ஆசிர்வாத் மைக்ரோபைனான்ஸ் லிமிடெட்          Asirvad Micro Finance Limited          आशीर्वाद माइक्रोफिनॅन्स लिमिटेड         ആശിർവാദ് മൈക്രോഫിനാൻസ് ലിമിറ്റഡ്          ಅಸೀರ್ವಾಡ್ ಮಿಕ್ರೊಫಿನನ್ಸೆ ಲಿಮಿಟೆಡ್          ਅਸਿਰਵਾਦ ਮਿਕਰੋਫਈਨਂਸੇ ਲਿਮਿਟੇਡ          ଆଶୀର୍ବାଦ ମଇକ୍ରୋଫାଇନାନ୍ସ ଲିଃ          আশির্বাদ মাইক্রো ফাইনান্স লিমিটেড

Corporate Governance – Internal Guidelines

OBJECTIVE OF GUIDELINES ON CORPORATE GOVERNANCE: 

A Good Corporate Governance practice is a key factor of sustainable corporate growth and  maintains a long term relationship with the stakeholders of the Company. Asirvad Micro  Finance Limited (“the Company”) is committed to highest level of Corporate Governance  practices and emphasizes the need for full transparency and accountability in all  transactions, in order to protect interests of its stakeholders. This enables the Company to  attract high quality financial and human capital. 

The Company believes that a strong professionally balanced Board of Directors is necessary  to ensure the highest standards of Corporate Governance; we have an appropriate mix of  executive /non-executive and independent directors in our Board. Board of Directors  represent the shareholder’s interest in perpetuating a successful business and optimizing  long term financial returns in a manner consistent with applicable regulatory and legal  requirements and ethical considerations. 

In order to enable NBFCs to adopt best practices and greater transparency in their  operations, RBI has stipulated all NBFCs to frame an internal guideline on Corporate  Governance. In pursuance to the Master Direction on Non-Banking Financial Company – Systemically Important Non-Deposit taking Company and Deposit taking Company  (Reserve Bank) Directions, 2016, the Company has framed an internal guideline on  Corporate Governance and the same shall be uploaded on the website of the Company. 

2. Governance Structure: 

A. Board of Directors (“Board”) 

The Directors are responsible to set strategic objectives for the management and to  ensure that the long term interests of all stakeholders are served by adhering to and  enforcing the principles of sound Corporate Governance.

The role of the Board is to determine the overall strategic direction and management  of the Company, including monitoring its performance. The Board is responsible to  the shareholders and its conduct is determined by applicable laws and the Articles of  Association of the Company. In performing its duties, the Board meets regularly and  acts in the best interests of the Company including shareholders, employees & clients.  The Board is independent of the Management. 

Composition

The Company’s Board shall have an optimum combination of Executive, Non Executive and Independent Directors in line with the requirements of the provisions  of the Companies Act, 2013, SEBI (Listed Obligations & Disclosure Requirements)  Regulations, 2015 (“LODR”) and the Articles of Association of the Company. 

Board Meetings: 

The Board Meeting shall be held at least four times a year in such a manner that not  more than one hundred and twenty days shall intervene between two consecutive  meetings of the Board. The minimum information made available to the Board shall  be furnished to the Directors. The Company shall also adhere to the Secretarial  Standards on Board/ Committee Meetings as well as General Meetings as issued by  the ICSI and approved by the Central Government.  

B. Committees of the Board: 

The Board has constituted various Committees to deal with specific matters and for  operational convenience, delegated powers for different functional areas to different  Committees in accordance with applicable laws. The Audit Committee, Risk  Management Committee, Nomination & Remuneration Committee, Corporate Social  Responsibility Committee, IT Strategy Committee and Asset Liability Management  Committee have been constituted in accordance with the provisions of the Companies  Act, 2013, Guidelines issued by Reserve Bank of India as applicable to the Company 

for internal and operational convenience. The composition, terms of reference and  functioning of the Committee(s) shall be decided by the Board of Directors in  accordance with the provisions of the applicable laws. The Minutes of the Board Level  Committee(s) as specified by the Board are placed before Board for its perusal,  discussion and noting. 

1. Audit Committee: 

The Company shall have in place Audit Committee of the Company constituted  in accordance with the provisions of the Section 177 of the Companies Act, 2013  read with Rules framed there under, Regulation 18 of LODR and applicable  provisions of the RBI Directions. The Audit Committee’s constitution and  functioning shall be in compliance with the provisions of the Companies Act,  2013 and LODR. 

Composition: 

The Audit Committee of the Company shall be constituted as per the provisions  of Section 177 of the Companies Act, 2013 read with rules made thereunder and  Regulation 18 of LODR. They shall meet all applicable legal requirements with  respect to independence, financial literacy, accounting or related financial  expertise, etc. The members of the Audit Committee shall be appointed by the  Board of Directors. 

Meetings:  

The audit committee shall meet at least four times in a year and not more than  one hundred and twenty days shall elapse between two meetings. 

Quorum 

The quorum for any meeting of the Committee shall either be two members or  one third of the members of the audit committee, whichever is greater, with at  least two independent directors. 

Role of Audit Committee:  

∙ The recommendation for appointment, remuneration and terms of  appointment of Auditors of the Company; 

∙ Review and monitor the Auditor’s independence and performance, and  effectiveness of Audit process; 

∙ Approval of payment to statutory auditors for any other services  rendered by the statutory auditors; 

∙ Oversight of financial reporting process and disclosures of financial  information to ensure that the Financial Statement is correct, sufficient  and credible; 

∙ Examining/ Reviewing with management the annual Financial Statement  and the Auditors’ Report thereon before submission to the board for  approval, with particular reference to: 

a. matters required to be included in the director’s responsibility  statement to be included in the board’s report in terms of clause (c)  of sub-section (3) of Section 134 of the Companies Act, 2013; 

b. changes, if any, in accounting policies and practices and reasons for  the same;

c. major accounting entries involving estimates based on the exercise  of judgment by management; 

d. significant adjustments made in the financial statements arising out  of audit findings; 

e. compliance with listing and other legal requirements relating to  financial statements; 

f. disclosure of any related party transactions; 

g. modified opinion(s) in the draft audit report 

∙ Reviewing, with the management, the quarterly financial statements  before submission to the board for approval; 

∙ Approval or any subsequent modification of transactions of the Company  with related parties; 

∙ Security of inter-corporate Loans and Investments; 

∙ Valuation of undertakings or Assets of the Company, wherever it is  necessary; 

∙ Evaluation of internal financial controls and risk management systems; 

∙ Reviewing, with the management, performance of statutory and internal  auditors, adequacy of the internal control systems; 

∙ Reviewing the adequacy of internal audit function, if any, including the  structure of the internal audit department, staffing and seniority of the  official heading the department, reporting structure coverage and  frequency of internal audit;

∙ Discussion with internal auditors of any significant findings and follow  up there on; 

∙ Reviewing the findings of any internal investigations by the internal  auditors into matters where there is suspected fraud or irregularity or a  failure of internal control systems of a material nature and reporting the  matter to the board; 

∙ Discussion with statutory auditors before the audit commences, about the  nature and scope of audit as well as post-audit discussion to ascertain any  area of concern; 

∙ To look into the reasons for substantial defaults in the payment to the  depositors, debenture holders, shareholders (in case of non-payment of  declared dividends) and creditors; 

∙ To review the functioning of the whistle blower mechanism; 

∙ Approval of appointment of chief financial officer after assessing the  qualifications, experience and background, etc. of the candidate; 

∙ Carrying out any other function as is mentioned in the terms of reference  of the audit committee; 

∙ Reviewing the utilization of loans and/ or advances from/investment by  the holding company in the subsidiary exceeding rupees 100 crore or 10%  of the asset size of the subsidiary, whichever is lower including existing  loans / advances / investments existing as on the date of coming into  force of this provision;

∙ consider and comment on rationale, cost-benefits and impact of schemes  involving merger, demerger, amalgamation etc., on the Company and its  shareholders; 

∙ Reviewing, with the management, the statement of uses/ application of  funds raised through an issue (public issue, rights issue, preferential  issue, etc.), the statement of funds utilized for purposes other than those  stated in the offer document/ prospectus/ notice and the report  submitted by the monitoring agency monitoring the utilization of  proceeds of a public or rights issue, and making appropriate  recommendations to the board to take up steps in this matter;  

2. Risk Management Committee: 

The risk management framework is perhaps one of the most important  parameters that define the success of a financial services organization. A risk  management programme establishes a process of identifying and assessing the  major risks covering all areas of the institution’s activities risk. The board of  directors is responsible to ensure that management has implemented a risk  management programme, that resources are allocated for risk management and  internal controls, and that there is adequate oversight of the audit function as  one of the board of director’s responsibilities. 

Composition

The Committee should have such members as approved by the Board as per the  provisions of LODR and Reserve Bank of India Master Direction. The  Committee shall appoint one of its members as the Chairman of the Committee,  which shall be a member of Board of Directors. Further, the Chief Risk Officer 

(“CRO”) of the Company shall be the Member cum Secretary of the Committee.

Meetings:  

The Committee shall meet as and when required and further, based on the  reporting authority of CRO the Committee meetings can be convened as per the  guidelines issued by Reserve Bank of India in this regard. 

In adherence to LODR, the Committee shall meet at least twice in a year and  not more than one hundred and eighty days shall elapse between two  consecutive meetings. 

Quorum: 

The quorum for a meeting of the Committee shall be either two members or  one third of the members of the committee, whichever is higher, including at  least one member of the board of directors in attendance. 

Role of the Committee:  

The role of the Risk Management Committee, inter-alia, shall include the  following:  

∙ To formulate a detailed Risk Management Policy, which shall cover the  following: 

a. A framework for identification of internal and external risks  specifically faced by the Company, in particular including financial,  operational, sectoral, sustainability (particularly, ESG related risks),  information, cyber security risks or any other risk as may be  determined by the Committee; 

b. Measures for risk mitigation including systems and processes for  internal control of identified risks; 

c. Business continuity plan

∙ To ensure that appropriate methodology, processes and systems are in  place to monitor and evaluate risks associated with the business of the  Company; 

∙ To monitor and oversee implementation of the risk management policy,  including evaluating the adequacy of risk management systems; ∙ To periodically review the risk management policy, at least once in two  years, including by considering the changing industry dynamics and  evolving complexity; 

∙ To keep the board of directors informed about the nature and content of  its discussions, recommendations and actions to be taken; 

∙ The appointment, removal and terms of remuneration of the Chief Risk  Officer (if any) shall be subject to review by the Risk Management  Committee; 

∙ Identification, monitoring and measurement of the risk profile of the  Company (including market risk, operational risk, compliance risk, credit  risk, transactional risk etc.);  

∙ overseeing its integrated risk measurement system;  

∙ to analyze the critical decision for investments and corporate lending;  

∙ Perform such other act, including the acts and functions stipulated by RBI  and any other regulatory authority, as prescribed from time to time. 

3. Nomination & Remuneration Committee 

The Company shall have in place a Nomination & Remuneration Committee in  adherence to Section 178 of the Companies Act, 2013 read with the Rules framed  there under and LODR. The Committee shall apart from other things review  the appointments and removals of directors and senior management, the  compensation related matters of the directors and senior management,  evaluation of Directors performance, etc. 

Composition:  

The Nomination & Remuneration Committee of the Board shall be constituted  in accordance with the provisions of Section 178 of the Companies Act, 2013 read with rules made thereunder and LODR. The Committee shall appoint  Independent Director as the Chairman of the Committee. 

Meetings:  

The Committee shall meet as and when required,but at least meet once in a year. Quorum: 

The quorum for a meeting of the committee shall be either two members or one  third of the members of the committee, whichever is greater, including at least  one independent director in attendance. 

Role of the Committee:  

The role of the Nomination & Remuneration Committee, inter-alia, shall  include the following:  

∙ To formulate the criteria for determining qualifications, positive  attributes and independence of a director and recommend to the board of 

directors a policy relating to, the remuneration of the directors, key  managerial personnel and other employees; 

∙ For every appointment of an independent director, the Committee shall  evaluate the balance of skills, knowledge and experience on the Board and  on the basis of such evaluation, prepare a description of the role and  capabilities required of an independent director. The person  recommended to the Board for appointment as an independent director  shall have the capabilities identified in such description. For the purpose  of identifying suitable candidates, the Committee may: 

a. use the services of an external agencies, if required; 

b. consider candidates from a wide range of backgrounds, having due  regard to diversity; and 

c. consider the time commitments of the candidates. 

∙ To identify persons who are qualified to become Directors, Key  Managerial Personnel and also who may be appointed in senior  management positions in accordance with the criteria laid down and  recommend to the Board their appointment and removal; 

∙ To formulate the criteria for performance evaluation of Independent  Directors and the Board; 

∙ To carry out performance evaluation of Independent Directors along with  the Board as a whole; 

∙ Whether to extend or continue the term of appointment of the  independent director, on the basis of the report of performance evaluation  of independent directors;

∙ Devising a policy on diversity of board of directors 

∙ To determine remuneration for Directors, Key Managerial Personnel,  Senior Management Personnel and others employees and recommend the  same to the Board of Directors. 

∙ To recommend sitting fees for Directors. 

∙ To evaluate the level and composition of remuneration to be reasonable  and sufficient to attract, retain and motivate Directors. 

A Policy for ensuring the fit and proper criteria for appointment of Directors is  forming part of the Nomination and Remuneration Committee criteria and the  said Committee approves and recommends to the Board appointment and  reappointment of Directors. 

4. Asset Liability Management Committee 

Asset Liability Management Committee is constituted to monitor the asset  liability gap, strategize action to mitigate the risk associated, ensuring  adherence to the limits set by the Board as well as for deciding the business  strategy of the Company (on the assets and liabilities sides) in line with the  Company’s budget and decided risk management objectives. 

Composition: 

The Committee should have such members as approved by the Board. The  Committee shall appoint one of its members as the Chairman of the Committee. Further, Chief Financial Officer of the Company shall be the part of the  Committee and he will be the secretary for the said committee.

Meetings

The Committee shall meet every month 

Role of the Committee: 

The role of the Asset Liability Management Committee, inter-alia, shall include  the following: 

∙ Management of the balance sheet of the Company; 

∙ Review of the asset-liability profile of the Company with a view to  manage the market exposure assumed by the Company 

∙ Safeguarding the recovery positions at any point of time; 

∙ Review of risk monitoring system, ensure payment of liability on its due  dates, liquidity risk management, funding and capital planning, profit  planning and growth projections, forecasting and analyzing different  scenarios and preparation of contingency plans; and 

∙ Perform such other allied functions as may be required from time to time. 5. CORPORATE SOCIAL RESPONSBILITY COMMITTEE 

The Board shall constitute a Corporate Social Responsibility (“CSR”)  Committee in adherence to the provisions of Section 135 of the Companies Act,  2013 read with rules made thereunder. The Committee will be vested with  necessary powers, as laid down in its charter/ policy to achieve its objectives. 

Composition  

The CSR Committee shall be constituted as per the provisions of Section 135 of  the Companies Act, 2013 and rules made thereunder. The members of the CSR  Committee shall be appointed by the Board of Directors. The Board shall elect  the Chairman of the Committee.  

Meetings

The Committee shall meet as and when required in pursuant to the requirement  of the Companies Act, 2013. 

Role of the Committee: 

The role of the CSR Committee, inter-alia, shall include the following: 

∙ Formulate and recommend to the Board, a CSR Policy which shall  indicate the activities to be undertaken by the Company as specified in  Schedule VII; 

∙ Recommend the amount of expenditure to be incurred on the activities  referred to in clause (a);  

∙ Monitor the CSR Policy of the Company from time to time; ∙ Formulation of Annual Action Plan in accordance with CSR Policy 6. BORROWING & SECURITIES ALLOTMENTCOMMITTEE 

The Borrowing & Securities Allotment Committee of the Board is constituted  pursuant to Section 179 of the Companies Act, 2013, which empower them to  raise funds in any form including term loan, debentures, Commercial Paper, 

securitization etc. from banks and financial institutions and also to empower  designated individuals in the senior management to finalize the terms and  conditions relating to the proposal under consideration.  

Composition: 

The members of the Committee shall be appointed by the Board of Directors.  The Board shall elect the Chairman of the Committee.  

Meetings: 

The Committee shall meet as and when required. 

Role of the Committee:  

The role of the Borrowing & Securities Allotment Committee, inter-alia, shall  include the following: 

∙ To approve the borrowings/ loans/ financial assistance to be availed by  the Company from any Bank/ Financial Institutions/ firms/ bodies  corporate/ Company(ies)/ Mutual Fund(s)/ any such other entity within  the overall limit as approved by the Board of Directors as well as Members  of the Company from time to time; 

∙ To consider and approve any modification(s)/ renewals in the existing  borrowings/ loans/ financial assistance as availed by the Company from  any such above mentioned entity; 

∙ To approve creation of any mortgages / charge or other encumbrance  over the Company properties or assets for the above purpose; ∙ To raise funds in any form including term loan, issue of debentures,  Commercial Paper, securitization etc., within the overall borrowing limit  of the Company as set from time to time;

∙ To approve the allotment of securities to any identified investors as  proposed by the Company from time to time except allotment of equity  under ESOP; 

∙ To authorize any officer(s) of the Company to sign /execute loan  documents and other papers, documents ancillary to it; 

∙ To appoint/ authorize any individual as Authorized Signatory(ies) with  limit or without limit in respect of bank accounts maintained by the  Company with any banks and other financial institutions  

∙ To authorize any officer/staff for opening. Operations and closing of bank  accounts in different centers for different branches. 

∙ To authorize any officer/ employee to apply for net banking facilities and  operate the same for online transaction. 

∙ To affix the Common Seal of the Company on any one or all documents/  instruments on behalf of the Company; 

∙ To appoint Debenture trustee(s), RTA, Credit Rating Agency (ies) and  Legal counsel; 

∙ For opening/ closing and operating of lockers as may be required from  time to time 

7. IT STRATEGY COMMITTEE 

IT Strategic Committee was constituted as per the RBI Master Directions on IT  Framework for NBFC Sector. The Constitution of IT Strategy Committee is  mandatory for the Company. 

Composition: 

The Committee should have such members as approved by the Board. The  Chairman of the Committee shall be an Independent director. Further, Chief  Information Officer & Chief Technology Officer of the Company should be part  of the Committee.

Meetings:  

The Committee shall meet as and when required, however, the gap between the  two meetings shall not exceed 6 months. 

Role of the Committee:  

The role of the IT Strategy Committee, inter-alia, shall include the following: 

∙ To approve IT strategy and policy documents; 

∙ To ensure that Management has placed an effective strategic planning  process; 

∙ To ensure that Management has implemented processes and practices to  ensure that the IT delivers value to the business; 

∙ To ensure IT investments represent a balance of risks and benefits and  that budgets are acceptable. 

∙ To monitor the method adopted by the Management to determine the IT  resources needed to achieve strategic goals and provide high level  direction for sourcing and use of IT resources. 

∙ To ensure proper balance of IT investments for sustaining the Company  growth and becoming aware about exposure towards IT risks and  controls. 

8. MANAGEMENT COMMITTEE 

For ensuring effective management of overall operations of the Company, the  Management Committee of the Board is constituted. The said Committee meets  from time to time for monitoring the activities of various departments of the  Company in order to ascertain that procedures/ codes of the Company are  adhered effectively.

Composition: 

The Committee should have such members as approved by the Board. The  Chairman of the Committee shall be appointed by the Board. 

Meetings: 

The Committee shall meet as and when required. 

Role of the Committee:  

The role of the Committee, inter-alia, shall include the following: 

∙ To overview the governance norms followed by the Company and  ascertain proper management; 

∙ To monitor the workings of various divisions/ departments of the  Company; 

∙ To ensure the adherence of various procedures/ processes by the  Company; 

9. STAKEHOLDERS RELATIONSHIP COMMITTEE 

The Stakeholders Relationship Committee is constituted pursuant to Section  178 of the Companies Act, 2013 read with rules made thereunder and LODR. 

Composition: 

The Committee should have such members as approved by the Board in  adherence to Companies Act, 2013 and LODR. The Chairperson who shall be a  non-executive director and such other members as may be decided by the  Board.

Meetings: 

The Committee shall meet half-yearly. 

Quorum

The quorum of the meeting shall be fixed by the Board of Directors. 

Role of the Committee:  

The role of the Committee, inter-alia, shall include the following: 

∙ Resolving the grievances of the security holders of the Company  including complaints related to transfer/transmission of shares, non receipt of annual report, non-receipt of declared dividends, issue of  new/duplicate certificates, general meetings etc. 

∙ Review of measures taken for effective exercise of voting rights by  shareholders 

∙ Review of adherence to the service standards adopted by the Company in  respect of various services being rendered by the Registrar & Share  Transfer Agent 

∙ Review of the various measures and initiatives taken by the Company for  ensuring timely receipt of annual reports/statutory notices by the  security holders of the Company. 

∙ Review of all communications to security holders mandated by LODR  and Companies Act, 2013

STATUTORY AUDITORS 

As per the Section 141 of the Companies Act, 2013, the Company shall have  Statutory Auditors. The appointment of Auditor shall be recommended by  Audit Committee to the Board for consideration, and thereafter Board shall  recommend the same to the members, for their approval in General Meeting. 

Internal Auditors: 

As per Section 138 of the Companies Act, 2013 and rules made thereunder, the  Company shall have an Internal Auditor. The appointment of Auditor shall be  recommend by Audit Committee and subsequently approved by the Board. The  Internal Auditor shall perform independent and objective assessment of the  internal controls, processes and procedures instituted by the Management and  accordingly monitor its adequacy and effectiveness.  

Secretarial Auditors: 

The Company shall appoint an Independent Company Secretary or a firm of  Company Secretaries in Practice, in accordance with the provisions of the  Companies Act, 2013 and rules made thereunder, to conduct a Secretarial Audit  of the Company for every Financial Year. The Secretarial Audit Report shall be  placed before the Board for its noting and records and the same be annexed to  the Board’s Report which shall be circulated to the Shareholders of the  Company in accordance with the applicable laws / regulations. 

CODE OF CONDUCT FOR DIRECTORS & SENIOR MANAGERIAL  PERSONNEL 

The Company has laid down the Code of Conduct for Directors and Senior  Managerial personnel. The Code is applicable to Executive/ Non-Executive 

Directors including Independent Directors and Senior Managerial Personnel of  the Company. 

WHISTLE BLOWER POLICY/ VIGIL MECHANISM 

The Vigil (Whistle Blower) Mechanism is to ensure highest ethical, moral and  business standards in the course of functioning and to build a lasting and strong  culture of Corporate Governance within the Company. In terms of policy, an  internal mechanism is established for Directors and employees to report to the  management, concerns about unethical behavior, actual or suspected fraud or  violation of Company’s code of conduct. The policy is intended to encourage all  Directors and employees of the Company to report suspected or actual  occurrence of illegal, unethical or inappropriate actions, behaviors or practices  by Directors/employees without fear of retribution. The Directors/ employees  can voice their concerns on irregularities, malpractices and other misdemeanors  through this Policy. It also provides necessary safeguards and protection to the  Directors/employees who disclose the instances of unethical practices/  behavior observed in the Company. The mechanism also provides for direct  access to the Chairman of the Audit Committee in exceptional cases. 

DISCLOSURE TO THE BOARD 

The following disclosures shall be made to the Board of Directors at intervals as  may be prescribed by the Board in this regard: 

⮚ progress made in putting in place a progressive risk management system,  and risk management policy and strategy followed; 

⮚ conformity with corporate governance standards viz. in composition of  various committees, their role and functions, periodicity of the meetings and  compliance with coverage and review functions, etc.