Dear Members,

The Board of Directors of Utkarsh Small Finance Bank Limited ("the Bank or Utkarsh SFBL") presents the tenth (10 th) Annual Report along with the Audited Financial Statements of the Bank for the Financial Year ended March 31, 2026.

FINANCIAL HIGHLIGHTS

The financial highlights for the year under review are presented below:

(Rs. in Crores)

*Net worth computed as per RBI guidelines

#Business is the total of net advances and deposits (net of inter-bank deposits) **Ratio is based on average employee count

Key financial/operational highlights of the Bank for FY 2025-26 are as under:

Total deposits increased to Rs. 21,654 Crore as on March 31, 2026, from Rs. 21,566 Crore as on March 31, 2025

Net Advances decreased to Rs. 18,070 Crore as on March 31, 2026, from Rs. 18,716 Crore as on March 31, 2025

Bank's operating profit decreased to Rs. 56 Crore for FY26 from Rs. 1,007 Crore in FY25.

The Bank reported annual loss of Rs. 1,151 Crore for FY26.

On the asset quality, the Bank witnessed Net NPAs at 3.3% as on March 31, 2026 vs. 4.8% as on March 31, 2025.

The Bank's overall provision cover was at 59.3% as on March 31, 2026.

The Bank's capital plus reserves decreased to Rs. 2,776 Crore as on March 31, 2026 from Rs. 2,975 Crore as on March 31, 2025

There are 1,110 Branches spread across 23 States and 4 Union Territories as on March 31, 2026

During the FY 2025-26 the Bank raised ~ Rs. 950 Crore through Rights issue in the month of November 2025.

BUSINESS OPERATIONS AND STATE OF AFFAIRS OF THE BANK

The detailed operational performance of the Bank during the year has been elaborated in the Management Discussion and Analysis Report which forms an integral part of this Annual Report.

The brief details on business operations during the financial year ended March 31, 2026 and state of affairs of the Bank as on March 31, 2026 are given below:

Liabilities

Network

The bank focuses on top 100 deposit centres across India with strong metro & urban focus, serving diverse retail segments. The bank operates 1,110 banking outlets in 27 states and UTs. While, the General Banking segment, managing 331 branches, drives deposit at urban and metro centres, the Micro Banking segment, with 779 branches, supports financial inclusion in rural areas. The network is supported by an infrastructure of 373 ATMs and 787 micro-ATMs for efficient access.

Offerings

The Bank continues to enhance its digital and fintech capabilities through both direct initiatives and strategic partnerships. The Bank has enabled instant onboarding for term deposit accounts through video KYC on its website and via FinTech BC Partners. In addition, strategic fintech collaborations have strengthened the Bank's digital distribution capabilities, allowing term deposit products to be offered seamlessly across partner platforms.

Innovative offerings have been introduced which includes Green PIN Generation through Website, Utkarsh Smart Business Account, Will Making Services, ITR Filing Services, 3-in-1 Account, NRI Savings and Fixed Deposits and Bharat Bill Payment System Biller Operating Unit. The Bank also participates in the Aadhaar enabled payment system (AEPS) as both an issuer and acquirer, facilitating convenient cash withdrawals and access to micro-ATM services in rural and semi-urban regions.

Deposit Growth

FY25-26 has been the year of business consolidation with focus on overall business scalability, margin improvement and operational efficiency. As a result, the total deposit grew to Rs. 21,654 Crore as of March 31, 2026 marking a year-on-year (YoY) increase of 0.4%. CASA+ Retail Term deposits reached Rs. 17,916 Crore, led by 16.8% YoY growth. The Bank's CASA Deposits grew by 10.6% YOY to Rs. 5,196 Crore, reaching a CASA ratio of 24.0% from 21.79% as on March 31, 2025.

(Rs. in Crores)

Deposits Composition as on March 31, 2026

Deposits Composition

59%

Retail Term Deposit

17%

Bulk Term Deposit

20%

Saving Deposit

4%

Current Deposit

Retail term deposits (RTD) emerged as a key driver, growing by 19.6% YoY to Rs. 12,720 Crore as of March 31, 2026. Under CASA, Current account registered YoY growth of 23.6% and Savings account registered YoY growth of 8.5%. Key performance metrics saw notable improvements:

1. CASA Ratio: 24.0%

2. CASA + RTD Ratio: Improved to 82.7%

3. Credit to Deposit (CD) Ratio: stood at 83.4%

4. Liquidity coverage ratio (LCR) stood at 175.1%.

Other retail and wholesale lending book

As a Small Finance Bank (SFB), the Bank, which is primarily focussed on micro banking products, has diversified its product offerings to its customers viz. retail loans, unsecured Business loans, personal loans, and secured loans such as loans against property, wholesale lending that includes short term and long-term loan facilities to small and medium enterprises (SMEs), mid and large corporate and institutional clients and gold loans. In addition, we offer housing loans with a focus on affordable housing. Our micro banking and retail loan products are primarily aimed at customers who are not a part of the formal banking infrastructure.

Retail Loans:

(a) Micro Small & Medium Enterprises (MSME):

The Bank extends a diverse array of both secured and unsecured loans tailored to meet the needs of individuals and non-individual entities, including micro, small, and medium enterprises (MSMEs). We have curated specialized products with adaptable security prerequisites to enhance accessibility to credit for retail and MSME borrowers.

Throughout the fiscal year 2025-26, our retail assets loan portfolio demonstrated steady growth, expanding to Rs. 4,455.93 Crore, compared to Rs. 3,874.53 Crore in FY25. The modest increase in the MSME portfolio was due to Bank's focus on consolidation of the business in the geography of its presence.

(b) Housing Loans (HL):

The Bank provides comprehensive home loan solutions to individuals seeking financing for the construction, purchase, repair, and renovation of homes. We meticulously assess our customers' repayment capacity and tailor loan solutions accordingly.

As of March 31, 2026, our Housing Loan portfolio, managed by our Mortgage team across 62 branches, amounted to H 989.55 Crore, marking year-on-year growth of 7.76% compared to Rs. 918.29 Crore as of March 31, 2025.

(c) Wheels

The Wheels business which was launched in October 2020 with 2 businesses i.e., Commercial Vehicles & Construction Equipment Loans being offered in Chandigarh, Delhi NCR, Jharkhand, Rajasthan, Uttar Pradesh, Uttarakhand & West Bengal regions from 15 branch outlets. As of March 31, 2026 these loans are offered from states of Bihar, Chandigarh, Delhi NCR, Haryana, Jharkhand, Madhya Pradesh, Punjab, Rajasthan, Uttar Pradesh, Uttarakhand & West Bengal from 46 branches. The Bank's wheels loan portfolio de-grew to Rs. 1,090.42 Crore.on March 31, 2026 from Rs. 1,188.13 Crores as on March 31, 2025. Book has de-grown in March 31, 2026 as compared to March 31, 2025 mainly due to heightened focus on Portfolio Management to control the delinquency in the portfolio. The Bank exited few locations where Portfolio was not performing as per expectation in order to improve the overall Wheels Portfolio Quality.

Wholesale Banking Business

The Wholesale lending vertical includes lending, deposits and other banking services provided to corporate customers of the Bank. The Bank's Wholesale Lending book stood at Rs. 2,980.66 Crore as on March 31, 2026 compared to Rs. 2,239.73 Crore in March 31, 2025. The wholesale loan portfolio comprises lending to financial institutions (WSL FI), business banking loans extended to small corporates and TReDS Loans which acts as a receivable financing for MSMEs. The Bank's Wholesale Lending book stood at Rs. 2,980.66 Crore ( Rs. 1,073.99 Crore for Business Banking, Rs. 1,602.41 Crore for NBFC and Rs. 304.26 Crores for TReDS) as on March 31, 2026 compared to Rs. 2,239.73 Crore ( Rs. 902.72 Crore for Business Banking and Rs. 1,337.01 Crore for NBFC) as on March 31, 2025. The NBFC customers are being offered term loans for on-lending to their customers and overdraft for meeting their working capital requirement.

Business Correspondent (BC)

The strategy of the Bank is to build its asset portfolio through a combination approach.

1. Own Branches

2. Partnership Approach.

The partnership approach with a well-entrenched and networked individual/entity will help it gain significant presence in those markets of business interest. As on March 31, 2026, the Bank had total loan book aggregating to Rs. 1,218.24 Crore compared to Rs. 1,093.69 Crores in March 31, 2025. The portfolio comprised of JLG loans of Rs. 403.00 Crore, Retail Assets secured loans of Rs. 124.37 Crore, PL Rs. 671.43 Crore and BL & SCF Rs. 19.44 Crore contributing 33%, 10%, 55% and 2 % respectively of the total BC portfolio.

Micro Banking

Micro banking is widespread business which provides a comprehensive package of financial inclusion products and business development services to the underprivileged or low- income individuals or groups who have limited access to financial services. In micro banking, the Bank offers 'Joint Liability Group' (JLG) loans, Individual Loans, Business Loans, PM SVANidhi loans, PM Vishwakarma, and CM Yuva loans along with entire gamut of liabilities products through MB branches. In addition, the Bank provides micro banking loans through Business Correspondent (BC) partners also.

The Bank provides group loans built on the peer-guarantee loan model (Joint Liability Group), which enables individuals to take collateral free loan in groups while promoting credit discipline. This is achieved through mutual support within the group, prudent financial conduct among the group and prompt repayment of their loans. By the end of FY26, JLG business through Micro Banking (MB) reached to Rs. 5,386 Crores. During the year, 18 new MB branches were opened in existing operational states.

During the year, the Bank introduced a new product, MBIL, positioned as an intermediate stage between JLG and MBBL to bridge the gap between both product while addressing client's evolving individual financial needs. On the other hand, the micro-banking business loan segment along with micro banking individual loan reached to Rs. 2,022 Crores in FY26 from Rs. 910 Crores in FY25, reflecting a year-on-year increase of 122%. Micro Banking also offers PM SVANidhi loans tailored for street vendors and PM Vishwakarma to traditional artisans and craftspeople and CM Yuva loans for the young and budding entrepreneurs.

These financial products are designed to empower low-income and underprivileged individuals who traditionally have limited access to formal banking. The JLG portfolio through Business Correspondents reached to Rs. 403 Crores in FY26. The Bank has seven (7) Business Correspondents (JLG) which are operating in Ten (10) states covering 101 districts through 199 branches. As of March 31, 2026, the Bank had opened more than 26 lakh basic savings bank deposit accounts (BSBDA), aimed at offering appropriate savings and financial products to microfinance borrowers while encouraging a habit of saving.

In FY26, the Bank implemented several initiatives, some of them are, introduction of Micro Banking Individual Loan for existing JLG clients, launch of Micro Banking Business Loan for non-existing customers and facilitating acquisition of new clients, increase in first cycle loan ticket size.

CHANGE IN NATURE OF BUSINESS

During the year under review, there has been no change in the nature of business of the Bank.

CAPITAL

There is no change in the authorized share capital of the Bank.

In compliance with the provisions of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 ("SEBI (ICDR) Regulations") and Section 62 of the Companies Act, 2013 ("Act") and Rules made thereunder, the Bank issued and allotted 677,913,784 Equity Shares of face value of Rs. 10 each to the existing shareholders and specific investors at an issue price of Rs. 14 per Equity Share, which includes a premium of Rs. 4 per Equity Share, aggregating to Rs. 9,490,792,976.

Accordingly, the total issued, subscribed and paid-up share capital of the Bank as on March 31, 2026 stood at Rs. 17,795,236,840 /- comprising of 1,779,523,684 equity shares of Rs. 10 each.

Your Bank has not issued any Equity Shares with differential voting rights nor any sweat equity shares.

NON-CONVERTIBLE DEBENTURES

As on March 31, 2026, the total outstanding Non-Convertible Debentures of the Bank aggregated to Rs. 500,00,00,000. All such debentures were issued on a private placement basis and are listed on BSE Limited. During the year, 1,500 rated, unsecured, redeemable, taxable, transferable, listed, Basel III compliant Tier II Bonds (ISIN: INE735W08020), aggregating to Rs. 15,00,00,000, which was due for redemption on August 30, 2025, were redeemed in full.

REVERSE MERGER

During the year under review, the Bank continued to progress with the proposed Scheme of Amalgamation of Utkarsh CoreInvest Limited ("UCL"), the promoter, with the Bank. The Bank has received the necessary no objection from the Reserve Bank of India (RBI) and observation/ no objection letters from the stock exchanges. Pursuant thereto, a joint application was filed before the Hon'ble National Company Law Tribunal (NCLT), Allahabad Bench, Prayagraj.

In terms of the directions of the Hon'ble NCLT, meeting of shareholders and creditors were convened on March 28, 2026, wherein the Scheme was approved with the requisite majority. Further, a joint second motion petition was filed before the Hon'ble NCLT on April 05, 2026 seeking sanction of the Scheme, which as on the date of report is under consideration.

CAPITAL ADEQUACY RATIO

As of March 31, 2026, the capital adequacy ratio of the Bank stood at 17.7%.

CREDIT RATINGS

The details of all credit ratings obtained by the Bank for various instruments, including debt instruments outstanding as on March 31, 2026, are disclosed in the Report on Corporate Governance, annexed to this Report.

DIVIDEND

The Board of Directors did not recommend dividend for the financial year ended on March 31, 2026.

The Dividend Distribution Policy, in terms of Regulation 43A of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations"), is available on the Bank's website viz., URL: https://www.utkarsh.bank.in/uploads/ template_forty_pdf/Dividend_Distribution_Policy.pdf

TRANSFER TO RESERVES

In accordance with the RBI regulations, the Bank had transferred the following amount to reserves for the financial year ended March 31, 2026:

NET WORTH

As on March 31, 2026, the Bank's net worth was Rs. 2,247 Crore*

*as per RBI norms

MATERIAL CHANGES AND COMMITMENTS

There were no material changes and commitments affecting the financial position of the Bank which occurred between the end of the financial year i.e. March 31, 2026 and up to the date of this Report.

TRANSFER TO INVESTORS EDUCATION AND PROTECTION FUND

During the year under review, the Bank was not required to transfer any fund or Equity shares to the Investor

Education and Protection Fund as per the provisions of Section 125 of the Act read with applicable rules framed thereunder, as amended from time to time.

Further, details of the unclaimed/un-encashed interest/ dividends lying in the unpaid dividend accounts as on end of the financial year and details of Nodal Officer for IEPF are provided on website of the Bank at www.utkarsh.bank.in

INTERNAL FINANCIAL CONTROL

The Bank has an Internal Control System commensurate with the size, scale and complexity of its operations. The Bank has an adequate and effective Internal Audit System, covering on a continuous basis, the entire gamut of operations and services spanning all locations, business and functions. The Audit Committee monitors the Internal Audit System at regular intervals and directs necessary steps to further improve the Internal Control System. Proper internal financial controls are in place, and that the financial controls have been adequate and operating effectively.

EMPLOYEES STOCK OPTION PLAN (ESOP)

Employee Stock Options have been recognised as an effective instrument to attract talent and align the interest of employees with that of the Company, thereby providing an opportunity to the employees to share in the growth of the Company and to create long-term wealth in the hands of employees, thereby and acting as a retention tool. In view of the above, the Bank had formulated "USFBL Employee Stock Option Plan 2020 ("ESOP Plan 2020") for its employees. The ESOP details form part of Corporate Governance Report.

The details and disclosures as required under Regulation 14 of the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 ("SBEB & SE Regulations") and circulars issued thereunder, have been uploaded on the Bank's website at www.utkarsh.bank.in.

A certificate from the Secretarial Auditor of the Bank that the ESOP Plan has been implemented in accordance with the SBEB & SE Regulations and the same has been enclosed as "Annexure 1" to this report.

DEPOSITS

Being a banking company, the disclosures relating to deposits as required in accordance with Sections 73 and 74 of the Act read with Companies (Accounts) Rules, 2014 and other applicable provisions of the Act are not applicable to the Bank.

BOARD OF DIRECTORS AND KEY

MANAGERIAL PERSONNEL

In accordance with the provisions of the Act, the Banking Regulation Act, 1949 ("BR Act") and Regulation 17 of the SEBI Listing Regulations, the Board of the Bank is duly constituted comprising of Executive, Non-Executive Directors, Independent Directors and Women Directors. The changes in the composition of the Board that took place during the period under review were carried out in compliance with the provisions of the Act, SEBI Listing Regulations and applicable RBI Regulations/ Guidelines.

CHANGES IN COMPOSITION OF THE BOARD

Following changes took place in the Board Composition during the FY 2025-26:

The Board placed on record its appreciation for the valuable services and support provided by Mr. Nagesh Dinkar Pinge, Mr. Muralidharan Rajamani and Mr. Pramod Kumar Dubey during their tenure as Directors of the Bank.

Re-appointment of Director retiring by rotation

In accordance with the provisions of Section 152 of the Act and the Articles of Association of the Bank, Dr. Ram Jass Yadav (DIN: 08911900), Non- Executive Non-Independent Director of the Bank retires by rotation at the ensuing Annual General Meeting ("AGM") and being eligible, has offered himself for re-appointment. The re-appointment of Dr. Ram Jass Yadav is being put up for your approval at the ensuing AGM. The profile and particulars of experience, attributes, skills of Dr. Ram Jass Yadav together with his other directorships and committee memberships in terms of Regulation 36 of SEBI Listing Regulations and SS-2 issued by the Institute of Company Secretaries of India forms part of the Notice of the 10th AGM.

KEY MANAGERIAL PERSONNEL

Pursuant to the provisions of Section 203 of the Act and Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, following officials of the Bank are the Key Managerial Personnel ("KMP"), as on the date of this Report:

1. Mr. Govind Singh, Managing Director & CEO

2. Mr. Sarju Simaria, Chief Financial Officer

3. Mr. Muthiah Ganapathy, Company Secretary & Compliance Officer

Mr. Pramod Kumar Dubey resigned from the services of the Bank with effect from close of business hours on December 31, 2025.

DECLARATION OF INDEPENDENCE

All Independent Directors ("IDs") of the Bank have submitted a declaration that each of them meets the criteria of independence as provided in Section 149(6) of the Act read with Rules framed thereunder and Regulation 16(1)(b) of the SEBI Listing Regulations. There has been no change in the circumstances affecting their status as IDs of the Bank. In the opinion of the Board, the IDs possess the requisite integrity, experience, expertise and proficiency required under all applicable laws and the policies of the Bank.

All IDs of the Bank have complied and affirmed to abide by Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014, as amended, with respect to enrolling their name in the online databank of Independent Directors maintained by Indian Institute of Corporate Affairs ("IICA") and qualifying the online proficiency self-assessment test, as applicable.

NOMINATION AND REMUNERATION POLICY

The Bank pursuant to the provisions of Section 178(3) of the Act, Regulation 19 of SEBI Listing Regulations and RBI Requirements has formulated and adopted a Nomination and Remuneration Policy on directors' appointment and remuneration and the criteria for determining qualification, positive attributes and independence of directors, which is available on the website of the Bank at https://www.utkarsh.bank.in/uploads/template_forty_ pdf/NRC_Policy.pdf The details of remuneration paid to Executive and Non-executive Directors during the year forms part of the Corporate Governance report.

Compensation Policy for Non-Executive Directors

The Board of Directors of the Bank has formulated and adopted a comprehensive Compensation Policy for Non-Executive Directors ("NEDs").

The remuneration payable to the NEDs, other than Part-time Non-Executive Chairman, is in accordance with the provisions of the Circular Dated April 26, 2021 and the Circular on Review of Fixed Remuneration granted to Non-Executive Directors dated February 09, 2024, issued by RBI which, inter alia, provides for payment of compensation to NEDs, other than the Chair of the Board, in the form of a fixed remuneration commensurate with an individual director's responsibilities and demands on time and which is considered sufficient to attract qualified competent individuals, for an amount not exceeding Rs. 30 lakh per annum, including any statutory modification or amendment or re-enactment thereof for the time being in force and the provisions of the Act.

The above mentioned policy is available on the Bank's website at https://www.utkarsh.bank.in/uploads/ template_forty_pdf/Non_Executive_Compensation_ Policy.pdf The Non-Executive Independent Part-time Chairman of the Bank receives a fixed remuneration as recommended by the Board and approved by RBI and the members of the Bank, from time to time. This is in addition to payment of sitting fees, car with driver, as per applicable policy and reimbursement of expenses for official purposes / attending duties as a Chairman.

BOARD PERFORMANCE EVALUATION

In accordance with the provisions of the Act and SEBI Listing Regulations, the annual Performance Evaluation of the Board, its Committees, Part-time Chairperson and individual Directors has been carried out for the year under review. The performance evaluation was carried out internally through circulation of questionnaires covering various aspects of the performance of the Board and its Committees, including composition, roles and responsibilities, Board processes, quality and flow of information etc. The responses received to the questionnaires were placed before the Board and performance of Board as a whole including its Committees and individual Directors was found to be satisfactory.

NUMBER OF MEETINGS OF BOARD, ATTENDANCE AND CONSTITUTION OF VARIOUS COMMITTEES

During FY 2025-26, the Board met 12 (Twelve) times. The details of Board Meetings held during the year, attendance of Directors at the Meetings and constitution of various Committees of the Board are included separately in the Report on Corporate Governance.

RECOMMENDATIONS OF AUDIT COMMITTEE

During the FY 2025-26, there was no incidence, where the Board has not accepted any recommendations of the Audit Committee.

MEETING OF INDEPENDENT DIRECTORS

In accordance with Section 149(8) read with Schedule IV of Act and Regulation 25 of SEBI Listing Regulations, the Independent Directors of the Bank met 1 (once) on March 15, 2026, which was attended by all the Independent Directors of the Bank.

FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS

In accordance with Regulation 25(7) of the SEBI Listing Regulations and RBI guidelines, various training programmes were organized for the Board Members, which inter-alia covered topics related to corporate governance, generative artificial intelligence & risk management and overview of the fintech functions. The details of familiarization programme for Independent Directors is available on the Bank's website at https:// www.utkarsh.bank.in/investors

SUCCESSION PLANNING

The Bank has adopted Succession Planning Policy (the "policy") for the Board, Key Managerial Personnel and Senior Leadership positions. The policy has been formulated for successful transition of the Board and other key executives and provides for the succession process viz. periodical screening, evaluation of suitable candidates on parameters such as knowledge, experience, expertise, skill sets, conduct, age, qualifications under the relevant laws, adherence to 'fit & proper' criteria and overall readiness to take up the role. Wherever necessary, services of external consultants / experts are also availed for scouting talent, internally and / or externally. The Policy on Succession Planning is made available on the Bank's website at https://www.utkarsh.bank.in/uploads/ template_forty_pdf/Policy_on_Succession_Planning_ for_Board_and_Senior_Management.pdf.

STATUS OF IND AS IMPLEMENTATION

As per RBI circular RBI/2015-16/315 DBR.BP.BC. No.76/21.07.001/2015-16 dated February 11, 2016, Implementation of Indian Accounting Standards ("Ind AS"), Banks are advised that scheduled commercial banks (excluding RRBs) shall follow the Indian Accounting Standards as notified under the Companies (Indian Accounting Standards) Rules, 2015, subject to any guidelines or directions issued by the RBI in this regard. Banks in India currently prepare their financial statements as per the guidelines issued by RBI, the Accounting Standards notified under Section 133 of the Act and generally accepted accounting principles in India ("Indian GAAP").

In January 2016, the Ministry of Corporate Affairs issued the roadmap for implementation of new Indian Accounting Standards (Ind AS), which were based on convergence with the International Financial Reporting Standards (IFRS), for scheduled commercial Banks, insurance companies and non-banking financial companies (NBFCs). In March 2019, RBI deferred the implementation of Ind AS for Banks till further notice as the recommended legislative amendments were under consideration of Government of India.

The Banks are advised to follow the Indian Accounting Standards as notified under the Companies (Indian Accounting Standards) Rules, 2015. The Banks in India currently prepare their financial statements as per the guidelines issued by the RBI, the Accounting Standards notified under Section 133 of the Act and generally accepted accounting principles in India (Indian GAAP).

DIRECTORS' RESPONSIBILITY STATEMENT

As per the requirements of Section 134(3)(c) of the Act, it is hereby confirmed that: a. in the preparation of the annual accounts, the applicable accounting standards have been followed, and there is no material departure from the same; b. the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Bank as on March 31, 2026, and of the loss of the Bank for that period; c. the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Bank and for preventing and detecting fraud and other irregularities; d. the Directors have prepared the annual accounts on a going concern basis; e. the Directors have laid down internal financial controls to be followed by the Bank and that such internal financial controls are adequate and operating effectively; and f. the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws, and that such systems were adequate and operating effectively.

ANNUAL RETURN

In accordance with the provision of Section 92 (3) of the Act, the Annual Return in the prescribed form MGT-7 is uploaded on Bank's website at www.utkarsh.bank.in/ investors.

AUDITORS

Statutory Auditors

RBI, on April 27 2021, had issued guidelines for appointment of Statutory Central Auditors/Statutory Auditors of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs). As per the said guidelines statutory audit of entities with asset size of Rs. 15,000 Crore and above as at the end of previous year, should be conducted under joint audit of a minimum of two audit firms. The audit firms can be appointed as the Statutory Auditors (SA) of the Bank for a continuous period of 3 (three) years only and thereafter, reappointment in the same entity will be possible only after a cooling period of 6 (six) years. Further, prior approval of RBI for appointment/reappointment of SAs on an annual basis is required in terms of the above guidelines.

The Members of the Bank at the 9th Annual General Meeting ("AGM") held on August 22, 2025, had approved the appointment of M/s. M. M. Nissim & Co LLP, Chartered Accountants (FRN 107122W/W100672) and M/s KKC & Associates LLP, Chartered Accountants (FRN 105146W/ W100621) as the Joint Statutory Auditors of the Bank for a period of 3 (three) consecutive financial years to hold office till the conclusion of 12th AGM of the Bank, subject to RBI on an annual basis. The Bank has approached RBI seeking approval for their appointment for FY 2026-27. The approval from the RBI is awaited as on the date of this Report.

The Statutory Audit of the Bank for the FY 2025-26 was conducted jointly by M/s. M. M. Nissim & Co LLP, Chartered Accountants (FRN 107122W/W100672) and M/s KKC & Associates LLP, Chartered Accountants (FRN 105146W/W100621). The Auditors' Report forms an integral part of this Annual Report.

The observations made in the Auditor's Report are self-explanatory and therefore, do not call for any further comments under Section 134(3)(f) of the Act. The Auditor's Report does not contain any qualifications, reservations or adverse remarks.

Secretarial Auditors

In compliance with the provisions of Section 204 of the Act and the rules framed thereunder, M/s. BNP & Associates, Company Secretaries, the Secretarial Auditors of the Bank, conducted the Secretarial Audit for the financial year ended March 31, 2026. There were no qualifications made by the Secretarial Auditors in their Report. The Secretarial Audit Report for FY2025-26 is annexed as "Annexure 2" to this Report.

Cost Auditor

The provisions for maintenance of cost records as specified by the Central Government under Section 148(1) of the Act are not applicable to the Bank.

Internal Auditor

As per the provisions of Section 138 of the Act read with Rule 13 of the Companies (Accounts) Rules, 2014, the Internal Auditors report was presented to the Audit Committee on a quarterly basis. The scope, functioning, periodicity and methodology for conducting the Internal Audit have been formulated under the applicable RBI guidelines and in consultation with the Audit Committee.

COMPLIANCE WITH SECRETARIAL STANDARDS

During the year under review, the Bank has complied with the applicable Secretarial Standards on meetings of the Board of Directors ("SS-1") and Secretarial Standard on General Meetings ("SS-2") issued by the Institute of Company Secretaries of India.

CONSERVATION OF ENERGY

The Bank continues to prioritise energy efficiency as part of its sustainability and ESG commitments. The Bank has undertaken focused initiatives to optimise energy consumption across its operations through a combination of technology adoption, infrastructure upgrades, and employee awareness. Key measures include the installation of solar panels, energy-efficient LED and sensor-based lighting, optimisation of air-conditioning systems, and deployment of efficient electrical infrastructure in its corporate building at Varanasi. Digital transformation initiatives such as paperless banking, and virtual meetings have further reduced energy consumption. The Bank actively monitors electricity usage across locations and promotes responsible energy practices through regular awareness programs.

However, the Bank continues to focus on efficient energy usage and technology upgradation to enhance operational efficiency and customer service in a cost effective manner.

TECHNOLOGY

In an increasingly digital and customer-centric banking landscape, Information Technology continues to be a key strategic enabler for Utkarsh Small Finance Bank. During FY 2025 26, the Bank focused on strengthening & execution of core technology foundations, modernizing critical enterprise platforms, enhancing digital customer journeys, and embedding advanced technologies to support scalability, resilience, and regulatory compliance.

Key Technology Initiatives and Platform Transformation

During the year, the Bank undertook multiple large-scale technology initiatives aimed at improving operational efficiency, customer experience, and risk management:

Payment Switch & ATM Modernization: The Bank successfully migrated its Debit Card and IMPS switching to a new, robust switch platform, resulting in significantly improved transaction throughput, stability, and scalability, and an enhanced overall customer experience. In parallel, the Bank's ATM network was modernized through migration to new ATM machines, further strengthening service reliability and availability.

Treasury & Financial Risk Systems: The Treasury Management System (TMS) was upgraded to support enhanced deal processing, regulatory reporting, and integrated risk monitoring. In parallel, the Bank migrated to a new Asset Liability Management (ALM) application, strengthening liquidity risk assessment and balance sheet management.

Strengthening AML & Compliance Capabilities: A new, advanced Anti-Money Laundering (AML) system was implemented, replacing the legacy application. The new platform enables stronger transaction monitoring, improved alert quality, enhanced regulatory reporting, and better scalability to support business growth.

Credit & Recovery Digitization: The Bank implemented a Centralized NPA Management System, enabling end-to-end monitoring, recovery tracking, legal actions, and analytics for delinquent accounts, thereby improving recovery governance and effectiveness.

Digital Lending & New Product Enablement: A Digital Gold Loan Platform was launched to provide a fully digitized, faster time-to-disbursement experience. Additionally, the Loan Origination System was enhanced to better support Micro Banking Individual Loan (MBIL) and Micro Banking Business Loan (MBBL) asset products, improving configurability, reporting, and operational controls.

Digital Channels & Customer Experience Enhancements

Significant investments were made to enhance digital touchpoints and improve customer convenience:

WhatsApp Banking Services were upgraded with extended service coverage and improved response capabilities.

Continuous improvements were made across Internet Banking and Mobile Banking platforms to enhance security, performance, and usability.

API, Middleware, and Low-Code Enablement

To support faster innovation and system integration, the Bank:

Continued strengthening its API and Middleware platforms, enabling secure, scalable integration with fintech partners and internal systems.

Introduced a Low Code / No Code development platform to accelerate internal application development, automate workflows, and reduce dependency on traditional development cycles.

Strategic Adoption of Artificial Intelligence

FY 2025 26 marked a significant milestone in the Bank's journey toward AI-led transformation. Artificial Intelligence was adopted as a strategic initiative across multiple functions leveraging both generative AI and Agentic AI capabilities. AI adoption has been structured along with appropriate governance, security controls, and regulatory alignment, ensuring responsible and scalable implementation across the Bank.

Data Centre Modernization & Managed

Infrastructure Services:

The Bank established a new on premises Data Centre and Disaster Recovery (DR) setup to support ongoing system modernization initiatives and strengthen infrastructure resilience. A leading industry partner was engaged for managed Data Centre services to ensure skilled operations, best in class practices, and service continuity. Additionally, enterprise grade Backup solutions were implemented to ensure data availability, integrity, and rapid recovery, while advanced Endpoint Detection & Response (EDR) solutions were onboarded to strengthen cyber security, enable proactive threat detection, and protect critical systems from evolving cyber risks.

New Core Banking System (CBS)

The Bank continued to make measured progress on its enterprise-wide transformation initiatives relating to the =Core Banking System (CBS) during FY 2025 26 and planned to go-live during the year. These programs are aimed at modernizing the Bank's core technology landscape, improving system scalability and resilience, and enabling a consistent omni-channel customer experience. The initiatives are being executed under strong governance with a phased approach to ensure business continuity and regulatory compliance throughout the transformation journey.

Outlook

The Bank remains committed to leveraging technology as a strategic differentiator. Investments made during FY 2025 26 have laid a strong foundation for future growth, operational excellence, and superior customer experience. The IT roadmap continues to prioritize modernization, resilience, digital innovation, and responsible adoption of emerging technologies.

Cyber Security Framework of the Bank

In an increasingly digital banking environment, cybersecurity remains a critical enabler of business growth, customer trust, and regulatory compliance at Utkarsh Small Finance Bank. The Bank's cybersecurity strategy is closely aligned with its business objectives, ensuring secure digital expansion, operational resilience, and protection of customer assets/ information. During FY 2025 26, the Bank significantly strengthened its cybersecurity posture through robust governance, advanced security controls, and proactive risk management, which includes:

A comprehensive Governance, Risk, and Compliance (GRC) framework, reinforced by board-level oversight through the Information Security Committee, ensures structured risk identification, proactive mitigation, and continuous monitoring.

The year was marked by notable achievements, including being honoured as "Cybersecurity Team of the Year" at the IBA CISO Summit 2025 and achieving a best-in-class BitSight Security Rating of 820/820, underscoring the Bank's strong cyber maturity and minimal risk exposure.

The Banks 24x7 Security Operations Center (SOC) continued to provide real-time monitoring and response to cyber threats, supported by advanced security technologies such as EDR, DLP, WAF, and threat intelligence integration, etc.

Proactive risk management remained a key focus, with regular VAPT, Red Team Exercise, Risk Assessments, Attack Surface Monitoring and Breach

Attack Simulations ensuring continuous evaluation and strengthening of security controls.

Strong progress was also achieved in regulatory compliance, including ISO 27001:2022 certification, which is a testament to the Bank's strengthened security framework and adherence to global best practices.

The Bank further strengthened its resilience by adopting Cyber Risk Insurance, providing financial protection against cyber incidents, including ransomware attacks, business disruptions, and regulatory liabilities.

Significant investments were also made in cybersecurity awareness, including phishing simulations and organization-wide training programs, helping build a strong security-conscious culture.

This complement exists security controls by addressing residual risks and enhancing overall cyber preparedness.

FOREIGN EXCHANGE EARNINGS / OUTGO

During the year under review, the Bank has foreign exchange earnings of Rs. 3.18 Crore. However, there was no foreign exchange outgo.

CODE OF CONDUCT

For a financial institution, transparency and the highest standards of corporate governance are important prerequisites for establishing a compliance-oriented bank. Towards this end, the Bank endeavours to ensure that all its activities are fairly aligned with the highest standards of personal and professional integrity and the highest level of ethical conduct.

The Bank has adopted a Code of Conduct and norms for the avoidance of conflict of interest, all the Senior Management officials, KMPs, Employees with loan sanctioning authority, employees directly related with sourcing/servicing corporate or wholesale banking relationships and employees directly involved in the procurement of goods and services, conduct duties according to the aforesaid Code of Conduct. Some of the areas that have been covered by the Code of Conduct are fairness of employment practices, protection of intellectual property, integrity, customer confidentiality and conflict of interest. The Bank's Code of Conduct for Directors and Senior Management is hosted on the website of the Bank at CODE_OF_CONDUCT_FOR_THE_BOARD_ OF_DIRECTORS_AND_SENIOR_MANAGEMENT_ PERSONNEL.pdf. A declaration on compliance with code of conduct for FY 2025-26 forms part of corporate governance report.

Whistle Blower /Vigil Mechanism

Pursuant to the provisions of Section 177(9) of the Act read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014, the Bank has in place a Whistle Blower Policy / Vigil Mechanism. The policy provides a mechanism to enable directors and employees of the Bank to report genuine concerns relating to unethical behaviour, actual or suspected fraud, violation of the Bank's code of conduct, or other irregularities, in a confidential and secure manner. The Whistle Blower Policy ensures adequate safeguards against victimisation of the individuals who avail themselves of the vigil mechanism.

The policy is hosted on the Bank's website at https://www. utkarsh.bank.in/uploads/template_forty_pdf/Whistle_ Blower_Policy_Revised_13_12_2022.pdf In addition, the Bank has also adopted a Vigilance Policy, which outlines the framework for prevention, detection, and handling of vigilance related matters, including risks arising from corruption, malpractices, fraud, and other misconduct, in accordance with applicable regulatory and statutory requirements.

VIGILANCE & SECURITY

The Bank has a Vigilance & Security Department for investigating frauds, bribery cases, and complaints, including complaints received under the whistle-blower policy of the Bank.

Vigilance & Security Department makes concerted efforts to curb fraud, forgery, and burglary incidents in the Bank with the help of new ideas, technology, previous experiences, and adopting preventive vigilance measures with appropriate tools.

CORPORATE SOCIAL RESPONSIBILTY

The Bank has a duly constituted CSR Committee in terms of the requirements of Section 135 of the Act read with the rules made thereunder. The details of the changes in the composition of the CSR Committee during the FY 2025-26 have been provided in the Corporate Governance Report which forms part of the Annual Report for the

FY 2025-26. The Bank has formulated its CSR policy pursuant to Section 135(4) of the Act and the Companies (Corporate Social Responsibility Policy) Rules, 2014, as amended, in accordance with the approach and direction given by the Board of the Bank, taking into account the recommendations of its CSR Committee, and including guiding principles for selection, implementation and monitoring of activities as well as formulation of the annual action plan.

The said Policy is available on the website of the Bank at https://www.utkarsh.bank.in/uploads/template_forty_ pdf/Corporate_Social_Responsibility_Policy.pdf. The detailed Annual Report on the CSR activities for the FY 2025-26 is annexed as " Annexure 3 " to this Report.

PARTICULARS OF EMPLOYEES

The information in terms of Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as " Annexure 4 " to this Report.

Further, the statement containing particulars of employees as required under Section 197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended, forms part of this Annual Report. In terms of section 136(1) of the Act, the Annual Report is being sent without this Annexure. The Annexure is available for inspection and any member interested in obtaining a copy of the statement may write to the Company Secretary of the Bank at secretarial.usfb@utkarsh.bank.in.

CORPORATE GOVERNANCE

The Bank's activities are carried out in accordance with the good Corporate Governance practices and the Bank is constantly striving to make them better with time. The Bank believes that governance framework and good practices helps in creating right culture and in turn enhances long-term sustainable value for all its stakeholders.

Pursuant to Regulation 34 of the SEBI Listing Regulations, a 'Report on Corporate Governance' has been annexed to this Report along with the certificate issued by the Secretarial Auditor as " Annexure 5 " of the Bank confirming compliance with the mandatory requirements relating to Corporate Governance under the SEBI Listing Regulations. The Report on Corporate Governance also contains certain disclosures required under the Act, including the details of the Board meetings held during the financial year ended March 31, 2026.

RISK MANAGEMENT POLICY

The details of Risk Management Policy & its framework are separately provided in the Management Discussion and Analysis Report.

LOANS, GUARANTEES AND INVESTMENTS

The particulars of investments made by the Bank are disclosed in notes to accounts forming part of financial statements.

During the year under review, no loans or guarantees were given or security provided on any loans or guarantees and hence, no disclosure is required to be made thereon.

RELATED PARTY TRANSCATION

There was no materially significant related party transaction entered between the Bank and its related parties.

All the contracts/arrangements/transactions entered by the Bank with the related parties during the FY 2025-26 were on arm's length basis; accordingly, the disclosure of particulars of contracts/ arrangements entered into by the Bank with related parties referred to in sub-section (1) of section 188 of the Act in Form AOC-2 is not applicable. The Policy on Related Party Transactions is available on the website of the Bank at https://www.utkarsh.bank.in/ uploads/template_forty_pdf/RPT_and_Arms_Length_ Policy.pdf

REPORTING OF FRAUDS BY AUDITORS

During FY 2025-26, no instances of fraud committed in the Bank, by its officers or employees were reported by the Joint Statutory Auditors and Secretarial Auditor under Section 143(12) of the Act, to the Audit Committee or the Board of Directors of the Bank.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT

In terms of Regulation 34(2)(f) of the SEBI Listing Regulations, as amended the Business Responsibility and Sustainability Report describing the initiatives taken by the Bank from an Environmental, Social and Governance perspective is presented in a separate section which forms an integral part of this Annual Report.

MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis Report for the year under review, as stipulated under Regulation 34 of the SEBI Listing Regulations is presented in a separate section which forms an integral part of this Annual Report.

SIGNIFICANT AND AN INTEGRAL MATERIAL

ORDERS PASSED BY REGULATORS OR COURTS OR TRIBUNALS

During the year under review, no material orders have been passed by the Regulators/Courts/Tribunals which would impact the going concern status of the Bank and its future operations.

However, basis the receipt of the Shareholders approval of the Bank and UCL, Promoter on the Scheme of Amalgamation between the Promoter and Bank, a second motion petition was filed with the Hon'ble NCLT, Allahabad Bench, Prayagraj for final sanction of the Scheme. The Bank has not made any application under the Insolvency and Bankruptcy Code, 2016 and no proceeding is pending under the said Code.

Further, no one time settlement was done with any Bank/ Financial Institution with respect to loans taken by the Bank, hence disclosure on the difference between amount of the valuation done at the time of one-time settlement and the valuation done while taking such loans is not applicable.

HOLDING, SUBSIDIARY & ASSOCIATE COMPANIES

The UCL is Promoter Company of the Bank. The Bank does not have subsidiary or associate company. Hence the details of sub-section (3) of section 129 read with rule 5 of Companies (Accounts) Rules, 2014 are not applicable to the Bank.

KNOW YOUR CUSTOMER / ANTI-MONEY LAUNDERING

The Bank complies with all requirements prescribed under the RBI Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines, as amended from time to time. The Bank's KYC/AML Policy has been framed in line with the RBI Master Direction Know Your Customer (KYC) Directions, as applicable to Small Finance Banks, and the provisions of the Prevention of Money Laundering Act, 2002 (PMLA) and the rules made thereunder. The Policy adopts a risk-based approach for the effective implementation of the AML framework across the Bank. The Bank complies with all applicable regulatory reporting requirements prescribed by the Financial Intelligence Unit India (FIU IND).

The Bank has put in place a robust transaction monitoring mechanism in line with FIU IND and regulatory requirements. An automated transaction monitoring system is deployed, which is closely monitored by a centralised AML team to identify, review, and report suspicious transactions in a timely manner. The Bank imparts regular training to its employees on KYC/AML compliance requirements to ensure awareness and effective implementation of regulatory guidelines. Senior officers and executives of the Bank also participate in periodic workshops and seminars organised by FIU IND, RBI, Indian Banks' Association (IBA), and the National Institute of Bank Management (NIBM), with a view to enhancing awareness and strengthening compliance standards.

Recent amendments and changes notified under the PMLA and RBI guidelines have been duly incorporated into the Bank's customer onboarding processes and internal policies. The Bank's KYC/AML Policy is reviewed annually and placed before the Board of Directors for approval, taking into account all applicable regulatory amendments and supervisory expectations.

PREVENTION OF SEXUAL HARASSMENT

The Bank has formulated and adopted a Policy on Prevention of Sexual Harassment of Women at workplace. The Bank has complied with the provisions relating to the constitution of Internal Committee under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. No complaints were pending with the Internal Complaints Committee for more than ninety days. The information as required pursuant to Rule 8 of Companies (Accounts) Rules, 2014 relating to complaints received, redressed and pending during FY 2025-26 forms part of the Corporate Governance Report.

The POSH Policy is periodically communicated to all employees and is available on the Bank's website https:// www.utkarsh.bank/uploads/policy/Prevention_of_ Sexual_ Harassment_Policy.pdf

HUMAN RESOURCES AND TRAINING

At Utkarsh, our employees are at the core of everything we do. Our human resources framework is built to foster inclusive growth, transparency, and equity across the organisation. With a well-structured HR setup encompassing recruitment, operations, training, and employee engagement supported by a robust zonal structure we ensure effective last-mile connectivity and responsiveness across regions.

Our technology-enabled HR services, including a mobile-based platform, provide employees with real-time access to key functions, enhancing efficiency and engagement. As of March 31, 2026, our workforce stands at 18,400 employees, reflecting our continued expansion and strong commitment to nurturing a collaborative, diverse, and growth-oriented workplace.

Learning and development remain a cornerstone of our people strategy, enabling employees to continuously build capabilities and progress in their careers. Through flagship programmes such as Utkarsh Aarambh, Utkarsh Pragati, Udaan, Saksham, and Manthan, we provide structured opportunities to develop functional expertise, leadership capabilities, and compliance awareness across levels.

In FY 2025 26, all the new joiners attended induction and taken through mandatory courses, and more than 10,000+ existing employees engaged in developmental programs, reinforcing a strong culture of continuous learning. Initiatives like the Probationary Officer Program, Branch Baithaks, and our partnership with Institute of Professional Banking (IPB) and Baddi University ensure we cultivate talent aligned with our mission. Our focus also included virtual training and leadership workshops aimed at improving performance across sales, liabilities, and assets.

Our broader talent and capability initiatives further strengthen workforce effectiveness and retention. These include competition role grade benchmarking, salary benchmarking, job norms rationalisation, succession planning, career portal utilisation, fortnightly zonal HR updates, and the "Know Your HR" initiative to enhance employee connect. Focused efforts such as diversity hiring, resource-level productivity and incentive optimisation, the rehire programme (Innings 2.0), and a retention grid for critical talent underscore our commitment to building a future-ready, resilient organisation.

As part of its ongoing commitment to building a future ready institution, the Bank continued to strengthen its talent management and leadership development agenda during the year. A key focus was on ensuring strong alignment of leadership mindsets and capabilities with the Bank's long-term strategic priorities.

In this context, the Bank conducted a Senior Management Alignment Workshop, designed to bring leadership teams onto a common platform around the Bank's vision, institutional growth agenda, and evolving business priorities. The workshop aimed to foster shared accountability, reinforce the desired organizational culture, and enable leaders to collectively steer the Bank through transformation while ensuring long term sustainability. Building on the outcomes of the alignment workshop, the Bank initiated a series of targeted leadership and capability development interventions. We promote employee well-being through structured engagement activities, comprehensive wellness initiatives, and robust recognition programs. From celebrating key milestones such as our 9th anniversary, to honouring long-serving employees and recognising top performers, we consistently acknowledge the contributions of our people. Platforms such as Utkarsh Samvaad and Sampark foster open dialogue by enabling direct interaction between employees and the Managing Director & CEO, as well as the Senior Leadership Team. These initiatives strengthen alignment, transparency, and connection across the organisation.

Our overarching objective is to engage, motivate, and retain talent by cultivating a supportive and inclusive work culture. Our POSH Policy, applicable to all employees and stakeholders, reinforces a zero-tolerance approach towards harassment and misconduct, ensuring a safe and respectful workplace. Collectively, these initiatives underscore our commitment to building a supportive, secure, and purpose-driven organisation.

COMPLIANCE ON MATERNITY BENEFIT ACT, 1961

The Bank is in compliance with the provisions of the Maternity Benefit Act, 1961.

BASEL III (PILLAR 3) DISCLOSURES

RBI Direction RBI/DOR/2025-26/182 DOR.CAP. REC.101/21-01-002/2025-26 dated November 28, 2025 (Updated as on March 10, 2026) on 'Reserve Bank of India (Small Finance Banks Prudential Norms on Capital Adequacy) Directions, 2025' requires banks to make Pillar 3 disclosures, as applicable. These disclosures have not been subjected to audit or limited review. These disclosures are available on the Bank's website at www. utkarsh.bank.in/basel-disclosures

Acknowledgement

The Directors of the Bank would like to place on record their gratitude towards the guidance and co-operation received from the RBI, SEBI, Stock exchanges, Ministry of Corporate Affairs and other Government and Regulatory Agencies. The Directors of the Bank would like to take this opportunity to express their appreciation for the hard work and dedicated efforts put in by the Bank's employees and acknowledge the continued support of the members.

For and on behalf of the Board of Directors