Our retail deposits represented 41.21% of our total deposits as of March 31, 2018 and grew to 42.91% as of March 31, 2019
and to 54.44% of our total deposits as of March 31, 2020 and were 51.83% and 72.40% of our total deposits as of December
31, 2019 and 2020, respectively. We intend to continue to strengthen our retail liability franchise by opening branches in new
geographies and focusing on improving our per branch productivity. With online and digital banking being increasingly
accepted and adopted, we propose to optimize the use of our Banking Outlets. We intend to do achieve this by rationalizing
two or more Banking Outlets in close proximity, and downsizing the premises of certain of our existing Banking Outlets, in
order to decrease our overhead expenses. We also intend to gradually expand our network of Banking Outlets to ensure optimum
utilization of resources.

Our Cost of Funds in Fiscal 2018, 2019 and 2020 and in the nine months ended December 31, 2019 and 2020 were 10.71%,
8.99%, 8.55% and 8.83% (annualized) / 6.62% (unannulized) and 8.05% (annualized) / 6.04% (unannualized), respectively.
Our primary source of funds is our relatively low-cost deposit base, which is largely derived from retail depositors in India. To
continue to source low cost and stable funds through deposits, we intend to develop a granular retail deposit customer base.
Over the next few years we intend to capitalise on our asset customer base and convert them to liability customers by launching
products customised for their needs. We intend to develop products and services designed for our rural, semi-urban as well as
urban retail customers. Expansion of our deposit base through measured expansion of our Banking Outlets will also be a focus
in the near future. For further information on growth of our retail liability franchise, see “Our Business — Strategies” beginning
on page 147. As we focus on growing our deposit base through strategic expansion of our network, any new Banking Outlets
we establish may not be profitable immediately upon their opening or may take time to break even. While we may generate
higher deposits from these outlets, failure to do so within a reasonable period may adversely impact our profitability.

Diversification of Product Offerings

We focus on customer segments that are unbanked or underbanked in terms of formal financing channels and believe that
diversification of our business with respect to the products we offer is a key component of our success.

Over the last three years we have been able to diversify our product portfolio which has resulted in a decline of our unsecured
business from representing 94.81% of our Net Advances as of March 31, 2018 to 77.49% of our Net Advances as of March 21,
2020 and were 74.59% of our Net Advances as of December 31, 2020. We commenced operations as a microfinance institution
in 2009, and upon conversion into a SFB have diversified into other products which broadly include commercial vehicles,
affordable home loans, secured and unsecured business loans and loans to financial intermediaries institutions. Our products
are primarily aimed at customers that are not a part of the formal banking infrastructure. For instance, we offer inclusive finance
loans and micro business loans for customers that are not a part of the formal banking infrastructure and undertake small
businesses and individuals involved in agricultural allied activities, we offer affordable housing loans to middle and low income
segment, secured business loans to SME/ MSME/ corporates, commercial vehicle loans to fleet owners and retail customers
and unsecured business loans to micro and small enterprises. We also provide institutional credit to NBFCs and various liability
products to individuals, enterprises, corporates, partnership firms, banks etc. In addition, we distribute various general and life
insurance products and mutual fund products. We also provide various liability products like higher interest-bearing savings
and term deposit loans to self-employed individuals and mid-sized enterprises. In addition, we offer funds transfer facilities and
distribution of insurance products.

JLG loans constitute a significant portion of our Gross Loan Portfolio and as of March 31, 2018, 2019 and 2020 and December
31, 2019 and 2020, these loans represented 89.89%, 81.44%, 75.85%, 75.73% and 70.35%, of our Gross Loan Portfolio,
respectively. We have over the years grown our secured portfolio and as of March 31, 2018, 2019 and 2020, our secured loans
represented 5.19%, 15.68%, 22.51%, 22.80% and 25.41% of our Net Advances, respectively.

Our business is dependent on developing and introducing financial products and services relevant to our target customer
segment on competitive terms and increasing our customer base for existing products as well as expanding our operations. In
order to improve our financial performance, we continue to monitor and align our product mix across our businesses by tapping
into relevant industry opportunities. For instance, for our home loans segment, our focus will be disbursing loans to self-
employed and salaried individuals for non-agricultural properties and in particular in the affordable housing segment and
leverage our existing inclusive finance (JLG) outreach and customer base to source home loan customers. For further
information, see “Our Business — Strategies” beginning on 147. We cannot assure you that such diversification or expansion of
operations will in future yield and/ or continue to yield favourable or expected results, as our overall profitability and success
will be subject to various factors, including, among others, our ability to effectively recruit, retain and motivate appropriate and
experienced managerial talent, and ability to compete with scheduled banks, housing finance companies and other NBFCs that
are already well established in this market segment.

Interest Rate Volatility

Our results of operations depend substantially on our Net Interest Income, which is the difference between our interest earned
and interest expended. Interest earned is the largest component of our total income, and represented 88.29%, 88.79%, 89.76%,
89.92% and 90.58% of our total income in Fiscal 2018, Fiscal 2019 and Fiscal 2020 and in the nine months ended December
31, 2019 and 2020, respectively. Our Net Interest Income is affected by our interest expense, which is largely dependent on

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