e Front office for managing all the dealing operation related to the treasury functions. The team invests or participates
in markets and instruments/ products which can be classified as SLR, non-SLR and money market securities. The
team carries out the following functions: (i) ensures the maintenance of SLR and CRR in accordance with RBI
guidelines; (ii) carries out investment activities under government securities, treasury bills, corporate debt and other
asset classes in accordance with internal policy; (iii) carries out money market borrowing and lending under
collateralized repo, TREPS, interbank uncollateralized call money market for the purpose of liquidity management;
and (iv) executes buying /selling of investments and takes positions for their own portfolios in accordance with the
internal policy and manages excess liquidity to enhance yield on investments; and (v) raises funds through various
money market instruments such as certificates of deposit, term money, and inter-bank participation certificates. In
addition, access funds by way of refinancing from various financial institutions.

¢ Back office for managing the processing, settlement, reconciliation and accounting of dealing transactions. We have
treasury software system to capture, authorize and settle the transactions with minimum manual intervention.

¢ Mid office to carry out the activities in monitoring the limits for trading activities covering daily trading limit,
exposure limits, credit norms, broker limits, pricing for shifting of portfolio, liquidity gap limits, management
information system.

Capital Adequacy Ratios

Under the SFB Operating Guidelines, we are required to maintain a minimum capital adequacy of 15% of risk weighted
assets, to be computed as per the Basel II norms prescribed by RBI, including a minimum Tier I capital of 7.5%, and the
Tier II capital should be limited to a maximum of 100% of total Tier I capital. However, under the SFB Operating
Guidelines, we are not required to maintain any capital conservation buffer or any counter-cyclical capital buffer. We
have not considered market risk and operational risk in the computation of capital risk weighted asset ratio in line with
RBI guidelines applicable for SFBs.

Our CRAR was 43.40%, 40.22%, 35.44%, and 41.17%, as of March 31, 2018, 2019 and 2020 and as of December 31,
2020, respectively. Our Tier I capital ratio was 40.25%, 38.66%, 34.30% and 36.94 % as of March 31, 2018, 2019 and
2020 and as of December 31, 2020, respectively. For further information, see “Selected Statistical Information” on page
211.

Compliance

We have an independent compliance function which is responsible for monitoring and reporting compliance. This mainly
comprises advisories and clarifications on regulatory guidelines, dissemination of regulatory guidelines, monitoring AML
alerts, provide views on policies and products from compliance perspective, identifying, assessing, monitoring and
mitigating compliance risks, creating a compliance culture in the organization and providing compliance-related training
to eemployees and reporting. The department ensures that the various functions and activities of the banks are in tune
with the regulatory, statutory guidelines and policies and also aligned to the internal policies and processes.

Our compliance team is headed by the Chief Compliance Officer and functions as an independent unit to assist the senior
management in the identification of compliance risks.

As part of regulatory requirements, all customer’s names are screened through various lists including the United Nations
Sanctions list and OFAC list, prior to onboarding.

In line with the regulatory practices, we have installed a software for Anti Money Laundering. The software tool
contains various scenarios/ parameters with varied thresholds for identifying the transactions from an AML perspective.
Based on these criteria, the system generates AML alerts on a daily basis. Our internal compliance team scrutinises these
alerts and seeks additional information (as may be required) from the branches on the customers, profile, and nature of
transactions. Based on this scrutiny, these alerts are closed as non-suspicious or suspicious transactions. In case of
transactions identified as suspicious, the same are reported to the regulators within prescribed timelines.

Risk Management

The key risks we are exposed to include: (i) credit risk; (ii) liquidity risk; (iii) operational and cash management risk; (iv)
market and interest rate risk; (v) information security and cyber risk; and (vi) reputational risk.

We have an independent risk management team reporting to the Chief Risk Officer. We operate based on our Board-

approved risk management and governance policies and manage our risks under the enterprise-wide risk management
framework. We have a Risk Management Committee of the Board supported by management-level Risk Management

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