Suryoday Small Finance Bank Limited
Annexure 22 - Notes forming part of the Restated Summary Statements
(All amounts are in Indian Rupees in million unless otherwise stated)

18. Disclosure on Remuneration
A) Qualitative Disclosures

(a) Information relating to the bodies that oversee remuneration.
Name, composition and mandate of the main body overseeing remuneration

‘The Nomination and Remuneration Committee (NRC) of the Board is the main body overseeing remuneration. As on December 31, 2020, the NRC had five
members of which three are Independent Directors. The functions of the Committee include formulating criteria to determine independence of directors,
identifying persons for appointment as directors on the Board of the Bank, devising a policy on board diversity, formulating criteria for evaluation of performance
of the Board, its Committees and individual directors, recommending remuneration of senior management personnel, administering, monitoring and formulating
detailed terms and conditions of the Employees’ Stock Option Scheme of the Bank, recommending to the Board policy on succession planning for the Board and
senior management and overseeing and reviewing the succession plans from time to time.

  

External consultants whose advice has been sought, the body by which they were commissioned, and in what areas of the remuneration process
Not Applicable

Scope of the Bank’s remuneration policy (e.g. by regions, business lines), including the extent to which it is applicable to foreign subsidiaries and
branches

(@) The Policy on appointment and remuneration of Directors, Key Managerial personnel and senior management employees was approved by the Board on
January 23, 2017 and reviewed periodically. It was modified in October 2020 to exclude the remuneration aspects in view of new Compensation Policy being
formulated and approved by the Board.

(b) The Bank's new Compensation Policy (formulated in accordance with RBI Guidelines on Compensation of Whole Time Directors, Chief Executive Officers,
Material Risk Takers and Risk Control & Compliance Staff), was approved by the Board in October 2020. The Compensation Policy is under implementation for
FY 2020-21.

(©) The Employee Policies Manual of the Bank approved by the Board on January 23, 2017 and reviewed periodically covers the compensation policy for all
other employees of the Bank.

‘Type of employees covered and number of such employees by the Compensation Policy and the Employee Policies Manual.
All permanent employees of the Bank are covered. The total number of permanent employees of the Bank at December 31, 2020 was 4,770.

(b) Information relating to the design and structure of remuneration processes.
Key features and objectives of Compensation policy: The Bank, under the guidance of the NRC and the Board, follows remuneration practices that are
intended to drive meritocracy and performance based on a prudent risk management framework and in line with the RBI guidelines.

Effective governance of compensation: The NRC has oversight over compensation to senior management personnel and also provides overall guidance to the
compensation paid to other employees.

Alignment of compensation philosophy with prudent risk taking: While the Bank seeks to achieve a mix of fixed and variable (cash and non-cash)
remuneration for employees covered under the new Compensation Policy, for all other employees, it has predominantly a fixed remuneration structure with no
guaranteed bonuses. Also, the remuneration of employees in financial and risk control functions is not linked to business outcomes and solely depends on their
performance. Further, the Bank has an Employee Stock Option Scheme for eligible employees aimed at aligning compensation to long term performance through
stock options that vest over a period of time.

Whether the remuneration committee reviewed the firm's remuneration policy during the past year, and if so, an overview of any changes that were
made: Yes; the new Compensation Policy was approved during the period and the earlier Policy on appointment and remuneration of Directors, Key Managerial
personnel and senior management employees was modified accordingly.

Discussion of how the Bank ensures that risk and compliance employees are remunerated independently of the businesses they oversee: The
remuneration of employees in control functions such as Risk and Compliance depends solely on their performance and is not linked to any business outcomes.

(0 Description of the ways in which current and future risks are taken into account in the remuneration processes.
Overview of the key risks that the Bank takes into account when implementing remuneration measures: The Board approves the overall risk management
policy including risk framework, limits, etc. The Bank conducts all its business activities within this framework. The NRC while assessing the performance of the
Bank and senior management, shall consider adherence to the policies and accordingly make its recommendations to the Board.

Overview of the nature and type of key measures used to take account of these risks, including risk difficult to measure: The evaluation process shall
incorporate both qualitative and quantitative aspects including asset quality, provisioning, increase in stable funding sources, refinement/improvement of the risk
management framework, effective management of stakeholder relationships and mentoring key members of the top and senior management.

 

Discussion of the ways in which these measures affect remuneration: In order to ensure alignment of remuneration with prudent practices, the NRC takes into
account adherence to the risk framework in addition to business performance.

Discussion of how the nature and type of these measures have changed over the past year and reasons for the changes, as well as the impact of changes
on remuneration: With the introduction of the new Compensation Policy, the compensation structure of employees covered therein has undergone a change

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