Write off, Compromise Settlement and Waiver Policy

WRITE-OFF, COMPROMISE SETTLEMENT AND WAIVER POLICY

Policy Overview

Document Revision History

TABLE OF CONTENT

1. Overview Background and Regulatory Context

This Policy is formulated in accordance with:

• Reserve Bank of India (Non-Banking Financial Companies – Resolution of Stressed Assets) Directions, 2025
• RBI Framework for Compromise Settlements and Technical Write-offs
• RBI (NBFC – Financial Statements: Presentation and Disclosures) Directions, 2025]
• Other applicable prudential, supervisory and accounting instructions issued by the Reserve Bank of India from time to time.

2. Objective

The objectives of this Policy are to:

• Ensure prudent, transparent and time-bound resolution of stressed and non-performing assets
• Enable cleansing of irrecoverable exposures through write-offs and technical write-offs
• Maximise recoveries through compromise settlements and waivers, where commercially justified.
• Ensure true and fair presentation of the Company’s financial position
• Strengthen governance, accountability, Board oversight and regulatory compliance.

3. Guiding Principles

• Write-off, technical write-off and compromise settlement are measures of last resort
• No borrower shall have a right to claim a compromise settlement or waiver
• Decisions shall be based on commercial prudence, recoverability assessment and cost-benefit analysis
• Settlement amounts shall endeavour to recover not less than the estimated realisable / liquidation value, wherever applicable
• Recovery efforts shall continue even after write-off or technical write-off.

4. Write- off Policy

Identification of Irrecoverable Accounts

Accounts may be considered for write-off or technical write-off where one or more of the following conditions are met:

• No effective communication with the borrower despite repeated attempts for over six months
• Legal proceedings pending for over six months with remote recovery prospects
• Continuation of recovery efforts is not cost-effective.

Write Off Criteria

• Under any of the circumstances above if it is established that the recovery of the loan is remote and the same fall into the following bucket the same will be considered for write off

• Receivable overdue for more than 365 Days
• The loan tenure is completed not less than 180 Days from the date of proposal.

• In addition to the above, accounts may also be considered for write-off under Specific Identification, where recovery is assessed as unviable based on internal evaluation and field-level verification. Specific identification may include, but is not limited to, the following internal parameters:

• Borrower untraceability despite reasonable follow-up efforts;
• Industry-wide delinquency, including instances where all loans of the borrower are reported overdue across the MFI sector;
• Borrowers having permanently relocated without traceable contact details;
• Accounts undergoing legal closure, insolvency proceedings, or other judicial processes where recovery likelihood is minimal;
• Unviable recovery due to extremely low outstanding ticket size, where recovery costs outweigh the potential recovery amount;
• Prolonged delinquency with no observable repayment intent or capacity;
• Any other relevant factors deemed appropriate by Management based on merit, documented assessment, and field-level realities.

Any account proposed for write-off under Specific Identification outside the standard ageing criteria shall require approval of the Board.

• MRR portion on the Co-lending/DA pool can be written off in the company books of accounts if the Tenure of the Pool is completed more than 90 days and loan account if the above condition is met for write off. On the MRR portion write-off there won’t be any CIC reporting of the client as write-off until the confirmation is received form the purchaser is received. The asset classification at customer level will be retained as per the Investor status.

Write-off Procedure

• A Field Investigation Report shall be prepared detailing:
• Borrower profile
• Recovery efforts undertaken
• Current status and recovery assessment
• Joint evaluation by Operations and Finance

Recommendation to the Chairman of the Board / Board of Directors, as per delegation of authority

Authority for Write-off

• Write-off cases to be proposed by Chief Financial Officer (CFO)
• Proposed cases will be approved by Board of Directors.

Post Write-off / Technical Write-off Recovery

• • • Recovery efforts shall continue even after write-off or technical write-off
    • Legal proceedings, including suits and execution proceedings, shall continue where applicable
    • Borrowers whose accounts are written off shall not be eligible for fresh credit until dues are fully recovered or legally extinguished.

5. Compromise Settlement and Waiver Policy

Eligibility

Compromise settlements / waivers may be considered where:

• • • The borrower is unable to service the loan due to genuine economic, business or personal hardship
    • Further legal recovery is likely to be time-consuming or uneconomical
    • A negotiated settlement maximises recovery compared to alternative recovery options

Settlement Tenure

Based on the final agreed settlement amount:

• • • Up to INR 5000 – single instalment
    • INR 5001 to INR 15000 – up to two instalments
    • Above INR 15000 – up to three instalments

Failure to adhere to the settlement schedule shall result in withdrawal of waiver benefits.

Fraud and Wilful Default Accounts

• • • Compromise settlements shall not ordinarily be permitted for borrowers classified as fraud or wilful defaulters
    • In exceptional cases, compromise settlement may be considered only with COO/Chairman of the Board approval, without prejudice to criminal proceedings and other penal measures

Delegation of Authority

Approval of compromise settlements and waivers shall be as per the approved Delegation of Authority (DOA) matrix, based on:

• • • Days Past Due (DPD) bucket
    • Quantum of principal waiver

Waivers approved by during the quarter shall be placed before the Board for ratification.

Cooling Period

• • • A minimum cooling period of 12 months shall be observed before extending fresh credit to borrowers who have availed compromise settlement
    • The Board may prescribe higher cooling periods, if deemed necessary

6. Staff Accountability

• All technical write-offs, compromise settlements and waivers shall be subject to a mandatory staff accountability review, irrespective of amount.
• The accountability framework shall apply to all staff involved across the credit lifecycle, including sourcing, credit appraisal, documentation, monitoring, collections, and recovery.
• Accountability shall not be restricted to the sanctioning authority but shall extend to all personnel whose actions or omissions materially contributed to the credit outcome.
• The review shall specifically assess:
  1. Compliance with underwriting norms,
  2. Adherence to credit appraisal standards,
  3. Monitoring and follow-up adequacy,
  4. Early warning signal identification,
  5. Collection efforts undertaken prior to write-off.
• In cases where negligence, deviation from policy, process lapses, or malfeasance is identified, appropriate disciplinary action shall be initiated in accordance with the Company’s HR Policy and Code of Conduct.
• Material lapses, repeat deviations, or systemic control failures shall be escalated to Senior Management and, where required, to the Board.
• Cases involving staff-related fraud shall be governed by the Company’s Fraud Risk Management Policy
• Outcomes of accountability reviews shall be placed before the appropriate authority / Board, as applicable.

7. Board Oversight, Disclosures and Compliance

Board Reporting

The following shall be placed before the Board on a quarterly basis:

• Number and value of:
• Write-offs
• Compromise settlements and waivers
• Break-up of accounts classified as:
• Fraud
• Wilful default
• Red-flagged / quick mortality accounts
• Sanctioning-authority-wise and/or business-segment-wise analysis
• Recovery performance in written-off accounts.

Financial Statement Disclosures

Appropriate disclosures shall be made in the Notes to Accounts in accordance with RBI (NBFC – Financial Statements: Presentation and Disclosures) Directions, 2025.

7.3 Compliance and Regulatory Oversight

• Compliance with this Policy shall be monitored by Risk Management department and Compliance functions.
• Any material deviations or regulatory concerns shall be reported to Senior Management and the Board
• The Policy shall be subject to RBI supervisory review and inspection

8. REVIEW AND AMENDMENT

This Policy shall be reviewed annually and may be amended with the approval of the Board of Directors, in line with regulatory changes and business requirements

Annexure of Approval Matrix

• This would be capped at 0.75% of the AUM for any Financial Year (FY)
• All the waiver cases will be reported to ACM/Board as per the disclosure format.