Further, the RBI requires the banks to create a reserve fund to which it must transfer not less than 25% of the net profit
before appropriations. If there is an appropriation from this account or the share premium account, our Bank is advised
to obtain prior approval from RBI in accordance with RBI circular DBOD.BP.BC No. 31 /2 21.04.018/ 2006-07.

Certain amendments also permit the RBI to establish a ‘Depositor Education and Awareness Fund’, to which banks shall
transfer credit balances in any account in India with a banking company which has not been operated upon for a period
of 10 years or any deposit or any amount remaining unclaimed for more than 10 years, within a period of three months
from the expiry of the said period of 10 years.

The amendments also confer power on the RBI (in consultation with the central government) to supersede the board of
directors of a banking company for a period not exceeding a total period of 12 months, in public interest or for preventing
the affairs of the bank from being conducted in a manner detrimental to the interest of the depositors or any banking
company or for securing the proper management of any banking company.

The appointment, re-appointment, or termination of the appointment of a chairperson, managing director or whole-time
director, manager, chief executive officer of a bank shall have effect only if it is made with the previous approval of the
RBI. Further, no amendment in relation to the maximum number of permissible directors, remuneration of the
chairperson, managing director, whole-time director or any other director, manager, chief executive officer shall have
effect unless approved by the RBI. RBI is also empowered to remove a chairperson, managing director and whole-time
directors from office on the grounds of public interest, interest of depositors or securing the proper management.
Moreover, RBI may order meetings of the board of directors to discuss any matter in relation to the bank, appoint
observers to such meetings, make such changes to the management as it may deem necessary, and may also order the
convening of a general meeting of the bank’s shareholders to elect new directors. As per the Master Circular on Loans
and Advances ~ Statutory and Other Restrictions dated July 1, 2015, banks are prohibited from entering into any
commitment for granting any loans or advances to or on behalf of any of its directors, or any firm in which any of its
directors is interested as partner, manager, employee or guarantor, or any company not being a subsidiary of the banking
company or a company registered under Section 8 of the Companies Act, 2013, or a Government company of which, or
the subsidiary or the holding company of which any of the directors of the bank is a director, managing agent, manager,
employee or guarantor or in which he holds substantial interest, or any individual in respect of whom any of its directors
is a partner or guarantor. The RBI may impose penalties on banks, directors and its employees in case of infringement of
provisions under the Banking Regulation Act. The penalty may be a fixed amount or may be related to the amount
involved in the contravention. The penalty may also include imprisonment of the concerned director or employee. Banks
are also required to disclose the penalty in their annual report.

The RBI Act, 1934 (“RBI Act”), as amended

The RBI Act provides a framework for supervision of banking firms in India. The RBI Act was passed to constitute a
central bank to, inter alia, regulate the issue of bank notes and keeping of reserves with a view to securing monetary
stability in India and generally to operate the currency and credit system of the country. RBI may, subject to certain
conditions, direct the inclusion or exclusion of any bank from the second schedule of the RBI Act. Scheduled banks are
required to maintain cash reserves with the RBI. In this regard, RBI may stipulate an average daily balance requirement
to be complied with by such banks and may direct that such banks regard a transaction or class of transactions as a
liability. Further, RBI may direct any banking company to submit returns for the collection of credit information and may
also furnish such information to a banking company upon an application by such company. RBI has the power to impose
penalties against any person for inter-alia failure to produce any book, account or other document or furnish any statement,
information or particulars which such person is duty-bound to produce or furnish under the RBI Act, or any order,
regulation or direction thereunder.

Reserve Bank of India’s Guidelines for Licensing of “Small Finance Banks” in the Private Sector dated November
27, 2014 (“SFB Licensing Guidelines”)

The RBI issued the SFB Licensing Guidelines and clarifications dated January 1, 2015, for licensing of SFBs in the
private sector. The following is an indicative list of guidelines applicable to our Bank:

1. Registration, licensing and regulations: An SFB is required to be registered as a public limited company under
the Companies Act and licensed under Section 22 of the Banking Regulation Act. The SFB is required to use
the words “Small Finance Bank” in its name. SFBs are governed by the provisions of the Banking Regulation
Act, RBI Act, FEMA, Payment and Settlement Systems Act, 2007, Credit Information Companies (Regulation)
Act, 2005, Deposit Insurance and Credit Guarantee Corporation Act, 1961, and other relevant statutes and the
directives, prudential regulations and other guidelines/instructions issued by RBI and other regulators from time
to time. The SFBs will be given scheduled bank status once they commence their operations and are found
suitable as per Section 42(6)(a) of the RBI Act.

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