our Bank’s gross NPAs were 2 299.13 million, 0.78 % of gross advances, and net NPAs were = 128.14 million, or 0.33
% of net advances.

Going forward, we intend to strengthen our relationship with our existing customers by leveraging our inclusive finance
customer base and by offering other asset and liability products based on their requirements. Our focus will be to grow
our customer base by providing quality customer service. We will continue to focus on the use of technology, explore
partnerships with fintech companies, undertake data analytics to better understand the requirements of our customers,
improve operational efficiency and further reduce costs. As we grow our operations, we will look to selectively expand
our network of Banking Outlets across newer geographies and also penetrate further into our existing markets. We also
intend to engage with BC partners and payment banks to leverage their network to help us expand and increase our market
share.

Strengths
Customer centric approach with a focus on financial inclusion

Weare a commercial bank focused on serving customers in the unbanked and underbanked segments in India and consider
our customers to be the most significant stakeholders of our operations. As of December 31, 2020, we served 1.44 million
customers and in the period between Fiscal 2018 to Fiscal 2020, our customer base increased by 0.65 million. Our
inclusive finance portfolio (comprising loans to JLGs) accounted for 70.35% of our Gross Loan Portfolio, as of December
31, 2020. While our business model has transitioned over the years, initially operating as a NBFC — MFI before
commencing our SFB operations in 2017, our core focus has been to serve unbanked and underbanked customers. Given
our operating history as microfinance institution, a significant portion of our portfolio continues to qualify as “priority
sector lending” as mandated by the RBI and helps us promote financial inclusion in India. In particular, the RBI requires
(i) SFBs to locate at least 25% of their banking outlets in URCs, and (ii) at least 75% of ANBC be made to “priority
sectors”, which includes micro loans. Our average “priority sector” loans as a percentage of average ANBC for Fiscal
2018, 2019 and 2020 and in the nine months ended December 31, 2020 was 99.08%, 112.10%, 103.67% and 114.09%,
respectively. Significant portion of our inclusive finance loans, T-Nagar loans, commercial vehicle loans, affordable
housing loans and secured and unsecured business loans and some portion of our commercial vehicle loans classify as
“priority sector” loans based on the criteria notified by the RBI. In addition, there has been a recent change in the definition
of micro, small and medium enterprises and accordingly, our Bank shall take necessary steps to classify/reclassify certain
loans as per the revised guidelines.

We believe that among our core strengths is our ability to customize products that cater to the requirements of our
customers. For instance, on the asset side, we offer overdraft facility (Smile OD) for our existing inclusive finance
customers. The product is offered to our existing inclusive finance customers who are regularly service their dues to
enable them to meet their additional working capital requirements. Total number of accounts as at December 31, 2020
stood at 302,918 with total balance outstanding (overdraft value) of = 966.73 million and balance outstanding (deposit
value) of = 380.89 million. We have opened 245,372 savings account for our inclusive finance customers, as of December
31, 2020. The process of opening Smile OD and savings accounts is entirely digital for existing customers. These inclusive
finance loans help meet their working capital requirements and, we believe, promote inclusion of such customers as part
of formal banking channels. On the liability side, we offer our inclusive finance customers with savings bank accounts
and recurring deposit product that enables customers to earn from their savings as well as ensuring that they form a part
of formal banking channels. In addition, we arrange and offer discounts on hotel stays for our deposit customers as part
of their pilgrimages to Shirdi in Maharashtra. We have also introduced an insurance product for our inclusive finance
customers to cover losses and damages on account of natural calamities. In addition, we have recently begun offering
overdraft facilities targeted at small and medium size fleet owners, retail transporters. Our customer centric approach is
evident from our customer retention ratio that was 67.97%, 77.58%, 79.50% and 87.36 % in Fiscal 2018, 2019 and 2020
and in the nine months ended December 31, 2020, respectively for our inclusive finance portfolio. As per a survey
conducted by 60 Decibels with over 500 customers, we have been credited for impacting the quality of life of customers,
ability to reach low-income customers and our high proportion of female customers.

Our 24/7 call centre, ‘Smile Centre’, has been set-up to resolve customer queries and actively gathers feedback to further
improve our services. In Fiscal 2021, we commenced offering digital collection facilities for all our customers to pay their
loan instalments digitally. We also conduct financial literacy programmes that are designed to create financial capabilities
for low-income households. In Fiscal 2020 and in the nine months ended December 31, 2020, we conducted 6,379 and
889 such training programs, respectively. These programs cover key concepts of savings, credit, insurance, pension,
digital financial services and information services on various social security schemes provided by the Government of
India.

Diversified asset portfolio with a focus on retail operations

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