The Board of Directors ('Board') of Capital Small Finance Bank Limited ('Bank') are pleased to present the 27^th Board's report I
on the business and operations of the Bank together with the audited financial statements for the financial year ended
March 31,2026.

Business Overview

The Board of Directors are pleased to present the financial performance of the Bank for the financial year ended March
31,2026, a year characterised by strong business growth, stable asset quality and resilient profitability, despite a relatively
tighter operating environment.

The key performance highlights are as follows:

•    As of March 31,2026, the Bank's gross advances increased to '8,687 crores, registering a healthy growth of ~21%
year-on-year. This growth reflects sustained momentum across core lending segments and continued focus on
secured asset expansion

•    Total deposits crossed '10,000 crores, at '10,018 crores, reflecting a robust growth of ~20% year-on-year,
supported by branch expansion and deepening of customer relationships

•    The Bank continued to maintain a stable liability profile, although CASA remained under industry-wide pressure due
to a shift towards higher-yielding term deposits

•    Asset quality improved to Gross NPA at 2.54% and Net NPA at 1.24% as of March 31, 2026, reflecting disciplined
underwriting and effective risk management practices

•    Profitability remained resilient, with Profit After Tax at '141.39 crores

•    Return on Assets (RoA) stood at 1.23%

•    Net Interest Margin (NIM) moderated slightly to 4.04%, reflecting evolving interest rate dynamics and
competitive pressures on cost of funds

During the year, the Bank continued its strategic focus on balanced growth, operational efficiency and prudent risk

management, while expanding its footprint in both existing and new markets.

The Bank remains committed to strengthening customer relationships, enhancing operational capabilities and building
a future-ready institution with a strong foundation for sustainable growth.

The Board expresses its sincere gratitude to all stakeholders for their continued trust and support.

2.    Financial Performance and State of Bank's Affairs

The Financial highlights (standalone) for the year under review, are presented below:

Profit and Loss Summary

Asset and Liability Composition

Key Ratios

Notes:

¹Net Interest Margin has been computed based on the Net Interest income (Interest Income — Interest Expense) and
average of total assets as reported to Reserve Bank of India in Form X under Section 27 of the Banking Regulation Act,
1949, during the year

²Return on Assets is calculated with reference to monthly average working funds (Working funds taken as total of assets
excluding accumulated losses, if any)

In Financial Year 2025-26, the Indian economy
sustained its growth momentum, supported by stable
domestic demand, improving consumption patterns
and continued infrastructure spending, albeit amid
persistent global uncertainties and evolving interest
rate dynamics. The demand for credit remained
healthy across segments, providing continued support
to the banking sector, particularly Small Finance
Banks ('SFBs'). Rising financial awareness, increasing
formalisation of the economy and sustained focus
on financial inclusion continued to drive demand for
small business and retail loans. Government initiatives
aimed at strengthening access to formal banking
channels, especially in rural and semi-urban areas,
further supported the growth and outreach of SFBs.

In contrast to the high interest rate environment of
the previous fiscal year, FY26 witnessed a decisive
shift towards an accommodative monetary policy
stance. The Reserve Bank of India (RBI) undertook
a significant easing cycle, reducing the repo rate by
a cumulative 125 basis points since February 2025
to 5.25%, a level expected to remain broadly stable
through FY27. This shift, supported by moderating
food inflation and stable global energy prices, has
improved cost-of-funds dynamics for the banking
sector. However, credit transmission has remained
gradual, with overall bank credit growth moderating
to around 10%. This evolving environment presents
both challenges and opportunities, with banks having
strong liability franchises and efficient transmission
mechanisms better positioned to sustain margins.

For the financial year ended March 31, 2026, the
Bank delivered steady growth across key financial
parameters, demonstrating resilience in a relatively
dynamic operating environment. Key indicators such
as total assets, deposits and advances registered
healthy growth, reflecting the Bank's ability to
scale its operations while maintaining prudent risk
management. This performance is underpinned by
a disciplined approach to balancing growth with
asset quality, resulting in a stable loan portfolio with
controlled levels of non-performing assets.

While the changing interest rate cycle led to some
moderation in margin and return ratios, the Bank
continued to maintain stable profitability, supported
by strong business momentum and a continued focus
on cost discipline and operational efficiency. Ongoing
investments in technology, product innovation and
customer engagement have further strengthened
the Bank's ability to respond effectively to evolving
customer needs and competitive dynamics.

Capital Small Finance Bank Limited continued to expand
its presence across existing and new geographies,
with a focus on deepening its reach in underserved
and underbanked segments. The Bank remains
committed to strengthening customer relationships
and enhancing service delivery, recognising that long¬
term success is closely linked to customer trust and
satisfaction. Through a consistent focus on inclusive
banking and sustainable growth, the Bank is well-
positioned to build on its strong foundation in the
years ahead.

In managing the Bank's liability profile, there is a
continued commitment to strengthening existing
relationships and maintaining robust levels of Current
Account and Savings Account ('CASA') deposits. The
Bank has consistently upheld strong CASA ratios, with
a ratio of 34.74% as of March 31, 2026, compared
to 33.93% as of September 30, 2025. These figures
continue to reflect the Bank's strong position in this
key segment, well above industry averages. Despite
the challenges posed by a rising interest environment,
our dedication to cost management is apparent
in the sustained favourable cost of funds. For the
FY ended March 31, 2026, it stood at 5.99%, while for
the previous financial year ending March 31, 2025, it
was 6.02%. Additionally, its retail deposits constitute
a significant proportion, accounting for 91.45% as
on March 31, 2026. Going forward, the Bank remains
committed to further increasing its CASA and retail
deposits to optimise its cost of funds.

On the asset front, the Bank continues to uphold
a strong secured lending strategy, with secured
loans making up ~98% of the overall portfolio—
approximately ~77% of which is backed by immovable
property and fixed deposits. This prudent approach,
supported by rigorous credit evaluation and robust
risk management practices, has contributed to further
improvements in asset quality. As of March 31, 2026,
the Bank's Gross Non-Performing Assets ('GNPA')
stood at 2.54%, down from 2.58% the previous year,
while Net Non-Performing Assets ('NNPA') improved
to 1.24% from 1.30%. This year-on-year enhancement
reflects the Bank's deep understanding of its borrower
profile and its continued emphasis on credit discipline
and portfolio quality.

The Bank recognises that interest rates are largely
influenced by market dynamics, and our focus remains
on actively managing our interest margin through
disciplined pricing strategies. Over various interest
rate cycles, we have consistently maintained a stable
spread in the range of 5.1% to 5.3%, reflecting the
resilience of our business model. On the liabilities side,
deposits account for approximately 80%-85% of our

funding base, including a strong CASA contribution of
35%. On the asset side, 45%-50% of the loan portfolio
is linked to floating interest rates, with nearly 75% of
that benchmarked to the Marginal Cost of Funds based
Lending Rate ("MCLR"), ensuring timely transmission
of rate movements.

Furthermore, the Bank's loan portfolio diversification
is noteworthy, with advances in Agriculture,
MSME, Trading & Other Business Loans, and
Mortgages, segments amounting to '2,451.76 crores,
'2,208.86 crores, and '2,192.05 crores, respectively,
as of March 31, 2026. In the previous year, as of
March 31, 2025, these segments accounted for
'2,334.60 crores, '1,511.59 crores and '1,923.31 crores
respectively. The average ticket size for these
segments as of March 31, 2025, stood at '1.26 mn,
'2.19 mn and '1.28 mn respectively and as of
March 31,2026 it is '1.31 mn, '2.70 mn and '1.42 mn.

In order to gain a foothold in new markets where the
branch network is not yet established, the Bank is
actively seeking partnerships to expand geographical
presence and better understand these markets.
By forging strategic alliances, it aims to mitigate
associated risks while diversifying the range of
products and services. Such collaborations will not
only enhance the offerings but also contribute to the
overall growth of Capital Small Finance Bank Limited.

The Bank has consistently delivered strong growth
in both profitability and operational performance,
reflecting its steadfast commitment to excellence.
Over recent years, operating profit before provisions
has experienced an exceptional compound annual
growth rate (CAGR) of approximately 25%, increasing
from '71.51 crores in FY21 to '218.04 crores in FY26.
Profit before tax (PBT) has also seen significant
growth, rising from '53.74 crores in FY21 to '188.80
crores in FY26. Similarly, profit after tax (PAT) surged
from '40.79 crores in FY21 to '141.39 crores in FY26
representing CAGR of 28%. These impressive results
underscore the Bank's strong financial position and
operational efficiency, backed by its experienced
leadership and a dedicated group of shareholders
committed to upholding the highest standards of
corporate governance.

Moving forward, the focus remains on strengthening
of operational and profitability metrics through several
key strategies. Firstly, the aim is to optimise asset-
liability mix in favour of asset creation while increasing
the credit to deposit ratio. Secondly, it continues
to emphasise on cost optimisation and efficiency
improvement. Lastly, it intends to enhance its fee
income and leverage cross-selling opportunities to
further diversify our revenue streams.

Cost optimisation remains a central focus for the
Bank, and we take pride in our enhanced operational
efficiency, reflected in the significant improvement in
the operating expense (opex) ratio as a percentage
of average assets. This ratio has reduced to 3.00%
in FY26, down from 3.17% in FY25, highlighting our
successful cost management strategies. Additionally,
the cost-to-income ratio continues to show positive
momentum, reaching approximately 61.22% in FY26,
building on the improvements from 70.75% in FY21.

The Board is confident that the continued focus on
maintaining strong liabilities and asset positions will
contribute to the sustained growth and success of
Capital Small Finance Bank Limited.

->

HI 3.    Dividend

In view of the overall performance of the Bank, while
retaining capital to support future growth, the Board
of Directors at its meeting held on April 29, 2026, has
recommended a Final Dividend of '5 per equity share
of '10 each fully paid up (50% of the face value) for the
financial year ended March 31,2026, resulting in a total
dividend payout of 16.06% against earnings of FY26,
subject to the approval of the members at the ensuing
27^th Annual General Meeting ("AGM") of the Bank. This
dividend payout demonstrates the Bank's commitment
to delivering value to its esteemed shareholders. The
Board believes in sharing the success of the institution
with those who have placed their trust and invested
in Capital Small Finance Bank Limited. The Board
remains dedicated to maintaining a healthy dividend
payout ratio while carefully considering the need for
reinvestment in the Bank's growth initiatives. The
support and confidence of shareholders are greatly
appreciated, and the Board is pleased to reward their
trust through this dividend declaration.

Further, the dividend is not paid out of Reserves. In
terms of the provisions of the Income Tax Act, 2025,
the dividend income is taxable in the hands of the
shareholders and the dividend will be paid to the
shareholders by the Bank after deduction of tax at
source ('TDS') at the applicable rates.

Regulation 43A of the SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015 ('SEBI
Listing Regulations') is not applicable, as your Bank
does not fall in top 1,000 listed entities based on
market capitalisation. Accordingly, your Bank has not
yet formulated and adopted a Dividend Distribution
Policy.

II 5.    Capital Adequacy Ratio (CAR)

The Bank continues to maintain a strong capital
position, providing a solid foundation to support growth
while ensuring resilience against potential risks. As
of March 31, 2026, the Capital Adequacy Ratio (CAR)
stood at 22.31%, well above the regulatory requirement
of 15%, reflecting a comfortable capital buffer.

During the year, capital levels were calibrated to support
business expansion, particularly in the advances
portfolio, while maintaining prudent risk thresholds.
The moderation in CAR compared to the previous year
is primarily attributable to growth in risk-weighted
assets, in line with the Bank's expansion strategy.

The Bank follows a disciplined capital management
framework, with continuous monitoring of both
external and internal risk factors. Macroeconomic
developments, interest rate movements and sectoral
trends are factored into capital planning, alongside
bank-specific risks such as credit, market and
operational exposures. This integrated approach
enables the Bank to align capital allocation with its risk
appetite and business objectives.

A strong capital base remains central to the Bank's
strategy, supporting not only regulatory compliance but
also providing flexibility to pursue growth opportunities,
absorb potential stress and maintain stakeholder

confidence. The Bank continues to maintain a prudent
buffer over regulatory requirements, ensuring adequate
headroom for future expansion.

Going forward, the Bank will continue to actively manage
its capital position, with a focus on optimising capital
efficiency, supporting asset growth and maintaining
resilience in a dynamic operating environment.

^

HI 6.    Capital and Debt Structure

6.1 Share Capital

a.    Authorised Share Capital:

During the year under review, there was no
change in the Authorised Share Capital of the
Bank and as of March 31, 2026, the authorised
share capital of the Bank stood at '50.00 crores
comprising of 5,00,00,000 equity shares of
'10 each.

b.    Issued, Subscribed and Paid-up Share Capital:

The Bank has issued, subscribed and paid-up
equity Share Capital of '45,41,87,710 comprising
of 4,54,18,771 equity shares of '10/- each as of
March 31, 2026. The Bank, during the year under
review, has issued and allotted 39,250 equity
shares on August 29, 2025, having face value of

'10 each at a premium of '88 (i.e., at the total
issue price of '98) per share and 1,32,584 equity
shares on December 05, 2025 having face value
of '10 each at a premium of '161 (i.e., at the
total issue price of '171) per share in the form of
Employee Stock Option as per CSFB ESOP Plan
2018 and Employee Stock Option as per CSFB
ESOP Plan 2023 of the Bank respectively. The
equity shares issued during the year under review
rank pari passu with the existing equity shares of
the Bank.

Apart from above, the Bank did not raise any
additional equity share capital during the year.

c.    Listing of Equity Shares of the Bank with BSE and
NSE

The equity shares of the Bank are listed on BSE
Limited and National Stock Exchange of India
Limited and open for trade for public at large.

The listing fee for FY27 has been duly paid.

d.    Disclosure regarding Employee Stock Option
Schemes

The Bank has implemented the following
Employee Stock Option Schemes ("ESOP
Schemes"), duly approved by the shareholders:

c

1.    CSFB ESOP Plan 2018: Capital Small
Finance Bank Limited - Employees Stock
Option Plan 2018 ('CSFB ESOP Plan 2018')
was approved by the shareholders of the
Bank in the Annual General Meeting held on
August 18, 2018, amended further in Extra
Ordinary General Meeting held on October
22, 2021, for granting equity options to its
employees.

2.    CSFB ESOP Plan for Material Risk Takers:

Capital Small Finance Bank Limited -
Employees Stock Option Plan for Material
Risk Takers ('CSFB ESOP Plan MRT') was
approved by the shareholders of the Bank
through Postal Ballot on July 11, 2020, amended
further on October 22, 2021, for granting
equity options to Material Risk Takers
(MRTs as identified by the Board in terms of
Compensation Policy).

3.    CSFB ESOP Plan 2023: Capital Small
Finance Bank Limited - Employees Stock
Option Plan 2023 ('CSFB ESOP Plan 2023')
was approved by the shareholders of the
Bank in the Extra Ordinary General Meeting
held on May 12, 2023 for granting equity
options to its employees.

of its Non-Convertible Debentures ('NCDs') and
subordinated debt instruments:

a.    Redemption of Lower Tier II Bonds

The Bank has redeemed 1,200 units of 10.50%
Unsecured Redeemable Non-Convertible
Subordinated Bond (Lower Tier II) in the nature of
Debenture Series - XII (ISIN - INE646H08178) on
February 17, 2026 and the interest amount along
with principal amount due thereon was credited
to the accounts of debenture holders.

b.    Exercise of Call Option - Upper Tier II Bonds

Pursuant to prior approval from the Reserve
Bank of India and in accordance with the terms
of issue, the Bank exercised the call option in
respect of the following Rated, Listed, Unsecured,
Redeemable Non-Convertible Debentures:

•    140 units under ISIN INE646H08012
(Series XI) redeemed on March 31,2026

•    2,500 units under ISIN INE646H08020
(Series XIII) redeemed on March 30, 2026

The redemption amount, including payment of principal and accrued interest, was credited to the accounts of
debentures holders as per following details, in accordance with the applicable terms and regulatory approvals:

c. Issuance during the Year

During the financial year under review, the Bank has not issued and allotted any Non-Convertible bonds.

HI

Ý I 7.    Debenture Trustee Detail and Rating of Debt Instruments

The Bank has got the following credit rating in respect of unlisted debt securities of the Bank issued in the form of Lower
Tier-II Bonds:

Pursuant to exercise of call option by the Bank, the following debt securities of the Bank in the form of Upper Tier - II
Bonds, which were listed on BSE Limited, were redeemed and the credit rating details are stated hereunder:

Contact Details of Debenture Trustee:

Name: IDBI Trusteeship Services Limited
Address: Universal Insurance Building,

Ground Floor, Sir PM. Road,

Fort, Mumbai - 400001
Email: itsl@idbitrustee.co.in
Tel No. +91-22-40807000

'

II 8.    Registered Office

During the year under review, there is no change in the
registered office of the Bank.

The Registered office of the Bank is situated at MIDAS
Corporate Park, 3^rd Floor, 37, G.T. Road, Jalandhar -
144001, Punjab, India.

-'l

II 9.    Dematerialisation of Securities

The Bank has been issued an ISIN for the Equity Shares
and debt securities by National Securities Depository
Limited ('NSDL) and Central Depository Services
(India) Limited ('CDSL).

The Bank has established connectivity with both
depositories to facilitate dematerialisation and trading
of its securities in electronic form. The equity shares
of the Bank are compulsorily traded in dematerialised
form in terms of the SEBI Listing Regulations and
applicable circulars/notification issued by SEBI and
MCA.

The Bank has ensured that the equity shares held by
all Directors, Key Managerial Personnel and Promoter/
Promoter Group (as applicable) are maintained in

dematerialised form in compliance with the applicable
provisions of the Companies Act, 2013 ('Act') and SEBI
Listing Regulations.

Out of total paid up capital, 87.74% of shares are in
dematerialised form as of March 31,2026.

The Bank continues to encourage shareholders holding
shares in physical form to dematerialise their holdings
to ensure safe, efficient and seamless transferability
of securities.

Compliances as per the Reserve Bank of
India and the Government of India

_x

The Bank has complied with statutory compliance
with respect to all the applicable rules/regulations/
guidelines/notifications issued by the Reserve Bank of
India and the Government of India.

II 11.    Particulars of Employees

The information in terms of Section 197(12) of the Act
read with Rule 5(2) of the Companies (Appointment
and Remuneration of Managerial Personnel) Rules,
2014 is given in Annexure-A.

Further, the statement containing particulars of
employees as required under Section 197(12) of the
Act read with Rule 5(1) of the Companies (Appointment
and Remuneration of Managerial Personnel) Rules,
2014 is given in Annexure-B and forms part of this
report.

The statement containing particulars of employees as
required under Section 197(12) of the Act read with
Rule 5(2) and 5(3) of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014
forms part of this report.

In terms of Section 136(1) of the Act, the Annual
Report excluding the said information is being sent to
the members of the Bank and others entitled thereto.
The said information is available for inspection by the
members during business hours at the Registered
Office of the Bank up to the date of ensuing AGM.

A copy of this statement may be obtained by the
Members by writing to the Company Secretary of the
Bank at email id cs@capitalbank.co.in

--\

Transfer of Unclaimed Dividend to

Investor Education and Protection Fund

Pursuant to the relevant provisions of Section 124
and 125 of the Act and the rules made thereunder, the
amount of unpaid dividend that is lying unclaimed for
a period of 7 years from the date of its transfer to the
unpaid dividend account, is liable to be transferred to
Investor Education and Protection Fund (IEPF).

Shareholders may note that both the unclaimed
dividend and corresponding shares, which have

Transfer of Underlying Equity Shares in respect of the
Unclaimed Dividend to IEPF

Pursuant to the relevant provisions of Section 124 and
Section 125 of the Act read with the IEPF (Accounting,
Audit, Transfer and Refund) Rules, 2016, as amended
from time to time, the Unclaimed Dividend and the
underlying Equity Shares of the Bank for FY18 (in case
where the Dividend for subsequent 7 financial years
have not been claimed by the concerned Shareholder),
were liable to be transferred by the Bank to IEPF
Authority and in terms thereof, 11,280 equity shares
have been transferred to IEPF on October 31, 2025,
pursuant to the notification issued by the Ministry of
Corporate Affairs (MCA) Dated October 16, 2017.

been transferred to IEPF in previous financial years,
including all benefits arising on such shares, can be
claimed from IEPF as per the procedure provided under
the applicable provisions of the Act. The Bank sends
periodic intimation to shareholders, advising them to
lodge their claims with respect to unclaimed dividend.

Mr. Amit Sharma, Company Secretary, has been
appointed as nodal officer to ensure compliance with
the IEPF Rules. The detail of Nodal officer is also
provided on the website of the Bank.

Accordingly, Unclaimed Dividends for and up to the
financial year ended March 31, 2018, have already
been transferred to the IEPF. Further, the Unclaimed
Dividend in respect of the financial year ended
March 31, 2019, must be claimed by the concerned
Shareholders on or before November 03, 2026, failing
which it will be transferred to IEPF in accordance with
the Rules. The data for the same is available on the
website of the Bank at https://www.capital.bank.in/
investors/disclosures-under-regulation-62-Of-the-
LODR/unclaimed-dividends-equity

-'l

Annual Return pursuant to sub- section
HI .    (3) of Section 92 of the Act

The draft Annual Return of the Bank in Form
MGT - 7 as of March 31,2026 as mandated under the
provisions of Section 92(3) read with Section 134(3)
(a) of the Act has been uploaded on the website of the
Bank at https://www.capital.bank.in/investors/yearly-
compliances

Requirement for maintenance of Cost
Records

Being a banking company, provisions of Section 148(1)
of the Act relating to maintenance of the cost records
are not applicable.

Ý    Disclosure under Section 134(3)(m) of the

? Act read with Rule 8(3) of the Companies
(Accounts) Rules, 2014

Energy Conservation: Being a Banking Company,
energy consumed during this period is only in the
form of electricity and diesel used in generators. The
Bank has allocated specific cost budgets to reduce
electric waste for Head Office and all its branches.
The same is monitored on a periodical basis. Other
measures like use of LEDs, and power saver air
conditioning equipment, among others, are being
installed for conserving the energy. There is no capital
investment on energy conservation equipment other
than specified.

The steps taken or impact on conservation of energy
and for utilising alternate sources of energy;

•    Encouraging green plants in/outside the Bank's
premises to lower air conditioning needs and
keeping temperatures at 24°C or higher.

•    Switching to LED lights instead of traditional ones
to cut down on electricity usage.

•    Using timers for signage to optimise energy
usage.

•    Installing power factor systems in electrical
panels for efficient electricity use and
implementing power factor corrections.

•    Recognising the importance of renewable energy
for a cleaner future, the Bank has installed a
220 KW solar plant at its Head Office situated at
Jalandhar, Punjab

Technology Absorption: We believe that banks with the
ability to adopt and integrate information technology
will dominate in the highly competitive domestic
market. Accordingly, the Bank continues to leverage
information technology as a strategic tool in business

operations for customer delight by offering efficient
and improved services with low cost and using it as a
tool to improve staff productivity, increasing efficiency
and more efficient & effective control over banking
operations.

We are convinced that investing in IT is critical and
also understand that its potential and consequences
on banking are enormous. That is why the Bank since
its inception is equipped with a full-fledged Information
Technology Department with required manpower
to strengthen, develop, maintain, and support IT
infrastructure.

Digital banking for asset products offers convenient
banking for customers, eliminating the need for
excessive paperwork and enhancing the banking
experience. This technological advancement allows
the Bank to leverage its capabilities and streamline
operations, ultimately leading to increased efficiency
and faster service.

Benefits derived like product improvement,
cost reduction, product development or import
substitution:

The Bank is investing in initiatives and innovations
to build a digital gateway to a sustainable lifestyle.
The Bank's investments in digital technologies have
simplified banking and enabled a smoother customer
journey. In addition, the Bank continues to strengthen
its core systems and applications with planned
upgrades and offers a robust technology platform.

A proper structure and process is available which
facilitates the incorporation of risk criteria in the
product development and approval process. The
Bank is continuously taking various steps on product
improvement. Your Bank has implemented a system,
which will manage all Bank's IT asset life cycle, i.e.,
from procurement to scrap and disposal of assets, for
all banking operations.

In case of imported technology (imported during the
last three years reckoned from the beginning of the
financial year):

a)    The details of technology imported: Nil

b)    The year of import: Nil

c)    Whether the technology has been fully absorbed: Nil

d)    If not fully absorbed, areas where absorption has
not taken place, and the reasons thereof: Nil

Expenditure incurred on Research and Development:

Since financial services is being primarily covered
under Service Sector, the details of this clause are not
applicable to the Bank.

Foreign exchange earnings and outgo: There was no
foreign exchange earnings or outgo during the year
under review.

Disclosures Under Section Sec 134(3)(l)
of the Act

There were no material changes and commitments,
affecting the financial position of the Bank, which
occurred between the end of the financial year of the
Bank to which the financial statements relate and date
of this report.

Ý Details of significant and material orders
? passed by the regulators or courts or
tribunals

There were no significant material orders passed by
the Regulators or Courts or Tribunals which would
impact the going concern status of the Bank and its
future operations.

Disclosure of Penalties imposed on the
Bank during the Financial Year

v_J__-

I. Please refer note 16 to Schedule 18 forming part
of the financial statements, which forms part of
this annual report.

II. Penalties imposed by stock exchanges or SEBI
or any statutory authority, on any matter relating
to capital markets: During the review period, no
penalty was imposed by stock exchanges or
SEBI or any statutory authority on any matter
relating to capital markets.

II 19.    Deposits

y _y

Being a banking company, the disclosure relating to
deposits as required under Rule 8(5)(v) & (vi) of the
Companies (Accounts) Rules, 2014 read with Section
73 and 74 of the Act and Companies (Acceptance of
Deposits) Rules, 2014, are not applicable. The details
of the deposits received and accepted by your Bank
as a banking company are in the ordinary course of
business and have been disclosed in the financial
statements for the financial year ended March 31,
2026, forming part of the Annual Report for FY26.

Asset-Liability and Risk Management

pursuant to Section 134(3)(n) of the Act

The Bank has instituted a comprehensive and
robust Risk Management Framework to proactively
identify, assess, monitor, and mitigate risks across
its operations. Whilst the Board is responsible for
framing, implementing, and monitoring the said
risk management framework, it has delegated its
powers relating to monitoring and reviewing of risks
associated with the business of the Bank to the
Risk Management Committee. The Bank follows an
integrated approach to managing risks, and these
processes are embedded within the fundamental
business model. The Risk Management Landscape
in the Bank encompasses the stages of identifying,
assessing, measuring, managing, controlling, and
reporting risk concerns across all major risk classes,
viz. Credit, Market, Operational, and Liquidity Risks.
The Risk Management Policies, adopted and reviewed
periodically, articulate and codify the strategy,
structure, processes, and systems to manage bank¬
wide risks. Expanding business horizons, deregulation,
globalisation of financial activities, the emergence of
new financial products, and increasing competition
have necessitated a more effective and structured
risk management framework in financial institutions.
The Bank has adopted an integrated approach for risk
management, supported by effective internal policies
aligned with business requirements and best practices.
The Bank has formulated a 'Risk Management Policy',
which also includes the Internal Capital Adequacy
Assessment Process ('ICAAP') for identifying and
measuring various operational, credit, market, and

solvency risks. Operational risks are managed through
comprehensive internal control systems, including
well-defined procedures to monitor transactions,
maintain key back-up processes, and undertake regular
contingency planning. The Bank continuously strives
to enhance its risk management capabilities in line
with evolving regulatory guidelines and overarching
risk management principles. The Bank reviews the
risk management system and the progress made in
implementing the RBI guidelines on risk management
on a quarterly basis. The Asset Liability Management
Committee ('ALCO'), comprising senior management
and the Managing Director, is responsible for ensuring
adherence to the limits set by the Board, as well as
for determining the Bank's business strategy (on
both asset and liability sides) in line with the Bank's
budget and defined risk management objectives.
The Committee actively manages and controls the
structure of assets and liabilities and interest rate
sensitivities with a view to optimising profitability,
while maintaining capital adequacy and sufficient
liquidity. Statements for Structured Liquidity, Liquidity
Coverage, and Interest Rate Sensitivity of the Bank are
prepared in line with RBI guidelines to actively manage
liquidity and interest rate risks.

Liquidity Risk Management has been at the core of
sound risk management practices in the modern
banking industry. Liquidity risk refers to the potential
inability to meet the Bank's liabilities as they become
due. It arises when banks are unable to generate
sufficient cash to cope with a decline in deposits or an
increase in assets.

The Bank accords utmost importance to managing
risks in the most efficient manner and has articulated a
comprehensive structure for liquidity risk management
through various policies, including the Contingency
Funding Plan ('CFP'), which aims to address adverse
liquidity scenarios. The CFP is recommended by
ALCO to the Risk Management Committee of the
Board ('RMCB') annually for approval and is reviewed
quarterly by ALCO. In case any review by ALCO indicates
a funding gap, ALCO is responsible for formulating an
action plan, which is subject to approval by the RMCB.
Further, the decision to activate the lines of defence
as per the CFP rests with ALCO. The contingency
scenarios are clearly defined. The comprehensive
CFP seeks to monitor liquidity on a real-time basis,
supported by a diversified and uncorrelated range of

funding sources, along with well-defined reporting,
escalation, and decision-making channels.

The Bank has constituted a Risk Management
Committee. The details of the said committee and its
terms of reference are set out in the Report on Corporate
Governance, which forms part of this Annual Report.
Further, the Bank has formulated a Stress Testing
Framework for evaluating the Bank's financial position
under severe but plausible scenarios to support
informed decision-making. It enables forward-looking
assessment of risks, facilitates internal and external
communication, and assists senior management in
understanding the Bank's condition under stressed
situations. Stress testing outputs are highly useful in
decision-making, particularly in relation to potential
actions such as risk mitigation strategies, contingency
planning, and capital and liquidity management under
stressed conditions.

Stress testing forms an integral input to the ICAAP
which requires the Bank to undertake forward-looking
stress scenarios that identify severe events or changes
in market conditions that could adversely impact
the Bank. The stress testing reports provide senior
management with a comprehensive understanding
of material risks to which the Bank may be exposed
and support potential actions such as mitigation
strategies, contingency planning, and capital and
liquidity management under stressed conditions.
Further, stress testing serves as an important tool in
identifying, measuring, and controlling funding liquidity
risks, particularly in assessing the Bank's liquidity
profile and the adequacy of liquidity buffers under both
bank-specific and market-wide stress scenarios.

The Bank places strong emphasis on risk management
and recognises it as the backbone of the banking
industry. Given its dynamic and evolving nature,
the Bank continuously explores new avenues to
strengthen its risk management practices in line
with its Risk Management Policy and Framework.
This ensures that the overall structure remains well
aligned with the Bank's risk appetite, risk assessment,
and risk mitigation strategies. The Risk Management
Committee continues to provide effective oversight by
monitoring and reviewing the risk management plan
and discharging its responsibilities in line with the
provisions of the Act and SEBI Listing Regulations.

-"l

) Independent Directors Declaration in
terms of Section 134(3)(d); Section
149(6) of Act and Regulation 16(1)(b) of
SEBI Listing Regulations

_ _,

The composition of Board of Directors of the Bank is
governed by the provisions of the Act and the Banking
Regulation Act, 1949. The Board of the Bank as of
March 31, 2026, consisted of ten Directors, out of
which six directors are Independent Directors.

Further, Mr. Sham Singh Bains (DIN: 01537844) retired
as Independent Director of the Bank on November
08, 2025 pursuant to expiry of his second term as
Independent Director in terms of the provisions of the
Act.

The Bank has obtained declaration of independence
from all Independent Directors confirming that they
meet and comply with the criteria of independence as
laid down under Section 149(6) and 149(7), Schedule
IV of the Act and Regulation 16(1 )(b) & Regulation
25(8) of SEBI Listing Regulations. Further, all the
Independent Directors have complied with the Code
for Independent Directors prescribed in Schedule IV
to the Act. During the year under review, the separate
meetings of Independent Directors were conducted on
December 30, 2025 and March 18, 2026.

The Board has assessed the confirmations submitted
by the Independent Directors and thereafter has taken
the same on record, as required under Regulation
25(9) of the SEBI Listing Regulations. During the
year, there has been no change in the circumstances
affecting their status as Independent Directors of the
Bank and that they are not debarred from holding the
office of director under any SEBI order or any other
such authority.

Pursuant to the Rule 8(5) (iiia) of the Companies
(Accounts) Rules, 2014, the Board opines that all the
Independent Directors of the Bank are competent,
proficient and adhere to corporate integrity, possess
the requisite expertise, experience and qualifications
to discharge the responsibilities and duties as an
Independent Director as mandated by the Act and
other applicable laws and fulfil the conditions of
independence specified in the Act and the SEBI Listing
Regulations and that they are independent of the
management.

All the Independent Directors of the Bank have been
registered and are members of the Independent

Directors Databank maintained by the Indian Institute ^
of Corporate Affairs (IICA). Two Independent Directors
were granted exemption and the four Independent
Directors had passed the online proficiency self¬
assessment test.

I Company's Policy on Directors'
Appointment & Remuneration including
criteria for determining Qualifications,
Attributes, and Independence, among
others, in terms of Section 134(3)(e);

Section 178(1) & (3) of the Act

_/

Basis the 'Fit and Proper' criteria laid down by
the Reserve Bank of India, the Nomination and
Remuneration Committee (NRC) of the Bank conducts
the due diligence of the Board members on yearly basis
except for the Directors who are members of the NRC.

The Board of Directors conducts the due diligence of
all the Directors on annual basis. Further, at the time of
appointment or re-appointment of Director(s), the NRC
of the Bank conducts due diligence of the appointee in
accordance with the applicable provisions of the Act,
rules made thereunder, Banking Regulation Act, 1949,
guidelines issued RBI and relevant provisions of SEBI
Listing Regulations and the decision is taken based on
the outcome.

Further, the Board also conducts due diligence of
all the Directors on yearly basis. The due diligence
process involves considering the appointment
and remuneration of Directors and Key Managerial
Personnel as per the guidelines issued by Reserve
Bank of India and the Act. The process contains
detailed procedures for determining qualifications,
positive attributes, due diligence mechanism and
reference checks for appointment of Directors and Key
Managerial Personnel.

The Bank has put in place the Compensation Policy of
Employees including MD & CEO, WTD and other Material
Risk Takers (MRTs) and Comprehensive Compensation
policy for Non-Executive Directors with a key objective
to support organisational strategy by helping to build
a competitive, high performance and accompany
with an entrepreneurial culture that attracts, retains,
motivates and rewards high performing employees as
well as properly compensate the employees vis-a-vis
their risk and performance involvement. The policies
are available on the website of the Bank at https://
www.capital.bank.in/investors/secreterial-policies

-'l

Performance Evaluation of Board in terms

II ‘    of Section 134(3)(p) of the Act

-_-__-

The Act and SEBI Listing Regulations provide for
evaluation of the performance of the Board, its
Committees, Individual Director and the Chairperson
of the Bank.

The Nomination and Remuneration Committee
(NRC) and the Board has approved the criteria and
mechanism for carrying out the evaluation for
assessing the performance of the Board and
Committees as a whole and individual director.
During the year under review, a separate meeting of
Independent Directors was held on December 30,
2025, which carried out the annual evaluation of the
performance of Non-Executive Non-Independent
Directors, Executive Directors, Chairperson, Board as
a Whole and Board Committees. Further, the Board of
Directors in its meeting held on January 29, 2026, had
also conducted the Annual evaluation of performance
of Board as a whole, Board Committees, Chairperson,
Managing Director, Executive Director, Independent
Directors and Non-Executive Directors.

In accordance with the provisions of Section 149(8)
read with Schedule IV, Section 178(2) of the Act,
Regulation 17 and other applicable Regulations of SEBI
Listing Regulations, and in consonance with Guidance
Note on Board Evaluation issued by the SEBI, the
Board assesses the performance of the Chairperson,
Managing Director, Executive Director, Independent
Directors and Non-Executive Non-Independent
Directors, Board Committees and Board as a whole on
the basis of various criteria with the aim to improve the
effectiveness of the Individual Director, Chairperson,
Committees and the Board. The description and
process of annual performance evaluation has been
provided in the Report on Corporate Governance
annexed with Board's Report as Annexure-C.

State of the Company's Affairs in terms of

II '    Section 134(3)(i) of the Act

The state of affairs of the Bank in detail has been given
separately in different sections of the Board Report
and also under Management Discussion and Analysis.
There was no change in status of the Bank during the
year ended March 31, 2026.

-

I Name of the companies which have
become or ceased to be Subsidiaries/
Associates or Joint Ventures during
the year in terms of Section 134(3)(q)
read with Rule 8(5)(iv) of Companies
(Account) Rules, 2014

The Bank does not have subsidiary, joint venture
and associate company. Further, no company has
become or ceased to be the subsidiary, joint venture
or associate company of the Bank during the financial
year under review.

Ý Disclosure Under the Sexual Harassment
? of Women at Workplace (Prevention,
Prohibition and Redressal) Act, 2013

The Bank is dedicated to fostering a safe and
healthy work environment for all employees, free
from prejudice, gender bias, and sexual harassment
('SH'). The Bank upholds a zero-tolerance policy
towards any form of sexual harassment and strive
to promote a positive and productive workplace for
everyone. In alignment with the guidelines set forth
in the Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013, the
Bank ensures a safe and conducive work environment
for all employees and associates by implementing a
Policy on Prevention of Sexual Harassment of Women
at the Workplace.

The Bank has formulated and adopted a policy
on prevention of sexual harassment of women at
workplace and has complied with the provisions by
constituting Internal Complaint Committees at Head
office level and at regional level (for Branches). The
composition of the committees is in consonance with
the provisions of the Sexual Harassment of women at
the workplace (Prevention, Prohibition & Redressal) Act,
2013. These committees are formulated for redressal
of complaints for Sexual Harassment of women at the
workplace and take all necessary measures to ensure
a harassment-free workplace. The Bank believes that
all employees, including other individuals who are
dealing with the Bank have the right to be treated with
dignity.

The following is the summary of the complaints
received and disposed of during FY26:

In Head Office (including Regional Offices)

a)    No. of SH complaints received: Nil

b)    No. of SH complaints disposed off: Nil

c)    No. of complaints pending for more than 90 days:
Nil

In Branches:

a)    No. of SH complaints received: Nil

b)    No. of SH complaints disposed off: Nil

c)    No. of complaints pending for more than 90 days:
Nil

The Committee believes in ethics and takes appropriate
action against the employees who have violated
the norms, which includes disciplinary action such
as warning letter and in some cases termination of
employment depending upon the gravity of violation.

^>

Adequacy of Internal Financial Controls
Related to Financial Statements

Auditors of the Bank are required to report on
adequacy and operating effectiveness of internal
financial controls of the Bank with report on financial
statements prepared under Section 143 of the Act.

The Bank as per the requirement of Section 134(5)(e)
has adopted the policies and procedures to ensure
orderly and efficient conduct of its business, including
adherence to the Bank's policies, safeguarding of its
assets, prevention and detection of frauds and errors,
accuracy and completeness of accounting records,
timely preparation of reliable financial information. The
internal financial controls of the Bank with respect to the
financial statements are adequate and are operating
effectively. The Statutory Auditors expressed their
opinion on the adequacy and operational effectiveness
of your Bank's internal controls over financial reporting,
as required under the applicable provisions of the Act.
This opinion can be referred to in the Auditor's Report
attached to the audited financial statements for FY26
forming part of this Annual Report.

During the year under review, the Auditors have
not reported any instances of frauds committed in
the Bank by its Officers or Employees to the Audit
Committee under Section 143(12) of the Act, details of
which need to be mentioned in the Report.

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II 28.    Directors

)    _z

The Board of the Bank is duly constituted in accordance
with the provisions of Banking Regulation Act, 1949,
the Act, SEBI Listing Regulations and other applicable
laws/guidelines.

Mr. Sarvjit Singh Samra (DIN: 00477444) was
re-appointed and held office as Managing Director
& CEO of the Bank w.e.f. April 24, 2025, for a period
of three years. Mr. Sarvjit Singh Samra has been
instrumental in taking key decisions from day one that
has contributed to the Bank emerging as the most
preferred Bank in its area of operation. His vision to
serve common man and the local touch has given the
Bank a competitive edge over other banks operating
in the area and the Bank is able to provide safe,
efficient and service oriented repository of savings to
the local community while reducing their dependence
on moneylenders by making need-based credit easily
available.

Mr. Munish Jain (DIN: 10132430) was appointed as
Whole-Time Director (designated as Executive director)
w.e.f August 28, 2023, for a term of three years.

Further, the shareholders vide Postal Ballot
approval dated March 25, 2026, has approved the
re-appointment of Mr. Munish Jain as Whole-Time
Director (designated as Executive Director) of the
Bank for further period of three years w.e.f. August
28, 2026, considering his past association with the
Bank, his vast and diverse knowledge, experience and
professional acumen. The approval of Reserve Bank of
India is awaited in this regard.

Part-time Chairman

Pursuant to the approval of the Reserve Bank of India,
Mr. Navin Kumar Maini (DIN: 00419921) is acting as
Part-time Chairman of Capital Small Finance Bank
Limited w.e.f. April 24, 2022, and was re-appointed as
Part-time Chairman of the Bank till January 29, 2027.

Retirement/Appointment of Directors in compliance
to Section 10(2A)(i) of the Banking Regulation Act,
1949

Mr. Mahesh Parasuraman (DIN: 00233782), Nominee
Director of Amicus Capital Private Equity I LLP and
Amicus Capital Partners India Fund I, resigned from
the Board of the Bank on August 14, 2025, due
to his increased professional commitments and
responsibilities.

Mr. Dinesh Gupta (DIN: 00475319), Non-Executive
Non-Independent Director, resigned from the Board
of the Bank on August 14, 2025, due to his increased
professional commitments in the legal field and his
growing involvement in family business.

During the year under review, Mr. Dinesh Gupta and
persons related to him (Promoter group) of the Bank
were re-classified from the 'Promoter/Promoter
Group' category to 'Public' category. Further, the
Bank has received no-objection from BSE Limited
vide its letter No. LIST/COMP/SJ/551/2025-2026
dated November 14, 2025 and from National
Stock Exchange of India Limited vide its letter No.
NSE/LIST/COMP/CAPITALSFB/520/2025-2026,
dated November 14, 2025 for reclassification of
outgoing Promoter group shareholder as Public
Shareholder in accordance with Regulation 31A of the
SEBI Listing Regulations.

Further, Mr. Sham Singh Bains (DIN: 01537844)
Independent Director, retired on November 08, 2025
pursuant to expiry of his second term in term of the
provisions of Act.

Mr. Bhavdeep Sardana (DIN: 03516261) was appointed
as Additional Director (Category: Non-Executive
Non-Independent) on August 04, 2025, and regularised
as Non-Executive Non-Independent Director, liable
to retire by rotation, on the Board of the Bank on
October 23, 2025.

There was no other change in the Board of Directors
of the Bank during the year under review.

Directors Retiring by Rotation

In terms of Section 152 of the Act, Mr. Balbir Singh
(DIN:02284941), Nominee Director being longest in
the office is liable to retire by rotation at the ensuing
Annual General Meeting and being eligible for re¬
appointment, offers himself for re- appointment.

The Board is duly constituted as per the provisions
of the Banking Regulation Act, 1949, the Act, RBI
guidelines for Small Finance Banks and SEBI
Listing Regulations, as may be applicable. As of
March 31, 2026, the Board consisted of 10 Directors,
including 6    Independent    Directors (including

one woman director), 1    Non-Executive Non¬

Independent Director, 1 Nominee Director and
2 Executive Directors.

Certificate of Non-Disqualification of Directors

In terms of Regulation 34(3) read with Schedule V of
the SEBI Listing Regulations, the Bank has obtained
a certificate from Mr. Bunny Sehgal, Proprietor of B.
Sehgal & Associates, Company Secretaries, confirming
that none of the Directors on the Board of the Bank have
been debarred or disqualified from being appointed or
continuing as directors of the companies either by SEBI
or MCA or any other statutory/regulatory authority.
The said certificate is available on the website of the
Bank at https://www.capital.bank.in/investors/yearly-
compliances

Appointments/Resignations of the Key Managerial
Personnel

There was no change in the Key Managerial Personnel
during the year under review. As of March 31, 2026,
and on the date of this report, the following are the
Key Managerial Personnel ('KMP') as per Section
203(1) read with Section 2(51) of the Act and Rule 8
of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014:

-'l

I 29.    Corporate Governance

Corporate governance is the combination of rules,
processes or laws by which businesses are operated,
regulated or controlled and that aim at effective,
transparent, and responsible management of a
company within the applicable statutory and regulatory
structures.

Over the last several years, the external environment
in which public companies operate has become

increasingly complex for companies and shareholders
alike. The increased regulatory burdens imposed on
public companies in recent years have added to the
costs and complexity of overseeing and managing a
corporation's business and bring about new challenges
from operational, regulatory and compliance
perspectives. Many cases of Management failures
and financial crisis have been reported in the finance
industry during the financial year and all these are the
cause of poor corporate governance.

The Bank is committed to upholding the highest
standards of corporate governance and has
formulated a Corporate Governance framework
which ensures timely disclosures and filing of correct
information regarding our financials and performance,
as well as the leadership and governance of the Bank.

The Board is constituted professionally with a strong
commitment to shareholder value, transparency,
accountability, ethical standards and regulatory
compliance. The Bank's governance framework is
structured to ensure that it is managed in the best
interests of all stakeholders, including regulators,
depositors, customers, employees, shareholders, and
others, while maintaining robust risk management and
full compliance with applicable laws and regulations.

The Bank believes that strong corporate governance
is achieved through the adoption of best management
practices, strict adherence to legal and regulatory
requirements, and a firm commitment to transparency
and ethical conduct. Accordingly, the Bank remains
committed to continuously enhancing its governance
and assurance practices by benchmarking them
against global best practices.

The Board's supervisory role is independent and
separate from the executive management and the
Board Committees. The composition of the Board of
Directors as of March 31, 2026, comprised a majority
of Independent Directors and this is a great step of the
Bank towards better corporate governance.

The Board presently comprises ten Directors and it
provides a diverse combination of professionalism,
knowledge, expertise and experience as required
in the banking business for long-term success. The
Board has six Independent Directors constituting
more than one-half of its total membership strength
(including one woman Director), one Nominee Director,

under SEBI Listing Regulations, is annexed as
Annexure-C and forms an integral part of this Annual
Report.

Business Responsibility and Sustainability Report

The Bank does not fall in top 1000 listed entities
based on the market capitalisation. Hence, Business
Responsibility and Sustainability Report is not
applicable.

Code of Conduct for Directors and SMPs

In accordance with Regulation 17(5) of SEBI Listing
Regulations, the Bank has adopted the Code of
Conduct for Directors and Senior Management
Personnel ('SMPs'). The code of conduct sets forth
the guiding principles for orderly and fair conduct by
Directors and SMPs. All Directors and SMPs have
affirmed compliance with the code for the FY26 and
a declaration to this effect signed by the MD & CEO
forms part of Corporate Governance Report annexed
with Board's Report as Annexure-C. The Bank's Code
of Conduct for Directors and SMPs is disclosed on the
website of the Bank at https://www.capital.bank.in/
investors/secreterial-policies

^11 30.    Meeting of Independent Directors

_>

As per the requirement of the Section 149(8) read with Schedule IV of Act (Code for Independent Directors) and Regulation
25 of SEBI Listing Regulations, the Independent Directors of the company shall hold at least one meeting in a financial
year, without the attendance of Non-Independent Directors and members of management.

During the year under review, two meetings of the Independent Directors of the Bank were held, i.e., first meeting held
on December 30, 2025 and second meeting held on March 18, 2026, which were exclusively attended by Independent
Directors.

>

^11 31.    Details of General Body Meetings

A. Location and time of last three Annual General Meetings (AGMs) and details of special resolutions passed thereat:

ballot voting process fairly and transparently. The
Scrutiniser submits his report to the Company
Secretary & Compliance Officer as authorised by
the Chairman of the Board after the completion
of the scrutiny of the e-voting results. Considering
the results and report of the Scrutiniser of the
Postal Ballot, the resolutions were considered
approved. The necessary intimations as required
under the applicable provisions of SEBI Listing
Regulations were submitted to the Stock

Exchanges and post declarations of the results,
the same are displayed on the website of the
Bank and e-voting service provider.

C. Extraordinary General Meeting during the FY26

No Extraordinary General Meeting ('EGM') of the
Shareholders was conducted during the FY26.

-'l

^11 32.    Corporate Social Responsibility

_>

As a responsible corporate entity, Capital Small Finance
Bank Limited strongly believes in the idea of paying back
to the society in order to run a sustainable business.
Accordingly, in Capital Small Finance Bank Limited,
Corporate Social Responsibility ('CSR') is considered
as an important function. Our CSR activities include
encouraging education, commitment to environment
stewardship, inclusion & empowerment, promoting
sports, ready relief, eradicating hunger and improving
health care. We are also managing education centres
for underprivileged children.

The Bank's CSR policy and programmes are in
accordance with Section 135 of Act, the Bank takes
multiple initiatives in the areas of education, green
belt, environment, rural sports development, inclusion
& empowerment and health. During the year under
review, the Bank provided support to flood relief victims.
Corporate Social Responsibility Policy of the Bank
can also be accessed from the website of the Bank
https://www.capital.bank.in/investors/secreterial-
policies

The Annual Report on CSR activities as required to be
given under Section 135 of the Act and Rule 8 of the
Companies (Corporate Social Responsibility Policy)
Rules, 2014 has been provided as Annexure-D which
forms part of the Board's Report.

The Bank undertakes its Corporate Social Responsibility
activities through various implementing agencies and
'1,12,19,244.23 has remained unspent as some of the
Ongoing Projects has not been fully matured.

Further, as approved by the CSR Committee, the
Capital Foundation has transferred the said unspent
amount to Unspent Corporate Social Responsibility
Account in accordance with the provisions of Section
135(6) of the Act.

Impact Assessment of CSR Projects

The Bank's average CSR obligation in the three
immediately preceding financial years does not exceed
'10 crores. Hence, the Bank is not required to undertake
impact assessment, through an independent agency
in terms of Rule 8(3)(a) of the Companies (Corporate
Social Responsibility Policy) Rules, 2014.

II 33.    Green Initiatives

) _/

The Ministry of Corporate Affairs ('MCA') has taken a
'Go Green Initiative in the Corporate Governance' by
allowing paperless compliances by companies. The
applicable provisions of Act read with rules made
thereunder permits circulation of financial statements,
and notices, among others, to Shareholders through
electronic mode as per the records of the Bank's
Registrar and Share Transfer Agent or as provided by
the Depositories.

In view of the same, the Bank hereby requests all the
stakeholders to get their Email address registered
with the Bank so as to get the Annual Reports at the
Email IDs eliminating the usage of paper mode.

Also, registering your Email address with the Bank will
ensure that the Bank can directly connect with you and
no important communication from the Bank's side will
be missed by you as a shareholder of the Bank.

^

II 34. Vigil Mechanism

The Bank values reliability, fairness and equality which
form the foundation for all the decisions taken and
believes in conducting its affairs in a fair manner
to build customer trust and confidence and ensure
customer delight. The Bank encourages its employees,
all stakeholders and members of general public, who
have concerns about suspected misconduct, to come
forward and express these concerns without fear
of retaliation or unfair treatment. A Whistle-Blower
Policy in banking institutions is crucial for fostering
transparency, accountability, and ethical behaviour
within the organisation.

The Bank has implemented a Whistle-blower Policy,
which is periodically reviewed, which provides
safeguard against victimisation of employees and
Directors. The Policy allows employees to raise
concerns on Reportable Matters (as defined in the
policy) such as breach of Bank's Code of Conduct,
fraud, bribery, corruption, employee misconduct,
illegality, health & safety, environmental issues
and wastage/misappropriation of bank funds/
assets, among others, and also provides for direct
access to the Ombudsperson, i.e., Chairman of the
Audit Committee of the Bank, in exceptional cases.
The policy is available on the Bank's intranet and
website. The Whistle-blower Policy complies with all
the requirements of Vigil mechanism as stipulated
under Section 177 of the Act and Regulation 4(2)(d)
and Regulation 22 of the SEBI Listing Regulations,

and other applicable laws, rules and regulations,
as applicable. The updated Whistle-blower Policy
is also available on the website of the Bank at link
www.capital.bank.in.

The Bank has also appointed Chief of Internal
Vigilance to ensure compliance with all the internal
guidelines issued by the Bank from time to time.

The functioning of the Policy is reviewed by the Audit
Committee from time to time. The Audit Committee
reviews the whistle-blower complaints on quarterly
basis. During the review period, no concern has been
reported in accordance with the said policy and none
of the complainants has been denied access to the
Audit Committee of the Board.

>

Loans, Guarantees or Investments in
Securities

Pursuant to Section 186(11) of the Act, the provisions
of Section 186 of Act, except sub-section (1), do not
apply to any loan made, guarantee given or security
provided or investment made by a banking company
in the ordinary course of business. Therefore, the said
provision is not applicable to the Bank.

->

I The details of application made or any
proceeding pending under the Insolvency
^ and Bankruptcy Code, 2016 (31 of 2016)
during the year along with their status as
at the end of the financial year
_/

During the year under review, no application was made
or any proceeding is pending against the Bank under
the Insolvency and Bankruptcy Code, 2016.

-'l

I The details of difference between amount
of valuation done at the time of one-time
? settlement and the valuation done while
taking loan from the banks or financial
institutions along with the reason thereof
_>

There was no instance of one-time settlement with any
other bank/financial institution during the year under
review.

Particulars of Contracts or Arrangements
with Related Parties

All related party transactions conducted during the
year under review were in ordinary course of the
business of the Bank and carried out at arm's length
basis. During the year under review, there were no
material significant transactions with related parties
(Promoters, Directors, Key Managerial Personnel or
other persons) that could potentially create conflict
of interest with the interest of the Bank. The Audit
Committee has accorded omnibus approval for related
party transactions which are of a repetitive nature and
entered in the ordinary course of business. Further,
the Audit Committee of the Bank reviewed details of
all related party transactions entered by the Bank on
quarterly basis.

As per Section 134(3)(h) of the Act read with Rule
8(2) of the Companies (Accounts) Rules, 2014, there
are no related party transactions that are required to
be reported in Form AOC-2. The requisite disclosure
has been made under Schedule 18 of the note no. 12
forming part of audited financial statements for the
financial year ended March 31, 2026.

The Materiality Policy for Related Party Transactions
as approved by the Board can be accessed on the
website of your Bank at https://www.capital.bank.in/
investors/secreterial-policies

Disclosure pursuant to Section 197(14)
of the Act

The Bank does not have any holding or subsidiary
company, therefore no disclosure is required to be
made pursuant to the provisions of Section 197(14) of
the Act and as per the relevant rules thereunder.

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Disclosure pursuant to Section 177(8) of
II ' the Act

The composition, role and functions of Audit Committee
of Board is provided in Corporate Governance Report,
which forms part of this Board's Report.

During FY26, the Board has accepted all the
recommendations made by Audit Committee of Board
and hence, no further explanation in the same regard is
required to be provided in this Report.

-'l

II 41.    Change in Nature of Business

Pursuant to the relevant provision of Rule 8(5) of the
Companies (Accounts) Rules, 2014, there were no
changes in the nature of Business of the Bank during
FY26.

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II 42. Auditors and Auditors' Report
Statutory Auditors and Audit

In consonance with the 'Guidelines for Appointment of
Statutory Central Auditors (SCAs)/Statutory Auditors
(SAs) of Commercial Banks (excluding RRBs), UCBs
and NBFCs (including HFCs)' dated April 27, 2021,
issued by RBI, Banks are required to appoint Statutory
Auditors for a continuous period of three years, subject
to the audit firms meeting eligibility criteria annually
and obtaining RBI approval on an annual basis.

Post filing the casual vacancy and audit for the
FY24, M/s SCV & Co. LLP (FRN 000235N/N500089),
Chartered Accountants were appointed as Statutory
Auditors of the Bank for the period of two years effective
from FY25, which was approved by shareholders of the
Bank in 25th Annual General Meeting held on August
30, 2024.

The said Auditors have provided audit report on the
financial statements for the FY26. No qualifications,
reservations or adverse remarks are reported by
Statutory Auditors of the Bank, in their Audit report.
Information referred to in the Auditors' Report are self¬
explanatory and do not call for any further comments.

Further, in accordance with Section 143(12) of the Act,
the auditors have not identified any instances of fraud
within your Bank by its officers or employees.

The said Statutory Auditors have confirmed their
eligibility in adherence to Section 141 of the Act and
the guidelines issued by the RBI from time to time.
Moreover, pursuant to the relevant provisions of SEBI
Listing Regulations, the Statutory Auditors have also
confirmed their adherence to the peer review process
as mandated by the Institute of Chartered Accountants
of India ('ICAI'). The Statutory Auditors also possess
a valid certificate issued by the Peer Review Board of
ICAI, ensuring their competence and professionalism
in their field.

As the tenure of three years of M/s SCV & Co.
LLP as Statutory Auditors is going to complete
as per Guidelines for Appointment of Statutory
Central Auditors (SCAs)/Statutory Auditors (SAs)
of Commercial Banks (excluding RRBs), UCBs and
NBFCs (including HFCs), the Board of Directors, on the
recommendation of the Audit Committee, in its meeting
held on April 29, 2026, approved the appointment of
G S A & Associates LLP (FRN 000257N/N500339) as
Statutory Auditor of the Bank for the period of three
(03) years effective from FY27, which was proposed
for the approval of the Shareholders of the Bank in 27th
Annual General meeting scheduled to be held on June
25, 2026. The said appointment shall also be subject
to approval of Reserve Bank of India ("RBI") every year.

The Bank has received the approval of Reserve Bank
of India ('RBI') vide its letter dated April 16, 2026,
for the appointment of M/s. G S A & Associates LLP
(FRN 000257N/N500339), Chartered Accountants as
Statutory Auditors of the Bank for FY27.

Secretarial Auditor

Pursuant to the provisions of Section 204 of the Act
and the Companies (Appointment and Remuneration
of Managerial Personnel) Rules, 2014 and Regulation
24A of Listing Regulations, the Bank appointed M/s
Deepak Arora & Associates, Practicing Company
Secretaries through its partner Mr. Deepak Arora (FCS
No. 5104 and COP No. 3641) as Secretarial Auditor
for five years w.e.f. FY26 to conduct Secretarial Audit
of the Bank. M/s Deepak Arora & Associates have
confirmed their eligibility as Secretarial Auditors of the
Bank for FY27 under the provisions of Section 204 of
the Act.

The Secretarial Auditors have not reported any
instance of fraud in accordance with Section 143(12)
of the Act during the year under review and their report
does not contain any qualification, reservation, or
adverse remark for FY26. The Secretarial Audit Report
for FY26 in form MR-3 is annexed with Board's Report
as Annexure-E.

Information referred to in the Secretarial Auditors'
Report are self-explanatory and do not call for any
further comments.

z^^—->

II 43.    Cost Audit

Being the Banking Company, the Bank is not required
to appoint a Cost Auditor.

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Annual Secretarial Compliance Report

The Bank has undertaken an audit for FY26 for
all applicable compliances as per SEBI Listing
Regulations and circulars/guidelines issued
thereunder. The Annual Secretarial Compliance
Report pursuant to Regulation 24A of SEBI Listing
Regulations will be submitted to the Stock Exchanges
within 60 days of the end of the financial year.

-'I

Familiarisation Programme for

Independent Directors

The Bank's Independent Directors are eminent
professionals with several decades of experience in
Banking and financial services industry, technology,
finance, governance and management areas and are
fully conversant with the business of the Bank. The
familiarisation programme helps ensure that Directors
stay up to date with the Bank's business, regulatory
environment, and overall operations. This, in turn,
enables them to make well-informed decisions in the
best interests of the Bank and its stakeholders.

In line with Regulation 25(7) of SEBI Listing
Regulations and RBI guidelines, the Bank organised
presentations, deep-dive sessions, and discussions
during Board and Committee meetings throughout
the year. These sessions covered key aspects such as
annual plans and strategies, compensation approach,

the impact of inflation, non-financial risks, customer
service framework, risk management, priority sector
lending, liquidity, and new regulatory developments.
These interactions were designed to help Independent
Directors gain a deeper understanding of the Bank,
its management, business operations, and overall
functioning, enabling them to effectively carry out their
roles and responsibilities and contribute meaningfully
to the Bank's sustainable growth.

Further, updates on key regulatory developments
including RBI and other regulatory circulars/
notifications/guidelines, among others, are provided to
directors on regular basis at the Board and Committee
meetings to keep the Directors informed about the
dynamic regulatory environment and its impact.
The details thereof are disclosed in the Report on
Corporate Governance annexed with Board's Report as
Annexure - C and on the website of the Bank under
https://www.capital.bank.in/investors/secreterial-
policies

-'l

Management Discussion and Analysis

Report

The Management Discussion and Analysis Report of
the financial conditions and results of operations of
the Bank for the year under review, as required under
Regulation 34(2)(e) of SEBI Listing Regulations, is
being given separately and forms a part of the Annual
Report.

-'l

Ý    48.    Compliance with Secretarial    Standards

The Bank is in compliance with the applicable
Secretarial Standards, i.e., SS-1 and SS-2 relating
to Meetings of the Board of Directors and General
Meetings respectively issued by the Institute of
Company Secretaries of India on regular basis.

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Compliance with Maternity    Benefit    Act,

HI    .    1961

The Bank has complied with the applicable provisions
related to Maternity Benefit Act, 1961.

Ý    50.    Investor Relations

The Bank interacted with investors and analysts
through one-on-one meetings, conference calls, and
regular quarterly meetings during the year. Earnings
call transcripts/recording of the meeting on quarterly/
event-based meetings are posted on the website of the
Bank.

II 51.    Prevention of Insider Trading

In compliance with the provisions of Securities
Exchange Board of India (Prohibition of Insider
Trading) Regulations, 2015 ('SEBI (PIT) Regulations'),
the Board has adopted a Code of Conduct to regulate,
monitor and report trading by Designated Persons
to preserve the confidentiality of price sensitive
information, to prevent misuse thereof and regulate
trading by designated persons. It prohibits the dealing
in the Bank's shares by the promoters, promoter group,
directors, designated persons and their immediate
relatives, and connected persons, while in possession
of unpublished price sensitive information in relation
to the Bank and during the period(s) when the Trading
Window, to deal in the Bank's shares is closed.
Pursuant to the above, the Bank has put in place
adequate and effective system of internal controls to
ensure compliance with the requirements of the SEBI
(PIT) Regulations. The code is available on the Bank's
website at https://www.capital.bank.in/investors/
secreterial-policies

The Board of Directors also formulated a code
of practices and procedures for fair disclosure of
unpublished price sensitive information containing
policy for determination of 'legitimate purposes' as
a part of this Code, which is available on the Bank's
website at https://www.capital.bank.in/investors/
secreterial-policies

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Anti-Bribery and Anti-Corruption Policy

The Bank upholds a strict 'zero-tolerance approach'
towards bribery, corruption, and unethical practices
and is committed to conduct all its dealings and
operations with professionalism, fairness, and
integrity. In alignment with this commitment, the Bank
implemented an Anti-Bribery and Anti- Corruption
Policy that has been approved by the Board. This policy
outlines the fundamental principles for conducting
Banking business in a transparent, honest, and ethical
manner. The policy can be accessed on the website
of the Bank at https://www.capital.bank.in/codes-and-
policies

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II 53.    Internal Audit

The Bank's Internal Audit function provides an
independent view to its Board of Directors and Senior
Management on the quality and efficacy of the internal
controls, risk management systems, governance
systems and processes in place on an ongoing basis.

This is primarily provided to ensure that the business
and non-business functions are following both internal
and regulatory guidelines. In line with the RBI's
guidelines on Risk Based Internal Audit (RBIA), the
Bank has adopted a risk based internal audit policy.

The Risk Based Internal Audit policy has been designed
factoring regulatory guidelines and international best
practices. The policy has a well-defined architecture
for conducting Risk Based Internal Audit which
articulates the audit strategy in terms of a concerted
focus on strategic and emerging business risks. These
inputs form a key step in the identification of the audit
universe for the audit planning exercise. The audit
frequencies are in congruence with the risk profile of
each unit to be audited. The scope of RBIA includes
examining the adequacy and effectiveness of internal
control systems, external compliances, and evaluating
the risk residing within the audit entities. Further to
augment the internal audit function, concurrent audit,
off-site audit, and thematic & snap audit reviews have
been integrated into the internal audit process to
make the function more robust. The Audit function
recommends improvements in operational processes,
design elements, policies, as part of audit report
recommendations.

The Internal Audit function of the Bank operates
independently under the supervision of the Audit
Committee of the Board, that reviews the efficacy
and performance of the internal audit function,
effectiveness of the internal controls laid down by
the Bank and compliance with internal and regulatory
guidelines and provide guidance and directions.

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^11 55. Acknowledgment

The Board of Directors is grateful to the Government of
India, Reserve Bank of India, various State Governments,
SEBI, IRDA and all the regulatory authorities in India
and overseas for their valuable guidance, support and
cooperation.

The Directors record their sincere gratitude to the Bank's
shareholders, esteemed customers and all other well-
wishers for their continued patronage. The Directors
express their appreciation for the contribution made
by every member of the staff in ensuring high level of
growth that the Bank has achieved during the year.

The Board also places on record its gratitude to the
Shareholders, Bankers, Customers, Suppliers and
other stakeholders who have extended their valuable
sustained support, co-operation and encouragement.

The Board would also like to thank BSE Limited,
National Stock Exchange of India Ltd., National
Securities Depository Limited, Central Depository
Services (India) Limited, Debenture Trustee, Registrar
& Share Transfer Agent, Vendors and Service Providers
for their continued support & co-operation.

The Directors wish to express their gratitude to
Investment Banks & rating agencies for their
wholehearted support. The Directors look forward
to their continued contribution in realisation of the
corporate goals in the years ahead. We wish to apprise
our worthy members who have placed their trust and
confidence in the Bank that Capital Small Finance
Bank will venture to strive hard to take long strides
ahead with freshly instilled energies.

For and on behalf of the Board of Directors

Sd/-

Sarvjit Singh Samra

Managing Director & CEO
DIN: 00477444

Sd/-

Gurpreet Singh Chug

Place: Jalandhar    Independent Director

Date: April 29, 2026    DIN: 01003380

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II 54. Awards and Recognitions