As on: Jul 29, 2025 01:56 PM
Dear Members,
The Board of Directors ("the Board") is pleased to present the 30th Annual Report of AU Small Finance Bank Limited ("Your Bank"/"the Bank"), encompassing an overview of Bank's operations, key financial highlights along with the Audited Financial Statements and the Independent Auditors' Report for the financial year ended March 31, 2025.
A. Financial Summary & Highlights
The summary of the financial performance of your Bank for FY 2024-25 is presented below:
(Hin Crore)
Particulars
Deposits and Borrowings
Advances
Total Assets
Total Income
Interest Income
Other Income
Interest Expenditure
Operating Expenses (excluding depreciation)
Profit before Depreciation, Provisions and Tax
Depreciation
Provision for Income Tax
Other Provisions and Write-offs
Net Profit
Add: Additions on Amalgamation
Appropriations
Transfer to Statutory Reserve
Transfer to Special Reserve u/s 36(1)(viii) of Income Tax Act, 1961
Transfer to Capital Reserve
Transfer to Investment Reserve Account
Transfer to Investment Fluctuation Reserve
Deduction due to Amalgamation adjustments
Dividend pertaining to previous year paid during the year
Dividend (in H) (Per Equity Share)
Surplus carried over to Balance Sheet
Earnings Per Share (EPS) (in ?) (After excluding Exceptional Items not annualized)
Basic (in H)
Diluted (in H)
Key Performance Highlights
Your Bank witnessed growth and consistent performance in FY 2024-25. The key financial performance indicators for the year are as follows:
Net Interest Income (NII) grew to H8,011.58 Crore for FY-2024-25 vis-a-vis H5,157.09 Crore for FY 2023-24.
Net Profit After Tax increased to H2,105.93 Crore for FY 2024-25 vis-a-vis H1,534.72 Crore for FY 2023-24 (post considering pre-tax exceptional impact of H76.80 Crore in Q4 FY2024 towards erstwhile Fincare merger related expense).
Balance sheet size grew to H1,57,845.67 Crore as on March 31, 2025 vis-a-vis H1,09,425.67 Crore as on March 31, 2024.
Deposits grew to H1,24,268.54 Crore and CASA ratio stood at 29.17% as on March 31, 2025 against 33.41% as on March 31, 2024.
Gross Advance grew to H1,08,778.17 Crore and Credit to Deposit ratio* stood at 86.18% as on March 31, 2025 against 83.92% as on March 31, 2024.
* Credit to Deposit ratio (excluding Re-Finance) stood at 78.49% as
on March 31, 2025 against 78.31% as on March 31, 2024.
Notes:
1. Figures of previous year have been regrouped/reclassified wh erever n e cess a ry to confo rm to the c urrent p e rio d 's classification.
2. Previous year numbers are not directly comparable due to erstwhile Fincare merger being effective from April 01, 2024.
Analysis of Bank's performance is covered in Management Discussion & Analysis section of the Annual Report.
B. Business Overview
Amidst a challenging global macroeconomic environment, the Indian economy is exhibiting a quickening growth momentum, with resilience and financial stability. Despite facing certain headwinds such as inflationary pressures and geopolitical uncertainties, the Indian economy remains on a positive trajectory, positioning itself as a key player in the global economic landscape. With a prudent fiscal policy and a conducive business environment, India is poised to sustain its growth momentum and solidify its position as a major economic force in the years to come. The government's initiatives to boost manufacturing, infrastructure development, and digital transformation have propelled the economy forward, attracting both domestic and foreign investment.
The financial sector played a crucial role in supporting this growth, contributing to overall economic stability and development. The optimistic economic environment presents ample opportunities for small finance banks in India to contribute to financial inclusion and economic development.
With a stable GDP growth rate, controlled inflation, easing liquidity and monetary conditions and a strong focus on infrastructural development, India remains a bright spot in an uncertain global landscape. Additionally, India's corporate and financial sectors have stronger balance sheets than before the pandemic. These figures highlight the Indian economy's resilience and positive trajectory during the specified period.
During the financial year 2024-25, your Bank demonstrated resilience and steady growth amidst a challenging economic and operational environment marked by persistent interest rate pressures, tight liquidity conditions, climate related disturbances and uncertain global macro trends. Your Bank exhibited sustained performance across key metrics, including
asset and deposit growth, profitability, and digital products for higher engagement with customers. Noteworthy highlights include the successful launch of innovative banking products like AU ivy', AU Eternity' and Green deposits titled 'Planet First', along with strategic initiatives such as the 'Soch Badlo aur Bank Bhi' brand campaign and the merger of erstwhile Fincare Small Finance Bank ('Fincare SFB'). Your Bank remains focused on sustainable growth, leveraging its strong regulatory compliance framework, technological investments, and strategic partnerships to fortify its position in the market and deliver consistent returns to stakeholders.
Your Bank is delighted to inform that following the successful Amalgamation of erstwhile Fincare SFB as on April 01, 2024, your Bank has evolved into a formidable banking franchise, greatly expanding its reach to over 1.13 Crore customers across 21 States & 4 Union Territories. With a network of 2,456 Banking touchpoints, your Bank is committed to provide top notch services through a dedicated workforce of 50,000+ employees. This merger has paved a way for your Bank to extend its presence into South India, significantly broadening its distribution network. This increased footprint of Branches and touchpoints will enhance Bank's ability to provide diverse range of products and services to a larger customer base, solidifying its market position and helping to realise its aspirations of PAN India Banking franchise.
The key business developments and segment-wise position of business and its operations are covered in detail under the Management Discussion & Analysis section of the Annual Report.
C. Update on the Amalgamation of Erstwhile Fincare Small Finance Bank Limited with Bank
Following the successful amalgamation of erstwhile Fincare Small Finance Bank Limited ("Transferor Bank") into and with the AU Small Finance Bank Limited ("Transferee Bank" or "your Bank"), the consolidated entity has completed one year of its operation as a unified Banking institution. Your Bank with this strategic merger has achieved strong and diversified retail banking franchise with a wide reach across India and have augmented your Bank's portfolio with microfinance, mortgages, and gold loans, while leveraging erstwhile Fincare SFB's rural distribution network and your Bank's digital capabilities. The combined entity has achieved synergies in deposits, technology, and efficiency, ultimately benefiting key financial metrics.
Integration Phases:
Amalgamation became effective on April 1, 2024 (the "Effective Date") and your Bank has undertaken a structured and strategic approach towards post- merger integration. The primary focus has been on seamlessly consolidating operations, standardizing internal processes, and fostering a unified organizational culture across all functional areas. To facilitate this, your Bank developed a comprehensive, phased integration roadmap that outlined key milestones, timelines, and responsibilities. This roadmap is being diligently followed, ensuring that operational alignment and systems harmonization to cultural integration and stakeholder communication is executed in timely and coordinated manner. These efforts have been instrumental in driving synergies, enhancing operational efficiency, and reinforcing your Bank's commitment to delivering consistent value to its stakeholders. Phase 1 included erstwhile Fincare payment systems (CTS, IMPS, AePS, NACH/ e-Nach, ATM/POS/ECOM, UPI, NEFT/RTGS) which was successfully integrated into AU SFB's payment system and Phase 2 of IT consolidation and Integration is in progress.
D. Dividend
Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations") and Reserve Bank of India ("RBI") guidelines, your Bank has formulated and adopted a Dividend Distribution Policy. This policy aims to strike a balance between rewarding Your Bank's shareholders by distributing a portion of profits whilst ensuring that adequate funds are retained for the sustainable growth of your Bank. The same can be viewed on the website of the Bank at https://www.aubank.in/investors/secretarial-policies.
In line with the aforementioned policy and considering your Bank's financial performance during the FY 2024- 25, the Board at its meeting held on April 22, 2025 recommended a dividend of 10% (H 1 per fully paid-up Equity Share of H10 each) for the year ended March 31, 2025. This recommendation will be placed before the shareholders for approval at the upcoming Annual General Meeting ("AGM") of your Bank.
In terms of the provisions of the Income Tax Act, 1961, the dividend income is taxable in the hands of the members and the dividend will be paid to the members by your Bank after deduction of tax at source ("TDS") at the applicable rates.
E. Credit Rating
The details of credit rating assigned to your Bank for debt instruments issued and outstanding as on March 31, 2025 along with outlook are given below:
Nature of Debt instrument
Fixed Deposits
Long-Term/ Subordinated Debt/ Tier II Bond
Certificate of Deposits
Note:
Post Amalgamation, all NCDs of erstwhile Fincare SFB have been transferred to your Bank, accordingly ratings have been upgraded by India Ratings and CARE on April 10, 2024 and by ICRA Limited on May 17, 2024.
CRISIL reaffirmed the above credit ratings of the Bank on April 10, 2024 and on April 2, 2025.
The India Ratings have reaffirmed the above credit ratings of your Bank April 10, 2024 and September 09, 2024 and November 29,2024
The CARE has reaffirmed the above credit ratings of your Bank on April 10, 2024, August 14, 2024, October22, 2024 and January 14, 2025.
The ICRA have reaffirmed the above credit ratings of your Bank on February 27, 2025
Further, new credit rating has been assigned for proposed issue of Tier II Bond by CARE and ICRA on January 14, 2025 and February 27, 2025 respectively.
The above rating details can be accessed on the website of the Bank at https://www.aubank.in/credit-rating
F. Change in Nature of Business
During the year under review, there were no changes in the nature of business of your Bank.
G. Transfer to Reserves
In consonance with the RBI regulations and other applicable regulations, your Bank has proposed transferring the following amounts to various reserves for the financial year ended March 31, 2025 as mentioned below:
Amount transferred to
Statutory Reserve
Transfer to Special Reserve U/s 36 (1) (viii)
H. Transfer to the Investor Education and Protection Fund ("IEPF")
In accordance with Section 124 and 125 of the Companies Act, 2013 ("Act") read with the Investor Education and Protection Fund ("IEPF") Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (as amended from time to time), all the equity shares of your Bank in respect of which dividend amounts have not been paid or claimed by the shareholders for seven consecutive years or more are required to be transferred to demat account of IEPF Authority. There was no unclaimed/unpaid dividend or shares of your Bank liable to be transferred to the IEPF during the FY 2024-25.
Further, the details of amount relating to unclaimed dividends and the dates by which such dividend can be claimed by the shareholders from your Bank are mentioned under Report on Corporate Governance appended with Board's Report as Annexure-i.
Further, details of the unclaimed/un-encashed dividends lying in the unpaid dividend accounts as on end of the financial year are available on website of the Bank at https://www.aubank.in/unclaimed- dividend-page
I. Deposits
As a Banking company, your Bank is not subject to disclosures pertaining to deposits as required under Rule 8(5)(v) & (vi) of the Companies (Accounts)
Rules, 2014 read with Sections 73 and 74 of the Act and the Companies (Acceptance of Deposits) Rules, 2014. The details of the deposits received and accepted by your Bank as a Banking company have been disclosed in the financial statements for the financial year ended March 31, 2025 forming part of this Annual Report for FY 2024-25.
J. Capital Structure & Fund Raising
Authorised Share Capital
During the period under review, there was no change in the Authorised Share Capital of your Bank and as on March 31, 2025, the Authorised Share Capital of your Bank stood at H1,200 Crore comprising 1,20,00,00,000 equity shares of H10 each.
Paid-up Capital
In accordance with the Scheme of Amalgamation of erstwhile Fincare SFB with and into your Bank, 7,35,25,352 equity shares of face value H10 each were issued and allotted to the shareholders of erstwhile Fincare SFB on April 01, 2024.
Further during the period under review, your Bank issued and allotted 18,42,728 equity shares of face value of H10 each pursuant to exercise of Employee Stock Options (ESOPs) under different ESOP Schemes ("Schemes"). Consequently, the total issued, subscribed and Paid-up Equity Share Capital ("PUSC") of your Bank has increased by H75.37 Crore and accordingly PUSC stood at H744.53 Crore as on March 31, 2025, comprising of 74,45,30,531 equity shares of H10 each.
Non-convertible Debentures ("NCDs")
During the year, your Bank has successfully raised H770 Crore by issuing 77,000 9.2% unsecured, rated, listed, redeemable, subordinated, non-convertible lower Tier II bonds in the nature of Non-Convertible Debentures and categorized as Tier II capital under the BASEL II Framework having a Face Value of H1,00,000 each for cash by way of private placement.
Also, your Bank has redeemed Non-Convertible NCDs of H75 crores in total during the year under review.
Details of outstanding NCDs as on March 31, 2025, includes NCDs of erstwhile Fincare SFB, transferred to your Bank pursuant to Amalgamation becoming effective from April 01, 2024 are as follows:
Sr. ISIN
1. INE949L08418
2. INE949L08442
3. INE949L08434
4. INE949L08426
5. INE519Q08152*
6. INE519Q08160*
7. INE519Q08178*
8. INE519Q08186*
9. INE519Q08194*
10. INE949L08459
Total
* ISINs are listed under the name of AU Small Finance Bank w.e.f. April 12, 2024 and the notification was issued by BSE in this regard can be accessed at https://www.bseindia.com/markets/MarketIn fo/DispNewNoticesCirculars.asDx?Dage=20240409-4
K. Employee Stock Option Schemes
Your Bank has instituted multiple Schemes, all of which have received requisite approval from the shareholders. These Schemes are structured in accordance with the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, as amended from time to time, with the objective of enabling employees to participate in your Bank's long-term growth and financial success.
At your Bank, employee engagement and retention are key strategic priorities. The Bank believes that fostering a sense of ownership among employees not only enhances their commitment and job satisfaction but also contributes significantly to improved productivity and sustained organizational performance. Through these initiatives, the Bank aims to cultivate a culture of shared success and long-term value creation.
The grant of Employee Stock Options under the approved Schemes is subject to the review and approval of the Nomination and Remuneration Committee ("NRC"), in accordance with the Bank's Compensation Policy. Options are awarded as part of the Annual Performance Review cycle and at the
time of hiring, based on a comprehensive evaluation of several parameters including the employee's scale, designation, performance ratings, grade, tenure of service, strategic importance of the role, and overall contribution to Bank's performance etc. This structured and merit-based approach has helped in aligning employees with Bank's long-term objectives and thereby reinforcing a culture of performance and accountability.
Following are the Employee Stock Option Schemes in force as on March 31, 2025:
Employee Stock Option Scheme 2015 - Plan A (ESOP 2015 - Plan A)
Employee Stock Option Scheme 2015 - Plan B (ESOP 2015 - Plan B)
Employee Stock Option Scheme 2016 - (ESOP 2016)
Employee Stock Option Scheme 2018 - (ESOP 2018)
Employee Stock Option Scheme 2020 - (ESOP 2020)
Employee Stock Option Scheme 2023 - (ESOP 2023)
The details of vesting of various schemes are as follows:
ESOP Scheme & Plan
ESOP 2015 - Plan A
ESOP 2015 - Plan B
ESOP 2016
ESOP 2018
Refer Note
ESOP 2020
ESOP 2023
Note: Options granted may be exercised within four years from the date of first vesting of the options under ESOP 2015 and six years from the date of first vesting of the options under ESOP 2016, ESOP 2018, ESOP 2020 and ESOP 2023. Vesting is as per terms of grant approved by NRC in the grant letter issued to employees and NRC is empowered to change the vesting period in case of corporate action such as A malgama tion.
The Brief Details of Existing ESOP Schemes as on March 31, 2025 are given below:
Date of Shareholders Approval
Total Number of Options approved
Total Number of options outstanding at the Beginning of the period@
Total No. of Options granted (during FY 2024-25)
The Pricing Formula
Options Vested (during FY 2024-25)@
Options Exercised & allotted (during FY 2024-25)
Total No of shares arising as a result of exercise of option
Options lapsed/ Forfeited (during FY 2024-25) (Available for re-issue)@
Total No. of options exercisable at the end of the year@
Total No of options outstanding at the end of the year@
Variation in terms of options
There is no variation in terms of options during the year
Money realized by exercise of Options during FY (in H)
Total No of Options granted to KMPs
Please refer Note
Any other employee who received a grant in any one year of options amounting to 5% or more of options granted during that year
Identified employees who are granted options, during any one year equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of your Bank at the time of grant
Diluted Earnings Per Share (EPS) of the Company after considering the effect of potential equity shares on account of exercise of Options
Please refer to point no. 24 of B. Other Disclosures of Schedule 18 of Notes to accounts to Audited Financial Results for FY 2024-25
Impact of the difference between the Intrinsic Value of the Options and the Fair Value of the Options on Profits and on EPS
Weighted average share/exercise price of the shares exercised during the year (in H)
Weighted average fair values of the outstanding options (in H)
@ In terms of SEBI circular dated June 15, 2021 regarding relaxation from the requirement of minimum vesting period in case of death of employee(s) and provisions of the SEBI (Share-Based Employee Benefit and Sweat Equity) Regulations, 2021, options granted to employees who have demised, have been vested in the legal heirs or nominees of the deceased employees immediately. The numbers given above include the options vested in legal heirs/nominees of deceased employees.
# Pricing for ESOP Scheme 2016 was changed from fixed price of H140 to market linked price with the approval of shareholders obtained in the Annual General Meeting held on July 19, 2019.
Note
Sr. No. Name of Official
1 Uttam Tibrewal
2 Vimal Jain
3 Manmohan Parnami
Grand Total
In accordance with SEBI (Share-Based Employee Benefits and Sweat Equity) Regulations, 2021, as amended, necessary disclosures are made in Schedule 18 - Notes forming part of the financial statements for FY 2024-25 and are included in the annual report and also disclosed on the website of your Bank at https://www.aubank. in/reports/disclosures.
L. Details of Board and Key Managerial Personnel ("KMP")
The composition of the Board is regulated by a combination of the provisions of the Act, the Banking Regulation Act, 1949 ("BR Act"), the Listing Regulations and other applicable laws, and the Articles of Association of your Bank. As of March 31, 2025, the Board consisted of 10 Directors, including 7 Independent Directors and 2 Executive Directors and a Non-Executive Non-Independent Director.
During FY 2024-25 and after the end of financial year up to the date of this report, the following changes took place in the Board and Key Managerial Personnel of your Bank:
I. Appointments
1. Mr. Divya Sehgal (DIN: 01775308) was appointed as an Additional Director (Non-Executive Non- Independent) of your Bank to hold office for a period of 3 years with effect from April 01, 2024 up to March 31, 2027.
Further, shareholders vide resolution passed through postal ballot dated May 30, 2024, approved his appointment as Non-Executive and Non-Independent Director, not liable to retire by rotation, with effect from April 01, 2024.
2. Mr. Nandkumar Saravade (DIN: 07601861)
was appointed as an Additional Director (Non- Executive Independent) of your Bank to hold office for a period of 3 years with effect from May 31, 2025 subject to approval of shareholders in the ensuing Annual General Meeting.
Mr. Nandkumar Saravade is an IT expert and the Board is of the opinion that he is a person of integrity, expertise, and competent experience and proficiency to serve your Bank as an Independent Director strengthening the overall composition of the Board.
3. Mr. Jagajit Mangal Prasad (DIN: 11146660) was appointed as an Additional Director (Non-Executive Independent) of your Bank to hold office for a period of 3 years with effect from July 01, 2025 subject to approval of shareholders in the ensuing Annual General Meeting.
The Board is of the opinion that Mr. Jagajit Mangal Prasad is an HR expert and a person of integrity, expertise, and competent experience and proficiency to serve your Bank as an Independent Director strengthening the overall composition of the Board.
II. Re-appointments
1. The Board at its meeting held on August 17, 2024, on recommendation of NRC, and after evaluating the performance of Mr. Harun Rasid Khan ("H.R. Khan") (DIN: 07456806) has approved and recommended his re-appointment as Part Time Chairman and Independent Director of your Bank for a second term of 3 (three) consecutive years from December 28, 2024 upto December 27, 2027 (both days inclusive), for the approval of the Members. He shall not be liable to retire by rotation during his tenure as an Independent Director. The same has been approved by the members vide resolutions passed through the postal ballot on October 24, 2024. Further, his re-appointment as Part Time Chairman is also approved by the RBI vide its letter dated December 19, 2024.
The Board is of the opinion that Mr. H.R. Khan is a person of integrity, expertise, and competent experience and proficiency to serve your Bank as an Independent Director and Part-time Chairman.
Further, Mr. H.R. Khan's presence on the Board has greatly benefited your Bank in improving the governance framework and advancing financial inclusion initiatives. His active involvement as Chairman/member of various Board Committee such as the Committee for Financial Inclusion, Risk Management Committee, NRC, and Corporate Social Responsibility Committee among others has significantly contributed to informed decision-making and effective oversight.
2. The Board at its meeting held on March 07, 2025, on recommendation of NRC, and after evaluating the performance of Mr. Kamlesh Shivji Vikamsey (DIN: 00059620), during his first tenure as an Independent Director, has approved and recommended his re-appointment as an Independent Director of your Bank for a second term of 5 (five) consecutive years from April 25, 2025 to April 24, 2030 (both days inclusive), for the approval of the Members and he shall not be liable to retire by rotation during his tenure as an Independent Director. The same has been approved by the members vide special resolution passed through postal ballot on April 10, 2025.
The Board is of the considered view that Mr. Kamlesh Shivji Vikamsey possesses the requisite integrity, professional expertise, proficiency and extensive experience to serve effectively as an Independent Director of your Bank. His deep domain knowledge and strategic acumen have been instrumental in guiding your Bank's governance and operational frameworks.
III. Others
1. Mr. Rajeev Yadav was appointed as Deputy CEO and categorised as Senior Management Personnel ("SMP") of the Bank w.e.f. April 01, 2024 as a part of key terms & conditions of the Scheme of Amalgamation of erstwhile Fincare SFB into and with your Bank.
IV. Directors Retiring by Rotation
In accordance with the provisions of Section 152 of the Act, Mr. Sanjay Agarwal, Managing Director & CEO, retired by rotation at the previous AGM and shareholders approved his re-appointment. Further, Mr. Uttam Tibrewal, Whole-Time Director & Deputy CEO of your Bank shall retire by rotation at the ensuing AGM and being eligible for reappointment, offers himself for re-appointment.
Except as aforesaid, no other change took place in the Board or in Key Managerial Personnel
("KMP") of your Bank. The composition of the Board and Key Managerial Personnel of your Bank is in compliance with the applicable regulatory norms.
All the Directors of your Bank have confirmed that they satisfy the fit and proper criteria as prescribed under the applicable regulations and that they are not disqualified from being appointed as directors in terms of Section 164(2) of the Act. Further, none of the directors have been debarred from holding office as director by virtue of any order of the SEBI or any other authority.
V. Directors and Officers Liability Insurance Policy
Your Bank has a Directors and Officers Liability Insurance Policy which protects Directors and Officers of your Bank for any breach of fiduciary duty. Further, the Board is apprised about the insurance coverage under the said policy annually.
M. Code of Conduct for Directors and SMPs
I n accordance with Regulation 17(5) of the Listing Regulations, your Bank has formulated and adopted a Code of Conduct ("Code"), for Directors and SMPs, duly approved by the Board. This Code sets forth the guiding principles for ethical, transparent, and responsible conduct expected from the Directors and SMP, including (KMPs), thereby reinforcing a culture of fairness, integrity, and accountability within the organization.
All Directors and SMPs have affirmed compliance with the Code for the financial year 2024-25. A declaration to this effect, signed by the Managing Director & CEO, forms part of the Report on Corporate Governance, annexed to the Board's Report as Annexure-i. The Code is available on the Bank's website at https:// www.aubank.in/investors/secretarial-policies.
N. Number of Meetings of Board
During the period under review, a total of eleven (11) Board Meetings were convened, with none exceeding the mandated 120-day interval as mandated under the provisions of the Act read with rules made thereunder, Secretarial Standard-I issued by the Institute of Company Secretaries of India ("ICSI"), and Listing Regulations. The dates of these meetings, along with attendance details for each Director, have been comprehensively disclosed in the Report on
Corporate Governance annexed as Annexure-i to the Board's Report.
O. Committees of the Board
Your Bank recognizes the significance of Board Committees in fostering strong Corporate Governance practices. Accordingly, your Bank has constituted various Board Committees to enhance the effectiveness & efficiency of the Board and assist in decision-making processes. These Committees have been formed in compliance of provisions of the Act and relevant rules made thereunder, Listing Regulations, BR Act, RBI Circular & Guidelines, Articles of Association of your Bank and other pertinent guidelines/circulars issued from time to time.
The details of the Board Committees of your Bank including, re-constitution, their terms of reference, number & date of meetings held during FY 2024-25 and attendance thereof are disclosed in the Report on Corporate Governance annexed with Board's Report as Annexure-i.
P. Meeting of Independent Directors
As per the requirement of Section 149(8) read with Schedule IV of the Act and Regulation 25 of the Listing Regulations, a meeting of the Independent Directors of your Bank is required to be held at least once a year in absence of non-independent directors and members of the management.
During the year under review, two (2) meetings of your Bank's Independent Directors were convened on April 23, 2024, and June 26, 2024 chaired by Mr. M. S. Sriram and Mr. H.R. Khan, respectively. These meetings were attended exclusively by the Independent Directors, without the presence of any other members of the Board or management. A range of matters were deliberated upon and reviewed during these meetings including the following:
Action taken report of previous meeting of Independent Directors.
The quality, quantity, and timeliness of flow of information between the management of your Bank and the Board that is necessary for the Board to effectively and reasonably perform their duties
Whether adequate time is spent by the Board/ Committees on discussions on important issues.
Performance of Non-Independent Directors, the Board as a whole, Chairperson of your Bank.
Q. Familiarisation Programme for Independent Directors
In accordance with Regulation 25(7) of the Listing Regulations and RBI guidelines, your Bank conducts familiarisation programme for all its Directors including Independent Directors.
These familiarisation programmes are conducted through a combination of experts from your Bank and/or external agencies having in-depth expertise in various areas, taking into account the business requirement of your Bank, and the existing skill sets of the Directors. Such sessions enable the Directors to obtain an insight on contemporary matters and changes therein.
The Details of familiarisation programme and other sessions organised for Independent Directors during FY 2024-25 is disclosed in the Report on Corporate Governance annexed with Board's Report as Annexure-i and on the website of your Bank under Disclosures under Regulation 46 of the LODR.
R. Declaration of Independence
In accordance with provisions of Sections 149(6) and 149(7) read with Schedule IV of the Act and Regulation 16(1)(b) and 25(8) of the Listing Regulations, your Bank has received necessary declarations/disclosures from all the Independent Directors confirming that they meet and comply with the criteria of independence.
Pursuant to the Companies (Creation and Maintenance of Databank of Independent Directors) Rules, 2019 read in conjunction with the Companies (Appointment and Qualifications of Directors) Rules, 2014, the Independent Directors of your Bank have successfully registered their names in the online databank of Independent Directors maintained & administered by the Indian Institute of Corporate Affairs ("IICA"). The Independent Directors have also confirmed that they were not aware of any circumstance or situation which existed or may be reasonably anticipated, that could impair or impact their ability to discharge their duties with an objective independent judgement and without any external influence.
In the opinion of Board, the Independent Directors possesses requisite domain knowledge, experience, expertise, integrity, and proficiency as required under the Code applicable for Independent Directors as stipulated under Schedule IV of the Act and in terms of the policy of your Bank.
S. Compensation Policy for appointment and remuneration of Director's, KMP, SMP, Material Risk Takers (MRTs) and Control Function Staff
Your Bank has formulated and adopted a comprehensive Compensation Policy for appointment and remuneration of its Directors, Key Managerial Personnel ("KMP"), Senior Management Personnel ("SMP"), Material Risk Takers ("MRT") and Control Function Staff on the recommendation of the NRC, in compliance with the provisions of Section 178(3) of the Act read with relevant rules made thereunder, Listing Regulations and RBI guidelines.
The policy governs the appointment and remuneration of Directors (including Independent Directors), KMP, SMP, MRTs and Control Function staff as applicable in accordance with the criteria established by the NRC of the Board as mandated by the Act and applicable Rules, Listing Regulations, and other relevant guidelines.
Key objectives of the policy include establishing standards for compensation, including fixed and variable pay, retaining and motivating talent, defining internal guidelines for reimbursement to Directors and KMPs, institutionalising a mechanism for appointment/removal/evaluation of performance of Directors, administering ESOP as per SEBI regulations and ensuring compliance with applicable laws, rules, and regulations as well as 'Fit and Proper criteria' of directors for their appointment.
The policy undergoes regular review by the Board in addition to the other amendments that may be required in the policy and is hosted on the Bank's website https://www.aubank.in/investors/ secretarial-policies.
The terms of reference of the NRC and details of Compensation Policy are covered in Report on Corporate Governance annexed with Board's Report as Annexure-i.
T. Evaluation of the Directors, the Board and Committees
The provisions of Section 149(8) read with Schedule IV, Section 178(2) of the Act, Regulation 17 and other applicable Regulations of the Listing Regulations, and Guidance Note on Board Evaluation issued by the SEBI, mandates the performance evaluation of the Board, its committees, individual directors and the Chairperson of your Bank on the basis of various parameters with the aim to improve the effectiveness of the individual Director, Committees and the Board.
Board evaluation is a vital aspect of corporate governance that enhances the effectiveness of the Board by identifying strengths and areas for improvement and promotes transparency and accountability. Your Bank has structured process in place for Board performance evaluation which is conducted annually. The evaluation is conducted based on a comprehensive framework reviewed and approved by the NRC.
The Performance evaluation of the Board, its Committees, Chairperson, Independent Directors, Executive and Non-Executive Director is evaluated after seeking inputs from all the Directors on the basis of criterias prescribed under guidance note on Board Evaluation issued by SEBI which inter alia covered the following aspects:
Board as a Whole: Assess structure of Board, effectiveness of Board meetings, functions of Board and level of independence of the management from the Board
Board Committees: Review composition, size and scope of work, quality of deliberations, timeliness, and expertise.
independent Directors: Evaluate participation, Assesses independence, contribution to discussions, fulfillment of functions, management oversight, and shareholders' interest.
Chairperson: Focus on contribution in meetings, strategic input, integrity, collaboration and governance oversight.
Executive Directors: Measure strategic
execution, commitment, operational leadership, accountability, performance, value creation, Governance & Compliance.
Non - Executive Director: Evaluate Knowledge & Participation, contribution to discussions, fulfillment of functions, Impartial approach and shareholders' interest.
Details of Board performance evaluation carried out for FY 2024-25 including methodology used, its outcome and proposed recommendations for implementation in the upcoming financial year, are covered under Report on Corporate Governance, forming part of this Board's report as Annexure-i.
U. Statutory Auditors and their Report
In consonance with the 'Guidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory
Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs)' dated April 27, 2021 issued by RBI, Banks are required to
appoint Statutory Auditors for a continuous period of three (3) years, subject to the audit firms meeting eligibility criteria annually and obtaining RBI approval on an annual basis.
At the 29th AGM of your Bank held on July 26, 2024, M/s. M S K A & Associates, Chartered Accountants (FRN: 105047W) and M/s. Mukund M Chitale & Co., Chartered Accountants (FRN: 106655W) were
appointed as Joint Statutory Auditors for a period of Three (3) years to hold office from the conclusion of the 29th AGM till the conclusion of the ensuing 32nd AGM, subject to RBI approval on an annual basis.
M/s. M S K A & Associates, Chartered Accountants and M/s. Mukund M Chitale & Co., Chartered Accountants, Joint Statutory Auditors of your Bank, have provided audit report on the financial statements for the FY 2024-25, with no qualifications, reservations, or adverse remarks. Further, in accordance with Section 143(12) of the Act, the auditors have not identified any instances of fraud within your Bank by its officers or employees.
The SAs have confirmed their eligibility in adherence to Section 141 of the Act and the guidelines issued by the RBI from time to time. Moreover, pursuant to the relevant provisions of Listing Regulations, the SAs have also confirmed their adherence to the peer review process as mandated by the Institute of Chartered Accountants of India ("ICAI"). The SAs also possess a valid certificate issued by the Peer Review Board of ICAI, ensuring their competence and professionalism in their field.
V. Secretarial Auditors and their Report
The Board of your Bank, on the recommendation of the Audit Committee, had appointed M/s. V. M. & Associates, Company Secretaries (Registration No. P1984RJ039200 & Peer Review Certificate No.: 5447/2024) to conduct the Secretarial Audit of your Bank for the financial year 2024-25.
The Secretarial Auditors have not reported any instance of fraud in accordance with Section 143(12) of the Act during the year under review and their report does not contain any qualification, reservation, or adverse remark for the financial year 2024-25. The Secretarial Audit Report for the financial year 2024-25 in form MR-3 is annexed with Board's Report as Annexure-iV.
Further, in compliance to the provisions of Section 204 of the Act read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Regulation 24A of Listing Regulations read
with SEBI Circular No. SEBI/HO/CFD/CFD-PoD-2/ CIR/P/2024/185 dated December 31, 2024 and upon recommendation of the Audit Committee, the Board of your Bank, subject to the approval of the shareholders of your Bank at the ensuing Annual General Meeting, have approved the appointment of M/s. Mehta & Mehta, Company Secretaries (Registration No. P1996MH 007500 & Peer Review Certificate No.:3686/2023), as the Secretarial Auditors of your Bank to conduct the audit of the secretarial records for a period of five (5) consecutive years starting from the Financial Year 2025-26 till the Financial Year 2029-30.
W. Particulars of Loans, Guarantees and Investments
Pursuant to the provisions of Section 186(11) of Act, the provisions of Section 186 of the Act except sub- section (1), do not apply to loans made, guarantees given or securities provided or acquisition of securities by a Banking company in the ordinary course of business and are exempted from disclosure requirement in the Annual Report.
However, the particulars of investments made by your Bank are disclosed in Schedule 8 of the Financial Statements for FY 2024-25, forming part of this Annual Report, as per the applicable provisions of BR Act.
X. Related Party Transactions
During FY 2024-25, your Bank did not engage in any material significant transactions with related parties that could potentially create conflicts of interest between your Bank and these parties. All related party transactions conducted throughout the year were carried out at arm's length basis and in the normal course of business operations.
The Audit Committee has accorded omnibus approval for related party transactions which are of a repetitive nature and entered in the ordinary course of business. Further, the Audit Committee of your Bank reviewed details of all related party transactions entered by your Bank on quarterly basis.
As per Section 134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules, 2014, there are no related party transactions that are required to be reported in form AOC-2. The requisite disclosure has been made under Schedule 18 of the notes forming part of audited financial statements for the financial year ended March 31, 2025.
The Policy on Related Party Transactions and Materiality as approved by the Board can be accessed on the website of your Bank at https://www.aubank. in/investors/secretarial-policies.
Y. Material Changes and Commitments, if any, affecting the Financial Position of Bank
There were no material developments/changes/ commitments affecting the financial position of your Bank which have occurred after March 31, 2025, till the date of this report
Z. Conservation of Energy, Technology Absorption & Foreign Exchange Earnings and Outgo
Your Bank remains deeply committed to environmental sustainability, consistently advancing initiatives aimed at reducing its carbon footprint. By leveraging digital technologies and implementing targeted emission- reduction strategies across its operations, your Bank continues to foster eco-conscious practices and contribute meaningfully to a greener future.
(a) Conservation of Energy
Steps taken or impact on conservation of energy, utilising alternate sources of energy and capital investment on energy conservation equipments:
Your Bank is committed to environmental sustainability and is actively reducing emissions through digital solutions and adopting low-carbon innovations, like exploring zero-carbon electricity for Banking operations. Your Bank has implemented a three-tiered strategy for energy conservation:-
1. Energy Efficiency Measures
Encouraging green plants and gardens on Bank's premises to lower air conditioning needs and keeping AC temperatures at 25?C or higher.
Engaging in performance-based contracts for energy savings.
Replacing conventional lighting with energy-efficient LED fixtures.
Using timers for signage to optimise energy usage.
Installing power factor systems in electrical panels for efficient electricity use and implementing power factor corrections.
2. Technology Upgrades
Deploying an i-Touch manager for efficient monitoring and control of electricity usage, leading to reduced consumption.
Using Variable Refrigerant Volume (VRV) based Chillers to cut down on energy usage in ACs By upto 20%.
Employing insulation to minimise heat load in offices, reducing the reliance on air conditioning.
Using UPS and inverters to reduce reliance on diesel electricity generators.
3. Renewable Energy, Recycling and Resource Optimization
Recognising the importance of renewable energy for a cleaner future, your Bank has installed a 1 MW solar plant.
The solar project is situated in Gajner Site, Bikaner district, Rajasthan, and serves Jagatpura, Malviya Nagar, and Tonk Road offices at Jaipur, Rajasthan.
This project is expected to generate 1.6 million units annually, contributing significantly to reducing carbon footprint and supporting global sustainability goals.
Recycling systems and supplies: Your Bank also practices highly efficient management methods to refurbish aging IT systems. This is carried out to avoid sending hazardous materials into huge landfills and scaling down the load on already overburdened junkyards.
Your Bank also employs a coherent system of recycling slightly older IT systems by assigning them to the staff that does not need to perform heavy data processing on their system. By doing so, your Bank successfully reduces the demand for new desktops and laptops even with the growing workforce.
Other initiatives
Green Building: Natural Sunlight is maximised through Green Building design in Offices to the extent possible to reduce reliance on artificial lighting to the extent possible.
Green building encompasses environmentally responsible and resource-efficient practices throughout a building's life cycle, from planning to demolition. It expands on traditional building concerns of economy, utility, durability, and comfort by prioritising energy, land, water, and material savings while reducing pollution and
promoting harmony with nature. Bank's office at Sanpada, Mumbai, achieved a "Gold" rating in IGBC's Existing Green Interior Category, showcasing a commitment to indoor environment quality, sustainable materials, energy efficiency, water conservation, and eco-design principles. This achievement reflects your Bank's dedication to environmental responsibility and sets a standard for future branches nationwide.
(b) Technology Absorption
I) The efforts made towards Technology absorption:
1. AU 0101 App: AU 0101 App feature enables customer access to Bank from anywhere, which contributes to reducing carbon footprint and seamless video banking enables customers to avail Banking services virtually through a video enabled chat with branch executives, eliminating the need to travel to the branch. The 'AU 0101' retail Internet and mobile banking application and platform have been successfully migrated to AWS's private cloud, ensuring high availability, scalability, and security. Even during peak traffic periods, the system remains responsive and reliable, seamlessly meeting customer demands. In FY 2024-25, ~53% term deposits were booked via AU 0101 app and contributing to ~22% of overall term deposits mobilized.
2. Digital Banking: Your Bank has significantly advanced its digital banking capabilities, making banking more convenient and paperless. Over 90% of deposit accounts are now opened digitally, primarily through Tab and Video Banking. The platform is expanding to support end-to-end onboarding for various products, including loans, credit cards, insurance, and wealth services.
Your Bank witnessed strong growth in the adoption of tab-based account opening, mobile banking, WhatsApp banking (24/7 banking solutions), and Net banking, thus minimising paper usage, reducing waste generation, and achieving improved waste management.
3. Video Banking: This service helps Customers to connect with Video Bankers on real time basis at Customer's convenience from home. Customer can open account, book FD, and much more. Bank provides video banking facility with a vision to offer all its services virtually through video-enabled chat with branch executives, eliminating the need for branch visits. This
initiative helped your Bank twofold in promoting digital banking and inspiring its customers to adopt a more environmentally sustainable banking channel and saving of fuel by reducing commutation challenges.
4. Tab Onboarding Journey: This service enables bank staff to onboard customers using digital platform which helps with increased speed and efficiency by reducing time for document verification and data entry. Customers appreciate the convenience and accessibility of online onboarding, Tab based onboarding platform incorporates security measures like encryption and biometric authentication. In FY 2024-25 ~80% of the accounts were processed using Tab banking. In FY 2025-26, Tab banking journey has moved to a new platform to ensure faster TAT through seamless activation, robust mule account detection modules and co-originated offerings like Term Deposit, Mutual Fund, Insurance and Demat at the point of onboarding.
5. Embracing E-receipts Culture: Bank encourage customers to choose electronic receipts at ATMs, and send them a detailed SMS on their most recent transaction and Bank balance to their registered mobile number to reduce paper usage. Bank also collaborated with the transport department of Haryana to automate the ticketing process, allowing for the conservation of natural resources.
6. Automate Energy data collection: This is an application of digital technologies for energy data collection. Bank has replaced manual way of data collection from its various sites and automated data collection through ERP software.
Energy accounting and reduction have a major effect on emissions as an enabler in accelerating clean energy transitions. The system is helping your Bank to cut costs, improve efficiency and resilience, and reduce emissions.
7. Cloud computing & storage: Cloud infrastructure modernizes your Bank's operations by:
Enhancing scalability and resiliency
Supporting load sharing
Reducing operational costs
Improving environmental sustainability
through reduced physical infrastructure needs
II) The benefits derived like product improvement, cost reduction, product development or import substitution:
Your Bank delivers products and services that promote sustainable development and conduct its business in a fair and professional manner. A proper structure and process is available which facilitates incorporating risk criteria in the product development and approval process. Your Bank is continuously taking various steps on product improvement. Your Bank has implemented an upgraded version of ITAM tool (IT asset management tool). This tool will manage all Bank's IT assets life cycle i.e. from procurement to scrap and disposal of asset, for pan India banking operations. Highly efficient use of technology through software helps save time, improve efficiency, reduce costs, improve productivity, make institution more agile and enhances the information security.
Embracing the transformative power of robotics, your Bank has automated over 100 processes through Robotic Process Automation (RPA). This strategic move not only reduces manual intervention but also underscores Bank's dedication to technological excellence and continuous improvement.
In terms of AD-1 applications, your Bank has implemented the Kondor Treasury Application to enhance financial efficiency and global connectivity. This state-of-the-art solution streamlines interbank trading processes by automating tasks, improving accuracy, and enhancing risk assessment. Additionally, Bank has enabled secure interbank transactions in USD via SWIFT. The SWIFT network ensures reliable and efficient cross-border financial transactions. Leveraging SWIFT's standardised messaging system, we have fostered international trade and facilitated seamless USD transactions.
Your Bank is investing in initiatives and innovations to build a digital gateway to a sustainable lifestyle. Your Bank's investments in digital technologies have simplified banking and enabled a smoother customer journey. In addition, a robust technology platform has been created by your Bank as a part of the new-age digital banking ecosystem.
III) In case of imported technology (imported during the last three years reckoned from the beginning of the financial year):
a) The details of technology imported: Nil
b) The year of import: Nil
c) Whether the technology been fully absorbed: Nil
d) If not fully absorbed, areas where absorption has not taken place, and the reasons thereof: Nil
IV) Expenditure incurred on Research and Development:
Since financial services is being primarily covered under service Sector, the details of this clause are not applicable to your Bank.
(c) Foreign Exchange Earnings and Outgo
During the financial year ended March 31, 2025, the foreign exchange earnings was H76.51 Crore and the foreign exchange outgo was H44.02 Crore.
AA. Risk Management
Your Bank operates within a robust Enterprise Risk Management Framework aligned with its risk appetite, ensuring proactive identification, assessment, mitigation, and monitoring of risks. A multi-layered governance model based on the three- lines-of-defense principle supports prudent risk oversight. Your Bank has institutionalized a strong risk culture and governance structure, driven by Board- approved policies, a defined risk appetite statement, and continuous risk assessment. Key risks monitored include credit, operational, market, liquidity, fraud, compliance, cyber security, and emerging risks such as climate and data privacy. Technology-enabled tools and automated reporting enhance real-time risk monitoring and portfolio oversight. The Board, supported by the Risk Management Committee (RMC) and other specialized committees, oversees the risk governance process. The Chief Risk Officer, reporting independently to the RMC, plays a central role in managing risk areas and aligning risk strategy with business objectives. The Internal Capital Adequacy Assessment Process (ICAAP) and stress testing further strengthen your Bank's resilience and capital planning.
Credit Risk Management
Credit risk arises from a borrower's failure to meet contractual obligations. Your Bank mitigates this through robust underwriting standards, portfolio monitoring, early warning systems, and defined risk limits aligned with business strategy. Credit risk is managed through a comprehensive policy framework, with oversight by the Credit Risk Management Committee ("CRMC"), which monitors large exposures, asset quality, and portfolio concentration.
Operational Risk Management
Operational risk stems from failures in internal processes, systems, or external events. Your Bank follows a three-lines-of-defense model, with the Operational Risk Management Department (ORMD) implementing the framework and the Operational Risk Management Committee ("ORMC") overseeing it. Fraud risk is addressed through a dedicated Risk Containment Unit and monitored by the Special Committee of the Board for Monitoring and Follow up of Cases of Fraud ("SCBMF"). Continuous enhancements in systems and controls ensure resilience, especially in digital banking.
Outsourcing Risk
Your Bank manages outsourcing risk through Board- approved IT and financial outsourcing policies, aligned with RBI guidelines. The Committee for Outsourcing of IT and Financial Services oversees vendor risk, ensuring due diligence, monitoring, and compliance with risk management standards.
Business Continuity Management (BCM)
Your Bank has a comprehensive BCM framework to ensure continuity of critical operations during disruptions. This includes disaster recovery sites, regular BCP drills, and emergency response plans. The ORMD coordinates BCM efforts across units, ensuring preparedness and resilience.
Market Risk, Liquidity Risk & Asset Liability Management
Your Bank manages market risk arising from investments, trading, and forex positions through a Board approved framework that includes defined limits, benchmarks, and analytical tools to optimize risk-adjusted returns. Liquidity risk, the inability to meet funding obligations, and the same is mitigated through robust fund planning, daily liquidity monitoring, and adherence to internal thresholds which are stricter than regulatory norms. The Asset Liability Management Policy outlines a comprehensive governance structure for managing market, interest rate, forex, and liquidity risks. The Asset Liability Management Committee ("ALCO") oversees risk identification, measurement, and compliance with internal and regulatory limits, ensuring resilience under normal and stressed conditions.
Information Security Risk Management
Your Bank has implemented a robust cyber and information security framework to safeguard its IT infrastructure and customer data against evolving threats such as phishing, malware, and system vulnerabilities. Governed by Board approved policies overseen by the Chief Information Security Officer (CISO), the framework includes real-time monitoring
via a Cyber Security Operations Centre, layered security controls, and adoption of next-gen solutions. Your Bank follows a People-Process-Technology (PPT) model, emphasizing employee training, defined procedures, and advanced technologies. Awareness campaigns are conducted regularly to educate customers on cyber fraud prevention and safe banking practices.
Reputation Risk Management
Reputation risk is managed through strong governance, ethical conduct, and transparent stakeholder engagement. Your Bank monitors reputational exposure via its ICAAP and a Reputation Risk Index (RRI). Senior management and the Board ensure zero tolerance for misconduct and uphold high standards of integrity. Regular communication with stakeholders and adherence to Bank's values and Code of Conduct help preserve and enhance its reputation.
Compliance Risk Management
Your Bank manages compliance risk through a robust framework guided by its Board-approved Compliance Policy and KYC/AML Policy, aligned with RBI regulations and the Prevention of Money Laundering Act. A dedicated Compliance Department ensures adherence to applicable laws, monitors regulatory developments, and reports regularly to senior management and the Audit Committee. Your Bank emphasizes a strong compliance culture, supported by regular training and policy reviews to stay aligned with evolving regulatory expectations.
Emerging Risks
Data Privacy: Your Bank ensures compliance with the applicable data privacy guidelines through multi-layered data protection controls and regular threat assessments.
Cybersecurity & Fraud Risk: A next-gen
cybersecurity framework, supported by AI/ML- based fraud detection and a multi-tier governance structure, safeguards IT infrastructure and customer data.
Climate Risk: Through its Sustainability Policy and Green Fixed Deposit Policy, your Bank addresses climate-related risks and promotes green financing initiatives like green loans and Planet First - Green Fixed Deposits, with third- party validation and audits.
Social Media Risk: Your Bank actively monitors and mitigates reputational and operational risks from social media through external partnerships and real-time surveillance of digital platforms.
AB. Corporate Social Responsibility
Over the past seven years, your Bank has upheld a consistent and purpose-driven approach to its Corporate Social Responsibility (CSR) initiatives, addressing socio-economic challenges through inclusive and transformative CSR programs. These efforts aim to build skills, nurture talent, and create pathways for self-reliance. Rooted in Bank's foundational commitment to reach the unreachable and serve the underserved, CSR initiatives are centered around three core pillars:
Skill Development with Job Placement Support
Sports Training and Talent Development
Women Empowerment through Entrepreneurship
Beyond these focus areas, your Bank also supports broader social development initiatives in healthcare, safe drinking water, road safety, environmental conservation, water resource management and promotion of art & culture among others.
Each initiative reflects your Bank's mission to uplift communities and contribute meaningfully to the vision of Viksit Bharat. As your Bank continues its journey of social transformation, it remains deeply committed to enabling long-term, sustainable change ensuring that beneficiaries experience lasting impact and they progress toward a more equitable society.
The terms of reference of the CSR Committee are outlined in the Report on Corporate Governance annexed as Annexure-I. The disclosures required to be given under Section 135 of the Act read with Rule 8(1) of the Companies (Corporate Social Responsibility Policy) Rules, 2014 and Companies (Corporate Social Responsibility Policy) Rules, 2021, in the prescribed format has been appended herewith as Annexure-II. The CSR Policy is also available on the Bank's website at https://www.aubank.in/investors/ secretarial-policies.
AC. Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013
Your Bank maintains a zero-tolerance policy towards any form of harassment, reinforcing its commitment to fostering a workplace culture rooted in respect, dignity, and inclusivity. Your Bank is dedicated to ensuring a safe, prejudiced-free environment where employees can work without fear of bias or misconduct.
In alignment with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Policy on Prevention and Redressal of Sexual Harassment at the Workplace, your Bank has constituted three level Internal Committees (Branch,
Regional & Central) to address complaints promptly and impartially. These committees are empowered to conduct thorough independent and fair inquiries, ensuring justice and accountability. Your Bank has also implemented mandatory training and awareness programs to educate staff on respectful workplace behavior and the procedures for reporting and addressing grievances.
Detailed information regarding your Bank's commitment to prevent and address sexual harassment along with summary of cases is provided in the Report on Corporate Governance as Annexure-i to the Board's Report.
AD. Compliance with Maternity Benefit Act 1961
Your Bank has adhered to all applicable provisions of the Maternity Benefit Act, 1961, ensuring full compliance with statutory requirements.
AE. Subsidiary, Joint Ventures & Associate Companies
Your Bank does not have any subsidiary, joint ventures & associate companies. Hence, the details of this clause are not applicable to your Bank. Accordingly, Bank is also not required to formulate a specific policy on dealing with material subsidiaries.
AF. Material Orders Passed by Regulators or Courts or Tribunals
During the FY 2024-25, no material orders have been passed by the Regulators/ Courts/ Tribunals which would impact the going concern status of your Bank and its future operations.
AG. Internal Financial Control & their Adequacy
Your Bank has instituted a strong internal financial control framework, thoughtfully aligned with its defined risk appetite and tailored to the size, scale, and complexity of its operations. The scope and authority of the risk-based internal audit function are clearly articulated in the Board-approved Internal Audit Policy.
The audit function plays a pivotal role in ensuring that your Bank's processes and operations adhere to regulatory guidelines, accounting standards, and internal rules and guidelines of your Bank. This function offers an impartial evaluation of the quality and effectiveness of your Bank's internal control, risk management, and governance systems to provide assurance to the Board and Audit Committee.
During the year under review, your Bank's internal control systems were found to be adequate and
operating effectively. Additionally, the Joint Statutory Auditors expressed their opinion on the adequacy and operational effectiveness of your Bank's internal controls over financial reporting, as required under the applicable provisions of the Act. This opinion can be referred to in the Auditor's Report attached to the audited financial statements for FY 2024-25 forming part of this Annual Report.
AH. Cost Records
Being a Banking company, provisions of Section 148(1) of the Act, relating to maintenance of cost records is not applicable to your Bank.
AI. Corporate Governance
The governance structure of your Bank is designed to ensure that your Bank is managed in the best interests of all its stakeholders, including regulators, depositors, customers, employees, shareholders, and all other stakeholders while maintaining effective risk management and compliance with applicable laws and regulations. The Corporate Governance has been an integral part of the way the Bank has been operating since inception. The Bank believes that good Corporate Governance emerges through the implementation of best management practices, strict adherence to laws and regulations, and a commitment to transparency and ethical conduct.
Your Bank is dedicated to constantly refining its governance and assurance practices by benchmarking itself against the global best practices. The Bank is committed to have a top-notch Governance and assurance framework in place, and it constantly works to enhance its Risk Management, Compliance, and Audit practices.
Key aspects of these functions, along with recent initiatives, are integral to the Bank's commitment to excellence in governance which inter alia include:
1. Risk Management:
Your Bank has designed comprehensive Enterprise Risk Management framework to protect the organization as well as the interests of all major stakeholders. The risk governance is driven by a risk appetite statement, well-articulated policies for effective risk management, and a robust risk management structure. The Bank continuously carry out the risk assessment and ensure compliance to the internal/ regulatory limits along with periodic review, monitoring and submission of the key reports to relevant management and Board committees. Adherence to the framework ensures a structured and systematic approach to risk management that is crucial for the calibrated growth of the Bank. Since your Bank operate
in underserved segments and accordingly it has evolved its risk management practices to mitigate and manage the associated risks.
The responsibility for executing key risk management activities has been entrusted to the Board Delegated Committees (Executive Committees), including the Credit Risk Management Committee, ORMC, ALCO, Asset Liability Management Committee, IT Steering Committee, and Information Security Committee. Risk management is a top priority for your Bank, with a strong framework in place to address potential risks. The Bank's risk management philosophy and approach are centered on safeguarding the interests of customers and investors, as well as preserving your Bank's reputation and financial stability.
2. Compliance Function:
Compliance is a key pillar of your Bank's governance framework and it is designed to ensure adherence to all regulatory requirements (in letter and spirit) and foster a robust compliance culture across the organization. In order to cultivate the right tone for compliance, the function consistently seeks guidance from the Board and its committees. It engages with internal stakeholders through both structured and informal meetings to effectively communicate the necessary compliance standards.
As a technology-driven Bank, it has embedded regulatory requirements in a digitalized processes/workflows to ensure full compliance and have invested in various advanced systems and technological solutions. Further, to strengthen its efforts, the Compliance Function has adopted several initiatives, including:
(i) Compliance Sustenance Framework
(ii) Compliance Self Certification
(iii) Enhancing the Product Approval Process
(iv) Quality Assurance and Improvement Programme (QAIP)
3. Internal Audit Function:
The Internal Audit function is the guardian of your Bank's governance framework. It adheres to a risk-based audit approach outlined in your Bank's Risk Based Internal Audit Policy. This function independently assesses the adequacy and effectiveness of your Bank's internal control and risk management frameworks and processes to provide objective assurance to your Bank's Board/ Committees, senior management, and the regulator.
Further, the Internal Audit function is resp for formulating, implementing and mo your Bank's audit plan. Based on the conducted, it highlights relevant findir continuously monitors, validates, and rep the progress of remediation actions. Addi while maintaining objectivity and indepe the Internal Audit function also offers a services, which aim to enhance governan management, and control processes.
The Report on Corporate Governan FY 2024-25 along with certificate iss M/s. V. M. & Associates, Company Sec confirming the compliance to ap requirements related to corporate gov as stipulated under Chapter IV of the Regulations, is annexed with Board's Re Annexure-i.
AJ. Business Responsibility and Sustair Report & Sustainability Initiatives
In terms of Regulation 34(2)(f) of the Regulations, top 1000 listed entities based < market capitalization as on December 31, eve are required to submit Business Responsibi Sustainability Report ("BRSR"), as a part annual report. In the BRSR disclosures on perfc against the nine principles of the 'National Gu on Responsible Business Conduct' (NGRB reported wherein each principle is divid essential and leadership indicators.
SEBI has further mandated the top 15( companies (by market capitalization) to un an assessment or assurance of the BRSR Co financial year 2023-24 and for top 250 listed cor from the financial year 2024-25 subsequen BRSR Core is a sub-set of the BRSR, consisting of Key Performance Indicators (KPIs) / metric 9 ESG attributes. Considering market capitaliz the Bank, the requirement of BRSR and asse or assurance of the BRSR core for the FY 20 applicable on your Bank.
Accordingly, the Bank's BRSR for FY : along with the Independent reasonable as statement on BRSR core disclosures from India Private Limited, is annexed with Board's
Your Bank has Board level Sustainability Com chaired by Independent Director. This comn responsible for decision-making on susta related issues. The composition, terms of re and meeting details of the Sustainability Com are included in Report on Corporate Gov annexed with Board's Report as Annexure-i.
it has initiated need based several environmental and social initiatives for the benefit of its stakeholders.
AK. Particulars of Employee Remuneration
As per Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rule, 2014, the ratio of the remuneration of each Director to the median employee's remuneration and other details is annexed with Board's Report as Annexure-iii.
Additionally, the statement containing employee particulars required by Section 197(12) of the Act and Rule 5(2) and Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, is a part of this report. Pursuant to Section 136(1) of the Act, the annual report has been sent to Members without the aforementioned statement, which can be inspected at the registered office of your Bank up to the date of the AGM. Members interested in obtaining a copy of the Annexure may request it from the Company Secretary of the Bank at investorrelations@aubank.in
AL. Management Discussion and Analysis
The Management Discussion and Analysis Report for the FY 2024-25 is included as a separate section within the Annual Report, as required under Regulation 34(2)(e) and Schedule V of the Listing Regulations.
AM. Annual Return
The draft Annual Return for the financial year ended on March 31, 2025 in the prescribed form MGT-7, as required under Section 134(3)(a) and Section 92(3) of the Act, can be accessed on the Bank's website at https://www.aubank.in/other-reports
AN. Whistle-Blower Policy & Vigil Mechanism
Your Bank values reliability, fairness and equality which form foundation for all the decisions taken and believes in conducting its affairs in a fair manner to build customer trust and confidence and ensure customer delight. Your Bank encourages its employees, all stakeholders and members of general public, who have concerns about suspected misconduct, to come forward and express these concerns without fear of retaliation or unfair treatment.
A Whistle-Blower Policy in Banking Institutions is crucial for fostering transparency, accountability, and ethical behavior within the organisation. Your Bank has implemented Whistle-Blower Policy & Vigil Mechanism in pursuance of the provisions of Section 177(9) of the Act read with the rules made thereunder and Regulation 4(2)(d) and Regulation 22 of the Listing Regulations, which aims at establishing
an effective vigil mechanism in your Bank to quickly spot aberrations and deal with it at the earliest.
The Whistle-Blower Policy provides a safe and confidential avenue for employees to report any potential misconduct or fraudulent activities without fear of retaliation. This Policy includes adequate safeguards against the victimisation of individuals who avail this mechanism ensuring they have direct access to the Chairman of the Audit Committee. None of your Bank's personnel has been denied access to the Audit Committee of your Bank.
The policy can be accessed on the website of the Bank at https://www.aubank.in/investors/ secretarial-policies and further details have been provided in the Report on Corporate Governance forming part of this Board's Report as Annexure-i.
AO. Anti-Bribery and Anti-Corruption Policy
Your Bank upholds a strict 'zero-tolerance approach' towards bribery, corruption, and unethical practices and is committed to conduct all its dealings and operations with professionalism, fairness, and integrity. In alignment with this commitment, your Bank has implemented an Anti-Bribery and Anti- Corruption Policy that has been approved by the Board. This policy outlines the fundamental principles for conducting Banking business in a transparent, honest, and ethical manner. The policy can be accessed on the website of the Bank at https://www.aubank.in/notice-board.
AP. Adherence to Secretarial Standard issued by the Institute of Company Secretaries of India
Your Bank has adhered to the Secretarial Standards issued by the ICSI of India on Meetings of Board and General Meetings.
AQ. Status of Ind AS Implementation
The Banks are advised to follow the Indian Accounting Standards as notified under the Companies (Indian Accounting Standards) Rules, 2015, subject to any guideline or direction issued by the RBI in this regard. 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"). 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. Your Bank had undertaken preliminary diagnostic analysis of the GAAP between Indian GAAP vis-a-vis Ind AS and shall proceed for ensuring the compliance as per applicable requirements and directions in this regard.
In FY 2023, Reserve Bank of India, through its discussion paper on "Introduction of Expected Credit Loss framework for provisioning by Banks" has proposed to adopt an expected credit loss framework based on the approach as per Ind AS 109, supplemented by regulatory backstops wherever necessary. Further, in FY 2024, the RBI issued a master direction on classification, valuation and operation of investment portfolio of Commercial Banks (Directions), 2023, which became effective from April 1, 2024. The revised master direction brings the classification and accounting of investments closer to Ind AS. Your Bank has implemented the required changes as per the master direction with effect from April 1, 2024.
Directors' Responsibility Statement
Pursuant to Section 134(3)(c) read with Section 134(5) of the Act, the Board hereby confirms that:
1. In the preparation of the annual accounts for the year ended March 31, 2025, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any.
2. We have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of your Bank as of March 31, 2025 and of the profit of your Bank for the year ended on that date.
3. We have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies
Act, 2013 for safeguarding your Bank's assets and for preventing and detecting fraud and other irregularities.
4. We have prepared the annual accounts on a going concern basis.
5. We have laid down internal financial controls to be followed by your Bank and ensured that such internal financial controls are adequate and were operating effectively.
6. We have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Acknowledgement and Appreciation
The Board extends its sincere gratitude to the Government of India, various State Governments, regulatory bodies such as RBI, SEBI, MCA, IRDAI, IBA, UIDAI, CERSAI, as well as to all the shareholders, debenture holders, esteemed Bankers, Lenders, Credit Rating Agencies, and Debenture Trustees for their unwavering support and trust in your Bank.
The Board would further like to express appreciation to BSE Limited, National Stock Exchange of India Ltd., National Securities Depository Limited, Central Depository Services (India) Limited, Registrar & Share Transfer Agent, Vendors and Service Providers for their continued support & co-operation.
Your Bank's valued customers deserve a special mention for their loyalty and continued patronage and the Board is truly grateful for the trust they have placed in your Bank.
The Board also expresses its heartfelt thanks and gratitude to each employee for their hard work, solidarity, cooperation, support and continued commitment towards your Bank and its customers. Through their commitment to strong work ethics, professionalism, teamwork, and initiatives, they have played a crucial role in enabling your Bank to continue serving its depositors and customers and maintaining Bank's customer-centric approach.
au small finance bank limited
Sd/-
Sanjay Agarwal
Managing Director & CEO
DIN: 00009526
Date: June 28, 2025
Place: Jaipur
CIN: L36911RJ1996PLC011381