Suryoday Small Finance Bank Limited
Annexure to the Restated Financial Statements

Annexure 21 - Significant accounting policies appended to and forming part of the restated financial statements.

1. Background and nature of operations

Suryoday Small Finance Bank Limited (the ‘Bank’ or ‘Company’) started its banking operation in January 2017 pursuant to SFB Licence
given by Reserve Bank of India (RBI). The Bank is included in the Second schedule to the Reserve Bank of India Act, 1934 vide
Notification No. DBR.NBD.(SFB- Suryoday). No. 766/16.13.216/201718 dated 24 July 2017 and published in the Gazette of India (part
Ill- Section 4) dated 2 September 2017. The Bank operates with 477 banking outlets.

‘The Bank is primarily engaged in extending micro credit to economically weaker women who are otherwise unable to access finance
from the mainstream banking channels. The Bank broadly follows the Grameen model with suitable adaptations using the Joint Liability
Groups (JLG) framework, where each member of the group guarantees the loan repayment of the other members of the group. The Bank
also provides finance for mortgage loans, commercial vehicles, loans to micro, small and medium enterprises and loans to Non banking
finance companies (NBFCs).

2. Basis of preparation of financial statements

The Restated Financial Information of the Bank have been prepared for inclusion in the addendum to Draft Red Herring Prospectus
(DRHP) to be filed by the Bank with the Securities and Exchange Board of India (“SEBI”) in connection with the proposed Initial Public
Offering (‘IPO’) of equity shares of the Bank. The Restated Financial Information comprise of the Restated Summary Statement of Assets
and Liabilities as at 31 December 2020, 31 December 2019,31 March 2020, 31 March 2019, 31 March 2018, the Restated Summary
Statements of Profit and Loss, the Restated Summary Statement of Cash Flows for the period/ years ended 31 December 2020 31
December 2019, 31 March 2020, 31 March 2019 and 31 March 2018 and Annexure 1 to 23 thereto (hereinafter collectively referred to
as “the Restated Financial Information”).

The Restated Financial Information have been prepared to comply in all material respects with the requirements of:

1) Section 26 of Part I of Chapter III of the Companies Act, 2013 as amended (“the Act”),

2) the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended from
time to time (“SEBI ICDR Regulations”); and

3) Guidance Note on Report in Company Prospectus (Revised 2019) issued by Institute of Chartered Accountants of India (referred to
as ‘the Guidance note’)

‘The restated financial information have been prepared and presented under the historical cost convention and accrual basis of accounting,
unless otherwise stated and are in accordance with Generally Accepted Accounting Principles in India (“GAAP”), statutory requirements
prescribed under the Banking Regulation Act, 1949, circulars and guidelines issued by the Reserve Bank of India (‘RBI’) from time to
time, Accounting Standards (“AS”) specified under Section 133 of the Companies Act, 2013 to the extent applicable, in so far as they
apply to banks and current practices prevailing within the banking industry in India.

Use of estimates

The preparation of financial statements in conformity with GAAP requires the management to make estimates and assumptions
considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and
the reported income and expenses for the reporting period. Management believes that the estimates used in the preparation of the financial
statements are prudent and reasonable. Actual results could differ from these estimates. Any revision in the accounting estimates is
recognised prospectively in the current and future periods.

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