Dear Members,

The Board of Directors (‘the Board') is pleased to present the 31st Annual Report of AU Small Finance Bank Limited (‘the Bank'), encompassing an overview of the Bank's operations, key financial highlights, along with the Audited Financial Statements and the Independent Auditors' Report for the financial year ended March 31, 2026.

A. Financial summary and highlights

The summary of the financial performance of the Bank for FY 2025-26 is presented below:

B. Business overview

The FY 2025-26 reflected a year of sustained macroeconomic strength, with India's growth supported by resilient domestic fundamentals despite an increasingly uncertain global environment. The most consequential shift of the year was on inflation where the headline consumer price inflation moderated sharply, easing the burden on household budgets and creating space for improved real purchasing power across income groups. The Reserve Bank of India (‘RBI') responded by delivering a series of policy rate cuts and injecting substantial durable liquidity into the system.

On the fiscal side, the Union Budget introduced direct tax relief for the middle class while sustaining the government's public capital expenditure programme, together providing a dual boost to both consumption and investment. Rural demand emerged as a bright spot, supported by a favourable monsoon, stable agricultural incomes and rising real wages, while urban consumption also recovered on the back of tax rationalisation measures. The banking sector ended the year in its strongest condition in over a decade, with non-performing assets declining to multi-decade lows and profitability improving across the system. India's improving macro credibility was also recognised internationally, with the country receiving a sovereign credit rating upgrade during the year reflecting confidence in its fiscal discipline and structural reform momentum. While global uncertainties, including geopolitical developments and energy price volatility, persisted, India's stable financial system and continued policy support enabled it to maintain a steady growth momentum.

Against this backdrop, the Bank delivered resilient and broad-based growth across its franchise, with deposits increasing by

23% year-on-year to 1,52,661 Crore and gross loan portfolio growing by 21% year-on-year to 1,40,327 Crore. The liability franchise continued to strengthen, with stable deposits constituting 79% of total deposits and cost of funds declining by

32 bps during FY 2025-26 to 6.75%, reflecting the Bank's continued focus on granularity, stability and funding efficiency. Profitability improved meaningfully during the year, with profit after tax rising by 25% year-on-year to 2,641 Crore, return on assets improving to 1.6%, and return on equity to 14.2%. Asset quality strengthened over the course of the year as stress in unsecured portfolios normalised and secured businesses saw seasonal recovery. Gross NPA improved to 2.03%, net NPA stood at 0.74%, and credit cost for FY 2025-26 moderated to 1.0% of average assets as compared with 1.3% in FY 2024-25. The Bank's asset book remained well diversified and predominantly secured, with secured retail and commercial portfolios continuing to drive growth. A major strategic milestone during the year was the Bank's progress towards transition into a Universal Bank. The Bank became the first Small Finance Bank to receive in-principle approval from the RBI for such transition, and subsequently, pursuant to the Bank's request, the condition relating to the promoter holding structure was revised so that the Non Operative Financial Holding Company (‘NOHFC') requirement would apply only if the Bank or its promoter group proposes to establish any group entity in the future. Following this, the Bank filed its application with the RBI in March 2026 for grant of the final licence for

Universal Bank transition which is subject to regulatory approvals.

The year also saw notable progress in technology-led transformation. The Bank rolled out its first agentic AI platform with embedded guardrails and control frameworks, launched the gold loan origination journey on this AI-native platform, and continued to embed AI across customer engagement, underwriting, collections, internal productivity and workflow automation. The Bank also completed the migration of the core banking system of erstwhile Fincare Small Finance Bank into AU Small Finance Bank, resulting in a unified CBS, while revamping the AU0101 app and refreshing its website to improve customer experience and scalability. During FY 2025-26, the Bank continued to deepen and diversify its distribution footprint by adding new branches and touchpoints across geographies, with a focus on deepening presence in key markets including South India and expanded product distribution significantly across key businesses such as Wheels, Mortgages and Gold Loans. As at March 31, 2026, the Bank served over 1.20 Crore customers through 2,790 touchpoints across 21 states and 4 union territories, supported by a workforce of 59,207 dedicated employees and a technology-led operating model built for scale, the Bank stands at the threshold of its most consequential chapter yet poised to grow not just in size, but in purpose and impact.

C. Dividend and dividend distribution policy

Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations') and RBI guidelines, the Bank has formulated and adopted a Dividend Distribution Policy. The Policy is designed to achieve an optimal balance between rewarding shareholders through distribution of profits and retaining sufficient earnings to support the Bank's sustainable growth and capital requirements.

In line with the aforementioned policy and considering the Bank's financial performance during the FY 2025-26, the Board at its meeting held on April 27, 2026 recommended a dividend of 10% ( 1 per fully paid-up Equity Share of 10 each) for the year ended March 31, 2026. This recommendation will be placed before the shareholders for approval at the upcoming Annual General Meeting (‘AGM') of the Bank.

Pursuant to RBI (Small Finance Banks-Prudential Norms for Declaration of Dividend) Directions, 2026, applicable from FY 2026-27, the Policy was reviewed and amended by the Board. The same can be viewed on the Bank's website at https://www.au.bank.in/investors/secretarial-policies.

In terms of the provisions of the Finance Act, 2020, dividend income is taxable in the hands of the members, and the dividend will be paid to the members by the Bank after deduction of tax at source (‘TDS') at the applicable rates.

D. Credit rating

The details of the credit rating assigned to the Bank for debt instruments issued and outstanding as of March 31, 2026, along with the outlook, are given below:

Note:

• CRISIL reaffirmed the above credit ratings of the Bank on April 2, 2025 and April 2, 2026.

• India Ratings reaffirmed the above credit ratings of the Bank on November 21, 2025.

• CARE reaffirmed the above credit ratings of the Bank on October 16, 2025 and December 1, 2025.

• ICRA reaffirmed the above credit ratings of the Bank on February 26, 2026.

• CRISIL and India Ratings withdrew the ratings assigned to the Long-Term Debt Instrument (‘ISIN: INE949L08418'), and CARE and ICRA withdrew the ratings of the Long-Term Debt Instrument (‘ISIN: INE519Q08152'), consequent to full repayment of the respective instruments.

• The above rating details can be accessed on the website of the Bank at https://www.au.bank.in/credit-rating.

E. Change in nature of business

During the year under review, there were no changes in the nature of business of the Bank.

F. Transfer to reserves

In consonance with the RBI regulations and other applicable regulations, the Bank has proposed transferring the following amounts to various reserves for the Financial Year ended March 31, 2026, as mentioned below:

G. 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 IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (as amended from time to time), all the equity shares of the 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 the demat account of the IEPF Authority.

During the year, the Bank transferred the unclaimed dividend pertaining to FY 2017-18 of 20,511.50 to the IEPF. Further,

463 corresponding shares on which dividends had been unclaimed for seven consecutive years were transferred to the IEPF. Details of the amount relating to unclaimed dividends and the dates by which such dividends can be claimed by the shareholders from the Bank are mentioned in the Report on Corporate Governance appended with the Board's Report as Annexure-I. Details of unclaimed dividends held in unpaid dividend accounts as at the end of the financial year are available on the Bank's website at https://sr.au.bank.in/unclaimed-dividend.

Details of shares/dividend transferred to the IEPF are available on Bank's website at https://sr.au.bank.in/unclaimed-share.

H. Deposits

Being a Banking company, the disclosure requirements pertaining to deposits as required under Rule 8(5)(v) and (vi) of the Companies (Accounts) Rules, 2014, read with Sections 73 and 74 of the Act and the Companies (Acceptance of Deposits) Rules, 2014 are not applicable to the Bank. The details of the deposits received and accepted by the Bank as a Banking company have been disclosed in the financial statements for the financial year ended March 31, 2026, forming part of this Annual Report for FY 2025-26.

Authorised share capital

During the period under review, there was no change in the authorised share capital of the Bank, and as of March 31, 2026, it stood at 1,200 Crore, comprising 1,20,00,00,000 equity shares of 10 each.

Paid-up capital

During the period under review, the Bank issued and allotted 37,36,590 equity shares with a face value of 10 each pursuant to the exercise of Employee Stock Options (‘ESOPs') under various ESOP Schemes. Consequently, the total issued, subscribed, and paid-up equity share capital of the Bank has increased by 3.74 Crore, and the same stood at 748.27 Crore as of March 31, 2026, comprising 74,82,67,121 equity shares of 10 each.

Non-convertible debentures (‘NCDs')

During the year, the Bank has not issued any Tier II capital, and total outstanding NCDs stood at 1,504 Crore as of March 31, 2026.

Also, the Bank has redeemed total NCDs of 600 Crore during the year under review.

Details of outstanding NCDs as on March 31, 2026 are as follows:

Capital adequacy ratio

The Bank's Capital to Risk Weighted Assets Ratio (‘CRAR') under Basel III stood at 18.68% as of March 31, 2026, which is above the RBI's minimum regulatory requirement of 15%. The Tier I Capital Ratio stood at 16.86% against the minimum requirement of 7.50%. The Tier II Capital Ratio under Basel III stood at 1.82%.

J. Employee stock option schemes

The Bank has instituted multiple Employee Stock Option Schemes, all of which have been duly approved by 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, to enable employees to participate in the Bank's long-term growth and financial success. The Bank recognises employee engagement and retention as key strategic priorities. It believes that fostering a sense of ownership among employees enhances commitment and job satisfaction, while also contributing to improved productivity and sustained organisational performance. Through these initiatives, the Bank seeks to promote 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 the Bank's performance, etc. This structured and merit-based approach has helped align employees with the Bank's long-term objectives, thereby reinforcing a culture of performance and accountability.

Following are the Employee Stock Option Schemes in force as on March 31, 2026:

• 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:

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. The term of vesting is also mentioned 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 amalgamation.

The brief details of existing ESOP schemes as on March 31, 2026 are given below:

@In terms of the 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 are deceased, 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 the ESOP Scheme 2016 was changed from a fixed price of 140 to a market-linked price, with the approval of shareholders obtained at the AGM held on July 19, 2019.

Note 1

The Shareholders, through a postal ballot on February 28, 2026, approved amendments to the AU ESOS 2023, inter alia, to increase the number of employee stock options by 3 Crore, thereby enhancing the total options pool to 5 Crore. Further, certain provisions were amended relating to the exercise of options by nominees in the event of permanent disability and by legal heirs/nominees in the event of death after retirement or superannuation.

Note 2

Note 3

The SEBI has prescribed two methods to account for stock grants: namely (i) the intrinsic value method; (ii) the fair-value method. Further, in accordance with the RBI (Small Finance Banks-Governance) Directions, 2025 [earlier RBI circular on Guidelines on Compensation of Whole Time Directors (‘WTD')/Chief Executive Officers (‘CEO')/Material Risk Takers (‘MRTs') and Control Function staff-Clarification dated August 30, 2021], Share-linked instruments granted to WTD/ CEO/ MRTs and

Control Function staff after the accounting period ending March 31, 2021, are fair-valued on the date of grant using the Black-Scholes model. The Bank had previously adopted the intrinsic value method for valuation of employee stock options granted to all employees except WTD, MRTs, and the Control Function, for whom the fair-value method was followed. With effect from April 1, 2024, the Bank adopted the fair-value method for valuation of employee stock options granted to all employees.

Had the Bank used the fair-value model to determine the compensation, its profit after tax and earnings per share as reported would have changed to the amounts indicated below:

( in Crore)

( in Crore)

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 2025-26 and are included in the annual report and also disclosed on the website of the Bank at https://www.au.bank.in/reports/disclosures.

K. The Details of the 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 the Bank. As of March 31, 2026, the Board consisted of ten Directors, including eight Independent Directors and two Executive Directors.

During FY 2025-26, the Board of Directors of the Bank underwent a structured and well-planned transition, reflecting the

Bank's continued focus on strong governance, regulatory compliance and leadership continuity.

During FY 2025-26 and up to the date of this report, the following changes occurred in the Board and KMP of the Bank.

Board of Directors

The FY 2025-26 marked an important phase of transition in the composition of the Board of Directors of the Bank, through the appointment of new Directors, re-appointment of continuing members and cessation of certain Directors during the year. This calibrated and orderly transition was undertaken through a structured process, with due emphasis on governance continuity, relevant expertise, experience, diversity of thought and alignment with the Bank's evolving strategic priorities. Based on the recommendations of the NRC and subject to requisite approvals, the Board inducted and re-appointed Directors having regard to their integrity, specialised knowledge, practical experience, expertise and alignment with the Board skill matrix.

These changes also reflected the Bank's structured approach to Board succession planning, while preserving institutional strength, continuity of oversight and effective governance.

I. Appointments

Based on the recommendation of the NRC and after due consideration of skills, expertise and experience, the Board and the shareholders approved the appointment of the following Directors, having regard to their specialised knowledge, practical experience, integrity and in alignment with the Board Skill Matrix, as set out in the Report on Corporate Governance annexed as Annexure-I.

*Appointment approved by RBI vide its letter dated April 23, 2026

II. Re-appointments

Based on the recommendation of the NRC and performance evaluation, the Board and the shareholders approved the re-appointment of the following Directors, considering their integrity, expertise, experience and sustained contribution to the Board.

*Appointment approved by RBI vide its letter dated February 12, 2026

III. Cessation

The Board of Directors and the management place on record their sincere appreciation for the valuable guidance, contribution and services rendered by the aforesaid Directors during their association with the Bank.

Key Managerial Personnel

• Mr. Vimal Jain ceased to be the CFO of the Bank with effect from September 10, 2025, due to his untimely demise.

• Mr. Gaurav Jain was appointed as the Interim Chief Financial Officer with effect from September 26, 2025 and was later appointed as the Chief Financial Officer with effect from April 27, 2026.

IV. Directors retiring by rotation

In accordance with the provisions of Section 152 of the Act, Mr. Uttam Tibrewal, the then Whole Time Director & Deputy

CEO, retired by rotation at the previous AGM and shareholders approved his re-appointment. Mr. Sanjay Agarwal, Managing Director & CEO, shall retire by rotation at the ensuing AGM and, being eligible for re-appointment, offers himself for re-appointment.

Except as aforesaid, no other change took place in the Board of Directors or in the KMP of the Bank. The composition of the Bank's Board of Directors and KMP is in compliance with the applicable regulatory norms.

All the Directors of the 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 has been debarred from holding office as a director by virtue of any order of SEBI or any other authority.

V. Directors and Officers Liability Insurance Policy

The Bank has a Directors and Officers Liability Insurance Policy which protects its Directors and Officers against any breach of fiduciary duty. Further, the Board is apprised of the insurance coverage under the said policy annually.

L. Code of Conduct for Directors and Senior Management Personnel (‘SMPs')

In accordance with Regulation 17(5) of the Listing Regulations, the Bank has in place a Code of Conduct (‘Code') for Directors and SMPs, duly approved by the Board. The Code delineates the core principles governing ethical, transparent and responsible conduct expected from the Directors and SMPs, including KMPs and underscores the Bank's commitment to fostering a culture of integrity, fairness and accountability across the organisation.

All Directors and SMPs have affirmed compliance with the Code for FY 2025-26. A declaration to this effect, signed by the Managing Director and CEO, forms part of the Report on Corporate Governance, annexed to the Board's Report as Annexure-I. The Code of Conduct is available on the Bank's website at https://www.au.bank.in/investors/secretarial-policies.

M. Number of Meetings of the Board

During the period under review, a total of 11 Board meetings were convened, with none exceeding the 120-day interval as mandated under the provisions of the Act, read with the rules made thereunder, Secretarial Standard-I issued by the Institute of Company Secretaries of India (‘ICSI'), and the 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.

N. Committees of the Board

The Bank recognises the significance of Board Committees in fostering strong Corporate Governance practices. Accordingly, the Bank has constituted various Board Committees to enhance the effectiveness and efficiency of the Board and to support informed decision-making. These Committees have been formed in compliance with provisions of the Act and relevant rules made thereunder, Listing Regulations, BR Act, RBI Circular and Guidelines, Articles of Association of the Bank and other pertinent guidelines/circulars issued from time to time.

The details of the Board Committees of the Bank, including reconstitution, their terms of reference, number and date of meetings held during FY 2025-26 and attendance thereof, are disclosed in the Report on Corporate Governance annexed to the Board's Report as Annexure-

O. 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 the Bank is required to be held at least once a year in the absence of Non-Independent Directors and members of the Management.

During the year under review, one meeting of the Independent Directors of the Bank was convened on June 28, 2025, which was chaired by Mr. H. R. Khan. The meeting was attended exclusively by all the Independent Directors and was conducted without the presence of any other members of the Board or management. The meeting involved detailed deliberations on various matters, including the following:

• Action taken report of the previous meeting of Independent Directors.

• The quality, quantity, and timeliness of the flow of information between the management of the Bank and the Board of Directors is necessary for the Board of Directors to perform their duties effectively and reasonably.

• Adequacy of time allocated by the Board/Committees for deliberation on key and significant matters.

• Performance of Non-Independent Directors, the Board as a whole, and the Chairperson of the Bank.

• Training and knowledge-enhancement sessions required for the Directors.

P. Familiarisation Programme for Independent Directors

In accordance with Regulation 25(7) of the Listing Regulations and RBI guidelines, the Bank conducts familiarisation programmes for all its directors, including Independent Directors.

These familiarisation programmes are conducted through a structured mix of internal functional experts and/or external subject-matter specialists, taking into consideration the Bank's business requirements and the existing skill sets of the

Directors. The programmes are designed to provide Directors with insights into the Bank's operations, key developments and evolving regulatory and industry landscape.

The details of the familiarisation programme and other sessions organised for Independent Directors during FY 2025-26 are disclosed in the Report on Corporate Governance annexed to the Board's Report as Annexure-I and on the website of the Bank at https://www.au.bank.in/stock-exchange-disclosures.

Q. 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, the 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 the Bank are duly registered in the online databank of Independent Directors maintained and 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 possess the 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 the Bank.

R. Compensation Policy for appointment and remuneration of Directors, Key Managerial Personnel, Senior Management Personnel, Material Risk Takers and Control Function Staff

The Bank has formulated and adopted a comprehensive Compensation Policy for appointment and remuneration of its Directors,

KMP, 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, the Listing Regulations and RBI guidelines.

The Policy establishes a clear framework for the appointment and remuneration of Directors (including Independent Directors),

KMP, SMP, MRTs and Control Function Staff, in accordance with the criteria approved by the NRC of the Board as mandated by the Act and applicable Rules, Listing Regulations, and other relevant guidelines.

The Policy aims to provide a structured compensation approach comprising fixed and variable components, support the attraction, retention and motivation of talent, outline guidelines for reimbursement to Directors and KMPs, define the process for appointment, removal and performance evaluation of Directors, facilitate administration of Employee Stock Option Schemes in compliance with SEBI regulations, and ensure adherence to 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 any other amendments that may be required, and is hosted on the Bank's website at https://www.au.bank.in/investors/secretarial-policies.

The terms of reference of the NRC and Compensation Policy are detailed in the Report on Corporate Governance annexed to Board's Report as Annexure-I.

S. Evaluation of the Directors, the Board, and Committees

Pursuant to 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, the Bank undertakes annual evaluation of the performance of the Board, its Committees, individual Directors and the Chairperson. The evaluation is conducted based on a comprehensive framework reviewed and approved by the NRC.

Details of Board performance evaluation carried out for FY 2025-26 including methodology used, its outcome and proposed recommendations for implementation in the upcoming financial year, action taken on previous year's observations are covered under Report on Corporate Governance, forming part of this Board's report as Annexure-I.

T. 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 years, subject to the audit firms meeting eligibility criteria annually and obtaining RBI approval on an annual basis.

At the 29th AGM of the Bank held on July 26, 2024, M/s. M S K A & Associates LLP, Chartered Accountants (formerly known as M S K A & Associates, Chartered Accountants) (FRN: 105047W/W101187) and M/s. Mukund M Chitale & Co., Chartered Accountants (FRN: 106655W) were appointed as Joint Statutory Auditors for a period of three years to hold office from the conclusion of the 29th AGM till the conclusion of the 32nd AGM, subject to RBI approval on an annual basis.

M/s. M S K A & Associates LLP, Chartered Accountants and M/s. Mukund M Chitale & Co., Chartered Accountants, Joint Statutory Auditors of the Bank, have provided an audit report on the financial statements for the FY 2025-26, with no qualifications, reservations, or adverse remarks.

Further, pursuant to Section 143(12) of the Act, the Statutory Auditors reported 14 instances of fraud involving an aggregate amount of 1.09 crore relating to misappropriation of funds and falsification of records, to the Audit Committee during the year. In this regard, the Bank has submitted the requisite Fraud Monitoring Reports (FMRs) and initiated appropriate legal actions.

Details of the provision pertaining to fraud accounts are disclosed in Note 5(f) of Schedule 18 to the Financial Statements for

FY 2025-26, forming part of this Annual Report.

The SAs have confirmed their eligibility in accordance with Section 141 of the Act and RBI guidelines issued from time to time. Moreover, pursuant to the relevant provisions of the Listing Regulations, the SAs have confirmed their adherence to the peer review process mandated by the Institute of Chartered Accountants of India (‘ICAI'). The SAs also hold a valid certificate issued by the Peer Review Board of ICAI, demonstrating their competence and professionalism in their field.

U. Secretarial Auditors and their Report

In compliance with 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 pursuant to the recommendation of the Audit Committee and the Board of Directors, the shareholders at the AGM held on August 8, 2025 appointed M/s. Mehta & Mehta, Company Secretaries (Firm Registration No. P1996MH007500 and Peer Review Certificate No.: 7281/2025), as the Secretarial Auditors of the Bank, to conduct the Secretarial Audit for a term of five consecutive years from FY 2025-26 till FY 2029-30.

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 FY 2025-26. The Secretarial Audit Report for the FY 2025-26 in form MR-3 is annexed to the Board's Report as Annexure-IV.

V. Particulars of Loans, Guarantees and Investments

Pursuant to the provisions of Section 186(11) of the 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 requirements in the Annual Report.

However, the particulars of investments made by the Bank are disclosed in Schedule 8 of the Financial Statements for

FY 2025-26, forming part of this Annual Report, as per the applicable provisions of the BR Act.

W. Related Party Transactions

During FY 2025-26, the Bank did not engage in any material or significant transactions with related parties that could potentially create conflicts of interest between the Bank and these parties. All related party transactions conducted throughout the year were carried out on an arm's length basis and in the normal course of business operations.

The Audit Committee has accorded omnibus approval for related party transactions that are repetitive and entered into in the ordinary course of business. Further, the Audit Committee of the Bank reviewed details of all related party transactions entered by the Bank on a 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, 2026.

The Policy on Related Party Transactions and Materiality as approved by the Board can be accessed on the website of the

Bank at https://www.au.bank.in/investors/secretarial-policies.

X. Material Changes and Commitments, if any, affecting the Financial Position of the Bank

There were no material developments/changes/commitments affecting the financial position of the Bank which have occurred after March 31, 2026, till the date of this report.

Y. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

The 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, the Bank continues to foster eco-conscious practices and contribute meaningfully to a greener future.

(a) Conservation of energy

Energy conservation at the Bank is approached through a combination of operational discipline, technology-led optimisation, and a progressive transition towards cleaner energy sources. Across offices and branches, initiatives are designed to minimise avoidable electricity consumption, enhance the efficiency of cooling and lighting systems, and strengthen monitoring mechanisms for informed decision-making.

In parallel, the Bank remained committed to sustainability through investments in renewable energy infrastructure and the promotion of sustainable finance solutions. These initiatives extend the Bank's impact beyond internal operations, supporting the broader transition towards a low-carbon economy. Such efforts are aligned with the objectives of

SDG 7 (Affordable and Clean Energy) and SDG 13 (Climate Action), while also contributing to national priorities relating to renewable energy expansion and clean mobility.

1. Steps taken and impact on conservation of energy

The Bank's approach is anchored in practical, site-level interventions that directly influence day-to-day energy consumption:

• Optimisation of cooling demand

Indoor green cover and plants have been promoted across premises to improve microclimate conditions and reduce heat load. This is complemented by maintaining air-conditioning temperatures at 25?C or higher, encouraging responsible energy use. These combined nature-based and behavioural interventions contribute to overall energy efficiency.

• Lighting efficiency improvements

Conventional lighting systems are being progressively replaced with energy-efficient LED fixtures, resulting in lower electricity consumption and improved lighting performance.

• Automation and control measures

Timers and automated controls have been deployed for signage and non-essential lighting to ensure that energy usage is linked to operational need, thereby reducing avoidable energy consumption.

• Power factor optimisation

Power factor correction systems have been implemented across electrical panels to improve electricity utilisation, reduce technical losses, and enhance overall energy efficiency and grid performance.

2. Technology upgrades for energy optimisation

The Bank has strengthened its energy management capabilities through the deployment of advanced monitoring and efficient infrastructure:

• Smart energy monitoring systems iTouch Manager systems have been deployed across selected locations to enable real-time monitoring, control, and optimisation of electricity consumption. This intervention has improved visibility into energy usage patterns and contributed to the optimisation of consumption.

• Efficient cooling systems

Adoption of Variable Refrigerant Volume-based chiller systems has enhanced air-conditioning efficiency, delivering energy savings of up to 20% compared to conventional systems.

• Reduction in diesel dependency

Strengthening of backup power infrastructure through UPS systems and inverters has reduced reliance on diesel generators, thereby lowering fossil fuel consumption and associated emissions while improving energy reliability.

3. Renewable energy and resource optimisation

Recognising the importance of clean energy, the Bank has made strategic investments in renewable power generation:

• A 1 MW solar power plant has been commissioned at Bikaner (Rajasthan), contributing to renewable energy generation. The plant supplies green electricity to key offices, including:

- Jagatpura Office (JPO 01)

- Malviya Nagar Office, and

- Tonk Road Office, Jaipur

This initiative enables partial substitution of grid electricity with renewable energy, supporting the Bank's transition to a lower-carbon energy mix and aligning with national missions such as the National Solar Mission.

4. Green infrastructure and resource efficiency

• Green building considerations: Natural daylight is maximised through building design to reduce reliance on artificial lighting. The Bank continues to adopt resource-efficient and environmentally responsible practices across its infrastructure lifecycle.

• Resource optimisation and circularity: The Bank follows the principles of Reduce, Reuse, and Recycle, including:

- Minimising single-use plastics

- Extending the lifecycle of IT equipment

- Disposal of e-waste through authorised vendors

• Awareness and behavioural change: Regular initiatives are undertaken to promote energy-conscious behaviour among employees, encouraging efficient use of energy and responsible workplace practices.

5. Scrap disposal

Given the Bank's service-oriented operations, the scope for scrap generation is limited. Disposal of IT assets is undertaken through authorised e-waste vendors, with detailed disclosures provided in the BRSR for FY 2025-26.

6. Extending impact beyond operations (Sustainable finance)

The Bank also drives energy conservation and emissions reduction through its financing activities:

• Under the Planet First AU Green Fixed Deposit programme, aligned with RBI Green Deposit Guidelines, the Bank has mobilised over 2,952.29 Crore (as of March 31, 2026 on cumulative basis).

• Funds are deployed towards renewable energy, clean mobility, and green buildings, enabling:

- Improved energy efficiency

- Reduced fossil fuel dependence

- Lower greenhouse gas emissions

This directly supports India's ambition of 500 GW renewable capacity by 2030 and advances the National Electric Mobility Mission Plan, strengthening the linkage between finance and the energy transition.

7. Capital investment in energy conservation

During the year, the Bank has made sustained investments in energy conservation and clean energy infrastructure, including solar power generation systems, smart energy monitoring and management solutions, energy-efficient lighting systems, UPS and inverter infrastructure, green landscaping and microclimate management initiatives, etc.

(b) Technology Absorption

I) The efforts made towards Technology absorption

During FY 2025-26, the Bank continued to strengthen its technology capabilities in line with its strategic objective of building a technology-led, customer-centric and scalable operating model. The focus remained on leveraging digital platforms, advanced analytics, and artificial intelligence (‘AI') to enhance the customer experience, drive operational efficiency, and enable sustainable growth.

Key initiatives undertaken during the year include:

• Digital banking and platform expansion: The Bank continued to strengthen its digital ecosystem across AU 0101 and AU 0101 Business platforms, driving improvements in customer acquisition, cross sell, engagement, and servicing.

The Bank launched a refreshed AU 0101 mobile app, delivering a simpler, faster, and personalised experience. Key enhancements include a modern, clutter-free UI, personalised home screen, unified payments hub, centralised service requests, pre-approved offers, and live face verification for secure journeys — aimed at improving customer experience, engagement, feature discovery, and cross-sell.

The Bank also introduced a redesigned website with improved navigation, smart search, and 11-language support to strengthen digital acquisition and self-service. The AU 0101 Business App was expanded with new features and enhancements focused on improving customer experience, service capabilities, and supporting evolving business needs.

• AI, data and AI-native transformation: The Bank has made significant progress in institutionalising AI as a core capability, aligned with its strategic objective of becoming an AI-native, data-driven organisation. A centralised AI platform integrated with the Bank's data lake enables scalable model development, deployment and lifecycle management, while agentic AI frameworks are being adopted for end-to-end journey orchestration and context-aware decisioning.

In customer interactions, the Bank has deployed AI-powered voice bots for inbound servicing, providing 24x7 automated support with improved consistency and reduced manual dependency, and has also rolled out a Credit Card Voice Bot for specialised use cases. Conversational AI capabilities have been strengthened through multilingual support, Indic language optimisation, dynamic knowledge base enhancements and context-aware interactions, resulting in improved first-call resolution, reduced handling time and enhanced customer experience.

• Digital lending stack transformation: The Bank continued to transform its end-to-end digital lending stack, covering sourcing, underwriting, disbursement and servicing. Technology interventions enabled faster turnaround times, improved risk assessment and seamless customer journeys across lending products.

In lending and risk decisioning, the Bank has deployed AI-native Loan Origination Systems starting with Gold

Loans, with progressive rollout across products. AI models are leveraged for automated underwriting, eligibility assessment, fraud detection and risk-based pricing. Integration with alternative data and advanced analytics has improved the accuracy of credit risk assessment, reduced turnaround time for loan processing, and strengthened portfolio quality monitoring.

• Automation and intelligent workflow digitisation: Automation was further expanded across functions through Robotic Process Automation (‘RPA') and AI-enabled workflows. The focus was on reducing manual intervention, improving process standardisation and enhancing auditability and control through system-driven processes.

• Core technology and scalable infrastructure: Investments continued towards modernising core banking systems and migrating towards scalable and cloud-aligned infrastructure. This supports business growth, enhances system resilience and enables faster rollout of digital capabilities.

• Cybersecurity and technology risk management: The Bank strengthened its cybersecurity posture through enhanced monitoring, detection and response mechanisms, including upgraded Security Operations Centre (‘SOC') capabilities, to manage evolving cyber risks and ensure secure digital operations.

II) The benefits derived like product improvement, cost reduction, product development or import substitution

Technology absorption initiatives resulted in multiple strategic and operational benefits, including:

• Enhanced customer experience and product capabilities: Improved digital journeys, customer self-service and digital servicing penetration and AI-driven processes, omni-channel customer journeys and self-service tools enabled faster onboarding, seamless servicing and enhanced product capabilities, driving higher digital adoption.

• Scalable growth with cost efficiency: Adoption of AI-led automation and digital platforms has enabled the Bank to achieve scalable growth without proportionate increase in operating costs, through optimised resource utilisation and reduced manual intervention.

• Improved operational efficiency and turnaround times: Automation and digital workflows, Cloud-aligned / scalable infrastructure upgrades resulted in improved processing accuracy, faster turnaround times with gradual automation of credit underwriting and enhanced operational controls.

• Data-driven decision-making and risk management: Advanced analytics, data governance and enterprise data platforms and AI capabilities enabled better underwriting, targeted customer engagement, enhanced cross-sell and improved risk monitoring through real-time insights.

• Accelerated product development and innovation: Technology platforms and AI-native systems supported rapid rollout of new products and enhancements, improving responsiveness to market needs.

• Strengthened technology resilience and security: Continued investments in infrastructure and cybersecurity enhanced system availability, resilience and protection against evolving cyber threats.

• Reduced paper usage and sustainability benefits: Increased digital adoption and paperless processes contributed to a reduction in paper consumption and supported the Bank's sustainability objectives.

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 has 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 are primarily covered under service sector, the details of this clause do not apply to the Bank.

(c) Foreign Exchange Earnings and Outgo

During the financial year ended March 31, 2026, the foreign exchange earnings was 98 Crore and the foreign exchange outgo was 108 Crore.

Z. Risk Management

The Bank has invested significantly in elevating every dimension of its risk architecture from governance and Board oversight to technology-enabled risk surveillance, culture, and regulatory alignment. There is a well-institutionalised ‘Three Lines of Defence model' Business units own risk management and internal controls, the

Risk and Compliance function provides independent oversight and policy frameworks, and Internal Audit delivers objective assurance to the Board.

The Bank has instituted a comprehensive Enterprise Risk Management Framework (‘ERM') that includes a strong governance structure, with the Board of Directors at its helm, Board Committees (including the Risk Management Committee of the Board), and executive committees of management for specialised risk-related aspects. Risk governance at the Bank is driven by the Board of Directors, which oversees the risk management framework and reviews the effectiveness of the material risk management systems. The Board is supported by the Risk Management Committee of the Board and other executive management-level committees constituted for specific risk areas.

The Chief Risk Officer (‘CRO') functions independently and reports directly to the Risk Management Committee of the Board (‘RMC'), with no reporting lines to business verticals and without any dual responsibilities. This independent reporting structure ensures objective oversight and effective challenge of risk-management activities across the Bank. The Bank's risk management function is supported by a dedicated team of professionals, who supervise and manage risk across the organisation.

The ERM Framework further comprises the Risk Appetite Statement (‘RAS'), covering various risk limits, risk policies and procedures, risk reports, Internal Capital Adequacy Assessment Process (‘ICAAP'), and stress testing. This framework is designed to enhance the Bank's ability to identify, monitor, mitigate, and report all types of risks in a timely and holistic manner.

This ERM model encapsulates both financial and non-financial risk categories, including Credit Risk, Market and Liquidity Risk, Compliance Risk, Operational and Fraud Risk, People Risk, and Information Technology and Information Security Risk

Risk Appetite and Strategic Alignment

The Risk Appetite Statement serves as an important governance tool for aligning strategic decision-making with prudent risk-taking. The Risk Appetite Statement (‘RAS'), as approved and periodically reviewed by the Board, sets out the nature and extent of risk that the Bank is willing to assume in pursuit of its strategic and business objectives. It is integrated with business planning and capital management and is operationalised through defined limits, escalation thresholds and key risk indicators across relevant portfolios and functions.

Capital adequacy framework and stress testing

The Bank has adopted a Board-approved ICAAP and Stress Testing Policy as part of its capital management and risk governance framework. The RAS governs the Bank's capital adequacy approach, and periodic stress-testing is undertaken to assess the resilience of capital adequacy, earnings and risk thresholds under base, adverse and severe stress scenarios. The outcomes of such assessments are reviewed through the Bank's governance framework and are used to support prudent capital planning and risk mitigation measures.

In addition, while the regulatory capital charge requirements for market risk and operational risk are not applicable to Small Finance Banks, the Bank has, as a matter of prudent risk management, incorporated these risk categories within its ICAAP and stress-testing framework. The Bank continues to remain adequately capitalised under all relevant scenarios pertaining to its scale and nature of operations.

Risk categories, limits, thresholds and monitoring

The Bank's comprehensive risk management framework ensures prudent identification, monitoring, mitigation, and reporting of risks across the organisation. The framework covers key risk domains, including Credit Risk, Asset Liability Management (‘ALM'), Market Risk, Operational Risk, Cyber Security Risk, and Information Technology Risk. The RAS prescribes the Bank's appetite/limits for various metrics for these risk categories. These limits are duly reviewed and presented to the Risk

Management Committee of the Board on a quarterly basis.

The Bank has put in place detailed Board-approved risk management policies, frameworks, and internal risk limits for the key risks as detailed below. These internal thresholds are more stringent than the applicable regulatory requirements. Adherence to these limits, along with liquidity, deposit, and key regulatory ratios, is regularly monitored and reported to the RMC.

• Credit Risk: The Bank manages credit risk through portfolio-level and obligor-level controls, including internal limits relating to borrower, product and geographic concentrations, ticket-size mix, exposure limits to sensitive sectors, unsecured exposures (overall and product-wise), asset quality metrics and with limits on consumer credit exposures.

The Bank has a well-developed, strong framework for Early Warning Signals (‘EWS') for early identification of credit weakness in the portfolio across all ticket sizes through various risk checks like early delinquency, bouncing in repayments, external rating downgrade etc. through an automated EWS system for identification of weak/red-flagged accounts.

• Asset Liability Management and Market Risk: The Bank monitors the set internal limits and thresholds relating to liquidity and market risk, including liquidity coverage ratio, net stable funding ratio, earnings at risk, market value of equity, value at risk, PV01 for investment portfolios, modified duration, net overnight open position and stop-loss limits for the investment and foreign exchange books, as applicable.

• Operational Risk: Operational risk is managed through an established framework addressing the risk of loss arising from inadequate or failed internal processes, people and systems, or from external events. The Bank monitors operational loss events and fraud-related incidents arising from digital or physical channels through defined thresholds, control mechanisms and periodic review processes. The framework has been implemented covering third-party risk management, including financial and information technology outsourcing arrangements.

• Operational Resilience and Business Continuity: The Bank has a Board-approved Business Continuity Plan Policy aimed at preserving continuity of critical operations in the event of disruptions arising from system outages, infrastructure failures, process breakdowns or external events. Periodic business continuity testing is undertaken, and the results thereof are reviewed through the governance framework to strengthen operational resilience and preparedness.

• Technology Risk: During the year, the Bank continues to strengthen its technology risk management framework to address risks relating to technology infrastructure, critical systems and applications, business continuity and disaster recovery, information technology vendor management, change and project implementation, and associated people and process dependencies. Monitoring mechanisms include oversight of system availability, critical access controls and other key technology risk indicators.

• Information Security Risk: Information security risk management is led by the Chief Information Security Officer (‘CISO') who reports directly to the Managing Director and CEO, thereby ensuring independence and robust oversight of information security risks. The CISO is supported by a dedicated team and an established cyber and information security framework. The Bank continues to strengthen its control environment, technology safeguards, monitoring processes, and response capabilities to protect its information assets, systems, and digital infrastructure against unauthorised access, cyber threats, and service disruptions.

The Bank has consistently invested in advanced security tools and skilled manpower, commensurate with its scale of operations and evolving risk environment. The Bank has not faced or encountered any major cybersecurity incidents during the last financial year, reflecting the effectiveness and maturity of its information security controls and governance framework.

• Environmental, Social and Governance (‘ESG') Risks: As the Bank prepares itself for transition to a Universal Bank, responsible growth remains central to its strategy. The Bank continued to strengthen its framework for the identification, assessment, and management of ESG risks, including climate-related physical and transition risks, recognising their potential impact on asset quality, operational resilience, and long-term sustainability. ESG considerations are being progressively integrated into credit appraisal, risk assessment, and portfolio monitoring processes, guided by the SEBI

BRSR framework, the GRI Standards, the RBI's Master Direction on Climate Finance, 2025, and the Bank's 4S Sustainability Framework, i.e., Sustainable Finance, Sustainable Operations, Sustainable Communities, and Sustainability Reporting.

AA. Corporate Social Responsibility

During FY 2025-26, the Bank continued its commitment to driving inclusive and sustainable community development through focused and impactful Corporate Social Responsibility (‘CSR') initiatives. Through AU Foundation, Bank's CSR Arm, the Bank has evolved from being a benefactor to becoming a catalyst of self-reliant growth, building bridges to a more equitable future not merely by filling gaps, but by unlocking potential and exploring new possibilities. Guided by its mission to reach the unreachable and empower underserved communities, the Bank's CSR efforts remained anchored in the belief that empowerment begins with access to education, healthcare, and sustainable livelihoods. The Bank's initiatives are designed not with rigid blueprints, but with dynamic strokes that honour the unique aspirations and potential of every individual and the community it serves, embodying the spirit of Atmanirbhar Bharat and strengthening the foundation of community resilience.

During the year, these initiatives were primarily aligned around the following strategic focus areas:

• Education and Job-Oriented Skill Development

• Sports Training and Talent Development

• Women Empowerment through Entrepreneurship

These focus areas were implemented through the flagship initiative AU Ignite, and strategic initiatives, Bano Champion and AU Udyogini, which collectively seek to strengthen employability, nurture grassroots sporting talent, and enable women to build sustainable enterprises.

In addition to the above, under AU Kartavya, the Bank supported various need-based projects aligned with Schedule VII of the Act, covering areas such as healthcare, safe drinking water, environmental conservation, water resource management, road safety, and promotion of art and culture.

The terms of reference of the CSR and Sustainability 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, in the prescribed format had been appended herewith as Annexure-II. The CSR Policy is also available for viewing on the Bank's website at https://www.au.bank.in/investors/secretarial-policies.

AB. Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Bank maintains a strict zero-tolerance approach towards any form of harassment, underscoring its commitment to fostering a workplace culture grounded in respect, dignity and inclusivity. The Bank strives to ensure a safe and equitable work environment where employees can perform their responsibilities free from bias, discrimination or misconduct.

In accordance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Bank's internal policy, a three-tier Internal Committee framework (Branch, Regional and Central) has been constituted to address complaints expeditiously and impartially. These Committees are duly empowered to conduct fair, objective and comprehensive inquiries, ensuring effective redressal and accountability.

The Bank further reinforces its commitment through regular, mandatory training and awareness initiatives, aimed at sensitising employees to appropriate workplace conduct and strengthening awareness of grievance reporting and redressal mechanisms.

Detailed information regarding the 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.

AC. Compliance with the Maternity Benefit Act, 1961

The Bank affirms its adherence to all applicable provisions of the Maternity Benefit Act, 1961, ensuring full compliance with statutory requirements.

AD. Subsidiaries, Joint Ventures and Associate Companies

The Bank does not have any subsidiary, joint ventures, or associate companies. Hence, the details of this clause are not applicable to the Bank. Accordingly, the Bank is also not required to formulate a specific policy on dealing with material subsidiaries.

AE. Material Orders Passed by Regulators, Courts, or Tribunals

During FY 2025-26, no material orders have been passed by the Regulators/Courts/Tribunals that would impact the going concern status of the Bank and its future operations.

AF. Internal Financial Controls and Their Adequacy

The Bank has established a robust internal financial control framework that is closely aligned with its risk appetite and thoughtfully tailored to the organisation's size, scope, and operational complexity. The responsibilities and authority of the risk-based internal audit function are clearly defined within the Board-approved Internal Audit Policy. The audit function is instrumental in ensuring that all processes and operations consistently comply with regulatory requirements, accounting standards, and the Bank's internal policies. By providing an objective assessment of the quality and effectiveness of the Bank's internal controls, risk management, and governance processes, the audit function delivers valuable assurance to both the Board and the Audit Committee. For the year under consideration, a comprehensive review confirmed that the Bank's internal control systems are adequate and operating effectively. In addition, the Joint Statutory Auditors expressed their opinion on the adequacy and operational effectiveness of the 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 2025-26, forming part of this Annual Report.

AG. Cost Records

Being a Banking company, provisions of Section 148(1) of the Act, relating to the maintenance of cost records, are not applicable to the Bank.

AH. Corporate Governance

Corporate governance is the cornerstone of the Bank's operations and is deeply embedded in its organisational ethos. The Bank's governance framework is designed to ensure that its affairs are conducted with integrity, transparency and accountability, safeguarding the interests of all stakeholders, i.e., regulators, depositors, customers, employees and shareholders, among others, while ensuring full compliance with applicable laws and regulatory requirements. The Bank remains committed to upholding the highest standards of governance through sound management practices, ethical conduct and a strong compliance culture, continuously aligning with evolving regulatory expectations and benchmarking against global best practices.

The Bank's commitment to governance excellence is reinforced through three core assurance functions:

Risk Management: The Bank operates a comprehensive Enterprise Risk Management framework anchored in a well-defined risk appetite, robust policies and a structured governance architecture. Risk assessments are conducted continuously, with adherence to internal and regulatory thresholds and periodic reporting to Board-level committees, including the Executive Committees, i.e., Credit Risk Management, Operational Risk Management, Asset Liability Management, and Information

Security Committees. This disciplined approach safeguards customer, depositor and investor interests while preserving financial soundness and reputation. Compliance Function: A key pillar of the governance framework, the Compliance Function ensures adherence to regulatory requirements in both letter and spirit. Leveraging the Bank's technology-driven model, regulatory requirements are embedded into digitised workflows and strengthened through structured initiatives with a focus on accurate, timely and transparent reporting to all regulators, authorities, Audit Committee and Board.

Internal Audit Function: Following a risk-based audit approach, the function provides independent assurance on the adequacy and effectiveness of internal controls, risk management and governance mechanisms, reporting periodically to the Audit Committee of Board, Board, senior management and regulators.

The Report on Corporate Governance for FY 2025-26, along with the certificate issued by M/s. Mehta & Mehta, Company Secretaries, confirming compliance with Chapter IV of the Listing Regulations, is annexed as Annexure-I.

AI. Business Responsibility and Sustainability Report and Sustainability Initiatives

In terms of Regulation 34(2)(f) of the Listing Regulations, top 1000 listed entities based on their market capitalisation as of December 31, every year, are required to submit Business Responsibility and Sustainability Report (‘BRSR'), as a part of their annual report. In the BRSR disclosures on performance against the nine principles of the National Guidelines on Responsible Business Conduct (‘NGRBCs') are reported wherein each principle is divided into essential and leadership indicators.

SEBI has further mandated the top 500 listed companies (by market capitalisation) to undertake an assessment or assurance of the BRSR Core for FY 2025-26. The BRSR Core is a sub-set of the BRSR, consisting of a set of Key Performance Indicators (‘KPIs')/metrics under nine ESG attributes. Considering market capitalisation of the Bank, the requirement of BRSR and assessment or assurance of the BRSR Core for FY 2025-26 is applicable to the Bank.

The Bank's BRSR for FY 2025-26 along with the Independent reasonable assurance statement on BRSR Core disclosures and Limited assurance statement on selected Sustainability Disclosures from Intertek India Private Limited, is annexed to the Board's Report.

The Bank has a Board-level CSR and Sustainability Committee chaired by Independent Director, which is responsible for overseeing and guiding matters related to sustainability and CSR. The composition, terms of reference and meeting details of the CSR and Sustainability Committee are included in Report on Corporate Governance annexed to the Board's Report as Annexure-I. The Bank has also undertaken several need-based environmental and social initiatives for the benefit of its stakeholders.

AJ. 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) Rules, 2014, the ratio of the remuneration of each Director to the median employee's remuneration and other details is annexed to the 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 is sent to Members without the aforementioned annexure, which can be inspected at the registered office of the 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.

AK. Management Discussion and Analysis

The Management Discussion and Analysis Report for FY 2025-26 is included as a separate section within the Annual Report, as required under Regulation 34(2)(e) and Schedule V of the Listing Regulations.

AL. Annual Return

The draft Annual Return for the Financial Year ended on March 31, 2026 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.au.bank.in/other-reports .

AM. Whistle-Blower Policy and Vigil Mechanism

The Bank upholds the core values of reliability, fairness and equality, which form the foundation of its decision-making processes. It is committed to conducting its affairs with integrity and fairness, thereby fostering customer trust, strengthening stakeholder confidence, and delivering superior customer experience. The Bank encourages its employees, stakeholders and members of the public to report any concerns relating to suspected misconduct without fear of retaliation or discrimination.

In line with the provisions of Section 177(9) of the Act, read with the rules thereunder, and Regulation 4(2)(d) and Regulation 22 of the Listing Regulations, the Bank has implemented a Whistle-Blower Policy and Vigil Mechanism. The framework is designed to promote transparency, accountability, and ethical conduct, and to enable timely identification and redressal of any irregularities.

The Policy provides a secure and confidential mechanism for reporting concerns relating to unethical behaviour, fraud or misconduct, with adequate safeguards against victimisation. It also ensures direct access to the Chairman of the Audit Committee, and no personnel have been denied such access during the year.

The Policy can be accessed on the website of the Bank at https://www.au.bank.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.

AN. Anti-Bribery and Anti-Corruption Policy

The Bank maintains a zero-tolerance stance towards bribery, corruption and unethical practices, and is committed to conducting its affairs with the highest standards of professionalism, integrity and fairness.

In furtherance of this commitment, the Bank has adopted a Board-approved Anti-Bribery and Anti-Corruption Policy, which sets out the guiding principles and standards for ensuring that all business activities are carried out in a transparent, ethical and accountable manner. The policy can be accessed on the website of the Bank at https://www.au.bank.in/notice-board.

AO. Adherence to Secretarial Standard Issued by the Institute of Company Secretaries of India

The Bank has adhered to the Secretarial Standards issued by the Institute of Company Secretaries of India on Meetings of Board of Directors and General Meetings.

AP. Status of Ind AS Implementation

As per the RBI circular no. RBI/2015-16/315 DBR.BP.BC.No.76/21.07.001/2015-16 dated February 11, 2016 on the implementation of Indian Accounting Standards (‘Ind AS'), banks are advised to follow Ind AS, as notified under the Companies (Indian Accounting Standards) Rules, 2015, subject to guidelines or directions issued by the RBI in this regard.

Banks in India currently prepare their financial statements in accordance with the guidelines issued by the RBI, the Accounting

Standards notified under Section 133 of the Companies Act, 2013, and generally accepted accounting principles in India (‘Indian GAAP'). In January 2016, the Ministry of Corporate Affairs issued the roadmap for implementation of Ind AS, which are converged with International Financial Reporting Standards (‘IFRS'), for scheduled commercial banks, insurance companies and non-ban king financial companies. In March 2019, the RBI deferred the implementation of Ind AS for banks until further notice, as the recommended legislative amendments were under consideration by the Government of India. The Bank has undertaken a preliminary diagnostic assessment of differences between Indian GAAP and Ind AS and will progress implementation in line with applicable requirements and regulatory directions.

Subsequently, the RBI, through its discussion paper on the introduction of the Expected Credit Loss (‘ECL') framework for provisioning by banks, proposed a shift from the incurred loss approach to an ECL-based framework aligned broadly with Ind

AS 109, supplemented by regulatory backstops where necessary. Further, the RBI issued the Master Direction on Classification, Valuation and Operation of Investment Portfolio of Commercial Banks, 2023, which became effective from April 1, 2024. These directions bring the accounting and classification of investments closer to Ind AS principles and have been implemented by the Bank with effect from April 1, 2024.

The RBI has also issued draft guidelines for implementation of the ECL approach to replace the existing incurred loss-based provisioning framework. As per the draft guidelines, the ECL framework is proposed to be effective from April 1, 2027, with a transition period of five years, subject to issuance of the final guidelines.

Directors' Responsibility Statement

Pursuant to Section 134(3)(c) read with Section 134(5) of the Act, the Board of Directors hereby confirms that:

1. In the preparation of the annual accounts for the year ended March 31, 2026, 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 the Bank as of March 31, 2026 and of the profit of the 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 the Bank's assets and 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 the Bank and ensured that such internal financial controls are adequate and are operating effectively.

6. We have devised proper systems to ensure compliance with the provisions of all applicable laws, and such systems are adequate and operate effectively.

Acknowledgement and Appreciation

The Board places on record its sincere appreciation and gratitude to the Government of India, various State Governments, and regulatory authorities, including the RBI, SEBI, Ministry of Corporate Affairs, Insurance Regulatory and Development Authority of India, Indian Banks' Association, Unique Identification Authority of India, and Central Registry of Securitisation Asset Reconstruction and Security Interest of India, for their continued guidance, support, and encouragement. The Board also expresses its gratitude to the shareholders, debenture holders, bankers, lenders, credit rating agencies, and debenture trustees for their continued trust and confidence in the Bank.

The Board further acknowledges the valuable support and cooperation received from BSE Limited, National Stock Exchange of India Limited, National Securities Depository Limited, Central Depository Services (India) Limited, the Registrar and Share

Transfer Agent, as well as the Bank's vendors and service providers.

The Board places on record its deep appreciation for the continued patronage and trust of the Bank's valued customers, which remain fundamental to its growth and success.

The Board also conveys its heartfelt appreciation to all employees for their dedication, commitment and teamwork. Their professionalism, strong work ethic and customer-centric approach have been instrumental in driving the Bank's performance and enabling it to consistently serve its customers and stakeholders with excellence.