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

Significant accounting policies (Contd.)

The Bank recognises the provision for unhedged foreign currency exposure of its borrowers as per regulatory guidelines stipulated by
the RBI from time to time and as per methodology prescribed. The provisions are included in provision for standard assets and reported
under other liabilities.

C. Transfer and Servicing of Assets

The Bank transfers loans through securitisation transactions. The transferred loans are de-recognised, and gains/losses are accounted for,
only if the Bank surrenders the rights to benefits specified in the underlying securitised loan contract.

In accordance with the RBI guidelines for securitisation of standard assets, the profit/premium arising from sell down/securitisation to
be amortised over the life of the transaction based on the method prescribed in the guidelines and the loss, if any, arises in the sell
down/securitisation transaction, is recognised upfront in the Profit or Loss Account.

‘The Bank transfers advances through inter-bank participation with risk. In accordance with the RBI guidelines, for participation with
risk, the aggregate amount of the participation issued by the Bank is reduced from advances.

D. Priority Sector Lending Certificates

The Bank enters into transactions for the sale or purchase of Priority Sector Lending Certificates (PSLCs). In the case of a sale transaction,
the Bank sells the fulfilment of priority sector obligation and in the case of a purchase transaction, the Bank buys the fulfilment of priority
sector obligation through the RBI trading platform. There is no transfer of risks or loan assets. The fee received for the sale of PSLCs is,
recorded as ‘Miscellaneous Income’ and the fee paid for purchase of the PSLCs is recorded as ‘Other Expenditure’ in Profit and Loss
account. The Bank amortise the income over the residual quarters.

E, Foreign Currency Transactions

(i) Foreign currency transactions are recorded in the reporting currency, by applying to the foreign currency amount the exchange rate
between the reporting currency and the foreign currency at the date of the transaction.

(ii) Foreign currency monetary items are reported using the closing rate prevailing at the Balance Sheet date. Non-monetary items
which are carried in terms of historical cost denominated in a foreign currency are reported using the exchange rate at the date of
the transaction.

Alll exchange differences are recognized as income or as expenses in the period in which they arise.

F. Revenue Recognition

() Interest income is recognised in the Profit and Loss Account on an accrual basis, except in the case of non-performing assets is
recognised upon realisation as per income recognition and asset classification norms of RBI.

(ii) Income on non-coupon bearing discounted instruments is recognised over the tenor of the instrument on a constant effective yield
basis.

(iii) Loan processing fees is accounted for upfront when it becomes due.

(iv) Interest income on deposits with banks and financial institutions is recognized on a time proportion basis taking into accounts the
amount outstanding and the implicit rate of interest.

(v) Dividend is recognised as income when the right to receive the dividend is established.

(vi) Profit or loss on sale of mutual fund units is recognised on trade date.

(vii) All other fees are accounted for as and when they become due.

G. Fixed Assets and Depreciation
Tangible Assets
Fixed assets are stated at cost less accumulated depreciation / amortization and impairment loss, if any. The cost comprises purchase

price and any attributable cost of bringing the asset to its working condition for its intended use. Any trade discounts and rebates are
deducted in arriving at the purchase price.

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