39,

40.

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borrowers to classify the loans advanced to them under the MSME category and we may be required to grant new loans
or purchase portfolios including PSLCs to meet the targets.

We have implemented systems and procedures for “know-your-customer/ anti-money laundering/ combating financing
of terrorism” (“KYC/AML/CFT”) but may not be able to detect money-laundering and other illegal or improper
activities in a comprehensive manner or on a timely basis, which could expose us to additional liability and harm our
business or reputation.

We are required to comply with applicable know-your-customer, anti-money laundering and anti-terrorism laws and other
regulations in India. These laws and regulations require us to adopt certain measures, including, to adopt and enforce
KYC/AML/CFT policies and procedures and to report suspicious and large transactions to the applicable regulatory
authorities. We are also required to undertake constant review and assessment of existing control processes and programs
to meet the increased regulatory expectation. We may face significant challenges with system upgradation to meet the
requirements of such regulatory developments. While we have adopted policies and procedures for KYC/ AML/ CFT,
such policies and procedures may not eliminate instances where we may be used by other parties to engage in money-
laundering and other illegal or improper activities. In addition, there may be inconsistencies in the manner in which specific
operational and KYC/AML/CFT policies are actually interpreted and implemented at an operational level in each of the
Banking Outlets and other customer interface levels. For instance, in the past, there have been certain loan accounts under
inclusive finance (JLG) loans which were created without PAN/Form60 and multiple customer IDs were created with
respect to same KYC documents. In the event accounts are not routinely monitored or if subsequent complete KYC checks
are not carried out, and if any such parties use our banking channels for money-laundering or illegal or improper purposes,
our business and reputation could be significantly impacted.

While we intend to continue to strengthen our KYC/AML/CFT policies and procedures, to the extent we fail to fully
comply with applicable laws and regulations, the relevant governmental and regulatory agencies may impose fines and
other penalties. In addition, any adverse action taken by such agencies could adversely affect our reputation, thereby
affecting our business and future financial performance.

You will not, without prior RBI approval, be able to acquire Equity Shares if such acquisition would result in an
individual or group (along with persons acting in concert) holding 5% or more of our share capital or voting rights;
further, even with RBI approval, you may not be able to exercise voting rights in excess of 26% of the total voting rights
of our Bank.

The Banking Regulation Act, read with the SFB Licensing Guidelines, requires any person to obtain prior approval of the
RBI, to acquire or agree to acquire shares or voting rights of a bank, either directly or indirectly, beneficial or otherwise,
by himself or acting in concert with other persons, wherein such acquisition (taken together with shares or voting rights
held by him or his relative or associate enterprise or persons acting in concert with him) results in the aggregate
shareholding of such persons to be 5% or more of the paid-up share capital of a bank or entitles him to exercise 5% or
more of the voting rights in a bank.

An approval may be granted by the RBI if it is satisfied that the applicant meets the fit and proper criteria laid down by
the RBI. The RBI may require the proposed acquirer to seek further RBI approval for subsequent acquisitions. Further,
the RBI may restrict any person holding more than 5% of our total voting rights from exercising voting rights in excess of
5%, if such person is deemed to be not fit and proper by the RBI. Further, as per the Banking Regulation Act read with
gazette notification no. DBR.PSBD.No.1084/16.13.100/2016-17 dated July 21, 2016, and as amended, no shareholder in
a bank can exercise voting rights on poll in excess of 26% of total voting rights of all the shareholders of the bank in
respect of private sector banks. For details, see “Key Regulations and Policies” on page 172.

Our insurance coverage may be inadequate to cover claims. If we incur substantial uninsured loss or loss that exceeds
our insurance coverage, it could have a material adverse effect on our business, cash flows, results of operations and
financial condition.

While we are covered by a range of insurance that we believe is consistent with industry practice in India and in accordance
with the guidelines provided by RBI to cover risks associated with our business, we cannot assure you that the existing
coverage will insure our Bank completely against all risks and losses that may arise in the future. These include banker’s
blanket indemnity insurance policy, business shield policy (corporate cover policy), directors and officers liability
insurance policy, cyber policy (digital business and data protection policy), commercial crime insurance policy, group
health (floater) insurance policy, group term policy and group personal accident insurance policy. Our book value of assets
under insurance cover as of December 31, 2020 was 2 162.12 million in respect of our book value of total property plant
and equipment (excluding software and capital work-in-progress) which was = 192.83 million as of December 31, 2020.
Consequently, our insured assets as a percentage of our total property plant and equipment (excluding software and capital
work-in-progress) was approximately 84.07%. We may not have insurance to cover all of the risks associated with our
business, as insurance coverage is either unavailable for certain risks or is prohibitively expensive. In addition, even if

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