Capital Trade Links Ltd Management Discussions

Amid these crosscurrents, financial conditions have improved modestly, equity valuations have recovered, and capital flows to emerging markets—excluding China—have resumed. A handful of low-income and frontier economies have regained limited market access. Yet the world economy remains vulnerable, with escalating trade disputes, inflation risks, and geopolitical fragmentation threatening progress on the Sustainable Development Goals (SDGs). These mounting challenges underscore the urgent need for global cooperation, stable trade rules, and a recommitment to inclusive, sustainable growth in a rapidly evolving geopolitical landscape.

Global inflation is on a decelerating trajectory but is expected to be above pre-pandemic norms through 2025. Most multi-lateral and private-sector panels now place headline CPI falling between 3.8-4.5% in 2025 and 3.2-3.5% in 2026, with sizable dispersion driven by fresh trade frictions. Many emerging markets, though not all, have been seen to entering 2025 with inflation back near pre-pandemic averages. In India, inflation has aligned with the Reserve Bank of Indias (RBI) 4 % medium-term target, prompting two 25-basis-point repo cuts in February and April 2025 and 50 basis points in June 2025, which lowered the rate to 5.50 % and shifted the stance to "accommodative."

U.S. tariff rates recently reached their highest level since the 1930s; however, a provisional U.S.-China agreement announced in May 2025 aims to roll back a portion of these duties. This uncertainty continues to weigh on global growth prospects, though the IMF still does not foresee a U.S. recession in calendar-year 2025. If the trade friction escalates, it could trigger a demand shock event in the US, which can hit output and prices.

Amid ongoing global uncertainty, investor sentiment toward emerging markets (EMs) remains cautiously optimistic. On the one hand, expectations of a weaker U.S. dollar are seen as a potential catalyst for increased capital flows into EMs. Additionally, the prospect of monetary

easing by EM central banks—driven by a global disinflationary trend—is expected to support domestic growth momentum. In Financial year 2025, foreign investors added approximately USD 273.5 billion to emerging market equity and debt portfolios, marking a notable increase of USD 100 billion over 2024. However, this figure still falls short of the USD 375 billion annual average recorded between 2019 and 2021. Elevated foreign exchange volatility continues to pose a significant risk, potentially limiting further inflows.

India stands out within the EM landscape as relatively insulated from global trade shocks, owing to its lower trade dependency and substantial progress on fiscal consolidation. The International Monetary Fund (IMF) projects India to remain the fastest-growing major economy, with real GDP growth expected at 6.2% in 2025 and 6.3% in 2026. This robust outlook is anchored in resilient domestic demand, with a notable pickup in rural consumption acting as a key growth driver. Overall, Indias macroeconomic fundamentals position it well to navigate external headwinds while sustaining strong medium-term growth.

CHALLENGES FOR GLOBAL ECOMONY

The economic survey identifies various challenges confronting the global economy:

1. Escalating Trade Tensions and Tariffs

The sharp rise in U.S. tariffs on key trade partners (China, Mexico, Canada, EU) and retaliatory measures have disrupted global trade flows. Effective global tariff rates have reached multidecade highs, surpassing even Great Depression-era levels in some sectors.

This has led to increased policy uncertainty, reduced investment confidence, and a slowdown in global trade volumes.

2. Slowing Global Growth

The IMF, World Bank, and OECD have revised down global growth projections for FY 2025 to the 2.3%-2.9% range. Trade fragmentation, tighter financial conditions, and weak investment are key contributing factors.

Advanced economies are expected to grow below trend, while emerging markets face mixed prospects due to capital flow volatility and inflation pressures.

3. Persistent Inflation and Cost-of-Living Pressures

Although global inflation has shown signs of moderation, it remains persistently above target in many economies, posing ongoing challenges. In particular, food and energy prices continue to stay elevated in several regions, especially affecting lower-income countries where these costs form a larger share of household budgets. This dynamic has intensified the cost-of-living pressures, disproportionately impacting vulnerable populations. In response, central banks have paused their cycles of interest rate hikes but maintain a deliberately tight monetary policy stance. This cautious approach aims to anchor inflation expectations and prevent a resurgence of price pressures while supporting a gradual return to price stability.

4. Volatile Financial Markets and Capital Flows

Heightened interest rate differentials and global uncertainty have led to high FX volatility, impacting portfolio inflows into emerging markets. Despite a pickup in EM capital inflows in FY 2025, they remain below pre-pandemic averages.

Frontier and low-income countries still face limited access to international capital markets.

5. Geopolitical Risks and Global Fragmentation

The global economy in FY 2024-25 continues to be shaped by heightened geopolitical tensions that contribute to economic fragmentation and uncertainty. Key flashpoints such as the ongoing conflict in Eastern Europe, unresolved tensions in the Middle East, and the intensifying strategic competition between the United States and China have profound economic implications. These conflicts disrupt global supply chains, increase commodity price volatility, and raise the cost of doing business internationally.

Moreover, heightened national security concerns have prompted stricter controls on technology transfers and foreign investment, particularly in sensitive sectors such as semiconductors, telecommunications, and artificial intelligence. This decoupling of technology ecosystems can slow innovation and raise costs, especially for emerging markets that rely on access to global technology networks.

Geopolitical uncertainty also leads to greater market volatility and cautious investor behaviour, which can reduce cross-border capital flows, especially into emerging and frontier markets. In sum, the persistence and potential escalation of geopolitical risks pose significant challenges to global economic stability, growth, and cooperation in FY 2024-25.

6. Climate Change and Sustainability Challenges

Extreme weather events, food insecurity, and water stress continue to threaten economic stability, especially in vulnerable regions.

Many countries face a tough balancing act between meeting fiscal targets and investing in climate adaptation and the SDGs.

7. Debt Vulnerabilities in Emerging and Low-Income Economies

Emerging and low-income economies face mounting debt vulnerabilities as rising global interest rates increase borrowing costs and strain fiscal balances. Many countries accumulated significant debt during the pandemic to support health and economic recovery, leaving them with limited fiscal space today. The combination of higher debt servicing costs and slower economic growth has heightened the risk of debt distress and potential defaults, particularly in countries heavily reliant on external financing. Currency depreciation in several emerging markets has further amplified debt burdens denominated in foreign currencies, worsening repayment challenges. Additionally, constrained government revenues limit the ability to invest in critical infrastructure and social programs, jeopardizing long-term development

goals. International efforts to provide debt relief and restructuring remain crucial to prevent economic instability and support sustainable growth in these vulnerable economies.

8. Technological Disruption and Labor Market Shift

Rapid digitization and the widespread adoption of AI technologies are driving significant productivity improvements across many sectors. However, this technological transformation is also leading to the displacement of certain job categories, creating challenges for labor markets.

Emerging economies, in particular, face the risk of lagging behind due to gaps in digital infrastructure and limited access to advanced skills development. Without targeted investments and inclusive policies, these disparities could deepen existing inequalities both within and between countries.

Fed Rate Outlook

In FY 2023-24, the Federal Reserve undertook a series of aggressive interest rate hikes to combat persistently high inflation, pushing the federal funds rate to a peak range of approximately 5.25% to 5.50%, the highest level in over 15 years. This tightening cycle was aimed at cooling demand and bringing inflation closer to the 2% target.

For FY 2024-25, the outlook signals a pause or near pause in further rate increases, as inflation shows signs of gradually easing but remains somewhat above target. The Fed is expected to maintain a restrictive monetary policy stance, keeping rates elevated for an extended period to ensure inflation is firmly under control. Compared to the prior years aggressive hikes, monetary policy will likely shift toward a more data-dependent, cautious approach, with potential minor adjustments based on inflation dynamics and economic growth.

In its March 2025 Summary of Economic Projections, the Fed signalled two more cuts in the year, tied to forecasts of 1.7% GDP growth and 2.7% inflation. However, market participants anticipate a deeper easing cycle - between three to five cuts - driven by concerns that rising tariffs and weakening domestic demand could trigger stagflation risks. The Feds near-term stance remains cautious but clearly oriented toward growth support.

Overall, while the Feds rate increases may slow or halt in FY 2024-25, real policy rates will remain relatively high, reflecting a continued commitment to price stability amid uncertain global and domestic economic conditions.

Monetary Policy Trends Globally

As of mid-2025, global monetary policy is undergoing a gradual shift from an aggressive inflation-fighting stance to a more growth-supportive approach. After sharp interest rate hikes in 2022 and 2023, many central banks have begun easing their policy rates in response to cooling inflation and slowing economic momentum. Notably, the U.S. Federal Reserve

started cutting rates in mid-2024, bringing the federal funds rate down to 4.75% by early 2025. The European Central Bank (ECB) also lowered rates in the second quarter of 2024, citing subdued inflation and sluggish growth in the eurozone. Similarly, other advanced economies like Canada and Australia have adopted a cautious easing stance.

Emerging market economies such as India, Brazil, and Indonesia began their rate-cutting cycles earlier due to relatively better inflation control and more stable external balances. Indias Reserve Bank has cut its repo rate by 100 basis points in 2025 alone, bringing it to 5.50%. Meanwhile, China has maintained an accommodative policy with targeted stimulus to support domestic demand and stabilize its property sector. However, countries like Turkey and Argentina remain exceptions, having to keep interest rates elevated due to persistent inflation and currency instability.

While headline inflation has moderated across most economies, core inflation remains sticky in some regions, prompting central banks to remain cautious. The overall trend now leans toward supporting economic recovery, especially in sectors like housing, MSMEs, and infrastructure. At the same time, there is increased focus on financial system resilience, digital finance regulation, and climate-related risks. Looking ahead, most central banks are expected to proceed with gradual rate cuts depending on inflation dynamics, though geopolitical risks, supply chain uncertainties, and energy price volatility could influence the pace and extent of monetary easing.

With inflation moving closer to its target, the Reserve Bank of India (RBI) shifted its policy stance, cutting the repo rate by 50 basis points to 5.5% in June 2025 and easing the cash reserve ratio, signaling a more neutral approach to monetary policy. On the fiscal side, the government continued its path of consolidation, targeting a fiscal deficit below 4.9% of GDP while maintaining strong capital spending on infrastructure, green energy, and logistics. Revenue collections remained buoyant, supported by robust GST and direct tax performance.

Indias external position remained stable, with the current account deficit contained at 1.21.3% of GDP, backed by resilient service exports, steady remittances, and strong foreign exchange reserves. Although merchandise exports faced global headwinds, the overall balance

of payments stayed healthy. Foreign portfolio investments surged in the latter half of the year, particularly in debt markets, driven by improved rate outlooks and stable macroeconomic

conditions. Financial markets reflected this optimism, with stock indices reaching record highs and the banking sector reporting strong credit growth, declining NPAs, and healthy capital buffers.

However, structural challenges persist—unemployment, particularly among youth and low- skilled workers, remains elevated, and private investment recovery is still cautious amid global uncertainty and domestic regulatory concerns. Inflationary risks from food and climate shocks, along with geopolitical disruptions and global trade fragmentation, continue to pose threats. Despite these risks, Indias large consumer base, strong policy buffers, expanding digital infrastructure, and focus on inclusive development position it well for continued growth and resilience in the years ahead.

In FY 2024-25, NBFCs in India are well-positioned to capitalize on the countrys resilient economic growth, strong domestic demand, and a supportive policy environment. With GDP expected to grow between 6.4% and 6.7%, and rural consumption recovering steadily, NBFCs should focus on expanding their presence in retail and MSME lending—especially in underserved segments such as small businesses, informal workers, and first-time borrowers. The rebound in rural demand presents a strategic opportunity to grow loan books in Tier 2 and Tier 3 cities through products like gold loans, farm equipment finance, and small-ticket consumer credit. Additionally, used vehicle financing and affordable housing loans offer promising avenues, particularly for borrowers outside the formal banking system. As inflation moderates and interest rates begin to ease, NBFCs must continue strengthening their digital capabilities to improve cost efficiency, underwriting accuracy, and customer reach. Collaborating with fintechs and participating in co-lending models with banks can further enhance scale and competitiveness. At the same time, maintaining asset quality will be critical, especially amid residual inflationary pressures and elevated credit risk in lower-income segments. Prudent risk management, improved collections infrastructure, and compliance with evolving RBI norms should remain a priority. Overall, a balanced approach that combines digital innovation with responsible lending can help NBFCs achieve sustainable growth in FY 2024-25.

Our strategic focus on sustainable growth led to healthy portfolio performance, stable asset quality, and deeper customer engagement across geographies. The strengthening of Pulse, our in-house technology platform, enhanced operational agility, improved risk oversight, and enriched the borrower experience through real-time intelligence and predictive insights— enabling faster turnaround times for loan approvals.

As we scale responsibly, our emphasis remains on building a resilient, technology-enabled, and professionally managed platform aligned with the aspirations of Indias emerging middle class and underserved communities. With a future-focused lens, CTL is poised to contribute meaningfully to Indias financial inclusion journey while delivering consistent value to all stakeholders.

Indias economy is expected to remain robust in FY 2024-25, with real GDP growth projected between 6.4% and 6.7%, maintaining its status as the worlds fastest-growing major economy. This growth is driven primarily by resilient domestic consumption, ongoing public infrastructure investment, and a strong performance in the services sector, especially IT, financial services, and retail trade. The governments continued focus on capital expenditure, logistics development, and digital infrastructure under initiatives like Gati Shakti and PM Gati Shakti Master Plan is expected to further support medium-term growth. Inflation is projected to moderate to 4.5%-4.8%, supported by stable fuel prices and easing core inflation, though food inflation remains a key risk due to climate volatility. With inflation gradually easing, the Reserve Bank of India (RBI) has begun loosening its monetary policy stance, having cut the repo rate to 5.5% in mid-2025. This is expected to boost credit demand and lower borrowing costs for businesses and households.

Indias domestic interest rate outlook for FY2025-26 indicates a continuation of the Reserve Bank of Indias (RBI) accommodative monetary policy stance, aimed at supporting economic growth amid global uncertainties. In April 2025, the RBI reduced the repo rate by 25 basis points to 6.00%, marking the second consecutive rate cut of the year. This decision was driven by a significant decline in retail inflation, which fell to 4.60% in March 2025—the lowest in over five years—primarily due to easing food prices. The central bank also shifted its policy stance to accommodative, signalling a readiness to implement further easing measures if necessary.

To enhance liquidity and reduce borrowing costs, the RBI has injected substantial funds into the banking system. In May 2025 alone, it plans to purchase government bonds worth ^1.25 lakh-crore (approximately $14.66 billion), adding to the over ^4.8 lakh-crore infused since January 2025 through OMOs. These actions are expected to lower short-term interest rates and improve the transmission of monetary policy. Looking ahead, economists anticipate that the RBI may implement additional rate cuts, potentially bringing the repo rate down to 5.75% by mid-2025, depending on the evolving economic landscape and inflation trends.

The RBI Governor has indicated that any further easing will be "data-dependent", noting that a spike in food prices or renewed oil shock could pause or even reverse the rate-cut cycle. The central bank is expected to proceed cautiously, balancing the need to support growth with the imperative to maintain inflation within its target range.

Overall, the RBIs monetary policy in FY2025-26 is expected to remain supportive of economic activity, with a focus on ensuring adequate liquidity and favourable borrowing conditions to foster investment and consumption.

FINANCIAL SECTOR

Indias financial sector has been one of the fastest growing sectors in the economy. The economy has witnessed increased private sector activity including an explosion of foreign

NBFCs are involved in offering credit facilities to both the urban and the rural clientele for the development of the economy. It helps micro-businesses and build low-cost houses, promoting the economic growth of the countryside, and providing microcredit for women.

Being able to manage various risks and also operate as strong financial intermediaries, NBFCs have a significant impact on the stability of the financial market. They offer product and service differentiation which assists in reducing the risks and enhancing the stability of the financial system.

NBFCs help in the growth of small-scale industries and trading companies which in turn leads to the creation of more employment opportunities and thereby enhancing the standards of living and thus the economic growth.

In return, NBFCs provide higher deposit rates and mobilise the publics savings, turning it into investments. This capital deployment fosters the growth of trade and industries, which are key players in the economic transformation process.

The future of NBFCs in India looks promising. Despite occasional economic slowdowns, the sector continues to expand and improve operations. NBFCs have outperformed banks in year- on-year growth rates due to lower operating expenses, allowing them to offer competitive interest rates. NBFCs lead in developing innovative financial products and solutions. They are more flexible in lending and investment options, offering value-added services such as P2P lending, factoring, and bill payment solutions.

connected channel experience that provides an omnichannel, seamless experience of sales and service 24 hours a day, seven days a week.

Regulatory developments and tighter liquidity shall push up the weighted average cost of funds (CoF) by 30-50 basis points (bps) in H2 FY2024 and further 20-40 bps in FY2025. Moreover, as most NBFCs have a fixed rate loan book, they are expected to face further margin pressure in FY2025. This, along with the bottoming out of credit costs, would impact the net profitability, which would moderate by 20- 40 bps in FY2025 vis-a-vis FY2024.

In Fiscal 2023, there was a notable surge in NBFCs borrowings from banks, leading to a significant uptick in their share of total funding to 36%, up from 29%at the conclusion of Fiscal 2022. Over the past decade, the proportion of bank lending to NBFCs has nearly doubled. However, it is anticipated that NBFCs will continue to rely heavily on funding from banks, as well as from other NBFCs and small finance banks, throughout Fiscal 2024and Fiscal 2025.

Emerging sources of fund in addition to traditional sources are as following;

impacted. Maintaining a balanced mix of secured and unsecured assets becomes crucial to meet capital adequacy parameters effectively.

During the pandemic period, NBFCs became cautious in lending to preserve the asset quality, which restricted AUM growth. The restricted demand drove AUM growth, especially across higher-yielding segments, which impacted profitability positively. The low-interest environment translated into lower cost of funds, resulting in higher spreads, which further impacted profitability positively. The microfinance segment also witnessed equity infusion from private equity and Alternative Investment Funds (AIFs). This in turn has helped the NBFCs to increase their spreads and decrease their debt levels in FY23 which is expected to remain consistent for the next 2 years with a marginal increase in the cost of funds only due to the rate hikes.

NBFCs are gaining market share from banks in small business loans, here is why

COMPANY OUTLOOK

Capital Trade Links Limited (CTL) is RBI-licensed and one of the top listed non deposit accepting NBFC established in 1984 with the mission of extending inclusive financial services to individuals and organizations across a diverse spectrum of society. Since 2001, CTL has been dedicated for more than two decades to realizing the aspirations of people belonging to low-income brackets, emerging small entrepreneurs and corporate groups. We leverage technology to offer tailored financial assistance in the form of Personal Loans, Business Loans, Corporate Bridge Loans and E-Vehicle Loans.

Headquartered in Delhi, CTL operates in five states across the country committed to fostering financial inclusion and empowering a wide range of stakeholders. The company has established its own standards and norms for evaluating different needs of its clients and always provides suitable payment option to its customers.

CTL has professionally qualified board of directors and key managerial persons qualified as Chartered Accountants, Company Secretary, Advocates having vast experience in the field of capital market, corporate governance, financial management, compliance management and banking. Being a professionally managed company enables CTL to have a strong corporate governance foundation always.

Our aim is to align with the governments vision of supporting renewable energy sources by extensively financing electric vehicles, promoting an environmentally friendly and sustainable mode of transport.

KEY STRENGHTS

The company operates with the following key strengths:

Robust Technology: The use of technology in conducting operations enhances efforts of financial inclusion by placing transparency, accessibility and technology at the heart of in this endeavor. The technology is mainly based on:

1. Digio: The use of digio in bank statement and KYC verification ensures credit availability to right borrower and maintains quality of assets. This enhances efficiency of the borrower verification process.

2. Payment: We provide multiple secure payment options to borrower to suit their convenience which includes dynamic QR code for specific amount payment, Payment Aggregators, NACH etc.

3. Automation: Customers now get recorded calls for their due amount, arrears and newer eligible loans using OBD calls, SMS etc. Staff has been enabled with real-time information of customers demand sheet, arrears etc.

4. Effective Internal Audit: The Company has strong internal audit teams who do frequent internal audits of the branches. The frequency being quite regular helps in reduction in frauds and implementation of companys policies.

5. Customer Identification: We use geographical tagging application to ensure identification of borrower location on real time basis, which in turn help us I securely expanding our reach to rural area borrowers and suitably serve their needs.

KEY WEAKNESS

Technology Adoption: With the proliferation of digital technologies, Company leverages mobile banking, digital payments, and online application processes to reach remote rural areas cost-effectively and efficiently.

OPPORTUNITIES

Unmet Demand: There is often a considerable unmet demand for credit in rural areas due to the limited presence of traditional banks. NBFCs can fill this gap by offering customized loan products tailored to the needs of MSMEs in these regions.

THREATS:

Economic Downturns: Economic downturns pose a significant threat to NBFCs that cater to corporates. During periods of economic slowdown, business often experience reduced cash flow and revenue, which can severely impact their ability to repay loans. This leads to higher default rates, affecting the financial health of NBFCs. Additionally, certain sectors are more vulnerable to market fluctuations, resulting in inconsistent repayment patterns and increased credit risk for lenders.

Regulatory Changes: Regulatory changes present another critical threat to NBFCs. New compliance requirements can increase operational costs and complicate business processes, thereby reducing profitability. The regulatory environment for financial institutions is constantly evolving, necessitating quick adaptation from NBFCs. Sudden shifts in government policies or financial regulations can create uncertainty, making strategic planning and consistent operations challenging.

RISK MANAGEMENT

The company has a robust risk management framework in place to identify, which measures, monitors and manages the critical risks. While risk is inherent to every institution, it assumes greater significance in the context of Micro Credit due to the very nature of the business with its absence of collaterals quality and the vulnerable, financially excluded customer segment it serves.

Risks may be avoided through pre-emptive action and hence the need to identify the risks and put in place various mitigation mechanisms. CTL has identified the following potential risks that could have an adverse impact on the company:

Credit Risk

Mitigation

Operational Risk

Mitigation

Portfolio Concentration Risk

Mitigation

Compliance Risk

Mitigation

Reputation Risk

Mitigation

coercive recovery practices and has an approved delinquency management policy including restructuring of loans where necessary.

Strategic Risk

It is the risk to earnings and capital arising from lack of responsiveness to changes in the business environment and/or adverse business decisions, besides adoption of wrong strategies and choices.

Mitigation

This is being addressed and the risk mitigated to a great extent, by referring matters of strategic importance to the Management, consisting of members with diversified experience in the respective fields, for intense deliberations, so as to derive the benefit of collective wisdom.

Contagion Risk

Contagion risk as an enlarged version of systemic risk, refers to the probability of credit default among a large group of borrowers in a particular geographical Territory or State, arising out of external factors, thereby escalating the risk of possible default.

Mitigation

This is being addressed by customer connect program wherein we pro-actively reach out to each individual customer as well as customers in each center to validate that the customers have genuinely applied for the loan and there has been no incidence of commission, following a relationship-based mode of engagement so the customer feels a sense of loyalty to the company.

INTERNAL CONTROL SYSTEM is crucial for a (NBFC) to ensure operational efficiency, financial accuracy, and regulatory compliance. It involves a comprehensive framework of policies, procedures, and practices designed to safeguard assets, prevent fraud, and ensure the accuracy and reliability of financial reporting. By implementing robust internal controls, an NBFC can mitigate risks, maintain transparency, and uphold stakeholder trust, ultimately contributing to its long-term stability and success.

HUMAN RESOURCES

CTL policy offers equal employment opportunity for all persons, without bias or discrimination. It applies to all employment practices including (but not limited to) recruitment, promotion and training.

It is CTL,s policy to maintain a working environment free of harassment and intimidation. Any type of harassment (including sexual harassment, verbal or implicit), or intimidation, is a violation of CTL policy, and is dealt with in accordance with corrective action procedures. The company has in place the Sexual Harassment policy, where the company has zero tolerance for any offence.

The human capital is major component in the finance industry besides capital. So having the right people at right place is the major strength of CTL. We believe that the employees working with CTL are realizing their dreams and in return the company achieves it goal.

CTL does not hesitate in recognizing the co-existence of the Company and its Human Capital. Some of the employees in the company have been for more than 8 years with us. The company believes in long term relations with employees and the company has good retention rate.

The company has hired some senior people from reputed companies who are expert in their area of activity. With professionals at the top and fully motivated team at the field, the company is bound to grow in the future.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has implemented adequate internal control practices and has well laid down processes across all functions and departments. The Company has a proper and adequate system of internal controls commensurate with the nature of its business and the size of its operations. These controls ensure transactions are authorized, recorded and reported correctly and assets are safeguarded and protected against loss from unauthorized use or disposition.

There is adequate segregation of duties in the front and back-office functions to ensure that there is absolute independence in the functions. The Company has three lines of control, wherein the first line is the risk owners or risk managers who own the risk, the second line of control is the risk and compliance functions, who oversee risk control and compliance, and the third line is internal audit who provides independent assurance to all stakeholders.

The Company has adequate monitoring processes and controls. The Company has engaged an independent firm of Chartered Accountants to assist the internal audit division. The Independent Internal Audit Function provides risk-based assurance across all material Risk and Compliance exposures of the Company.

COMPLIANCES

Key regulatory Updates

In line with its objective to align the regulatory and supervisory framework with global best practices, the Reserve Bank of India (RBI) introduced significant updates throughout the financial year. These measures primarily focus on strengthening risk management, improving regulatory compliance, and enhancing enforcement across various financial sectors. Below are some Key regulatory guidelines and notifications issued by RBI, which cover areas such as fraud risk management, operational risk management, fair practices for lenders, and disclosure norms for financial products. These updates aim to ensure the stability,

transparency, and resilience of Indias financial system, ensuring better protection for both consumers and lenders while fostering trust in the regulatory environment.

1. Master Direction - Credit Information Reporting. 2025:

The RBI issued the Master Direction - Credit Information Reporting, 2025 on January 06, 2025 to standardize and strengthen credit reporting across financial institutions. It mandates fortnightly data submissions, stricter correction protocols, a Data Quality Index, and mandatory credit reports in loan appraisals. The directive emphasizes transparency, data protection, grievance redressal, and board-level oversight, reinforcing credit discipline and data accuracy in the financial ecosystem.

2. Change in REPO Rate:

The Reserve Bank of Indias (RBI) Monetary Policy Committee (MPC) initiated a series of repo rate cuts in 2025 to support economic growth amid moderating inflation and improving macroeconomic conditions. On February 7, 2025, the RBI reduced the repo rate by 25 basis points, bringing it down from 6.50% to 6.25%. The move was intended to lower borrowing costs and revive credit demand in key sectors like housing, manufacturing, and infrastructure.

Continuing its accommodative approach, the RBI again cut the repo rate by 25 basis points on April 9, 2025, reducing it further to 6.00%. This decision came on the back of sustained moderation in inflation, a stable rupee, and the need to accelerate private consumption and investment. The RBI emphasized that the economy required continued policy support to consolidate recovery and ensure broad-based growth.

On June 6, 2025, the RBI made a more aggressive move by cutting the repo rate by 50 basis points, bringing it down to 5.50%. Alongside this, the Cash Reserve Ratio (CRR) was also reduced by 100 basis points, from 4% to 3%, injecting substantial liquidity into the banking system. This larger-than-usual rate cut reflected RBIs confidence in the inflation outlook and its intention to further strengthen the economic recovery. The impact of this easing cycle has been significant, resulting in reduced EMIs, improved credit flow, and stronger support for sectors sensitive to interest rates, such as real estate and consumer durables.

In total, the repo rate was cut by 100 basis points in the first half of 2025, demonstrating the RBIs commitment to fostering a supportive environment for sustainable and inclusive economic growth.

3. Treatment of Right-of-Use (ROU) Asset for Regulatory Capital Purposes:

The RBI on March 21, 2025 has clarified that ROU assets arising from leases under Ind AS 116 need not be deducted from regulatory capital if the underlying asset is tangible (e.g., buildings, equipment); instead, they will be risk-weighted at 100%. However, ROU assets linked to intangible assets must continue to be deducted. This applies to NBFCs, HFCs, CICs, ARCs, Mortgage Guarantee Companies, and Standalone Primary Dealers following Ind AS.

4. Amendment to the Master Direction - Know Your Customer (KYC) Direction. 2016

The RBI, through its notification dated 6th November, 2024, amended the Master Direction - KYC, 2016 to streamline and strengthen the KYC process. Regulated Entities ("RE") must follow a "one customer, one KYC" approach at the UCIC level. Monitoring intensity must match the customers risk profile, with clearer guidance for high-risk accounts. Periodic KYC updation is emphasized, including updates initiated by the RE. Updated customer data must be filed with CKYCR within 7 days of receipt.

5. Master Direction on Treatment of Wilful Defaulters and Large Defaulters:

The RBIs Master Direction dated July 30, 2025 on Treatment of Wilful Defaulters and Large Defaulters, effective from October 28, 2024, sets out a structured process to identify and act against borrowers who deliberately default. It defines Large Defaults as ^1 crore+ and Wilful Defaults as ^25 lakh+ involving intentional non-payment, fund diversion, or misuse of assets. Regulated Entities must form dedicated committees, follow a transparent classification process, report cases to Credit Information Companies (CICs), and restrict credit facilities to such defaulters. The framework also covers internal audits, compromise settlements, and safeguards during credit appraisal and loan transfers.

6. Master Directions on Fraud Risk Management:

The RBI, via notification dated 15th July, 2024, issued Master Directions on Fraud Risk Management for Non-Banking Financial Companies, including Housing Finance Companies. The framework enhances fraud prevention, detection, reporting, and monitoring mechanisms. Key provisions include stricter timelines for fraud classification and reporting to RBI, adoption of robust internal controls, and regular fraud risk assessments. NBFCs are also required to strengthen governance, conduct root cause analysis, and ensure accountability of staff involved in fraudulent activities.

7. Operational Risk Management and Operational Resilience:

The RBIs Guidance Note on Operational Risk Management and Operational Resilience dated April 30, 2024 now applies to NBFCs and HFCs. It introduces a framework based on three pillars: Prepare and Protect, Build Resilience, and Learn and Adapt. The note emphasizes strong governance, internal controls, and risk management. It advocates for business continuity, third-party dependency management, and robust ICT and cybersecurity systems. The guidance encourages continuous learning from disruptions to improve operational resilience.

8. Fair Practices Code for Lenders - Charging of Interest:

The RBIs circular dated April 29, 2024 on Fair Practices Code for Lenders - Charging of Interest addresses unfair practices observed during inspections. Key issues include charging interest from the loan sanction date or cheque issuance rather than the disbursement date, charging interest for an entire month despite mid-month disbursal or repayment, and collecting advance installments while charging interest on the full loan amount. To ensure fairness and transparency, RBI has directed all regulated entities (REs) to review and correct their practices, including making necessary system adjustments.

9. Key Facts Statements (KFS) for Loans & Advances:

RBI vide Circular dated April 15, 2024 mandates that Key Facts Statements (KFS) be provided for all retail and MSME term loans by regulated entities (including NBFCs and HFCs), aimed at enhancing transparency and reducing information asymmetry between lenders and borrowers. KFS must be in clear language, include details like the Annual Percentage Rate (APR), loan proposal number, and amortization schedule, and be validity period. All charges, including third-party service fees, must be disclosed in the APR. The guidelines apply to all new loans from October 1, 2024. Credit card receivables are exempt from this circular.

CAUTIONARY STATEMENT

The Management Discussion and Analysis report containing statements used for describing the Companys objectives, projections, estimates, expectation or predictions are ‘forward looking in nature. These statements are within the meaning of applicable securities laws and regulations. Though, Company has undertaken necessary assessment and analysis to make assumptions on the future expectations on business development it does not guarantee the fulfilment of same. Various risks and unknown factors could cause differences in the actual developments from our expectations. The key factors that can impact our assumptions include macro-economic developments in the country, state of capital markets, changes in the Governmental regulations, taxes, laws and other statues, and other incidental factors. The Company undertakes no obligation to publicly revise any forward-looking statements to reflect future/likely events or circumstances.