Satin Creditcare Network Ltd Management Discussions

ECONOMIC OVERVIEW Global Economic Overview

The global economy has showcased exceptional resilience and adaptability, maintaining a steady growth trajectory, while registering a swift deceleration in inflation rates - reminiscent of its previous rapid escalation. This buoyancy signifies the collective strength of the world, having navigated the initial post-pandemic supply chain disruptions, the consequential energy and food crises stemming from the geopolitical tensions, and the vigorous inflationary pressures that followed.

In 2023, the global economy grew at 3.2% as a testament to the underlying stability and potential for future prosperity. Although slightly below the long-term average, it reflects a prudent approach to monetary policy, a strategic reduction in fiscal stimulus, and a focus on sustainable productivity advancements. Further highlighting the inherent strength of the global economy, headline inflation is anticipated to fall from 6.8% in 2023 to 5.9% in 2024, and further down to 4.5% in 2025; thereby indicating a return to more stable economic conditions as inflationary pressures ease. The advanced economies, particularly the Euro Area, are poised for a resurgence, contributing to the global upturn, while emerging markets continue to display robust growth dynamics, despite regional disparities.

In the context of a gradual yet steady recovery, the global economy continues to chart its path forward with confidence and flexibility. Through vigilant and proactive policy interventions, there exists a robust framework to sustain this favorable momentum and foster inclusive growth across all regions. The future holds promise, and with continued collaboration and innovation, the global economy is well- positioned to thrive.

Growth of the Global Economy (in %)

	Year-on-Year
	Estimate	Projections
	2025	2023 2024
World	3.2%	3.2%	3.2%
Advanced Economies	1.6%	1.7%	1.8%
Emerging Markets and Developing Economies	4.3%	4.2%	4.2%

(Source: International Monetary Funds World Economic Outlook - April 2024)

Outlook

Looking forward, the prospect of global economic growth remains on a steady trajectory, dotted with the diminishing influence of favorable factors and the emergence of tighter credit conditions. While there are expectations for a

moderation in inflation, persistent supply chain disruptions and shifting inflation sentiment may hinder this trend. Moreover, pressure is likely to intensify within the business sector, potentially impacting profit margins, which in turn, has the potential to slowdown hiring and expenditure.

Going forward, the global growth outlook offers a promising yet diverse panorama. Advanced economies are anticipated to experience moderate growth, primarily driven by a rebound in the Euro Area following a subdued performance in 2023. Conversely, the emerging markets and developing economies are forecasted to sustain stable growth throughout 2024 and 2025, albeit with regional variations. Indian Economic Overview

The Indian economy continues to shine as a torch bearer of consistent growth within the global economic landscape, delivering one stellar performance after another. Sustaining its upward trajectory, the Indian economy recorded a GDP growth of 8.2% in 2023-24, surpassing the 7.0% growth in the preceding fiscal. Improved performances in sectors such as mining and quarrying, manufacturing, and specific segments of the services sector are driving this growth spurt. The resilience of the Indian economy shines through, supported by a host of factors, including increased public sector investment, a robust financial sector, and notable growth in non-food credit.

The focal point of the Governments economic agenda is the strengthening of Indias growth trajectory. This entails revitalizing the financial sector, streamlining business regulations to stimulate economic activity, and substantially improving both physical and digital infrastructure to enhance connectivity and elevate the competitiveness of the manufacturing sector. Aligned with this vision, the Government has introduced a range of economic reforms to cultivate a conducive environment for businesses, improve quality of life, and bolster governance structures and procedures.

Fueled by adept Government intervention and robust fundamentals, India continued its streak as the worlds fastest-growing economy in 2023-24, witnessing notable advancements that have boosted foreign investors confidence. India now transitions to a pivotal phase of the S-curve, characterized by accelerated urbanization, industrialization, rising household incomes and increased energy consumption.

The construction and manufacturing sector remained the driving force behind Indias economic growth. The construction sector recorded strong growth, with gross value added at basic prices reaching 9.9% in 2023-24, compared to 9.4% in 2022-23. The manufacturing sector also witnessed a remarkable surge in gross value added, reaching 9.9% in 2023-24, compared to a decline of 2.2% in the previous fiscal year. However, the services sector witnessed a slight moderation in growth to 7.8% in 202324, down from 8.9% in 2022-23. Within the services sector, the largest component, which comprises trade, hotels, transport, and communication, expanded by 6.4% due to a higher base. Conversely, the agriculture sector grew by 1.4% in 2023-24, marking a seven-year low attributed to poor Kharif harvest and weak initial sowing of Rabi crops. In recent years, India has made significant strides in terms of infrastructure development. The Governments dedication to this sector is evidenced by its expenditure of INR 23 Lakh Crores over the three-year period spanning from 2021-22 to 2023-24. This emphasis on infrastructure is highlighted by the nearly doubled capital spending to GDP ratio, which escalated from 1.6% in 2018-19 to 3.2% in 2023-24. Parallel to these advancements, the Indian banking and finance sector is experiencing a period of significant transformation and growth. This year has seen remarkable milestones, policy reforms, and technological advancements that have paved the way for a more inclusive, efficient, and resilient financial ecosystem. As the sector continues to adapt, innovate, and thrive in an increasingly digital world, its role in shaping Indias economic future looks more promising than ever. (Source: Press Information Bureau, Ministry of Statistics and Programme Implementation, Government of India) Outlook

India demonstrated astounding resilience and progress in the face of global economic uncertainties, guided by adept and timely policy interventions aimed at ensuring macroeconomic stability and revitalizing both financial and nonfinancial sectors. The country is expected to record a strong economic growth, registering 6.8% in 2024-25 and 6.5% in 2025-26, driven by sustained growth in domestic demand and a rising working-age population. As a sign of inherently strong fundamentals, Indias consumer price inflation is

anticipated to cool off from an average of 5.4% in 2023-24, to 4.6% in 2024-25, before further declining to 4.2% in 202526. Moreover, substantial investments in robust physical and digital public infrastructure have allowed the country to navigate challenges, both domestic and international, ensuring sustained economic progress. With existing and forthcoming Government policy reforms, optimism and confidence in Indias economic trajectory remain significantly high. Embracing its Amrit Kaal with assurance, the nation perceives growth challenges as opportunities for inclusive development rather than tagging them as hindrances. (Source: Business Standard)

INDUSTRY OVERVIEW Indian BFSI Sector Review

In India, the Banking, Financial Services, and Insurance (BFSI) sector stands as a pivotal pillar of economic stability and growth, encapsulating a range of financial services, including banking, insurance, and other financial entities. Non-Banking Financial Companies (NBFCs) and Microfinance Institutions (MFIs) occupy a critical niche within this framework. With their unique ability to unlock economic potential within rural and underserved regions, these institutions play a crucial role within this ecosystem, facilitating capital formation and spurring economic activities in Indias hinterlands, thereby stimulating inclusive growth and development.

The impact of the BFSI sector is etched beyond mere business transactions, delving into societal upliftment by promoting financial inclusion through digital banking and microfinance initiatives, reaching underserved and rural populations. Additionally, the sector supports economic growth by providing accessible credit to small and medium enterprises, fostering entrepreneurship and job creation. Moreover, the sector is driving innovation in financial literacy programs, ensuring more individuals can make informed financial decisions. Moreover, BFSI companies are increasingly involved in corporate social responsibility activities, investing in community development, education and healthcare projects.

Notably, Microfinance Institutions in India have undergone a significant transformation, emerging as key contributors to Indias inclusive growth narrative. As of March 31,2024, NBFC-MFIs are the largest providers of micro-credit with a loan amount outstanding of INR 1,70,903 Crores accounting for 39.4% to total industry portfolio. With a strong emphasis on fostering womens economic empowerment, the sector is instrumental in promoting capital formation, particularly through affinity-based lending in rural areas. Globally, India stands as one of the most advanced microfinance markets, buoyed by a multitude of factors. These include

robust regulations from the Reserve Bank of India (RBI), extensive digital infrastructure, comprehensive credit bureau information, priority sector lending recognition, and the presence of self-regulatory organizations within the industry. These enablers drive forward the agenda of financial inclusion in India. Moreover, this robust framework has attracted global Development Financial Institutions (DFIs) to invest capital, recognizing the sectors alignment with United Nations Sustainable Development Goals (UN SDGs) and its adherence to strong Environmental, Social, and Governance (ESG) standards.

(Source: Micrometer, Invest India, Great Place to Work, Airtel)

INDIAN MICROFINANCE SECTOR REVIEW

The evolution of microfinance in India is particularly striking, notably gaining momentum following the economic liberalization in 1991. Microfinance Institutions (MFIs), Self-Help Groups (SHGs), and even commercial banks have played pivotal roles in this transformative journey. The RBI has been instrumental in shaping regulatory frameworks for MFIs, ensuring their alignment with national economic objectives. Self-regulatory organizations (SROs) like Sa-Dhan and Mfin have also played crucial role in Indias microfinance sector by monitoring member institutions for compliance, policy advocacy, developing industry standards, and providing capacity-building and grievance redressal mechanisms. SROs complement RBIs regulatory efforts by offering industry insights and ensuring customer protection. Furthermore, the microfinance sector in India extends credit and financial services to marginalized communities, serving as catalysts for financial inclusion and grassroot development. This concerted effort continues to yield significant dividends in poverty alleviation, womens empowerment, and the advancement of rural economies.

In the context of the microfinance industrys performance up to March 31, 2024, an analysis reveals a significant

transformation characterized by robust loan portfolios and diversified credit provision across various financial entities. The industry boasts a total loan portfolio of INR 4,33,697 Crores in 2023-24. The sector comprises 14.9 Crores active loan accounts, serving 7.8 Crores unique borrowers, demonstrating an aggregate growth in gross loan portfolio of 24.5%. As of March 31, 2024, NBFC- MFIs stand as the primary drivers of micro-credit, holding a significant outstanding loan amount of INR 1,70,903 Crores, commanding a significant 39.4% share of the overall NBFC industrys portfolio. Following closely, the traditional banking institutions hold the second largest share, with a total outstanding loan portfolio of INR 1,44,022 Crores, constituting 33.2% of the overall micro-credit spectrum. Small Finance Banks (SFBs) hold a substantial share as well, with an outstanding loan aggregate of INR 74,728 Crores, accounting for 17.1% of the total micro-credit domain. Moreover, NBFCs contribute a further 9.3%, while other MFIs constitute 0.9% of the micro-credit landscape.

Additionally, in a move to enhance credit accessibility, the Government had introduced a revamped Credit Guarantee Scheme for small businesses, with an allocation of INR 9,000 Crores in the Union Budget of 2023-24. The announced infusion was targeted towards enablement of additional collateral-free guaranteed credit of INR 2 Lakh Crores to banks and other lending institutions, reducing cost of credit by 1%. Moreover, this initiative is expected to mitigate risk for lending institutions and encourage them to provide more loans to micro and small enterprises. This enhanced financial support, in turn, will help small businesses grow and create more job opportunities. (Source: Micrometer and Press Information Bureau)

Portfolio Outstanding of the Microfinance Industry The microfinance industry has shown robust growth, with the total portfolio outstanding reaching new heights. This expansion reflects the increasing demand

for micro-credit services and the sectors critical role in promoting financial inclusion and economic development. The portfolio outstanding in the NBFC-MFIs segment grew by 23.6% from INR 1,38,310 Crores as of March 31,2023 to INR 1,70,903 Crores as of March 31,2024.

(Source: Issue 48 Micrometer Q4 FY 2023-24)

INDIAN NON-BANKING FINANCIAL INSTITUTION- MICROFINANCE INDUSTRY (NBFC-MFIs) REVIEW

The microfinance sector in India has emerged as a crucial instrument for financial inclusion, empowering marginalized segments of society. Microfinance Institutions (MFIs), particularly Non-Banking Financial Companies specializing in Microfinance (NBFC-MFIs), continue to play a significant role in this regard, capturing a notable portfolio share of 40%. Banks and Small Finance Banks hold a portfolio share of 33% and 17%, respectively.

These institutions have made remarkable strides, disbursing a substantial number of loans, totaling 223 Lakhs, representing substantial credit demand in rural areas. This emphasizes the pivotal role of the sector in addressing the credit needs of economically marginalized individuals, thereby promoting inclusive growth. Nevertheless, the sector is undergoing a significant transition towards offering larger loan amounts, seen as essential in response to rising inflation and the increased costs of running small businesses. This approach is considered more viable and profitable from an operational standpoint.

However, the Government has introduced various policies to support Microfinance Institutions (MFIs) and small businesses, aiming to sustain the sectors growth trajectory

and its contribution to inclusive economic development. (Source: Micrometer Report)

Numbers that Define the Sector

(as of March 31, 2024)

INR 1,70,903	39.4%	720 Districts
Crores	Share of Total	Portfolio Spread
Total Loan	Loan Portfolio
Amount
Outstanding

The Operational Model of the Indian Microfinance Industry

The microfinance industry predominantly operates on the Joint Liability Group (JLG) model, where individuals form

groups to access loans from banks or financial institutions. These groups consist of members engaged in similar economic activities, offering reciprocal assistance in loan repayment, thus mitigating risk for lenders. The procedural

sequence entails group formation, documentation, and training, culminating in loan disbursements. Regular meetings are held to monitor progress, and loans are tracked closely. JLGs enable small-scale farmers and entrepreneurs to access financial aid without requiring traditional collateral, thereby cultivating economic inclusivity and enhancing livelihoods in rural and semiurban areas.

SECTORAL CHALLENGES

Lack of Financial Services Awareness

Despite numerous Government initiatives, Indias literacy rate continues to remain low, especially in rural areas. A significant portion of rural residents face a dearth of fundamental understanding regarding financial products and services. This lack of awareness presents obstacles for both clients and Microfinance Institutions operating in India.

Low Financial Literacy

Inadequate understanding of loan terms and conditions among borrowers poses significant risks for Microfinance Institutions. These risks encompass heightened credit risk stemming from potential over-borrowing and increased defaults, augmented operational expenses for debt recovery, and impediments to achieving financial inclusion objectives. Therefore, it is imperative for MFIs to prioritize the enhancement of financial literacy among borrowers to effectively mitigate these risks.

Technological Adoption

Despite the significant potential of technology to improve accessibility and reduce costs, many Microfinance Institutions face challenges in adopting technological solutions. These obstacles, stemming from factors such as limited resources, inadequate infrastructure, and a lack of technical expertise, are needed to be tackled to brighten the prospect of such MFIs.

Regulatory Compliance

Adopting regulatory compliance poses several challenges for Microfinance Institutions, primarily due to their unique operational characteristics and the diverse regulatory landscape they operate in. Addressing these challenges requires a proactive approach, strategic planning, and investment in resources and infrastructure.

High Operational Costs

Microfinance institutions encounter substantial operational costs that present hurdles to their sustainability. Tackling these challenges demands strategic planning, efficient resource allocation, and a commitment to innovation and technological advancement. By addressing operational inefficiencies and leveraging economies of scale, MFIs can

improve their financial viability and better serve their target populations.

Geographical Risk

Microfinance institutions often operate within specific geographic clusters or communities. However, this localized focus exposes them to risks associated with regional, political, social, or environmental instability. These volatilities have the potential to severely disrupt their operations, hampering their ability to serve customers and meet obligations. To counteract these risks and fortify their growth and effectiveness, MFIs strategically pursue a wider geographical dispersal of their operations.

Interest Risk

Interest rate fluctuation is a significant concern for Microfinance Institutions, given their reliance on borrowed funds to finance their lending operations, particularly to low-income clients in countries like India. Therefore, effective management of interest rate risk assumes critical importance for ensuring the financial stability and sustainability of MFIs. This enables them to continue to provide essential financial services to underserved communities, while maintaining their own viability.

Liquidity Risk

Liquidity issues have the potential to pose significant challenges for Microfinance Institutions, affecting their ability to sustain lending activities, serve clients effectively, manage risks and maintain financial stability. Proactive liquidity management, diversified funding sources, prudent risk assessment, and effective regulatory compliance are essential for MFIs to navigate these challenges and safeguard their long-term viability.

Outreach Expenses

Microfinance institutions predominantly serve rural and semi-urban poor and underbanked populations in remote regions, necessitating significant logistical and field workforce investments to facilitate their outreach efforts. Therefore, there is a growing need to prioritize digitalization and process automation to enhance operational efficiency and optimize resource utilization.

OPPORTUNITIES: GROWTH DRIVERS Financial Inclusion: The annual financial inclusion index of India stood at 60.1 according to the Reserve Bank of India, representing the large growth headroom of the microfinance sector. This highlights the potential for further expansion in the microfinance sector. The continued growth of digital financial services and government initiatives are expected to enhance financial access. Strengthening financial literacy and support for small enterprises will be crucial in driving this sectors future growth.

Portfolio Diversification: Microfinance institutions (MFIs) with their strong presence in rural areas, often serve as the only channels for customers to access affordable finance for various needs, including education, healthcare, infrastructure, and insurance, among others. This situation presents MFIs with opportunities to diversify their products and services while catering to a large customer base.

Technological Upgradation: Technology is crucial in making information, education, and governance, among others, accessible and affordable, even in remote areas. This technological revolution has particularly transformed the financial sector, promising long-term changes in product development and service delivery. For microfinance companies, technology automates routine tasks, making operations more convenient, faster, and secure.

Untapped MSME Sector: The Micro, Small, and Medium Enterprises (MSME) sector in India presents a significant untapped opportunity for growth and development. Despite being a key driving force in Indias economic growth, many MSMEs face challenges in accessing adequate financing, with only 16% having access to formal sources of finance. This financing gap highlights the immense potential willing to cater to the financial needs of these enterprises. By providing tailored financial solutions, financial institutions positioned themselves as catalysts for the growth and stability of MSMEs.

Affordable Housing Demand: The demand for affordable housing in India is projected to reach 7.4 Million units by 2024. This surge is fueled by the expanding middle class and government initiatives such as the Pradhan Mantri Awas Yojana (PMAY). As the demand for affordable housing continues to rise, the role of Microfinance Institutions (MFIs) and Non-Banking Financial Companies (NBFCs) will expand, helping customers who face challenges with valid documentation and access to formal financing options.

TECHNOLOGY TRENDS FOR THE MICROFINANCE INDUSTRY

Digital-First for Financial Inclusion: In 2024, Indian MFIs find it imperative to embrace a digital-first approach to effectively serve a diverse and geographically dispersed customer base. With the number of cellular mobile connections in India reaching 1.40 Billion in 2024, compared to 1.12 Billion in 2020, equivalent to 78% of the total population; this widespread adoption of mobile phones presents a unique opportunity. By harnessing digital technologies, MFIs can provide convenient and efficient banking services to underserved communities. Mobile and online platforms play crucial roles in reaching remote areas, enabling seamless access to financial services and ensuring that even the most isolated customers are included in the financial ecosystem.

This shift towards digitalization is driven by the need to meet the growing demands of a tech-savvy population and to enhance operational efficiency and customer satisfaction.

AI-Driven Data Analysis and Personalization: MFIs are witnessing a revolution in their operations as AI and data analysis take center stage. These technologies enhance customer experiences, streamline internal processes, and provide valuable insights through AI-driven algorithms. Personalized banking experiences tailored to individual needs are becoming standard practice, bolstering customer satisfaction and loyalty. Additionally, AI assists MFIs in risk assessment and ensures responsible lending practices.

UPI and Digital Payment Integration: MFIs are seamlessly integrating with the Unified Payments Interface (UPI) to expedite secure transactions, in tandem with the surge in digital payments in India. This integration echoes the Governments push towards a cashless economy and caters to the preferences of a tech-savvy population. By incorporating UPI into their systems, MFIs enhance financial accessibility, empowering clients to effortlessly execute payments, transfers, and repayments using the widely adopted digital payment infrastructure Nearly 100% of microfinance loans are being disbursed digitally directly to the borrowers bank account. At the same time, concerted efforts to make the borrowers comfortable with digital repayments have shown very good results. Blockchain Technology for Transparent Transactions: MFIs are increasingly embracing blockchain technology in the microfinance sector, drawn by its capacity to deliver secure, transparent, and efficient transactions. Implementation of blockchain enhances security, reduces fraud, and synchronizes processes such as loan disbursement and repayment. Its decentralized nature ensures tamper-proof transactions that can be easily audited, fostering trust among MFIs and their customers. Cybersecurity and Fraud Prevention: MFIs prioritize the security of financial transactions amid the proliferation of digital banking. Investments in advanced cybersecurity measures, including biometric authentication and AI-driven threat detection systems, are crucial to safeguard customer data and prevent fraudulent activities. This commitment to strengthening cybersecurity promotes trust and upholds the integrity of the microfinance ecosystem.

Rise of Contactless Payments and ‘Pay Later Market: MFIs are adapting to the evolving landscape of microfinance transactions, where contactless payments and the emerging Pay Later market are reshaping microfinance transactions. These trends cater to the preferences of a diverse customer base. In response, MFIs are offering contactless payment options, thereby enhancing accessibility, and simplifying financial transactions for customers.

Regulatory Technology (RegTech): MFIs are experiencing a revolution in compliance thanks to RegTech, which is transforming the regulatory landscape for banks, NBFC- MFIs and fintechs alike. Leveraging AI-powered solutions, RegTech automates tasks, improves data analysis, and identifies risks, facilitating cost-effective operations within evolving regulatory frameworks. This trend ensures seamless adherence to regulatory requirements, promoting efficiency and positioning financial institutions for success in a dynamic regulatory landscape.

GOVERNMENT INITIATIVES ACROSS THE YEARS

The Government has undertaken various initiatives in the microfinance sector, including implementing regulatory frameworks to ensure transparency and protect borrowers rights. Various schemes were also launched to promote financial inclusion and offer credit support to underserved populations. Additionally, the government has encouraged the adoption of digital technologies to enhance the accessibility and efficiency of microfinance services.

• As per the Interim Union Budget 2024-25, the government has allocated INR 5 Billion for SME support, reflecting an increase from previous allocations.

• The Udyam Assist Platform was launched on January 11,2023, to formalize Informal Micro Enterprises (IMEs) within the MSME framework, facilitating their access to benefits under priority sector lending. Non-tax benefits are extended for a duration of three years in case of an upward change in the status of MSMEs. In 2019, the government had proposed to waive Merchant Discount Rate (MDR) charges on digital transactions for small businesses with a turnover of up to INR 50 Crores (USD 6.7 Million).

• Launched in 2012, the Credit Guarantee Scheme (CGS) aimed to fortify the credit delivery system and streamline credit flow to the Micro and Small Enterprise (MSEs) sector. It offers support without the requirement of collateral or third-party guarantees, with coverage extending up to a maximum of INR 5 Crores.

• The Prime Ministers Employment Generation Program (PMEGP) launched in 2008 by the Government offered significant credit-linked subsidy aimed at fostering self-employment opportunities.

OUTLOOK

Microfinance institutions find themselves at a crucial juncture characterized by technological breakthroughs, regulatory advancements, and a resolute push for financial inclusivity. Those embracing these trends are primed to streamline operations, bolster security measures, and significantly empower economically marginalized communities.

As the microfinance sector absorbs transformative changes, it remains focused in its adherence to fundamental principles, with a commitment to delivering enhanced value, unparalleled service, and robust security measures. This collective effort charts a path towards a future that promises excitement, propels inclusion and inspire confidence among all stakeholders within the financial ecosystem.

COMPANY OVERVIEW

Satin Creditcare Network Limited (hereon referred to as SCNL or the Company), established in 1990, holds a prominent position in the Indian microfinance sector. SCNL was registered as a Non-Banking Financial Company (NBFC) with the RBI in 1998 and attained NBFC-MFI status in November 2013. Initially offering individual loans to small businesses, the Companys business model underwent a transition to predominantly emphasize on the Joint Liability Group (JLG) approach. This model enables SCNL to extend collateral-free micro-credit facilities to economically active women in rural and semi-urban areas.

In addition to micro-credit, SCNL extends financing for a range of consumer durable items, including solar products, bicycles, home appliances, consumer durables, and water and sanitation facilities. Moreover, the Companys clientele consists of women entrepreneurs - a resilient group historically underserved or excluded by traditional banking channels.

States and UTs	26
Villages	89,000
Districts	421
Branches	1,393
Clients	34.7 Lakhs

OUR SUBSIDAIRIES

Satin Housing Finance Limited (SHFL)

Satin Housing Finance Limited (SHFL), founded in 2017, operates as a wholly owned subsidiary of SCNL. With a focus on delivering accessible home loans to middle and low-income individuals residing in the outskirts of tier-II and below cities, SHFL assists in house construction, purchase, repair, and upgrades, along with offering mortgage business loans.

Headquartered in Gurugram, Haryana, the primary operational landscape of SHFL spans Delhi-NCR, Haryana, Uttar Pradesh, and Rajasthan. With Assets Under Management (AUM) of INR 755.77 Crores, SHFL recorded a robust year-on-year growth rate of 49.58%. Moreover, disbursements aggregating INR 456.30 Crores was

registered, showcasing a remarkable year-on-year growth of 44.48%.

Operating across four states, SHFL has garnered a substantial customer base of 7,456 individuals. The Company exclusively maintains a retail book, constituting 100% of its portfolio. Its commitment to maintain portfolio quality is evident through a Gross Non-Performing Assets (GNPA) ratio of 0.84% as of March 31, 2024. The Company recorded a CRAR of 49.15% and credit rating of A- (Stable) from ICRA. Additionally, SHFL cultivated relationships with 26 active lenders, including NHB-Refi nance.

Satin Finserv Limited (SFL)

Satin Finserv Limited (SFL), established in August 2018, functions as a wholly owned subsidiary of SCNL. The Companys corporate office is located in Gurugram, Haryana, with branches spanning eleven states across India.

SFL specializes in offering secured small ticket-size MSME/SME loans to its target market comprising traders, retail and wholesale merchants, manufacturers, service providers, self-employed professionals, education ventures, and agribusinesses. Following the successful merger of Taraashna Financial Services Limited (TFSL) with SFL, the subsidiary expanded its operations to include business correspondent activities with various banks. Currently, the Company is phasing out the business correspondent book and shifting its focus towards building a retail MSME book for future growth. SFL has achieved an impressive Assets Under Management (AUM) totaling INR 501.01 Crores as of the end of 2023-24, with disbursements reaching INR 401.77 Crores, indicating a favorable trajectory in the retail loan segment. The Gross Non-Performing Assets (GNPA) ratio stands at 4.32% as of the end of 2023-24, reflecting the proportion of non-performing loans relative to the total loan portfolio. Furthermore, the Capital to Risk-Weighted Assets Ratio (CRAR) is positioned at an impressive 48.00% as of March 31, 2024, signifying the Companys robust capital adequacy and resilience. The Companys credit rating stood at A- (Stable) from ICRA. SCNL Group thrives on its reputation as a trusted brand dedicated to improving the quality of life for its customers, while upholding its commitment to financial inclusion. Through diversified financial solutions and services, the SCNL Group addresses the financial needs of individuals having limited access to formal financial services. The Group manages customer life cycle through its subsidiary offerings for clients that have graduated from micro-credit products to products with higher credit requirements. Moreover, SCNLs Group offerings are complemented by a top-notch digital customer experience, ensuring convenience and efficiency for its clients.

Product Range

	Loan Size	Loan Tenure
	(in INR)	(in Months)
Income Generating Loans	10,000-80,000	12-30
Water and Sanitation (WASH) Loans	10,000-35,000	12-24
AMSME Loan	1,00,000-15,00,000	Max 120
ALending to Corporate	1,00,00,000-	Max 36
Institutions	10,00,00,000
Social Impact Financing
Solar	2,200-4,400	6-9
Cycle	5,600-7,000	6-12
Home Appliances	2,100-32,000	6-24
Mobile	11,499-21,499	12-24

AEarlier, the Company provided MSME loans and lent to corporate institutions, but the Company is currently running down these two areas to focus on smaller ticket loan size book.

PRODUCT RANGE OF OUR SUBSIDIARIES Satin Housing Finance Limited

The Companys offerings encompass loans for home purchase/construction or refurbishment and expansion of an existing home.

Features	Urban Home Loan	Micro Home Loan
Loan Range	INR 5,00,00040,00,000 *	INR 1,00,0007,00,000 *
Repayment Time	Maximum loan	Maximum loan
Period	tenure of 20 years *	tenure of 7 years *
Rate of Interest	Competitive ROI**	Competitive ROI**

* May vary on case basis.

** The ROI ranges between 9% to 25% for different products of the Company.

The Company offers loan against property as the right product for urban business loans and micro home loans.

Features	Urban Business Loan	Micro Business Loan
Loan Range	INR 5,00,00025,00,000 *	INR 1,00,0007,00,000 *
Repayment Time	Maximum loan	Maximum loan
Period	tenure of 15 years *	tenure of 7 years *
Rate of Interest	Competitive ROI**	Competitive ROI**

* May vary on case basis.

** The ROI ranges between 9% to 25% for different products of the Company.

Satin Finserv Limited

Small Ticket Business Loan

Purpose	Ticket Size	Tenure	Collateral	Eligibility Criteria
Income Generation Activities Working Capital	INR 1.5 Lakhs to INR 3.5 Lakhs	60 Months	Property	• Minimum age: 22 years
				• Business stability of minimum 3 years
- Long Term loans (3-5 Years)
- Short Term Loans (1 to <3 Years)

Aiarge Ticket Business Loan

Purpose	Ticket size	Tenure	Collateral	Eligibility Criteria
Term Loans	Up to INR 5 Crore	60 Months	Secured/ Unsecured	The business must have a minimum stability of 3 years, and the Company needs to have been profitable as per the last audited financials.

AThe Company is currently running down large ticket book as the focus is on small retail book.

SCNLS CORE COMPETENCIES

Legacy to Turn Challenges into Opportunities

SCNL demonstrates a track record of turning challenges into opportunities, exemplifying resilience and innovation throughout its journey spanning over three decades. Innovative Microfinance Products Portfolio

SCNL maintains a diversified product portfolio, comprising income generating loans, WASH loans along with social impact financing loans for solar lamps, and bicycles, among others. Through its subsidiaries, the Company extends its services to MSMEs and affordable housing segments. This broad-based product basket positions the Company to be industry leaders in the foreseeable future.

Wider Geographical Footprint SCNL leverages extensive geographical footprint spanning 26 states and 89,000 villages, reinforcing its commitment to inclusive financial access and empowerment. The Company has the most diversified geographic coverage compared to other peers in the industry.

Technological Expertise

SCNL derives strength from cutting-edge technology to craft seamless digital solutions, thereby strengthening operation efficiency, empowering clients and transforming the financial landscape.

Well-Diversified Liability Profile

SCNL prides itself on a well-diversified liability profile, exhibiting a robust risk management strategy that ensures stability and resilience amid dynamic market conditions. Robust Underwriting Processes

SCNL demonstrates meticulous risk assessment and prudent lending practices through its robust underwriting profile, safeguarding both the institution and its clientele against financial volatility.

Strong Capital Adequacy

SCNL navigates challenges with resilience by harnessing its sound capital adequacy, consistently maintaining a CRAR of over 25% for the last five years, which serves as a pillar of strength. This robust capital foundation enables the institution to foster sustainable growth and ensure stability in its operations.

Adept and Experienced Board of Directors and Management Team

SCNL boasts a proficient Board of Directors and a seasoned Management Team, whose wealth of experience and strategic acumen drives the Company through dynamic market landscapes, fostering innovation, fueling growth and propelling sustainable value creation.

2023-24 SNAPSHOT

• SCNLs Assets under Management (AUM) grew by 34% to reach INR 10,593 Crores compared to INR 7,929 Crores in 2022-23. The Company recorded a 31% growth in disbursements in 2023-24 amounting to INR 9,691 Crores.

• During the year, added 7.8 Lakhs client taking the client base to 33.4 Lakhs as of March 2024.

• SCNL experienced significant improvement enhancements in its asset quality, as evidenced by the decline in Gross Non-Performing Assets (GNPA) from 3.28% in March 2023 to 2.49% in March 2024. The robust underwriting procedures and reinforced collection process implemented by SCNL play the pivotal roles in this betterment.

• SCNLs portfolio, originated from July 2021 onwards, performed better than the industry with remarkably low Portfolio at Risk (PAR) figures. PAR 1 stood at

2.5% as compared to industry numbers and PAR 90 stood at 1.5%, highlighting the Companys effective implementation of risk management and underwriting practices.

• SCNLs collections against write off pool for 2023-24 stood at INR 46 Crores, symbolizing its commitment towards recovering write-off loans.

• SCNL secured funding from a diverse pool of lenders and through multiple instruments. During the year, the Company raised INR 9,494 Crores; 39% YoY growth as compared to 2022-23.

• SCNL successfully completed equity infusion of INR 250 Crores via QIP

• SCNLs Capital to Risk-Weighted Assets Ratio (CRAR) attained a healthy level of 27.7%, indicating a strong capital base to support growth momentum.

• SCNLs long-term credit rating got upgraded to A (Stable) by ICRA from A- (Stable) during the financial year.

FINANCIAL OVERVIEW

SCNL recorded an annual revenue of INR 2,051 Crores, marking a 17% increase compared to the previous year. The profit after tax (PAT) for the period amounted to INR 423 Crores, registering a YoY growth of 60%. The Company reported a steady net interest margin of 13.2%. The credit cost reduced to 1.4%, leading to return on asset of 4.8% during the financial year. With operating leverage playing out, the Opex to Avg AUM ratio witnessed significant improvement, dropping to 5.6% as compared to 6.3% in the previous fiscal year. The cost-to-income ratio also reduced to 42.6%, while the return on equity (RoE) stood at 18.5%. Key Financial Ratios

Particulars		March 31, 2023
Gross Yield	22.14%	19.55%A
Financial Cost Ratio	8.99%	8.04%
Net Interest Margin	13.15%	11.51%a
Operating Expenses Ratio	5.60%	6.25%
Loan Loss Ratio	1.44%	5.42%
RoA	4.77%	3.52%
RoE	18.46%	15.02%
Leverage (Total Debt/ Total Net Worth)	2.7 times	2.9 times
Cost-to-Income Ratio	42.59%	54.31%a

Adjusted cost-to-income ratio (excluding extraordinary income of

~INR 350 Crores)

• Gross Yield represents the ratio of Total Income generated during the relevant period to the Average AUM. Gross Yield for 2022-23, including extraordinary income of ~INR 350 Crores, stands at 24.46%

• Financial Cost Ratio denotes the ratio of Interest Expense incurred during the relevant period to the Average AUM

• Net Interest Margin (NIM) signifies the difference between the Gross Yield and the Financial Cost Ratio. The adjusted NIM, including extraordinary income of ~INR 350 Crores for 2022-23 is calculated at 16.42%,

• Operating Expenses Ratio represents the ratio of the Operating Expenses (expenses including depreciation but excluding Credit Cost and Interest Expense) to the Average AUM

• Loan Loss Ratio denotes the ratio of Credit Cost (including FLDG on BC) to the Average AUM

• RoA represents ratio of PAT to the Average Total Assets

• RoE represents PAT to the Average Equity

HUMAN RESOURCES MANAGEMENT

SCNL acknowledges the pivotal role of its human resources in driving the Companys sustainable success. It adopts a holistic HR approach, encompassing initiatives focused on talent acquisition, diversity, learning and development, employee recognition, and well-being. Moreover, the Company prioritizes sourcing top talent to stimulate innovation and foster a positive workplace culture, evidenced by significant hiring initiatives resulting in the recruitment of new employees. Its proactive talent retention strategies include initiatives like Great Managers, 360-degree feedback mechanisms, and internal job postings, were envisaged to promote employee engagement and satisfaction.

Diversity and womens empowerment are integral to SCNLs culture, demonstrated through programs focused on training, mentorship, and flexible work arrangements. Elevating women to leadership positions and implementing initiatives to promote gender equality, the Company achieved global recognition. Moreover, the unique Satin Ease Leave policy reflects its commitment to inclusivity by offering menstrual leave, thereby advocating equality and dignity at workplace. Additionally, the Company remains committed to promote learning and development, with initiatives like university-recognized courses and the buddy program for practical training taking center stage, along with IT-focused learning initiatives. Our efforts have enabled us to bag a Great Place to Work recognition for the fifth consecutive time. This achievement is testament to our efforts toward creating a happier and conducive work place.

The performance management system of SCNL fosters continuous improvement, while talent development programs identify and nurture future leaders, exemplified by initiatives like The Leaders Club. Meritocracy guides career progression within the Company, with transparent evaluations and recognition programs rewarding outstanding performance. Employee health, safety, and sustainability remain the priorities for SCNL, with various initiatives and wellness programs ensuring a safe and healthy work environment. Employee well-being is prioritized through health camps, stress management workshops, and cultural celebrations, fostering unity and inclusivity. Awareness campaigns and workplace surveys are conducted to gather feedback, enabling continuous upgradation of HR practices, thereby nurturing an engaged, energetic and future-ready workforce.

TECHNOLOGICAL UPGRADATIONS

SCNL initiated a transformative journey in 2016-17, by developing its own Enterprise Resource Planning (ERP) system. This decision was driven by the limitations of the legacy application (BIJLI) previously utilized by the Company which lacked scalability due to constraints in its architecture.

The in-house ERP development has yielded significant advancements as listed below:

Transition to Centralized Architecture: Previously,

operating on a decentralized architecture, the Companys processes were time-consuming, taking up to 15-20 days. However, with the implementation of the new ERP, the architecture shifted to a centralized model. This centralized setup enables real-time data capture and generates dashboards on real time basis, providing management with comprehensive insights. Furthermore, leveraging the centralized architecture, field personnel now conduct realtime transactions via synchronized tablets, enhancing operational efficiency. Additionally, the Company migrated to Oracle as its database, utilizing its advanced capabilities, while upgrading its hardware infrastructure with state-of- the-art technology and faster storage. To address network instability in rural areas, the proposed Android application functions offline and online, automatically syncing with the server.

Real-Time Data Processing: SCNL enhanced its data processing capabilities, facilitating real-time updates of captured data. Detailed analytics and business dashboards enable management at all levels to access minute details and track key performance indicators (KPIs) promptly.

GEO Fencing-Based Solutions: SCNL incorporates

geofencing technology in its application, mapping customer locations using GPS. This feature aids in tracking the field force based on customer location, providing insights into business density in specific geographical areas.

AI and ML Integration: SCNL seamlessly integrates AI and ML technologies into its application. The AI/ML engine ensures the capture and upload of clean and readable KYC documents by field personnel, ensuring regulatory compliance and enhancing KYC quality.

Cashless Collection: SCNLs application offers multiple cashless collection modes, including NEFT, IMPS, Debit Card, QR Code-based payment, AEPS and UPI 2.0, facilitating hassle-free and secure transactions for customers.

AWS Implementation: SCNLs adoption of Amazon Web Services (AWS) ushered in numerous benefits and ample growth opportunities for the Company. AWS provides scalability, cost efficiency through a pay-as-you-go model,

in addition to offering robust security measures, enhanced reliability and resilience. Leveraging AWSs data analytics and machine learning services, SCNL extracts valuable insights for data-driven decision-making and operational efficiency. Moreover, AWS supports the Companys digital transformation journey, facilitating the adoption of advanced technologies to elevate customer experience and operational efficiency.

Cybersecurity Framework: SCNL has adopted an all- encompassing cybersecurity framework to fortify the security of the Companys systems and data. This framework incorporates robust firewalls, Window Application Firewall (WAF) and advanced intrusion detection/prevention systems to vigilantly monitor network activities. Additionally, it encompasses SOC, SIEM and endpoint security software to shield devices from potential threats and ensures timely software updates are applied to address vulnerabilities effectively.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The policies and procedures adopted by SCNL takes into account the design, implementation and maintenance of adequate internal financial controls, keeping in view the size and nature of the business. The internal financial controls ensure the efficient conduct of its business. The controls encompass safeguarding of assets, strict adherence to policies and prevention and detection of frauds and errors against any unauthorized use or disposition of assets and misappropriation of funds. These controls help to keep a check on the accuracy and completeness of the accounting records and timely preparation of reliable financial disclosures. The Audit Committee ensures that all procedures are properly authorized, documented, described and monitored. SCNL has in place technologically advanced infrastructure with computerization in all its operations, including accounts and MIS.

SCNL has in place strong internal audit processes and systems and designs annual risk-based audit plan to ensure optimum portfolio quality and keep risks at bay. There is a risk-based audit methodology for field audits and corporate functions audits which are planned based on various risk- based parameters. There is a full-fledged in-house Internal Audit department. The branch and regional office audits take place generally thrice a year and corporate function audits takes place as per periodicity defined in the approved internal audit plan.

The Audit Committee of the Board of Directors, comprising Non-Executive Directors, periodically reviews the internal audit reports, covering findings, adequacy of internal controls, and ensure compliances. The Audit Committee also meets SCNLs Statutory Auditors to ascertain their

views on the financial statements, including the financial reporting system, compliance to accounting policies and procedures, adequacy and effectiveness of the internal controls and systems followed by the Company. Information system security controls enable SCNL to keep a check on technology-related risks and also improve business efficiency and distribution capabilities. SCNL is committed to invest in IT systems, including back-up systems, to improve the operational efficiency, customer service and decision-making process.

High standards of SCNLs internal control systems are adequately reflected in it receiving ISO 27001:2022 Certification post qualifying two stages of audit by third- party certification body - Documentation audit and Control Testing audit. There is also an annual Surveillance Audit conducted by third-party ISO Auditors to retain the certification. By implementing ISO 27001 standards, organizations identify and mitigate potential security threats to financial data. This enhances the integrity, confidentiality, and availability of financial information, reducing the risk of fraud, unauthorized access, and data breaches. SCNL demonstrates its commitment to safeguarding sensitive financial information, thereby enhancing trust and credibility within investors and stakeholders.

IT security controls are essential measures implemented to protect digital assets from unauthorized access, alteration, or destruction. These controls encompass a range of technologies, processes and policies designed to safeguard information systems, networks and data from cyber threats and vulnerabilities. There are robust cloud systems which are implemented efficiently, ensuring scalability, security and reliability for seamless operations and data management. SCNL has been using Centralized Shared Services Centre to be more vigilant in authentic onboarding of customers. Centralized Shared Services (CSS), an outsourced Process unit helps in verification of Loan Application and KYC documents by verifying the authenticity of the clients being disbursed. This has helped in filtering adverse customer selection & sanctioning.

RISK MANAGEMENT

SCNL acknowledges the presence of various risks that could potentially impact its operations, given the dynamic and challenging environment it operates in. To address these challenges, the Company has developed a robust risk management structure, including policy, framework and risk monitoring tools, aimed at early identification and timely mitigation of these risks.

SCNL deploys an intricately designed risk management framework to identify, assess, and mitigate risks across

different levels of the organization. Through this holistic approach, the Company puts in place proactive measures to address potential threats and uncertainties.

The Companys risk management process considers several key factors, while assessing the risk of exposure on a case- to-case basis. These include reputation risk, the inherent nature of the product, credit risk, and historical performance of similar clients, among others. Additionally, the tenure of the borrower relationship, repayment track record, future potential, and competitor rates are also taken into account in assessing the risk premium. By comprehensively evaluating these factors, the Company strives to make informed decisions that strike a balance between risk and return, ultimately safeguarding its interests and ensuring sustainable growth in the face of evolving market dynamics. Detailed information about the Companys risk mitigation measures is provided on page no.54 of the Annual Report.

CORPORATE GOVERNANCE

SCNL actively strives to promote financial inclusion and empower individuals from economically and socially underserved segments of society. The Company upholds its reputation as a responsible player in the finance industry, operating with a robust commitment to fairness, transparency, integrity, and ethics. Its framework is meticulously detailed to create a strong sense of responsibility towards the broader community. This principled approach has enabled the Company to navigate challenges that have periodically beset the microfinance industry.

Governance standards, initiated by the Board and senior management of SCNL, permeate throughout the organization to ensure uniformity and equity. Internal stakeholders are carefully educated to understand that adherence to Corporate Governance principles extends beyond mere compliance with regulations; it reflects the Companys commitment to ethical business practices. The Company maintains a vigilant oversight of its organizational governance structure, practices, and processes, regularly revising them to align with the highest ethical standards. Adherence to applicable regulations and provisions issued by regulatory bodies, including the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), and the Ministry of Corporate Affairs (MCA) is held in supreme importance. The regulatory frameworks outlined by these authorities significantly influence the corporate governance structures and practices of SCNL.

The Company has adopted a policy on Internal Guidelines on Corporate Governance in accordance with RBIs Scale Based Regulations, outlining the Governance Philosophy and detailing the composition and terms of reference of the

Companys Committees in terms of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Regular Board meetings are conducted to assess SCNLs adherence to corporate governance standards, including committee composition, functions, meeting frequency and compliance. The Board, at its March 22, 2024 meeting, approved an AntiBribery and Anti-Corruption Policy, clarifying stakeholder responsibilities in the event of such instances within the Company. This policy is designed to uphold legitimate business practices, prevent corruption and bribery, and is binding on all employees as part of SCNLs Code of Conduct.

RESERVE BANK OF INDIA (RBI): COMPLIANCE

A circular on Scale-Based Regulation (SBR): A Revised Regulatory Framework for NBFCs (the SBR Framework) was released by the Reserve Bank of India on October 22, 2021. The SBR Framework divides NBFCs into four tiers: NBFC - Base Layer (NBFC-BL), NBFC - Middle Layer (NBFC-ML), NBFC - Upper Layer (NBFC-UL), and NBFC - Top Layer (NBFC-TL). These layers are determined by factors such as size, activity, and perceived risk. The Company has been classified as NBFC - ML under the aforementioned framework as of October 1,2022.

The Company strictly adheres to the major gudielines issued by the RBI viz. Master Direction - Reserve Bank of India (Non-Banking Financial Company - Scale Based Regulation) Directions, 2023, Master Direction - Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022, Master Direction on Information Technology Governance, Risk, Controls and Assurance Practices, 2023, Master Direction on Outsourcing of Information Technology Services, 2023.

CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (CSR) is a business approach that fosters sustainable development by providing economic, social, and environmental benefits for all stakeholders. In light of the aforementioned context, the Corporate Social Responsibility (CSR) policy of SCNL is broadly structured around the following key measures:

• Implementing welfare initiatives for the community at large, with a focus on maximizing benefits for the poorer sections of society.

• Contributing to the broader society through social and cultural development, providing education and training, and raising social awareness, particularly targeting the economically disadvantaged to aid in their development and income generation, thereby reducing employment- related liabilities.

• Protecting and safeguarding the environment while maintaining ecological balance.

Over the years, through strategic partnerships and initiatives, the Company has made significant strides in enhancing its vision to drive holistic empowerment of the community by partnering with a trust/foundation, qualified to undertake CSR activities in accordance with Schedule VII of the Companies Act, 2013.

With the aim of promoting education and empowering children, the Company forged a strategic partnership with GNA University in 2021-22, with plans for a long-term collaboration. Leveraging the CSR grant, the Company has supported various impactful projects, including sponsoring the education of underprivileged children, construction of girls hostel to provide safe and secure accommodation and to enhance the future employability of students. These initiatives reflect the Companys commitment to creating sustainable and inclusive growth for the community.

In 2023-24, the Company supported GNA University by funding towards the development of a computer lab, installing elevators and construction a girls hostel, demostrating our dedication to societal upliftment. With a CSR expenditure of INR 150 Lakhs, the Company has partnered with agency, Sardar Amar Singh Educational Charitable Trust to further impact on community development. This trust has been selected based on the Companys CSR policies and objectives. Our community engagement initiatives revolve around the core principles of the Sustainable Development Goals (SDGs).

The detailed information on the Companys corporate social responsibility initiatives is covered on page no. 107 in the Social & Relationship Capital section of this Annual Report.