25.

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foreclose on collateral at all. Further, we may be required to increase our provision for loan losses in case of any decline
in the value of the security, which could impair our ability to realize the secured assets upon any foreclosure.

An inability to secure funding in an acceptable and timely manner and at competitive rates, or any disruption in the
access to funds would adversely impact our results of operations, financial condition and cash flows.

Our business and results of operations depend on our ability to raise funds from various external sources on suitable terms
and in a timely manner. Prior to operating as an SFB, as an NBFC we met our funding requirements through a combination
of term loans from banks and financial institutions, issuance of non-convertible debentures, refinancing arrangements,
securitization/ assignment of receivables, and issuance of commercial paper. On transitioning into an SFB, our borrowings
are subject to inter-bank borrowing limits, at par with scheduled commercial banks prescribed by RBI and thus our primary
sources of funding have been deposits and refinancing. As of December 31, 2020 majority of our funding consists of retail
deposits accounting for 72.40% of our total deposits, with a CASA ratio of 13.32%. Further, as of December 31, 2020,
our refinance facilities amounted to = 11,226.00 million, representing 23.24% of our overall funding profile.

Our ability to continue to meet customer demand for new loans will depend primarily on our ability to raise funds through
deposits, including savings and current account deposits and term and recurring deposits, and refinancing on suitable
interest rates and terms, and in a timely manner. In addition, our inability to diversify our funding sources or to reduce our
dependence on refinancing as a source of funds may increase our exposure to adverse market risks. Our ability to raise
such funds on competitive terms in the future will depend on various factors including our credit ratings, macroeconomic
factors, the regulatory environment and policy initiatives in India, developments in the international markets affecting the
Indian economy, investors’ and/ or lenders’ perception of demand for debt and equity securities of SFBs, and our current
and future results of operations, financial condition and cash flows. Our cost of borrowings are partly determined by the
credit ratings we have obtained from various agencies in the past, including rating of Al+ by CRISIL and ICRA for our
Certificate of Deposit (CD) programme, and a rating of A (Stable) by ICRA for our existing non-convertible debentures
and subordinated debt programmes. There can be no assurance that we will continue to be granted strong credit ratings
and any downgrade in our credit ratings may increase interest rates for refinancing our outstanding debt, which would
increase our financing costs, and adversely affect our future issuances of debt and our ability to raise new capital on a
competitive basis.

We are subject to inter-bank borrowing limits for borrowings made by us after commencing operations as an SFB, at par
with scheduled commercial banks. Further, the funds provided by commercial banks and financial institutions to us are
not eligible for classification as ‘priority sector’ advances, as such loans extended are required to be qualified as ‘inter-
bank lending’ and accordingly, our access to loans from banks and financial institutions is currently limited. In addition,
while banks in India are precluded from creating floating charges on their assets, any existing floating charge created on
our assets pursuant to conversion of the erstwhile NBFC into the Bank have to be grandfathered till their maturity, in
accordance with guidelines issued by the RBI. Accordingly, we may be required to avail unsecured loans at higher interest
rates as compared to secured loans. We may also be unable to attract sufficient deposits from customers, due to various
factors beyond our control, such as the market acceptance of the ‘Suryoday” brand and its associated reputation, and overall
perception of private banks as compared to public sector banks. We have to also compete with other banks by offering
attractive interest rates, and may be unable to raise sufficient funds, including funds through deposits at existing or higher
interest cost. We also face certain restrictions on our ability to incur debt from international markets, which may further
constrain our ability to raise funds at attractive rates. Consequently, our inability to raise sufficient funds in a timely
manner, or at all, may have an adverse effect on our business, results of operations, financial condition and cash flows.

We are subject to supervision and inspection by authorities such as the RBI. Any adverse observations from such
regulators could have a material adverse effect on our business, financial condition, results of operation and cash
flows.

We are subject to regulation and supervision by the RBI. The RBI as a part of its supervisory processes, conducts periodic
inspections under the Banking Regulation Act, pursuant to which the RBI issues observations, directions and monitorable
action plans, on issues related to, amongst other things, our operations, risk management systems, internal controls and
regulatory compliance and credit monitoring systems. During the course of finalizing inspections, the RBI inspection team
shares its findings and recommendations with us and provides us an opportunity to provide clarifications, additional
information and, where necessary, justification for a different position, if any, than that observed by the RBI. The RBI
incorporates such findings in its final inspection report and, upon final determination by the RBI of the inspection results,
we are required to take actions specified therein by the RBI to its satisfaction, including, without limitation, requiring us
to make provisions, implement credit rating and scoring models for loans, and tighten controls and compliance measures.

Any significant deficiencies identified by the RBI that we are unable to rectify to the RBI’s satisfaction could lead to
sanctions and penalties imposed by the RBI against us and our management, as well as expose us to increased risks. While
we have responded to such observations, directions and monitorable action plans in the past and we have either complied
with or, are in the process of complying with the observations, we cannot assure you that RBI will not require us to take

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