Satin Creditcare Network Ltd Management Discussions.

The Indian Economy

The Indian economy registered GDP growth of 7.2% and 6.8% in 2017-18 and 2018-19, respectively. The current fiscal has witnessed a number of headwinds in the form of credit squeeze, sluggish manufacturing growth and subdued consumption. Economies across the globe have displayed signs of stagnation owing to the rising trade barriers and increasing geopolitical tensions. However, India was well- placed after timely measures taken by the Government such as reduction in the corporate tax rate and income tax rates which indicated some signs of green shoots and steady economic recovery. But the world got badly hit in the last quarter of 2019-20 with an unprecedented Covid-19 pandemic that disrupted the growth prospect of most global economies including India. Despite of these testing times where most of the economies are expected to deliver negative GDP growth, IMF projects Indias GDP to grow at 4.2% in 2019-20 amid Coronavirus pandemic.

Our Government and policymakers are providing consistent support to households, firms and financial markets which is critical for a strong recovery. As a major move to boost liquidity in the market, the Reserve Bank of India (RBI) announced several measures to accelerate the economy and facilitate bank credit flows. The Government announced economic stimulus worth Rs. 20 lakhs Crores in May 2020, which is 10% of GDP focusing on migrant workers, street vendors, self-employed people, small farmers, tax breaks for small businesses and incentives for domestic manufacturing. In addition, reduced repo rate and CRR will enable banks to lend even more. Also, to ease the lack of liquidity that borrowers might face, the RBI allowed offering two phases of three months moratorium on term loan and credit card bill payments.

(Source: Live Mint dated on May 14, 2020)

Economy Outlook:

According to IMF, GDP growth for 2020-21 is estimated at 1.9% before it rebounds to 7.4% in 2021-22 taking into consideration, a significant economic revival and pandemic fading in the second half of 2020. Thus, letting containment efforts to be slowly scaled back as well as restoring consumer and investor confidence is highly imperative. In addition, measures such as promoting access to finance for small enterprises and improving infrastructure can result in productivity gains and boost growth.

Industry Review

Microfinance Institutions (MFI) Industry Structure and Developments

Over the last few years, Indias microfinance industry has seen promising growth on the back of the rapid economic growth. The sector has been instrumental in offering credit facilities to underserved lower and mid-income households and also to micro, small and medium enterprises (MSMEs), thereby increasing the contribution of these segments to Indias overall GDP With penetration of over 30% potential households, especially women, it helps drive financial inclusion for millions in the rural areas.

According to Micro Finance Institution Network (MFIN) Micrometer as on December 31, 2019, banks hold the largest share of portfolio in micro-credit universe followed by NBFC-MFIs (Non-Banking Finance Company-Microfinance Institutions), SFBs (Small Finance Banks), NBFCs (NonBanking Finance Companies) and others. The three models prevailing in the microfinance lending sector are - Self Help Group (SHG), JLG (Joint Liability Group) and SHG Bank Linkage. The operating model varies in accordance to the different players in the industry whilst the two only groups with loan portfolios primarily inclined towards microcredit are NBFC-MFIs and non-profit MFIs.

Market Share of Financial Institutions in Outstanding Loan Portfolio

MFIs have extensive presence across 32 states and union territories with an aggregate Gross Loan Portfolio (GLP) of Rs. 67,466 Crores as on December 31,2019. The top five states; Bihar, Karnataka, Tamil Nadu, Maharashtra and Odisha account for 50% of the GLP with respect to the outstanding loan amount and the top ten states account for 79% of the GLP In terms of the geographical spread, 75% of the portfolio is rural while 25% is urban. Majority of the loans were disbursed for agriculture (57.4%) followed by trade, services and manufacturing loans (38.4%) and household finance loans (4.2%).

The large MFIs persist to retain a major proportion of the industry outreach. They account for 91% of the industry GLP that is 89.4% of the client base, 91% of loan amount disbursed and 87.3% of debt funding received. As on December 31,2019, top ten MFIs accounted for 71% of the industry portfolio.

NBFC MFI Industry Overview:

Particulars Q3 2019- Q3 2018- Y-o-Y change (%)
20 19 (2019-20 over 2018-19)
Branches 13,844 10,877 27
Employees 1,12,616 86,225 31
Clients* (Crores) 3.1 2.4 31
Loan accounts (Crores) 3.71 2.82 32
GLP (Rs. Crores) 67,466 46,589 45
Loans disbursed during the quarter (Crores) 0.67 0.57 18
Loan amount disbursed during the quarter (Rs. Crores) 19,275 14,179 36

*The clients number here is the aggregate of clients of member MFIs. Given some degree of overlaps, it does not reflect the number of uniqueRs. clients.

(Source: MFIN Micrometer: December 31,2019)


Coronavirus Pandemic:

The Corona Virus (COVID-19) pandemic has contributed to a significant decline and volatility in global and Indian markets, and a significant decrease in economic activity. On March 24, 2020, the Government of India announced a nation-wide lockdown till April 14, 2020, which was extended till May 31, 2020 through subsequent announcements, to contain the spread of the virus. From 1st June onwards, further relaxations in lockdown has been granted across the country, which has helped the Company employees to contact the borrowers. This has led to significant disruptions and dislocations for individuals and businesses, impacting the Companys regular operations including lending and collection activities due to inability of employees to physically reach borrowers. The Company has major proportion of its borrowers and AUM in rural geographies, where the impact of COVID-19 has been relatively lower.

However, the impact can be mitigated through adequate measures taken by the RBI and the Government to maintain liquidity in the system. The Government has announced a series of economic relief measures for rural India, which is expected to further support rural borrowers repayment capacity. In addition, the Reserve Bank of India has provided a separate liquidity window for the smaller non-bank lenders including microfinance firms to overcome this distress situation. RBI has also created a special Rs. 50,000 Crores corpus to enable National Bank for Agriculture & Rural Development (NABARD), Small Industrial Development Bank of India (SIDBI) and National Housing Bank to meet sectoral needs to refinance.

Further, pursuant to the Reserve Bank of India measures, allowing lending institutions to offer moratorium to borrowers on payment of instalments falling due between March 1, 2020 and August 31, 2020, the Company has extended/will be extending moratorium to its borrowers in accordance with its Board approved policy. In managements view, providing moratorium to borrowers at a large scale based on RBI directives, by itself is not considered to result in a significant increase in credit risk ("SICR") for such borrowers. Accordingly, considering the unique and widespread impact of COVID-19 pandemic, the Company has estimated expected credit loss allowance in its provisions, based on information available at this point in time to reflect among other things, the deterioration in the macro-economic factors. Given the dynamic nature of the pandemic situation, these estimates are based on early indicators, subject to uncertainty and may be affected by the severity and duration of the pandemic. The actual impact of the pandemic, including governmental and regulatory measures, on the business and financial metrics of the Company could be different from estimates.

Natural Disasters: Delinquencies can happen as an outcome of natural disasters like flood, drought and earthquake.


Credit Risk Assessment Mechanisms: Establishing a credit history for most of the customers is a challenge as most of them come from low-income households. This in turn hinders development of efficient underwriting processes and collection models. Factors such as the lack of comprehensive data on customers, decentralized information sources and dependency on borrowers for data disclosure create bars in the process of customer credit profile development. This also impacts functioning of fraud management further affecting the NPA monitoring systems with direct implications on compliance costs and the credibility of the organization.

However, advancements in technology, development of regulatory policies and credit bureau checks have significantly helped the industry to mitigate risk of defaults. MFIs share their daily data with credit bureaus which facilitates better decision making.


Lack of Enough Financial Literacy in the Economy: India being a developing country has a low literacy rate where majority of people in the rural areas fail to understand the basic financial concepts. The lack of awareness of financial services and adequate knowledge is an imperative factor that helps the rural population access MFIs for easy credit to meet their financial needs.


Opportunities - Growth Drivers

In India, microfinance has become essential for driving financial inclusion of a large section of the underserved and unbanked population. It enables greater access to financial products and services along with wider reach across the country.


Collaboration with Fintech and Other Players: Partnering with Fintech players will help the MFIs to reduce the operational cost and reach a larger customer base without having to hire an additional field officer. It will also prove helpful in collections through system integration.


Customer-Centricity: Majority of the population still lacks access to credit from the formal sector and consequently borrows from informal channels. This indicates the scope of micro-lending in achieving financial inclusion and ushering the overall industry growth.


Focus on Digitization: Taking a crucial step towards the digitization goal, the Government announced a proposal to provide Rs. 6,000 Crores to the Bharat net program in 202021. This will help increase digital connectivity across the country, thus making micro loans more accessible as well as increasing cashless disbursement and collection.


Massive Growth Potential of MSME Sector: Promoting the growth of small-scale industries and MSME businesses have been among the important priorities of the Government. Hence, placing emphasis on creating growth opportunities for MFIs in providing financial assistance.


Business Correspondent (BC): Banks were permitted to use third-party agents as BCs to offer banking and financial services comprising credit and savings, on their behalf. In this way they would gain from outreach and competent distribution structures of MFIs. On the other side, MFIs can leverage their relationship with the customers to push credit and provide an extensive range of products. This in turn, creates an enormous opportunity for MFIs to tap large number of unbanked people.


Healthy Growth in Affordable Housing Finance Segment: The economically weaker sections who have low levels of income are constrained by factors like access to housing finance, fund mobilization and stringent regulatory framework. MFIs play an active role in lending loans to them.


Industry Outlook

With several positives such as surge in SMEs, lower interest rates and Government initiatives to improve credit lines for the unbanked and under-banked, the sector is estimated to witness a robust double-digit CAGR during 2019-24. Also, for the year gone by, the RBI has raised the limit for annual household income eligibility from Rs. 1 lakh to Rs. 1.25 lakhs in rural areas and from Rs. 1.6 lakhs to Rs. 2 lakhs in urban and semi-urban pockets. Likewise, it has also increased the lending limit to Rs. 1.25 lakhs per eligible borrower from Rs. 1 lakh earlier. With the right steps and support from the RBI and Government, the industry will be back on track as there will be pent-up demand for loans once the Covid-19 crisis subsides.


Company Overview

Satin Creditcare Network Limited (hereafter referred to as SCNLRs. or the Company) was incorporated in 1990 with a simple yet forward-looking credo of providing individual loans to urban shopkeepers for small businesses. Today, SCNL has emerged as one of Indias leading and trusted MFIs with the purpose of bringing about the key imperative of financial inclusion for the economically disenfranchised. The Company after being registered as an NBFC in the year 1998 attained an NBFC-MFI status in November 2013.

The Companys operations are based on a Joint Liability Group model that enables collateral-free, micro-credit facilities to economically active women in both rural and semi-urban areas. These women have otherwise continued being a spectator than a participant in the periphery of traditional banking network or other channels of finance. It also finances purchase of solar products, bicycles, home appliances, consumer durables and safe water and sanitation facilities, among others. With operations in 23 states and union territories across India and an expanding presence in the Southern part, the Company has 1,183 branches (consolidated basis) as on March 31,2020.

SCNL has been consistently improving its product basket by onboarding relevant market offerings along with the latest lending practices. The Company introduced new loan products called Mid term LoanRs. and Festive LoanRs. for existing customers to help them meet their add-on business expenses during peak season. Besides, the company has introduced a new loan PragatiRs. loan to help rebuild the livelihood of our clients which was impacted due to lockdown. The Company has also introduced process for disbursement of new loans to existing customers by balance transfer adjustment which ensures smooth cashless flow for high volume transactions.

In addition to the above product offerings, the Company also offers finance to its customers with purchase of solar lamps, bicycles etc. and grants loan for safe water and sanitation facilities. During FY20, around 1 lakh such products were financed by the Company. This includes financing of ~ 85,579 clean energy products, impacting 4.11 lakhs peoples lives. Company has been awarded a certificate of excellence in clean energy finance by Micro Energy Credits. Satin has partnered with Micro energy Credits. Satins clean energy program is an illustration of its dedication to serve the bottom of pyramid section of society by providing customized financial solution. Satin is investing in carbon funds for expanding and improving their clean energy program.

Also, as a part of its expansion strategy, product diversification, capitalizing the distribution outreach and movement from unsecured to secured lending, the Company has three wholly owned subsidiaries namely:

• Taraashna Financial Services Limited: To provide Business Correspondent services in partnership with few leading public and private sector banks

• Satin Housing Finance Limited: To finance customers in the affordable housing segment.

• Satin Finserv Limited: To offer loans to individual businesses, Micro, Small & Medium Enterprises (MSMEs), other corporates and MFI companies.



Loan Repayment

SCNL is driving financial inclusion by building an end-to- end digital payment ecosystem for loan disbursement and repayments by collaborating with multiple banks and Fintech partners. The Company accepts loan repayments via digital modes such as Aadhar Pay, UPI, UPI-QR, Debit Card powered by Rupay. These steps have eliminated frauds and risks for customers as well as field staff. As such processes require a shift in customer behavior, SCNL has taken adequate steps to spread financial literacy.

With the best-in-class technology and planning, the Company has also incorporated Holiday Calendar in loan repayment schedule. This ensures that the customers get a repayment flexibility during festivals to avoid extra financial burden.


Cashless Collection

Cashless collection is an imperative step by the Company with Aadhaar Enabled Payment System (AePS) and has led to better control and efficiency. During March 2020, the Company collected 37% of its repayments through cashless mode by 250+ branches via 1,400+ devices. As a result, it saves cost and time of collection whilst the mode being the safest option. It eliminates the risk of frauds or robbery. In addition, the Company has achieved 100% cashless disbursement in the financial year 2019-20.



Geo-tagging of branches, centers and customers enable an enhanced control and traceability of the workforce. It assists in 100% event-based mapping of KYC sourcing, collection location, branch location, center location and its customer houses. This helps in abating the huge risk of customer identification and reach, without the need for relying a Community Service Officer (CSO). The handover process is also streamlined and transparent.


Centralized Shared Services

The Company has integrated its well-built technology platform within the BC subsidiary network to help them accelerate business growth. Centralized Shared Service Centers (CSS) was implemented within SCNL and Taraashna Financial Services Limited (BC Business) to ensure uniformity of processes and control across the entire business with back-end quality support. This has resulted in efficient services across business reporting and centrally managed infrastructure support.

KYC verification process goes through Centralized Shared Services (CSS) to get loan approvals. The credit risk management and data quality maintenance cover all aspects related to comments based on checklist, bank details verification and validation, loan application details, document verification and sanctioning the loan application. As on March 31,2020 approx. 3 million applications have been processed through CSS with improved efficiency and productivity. This has drastically reduced cost per application from Rs. 81 to Rs. 3, leading to better document quality check and risk mitigation. A noticeable sample (usually, 10% from every branch) of daily disbursements gets verified through TVR (Tele Verification) which measures deviation in process & controls (if any) and ensures adherence to processes & policies.

The Company has moved its Customer Grievance Redressal Mechanism to eight-language Interactive Voice Response System (IVRS) or Sparsh where customers can interact in their own language. This has improved the understanding of issues faced by customers resulting into smaller TAT for issue resolution, enhanced customer experience and brand stickiness. In addition, the customer services follow death verification process and Loan Dost (outgoing calls). These initiatives have led to a professional support model within the organization along with restructuring of teams at different levels and significant cost optimization.


Technology Tools for Newer Subsidiaries (MSME and Housing)

For newer subsidiaries (MSME and Housing), the Company has taken a strategic and tactical direction to move ahead with the industry-established technology platform - OMNIFIN. However, the technology team has already built the MSME Suite in-house and will go-live soon.



The Company constantly identifies potential areas of growth that will enhance market share and brand prominence.


Process Excellence: Leveraging robust technology capabilities along with comprehensive product range would enable the Company to rapidly gain market share.


Deepening Presence: Substantial exposure in the remotest corner of the country presents strong growth potential by increasing footprints and widening reach.


Financially Excluded Community: Large number of unbanked and underserved middle and lower-income families, provide great opportunity to further increase the customer base.


Digital Lending Ecosystem: Robust and secure digital lending platforms holds immense growth potential by transforming customer on boarding experience.



The Company, on continuous basis assesses potential threats that can hamper the growth owing to evolving macroeconomic factors and consumer perceptions:


Banks and Fintech Companies Entering in Lower Income Segments: The increase in competition as banks and Fintech companies have started offering products and services to the underserved and unbanked people in rural and semi-urban areas.


Economic Volatility and Government Reforms: Reforms in the financial as well as the non-financial sector impact the financial capabilities of customers as well as the economic stability of the country. This in turn impacts growth prospects of the Company with respect to disbursements, credit risk and asset quality.


Issue of Over-Indebtedness: Borrowers very often get shortterm credit from various semi-formal and informal money lenders outside the formal economy. Thus, unregulated lending increases the chances of the borrowers defaulting on repayments.


Information Technology (IT)

Advanced technology architecture is the backbone of SCNLs business operations.

The Company has world-class technology systems in place that continues to meet customers needs and expectations. Digital Transformation Technology (Loan Management System) has been the game changer for SCNL by making operations quick and easy. It also enabled the Company to turn around its customer acquisition to disbursement journey by bringing it down from the earlier 18 days to a few minutes. The digital expansion has given the Company a competitive edge to respond to the rapidly changing business scenario. Various digital platforms with real-time system provide support to the end-to-end lending process. It is well- equipped with comprehensive reporting capabilities, audit trails and logs, detailed information about loan histories, transaction reports, required decision-making reports, numerous management analysis and real-time dashboards. These state-of-the-art digital services help the Company expand its geographical outreach and increase efficacy.


Benefits of Technological Advancement

• All the branches can make cashless disbursements with instant bank account verifications

• Advanced processes such as QR Code Scan and other technological advancements have enhanced brand recall value

• The last mile technology penetration launched through TABS presents real-time visibility of loan status and instantly addresses any customer queries/touch points

• Event-based capturing, recording and tracking of geolocation based on business actions is undertaken by the workforce

• The solution provides instant customer identification and bank account verification, real-time CB checks, and SMS notifications with various real-time integration of APIs

• The Borrowing Module gives an integrated solution to manage loans & borrowings with real-time information, multipurpose reporting and better management of accounting details

• The solution has an integration with Fingpay for Cashless Collection and UPI payments; caters to various other integrations with Cross Sell Partners like Hospicash (TATA), D-Light and SolarSunking (for Solar Products).

• It has enabled Centralized Cash Management Integrations with large banks like PNB, SBI, ICICI and Axis bank

• The solution also has a module for quality verification of the KYC Documents through a shared service center wherein the loan application details and documents are verified and approved before it moves to the branch for disbursal


HRMS Suite

The Company has launched another initiative of in-house developed complete suite of HRMS product, which is named as "SATIN ESS". With latest technology stack and Micro Services concept, this product is more agile, scalable, flexible, leading to superior performance. The mobile and web application for HRMS is available on both Google Play Store and App Store. The HRMS suite will come with rich features like attendance and branch visit, leave management, Employee Self Portal, Employee Performance Management. Further, it will have HR Admin Portal, Employee Creation, Confirmation & Employee Dashboard, Employee Exit as well.


Information Security System

The Company has a robust Information Security Management System (ISMS) in place, to secure the information against unauthorized disclosures. It emphasizes on people, processes and technologies covering all departments while constantly enhancing the management systems. SCNL was awarded with ISO 27001:2013 in October 2018; the certification has 14 domains and 114 controls. It states that ISMS has been incorporated in all the activities and embodies that information security and client confidentiality are integral part of its strategies.


Financial Performance

Particulars 31-Mar-20 31-Mar-19
Gross Yield (1) 20.61% 23.97%
Financial Cost Ratio (2) 8.44% 11.15%
Net Interest Margin (3) 12.17% 12.81%
Operating Expense ratio (4) 6.07% 6.51%
Loan Loss ratio (5) 2.97% 0.96%
RoA (6) 2.25% 3.01%
RoE (8) 12.00% 19.08%
Leverage (Total Debt (7)/ Total Net Worth) 3.72 times 4.55 times
Cost to Income Ratio 49.86% 50.83%

1. Gross Yield represents the ratio of total income in the relevant period to the average AUM

2. Financial Cost Ratio represents the ratio of interest expense in the relevant period to the Average AUM

3. Net Interest Margin represents the difference between the Gross Yield and the Financial Cost Ratio

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

5. Loan Loss Ratio represents the ratio of credit cost (including FLDG on BC) to the Average AUM

6. RoA is annualized and represents ratio of PAT to the Average Total Assets

7. Total Debt includes Securitization and preference shares considered as debt in accordance of IndAS

8. RoE is annualized and represents PAT (Post Preference Dividend) to the average equity (i.e. net worth excluding preference share capital)


Risk Management and Concerns

Being a financial institution, the Company is subjected to risks that are pertaining to lending and its operating environment. Risk management is a vital part of the overall governance process; hence the Company has comprehensive policies and procedures in place that help identify, mitigate and monitor risks at various levels. It takes proactive measures in managing risks to ensure that strategic business objectives are achieved. The objective is to support sustainable growth and generate value for its customers, investors, employees and other stakeholders. Further, the Risk Management Committee monitors the risks, mitigation actions and the key risks are also discussed at the Audit Committee. This is achieved by deploying an effective risk management framework which helps in proactively identifying and responding to emerging challenges in a timely manner. Nonetheless, the intensity of competition and fluctuations in the legal and regulatory environment also contribute to the nature of certain risks. To deal with the same, the Company follows a conservative approach through prudent business and risk management practices.


Risk Management Framework:

The Company follows three line of defense approach for managing its risks. At the first line of defense are various business and support functions, second line is made of Risk and Compliance and the third line is Audit function.

The Board of Directors are responsible for overall governance and oversight of core risk management activities, execution strategy is delegated to the Risk Management Committee of the Board (RMCB) and further sub-delegated to Executive Risk Management Committee (ERMC) and the Asset Liability Management Committee (ALCO).


The Key Process of Framework Comprise:

Material Risk and Mitigations:

Risks Mitigation Strategies
Credit Risk: Default by borrower to make required payments The Companys effective business model aids them in reducing this risk. Also, various processes backed by technology, proactively help to identify people with negative intentions.
Market & ALM Risk : Arising due to market variables and mismatch in asset and liability The Company has well documented Market and ALM risk policy with well-defined risk limits. ALM Department manages liquidity and interest rate risk.
Operational Risk: Arising in the normal course of business Operations were impacted in North Eastern districts of Assam by some organizations and protests. The Company took several measures, along with SROs viz. MFIN and Sadhan to address the concerns. In addition, the cashless disbursement and collection mitigates cash-based operation risks.
Information Technology / Cyber Security risk: Concerns relating to disruption in services in case of loss of confidential information SCNL has ISO 27000:2013 certification that states prevalence of robust Information Security Management System (ISMS).
Regulatory Risk: Inability to obtain regulatory approvals and licenses for conducting the business The Company complies with all the regulatory framework imposed by respective authorities.



The Companys growth prospects remain positive as re-engineered processes and controls enable it to be well-equipped to handle any exigency. The primary aim is to consistently improve the portfolio quality while maintaining low delinquency and diversifying revenue sources by growing share of cross-selling income. Moreover, the Company seeks to limit per state exposure to <20% and per district exposure to <1% of AUM. The digital lending app will aid the growth potential by providing competitive edge over others. Additionally, the Company will continue to focus on training and development of the workforce to enhance their capabilities and knowledge thus, making them future ready. As, GDP forecast is below 2% for India, disbursement will be muted or at the same levels as 2019-20.

On the MSME front, the Company will continue to pursue its strategic objective of enriching the portfolio quality and expanding operations to newer geographies. In addition, it will focus on a secured retail MSME lending, wholesale lending to small NBFC MFI and others. With respect to the housing finance, the Company aims to be a niche housing finance player in tier II, III and IV cities and towns and further emphasize to boost excellent portfolio quality with NIL delinquency. The BC arrangement with IndusInd bank, will assist in scaling up the operations, in turn enabling them to broaden their base offerings apart from microfinance. Moreover, the Company will continue to diversify its portfolio through the subsidiaries by capitalizing on the distribution outreach.


Human Resource Management

The Company believes that human resources are the most vital elements contributing to the growth of a business. During the year, SCNL focused on automating HR processes and envisioning efficient and error-free functionalities. With comprehensive and well-designed HR policies, the Company ensures both personal and professional development of employees. The HR team works towards ensuring that the employee goals are aligned with that of the Company. A meritocratic and transparent culture is fostered through score cards and online performance management system (PMS). The launch of UDAAN has set an industry benchmark by creating first line of leaders. It is an appraisal philosophy for the field employees which makes them eligible for bi-annual promotion based on the performance. The establishment of Assessment Development Centers has enabled the promotion of right talent along with the overall development of employees.

During the year 2019-20, all the employees received adequate training as per their roles. Field employees were imparted a number of learning sessions namely Pride, personality development, promotional trainings as well as refresher sessions. Online training modules were launched for field employees to gain better insights on the industry, products and policies. On the same lines one-hour learning sessions were launched for the entire support staff to enhance their learning curve. The corporate team also attended leadership training and strategic meets to set the impetus right for the planned actionable. Further, third party interventions helped in preparing the next line of leadership through 360-degree detailed assessments and feedback.

Adoption of Geo-fencing technology allows capturing attendance on real-time basis and inculcates discipline among the employees. This has facilitated HR in effective manpower planning and initiating disciplinary actions by constructing a leakage-free system. The Company emphasizes on good governance through well-placed whistle blower and anti-sexual harassment policies. By empowering its people, the Company is committed to provide better customer service and higher employee satisfaction.

SCNL launched in-house developed complete suite of HRMS software, which named as "SATIN ESS". This software comes with rich features like punching online attendance. Also, to instill discipline and understanding the frequency of center visits, geo-tagging of employees on the field is also enabled. Apart from it, this product is capable of handling leaves, employee self-service portal, HR admin portal, confirmation runs, employee dashboards and resignations as well. The software becomes handy in the form of an app available on both Google and Apple store. Employees also enjoy easy access to Employee directory through the web and application.

In the next phase, employee onboarding, transfers module, investment proof declaration and submission will also be managed through it. SCNL was certified as a Great Place to WorkRs. with a trust index score as high as 81. Additionally it was also featured as Companies with Great ManagersRs. organized by People Business. The Company was also awarded the title of Dream Companies Companies to Work ForRs. and Best Employer Brand, which in turn acted as a great way of promoting trust among employees and in driving job satisfaction. It is encouraging a value-driven culture and is building the sense of pride amongst the employees. The Companys number of employees as of March 31, 2020 were 13,005 as compared to 11,831 in the previous year.


Internal Control system and Adequacy

The policies and procedures adopted by the Company take 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 orderly and efficient conduct of the business. The controls encompass safeguarding of the Companys assets, strict adherence to policies, 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. Job rotation is mandatory across departments to ensure high level of correctness and accuracy. The Company has in place technologically advanced infrastructure with computerization in all its operations, including accounts and MIS.

SCNL has a full-fledged in-house Internal Audit department with processes and systems to design an Annual Audit Plan and ensure optimum portfolio quality, keeping risks at bay. The Regional Office Audit, Branch Audit and Social Audit takes place on a quarterly basis based on the risk-based audit methodology. The Audit team consists of seasoned auditors with good understanding of systems and processes.

The Audit Committee of the Board of Directors, comprising of independent directors, periodically reviews the internal audit reports, covering findings, adequacy of internal controls and ensure compliances. The Audit Committee also meets the Companys 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. Information System Security controls enable the Company to keep a check on technology-related risks and also improve business efficiency and distribution capabilities. The Company 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 the Companys internal control systems are adequately reflected in it receiving ISO 27001:2013 Certification post qualifying two stages of audit by third party certification body - Documentation audit and Control Testing audit. This indicates an Integrated and Robust Information Security Management System (ISMS) in the Companys business processes and exemplifies that information security and client confidentiality are part of the cornerstones of the Companys strategic objectives. This approach also ensures that employees supported by IT systems and processes throughout the organization maintain a high standard of security.



The Reserve Bank of India in exercise of its powers under The Reserve Bank of India Act, 1934, has granted NBFC-

MFI (Serial No. B-14.01394) status to the Company and the Company is NBFC-NDSI. The Board of Directors of the Company have passed a resolution by circulation declaring that the Company has not accepted any public deposits and will not accept the same during 2020-21.


Reserve Bank of India - Registration and Directions

The Company is always very particular regarding the compliance of the relevant guidelines issued by Reserve Bank of India. Further, the Company has the Capital Adequacy Ratio of 30.49% as on March 31, 2020. The NonBanking Financial Company - Micro Finance Institutions (Reserve Bank) - Directions, 2011 (NBFC-MFI Directions) were issued in December 2011 by the Reserve Bank of India (RBI) pursuant to the Reserve Bank of India Act, 1934 (RBI Act). The Company satisfies the required conditions and was re-classified as a Non-Banking Financial Company - Micro Finance Institution (NBFC-MFI) on November 6, 2013. This in turn requires the Company to comply with the NBFC-MFI Directions. Qualifying assets criteria, asset classification and provisioning, pricing of credit, capital adequacy, multiple lending, over-borrowing, compliances and fair practices are the directions included in the guidelines. The Company complies with all the conditions and directions issued by RBI regularly.


Corporate Governance

Corporate Governance in the Company goes beyond the fundamentals of the legislative and regulatory compliance. The management strives to entrench an enterprise-wide culture of good corporate governance. With an aim to ensure the same, all the decisions are taken in a fair, transparent manner and within an ethical framework. This promotes the responsible consideration of all stakeholders, while also holding decision-makers appropriately accountable. In line with the philosophy that good governance is an evolving discipline, governance structures, practices and processes are actively monitored and revised from time-to-time to reflect the best ethical practice.

SCNL is subject to the regulations of the RBI (Reserve Bank of India) and SEBI (Securities and Exchange Board of India). The Corporate Governance structures and practices are predominantly impacted by the respective regulations of these ruling bodies. The Compliance Certificate from S. Behera & Co., Company Secretary in Practice regarding compliance of conditions of corporate governance and to certify that none of the directors have been debarred or disqualified from being appointed or continuing as directors of the Companies by the Board /Ministry of Corporate affairs or any such authority, under the SEBI LODR Regulations for 2019-20 is annexed to the Corporate Governance Report which is provided separately in the Annual Report. A report on Corporate Governance forming part of the DIRECTORS Report is also enclosed herewith.



Form No. AOC-2

(Pursuant to clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014)

This form pertains to the disclosure of particulars of contracts/arrangements entered into by the Company with related parties referred to in Sub-section (1) of Section 188 of the Companies Act, 2013 including certain arms length transactions under third proviso thereto.


Details of contracts or arrangements or transactions not at arms length basis

There were no contracts or arrangements or transactions entered during the year ended March 31, 2020, which were not at arms length basis.


Detail of material contracts or arrangements or transactions at arms length basis

There were no material contracts or arrangements or transactions entered into by the Company with related parties referred to in Section 188(1) of the Companies Act, 2013. However, the Company has entered into transactions with related parties at arms length basis, the details of which are given in the notes to financial statements.

For and on behalf of the Board of Directors
H P Singh
Place: Gurugram Chairman Cum Managing Director
Date: June 15, 2020 (DIN: 00333754)