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NOTES TO ACCOUNTS

Federal Bank Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 87332.70 Cr. P/BV 2.27 Book Value (₹) 155.84
52 Week High/Low (₹) 372/188 FV/ML 2/1 P/E(X) 20.10
Bookclosure 14/08/2026 EPS (₹) 17.59 Div Yield (%) 0.34
Year End :2026-03 

• Treasury' includes the entire investment
portfolio of the Bank.

• Retail Banking include exposures which fulfill the
four criteria of orientation, product, granularity, and
low value of individual exposures for retail exposures
laid down in Master Directions on Basel III: Capital
Regulations. Individual housing loans also form part
of Retail Banking segment. Further, 'Digital Banking'
has been identified as a sub-segment of the existing
'Retail Banking' segment as per Reserve Bank of India
(RBI) guidelines.

• Corporate / Wholesale Banking include all advances
to trusts, partnership firms, companies, and statutory
bodies, which are not included under 'Retail Banking'.

• Other Banking Business includes all other banking
operations not covered under 'Treasury, 'Wholesale
Banking' and 'Retail Banking' segments. It also includes
all other residual operations such as para banking
transactions / activities.


4.22 Provisions, contingent liabilities, and contingent assets

In accordance with Accounting Standard - 29 “Provisions,
Contingent Liabilities and Contingent Assets” issued by ICAI,
as notified under Section 133 of the Companies Act, 2013
read together with the Companies (Accounting Standards)
Rules, 2021, a provision is recognized when the Bank has a
present obligation as a result of past event, it is probable that
an outflow of resources embodying economic benefits will
be required to settle the obligation and a reliable estimate
can be made of the amount of the obligation.

Provisions (excluding retirement benefits) are not
discounted to its present value and are determined based
on management best estimate required to settle the
obligation at the Balance Sheet date, supplemented by
experience of similar transactions. These are reviewed at
each Balance Sheet date and adjusted to reflect the current
best estimates. If it is no longer probable that an outflow of
resources embodying economic benefits will be required to
settle the obligation, the provision is reversed.

No provision is recognized, and a disclosure of contingent
liability is made when there is:

(i) a possible obligation arising from a past event and the
existence of which will be confirmed only by occurrence
or non-occurrence of one or more uncertain future
events not wholly within the control of the Bank; or

(ii) a present obligation arising from a past event which is
not recognized because:

a) it is not probable that an outflow of resources
embodying economic benefits will be required to
settle the obligation; or

b) a reliable estimate of the amount of the obligation
cannot be made.

The Bank does not expect the outcome of these contingencies
to have a materially adverse effect on its financial results.

No provision or disclosure of contingent liability is
made when there is a possible obligation or a present
obligation in respect of which the likelihood of outflow of
resources is remote.

Contingent assets, if any, are not recognized nor disclosed
in the financial statements since this may result in the
recognition of income that may never be realized. However,
contingent assets are assessed continually and if it is virtually
certain that an inflow of economic benefits will arise, the
asset and related income are recognized in the financial
statements of the period in which the change occurs.

4.23 Segment information

The disclosure relating to segment information is in
accordance with Accounting Standard 17 - “Segment
Reporting” issued by the ICAI, as notified under Section
133 of the Companies Act, 2013 read together with the
Companies (Accounting Standards) Rules, 2021 and as
per as per RBI Master Direction on Financial Statements-
Presentation and Disclosures, (as amended from time to
time). As per the Master Direction, the reportable segments
are identified as 'Treasury', 'Corporate / Wholesale Banking',
'Retail Banking' and 'Other banking operations.

4.24 Accounting for Dividend

In terms of Accounting Standard 4 - “Contingencies and
Events occurring after the Balance sheet date” issued by
the ICAI, as prescribed under Section 133 of the Companies
Act, 2013 read together with the Companies (Accounting
Standards) Rules, 2021, the Bank does not account for
proposed dividend or Dividend declared after balance sheet
date as a liability through appropriation from Profit and Loss
Account in current year balance sheet. This is disclosed in
the notes to accounts. The same is recognized in the year
of actual payout post approval of shareholders. However,
the Bank reckons proposed dividend in determining capital
funds in computing the capital adequacy ratio.

4.25 Cash and Cash Equivalents

Cash and cash equivalents include cash in hand, balances
with Reserve Bank of India and Balances with Other Banks
/ institutions and money at call and short notice (including
the effect of changes in exchange rates on cash and cash
equivalents in foreign currency).

1. Disclosure Requirement as per RBI’s Master Direction on Financial Statements - Presentation and Disclosures

Amounts in notes forming part of the financial statements for the year ended March 31, 2026 are denominated in Rupees Crore to
conform to extant RBI guidelines except where stated otherwise.

1.1 Regulatory Capital

1.1. 1 Capital To Risk-Weighted Assets Ratio (Capital Adequacy Ratio)

The Bank computes Capital Adequacy Ratio in accordance with RBI (Commercial Banks - Prudential Norms on Capital Adequacy)
Directions. As per the direction, the Bank is required to maintain, on an on-going basis, a Minimum Total Capital (MTC) of 11.50
% (previous year 11.50%) including Capital Conservation Buffer (CCB) at 2.50% (previous year 2.50%) of the total risk weighted
assets (RWA). Out of the MTC, at least 8.00% (previous year 8.00%), shall be from Common Equity Tier 1 (CET1) capital and at
least 9.50% (previous year 9.50%) from Tier 1 capital, including 2.50% (previous year 2.50%) towards CCB.

During the year, the Bank has issued and allotted 27,29,74,043 warrants by way of preferential allotment on a private
placement basis to Asia II Topco XIII Pte. Ltd., on receipt of 25% of the warrant price of H 227 per warrant, aggregating to H
1,549.13 Crore. Each warrant carries the right to subscribe to one fully paid up equity share of the Bank having a face value
of H 2 per share, upon exercise, by paying the remaining 75% within 18 months of allotment.

During the year ended March 31, 2026, the Bank has not redeemed unsecured Basel III compliant Tier 2 Bonds. (Previous
Year : H 300.00 Crore)

In accordance with RBI Guidelines banks are required to make Consolidated Pillar 3 and Net Stable Funding Ratio (NSFR)
disclosures under Basel III capital regulations. The Bank has made these disclosures and the same is available in Bank's website
at the following link:
https://www.federal.bank.in/regulatory-disclosures. The disclosures have not been subjected to audit.

1.1. 2 Reserves and Surplus

i) Statutory Reserve

During the year ended March 31, 2026, the Bank had appropriated H 1,029.33 Crore (previous year: H 1,012.97 Crore)
out of profits for the year ended March 31, 2026 to the Statutory Reserve in terms of sections 17 of the Banking
Regulation Act, 1949 and RBI guidelines.

ii) Capital Reserve

During the year ended March 31, 2026, the Bank had appropriated H 66.22 Crore (previous year: H 83.55 Crore), being
the profit from sale or redemption of investments under HTM category, gain / profit arising on the reclassification/ sale
of an investment in associate and profit on sale of immovable properties, net of taxes and transfer to statutory reserve,
from the Profit and Loss Account to the Capital Reserve.

Additionally, during the year ended March 31, 2026, the Bank has transferred the profit on sale of of equity instruments
designated as AFS, net of taxes, amounting to H 143.09 Crore (previous year: Nil) from AFS Reserve to Capital Reserve.

iii) Revenue Reserve

During the year ended March 31, 2026, the Bank had appropriated H 616.21 Crore (previous year: H 606.72 Crore) out
of profits for the year ended March 31, 2026 to the Revenue Reserve.

In addition, during the previous year ended March 31, 2025, the Bank implemented the RBI Master Direction -
Classification, Valuation, and Operation of Investment Portfolio of Commercial Banks (Directions), 2023, dated September
12, 2023. This directive was applicable to banks from April 01, 2024. Consequent to the transition provisions, the Bank's
revenue reserve increased by H 105.02 crore, on account of revision in the carrying value of investments to the fair value
as on such date.

iv) Investment Fluctuation Reserve

During the year ended March 31, 2026, the Bank had appropriated H 56.40 Crore (previous year: H 151.93 Crore) to
Investment Fluctuation Reserve in compliance with Reserve Bank of India (Commercial Banks - Classification, Valuation,
and Operation of Investment Portfolio) Directions, 2025.

In addition, during the previous year ended March 31, 2025, pursuant to implementation of the RBI Master Direction -
Classification, Valuation, and Operation of Investment Portfolio of Commercial Banks (Directions), 2023, dated September
12, 2023, the Bank had transferred H 16.24 Crore from Investment Reserve to Investment Fluctuation Reserve.

v) Special Reserve

During the year ended March 31, 2026, the Bank had appropriated H 205.49 Crore (previous year: H 195.65 Crore) out
of profits for the year ended March 31, 2026, to the Special Reserve as required under Income Tax Act, 1961.

vi) Foreign Currency Translation Reserve

As at March 31, 2026, the Bank has recognised H (31.16) Crore (previous year: H (22.02) Crore) as Foreign Currency
Translation Reserve on account of translation of foreign currency assets and liabilities of non-integral foreign operations.

vii) Employees Stock Options Reserve

During the year ended March 31, 2026, the Bank has recognised H 26.59 Crore (previous year: H 8.49 Crore) as Employees Stock
Options Reserve on account of fair valuation of share-linked instruments and an amount of H 0.47 Crore (previous year: H 0.21
Crore) is transferred from Employees Stock Options Reserve to share premium on exercise of share-linked instruments.

viii) AFS Reserve

As at March 31, 2026, in accordance with Reserve Bank of India (Commercial Banks - Classification, Valuation, and
Operation of Investment Portfolio) Directions, 2025, the Bank has recognised H 9.52 Crore (previous year: H 226.05
Crore) as AFS Reserve.

ix) Cash Flow Hedge Reserve

As at March 31, 2026, the Bank has recognised H (27.04) Crore (previous year: H 67.91 Crore) as Cash Flow Hedge
Reserve on derivative contracts designated as cash flow hedge.

Draw down from Reserves

The Bank has not drawn down any amount from any reserves during the years ended March 31, 2026 and March 31, 2025.

1.3.3. B. The Bank had dealt in exchange traded currency futures during the financial year ended March 31, 2026 and March 31, 2025.

As at March 31, 2026, the notional principal amount outstanding on open contracts is Nil (previous year: Nil).

1.3.3. C. The credit exposure with clients, as compared to inter-bank counterparties, are generally secured by permitted collaterals.

The credit exposure includes exposure arising out of swap contracts. However, generally, the collaterals provided by the
clients are not specifically earmarked towards derivatives or swaps. Hence the amount of exposure is arrived conservatively
without netting with the collateral.

1.3.4. Disclosure on Risk exposure in Derivatives
A. Qualitative disclosures:

(a) Structure and organization for management of risk in derivatives trading, the scope and nature of risk measurement,
risk reporting and risk monitoring systems, policies for hedging and/or mitigating risk and strategies and processes for
monitoring the continuing effectiveness of hedges/ mitigants:

Derivatives are financial instruments whose characteristics are derived from underlying parameter's like interest rates,
exchange rates or indices. The Bank undertakes over the counter and exchange traded derivative transactions for
Balance Sheet management and also for proprietary trading. Bank offers derivative products to the customers to enable
them to hedge their exposure within the prevalent regulatory guidelines. Proprietary trading includes Interest Rate
Futures, Currency Futures, Non Deliverable Forwards and Rupee Interest Rate Swaps under different benchmarks (viz.
MIBOR, MIFOR etc.) in over the counter/exchange traded derivatives.

The Bank also undertakes transactions in Long Term Forex Contracts (LTFX) for hedging its Balance Sheet and also offers
them to its customers. These transactions expose the Bank to various risks primarily credit, market, operational, legal and
reputational. The Bank has adopted the following mechanism for managing risks arising out of the derivative transactions.

The derivative transactions are governed by the Policy for Investment, Forex and Derivative Activities and Market Risk
Management Policy of the Bank as well as by the extant RBI guidelines. Various operational/risk limits are set up and
actual exposures are monitored vis-a-vis the limits allocated. These limits are set up taking into account market volatility,
risk appetite, business strategy and management experience. Risk limits are in place for risk parameters viz. Value at Risk
(VaR), Net loss, deal size and Price Value of a Basis Point (PVBP). Actual positions are monitored against these limits on
a daily basis and breaches if any are reported promptly. Risk assessment of the portfolio is undertaken periodically.

The Treasury front office enters into derivative transaction with customers and interbank counterparties. The Bank has
an independent back office and mid office as per regulatory guidelines. The MTM position of the derivative portfolio
is monitored on a regular basis. The impact on derivative portfolio on account of the probable market movements are
assessed on regular basis. The risk profile of the outstanding portfolio is reviewed by the Board at regular intervals.

Interest rate contracts

Interest rate swaps involve the exchange of interest obligations with the counterparty for a specified period without
exchanging the underlying (or notional) principal.

Interest rate futures are standardised interest rate derivative contracts traded on a recognised stock exchange to buy
or sell a notional security or any other interest bearing instrument or an index of such instruments or interest rates at a
specified future date at a price determined at the time of the contract.

Exchange rate contracts

Cross currency swaps are agreements to exchange principal amounts denominated in different currencies. Cross
currency swaps may also involve the exchange of interest payments on one specified currency for interest payments in
another specified currency for a specified period.

Currency options (including Exchange Traded Currency Option) give the buyer on payment of a premium, the right but not
an obligation to buy or sell specified amounts of currency at agreed rates of exchange on or before a specified future date.

Currency futures contract is a standardised contract traded on an exchange to buy or sell a certain underlying currency
at a certain date in the future at a specified price. The contract specifies the rate of exchange between one unit of
currency with another.

Non-Deliverable Derivative Contracts

Non Deliverable Forwards are foreign exchange derivative contract involving the Rupee, entered into with a person
resident outside India and which is settled without involving delivery of the Rupee.

(b) Accounting policy for recording hedge and non-hedge transactions, recognition of income, Premiums and discounts,
valuation of outstanding contracts and provisioning

Bank deals in derivatives for hedging domestic or foreign currency assets/liabilities subject to the prevailing regulatory
guidelines. Transactions for hedging and trading are recorded separately. For hedge transactions the Bank identifies
the hedged item (asset or liability) at the inception of the transaction itself. The effectiveness is ascertained at the time
of inception of the hedge and periodically thereafter. Transactions related to foreign exchange forward / Interest rate
Future/IRS/Currency futures are marked to market daily and the MTM is accounted in the books.

(c) Collateral Security

Bank has provided sufficient collateral to central counter parties and exchanges wherever applicable. As per market
practice no collateral is insisted on for the contracts with counter parties like Banks/Primary Dealers (PDs) etc. but
if a Credit Support Annexure (CSA) is signed then collateral is insisted as per the terms of CSA agreement. For deals
with Corporate Clients appropriate collateral security/margin etc. is stipulated wherever considered necessary as per
the CSA agreement.

(d) Credit Risk Mitigation

In the Interbank Space the Bank deals with other major banks and the default risk is perceived as low in this segment.
Wherever the Credit Support Annexure (CSA) is signed the collateral is insisted as per the terms of the CSA agreement.
This risk is managed under the limit framework laid down by the policy on Sovereign and Counterparty Bank Limits.
Exposure against clients is mitigated by collecting proper collateral securities / margin as envisaged by the credit
sanctioning team as per the CSA.

• The notional principal amount of forward exchange contracts (excluding Cash, tom and spot contracts) classified
as Hedging and Trading outstanding as on March 31, 2026 amounting to H 5,136.27 Crore (previous year H
2,441.51 Crore) and H 1,09,014.86 Crore (previous year H 80,366.74 Crore) respectively. For the trading contract,
as at March 31, 2026 the marked to market position was asset of H 3,349.09 Crore and liability of H 2,563.20
Crore (previous year asset H 514.52 Crore and liability of H 603.38 Crore). Credit exposure on forward exchange
contracts classified as Hedging and Trading as at March 31, 2026 amounting to H 65.27 Crore (previous year
H 53.70 Crore) and H 4,730.69 Crore (previous year H 4,577.49 Crore) respectively. The notional principal amounts
of derivatives reflect the volume of transactions outstanding as at the Balance Sheet date and do not represent
the amounts at risk.

• Interest rate derivative represents interest rate swaps and bond FRA.

• The Bank has computed the maximum and minimum of PV01 for the year based on the daily balances for Interest
rate Derivatives and Currency Derivatives.

• In respect of derivative contracts, the Bank evaluates the credit exposure arising therefrom, in line with RBI
guidelines. Credit exposure has been computed using the current exposure method which is the sum of:

a) The current replacement cost (Marked to Market value including accruals of the contract) or zero
whichever is higher.

b) The Potential Future Exposure (PFE) is a product of the notional principal amount of the contract and a factor
that is based on the grid of credit conversion factor prescribed in RBI Guidelines, which is applied on the basis
of the residual maturity and the type of contract.

1.3.5. Credit default swaps: The Bank has not undertaken any transactions in Credit Default Swaps (CDS) during the years ended March
31, 2026 and March 31, 2025.

1.4.3. Details of Overseas Assets, NPAs and Revenue

During the year ended March 31, 2016 the Bank had commenced its operation, pursuant to RBI approval, in International Financial
Services Centre (IFSC) Banking Unit (IBU) in Gujarat International Finance Tec City (GIFT City) and business transactions from
the same are considered as a Foreign branch for most Regulatory purposes as per para 2.2 of Annex I of RBI Circular DBR.IBD.BC
14570/23.13.004/2014-15 dated April 01, 2015. Apart from the said IBU, the Bank did not have any overseas branch as on March
31, 2026 and March 31, 2025. Details of Assets, NPAs and Revenue of IBU are given below:

1.4.5. Divergence in Asset classification and Provisioning for NPAs

The divergence observed by RBI for the financial years 2024-25 and 2023-24 in respect of the Bank's asset classification and
provisioning under the extant prudential norms on income recognition, asset classification and provisioning is below the regulatory
requirement for disclosure and hence the disclosure as required under RBI Master Direction on 'Financial Statements-Presentation
and Disclosures' on 'Divergence in the asset classification and provisioning', is not required to be made.

1.4.6. Transfer of Loan Exposures

i) Details of loans not in default acquired through assignment during the year ended March 31, 2026 and March 31, 2025
are given below:

b) Qualitative Disclosure
As at March 31, 2026

The Bank adheres to RBI guidelines on Liquidity Coverage Ratio, Liquidity Risk Monitoring Tools and the LCR Disclosure
Standards pursuant to the Basel III Framework on Liquidity Standards that are applicable to banks in India with effect from
January 1, 2015. Liquidity Coverage Ratio (LCR) promotes short-term resilience of banks to potential liquidity disruptions by
ensuring that they have sufficient high quality liquid assets (HQLAs) to survive an acute stress scenario lasting for 30 days.
LCR is computed daily from 1st January 2017 and in accordance with regulatory prescriptions. The LCR disclosures contain
data on simple average of daily observations for the days in each quarter. The bank has not computed LCR separately for any
foreign currency since the aggregate liabilities denominated in any foreign currency doesn't amount to 5% or more of the
Bank's total liabilities. Bank has consistently maintained LCR above the prescribed regulatory minimum.

On an average, 98% of the HQLA maintained by the Bank comprises of Level 1 assets which is the most liquid asset category.
Cash in hand, excess CRR and SLR, G-Sec within mandatory SLR requirement permitted by RBI under Marginal Standing Facility

(MSF) and Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) as per RBI guidelines from time to time, constitutes
Level 1 HQLA. Level 2 assets maintained by the Bank comprises of (a) marketable securities representing claims on or claims
guaranteed by sovereigns, Public Sector Entities (PSEs) or multilateral development banks that are assigned a 20% risk weight
under the Basel III Standardized Approach for credit risk and that are not issued by a bank/financial institution/NBFC or
any of its affiliated entities and (b) Corporate bonds and commercial papers, not issued by a bank/financial institution/NBFC
or any of its affiliated entities, which have been rated AA- or above by an Eligible Credit Rating Agency. HQLA is also well
diversified across various instruments and liquid asset types and shall provide the Bank with adequate and timely liquidity.

Bank has a well-diversified funding portfolio. Retail deposits, considered stable from a liquidity perspective is the major
funding source of the Bank, indicating lower dependence of the Bank on wholesale funds.

The liquidity risk management in the Bank is guided by the ALM Policy. Asset Liability Management Committee (ALCO) is
the executive level committee responsible for ALM process in the Bank. Bank's liquidity management is done by the Treasury
department as per the directions of ALCO. Integrated Risk Management Department actively monitors the liquidity position
of the Bank and apprises ALCO on a continuous basis to initiate appropriate actions to ensure that the liquidity position is well
within the Risk Appetite set by the Board of Directors.

As at March 31, 2025

The Bank adheres to RBI guidelines on Liquidity Coverage Ratio, Liquidity Risk Monitoring Tools and the LCR Disclosure
Standards pursuant to the Basel III Framework on Liquidity Standards that are applicable to banks in India with effect from
January 1, 2015. The regulatory threshold is embedded into the Risk Appetite Statement of the Bank and hence maintenance
of LCR is subject to periodic review of Risk Management Committee/Board. The Bank computes the LCR and reports the
same to the Asset Liability Management Committee (ALCO) every month for review as well as to the Risk Management
Committee of the Board. Liquidity Coverage Ratio (LCR) promotes short-term resilience of banks to potential liquidity
disruptions by ensuring that they have sufficient high quality liquid assets (HQLAs) to survive an acute stress scenario
lasting for 30 days. LCR is computed daily from 1st January 2017 and in accordance with regulatory prescriptions, the LCR
disclosures contain data on simple average of daily observations over a period of 90 days. The bank has not computed LCR
separately for any foreign currency since the aggregate liabilities denominated in any foreign currency doesn't amount to 5%
or more of the Bank's total liabilities. Bank has consistently maintained LCR above the prescribed regulatory minimum.

On average, 98% of the HQLA maintained by the Bank comprises of Level 1 assets which is the most liquid asset category. Cash
in hand, excess CRR and SLR, G-Sec within mandatory SLR requirement permitted by RBI under Marginal Standing Facility
(MSF) and Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) as per RBI guidelines from time to time, constitutes
Level 1 HQLA. Level 2 assets maintained by the Bank comprises of (a) marketable securities representing claims on or claims
guaranteed by sovereigns, Public Sector Entities (PSEs) or multilateral development banks that are assigned a 20% risk weight
under the Basel III Standardized Approach for credit risk and that are not issued by a bank/financial institution/NBFC or
any of its affiliated entities and (b) Corporate bonds and commercial papers, not issued by a bank/financial institution/NBFC
or any of its affiliated entities, which have been rated AA- or above by an Eligible Credit Rating Agency. HQLA is also well
diversified across various instruments and liquid asset types and shall provide the Bank with adequate and timely liquidity.

Bank has a well-diversified funding portfolio. Retail deposits, considered stable from a liquidity perspective is the major
funding source of the Bank, indicating lower dependence of the Bank on wholesale funds.

The liquidity risk management in the Bank is guided by the ALM Policy. Asset Liability Management Committee (ALCO) is
the executive level committee responsible for ALM process in the Bank. Bank's liquidity management is done by the Treasury
department as per the directions of ALCO. Integrated Risk Management Department actively monitors the liquidity position
of the Bank and apprises ALCO on a continuous basis to initiate appropriate actions to ensure that the liquidity position is well
within the Risk Appetite set by the Board.

1.5.3. Net Stable Funding ratio (NSFR)

In accordance with RBI Guidelines banks are required to make Net Stable Funding Ratio (NSFR) and Consolidated Pillar 3 disclosures
under Basel III capital regulations. The Bank has made these disclosures and the same is available in Bank's website at the following
link:
https://www.federal.bank.in/regulatory-disclosures. The disclosures have not been subjected to audit.

1.6.7. Unhedged Foreign Currency Exposure: The Bank has in place a policy on managing credit risk arising out of unhedged foreign
currency exposures of its borrowers. The objective of this policy is to maximize the hedging on foreign currency exposures of
borrowers by reviewing their foreign currency exposures and encouraging them to hedge the unhedged portion. The policy
framework also articulates the methodologies for ascertaining the amount of unhedged foreign currency exposures, estimating the
extent of likely loss, estimating the riskiness of the unhedged position and making appropriate provisions and capital charge as per
extant RBI guidelines. In line with the policy, assessment of unhedged foreign currency exposure is a part of credit appraisal while
proposing limits or at the review stage. Further, the Bank reviews the unhedged foreign currency exposure across its portfolio on
a periodic basis. The Bank maintains incremental provisions and additional capital for the unhedged foreign currency exposures
of its borrowers in line with the extant RBI guidelines. The Bank has maintained H 71.89 Crore (previous year H 71.42 Crore) as
provision and H 154.59 Crore (previous year H 150.36 Crore) as additional capital for computation of capital adequacy ratio on
account of the unhedged foreign currency exposures of borrowers.

1.6.8. During the years ended March 31, 2026 and March 31, 2025, the Bank's credit exposure to single borrower and group borrowers
was within the prudential exposure limits prescribed by RBI.

1.11. Disclosures on Remuneration

i) Qualitative disclosures

a) Information relating to the composition and mandate of the Nomination, Remuneration, Ethics and Compensation
Committee (or Remuneration Committee in short):

The Nomination, Remuneration, Ethics and Compensation Committee of the Board oversees the framing, review and
implementation of the compensation policy of the Bank, on behalf of the Board. As per the code of corporate governance
and code of conduct for the board of directors and management, The Committee shall consist of only Non-Executive
Directors and the minimum number of members shall be three. At least half of the members attending the meeting of
the Remuneration Committee shall be independent directors, of which one shall be a member of the Risk Management
Committee of the Board.

As on March 31, 2026, the remuneration committee of the Board comprises of the following Independent Directors:

- Mr. Siddhartha Sengupta (Chairman)

- Mr. Manoj Fadnis

- Mr. Sudarshan Sen

- Mr. Ramanand Mundkur

Out of the above, Mr. Siddhartha Sengupta and Mr. Sudarshan Sen are also a member of Risk Management
Committee of the Board.

The Nomination, Remuneration, Ethics and Compensation Committee of the Board functions with the following
mandate, in respect of matters related to remuneration:

i. Recommending to the Board a policy, relating to the remuneration for the directors, key managerial personnel and
other employees.

ii. Formulating and determining the Bank's policies on remuneration packages payable to the Directors and key
managerial personnel including performance/achievement bonus, perquisites, retirals, sitting fees.

iii. Considering grant of Stock Options to employees.

iv. Recommend to the board, all remuneration, in whatever form, payable to senior management

b) Information relating to the design and structure of remuneration processes and the key features and objectives of
remuneration policy.

The Bank has formulated and adopted a comprehensive compensation policy covering all the employees and the policy
is reviewed on an annual basis. The policy covers all aspects of the compensation structure such as fixed pay, variable
compensation, perquisites, performance bonus, guaranteed bonus (joining/sign-on bonus), severance package, share-
linked instruments e.g. Employee Stock Option Scheme (ESOS), pension, gratuity, etc., taking into account the Guidelines
issued by Reserve Bank of India from time to time.

The objectives of the remuneration policy are four-fold:

• To align compensation with prudent risk taken

• To drive sustainable performance in the Bank

• To ensure financial stability of the Bank; and

• To attract and retain talent

The compensation paid to the Chief Executive Officer (CEO) / Whole Time Directors (WTDs) /Material Risk Takers
(MRTs) is divided into two components:

1. Fixed Pay and Perquisites: The fixed compensation is determined based on the relevant factors such as industry
standards, the exposure, skill sets, talent and qualification attained by the official over his/her career span and
adherence to statutory requirements. All the fixed items of compensation, including the perquisites, will be treated
as part of fixed pay. Perquisites that are reimbursable would also be included in the fixed pay so long as there are
monetary ceilings on these reimbursements. Contributions towards superannuation/retiral benefits will also be
treated as part of fixed pay.

2. Variable Compensation: The variable compensation for Whole Time Directors, Managing Director & Chief
Executive Officer and Material Risk Takers is fixed based on organizational performance (both business-unit
and firm-wide) and KPAs set for the official. The organization's performance is charted based on Performance
Scorecard which takes into account various financial indicators like revenue earned, cost incurred, profit earned,
NPA position and other intangible factors like leadership and employee development. The Scorecard provides
a mix of Financial and Non-Financial, Quantitative and Qualitative Metrics. Additionally, serious supervisory
observations (if any) are also factored. The variable pay is paid in the form of share-linked instruments, or a mix of
cash and share-linked instruments.

Risk, Control and Compliance Staff: Members of staff engaged in financial and risk control, including internal audit,
are compensated in a manner that is independent of the business areas they oversee and commensurate with their
key role in the Bank. The total fixed and variable compensation paid out to the employees in the Risk Control and
Compliance Function is decided independent of business parameters. The mix of fixed and variable compensation for

control function personnel is weighted in favour of fixed compensation, to ensure autonomy and independence from
business goals.

Grander Compensation Package to Executives in Level IV and above: The Compensation package applicable to
Executives in Level IV and above are governed under the provisions of Grander Compensation Package, a performance
linked pay structure implemented in the Bank with effect from May 01, 2017. Annual Increment under the “Grander
Compensation Package” is based on the annual performance rating of the Executive concerned.

Compensation paid to Employees on IBA Package: The compensation paid to Award Staff and Officers coming under
Scale I to III is fixed based on the periodic industry level settlements with Indian Banks' Association. The present scale
of pay and other service conditions applicable to employees, whose compensation package is governed under IBA
package is as per provisions of 12th Bipartite Settlement/ Joint note dated March 08, 2024.

c) Description of the ways in which current and future risks are taken into account in the remuneration processes.

For the purpose of effectively aligning compensation structure with risk outcomes, the functionaries in the Bank are
arranged under the following three categories:

1. MD & CEO/Whole Time Directors/ Material Risk Takers (MRTs)

2. Risk Control and Compliance Staff

3. Other Categories of Staff

In order to manage current and future risk and allow a fair amount of time to measure and review both quality and
quantity of the delivered outcomes, the Bank maintains proper balance between fixed pay and variable pay. A significant
portion (i.e. at least 50 per cent) of total compensation payable to MD & CEO, Whole Time Directors and Material Risk
Takers (MRTs) is variable.

Committees to mitigate risks caused by an individual decision.

In order to further balance the impact of market or credit risks caused to the Bank by an individual decision taken
by a senior level executive, MD & CEO or ED, the Bank has constituted various committees to take decisions on
various aspects:

• Credit limits are sanctioned by committees at different levels.

• Investment decisions of the Bank are taken and monitored by Investment committee and there is an upper limit in
treasury dealings where individual decisions can be taken.

• Interest rates on asset and liability products for different buckets are decided and monitored by the Asset Liability
Committee of the Board (ALCO). Banks' exposures to liquidity risk are also monitored by ALCO.

Hedging

No compensation scheme or insurance facility would be provided by the Bank to employees to hedge their compensation
structure to offset the risk alignment mechanism (deferral pay and claw back arrangements) embedded in their
compensation arrangement. Appropriate compliance arrangements have been established to ensure that employees
do not insure or hedge their compensation structure.

Committee of Management for reviewing the linkage of Risk Based Performance with Remuneration: A Committee,
comprising of CFO and Heads of Risk Division and HR Department would assist the Nomination and Remuneration
Committee of the Board to monitor, review and control various risks and to balance prudent risk taking with the
compensation paid out to top Executives, WTDs and other employees

d) Linkage of performance during a performance measurement period with levels of remuneration.

The Bank's performance is charted based on performance scorecard which takes into account various financial indicators
like revenue earned, cost deployed, and profit earned, NPA position and other intangible factors like leadership and
employee development. Variable pay is paid purely based on performance and is measured through Scorecard for MD
& CEO / EDs. The scorecard provides a mix of financial and non-financial, quantitative and qualitative metrics.

The compensation package applicable to Executives in Level IV to VII was earlier fixed and governed based on the
periodical industry level settlements under IBA pattern. To make the Compensation Structure market driven and
competitive, a new performance-based compensation package called “Grander Compensation Package” has been
introduced for Executives in Level IV (Associate Vice President / Assistant Vice President) and above with effect
from May 01, 2017.

The compensation paid to other officials that include Award Staff, Officers coming under Scale I to III is fixed based on
the periodic industry level settlements with Indian Banks Association.

e) Bank's policy on deferral and vesting of variable remuneration and criteria for adjusting deferred remuneration before

vesting and after vesting.

MD & CEO, Whole Time Directors and Material Risk Takers (MRTs).

Deferral of Variable Pay: For MD & CEO, Whole Time Directors and Material Risk Takers (MRTs) deferral arrangements
would invariably exist for the variable pay, regardless of the quantum of pay. For such executives of the Bank, a minimum
of 60% of the total variable pay must invariably be under deferral arrangements. Further, if cash component is part of
variable pay, at least 50% of the cash bonus would also be deferred. However, in cases where the cash component of
variable pay is under H 0.25 crore, deferral requirements would not be necessary.

Period of Deferral Arrangement: The deferral period would be minimum of three years. This would be applicable to both
the cash and non-cash components of the variable pay.

Vesting: Deferred remuneration would either vest fully at the end of the deferral period or be spread out over the course
of the deferral period, subject to the following conditions:

• The first such vesting will be not before one year from the commencement of the deferral period.

• The vesting will be no faster than on a pro rata basis.

• Vesting will not take place more frequently than on a yearly basis.

In case of deferred compensation (cash component), the payment will be made as per the Schedule mentioned below.

Malus / Claw back arrangement

The variable compensation is covered under Malus / Claw back arrangements in case of all categories of employees. In
the event of subdued or negative contributions of the Bank and/or the relevant line of business in any year, the deferred
compensation will be subjected to:

• Malus arrangement wherein Bank shall withhold vesting of all or part of the amount of deferred remuneration.

• Claw back arrangement wherein the employees shall be liable to return previously paid or vested remuneration to
the Bank. The deferred compensation, if any, paid to such functionaries shall be subject to Claw back arrangements,
which will entail the Bank to recover proportionate amount of variable compensation from such functionaries, on
account of an act or decision taken by the official which has brought forth a negative contribution to the Bank at a
prospective stage.

The malus and claw back provisions would cover the deferral and retention periods. If an Official covered under these
provisions is responsible for any act or omission or non-compliance of regulatory guidelines resulting in a penalty being
imposed by any Regulators or engages in a detrimental conduct, the Bank would be entailed to recover proportionate
amount of variable compensation from such functionaries within 48 months from the date of payment/vesting of variable
compensation. The Bank has put in place appropriate modalities, performance thresholds and detailed framework
to cover the trigger points with or invoking malus/claw back, taking into account relevant statutory and regulatory
stipulations, as applicable.

f) Description of the different forms of variable remuneration

The variable pay is in the form of share-linked instruments, or a mix of cash and share-linked instruments. The Bank
uses an optimum and proper mix of cash (Performance Linked Incentive/Ex- Gratia) and share-linked instruments (Stock
Options) to decide the compensation of employees in all categories.

The distribution of Stock Options and variable Performance Linked Incentives are higher in top levels and is linked with
their performance measurements taken from Scorecards. This is done to align the compensation of senior staff with
their performance, risk and responsibility taken in higher assignments.

Risk Control and Compliance Staff

At least 25% of the total compensation would be variable and the total variable pay will be limited to a maximum of
100% of the fixed pay (for the relative performance measurement period). Deferral arrangements would invariably
exist for the variable pay, if the Variable Pay exceeds 75% of the fixed pay. In such cases a minimum of 60% of the total
variable pay must invariably be under deferral arrangements. Further, if cash component is part of variable pay, at least
50% of the cash bonus would also be deferred. However, in cases where the cash component of variable pay is under
H 0.25 crore, deferral requirements would not be necessary.

Other categories of Staff

The variable pay would be in the form of cash, share-linked instruments, or a mix of both cash and share-linked
instruments. The total variable pay will be limited to a maximum of 300% of the fixed pay (for the relative performance
measurement period). Deferral arrangements would invariably exist for the variable pay, if the Variable Pay exceeds
200% of the fixed pay. In such cases a minimum of 60% of the total variable pay must invariably be under deferral
arrangements. Further, if cash component is part of variable pay, at least 50% of the cash bonus would also be deferred.
However, in cases where the cash component of variable pay is under H 0.25 crore, deferral requirements would
not be necessary.

The key impact areas during the implementation of Ind AS for the Bank include effective interest rate accounting, fair valuation
inputs, methodologies and assumptions, specific valuation considerations in many instruments, expected credit losses, employee
stock options and implementation of technology systems.

1.12.7. Payment of DICGC Insurance Premium

The Bank has remitted the applicable Deposit Insurance Premium to the DICGC within the prescribed timelines for the years
ended March 31, 2026 and March 31, 2025.

1.12.8. Letter of Comfort

The Bank has not issued any letters of comfort (LoC) on behalf of its subsidiaries during the years ended March 31, 2026 and
March 31, 2025.

1.12.9. Income and Expenses exceeding one percentage of the Total Income

Details of items under “Other expenditure” in Schedule 16 - Operating Expenses & “Miscellaneous income” in Schedule 14 -
Operating Income exceeding 1% of total income of the Bank are given below:

1.12.6. Implementation of IFRS converged Indian Accounting Standards (Ind AS)

The Ministry of Corporate Affairs (MCA), Government of India notified the Companies (Indian Accounting Standards) Rules,
2015 on February 16, 2015. Further, a press release dated January 18, 2016, was issued by the MCA outlining the roadmap for
implementation of IFRS converged Ind AS for banks. This roadmap required banks to prepare Ind AS based standalone & consolidated
financial statements for the accounting periods beginning April 01, 2018 onwards, with comparatives for the periods ending March
31, 2018 or thereafter. RBI, through its notification dated February 11, 2016, required all scheduled commercial banks to comply
with Ind AS for financial statements from the stated periods and also stated that early adoption of Ind AS is not permitted.

The implementation of Ind AS by banks requires certain legislative amendments to make the format of financial statements,
prescribed in the Third Schedule to Banking Regulation Act, 1949, compatible with accounts under Ind AS. Considering the
amendments needed to the Banking Regulation Act, 1949, as well as the level of preparedness of several banks, RBI, through its
Statement on Developmental and Regulatory Policies dated April 05, 2018, had deferred the implementation of Ind AS by a year.

The legislative amendments recommended by the Reserve Bank are under consideration of the Government of India. Accordingly,
RBI through its notification dated March 22, 2019 deferred the implementation of Ind AS till further notice.

Even though RBI has deferred the implementation, the Bank is gearing itself to bring the necessary systems and processes in place
to facilitate the Proforma submission to RBI and seamless transition to Ind AS. With respect to the various instructions from the
Ministry of Corporate Affairs and Reserve Bank of India (RBI), the actions taken by the Bank are summarized as follows:

• A steering committee was formed by MD & CEO with ED as its Chairman with members from all cross-functional departments.
The Committee oversees the progress of Ind AS implementation in the Bank and provides guidance on critical aspects
of the implementation such as Ind AS technical requirements, systems and processes, business impact, people and
project management.

• The implementation of IT solution procured to automate the computation of Expected Credit Losses (ECL), Effective Interest
Rate, Fair valuation and other accounting changes required under Ind AS is completed and Bank is generating extracts from
the system on a half yearly basis.

• The Bank is now in the process of implementing the other assessed changes required in existing IT architecture and other
processes to enable smooth transition to Ind AS.

• The Bank is continuing to submit the quarterly progress report on the status of Ind AS implementation to the Audit
Committee of the Board.

• The Bank is submitting half yearly Proforma Ind AS financial statements to the RBI within the stipulated timeline.

• Training to the employees is imparted in a phased manner.

1.12.11. Portfolio-level information on the use of funds raised from green deposits

Bank has not accepted any Green Deposits under Framework for acceptance of Green Deposits issued by RBI.

2. Disclosure requirements as per Accounting Standards where RBI has issued guidelines in respect of disclosure
items for ‘Notes to Accounts’

2.1. Employee Benefits (AS 15)

2.1. A Defined Contribution Plan

i) Provident Fund

Employees who have not opted for pension plan are eligible to get benefits from provident fund, which is a defined
contribution plan. Aggregate contributions along with interest thereon are paid on retirement, death, incapacitation or
termination of employment. Both the employee and the Bank contribute a specified percentage of the salary to the Federal
Bank (Employees') Provident Fund Trust. The Bank has no obligation other than the monthly contribution.

During the year, the Bank has recognised H 1.22 Crore (previous year: H 1.15 Crore) for provident fund contribution in the
Profit and Loss Account.

ii) National Pension System

As per the industry level settlement dated April 27, 2010, a Defined Contributory Pension Scheme (DCPS) in line with the
National Pension System (introduced for employees of Central Government) was implemented and employees who are
covered under National Pension System are not eligible for the existing pension scheme. Employee shall contribute 10% of
their Basic Pay and Dearness Allowance towards DCPS and the Bank shall contribute 14% of the Basic Pay and Dearness
Allowance towards DCPS. There is no separate Provident Fund for employees covered under National Pension System.

During the year, the Bank has recognised H 151.14 Crore (previous year: H 137.66 Crore) for DCPS contribution in the Profit
and Loss Account.

2.1.B Defined Benefit Plan

i) Gratuity

The Bank provides for Gratuity, a defined benefit retirement plan (the “Gratuity Plan”) covering the eligible employees.
The Gratuity Plan provides a lump sum payment to vested employees on retirement, death, incapacitation or termination
of employment, of an amount based on the respective employees' salary and the tenure of employment. Vesting occurs
upon completion of 4 years and 240 days of service as per Payment of Gratuity Act, 1972 and its amendment with effect
from March 29, 2018 or as per the provisions of the Federal Bank Employees' Gratuity Trust Fund Rules / Bi-partite Award
provisions. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation as on the Balance Sheet date,
based upon which, the Bank contributes all the ascertained liabilities to the Federal Bank Employees' Gratuity Trust Fund
(the “Trust”). Trustees administer contributions made to the Trust and contributions are invested in specific investments as
permitted by law.

ii) Superannuation / Pension

The Bank provides for monthly pension, a defined benefit retirement plan (the “pension plan”) covering eligible employees.
The pension plan provides a monthly pension after retirement of the employees till death and to the family after the death
of the pensioner. The monthly pension is based on the respective employees' salary and the tenure of employment. Vesting
occurs upon completion of ten years of service. Liabilities with regard to the pension plan are determined by actuarial
valuation as on the Balance Sheet date, based upon which, the Bank contributes all the ascertained liabilities to the Federal
Bank (Employees') Pension Fund Trust (the “Trust”). Trustees administer contributions made to the Trust and contributions
are invested in specific investments as permitted by law.

The following table as furnished by actuary sets out the funded status of gratuity / pension plan and the amount recognised in
the Bank's Financial Statements for the years indicated:

2.1.C. Leave Encashment/ Sick Leave / Leave Travel Concession / Unavailed Casual Leave

The employees of the Bank are entitled to compensated absence. The employees can carry forward a portion of the unutilised
accrued compensated absence and utilise it in future periods or receive cash compensation at retirement or termination of
employment for the unutilized accrued compensated absence for a maximum of 255 days. The Bank records an obligation for
compensated absences in the period in which the employee renders the services that increase this entitlement. The Bank measures
the expected cost of compensated absence as the additional amount that the Bank expects to pay as a result of the unutilised
entitlement that has accumulated at the balance sheet date based on actuarial valuations.

A sum of H 32.33 Crore (previous year H 99.92 Crore) has been provided towards the above liabilities in accordance with AS 15
based on actuarial valuation.

The actuarial liability of compensated absences of accumulated privilege, sick, casual leave and leave travel concession of the
employees of the Bank is given below:

The discount rate is based on the prevailing market yields of Government of India securities as at the Balance Sheet date for the
estimated term of the obligations.

The estimate of future salary increases considered, takes into account the inflation, seniority, promotion, increments and other
relevant factors.

2.2. Segment Reporting (AS 17)

2.2. A. Business Segments

Business of the Bank is divided into four segments viz. Treasury, Corporate or Wholesale Banking, Retail Banking and Other
Banking Operations. The principal activities of these segments and income and expenses structure are as follows:

i) Treasury

Treasury operations include trading and investments in Government Securities and corporate debt instruments, equity and
mutual funds, derivative trading and foreign exchange operations on proprietary account and for customers.

The income of this segment primarily consists of earnings in the form of interest from the investment portfolio of the Bank,
gains, losses, margins and fee/charges on trading and foreign exchange operations. The principal expense of the segment
consists of interest expense on funds borrowed/utilized and other allocated overheads. Provisions allocated to the segment
consist of diminution in the value of non-performing portfolio of the segment.

ii) Corporate/Wholesale Banking:

The segment consists of lending of funds, acceptance of deposits and other banking services to corporates, trusts, partnership
firms, statutory bodies which are not considered under retail banking segment.

Revenue of this segment consists of interest earned, charges /fees from loans and other banking services rendered to
such customers. The principal expenses of the segment consist of interest expenses on funds utilized and other expenses
allocated as per the approved methodology. Provisions allocated to the segment include the loan loss provision and standard
asset provision created for the portfolio under the segment.

iii) Retail banking:

Retail banking constitutes lending of funds, acceptance of deposits and other banking services to any legal person including
small business customers, on the basis of the status of the borrower, nature of the product, granularity of the exposure and
quantum thereof.

Revenue of this segment consists of interest earned, charges /fees from loans and other banking services rendered to such
customers. The principal expenses of the segment consist of interest expenses on funds utilized and other expenses allocated
as per the approved methodology. Provisions allocated to the segment includes the loan loss provision and standard asset
provision created for the portfolio under the segment.

Digital Banking Business is separately reported as a sub-segment under Retail Banking Segment as per the RBI guideline. The
Sub Segment includes the businesses involving digital banking products acquired by the Digital Banking Unit together with
the existing digital banking products.

iv) Other Banking Operations

This segment includes banking operations, not covered under any of the above segments such as para banking operations. The
income from such services and associated costs are disclosed in this segment.

v) Unallocated

All items that are reckoned at enterprise level and cannot be allocated to reportable segments are included in unallocated
portion. These mainly includes provision for tax (net of advance tax), deferred tax asset/liability, cash and balances in other
bank current accounts, etc. Unallocated segment revenue consists of profit on sale of fixed assets, notice pay on resignation
of employees etc.

Note: The Bank has made improvements to the internal transfer pricing methodology aligning to matched maturities for
better presentation of the segment information effective from April 01, 2025. Correspondingly the segment information for
previous periods have been regrouped / reclassified to conform to current period's presentation. This change in segment
information does not impact the segment identification, overall Revenue, Results, Assets, Liabilities and Capital Employed of
the Bank for the year ended March 31, 2026 and March 31, 2025.

2.2.B. Geographical Segment Information

The Business operations of the Bank are largely concentrated in India and for purpose of Segment reporting, the Bank considered to
operate only in domestic segment, though the Bank has its operation in International Financial Services Centre (IFSC) Banking Unit in
Gujarat International Finance Tec-City (GIFT City). The business conducted from the same is considered as a part of Indian operations.

Segment information is provided as per the MIS available for internal reporting purposes, which include certain estimates/
assumptions. The methodology adopted in compiling and reporting the above information has been relied upon by the auditors.

3. Other Disclosures
3.1 Earnings Per Share (AS 20)

Basic and diluted earnings per equity share of the Bank have been computed in accordance with AS 20 - Earnings Per Share.
Basic earnings per equity share has been computed by dividing net profit for the period attributable to equity shareholders by the
weighted average number of equity shares outstanding during the year. Diluted earnings per equity share has been computed by
dividing the net profit for the period attributable to equity shareholders by the weighted average number of shares outstanding
during the period adjusted for the effect of all dilutive potential equity shares outstanding during the period. The dilutive impact
is on account of stock options granted to employees and share warrants issued by Bank.

3.2.D. Employee Stock Option Scheme (ESOS)

(i) Employee Stock Option Scheme 2010 (ESOS 2010)

Shareholders of the Bank had approved Employee Stock Option Scheme 2010 (ESOS 2010) through postal ballot, the result
of which was announced on December 24, 2010, enabling the Board and/or the “Compensation Committee” to grant such
number of equity shares, including options, of the Bank not exceeding 5% of the aggregate number of paid up equity shares
of the Bank, in line with the guidelines of SEBI. The options granted will vest based on the status of the employee on the date
of vesting, subject to the fulfilment of the performance criteria for the vesting. The exercise period would commence from
the date of vesting and will expire on the completion of five years from the date of vesting of options.

3.2 Share Capital

3.2. A. Equity Issue

During the year, the Bank has allotted 84,53,291 (previous year 2,04,77,127) equity shares consequent to exercise of ESOS
vested. Accordingly, the share capital increased by H 1.69 Crore (previous year H 4.10 Crore) and share premium account increased
by H 62.75 Crore (previous year H 161.23 Crore).

During the year, the Bank has issued and allotted 27,29,74,043 warrants by way of preferential allotment on a private placement
basis to Asia II Topco XIII Pte. Ltd., on receipt of 25% of the warrant price of H 227 per warrant, aggregating to H 1,549.13 Crore.
Each warrant carries the right to subscribe to one fully paid up equity share of the Bank having a face value of H 2 per share, upon
exercise, by paying the remaining 75% within 18 months of allotment.

3.2. B. Subscribed and paid up capital includes:

(i) 16,590 equity shares of H 2 /- each (previous year 16,590 equity shares of H 2/- each) issued for consideration other than cash.

(ii) 2,50,20,760 underlying equity shares of H 2/- each (previous year 2,42,47,016 equity shares of H 2/- each) held by custodian
on behalf of holders of Global Depository Receipts (GDRs).

3.2. C. The following allotments are kept pending following Orders from various Courts:

(i) Allotment of 6,530 equity shares of H 2 /- each (previous year 6,530 equity shares of H 2/- each) pertaining to the Rights issue
of 1993 issued at a premium of H 5/- per share.

(ii) 2,62,100 equity shares of H 2 /- each (previous year 2,62,100 equity shares of H 2/- each) pertaining to the Rights issue of
1996 issued at a premium of H 28 /- per share.

(iii) 10,56,665 equity shares of H 2 /- each (previous year 10,56,665 equity shares of H 2/- each) at a premium of H 48/- per share
pertaining to Rights issue of 2007.

Listing of shares and credit in demat account in respect of the following Bonus issues are kept in abeyance consequent to injunction
orders from various Courts.

(i) 3,96,670 equity shares of H 2/- each (previous year 3,96,670 equity shares of H 2/- each) out of the Bonus issue of 2004 and

(ii) 5,97,005 equity shares of H 2 /- each (previous year 5,97,005 equity shares of H 2/- each) out of the Bonus issue of 2015.

As per SEBI guidelines and the Guidance Note on “Accounting for Share-based Payments” issued by the ICAI, the accounting
for ESOS can be done either under the “Intrinsic value method” or “Fair value method”. The Compensation Committee in their
meeting dated May 10, 2012 decided to adopt “Intrinsic value method” for accounting of ESOS, in terms of the power vested
on them as per the resolution of EGM dated December 24, 2010. Accordingly, options under the scheme are accounted
using the intrinsic value method except as stated otherwise#. No cost has been incurred by the Bank on ESOS issued to the
employees of the Bank under the intrinsic value method during the year ended March 31, 2026 (previous year Nil)

#In compliance with RBI guidelines, stock options granted to Whole Time Directors/Chief Executive Officer and Material Risk
Takers after the year ended March 31, 2021 have been accounted using fair value method. Accordingly, under this scheme,
the Bank has recognised H 0.30 Crore as employee cost in the Profit and Loss Account during the year ended March 31, 2026
(previous year H 1.15 Crore).

ii) Employee Stock Option Scheme 2017 (ESOS 2017)

Shareholders of the Bank had approved The Federal Bank Limited Employee Stock Option Scheme 2017 (ESOS 2017) in the
AGM held on July 14, 2017, as a Special Resolution, enabling the Board and/or the “Compensation Committee” to grant such
number of equity shares, including options, of the Bank not exceeding 5% of the aggregate number of paid up equity shares
of the Bank, in line with the guidelines of SEBI. The options granted will vest based on the status of the employee on the date
of vesting, subject to the fulfilment of the performance criteria for the vesting. The exercise period would commence from
the date of vesting and will expire on the completion of five years from the date of vesting of options.

As per SEBI guidelines and the Guidance Note on “Accounting for Share based payments” issued by the ICAI, the accounting
for ESOS can be done either under the “Intrinsic value method” or “Fair value method”. The Compensation Committee in their
meeting dated May 10, 2012 decided to adopt “Intrinsic value method” for accounting of ESOS, in terms of the power vested
on them as per the resolution of EGM dated December 24, 2010. Accordingly, options under the scheme are accounted using
the intrinsic value method except as stated otherwise#. Under the intrinsic value method, the Bank has recognised H 6.10
Crore as employee cost in the Profit and Loss Account during the year ended March 31, 2026 (previous year: H 3.41 Crore).

#In compliance with RBI guidelines, stock options granted to Whole Time Directors/Chief Executive Officer and Material Risk
Takers after the year ended March 31, 2021 have been accounted using fair value method. Accordingly, under this scheme, the
Bank has recognised H 1.92 Crore as employee cost in the Profit and Loss Account during the year ended March 31, 2026 (previous
year H 0.74 Crore).

iii) Employee Stock Option Scheme 2023 (ESOS 2023)

Shareholders of the Bank had approved The Federal Bank Limited Employee Stock Option Scheme 2023 (ESOS 2023) in
the AGM held on August 18, 2023, as a Special Resolution, enabling the Board and/or the “Compensation Committee” to
grant such number of equity shares, including options, of the Bank not exceeding 0.71% of the aggregate number of paid
up equity shares of the Bank, in line with the guidelines of SEBI. The options granted will vest based on the status of the
employee on the date of vesting, subject to the fulfilment of the performance criteria for the vesting. The exercise period
would commence from the date of vesting and will expire on the completion of five years from the date of vesting of options.

* During the year ended March 31, 2025, 16,00,000 Stock Options were granted on September 24, 2024. Pursuant to the NRC meeting held on June
28, 2025, the said grant was subsequently split into two tranches, comprising 12,00,000 Stock Options in the first tranche and 4,00,000 Stock Options
in the second tranche on August 18, 2025.

As per SEBI guidelines and the Guidance Note on “Accounting for Share based payments” issued by the ICAI, the accounting
for ESOS can be done either under the “Intrinsic value method” or “Fair value method”. The Compensation Committee in their
meeting dated May 10, 2012 decided to adopt “Intrinsic value method” for accounting of ESOS, in terms of the power vested
on them as per the resolution of EGM dated December 24, 2010. Accordingly, options under the scheme are accounted
using the intrinsic value method except as stated otherwise#. No cost has been incurred by the Bank on ESOS issued to the
employees of the Bank under the intrinsic value method during the year ended March 31, 2026 (previous year Nil).

#In compliance with RBI guidelines, stock options granted to Whole Time Directors/Chief Executive Officer and Material Risk
Takers after the year ended March 31, 2021 have been accounted using fair value method. Accordingly, under this scheme,
the Bank has recognised H 4.15 Crore as employee cost in the Profit and Loss Account during the year ended March 31, 2026
(previous year H 3.01 Crore).

iv) Employee Stock Incentive Scheme 2023 (ESIS 2023)

Shareholders of the Bank had approved The Federal Bank Limited Employee Stock Incentive Scheme 2023 (ESIS 2023) in
the AGM held on August 18, 2023, as a Special Resolution, enabling the Board and/or the “Compensation Committee” to
grant such number of equity shares, including options, of the Bank not exceeding 0.30% of the aggregate number of paid
up equity shares of the Bank, in line with the guidelines of SEBI. The options granted will vest based on the status of the
employee on the date of vesting, subject to the fulfilment of the performance criteria for the vesting. The exercise period
would commence from the date of vesting and will expire on the completion of four years from the date of vesting of options.

As per SEBI guidelines and the Guidance Note on “Accounting for Share-based Payments” issued by the ICAI, the accounting
for stock options can be done either under the “Intrinsic value method” or “Fair value method”. As per the approval of
shareholders, the Bank has adopted 'Fair value method' for accounting of stock options. Accordingly, the Bank has
recognised H 14.12 Crore as employee cost in the Profit and Loss Account during the year ended March 31, 2026 (previous
year H 0.18 Crore).

v) Employee Stock Option Scheme 2025 (ESOS 2025)

Shareholders of the Bank had approved The Federal Bank Limited Employee Stock Option Scheme 2025 (ESOS 2025) in the
AGM held on August 29, 2025, as a Special Resolution, enabling the Board and/or the “Compensation Committee” to grant
such number of equity shares, including options, of the Bank not exceeding 1.00% of the aggregate number of paid up equity
shares of the Bank, in line with the guidelines of SEBI. The options granted will vest based on the status of the employee on
the date of vesting, subject to the fulfilment of the performance criteria for the vesting. The exercise period would commence
from the date of vesting and will expire on the completion of five years from the date of vesting of options. During the year, no
options were granted.

vi) Employee Stock Incentive Scheme 2025 (ESIS 2025)

Shareholders of the Bank had approved The Federal Bank Limited Employee Stock Incentive Scheme 2025 (ESIS 2025) in
the AGM held on August 29, 2025, as a Special Resolution, enabling the Board and/or the “Compensation Committee” to
grant such number of equity shares, including options, of the Bank not exceeding 0.60% of the aggregate number of paid
up equity shares of the Bank, in line with the guidelines of SEBI. The options granted will vest based on the status of the
employee on the date of vesting, subject to the fulfilment of the performance criteria for the vesting. The exercise period
would commence from the date of vesting and will expire on the completion of three years from the date of vesting of
options. During the year, no options were granted.

vii) Cash Settled Stock Appreciation Rights Plan 2026 (CSAR 2026)

The Board of Directors of the Bank had approved The Federal Bank Limited Cash Settled Stock Appreciation Rights Scheme
2026 (CSAR 2026) on March 27, 2026. The Cash Settled Stock Appreciation Rights (CSARs) are settled in cash and vest on the
respective due dates as per the terms and conditions of grant. During the year, no CSAR Units were granted.

The options under various schemes were exercised regularly throughout the year and weighted average share price as per
National Stock Exchange price volume data during the year ended March 31, 2026 was H 229.47 (previous year H 186.25).

viii) Effect of Fair value method of accounting ESOS & ESIS

If “Fair Value Method” had been adopted based on “Black-Scholes pricing model” for pricing and accounting of options which
are presently accounted using “Intrinsic Value Method”, net profit after tax would be lower by H 17.14 Crore (previous year
H 15.02 Crore). The modified basic and diluted earnings per share for the year had the Bank followed Fair Value Method for
accounting of options which are presently accounted using intrinsic value method would be H 16.67 and H 16.49 (previous
year H 16.48 and H 16.35) respectively.

3.3. B. Revaluation of Fixed Assets

During the year 1995-96, the appreciation of H 9.65 Crore in the value of land and buildings consequent upon revaluation by
approved valuer was credited to Revaluation Reserve. There has been no revaluation of assets during the years ended March 31,
2026 and March 31, 2025.

3.4. Leases (AS 19)

Lease payments for assets taken on operating lease are recognised as an expense in the Profit and Loss Account as per the lease
terms. During the year an amount of H 292.55 Crore (previous year: H 266.73 Crore) was charged to Profit and Loss Account.

There are no provisions relating to contingent rent.

The terms of renewal/purchase options and escalation clauses are those normally prevalent in similar agreements. There are
generally no undue restrictions or onerous clauses in the agreements.

3.2.E. Dividend

The Board of Directors have recommended a final dividend of 60 % i.e. H 1.20 per Equity Share on face value of H 2.00 each
for the year 2025-26 (previous year H 1.20 per Equity Share) subject to the approval of the members at the ensuing Annual
General Meeting.

In terms of Accounting Standard (AS) 4 "Contingencies and Events occurring after the Balance sheet date" the Bank has not
appropriated proposed dividend aggregating to H 295.71 Crore from the Profit and Loss Account for the year ended March 31,
2026. However, the effect of the proposed dividend has been reckoned in determining capital funds in the computation of Capital
adequacy ratio.

During the year, the Bank paid a final dividend of H 1.20 per equity share amounting H 295.04 Crore pertaining to year ended
March 31, 2025, has been considered as an appropriation from the Profit and Loss Account during the year.

3.6. Description of contingent liabilities:

i) Claims against the Bank not acknowledged as debts

These represent claims filed against the Bank in the normal course of business relating to various legal cases currently in
progress. These also include demands raised by income tax and other statutory authorities and disputed by the Bank.

ii) Liability on account of forward exchange and derivative contracts

The Bank presently enters into foreign exchange contracts and interest rate swaps with interbank Counterparties and
Customers. Forward exchange contracts are commitments to buy or sell foreign currency at a future date at the contracted
rate. Interest rate swaps are commitments to exchange fixed and floating interest rate cash flows in the same currency based
on fixed rates or benchmark reference. The notional amounts of such foreign exchange contracts and derivatives provide a
basis for comparison with instruments recognised on the balance sheet but do not necessarily indicate the amounts of future
cash flows involved or the current fair value of the instruments and, therefore, do not indicate the Bank's exposure to credit
or price risks. The fluctuation of market rates and prices cause fluctuations in the value of these contracts and the contracted
exposure become favorable (assets) or unfavorable (liabilities). The aggregate fair values of derivative financial assets and
liabilities can fluctuate significantly as the aggregate contractual or notional amount of derivative financial instruments on
hand can vary and the market rate fluctuations can decide the extent to which instruments are favorable or unfavorable.

iii) Guarantees given on behalf of constituents

As a part of its banking activities, the Bank issues guarantees on behalf of its customers to enhance their credit standing.
Guarantees represent irrevocable assurances that the Bank will make payments in the event of the customer failing to fulfill
its financial or performance obligations.

iv) Acceptances, endorsements and other obligations

These include documentary credit issued by the Bank on behalf of its customers and bills drawn by the Bank's customers that
are accepted or endorsed by the Bank.

v) Other items for which the Bank is contingently liable

Includes Capital commitments, amount transferred to RBI under the Depositor Education and Awareness (DEA) Fund etc,.
(Refer schedule 12 for amounts relating to Contingent Liabilities).

3.7. Inter-bank participation with risk sharing

The aggregate amount of participation purchased by the Bank, shown as advances as per regulatory guidelines, outstanding as of
March 31, 2026 was H 5,278.47 Crore (previous year: H 1,934.59 Crore).

The aggregate amount of the participation issued by the Bank, reduced from advances as per regulatory guidelines, outstanding
as of March 31, 2026 was H 3,150.00 Crore (previous year: H 5,265.74 Crore).

3.8. Provision for Long Term contracts

The Bank has a process whereby periodically all long term contracts (including derivative contracts) are assessed for material
foreseeable losses. At the year end, the Bank has reviewed and recorded adequate provision as required under any Law/Accounting
Standards for material foreseeable losses on such long term contracts (including derivative contracts) in the books of account and
disclosed the same under the relevant notes in the financial statements.

3.12. Disclosure under Rule 11(e) of the Companies (Audit and Auditors) Rules, 2014

No funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of
funds) by the Bank to or in any other person(s) or entity (ies), including foreign entities (“Intermediaries”) with the understanding,
whether recorded in writing or otherwise, that the Intermediary shall lend or invest in party identified by or on behalf of the Bank
(“Ultimate Beneficiaries”). The Bank has not received any fund from any party(s) (Funding Party) with the understanding that the
Bank shall whether, directly or indirectly lend or invest in other persons or entities identified by or on behalf of the Bank (“Ultimate
Beneficiaries”) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

3.13. On November 21, 2025, the Government of India notified the four Labour Codes - the Code on Wages, 2019, the Industrial
Relations Code, 2020, the Code on Social Security, 2020, and the Occupational Safety, Health and Working Conditions Code,
2020 - consolidating 29 existing labour laws. The Bank has assessed impact of these changes to the extent applicable and has
made an incremental provision of H 2.08 Crore during the year, towards the estimated impact of these changes.

3.14. Figures for the previous year have been regrouped and reclassified, wherever necessary to conform to current year's presentation.

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