores Only) divided into 350000000(Thirty Five Crores) equity shares of face value of ' 10 (Ten) each and issued and paid upcapital was ' 2842509060 (Two Hundred and Eighty Four Crores Twenty Five Lakhs andNine Thousand and Sixty) divided into 284250906 (Twenty Eight Crores Forty Two LakhsFifty Thousand Nine Hundred and Six) equity shares having face value of ' 10 (Ten) each ason 31st March 2017.

Employee stock Option Plan

Your Company has instituted Stock Option Schemes is to attract and retain the personnelfor positions of substantial responsibility and to provide additional incentive toEmployees. The ESOP Plan is implemented to enable the Employees to share the wealth thatthey help to create for the Company over a certain period of time. The Company stronglybelieves that an equity linked component in the wealth creation goes a long way inaligning the objectives of an individual with those of the Company. Through ESOP Plan theCompany intends to offer an opportunity of sharing the wealth created to those Employeeswho have contributed in creation of this wealth. The Stock Option Schemes also enable theCompany to hire the best talent for its senior management and key positions.

The Company instituted "2011 Au Employees Stock Option Plan" on 21stSeptember 2011 pursuant to Resolution dated 21st May 2011 and 27th September 2011passed by Board of Directors and Shareholders respectively. This ESOP scheme wascompleted and shares underlying the ESOP scheme were issued. Board of Directors formulated'Employees Stock Option Scheme 2015' in their Meeting dated 10th August 2015 which wassubsequently approved by the shareholders of the Company at their Extra-ordinary Generalmeeting dated 31st August 2015 and empowering the Board & Nomination and remunerationcommittee to execute the said employees stock option scheme as "Au FINANCIERS (INDIA)LIMITED- Employees Stock Option Plan A & Plan B 2015".

Board of Directors at its meeting dated 23rd August 2016 passed a resolution toapprove ESOP Scheme called as

"Au FINANCIERS (INDIA) LIMITED-Employees Stock Option Plan 2016" which wasapproved by shareholders at extraordinary general meeting dated 10th October 2016approving the scheme".

The above referred ESOP Scheme 2015 and ESOP Scheme 2016 i.e. ESOP Plans called as"Au FINANCIERS (INDIA) LIMITED-Employees Stock Option Plan A & Plan B 2015

and Au FINANCIERS (INDIA) LIMITED-Employees Stock Option Plan 2016" weresubsequently amended by the shareholders on 24th January 2017 through postal ballot.

The Employee Stock Option Plans are administered by the

Nomination & Remuneration Committee of the Board of the Company.

The details of vesting of various schemes in which ESOP is granted are as follows:

ESOP Schemes Vesting period
ESOP Plan-A-2015 Vesting Date % of vesting of options
1 year from the date of grant or at the time of IPO whichever is later 20%
Expiry of 1 year from 1st vesting 30%
Expiry of 2 years from 1st vesting 50%
Total 100%

ESOP Plan - B 2015

1 year from the date of grant or at the time of IPO whichever is later 20%
Expiry of 1 year from 1st vesting 30%
Expiry of 2 years from 1st vesting 50%
Total 100%
ESOP Scheme 2016 Options granted under this scheme would vest after one year but not later than six years from
the date of grant of options.

Various details including option movement during the year under Schemes i.e. ESOP Plan- A 2015 ESOP Plan - B 2015 and ESOP Scheme 2016 respectively as on 31st March 2017 areas follows:

Particulars ESOP Plan A 2015 ESOP Plan B 2015 ESOP Scheme 2016
Date of Shareholder's Approval 31st August 2015 31st August 2015 23rd August 2016
Total Number of Options approved 3836058 4933194 2100000
Total Number of options outstanding at the Beginning of the period 3338418 2862846 -
Total No. of Options granted (during FY 2016-17) 418512 1122654 268300
The Pricing Formula 10.11 33.37 140
Options Vested (during FY 2016-17) - - -
Options Exercised (during FY 2016-17) - - -
Total No of shares arising as a result of exercise of option - - -
Options lapsed/ Forfeited (during FY 2016-17) (available for reissue) 318864 109716
Total No of options exercisable at the end of the year -
Total No of options outstanding at the end of the year 3438066 3875784 268300
Variation in terms of options Refer Note 1 Refer Note 1 Refer Notel
Money realized by exercise of Options (during FY 2016-17) (in ' ) - - -
Total No of Options granted to Senior Management Personnel (SMP) i.e. Directors and Key managerial personnel 2188212 Refer Note 2 2075178 Refer Note 2 -
Any other employee who received a grant in any one year of options amounting to 5% or more of options granted during that year Nil Nil Nil
Identified employees who are granted options during any one year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant Nil Nil Nil


Particulars ESOP Plan A 2015 ESOP Plan B 2015 ESOP Scheme 2016
Diluted Earnings Per Share (EPS) of the Company after considering the effect of potential equity shares on account of exercise of Options Refer Note 3
Impact of the difference between the Intrinsic Value of the Options and the Fair Value of the Options on Profits and on EPS Refer Note 3 Refer Note 3 Refer Note 3
Weighted average share/exercise price of the shares exercised during the year (in ') 10.11 66.67 140
Weighted average fair value(WAFV) of the outstanding options (in ') Refer note 33 to notes to accounts of Standalone Annual Audited Financial Results of FY2016-17

Note: Pursuant to issuance of Bonus issue in the ratio of 5:1 on 19th October 2015 allthe ESOP option/price converted into multiple/divide in 5 after effecting bonus issue andall the figures mentioned above has been converted to such post bonus issue nos. and value

The Securities and Exchange Board of India ('SEBI') has prescribed two methods toaccount for stock grants;namely (i) the intrinsic value method; (ii) the fair valuemethod. The Company adopts the intrinsic value method to account for the stock options itgrants to the employees. The Company also calculates the fair value of options at the timeof grant using Black-Scholes pricing model with the following assumptions:

Particulars 31st March 2017
Risk free interest rate 6.86%
Expected life 3.1 -4.1 year
Expected volatility 49.91%
Expected dividends 0%

Note 1:

The above referred ESOP Plan 2015 and ESOP Scheme 2016 were subsequently amended by theshareholders on 24th January 2017 through postal ballot and the amended as follows:

ESOP Plan A2015:

Particulars Existing Terms Amended Terms if any
Name of Plan Au FINANCIERS (INDIA) LIMITED-Employees Stock Option Plan-A 2015 same as original
ESOP Scheme Nos. of ESOPs 639343 3836058 (post bonus)
Exercise Price ' 60.65/- each ' 10.11/- each (post bonus)
Exercise Period the time period of 4 years from the 1st Vesting Date within which an Employee should exercise his right to apply for Shares against the Vested Option in pursuance to this ESOP Plan. The Options shall not be permitted to be exercised after the expiry of the above-mentioned Exercise Period. After the above-mentioned date all the Options vested but remaining unexercised under the ESOP Plan shall lapse and such Options which were subject thereto shall become available for future grant under the ESOP Plan (unless the ESOP Plan is terminated) Same as original
Vesting Schedule As detailed above Same as original
Secondary Acquisition Post Listing Au Financiers Employee Welfare Trust can

purchase shares from stock exchanges where shares of Company would be listed

ESOP Plan B 2015:

Particulars Existing Terms Amended Terms if any
Name of Plan Au FINANCIERS (INDIA) LIMITED-Employees Stock Option Plan-B 2015 same as original
ESOP Scheme Nos. of ESOPs 822199 4933194 (post bonus)
Exercise Price '200.21/-each ' 33.37/- each (post bonus)
Exercise Period The time period of 4 years from thelstVesting Date within which an Employee should exercise his right to apply for Shares against the Vested Option in pursuance to this ESOP Plan. The Options shall not be permitted to be exercised after the expiry of the above-mentioned Exercise Period. After the above-mentioned date all the Options vested but remaining unexercised under the ESOP Plan shall lapse and such Options which were subject thereto shall become available for future grant under the ESOP Plan (unless the ESOP Plan is terminated) Same as original
Vesting Schedule As detailed above Same as original
Secondary Acquisition Post


Au Financiers Employee Welfare Trust can

purchase shares from stock exchanges where shares of Company would be listed

ESOP Scheme 2016:

Particulars Existing Terms Amended Terms if any
Name of Plan Au FINANCIERS (INDIA) LIMITED-Employees Stock Option Plan 2016 No change
ESOP Scheme Nos. of ESOPs 350000 2100000 (post bonus)
Exercise Price ' 840/- each ' 140/-each (post bonus)
Exercise Period Time period of four years starting from the first vesting date. Time period of six years from first vesting date.
Vesting Schedule First vesting - 20% -One (1) year from Initial Public Offer ("IPO") or twelve (12) months from grant date whichever is later.

Second Vesting - 30%- after 2 year from date of 1st grant. Third Vesting - 50% - after 3 year from date of 1st grant.

Options granted under this scheme would vest after one year but not later than six years from the date of grant of options.
Secondary Acquisition Post


Au Employee Welfare Trust can purchase

shares from stock exchanges where shares of Company would be listed.

Note 2:

Details of Options granted to senior managerial personnel i.e.. Directors and Keymanagerial personnel

S. Name NO. Designation No. of ESOP Granted in ESOP Plan -A 2015 No. of ESOP Granted in ESOP Plan -B 2015 No. of ESOP Granted in ESOP Scheme 2016
1 Mr. Uttam Tibrewal Whole-time Director 1665000 @'10.11/- 2061924 @' 33.37/- -
2 Mr. Deepak lain Chief Financial Officer 509562 @'10.11/- - -
3 Mr. Manmohan Parnami Company Secretary 13650 @'10.11/- 13254 @'33.37/- -

Note 3:

The Company measures the cost of ESOP using the intrinsic value method. Had the Companyused the fair value model to determine compensation its profit after tax and earnings pershare as reported would have changed to the amounts indicated below:

(' in Lakh)
Particulars Year ended 31st March 2017 Year ended 31st March 2016
Profit after tax as reported (' in Lakh) 82197.61 21161.95
Add: ESOP cost using intrinsic value method (net of tax) 266.45 135.87
Less: ESOP cost using fair value method (net of tax) C in Lakh) 408.67 202.42
Profit after tax (adjusted) (' in Lakh) 82055.38 21095.40
Earnings Per Share*
- As reported 30.18 8.00
-Adjusted for ESOP cost using fair value method 30.12 7.98
- As reported 29.61 7.95
-Adjusted for ESOP cost using fair value method 29.56 7.91

*Earning Per share is in '

Contracts orArrangements with related parties

All contracts/ arrangements/transactions entered by the Company during the financialyear with related parties have been covered in note no. 28 to Financial Statements for theperiod 31st March 2017 and all related party transactions are placed before the AuditCommittee & Board for approval. Prior omnibus approval for relevant transactions isalso obtained from the Audit Committee & Board for the related party transactions andaccordingly the required disclosures are made to the Committee & Board on quarterlybasis in terms of the applicable requirements under the law.

The policy on Related Party Transactions and materiality

dealing with Related Party Transactions as approved by the Audit Committee and theBoard of Directors is uploaded on the website of the Company and linkforthe same is

Particulars of contracts or arrangements with related parties referred to in Section188 of the Companies Act 2013 in the prescribed Form AOC-2 is appended as Annexure IIto the Board's report.

Loans Guarantees or Investment in Securities

Required disclosure on Loans guarantees and investments covered under Section 186 ofthe Companies Act 2013 form part of the notes to the financial statements provided inthis Annual Report and in reference to Section 186 of the Companies Act 2013 read withRule 11(2) of the Companies (Meetings of Board and its Powers) Rules 2014

the loans made guarantee given or security provided are in the ordinary course ofbusiness by a Non-Banking Financial Company (NBFC) registered with Reserve Bank of India(RBI) is exempt from the applicability of provisions of Section 186 of the Act.

Change in Nature of Business

During the year under review we continued to operate as a retail focused"Systemically Important Non-Deposit Accepting Asset Finance Company"(NBFC-ND-AFC) a nonbanking finance company ("NBFC") offering vehicle finance;micro small and medium enterprises ("MSMEs") loans; and small and mediumenterprises ("SMEs") loans and there was no change in nature of business duringFY 2016-17.

However Company changed its namefrom"Au FINANCIERS (INDIA) LIMITED" to"AU SMALL FINANCE BANK LIMITED" on 13th April 2017 and commenced its bankingoperations formally on 19th April 2017.

Treasury & Finance Mobilization of Funds

During the year under report and as per business requirement your Company raised fundsat lower cost mainly by way of private placement of Non-Convertible Debentures withcomfortable liquidity position undrawn cash credit lines working capital demand loanrupee Term Loans from Banks.

During the year your Company further focused on bringing reduction in its cost ofborrowings by raising

funds through short term instruments like Commercial Papers WCDL etc. and furtherreduction in rate of interest on existing lines of credit from banks. We are pleased toinform that Company successfully raised credit lines from National Bank for Agricultureand Rural Development (NABARD).

Non-Convertible Debentures

During the year under review your company raised funds via issuance of ' 2555 Cr.Non-Convertible Debentures. Company earned trust of the investor's viz. HDFC Bank LimitedICICI Bank State Bank of India Mutual Fund IDFC Bank Limited International FinanceCorporation ICICI Prudential Mutual Fund Reliance Mutual Fund FMO Franklin TempletonDSP Blackrock Investments Managers and Asian Development Bank under their various schemes.

Credit Ratings

Your Company was rated by leading rating agencies of India as on 31st March 2017 andthe ratings have been presented under note no. 37 (P) of the financial statements of theCompany for FY 2016-17.

Capital Adequacy Ratio

Your Company is well capitalized and the Capital Adequacy Ratio (CRAR) of your Companyis 23.04% as on 31st March 2017 which is higher than minimum requirement as prescribedby the RBI. Strong Capital Adequacy Ratio not only defines that your Company is adequatelycapitalized and it also signifies that it has strong capacity to meet the time liabilitiesand had cushion for other risks such as credit risk operational & other inherentrisks of the Business.

Corporate Governance

Board &Committees Briefand Composition

Duty of the Board of Directors of your Company is to oversee that the operation &management of Company is run in ethical manner. The Board is scheduled to meet at leastonce a quarter and each quarterly meeting of the Board will generally include a businessand finance update and discussion. Board reviews the Company's annual financial plan andmonitors the Company's performance against its annual financial plan.

Board Meetings:

There were 10 meetings of the Board held during the year under review and theintervening gap between the meetings was within the period prescribed under the CompaniesAct 2013 & Secretarial Standard-I.

The composition number of meetings held under the review the scope of work of therespective committees including Nomination & Remuneration Committee Audit CommitteeStakeholder's relationship committee and Corporate Social responsibility committee havebeen appended in the report on corporate governance forming part of this Annual Report.

Declaration by Independent directors

Company has received necessary declaration from

each independent director under Section 149(7) of the Companies Act 2013 and SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 ('ListingRegulations') that they meet the criteria of independence laid down in the Companies Act2013 and Listing Regulations.

Board of Directors and Key Managerial


Board of Directors

• The composition of the Board of your Company is in

conformity with the provisions of the Companies Act 2013 as amended from time to timeand has a well- structured Board with a balanced mix of Executive and Non-ExecutiveDirectors comprising of Five (5) Directors with 3 (Three) Non-Executive (IndependentDirectors) and 2 (Two) Executive Directors. Your Company is also in compliance ofrequirement of having 1 woman Director on Board. The Executive and Non-Executive Directorsare competent and knowledgeable personalities possessing required skills and competenciesin compliance to the requirements of Banking Regulations Act 1949 Companies Act 2013 andother applicable laws and regulations.

• None of the Directors of the Company are disqualified from being appointed asDirectors as specified under Section 164 (2) of the Companies Act 2013 read with itsapplicable rules.

• Following directors resigned from the Board of Company during the period underreview:

Mr. Vishal Mahadevia (Nominee Director) 23rd January 2017
Mr. Nishant Sharma (Nominee Director) 24th January 2017
Mr. Ravindra Bahl (Nominee Director)- 24th January 2017

Company applied with RBI for granting approval for Mr. Mannil Venugopalan for theposition of NonExecutive Part Time Chairman and considering his vast experience RBIgranted approval and he is being designated as Non Executive Part Time Chairman of theBank.

Pursuant to the applicable provisions of the Companies

Act 2013 Regulation Act 1949 and Articles of Association of the Company and subjectto the approval of Reserve Bank of India (RBI) and on approval by shareholders at theirmeeting held on 31st March 2017 for appointment of Mr. Sanjay Agarwal as the"Managing Director & CEO" and Mr. Uttam Tibrewal as the "Whole timeDirector" in view of proposed transition to Banking platform for the tenure of 3years from date of taking the charge.

In terms of Section 152 of the Companies Act 2013 Mr. Uttam Tibrewal being directorliable to retire by rotation shall retire at the ensuing AGM and being eligible forreappointment offers himself for re-appointment.

Other Key Managerial Personnel

Mr. Deepakjain Chief Financial Officer and Mr. Manmohan Parnami Company Secretary arethe other 2 Key Managerial Personnel of your Company as per the provisions of theCompanies Act 2013 and rules made thereunder.

Performance evaluation

Board evaluation is the most effective way to ensure the Board members understand theirduties and to adopt effective good governance practices. To be effective boardroomappraisals need to have specific clearly defined steps and practices and a specialcommitment from the Board. Your Company evaluates the performance of individual directorsthe Board as a whole and its committees annually.

Evaluation mechanism is based on independent assessment of performance of Directors andBoard as a whole and of its committees. The performance of the committees was evaluated bythe Board after seeking inputs from the committee members on the basis of criteria such asthe composition of committees manner of conducting the meetings value additions made bythe members of the committees sharing of relevant knowledge effectiveness of committeemeetings etc.

The Board and the Nomination and Remuneration

Committee reviewed the performance of individual directors on the basis of criteriacovering their knowledge participation and the contribution of the

individual director to the Board and committee meetings like attendance of thedirectors in the meetings their contribution & inputs and expertise and otherrelevant parameters.

Familiarization Programme for Independent Directors

In compliance with the requirements of the act and the regulations the Company hasputin place a familiarization programmes for the Independent Directors to familiarize themwith their role rights and responsibility as directors the working of the Companynature of the industry in which the Company operates business model etc. The details ofsuch familiarization programmes imparted to Independent Directors are posted on thewebsite of the Company and can be accessed at au-notice-board

Meetings of Independent Directors

The Independent Directors met once during the year under review. The meeting wasconducted in an informal manner without the presence of any of the Executive Directorsthe Non-Executive Non-Independent Directors or any other Management Personnel.

The meetingwas held inter alia to discuss:

• Review of the performance of Non-independent Directors and the Board ofDirectors as a whole.

• Review of the performance of the Chairman of the Company taking into accountthe views of the Executive and Non-executive directors.

• Assess the quality content and timeliness of flow of information between themanagement and the Board that is necessary for the Board to effectively and reasonablyperform its duties.

Regulatory Compliances RBI Guidelines

Your Company continued to comply with guidelines of RBI Companies Act 2013 and otherapplicable regulation as applicable to a Non-Banking Non-Deposit Taking SystemicallyImportant Asset Finance Company ('NBFC- ND-SI-AFC') Your Company continues to comply withall requirements prescribed by RBI from time to time.


Your Company was a non-deposit taking NBFC as on 31st March 2017 and thus has notaccepted any public deposits during the FY 2016-17.

Material Events Occurring After Balance Sheet Date- Sec 134 (3) (I) of Companies Act2013

The major events after the balance sheet date i.e. after 31 st March 2017 were asfollows:

Name Change

Your Company received license from Reserve Bank of India dated 20th December 2016 tocommence banking business under Section 22(1) of the Banking Regulation Act 1949 andchanged name of the company from "Au FINANCIERS (INDIA) LIMITED" to "AUSMALL FINANCE BANK LIMITED" and approval of Registrar of Companies Rajasthan wasreceived on 13th April 2017.

Governance Framework

Bank formed the Board and Board delegated committees approved the policies asapplicable on Banks in terms of applicable RBI guidelines and Listing Regulations forbuilding strong governance framework for Banking platform.

Commencement of Banking Business Operations

Commenced its banking operations on 19th April 2017 to build AU SMALL FINANCE BANK anadmired retail franchise offering diverse suite of banking products and services byleveraging our asset based lending strengths. Simultaneously Company also surrendered itsNBFC-ND- Sl AFC License with RBI on the same day.

Approval to the terms of appointment of MD & CEO & Whole Time Director

RBI granted approval to the terms of the appointment Mr. SanjayAgarwal as the"Managing Director & CEO" and Mr. Uttam Tibrewal as the "Whole timeDirector".

Initial Public Offer

In terms of in-principle approval of RBI to set up Small Finance Bank it was mandatoryto get Company listed within a period of 3 years. During 2016-17 taking this initiativeforward. Company filed Draft Red Flerring Prospectus and received approval for the same on22nd March 2017 and in recently concluded IPO there was an overwhelming response acrossall the categories of investors and issue was oversubscribed by 54 times. We aresufficiently capitalized and IPO of T 1913 crore was a pure Offer for Sale which providedliquidity to our existing shareholders and Bank got listed on 10th July 2017 on NSE &BSE Bourses.

With commencement of the bank and the completion of our listing we are now focused tobuild our Bank and stabilize our operations. Our key priorities for the future will be tocontinue to serve the customers in the best possible way maintain and continuouslyimprove the asset quality thoroughly abide by all the regulations mandated on us controlour operational expenditure strengthen our product portfolio across assets andliabilities.

Extract of annual return

Pursuant to sub-section 3(a) of Section 134 and sub-section (3) of Section 92 of theCompanies Act 2013 read with Rule 12 of the Companies (Management and Administration)Rules 2014 extract of annual return in the prescribed form MGT-9 as annexure IV isattached to this Report.

Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo

The disclosures to be made under sub-section (3) (m) of Section 134 of the CompaniesAct 2013 read with Rule 8(3) of the Companies (Accounts) Rules 2014 by your Company areas under:

Conservation of Energy

(i) The steps taken or impact on conservation of energy

Your Company has adopted social environment management system and installed energyconserving computer monitors LED lights AC with good electric saving ratings whereverpossible at branches & other offices to conserve energy and plans to carry outoperations with low cost highly technology lean operations model.

(ii) The steps taken by the company for utilising alternate sources of energy

We are taking measures to utilize the day light to the extent possible to saveelectricity at Branches and other offices.

(iii) The capital investment on energy conservation equipments

In view of bankingtransition Bankshall explore more options to have monitoring andcontrol over usage of electricity and other resources by the Branches to ensure efficiencyin our operations.

Technology Absorption

(i) The efforts made towards technology absorption

Your Company has implemented social media cutting- edge technologies likevirtualisation and continue to invest in the best-in-class IT systems with the objectiveto make IT systems as business enabler and tool for improving efficiency and speed of itsoperations.

Your Company has incurred huge amount to build a lean and efficient Bankinginfrastructure and availed services of Netmagic an NTT Communication Company to manage itsDatacentre Near DR & DR site with view to ensure Business Continuity and seamlessworking.

For easy & convenient banking for our customers and to take maximum benefit ofavailable technology resources for improving our efficiencies we have taken followingmeasures

• Aadhar enabled authentication

• Account opening over tabs

• Paperless account banking with no deposition and withdrawal slips at Branchesrequired for carrying out transactions.

(ii) The benefits derived like product improvement cost reduction product developmentor import substitution;

Above measures would help us in cost reduction increase in efficiency of operationsand productivity per employee.

Company implemented several key applications for Customer Relationship Management andis currently underway of implementing the other applications to improve its technologyarchitecture further.

(iii) In case of imported technology (imported during the last three years reckonedfrom the beginning of the financial year) - NA

(iv) Your Company has not incurred any expenditure on Research and Development duringthe year under review

Foreign Exchange Earnings and Outgo

The foreign exchange earnings and the foreign exchange outgo of the Company isfurnished in note no. 32 of Annual Financial Statements for FY2016-17.

Management Discussion and Analysis Report

The Management Discussion and Analysis Report for the year under review is presented ina separate section forming part of Annual Report.

Policies & Framework:

Policies regarding appointment & remuneration

Your Company has formulated a policy for nomination and remuneration of Director andKMPs which laid down

the process for appointment of Directors including the required skill sets experienceetc. The Policy covers aspects of board composition skill sets diversification of boardof directors as required under the Companies Act 2013. Nomination & Remunerationcommittee (NRC) identifies and scrutinizes the prospective candidates for the position ofDirector keeping in view the requisite qualifications expertise skill sets trackrecord etc. The NRC has also put in place the policy on board diversity and policy fornomination and remuneration of Directors and KMPs. Policy is placed on the website of yourcompany at weblink

Vigil Whistle Blower Mechanism & Anti-Bribery and Corruption Policy

The Company formulated and established a Vigil Mechanism Framework to enable directorsand employees to report genuine concerns about unethical behavior actual or suspectedfraud or violation of Code of Conduct. This policy promotes open and fearless environmentof direct communication by employees to management of the Company. Further this policyseeks to provide necessary safeguards for protection of employees from reprisals orvictimization for whistle blowing in good faith. The Policy neither releases employeescustomers and/or vendors from their duty of confidentiality in the course of their worknor is it a route for taking up a grievance about personal situation. During the year nowhistle blower event was reported and mechanism is functioning well. No personnel has beendenied access to the Audit Committee.

The Vigil Mechanism whistle blower policy has been uploaded on the website of theCompany i.e. https://www. Anti-Bribery Policy mechanism is alsoin place to ensure that no bribe and corrupt practices are carried out by the Company orits employees and associates and report on the same being submitted to the Board.

Disclosures under Sexual Harassment of Women at Workplace (Prevention Prohibition& Redressal) Act 2013

The Company is committed to provide a safe and conducive work environment to itsemployees and has formulated Policy for Prevention of Sexual Harassmentto prohibitprevent or deter any acts of sexual harassment at workplace and to provide the procedurefor the redressal of complaints pertaining to sexual harassment thereby providing a safeand healthy work environment. During the year under review no case of sexual harassmentwas reported. The internal complaint committee has been formed to ensure safe andconducive work environment is

provided to its employees and to monitorthe compliance of applicable guidelines in thisregard.

Corporate Social Responsibility

Your Board has constituted a Corporate Social Responsibility committee in accordancewith requirement of Section 135 of Companies Act 2013. Details of CSR Committee areavailable in the report on Corporate Governance. CSR Committee has formulated andrecommended a CSR policy which has been approved by the Board and periodically reviewed.Your Company's CSR policy is committed towards CSR activities as envisaged in Schedule VIIof the Companies Act 2013. The Annual Report on CSR activities as required underCompanies (CSR Policy) Rules 2014 which is attached to this report as Annexure V. The CSRPolicy can be accessed at https://

Your company has implemented Social Environment Management System as agreed upon withInternational Finance Corporation & Asian Development Bank in its internal credit andmanagement assessment processes with respect to offering its financial services to itscustomers.

Internal Financial Controls and their Adequacy

The Companies Act 2013 has introduced a reasonably advanced reporting concept forauditors i.e.. Internal Financial Control (IFC) over financial reporting. Auditors of theCompany are required to report on adequacy and operating effectiveness of InternalFinancial Controls of the Company with report on financial statements prepared underSection 143 of the Act.

The Company as per the requirement of section 134 (5) (e) has adopted the policies andprocedures to ensure orderly and efficient conduct of its business including adherence tothe Company's policies safeguarding of its assets prevention and detection of frauds anderrors accuracy and completeness of accounting records timely preparation of reliablefinancial information.

During the year under review the Statutory Auditors and the Secretarial Auditor havenot reported any instances of frauds committed in the Company by its Officers or Employeesto the Audit Committee under section 143(12) of the Companies Act 2013 details of whichneeds to be mentioned in this Report.

Auditors & Auditors' report:

Statutory Auditor

Your Company recently converted into Small Finance Bank and commenced its BankingBusiness on 19th April 2017. It is regulated by the Banking Regulation Act 1949therefore as per the Section 30 of the Banking Regulation Act and as per the prescribedCirculars of RBI it is required to take prior approval of RBI for the Appointment ofStatutory Auditor in the Bank for each financial year and we hereby inform that Companyreceived approval from RBI for the appointment of M/S S.R. BATLIBOI & ASSOCIATES LLPChartered Accountants as Auditors of the Bank for the FY 2017-18.

In terms of Sections 139 and 141 of the Companies Act

2013 read with Companies (Audit and Auditors) Rules

2014 it is hereby informed that RBI has granted approval to the name of M/s. S. R.BATLIBOI & ASSOCIATES LLP Chartered Accountants (Registration No. 101049W/ E300004)for appointment as statutory auditor of the Company for FY 2017-18 and it is proposed forapproval of the members in the forthcoming Annual General Meeting for auditing the AnnualAccounts of the Company for FY 2017-18 and for appointing them as statutory auditors fromthe conclusion of 22nd Annual General Meeting till the conclusion of the 26th AnnualGeneral Meeting of Bank to be held in the calendar year 2021 subject to ratification oftheir appointment by the Members of the Bank at every subsequent Annual General Meeting. Acertificate under Section 141 of the Companies Act 2013 is received from the M/s S. R.BATLIBOI & ASSOCIATES. LLP Chartered Accountants existing auditors and proposedaudit firm which fulfils the criteria prescribed in the said section to the effect thattheir appointment if made would be within the prescribed limits under Section 141 of theAct and that they are not disqualified for such appointment within the meaning of Section141 of the Act and the Company.

Reports & qualifications if any

The notes on the financial statements referred to in the Auditors' Report areself-explanatory and do not call for any further comments. The Auditors' Report does notcontain any qualification reservation or adverse remark.

Secretarial Auditor

Pursuant to Section 204 of the Companies Act 2013 your Company had appointed M/s V. M.Associates Practicing Company Secretaries Jaipur as its Secretarial Auditors to

conduct the secretarial audit of the Company for FY 2016- 17. Your Directorsrecommended and approved their appointment as the Secretarial Auditors of the Company forFY 2017-18.

Reports & qualifications if any

Company provided all assistance and facilities to the Secretarial Auditor forconducting their audit for FY 2016- 17. The Secretarial Audit Report as specified inSection 204 of Companies Act 2013 in Form MR-3 as annexure VI to this report. There areno qualifications or adverse remarks in the Secretarial Audit Report except observation onexpense on CSR activities were below the prescribed limit. Board's explanation has beenformed as set out in Annexure V Annual Report on Corporate Social Responsibility.

Details of significant and material orders passed by the Regulators or Courts orTribunals impacting the going concern status and the Company's operations in future.

No significant and material orders were passed by the regulators or courts or tribunalsimpacting the going concern status and the Company's operations in future.

Risk Management Framework & Policy

The Board of Directors has overall responsibility for Risk Management of the Company.The Board oversees the Company's Risk and related control environment reviews andapproves the policies designed during transition of company from Non-Banking FinanceCompany to Bank.

The Board ensures that comprehensive policies systems and controls are in place toidentify monitor and manage material risks at banking platform. The Board has laid down aRisk appetite framework which identifies the quantum of risk and the Company is willingand able to assume in its exposures and business activities in pursuit of its strategicobjectives and desired returns. The Board has also established policies governing riskmanagement frame work and hired experienced senior personnel to identify and look overallrisk framework.

In view of Banking transition. Board has taken following steps to strengthen the riskgovernance framework:

a. Board has reviewed and approved applicable regulatory and business operationspolicies to enhance & improve the monitoring mechanism of its risk embedded in Bankingbusiness model

b. Board has constituted 21 committees including following committees for monitoringand

mitigating the risk involved on Banking platform with a view to strengthen itsframework for risk governance and control and for risk management following are thecommittees of the Board

• Risk Management Committee of the Board

• Operational Risk Management & IT Committee and

• Credit Risk & NPA management committees

c. Each new product is assessed recommended by product approval committee and approvedby Board before being introduced.

d. There are separate Audit Risk & Compliance functions in the Bank led byrespective department heads for monitoring the regulatory and other business risks.

e. Chief Risk Officer has also been appointed for building governing & monitoringthe risk management framework of the Bank.

f. Risk Management Policy has been uploaded on the website of the Company i.e. athttps://www.

Human Resources

The Company aims to align FIR practices policies and processes with businessobjectives goals to motivate people for higher performance and build a competitiveworking environment. The Company strongly believes that its employees are the mostimportant asset base and all measures introduced by the Company is aimed at providingemployee satisfaction enabling them to deliver better results year over year. At the endof March 2017 the Company had 8515 employees. With increase in growth and size it wasinevitable for the Company to increase ability to hire manpower faster to handle andmanage banking operations. In line of banking business requirements the Company hiredmanpower from external manpower service companies and direct recruitments to ensure thatgrowth envisaged by management can be achieved on consistent basis. Employee relationsremained cordial and the work atmosphere remained congenial during the year.

Brief of Bank Products

Your Bank successfully commenced banking operation and bifurcated its products offeredto the customers covering Liability and Asset Products.

Assets Products Portfolio

Your Bank launched various customized assets products such as Retail bank &Wholesale Banking Products and commits to provide consistent customization in assetproducts to meet evolving need of our customers.

Brief of asset products is mentioned below.

a. Commercial Vehicle Loan
b. Auto/Car Loan
c. Tractors Loan
d. Two Wheelers Loan
e. Construction Equipment Loan
f. Gold Loan
b. Agriculture Term Loan
a. Lending to NBFC HFC&MFIs
b. Business Banking
c. Real Estate Finance

IT Strategy

Unified Payment Interface (UPI) Aadhar Enabled Authentication Payment E-walletsmobile banking and post demonization less cash environment has led to revolution in thebanking sector wherein convenience ease of use and cost effective way of transacting arekey enablers for Bank to get more customers and to enhance customer convenience.

At AU Bank we focus on building a Differentiated technology infrastructure enhancingconvenience for customers and building a differentiated simplified banking experience forour customers.

It included the Mobility solutions for our sales force call center operationsliability centralized processing hub cheque clearing centers unified platform forcustomer relationship management and cash dispensation machines and we shall take forwarddigital banking & analytics for tapping growing digital banking culture that

Liability Products Portfolio

Your Bank launched various liability customized liability products viz. SavingAccounts Currents Accounts Fixed Deposit (FD) Recurring Deposit (RD) Gold Loans AgriTerm Loan Locker Facility Assets Point of Sale (POS) and Fixed Deposit Overdraft (FDOD)and commits to provided consistent development of liability products.

Brief of liability products is mentioned below.

a. Fixed Deposit
b. Regular Fixed Deposit
c. 5-year tax saving Fixed Deposit
d. Sweep-in facility
e. Recurring Deposits

will allow the unbanked masses to open their accounts and those with bank accounts toeasily manage their finances.

Digital Banking

Your Bank committed to provide digitalized banking services to its customer and enhancescope of paper less banking for our customers. As per the commitment of Bank we haveassociated with various technology partners.

Particular of Employees

The Particular of Employees pursuant to sub Rule 2 & 3 of Rule 5 of Companies(Appointment & Remuneration of Managerial Personnel) Rules 2014 as amended iscovered under annexure III & for particular of employees under Rule 5 (1) of Companies(Appointment & Remuneration of Managerial Personnel) Rules 2014 is covered inannexure VII to this report.

Investor Relations

To communicate details of performance important developments and exchange ofinformation any investor can write at investorrelations@aubank.inand for other enquiries investors can visit the Company's website

Your Company ensures that critical information about the Company is available to allthe investors by hosting all such information on the Company's website

MD & CEO / CFO Certification

The MD & CEO and the CFO of the company have issued certificate certifying that thefinancial statements do not contain any materially untrue statement and these statementsrepresent a true and fair view of the Company's affairs. They also certify that notransactions entered into during the year were fraudulent illegal or violative of thecode of conduct of the Company they are responsible for establishment and maintenance ofthe Internal Financial Controls forfinancial reporting and they have indicated to theauditors and the Audit Committee about any significant changes in internal control overfinancial reporting significant changes in the accounting policies and instances ofsignificant frauds if any which they were aware. The Annual certificate is annexed andforms part of the Annual Report.

Directors' responsibility statement

As required under clause (c) of sub-section (3) of section 134 of the Companies Act2013 directors to the best of their knowledge and belief state that -

a. In the preparation of the annual accounts the applicable Accounting Standards hadbeen followed along with proper explanation relating to material departures;

b. The directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable

For and on behalf of the Board of Directors AU SMALL FINANCE BANK LIMITED


Sanjay Agarwal

Managing Director & CEO V


Date: 09th August 2017 Place: Mumbai

CIN No. L36911RJ1996PLC011381

and prudent so as to give a true and fair view of the state of affairs of the Companyat the end of the financial year and of the profit and loss of the Company for thatperiod;

c. The directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the Company's assets and for preventing and detecting fraud and otherirregularities;

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 theCompany and that such internal financial controls are adequate and were operatingeffectively; and

f. The directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.


We place our sincere appreciation to our Chairman and other Independent Directorsduring the course of transition from NBFC to Bank and in getting the Bank Listed.

Your Company would like to acknowledge the role of all its stakeholders includingshareholders customers key partners and lenders for their continued support to theCompany.

The directors appreciate the guidance received from various regulatory authoritiesincluding RBI SEBI MCA Registrar of Companies the Stock Exchanges and thedepositories.

Your directors place on record their appreciation of the hard work and dedication ofall the employees towards company.

Uttam Tibrewal

Vhole Time Director DIN:01024940