Dhanlaxmi Bank Ltd Management Discussions

Global Economy

The global macroeconomic landscape for 2025-26 is defined by a delicate balancing act. After navigating a wave of high inflation, sharp interest rate hikes, and shifting trade policies through 2025, the global economy faces a new set of complex challenges most notably renewed geopolitical conflicts, volatile energy markets, and structural shifts from artificial intelligence.

Global Growth trajectory - A mild softening: Global economic activity has proved highly resilient, global GDP growth is hovering between 2.9% and 3.1% for 2026, a minor softening from the estimated 2.8% to 3.00% seen in 2025.

The post - pandemic recovery remains uneven. While advanced economies have largely recovered or consolidated their output, roughly a quarter of emerging market and developing economies (EMDEs) still struggle with per capita incomes below 2019 levels.

Regional Outlooks

United States: Projected to grow around 2.0% to 2.3% in 2026. Consumer spending remains a steady pillar, and monetary policy easing provides support, through a slightly softening labour market behaves as a natural drag on momentum.

Eurozone/European Union: Growth remains modest, projected at 1.1% to 1.3% for 2026. While monetary easing helps, high tariff uncertainties, localized manufacturing headwinds and energy price fluctuations limit a sharper rebound.

China: Growth is gradually moderating to the 4.4% to 4.6% range. The economy is continually transitioning towards domestic consumption while managing structural property sector adjustments and external trade frictions.

Inflation and Monetary Policy Paradox

The dominant theme of 2024-25 was the "higher-for-longer “interest rate environment designed to cool pandemic-era inflation. While headline inflation successfully retreated towards the 2% target in many advance economies by late 2025, the narrative has shifted slightly in 2026.

Renewed Price Pressures: Due to recent supply chain frictions and energy infrastructure disruptions in the Middle East, global headline inflation is experiencing a temporary, modest uptick in 2026 (with G-20 inflation projected near 4.0%) before it is expected to resume its downward path in 2027.

Central Bank Agility: Central banks are walking a tightrope. Easing cycles are underway, with the Federal Reserve, European

Central Bank (ECB), and Bank of England expected to gradually lower policy rates through 2026.

Dominant Headwinds and Risks

Geopolitical Conflicts and Energy Shocks: The outbreak of conflict in the Middle East has re-introduced significant volatility to commodity markets. Halts or delays in critical shipping corridors (like the Strait of Hormuz) and localized damage to energy infrastructure have spiked oil and fertilizer prices.

Sovereign Debt and Fiscal Pressures: Public debt levels worldwide have reached historical highs. Many governments are facing heavily pressured primary fiscal balances due to a combination of rising defense expenditures, climate adaptation costs and elevated debt servicing yields. This leaves very narrow fiscal buffers to respond to any new economic shocks.

Trade Fragmentation and Tariffs: The carry over effect of protectionist trade policies and tariff adjustments enacted over the last year continues to weigh on international trade growth. Global trade momentum is expected to cool to roughly 2.2% in 2026, down from a front loaded 3.8% spike in 2025.

Structural Silver Lining: AI and Tech Investment

Despite macro headwinds, capital expenditure in technology remains remarkably aggressive. High momentum in technology related production and deep investments in Artificial Intelligence (AI) are acting as a major growth engine. While these capital injections fuel pockets of immense productivity in advanced markets, economists caution that the long-term gains risk being unevenly distributed, potentially widening the structural in equality gap between technology exporting nations and developing countries.

Indian Economy

During the financial year 2025-26, the Indian economy solidified its position as the fastest growing major economy globally for the fourth consecutive year. Powered by a potent "double engine” of resilient domestic consumption and aggressive infrastructure investment, India outperformed expectations despite severe global headwinds, including escalating conflicts in the Middle East and sluggish global growth.

A landmark shift also occurred this year: the Ministry of Statistics and Programme Implementation (MoSPI) revised the GDP base year from 2011-12 to 2022-23 to more accurately capture the structural evolution of the modern digitized economy.

Growth Trajectory and Structural Rebounding: Indias real GDP growth for FYRs.26 reached an impressive 7.4% to 7.6%, up from the 7.1% recorded in FYRs.25. Nominal GDP growth hovered around 8.6%.

Manufacturing Boom: Industrial performance served as a major growth anchor, with manufacturing expanding at a robust 8.4% in the first half of the year. High frequency indicators like the manufacturing PMI and e-way bill generation signaled structural strength all year long.

Dual Consumption Engine: Private consumption grew to account for 61.55% of GDP This was anchored by two distinct recoveries: a sharp rebound in rural consumption - aided by a highly favourable south west monsoon and a steady rise in urban purchasing power, which was boosted by direct tax relief.

Capital Formation: Investment activity remained aggressive, with Gross Fixed Capital Formation stabilizing firmly at 30% of GDP

Fiscal Discipline and Policy Highlights

The government successfully balanced growth objectives with sharp fiscal prudence maintaining its long-term consolidation target. The fiscal deficit for FYRs.26 was brought down strictly to 4.4% of GDP compared to 4.8% in FYRs.25. Capital expenditure was sustained at a massive Rs.11.21 lakh Crore (3.1% of GDP), focusing heavily on interest free capital loans to states and the multi-year asset monetization program. To unlock disposable income and power consumption, the New Tax regime was rationalized. The credit guarantee cover for MSME was doubled from Rs.5 Crore to Rs.10 Crore, and the FDI limit in the insurance sector was raised from 74% to 100%.

Monetary and Banking Environment

RBIs Strategic Shift: After maintaining a strict “withdrawal of accommodation” stance to fight inflation, the RBI shifted its stance to “neutral” and eased systemic liquidity pressures by trimming the CRR to 3%. Headline Inflation began settling comfortably close to the 4% target. Backed by robust industrial demand and corporate capital needs, lending of Commercial banks grew by an exceptional 16.10% YoY, up substantially from 11% in the previous year. Banking balance sheets remained at multi decade health peaks, characterized by very low NPA ratios and high capital adequacy ratios.

External Pressures and Vulnerabilities

While domestic indicators flashed bright green, external vulnerabilities required highly active management.

Crude Oil threat: Escalating geopolitical tensions in the Middle East spiked global oil prices. Various research indicates that every $10 barrel increase in crude adds roughly 35-40 basis points to domestic inflation and shaves 20-25 basis points of GDP growth.

Forex Reserves: Despite temporary balance of payment pressures arising from elevated transport and commodity insurance costs,

Indias massive foreign exchange reserves acted as a vital macroeconomic shield, successfully insulating the rupee against heavy global volatility.

However, challenging periods are ahead for our economy if geo political tensions does not de-escalate.

Kerala Economy

During the FY 2025-26, the Kerala economy demonstrated steady growth with structural transformations, navigating a path of rigorous fiscal consolidation while heavily leaning into its service driven strengths. State focused on balancing severe pressures on its borrowing limits with strategic revenue generation and infrastructure expansions.

Growth Trajectory and Macro targets

GSDP Growth: Keralas GSDP for 2025-26 shows a healthy nominal growth of 12% and the real GDP growth is stabilized around the 6.2% to 6.5% range.

Per Capita Income Outperformance: Kerala maintained its distinct position with a per capita GSDP roughly 50% to 60% higher than the national Indian average, reflecting high human development metrics, though overall output growth remains slightly below the aggressive pace of the national GDP engine.

Sectoral Dominance: The economy continues to be highly skewed toward the Services sector, which accounts for roughly 64% to 66% of the states Gross value.

Fiscal Deficit & Debt Realities

Fiscal deficit for 2025-26 was targeted at 3.2% of GSDP. This is notable improvement from the 3.86% peak hit in FYRs.25. The revenue deficit is estimated to drop to 1.9% of GSDP from the 2.3% to 2.5% recorded in the preceding years. There has been continuous multi year structural decline in Central financial transfers, prompting the state to increasingly rely on States Own Tax Revenue, which now funds over 61% of total revenue. A high percentage of Keralas revenue expenditure remains tied up in non-discretionary commitments. Out of the estimated Rs.1.79 lakhs Crore revenue expenditure, a massive Rs.1.05 lakh Crore(approx.59%) goes strictly toward salaries, pensions and interest payments on outstanding public debt.

Key Policy and Sectoral Highlights

To fund developmental plans without crossing strict central borrowing limits, the state enacted major tax structure overhauls such as Land and Road tax were hiked and lifetime tax for green vehicles were systematically structured. State ramped up its capital outlay by 20% to Rs.16938 Crore, driving asset creation after years of compressed capital budgets.

Primary Sector Shifts

While small in terms of overall GDP share, the primary sector saw key structural developments like Aqua culture boom where spearheaded by proactive state backed policy interventions, fishing and aquaculture emerged as a powerful subsector engine, showing double digit growth (approx .10.50%). Crop yields for cash crops and rice experienced mild turnarounds, benefiting from highly favourable monsoon distribution profiles across the Western Ghats and coastal plains.

Regulatory Measures and Monetary Policies

Bank regulation involves the development and enforcement of guidelines and restrictions by government authorities or central banks to oversee banking institutions. These regulations are designed to ensure consumer protection, operational transparency, and the overall stability of the financial system.

A robust financial system is crucial for the economic health of any country, and banks play a central role in this system. Regulations help define the boundaries within which banks operate, ensuring they function efficiently and responsibly, These rules not only govern the operations of financial institutions but also establish a framework for their regulation and supervision, contributing to a stable and trustworthy banking environment.

Financial Performance of Bank

The Bank declared a net profit of Rs.102.75 Crore for the financial year ended March 31, 2026, as against Rs.66.64 Crore in the previous year.

The total business of the Bank as on March 31, 2026 stood at Rs.33,771,57 Crore as against Rs.28,219.11 Crore as on March 31, 2025.

Total deposits stood at Rs.18,642.88 Crore and gross advances at Rs.15,128.69 Crore as on March 31,2026.

Gross NPA and Net NPA ratios stood at 1.89% and 0.51% respectively during the year under review, as against 2.98% and 0.99% respectively in the previous year.

The CRAR as on March 31,2026 was 18.92%, as against 16.12% as on March 31,2025.

Pursuant to Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the details of ratios and the details of any change in Return on Net Worth as compared to the immediately previous financial year are given below:

Ratios	Mar-25	Mar-26	Variance In %
Operating Profit Margin (Note 1)	6.39%	12.06%	88.73%
Operating Profit as a percentage to Working Funds (Note 1)	0.57%	1.11%	94.74%
Net Profit Margin (Note 1)	4.48%	5.73%	27.90%
Debt Equity Ratio (Note 2)	Nil	0.12	100.00%
Return on Assets (Note 3)	0.40%	0.53%	32.50%
Return on Net worth (Note 3)	5.65%	8.13%	43.89%

1. Operating Profit Margin, Operating Profit as a percentage to Working Funds and Net Profit Margin: The ratio improved due to higher Net Interest Income and Non-Interest income. The Banks gross advance increased by 23.95%, i.e., from Rs.12206 Crore to Rs.15129 Crore. Major component of increase in non-interest income are recovery from written off accounts, loan processing fees and commission from insurance products.

2. Debt Equity Ratio: The Debt- Equity ratio stood at 0.12 as on March 31 , 2026 compared to Nil position in the previous year. During the year ended March 31,2026, the Bank issued lower Tier II Bonds of Rs.150.00 Crore, whereas there was no outstanding debt with residual maturity exceeding one year as on March 31, 2025.

3. Return on Assets and Return on Net worth: Return on Assets and Return on net worth has increased due to increase in net profit from Rs.66.64 Crore to Rs.102.75 Crore.

Strategies of Bank

The Bank continues its focus on profitability, asset quality, resilient loan book focusing on robust retail liability portfolio, optimum organizational structure and technology initiatives to achieve the business goals.

Comprehensive Product Suite and Customer-Centric Approach

Dhanlaxmi Bank offers a wide range of financial products tailored to meet customer needs at various stages of life, including home, agriculture, personal, education, gold, and vehicle loans. Its portfolio also includes Corporate and MSME loans, alongside non-financial services such as financial literacy and livelihood programs. With 98 years of experience, the Bank focuses on underbanked and underserved customers, particularly within the MSME segment. Its customer-centric strategy has fostered strong retention rates, establishing the Bank as a one-stop shop for financial needs.

Technology-Driven Operations with a Digital Edge

Dhanlaxmi Bank continuously enhances customer experience through its advanced digital platforms, offering internet and mobile banking, bill payments, Credit Cards and VISA & RuPay debit cards. The majority of banking transactions, such as remittances and utility payments, are conducted digitally, The Banks onboarding process is largely digitalized, improving efficiency and customer engagement. Technology-driven automation in areas like credit assessment further supports accuracy and consistency.

Streamlined Credit Assessment and Risk Management

The Banks focus on secured lending, backed by conservative loan- to-value ratios, helps minimize delinquencies and credit losses. As the primary banker for most customers, it has comprehensive visibility into customer cash flows, enabling more accurate credit assessments. Dedicated customer relationship teams maintain close engagement with clients, improving collections and asset quality. This, combined with decentralized loan sanctioning and data analytics, supports a risk-based lending model.

Integrated Risk and Governance Framework

Dhanlaxmi Banks integrated risk management framework covers key risks such as credit, operations, liquidity, market, cyber, and reputational risks. The Bank adopts a risk-based oversight model, with clear risk ownership across all functions. Supported by functional risk committees, it ensures robust management of risks. Credit decisions, particularly for unsecured loans, are automated to reduce human errors. IT systems are leveraged to control operational risk, including fraud detection.

Experienced Leadership with Strong Industry Expertise

Dhanlaxmi Banks Board comprises experienced professionals from diverse business backgrounds, many of whom have held senior roles in renowned financial institutions. The senior management team is skilled in scaling financial services organizations, providing strategic leadership that drives sustainable growth.

Our strategic themes and goals are as follows:

1. Capital Optimization and Conservation: Efficient utilization of capital and conserving resources to achieve sustainable growth.

2. Organizational Structure Enhancement: Strengthening our organizational structure to increase agility, improve decisionmaking, and enhance overall performance.

3. Business Model Optimization: Through analysis of market trends and customer needs, business model is optimised to identify areas for improvement and growth opportunities. Additionally, new products and services that align with our business strategy are introduced to improve the product mix.

4. Future-Proof Customer Profile Creation: Creating a customer profile that aligns with our business strategy and is future- proof, taking into consideration changing market trends and evolving customer needs.

5. Governance and Process Improvement: Strengthening our governance processes to evolve compliance and risk culture, improve transparency, and increase accountability,

6. Evolve Compliance and Risk Culture: Strengthening our risk management and monitoring processes to promote a culture of compliance and risk awareness throughout the organization. This will include enhancing our risk management framework, identifying and mitigating potential risks, and improving the overall resilience of our business.

7. Improved Operational Efficiency: Streamlining and optimising our operational processes to reduce costs, improve efficiency, and increase customer satisfaction.

8. Leveraging Technology to Augment Business: Leveraging technology to augment our business and create a competitive advantage by improving operational efficiency, enhancing customer experience, and unlocking new growth opportunities.

9. Environmental, Social, and Governance (ESG) Integration: Integrating ESG considerations into our business strategy, decision-making processes, and operations to promote sustainable practices, reduce our environmental impact, and enhance our social responsibility, We will prioritize transparency in reporting, engage with stakeholders on ESG issues, and align our values with the United Nations Sustainable Development Goals. By integrating ESG considerations into our business, we aim to create long-term value for our stakeholders and contribute to a sustainable future.

Way Ahead

With a legacy of 99 years, riding on the loyal and vintage customer base, Bank is now looking forward to break all benchmarks set in the recent past. The steps initiated to increase the branches, especially in South India, with innovative products and technology backed services, Bank would focus on following to improve profitability and there by stakeholder value.

• Continued focus in Retail and MSME segments to mitigate the slowdown in Corporate lending and to boost non-interest income through fee income and X Selling

• Introducing tailor made MSME product

• Deepening existing MSME relationship to improve CASA penetration

• Enhanced focus in forex business by upgrading all branches for forex transactions

• Business growth through digital channels

• Strengthening our risk management and governance processes to ensure compliance and accountability

• Leadership training and reskilling

• Strengthen internal cyber awareness programs and enhanced governance

Different Functions of Bank are as follows:

Business Development and Planning

The Business Development and Planning function continued to play a pivotal role in supporting the Banks growth strategy by identifying new business opportunities, strengthening market presence, and aligning business initiatives with the Banks strategic objectives.

The department undertook comprehensive market research and competitive analysis to assess evolving customer preferences, industry developments, and emerging business opportunities. These insights facilitated the formulation and execution of growth- oriented strategies aimed at enhancing the Banks market share and customer engagement across key segments.

Innovation remained a core focus area, with efforts directed towards identifying customer needs, evaluating market gaps, and supporting the development of innovative products, services, and digital solutions. The Bank also strengthened strategic collaborations with technology partners, and other service providers to enhance operational capabilities, improve customer experience, and expand service offerings.

The department actively monitored business performance across various channels, driving initiatives to improve customer acquisition, deepen existing relationships, and enhance cross-selling and upselling opportunities. Focused marketing campaigns and business development initiatives were implemented to support revenue growth and achieve business targets.

While pursuing growth, the department incorporated robust risk assessment practices into business planning and decisionmaking processes. Budget preparation and financial planning are conducted in close coordination with finance teams to align with business objectives. Financial performance is tracked through variance analysis, enabling strategic adjustments to maintain stability and profitability, Continuous monitoring of business and financial performance enabled timely course corrections and improved operational efficiency.

The department remained committed to maintaining the highest standards of governance, regulatory compliance, and ethical business practices, All business development activities were conducted in adherence to applicable regulatory requirements and industry standards, thereby safeguarding the Banks reputation and supporting long-term value creation for stakeholders,

Customer Relationships Management

Bank has implemented Customer Relationship Management strategies to enhance customer satisfaction, retention, loyalty through personalized services, targeted marketing campaigns, building and maintaining strong relationships with customers,

Public Relations and Publicity

To connect with its customers and to create awareness regarding products and services, Bank continues its publicity and marketing efforts by way of social media, localized and regional initiatives, Bank foster relationships with key stakeholders, and decisionmakers, which can lead to business opportunities and market insights with the active participation in industry events, networking forums, and community engagements,

Government Initiatives

Bank was empanelled for conducting Government Agency Business and facilitating collection of direct and indirect Taxes,

Bank has successfully integrated with Goods and Services Tax Network (GSTN) for collection of Goods and Services Tax (GST), the Income Tax payment services through online (RIB & CIB) and offline (over the counter) modes and Customs Duty payments through online mode, The Bank became the first Kerala-based Bank to introduce GST collections through UPI mode,

Banks association with Kerala State Welfare Corporation for Forward Communities for financing the poor and marginalized people among the forward communities of the State of Kerala, Government of Kerala empanelled the Bank for Contractors Bill discounting facility through Digital Platform,

Financial Inclusion

Financial inclusion envisages inclusive growth by reaching the unreached, unbanked and under-banked areas, It guarantees access to basic financial products and services to all especially those in vulnerable sections of the society at an affordable cost and in a transparent manner,

Bank has engaged 4 Financial Literacy Centres in the state of Kerala and conducted 422 Financial Literacy awareness campaigns during the financial year 2025-26, to provide basic banking knowledge to people across various parts of the Society,

Financial Inclusion remains a key focus area of Department of Financial Services, with initiatives like the Pradhan Mantri Jan Dhan Yojana (PMJDY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Atal Pension Yojana (APY)making significant strides,

Bank actively promotes APY, PMJDY, PMSBY and PMJJBY so that all sections of society have access to basic banking services, insurance, and pension schemes, APY provides Government backed pension scheme to the unorganized sector, The PMSBY scheme is a Personal Accident Insurance Scheme, offering protection against death or disability due to accident and PMJJBY schemes is a government backed insurance scheme offering Rs.2 lakh life insurance cover for death due to any reason, PMJDY is a National Mission on Financial Inclusion encompassing an integrated approach to bring about comprehensive financial inclusion of all the households in the country, The plan envisages universal access to banking facilities with at least one basic banking account for every household, As on March 31, 2026, Bank has opened 107318 PMJDY accounts,

Bank engaged 2 Corporate Business Correspondent for effective implementation of financial inclusion programmes, to reach the banking services in sub service areas of a branch,

Micro credit (SHGs Bank linkage)

Dhanlaxmi Bank formalises effective credit delivery to Self Help Groups (SHG) through most adopted and successful ”NGO promoted & bank financed” model, This model provides affordable and responsible credit to Self Help Groups for sustainable development, Bank is also promoting Joint Liability Group (JLG) lending, one of best tool to support small farmers, women and rural entrepreneurs for generating sustainable lively hood, State Kudumbasree Mission, Kerala State Welfare Corporation for Forward Communities, Shreyas, Thalassery Social Service Society are the major Self Help Promoting Institutions associated with us in the journey of empowerment through financial inclusion, As on March 31,2026, 8199 SHGs and 303 JLGs with cumulative outstanding of Rs.385 Cr are being credit linked with our bank,

Banks Operations at Sabarimala

The Bank has been the principal bankers to Travancore Devaswom Board since 1970s. Bank is fortunate to become the Banker to Lord Ayyappa and the temples administered by TDB in a spirit of public service. Since then, the Bank has been extending the best of services to Sabarimala and other temples under TDB. Bank opens a seasonal branch at Sabarimala to facilitate banking services at Sabarimala and handles the prasadam distribution counters at Sannidanam and Pamba during Mandalam and Makaravilakku season and monthly poojas.

Associate Products Distribution

The Associate Products Division is responsible for the distribution of a comprehensive suite of third-party financial solutions, including Life, General and Health Insurance, Mutual Fund investments, and the Banks 3-in-1 account proposition comprising Savings/Current Account, Demat Account, and Trading Account in partnership with SMC Global Securities Limited and Religare Broking Limited. The department also plays a key role in implementing Government social welfare schemes such as APY, PMJBY and PMSBY, thereby supporting the Banks financial inclusion initiatives.

The Bank has established strategic partnerships with leading insurance and mutual fund providers to deliver holistic financial protection and wealth-creation solutions to customers. Life Insurance products are distributed in association with Bajaj Allianz Life Insurance Company and Canara HSBC Life Insurance Company, while General Insurance solutions are offered through Bajaj Allianz General Insurance Company Limited and SBI General Insurance Company Limited.

The Bank has recorded strong growth in fee based income from insurance business during FY 2025-2026. The Banks income from Life insurance grew by 28% while General insurance income grew by 6% compared to the previous year.

Further Bank has qualified for the PFRDA APY Annual awards for successfully achieving the annual target set for Atal Pension Yojana, a flagship social security scheme of the Government of India.

In addition, the Bank has tie-ups with all major mutual fund houses in India and actively distributes their schemes to customers in a fully compliant and regulatory-aligned manner, ensuring responsible distribution practices while enhancing customer trust and expanding the Banks non-interest income streams.

Credit Sanction

During FY 2025-26, the Credit Sanction Department being the core underwriting arm, played a key role in on boarding quality loan assets of acceptable risk profiles by maintaining perfect balance between profitability, risk management and customer satisfaction.

Department emphasised on strengthening of Banks Credit Portfolio, ensuring geographical/sectoral diversification and compliance with regulatory norms in respect of exposure caps, IRAC guidelines, targeted credit etc,.

A continued focus was placed on securing adequate returns on assets while maintaining transparency and efficiency in the sanctioning process. The department adopted a robust risk- return evaluation model, aligning with industry best practices and contributing to the Banks objective of sustainable and responsible credit growth.

Credit Administration & Monitoring

Credit Administration & Monitoring (CAM) Department is integral to safeguarding the Banks credit portfolio and ensuring asset quality throughout the post-sanction lifecycle. CAM Dept oversees creation of security, and continuous monitoring of account conduct, ensuring compliance with sanction terms. Through proactive remediation and an effective Early Warning Signals (EWS) system, CAM Dept identifies emerging risks and potential fraud, enabling early intervention and mitigating credit risk to maintain portfolio integrity and prevent slippages into NPAs.

A sustained and encouraging improvement in stressed asset indicators has been observed over the three-year period ending 31 March 2026. The SMA ratio, as a proportion of Total Gross Advances, declined from 1.77% to 1.65% and further to 0.57%, representing a reduction of 0.12% in FY 2024-25 and 1.08% in FY 2025-26. Total SMA stood at Rs.84.32 Crore, marking a historic alltime low, This consistent downward trajectory reflects strengthened monitoring and improved collection efficiency, underscoring the effectiveness of ongoing asset quality management efforts.

Non-Performing Assets Management

Bank has shown consistent improvement in NPA management in recent years, reflecting strong recovery efforts and prudent credit monitoring. During the financial year 2025-26, our Bank demonstrated significant progress in managing its NPAs, reflecting enhanced asset quality and effective credit risk management. The Bank achieved a notable reduction in its Gross NPA levels, bringing it down from Rs.364.11 Crore to Rs. 286.38 Crore. The banks gross NPA ratio declined to 1.89% by March 2026, down from 2.98 % the previous year, while the net NPA ratio improved to 0.51 % from 0.99 %. The achievement is particularly noteworthy as it reflects the Banks sustained focus on recovery, early resolution of stress despite macroeconomic challenges.

Finance & Accounts

The Finance and Accounts function continued to play a central role in strengthening the Banks financial discipline, transparency, and regulatory compliance framework during the year. The Department remained focused on enhancing process efficiency, strengthening internal controls, and supporting strategic decisionmaking through reliable financial insights.

The Bank maintained robust financial reporting systems, ensuring timely and accurate preparation of financial statements in line with regulatory requirements. Continuous improvements were undertaken in financial disclosures and internal controls to enhance transparency and reliability, During the year, focused efforts were made to enhance automation in financial reporting processes, reduce manual interventions, and improve data integrity through system-driven controls,

In the area of profitability and balance sheet management, the function provided critical insights on yield optimization, cost of funds, and asset mix, Focus remained on improving key metrics such as Net Interest Margin, Return on Assets, and Return on Equity,

The Bank continues to follow a disciplined and compliant approach to taxation, ensuring timely adherence to applicable direct and indirect tax regulations, Proactive management of tax assessments and ongoing litigations remains a priority, along with prudent tax planning within the regulatory framework,

With regard to evolving regulatory requirements especially with respect to moving to Indian Accounting Standards framework; impact assessments, system enhancements, and parallel runs are being undertaken to ensure a seamless transition,

Treasury

Our treasury department efficiently manages our funding position and ensures compliance with regulatory reserve requirements, Bank invest in sovereign and corporate debt instruments, equities, commercial paper, mutual funds, and other money market instruments to manage short-term liquidity, Additionally, based on our Board approved treasury management policy, Bank adhere to intra-day, overnight, and monthly gap limits, and our exposures remain within these limits, We also engage in proprietary trading, liquidity management, and booking forex forward contracts for our customers,

The Banks gross Investment portfolio as on 31 March 2026 was Rs.4257,44 Crore consisting of Rs.4086,77 Crore SLR instruments and Rs.170,67 Crore non SLR instruments, In domestic treasury operation, the yield of investment portfolio was 6,75 %, During the year ended 31,03,2026, there was net depreciation of investment in SLR categories and net appreciation in Non SLR categories, Treasury booked a trading profit of Rs.11,03 Crore during the Financial Year vis-a-vis trading profit of Rs.13,19 Crore during the previous Financial Year, Decline in profit was primarily due to unprecedent macroeconomic factors which hit the market in a big way during Q4 of FY 2025-26 primary reasons of which are as stated below,

Global financial markets remained under sustained pressure due to escalating geopolitical tensions, in key energy-producing middle east regions, This led to a sharp increase in crude oil and energy prices, which in turn revived inflationary concerns across major economies due to supply chain disruptions,

Persistent inflationary pressures prompted major central banks, including the ECB and the Bank of England, to maintain a hawkish policy stance, with indications of higher interest rates for a prolonged period, The US Federal Reserve also indicated limited scope for near-term rate cuts, Consequently, global bond yields hardened across markets and risk appetite weakened, with a more pronounced impact on emerging economies,

In line with global trends, the Indian debt market also witnessed significant volatility, with government bond yields moving sharply higher, The 1 0-year benchmark yield hardened considerably during the period and touched high of 7,1436%, while the Indian Rupee depreciated to all time low of Rs.95,2300, adding further pressure on foreign investment flows and bond valuations, Consequently, mark-to-market losses have shot up across the government securities portfolio,

Aggregate profit of Treasury for the financial year was Rs.62,21 Crore vis-a vis Rs.49,65 Crore for the previous financial year,

Infrastructure Management

Infrastructure department takes care of Management of Premises, Fixed Assets, Security & communication equipment, etc,, and getting infrastructure related works done, Bank has adopted various measures to curtail rental and operational expenditure, Bank has undertaken shifting of branches to new premises as a part of rent reduction and renovation as part of facelift,

Major activities undertaken during the FY 2025-26 are as follows:

• 3 new branches opened during the FY 2025-26

• 7 branches have been successfully relocated to new premises bringing more facility and visibility to branches

• Entire branch refurbishment undertaken in 7 branches to have more convenience for employees and customers

• "Swachhata Drive 2025” undertaken during October to December 2025 towards cleanliness drive and upkeep of premises with active participation of all branches

• Centralized Monitoring project successfully implemented in 256 ATM locations,

Operations

Operations Department of the bank ensures smooth financial operations of the banks primary activity of opening accounts and releasing of loans, It works towards better efficiencies, controls, compliance and ensures KYC guidelines are adhere to, while keeping the customers accounts operational, The sub-functions of the operations department are as follows:

1. Cash Management and Currency Chests

Manages Cash holding at Branches and Currency Chests and ensure that it is kept at adequate and optimum levels, Cash transactions are maintained in line with the banks policies and stipulations of RBI,

2. Regional Processing Centers

Bank operates Regional Processing Centers at Thrissur and Chennai, which help the branches in account opening, processing of various customer request related to their accounts with the bank. RPC- Chennai in additions undertakes cheque clearing.

3. Central Processing Centre

Manages Electronic Payments & Settlements like RTGS, NEFT, NACH, DBT. The department facilitates timely opening of loan accounts. They also provide logistics for supply of cheque book, debit card etc.

4. Depository Participant Operations

Bank is a depository participant of National Securities Depository Limited since last two decades. Bank handles Depository participant activities in compliance with SEBI Regulations, NSDL Bye Laws and NSDL Compliance and Operations Manuals. Insta Demat Account opening, bidding of IPO and right issue for the customers through BSE & NSE portals and Sovereign Gold Bonds related operations are also undertaken.

5. Branch Banking Operations

To facilitate the smooth functioning of the branches, Circulars/ SOPs/Desk Cards / Learning series, etc are issued on need-to- need basis.

6. Offsite Surveillance

Bank implemented an Offsite Surveillance System to implement an internal control system centrally to monitor the financial transactions on daily basis to analyse the exceptions and deviations. The Offsite Surveillance System also monitors other alerts and exceptions, in order to prevent and detect any type of abnormal activity carried out.

7. Trade Finance Operations

Bank offers an array of Trade Finance products and services to exporters and importers through a well-equipped branch network that operates from 14 States and 2 Union Territories. The entire back-end trade finance operations are centralized. The objective is to ensure error free & TAT based processing of transactions.

8. Customer Care Division

Our Banks customer care centre functions, 24x7 with primary unit in Chennai and Business Continuity Management (BCM) unit in Thrissur. Customers can reach our customer care team for all their queries, requests and complaints related to our Banks products and services by calling 044-42413000 / 1800 425 1 747 or by mailing to customercare@dhanbank.co.in. For the immediate processing of any fraudulent transactions, customers can reach the team by mailing to support@ dhanbank.co.in. All the basic facilities like account balance inquiry, account statement, cheque book requests, etc., are provided through automated IVR services also.

Information Technology

During FY 2025-26, the Bank continued to strengthen its technology landscape with a strategic focus on digital transformation, robust IT governance and enhanced customer experience. Building on the progress of previous years, the Bank has undertaken key initiatives to modernize its systems, improve operational efficiency and deliver seamless digital services. The volume of digital transactions is now 90% of the total transactions.

A major milestone during the year was the successful implementation of the Loan Origination System (LOS). These systems have streamlined the end-to-end credit lifecycle, enabling faster processing, improved monitoring and better risk management.

The Bank has also significantly strengthened its IT Governance framework through enhanced policies, improved control mechanisms and closer alignment with regulatory and industry best practices. This has further reinforced the Banks commitment to secure, compliant and resilient technology operations.

In line with its customer-first approach, the Bank has undertaken substantial enhancements to its Internet Banking and Mobile Banking platforms. These improvements have focused on user experience, accessibility, performance optimization and advanced security features, resulting in increased customer engagement and adoption of digital channels.

The Bank continues to invest in digital initiatives, automation and paperless processes to improve efficiency across internal operations as well as customer-facing services. Further, the Bank undertakes regular resilience and recovery exercises on a halfyearly basis and periodically evaluates its technology infrastructure and cyber security posture to ensure business continuity and operational stability,

Awards & Recognitions:

• The Head - IT& Digital Banking has been recognized as one of the ET Edge BFSI Top 100 Tech Leaders 2026, highlighting significant contributions towards driving innovation, fostering growth and leveraging transformative technologies within the Bank.

List of major initiatives

1. Implemented TAB based application to facilitate Account Opening, Re-KYC and customer service requests.

2. Integrated UPI with the GSTN (PAYTAX) application to enhance customer convenience.

3. Automated PMJJBY and PMSBY renewals to ensure seamless policy continuity, enhance operational efficiency and improve customer experience

4. Migrated the public domain to dhan.bank.in in line with the regulatory requirement to adopt a secure and compliant .bank.in domain for enhanced trust, authentication, and protection against phishing and other cyber threats

5. Implemented Learning Management Application to enable digital training and enhance employee capabilities.

6. Enabled ECS-based collection of Recurring Deposits to ensure automated payments and improve customer convenience

7. Introduced SMS-based blocking of Retail Internet Banking and Mobile Banking services to enhance customer security and enable swift response to potential fraud

8. Upgraded all branches to B category in Core System to enable pan-branch forex transactions and enhance customer access to forex services

9. Real-time fraud monitoring of digital channels strengthened to enhance customer security.

10. Enabled end-to-end online Re-KYC through Retail Internet Banking to enhance customer convenience.

11. Enabled UPI onboarding and transactions for customers with international mobile numbers, enhancing global accessibility and digital payment adoption.

12. Enabled Digital KYC in DCAMS for differently abled persons promoting inclusive banking and enhancing customer onboarding experience

13. Digitized ATM withdrawal dispute handling via Mobile Banking, reducing manual intervention and enabling faster resolution and tracking

14. Enabled UPI services for Dhanam Genius and Dhanam Yuvak customers upon attaining 18 years, ensuring seamless transition to full digital banking capabilities

15. Launched ASHRAYA application to streamline and digitize death claim settlement processes.

1 6. Enabled online modification of communication address via RIB and MB, empowering customers with secure and convenient self-service option.

17. Digitized the credit card closure process in RIB & MB, minimizing manual intervention and improving turnaround time.

18. Enabled delegated payment functionality (UPI Circle) in UPI

19. Strengthened the UPI ecosystem by introducing exclusive UPI IDs with the @validdlb handle for SEBI-registered intermediaries to collect funds from the investors through UPI

20. Enabled net banking registration using credit card details- simplifying the onboarding process and improving customer convenience

21. Strengthened dispute handling of digital transactions through UDIR in Retail Internet Banking and Mobile Banking, minimizing manual intervention and enhancing resolution efficiency,

Alternate Channels

The Alternate Channels Department is responsible for the deployment, maintenance, and support of Automated Teller Machines (ATMs) and Cash Recycling Machines (CRMs). As on March 31, 2026, the Bank has deployed 285 ATMs/CRMs across the country. During the branch relocation exercise, six existing ATMs were shifted to the new premises of the respective branches. Additionally, three new onsite ATM locations were commissioned. This relocation ensured that customers continued to have uninterrupted access to cash withdrawal facilities at the most convenient locations aligned with branch operations. Additionally, five offsite ATMs were strategically closed and moved to onsite locations within branch premises. This decision was aimed at significantly reducing recurring rental, maintenance, and security costs associated with operating ATMs at external sites, while improving operational control. To further improve cost efficiency the Cash Replenishment & Administration (CRA) handling of 3 ATMs was transferred to their respective branches. This decentralization allows branches to directly oversee ATM cash management, resulting in faster response times for replenishment and issue resolution, as well as reduced reliance on centralized vendor services.

As part of infrastructure upgradation,

• the Bank onboarded three ATM vendors viz. OKI, Diebold, and Hitachi for deployment of diverse ATM models at branches. Further, all VSAT connectivity was migrated to 5G network through M/s Hughes Communications.

• Onboarded M/s Hitachi for ATM loading activities, which help us the offsite ATM loading activity, And Onboarded M/s Diebold for the ATM management services and SLM activities.

• Migration to the revamped debit card management system- Crotex.

• Implemented the PIN Encryption facility from “Variant” to "Key Block” for RuPay NFS network which will enhance the integrity and security of transactions on the RuPay and NFS network.

• Implemented Online Dispute Resolution process for both issuing and acquiring ATM transactions for handling and resolving customer complaints online in a better way.

• Implemented NPCI program to implement EMV 3DS standard which is named as NPCI Secure Nxt, which provides a strong security layer for user authentication and complies with EMV and regulators regulations

• Implementation of Visa Clearing Exchange (VCX) which Visas next-generation clearing and settlement interface designed to replace the existing Edit Package 4.0 application. VCX enables secure, efficient, and standardized exchange of clearing data between Visa Net and endpoint processors.

In line with our focus on digital payments, 1590 new Sound Box devices were installed at merchant outlets. These devices provide instant audio confirmation of successful transactions, boosting merchant confidence and reducing payment disputes. Alongside this, 486 new Point-of-Sale (POS) machines were deployed, expanding our merchant acquiring network and promoting cashless transactions. Introduced new PoS terminal models E600 and E700 for Temple Solution through the service provider Pinelabs. Reduced existing rentals and MDR commercials of one of our PoS service providers M/s. Skilworth Technologies (BijliPay) through several negotiations and introduced 2 new terminal models, all in one PoS and QR sound box.

Integrated Payment Gateway for BVVS Kudumba Mitram Benevolent Society, Gurukulam School, Amrita School of Medicine and Amrita Vidyalayam Durgapur.

The reconciliation process for all major digital banking channels, including UPI, IMPS, DCRS, and IBOPS, was successfully managed during the review period. This involved ensuring complete accuracy, settlement, and verification of high-volume transactions across platforms. Around 22,000 Crore number of transactions were reconciled, reflecting the robustness of our systems, the efficiency of our operations team, and our commitment to maintaining seamless and error-free digital payment services for customers.

Credit Cards

To elevate customer convenience and enrich the overall banking experience, during the current fiscal, Bank unveiled 2 new credit card variants, i.e., Dhan Vriddhi (RuPay Platinum) and Dhan Samriddhi (RuPay Select), complementing the existing Dhan Namaste (VISA Platinum). Crafted to deliver seamless financial flexibility, these RuPay variants further enable credit card usage on UPI enhancing everyday digital payments. With curated benefits such as cashback on routine spends, airport lounge access, reward points, EMI options, and secure transactions, these cards empower customers with a refined and rewarding spending experience

Information Security

In line with the Reserve Bank of India (RBI) Cyber Security Framework, the bank has implemented key security policies, including the Cyber Security Policy, Information Security Policy, Digital Payment Security Policy, Business Continuity Policy, IT Outsourcing Policy, and Cyber Crisis Management Plan. These policies are reviewed annually to ensure ongoing compliance with regulatory requirements.

Furthermore, we continue to enhance our cybersecurity resilience through regular participation in cybersecurity drills aimed at refining our incident response mechanisms. These drills are essential for testing the effectiveness of our preparedness and ensuring that our response to cyber incidents remains timely and efficient. Bank also have 24/7 SOC operations.

Certifications and Standards

Our commitment to maintaining the highest standards of information security is reflected in our achievement of ISO/IEC 27001:2022 Certification for Information Security Management Systems (ISMS) as of April 2025. This certification underscores our alignment with global cybersecurity standards and reinforces our commitment to maintaining robust security measures. Additionally, the bank has been certified with PCI DSS (Payment Card Industry Data Security Standard), ensuring the protection of sensitive cardholder data, including credit and debit card numbers, expiration dates, and security codes. This certification provides assurance to our stakeholders regarding the security of their financial information.

Internal Audit

While the business continues to grow with the advent of emerging technology, evolving business models, dynamic regulatory environment, cyber security, data privacy and the changing needs of the customers, it is critical that a strong control framework is maintained across all functions of the Bank. Internal Audit function of the Bank plays a critical role in ensuring a strong control framework and provides vital assurance to Board and supervisors as to the quality of banks internal control mechanism. Internal Audit also ensures prompt reporting of Internal control deficiencies and effectiveness of risk management functions.

The Reserve Bank of India has brought about continuous changes in the Internal Audit framework so as to align it with international practices and to build robust controls to enhance governance, regulation and supervision. Bank has meticulously implemented the directives of the regulator. Internal audit function of the Bank has sufficient authority, stature, independence, thereby enabling internal auditors to carry out their assignments with objectivity, Adequate training has been provided to all internal auditors and audit staff at premium training institute such as NIBM, IIBF etc.

During FY 2025-26, 176 Branches and 5 Business Units of the Bank were covered under Risk Based Internal Audit (RBIA). 61 Branches and 1 7 Business units were brought under concurrent audit coverage. Management audit of 21 departments and 8 Regional Offices, credit audits of eligible accounts and Sustenance audit of randomly selected branches were also conducted during the year. Surprise inspections were conducted in all the Branches with a frequency of once in a quarter. Currency chest inspections were conducted on a bi-monthly basis.

The Information System Audit wing of the Bank plays a major role in assessing/ensuring alignment of Banks Digital ecosystem with regulatory norms and Banks Information Security objectives and Information Technology Objectives. During the FY 2025-26, IS Audit was conducted for Data Centre, DR Site, Digital delivery channels, CBS and various critical IT applications. The SAR audit on Data localisation and various audits stipulated by Regulatory Authorities were conducted during the year. The officials of IS Audit wings were undergone periodic trainings to acquaint with the rapid changes in the technology , cyber security and regulatory environment.

Irregularities observed in the various audits are first reviewed by the Audit Committee of Executives (ACE). Significant audit findings are reviewed by the Audit Committee of Board (ACB). The Audit Committee of the Board provides directions and advises the audit team on corrective actions. ACB also reviews the adequacy of the internal audit function, including the reports and frequency of audits.

Vigilance Department

The Vigilance function of the Bank aims to achieve a high level of integrity in systems and procedures by creating awareness and fostering commitment and probity at all levels, thereby contributing to high standards of efficiency and professionalism. The Vigilance function is responsible for ensuring that public money is not misused by delinquent elements exploiting loopholes in systems and procedures.

The Bank has a well-defined and comprehensive Board-approved Vigilance Policy, which is reviewed annually by the Board. The Bank also has a Whistle Blower Policy aimed at conducting its affairs in a fair and transparent manner by adopting the highest standards of professionalism, honesty, integrity, and ethical behaviour. The Whistle Blower Policy provides a mechanism for employees and stakeholders to report instances of corruption, misuse of office, unethical behaviour, actual or suspected fraud, or violations of the Banks Code of Conduct, including non-compliance with rules and regulations that may result in financial loss, operational risk, or reputational damage, thereby affecting depositors and public interest.

The Department is responsible for conducting investigations, wherever necessary, based on complaints or inputs received from whistleblowers. This is in addition to the Protected Disclosure Scheme framed in line with RBI directions. The Bank sensitizes its officials on the need for robust appraisal and effective credit monitoring mechanisms throughout the lifecycle of loan accounts, along with necessary precautions in day-to-day operations to mitigate fraud risk. Root Cause Analysis of reported frauds is conducted, and wherever system flaws or control weaknesses are identified, appropriate corrective measures are recommended.

Observance of Vigilance Awareness Week 2025

In connection with Vigilance Awareness Week 2025, the Bank initiated various activities to create awareness among staff members as well as the general public. The Bank observed the week by administering the Integrity Pledge to all staff members at the Head Office, Regional Offices, and branches. A handbook on preventive vigilance titled “VIGIL-2025” was also released and circulated among branches and controlling offices to guide staff and reinforce the importance of vigilance practices. A survey on preventive vigilance was also conducted, which was participated by most of the staff members.

A quiz competition on Knowledge Series and Fraud Prevention Mechanisms was organized on October 30, 2025, with enthusiastic staff participation. The valedictory function on the theme

“Vigilance: Our Shared Responsibility” was held at the Banks Corporate Office , Thrissur on November 1, 2025. Shri V, Devaraj, Additional Superintendent of Police, CBI-ACB, Kochi, attended as Chief Guest. The quiz winners were felicitated during the event.

On the final day of Vigilance Awareness Week, a walkathon was successfully conducted on 02.11.2025 at Thrissur Swaraj Round. The event witnessed overwhelming participation from member banks, with more than 100 employees taking part. The walkathon focused on creating awareness about cyber frauds among the general public, with staff members carrying placards displaying various cyber fraud alerts.

LEGAL

Legal Department of the Bank inter-alia takes care of the following:

¦ ensure proper due diligence in documentation to augment the business of the Bank

¦ devise the ways and means to implement preventive legal measures in tune with the statutory provisions, regulatory prescriptions and judicial expositions

¦ minimize the legal risks in the decision-making process of the Bank and thus mitigating the legal and operational risks in a time bound manner.

¦ follow up all litigations filed by and against the Bank through appropriate steps and continuous monitoring till its logical conclusion

The Bank has its credit a well-defined Legal Policy, which defines and support the functions of the Legal Department of the Bank.

The Bank is having a well-structured and defined Manual on Documentation to suit the loan products, updated from time to time, in tune with the statutory and regulatory changes.

Legal Dept is capable of supporting the Bank to understand the legislative changes that may affect the operations and business.

KYC - “Know Your Customer” and AML - “Anti Money Laundering”

The Banks Know Your Customer (KYC) and Anti-Money Laundering (AML) framework is aligned with the RBI Master Direction on KYC, the Prevention of Money Laundering Act (PMLA), 2002, and the PMLA Rules, as applicable. The framework is also guided by regulatory expectations and international standards aimed at combating money laundering, terrorist financing and other financial crimes.

The AML function plays a vital role in protecting the Bank and the financial system from misuse by ensuring customer due diligence, risk-based monitoring, identification of unusual transaction patterns, and timely escalation of suspicious activities. The Bank adopts a risk-based approach by considering the customer profile, the nature of the business, transaction behaviour, volume and frequency, and other relevant risk indicators.

The Bank has implemented an automated AML monitoring solution to identify potentially suspicious transactions based on defined scenarios, thresholds, and behavioural patterns. Alerts generated through the system are reviewed by dedicated teams and escalated, wherever required, in accordance with internal policies and regulatory requirements. Periodic reviews, monitoring of high-risk accounts and reporting obligations are carried out to ensure continued compliance.

Through continuous strengthening of KYC and AML controls, transaction monitoring processes and regulatory reporting mechanisms, the Bank remains committed to preventing money laundering, terrorist financing and other financial crimes, while maintaining the integrity of the banking ecosystem.

Risk Management

Bank has adopted an integrated approach for the management of risk. The Banks risk management functions are overseen by the Board of Directors and the Risk Management Committee of the Board (RMCB) at the Board level. At the executive level, Bank has Asset Liability Management Committee (ALCO), Credit Risk Management Committee (CRMC), Operational Risk Management Committee (ORMC) and Market Risk Management Committee (MRMC) for Risk Management.

Bank has framed comprehensive risk management policies to manage various types of risks like ICAAP (Internal Capital Adequacy Assessment Process) Policy, Credit Risk Management (CRM) Policy, Asset Liability Management Policy, Operational Risk Management Policy, Market Risk Management Policy and Integrated Risk Management Policy, The Stress testing Policy of the Bank was formulated to define different stress scenarios according to the RBI guidelines. The Bank has also developed various other risk Policies such as Stressed Industry Risk Management Policy, Fund Transfer Pricing Policy, Key Risk Indicator framework, Credit Pricing Policy and Risk Appetite Framework, etc., for better management of various Risk functions.

Credit Risk: The credit risk management aims at ensuring sustained growth of healthy credit portfolio. Exposure caps in terms of individual, group, industry/ sector and segment level are defined to control portfolio concentrations and to ensure a fairly diversified spread of credit portfolio. Bank has developed comprehensive risk rating system that serves as a single point indicator of diverse risk factors of counterparty and for taking credit decisions in a consistent manner. The Bank assesses the credit risk at the portfolio level as well as at the exposure or counterparty level. It has a robust credit risk management framework comprising of the three distinct building blocks namely Policy & Strategy, Organizational structure and Operations/ Systems.

Bank has a Board approved CRM Policy which deals with the various measures of Credit risks, goals to be achieved, current practices and future strategies.

The Credit Risk Management Committee of the Bank deals with issues relating to Credit Risk, which includes implementation of Rating models, monitoring of prudential limits on credit exposure, credit portfolio analysis, rating migration study, etc.

Market and Liquidity Risk: Market Risk is defined as the possibility of loss to a bank caused by changes in the market variables. Liquidity risk is the risk to a banks earnings and capital arising from its inability to timely meet obligations when they come due without incurring unacceptable losses. The primary tool of monitoring liquidity is the mismatch/ gap analysis, which is monitored over successive time bands on a static basis. Moreover, the funds readily available as a back stop to meet contingency situations are measured and analyzed on a continuous basis.

Interest Rate Risk is another major risk involved in market risk. It is the risk of a bank which leads to financial loss due to adverse movement in interest rates. The immediate impact of changes in interest rates is on banks earnings due to change in Net Interest Income (NII) and long-term impact of changing interest rates is on banks market value of equity (MVE) or Networth as the economic value of banks assets, liabilities and off-balance sheet positions get affected due to variation in market interest rates. The Bank measures the impact on Economic Value of Equity (EVE) on a monthly basis using Duration Gap Analysis. Bank uses VaR limits in the trading portfolios to determine the potential loss on a 10 day holding period basis with a 99% confidence level.

ALCO plays an important role in deciding the business strategy of the Bank in line with the Banks budget, Corporate Goals and risk tolerance levels decided by the Board having regard to the Capital Adequacy and Regulatory prescriptions. Bank has also a Market Risk Management Committee which is responsible for ensuring /adhering to the market risk limits set by the Board and plays a major role in devising the market risk strategy of the Bank.

Operational Risk: Operational risk is the risk of loss resulting from inadequate or failed internal processes, people, systems or from external events. It is impacted by numerous factors such as internal business processes, regulatory landscape, business growth, customer preferences, and even factors external to the organization. It is highly dynamic in nature where new and emerging forces such as breakthrough technologies, data availability, new business models, interaction with third parties, etc., continuously create new demands on Operational Risk Management Framework. The Bank has a comprehensive policy on Operational Risk Management to ensure that all the operational risks within the Bank are identified, monitored and reported in a structured manner and delivery of critical functions is ensured in the event of any disruption by strengthening Operational Resilience .The Operational Risk Management Committee consisting of the Banks senior management including MD & CEO is responsible for the implementation of the Operational risk policy/strategy approved by the Board.

Bank had rolled out the Risk and Control Self-Assessment (RCSA) to pro-actively identify emerging risks at operational level for devising mitigants at source itself and has been carrying out RCSAs in branches and other business functions. Collation of Loss Events is also being continued as a measure to move towards

The Basel III (new) Standardized Approach for capital calculation, Bank has also established a Key Risk Indicator Framework across the Bank which assists in identification, assessment, monitoring and mitigation of operational risk, Apart from these, in view of the emerging risks related to business continuity, interaction with business third parties, changing business models etc,, Risk Assessments of various processes and products are carried out,

Fraud Risk Management (FRM):

I. Digital Payment Transactions Fraud Monitoring System

Bank has deployed Enterprise Fraud Risk Management (EFRM) Solution covering all the major Payment Channels, including ATM/ POS/ E-commerce (Debit Card & Credit Card), Internet Banking (RIB/ CIB), Mobile Banking, and UPI, The real-time monitoring mechanism, driven by predefined fraud detection and prevention scenarios, strengthens the security framework and enhances protection across the digital payment ecosystem, EFRM-generated alerts are verified with customers in real time to confirm the authenticity of transactions, If any transaction is found to be suspicious or fraudulent, necessary preventive actions, including blocking of the respective channel, are initiated immediately,

The Banks Enterprise Fraud Risk Management (EFRM) solution underwent a significant upgradation during the year to enhance security, operational efficiency, and alignment with evolving technological standards, This includes the implementation of inline monitoring mechanisms across all Digital Payment Channels, The Bank has also initiated the adoption of AI/ ML-based capabilities to strengthen fraud detection through advanced machine learning models,

The Bank has introduced e-KYC authentication request monitoring within the EFRM framework through system integration, in compliance with the GRCP (Governance Risk Compliance Professional) Audit observation to detect fraudulent activities arising from e-KYC authentication requests,

II. Cyber Fraud Reporting and Grievance Mechanism

FRM Cell also act upon the Cyber Fraud complaints reported by our customers at our Bank, through various touch points such as Customer Care, Branches, etc,, or through National Cyber Crime Reporting Portal (NCRP Portal by MHA), For such complaints reported through NCRP Portal, the money transfer details are immediately updated and escalated to the beneficiary Bank through the NCRP Portal, All the cyber complaints shall be analysed, after taking the detailed Root Cause Analysis (RCA), and escalating this to Reconciliation Team for the grievance redressal of the complaint,

III. Cyber Awareness Initiatives

The FRM Cell initiative titled “Cyber Watch,” aligned with the Cyber Jagarookta Diwas programme of the Ministry of Home Affairs, under which cyber awareness content is disseminated through a periodic publication circulated on a weekly basis among employees and customers to enhance awareness on mitigating Cyber-enabled financial frauds, The initiative also supported the Reserve Bank of Indias (RBI) mission “Har Payment Digital” by actively promoting key themes during the Digital Payments Awareness Week (DPAW) 2026, scheduled in March 2026, thereby reinforcing the Banks commitment to strengthening cyber hygiene and ensuring safe digital payment practices,

Compliance

The compliance function is the guardian of the banks rulebooks and the regulator, It protects the Bank from risks by ensuring the business remains within regulatory parameters,

The Banks Compliance Policy strengthens the compliance function, enabling it to be adequately enabled, strengthened, and independent, The Policy reflects the Banks commitment to maintaining high regulatory compliance standards, It is reviewed periodically to ensure continued relevance and effectiveness, We kept our policy updates in line with the regulators guidelines as they are issued,

The Compliance Manual, which outlines the compliance functions of each unit in the Bank, serves as guidance for business units/offices, It is comprehensively updated to stay contemporary, The Bank has well-laid-out procedures and an online mechanism to monitor compliance, We have a compliance team available to oversee compliance functions at various levels, Compliance Officers have been nominated across all units to monitor compliance and develop a robust compliance culture in the Bank,

The Bank is educating employees through circulars, frequent contact sessions, e-learning, and online tests to build a strong/ dynamic compliance culture across the Bank, The Department serves as the focal point for regulators such as the RBI, SEBI, and IRDAI on compliance matters, The Compliance function has conducted training and workshops to build a compliance culture among employees working at all levels of business units and branches, The bank has automated regulatory compliance to track implementation across the Bank, proactively detect lapses, and quickly remediate them, To ensure we meet all regulatory requirements and maintain strong controls, the Department has strengthened monitoring and conducted compliance testing, In addition, thematic reviews and internal assessments have been conducted to further strengthen internal controls, The bank is automating regulatory reporting in phases, thereby avoiding manual submissions and improving data quality, The Bank has taken corrective steps regarding the monetary penalties imposed by the Reserve Bank of India during the financial year,

Human Resources

Human Capital Enhancement

During the reporting period, the Bank successfully onboarded resources, demonstrating our continued investment in talent acquisition and organizational capacity building. This recruitment drive aligns with our strategic objectives of enhancing service delivery capabilities and supporting business expansion across all operational verticals.

Training and Professional Development

Banks commitment to continuous learning and professional excellence remained firm throughout FY 2025-26. Bank implemented a comprehensive training agenda that covered 168 specialized programs and successfully trained employees across various competency areas. Bank also has introduced Online Learning Platform (Learning Management System - LMS) and hosted various training modules to its employees.

Key Training Focus Areas

The Banks training initiatives were strategically designed to address critical operational requirements and regulatory compliance standards. Our specialized training programs emphasized the following priority areas:

• Credit Management and Risk Assessment: Enhancing lending practices and credit evaluation capabilities

• Information Security and Cyber Security: Strengthening digital security protocols and threat mitigation strategies

• Regulatory Compliance: Ensuring adherence to evolving banking regulations and industry standards

• Preventive Vigilance: Building proactive risk management and fraud prevention capabilities

• Know Your Customer (KYC) and Anti-Money Laundering: Reinforcing customer due diligence and compliance frameworks to adhere the regulatory guidelines

• Trade Finance Operations: Developing expertise in international banking and trade facilitation

• Sales and Customer Relationship Management: Enhancing business development and customer service skills

• Regulatory Guidelines Implementation: Ensuring seamless adoption of new regulatory mandates and best practices.

Strategic Direction:

These initiatives speak to something deeper than training — they reflect the Banks belief that excellence is cultivated, not assumed. A workforce that is empowered, well-prepared, and growth-oriented is our strongest asset in an ever-evolving banking landscape. Through sustained investment in our people, we deliver not just compliance and competence, but the kind of inspired service that earns lasting trust from every stakeholder we serve.

Corporate Social Responsibility

The Bank is grateful to the society for the support and encouragement in the Banks growth and development. The Bank believes that no organization can make sustainable development without the patronage from the society. The Bank is committed in the integration of social and environmental concerns in its business operations and also in the interactions with its stakeholders. The Bank shall continue to have among its objectives, the promotion and growth of the national economy and shall continue to be mindful of its social and moral responsibilities to customers, shareholders, employees and society. The Banks CSR mission is to contribute to the social and economic development of the community.