4,

 

 

 

 

 

Our Bank and our Directors, are involved in certain legal proceedings, any adverse developments related to which

could materially and adversely affect our business, reputation and cash flows.

Our Bank and our Directors are involved in certain legal proceedings. These proceedings are pending at different levels

of adjudication before various courts, tribunals and appellate tribunals. We cannot assure you that these proceedings will

be decided in our favour. Brief details of material outstanding litigation that have been initiated against our Bank and our

Directors are set forth below.

Nature of Cases Number of outstanding cases Amount involved (in @ million)

Indirect tax matters 1 4.87

Direct tax matters 2 28.67%
[Litigation filed against our Directors

Matters outcome of which would 2 43,770.16

materially and adversely affect the

business, operations, financial position

or reputation of our Bank

 

 

 

 

 

* Refund amount of ® 10.82 million determined for assessment year 2015-2016 has been adjusted against the disputed demand for
assessment year 2014-2015. Further, Bank has paid @ 7.50 million in compliance of the order passed by the Principal Commissioner of
Income Tax on stay application filed by our Bank. The abovementioned amount is prior to the adjustment of refund amount of & 10.82
million and payment of @ 7.50 million in compliance of the order.

Further, we have recognized an amount of % 48.76 million as of December 31, 2020 as contingent liabilities on account of
certain litigations and obligations including service tax and income tax litigation outstanding against our Bank. For further
information, see “Restated Financial Statements - Annexure 16 - Contingent Liabilities” on page 257.

The amounts claimed in these proceedings have been disclosed to the extent ascertainable and include amounts claimed
jointly and severally. If any new developments arise, such as a change in Indian law or rulings against us by appellate courts
or tribunals, we may need to make provisions in our financial statements that could increase our expenses and current
liabilities. Any adverse decision in any of these proceedings may have an adverse effect on our business, results of
operations, financial condition and cash flows.

For further information, see “Outstanding Litigation and Material Developments” beginning on page 337.

We may not be able to comply with certain provisions of the SFB Licensing Guidelines. In the event of any non-
compliance, we may be subject to various sanctions and penalties by the RBI and our business, financial condition,
results of operations and cash flows could be adversely impacted.

Under the provisions of the SFB Licensing Guidelines and the RBI Final Approval, our Equity Shares are required to be
mandatorily listed on the stock exchanges within three years from the date of meeting net worth (i.e. tier I capital as defined
by the RBI) of 2 5,000 million, (which in our case was November 30, 2017), i.e., on or prior to November 29, 2020. Whilst
we are in the process of undertaking an initial public offering, we may not be able to complete our initial public offering
within the timelines prescribed the SFB Licensing Guidelines and the RBI Final Approval. We had applied to the RBI for
an extension of this timeline till May 31, 2021 and RBI has by its letter dated December 8, 2020 stated that request for
extension of timeline for listing of shares of our Bank cannot be acceded to and has advised us to complete the listing
process at the earliest.

Our business is vulnerable to interest rate risk, and any volatility in interest rates or inability to manage interest rate
risk could adversely affect our Net Interest Margins, business, financial condition, results of operations and cash flows.

Our results of operations depend substantially on our Net Interest Income, which is the difference between our interest
earned and interest expended. Interest rate risk depends on the nature and extent of gaps in rate sensitive assets and rate
sensitive liabilities. Any change or volatility in interest rates would affect our interest expense on our interest-bearing
liabilities and interest income from interest-bearing assets including investments, and therefore affect our Net Interest
Income and Net Interest Margins. Any increase in our cost of funds may lead to a reduction in our Net Interest Margins,
or require us to increase interest rates on loans disbursed to customers in the future to maintain our Net Interest Margins.
In addition, a portion of the loans we advance are linked to external benchmark rates and the yield on such loans may vary
depending on market factors. In the event the interest rates at which we advance these loans declines due to a decrease in
external benchmark rates and there is no corresponding decrease in the interest rates payable by us, we may experience
reduced Net Interest Margins. In Fiscal 2018, 2019 and 2020 and in the nine months ended December 31, 2020, interest
expended represented 38.62%, 37.45%, 37.12% and 42.73%, respectively, of our total expenditure. In Fiscal 2018, 2019
and 2020 and in the nine months ended December 31, 2020, our Net Interest Margins were 10.40%, 12.80%, 11.92% and
8.49% (annualized) / 6.36% (unannulized), respectively. For further information, see “Selected Statistical Information”
beginning on page 211.

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