Arohan Annual Report FY 20-21

Cash and cash equivalents and bank deposits Credit risk related to cash and cash equivalents (excluding cash on hand) and bank deposits is managed by only accepting highly rated deposits from banks and financial institutions across the country. Trade receivables Trade receivables measured at amortised cost and credit risk related to these are managed by monitoring the recoverability of such amounts continuously. Other financial assets Other financial assets measured at amortized cost includes security deposits, receivable on assignment, advances recoverable on behalf of business correspondence arrangements, insurance claim receivables and other receivables. Credit risk related to these other financial assets is managed by monitoring the recoverability of such amounts continuously. The Company provides for expected credit loss based on the following: Financial assets that expose the entity to credit risk In order to avoid excessive concentration of risk, the Company’s policies and procedures include specific guidelines to focus on maintaining a diversified portfolio. Identified concentrations of credit risks are controlled and managed accordingly. A. Credit risk Credit risk is the risk that the Company will incur a loss because its customers or counterparties fail to discharge their contractual obligations. The Company’s exposure to credit risk is influenced mainly by cash and cash equivalents, other bank balances, investments, loan assets, trade receivables and other financial assets. The Company continuously monitors defaults of customers and other counterparties and incorporates this information into its credit risk controls. a) Credit risk management Based on business environment in which the Company operates, a default on a financial asset is considered when the counter party fails to make payments within the agreed time period as per contract. ‘The Company assesses andmanages credit risk based on internal credit rating system. Internal credit rating is performed for each class of financial instruments with different characteristics. The Company has established a credit quality review process to provide early identification of possible changes in the creditworthiness of counterparties, including regular collateral revisions. The Company assigns the following credit ratings to each class of financial assets based on the assumptions, inputs and factors specific to the class of financial assets. (i) Low credit risk (ii) Moderate credit risk (iii) High credit risk Nature Assets covered Basis of expected credit loss Low credit risk Cash and cash equivalents (excluding cash on hand), other bank balances, investments, loans, trade receivables and other financial assets Life time expected credit loss or 12 month expected credit loss Moderate credit risk Loans Life time expected credit loss or 12 month expected credit loss High credit risk Loans Life time expected credit loss or fully provided for Particulars Year ended 31 March 2021 Year ended 31 March 2020 (i) Low credit risk Cash and cash equivalents (**) 115,630.20 68,493.02 Other bank balances 19,249.42 15,165.59 Trade receivables 113.67 500.26 Loans (*) 360,257.37 430,578.26 Other financial assets 1,051.46 2,154.37 (ii) Moderate credit risk Loans (*) 51,230.98 11,709.19 (iii) High credit risk Loans (*) 52,096.33 11,183.84 (*) These represent gross carrying values of financial assets, without netting off impairment loss allowance (**) Exclude cash in hand balance since there is no credit risk. Arohan Financial Services Limited Summary of significant accounting policies and other explanatory information for the year ended 31 March 2021 (Contd.) Financial 165