ANNUAL REPORT 2019-20 Creating Value the sustainable way Microbanking Clean Energy Finance Agri Lending MSME Our Stories Inside Quantitative Performance Corporate Overview 01 ` 7,028.38 cr Deposits 01 Creating Value – The Sustainable Way 02 Solid Foundation, Strong Vintage 04 Driving Inclusiveness and Progress for All ` 960.28 cr 05 The ESAF SFB Journey CASA 06 Message from the Chairman 08 Message from the Managing Director & CEO 10 Our Board and Leadership Team ` 12 Corporate Information 9,469.97 cr 13 Growing our Footprint Total Assets 14 Our Consistent Performance Trajectory 16 Our Ways of Banking 24 Sustainable Outcomes of our Consistent Efforts ` 6,606.51 cr 26 Transforming Lives and Communities Gross Advances 30 Leveraging Technology and Customer Data Analytics 32 Not Just Lending, A new way of life 34 Our Human Capital 36 Giving Back to the Community 0.64% Net NPA Ratio Statutory Reports 02 64.91% 41 Management Discussion & Analysis Cost to Income Ratio 58 Notice 63 Directors’ Report 105 Report on Corporate Governance Financial Statements 03 113 Independent Auditors’ Report & Financial Statements To view this report online, Please visit: www.esafbank.com Creating Value the sustainable way ESAF Small Finance Bank is committed to serving the unserved and underserved segments of the society, including those in the remotest corners of India, and give them their rightful access to last-mile banking. By providing financial access to customers, many of whom have no credit history, we emerge as a Bank that enables economic growth and creates a positive social impact. We are, therefore, the key enablers in broadening and deepening of financial services till the bottom of the pyramid. With this, we are furthering the financial inclusion agenda and bringing more people into the formal banking channel, infusing sustainability in their lives, and thereby, to the business as a whole. By synergising a Triple Bottom Line approach (People, Planet and Prosperity), we create value for all our stakeholders – in a sustainable way. Every single day, we work towards becoming India’s leading social bank by providing financial inclusion, responsible and supportive banking, and tools for economic development to those whose upliftment is an urgent need for the whole country. With a focus on the underserved sections of the society, we continue Fighting the Partiality of Prosperity. Solid Foundation, Strong Vintage. Rich Legacy of more Driving Financial Delivering a than a Quarter of a Inclusion Comprehensive Century Our goal is to become one Product Suite Along with our promoters, of India’s leading banks in Our Banking Outlets provide we have a history of more the microfinance sector that a full range of banking than 25 years of primarily offers equal opportunities services including Savings serving the unserved and through universal financial and Current Accounts, Fixed underserved, with a focus on access and inclusion and Deposits, Recurring Deposits, financial inclusion. Today, we livelihood and economic Micro-Finance Loans, Retail are one of the leading Small development. We remain Loans, and also Insurance Finance Banks in India, in focussed on providing Savings Products. As at March 31, terms of yield on advances, and Credit solutions and a 2020, we operate in 17 states AUM growth rate and share of plethora of banking services and 1 union territory across retail deposits. We are the to our customers, making a India, with operations in 454 5th Scheduled Commercial meaningful contribution in Banking Outlets. Bank headquartered in the lives and communities Kerala and the first private through our infrastructure, bank to have received a products, services, and banking licence in the State execution of doorstep since independence. delivery of services. 02 Annual Report 2019-20 Our Product Verticals Vision Corporate Overview To be India’s leading social bank Micro- Retail Retail Agri- MSME that offers equal opportunities banking Assets Liability Lending for the whole society through universal access and financial deepening, thus promoting financial inclusion, livelihood, and economic development Multiple Channels of Customer Engagement as a whole. Banking Digital Business Our Outlets Channels Correspondents Mission Driven by Our Triple Bottom Line Strategy To provide responsive banking services to the underserved and PEOPLE unserved households in India, facilitated by customer-centric Social impact on lives and communities products, high-quality service through financial and innovative technology. enablement Our Brand PROSPERITY PLANET Promise Economic Environmental value created impact of the Bank’s actions To deliver the Joy of Banking through personalised, accessible, safer and responsive services. 03 Driving Inclusiveness and Progress for All Comprehensively serving and creating EMPLOYEES value for: CUSTOMERS Customers • Delivering customised solutions to a base of 40.74 Lakh Customers, including 36 Lakh women customers, in 17 states and one union territory • Serving Customers through 454 Banking Outlets & 311 ATMs • 24x7 customer care centre COMMUNITIES • SMS/ missed call banking Employees • Nurturing a passionate team of 3,337 employees Communities • Over 40 Lakh lives impacted through social initiatives and financial inclusion drives Growing Number Providing Services at Growth in ATM of Customers Business Correspondent Numbers Outlets 136 311 40,74,086 226 32,75,881 25,03,724 104 34 14,35,792 0 0 12 04 2017 2018 2019 2020 2017 2018 2019 2020 2017 2018 2019 2020 Annual Report 2019-20 The ESAF SFB Journey 2015 2016 2017 2018 ESAF Microfinance ESAF Small Finance ESAF launches ESAF Government of India receives in-principle Bank receives licence Small Finance Bank, the picks ESAF for Atal approval for setting up to commence banking first bank from Kerala Pension Yojana of Small Finance Bank operations from RBI since Independence from the RBI Corporate Overview 2018 2018 2018 2018 ESAF Small Finance Bank receives RBI ESAF Small Finance Prof. Muhammad ESAF among the approval for NRI Bank opens Yunus, Nobel Laureate, finalists to receive the operations 100 new Retail Banking visits ESAF Small prestigious European Outlets Finance Bank Microfinance Award 2018 2018 2018 2019 ESAF Small Finance ESAF Small Finance ESAF Small Finance ESAF Small Finance Bank becomes the Bank wins Bank receives Bank launches the member of GABV PFRDA Award Scheduled Bank status ‘Humanoid Robot’ named ‘EIDA’ 2019 2019 2020 2020 ESAF Small Finance ESAF Small Finance ESAF Small Finance Business Crosses Bank opens 222 new Bank hosts GABV Asia Bank submits the ` 10,000 Crore Retail Banking Outlets Pacific Meet DRHP 05 Living our Values, Steering our Passion. Message from the Chairman Our strategy is to grow sustainably and responsibly, with a focus on inclusiveness and progress for all. Dear Shareholders, It is my privilege to present before A solid foundation, a customer- you the Annual Report of your centric business model, a deep Bank for the year ended understanding of the segment 31st March, 2020. Ever since the we serve, and a dedicated team beginning of its journey in 1992 have been our key differentiators. as an NGO, ESAF has worked Today, we are a Small Finance Bank consistently for over two decades serving our customers holistically for the unserved and underserved, for all their financial requirements, helping in transforming the lives reaching them even in the of over 40 Lakh people. Having remotest corners of India, and become a Small Finance Bank in promoting financial inclusion and 2017, we have now completed financial literacy. three years of our banking 06 operations. Annual Report 2019-20 40.74 Lakh 454 ` 6,606.51 cr ` 7,028.38 cr Customers Banking Outlets Gross Advances Deposits Your Bank Today Committed to Triple to sharp focus the need for protecting Our strategy is to grow sustainably Bottom Line the lives and livelihood of the people across the globe and India is no and responsibly, with a focus on We follow a social business strategy exception to this. As a responsible inclusiveness and progress for all. We with a Triple Bottom Line approach, and proactive institution, your Bank remain proud of our achievements emphasising on people, planet has fully supported the initiatives during the past three years. We and prosperity. As we help our of the Government/s in fighting this have expanded our offerings to customers grow, we also follow a pandemic. We have extended relief varied products and solutions across single-minded approach to achieve for loan repayments, introduced Microbanking, Assets and Liability social, environmental and economic fresh loans to existing microfinance products, and Third-party products. objectives. Solutions to critical social borrowers and permitted use of funds We use finance as an instrument of problems are integrated into the earmarked under Corporate Social transformation, rooted in our vision: Bank’s strategies. Corporate Overview to be the leading social bank in the Responsibility for activities relating to fighting of COVID-19. country. Through our last-mile banking Our sustainable development agenda connectivity, we have made a significant includes intervention and initiatives in impact in the society we serve. the key areas of education, environment, Conclusion Our customers and shareholders Since our transformation into a water, sanitation, and livelihoods. Our have reposed their unstinted faith Small Finance Bank, we have nearly mission is to provide responsive and in us. But if it was not for the tireless 40.74