EARNINGS UPDATE Q1FY19 · 2019-04-22 · Similarly, home improvement loans can be scaled up...

EARNINGS UPDATE Q1FY19

BHARAT FINANCIAL INCLUSION LIMITED(Formerly known as ‘SKS Microfinance Limited’)BSE: 533228 ● NSE: BHARATFIN

Corporate Identity No. L65999MH2003PLC250504

www.bfil.co.in

This presentation is solely for viewing. No part of it may be circulated, quoted, or reproduced for distribution without prior written approval from BHARAT Financial Inclusion Limited.

JULY 2018

CONTENTS

Particulars Slide No.

Update on Merger 3

Executive Summary 7

Investment Hypothesis 9

Company Overview 12

Clarity on Major Uncertainties Post AP MFI Crisis 17

Growth Anatomy 22

Future Strategy 28

Pilot on Retail Distribution And Service Points (RDSP) 32

Update on Cashless and E-KYC 36

Loans for Housing Improvement & Two-Wheeler (Pilot) 39

Q1FY19 Performance Highlights 43

Industry Update On Credit Quality 54

Review of Financials 56

Financial Architecture 74

Risk Management 79

Capital Structure 81

Annexures 83

With effect from 1st April ,2018 , the company has adopted Indian Accounting Standards (Ind AS). Accordingly FY18 numbers

have been restated from previous GAAP to Ind AS to make them comparable.

Figures rounded off to the nearest digit across the presentation. Figures and ratios have been regrouped wherever necessary.2

3

UPDATE ON MERGER

3

RATIONALE FOR MERGER FOR BFIL

4

Access to savings &

deposits products▪ Enhanced relationship with customers

▪ Competitive edge with significant head start vis-a-vis SFBs

Retail Distribution Service

Point Rollout (RDSP)

▪ Cashless collections > Customer analytics > Consumer finance loan

▪ Cross-sell opportunity to Non-MFI customers – Ex: Solar, Mobile,

Sewing machines, etc.

Create a robust Secured

lending platform

▪ Banks expertise in 2-wheeler financing coupled with extensive

distribution network of BFIL creates a significant opportunity

▪ Similarly, home improvement loans can be scaled up

▪ Cashless collections > Time saved in center meeting > Improved

Sangam manager productivity > Improved cost to Income ratio

Reduced impact of Political

Risk

▪ Propensity to default by customers reduces in case of political events.

e.g. In the 5 pilot branches, customers with RD(Recurring deposit) had

lower overdues (>4 weeks at 0.08%*) vis-a-vis non-RD customers ( >4

weeks at 4.3%*)

* As on 30th Sep 2017

TRANSACTION STRUCTURE

5

1. BFIL to merge into IBL under a Scheme of

Arrangement

2. BFIL shareholders to receive IBL shares as

consideration

3. IBL to transfer the employees and

operations into a wholly owned subsidiary*

making it a captive Business

Correspondent

* Subsidiary to be incorporated post RBI approval

Issue of shares by IBL to shareholders

of BFIL

BFILShareholders

BFILIndusind Bank

Ltd.1

Wholly Owned Subsidiary

3 Subsidarisation of BC Operations

2

Merger of BFIL into IBL

Board ApprovalRegulatory Filings

& Approvals

NCLT Filings &

Approval

ROC Filings &

Share Issuance

▪ Valuation / Swap

Ratio

▪ Approval of

‘Scheme’, matters

therein and other

legal documents

▪ RBI

▪ CCI

▪ SEBI and Stock

Exchanges (NOC)

▪ Filing of Scheme

▪ NCLT approval:

Shareholders

approval, Creditors

approval, other

approvals

▪ ROC Filing

▪ Allotment of

shares to BFIL

shareholders

4-6

months1 month

Date of Announcement

14th Oct’ 2017

STATUS ON MERGER – CCI,RBI,SEBI AND STOCK EXCHANGES APPROVAL RECEIVED

6

EXECUTIVE SUMMARY

7

8

136 244

377

641

848

1,276

232

363

FY13 FY14 FY15 FY16 FY17 FY18 Q1FY17Q1FY18

2,016 2,837

4,171

7,677 9,150

12,575

9,629

13,832

Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18 Jun-17 Jun-18

Overview AUM Growth (Non-AP portfolio) Growing Net Interest Income

Financial Metrics Balanced Geographical mix Diversified Shareholding

Marginal cost of borrowing# 8.3%

Cost to income 51.2%

Return on Asset^* 3.7%

Return on Equity* 17.6%

EXECUTIVE SUMMARY

• Largest microfinance company in India

with gross loan portfolio of INR 13,832

Cr., 78 Lakhs members in Non-AP states

and 1,639 branches

• Sub 20% lending rate

• Company’s non-AP Portfolio grew by

44% (YoY) to INR 13,832 Crs. as of

June 30, 2018

• Profit after tax for Q1FY19 of INR 142

Crs (Previous GAAP Rs. 190 Crs)

Note: Shareholding as of June 30, 2018

Net worth (INR Cr.) 3,310

Capital Adequacy 30.6%

Cash & Cash equivalent

(INR Cr.)

1,236

Note: Portfolio as of June 30, 2018

Strong Balance sheet and liquidity

Efficiency and Profitability

INR Cr.INR Cr.

NII = Interest income on Portfolio loans +Net gain on

derecognition of loans sold under assignment transaction

+ BC Fee – Financial Cost

Note: Above Data for Q1FY19

Non-AP = excluding states of AP and Telangana

# includes on and off b/s borrowings (excluding processing fees) for Q1FY19

^Assets includes securitized, assigned and managed loans

Odisha 16%

Bihar 14%

West Bengal 13%

Karnataka 11%

Maharashtra 10%

Uttar Pradesh

8%

Kerala 6%

Rajasthan 7%

Jharkhand 5%

Madhya Pradesh

4%

Others 6%

2.8%

2.8%

2.9%

3.1%

3.2%

3.3%

3.6%

3.6%

4.8%

6.7%

Tree Line

Birla Sun Life Mutual Fund

Blackrock

Amansa Capital PTE Limited

DSP Blackrock

East Bridge Capital

Wellington

Kotak Mutual Fund

Route One

Reliance Mutual Fund

Top 10 Shareholders

Figures rounded off to the nearest digit across the presentation

9

INVESTMENT HYPOTHESIS

9

INVESTMENT HYPOTHESIS

BFIL is the most efficient and one of the low cost lender (interest rate at sub 20%)

Impeccable track record of meeting financial obligations in a timely manner even during the black swan event of AP-MFI Crisis

Diversified earnings stream with cross-sell / Non-Loan revenue contributing 8.0% to PAT for Q1FY19

Pan-India presence with no unbalanced geographic sectoral exposure

Strong solvency (Capital Adequacy of 30.6% as on 30th June 2018) and sufficient liquidity

Steady state RoA of 4% is the highest among financial services play

Favorable Macros

Unmatched leadership

There is a huge demand/ supply gap for microfinance

Entry barriers and supervisory standards are significantly enhanced thwarting future competition

No credible alternative for microfinance emerges even after 7.9 years of AP MFI Act

Regulatory Clarity

RBI’s comprehensive regulatory framework mitigates political and regulatory risks

RBI and MoF acknowledge microfinance as a key component of financial inclusion

PSL requirement of banks to enhance funding availability and value of the franchise

10

11

Segment -1

70 mn households in India

with some assets (INR

90/day PPP)

Segment -2 (BPL)

80 mn households in India

with no assets (INR 55/day

PPP)

THERE IS A HUGE UNMET DEMAND FOR MICROFINANCE

Assumptions

• Target households: 150 mn

•Basis: World Bank poverty statistics, India

• Avg. credit requirement: per household Rs. 45,000 (2015), adjusted with inflation on per

household Rs 20,000 (Year 2005)

•Basis: EDA Rural Systems, World Bank, Access to Finance

• Adjustment for service difficulties: 20%

•Basis: adjustment made to reflect inaccessible poor in rural areas (~7%) and half of

underserved urban poor (0.5 x 26% = 13%)

Source: World Bank; Sa-Dhan Bharat Microfinance reports

38,558 59,860 72,345

52,447

24,017

27,582 37,286

38,781

FY14 FY15 FY16 FY17

MFIs SHG

Micro-Credit Demand In India

covered in part by

moneylenders and

informal sources,

but largely untapped

*Disbursement in INR Crs.

Demand

Rs. 2,40,000

* *

Rs.87,442

Rs. 62,575

Rs. 5,40,000

Year 2005

Year 2015

*

Rs. 1,09,631 Rs. 91,228

*

INR crore

12

COMPANY OVERVIEW

12

13

Survey a village Recruit members

Deliver doorstep service Provide training

BFIL USES GRAMEEN MODEL TO PROVIDE UNSECURED CREDIT AT THE

DOORSTEP OF LOW INCOME RURAL WOMEN

Put loan

officers pic

1,484

2,875

3,503

FY 12 FY 13 FY 14

Drawdowns

AP exposure of Rs. 1,360

crore written off

Q3FY11 Q4FY14 Var.

Branches 2,403 1,255 -48%

Other Opex (INR crore)

51 21 -60%

Headcount 25,735 8,932 -65%

Personnel Cost (INR crore)

89 43 -52%

3,526

1,185

2,837

Q3FY11 Q3FY12 Q4FY14

Non–AP Gross Loan Portfolio

(13.6) (3.0)

70

FY12 FY13 FY14

Return To Profitability

Bn Bn

INR crore

BUILDING BLOCKS OF TURNAROUND POST AP MFI CRISIS

Balance Sheet Cleansed Supply-side Shock Managed Credit Growth Resumed

Cost Structure Optimization

14

12.6%

8.7% 8.4%

FY14 FY18 Q1FY19

Marginal Cost of Borrowing#

74.5%

49.0% 51.2%

FY14 FY18 Q1FY19

Cost to Income

2000 2014 -152012Yrs

14%

8%1,229

Oct’10 June’12 Mar’18

28,300

14,600

Non-AP Portfolio Outstanding

3,945

BFIL

Others

INR Crs.

▪ Net worth - Rs. 3,310 crs

▪ CAR - 30.6% (RBI Requirement

15%)

# On and Off balance sheet borrowings (excl. Managed Loans)

including processing fees 2015 -16

*Mar’18 Includes data for NBFC-MFIs & SFBs (source: MFIN)

16%12,594

78,113

DURABLE FOUNDATION FOR SUSTAINABLE GROWTH (1/2)

Market Share Regained

Technology Upgraded

Capital Reinforced

Efficiency Gains

Installed Computers at all branches with In-House lending system

All branch connectivity with daily data receipt (1,215 remote locations)

Refactoring of In-house lending system

Equipped Loan Officers with tablets

Instant Credit Bureau check, E-KYC and cashless Disbursements done

2017 - 18 15

*

Retail

Distribution

& Service

Points &

Cashless

Collections

29.25%

24.55%23.55%

22.00%20.75%

19.75%

Oct-10 Jan-11 Oct-14 Jul-15 Oct-15 Dec-15

4.8% reduction since Oct’14

GLP: Gross Loan PortfolioTerm loan and cash credit facilities

Interest rate on income generation loans

74%

53%

Mar-13 Jun-18

Share of borrowing from top 5 banks

53%

43%

Sep-10 Jun-18

Top three states share in GLP

Political Risk Mitigation through interest rate reduction

Reduced Borrowing Dependence Lower State Concentration

DURABLE FOUNDATION FOR SUSTAINABLE GROWTH (2/2)

16

CLARITY ON MAJOR UNCERTAINTIES

POST AP MFI CRISIS

17

WHAT DOESN’T KILL YOU, MAKES YOU STRONGER - POSITIVE DEVELOPMENTS POST AP MFI CRISIS

Will there be multiple

regulators?

▪ Regulatory clarity – RBI to be the sole regulator

Funding uncertainty?

▪ Priority sector status continues

▪ MFIs are the only indirect priority sector dispensation

Will there be contagion?

▪ No contagion

▪ Since past 7.9 years no other state has followed suit

Has the operating model

been challenged?

▪ Collection efficiency maintained despite disbursements being a fraction

of collections during the wind-down mode i.e. Oct’2010 to June’2012.

▪ No alternative credit delivery model has gained currency.

What will be the economics

under regulated interest

rate regime?

▪ RoA of 3-4% on a steady-state basis

Concerns Clarity

18

OPERATING MODEL VAILIDITY ESTABLISHED

3,942 3,526

2,706

2,101

1,635

1,185 1,320 1,229

Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13

Collection efficiency of 97% during wind-down mode dispels ever greening myth

Non-AP

Loan

Portfolio

No. of non-AP borrowers who repaid on-time

during this period5.2

No. of non-AP members who availed loans

during this period3.3

No. of non-AP members who didn’t

receive any incremental credit from BFIL

during this period

1.9

in Millions

1.9 million borrowers repaid loans

without incremental lending

INR crs

Internal generation -- and not incremental debt --

aids prompt repayment

MFI Industry non- AP Portfolio Outstanding (Rs Cr)

Oct’10 28,300

June’12 14,600

19

Sector outstanding

Non-AP Portfolio

Oct ’10 – 28,300

Mar’14 – 24,615

Mar’15 – 40,138

Mar’16 – 50,534

Mar’17 – 61,623

Mar’18– 78,113#

Market Share Dynamics

3rd, 4th and 5th largestMFI players with 33%Non-AP market sharewent under CDR.

Institutional Infrastructure

Credit Bureaus-

- Equifax & Highmarkare functional

- 95% of MFIs now use CB reports for disbursements

COMPETITIVE LANDSCAPE CHANGES TO BFILS’ ADVANTAGE

INR crore

• No. of loan records - 30.8 Crore

• No. of borrower records – 8.9 Crore

• No. of loan records (live) – 7.1 Crore^

• No. of borrower records (live) – 4.0 Crore^

• No. of MFIs reporting – 173

Snapshot of Equifax Credit Bureau*:

* Source: Equifax (as on May’18), Excluding A.P and Telangana

# as per MFIN; Mar’18 - Includes data for NBFC-MFIs & SFBs

^ 0-179 DPD.20

6.7

6.4

1.0

2.7

4.4

21.20

STEADY-STATE ROA OF 4% CAN BE TARGETED

RevenueProfitTaxesProv. &

Write-off

Operating

cost

Financial cost

▪ Marginal Cost of borrowings

for Q1FY19: 8.4%.

▪ Portfolio funded by debt: 80%

Tax Rate @ 34%

21

Interest Income

(EIR) #

*interest rate charged is 19.75% for new loans effective from 7th Dec’15

#Processing fee is calculated based on weighted average portfolio mix of 48% IGL (1 Yr. loan) , 23% LTL (2 Yr. loan) and 28% MTL

(1.5 Yr. loan)

GROWTH ANATOMY

22

3,942

1,185 1,320 2,016

2,837

4,171

7,677

9,135

12,575

Sep'10 Dec'11 Mar'12 Mar'13 Mar'14 Mar'15 Mar'16 Mar'17 Mar'18

BFIL GLP

28,300

14,600 16,740

24,499

38,386

50,535

61,623

78,113

Oct'10 Jun'12 Mar'13 Mar'14 Mar'15 Mar'16 Mar'17 Mar'18

Industry GLP

7.5 YEAR CAGR FOR THE SECTOR AND BFIL ARE 14% AND 17% RESPECTIVELY

^Industry portfolio includes NBFC-MFIs and SFBs only

Source: MFIN Micrometer (Mar’13,Mar’14, Mar’15, Mar’16,Mar’17 & Mar’18 data)

23

^

^

20%

57%

33%

80%

43%

67%

0% 20% 40% 60% 80% 100%

BFIL- June'18

MFI Industry -Mar'17*

MFI Industry-Mar'13^

Urban Rural

INDUSTRY GROWTH SKEWED TOWARDS URBAN, WHEREAS WE REMAIN RURAL FOCUSED

Industry growth skewed

towards urban

We are rural

focused

Source: ^Sa-Dhan Report 2013,*MFIN Micrometer

24

AUM GROWTH IS PRIMARILY LED BY CUSTOMER ACQUISITION OVER THE LAST DECADE

25

150%

-13%

44% 42%

124%

-15%

19%25%

13%

2%

21%14%

FY 07 - 10 FY 10 - 13 FY 13 - Q1FY19 FY 07- Q1FY19

Gross loan portfolio Active Borrowers Gross loan portfolio/ Active Borrowers

CAGR %

*

*Enterprise figures^ Excluding states of A.P and Telangana

^ ^ *

CREDIT BUREAU DATA

13%

16%18%

22% 23%

FY-17 FY-18 Q1-FY18 Q4-FY18 Q1-FY19

22%

27% 26%

37% 36%

FY-17 FY-18 Q1-FY18 Q4-FY18 Q1-FY19

Rejection rate for Long Term loansRejection rate for All Products

88% 89% 94% 89% 91%

FY17 FY18 Q1-FY18 Q4-FY18 Q1-FY19

Hit rate^ for all products

Hit rate = % of loan applications with matching record in credit bureau

Rejection Reasons – Q1FY19 % Mix

26

Reasons

IGL 1 &

IGL 1 +

MTL 1

>IGL 1 or > MTL

1 (excl. IGL1 +

MTL1)LTL

Q1FY191st Apr to

9th June

10th to

30th June

1st Apr to

9th June

10th to

30th June

Loans from=>2MFIs 33% 46% - 54% -

Loans from > 2 MFIs or Other lending

entity- - 48% - 54%

=>2MFIs and Outstanding Balance

>60K19% 31% - 29% -

=>2MFIs or other lending entity and

Outstanding Balance >80K- - 20% - 10%

Outstanding Balance>60K 17% 10% - 6% -

Outstanding Balance>80K - - 21% - 26%

=> Default History (club all type of

defaults)10% 9% 4% 7% 1%

Eligibility < Min Ticket Size 22% 4% 7% 3% 9%

Total 100% 100% 100% 100% 100%

*Note:

Rejections are done based on data input from Credit bureau. Rejection data is

calculated based on unique clients basis.

* *

*

Pre Post#RBI

Guidelines

MFIN

Guidelines^^

Indebtedness

limit (INR)60,000 80,000

Maximum No. of

Lenders2 3

Note:

▪ The revised guidelines pertains to JLG loans and does not

apply to first time customers (IGL1).

▪ Guidelines continue to remain same for IGL1 customers

Revised BFIL Guidelines#

^^MFIN guidelines revised to 3 lender norms in Sep’17 and indebtedness

to INR 80,000 in Apr’18

# With effect from 10th June’18

✓

✓ ✓

✓

State SHG Exposure* BFIL Exposure*

Andhra Pradesh 28% -

Telangana 20% -

Karnataka 13% 11%

Tamil Nadu 10% -

West Bengal 8% 13%

Kerala 5% 6%

Odisha 3% 16%

Maharashtra 3% 10%

Uttar Pradesh 2% 8%

Bihar 3% 14%

Madhya Pradesh 1% 4%

Assam 1% -

Rajasthan 1% 6%

Jharkhand 0.5% 5%

Gujarat 0.4% -

Chhattisgarh 0.6% 2%

Haryana 0.3% 2%

Punjab 0.1% 2%

Tripura 0.2% -

Himachal Pradesh 0.2% 0.1%

Others 0.5% 0.3%

BFIL HAS NIL EXPOSURE IN SHG CONCENTRATED STATES

SHG Exposure <=5%

SHG Concentrated

States

*SHG Data as on Mar’17 (Source: NABARD Status of Microfinance in India-2017), BFIL data as on June1827

FUTURE STRATEGY

28

UNMATCHED LEADERSHIP

Unique

Operating Model

Extensive Reach

Low Cost

Producer

External

endorsements

Parameter

▪ Interest rate

▪ No. of districts

▪ No. of customers

▪ Group Lending

▪ Rural customer base

▪ Rating/Grading

Status

▪ 100%

▪ ~80%

▪ Sub 20% lending rate

▪ 354

▪ 7.8 Mn

▪ Highest MFI grading “MFI 1”

▪ Highest Code of Conduct

Assessment Grading “C1”

▪ Corporate Governance rating at

“CGR2+”

▪ Highest safety Short-term rating at

“A1+”

29

THE MOST EFFICIENT MFI IN THE GLOBE

10

Metric

▪ Sub-20

Interest

Rate to

Borrower

▪ Cost to

Income

Ratio

▪ Balance sheet

strength

▪ Stellar

repayment

record

▪ Judicious

sources mix

▪ Technology

initiatives

▪ Scale

▪ AUM

growth

▪ Operating

leverage

▪ Non-Loan

revenue

Drivers

▪ Marginal

cost of

Borrowing

▪ Cumulative

next 2

years salary

increase to

field staff

Target %

▪ Annualised

earnings

growth

Medium Term Strategic Priorities:

20 30 40 50

▪ Low marginal

cost of borrowing

▪ Scale &

Efficiency

▪ Productivity &

Efficiency

Status –

Q1FY198.4* 19.75 - 51.2% 195%

*on and off b/s loans (including processing fees)

30

CREATIVE DISTURBANCE TO ASSET-REVENUE-EARNING CORRELATION

10%

90%

Revenues

5%

95%

Assets*

15%

85%

Earnings

*Note: Core microfinance will continue to be more than 95% of credit assets

Medium-Term Targets

MFI

Non - MFI

Non-MFI Actuals – Q1FY19

3.5%

0.9%

31

8.0%

PILOT ON RETAIL DISTRIBUTION

AND SERVICE POINTS (RDSP)

32

WE MEET OUR BORROWERS 52 TIMES A YEAR

Door Step Delivery

We meet 7.8 mn customer through 3 lacs centre meeting every week across the country

Center Meeting

Unique Distribution Channel

Convenient Day:

Monday to Friday

Convenient Timings:

Between 7 AM to 11 AM

Providing Financial &

Non-Financial Products

…AND WE UTILISED THIS CHANNEL FOR FACILITATION OF MULTIPLE FINANCIAL AND NON

FINANCIAL PRODUCTS.

33

DIGITAL AND PROCESS INITIATIVES HAVE HELPED REDUCE CENTER MEETING DURATION

EARLIER CENTER MEETINGDURATION

45 mins

WITH TAB AND PAPERLESS

35 mins

WITH CASHLESS AND RDSP

20 mins

• More time for value added activities at center meeting

• More center meetings per SM per day

Deposits and withdrawals point

Bill payments and recharges

Allied and OTC financial services

Cross sell and e-commerce

RDSP CREATES A PARADIGM SHIFT IN CLIENT CONNECT AND PRODUCES MULTITUDE OF OPPORTUNITIES

34

Customer

Cu

rre

nt*

Wit

h R

DSP

80% of our members travel for electricity bill payment. Travels 2-5 km, spending up to 1 hour

88% of our members visit Kirana store for ration items, travels less than 0.5 km, spending up to 15 minutes

Travels

to

99% of our members visit electronics store for DTH / mobile recharge, travels 1-5 kms, spending up to 30 minutes

51% travel to Municipality office for water bill payment, travels 1-5 kms, spending up to 30 minutes

Bank/ATM for cash deposit and withdrawal, travels 5-8 kms, spending up to 2 hours

Online shopping, only 5% customer reported access to this

1

2

3

4

5

6

Customer

Travels

to

RDSP

Single window for all requirements

< 0.5 km

1

RDSP CAN PROVIDE ACCESS TO THESE SERVICES AT THE SHORTEST DISTANCE THUS REDUCING MULTIPLE VISITS AND SAVES TIME FOR MEMBERS

*Source: 5,456 customers surveyed across Karnataka, Odisha and UP

Cashless Coll., RDSP

RDSP PILOT

35

Leveraging distribution

strength

Last mile for leading retailers

THE MODEL IS PROVEN THROUGH CENTER MEETINGS

IMMENSE E-COMMERCE POTENTIAL WITH RDSP IN PLACE EXISTING PARTNERS POTENTIAL BUSINESS OPPORTUNITY

OVER 68 LAKH NON FINANCIAL

UNITS FACILITATED*

*Cumulative units facilitated of non financial products as of Jun’18

RDSP

• E Commerce

• Railway ticketing

• OTC insurance

0.022

0.090

0.43

0.7

1.7

1.9

3.0

4.0

27

30

0 10 20 30 40

Two wheelers

Refrigerator

Water purifiers

Cooking stoves

Cooker

Cycles

Sewing machines

Mixer grinders

Solar Lamps

Mobile Phones

U N I T S I N L A K H S

UPDATE ON CASHLESS AND E-KYC

36

90%97% 98%

0%10%20%30%40%50%60%70%80%90%


CASHLESS PROCESS

CASHLESS DISBURSEMENT PROCESS

Center

meeting

Proposal on

TABE- KYC Instant Credit

Bureau

ABPS based

Loan

disbursal

Confirmati

on to

Customer

Customer

Consent

37

Sangam

Manager

checks the

willingness for

a new loan in

the center

meeting

Loan details

are recorded

in the proposal

screen on the

tab

Customer

consent is

taken and the

biometric

details are

captured

E-KYC is done

using online

UID data

check. This

happens

instantly in the

center meeting

Parallel CB

check

happens and

the customers

eligibility for

the loan and

the loan

amount gets

determined

Loan amount

is approved

and loan

proposal is e-

signed

Disbursement

is done on the

same day in

the Aadhar

linked bank

account

through ABPS

Customer gets

the

disbursement

confirmation

through an

SMS

E-sign

98% CASHLESS DISBURSEMENTS IN Q1FY19

E-KYC, E-SIGN AND INSTANT CB ROLLED OUT ACROSS ALL BRANCHES

38

Benefits

•Digitized Loan Application

•Saves CM by reducing signature on Loan Application

•Step Forward to Paper Less

•Minimize the risk of theft and robbery.

•Minimize the risk of high volume cash carrying and transactions

•Instant Approval.

•Reduced Loan Processing TAT

• Increased Business Volume

•Immediate member authentication

•Eliminates risk of fake borrowers

E-KYC Instant CB

E-signCashless Disbursement

• Time saving in center

meeting and at the

back office.

• Better competitive

advantage.

LOANS FOR HOUSING IMPROVEMENT

& TWO-WHEELER (PILOT)

39

Assumptions

• Rural households: 166 mn

•Basis: Census 2011

• Adjustment : 46 mn

• For service difficulties: 20%

• For rented houses: 5% (source:

NSSO survey)

• For HHs with no house: 4 mn

(Source: NSSO survey)

• Addressable HH: 120 mn

• Annual no. of HH : 14 mn

• % of HHs having spent on

construction in last 1 yr (Source

NSSO survey): 12%

• Avg. credit requirement: Rs 100,000

per household

40

HUGE UNMET DEMAND FOR RURAL HOME IMPROVEMENT/EXTENSION LOANS

*FY15 disbursement of PSBs Rs.5,231 Crs and HFCs Rs.3,146 crs (< Rs.5 lacs ticket size)

Source:(NHB Report on Trend & Progress of Housing in India 2015 )

Dollar Exchange rate for 27th April 2017 Rs. 64/-

Annual Disbursement Annual Demand

Gap filled by:

Own funds - 66%;

Family, Friends &

Money Lenders - 34%.

Rs. 1,40,000 Crs. ($22bn)

Rs. 8,377 Crores ($1.3 bn) *

NO FORMAL LENDER DUE TO OPERATING

CHALLENGES IN THIS SPACE

41

Metro Urban Semi Urban Rural

Salaried Very High High Moderate No Competition

Professionals High Moderate Low No Competition

Self Employed Moderate Low Very Low No Competition

No Rural Focused Player

Operating Challenges in Rural

Purpose Home improvement and

extension

Eligibility Criteria • Should have completed at

least 3 IGL loan cycles

• Age between (18 to 55 years)

Ticket size Rs. 1,00,000 to Rs. 3,00,000

Loan Tenure 3 to 5 years

LTV (Loan to

Value Ratio)

Maximum 50% of the property

value or 75% of the work estimate

whichever is lower

Repayment

Frequency

Monthly

Our Product Offering

PILOT DETAILS

Lack of title deeds

High Transaction

costs

Lack of skilled

manpower for technical

and legal assessment

Note: Portfolio outstanding as on 30th June’18 Rs. 1.2 Crs (no. of outstanding loans 53) . The Pilot is currently rolled in 55 branches.

LOANS FOR TWO WHEELER

Product Details

Purpose Purchase of Two Wheeler

Eligibility ▪ Member of Joint Liability Group

▪ Minimum Two IGL Loan cycle completed

▪ Should not have availed IGL/MTL/LTL in last 12

weeks

▪ Exposure to borrower capped to Rs. 1 Lac across

all the lenders

Ticket Size Rs. 33,044 to Rs. 54,950

Loan Tenure 104 Weeks

Loan To Value Maximum 88.5% of on road price of the vehicle

(subject to a maximum amount of Rs. 54,950)

Repayment Frequency Weekly

42

Note: Pilot resumed from April’17Portfolio outstanding for Two wheeler loans as on 30th June’18 Rs. 8.8 Crs (no. of outstanding loans 2,103)The Pilot is currently rolled in 323 branches.

Q1FY19

PERFORMANCE HIGHLIGHTS

43

Operational

Efficiency

Financial

Efficiency

P&L Impact

Key Balance

Sheet Figures

▪ As per previous GAAP, PBT for Q1FY19 is Rs.245 Crs against Q4FY18 of Rs. 210 Crs and loss of Rs. 37 Crs in Q1FY18.

▪ As per Ind AS, PAT stood at Rs. 142 Crs in Q1FY19 as against Rs. 213 Crs in Q4FY18 and Rs. 48 Crs in Q1FY18, primarily on

account of:

1. Upfront income recognition of Rs. 123 Crs on assignment transactions in Q4FY18 vis-à-vis no assignment transactions in Q1FY19.

2. Tax expense of Rs. 41 Crs in Q1FY19 compared to Rs. 2 Crs in Q4FY18. Tax expense of 22% considered for Q1FY19, based on

FY19 estimated tax expense percentage.

▪ Marginal cost of Borrowings* reduced to 8.4% in Q1FY19 ( 8.6% in Q4FY18)

▪ Weighted avg. cost of borrowing** at 9.2% in Q1FY19

▪ Incremental drawdowns of Rs.3,913 Crs (including securitization transactions) in Q1FY19 (growth of 183% YoY). BFIL also originated

Rs.1,367 Crs under managed portfolio in Q1FY19

▪ Completed two Securitisation transactions of Rs. 1,366 Crs in Q1FY19

▪ Healthy addition of 10.6 lacs customers in Q1FY19

▪ Loan disbursements^^ grew by 68% YoY and 9% QoQ to Rs. 6,260 Crs (Rs. 5,738 Crs in Q4FY18 and Rs. 3,734 Crs in Q1FY18)

▪ Non-AP Gross Loan Portfolio^^ grew by 44% YoY and 10% QoQ to Rs.13,832 Crs as of June 30, 2018

▪ AUM^^ of Rs.13,832 Crs as on June 30, 2018

▪ Networth of Rs.3,310 Crs as on June 30,2018 (Higher by Rs. 94 Crs compared to Previous GAAP Networth)

▪ Capital adequacy at 30.6% as of June 30, 2018

▪ Cash & Cash equivalent^ of Rs.1,236 Crs as of June 30, 2018

▪ Deferred tax asset has been recognised on the balance sheet in Q1FY19.

▪ Deferred tax asset of Rs 30 Crs and MAT Credit of Rs. 285 Crs as on June 30, 2018.

44

* Includes on and off balance sheet borrowings and including amortised processing fees. **Includes on and off balance sheet (Quarterly average) including amortised processing fees.

^ Excluding security deposit.. ^^Includes On balance sheet, securitised, assigned and managed loans

HIGHLIGHTS OF Q1FY19

Credit Quality▪ Cumulative Collection efficiency of 99.8% for loans disbursed amounting to Rs. 28,634 Crs between 1st Jan’17 to 30th Jun’18

▪ Net NPA at 0.1%

NETWORTH IS HIGHER BY RS.94 CRS WITH Ind AS (CONTD.)

45

S no. Particular Previous GAAP Ind AS Impact on Net worth*

1 Loan Provisioning Company’s policy subject to RBI

compliance

ECL (Expected Credit

Loss)Rs. 8 crs

2Income recognition on

balance sheet assets

Straight line amortisation of

processing fees

EIR (Effective interest

rate) amortisation of

processing fees

Rs. 28 crs

3 Financial expenses Processing fees on borrowings

recognised upfront

EIR -amortisation of

processing fees on

borrowings

Rs. 10 crs

4 Valuation of assetsLoans were booked as at

principal outstanding amount

Fair valuation

approachRs. 51 crs

5Securitisation assets

recognitionRecognised as off-balance sheet

Recognised as on-

balance sheet-

6Income recognition on

assignment dealsRecognised over loan contract

Recognised on

transaction dateRs. 57 crs

7 Others Items Rs. 3 crs

8Tax impact on above

items(Rs. 63 crs)

Net worth

(As on June 30,2018)Rs. 3,216 Crs (A) Rs. 3,310 Crs (B) Rs. 94 Crs (B-A)

* Note: There could be negative variances between Previous GAAP and Ind AS while comparing for a particular period for the

above items, but on overall basis the net effect of Ind AS Net worth is positive by Rs 94 Crs. as of 30th June, 2018.

…..NETWORTH IS HIGHER BY RS.94 CRS WITH Ind AS

46

Profit After Tax As Per Previous GAAP Profit After Tax As Per Ind AS

INR Crs.

Net Worth As Per Previous GAAP Net Worth As Per Ind AS

(37)

119 163

211 190

455

Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 FY18

2,447

3,216

Q4FY17 Q1FY19

48

135 192 213

142

589

Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 FY18

2,448

3,310

Q4FY17 Q1FY19

KEY PARAMETERS – Ind AS vs PREVIOUS GAAP

47

* Net interest income(Ind AS) = Interest income on Portfolio loans + Net gain on derecognition of loans sold under assignment transaction + BC Fee – Financial Cost

* Net interest income(GAAP) = Interest income on Portfolio loans + Excess interest spread on assignment/securitization + BC Fee – Financial Cost

INR Crs.

Particulars

Ind AS GAAP

Q1FY18 Q1FY19 YoY% Q4FY18 QoQ% Q1FY18 Q1FY19 YoY% Q4FY18 QoQ%

Gross Loan Portfolio 9,629 13,832 44% 12,575 10% 9,631 13,850 44% 12,594 10%

Net Interest Income* 232 363 56% 417 (13%) 213 361 69% 326 11%

Operating expenses 147 211 44% 199 6% 149 214 43% 198 8%

PBT 93 183 96% 215 -15% (37) 245 - 210 17%

PAT 48 142 195% 213 -33% (37) 190 - 211 (10%)

Net worth 2,515 3,310 32% 3,141 5% 2,420 3,216 33% 2,999 7%

OPERATIONAL HIGHLIGHTS

48

HEALTHY ADDITION OF 10.6 LACS CUSTOMERS IN Q1FY19 VIS-À-VIS 4.8 LACS IN Q1FY18

Particulars Jun-17 Jun-18 YoY% Mar-18 QoQ%

Branches 1,408 1,639 16% 1,567 5%

Centers (Sangam) 2,86,259 3,56,685 25% 3,35,070 6%

- Centers in non-AP States 2,37,372 3,07,798 30% 2,86,183 8%

Employees (i) + (ii) + (iii) + (iv) + (v) + (vi)+(vii) 15,284 17,415 14% 16,021 9%

▪ Field Staff (i) + (ii) + (iii) + (iv) + (v) 14,546 16,808 16% 15,418 9%

– Sangam Managers* (i) 9,251 10,380 12% 10,208 2%

– Sangam Manager Trainees(ii) 1,000 1,588 59% 556 -

– Branch Management Staff (iii) 2,831 3,183 12% 3,077 3%

– Area Managers (iv) 271 322 19% 282 14%

– Regional Office Staff (v) 1,193 1,335 12% 1,295 3%

▪ Central Processing Unit and Member helpline (vi) 374 191 -49% 195 -2%

▪ Head Office Staff (vii) 364 416 14% 408 2%

Members in non-AP States (in '000) 6,847 7,808 14% 7,270 7%

− Members added (in the quarter) (in ‘000) 416 1,065 - 1,145 -7%

Active borrowers in non-AP States (in '000) 5,152 6,425 25% 6,188 4%

− Active borrowers added (in the quarter) (in ‘000) 478 913 91% 938 -3%

No. of loans disbursed (in '000) 1,894 2,862 51% 2,768 3%

Disbursements (for the quarter) (INR Crs.) 3,734 6,260 68% 5,738 9%

Gross loan portfolio – Non-AP (INR Crs.) (A+B+C+D) 9,629 13,832 44% 12,575 10%

• Loans outstanding (A) 7,707 10,574 37% 9,528 11%

• Securitized (B)^ 517 - - 42 -

• Assigned (C) 759 1,234 63% 1,971 -37%

• Managed loans (D) 647 2,024 213% 1,034 96%

Operational Efficiency – Non-AP :

Off-take Avg (Disbursements/ No of Loans disbursed) (INR) 19,717 21,875 11% 20,735 5%

Off-take Avg Excluding Cross Sell 24,037 26,820 12% 25,852 4%

Gross loan portfolio/ Active Borrowers (INR) 18,689 21,530 15% 20,320 6%

Gross loan portfolio/ No. of Sangam Managers (Rs. '000) 10,968 13,895 27% 12,866 8%

Active borrowers / No. of Branches 4,041 4,266 6% 4,315 -1%

Active borrowers / No. of Sangam Managers 587 645 10% 633 2%

*Sangam Managers (SMs) are our loan officers who manage our centers (also called Sangams). As of Jun’18, we had 9,955 SMs in Non-AP States

^ Securitised portfolio originated on or before 31 March, 2017, All securitization deals originated from 1st April, 2017 are being recognised as financial

asset on balance sheet as per Ind AS 49

50

INR crore

1,148 1,684 1,538

2,489 2,369

2,657 2,974

4,062 3,769

4,016

2,981

3,902 3,734

4,288 4,712

5,738 6,260

Q1FY15

Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

Q4FY16

Q1FY17

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

Disbursement

% for the year 17% 25% 22% 36%

FY16 - Rs. 12,063

Q1FY19 DISBURSEMENT IS IN LINE WITH HISTORICAL TREND OF SEASONALITY (EXCEPT FY17)

FY15 - Rs. 6,860 FY18 - Rs. 18,472FY17 - Rs. 14,667

20% 22% 25% 34% 26% 27% 20% 27% 20%

Note: Demonetisation distorted the historical trend of seasonality in FY17

23% 26%

FY19 - Rs. 26,000*

31% 24%

*Guidance

IMPROVING OPERATING COST AND FINANCIAL EFFICIENCY

Best before

AP MFI crisis

Worst during

AP MFI crisisFY14 FY15 FY16 FY17 FY18 Q1 FY18 Q4FY18 Q1FY19

Productivity – Non-AP:

Borrowers/ SM 489* 287 721 787 733 615 633 587 633 645

Gross Loan Portfolio/ SM ('000) 3,640* 1,320 6,275 8,994 12,141 10,574 12,816 10,968 12,866 13,895

Offtake Avg. 10,299* 9,237 11,849 12,273 15,024 18,676 20,316 19,717 20,735 21,875

Offtake Avg. (Excl Cross-sell) 10,383* 11,021 12,277 14,149 18,102 21,491 24,922 24,037 25,852 26,820

Cost Efficiency:

Financial cost / Avg. Gross Loan Portfolio 6.6% 9.8% 8.3% 8.3% 8.5% 7.3% 6.8% 7.5% 6.3% 6.0%

On B/S daily Wt. Avg. Cost of borrowings % 10.3%^ 16.0%^ 13.9%# 13.5%# 12.0%# 10.9%# 9.6%## 10.0%## 9.3%## 9.4%##

Opex/ Avg. Gross Loan Portfolio % 10.4% 21.7% 9.6% 9.5% 7.1% 6.5% 6.6% 6.3% 6.6% 6.4%

Cost to Income Ratio 52.4% 275% 74.5% 61.1% 48.3% 50.0% 49.0% 53.2% 43.4% 51.2%**

Credit Quality - Non-AP:

Gross NPA% 0.20%* 5.5% 0.1% 0.1% 0.1% 6.0% 2.2%^^ 5.9% 2.2%^^ 0.3%^^

Net NPA% 0.16%* 2.9% 0.1% 0.1% 0.04% 2.7% 0.1% 0.2% 0.1% 0.1%

*Enterprise figures includes figures from AP state

^Cost of borrowing for Best before AP MFI crisis and Worst during AP MFI crisis calculated on monthly averages and daily Wt. Avg. Cost of borrowings % Includes processing

fee for on and off balance sheet funding for the said periods,

# Includes processing fee for on b/s funding only, for FY 14 Rs. 13 Crs, FY15 Rs. 14.3 Crs, FY16 Rs.10.5 Crs, FY17 Rs. 10.4 Crs

^^ Rs. 17.7 Crs , Rs. 190.0 Crs and Rs. 176.6 Crs write offs in Q3FY18, Q4FY18 and Q1FY19 respectively.

** Cost to income based on previous GAAP nos is 47.0%, ## based on quarterly Avg and includes amortised processing fees

Note: FY18 and Q1FY19 nos are based on Ind AS51

PORTFOLIO MIX CONCENTRATION NORMS

Metric % Cap on Disbursement* POS % Cap of Networth*

State ▪ <15%

▪ 17.5% for Bihar & Odisha

▪ 75%

▪ (100% for Odisha)

District ▪ <3 %

▪ 4% for Bihar & Odisha

▪ 5%

▪ (Only 5% of total operating

districts can go up to 10% of

Networth)

Branch ▪ <1 %

▪ 1.25 % for Bihar & Odisha

▪ 1%

▪ (Only 5% of the total

operating branches can go

up to 2% of Networth )

NPA▪ No disbursement to a

branch with NPA > 1 %

Collection

efficiency

▪ No disbursement to a branch

with on- time collection

efficiency of < 95%

15% Cap on portfolio outstanding for each state (17.5% for Bihar and Odisha)

*Subject to tolerance limits

Note: Portfolio percentage are based on proportion of

gross loan portfolio of respective states.

State %

0.1%

0.1%

0.6%

1.6%

1.5%

1.6%

3.7%

4.5%

5.9%

4.6%

6.4%

10.6%

11.9%

12.8%

15.3%

18.8%

0.1%

0.1%

0.2%

1.7%

2.0%

2.1%

4.1%

4.9%

6.0%

6.4%

8.2%

9.8%

11.2%

12.9%

14.3%

16.1%

Himachal Pradesh

Delhi

Uttarakhand

Chattisgarh

Punjab

Haryana

Madhya Pradesh

Jharkhand

Kerala

Rajasthan

Uttar Pradesh

Maharashtra

Karnataka

West Bengal

Bihar

Odisha

GLP Q1FY19

GLP Q1FY18

52

*As of June’18

VINTAGE OF NON-AP BRANCHES IS 7.3 YEARS PORTFOLIO OUTSTANDING BY ECONOMIC ACTIVITY

StateNo. of

Branches

Wt. Avg. Vintage

(in Yrs.)*

Bihar 196 6.6

Odisha 193 8.0

Karnataka 182 9.7

Uttar Pradesh 166 6.7

West Bengal 158 7.7

Maharashtra 154 7.8

Rajasthan 93 6.4

Madhya Pradesh 85 8.2

Kerala 74 5.6

Jharkhand 71 6.1

Chhattisgarh 51 4.9

Haryana 34 4.7

Punjab 31 5.4

Uttarakhand 11 8.1

Delhi 2 5.5

Gujarat 1 10.5

Himachal Pradesh 2 3.6

Tamil Nadu 1 0.1

Tripura 1 -

Total 1,506 7.3

Purpose % Mix

Livestock 42%

Agriculture 14%

Grocery stores and other retail outlets 9%

Tailoring, Cloth weaving 8%

Vehicle repairs 6%

Trading of vegetable & fruits 6%

Trading of agri. Commodities 3%

Masonry, painting, plumbing,

electrician, carpenter and related3%

Garments & footwear retailing 3%

Eateries 2%

Bangles shop 0.3%

Trading of utensils, plastic items 0.3%

Other income generating activities 4%

53

INDUSTRY UPDATE ON CREDIT

QUALITY

54

0.7%

0.5%

30+ DPD 60+ DPD

92% OF BORROWERS HAVE LOANS FROM <= 2 LENDERS

% Borrowers - Indebtedness

Portfolio Quality *

% Borrowers - Loans from Lenders

55

72%

20%

6%2%

1 lender 2 Lenders 3 Lenders 4 Lenders

Source : Equifax on Microfinance database as on Apr’18.

Includes data reported by Banks under Microfinance database.

91%

7% 2%

<60K 60K to 100K >100K

RBI Guidelines - 2 NBFC MFIs RBI Guidelines - 100K for NBFC MFIs

Note: Lenders include NBFC-MFIs and Banks

* Loans disbursed from May ‘17 to April’18 – Portfolio data as on April’18

INR

REVIEW OF FINANCIALS

56

STRONG SOLVENCY AND SUFFICIENT LIQUIDITY

INR Crs.

Capital AdequacyNetworth

Cash and Cash Equivalent^Drawdowns*

^ Excluding security deposit

15.0%

RBI Requirement

Q1FY19

30.6%

1,384

3,771 3,913


2,515

3,141 3,310


*Excluding Managed Loans

1,703 1,860

1,236


57

3,734

5,738 6,260


48

213

142


147

199

211


DISBURSEMENTS FOR THE QUARTER GREW BY 68% YoY

58

PATOperating Cost

Net Interest Income*

* Net interest income = Interest income on Portfolio loans + Net gain on derecognition of loans sold under assignment transaction + BC Fee – Financial Cost

Disbursements Non-AP Gross Loan Portfolio

INR Crs.

9,629

12,575 13,832


44%

YoY

232

417

363


93

215

183


PBT

Particulars Q1FY18 Q1FY19 YoY%

Q1FY19

As % of Total

Revenue

Q4FY18 QoQ%

Interest Income (A) 384 553 44% 91% 480 15%

Interest income on Portfolio loans 354 529 49% 87% 466 13%

Interest on deposits 29 24 -18% 4% 14 73%

Net gain on derecognition of loans sold under assignment transaction (B) 38 (2) -105% - 123 -102%

Fee Income (C) 29 57 95% 9% 41 39%

BC Fees 16 35 120% 6% 17 105%

Facilitation fees from Cross-sell 13 21 65% 3% 23 -9%

Other Fee income 0.3 0.4 18% 0% 0.3 21%

Recovery against loans written off (D) 1 3 - 1% 2 52%

Other income (E) 0.1 0.1 -5% - 1 -91%

Total Revenue (F) = (A+B+C+D+E) 452 611 35% 100% 647 -5%

Financial expenses (G) 176 199 13% 33% 189 5%

Personnel expenses 109 159 46% 26% 150 6%

Operating and other expenses 35 49 41% 8% 45 10%

Depreciation and amortization 3 3 -1% - 4 -30%

Total Operating Cost (H) 147 211 44% 35% 199 6%

Impairment on financial instruments (I) – ECL 36 18 -49% 3% 44 -59%

Total Expenditure(J)= (G+H+I) 358 428 20% 70% 432 -1%

Profit before Tax = (F-J) 93 183 96% 30% 215 -15%

Current Tax (I) 13 147 - 24% 3 -

Deferred Tax (II) 45 (106) - -17% 2 -

MAT Credit Entitlement (III) (13) - - - (4) -

Total Tax Expense (I+II+III)* 45 41 -9% 7% 2 -

Profit after Tax 48 142 195% 23% 213 -33%

Other Comprehensive income 9 (0.04) - 1% 2 -102%

Total Comprehensive income for the period 57 142 148% 23% 215 -34%

INR Crs.

59

P&L STATEMENT

*Tax expense is arrived based on estimated tax rate for FY19

Q1FY19 Ind AS VS PREVIOUS GAAP

60

Ind AS / Previous GAAPInd AS

(A)

IGAAP

(B)

Variance(

A-B)Remarks

Interest income 553 503 50

Interest income on portfolio loans/

Interest income on portfolio loans and Loan

processing fee

529 479 50

Under IndAS

• Securitisation portfolio is recognised as on balance sheet portfolio and

hence income is also recognised under interest income

• Interest on loans is calculated using Effective interest rate

Interest on deposits 24 24 -

Net gain on derecognition of loans sold under

assignment transaction /

Excess interest spread on securitization and

Assignment

(2) 72 (74)

Under IndAS

• Income from securitisation portfolio is recognised in interest income

• Total gain from the Assignments on the contract will be recognised on

transaction date

Fee Income 57 57 -

BC fees 35 35 -

Facilitation fees from Cross-sell 21 21 -

Other fee income 0.4 0.4 -

Recovery against loans written off 3.2 3.2 -

Other Income 0.1 0.1 -

Total Revenue 611 635 (24)

Financial expenses 199 180 19

Under IndAS

Interest expense on securitisation transactions to be included in financial

expenses

Amortisation of processing fees on borrowings

Personnel expenses 159 162 (3) Actuarial adjustments reclassified in other comprehensive income

Operating and other expenses 49 49 -

Depreciation, amortization and impairment 3 3 -

Total Operating Cost 211 214 (3)

Impairment on financial instruments/

Provisions & Write-offs18 (3) 22 Under IndAS ECL methodology is used to arrive at impairment of loans

Total Expenditure 428 390 38

Profit before Tax 183 245 (62)

Current Tax 147 142 5

Deferred Tax (Asset)/ Liability (106) (87) (19)

Minimum Alternate Tax credit entitlement - - -

Profit after Tax 142 190 (48)

Other Comprehensive income (0.04) - (0.04) Includes actuarial adjustments on gratuity and Fair value impact on assets

Total Comprehensive income for the period 142 190 (48)

INR Crs


61


(A)

IGAAP

(B)

Variance(

A-B)Remarks

Interest income 480 457 23



processing fee

466 443 23

Under IndAS








Assignment

123 89 34

Under IndAS



transaction date

Fee Income 41 41 -

BC fees 17 17 -





Total Revenue 647 590 57


Under IndAS


expenses


Personnel expenses 150 149 1 Actuarial adjustments reclassified in other comprehensive income



Total Operating Cost 199 198 1


Provisions & Write-offs44 1 43 Under IndAS ECL methodology is used to arrive at impairment of loans

Total Expenditure 432 380 52

Profit before Tax 215 210 5

Current Tax 3 3 -

Deferred Tax (Asset)/ Liability 2 - 2

Minimum Alternate Tax credit entitlement (4) (4) -

Profit after Tax 213 211 3

Other Comprehensive income 2 - 2 Includes actuarial adjustments on gratuity and Fair value impact on assets

Total Comprehensive income for the period 215 211 5

INR Crs


62


(A)

IGAAP

(B)

Variance(

A-B)Remarks

Interest income 384 389 (5)



processing fee

354 359 (5)

Under IndAS








Assignment

38 44 (6)

Under IndAS



transaction date

Fee Income 29 29 -

BC fees 16 16 -





Total Revenue 452 463 (12)


Under IndAS


expenses







Provisions & Write-offs36 176 (140) Under IndAS ECL methodology is used to arrive at impairment of loans

Total Expenditure 358 500 (142)

Profit before Tax 93 (37) 130

Current Tax 13 13 -



Profit after Tax 48 (37) 85

Other Comprehensive income 9 - 9 Includes actuarial gains/losses on gratuity and Fair value impact on assets

Total Comprehensive income for the period 57 (37) 94

INR Crs

FY18 Ind AS VS PREVIOUS GAAP

63


(A)

IGAAP

(B)

Variance(

A-B)Remarks

Interest income 1,774 1,734 40



processing fee

1,694 1,654 40

Under IndAS








Assignment

248 234 15

Under IndAS



transaction date

Fee Income 128 127 1

BC fees 61 61 -


Other fee income 1 0.4 1

Recovery against loans written off 5 4.8 -

Other Income 1 2.0 (1)

Total Revenue 2,156 2,102 54


Under IndAS


expenses







Provisions & Write-offs68 235 (167) Under IndAS ECL methodology is used to arrive at impairment of loans

Total Expenditure 1,496 1,647 (151)

Profit before Tax 660 455 206

Current Tax 78 78 -



Profit after Tax 589 455 134

Other Comprehensive income 7 - 7 Includes actuarial adjustments on gratuity and Fair value impact on assets

Total Comprehensive income for the period 597 455 141

INR Crs

PAT RECONCILIATION OF PREVIOUS GAAP VS Ind AS

64

Particulars Q1FY18 Q1FY19 Q4FY18 FY18 Remarks

Profit After Tax as per previous GAAP (37) 190 211 455

Ind AS adjustments increase /(decrease) profit

Expected Credit Loss Impact 140 (22) (43) 167 Provisioning based on ECL methodology

Effective Interest Rate impact on financial assets (0.2) 10 (0.5) 4 Change from Straight line amortisation of processing fees to EIR

Effective Interest Rate impact on borrowings (1) (4) 3 3 Amortisation of processing fees on borrowings

Assignment transactions impact 9 (51) 48 70Total gain from the assignment deals recognised on the

transaction date and derecognised in subsequent periods

Securitisation transactions impact (20) 2 (2) (39)

Total gain on securitisation deals prior to transition date

recognised on the transaction date and derecognised in

subsequent periods

Actuarial gain/(loss) on gratuity 3 3 (1) 1 Reclassification in other comprehensive income

Others (0.2) - (0.04) (0.5)

Deferred Tax impact on above items (45) 19 (2) (72)

Current Tax impact - (5) - -

Profit After Tax as per Ind AS 48 142 213 589

Other comprehensive income (Net of tax) 9 - 2 7Actuarial adjustments on gratuity and Fair value impact on

assets

Total Other Comprehensive Income after tax

as per Ind AS57 142 215 597

INR Crs

IMPACT ON NET WORTH ON TRANSITION DATE

65

Particulars 1-Apr-17 Remarks

Net worth as per previous GAAP 2,447

Ind AS adjustments increase /(decrease) Net worth

Expected Credit Loss Impact (137) Provisioning based on ECL methodology

Effective Interest Rate impact on financial assets 13 Change from Straight line amortisation of processing fees to EIR

Effective Interest Rate impact on borrowings 11 Amortisation of processing fees on borrowings

Assignment transactions impact 37 Total gain from the assignment deals prior to transition date recognised

Securitisation transactions impact 41Total gain on securitisation deals prior to transition date recognised on the

transaction date

Fair value gain on financial assets 36

Others 0.4

Tax impact on above items (0.5)

Net worth as per Ind AS 2,448

INR Crs

QoQ REVENUE VARIANCE ANALYSIS (1/2)

66

ParticularsQ4FY18

(A)

Q1FY19

(B)Variance(B-A) Comments

Interest income on portfolio loans 467 529 62 Increase in income by 13% on account of Portfolio increase QoQ by 11%

(Rs. 10,574 Crs as on Q1FY19 and Rs. 9,528 Crs as on Q4FY18).

Interest on deposits 14 24 10Income from investments increased by 73% on account of daily Avg. interest

yielding investments increasing by 69%

Net gain on derecognition of loans

sold under assignment transaction122 (2) (124)

Upfront income realised in Q4FY18 on account of 3 assignment deals vis-à-vis no

assignment deals in Q1FY19

Loss of income on past assignment deals on account of pre-payment and death

cases

BC Fees 17 35 18Monthly Average managed portfolio increased to Rs. 1,492 Crs in Q1FY19 from

Rs. 814 Crs in Q4FY18.

Facilitation fees from Cross-sell 23 21 (2)No of units facilitated in Q1FY19 is 5.8 Lacs units vis-a-vis 6.0 Lacs units in

Q4FY18

Recovery from write-offs 2 3 1

Other income 1 0.5 (0.5)

Total 647 611 (36)

INR Crs.

ParticularsQ4FY18

(A)

Q1FY19

(B)

Variance

(B-A)Comments

Finance costs 189 199 10

• Increase in Avg. quarterly borrowings cost from 9.33% in Q4FY18 to

9.36% in Q1FY19.

• Increase in Avg. quarterly borrowings (Rs. 8,007 in Q4FY18 and

Rs. 8,461 in Q1FY19)

~ Rs. 10 Crs = (9.36% * 8,461– 9.33% * 8,007) / 4

Personnel expenses 150 159 9 • Increase in employee headcount QoQ by 9%

Other Operating expenses 49 52 3

Impairment of financial assets (A+F) 44 18 (26)

Provisions (A= B+C+D+E) (149) (159) (10)

Stage I Provisions (B) 49 10 (39) ECL Methodology is used to arrive at impairment of loans

Stage II Provisions (C) -2 -0.3 2 ECL Methodology is used to arrive at impairment of loans

Stage III Provisions (D) -200 -180 21 Reversal in provision on account of write-offs wrt. Demonetisation

Managed Loans Provisions (E) 4 10 6 1% provisions on incremental managed portfolio

Losses & Write-offs (F = G+H+I) 193 177 (16)

Loss on Managed (G) 0.2 0.5 0.3 Losses settled against managed portfolio

Loss on Securitisation (H) 3.0 - (3) Losses on securitisation deals prior to April 1 , 2017

Stage III Write-offs (I) 190 177 (13)

QoQ EXPENSES VARIANCE ANALYSIS (2/2)

67

INR Crs.

EXPECTED CREDIT LOSS APPROACH

68

Expected Credit Loss (ECL): probability weighted estimate of credit losses (i.e. the present value of all cash shortfalls) over the expected

life of the financial instrument.

ECL Calculation = Probability of Default (PD) (Adjusted for Discount factor (Df)) * Loss Given Default(LGD) * Exposure at Default(EAD)

Forecast of Probability of Default (PD):

• Forecasted values of the chosen Macro economic variable

• Sensitivity of the historical Probability of Default (PD) data to the chosen macro economic variable

Computation of Loss Given Default (LGD):

• LGD is % of Exposure that the firm expects to lose at the time of default.

• LGD is computed as {1-Recovery Rate (RR)} where Recovery Rate indicates % of Recovery post default.

IGL

Probability of Default (PD) –A

Df (B) LGD (C)EAD

(INR Crs) (D)

ECL (E= A*B*C*D)

Weighted Average of

Scenarios

ECL% = E/DBase

(68%)*

Best

(11%)*

Worst

(21%)*

Stage I

(Current -30)0.16% 0.12% 0.21% 82% 92% 3,418 4 0.1%

Stage II

(31-60)66.32% 65.09% 67.54% 82% 92% 65 33 50.2%

Stage III

(>60)100% 100% 100% 100% 92% 247 228 92.0%

Total 3,731 265 7.1%

As on 31 March, 2017

ECL CALCULATION FOR IGL

As on 30 June, 2018

IGL

Probability of Default (PD) -A

Df (B) LGD (C)EAD

(INR Crs) (D)

ECL (E= A*B*C*D)

Weighted Average of

Scenarios

ECL% = E/DBase

(68%)*

Best

(11%)*

Worst

(21%)*

Stage I

(Current -30)0.15% 0.11% 4.30%* 82% 70% 4,835 28 0.6%

Stage II

(31-60)66.81% 65.54% 68.06% 82% 70% 3 1 38.5%

Stage III

(>60)100% 100% 100% 100% 70% 17 12 70.0%

Total 4,856 42 0.86%

Management overlay : Qualitative assessment of the portfolio based on historical observations.

* Weights

69

Period -> 31-Mar-18Pre-write offs

(30-Jun-18)

Post-write offs

(30-Jun-18)

Asset Classification:Amount

OutstandingProvision

Amount

Outstanding*Provision

Amount

Outstanding*Provision

Stage I (Current -30) 9,330 62 10,553 73 10,553 73

Stage II (31-60) 7 3 6 2 6 2

Stage III (>60)* 211 203 210 200 33 23

Total 9,547 268 10,769 275 10,592 98

INR Crs

Stage 3 assets & provision thereon

reduced from ₹ 200 Cr to ₹ 23 Cr due to

write-offs of ₹ 177 Cr

*Amount not adjusted against fair valuation of loans and EIR

On-Balance Sheet Off-Balance Sheet

Stage I

Provisions

Stage II

Provisions

Stage III

ProvisionsWrite-offs Loss Provisions Total

Adjusted against Net worth on

Transition date (1st Apr’17)

(Difference between Previous

GAAP and Ind AS)

(137)

Q1FY18 11.1 (40.6) 49.6 - 79.4 (63.8) 35.6

Q2FY18 (6.8) (11.0) (7.4) - 21.9 1.8 (1.6)

Q3FY18 (6.1) (4.9) (28.0) 17.7 10.6 1.2 (9.4)

Q4FY18 49 (2.3) (200.1) 190.0 2.8 4.2 43.6

Q1FY19 10.3 (0.3) (179.5) 176.7 0.5 10.4 18.0

FY18 47 (58.7) (186.0) 207.7 114.6 (56.6) 68.2

DETAILS OF CREDIT COSTS Ind AS – EXPECTED CREDIT LOSS METHODOLOGY

GUIDANCE VS ACTUALS FOR FY18 AND GUIDANCE FOR FY19

FY18 FY18 FY19

Guidance Actuals Guidance

Incremental debt requirement 14,500 11,167 18,500

Disbursement 19,500 18,472 26,000

Gross Loan Portfolio 13,500 12,594^ 18,000

PBT 435 455 900

PAT (Incl. MAT Credit) 435 455 620

INR Crs.

^ INR 208 Crs written off in FY18

70

Note: All the above numbers are based on previous GAAP

TAX IMPACT UNDER Ind AS

71

As per Ind ASAs on 1 April, 2017

(Transition date)As on 31 March, 2018 As on 30 June, 2018

MAT Credit Entitlement 206 285 285

Deferred Tax asset/ (Liability) (0.5) (76) 30

Total 206 209 315

INR Crs

Particulars As on 31 March, 2018 As on 30 June, 2018

ECL impact (10) 44

EIR impact on assets (6) (5)

Income recognition on assignment deals on transaction

date and securitisation deals prior to transition date (38) (28)

EIR impact on borrowings (5) (4)

Impact on Fair valuation of loans (17) (18)

Impact of ESOP disallowance - 34

Others (0.4) 7

Total (Deferred Tax asset/ (Liability) (76) 30

Note:

As per Ind AS, PAT stood at Rs. 142 Crs in Q1FY19 as against Rs. 213 Crs in Q4FY18 and Rs. 48 Crs in Q1FY18, primarily on account of:

1. Upfront income recognition of Rs. 123 Crs on assignment transactions in Q4FY18 vis-à-vis no assignment transactions in Q1FY19.

2. Tax expense of Rs. 41 Crs in Q1FY19 compared to Rs. 2 Crs in Q4FY18. Tax expense of 22% considered for Q1FY19, based on FY19 estimated

tax expense percentage.

STRONG CAPITAL BASE AND ROBUST LIQUIDITY DRIVE BFIL BALANCE SHEETParticulars Q1FY18 Q1FY19 YoY% Q4FY18 QoQ%

Equity share capital 138 139 1% 139 -

Other Equity 2,377 3,171 33% 3,002 6%

Total Equity 2,515 3,310 32% 3,141 5%

Borrowings 6,846 8,628 26% 8,294 4%

Interest accrued but not due on borrowings 24 17 -26% 43 -60%

Employee benefits payable 15 17 18% 33 -47%

Payable towards securitisation/assignment transactions 168 444 - 329 35%

Expenses & other payables 56 37 -34% 21 79%

Provision for gratuity and leave benefits 33 31 -7% 28 8%

Provision for Fraud Theft & Burglary 2 2 42% - -

Provision for Managed Portfolio 2 19 - 9 119%

Current tax liabilities (Net) 1 113 - 0.1 -

Statutory dues payable 8 12 45% 13 -4%

Unamortised fee income 1 1 34% 2 -22%

Liabilities 7,155 9,322 30% 8,771 6%

Total Liabilities and Equity 9,671 12,632 31% 11,912 6%

Cash and bank balances 2,101 1,599 -24% 2,173 -26%

Receivables 29 6 -78% 11 -43%

Loans 7,707 10,574 37% 9,528 11%

ECL provisioning (485) (98) -80% (268) -63%

Investments 0.2 0.2 - 0.2 -

Interest accrued but not due on portfolio loans 11 23 108% 20 12%

Interest accrued and due on portfolio loans 1.5 0.2 -85% 0.3 -30%

Interest strip on securitisation transactions 21 - - 0.3 -

Interest strip on loan assignment transactions 36 45 27% 88 -49%

Unbilled revenue - 30 - 7 -

Security deposits 4 4 15% 4 4%

Insurance deposit receivable 4 4 4% 4 -1%

Advance to vendor (cross-sale) 11 10 -10% 12 -16%

Claims Outstanding Receivable from Insurance Company 6 22 - 13 66%

Loans to BFIL Microfinance Employees Benefit Trust 2 - - - -

Current tax assets (Net) 23 42 82% 41 2%

Deferred tax assets (Including MAT Credit) 169 315 87% 209 51%

Fixed assets 16 17 6% 16 5%

Intangible assets 6 5 -21% 5 -10%

Other Assets 10 34 - 45 -24%

Total Assets 9,671 12,632 31% 11,912 6%

Note:1 Non-AP Securitised^/Managed/Assigned Portfolio 1,922 3,258 70% 3,047 7%

2. Non-AP Gross Loan Portfolio 9,629 13,832 44% 12,575 10%

INR Crs.

72^Securitised portfolio originated on or before 31 March, 2017, All securitization deals originated from 1st April, 2017 are being recognised as financial asset on balance sheet as per Ind AS

ROA OF 3.7% AND ROE OF 17.6% FOR Q1FY19

Particulars Q1 FY18 Q4 FY18 Q1 FY19

Spread Analysis (as % of Avg. Quarterly Gross Loan Portfolio)

Gross Yield (I) 19.3% 21.6% 18.5%

Portfolio Yield* (a) 17.4% 20.2% 17.0%

Financial Cost (b) 7.5% 6.3% 6.0%

NIM on portfolio (a-b) 9.9% 13.9% 11.0%

Operating Cost (c) 6.3% 6.6% 6.4%

Provision and Write-offs (d) 1.5% 0.36% 0.5%

Taxes (e) 1.9% 0.0% 1.2%

Total Expense II = (b+c+d+e) 17.2% 13.3% 14.2%

Return on Avg. Gross Loan Portfolio (I) - (II) 2.1% 8.3% 4.3%

Efficiency:

Cost to Income 53.2% 43.4% 51.2%

Asset Quality – Non-AP:

Gross NPA 5.9% 2.2% 0.3%

Net NPA 0.2% 0.1% 0.1%

Gross NPA (INR Crs.) 456.6 210.9 33.1

Net NPA (INR Crs.) 18.3 8.1 9.9

Leverage:

Debt : Equity 2.7 2.6 2.6

Debt : Equity (Incl. Assigned & Managed Loans) 3.5 3.6 3.6

Capital Adequacy: 31.8% 33.2% 30.6%

Profitability:

Return on Avg. Assets (Incl. Assigned & Managed Loans) ** 1.6% 6.1% 3.7%

ROE ** 7.8% 28.3% 17.6%

EPS - Diluted (INR) (Not Annualized) 3.5 15.2 10.1

Book Value (INR) 182.2 225.4 237.4

*Portfolio Yield = (Int. income on portfolio loans + Net gain on derecognition of loans sold under assignment transaction + BC Fee ) /Avg. GLP

** Calculated based on Quarterly Average73

FINANCIAL ARCHITECTURE

74

Q1FY18 % Mix Q4FY18 % Mix Q1FY19 % Mix

Term Loan 5,869 66% 7,416 64% 7,095 58%

Managed Loans 584 7% 955 8% 1,926 16%

Securitisation 550 6% 813 7% 1,743 14%

Asset

Assignment

841 10% 2,173 19% 1,454 12%

CC 38 0.4% 0.6 0.01% - -

CP 698 8% - - - -

NCD 250 3% 200 2% - -

Total 8,829 100% 11,558 100% 12,218 100%

On Balance Sheet* Q1FY18 Q4FY18 Q1FY19

IndusInd Bank 1% 8% 14%

Yes Bank 6% 5% 11%

SIDBI 7% 11% 11%

ICICI Bank 6% 6% 9%

Axis Bank 2% 4% 8%

HSBC Bank 4% 5% 7%

Bank of India 10% 7% 6%

RBL Bank 4% 6% 5%

Standard Chartered Bank 5% 5% 5%

Dena Bank 8% 5% 3%

IDFC Bank 5% 4% 3%

Mudra 2% 3% 3%

Citi Bank 2% 3% 3%

Union Bank of India 3% 3% 2%

State Bank Group 7% 3% 2%

Mahindra & Mahindra

Financial Services Ltd1% 2% 2%

IDBI Bank 6% 2% 1%

Others 3% 15% 2%

Total 5,907 7,417 7,095

Lenders Mix* Devoid Of Dependence Risk

* Includes Term loan and cash credit facilities

FINANCIAL ARCHITECTURE

Diversified Source Mix

Investor Mix (Off B/S) Broad-based

INR Crs.

75

Securitised / Assigned Q1FY18 Q1FY19

HDFC Bank 6% 30%

State Bank Group 55% 24%

Kotak Mahindra Bank 3% 16%

IndusInd Bank - 12%

Yes Bank 11% 9%

Bank of India 5% 6%

Vijaya Bank - 4%

DCB Bank 2% -

ICICI Bank 1% -

IDBI Bank 16% -

Total 1,391 3,197

SUB 9% MARGINAL COST OF BORROWING

* processing fees is amortized for marginal cost calculation.# Excluding Managed Loans. ** amortised processing fees for FY18 and Q1FY19 nos under Ind AS

Metric FY14 FY15 FY16 FY17 FY18 Q1FY18 Q4FY18 Q1FY19

Marginal

Cost of

Borrowings

on and off b/s loans

(excluding

processing fees)

12.2% 11.7% 10.1% 9.4% 8.6% 8.9% 8.5% 8.3%


(including processing

fees)*

12.6% 11.9% 10.2% 9.4% 8.7% 8.9% 8.6% 8.4%

on b/s loans

(excluding

processing fees)

12.9% 12.3% 11.0% 9.8% 8.8% 9.1% 8.6% 8.6%

on b/s loans


fees)*

13.6% 12.6% 11.1% 9.9% 8.9% 9.2% 8.7% 8.6%

Monthly

Average

(Quarterly

Avg for

FY18 and

Q1FY19)

Wt. avg.

cost of

borrowing#



fees )**

13.0% 12.2% 11.1% 10.1% 9.0% 9.4% 8.8% 9.2%

on b/s loans


fees)**

13.7% 12.8% 11.6% 10.7% 9.6% 10.0% 9.3% 9.4%

Loan Processing Fees (INR Crs.) 17.3 16.9 11.6 10.4 14.9 2.2 5.7 1.2

Drawdowns (INR Crs.) 3,503 5,020 7,317 6,900 9,977 1,384 3,771 3,913

Financial Cost^ 8.3% 8.3% 8.5% 7.3% 6.6% 7.5% 6.0% 5.4%

Funding Cost Analysis

^ Financial expenses to quarterly Avg. Gross Loan Portfolio.

76

POSITIVE ALM MISMATCH BENEFIT CONTINUES

56%39%

57% 46% 45% 39% 45% 41%

44%61%

43%54% 55% 61% 55% 59%

FY14 FY15 FY16 FY17 FY18 Q1FY18 Q4FY18 Q1FY19

Floating Fixed

* Excludes managed loans

ALM data includes Securitized/ Assigned loans

ALM

4.9 5.7 6.2 6.3 6.1 6.3 6.1 6.2 6.3

9.2 10.2

9.6 9.0 9.5 9.0 8.8

FY14 FY15 FY16 FY17 FY18 Q1FY18 Q4FY18 Q1FY19

Avg maturity of assets

Avg maturity of liabilities

No. of months

Interest Rate Mix of Borrowings*

77

EXTERNAL ASSESMENT

Rating Instrument Rating/Grading Rating AgencyRating Amount Limits (Rs. Crs.)

Q4FY18 Q1FY19

MFI Grading MFI 1 CARE Ratings N/A N/A

Code of Conduct Assessment C1 ICRA Limited N/A N/A

Corporate Governance Rating CGR2+ ICRA Limited N/A N/A

Bank Loan Rating (Long-term facilities) CARE A+ CARE Ratings

7,000 7,500

Bank Loan Rating (Short-term facilities) CARE A1+ CARE Ratings

Long-term Debt (NCD) CARE A+ CARE Ratings 400 400

Short-term Debt (CP/NCD) CARE A1+ CARE Ratings 200 200

Long-term Debt [ICRA] A+ ICRA Limited

750^ 750^

Short-term Debt [ICRA] A1+ ICRA Limited

Securitisation Pool

CARE AA (SO) CARE Ratings 575 244*

ICRA AA (SO)#

Provisional ICRA AA (SO)#ICRA Limited 1,402 2,237*

78

^Subject to Long-term borrowings limit of ₹300 Cr.

*Amount aggregates to 1 transaction rated by CARE Ratings and 4 transactions rated by ICRA

# Two transactions are rated as AA(SO) and two transactions has provisional rating of AA (SO).

RISK MANAGEMENT

79

KEY RISKS AND MANAGEMENT STRATEGIES

Management

Strategy

Key Risks

Risk Management

Political Risk

Responsible lending and fair

pricing

Concentration Risk

Geographic & dependence

norms

Operational Risk

Cash management system and

process controls

Liquidity Risk

Liquidity metrics

▪ Low cost lender

▪ Voluntary Cap on

RoA from core

lending

▪ Robust Customer

grievance redressal

(CGR) Mechanism

with Ombudsman

▪ Calibrated Growth

▪ Geographic

concentration

norms

- Disbursement

Related Caps

- Portfolio

Outstanding

Related Caps

▪ Borrowing

dependence norms

- Cap on borrowing

from any single

credit grantor (15%

of funding

requirement)*

▪ Integrated cash

management system

▪ Product and process

Design

▪ ISO Certified Internal

audit

▪ Well defined metrics

for

- Cash burn

- Optimal liquidity test

- Liquidity cap

80* Cap for Indusind Bank at 25%.

CAPITAL STRUCTURE

81

CAPITAL STRUCTURE AS ON 30TH JUNE 2018

Excludes no. of Outstanding ESOPs 0.6 Crs.

Note: The Investment under different accounts by a fund are clubbed

under their respective names 82

33.4%

1.0%

1.0%

1.1%

1.2%

1.2%

1.3%

1.3%

1.3%

1.3%

1.5%

1.5%

1.6%

1.6%

1.7%

1.9%

1.9%

2.3%

2.4%

2.7%

2.8%

2.8%

2.9%

3.1%

3.2%

3.3%

3.6%

3.6%

4.8%

6.7%

Others

Shivanand Shankar Mankekar

SIDBI

Copthall Mauritius Investment Limited

Vanguard

Vanguard Emerging Markets Stock Index…

Societe Generale

Kotak Offshore

Smallcap World Fund

Kismet SKS II

SBI Life Insurance

OHM Stock Broker Pvt Ltd.

Kismet Microfinance

L&T Mutual Fund

BNP Paribas Arbitrage

Ishana Capital Master Fund

Goldman Sachs Asset Management

American Century World Mutual Funds

MIRAE Asset

Alliancebernstein

Tree Line

Birla Sun Life Mutual Fund

Blackrock

Amansa Capital PTE Limited

DSP Blackrock

East Bridge Capital

Wellington

Kotak Mutual Fund

Route One

Reliance Mutual Fund

No. of shares -13.9 Crs.

SHAREHOLDING PATTERN

FII, 7.9%

Domestic MFs,

Insurance co's & FIs ,

28.4%

Foreign Corporates,

4.0%

FPI, 47.7%

Domestic Individuals,

8.5%NRI, 1.5%

Domestic Corporates,

2.1%

ANNEXURES

83

OUR PROVISIONING POLICY

RBI norms for NBFC-MFIs BFIL Policy (Earlier) BFIL Policy ( As per Ind AS)#

Asset

Classification

Standard Assets 0-90 days 0- 8 weeks Stage I 0- 30 days

Sub-Standard

Assets

91-180 days > 8 to 25 weeksStage II 31-60 days

Loss Assets >180 days >25 weeks and

> 8 weeks expired

contractsStage III (GNPA) >60 days

Provisioning

Norms

(On-balance

sheet^)

Standard Assets

1% of overall Portfolio

reduced by Provision for

NPA (If provision for NPA

< 1% of overall Portfolio)

0.4%-1% depending on

NPA or as stipulated by

RBI, whichever is higher

Stage I

ECL Methodology is usedSub-Standard

Assets

50% of instalments

overdue*

50% of outstanding

principal*Stage II

Loss Assets100% of instalments

overdue*

100% of outstanding

principal/ write-off* Stage III (GNPA)

Provisioning

Norms for

Managed loans

1% of overall Portfolio

subject to the maximum

guarantee given in respect

of these arrangements.

1% of overall Portfolio subject to the maximum

guarantee given in respect of these arrangements.

* The aggregate loan provision will be maintained at higher of 1% of overall portfolio or as per company’s provisioning policy.

^ Securitised portfolio is recognised as financial asset (on-balance sheet) as per Ind AS# As per Ind AS 109, Expected credit loss method should be used to forecast future expected credit loss 84

UPDATE ON DEMONETISATION

85

CUMULATIVE COLLECTION EFFICIENCY OF 99.8% FOR LOANS DISBURSED BETWEEN 1ST JAN’17

TO 30th JUN’18

State Disbursements

Gross Loan

Portfolio

(30-Jun-18)

Cumulative Collection

Efficiency

Odisha 4,734 2,204 99.8%

Bihar 4,396 1,964 99.8%

West Bengal 3,872 1,780 99.8%

Karnataka 3,170 1,514 99.8%

Maharashtra 2,545 1,248 99.7%

Uttar Pradesh 2,198 1,126 99.8%

Rajasthan 1,740 877 99.9%

Kerala 1,717 819 99.9%

Jharkhand 1,372 678 99.7%

Madhya Pradesh 1,161 570 99.8%

Haryana 567 290 99.7%

Punjab 533 280 99.7%

Chattisgarh 510 229 99.7%

Uttarakhand 65 28 99.8%

Delhi 31 15 99.9%

Himachal Pradesh 22 10 99.9%

Total 28,634 13,633 99.8%

DATA FOR LOANS DISBURSED BETWEEN 1st Jan’17 to 30th Jun’18

Constitutes 98% of Gross Loan

Portfolio as on 30th Jun’18 i.e. 98% =

(Rs. 13,633/13,850 Crs)86

Note: Above numbers are based on Previous GAAP

ANNEXURES - OPERATIONS

87

GROUP UNDERWRITING AT WORK

61%

45%

32% 35%39% 41% 39% 37% 34%

27%48% 42%

42% 40% 43% 48% 51%

14%

11%

7%8%

7% 6% 6%6% 5%

IGL - 2 IGL - 3 IGL - 4 IGL - 5 IGL - 6 IGL - 7 IGL - 8 IGL - 9 IGL - 10

Conversion from IGL to IGL Conversion from IGL to LTL Conversion from IGL to MTL

LOAN CONVERSION TO NEXT CYCLE

75%

87%84%

87% 88% 88% 90% 91%

83%

Note:The above data is as on 30th Sep’16 (Pre demonetisation period).Active IGL loans disbursed during Jan’15 to Mar’15 have been considered as base and loans disbursed in subsequent cycles over the next 1.5 yrs i.e. till Sep’16 have been taken and cycle wise conversion has been arrived. Only the next first loan taken by customer is taken into consideration for conversion. 88

JLG MODEL ENSURES EFFECTIVE CONTROL ON AVERAGE INDIVIDUAL EXPOSURE, IRRESPECTIVE OF ACTUAL LOAN ELIGIBILITY

26,84529,579 29,579 29,579 29,579 29,579 29,579 29,579 29,579 29,579

44,650

54,950 54,950

25,234 27,014 26,965 26,465 25,184 24,934 24,708 24,986 25,195 25,105

39,439

46,402 47,960

-5,000

5,000

15,000

25,000

35,000

45,000

55,000

Cycle 1 Cycle 2 Cycle 3 Cycle 4 Cycle 5 Cycle 6 Cycle 7 Cycle 8 Cycle 9 Cycle 10 Cycle 1 Cycle 2 Cycle 3

Income Generating Loan

Eligibility Amount (INR) Avg. Offtake Long Term Loan

Q1

FY

19

12,000

24,000

36,00042,000

50,000 50,000 50,000 50,000 50,000 50,000

10,20015,120 16,920 18,060 18,500 19,000 19,500 21,000 22,000 21,000

Cycle 1 Cycle 2 Cycle 3 Cycle 4 Cycle 5 Cycle 6 Cycle 7 Cycle 8 Cycle 9 Cycle 10

^ Note: Maximum Offtake eligibility for IGL (1 year Tenure) : June-11 to Dec’15 – Rs. 15,000; Dec’15 – IGL 1 Rs.20,000 , IGL 2 Rs.30,000, Mar’17 for – IGL 1 is Rs. 24,800 and IGL 2 is Rs. 29,800 and currently for IGL 1 is Rs. 26,845 and IGL 2 is Rs. 29,579

Q2

FY

11

(P

RE

-CR

ISIS

)

^^

89

24,780

29,995 29,995 29,995 29,995 29,995 29,995 29,995 29,995 29,995

21,53326,105 24,749 24,077 24,359 24,250 24,469 24,461 24,406 24,659

Cycle 1 Cycle 2 Cycle 3 Cycle 4 Cycle 5 Cycle 6 Cycle 7 Cycle 8 Cycle 9 Cycle 10

Mid Term Loan

Income Generating Loan

CYCLE WISE NON-AP LOAN BORROWERS

Cycle Wise Q1FY18 Q4FY18 Q1FY19

IGL 1 33% 38% 42%

IGL 2 21% 18% 15%

IGL 3 7% 9% 9%

IGL 4 2% 3% 3%

IGL 5 1% 1% 1%

IGL 6 1% 1% 1%

IGL 7 1% 1% 1%

IGL 8 1% 1% 1%

IGL 9 0.4% 1% 1%

Total IGL Borrowers 68% 72% 72%

LTL 1 19% 11% 12%

LTL 2 3% 5% 6%

Total LTL Borrowers 21% 17% 18%

MTL 1 7% 7% 6%

MTL 2 2% 2% 2%

MTL 3 1% 1% 1%

MTL 4 0.5% 0.6% 0.4%

MTL 5 0.3% 0.3% 0.2%

MTL 6 0.2% 0.3% 0.2%

Total MTL Borrowers 11% 11% 9%

Cross Sell 0.2% 0.4% 0.2%

Total IGL + LTL + MTL + Cross Sell 100% 100% 100%

Note:

▪ Customers having IGL & MTL loans, have been grouped under respective IGL loan cycle

▪ Customers having LTL & MTL loans, have been grouped under respective LTL loan cycle

▪ MTL clients represents borrowers with only MTL loans

▪ Cross-sell clients represents borrowers with only cross-sell loans 90

DIFFERENCES IN LENDING MODEL BETWEEN SHG & JLG

SHG JLG (BFIL)

ModelSavings led (Members collectively save

money for 6 months to avail credit)

Credit led (No savings required, members have

an access to the finance as per the requirement)

Borrowers Segment Women/Men Women

Lending Methodology Group (Size 10-20 members) Group (5 members)

Loan Processing time 4 Months 1 week

Repayment frequency Monthly Weekly

Credit DecisionGroup leader decides the quantum of

loan for the member

Entire group and the center decides the quantum

of loan

Credit Bureaus Reporting

Not much information available (RBI

mandated the SHGs to share data from

July 2016)

Weekly sharing of the data with CICs

Top 5 States % Mix in Portfolio (Mar-17) Portfolio O/S (Mar-17) INR Crs.

Andhra Pradesh 28% 17,406

Telangana 20% 12,053

Karnataka 13% 8,149

Tamil Nadu 10% 6,047

West Bengal 8% 4,842

Others 21% 13,084

Total 100% 61,581

SHG Concentration:

Source: NABARD91

IGL MTL LTL

Other product

offerings^^

Loan portfolio (INR

Crs) / (% Mix)6,629 (48%) 3,907 (28%) 3,164 (23%) 140 (1.0%)#

Ticket size rangeINR 7,750 to

INR 29,579

INR 7,185 to

INR 29,995^

INR 30,900 to

INR 54,950

INR 1,310 to

INR 6,906

Avg. Ticket Size (INR)

For Q1FY1925,812 22,614 41,545 2,194

Eligibility*

▪ Completion of CGT /

GRT

▪ Age limit 18 years to

58 years

▪ Maximum limit of

INR. 26,845 for

IGL 1

▪ With IGL - Between

19th to 44th week

▪ With LTL – Between

19th to 94th week

▪ Maximum limit of

INR. 24,780 for MTL1

▪ Minimum One IGL

Loan cycle completed

▪ Maximum limit for LTL

1 post IGL 1 - INR.

35,190**

▪ Maximum limit for LTL

1 post IGL 2 - INR.

44,650**

▪ With IGL – Between

4th to 44th week

▪ With LTL – Between

4th to 94th week

▪ With MTL – Between

4th to 71st week

Tenure 50 weeks 75 weeks^ 104 weeks 25 weeks

Annual effective

interest rate

19.75%

(w.e.f 7th Dec’15 for new loans) ▪ 19.60% - 19.70%

Processing fee (Incl.

Good & Service Tax)

▪ 1.18% for Non-BC branches

▪ For BC Branches

- 1.18% for Loan amount >Rs, 25,000

- Zero processing fee for loans <Rs. 25,000 for BC branches

▪ 0.7% -1.18%

* Eligibility criteria over and above the criteria prescribed by the RBI

^^Loans for Mobile Phones, Solar lamps, Sewing Machines, Bicycle , Bio-Mass Stove, Water-purifier(Excluding Two wheeler loans, Loans for home improvement and loans for

refrigerator which are in pilot stage).# Portfolio Including Two wheeler loans pilot of Rs.8.8 Crs, for loans for Home improvement Rs. 1.2 crs & Loans of Rs. 2.8 crs for Refrigerator .

^w.e.f Aug, 2016 Tenure has been changed from 50 weeks to 75 weeks and ticket sizes are changed.

** With effect from 27th November 2017

PRODUCT OFFERINGS

92Note: Above numbers are based on Previous GAAP

PRODUCT WISE - DISBURSEMENT, PORTFOLIO OUTSTANDING AND TICKET SIZE

93

IGL LTL MTL Others* Total

Q1FY18

No. of Loans Disbursed in '000 857 108 557 371 1,894

% Mix 45% 6% 29% 20% 100%

Amount of Loan Disbursed (In Crs.) 2,056 414 1,191 74 3,734

% Mix 55% 11% 32% 2% 100%

Portfolio Outstanding (In Crs.) 4,223 1,881 3,457 70 9,631

% Mix 44% 20% 36% 1% 100%

Avg. Ticket Size INR 23,979 38,227 21,368 1,983 19,717

Q4FY18

No. of Loans Disbursed in '000 1,355 241 568 604 2,768

% Mix 49% 9% 21% 22% 100%

Amount of Loan Disbursed (In Crs.) 3,397 976 1,221 145 5,738

% Mix 59% 17% 21% 3% 100%


% Mix 50% 20% 29% 1% 100%


Q1FY19

No. of Loans Disbursed in '000 1,299 287 695 580 2,862

% Mix 45% 10% 24% 20% 100%

Amount of Loan Disbursed (In Crs.) 3,354 1,194 1,572 140 6,260

% Mix 54% 19% 25% 2% 100%


% Mix 48% 23% 28% 1% 100%


*Cross sell products

Note: Above numbers are based on Previous GAAP

LEVERAGING THE DISTRIBUTION STRENGTH

FY15 FY16 FY17 FY18 Q1FY18 Q4FY18 Q1FY19

Total Total Total Total Total TotalMobile

Phone

Solar

lamp

Sewing

MachineCycle Others^ Total

No. of Units Facilitated

(in Lacs)8.4 15.6 11.6 18.5 3.7 6.0 1.1 2.1 0.2 0.02 2.4 5.8

Gross Fees (after

service tax) INR Crs.28.3 49.7 42.7 66.4 12.8 23.3 3.8 9.6 0.8 0.1 6.8 21.2

Less: Incentives INR

Crs.4.6 13.8 9.6 15.7 1.3 5.4 0.9 1.7 0.2 0.02 2.0 4.9

Net Fees INR Crs.* 23.7 28.3 26.0 39.9 9.1 14.1 2.1 5.5 0.5 0.03 3.3 11.4

Loan Portfolio INR Crs. 58.3 101.9 32.4 145.0 70.0 145.0 26.5 33.7 8.4 1.1 53.6 123.3

Net Fee Income as %

of PAT**12.6% 9.3% 13.5% 6.8% 18.8% 6.6% 1.4% 3.9% 0.3% 0.02% 2.3% 8.0%

Loan Portfolio Mix 1.4% 1.3% 0.4% 1.2% 0.7% 1.2% 0.2% 0.2% 0.1% 0.01% 0.4% 0.9%

*Net fee post the incentive payout and sans transfer pricing of other operating cost and Post MAT adjustment

^Loans for Bio-Mass Stove, Water-purifier, Solar Fans, Two Wheelers, Mixer Grinder and Refrigerator

** PAT before MAT credit entitlement of Rs.97 Crs as on 31-Mar-16 for FY17.

Cumulative Cross-sell Penetration % among our existing Non-AP Member base of 7.8 mn for last 5.3 years is 43.5%

Frequen

cy of

Loans

(for the

period)

FY14 FY15 FY16 FY17 FY18 Q1FY19

Cumulati

ve past

5.3 years

#1 1.6% 5.5% 9.5% 10.2% 18.4% 7.2% 30.8%

#2 0.1% 0.5% 1.3% 0.5% 2.0% 0.1% 8.4%

#3 - - 0.1% - 0.1% 2.7%

#4 - - - - - 1.0%

#5 - - - - - 0.5%

Total 1.7% 6.0% 11.0% 10.7% 20.6% 7.3% 43.5%

Penetration Based On Total No. Of Loans Frequency of Loans Based On Current Member Base

FY14 FY15 FY16 FY17 FY18 Q1FY19

Cumulative

past

5.3 years

Solar Lamp 0.9% 5.0% 6.8% 7.8% 10.2% 2.7% 33.4%

Mobile Phone 1.6% 5.7% 9.1% 5.0% 7.8% 1.4% 30.5%

Mixer Grinder 0.0% 0.0% 3.3% 1.8% 5.1%

Sewing

Machine1.7% 0.9% 0.8% 0.3% 3.7%

Bicycle 0.0% 1.4% 0.8% 0.2% 0.0% 2.4%

Pressure

Cooker0.0% 0.0% 1.0% 1.2% 2.2%

Others 0.4% 1.0% 0.1% 0.1% 0.1% 1.7%

Total 2.5% 11.0% 19.9% 14.7% 23.4% 7.4% 78.9%

94

BFIL FINANCIAL INCLUSION COVERAGE…

Doorstep Service Financial literacy Dedicated customer service

Doorstep delivery (i.e. at Center

meetings)

2 day process consisting of hour-long

sessions designed to educate clients

on BFIL processes and credit

discipline.

Toll-free helpline number with seven

different vernacular languages

Strong reach in under-banked areas Weaker & Minority section coverage

68% of BFIL branches are in RBI

under-banked district list

BFIL covers 68% of below average &

low financial districts identified by

CRISIL

20096 175

SKS 296 districts RBI 375 districts*

68%

68% of SKS branches are in RBI under-banked districts list SKS covers 68% of below average & low financial inclusion districts identified by Crisil

CRISIL level of financial inclusion

SKS Coverage of thosedistricts

High 18%

Above average 15%

Below average 51%

Low 16%

Grand Total 100%

68%

Weaker & Minority section coverage

16%

71%

100%

Minority

Economically Weakersection

Women

…. IS SUPPORTED BY ROBUST CUSTOMER CENTRIC PRACTISES

* Source: RBI under-banked districts data

[1] Source: CRISIL Inclusix: An index to measure India’s progress on Financial Inclusion, June 2013

95

WHAT ARE CLIENTS DOING POST THE ANDHRA PRADESH MFI CRISIS?

Interest rates charged by informal sources (in the

absence of MFIs)

Willingness to repay

Data relates to Andhra Pradesh & Telangana

Source: “What are Clients doing post the Andhra Pradesh MFI Crisis?”, MicroSave, 2011

59%

37%

22%

12%

29%

0%

10%

20%

30%

40%

50%

60%

70%

Money Lender SHG Pawn Broker Bank DFC

Sources of Credit (in the absence of MFI Loans) Reasons for not repaying MFI loans

96

ANNEXURES - FINANCIALS

97

CASH AND CASH EQUIVALENT BALANCES

INR Crs.

FY18 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19

Interest Yielding^ 929 1,532 978 610 594 1,240

Non Interest

Yielding^^429 406 324 433 514 504

Total 1,358 1,938 1,302 1,043 1,108 1,744

^fixed deposits, excluding margin money deposits.

^^Includes current account and cash balances

Note: Daily Average figures

98

ANNEXURES - TECHNOLOGY

99

Initiatives SolutionTechnology Partner Benefits

Mobility driven

Jandhan/Aadhaar compliant

(JAM)

Lending Management

Software (LOS & LMS)

TABLETS’ - Hand held device

for field staff

Migrated from on-premises

email system to hosted

exchange

Data Centre– Migration to

Cloud

ERP Implementation

In-House Team SKS SMART

Enterprise Mobility

Office 365

Data Centre Hosting

ERP

▪ Enhances Productivity of SMs- Reduced

time spent at both center meeting and back

office

▪ Paper less transaction - Pre-printed loan

application form.

▪ Enhanced email security, 99.99% uptime,

On mobile office 365 access.

▪ Additional products such as One-Drive,

Enterprise Skype etc. for easy access of

data and better communication.

▪ On-demand capacity scale-up.

▪ Business Continuity Plan.

▪ A robust framework that encompasses

workflow/reporting and analytic engines

▪ Works in online/offline mode to mitigate

connectivity challenges.

▪ ERP - Automation of financial

accounting/ investment management,

procurement and payment process.

TECHNOLOGY ADVANCEMENTS DRIVEN BY INDUSTRY LEADING PARTNERSHIPS

100

JAM Compliant Agent

Banking for Cash less

transactions and Cross-Sell

In-House Team SKS SMART Agent▪ A Mobile, Jan-Dhan / Aadhar compliant door

step banking solution with full eco-system is in

place

ANNEXURES – HR

101

Member ServicesAvg. Vintage (Yrs.)

As on June-18

Senior Management 9.3

Middle Management 9.4

Branch Management* 7.6

Sangam Managers 2.5 (3.4^)

Vintage of SMs Exited

Q1FY19%Mix

< 6 Months 36%

6 Months - 1 Yr. 26%

1 -2 Yrs. 20%

2- 3 Yrs. 11%

> 3 Yrs. 8%

Who?

When?

Sangam

Manager

Attrition %

Why?

Retention

Strategy

▪ 26% for Q1FY19 (Annualised)

▪ Sangam managers who earn lesser

average monthly performance incentive

i.e. ~Rs. 3,800 vis-à-vis ~Rs. 8,400 for

other Sangam Managers .

▪ Majority of the staff who leaves the job,

decides to leave within first year from

joining date.

▪ Work conditions such as :

− Average distance travelled per day is

~30 kms.

− Work location is different from home

location

− Branch Reporting time at 6:30 AM

▪ 2nd Best paying job (~Rs.17,500 pm) in

the local milieu (1st – Govt. Job)

▪ High growth career path – No lateral

recruitments till 4 levels above loan

officer.

ATTRITION RATE AT SANGAM MANAGER LEVEL IS LARGELY CONTRIBUTED BY NEW JOINEES. EXCLUDING NEW JOINEES, THE AVG. VINTAGE IS 3.4 YEARS

* Includes Promoted Sangam Mangers

^ Avg Vintage of Sangam Managers

(Excl. who joined in last one year) i.e.

68% of Sangam Managers is 3.4 Yrs.

102

ANNEXURES - COMPLIANCE

103

COMPLIANCE WITH RBI NBFC-MFI REGULATORY FRAMEWORK (1/2)

RBI norms for NBFC-MFIs BFIL compliance

NBFC–MFIs

▪ Qualifying assets to constitute not less than 85% of its

total assets (excluding cash and bank balances)

▪ At least 50% of loans for income generation activities

▪ Qualifying assets - 95%

▪ Income generation loans 99%

Pricing Guidelines

Income of

Borrower’s Family

▪ Rural : <=Rs.100,000

▪ Non-Rural : <=Rs. 1,60,000 ✓

Ticket Size▪ <= 60,000 – 1st cycle

▪ <= Rs.100,000 – Subsequent cycle ✓

Indebtedness▪ <= Rs. 100,000

✓<= Rs. 80,000*

Tenure▪ If loan amt. > Rs.30,000, then >= 24 months

✓

Collateral▪ Without collateral

✓

Repayment Model▪ Weekly, Fortnightly and Monthly

✓104

* Rs. 60,000 for 1st cycle loans (IGL 1 or IGL 1 + MTL 1)

COMPLIANCE WITH RBI NBFC-MFI REGULATORY FRAMEWORK (2/2)

RBI norms for NBFC-MFIs BFIL compliance

Pricing Guidelines

Interest Rate^

▪ A. Margin cap – 10% above cost of borrowings

▪ B. Avg. base rate of top 5 commercial banks X 2.75

▪ Lower of the A and B.✓

Margin: 9.6% for Q1FY19

Interest rate 19.75% w.e.f

7th December’15 for new

loans

Processing Fees▪ <= 1% of loan amt.

✓

Insurance

Premium

▪ Actual cost of insurance can be recovered from

borrower and spouse

▪ Administrative charges can be recovered as per IRDA

guidelines

✓

Penalty▪ No penalty for delayed payment

✓

Security Deposit

▪ No security deposit/ margin to be taken

✓BFIL has never taken

security deposit/ margin

105

^ W.E.F April 1, 2017 - Quarterly Margin Cap will be followed- Average interest rate on loans sanctioned during a quarter shouldn’t exceed the

Avg borrowing cost during the preceding quarter plus margin cap.

Note:

* Banks are also directed to ensure overall direct lending to non-corporate farmers, which should not fall below the system wide average

of last three years achievement, which is notified as 11.78% as per RBI notification dated 21st September 2017. They should also

continue to maintain all efforts to reach the level of 13.5% direct lending to beneficiaries..

Refer Slide no. 53 for details on purpose wise loan portfolio outstanding.

RBI BFIL

S.no. Sector Category Target for Banks %Qualifying

Portfolio of BFIL %Explanation

1

Agriculture Target 18%

56% Livestock, Agri & Allied- Direct Agriculture* Sub-target ~13.5%*

- Direct Small &

Marginal farmers*Sub-target 8%

2 Weaker Target 10% 100%

100% Loans are to women

beneficiaries (with less than

Rs.1 lac).

Further, Minority communities

constitute 17% and

economically weaker sections

72% of loan portfolio.

3 Micro-enterprises Target 7.5% 100%Loans to MFIs for on-lending to

microenterprises.

BFIL LOAN PORTFOLIO QUALIFIES FOR OVERALL PSL TARGET OF 40% AND ALL SUB-TARGETS UNDER NEW PSL NORMS

106

ANNEXURES – INTERNAL AUDIT

107

INTERNAL AUDIT PLAYS A CRITICAL ROLE IN ASSESSING PROCESS CONTROLS

Note:

* Approximately 20% of the clients are covered by Internal Audit in an year during the branch audits. Clients visited on a sample basis to check for

Loan confirmations, Loan utilization (LUC) , arrears and awareness on Client Protection Principles (CPP)

** Head Office Audit is co-sourced with Deloitte Haskins & Shell LLP, Hyderabad

• 236 strong headcount

• ISO 9001:2015 certified process

• All branches are inspected monthly based on a 4

tier grading system

• Top 25 disbursement branches are audited twice

in a month

• Incentives/appraisals of field staff linked to branch

grading

• Internal Audit of branches are fully automated

• Process Consulting & IT applications review

Strength

• Branches 1,639

• Branches per Internal Audit staff 7

• Regional Offices 38Scope

Scope of Audit

Audit area FrequencyClient

Acquisition

Center

Meeting

Process

Document

verification

(KYC, Loan

utilization

check etc.)

Monitoring

process by

supervisors

Adherence

to Process /

Policies

Statutory

Requirements

(Credit

bureau, Fair

practices etc.)

Client

Visits*

High Risk

items

(Frauds

etc.)

IGL

BranchesMonthly √ √ √ √ √ √ √ √

Regional

OfficesQuarterly - - - - √ √ - √

Head office** Quarterly - - - - √ √ - -

108

Pre Post Benefits

MS-Excel Automated risk

based audit

Improved Audit

quality

Offline audit &

control

Real time

control for

Managers

Improved Audit

supervision

7 branches

per IA staff

8 branches per

IA staff by FY19Efficiency gains

Automation of Internal Audit

For any investor relations queries, please email to [email protected]

THANK YOU

109

EARNINGS UPDATE Q1FY19 · 2019-04-22 · Similarly, home improvement loans can be scaled up...

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