BASIS OF ACCOUNTING AND PREPARATION OF FINANCIAL STATEMENTS

The financial statements of the company have been prepared in accordance with the generally accepted accounting principles in India (Indian GAAP). The company has prepared these financial statements to comply in all material respects with the accounting standards notified under section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 and the Companies (Accounting Standards) Rules, 2016 (as amended). The financial statements have been prepared on an accrual basis and under the historical cost convention. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.

The Company follows the applicable guidelines and directions, including prudential norms for income recognition, asset classification and provisioning as prescribed by the National Housing Bank (“NHB”).

Contingent Liabilities not provided for:-

1.1 (i) Claims against the Company not acknowledged as debts Rs. 0.21 crore (March 31, 2017- Rs.0.21 crore)

(ii) Disputed Income tax Liability Rs.7.33 crore (March 31 2017- Rs. 5.48 crore)

1.2 Commitment towards sanction pending disbursement including part disbursement as on March 31, 2018 - Rs. 486.91 crore (March 31, 2017- Rs. 381.46 crore).

1.3 Pending Capital Commitments: Pending capital commitments as on March 31, 2018 is Rs.0.55 crore (March 31, 2017-Rs.0.25 crore).

1.4 The following disclosures have been given in terms of the National Housing Bank’s notification no. NHB.HFC.CG-DIR.1/ MD&CEO/2016 dated February 9, 2017: 25.4.4

Derivatives -NIL

Forward rate agreement (FRA) / Interest rate swaps (IRS) - NIL Exchange traded interest rate (IR) Dreivative - NIL Disclosure on Risk exposure in Derivatives - NA

1.4.1 Securitisaion - NIL

Details of Financial Assets sold to Securitisation / Reconstruction Company for Asset Reconstruction - NA Details of Assignment transactions undertaken by HFCs - NA Details of non-performing financial assets purchased / sold - NA

1.4.2. Details of financing of parent company products : NIL

1.4.3. Details of Single Borrower Limit (SGL) / Group Borrower Limit (GBL):

The company has not exceeded limit prescribed by National Housing Bank for Single Borrower Limit (SGL) and Group Borrower Limit (GBL).

1.4.4. Unsecured Advances:

The Company has not financed against intangible securities such as rights, licenses, authority etc as collateral security.

1.4.5. Registration obtained from other financial sector regulaors :

The Company has not obtained registration from any other financial sector regulator.

1.4.6. Disclosure of Penalities imposed by NHB and other regulators :

Based on inspection observations made by the NHB, with reference to the position as of 31-03-2016, the Company has recalculated Net Owned Fund (NOF) and Capital Adequacy Ratio (CAR) as at 31-03-2016. The reported and revised NOF/CAR as at 31-03-2016 along with impact are given below-

The difference was attributed to additional provisioning due to reclassification of advances, reversal of interest income, netting the provisions created towards standard advances and consequent assignment of risk-weights. Pursuant to the inspection observations with reference to the financial position of the Company as at 31-03-2016, National Housing Bank levied penalty aggregating to Rs.35,000/- and GST thereon, with respect to the contraventions on (i) Income Recognition (Para-22); (ii) Assets Classification (Para-27); (iii) LTV Norms (Para-27A) (iv) Assigning wrong risk-weight resulting in incorrect CAR computation (Para-30); (v) Shortfall in Provisioning ( Para-28) of the Housing Finance Companies (NHB) Directions 2010 and also (vi) disbursement of loans on the property for which the approved plan was not available (Policy Circular No.18) (vii) Guidelines on Fair Practices Code.

1.4.7 Related Party Transactions:

(a) Disclosures in terms of Accounting Standard 18 “Related Party Disclosure” (AS 18) are given below:-List of related parties:

Repco Bank Ltd., Promoter

Repco Micro Finance Ltd., Associates

Key Management Personnel

Shri R. Varadarajan Managing Director

Shri I? Natarajan Executive Director(upto 31.08.2016)

Shri V Raghu Executive Director (upto 31.05.2017)

Shri K. Ashok Executive Director (upto 31.10.2017)

Shri T. Karunakaran Chief Financial Officer

Shri K. Prabhu Company Secretary and Compliance Officer The Company’s related party balances and transactions are summarized as follows:

1.4.8 Net Profit or Loss for the period, prior period items and changes in accounting policies:

During the year (a) no prior period items occurred which has impact on Statement of Profit and loss, (b) no change in Accounting policy, there were no circumstances (other than income recognition on Non performing advances) in which revenue recognition has been postponed pending resolution of significant uncertainty and there is no withdrawal from reserve fund.

1.4.9 Revenue Recognition

There are no circumstances in which revenue recognition has been postponed by the Company pending the resolution of significant uncertainties.

1.4.10 Consolidated Financial Statements (CFS)

RHFL has no subsidiary Company, hence requirement of CFS involving subsidiary Company is not applicable. However asscoiate’s financials is consolidated and reported.

Note:

1. The Company’s policy is to provide provisions towards NPA as per NHB guidelines. However by way of prudence and abundant caution, Company has provided additional provision over and above the NHB guidelines and has maintained cumulative NPA provision of Rs.157.17 crores (March 31, 2017 - Rs. 110.11 crores)

2. The total outstanding amount mean principal accrued interest other charges pertaining to loans

3. The Category of Doubtful Assets will be as under:

1.4.11 Draw Down from Reserves

Not applicable since the company has not drawn down any amount from reserves in the current year as well as previous year.

Concentration of Public Deposits, Advances, Exposures and NPAs.

1.4.12 Concentration of Public Deposits (for Public Deposit taking/holding HFCs):

Not applicable, since the company has not accepted any deposits from the public.

1.4.13 Overseas Assets : The company does not have any overseas assets.

1.4.14 Off-balance sheet SPVs sponsord (which are required to be consolidated as per accounting norms):

The company does not have any off balance sheet Special Purpose Vehicle (SPV) which requires to be consolidated as per accounting norms.

Disclosure of Compliants (As certified by the management)

1.5 In the opinion of the Board, all Assets other than Fixed Assets and Non current Investments have a realizable value in the Ordinary course of business which is not different from the amount at which it is stated with the exception of Non performing advances for which requisite provision has been made in accordance with the NHB Guidelines.

1.6 There are no Micro, Small and Medium Enterprises (MSME) to whom the Company owes dues, which are outstanding for more than 45 days as at 31-03-2018. This information as required to be disclosed under the Micro, Small and Medium Enterprises Development Act, 2006 has been determined to the extent such parties have been identified on the basis at information available with the Company.

1.7 Expenditure incurred in foreign currency: Towards Travelling Expenses - Rs. 0.004 crore (March 31, 2017 -Rs.0.04 crore) and Towards Other borrowing costs - Rs.2.82 crore (March 31, 2017 - Nil) . There are no Earnings in foreign currency during the current year as well as in the previous year.

1.8 There are no amounts to be reflected under payable to Investor Protection Fund.

1.9 In accordance with the Accounting Standard on ‘Leases’ (AS 19), the following disclosure in respect of operating leases are made:

The Company has taken retail office premises under operating lease/ leave and license agreements for a period ranging upto 120 months. These are generally cancellable and have no specific obligation for renewal. The total lease payments for current year amounts to Rs.7.41 crores (March 31, 2017 - Rs.6.22 crores) which is recognised in the Statement of Profit and Loss under ‘Rent Expenses’ under note 23.

Segment reporting-

1.10 The main business of the Company is to provide long term loan financing for acquisition / construction of Residential purposes in India. Accordingly, there is no separate reportable segment as per Accounting Standard -AS-17 “Segment Reporting”, as the company has only one Geographical and Business segment.

1.11. EMPLOYEE BENEFITS

i. Defined Contribution Plan:

Company Contribution to

i. Provident fund : Rs. 2.77 Crores (March 31, 2017- Rs. 2.53 Crores)

1.12. Employee Stock Option Scheme-2013 (ESOP-2013):

During the year 2013-14 the Company instituted Employee Stock Option Scheme 2013 (ESOP-2013). The Board of Directors and the share holders approved the scheme during the year 2013-14. As on 31-03-2016 the company has following Employee stock options schemes, the features of the same are as follows:

The Company has adopted the intrinsic value method in accounting for employee cost on account of ESOP Based on such valuation, the difference between the Market price on the date of grant and exercise price is accounted as Deferred Employee compensation cost and the same is amortized over the vesting period. Accordingly sums aggregating to Rs. Nil/- (March 31, 2017- Rs. 4,81,66,267/-) is recognized as expenses on employee stock option scheme.

The Black-Scholes Model have been used to derive the estimated value of the stock option granted, if the fair value method to account for the employee share based payment plans were to be used. The estimated value of each stock options and the parameters used for deriving the estimated value of stock option granted under the Black-scholes Model is as follows:

Had the compensation cost for the stock options granted under ES0S-2013 (Tranche- I) and ESOS - 2013 (Tranche - II) been determined on fair value approach, the company’s profit after tax and earnings per share would have been as per pro-forma amount indicate below:

1.13 Expenditure towards Corporate Social responsibility:

The gross amount required to be spent by the company during the year 2017-18 as CSR expenditure under section 135 of the Companies Act of 2013 is Rs.4.53 Crores/-(March 31, 2017-Rs. 3.73 Crores) . The amount is required to be spent on activities qualifying as CSR expenditure as per schedule VII of the Companies Act 2013.

During the financial year 2017-18 the company has spent sums aggregating to Rs.0.14 crore (Rs.0.19 crore) towards CSR activities. The details of disclosure as per the Guidance issued by the Institute of Chartered Accountants of India is as follows:-

(a) Gross amount required to be spent by the Company during the year Rs.4.53 Crores/-

1.14 The figures of the previous year have been audited by a firm of chartered accountants other than S.R. Batliboi & Associates LLP. Previous year’s figures have been regrouped / reclassified wherever necessary to correspond with the current year classification / presentation.