highest among all SFBs in India as of March 31, 2020 (Source: CRISIL Report). As of December 31, 2020, 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.

FACTORS AFFECTING OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The impact of COVID-19 on our results of operations and financial condition

In late 2019, COVID-19 emerged and by March 11, 2020 was declared a global pandemic by The World Health Organization.
Governments around the world instituted measures in an effort to control the spread of COVID-19, including quarantines,
shelter-in-place orders, school closings, travel restrictions, and closure of non-essential businesses. By the end of March 2020,
the macroeconomic impacts became significant, exhibited by, among other things, a rise in unemployment and market volatility.

Effective March 24, 2020, in compliance with the lockdown orders announced by the Indian Government, we temporarily
closed certain of our Banking Outlets and substantially all of our employees were working remotely. Additionally, many of our
customers, service providers and business correspondents/ direct selling agents temporarily ceased operating their respective
enterprises. As a result, while our financial results for Fiscal 2020 reflect historical trends for the most part, we experienced a
decline in collections, reduced disbursements and increased general provisioning in the last week of March 2020 and during
nine months ended December 31, 2020 due to continuing impact of COVID-19 and various regulatory measures in response to
COVID-19, including moratoriums availed by customers. Due to a surge in COVID-19 cases during January and February
2021, few State Government announced lockdown in selected regions and there may be further lockdown by Central and other
State Governments and may lead to further deterioration in collections, disbursement and increase in provisioning. The impact
of the pandemic on our business, operations and future financial performance include, but are not limited to the following:

e — Significant decline in collections as most of our collections are cash-based and involve physical presence of our employees,
which has not been possible due to the nation-wide lockdown and travel restrictions that have been imposed. This decline
in collections could persist through and beyond a recessionary period.

¢ — Significant decline in disbursements due to reduced economic activity in the three months ended June 30, 2020, particularly
for our inclusive finance portfolio, and corresponding decline in processing fees.

e Potential significant increase in our NPA levels due to deterioration in the credit quality of our customers. While many
borrowers had opted for the moratoriums available and most of the customers started paying instalments after moratorium
period was over, there can be no assurance that customers impacted due to COVID-19 will continue to make payments on
continuing basis. In the event our borrowers’ or their enterprises have been unable to withstand the economic pressures
caused by the COVID-19 pandemic, we may experience higher NPAs than anticipated driven by deterioration in asset
quality due to our borrower’s reduced ability to make timely repayments. We may therefore be required to recognise higher
loan loss provisions in future periods, on account of the uncertainty in the external environment due to COVID-19.

e Adverse impacts to our income and growth rates — particularly if operating expenses do not decrease at the same pace as
revenue declines. Many of our expenses are less variable in nature and may not correlate to changes in revenues, such as
employee benefit expenses, depreciation and other costs associated with operating and maintaining our Banking Outlets.
As such, we may not be able to decrease them significantly in the short-term, or we may choose not to significantly reduce
them in an effort to remain focused on long-term outlook and investment opportunities.

e The shift to a remote working environment creates inherent productivity, connectivity, and oversight challenges. The extent
and/ or duration of ongoing workforce restrictions and limitations may result in us adopting alternative modes of
introducing and growing our new products and services. In addition, the changed environment under which we are
operating could have an impact on our internal controls over financial reporting as well as our ability to meet a number of
our compliance requirements in a timely or quality manner.

In addition, the RBI has issued guidelines in an effort to contain the impact of the COVID-19 pandemic on the financial services
sector. Under these guidelines, all loans are eligible for moratoriums on instalments due during a period of three months, i.e.
from March 1, 2020 to May 31, 2020. This was subsequently extended by another period of three months, i.e. until August 31,
2020. Accordingly, banks and other financial institutions were permitted to provide a moratorium of three months that was
extended for another three months for all term loan instalments which are due for payment. In line with these guidelines, we
have provided a moratorium of three months on the payment of all principal amounts and/or interest, as applicable, falling due
between March 1, 2020 and May 31, 2020 to majority of our eligible borrowers, and have further extended the moratorium to
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