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Ujjivan Small Finance Bank Ltd.

BSE: 542904 Sector: Financials
NSE: UJJIVANSFB ISIN Code: INE551W01018
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OPEN 28.25
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VOLUME 279070
52-Week high 44.50
52-Week low 24.85
P/E
Mkt Cap.(Rs cr) 4,744
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Ujjivan Small Finance Bank Ltd. (UJJIVANSFB) - Director Report

Company director report

Dear Sta keholders

On behalf of the Board of Directors (the "Board") of Ujjivan Small FinanceBank Limited (the "Bank or Ujjivan") it is our immense pleasure to present the4th Annual Report of the Bank along with the Audited Financial Statements and Auditor'sReport thereon for the financial year ended March 31 2020.

OVERVIEW AND STATE OF AFFAIRS OF THE BANK

The financial year ended March 31 2020 saw the Bank continuing its track of growthexpansion and profitability. the Bank closed the financial year on a good note deliveringhealthy performance in asset and retail deposit businesses maintaining a stable portfolioquality resulting in bottom line numbers in line with the expectations. The businessgrowth had moderated in the third and the fourth quarters of the financial year as theBank had taken a cautious approach towards microfinance lending in certain pocketsincluding Indian state of Assam West Bengal Odisha Tamil Nadu Maharashtra and parts ofNorth-East India where delinquencies were higher due to natural calamities and otherexternal factors. The Bank also took a measured approach towards its Micro and SmallEnterprises ("MSE Business") lending in certain stressed pockets and limited itsexposure to NonBanking Financial Companies ("NBFCs") in its FinancialInstitutional Group ("FIG") lending business. With the nationwide lockdownimposed to contain the spread of COVID-19 in the last week of March 2020 the businessvolumes for the month were significantly affected.

overall business traction was good during the financial year with a 28% Y-o-Y growthin the Assets under Management (AuM). the Bank witnessed significant Y-o-Y growth in itsHousing Business (84%) and MSE Business (66%) coupled with sustained growth inmicrofinance book (17%). the FIG (Institutional) lending recorded remarkable growth (144%)while the personal Loan business incepted last year gradually scaled up till Quarter 3when the Bank decided to re- align its credit policies post a thorough portfolio qualityreview. the Bank also forayed into a new business segment - Vehicle Finance starting with2 wheeler loans for existing customers and staff in select locations.

In response to the 'COVID-19 - Regulatory Package' announced by Reserve Bank of India("RBI") on March 27 2020 the Bank provided moratorium for all segments ofcustomers deferring the repayments for ~ 99 % of the loan accounts. The RBI dispensationgranted on Non-

performing asset classification of the portfolio under repayment moratorium helpedprevent any spike in credit costs. Also the Bank made a prudential provision to the tuneof '70 Crores in view of the COVID-19 situation.

The Bank's deposits book saw a 46% Y-o-Y growth largely driven by a healthy growth inretail deposits which grew from 37% of total deposits in March 2019 to 44% at the end ofMarch 2020 with good traction in Current Account Saving Account ("CASA").Bank's CASA balances (as a % of total deposits) increased from 11% to 14%.

Committed to providing a comprehensive suite of products and services to its customersthe Bank expanded its bouquet of offerings during the year under review. Kisan PragatiCard was launched to primarily cater to the financing needs of customers engaged inagriculture and allied activities and Business Edge product targeted at the formalsegment was launched for MSE customers. Privileged Savings Account product withadditional features and Rupay platinum card for business and current account customerswere launched to diversify the deposit product offerings. The Bank initiated Goal baseddeposits for the microfinance customers and their families. The Bank also launched digitalsaving and term deposit products for better customer convenience and efficient onboardingbesides rolling out Internet Banking UPI and QR code based payment solutions during theyear.

The Bank launched a digital evangelism program to increase adoption of digital channelsamong its customers. Neighbourhood cash collection points were piloted and centre meetingdeposits were launched for Micro Banking customers and their families to promote activeusage of the accounts by providing convenient alternative channels for transactions. Forbetter customer convenience the Bank's mobile banking application has been developed in 9(Nine) languages. The number of customers using digital services has grown by 3 (Three)times in the past one year with digital transactions constituting 25% of overalltransactions as against 8% in the previous year.

During the year under review the Bank's total customer base grew by 17% Y-o-Y to 54.4Lakhs while Deposit customers increased by 68% to 47.1 Lakhs.

The Bank operationalised 101 Banking Outlets ("BO") including 24 in UnbankedRural Centres ("URC"). By the end of the year under review the Bank hadconverted all its asset centres into banking outlets complying with the requirement ofconverting the erstwhile Micro Finance

Institution ("MFI") branches to bank branches within 3 (Three) years from thecommencement of banking operations. As of March 31 2020 The Bank operated a network of575 BOs including 144 in URC complying with the RBI prescribed norm of 25% of the Bos tobe situated in uRC and 475 ATMs including 52 Automated Cash Recyclers (ACRs).

the Bank successfully completed its Initial public offer ("Ipo") as perregulatory requirements and got listed its equity shares on National Stock Exchange ofIndia Limited ("NSE") and BSE Limited ("BSE"). IPO was over-subscribedby ~170 times. The Bank rolled out Ujjivan Small Finance Bank -Employee Stock Option Plan2019 ("ESOP 2019") and Ujjivan Small Finance Bank-Employee Stock Purchase Scheme2019 ("ESPS 2019") for the eligible employees of the Bank and of UjjivanFinancial Services Limited ("UFSL or Holding Company or Promoter") at apreferential rate prior to the IPO.

The Bank was adequately capitalised with Capital Adequacy Ratio ("CRAR") of~29% as of March 31 2020 and its funding position stayed comfortable throughout the year.The Bank took a prudent call to build a liquidity buffer in the wake of the COVID-19situation.

The Bank stayed committed to its Corporate Social Responsibility initiatives and spent'12466821 during the year under review on several impactful activities focused onhealthcare/ preventive health care sanitisation cleanliness disaster relief promotingeducation safe drinking water and livelihood support. One of the key initiatives thisyear was the "Swachh Neighbourhood" which started off as a pilot campaign forcleanliness in the neighbourhood of the Koramangala branch in Bengaluru and later scaledto 98 locations across 67 districts in 15 Indian States.

For the financial year ended March 31 2020 Net Profit is '349.92 Crores against'199.22 Crores in the previous financial year ended March 31 2019.

Mr. Samit Kumar Ghosh retired on November 30 2019 and Mr. Nitin Chugh took over therole of Managing Director and CEO with effect from December 01 2019.

Mr. Sunil Vinayak Patel also retired as the Part-time Chairman of the Bank on January31 2020 and resigned as an Independent Director w.e.f February 01 2020.

Mr. Biswamohan Mahapatra was appointed as the Parttime Chairman of the Bank for aperiod of 3 (Three) years w.e.f April 28 2020.

SUMMARY OF FINANCIAL PERFORMANCE

Particulars Financial Year Ended March 312020 Financial Year Ended march 312019
Revenue from Operations 2703.60 1831.61
Other Income 322.21 205.96
Less: Operational Expenses (527.46) (423.96)
Personnel Expenses (718.49) (518.80)
Profit/loss before Depreciation Finance Costs Exceptional items Provisions and Tax Expense 1779.86 1094.81
Less: Depreciation/ Amortisation/ Impairment (72.63) (60.59)
Profit /loss before Finance Costs Exceptional items Provisions and Tax Expense 1707.23 1034.22
Less: Finance Costs (1070.01) (725.20)
Profit /loss before Provisions Exceptional items and Tax Expense 637.23 309.02
Less: Provisions & Contingencies (170.99) (40.60)
Add/(less): Exceptional items - -
Profit /loss before Tax Expense 466.24 268.42
Less: Tax Expense (Current & Deferred) (116.32) (69.20)
Profit /loss for the year (1) 349.92 199.22
Total Comprehensive Income/loss (2) - -
Total (1+2) 349.92 199.22
Balance of profit /loss for earlier years 118.36 5.17
Less: Transfer to Debenture Redemption Reserve - -
Less: Transfer to Statutory Reserves 87.48 49.80
Less: Transfer to investment Fluctuation Reserve 5.53 9.70
Less: Dividend paid on Equity Shares - -
Less: Dividend paid on Preference Shares 11.00 22.00
Less: Dividend Distribution Tax 2.26 4.53
Balance carried forward 362.01 118.36

Key Ratios: (Comparative ratios are annualised)

Particulars financial year ended march 31 2020 financial year ended march 31 2019
Interest income as a percentage to working funds 17.09% 17.28%
Non-interest income as a percentage to working funds 2.04% 1.94%
operating profit as a percentage to working funds 4.03% 2.93%
Business (deposits plus gross advances) per employee (`) 12564408 11344358
profit per employee ( `) 214720 153279
EPS (Basic) (`) 2.19 1.20
EPS (Diluted) (`) 2.18 1.20

Highlights of the year under review:

• PAT of the Bank For the financial year ended March 31 2020 stands at '349.92Crores.

• overall par stands at 2.7% against 1.5% in March 2019.

• NNpa at 0.2% against 0.3% in March 2019.

• Bank repaid almost all of its high cost legacy borrowings which constitutedonly 1% of its total outstanding borrowings and deposits as of March 31 2020.

• Cost of funds of the Bank reduced from 8.5% at the end of March 2019 to 8.2% inMarch 2020.

• The Deposit book stood at '10780 Crores spanning 42.1 Lakhs accounts at the endof March 2020.

• CASA book stood at '1459 Crores Time Deposits (excluding CDs) stood at '8474Crores of which institutional deposits stood at '5042 Crores.

• Certificate of deposits stood at '847 Crores.

Cost to Income Ratio reduced to 67.4% from 76.5% in FY 2019-20 on account of economiesof scale cost control initiatives and process improvements.

Profitability: Pre-tax profits - '466.24 Crores and Post- tax profits - '349.92 Croresfor the financial year ended March 31 2020.

LISTING OF EQUITY SHARES OF THE BANK THROUGH IPO

In terms of the RBI In-Principle Approval RBI Final Approval and Guidelines forlicensing of "Small Finance Banks" in the private sector issued by RBI onNovember 27 2014 ("SFB Licensing Guidelines") the Bank was required to listits equity shares on the Stock Exchange within 3 (Three) years from the date ofcommencement of business of the Bank i.e. by January 31 2020.

The Bank came up with an IPO of 202702702 equity shares of face value of '10 each forcash at a price of '37 per equity share (including a share premium of '27 per equityshare) aggregating to '7459.46 Million.

The aforesaid Ipo included a reservation of 20270270 equity shares aggregating to'709.46 Million for subscription by eligible shareholders of UFSL.

A discount of '2 per equity share was offered to eligible shareholders of UFSL biddingin the aforesaid reservation portion.

The subscription to the IPO was open from December 02 2019 to December 04 2019 andthe Bank's IPO witnessed a historic response from the Investors and was oversubscribed by~170 times.

The IPO had the distinction of being one of the most successful Ipos in the financialservices sector in recent times.

pursuant to the Ipo the equity shares of the Bank got listed on BSE and NSE onDecember 12 2019.

The Bank as part of its IPO had undertaken Pre- IPO Placement of 71428570 equityshares by way of preferential issue on private placement basis at a price of '35 perequity shares for cash consideration.

Transfer to Reserves

A. Statutory Reserve

The Bank has transferred '87.48 Crores to statutory reserves pursuant to therequirements of Section 17 of the Banking Regulation Act 1949 and RBI guidelines datedSeptember 23 2000.

B. Investment Fluctuation Reserve ("IFR")

The Bank has made an appropriation of '5.53 Crores (previous year: '9.70 Crores) out ofprofits for the financial year ended March 31 2020 to the IFR pursuant to the RBInotification 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 Policy pursuant toRegulation 43A of the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 ("SEBI Listing Regulations") and RBIRequirements

with an objective to appropriately reward shareholders through dividends for reposingtheir confidence in the Bank while retaining the capital required for supporting futurebusiness growth. The said policy is available on the website of the Bank athttps://www.uiiivansfb.in/ corporate-governance-policies.

Equity Dividend:

the RBI vide its circular dated April 17 2020 has decided that the banks shall notmake any further dividend payouts from profits pertaining to the financial year endedMarch 31 2020 until further communication from RBI with a view that banks must conservecapital in an environment of heightened uncertainty caused by

CoVID-19. Accordingly the Board of the Bank has not proposed any final dividend on theequity shares for the financial year ended March 31 2020.

Preference Dividend:

In compliance with the provisions of all applicable laws term sheet of preferenceshares and the aforementioned policy and considering the overall performance of the Bankthe Board of the Bank had declared interim preference dividend @ 5.50% on 200000000 11%Perpetual Non-Cumulative Preference Shares of '10/- each during the financial year endedMarch 312020.

the said dividend was declared out of the profits earned by the Bank during the quarterended on June 30 2019.

the details of the dividend declared on 200000000 11% perpetual Non-Cumulativepreference Shares of '10/- each amounting to '11 Crores is as follows:

Date of declaration % age of dividend Amount of dividend excluding dividend distribution tax (' in Crores) Dividend Distribution Tax (' in Crores)
July 30 2019 5.50 11.00 2.26

CHANGE IN THE NATURE OF BUSINESS

There was no change in the nature of business of the Bank during the financial yearended March 31 2020.

MATERIAL CHANGES AND COMMITMENTS

No material changes and commitments have occurred after the closure of the financialyear ended March 31 2020 till the date of this report which might have affected thefinancial position of the Bank. the CoVID-19 pandemic and the nationwide lockdown sincethe last week of March 2020 may adversely impact the portfolio quality hence the Bankhas made a prudential provision to the tune of '70 Crores.

REVISION OF FINANCIAL STATEMENT OR THE DIRECTORS' REPORT

the Bank has not revised its financial statements or the directors' report in respectof any of the three preceding financial years either voluntarily or pursuant to the orderof any judicial authority.

GENERAL INFORMATION

Detailed overview of the banking industry and important changes therein externalenvironment and economic outlook have been elaborated in the Management and DiscussionAnalysis Report which forms part of the Annual Report of the Bank for the financial yearended March 31 2020.

CAPITAL AND DEBT STRUCTURE

A. Changes in the Capital Structure

During the financial year ended March 31 2020 the Authorised Share Capital of theBank was increased from '17000000000 (Rupees one thousand Seven

Hundred Crores) divided into 1500000000 (one Hundred Fifty Crores) equity shares of'10/- (Rupees ten) each and 200000000 (twenty Crores) 11% perpetual non-cumulativepreference shares of '10/- (Rupees Ten) each to '25000000000 (Rupees Two thousand FiveHundred Crores) divided into 2300000000 (Two Hundred thirty Crores) equity shares of'10/- (Rupees Ten) each and 200000000 (twenty Crores) 11% perpetual non-cumulativepreference shares of '10/- (Rupees Ten) each vide shareholder's resolution dated April 262019.

B. Issue of Equity Shares or Other Convertible Securities

During the financial year ended March 31 2020 the Bank had issued and allotted14055097 equity shares under ESps 2019 71428570 equity shares by way of preferentialissue on private placement basis and 202702702 equity shares pursuant to its Ipo.

ESPS 2019

the Bank pursuant to the resolutions passed by the Board on July 30 2019 and byShareholders on August 03 2019 had adopted the ESPS 2019. The objective of the ESPS 2019is inter-alia to reward the employees of the Bank its present or future subsidiary (ies)and/or holding company (ies) for their association and performance as well as to motivatethem to contribute to the growth and profitability of Bank.

Pursuant to the ESPS 2019 the Board is authorised to issue up to 72001840 fully paidup Equity Shares of face value of '10 each with pari-passu voting rights to the eligibleemployees (as defined under the ESps 2019) in accordance with the terms and conditions asmay be decided by the Nomination and Remuneration Committee of the Bank.

The ESPS 2019 was implemented under two schemes upfront Scheme and Monthly Scheme.under the

upfront Scheme employees made the upfront payment to purchase the equity shares andequity shares were allotted to them while under the Monthly Scheme employees opened amonthly recurring deposit and the equity shares would be allotted to such employees at theend of the 12 months subject to the fulfillment of terms and conditions of subscription.As on March 31 2020 14055097 equity Shares have been allotted pursuant to the ESPS2019 Upfront Scheme.

Details of equity shares issued and allotted under ESps 2019 upfront Scheme are asfollows:

Date of issue and allotment Method of allotment Face value (?) Issue price (?) Number of equity shares allotted
November 112019 Employee Stock purchase Scheme 10 35 14055097

As on March 31 2020 3247467 equity shares have been earmarked for subscriptionunder the ESps Monthly Scheme. The equity shares would be allotted to eligible employeesunder ESps Monthly Scheme at the end of the 12 months subject to the fulfillment of termsand conditions of subscription.

Preferential issue on private placement basis

the Bank as part of its Ipo had undertaken pre-Ipo placement of 71428570 equityshares by way of preferential issue on private placement basis for cash consideration.

the pre-Ipo placement was authorised by the Board and shareholders in their meetingheld on november 08 2019. Details of equity shares issued under preferential issue onprivate placement basis are as follows:

Date of issue and allotment Method of allotment Face value (?) Issue price (?) Number of equity shares allotted Number of equity shares allotted to the promoter group
November 13 2019 Preferential Issue 10 35 71428570 Nil

iPO

In terms of RBI In-Principle Approval RBI Final Approval and SFB Licensing Guidelinesthe Bank was required to list its equity shares on the Stock Exchanges within three yearsfrom the date of commencement of business of the Bank i.e. by January 31 2020.

Having commenced operations on February 01 2017 to meet the licencing conditions theBank undertook an Ipo of 202702702 equity shares of face value of '10 each for cashconsideration including a reservation for subscription by eligible shareholders of itsHolding Company which resulted in inter alia listing of the equity shareson stock exchanges and partial dilution of its promoter's shareholding.

Date of issue and allotment Method of allotment Face value (?) Issue price (?) Number of equity shares allotted Number of equity shares allotted to the promoter group
December 10 2019 IPO 10 37* 202702702* Nil

*20270270 equity shares was reserved for subscription by eligible shareholders of theHolding Company and a discount of '2 per equity share was offered to them under thereservation portion.

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

During the financial year ended March 31 2020 the Bank has neither issued any equityshares with differential rights nor any sweat equity shares.

D. Employee Stock Options/ Share Based Employee Benefit Schemes

The Bank has Formulated and implemented ESOP 2019 and ESps 2019 to reward the employeesof the Bank its present or future subsidiary (ies) and/or holding company (ies) fortheir association and performance as well as to motivate them to contribute to the growthand profitability of the Bank.

ESOP 2019

The Bank pursuant to the resolutions passed by the Board on January 22 2019 and bythe Shareholders on March 29 2019 adopted the ESOP 2019. The Bank may grant an aggregatenumber of up to 144000000 stock options under the ESOP 2019.

upon exercise and payment of the exercise price the option holder will be entitled forallotment of one equity share per stock option. Accordingly the number of equity sharesthat may be issued under the ESop 2019 shall not exceed 144000000 equity shares of facevalue '10 each.

the ESop 2019 is effective from March 29 2019. The objectives of ESOP 2019 are amongothers to attract and retain employees with stock options as a compensation tool. ThroughESOP 2019 the Bank offers an opportunity of sharing the value created with thoseemployees who have contributed or are expected to contribute to the growth and developmentof the Bank.

The ESOP 2019 has been framed and implemented in compliance with SEBI (Share BasedEmployee Benefits) Regulations 2014 Companies Act 2013 and rules made thereunder andrelevant guidance notes and accounting standards. As on March 31 2020 40799100 stockoptions have been granted by the Bank under ESop 2019 to eligible employees of the Bankand its Holding Company.

No change has been made in the ESop 2019 during the financial year ended March 312020.

Particulars Details
Options granted 40799100
Options vested Nil
Options exercised Nil
The total number of shares arising as a result of exercise of options 38075857 equity shares assuming all grants are exercised. As on March 312020 no options have been exercised
Options lapsed 2723243
The exercise price '35 per option
Variation in terms of options Nil
Money realised by exercise of options Nil
Total number of options in force 38075857 are in forc< 5 as on March 312020
Employee-wise detail of options granted to:
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 Nil
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 SEBI (Share Based Employee Benefits)Regulations 2014 read with Circular CIR/CFD/ policy CELL/2/2015 dated June 162015 issued by SEBI are available on the website of the Bank at https://www.uiiivansfb.in.

ESPS 2019

the Bank pursuant to the resolutions passed by the Board on July 30 2019 and by theShareholders on August 03 2019 adopted the ESPS 2019. The ESPS 2019 has been framed andimplemented in compliance with the provisions of SEBI (Share Based

Employee Benefits) Regulations 2014 Companies Act 2013 and rules made thereunder andrelevant guidance notes and accounting standards.

The objective of the ESPS 2019 is inter-alia to reward the eligible employees of theBank and its holding company for their association and performance as well as to motivatethem to contribute to the growth and profitability of the Bank.

Pursuant to the ESPS 2019 the Board is authorised to issue up to 72001840 fully paidup equity shares of face value of '10 each with pari-passu voting rights to the eligibleemployees (as defined under the ESPS 2019) in accordance with the terms and conditions asmay be decided.

The ESPS 2019 was implemented under two schemes upfront Scheme and Monthly Scheme.under the upfront Scheme the employees made upfront payment to purchase the equity sharesand equity shares were allotted to them while under the

Monthly Scheme the employees opened a monthly recurring deposit and the equity shareswould be allotted to such employees at the end of the 12 months subject to the fulfillmentof terms and conditions of subscription.

The Nomination and Remuneration Committee has been entrusted with the responsibility ofadministering the ESPS 2019. The Nomination and Remuneration Committee of the Bankpursuant to its resolutions dated August 08 2019 authorised the opening of thesubscription of equity shares under Phase 1 and Phase 2 of the ESPS 2019 for eligibleemployees as defined under the ESps 2019.

Further the Nomination and Remuneration Committee pursuant to its resolution datedOctober 06 2019 authorised the opening of the subscription of equity shares under phase3 of the ESps 2019 for eligible employees as defined under the ESps 2019 in respect of theunsubscribed portion of equity shares left after Phase 1 and Phase 2.

As on March 31 2020 14055097 equity shares have been allotted pursuant to the ESps2019 under upfront scheme.

Particulars

Details

total number of equity shares allotted under ESps 2019 under upfront scheme

14055097

total number of equity shares subscribed under the monthly scheme to be allotted at the end of the 12-month period (subject to fulfilment of the terms and conditions of such subscription)

As on March 312020 3247467 equity shares have been earmarked for subscription under the ESPS monthly scheme subject to fulfilment of the terms and conditions of subscription.

the total number of Equity Shares arising as a result of ESPS 2019

17302564 Equity shares as on March 312020 assuming full subscription of equity shares earmarked under monthly scheme of ESPS 2019 being allotted.

Employee-wise details of the Equity Shares that were issued to Key Managerial Personnel:
Name of KMP Shares issued
Mr. Nitin Chugh Nil
Mr. Samit Kumar Ghosh* 2690000
Ms. Upma Goel 104355
Mr. Chanchal Kumar 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

Nil

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

*Mr. Samit Kumar Ghosh retired as the Managing Director and CEo of the Bank on November30 2019.

The disclosures as required under Regulation 14 of SEBI (Share Based Employee Benefits)Regulations 2014 read with Circular CIR/CFD/poUCY CELL/2/2015 dated June 16 2015 issuedby the SEBI are available on the website of the Bank at https://www.uiiivansfb.in.

E. Issue of Debentures Bonds or any Non-Convertible Securities or Warrants

During the financial year ended March 31 2020 the Bank has neither issued anydebenture bonds nonconvertible securities nor any warrants.

F. Promoter's Stake Dilution

As per the SFB Licencing Guidelines shareholding of uFSL in the Bank has to be broughtdown to 40% within 5 (Five) years From the date of commencement of its business i.e byJanuary 31 2022.

Accordingly Bank has constituted a focussed Board level Committee in the name ofPromoter Shareholding Dilution Committee for taking all necessary steps to comply with theSFB Licencing Guidelines.

CAPITAL ADEQUACY

The CRAR of the Bank has been calculated on the basis of Basel II guidelines. The CRARof the Bank as on March 31 2020 using RWA for credit risk exposures as required underthe operating guidelines of RBI for Small Finance Banks stood at ~29% as against theminimum capital adequacy requirements of 15%.

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

CREDIT RATING

Credit ratings assigned to various instruments of the Bank during the financial yearended March 31 2020.

Instrument Name Name of Credit Rating Agency Amount ('in Crores) Rating Date of Credit Rating Revision in the Credit Rating
Fund-based - LT-Term Loan CARE 72.75 CARE A+; Stable 12-04-2017 30-08-2019
Fund-based-Long Term CARE 1386.31 CARE A+; Stable 12-04-2017 30-08-2019
Certificate of Deposit CRISIL 2500 CRISIL A1 + 30-03-2017 28-02-2020
Short Term FD CRISIL 3000 CRISIL A1 + 30-03-2017 28-02-2020
Non-Convertible Debentures CARE 60 CARE A+; Stable 12-04-2017 -
Non-Convertible Debentures CARE 40 CARE A+; Stable 12-04-2017

-

the Bank has made timely redemption of the following Non-Convertible Debentures("NCD") maturing during the financial year ended March 31 2020.

Nr 'sin No. Description of NCD Maturity date Amount ('in Crores) Debenture Trustee
1 INE334L07076 Secured and Redeemable July 30 2019 40 IDBI Trusteeship Ltd.
2 INE334L07100 Secured and Redeemable May 28 2019 60 IDBI Trusteeship Ltd.
Total 100

TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO INVESTOR EDUCATION AND PROTECTION FUND

Section 125 read with Section 124 of the Companies Act 2013 requires that dividendsthat are not encashed/ claimed by the shareholders for a period of seven consecutiveyears have to be transferred to the Investor Education and Protection Fund (IEPF).

Being the fourth financial year since incorporation there were no amounts due fortransfer to IEPF. Further as on March 31 2020 there is no shareholder who has notencashed/claimed the dividend amount and there is no unclaimed dividend amount lying withthe Bank.

MANAGEMENT

the Board was duly constituted during the financial year ended March 31 2020 and thechanges in the Board composition is as follows:

A. Appointments

Ms. Chitra K Alai DIN:03138604

Pursuant to the Loan Agreements between Small Industries Development Bank of India("SIDBI") and the Bank SIDBI had appointed vide its letter dated May 09 2019Ms. Chitra K Alai as its nominee not liable to retire by rotation on the Board of theBank vice Mr. Sanjay Jain w.e.f May 09 2019.

The Board had noted her appointment in its meeting held on May 28 2019.

Mr. Sachin Bansal DIN:02356346

The Board had appointed Mr. Sachin Bansal in its meeting held on May 28 2019 as anAdditional Director (Independent) of the Bank w.e.f June 01 2019 to hold office up to thedate of 3rd Annual General Meeting of members of the Bank ("AGM").

Further he was appointed as Director (Independent) pursuant to resolution passed bythe members of the Bank in the 3rd AGM held on July 12 2019 for a term of fiveconsecutive years commencing June 01 2019 up to May 31 2024.

In terms of Section 152 of the Companies Act 2013 he was not liable to retire byrotation.

Rationale for his appointment:

The Board noted that Mr. Sachin Bansal is an acknowledged iconic leader in thee-commerce space (Co-founder of Flipkart) with phenomenal technological acumen andforesight. His guidance and direction will be very valuable in achieving Bank's mission ofcreating a state-of-the-art mass market bank.

Ms. Vandana Viswanathan DiN:05192578

Ms. Vandana Viswanathan was liable to retire by rotation and retired at 3rd AGM held onJuly 12 2019 and being eligible had offered herself for reappointment.

The members of the Bank appointed her as NonExecutive Non-Independent Director at 3rdAGM held on July 12 2019.

Further she was appointed/re-designated as Director (Independent) pursuant to aresolution passed by the members of the Bank in the Extraordinary General Meeting held onAugust 03 2019 for a term of five consecutive years commencing September 22 2019 up toSeptember 21 2024.

She meets the criteria of independence as prescribed under Section 149(6) of CompaniesAct 2013 read with Rule 5 of Companies (Appointment and Qualifications of Directors)Rules 2014 and Regulation 16(1)(b) of SEBI Listing Regulations.

In terms of Section 152 of the Companies Act 2013 she is not liable to retire byrotation.

Rationale for her appointment:

The Board noted that Ms. Vandana Viswanathan is a career professional in managing HumanResources (HR). As a HR professional her expertise and guidance will be very valuable tothe Bank.

Mr. Mahadev Lakshminarayanan DiN:05003710

Mr. Mahadev Lakshminarayanan was appointed as Director (Independent) pursuant toresolution passed by the members of the Bank in the Extraordinary General Meeting held onAugust 03 2019 for a term of five consecutive years commencing August 01 2019 up to July31 2024.

He meets the criteria of independence as prescribed under Section 149(6) of CompaniesAct 2013

read with Rule 5 of Companies (Appointment and Qualifications of Directors) Rules 2014and Regulation 16(1)(b) of SEBI Listing Regulations.

In terms of Section 152 of the Companies Act 2013 he is not liable to retire byrotation.

Rationale for his appointment:

The Board noted that Mr. Mahadev lakshminarayanan is a career professional. As aChartered Accountant he had held various positions in Deloitte. His financial expertiseand guidance will be very valuable to the Bank.

Mr. Nitin Chugh DiN:01884659

The RBI had accorded its approval vide its letter dated May 14 2019 for theappointment of Mr. Nitin Chugh as a Managing Director and CEO of the Bank for a period ofthree years commencing December 01 2019.

Further to the approval of RBI the Board had in its meeting held on May 28 2019appointed him as the Managing Director and CEO of the Bank w.e.f December 01 2019.

The members of the Bank have approved his appointment in the 3rd AGM held on July 122019.

In terms of Section 152 of the Companies Act 2013 he is not liable to retire byrotation.

Mr. Umang Bedi*

Din:02432920

The Board had appointed Mr. Umang Bedi in its m eeting held on March 2 3 2020 a s anAd ditional Director (Independent) of the Bank w.e.f April 01 2020 to hold office up tothe date of ensuring 4th AGM.

He meets the criteria of independence as prescribed under Section 149(6) of CompaniesAct 2013 read with Rule 5 of Companies (Appointment and Qualifications of Directors)Rules 2014 and Regulation 16(1)(b) of SEBI Listing Regulations.

The Board recommends his appointment as an Independent Director to the members fortheir approval at the ensuing 4th AGM.

In terms of Section 152 of the Companies Act 2013 he is not liable to retire byrotation.

Rationale for his appointment:

The Board noted that Mr. Umang Bedi is an iconic leader who has co-founded Dailyhunt;India's largest local language content & news discovery platform across 14 Indianlanguages. He has phenomenal technological acumen and foresight. His guidance

and direction will be very valuable in achieving Bank's mission of creating astate-of-the-art mass market bank.

*His appointment is effective after the closure of the financial year ended March 312020.

B. Resignations

Mr. Sachin Bansal DIN:02356346

He had resigned as an Independent Director w.e.f January 27 2020.

Reason of Resignation: He had confirmed that he had resigned from the Bank's Board inthe interest of propriety and corporate governance as an entity owned and controlled byhim has made an application to the RBI for a universal banking license and there were noother material reasons.

Mr. Sunil Vinayak Patel Din:00050837

Reason of Resignation: As per the extent RBI Guidelines he was not eligible to bereappointed as Chairman of the Bank as he had attained 70 (Seventy) years of age.Accordingly he had tendered his resignation as Independent Director of the Bank w.e.fFebruary 01 2020 (post completion of his tenor as Part-time Chairman of the Bank onJanuary 31 2020).

Further he had confirmed that he had resigned due to personal reasons and commitmentsand there were no other material reasons.

Mt Luis miranda DIN:01055493

Reason of Resignation: He was having common directorship between the Bank which is anInsurance Intermediary and Manipal Cigna Health Insurance Company Limited an InsuranceCompany and such common directorship may pose potential conflict of interest in terms ofprovisions of Section 48A of the Insurance Act 1938 which per se restricts such commondirectorship. To uphold the principles of good corporate governance he had opted toresign as an Independent Director of the Bank with effect from March 22 2020.

He had confirmed that except the reasons stated above there were no other materialreasons for his resignation.

C. Retirements/Cessation

Mr. Sanjay Jain DIN:02559601

Pursuant to the Loan Agreements between SIDBI and Bank SIDBI had appointed vide itsletter dated

May 07 2018 Mr. Sanjay Jain as its nominee not liable to retire by rotation on theBoard of the Bank.

He ceased to be Nominee Director of the Bank w.e.f May 09 2019 as SIDBIappointed/nominated Ms. Chitra K Alai as its Nominee on the Board of the Bank w.e.f May09 2019.

Ms. Vandana Viswanathan DIN:05192578

Ms. Vandana Viswanathan was liable to retire by rotation and retired at 3rd AGM held onJuly 12 2019 and being eligible had offered herself for reappointment.

The members of the Bank appointed her as NonExecutive Non-Independent Director at 3rdAGM held on July 12 2019.

Mr. Samit Kumar Ghosh DIN:00185369

Mr. Samit Kumar Ghosh completed his tenor as the Managing Director and CEO of the Bankon November 30 2019.

Mr. Sunil Vinayak Patel DIN:00050837

Mr. Sunil Vinayak patel completed his tenor as the part-time Chairman of the Bank onJanuary 31 2020.

Mr. Jayanta Kumar Basu DIN:01268046

Mr. Jayanta Kumar Basu would be retiring by rotation at the ensuing 4th AGM and beingeligible offers himself for reappointment as Director (NonExecutive non-Independent). Heshall be liable to retire by rotation in terms of Section 152 of the Companies Act 2013.

D. Re-Designated/Re-Categorised

Ms. Vandana Viswanathan DIN:05192578

Ms. Vandana Viswanathan was Non-Executive Non-Independent Director of the Bank and wasappointed/re-designated as Director (Independent) pursuant to resolution passed by themembers of the Bank in the extraordinary General Meeting held on August 03 2019 for aterm of five consecutive years commencing September 22 2019 up to September 21 2024.

Ms. Mona Kachhwaha DIN:01856801

Ms. Mona Kachhwaha was an Independent Director of the Bank and she was re-categorisedfrom Independent Director to Non-Executive NonIndependent Director of the Bank w.e.f.September 22 2019 whose office is liable to retire by rotation.

E. Key Managerial Personnel

As on March 31 2020 pursuant to Section 203 of the Companies Act 2013 Mr. NitinChugh Managing Director and CEO Ms. Upma Goel Chief Financial Officer and Mr. ChanchalKumar Company Secretary and Compliance officer are the Key Managerial Personnel("KMP") of the Bank.

Mr. Samit Kumar Ghosh

Mr. Samit Kumar Ghosh Ex-Managing Director and CEO and KMP of the Bank retired onNovember 30 2019.

Mr. Nitin Chugh

Mr. Nitin Chugh was appointed as Managing Director and CEo of the Bank for a period of3 (Three) years commencing December 01 2019.

In terms of Section 203 of the Companies Act 2013 the Board had appointed him as KMPof the Bank for the period co-terminus with his tenure as Managing Director and CEO of theBank.

Ms. Upma Goel

Ms. Upma Goel was appointed as Chief Financial officer and KMp of the Bank w.e.fFebruary 01 2017.

Mr. Chanchal Kumar

Mr. Chanchal Kumar was appointed as Company Secretary KMp and Compliance officer interms of Regulation 6 of the SEBI Listing Regulations of the Bank w.e.f March 24 2018.

DECLARATION BY INDEPENDENT DIRECTORS AND STATEMENT ON COMPLIANCE OF CODE OF CONDUCT

The Bank has received declarations from its Independent Directors confirming that theymeet the criteria of independence as prescribed under Section 149 (6) of the CompaniesAct 2013 and Regulation 16(1)(b) of SEBI

Listing Regulations and that they have complied with the code of conduct forindependent directors as prescribed under Schedule IV of the Companies Act 2013.

Further pursuant to Regulation 25(8) of the SEBI listing Regulations the IndependentDirectors of the Bank has also confirmed that they are not aware of any circumstance orsituation which exist or may be reasonably anticipated that could impair or impact theirability to discharge their duties with an objective independent judgment and without anyexternal influence.

In the opinion of the Board all the Independent Directors meet the criteria withregard to integrity expertise and experience (including the proficiency*).

*All Independent Directors of the Bank have registered themselves in the data bank asspecified under Section 150 of the Companies Act 2013 read with Rule 6 of Companies(Appointment and Qualification of Directors) Rules 2014. The Independent Directors havecommitted to qualify the online proficiency self-assessment as required under aforesaidRule within prescribed timeline.

The Bank has also received from its directors a statement that they have complied withthe Code of Conduct for Directors and Senior Management.

NUMBER OF MEETINGS OF THE BOARD

the Board met 10 (ten) times during the financial year ended March 31 2020. Thedetails of Board Meetings are available in the Corporate Governance Report which formspart of the Annual Report.

BOARD COMMITTEES

The Bank believes that the Board Committees are pillars of good corporate governance.In pursuit of highest standard of corporate governance and to comply with the provisionsof Companies Act 2013 SEBI Listing Regulations and RBI guidelines the Bank hasconstituted various statutory board committees. Further in order to improve the Boardeffectiveness efficiency and fast decision making the Bank has also constituted few nonstatutory Board Committees.

As on March 31 2020 the Bank has 14 (Fourteen) Board Committees which are givenbelow:

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. Human Resource & Compensation Committee* No No No
11. Committee of Directors* No No No
12. Business Strategy Committee* No No No
13. Promoter Shareholding Dilution Committee (Formerly known as listing Committee)* No No No
14. Business Continuity Monitoring Committee* No No No

* Non-Statutory Committees constituted for effective supervision

The details of composition number of meetings held and date thereof and terms ofreference of above Committees are available in Corporate Governance Report which formspart of the Annual Report.

RECOMMENDATIONS OF AUDIT COMMITTEE

During the financial year ended March 31 2020 there was no incidence where the Boardhas not accepted any recommendations of the Audit Committee.

BANK'S POLICY ON DIRECTORS' APPOINTMENT AND REMuNERATiON

The Bank pursuant to the provisions of Section 178 of the Companies Act 2013Regulation 19 of SEBI Listing Regulations and RBI Requirement has formulated and adopted aNomination and Remuneration policy on directors' appointment and remuneration and thecriteria for determining qualification positive attributes and independence of directorswhich is available on the website of the Bank at https://www.uiiivansfb.in/corporate-governance-policies.

BOARD EVALUATION

The Board has carried out annual evaluation of its own performance performance ofBoard Committees and Individual Directors pursuant to the provisions Section 178 read withSchedule IV of Companies Act 2013 and Regulation 19 of the SEBI Listing Regulations.

Performance evaluation criteria for Board Board Committees and Individual Directorswere approved by the Nomination and Remuneration Committee in its meeting held on January21 2020.

The approved evaluation formats and criteria are in line with the SEBI guidance note onevaluation dated January 05 2017.

The Nomination and Remuneration Committee has laid down comprehensive parameters forevaluation few of which are listed below:

I. The Board: Composition structure meetings functions management and professionaldevelopment ethics and compliance among others.

II. The Committees: Mandate & Composition

effectiveness structure meetings independence of the committee contribution todecision making of the Board among others.

III. Individual directors (including Chairperson Independent Directors andNon-Independent Directors): Leadership Commitment Contribution Experience ExpertiseIndependence Integrity Attendance Responsibility Flow of Information among others.

The performances of the Board and Board Committees were evaluated after seeking inputsfrom all the directors.

The Board and the Nomination and Remuneration Committee reviewed the performance of theIndividual Directors on the basis of the approved criteria for evaluation. In additionthe Chairman and Managing Director and CEo were also evaluated on the key aspects of theirroles.

Performance evaluation of Independent Directors was done by the entire Board excludingthe Independent Director being evaluated.

In a separate meeting of Independent Directors held on March 23 2020 performance ofNon-Independent Directors performance of the Board as a whole and performance of theChairman was evaluated.

REMUNERATION OF DIRECTORS AND EMPLOYEES

The remuneration being paid to the Managing Director and CEO is in accordance with theprovisions of the Companies Act 2013 and in conformity with the RBI approval.

the remuneration of non-executive directors was paid by way of sitting fees which iswithin the limits prescribed under Section 197(5) of the Companies Act 2013.

Disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5(1) (2) and (3) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 are annexed to thisReport as Annexure-1.

REMUNERATION RECEIVED BY THE MANAGING DIRECTOR/WHOLE-TIME DIRECTOR FROM

holding or subsidiary company

During the financial year ended March 31 2020 Mr. Mtin Chugh Managing Director andCEO or Mr. Samit Kumar Ghosh Ex-Managing Director and CEO of the Bank have not receivedany commission from the Bank and remuneration or commission from Ujjivan FinancialServices Limited Holding Company of the Bank. Bank has no subsidiary company.

DIRECTORS' RESPONSIBILITY STATEMENT

Based on the framework of internal financial controls established and maintained by theBank work performed by the internal statutory and secretarial auditors reviewsperformed by the Management and the relevant Board Committees the Board in concurrencewith the Audit Committee is of the opinion that the Bank's internal financial controlswere adequate and effective as on March 31 2020.

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

(a) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;

(b) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Bank at the end of the financial year and of the profit andloss of the Bank for that period;

(c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets 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 by the Bank and thatsuch internal financial controls are adequate and were operating effectively; and

(f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

ADEQUACY OF INTERNAL FINANCIAL CONTROL

The Bank has laid down certain guidelines policies processes and structures to enableimplementation of appropriate internal financial controls across the Bank. These controlprocesses enable and ensure the orderly and efficient conduct of the Bank's businessincluding safeguarding of assets prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and timely preparation of reliablefinancial information. There are control assessment for both the Bank's critical operatingprocesses and IT applications including ERP applications wherein the transactions wereapproved and recorded. These controls are both manual and automated. Review and controlmechanisms are built in to ensure that such control systems are adequate and operatingeffectively.

Because of the inherent limitations of internal financial controls including thepossibility of collusion or improper management override of controls materialmisstatements in financial reporting due to error or fraud may occur and may not bedetected. Also evaluation of the internal financial controls is subject to the risk thatthe internal financial control may become inadequate

because of changes in conditions or that the compliance with the policies or proceduresmay deteriorate.

The Bank has in all material respects an adequate internal financial controls systemwhich was considerably enhanced during the year and such internal financial controls wereoperating effectively based on the internal control criteria established by the Bankconsidering the essential components of internal control stated in the guidance note onaudit of internal control over financial reporting issued by the Institute of CharteredAccountants of India.

FRAUDS REPORTED BY THE AUDITORS

During the financial year ended March 31 2020 neither the statutory auditors nor thesecretarial auditor have 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 Subsidiaries Associates andJoint Ventures

there were no Subsidiary Company Associate Company and Joint Venture of the Bankduring the financial year ended March 31 2020.

B. Companies which have become or Ceased to be Subsidiaries Associates and JointVentures

No Company became or ceased to be Subsidiary Company Associate Company and JointVenture of the Bank during the financial year ended March 31 2020.

DEPOSITS

the Chapter V of Companies Act 2013 does not apply to the Bank. During the financialyear ended March 31 2020 the Bank has accepted deposits from public in ordinary courseof its banking business. the details of the deposits are enumerated in the financialstatement for the financial year ended March 31 2020.

Being a banking company the disclosures required as per Rule 8(5)(v) & (vi) of theCompanies (Accounts) Rules 2014 read with Section 73 and 74 of the Companies Act 2013are 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 notapply to a loan made guarantee given or security provided by a banking company in theordinary course of business. the details of the investments are disclosed in Schedule-8 ofthe financial statements as per applicable provisions of Banking Regulation Act 1949.

RELATED PARTY TRANSACTIONS AND CONTRACTS/ARRANGEMENTS

There was no materially significant related party transactions entered between the Bankand its related parties except for those disclosed in the financial statements.

All the contracts/arrangements/transactions entered by the Bank with the relatedparties during financial year ended March 31 2020 were on arm's length basis;accordingly the disclosure of particulars of contracts / arrangements entered into by theBank with related parties referred to in sub-section (1) of section 188 of the CompaniesAct 2013 in Form AOC-2 is not applicable.

the Bank has formulated a policy on 'Materiality of Related Party Transactions' whichforms part of the Policy on dealing with 'Related Party Transactions' which is availableon the website of the Bank at https://www. uiiivansfb.in/corporate-governance-policies.

CORPORATE SOCIAL RESPONSIBILITY ("CSR")

As per Section 135 (1) of the Companies Act 2013 "Every company having net worthof rupees five hundred Crores or more or turnover of rupees one thousand Crores or moreor a net profit of rupees five Crores or more during the immediately preceding financialyear shall constitute a CSR Committee of the Board consisting of three or more directorsout of which at least one director shall be an independent director".

Pursuant to the above the Bank has duly constituted CSR Committee with three Directorsand all of them are Independent Directors.

The Bank has formulated CSR policy which is available on the website of the Bank athttps://www.uiiivansfb.in/ corporate-governance-policies.

The detailed Annual Report on the CSR activities for the financial year ended March 312020 is annexed to this Report as Annexure-2.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO

Energy efficiency and conservation is a part of our business planning. The Bank'ssystems and processes are designed in manner to ensure optimum energy usage by continuousmonitoring of all forms of energy and augmenting the efficiency of operations.

A number of initiatives was taken by the Bank during financial year 2019-20 to saveelectricity consumption. Some of the key initiatives were designing Bank's branches andoffices in a manner to ensure maximum utilisation of day light after office hours allemployees

who need to work in a branch sit in a common area and all the non-essential lightsACs etc. are checked and switched off. AC/Lights installed at meeting rooms etc. inbranches as well as Head office and Regional offices are to be switched off when the roomsare not occupied. ACs are switched off after 6:30 PM and all ACs are maintained at 24degree or above in branches.

The Bank endeavors to shut down all branches on time. All these initiatives haveresulted in considerable electricity savings. Moreover it procures star rated electricalequipment auto monitors auto switch timers and LED lights are installed for costefficient operations in the Bank.

Bank has also launched Vehicle Finance Business for funding of electric vehicles whichare zero polluting and energy efficient vehicles.

There was no Foreign Exchange inflow however there was foreign exchange outflow of$222404 during the financial year ended March 31 2020.

RISK MANAGEMENT POLICY

The Risk Management Committee (''RMC") of the Bank consists of experienceddirectors from diverse background who bring in the best risk practices to the Bank. TheRMC comprises of 4 (Four) Directors out of which 2 (Two) are Independent Directors.

The RMC fulfills its roles and duties through various management level risk committeessuch as Credit Risk Management Committee (CRMC) Operational Risk Management Committee(ORMC) and Asset Liability and Market Risk Committee (ALCO). These committees areentrusted with the task to identify measure mitigate and monitor various risks.

The frequency members and the quorum required for these management level committees isfurnished in the respective risk management policies. These committees meet at regularintervals to assess and monitor the level of risk pertaining to market credit andoperations.

The Bank has identified the following risks which are material in nature and thereforemay 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 the following secondorder or derived risks using specialised methodologies. The Bank has on boardedspecialised personnel for monitoring the same and a comprehensive analysis is made underits Internal Capital Adequacy and Assessment Process (ICAAP).

1) Liquidity Risk

2) Information Security risk

3) IT risk

4) Outsourcing risk

5) Compliance Risk

6) Interest Rate Risk

7) Reputational Risk

8) Strategic Risk

The Bank's risk management framework is based on a clear understanding of the aboverisks disciplined risk assessment and measurement procedures and continuous monitoring.The policies and procedures established for this purpose are continuously benchmarked withinternational best practices. The Bank has an oversight on all the risks through regularmonitoring of Key Risk Indicators and benchmarks against each type of risk.

Further the Board reviews the risk management framework of the Bank and verifiesadherence to various risk parameters and compliances at quarterly intervals. The RMCapproves all its risk-related policies including the quarterly/half-yearly/annual reviewreports of major Risks.

The Bank has in place effective risk management policy (ies) which highlights thefunctions implementation and the role of RMC and the Board.

WHISTLE BLOWER POLICY/VIGIL MECHANISM

the Bank's Whistle Blower policy allows employees directors and other stakeholders toreport matters such as genuine grievances corruption fraud misconduct and instances ofleakage of unpublished price sensitive information ("UPSI") misappropriation ofassets and non-compliance of code of conduct of the Bank or any other unethical practices.the policy provides

adequate safeguard against victimisation to the Whistle Blower and enables them toraise concerns and also provides an option of direct access to the Chairman of AuditCommittee.

During the financial year ended March 31 2020 none of the personnel have been deniedaccess to the Chairman of the Audit Committee.

the Whistle Blower policy is available on the website of the Bank athttps://www.uiiivansfb.in/corporate- governance-policies.

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 - 560095

Karnataka

Email: saniav.kao@uiiivan.com

Protected disclosures against the Whistle and Ethics Officer should be addressed to theManaging Director and CEO of the Bank and the protected disclosure against the ManagingDirector and CEO of the Bank should be addressed to the Chairman 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 - 560095

Karnataka

Email: nitin.chuqh@uMivan.com

Name and Address of the Chairman of the Audit Committee

Mr. Mahadev Lakshminarayanan

26 25th Main Near LIC Apartments J P Nagar 1st Phase Bangalore SouthBengaluru-560078

Karnataka

Email: m.lakshminaravanan@uNivan.com

the confidentiality of those reporting violations is maintained and they are notsubiected to any discriminatory practice.

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

Particulars Number of Complaints
Number of Whistle Blower Complaint at the beginning of the financial year ended March 312020 0
Number of Whistle Blower Complaint received during the financial year ended March 312020 16
Number of Whistle Blower Complaint resolved during the financial year ended March 312020 15
Number of Whistle Blower Complaint at the end of the financial year ended March 312020 1

SIGNIFICANT AND MATERIAL ORDERS BY THE REGULATORS OR COURTS OR TRIBUNALS

During the financial year ended March 31 2020 there were no significant and materialorders passed by the regulators or courts or tribunals impacting the going concern statusof the Bank and its operations in future.

AUDITORS

A. Statutory Auditors

Further to the approval of RBI M/s. MSKA & Associates Chartered Accountants (ICAIFRN: 105047W) were appointed as the statutory auditors of the Bank for the financial yearended March 31

2019 vide shareholders' approval accorded in the Extra-ordinary General meeting of theBank held on September 28 2018.

The members of the Bank in the 3rd AGM held on July 12 2019 reappointed M/s. MSKA& Associates Chartered Accountants (ICAI FRN: 105047W) as statutory auditors of theBank for the period of 3 (Three) financial year until the conclusion of Sixth AGM of theBank to be held in financial year 2022-23.

Aforesaid appointment is subject to annual approval of RBI. RBI had accorded itsapproval for appointment of M/s. MSKA & Associates Chartered Accountants (ICAI FRN:105047W) as statutory auditors of the Bank for financial year 2019-20.

The Bank shall make an application to RBI for appointment of M/s. MSKA &Associates Chartered Accountants (ICAI FRN: 105047W) as statutory auditors for financialyear 2020-21.

the Auditor's Report on the financial statements of the Bank for the financial yearended March 31

2020 does not contain any qualification reservation or adverse remark. The Auditor'sReport enclosed with the financial statements forms part of the Annual Report.

B. Secretarial Auditor

Mr. K. Jayachandran practicing Company Secretary (ACS No.: 11309 and Certificate ofpractice No.: 4031) was appointed as the Secretarial Auditor of the Bank in the meeting ofBoard held on July 30 2019 to conduct Secretarial Audit of the Bank for the financialyear ended March 31 2020 as required under Section 204 of the Companies Act 2013 and therules made thereunder and Regulation 24A of SEBI Listing Regulations. The Bank hasprovided all assistance and facilities to the Secretarial Auditor for conducting hisaudit.

the Secretarial Audit Report does not contain any qualification reservation or adverseremark and is annexed to this Report as Annexure - 3.

explanations in response to auditor's qualifications

the Statutory Auditor's Report on the financial statements of the Bank for thefinancial year ended March 31 2020 and Secretarial Audit Report does not contain anyqualification reservation or adverse remark.

the statutory auditors have highlighted a statement in their report under Emphasis ofMatter as under:

Quote:

"We draw attention to Note 15 to the financial results which describes that theextent to which the COVID-19 Pandemic will impact the Bank's result will depend on futuredevelopments which are incapable of assessment at this point in time."

Response by the Board:

Keeping in view the current circumstances due to the outbreak of COVID-19 pandemic theBank has made total provision of 77000 Lakhs for COVID-19 as on March 31 2020 out ofwhich '4897 Lakhs is in respect of accounts in default but standard against the potentialimpact of COVID-19. The provision held by the Bank are in excess of the RBI prescribednorms.

extract of annual return

In accordance with Section 134(3)(a) of the Companies Act 2013 an extract of theannual return in Form MGT-9 is annexed to this Report as Annexure - 4.

annual return

Pursuant to the provisions of Section 134(3)(a) and Section 92(3) of the Companies Act2013 read with Rule 12 of the Companies (Management and Administration) Rules 2014 theAnnual Return of the Bank for the financial year ended March 31 2020 will be available onthe website of the Bank at https://www.uiiivansfb.in/annual-return.

compliance with secretarial standards

The Bank has complied with the provisions of Secretarial Standards specified by theInstitute of Company Secretaries of India and notified by the Ministry of CorporateAffairs under Section 118(10) of the Companies Act 2013. The Bank has also complied withthe provisions of Secretarial Standard-3 and Secretarial Standard-4 on voluntary basis.

human resources

The Bank has been ranked & recognised amongst the Best Workplaces consistently fornearly a decade. the Great place To Work Certification is one of the most prestigiousachievements for organisations across the globe. The Bank was Ranked 6th in 'India's BestCompanies to Work For' in 2019.

The Bank was also awarded the “Best HR Practice in Finance Sector Award atBanking Financial Services and Insurance Awards in 2019. The Bank also received manyother accolades to its credit such as:

• 16th Best Large Workplaces in Asia 2019.

• India's Best Workplaces for Women 2019 (top 75).

• Best Workplaces TM in Small Finance Banks.

• IBA Banking Technology Innovation Awards for 'The Best It Risk Management andCyber security Initiative.

• ERM Strategy of the year' for developing a framework for implementing ERM usingRAROC approach at ERM World Summit Awards 2019.

• Finnoviti Awards 2019 for 'Best innovation in IT'.

• IDEX legal awards 2019 for the 'Best in-house legal team medium large' category.

Mr. Samit Kumar Ghosh Founder and former Managing Director and CEO of the Bank wasconferred upon the prestigious Inclusive Finance India Awards 2019 in the category of"Contribution to advancing financial inclusion by an individual"

CORPORATE GOVERNANCE AND BUSINESS RESPONSIBILITY REPORT

The Bank recognises its role as a corporate citizen and endeavors to adopt the bestpractices and the highest standards of Corporate Governance through transparency inbusiness ethics and accountability to its shareholders customers government and otherstakeholders. The Bank's activities are carried out in accordance with good corporatepractices and the Bank is constantly striving to make them better and adopt the bestpractices.

The Bank believes that timely reporting transparent accounting policies and a strongIndependent Board goes a long way in preserving shareholders' trust and maximisinglong-term corporate value.

In pursuing the mission of becoming "The best institution to provide financialservices to the un-served and underserved customers and transform to a bank serving themass market" the Bank has been balancing its dual objectives of "social"and "financial goals since its inception. "Responsible financing""ethical values" and "transparency" in all its dealings with itscustomers lenders investors and employees" have been the cornerstone of itsoperations. Transparency in the decision making process has been providing comfort to allstakeholders particularly the customers lenders and investors.

The Report on Corporate Governance for the financial year ended March 31 2020 as perRegulation 34(3) read with Schedule V of the SEBI Listing Regulations forms part of theAnnual Report.

A Business Responsibility Report containing the requisite details as under Regulation34 (2) of the SEBI Listing Regulations forms part of the Annual Report and is alsodisclosed on the Bank's website at https://www.uiiivansfb.in.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

As required under Regulation 34 of SEBI Listing Regulations the Management Discussionand Analysis Report forms part of the Annual Report.

DISCLOSURE UNDER SECTION 22 OF THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013

The Bank has a strict Prevention of Sexual Harassment (POSH) Policy in accordance withthe statutory requirements of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013. The Policy is applicable to all employees of theBank. The Bank is committed to providing a workplace that is free from discriminationharassment and victimisation regardless of gender race creed and religion place oforigin and sexual orientation of a person employed or engaged with the Bank.

Composition of the Internal Complaints Committee ("ICC")

Every Region has an ICC and each ICC consists of the following members:

• Presiding Officer: who shall be a woman employed at a senior level in theregion.

• Secretary: who shall be the Regional Human Resources Manager

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

• 1 Independent Member: Nominated from amongst NGOs/associations committed to thecause of women or a person familiar with the issues relating to Sexual Harassment.

• Other Members: Additional members may be co-opted if required from amongstEmployees working in senior positions in the region especially from business operationsand control functions.

Function of ICC

Bank's ICC is responsible for all administrative units/ branches/regional offices. Allcomplaints of Sexual Harassment at the Workplace will be enquired into by the ICC havingjurisdiction over the establishment where the Respondent is posted. The ICC will forward areport of its findings to the Employer for action.

The status on the complaints received and resolved by ICC:

Number of Complaints Received Number of Complaints Resolved Number of Complaints Pending for Resolution
13 8 5*

*3 cases reported on November 14 2019 and 2 cases reported on January 29 2020.

STATUTORY DISCLOSURES

none of the directors of the Bank are disqualified as per provisions of Section 164(2)of the Companies Act 2013. The directors have made necessary disclosures as requiredunder various provisions of the Companies Act 2013 SEBI Listing Regulations and RBIguidelines.

COST RECORDS

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

FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS

Complying with Regulation 25(7) of SEBI Listing Regulations and RBI guidelinesFamiliarisation programmes were conducted during the financial year ended March 31 2020to give an overview and introduction to the Independent Directors about the Bank'sbusiness and operations. Further under the Familiarisation Programme for the IndependentDirectors newly appointed independent directors are appraised with the organisationstructure operational overview financial overview board matters and procedures keyrisk issues and its mitigation strategy among others.

The details of such programme is available on the website of the Bank athttps://www.uiiivansfb.in/corporate- governance-policies.

CORPORATE GOVERNANCE COMPLIANCE CERTIFICATE

the Bank has obtained a certificate from K. Jayachandran practicing Company Secretarycertifying that the Bank has complied with the conditions of the Corporate Governance asstipulated in Regulations 17 to 27 and clauses (b) to (i) of Regulation 46 (2) and otherapplicable regulations of Chapter IV pertaining to Corporate Governance and paragraphs CD and E of Schedule V of the SEBI listing Regulations for the financial year ended March31 2020.

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

STATEMENT OF DEVIATION OR VARIATION IN USE OF FUND RAISED FROM PUBLIC BY WAY OF IPO

Details of fund raised from public by way of Ipo:

Name of listed entity Ujjivan Small Finance Bank Limited
Mode of Fund Raising Public Issue
Date of Raising Funds (Listing) December 12 2019
Amount Raised (?) 7459.46 Million
Object Augment Tier-1 capital base to meet future capital requirement of the Bank
Funds Utilised (?) 7459.46 Million
Amount of Deviation/ Variation according to applicable object Nil
Amount Unspent (?) Entire amount has been utilised to meet the future capital requirement of the Bank. There is no amount unspent.

Further the Board confirms that entire amount has been utilised to meet the futurecapital requirement of the Bank and there is no deviation or variation between theprojected utilisation of funds made by the Bank in its offer document and the actualutilisation of funds.

KEY INITIATIVES WITH RESPECT TO STAKEHOLDER RELATIONSHIP CUSTOMER

relationship environment sustainability health and safety

Detailed information on initiatives with respect to stakeholders relationshipcustomers relationship environment sustainability health and safety have beenelaborated in the Business Responsibility Report of the Bank which forms part of theAnnual Report.

acknowledgement

We place on record our gratitude to our employees at all levels who have contributed tothe growth and sustained success of the Bank through their dedication hard workcooperation and support.

We would like to thank all our customers vendors bankers investors auditors mediaand other business associates for their continued support and encouragement during theyear.

We also thank the Government of India; the Government of Karnataka and Delhi; theMinistry of Commerce and Industry; the Ministry of Finance Ministry of Corporate Affairs;the Securities and exchange Board of India the Stock Exchanges the Central Board ofIndirect Taxes and Customs; the RBI; the Central Board of Direct Taxes and all othergovernment agencies for their support during the financial year ended March 31 2020 andlook forward to their continued support in future.

For and on behalf of the Board of Directors

Sd/- Sd/-
Biswamohan Mahapatra Nitin Chugh
Part-time Chairman and Managing Director and
Independent Director CEO
DIN:06990345 Din:01884659
Date: May 19 2020
Place: Bengaluru

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