Suryoday Small Finance Bank Limited
Annexure to the Financial Statements for the period ended December 31, 2020

Significant accounting policies (Contd.)

3. Significant accounting policies

A. Investments

Classification:

In accordance with the RBI guidelines on investment classification and valuation, investments are classified on the date of purchase into
“Held for Trading” (‘HFT’), “Available for Sale” (‘AFS’) and “Held to Maturity” (‘HTM?’ or “Banking book”) categories (hereinafter

called “categories”), Subsequent shifting amongst the categories is done in accordance with the RBI guidelines.

Under each of these categories, investments are further classified under six groups (hereinafter called “groups”) — Government Securities,
Other Approved Securities, Shares, Debentures and Bonds, Investments in Subsidiaries / Joint Ventures and Other Investments.

The Bank follows trade date accounting for purchase and sale of investments except for Central & State government securities where
settlement date method of accounting is followed in accordance with RBI Guidelines.

Basis of classification:
Investments that are held principally for resale within 90 days from the date of purchase are classified under HFT category.

Investments which the Bank intends to hold till maturity are classified as HTM securities. Investments which are not classified in either
of the above categories are classified under AFS category.

Acquisition Cost and Broken Period Interest

Brokerage, commission and broken period interest on debts instruments are recognised in Profit and Loss Account and are not included
in the cost of acquisition.

Disposal of Investments
Profit/loss on sale of investments under the aforesaid three categories is recognised in the Profit and Loss Account. Cost of investments
is based on the weighted average cost method. The profit from sale of investment under HTM category, net of taxes and transfer to
statutory reserve is appropriated from Profit and Loss Account to “Capital Reserve” in accordance with the RBI Guidelines.

Short Sale

The Bank undertakes short sale transactions in dated central government securities in accordance with RBI guidelines. The short positions
are categorised under HFT category and netted off from investments in the Balance Sheet. These positions are marked- to- market along
with the other securities under HFT portfolio. The mark to-market loss is charged to profit and loss account and gain, if any, is ignored
as per RBI guidelines.

Valuation

Investments classified under AFS and HFT categories are marked to market as per the RBI guidelines.

Traded investments are valued based on the trades / quotes on the recognised stock exchanges, price list of RBI or prices declared by
Primary Dealers Association of India (‘PDAI’) jointly with Fixed Income Money Market and Derivatives Association (“FIMMDA’)/

Financial Benchmark India Private Limited (FBIL), periodically.

The market value of unquoted government securities which qualify for determining the Statutory Liquidity Ratio (‘SLR’), included in
the AFS and HFT categories, is computed as per the Yield-to-Maturity (‘YTM’) rates published by FIMMDA/EFBIL.

The valuation of other unquoted fixed income securities (viz. State Government securities, other approved securities, bonds and
debentures) and preference shares, is done with a mark-up (reflecting associated credit and liquidity risk) over the YTM rates for

government securities published by FIMMDA/EBIL.

Units of mutual funds are valued at the latest repurchase price / net asset value declared by the mutual fund. Treasury bills, commercial
papers and certificate of deposits being discounted instruments, are valued at carrying cost.

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