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Ujjivan Small Finance Bank Ltd.

BSE: 542904 Sector: Financials
NSE: UJJIVANSFB ISIN Code: INE551W01018
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VOLUME 245584
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VOLUME 245584
52-Week high 34.35
52-Week low 14.15
P/E
Mkt Cap.(Rs cr) 2,912
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
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Ujjivan Small Finance Bank Ltd. (UJJIVANSFB) - Director Report

Company director report

Dear Stakeholders

On behalf of the Board of Directors (the "Board") of UjjivanSmall Finance Bank Limited (the "Bank or Ujjivan") it is our immense pleasureto present the 5th Annual Report of the Bank along with the Audited Financial Statementsand Auditor's Report thereon for the FY 2020-21.

OVERVIEW AND STATE OF AFFAIRS OF THE BANK

During the FY 2020-21 the Bank rebound from the initial setback in thebusiness observed in the 1st quarter due to COVID-19 lockdown and delivered a record highbusiness volume in the 4th quarter. With the opening up of markets gradually from the 2ndquarter volumes picked up across asset and deposit businesses reaching pre-COVID level byend of the 3rd quarter of FY 2020-21. The Bank closed the FY 2020-21 on a high note withthe last quarter showing tremendous growth across businesses. In the first half of the FY2020-21 the Bank took a cautious approach towards microfinance lending in select pocketsand increased focus on collections post lockdown. The Bank also took a measured approachtowards its Micro and Small Enterprises ("MSEs") lending in certain stressedsegments and shifted its focus towards lending to semi-formal and formal segments forbetter portfolio quality. During the FY 2020-21 the Emergency Credit Line GuaranteeScheme ("ECLGS") helped the MSE business ramp up after a muted 1st Quarter. TheBank maintained a cautious stance in its Institutional lending business lending to"AA" rated entities without having any adverse impact on the vertical level NetInterest Margin. The Personal Loans lending business volumes had increased on account ofgood traction coming from branches and saw limited traction in lending through fin-techpartnerships DSA and digital acquisitions until the 4th quarter of FY 2020-21. Businessvolumes under the Housing vertical saw a steady ramp up with improved approval ratesdespite restricted segments and stringent credit policy. Bank's Assets Under Management("AUM") registered a 7% y-o-y growth in FY 2020-21 over the previous year.Despite a slowdown in business momentum in the first half on account of the pandemic theBank witnessed significant y-o-y growth in Housing (35%) and MSE (31%) while themicrofinance book stayed relatively fiat. The new businesses of Personal Loan and Vehicleloans gradually scaled up in the year under review and now constitute 1.4% of the Bank'sportfolio compared to 0.64% a year ago.

During FY 2020-21 Bank's deposit book recorded 22% y-o-y growth drivenby new retail customers. 6.6 Lakhs new retail deposit customers were on-boarded during theFY 2020-21. CASA grew by 85% y-o-y closing at 21% of the total deposit book as of March31 2021 against 14% on March 31 2020.

The Bank offered a moratorium commencing from March 2020 to August2020 and also undertook restructuring as per the RBI guidelines for eligible customers inMicro Banking MSE and Housing segments. The focus remained on portfolio management andcollections with the strengthening of collection efforts with additional stafftele-calling adoption of digital and alternate collection channels like Airtel Paymentpoints PayTm Instamojo Setu and CC Avenue. There has been a continuous improvement inthe collection efficiency post moratorium with the overall collection efficiency improvingfrom 69% in August 2020 to 94% in March 2021. The Bank implemented restructuring for 3.7Lakhs accounts worth Rs852 Crores in the Micro Banking segment 121 accounts worth Rs14Crores in Housing and 76 accounts worth Rs13 Crores in the MSE segment. The restructuredbook witnessed improved collection efficiency of 74% against 49% witnessedpre-restructuring. The Bank took a call to maintain prudential provisioning on itsportfolio with total provisions covering 6.3% of the overall portfolio against 1.6% inthe previous year.

In a bid to diversify its product suite the Bank launched several newproducts and services attuned to the need of the customers. The Bank launched Gold LoansPM SVANIDHI (street vendor loans) and scaled up the Kisan Pragati Card product for theMicro Banking customers. The Bank had launched Navnirman Loans (ECLGS) to support its MSEcustomers in an effort to help them rebuild their livelihoods and recover from thepandemic impact Loan Against Rent Receivables product was also introduced for theLandlords of the Bank's branches and the Bank also ventured into the Supply Chain Financesegment through its first Fintech partnership. Micro & Mini Commercial Cargo Vehicleproduct was launched to leverage the growing demand for vehicles in this segment. The Bankalso launched the "Garima Savings Account" a Savings Bank Account catering tothe financial needs of the women segment. To ease the mechanism of repayment in times ofthe pandemic the Bank launched various modes of cashless EMI payment. Bank had partneredwith Airtel Payments Bank PayNearBy and API based digital repayment via Bharat BillPayment System. During the 4th quarter of FY 2020-21 11% of the customers had paid theirEMI via cashless modes. Cashless collections continue to remain stable contributing to anaverage 18% of Micro Banking and Rural Banking for FY 2020-21.

The Bank operated its premises with the strictest safety standards inline with the State Level Bankers' Committee and local guidelines limiting staff turnoutand offering work from home for backend staff. The Bank constituted a Quick Response Team(QRT) to monitor the situation on the ground and provide guidelines during the pandemic toall the employees of the Bank. Bank has continued to maintain a strong connection with itscustomers and staff especially during the pandemic.

The Bank stayed committed to its Corporate Social Responsibility("CSR") initiatives and spent more than Rs5.50 Crores during the FY 2020-21 onseveral impactful activities focused on pandemic relief disaster and flood reliefpromoting education and livelihood support. One of the key initiatives of FY 2020-21 wasthe "COVID relief" which involved the distribution of more than 3.40 LakhsMasks 8000 PPE kits more than 13700 dry ration 4 ICU beds were also provided to CMCVellore hospital & 5 information kiosks were installed at OPDs of St. John's HospitalBengaluru.

Bank educated more than 357000 beneficiaries including the generalpublic and trained its customers on COVID-19 symptoms precautions nearby testing centresand insurance schemes by the Government of India.

The Bank's total customer base grew by 13% y-o-y totalling 59.24 Lakhswhile Deposit customers increased by 36% making a total of 55.85 Lakhs.

As of March 31 2021 the Bank operated a network of 575 BankingOutlets ("BOs") including 144 in Unbanked Rural Centre ("URC")locations complying with the RBI prescribed norm of 25% of the BOs to be situated in URCsand 491 ATMs including 53 Automated Cash Recyclers.

The Bank was adequately capitalised with a CRAR of 26.44% as of March31 2021 and its funding position stayed comfortable throughout the year under review. TheBank took a prudent call to build a sufficient liquidity buffer in the wake of theCOVID-19 situation.

For FY 2020-21 the Net Profit is Rs8.30 Crores against Rs349.92 Croresin the FY 2019-20. Pre-provision operating profit stands at Rs809.30 Crores againstRs637.23 Crores in FY 2019-20.

Highlights of the FY 2020-21:

• Profit After Tax of the Bank for the FY 2020-21 stands at Rs8.30Crores.

• Overall Portfolio at Risk stands a 14.89% against 1.95% inMarch 2020.

• Net Non-Performing Assets at 2.93% against 0.20% in March 2020.

• The Cost of funds of the Bank reduced from 8.20% in FY 2019-20to 7.24% in FY 2020-21.

• The Deposit book stood at Rs13136 Crores. CASA stood at Rs2699Crores. The retail book stood at Rs6242 Crores and Institutional book at Rs6894 Crores.Certificate of deposits stood at Rs407 Crores.

• Cost to Income Ratio reduced to 60.32% from 67.42% in FY2019-20 on account of rationalisation of costs cutting down of non-essentialscost-saving initiatives and process improvements.

Profitability: Pre-provision operating profits is Rs809.30 Crores andPost-tax profits - Rs8.30 Crores for FY 2020-21.

The Bank's Board was strengthened on joining of 6 (Six) directorsduring the FY 2020-21 and 3 (Three) Directors had resigned from the Board including Mr.Biswamohan Mahapatra the Part-time Chairman and Independent Director of the Bank.

FINANCIAL PERFORMANCE

Summary of Financial Performance

(Rs in Crores)

Particulars FY 2020-21 FY 2019-20
Revenue from Operations 2806.07 2703.60
Other Income 310.82 322.21
Less: Operational Expenses 404.49 527.46
Personnel Expenses 748.78 718.49
Profit/loss before Depreciation Finance Costs Exceptional items Provisions and Tax Expense 1963.61 1779.86
Less: Depreciation/ Amortisation/ Impairment 76.80 72.63
Profit/loss before Finance Costs Exceptional items Provisions and Tax Expense 1886.81 1707.23
Less: Finance Costs 1077.51 1070.01
Profit/loss before Provisions Exceptional items and Tax Expense 809.30 637.23
Less: Provisions & Contingencies 799.10 170.99
Add/(less): Exceptional items 0 0
Profit/loss before Tax Expense 10.20 466.24
Less: Tax Expense (Current & Deferred) 1.90 116.32
Profit/loss for the year (1) 8.30 349.92
Total Comprehensive Income/loss (2) - -
Total (1+2) 8.30 349.92
Balance of profit/loss for earlier years 362.01 118.36
Less: Transfer to Debenture Redemption Reserve - -
Less: Transfer to Statutory Reserves 2.07 87.48
Less: Transfer to investment Fluctuation Reserve 5.28 5.53
Less: Transfer to Capital Reserves 19.33 -
Less: Dividend paid on Equity Shares - -
Less: Dividend paid on Preference Shares - 11.00
Less: Dividend Distribution Tax - 2.26
Balance carried forward 343.63 362.01

Key Ratios: (Comparative ratios are annualised)

Particulars FY 2020-21 FY 2019-20
Interest income as a percentage to working funds 14.67% 17.09%
Non-interest income as a percentage to working funds 1.62% 2.04%
Operating profit as a percentage to working funds 4.23% 4.03%
Business (deposits plus gross advances) per employee (Rs in thousands) 13772 12564
Profit per employee (Rs in thousands) 4.82 214.72
EPS (Basic) (Rs) 0.05 2.19
EPS (Diluted) (Rs) 0.05 2.18

TRANSFER TO RESERVES

A. Statutory Reserve

The Bank has transferred Rs2.07 Crores to statutory reserves pursuantto the requirements of Section 17 of the Banking Regulation Act 1949 and RBI circulardated September 23 2000 as amended from time to time.

B. Investment Fluctuation Reserve ("IFR")

The Bank has made an appropriation of Rs5.28 Crores as compared toRs5.53 Crores in FY 2019-20 out of profits for the FY 2020-21 to the IFR pursuant to theRBI notification RBI/2017-18/147 DBR.No.BP. BC.102/21.04.048/2017-18 dated April 02 2018.

DIVIDEND

The Bank has formulated and implemented a Dividend Distribution Policypursuant to Regulation 43A of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 ("SEBI ListingRegulations") and RBI Requirements with an objective to appropriately rewardshareholders through dividends for reposing their confidence in the Bank while retainingthe capital required for supporting future business growth. The said Policy is availableon the website of the Bank at www.uiiivansfb.in/corporate- governance-policies.

A. Equity Dividend

With a view to conserve capital in an environment of heighteneduncertainty caused by the COVID-19 pandemic the Board of the Bank has not proposed anydividend on the equity shares for the FY 2020-21.

B. Preference Dividend

During the FY 2020-21 no dividend was declared on the preferenceshares issued by the Bank.

CHANGE IN THE NATURE OF BUSINESS

There was no change in the nature of business of the Bank during FY2020-21.

MATERIAL CHANGES AND COMMITMENTS

No material changes and commitments have occurred after the closure ofthe FY 2020-21 till the date of this report which might have affected the financialposition of the Bank. In the wake of the COVID-19 pandemic situation which had an impacton the portfolio quality the Bank made a prudential provision to the tune of Rs172Crores providing coverage to 6.31% of the gross book as against 1.62% in the previousfinancial year. The Bank also maintained a healthy Provisioning Coverage Ratio of 60.34%as of March 31 2021.

REVISION OF FINANCIAL STATEMENT OR THE DIRECTORS' REPORT

The Bank has not revised its financial statements or the directors'report in respect of any of the three preceding financial years either voluntarily orpursuant to the order of any judicial authority.

GENERAL INFORMATION

Detailed overview of the banking industry and important changestherein external environment and economic outlook have been elaborated in the Managementand Discussion Analysis Report which forms part of the Annual Report of the Bank for theFY 2020-21.

CAPITAL AND DEBT STRUCTURE

A. Changes in Capital Structure

There was no change in the Authorised Capital of the Bank during the FY2020-21 however the Bank had allotted equity shares under its Employee Stock OptionPlan-2019 ("ESOP 2019 Scheme") and Employee Stock Purchase Scheme-2019("ESPS 2019 Scheme")

B. Issue of Equity Shares or Other Convertible Securities

During the FY 2020-21 the Bank had made 4 (Four) allotments of equityshares aggregating to 91036 under its ESOP 2019 Scheme and ESPS 2019 Scheme:

Date of issue and allotment Method of allotment Face value (Rs) Issue price (Rs) Number of equity shares allotted
November 07 2020 Employee Stock Purchase Scheme 10 35 29069
January 19 2021 Employee Stock Option Plan 10 35 20298
February 15 2021 Employee Stock Option Plan 10 35 37229
March 15 2021 Employee Stock Option Plan 10 35 4440
Total 91036

C. Issue of Equity Shares With Differential Rights and/or Sweat EquityShares

During the FY 2020-21 the Bank has neither issued any equity shareswith differential rights nor any sweat equity shares.

D. Employee Stock Options / Share Based Employee Benefit Schemes

The Bank has formulated and implemented ESOP 2019 Scheme and ESPS 2019Scheme to reward the employees of the Bank and employees of its present or futuresubsidiary(ies) and/or holding company(ies) for their association and performance as wellas to motivate them to contribute to the growth and profitability of the Bank.

ESOP 2019 Scheme:

The Bank pursuant to the resolutions passed by the Board on January22 2019 and by the Members on March 29 2019 adopted the ESOP 2019 Scheme. The Bank inits 4th Annual General Meeting held on September 02 2020 has ratified the ESOP 2019Scheme as required under the SEBI (Share Based Employee Benefits) Regulations 2014. TheBank may grant an aggregate number of up to 144000000 stock options under the ESOP 2019Scheme. Upon exercise and payment of the exercise price the option holder will beentitled for allotment of one equity share per stock option. Accordingly the number ofequity shares that may be issued under

No change has been made in the ESOP 2019 Scheme during the FY 2020-21.

Particulars Details
Options granted 41103649
Options vested 8170136
Options exercised 61967
The total number of shares arising as a result of exercise of options 61967
Options lapsed • 3388135 lapsed options as of June 30 2020 got added back to the ESOP 2019 Scheme pool. • 2602991 options have lapsed from July 012020-March 312021.
The exercise price Rs35 per stock option (granted to employees on August 08 2019 and to Managing Director and CEO on December 04 2019) Rs30.75 per stock option (granted to 6 employees on November 02 2020)
Variation in terms of options Nil
Money realised by exercise of options Rs2168845 (Exercise price collected) Rs39268 (Perquisite tax collected)
Total number of options in force 35050556 (8170136 Vested options + 26880420 Unvested options)

the ESOP 2019 Scheme shall not exceed 144000000 equity shares offace value Rs10 each.

The ESOP 2019 Scheme is effective from March 29 2019. The objectivesof ESOP 2019 Scheme are among others to attract and retain employees with stock optionsas a compensation tool. Through ESOP 2019 Scheme the Bank offers an opportunity ofsharing the value created with those employees who have contributed or are expected tocontribute to the growth and development of the Bank.

The ESOP 2019 Scheme has been framed and implemented in compliance withprovisions of the SEBI (Share Based Employee Benefits) Regulations 2014 Companies Act2013 and rules made thereunder and relevant guidance notes and accounting standards.

As on March 31 202141103649 stock options have been granted by theBank under ESOP 2019 Scheme to eligible employees of the Bank and its Holding Company.

During the FY 2020-21 304549 number of options were granted onNovember 02 2020 at the rate of Rs30.75 per stock option to selected employees of theBank.

Particulars Details
Key Managerial Personnel* Name of KMP Option Granted
Mr. Nitin Chugh 3798697
Ms. Upma Goel 156986
Mr. Chanchal Kumar 82974
Any other employee who received a grant in any one year of options amounting to 5% or more of the options granted during the year Mr. Rajiv Kumar Pathak 52754
Mr. Dheemant Mansukh Thacker 42513
Mr. Pradeep Kumar 34755
Identified employees who were granted options during any one year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Bank at the time of grant Nil

*No stock options were granted during the FY 2020-21.

The disclosures as required under Regulation 14 of the SEBI (ShareBased Employee Benefits) Regulations 2014 read with Circular CIR/CFd/ POLICY CELL/2/2015dated June 16 2015 issued by SEBI are available on the website of the Bank at www.uiiivansfb.in.

ESPS 2019 Scheme:

The Bank pursuant to the resolutions passed by the Board on July 302019 and by the Members on August 03 2019 adopted the ESPS 2019 Scheme. The ESPS 2019Scheme has been framed and implemented in compliance with provisions of the SEBI (ShareBased Employee Benefits) Regulations 2014 Companies Act 2013 and rules made thereunderand relevant guidance notes and accounting standards.

The objective of the ESPS 2019 Scheme is inter-alia to reward theeligible employees of the Bank and its Holding Company for their association andperformance as well as to motivate them to contribute to the growth and profitability ofthe Bank.

Pursuant to the ESPS 2019 Scheme the Board is authorised to issue upto 72001840 fully paid-up equity shares of the face value of Rs10 each with pari-passuvoting rights to the eligible employees (as defined under the ESPS 2019 Scheme) inaccordance with the terms and conditions as may be decided by the Nomination andRemuneration Committee of the Bank.

The ESPS 2019 Scheme was implemented under two schemes viz. UpfrontScheme and Monthly Scheme. Under the Upfront Scheme the employees made upfront paymentsto purchase the equity shares and equity shares were allotted to them while under theMonthly Scheme the employees opened a monthly recurring deposit account and the equityshares were allotted to such employees at the end of the 12 months.

The Nomination and Remuneration Committee has been entrusted with theresponsibility of administering the ESPS 2019 Scheme. The Bank has allotted 14055097equity shares under Upfront Scheme in FY 2019-20 and 29069 equity shares under MonthlyScheme during FY 2020-21.

Total number of equity shares allotted under ESPS 2019 Scheme under upfront scheme 14055097
Total number of equity shares allotted pursuant to the ESPS 2019 Scheme under monthly scheme 29069
Employee-wise details of the Equity Shares that were issued to Key Managerial Personnel:
Key Managerial Personnel* Name of KMP Shares Issued
Mr. Nitin Chugh Nil
Ms. Upma Goel Mr. Chanchal Kumar 104355 14252
Any other employee who received a grant in any one year of options amounting to 5% or more of the options granted during the year Mr. Ashok Kumar Razdan 6000
Mr. Prasanta Kumar Nayak 3000
Ms. Sneha Kavanadala Sridhara 2196
Ms. Suman Roshini 2056
Ms. Suzanne Prabhu Braggs 2000
Ms. Mriganka Mistry 1817
Mr. K M Nagarathnamma 1714
Mr. Janmejay Kumar 1600
Ms. Ambiya Raju Naik 1508
Identified employees who were granted options during any one year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Bank at the time of grant Nil

The disclosures as required under Regulation 14 of the SEBI (ShareBased Employee Benefits) Regulations 2014 read with Circular CIR/CFd/ POLICY CELL/2/2015dated June 16 2015 issued by the SEBI are available on the website of the Bank atwww.uiiivansfb.in.

E. Issue of Debentures Bonds or any

Non-Convertible Securities or Warrants

During the FY 2020-21 the Bank has neither issued any debenturebonds non-convertible securities nor any warrants.

DILUTION OF PROMOTER'S SHAREHOLDING

In terms of the RBI In-Principle Approval RBI Final Approval andGuidelines for licencing of "Small Finance Banks" in the private sector issuedby RBI on November 27 2014 ("SFB Licencing Guidelines") the Bank was requiredto list its equity shares on the Stock Exchange within 3 (Three) years from the date ofcommencement of business

i.e. by January 312020.

Bank's equity shares got listed on Stock Exchanges on December 12 2019well within the prescribed timeline in accordance with SFB Licencing Guidelines.

Further Bank has to dilute the Promoter's Shareholding to 40% within 5(Five) years from the date of commencement of business i.e. by January 31 2022.

Bank has constituted Promoter Shareholding Dilution Committee (a Boardlevel Committee for Dilution) to comply with the aforesaid regulatory condition relatingto dilution of Promoter Shareholding. The said Committee met 4 (Four) times during the FY2020-21.

The Bank is committed to comply with the condition relating to dilutionof Promoter shareholding to 40% within the prescribed timelines and is evaluating variousoptions to comply with the aforesaid dilution requirement.

CAPITAL ADEQUACY

The Bank is subject to the Basel II Capital Adequacy guidelines (NCAF)stipulated by RBI. The CRAR of the Bank is calculated as per the standardised approach forCredit Risk.

CRAR of the Bank has been calculated on the basis of Basel IIguidelines. The CRAR of the Bank as of March 31 2021 using Risk Weighted Assets forcredit risk exposures as required under the operating guidelines of RBI for Small FinanceBanks stood at 26.44% including 25.06% Tier 1 Capital as against the minimum capitaladequacy requirements of 15%.

CREDIT RATING

Credit ratings assigned to Long Term Bank Facilities and Certificate ofDeposit Programme of the Bank during the FY 2020-21:

Instrument Name Name of Credit Rating Agency Amount (Rs In Crores) Rating Date of Credit Rating Revision in the Credit Rating
Long Term Bank Facilities CARE Ratings Limited 407.63 (reduced from 1386.31) CARE A+; Stable 06-09-2017 Reaffirmed "CARE A+; Stable"on 07-07-2020
Certificate of Deposit Programme CRISIL Ratings Limited 2500 CRISIL A1 + 26-02-2018 Reaffirmed "A1+" on 25-02-2021

Further the rating on the Short Term Fixed Deposits Programme whichwas put on 'notice of withdrawal' in February 2020 was withdrawn in line with applicableCRISIL's Policy during the FY 2020-21.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO INVESTOR EDUCATION ANDPROTECTION FUND

In terms of Section 124 & 125 of the Companies Act 2013 read withthe Investor Education and Protection Fund Authority (Accounting Audit Transfer andRefund) Rules 2016 as amended from time to time the dividend that remains unpaid orunclaimed for a period of seven consecutive years from the date of transfer are requiredto be transferred to the Investor Education and Protection Fund (IEPF).

Being the Fifth financial year there were no amounts due for transferto IEPF. Further as of March 31 2021 there was no shareholder who has notencashed/claimed the dividend amount and there is no unclaimed dividend amount lying withthe Bank.

BOARD AND KEY MANAGERIAL PERSONNEL

The Board was duly constituted during the FY 2020-21 and the changesthat took place in the Board composition are as follows:

A. Appointments

1. Mr. Umang Bedi DIN:02432920

The Board appointed Mr. Umang Bedi in its meeting held on March 232020 as an Additional Director (Independent) of the Bank w.e.f. April 01 2020 to holdoffice up to the date of the 4th Annual General Meeting ("AGM") of members ofthe Bank.

Further he was appointed as Director (Independent) pursuant to aresolution passed by the members of the Bank in the 4 th AGM held on September 02 2020for a term of 5 (Five) consecutive years commencing April 01 2020 up to March 312025.

He meets the criteria of independence as prescribed under Section149(6) of Companies Act 2013 read with Rule 5 of Companies (Appointment andQualifications of Directors) Rules 2014 and Regulation 16(1) (b) of SEBI ListingRegulations. He also meets the fit and proper criteria as prescribed under the applicableRBI Circular.

In terms of Section 152 of the Companies Act 2013 he is not liable toretire by rotation.

Rationale for his appointment:

The Board noted that Mr. Umang Bedi is an iconic leader who hasco-founded Daily hunt; India's largest local language content & news discoveryplatform across 14 Indian languages. He has phenomenal technological acumen and foresight.His guidance and direction will be very valuable in achieving the Bank's mission ofcreating a state-of-the-art mass market bank.

His brief Profile is available on the website of the Bank atwww.uiiivansfb.in/board-of-director.

2. Ms. Rajni Mishra DIN:08386001

The Board appointed Ms. Rajni Mishra in its meeting held on December15 2020 as an Additional Director (Independent) of the Bank w.e.f. December 16 2020 tohold office up to the date of 5th AGM.

She meets the criteria of independence as prescribed under Section149(6) of Companies Act 2013 read with Rule 5 of Companies (Appointment andQualifications of Directors) Rules 2014 and Regulation 16(1) (b) of SEBI ListingRegulations. She also meets the fit and proper criteria as prescribed under the applicableRBI Circular.

In terms of Section 152 of the Companies Act 2013 she is not liableto retire by rotation.

Rationale for her appointment:

She has been a career banker for nearly four decades with State Bankof India as well as its Associate Banks where she has handled varied assignments anddiverse portfolios gaining exposure in Branch Administration Corporate Credit ForexTreasury Vigilance Audit & Inspection etc. She is the Chairperson and IndependentDirector on the Board of M/s. NCL Buildtek Limited Hyderabad a leading manufacturer ofbuilding materials and a Group Company of M/s. NCL Industries (erstwhile Nagarjuna CementLimited). She has completed M. Com (Gold Medalist) from M S University Vadodara.

Her brief Profile is available on the website of the Bank atwww.uiiivansfb.in/board-of-director.

3. Mr. Ittira Davis DIN:06442816

The Board appointed Mr. Ittira Davis in its meeting held on March 132021 as an Additional Director

(Non-executive Non-independent) of the Bank w.e.f. March 13 2021 tohold office up to the date of 5th AGM.

He also meets the fit and proper criteria as prescribed under theapplicable RBI Circular.

Rationale for his appointment:

He is an international banker with over 40 years of banking experiencehaving worked extensively in the Middle East and Europe. He was with the Europe Arab Bankfrom July 2008 to October 2012 initially as the Managing Director - Corporate andInstitutional Banking and then as an Executive Director. He has previously worked withCitibank in India and the Arab Bank Group in the Middle East. He has been associated withUjjivan since March 2015 and played a pivotal role in its transition into a Small FinanceBank. Later he was the Chief Operating Officer of the Bank until June 2018. Mr. IttiraDavis was the MD & CEO of Ujjivan Financial Services Limited from July 2018 and hasresigned as MD & CEO on March 12 2021. He has completed Post-Graduate Diploma inManagement from the Indian Institute of Management Ahmedabad.

4. Mr. Rajesh Kumar Jogi DIN:03341036

The Board appointed Mr. Rajesh Kumar Jogi in its meeting held on March13 2021 as an Additional Director (Non-executive Non-independent) of the Bank w.e.f.March 13 2021 to hold office up to the date of 5th AGM and his office is liable to retireby rotation.

He also meets the fit and proper criteria as prescribed under theapplicable RBI Circular.

Rationale for his appointment:

Mr. Rajesh Kumar Jogi is a seasoned risk management professional andhas over 27 years of experience in banking which includes 10 years with NatWest GroupIndia (erstwhile Royal Bank of Scotland) and 17 years with Citibank N.A. He held theposition of Head of Risk for India and also led Asia Pacific Risk for the NatWest Groupfrom 2016 through 2017 where he was responsible for all risk disciplines across NatWestGroup India and has been a member of the Bank's Executive Committees in India. He has alsoheld Executive Directorship positions on the Boards of various NatWest Group India legalentities and he was also the Chief Risk Officer at RBS Bank (India). Mr. Jogi is aChartered Accountant and has completed Advanced Management Programme from Harvard BusinessSchool.

His brief Profile is available on the website of the Bank atwww.uiiivansfb.in/board-of-director.

5. Mr. Harish Devarajan DIN:00080245

The Board appointed Mr. Harish Devarajan in its meeting held on March13 2021 as an Additional Director (Independent) of the Bank w.e.f. March 13 2021 tohold office up to the date of 5th AGM.

He meets the criteria of independence as prescribed under Section149(6) of Companies Act 2013 read with Rule 5 of Companies (Appointment andQualifications of Directors) Rules 2014 and Regulation 16(1) (b) of SEBI ListingRegulations. He also meets the fit and proper criteria as prescribed under the applicableRBI Circular.

In terms of Section 152 of the Companies Act 2013 he is not liable toretire by rotation.

Rationale for his appointment:

Mr. Harish Devarajan has more than 35 years of experience in thecorporate and consulting sectors and has been associated with TVS Sundram Fasteners Ltd.and Hindustan Unilever Ltd. He has rich experience in Change management in a globalbusiness context having worked in Unilever UK as a Global Project Manager - EnterpriseCulture. He has been a free-lance Organisation Consultant and Leadership Coach since 2008when he started his own consulting practice company "People Unlimited". Harishis a past President of the National HRD Network Bengaluru Chapter and was also honouredwith the "Exemplary Leader Award" as part of the Employer Branding Awards India2007 (recognising excellence in Human Resources) and with the "Most Talented CoachingLeader" award at the World Coaching Congress 2017. Mr. Devarajan is a CommerceGraduate from Madras University and has completed PGDPM&IR XLRI from Jamshedpur.

6. Dr. Umesh Bellur DIN:08626165

The Board appointed Dr. Umesh Bellur in its meeting held on March 132021 as an Additional Director (Independent) of the Bank w.e.f. March 13 2021 to holdoffice up to the date of 5th AGM.

He meets the criteria of independence as prescribed under Section149(6) of Companies Act 2013 read with Rule 5 of Companies (Appointment andQualifications of Directors) Rules 2014 and Regulation 16(1)(b) of SEBI ListingRegulations. He also meets the fit and proper criteria as prescribed under the applicableRBI Circular.

In terms of Section 152 of the Companies Act 2013 he is not liable toretire by rotation.

Rationale for his appointment:

Dr. Umesh Bellur is the Chairman of the Department of Computer Scienceand Engineering at IIT Bombay and has experience of 8 years as a professor in theDepartment of Computer Science and Engineering

at IIT Bombay. He carries a diverse profile and has worked with variousorganisations including TCSI Corp Oracle Corp Covad Comm. Corp Collation Inc. inCalifornia. He is a member of the Technology Advisory Board for The Securities andExchange Board of India State Bank of India Clearing Corporation of India and NationalSecurities Depository India. Board member at MySetu and Tutelez.com - both startupsincubating at SINE IIT Bombay. Dr. Bellur is an engineer from Bengaluru University andholds a Ph.D from Syracuse University USA.

His brief Profile is available on the website of the Bank atwww.uiiivansfb.in/board-of-director.

B. Resignations

1. Ms. Vandana Viswanathan DIN:05192578

She had resigned as an Independent Director w.e.f. November 15 2020.

Reason for Resignation: She had resigned due to personal reasons andconfirmed to the Bank that there were no other material reasons for her resignation.

2. Mr. Jayanta Kumar Basu DIN:01268046

He retired by rotation in previous AGM held on September 02 2020 andwas reappointed as Director (Non-Executive Non-Independent) and subsequently resigned asthe Director (NonExecutive Non-Independent) on January 20 2021 (end of Business Hours).

Reason for Resignation: He had resigned due to personal reasons andconfirmed to the Bank that there were no other material reasons for his resignation.

3. Mr. Biswamohan Mahapatra DIN:06990345

He had resigned as the Part-Time Chairman and Independent Director onFebruary 19 2021 (close of Business Hours).

Reason for Resignation: He had resigned due to personal reasons andconfirmed to the Bank that there were no other material reasons for his resignation.

C. Key Managerial Personnel

As on March 31 2021 pursuant to Section 203 of the Companies Act2013 Mr. Nitin Chugh Managing Director and CEO Ms. Upma Goel Chief Financial Officerand Mr. Chanchal Kumar Company Secretary and Compliance Officer are the Key ManagerialPersonnel ("KMP") of the Bank.

1. Mr. Nitin Chugh DIN:01884659

Mr. Nitin Chugh was appointed as Managing Director and CEO of the Bankfor a period of 3 (Three) years commencing December 01 2019.

In terms of Section 203 of the Companies Act 2013 the Board hadappointed him as KMP of the Bank for the period co-terminus with his tenure as ManagingDirector and CEO of the Bank.

2. Ms. Upma Goel

Ms. Upma Goel was appointed as Chief Financial Officer and KMP of theBank w.e.f. February 01 2017.

3. Mr. Chanchal Kumar

Mr. Chanchal Kumar was appointed as Company Secretary KMP andCompliance Officer in terms of Regulation 6 of the SEBI Listing Regulations of the Bankw.e.f. March 24 2018.

DECLARATION BY INDEPENDENT DIRECTORS AND STATEMENT ON COMPLIANCE OFCODE OF CONDUCT

The Bank has received declarations from its Independent Directorsconfirming that they meet the criteria of independence as prescribed under Section 149(6)of the Companies Act 2013 and Regulation 16(1)(b) of SEBI Listing Regulations and thatthey have complied with the code of conduct for independent directors as prescribed underSchedule IV of the Companies Act 2013.

Further pursuant to Regulation 25(8) of the SEBI Listing Regulationsthe Independent Directors of the Bank have also confirmed that they are not aware of anycircumstance or situation which exist or may be reasonably anticipated to impair orimpact their ability to discharge their duties with an objective independent judgement andwithout any external influence.

In the opinion of the Board all the Independent Directors meet thecriteria with regards to integrity expertise and experience (including proficiency*) asrequired under applicable laws.

*All Independent Directors of the Bank have registered themselves inthe data bank as specified under Section 150 of the Companies Act 2013 read with Rule 6of Companies (Appointment and Qualifications of Directors) Rules 2014. Few IndependentDirectors have qualified the prescribed proficiency test. The Independent Directors (notexempted under the Companies (Appointment and Qualification of Directors) Fifth AmendmentRules 2020 as notified on December 18 2020) are committed to qualify the onlineproficiency self- assessment test as required under aforesaid Rule within the prescribedtimeline.

The Bank has also received from its directors a statement that theyhave complied with the Code of Conduct for Directors and Senior Management of the Bank.

NUMBER OF MEETINGS OF THE BOARD

The Board met 9 (Nine) times during the FY 2020-21. The meetings of theBoard were convened in accordance with applicable laws and standards and the interveninggap between the said meetings was not exceeding 120 days. The details of Board Meetingsare available in the Corporate Governance Report which forms part of the Annual Report ofthe Bank for the FY 2020-21.

BOARD COMMITTEES

The Bank believes that the Board Committees are pillars of goodcorporate governance. In pursuit of the highest standard of corporate governance and tocomply with the provisions of the Companies Act 2013 SEBI Listing Regulations and RBIguidelines the Bank has constituted various statutory and regulatory Board LevelCommittees. Further in order to improve the Board effectiveness efficiency and fasterdecision making the Bank has also constituted a few non-statutory and non-regulatoryBoard Level Committees.

As on March 31 2021 the Bank had 13 (Thirteen)* Board Committeeswhich are given below:

Sr. No. Board Committee Companies Act 2013 SEBI Listing Regulations RBI Requirements
1. Audit Committee Yes Yes Yes
2. Risk Management Committee No Yes Yes
3. Nomination and Remuneration Committee Yes Yes Yes
4. Stakeholders Relationship Committee Yes Yes No
5. IT Strategy Committee No No Yes
6. Customer Service Committee No No Yes
7. Fraud Committee (Special Committee of Board for Monitoring High Value Frauds) No No Yes
8. Review Committee of Wilful defaulters No No Yes
9. Corporate Social Responsibility Committee Yes No No
10. Committee of Directors No No No
11. Business Strategy Committee No No No
12. Promoter Shareholding Dilution Committee No No No
13. Business Continuity Monitoring Committee No No No

* The Human Resource and Compensation Committee of the Board was mergedwith the Nomination and Remuneration Committee w.e.f. February 04 2021.

The details of composition number of meetings held and date thereofand terms of reference of the above Committees are available in the Corporate GovernanceReport which forms part of the Annual Report of the Bank for the FY 2020-21.

RECOMMENDATIONS OF AUDIT COMMITTEE

During the FY 2020-21 there was no incidence where the Board has notaccepted any recommendations of the Audit Committee.

BOARD EVALUATION

The Board has carried out an annual evaluation of its own performancethe performance of Board Committees and Individual Directors pursuant to the provisions ofSection 178 read with Schedule IV of Companies Act 2013 Regulation 19 of the SEBIListing Regulations and applicable RBI guidelines.

Performance evaluation criteria for Board Board Committees andIndividual Directors were approved by the Nomination and Remuneration Committee and theBoard in its meeting held on January 19 2021 and February 03 2021 respectively. Theperformance evaluation was carried on in the meetings of the Nomination and RemunerationCommittee and of the Board held on March 26 2021.

The approved evaluation formats and criteria are in line with the SEBIGuidance Note on Evaluation dated January05 2017.

The Nomination and Remuneration Committee has laid down comprehensiveparameters for evaluation a few of which are listed below:

I. The Board: Composition structure meetings functions managementand professional development ethics and compliance among others.

II. The Committees: Mandate & Composition effectivenessstructure meetings independence of the committee contribution to decision making of theBoard among others.

III. Individual directors (including Chairperson Independent Directorsand Non-independent Directors): Leadership Commitment Contribution ExperienceExpertise Independence Integrity Attendance Responsibility Flow of Information amongothers.

The performances of the Board and Board Committees were evaluated afterseeking inputs from all the directors.

The Board and the Nomination and Remuneration Committee reviewed theperformance of the Individual Directors on the basis of the approved criteria forevaluation. In addition the Chairman and Managing Director and CEO were also evaluated onthe key aspects of their roles.

Performance evaluation of Directors was done by the Nomination andRemuneration Committee and entire Board excluding the Director being evaluated.

In a separate meeting of Independent Directors held on March 26 2021performance of Non-independent Directors the performance of the Board as a whole theperformance of the Chairman and quality quantity and timeliness of the flow ofinformation between the Bank's Management and its Board were also evaluated.

REMUNERATION OF DIRECTORS AND EMPLOYEES

The remuneration being paid to the Managing Director and CEO is inconformity with the RBI approval and within in the limit prescribed under Section 197 ofthe Companies Act 2013 read with Schedule V thereto.

The remuneration of Non-executive directors was paid by way of sittingfees which is within the limit prescribed under Section 197(5) of the Companies Act 2013.

Disclosures pertaining to remuneration and other details as requiredunder Section 197(12) of the Companies Act 2013 read with Rule 5(1) (2) and (3) of theCompanies (Appointment and Remuneration of Managerial

Personnel) Rules 2014 are annexed to this Report as Annexure-1.

REMUNERATION RECEIVED BY THE MANAGING DIRECTOR/WHOLE-TIME DIRECTOR FROMHOLDING OR SUBSIDIARY COMPANY

During the FY 2020-21 Mr. Nitin Chugh Managing Director and CEO hasnot received any remuneration or commission from Ujjivan Financial Services LimitedHolding Company of the Bank. Bank had no subsidiary Company during the FY 2020-21.

FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS

Complying with Regulation 25(7) of SEBI Listing Regulations and RBIguidelines Familiarisation Programmes were conducted during the FY 2020-21 to give anoverview and introduction to the Independent Directors about the Bank's business andoperations.

Under the Familiarisation Programme for the Independent Directorsnewly appointed independent directors are appraised with the organisation structureoperational overview financial overview board matters and procedures key risk issuesand its mitigation strategy among others.

Further all the newly appointed Board Members undergo a face to faceinduction schedule where the Bank's Management Team provides insights about the affairs oftheir function and of the Bank as a whole.

The details of such programme are available on the website of the Bankat www.ujjivansfb.in/corporate- governance-policies.

DIRECTORS' RESPONSIBILITY STATEMENT

Based on the framework of internal financial controls established andmaintained by the Bank work performed by the internal statutory and secretarialauditors reviews performed by the Management and the relevant Board Committees theBoard in concurrence with the Audit Committee is of the opinion that the Bank's internalfinancial controls were adequate and effective as on March 312021.

Pursuant to Section 134 (5) of the Companies Act 2013 the Board tothe best of its knowledge hereby confirms and states that:

(a) in the preparation of the annual accounts the applicableaccounting standards have been followed along with proper explanation relating to materialdepartures;

(b) they have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Bank at the end of thefinancialyear and of the profit and loss of the Bank for that period;

(c) they have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the Bank and for preventing and detecting fraud and other irregularities;

(d) they have prepared the annual accounts on a going concern basis;

(e) they have laid down internal financial controls to be followed bythe Bank and that such internal financial controls are adequate and were operatingeffectively; and

(f) they have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

NOMINATION AND REMUNERATION POLICY

The Bank pursuant to the provisions of Section 178(3) of the CompaniesAct 2013 Regulation 19 of SEBI Listing Regulations and RBI Requirements has formulatedand adopted a Nomination and Remuneration Policy on directors' appointment andremuneration and the criteria for determining qualification positive attributes andindependence of directors which is available on the website of the Bank atwww.ujjivansfb.in/corporate- governance-policies.

RISK MANAGEMENT

The Risk Management Committee (''RMC") of the Board consists ofexperienced directors from a diverse backgrounds who bring in the best risk practices tothe Bank. The RMC comprises of 5 (Five) directors out of which 2 (two) are IndependentDirectors.

The RMC fulfils its roles and duties through various management levelrisk committees. Risk-specific management level committees have also been constituted suchas the Credit Risk Management Committee Operational Risk Management Committee and AssetLiability and Market Risk Committee. These committees are entrusted with the task toidentify measure mitigate and monitor various risks.

The frequency members and the quorum required for these managementlevel committees are furnished in the respective risk policies. These committees meet atregular intervals to assess and monitor the level of risk pertaining to market credit andoperations.

The Bank has identified the following risks that are material in natureand therefore may threaten the existence of the Bank:

1. Credit Risk

2. Operational Risk

3. Market Risk

In addition to the above primary risks the Bank also monitors thefollowing second order or derived risks using specialised methodologies. The Bank hasonboarded specialised personnel for monitoring the same and a comprehensive analysis isundertaken under its Internal Capital Adequacy and Assessment Process (ICAAP).

1. Liquidity Risk

2. Information Security Risk

3. IT Risk

4. Outsourcing Risk

5. Concentration Risk

6. Compliance Risk

7. Interest Rate Risk

8. Reputational Risk

9. Strategic Risk

The Bank's risk management framework is based on a clear understandingof the above risks disciplined risk assessment and measurement procedures and continuousmonitoring. The policies and procedures established for this purpose are continuouslybenchmarked with international best practices. The Bank has oversight on all the risksthrough regular monitoring of Key Risk Indicators and benchmarks against each type ofrisk.

Further the Board reviews the risk management framework of the Bankand verifies adherence to various risk parameters and compliances at quarterly intervals.The RMC approves all its risk-related policies including the quarterly/ half-yearly/annual review reports of major Risks.

The Bank has in place an effective risk management policy(s) thathighlights the functions implementation and role of the Committee and the Board.

WHISTLE-BLOWER POLICY / VIGIL MECHANISM

The Bank's Whistle-Blower Policy allows employees directors otherstakeholders of the Bank such as customers NGOs the Group (if any) Joint Ventures (ifany) Suppliers Contractors NGOs and members of the public to report matters such asgenuine grievances corruption fraud misconduct and instances of leakage of unpublishedprice sensitive information misappropriation of assets and non-compliance of code ofconduct of the Bank or any other unethical practices.

Utmost protection has been accorded to the whistle-blowers and theiridentities are kept confidential.

The Policy also further provides an adequate safeguard againstvictimisation to the Whistle-Blower and enables

Particulars Number of Complaints
Number of Whistle-Blower Complaint at the beginning of the FY 2020-21 1
Number of Whistle-Blower Complaint received during the FY 2020-21 12
Number of Whistle-Blower Complaint resolved during the FY 2020-21 12
Number of Whistle-Blower Complaint at the end of the FY 2020-21 1

them to raise concerns and also provides an option of direct access tothe Chairperson of The Audit Committee.

Name and Address of the Whistle and Ethics Officer

Mr. Sanjay Kao - Head of Human Resources

Ujjivan Small Finance Bank Limited

Grape Garden No. 27 3rd "A" Cross 18 th Main

6th Block Koramangala Bengaluru - 560 095

Karnataka

E-mail: saniav.kao@uiiivan.com

Protected disclosures against the Whistle and Ethics Officer need to beaddressed to the Managing Director and CEO of the Bank and the protected disclosureagainst the Managing Director and CEO of the Bank are required to be addressed to theChairperson of the Audit Committee.

Name and Address of Managing Director and CEO of the Bank

Mr. Nitin Chugh

Ujjivan Small Finance Bank Limited

Grape Garden No. 27 3rd "A" Cross 18 th Main

6th Block Koramangala Bengaluru - 560 095

Karnataka

E-mail: nitin.chugh@ujjivan.com

Name and Address of the Chairperson of the Audit Committee

Mr. Mahadev Lakshminarayanan

26 25th Main Near LIC Apartments J P Nagar 1st Phase BengaluruSouth Bengaluru - 560 078

Karnataka

E-mail: m.lakshminaravanan@ujjivan.com

During the FY 2020-21 no one has been been denied access to theChairperson of the Audit Committee.

The Whistle-Blower Policy is available on the website of the Bank atwww.uiiivansfb.in/corporate-governance- policies.

The confidentiality of those reporting violations is strictlymaintained and they are not subjected to any discriminatory practice.

The status of the whistle-blower complaints received and resolved bythe Bank:

ADEQUACY OF INTERNAL FINANCIAL CONTROL

The Bank has laid down certain guidelines policies processes andstructures to enable the implementation of appropriate internal financial controls acrossthe Bank. These control processes enable and ensure orderly and efficient conduct of theBank's business including the safeguarding of assets prevention and detection of fraudsand errors accuracy and completeness of the accounting records and timely preparation ofreliable financial information. There are control assessments for both the Bank's criticaloperating processes and IT applications including ERP applications wherein thetransactions are approved and recorded. These controls are both manual and automated.Review and control mechanisms are built in to ensure that such control systems areadequate and operating effectively.

Because of the inherent limitations of internal financial controlsincluding the possibility of collusion or improper management override of controlsmaterial misstatements in financial reporting due to error or fraud may occur and may notbe detected. Also evaluation of the internal financial controls is subject to the riskthat the internal financial control may become inadequate because of changes in conditionsor that the compliance with the policies or procedures may deteriorate.

The Bank has in all material respects an adequate internal financialcontrols system which was considerably enhanced during the FY 2020-21 and such internalfinancial controls were operating effectively based on the internal control criteriaestablished by the Bank considering the essential components of internal control stated inthe guidance note on audit of internal control over financial reporting issued by theInstitute of Chartered Accountants of India.

FRAUDS REPORTED BY THE AUDITORS

During the FY 2020-21 neither the statutory auditors nor thesecretarial auditor has reported to the Audit Committee/Board or Central Government anyinstances of material fraud in the Bank by its officers or employees under Section 143(12)of the Companies Act 2013.

DISCLOSURES RELATING TO SUBSIDIARIES ASSOCIATES AND JOINT VENTURES

A. Report on Performance and Financial Position of the SubsidiariesAssociates and Joint Ventures

There were no Subsidiary Company Associate Company and Joint Ventureof the Bank during the FY 2020-21.

B. Companies which have become or ceased to be Subsidiaries Associatesand Joint Ventures

No Company became or ceased to be Subsidiary Company Associate Companyand Joint Venture of the Bank during FY 2020-21.

DEPOSITS

The Chapter V of the Companies Act 2013 does not apply to the Bank.During the FY 2020-21 the Bank has accepted deposits from the public in the ordinarycourse of its banking business. The details of the deposits are enumerated in theFinancial Statement for FY 2020-21.

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 theCompanies Act 2013 are not applicable to the Bank.

PARTICULARS OF LOANS GUARANTEES AND / OR INVESTMENTS

The provisions of Section 186 of Companies Act 2013 except sub-section(1) do not apply to a loan made guarantee given or security provided by a banking companyin the ordinary course of business.

However during the FY 2020-21 the Bank has acquired 200 equity sharesof the face value of '10 each fully paid-up of Vishvakarma Payments Private Limited("Vishvakarma") at Rs10 per equity share.

Vishvakarma was incorporated on March 25 2021 to make an applicationto RBI for setting up a pan-India New Umbrella Entity (NUE) for retail payments. Subjectto RBI approval of the application for the NUE the main business of Vishvakarma would beto operate a Pan-India New Umbrella Entity for retail payment systems as would beallowed/authorised by RBI.

The details of the investments are disclosed in Schedule-8 of theFinancial Statement as per applicable provisions of the Banking Regulation Act 1949.

RELATED PARTY TRANSACTIONS AND CONTRACTS / ARRANGEMENTS

There was no materially significant related party transaction enteredbetween the Bank and its related parties except for those disclosed in the financialstatement.

All the contracts/ arrangements/ transactions entered by the Bank withthe related parties during the FY 2020-21 were on arm's length basis; accordingly thedisclosure of particulars of contracts/ arrangements entered into by the Bank with relatedparties referred to in sub-section (1) of Section 188 of the Companies Act 2013 in FormAOC-2 is not applicable.

The Bank has formulated a Policy on 'Materiality of Related PartyTransactions' which forms part of the Policy on dealing with 'Related Party Transactions'is available on the website of the Bank at www.ujjivansfb.in/corporate-governance-policies.

CORPORATE SOCIAL RESPONSIBILITY ("CSR")

As per Section 135 (1) of the Companies Act 2013 "Every companyhaving net worth of rupees five hundred crores or more or turnover of rupees one thousandcrores or more or a net profit of rupees five crores or more during the immediatelypreceding financial year shall constitute a CSR Committee of the Board consisting of threeor more directors out of which at least one director shall be an independentdirector".

Pursuant to the above as on March 312021 the Bank had dulyconstituted CSR Committee with 4 (Four) Directors out of which 3 (Three) are IndependentDirectors including the Chairperson of the Committee. The details of the changes in thecomposition of the CSR Committee during the FY 2020-21 have been provided in the CorporateGovernance Report which forms part of the Annual Report of the Bank for the FY 2020-21.

The Bank has formulated CSR policy pursuant to Section 135(4) of theCompanies Act 2013 and the Companies (Corporate Social Responsibility Policy) Rules2014 as amended in accordance with the approach and direction given by the Board of theBank taking into account the recommendations of its CSR Committee and including guidingprinciples for selection implementation and monitoring of activities as well asformulation of the annual action plan.

The said Policy is available on the website of the Bank atwww.uiiivansfb.in/corporate-governance-policies.

The detailed Annual Report on the CSR activities for the FY 2020-21 isannexed to this Report as Annexure-2.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGEEARNINGS AND OUTGO

A. Conservation of Energy

The Bank was exploring the feasibility of using solar energy and hadinitiated necessary action for the same. However it was put on hold due to the ongoingpandemic situation.

B. Technology Absorption

1. Robotic Process Automation ("RPA") in reconciliation ofUPI and IMPS transactions:

The Bank has started using RPA for the reconciliation of UPI and IMPStransactions thereby obviating the necessity for human intervention in the reconciliationprocess of UPI and IMPS transactions. Before the implementation of RPA reconciliationused to be outsourced to a vendor; by introducing RPA the Bank has brought thereconciliation process in-house eliminated the need for human intervention and savedRs1.05 Crores in outsourcing costs during the FY 2020-21.

2. Letters Notices and Statements in PDF Format through E-mails andBitly Links:

The Bank has started sending letters notices and statements tocustomers through electronic mode in the FY 2020-21. The documents were sent in PDF formatwhich was delivered either through E-mail or through Bitly links sent via SMS. Furtherthe Bank stopped sending debit card PIN's through paper mailers for a certain category ofcustomers. All these initiatives reduced the consumption of paper drastically. These 'gogreen' initiative has reduced the carbon footprint of the Bank and resulted in a saving ofRs46.25 Lakhs during the FY 2020-21. During the last 4 months of FY 2020-21 72% of thedocuments were sent through this route only.

C. Foreign Exchange Earnings and Outgo

During the FY 2020-21 the Bank took its first steps in the directionof foreign remittance. 48 transactions adding up to USD 3.75 Lakhs were processed by theBank during the period. It resulted in an exchange income of Rs2.45 Lakhs for the Bank.Total Foreign Exchange Outgo was USD 25667.37 during the FY 2020-21.

SIGNIFICANT AND MATERIAL ORDERS BY THE REGULATORS OR COURTS ORTRIBUNALS

During the FY 2020-21 there were no significant and material orderspassed by the regulators or courts or tribunals impacting the going concern status of theBank and its operations in future.

AUDITORS

A. Statutory Auditors

The members of the Bank in the 3rd AGM held on July 12 2019reappointed M/s. MSKA & Associates Chartered Accountants (ICAI FRN: 105047W) asstatutory auditors of the Bank for the period of 3 (Three) financial years until theconclusion of 6th (Sixth) AGM of the Bank to be held in the FY 2022-23 subject to theannual approval of RBI.

RBI vide its letter dated June 17 2020 had accorded its approval forthe appointment of M/s. MSKA & Associates as Statutory Auditor of the Bank for FY2020-21.

The Auditor's Report on the financial statements of the Bank for the FY2020-21 does not contain any qualification reservation or adverse remark. The Auditor'sReport enclosed with the financial statement forms part of the Annual Report for the FY2020-21.

In terms of "Guidelines for Appointment of Statutory CentralAuditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs) UCBs andNBFCs (including HFCs)" issued by the RBI on April 27 2021 the tenure ofappointment of statutory auditors shall be for a continuous period of three years.Accordingly the tenure of M/s MSKA & Associates statutory auditors shall concludein the ensuing AGM.

The Bank is having assets size of more than Rs15000 Crores as on March31 2021. Therefore pursuant to the aforesaid Guidelines the Bank is required to appointjoint statutory auditors.

The Bank shall take necessary steps for the appointment of jointstatutory auditors of the Bank in compliance with the provisions of the Companies Act2013 and Rules made thereunder and aforesaid RBI Guidelines.

B. Secretarial Auditor

Mr. K. Jayachandran Practicing Company Secretary (ACS No.: 11309 andCertificate of Practice No.: 4031) was appointed as the Secretarial Auditor of the Bank inthe meeting of the Board held on July 31 2020 to conduct Secretarial Audit of the Bankfor the FY 2020-21 as required under Section 204 of the Companies Act 2013 and the rulesmade thereunder and Regulation 24A of SEBI Listing Regulations. The Bank provided allassistance and facilities to the Secretarial Auditor for conducting the audit.

The Secretarial Audit Report contains the following observation:

The Bank was required to spend Rs. 55643742/- (Rupees Five CroresFifty Six Lakhs Forty Three Thousand Seven Hundred and Forty Two) which includes Rs.6077240 (Rupees Sixty Lakhs Seventy Seven Thousand Two Hundred and Forty) carriedforward from the previous financial year 2019-20 towards its Corporate SocialResponsibility(CSR) obligation during the Financial Year 2020-21. The Bank has spent Rs.55338438/- (Rupees Five Crores Fifty Three Lakhs Thirty Eight Thousand Four Hundred andThirty Eight) and Rs. 305304/- (Rupees Three Lakh Five Thousand Three Hundred and Four)was remaining as unspent CSR amount as on 31st March 2021 and an amount of Rs. 306000(Rupees Three Lakh Six Thousand) was transferred to PM Care Fund on 30th April 2021.

Board's Response:

An amount of Rs305304 which is 0.5% of the total CSR amount to bespent was not spent due to unavoidable operational delays. The Bank as per proviso toSection 135(5) of Companies Act 2013 had transferred an amount of Rs306000 to PM CARESfund specified under Schedule VII on April 30 2021.

The Secretarial Audit Report is annexed to this Report as Annexure - 3.

ANNUAL RETURN

In accordance with Section 134(3) and Section 92(3) of the CompaniesAct 2013 and pursuant to Companies (Amendment) Act 2017 a copy of the Annual Return forthe FY 2020-21 is available on the Bank's website at www. uiiivansfb.in/annual-return.

COMPLIANCE WITH SECRETARIAL STANDARDS

The Bank has complied with the provisions of Secretarial Standardsspecified by the Institute of Company Secretaries of India and notified by the Ministry ofCorporate Affairs under Section 118(10) of the Companies Act 2013. The Bank has alsocomplied with the provisions of Secretarial Standard-4 on voluntary basis.

HUMAN RESOURCES

The Bank prioritises service mantra both internally and externally.While technology plays a pivotal role in the effort its employees are the catalyst ofchange and progress at the Bank. People practices are derived from the Bank's core values;integrity responsible fairness respect professionalism and teamwork. The Bank isdriven to build better lives both for its customers and employees. This drive has bestowedmany accolades to the Bank.

• Bank was ranked No.3 amongst India's Best Companies to Work for2020 as per the study conducted by Great Place To Work Institute and Economic Timesacross 20 industries.

• Recognised among 'The Laureates'- organisations that have rankedfor 10 years or more in the Top 100.

• Recognised as 'Best in Small Finance Bank' and 'Best among allorganisations with more than 10000 employees' for inspiring trust among its employeesfor instilling pride in them for creating an environment within the workplace thatpromotes camaraderie and for many other reasons that make the Bank one of India's BestCompanies to Work for.

• Bank has also been recognised among 'India's 50 Best Workplacesfor Women 2020'. It strongly believes this was made possible because of its employees whocarry the passion with the purpose to serve the unserved and underserved.

Due to Bank's constant effort to create a better work environment foremployees it was recognised as a great employer year on year. Bank has always emphasisedand walked the path of having an open and transparent culture between its leaders andemployees. Being a diversified workforce with a presence in 24 states and unionterritories it had various forums for leaders and employees to connect. This ensures thatopinions from employees are heard and this makes them feel empowered. Though the pandemiccreated uncertainty and many travel restrictions Bank's Leadership Team includingManaging Director and CEO continued to connect with the employees virtually.

CORPORATE GOVERNANCE AND BUSINESS RESPONSIBILITY REPORT

The Bank recognises its role as a corporate citizen and endeavours toadopt the best practices and the highest standards of Corporate Governance throughtransparency in business ethics and accountability to its shareholders customersgovernment and all other stakeholders. The Bank's activities are carried out followinggood corporate practices and the Bank is constantly striving to make them better and adoptthe best practices.

The Bank believes that timely reporting transparent accountingpolicies and a strong Independent Board go a long way in preserving shareholders' trustand maximising long-term corporate value.

In pursuing the mission of becoming "The best institution toprovide Financial services to the un-served and underserved customers and transform to abank serving the mass market" the Bank has been balancing its dual objectives of"social" and "financial goals since its inception. "Responsiblefinancing" "ethical values" and "transparency" in all itsdealings with its customers lenders investors and employees" have been thecornerstone of its operations. Transparency in the decision-making process has beenproviding comfort to all stakeholders particularly the customers lenders and investors.

The Report on Corporate Governance for FY 2020-21 as per Regulation34(3) read with Schedule V of the SEBI Listing Regulations forms part of the Annual Reportof the Bank for FY 2020-21.

The disclosure as required under Section II of Part II of Schedule V ofthe Companies Act 2013 have been provided under the heading of Remuneration of Directorsin the aforesaid Corporate Governance Report.

A Business Responsibility Report containing the requisite details asper Regulation 34(2) of the SEBI Listing Regulations forms part of the Annual Report forthe FY 2020-21 and is also disclosed on the Bank's website at www.ujjivansfb.in.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

As required under Regulation 34 and Schedule V of SEBI ListingRegulations the Management Discussion and Analysis Report forms part of the Annual Reportfor the FY 2020-21.

DISCLOSURE UNDER SECTION 22 OF THE SEXUAL HARASSMENT OF WOMEN ATWORKPLACE (PREVENTION PROHIBITION AND REDRESSAL) ACT 2013

The Bank has a strict Prevention of Sexual Harassment("POSH") Policy in accordance with the statutory requirements of the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013. ThisPolicy applies to all categories of employees of the Organisation including permanentemployees permanent management workmen temporary employees trainees (interns)consultants advisers ad hoc employees daily wage earners probationers apprenticescontract employees etc. at its workplace or visits to partner organisations. This Policyrecognises the right of privacy of every individual and will strive to protect the privacyof the individuals involved and ensure that the complainant and the respondent are treatedfairly. The Policy ensures that the career interest of the parties involved in anyproceedings under this Policy will not be adversely affected merely on account of thecomplaint made to the Internal Committee or any evidence provided in connection with anyenquiry; however strict action will be taken against the Respondent if proven guilty postthe enquiry process.

Composition of Internal Committees

Bank has constituted Internal Committees (IC) in each of the regionsfor all administrative units/ branches/ regional offices of the Bank. All complaints ofSexual Harassment at the Workplace is enquired into by the IC having jurisdiction over theestablishment where the Respondent is posted. The IC forwards a report of its findings tothe Employer for action. Each Regional IC consists of the following members:

• Presiding Officer: who shall be a woman employed at a seniorlevel in the region.

• Secretary: who shall be the Regional HR Manager.

• 2 Members: From amongst Employees in the region preferablycommitted to the cause of women/ having legal knowledge/ experience in social work.

• 1 Independent Member: Nominated from amongst NGOs/associationscommitted to the cause of women or a person familiar with the issues relating to SexualHarassment.

• Other Members: Additional members may be co-opted if requiredfrom amongst Employees working in senior positions in the region especially frombusiness operations and control functions.

Functions of IC

The Committee is expected to conduct a fair prompt and impartialprocess of investigating all the complaints it receives. During a redressal process theComplaints Committee/s are required to assure confidentiality non-retaliation andrecommend interim measures as needed to conduct a fair enquiry.

POLICIES

To ensure better corporate governance adherence to various laws andregulations as applicable to the Bank and better management of the organisation as awhole the Bank has formulated various policies including the policies mentioned below.These policies are available on the Bank's website at www.uiiivansfb.in/corporate-governance-policies.

A brief description of below mentioned policies/code have been given inAnnexure-4 of this Report.

1. Policy for Determination of Materiality of Event/ Information forDisclosures

2. Code of Conduct for Prevention of Insider Trading and Code of FairDisclosure and Conduct

3. Corporate Social Responsibility Policy

4. Nomination and Remuneration Policy

The Status on the Complaints received and resolved by InternalCommittee during the FY 2020-21:

Number of Complaints Number of Complaints Resolved Number of Complaints Pending for Resolution
7 4 3

5. Policy on Board Diversity

6. Policy on Code of Conduct

7. Related Party Transactions Policy

8. Dividend Distribution Policy

9. Familiarisation Programme For Independent Director

10. Policy on Archival of Documents

11. Record Retention Policy

12. Whistle-Blower Policy

13. Terms and Conditions of Appointment of Independent Directors

CORPORATE GOVERNANCE COMPLIANCE CERTIFICATE

The Bank has obtained a certificate from Mr. K. JayachandranPracticing Company Secretary certifying that the Bank has complied with the conditions ofthe Corporate Governance as stipulated in Regulations 17 to 27 and clauses (b) to (i) ofRegulation 46 (2) and other applicable regulations of Chapter IV pertaining to CorporateGovernance and paragraphs C D and E of Schedule V of the SEBI Listing Regulations for theFY 2020-21.

The certificate is annexed to this Report as Annexure-5.

KEY INITIATIVES WITH RESPECT TO STAKEHOLDER RELATIONSHIP CUSTOMERRELATIONSHIP ENVIRONMENT

SUSTAINABILITY HEALTH AND SAFETY

While key initiatives on customer relationship and health and safetyhave been detailed below. Information on initiatives concerning stakeholders'relationship environment and sustainability have been elaborated in the BusinessResponsibility Report of the Bank which forms part of the Annual Report for the FY2020-21.

A. Customers Relationship

During FY 2020-21 the Bank has undertaken several new initiatives toimprove customer service and to strengthen internal processes on providing timely andsatisfactory resolution for customer queries requests and complaints. The Bank has alsotaken efforts to stay connected with customers during the pandemic and has implementedseveral digital initiatives to ensure uninterrupted banking services. Key customer serviceinitiatives and highlights are listed below:

• Under the "Janata Connect" programme various businessteams connected to more than 62 Lakhs customers (including repeat calls) during thelock-down period to check whether they are safe during the pandemic and also made themaware

of the symptoms and preventive measures of COVID-19. This effort wasmuch appreciated by the customers.

• Bank had also taken efforts to promote usage of the Aarogya SetuApplication by displaying it as a banner on the Bank's website to spread maximum awarenessof the said Application among the general public.

• A Paperless delivery mechanism was initiated for welcome kits/agreement copies for MSE and Housing loans through E-mail to avoid courier delays.

• "Manage Card Service Feature" was launched thatempowers the customers to control their debit card as it allows the card owner to disable(toggle off)/ enable (toggle on) their card and customer is also given the choice to sethis/her transactions limits for each channel (ATM POS & E-com). The facility can beused through mobile banking internet banking or ATM.

• SMS in regional languages were sent for promoting SMS/Miss callBanking facility for more than 6000 customers who had recently placed balance enquirywith phone-banking to improve the usage of self-service channels.

• A Virtual customer meet was organised by the Bank on August 112020 from 5.00 p.m. to 6.00 p.m. addressed by and CEO to directly connect with thecustomers for seeking their feedback about Bank's products and services during theCOVID-19 Pandemic outbreak and countrywide lockdown. Another virtual session withcustomers was addressed by the Head of Branch Banking and National Manager-Service Qualityin March 2021. The efforts of the leadership team of the Bank in directly connecting tothe last mile was much appreciated by customers.

• The Bank made the loan EMI payment facility available throughmultiple modes- both physical and digital modes by partnering with Airtel Paymentsestablishing Business Correspondence Network through Money Mitra and enabling EMI paymentsthrough BBPS platform via popular apps like Google Pay PhonePe PayTM etc.

• In absence of a physical "Monthly Customer ServiceMeeting" at Branches the branches connected with customers through phone calls forseeking their feedback on accessing banking services during the pandemic. More than 2Lakhs customers were contacted during the FY 202021 with different agendas of creatingawareness against fraudsters availability of nomination facility usage of digitalplatforms moratorium scheme etc.

• Created customer awareness on social engineering fraud usingmobile numbers similar to Bank's toll- free number through display on comprehensive noticeboard at branches.

• To augment the customer safety in cheque payments and reduceinstances of fraud occurring on account of tampering of cheque leaves the Bankimplemented Positive Pay System for cheque clearance in line with the RBI circular onPositive Pay System for Cheque Truncation System. Under the Positive Pay system theissuer of the high- value cheques (Rs50000/- and above) can reconfirm the cheque issuanceelectronically through Mobile Banking/ Internet Banking/ Phone Banking.

• "Aajeevan - Life Events Based Banking Services" - aProgramme that provides complete banking solutions for every stage of customers' liveswas launched enabling them to navigate through banking transactions during criticalphases of their lives with ease. The Programme enables us to support our customers in anempathetic efficient and meaningful way differentiating the Bank from other financialservice providers.

B. Heath and Safety

In lieu of the COVID-19 outbreak across the country the Bankprioritised the health and safety of its employees along with making the best efforts toensure business continuity. In addition to introducing Work From Home and facility forremote desktops for employees the Bank went ahead to extend support in the followingways:

i. One time grant of '30000 per employee from the Ujjivan Welfare andRelief Trust was provided in case employees and/or family members who stay with them andwere financially dependent tested positive for COVID-19. This was extended tillSeptember 2020.

ii. Introduction of COVID-19 insurance for employees in Grade B and C.

iii. Inclusion of COVID-19 cover in Group Health Insurance.

iv. The facility of 'Doctor On Site' from registered medicalpractitioners.

v. Unlimited Audio & Video Consultation of General Physician andDietician for employee and their families using 'Doctor On Call'.

vi. Salary advance for medical exigencies.

SHIFTING OF REGISTERED OFFICE

To exercise better administrative and economic control and to enablethe Bank to rationalise and streamline its operations as well as the management ofaffairs the Bank has shifted its Registered Office from New Delhi the NCT of Delhi toBengaluru the State of Karnataka w.e.f. December 04 2020.

OTHER DISCLOSURES

A. The Bank is not required to maintain cost records as specified bythe Central Government under sub-section (1) of Section 148 of the Companies Act 2013.

B. Disclosure as required under Rule 8(5)(xi) and 8(5) (xii) of theCompanies (Accounts) Rules 2014 does not apply to the Bank for FY 2020-21.

C. None of the directors of the Bank are disqualified as per provisionsof Section 164(2) of the Companies Act 2013. The directors have made necessarydisclosures as required under various provisions of the Companies Act 2013 SEBI ListingRegulations and RBI guidelines.

ACKNOWLEDGEMENT

We place on record our gratitude to our employees at all levels whohave contributed to the growth and sustained success of the Bank through their dedicationhard work cooperation and support.

We would like to thank all our customers vendors bankers investorsauditors media and other business associates for their continued support andencouragement during the year.

We also thank the Government of India; the Government of Karnataka andDelhi; the Ministry of Commerce and Industry; the Ministry of Finance Ministry ofCorporate Affairs; the Securities and Exchange Board of India the Stock Exchanges theCentral Board of Indirect Taxes and Customs; the RBI; the Central Board of Direct Taxesand all other government agencies for their support during the FY 2020-21 and look forwardto their continued support in future.

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