Integrated Annual Report 2025-26 444 Definition of default The financial services business considers a financial asset to be in “default” and therefore Stage 3 (credit impaired) for ECL calculations when the borrower becomes 90 days past due on its contractual payments. Since financial services business portfolio predominantly includes retail loan portfolio with around 12 million loan accounts making it difficult to define default at an individual loan account, it has considered 90 days past due as the event of default. The same is also in line with the regulator’s definition of default of 90 days past due. Policy for write off of Loan Assets The gross carrying amount of a financial asset is written off when there is no realistic prospect of further recovery. This is generally the case when the financial services business determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write- off. However, financial assets that are written off could still be subject to enforcement activities under the recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognised in profit or loss. Impairment loss The expected credit loss allowance provision is determined as follows: Rupees crores Particulars Stage-1 Stage-2 Stage-3 Total Gross Balance as at 31st March, 2026 ........................................................... 1,28,694.12 6,757.40 4,789.90 1,40,241.42 Expected credit loss rate ......................................................................................... 0.59% 8.03% 58.97% Carrying amount as at 31st March, 2026 (net of impairment provision)............................................................................................................................... 1,27,934.02 6,214.73 1,965.13 1,36,113.88 Gross Balance as at 31st March, 2025 ........................................................... 1,12,346.83 6,981.83 5,059.32 1,24,387.98 Expected credit loss rate ......................................................................................... 0.52% 9.32% 55.53% Carrying amount as at 31st March, 2025 (net of impairment provision) ............................................................................................................................. 1,11,757.23 6,331.27 2,249.74 1,20,338.24 Level of Assessment - Aggregation Criteria The financial services business recognises the expected credit losses on a collective basis that takes into account comprehensive credit risk information and considers the economic and risk characteristics, pricing range and sector concentration. Reconciliation of loss allowance provision for Retail and SME loans Rupees crores Particulars Stage-1 Stage-2 Stage-3 Total Balance as at 1st April, 2025.............................................................................. 589.60 650.56 2,809.58 4,049.74 — Transferred to Stage-1............................................................................................ 187.53 (114.54) (72.99) — — Transferred to Stage-2............................................................................................ (19.73) 70.02 (50.29) — — Transferred to Stage-3............................................................................................ (7.53) (103.43) 110.96 — Loans that have been derecognised during the year............................. (68.07) (130.47) (1,090.79) (1,289.33) New loans originated during the year............................................................... 356.41 38.96 87.50 482.87 Write-offs................................................................................................................................ (0.07) (10.26) (580.95) (591.28) Net remeasurement of loss allowance............................................................. (278.04) 141.83 1,611.75 1,475.54 Balance as at 31st March, 2026........................................................................ 760.10 542.67 2,824.77 4,127.54 40. Financial instruments (Continued) (b) Credit Risk Management (Continued)
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