| 200 Annual Report | 2024-2025 Financials Arohan Financial Services Limited Notes to financial statements for the year ended March 31, 2025 (Contd.) (All amounts in ` lakhs unless otherwise stated) Note 43: Financial risk management (cont'd) A. Credit risk (cont'd) Loans The Company closely monitors the credit-worthiness of the borrower’s through internal systems and appraisal process to assess the credit risk and define credit limits of borrower, thereby, limiting the credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties. These processes include a detailed appraisal methodology, identification of risks and suitable structuring and credit risk mitigation measures. The Company assesses increase in credit risk on an ongoing basis for amounts loan receivables that become past due and default is considered to have occurred when amounts receivable become 90 days past due. The major guidelines for selection of the client includes: 1. The client’s income and fixed obligation to income ratio levels must be within the prescribed guidelines of Reserve Bank of India; 2. The client must possess the required KYC documents; 3. The client’s household must be engaged in some form of economic activity which ensures regular and assured income; 4. Client must agree to follow the rules and regulations of the organisation and 5. Credit bureau check – In order to deal with the problem of over extension of credit and indebtedness of the client, the organisation undertakes credit bureau checks compulsorily for every client. The credit bureau check helps the organisation in identifying clients with poor repayment histories and multiple loans. Movement of carrying amount and expected credit loss for loans Definition of default: The Company considers default in all cases when the borrower becomes 90 days past due on its contractual payments. The Expected Credit Loss (ECL) is measured at 12-month ECL for Stage 1 loan assets and at lifetime ECL for Stage 2 and Stage 3 loan assets. ECL is the product of the Probability of Default, Exposure at Default and Loss Given Default. Particulars Stage 1 Stage 2 Stage 3 Total Gross carrying amount as at March 31, 2023 4,65,644.48 27,320.44 13,721.20 5,06,686.12 Assets originated (*) 5,48,819.92 - - 5,48,819.92 Net transfer between stages Transfer to stage 1 7.84 (6.34) (1.50) - Transfer to stage 2 (10,525.71) 10,540.22 (14.51) - Transfer to stage 3 (15,023.42) (6,961.52) 21,984.94 - Assets derecognised or collected (excluding write offs) (3,25,222.96) (2,671.02) (1,870.45) (3,29,764.43) Write - offs (including death cases & settlements) (339.93) (24,120.32)(22,661.90) (47,122.15) Gross carrying amount as at March 31, 2024 6,63,360.22 4,101.46 11,157.78 6,78,619.46 Assets originated (*) 3,78,647.86 - - 3,78,647.86 Net transfer between stages Transfer to stage 1 7.45 (5.37) (2.08) - Transfer to stage 2 (11,236.05) 11,236.60 (0.55) - Transfer to stage 3 (41,362.15) (3,538.07) 44,900.22 - Assets derecognised or collected (excluding write offs) (4,23,644.24) (550.61) (155.12) (4,24,349.97) Write - offs (including death cases & settlements) (0.03) - (39,487.37)(39,487.40) Gross carrying amount as at March 31, 2025 5,65,773.06 11,244.01 16,412.88 5,93,429.95 (*) Assets originated during the year has been presented on net basis i.e. the collections towards fresh loans has been netted off.
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