Suryoday Small Finance Bank Limited
Annexure to the Financial Statements for the period ended December 31, 2020

Significant accounting policies (Contd.)

O. Borrowing cost

Borrowing cost includes arranger fees, processing fees, stamp duty on issuance of debenture certificates and other associated transaction
cost related to borrowing from banks and other financial institutions.

In accordance with Accounting Standard 16, borrowing costs are recognised upfront.

P. Retirement and other employee benefits

(i) Defined Contribution Plans

Retirement benefits in the form of provident fund and employee state insurance schemes are defined contribution schemes and the
contributions are charged to the Profit and Loss Account for the year when the contributions to the respective funds are due. There are
no other obligations other than the contribution payable to the respective funds.

(ii) Defined Benefit Plan
The Bank operates a defined benefit scheme for its employees, viz., gratuity scheme. The costs of providing benefits under this plan is
determined on the basis of actuarial valuation at each year-end.

Separate actuarial valuation is carried out for each plan using the projected unit credit method. In accordance with the gratuity fund's
rules, actuarial valuation of gratuity liabilities is calculated based on certain assumptions regarding rate of interest, salary growth,
mortality and staff alteration as per projected unit credit method.

Gratuity liability is a defined benefit obligation and is provided for on the basis of an actuarial valuation on projected unit credit method
made at the end of each financial year. Actuarial gains/losses are immediately taken to profit and loss account and are not deferred.

(iii) Provision for Leave availment is made in accordance with Accounting Standard 15 “Employee benefits”.

Q. Employee Stock Compensation Cost

Employees (including senior executives) of the Bank receive remuneration in the form of share-based payment transactions, whereby
employees render services as consideration for equity instruments (equity-settled transactions).

In accordance with the Guidance Note on Accounting for Employee Share-based Payments, issued by the ICAI, the cost of equity-settled
transaction is measured using the fair value method and recognized, together with a corresponding increase in the “Employees Stock
options outstanding account” in reserves. The cumulative expense recognized for equity-settled transactions at each reporting date until
the vesting date reflects the extent to which the vesting period has expired and the Bank’s best estimate of the number of equity
instruments that will ultimately vest. The expense or credit recognized in the Profit and Loss Account for a period represents the
movement in cumulative expense recognized as at the beginning and end of that period and is recognized in employee benefits expense.

R. Share issue expenses

Share issue expenses are adjusted from Share Premium Account in terms of Section 52 of the Companies Act, 2013 and post approval
from RBI in accordance with RBI/2006-07/132 DBOD.BP.BC No. 31 / 21.04.018/ 2006-07.

S. Segment information
‘The disclosure relating to segment information is in accordance with AS-17, Segment Reporting and as per guidelines issued by RBI.

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