Interest rates are highly sensitive to many factors beyond our control, including the monetary policies and reduction of
repo rates by the RBI, various directives issued by the RBI in response to macroeconomic events such as the COVID-19,
deregulation of the financial sector in India, domestic and international economic and political conditions and other factors.
In the event rates for interest payable by us increase, we seek to pass the increased cost of funds to our customers, however,
‘we cannot assure you that such increased costs can be fully passed-on owing to various factors including mismatch in
timing of asset and liability repricing and competition. Additionally, the passing of increased cost of funds by us to our
customers might also not be viewed favourably by the target customers and might in turn impact the demand for our
banking products thereby affecting our business and results of operations. In addition, the requirement that we maintain a
portion of our assets in fixed income government securities could also have a negative impact on our Net Interest Income
and Net Interest Margins since we typically earn interest on this portion of our assets at rates that are generally less
favourable than those typically received on our other interest-earning assets. Also see “— We could be subject to volatility
in income from our treasury operations, which could have an adverse effect on our results of operations and cash flows”
on page 31. Micro finance NBFCs (NBFC-MFIs) are subject to a cap on the interest rates they offer to microfinance
customers while microfinance loans offered by banks in India including SFBs are not subject to any such cap, however,
‘we cannot assure you that such a cap will not be introduced for banks in India. Our inability to effectively manage interest
rate risk may cause our Net Interest Income and Net Interest Margins to decline, which may affect our business, results of
operations, financial condition and cash flows.

We have a limited operating history as an SFB and our future financial and operational performance cannot be
evaluated on account of our evolving and growing scale of operations. Accordingly, our future results may not be
reflective of our past performance.

We were granted a license by the RBI to set up an SFB on August 26, 2016 and commenced operations as an SFB on
January 23, 2017, pursuant to receipt of the RBI Final Approval. Prior to commencement of operations as an SFB, we
operated as an NBFC ~ MFI carrying out micro-finance operations. As a result of our limited operating history as an SFB,
our Restated Financial Statements may not be reflective of our future financial condition and results of operations and
there may be limited historical financial and operational information available to help prospective investors evaluate our
past performance as a commercial banking entity. Accordingly, investors should evaluate our business and prospects in
light of the risks, uncertainties and difficulties frequently encountered by NBFCs and banks that are in the early stages of
development.

Further, as the SFB model is relatively new to India, such operations pose various business and financial challenges,
including (i) sourcing deposits from customers and public at large at competitive rates to support the loan portfolio build
up, (ii) operationalization of banking outlets, (iii) diversification of loan portfolio, (iv) setting up of and running treasury
operations, (v) adopting a robust asset liability management system, (vi) migration to new technology platforms, (vii)
digitization of banking service delivery and other operations in order to source and deliver cost effective financial services
to customers, (viii) designing and developing a robust system for prevention of fraud committed by our personnel or
customers, (ix) designing and developing a comprehensive enterprise wide risk management framework, and (x) gaining
market share with limited brand recognition. These challenges have and will continue to entail substantial senior level
management time and financial resources and put significant demands on our management team and other resources. Our
failure to deal with such challenges and mitigate these risks and uncertainties successfully could materially affect our
business and operating results, and consequently result in a decline in the trading price of our Equity Shares.

We rely extensively on and upgrade our information technology systems and any disruptions in such systems, or breach
of data, could adversely affect our operations and reputation. Further, our success depends on our ability to respond
to new technological advances.

Our information technology systems are a critical part of our business. Our information technology systems enable us to
manage various back-end operations supported by a core banking system, customer relationship management system,
collection management system and document management system. See “Our Business — Information Technology” on page
169. Our business is therefore dependent on timely upgradation of our information technology systems and any delay in
upgrading our systems or any disruption, breach or failure in our technology infrastructure may have significant
consequences on our business operations, including:

e disabling or malfunctioning of financial, accounting or data processing systems;

e — inability to service our customers on a timely basis or at all;

¢ non-availability of certain information for our management in order to enable them to plan for or respond to
contingencies and changes in market conditions in a timely manner or at all; and

¢ — loss of confidential or material data in relation to our financial products.

Our hardware and software systems are subject to potential internal and external disruptions such as damage or
incapacitation by human error, natural disasters, power loss, nation/ region-wide interruptions in the infrastructure,

27.
