(xxii) Provisions, contingent liabilities and contingent assets
Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of past events, and 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. When the effect of the time value of money is material, the Company
determines the level of provision by discounting the expected cash flows at a pre-tax rate reflecting the current rates specific to
the liability. The expense relating to any provision is presented in the Statement of Profit and Loss net of any reimbursement.
Contingent assets/liabilities
A possible obligation that arises from past events and the existence of which will be confirmed only by the occurrence or non¬
occurrence of one or more uncertain future events not wholly within the control of the Company or; present obligation that arises
from past events where it is not probable that an outflow of resources embodying economic benefits will be required to settle
the obligation; or the amount of the obligation cannot be measured with sufficient reliability are disclosed as contingent liability
and not provided for. Contingent assets are disclosed where an inflow of economic benefits is probable. Contingent assets are not
recognised in the standalone financial statements.
Provisions, contingent liabilities and contingent assets are reviewed at each Balance Sheet date.
Where the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received
under such contract, the present obligation under the contract is recognised and measured as a provision
(xxiii) Commitments
Commitments are future liabilities for contractual expenditure, classified and disclosed as follows:
a) estimated amount of contracts remaining to be executed on capital account and not provided for;
b) funding related commitment to subsidiaries/associates; and
c) other non-cancellable commitments, if any, to the extent they are considered material and relevant in the opinion of
management;
d) other commitments related to sales/procurements made in the normal course of business are not disclosed to avoid excessive
details;
e) commitments under Loan agreement to disburse Loans;
f) lease agreements entered but not executed.
(xxiv) Statement of Cash Flows
Statement of Cash Flows is prepared segregating the cash flows into operating, investing and financing activities. Cash flow from
operating activities is reported using indirect method adjusting the net profit for the effects of:
i. changes during the period in operating receivables and payables transactions of a non-cash nature;
ii. non-cash items such as depreciation, Impairment, deferred taxes, unrealised foreign currency gains and losses, and
undistributed profits of associates and joint ventures; and
iii. all other items for which the cash effects are investing or financing cash flows.
Cash and cash equivalents (including bank balances) shown in the Statement of Cash Flows exclude items which are not available
for general use as on the date of Balance Sheet.
(xxv) Dividend payable
Interim dividend declared to equity shareholders, if any, is recognised as liability in the period in which the said dividend has been
declared by the Board of Directors. Final dividend declared, if any, is recognised in the period in which the said dividend has been
approved by the Shareholders.
The dividend payable is recognised as a liability with a corresponding amount recognised directly in equity.
(xxvi) Business combinations
Business combinations involving entities that are controlled by the Group are accounted for using the pooling of interest method.
Assets and liabilities of the combining entities are reflected at their carrying value without adjustments being made to reflect
fair values. The identity of the reserve are preserved and reserve of the transferor become the reserves of the transferee. The
difference, if any, between the amounts recorded as share capital issued and the amount of share capital of the transferor is
transferred to capital reserve. The financial information in the standalone financial statements in respect of prior period is restated
as if the business combination had occurred form the beginning of the preceding period in the standalone financial statements,
irrespective of the actual date of the combination.
The Company applies the acquisition method of accounting for business combinations where common control does not exist.
The consideration transferred by the Company for the acquisition of business comprises of fair value of the assets transferred,
liabilities incurred, and the equity interests issued by the Company as at the acquisition date i.e. the date on which it obtains the
control of the acquiree. Consideration transferred also includes amounts related to settlement of pre-existing relationships. The
acquisition related costs are recognised in the Statement of Profit and Loss as incurred, except to the extent related to the issue of
debt (classified as equity as per IndAS) or equity securities, which are directly adjusted in other equity.
Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values on the
acquisition date. Intangible assets acquired in a business combination and recognised separately from Goodwill are initially
recognised at their fair value at the acquisition date.
Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated
amortisation.
Goodwill is initially measured at cost, being the excess of the consideration transferred over the fair value of the net identifiable
assets acquired.
Further details and impact of this merger on financial statements of the Company is disclosed in note 44.
(xxvii) Event After reporting date
Where events occurring after the balance sheet date provide evidence of conditions that existed at the end of the reporting
period, the impact of such events is adjusted within the financial statements. Otherwise, events after the balance sheet date of
material size or nature are only disclosed.
(xxviii) Recent Accounting pronouncements
Ministry of Corporate Affairs ("MCA") notifies new standards or amendments to the existing standards under Companies (Indian
Accounting Standards) Rules as issued from time to time.
In May 2025, MCA notified amendments to IndAS 21 - The Effects of Changes in Foreign Exchange Rates, applicable w.e.f. April 1,
2025. The Company has reviewed the amendment and based on its evaluation has determined that it does not have any significant
impact in its financial statements.
In August 2025, MCA notified the following amendments to:
1. IndAS 1, Presentation of Financial Statements, applicable w.e.f. April 1, 2025 - The amendment relates to classification of
liabilities as current or non-current and non-current liabilities with covenants. In the context of classifying a liability as current,
it removes the requirement of existence of a right to defer settlement for at least 12 months after the reporting date and
instead requires that the said right should exist on the reporting date and have substance. The amendment also introduces
guidance on classification of liabilities with covenants. The Company has no impact of these amendments in its classification
criteria of current and non-current liabilities.
2. IndAS 7, Statement of Cash Flows and IndAS 107, Financial Instruments: Disclosures, applicable w.e.f. April 1, 2025 - The
amendment in IndAS 7 requires to inform users of financial statements of the existence of supplier finance arrangements and
explain the nature of the arrangements, the carrying amount of liabilities and the range of payment due dates. IndAS 107 has
been amended to add supplier finance arrangements as a factor that may cause concentration of liquidity risk. The Company
has no impact of these amendments.
3. IndAS 12, International Tax Reform - Pillar Two Model Rules applicable immediately - The amendments provide a temporary
mandatory relief from deferred tax accounting for top-up tax and disclose that they have applied the relief. The Company
does not have any impact in its financial statements.
7. c. Impairment loss allowance of ' 3.19 crore (March 31, 2025 : ' 1.40 crore) has been provided on loans designated as fair value through other
comprehensive income.
7. d. Loans secured by tangible assets include loans measured at fair value through profit and loss is ' 7.01 crore (March 31,2025 : ' 8.69 crore)
and loans measured at FVTOCI ' 744.39 crore (March 31, 2025 : ' 221.83 crore).
7. e. Unsecured loans include loans measured at fair value through profit and loss ' Nil (March 31, 2025 : ' Nil) and loans measured at FVTOCI
' 402.36 crore (March 31, 2025 : ' 401.19 crore).
7. f. Loans to related parties ' 1,986.50 crore (March 31,2025 : ' 1,021.01 crore).
14.1. Privately placed secured Non-Convertible Debentures are secured by pari passu charge on specified class of assets i.e. Specific immovable
property, receivables and book debts arising out of Secured/Unsecured loans, investments in nature of credit substitutes, lease and hire
purchase receivables, Trade advances & bill discounting facility extended to borrower and sundry debtors and other assets as identified
by the Company from time to time, as stated in respective transaction documents.
14.2. Public issue of Non-Convertible Debentures are secured by a pari passu charge on the specific immovable property, receivables against
unsecured loans, bills discounted and trade advances and other current assets of the Company.
14.3. The Company has, at all times, for the secured NCDs, maintained sufficient security cover as stated in the respective General information
memorandum/ Key Information Documents towards the principal amount, interest accrued thereon, and such other sums as mentioned
therein.
14.4. Discount on commercial paper varies between 6.50% to 7.90% (March 31, 2025 : 7.62% to 7.99%) and are repayable within 12 months
from the date of reporting.
14.5. Rate of interest on Medium Term Notes is 8.12% (March 31, 2025 : 8.12%) and are repayable in 28 months from the date of reporting.
14.6. Of the above, Public issue of Secured Non-Convertible Debentures amounting to face value of ' 6 crore (March 31, 2025 : ' 6 crore) are
held by related parties.
14.7. Of the above, Privately placed Secured Non-Convertible Debentures amounting to face value of ' 774 Crore (March 31, 2025 : ' 780 crore)
and Unsecured Non-Convertible Debentures amounting to face value of ' 215 crore (March 31, 2025 : ' 240 crore) are held by related parties
14.8. The Company has not defaulted in the repayment of debt securities and interest thereon for the year ended March 31, 2026 and
March 31, 2025.
15.1. As at March 31, 2026, the Company had undrawn borrowing facilities of ' 14,324.53 crore (March 31, 2025: ' 16,773.00 crore)
15.2. The Company has not defaulted in the repayment of borrowings (other than debt securities) and interest thereon for the year ended
March 31, 2026 and March 31,2025.
15.3. The quarterly returns/statements of current assets filed by the company with banks or financials institutions are in agreement with the
books of accounts.
16.1. Of the above, subordinated and perpetual debentures amounting to face value of ' 982.32 crore (March 31,2025 : ' 813.82 crore) are held
by related parties.
16.2. Of the above, Cumulative Redeemable Preference Shares amounting to face value of ' Nil (March 31, 2025 : ' 20.00 crore) are held by
related parties.
16.3. The Company has not defaulted in the repayment of subordinated liabilities and interest thereon for the year ended March 31,2026 and
March 31, 2025.
During the financial year ended March 31, 2026, the Company has increased its issued, subscribed and paid-up equity share capital
through the following transactions:
(a) Issue for consideration other than cash: 18,38,67,495 Equity shares of TCL have been allotted to TMF Holdings Limited, being the
shareholder of Tata Motors Finance Limited (TMFL) as on Record Date i.e. May 13, 2025, as per the share exchange ratio determined based
on the Valuation Reports and the Fairness Opinions obtained by TCL and TMFL.
(b) Right issue: The Company has allotted 5,10,74,292 fully paid-up equity shares of face value of ' 10/- each on Rights Basis to the eligible
shareholders on July 18, 2025, at an issue price of ' 343/- per equity share (including a premium of ' 333/- per equity share).
(d) Rights, preferences and restrictions attached to shares
Equity Shares : The Company has one class of equity shares having a face value of ' 10 per share. Each shareholder is eligible for one
vote per share held. The dividend proposed by the Board of Directors, if any, is subject to the approval of the shareholders in the
ensuing Annual General Meeting, In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the
Company after distribution of all preferential amounts, in proportion to their shareholding. Tata Sons Limited is the ultimate holding
company. Tata Sons Private Limited is the holding company.
(e) There are no shares reserved for issue under options and contracts/commitments for the sale of shares or disinvestment.
Pursuant to the Scheme of Amalgamation between the Company and Tata Motors Finance Limited ("Amalgamating Company") becoming
effective from May 8, 2025, the Company issued and allotted equity shares to the shareholders of the Amalgamating Company as consideration
for the amalgamation.
As per the share exchange ratio, 37 equity shares of '10/- each of the Amalgamated Company issued and allotted for every 100 equity shares of
'100/- each held in the Amalgamating Company, to those shareholders whose names appear in the register of members or depository records
on the Record Date.
(iii) The amount of shortfall at the end of the period out of the amount required to be spent by the Company during the year: ' 19.81 crore.
(iv) The total of previous years' shortfall amounts: Nil
(v) The reason for above shortfalls by way of a note:
(a) The amount of ' 19.81 crore allocated towards existing and the new Ongoing Projects (Education, JalAadhar projects and Pankh
Scholarship with Buddy4Study) remained unspent during FY 2025-26 and is transferred to an unspent CSR account of the Company
which would be utilised in accordance with the provisions of Companies Act, 2013 and the Rules framed thereunder.
(b) The erstwhile Tata Motors Finance Limited ("TMFL") which had merged into the Company had two Unspent Accounts with a total
of ' 0.57 crore (including ' 0.03 crore of GST) to be spent towards Ongoing Healthcare Projects as approved by the CSR Committee
of TMFL. The total amount was utilised in FY 2025-26.
(vi) The nature of CSR activities undertaken by the Company: The CSR activities are undertaken as per Section 135 CSR Rules of the
Companies Act 2013. The company's mission is to improve the lives of the community, especially the socially and economically
underprivileged communities, by making a long term, measurable and positive impact through projects in the areas of Education,
Climate Action, Health, and Skill Development.
(vii) Details of related party transactions: Nil
(viii) Where a provision is made with respect to a liability incurred by entering into a contractual obligation, the movements in the provision
during the period should be shown separately: Not Applicable
Note 33 : Employee benefit expenses
A. Defined contribution plans
1) Superannuation Fund
The Company makes contribution towards superannuation fund, a defined contribution retirement plan for qualifying employees.
The Superannuation fund is administered by superannuation fund set up as Trust by Tata Capital Limited ("the parent Company").
The Company is liable to pay to the superannuation fund to the extent of the amount contributed. The Company recognizes such
contribution as an expense in the year of contribution. The Company has recognised ? 2.43 crore (Year ended 31 March 2025
? 2.40 crore) for Superannuation Fund contributions in the Statement of Profit and Loss.
The Board of Directors of the Company in its meeting held on June 4, 2024 had approved a Scheme of Arrangement and
Amalgamation ("Scheme"), inter alia, involving the amalgamation of Tata Motors Finance Limited (Formerly known as Tata Motors
Finance Solutions Limited) ("amalgamating company") with and into Tata Capital Limited. The Hon'ble NCLT vide its Order dated
May 1,2025, has sanctioned the Scheme. Upon receipt of all requisite approvals, the Amalgamating Company and the Company
have filed the relevant Form with the Registrar of Companies on May 8, 2025. Accordingly, the Scheme has become effective on
May 8, 2025 ("Effective Date") and the Amalgamating Company has amalgamated with the Company from the Effective Date.
As per the Scheme, the Appointed Date is April 1, 2024.
The contributions towards superannuation, for qualifying employees of the erstwhile company Tata Motors Finance Limited for
the year upto the date of order i.e. May 1, 2025 was paid to a superannuation fund administered by the Trustees of the Tata Motors
Limited Superannuation Fund.
B. Defined benefit plan
1) Provident Fund
The Company makes Provident Fund contributions, a defined contribution plan for qualifying employees. Under the Schemes, both
employees and the Company make monthly contributions at a specified percentage of the covered employees' salary (currently
12% of employees' salary). The contributions, except that the employer's contribution towards pension fund is paid to the Regional
Provident Fund office, as specified under the law, are made to the provident fund set up as an irrevocable trust by the Company.
The interest rate payable to the members of the trust shall not be lower than the statutory rate of interest declared by the Central
Government under the Employees Provident Funds and Miscellaneous Provisions Act, 1952 and shortfall, if any, shall be made
good by the Company. Hence the Company is liable for annual contributions and any deficiency in interest cost compared to
interest computed based on the rate of interest declared by the Central Government. The total liability in respect of the interest
shortfall of the Fund is determined on the basis of an actuarial valuation. The interest liability arising only to the extent of the
aforesaid differential shortfalls is a defined benefit plan. There is no such shortfall as at March 31, 2026.
The Provident Fund contributions, for qualifying employees of the erstwhile company Tata Motors Finance Limited for the year
upto the date of NCLT order (May 1,2025) was paid to provident fund administered by the Regional Provident Fund Commissioner.
The Provident Fund contributions along with the interest shortfall if any are recognised as an expense in the year in which it is
determined. The Company has recognised ' 82.60 crore (Year ended March 31,2025'79.74 crore) for Provident Fund contributions
and ' Nil (Year ended March 31,2025 ' Nil) for interest shortfalls in the Statement of Profit and Loss.
2) Gratuity
The Company offers its employees defined benefit plans in the form of a gratuity scheme (a lump-sum amount). Benefits under
the defined benefit plans are typically based on years of service and the employee's compensation (generally immediately before
retirement). The gratuity scheme covers substantially all regular employees. Commitments are actuarially determined at year-end.
These commitments are valued at the present value of the expected future payments, with consideration for calculated future
salary increases, using a discount rate corresponding to the interest rate estimated by the actuary having regard to the interest
rate on Government bonds with a remaining term that is almost equivalent to the average balance working period of employees.
Actuarial valuation is done based on "Projected Unit Credit" method. Gains and losses of changed actuarial assumptions are
recorded in the Other Comprehensive Income. The Company provides gratuity for employees in India as per payment of Gratuity
Act, 1972. The gratuity scheme for employees is as under:
There are no statutory minimum funding requirements for gratuity plans mandated in India. However, a Company can fund the benefits
by way of a separate irrevocable Trust to take advantage of tax exemptions and also to ensure security of benefits.
The Tata Capital Limited Gratuity Scheme is funded by way of a separate irrevocable Trust and the Company is expected to make regular
contributions to the Trust. The fund is managed internally by the Company and the assets are invested as per the pattern prescribed
under Rule 67 of Income Tax Rules, 1962. The asset allocation of the Trust is set by Trustees from time to time, taking into account the
membership profile, the liquidity requirements of the plan and risk appetite of the plan sponsor as per the investment norms. Each year
asset-liability matching study is performed in which the consequences of the strategic investment policies are analysed in terms of risk
and return profiles. Investment and Contribution policies are integrated within this study.
The contributions for qualifying employees of the erstwhile company Tata Motors Finance Limited for the year upto the date of NCLT
order (May 01, 2025) was paid to the Tata Motors Finance Limited Employee Gratuity Trust.
Through its defined benefit plans, the Company is exposed to a number of risks, the most significant of which are detailed below:
1. Interest rate risk: The defined benefit obligation calculated uses a discount rate based on government bonds. If bond yields fall, the
defined benefit obligation will tend to increase.
2. Salary Inflation risk : Higher than expected increases in salary will increase the defined benefit obligation
3. Demographic risk : This is the risk of variability of results due to unsystematic nature of decrements that include mortality,
withdrawal, disability and retirement. The effect of these decrements on the defined benefit obligation is not straight forward and
depends upon the combination of salary increase, discount rate and vesting criteria. It is important not to overstate withdrawals
because in the financial analysis the retirement benefit of a short career employee typically costs less per year as compared to a
long service employee.
4. Investment risk : For funded plans that rely on insurers for managing the assets, the value of assets certified by the insurer may
not be the fair value of instruments backing the liability. In such cases, the present value of the assets is independent of the future
discount rate. This can result in wide fluctuations in the net liability or the funded status if there are significant changes in the
discount rate during the inter-valuation period.
5. Legislative risk : Legislative risk is the risk of increase in the plan liabilities or reduction in the plan assets due to change in the
legislation/regulation. The government may amend the Payment of Gratuity Act, 1972, thus requiring the companies to pay higher
benefits to the employees. This will directly affect the present value of the defined benefit obligation and the same will have to be
recognised immediately in the year when any such amendment is effective.
Note 34 : Fair values of financial instruments
A. Valuation models
The Company measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making
the measurements:
a) Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at
measurement date.
b) Level 2 inputs are inputs, other than quoted prices included within level 1, that are observable for the asset or liability, either
directly or indirectly; (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active
markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or
other valuation techniques in which all significant inputs are directly or indirectly observable from market data.
c) Level 3 inputs are unobservable inputs for the valuation of assets or liabilities that the Company can access at measurement
date. This category includes all instruments for which the valuation technique includes inputs that are not observable and the
unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued
based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to
reflect differences between the instruments. Valuation techniques include net present value and discounted cash flow models,
income approach, comparison with similar instruments for which observable market prices exist, option pricing models and other
valuation models.
The objective of valuation techniques is to arrive at a fair value measurement that reflects the price that would be received to sell
the asset or paid to transfer the liability in an orderly transaction between market participants at the measurement date.
The Company uses widely recognised valuation models to determine the fair value of financial instruments, that use only
observable market data and require little management judgement and estimation. Observable prices or model inputs are usually
available in the market for listed equity securities. The availability of observable market prices and model inputs reduces the need
for management judgement and estimation and also reduces the uncertainty associated with determining fair values.
Discounting of the cash flows of financial asset/ financial liability for computing the fair value of such instrument: the future
contractual cash flows of instrument over the remaining contractual life of the instrument are discounted using comparable rate
of lending/borrowing as applicable to financial asset/ financial liability in the month of reporting for a similar class of instruments.
For shorter tenure financial assets such as channel finance, the remaining tenure is assumed to be six months.
Derivatives held for risk management :
The Company enters into derivatives to mitigate the currency exchange risk and interest rate risk on account of fluctuation in
the foreign exchange rates and floating rates towards the principal and interest repayments of external commercial borrowing,
medium term notes and letters of credit. Some of these instruments are valued using models with significant unobservable inputs,
principally expected long-term volatilities and expected correlations between different underlyings.
B. Valuation framework
The Company has a established a policy for the measurement of fair values addressing the requirement to independently verify the
results of all significant fair value measurements.
Specific controls include:
1) verification of observable pricing basis;
2) analysis and investigation of significant annual valuation movements; and
3) review of significant unobservable inputs, valuation adjustments and significant changes to the fair value measurement of Level 3
instruments compared with the previous year.
When third party information, such as valuation agency report is used to measure fair value, the Company assesses the documents
used to support the conclusion that the valuations meet the requirements of IndAS. This includes:
1) understanding how the fair value has been arrived at, the extent to which it represents actual market transactions and whether it
represents a quoted price in an active market for an identical instrument;
2) when prices for similar instruments are used to measure fair value, how these prices have been adjusted to reflect the characteristics
of the instrument subject to measurement; and
3) if a number of quotes for the same financial instrument have been obtained, then how fair value has been determined using those
quotes.
Investment in subsidiaries and associates:
The Company has elected to measure Investment in subsidiaries and associates at cost and accordingly the requirement of disclosure
of fair value of the instrument under IndAS 107 does not apply.
Fair value of the Financial instruments measured at amortised cost
The fair value of loans given is based on observable market transactions, to the extent available. Wherever the observable market
transactions are not available, fair value is estimated using valuation models, such as discounted cash flow techniques. Input into the
valuation techniques includes interest rates, prepayment rates, primary origination or secondary market spreads. Input into the models
may include information obtained from other market participants, which includes observed primary and secondary transactions.
To improve the accuracy of the valuation estimate for retail and smaller commercial loans, homogeneous loans are grouped into
portfolios with similar characteristics such as product.
The fair value of borrowings is estimated using discounted cash flow techniques, applying the rates that are offered for borrowings of
similar maturities and terms.
T bills, Tri Party Repo (TREPS), Government securities are valued based on market quotes.
Note 35 : Risk Management Framework
A Introduction;
Risk management forms an integral part of our business as we are exposed to various risks related to our business and operating
environment. We have adopted a comprehensive enterprise risk management ("ERM") framework through which we monitor the
internal and external risks arising out of macroeconomic factors, regulatory changes and geopolitical scenarios. The ERM framework
includes our risk philosophy, approach and oversight structure, and lays down detailed guidelines for risk identification, assessment
and monitoring, in line with our business strategies.
Our ERM Framework uses defined key risk indicators based on quantitative and qualitative factors. We have implemented a heat map,
a two-dimensional quantitative data management tool, which enables management to have a comprehensive view of 11 identified
key risk areas based on their probability and impact. The 11 categories of risks identified and monitored by the Company are credit risk,
market risk, liquidity risk, process, people, outsourcing, compliance and governance, technology, business continuity, cybersecurity
and reputation risk. These key risk indicators align with our strategic objectives and business developments.
The Board is assisted by the Risk Management Committee ("RMC") and is supported by various Board and Senior management
committees as part of the risk governance framework to ensure that we have a sound system of risk management and internal controls.
The RMC assists the Board in its oversight of various risks, analyze risk exposure related to specific issues and reviews the risk profile
across our Company. The Charter of the RMC lays down the risk management processes and controls.
Our risk management practices are compliant with ISO 31000: 2018, which is the International Standard for Risk Management that lays
down principles, guidelines and framework for risk management in the organization.
Risk management framework:
Company's Risk Management is an integral part of all organizational activities. Changes in internal and external operating environment,
digitalization, technological advancements and agile way of working have increased the significance of Fraud, Information & Cyber
Security and Operational Risks. At Tata Capital there is continued focus on increasing operational resilience and mitigation of these
risks. The structured approach contributes to consistent and comparable results along with customization of external and internal
objectives. Important pillars of the risk management approach are developing a strong risk management culture within Company
through alignment of risk by creating, preserving and realizing value.
Board level committees
Risk Management Committee of the Board (RMC): The purpose of the Committee is to assist the Board in its oversight of various risks
(i) Credit Risk (ii) Market & Liquidity Risk (iii) Operational Risk (Process, People, Outsourcing, Technology, Business Continuity and Fraud)
(iv) Strategic Risks (including emerging and external risks) (v) Compliance and Governance (vi)Reputation Risk(vii) Information Security
and Cyber Security Risk.
Investment Credit Committee of the Board (ICC): Provides guidance on nature of investments that shall be undertaken, and approve
credit limits for various counterparties, where exposures in aggregate exceed a certain level.
IT Strategy Committee(ITSC): Reviews and approves IT strategy and policies. Monitors IT resources required to achieve strategic goals
and to institute an effective governance mechanism and risk management process for all outsourced IT operations so that maximum
value is delivered to business.
Special Committee of the Board for Monitoring and Follow-up of cases of Frauds (SCBMF) : Oversees the effectiveness of the Fraud
Risk Management in the company. It reviews and monitors cases of frauds as per the Board approved Fraud Risk Management Policy of
the Company. The coverage of such reviews includes categories / trends of frauds, industry / sectoral / geographical concentration of
frauds, delay in detection / classification of frauds and delay in examination / conclusion of staff accountability.
The Company's risk management policies are established to identify and analyse the risks faced by the Company, to set appropriate
risk limits and controls, and to monitor risks and adherence to limits. The risk management policies and systems are reviewed regularly
to reflect changes in the market conditions and the activities of the Company. The Company, through its training and management
standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand
their roles and obligations. The Risk Management Committee reviews risk management policies of the Company pertaining to credit,
market, liquidity and operational risks. It oversees the monitoring of compliances with the risk management policies and procedures
and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.
The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad-hoc reviews of risk
management controls and procedures, the results of which are reported to the Audit Committee.
Senior Management Committees
a) Management Credit Committee (MCC): The members of committee are senior management of the Company as defined in the
prevailing delegation of authority. It recommends proposal including review to ICC / Board for loan facilities falling beyond assigned
Delegation of Power and Authority. The committee is governed as per the delegation of authority applicable to the Company.
b) Operational Risk Management Committee (ORMC): ORMC is the oversight committee for ensuring effective management of
operational risks. The committee reviews and approves the following:
• Operational risk management policy and including amendments if any.
• Insurance management framework.
• Corrective actions on operational risk incidents, based on analysis of the Key Risk Indicators (KRIs), operational risk process
reviews, etc.
• Operational risk profile based on the KRIs which are beyond the tolerance limit"
c) Fraud Risk Management Committee (FRMC): An independent Fraud Risk Management Committee (FRMC) comprising of top
management representatives has been constituted that reviews the matters related to fraud risk and approves/recommends
actions against frauds. It reviews the frauds reported and investigated with detailed root cause analysis and corrective action.
Asset Liability Management Committee of the Board (ALCO): ALCO reviews the Liquidity Risk and Interest Rate Risk on a regular basis
and suggests necessary actions based on its view and expectations on the liquidity and interest rate profile.
Business Unit Level Committees
There are various committees that exist at the business level for credit sanctions, monitoring and reviews such as Credit Committee
(CC), Credit Monitoring Committee (CMC), Credit & Collection review, Retail Risk Review (RRR) for retail business.
a) Credit risk;
Credit aspects in our Company are primarily covered by the Delegation of Authority approved by the Board. Credit underwriting
is standardised and there is an increased focus on use of the scorecards. Credit monitoring happens at a portfolio level.
Product performance is examined using analytics which forms the basis for policy changes, as well as the rollout of new
products / programs or discontinuation of existing products / programs We measure, monitor and manage credit risks at
individual borrower and portfolio level. During the course of the year, we recalibrate and realign our underwriting criteria with
the prevailing market environment across product lines and the associated digital scorecards, significantly leveraging our risk
analytics capabilities. This helps us in refining our credit decisioning as well as granular monitoring of our existing portfolio.
Our risk team ensures that our loan portfolio is strictly in line with all internal policies and regulatory guidelines with ongoing
improvement of the credit processes. It also identifies, controls and mitigates various types of risks involved in the business, and
defines the method to measure and quantify the risks. It also tracks relevant sectors and industries and assesses key industry risks
on an ongoing basis along with carrying detailed credit analysis and providing independent opinion to sanctioning committees
which ensure that all risks are clearly identified and steps to mitigate are set out and adhere to. Our Company also does portfolio
monitoring and portfolio "stress-testing" on a regular basis.
b) Market risk;
Market risk is risk due to change in market prices - e.g. interest rates, equity prices, foreign exchange rates and credit spreads, but
not relating to changes in the obligor's/issuer's credit standing and will affect the Company's income or the value of its holdings
of financial instruments. The objective of the Company's market risk management is to manage and control market risk exposures
within acceptable risk tolerances levels to ensure the solvency and minimum volatility while optimising the balance between
profitability and managing associated risks.
Under Liquidity Risk Management (LRM) framework for the Company, ALCO sets up limits for each significant type of risk/
aggregated risk with liquidity being a primary factor in determining the level of limits. The monitoring of risk limits defined as per
ALM policy is done by ALCO on regular basis. The Company has Asset Liability Management (ALM) support Company prescribed by
RBI which meets on regular basis to ensure internal controls and reviews the liquidity risk management of the Company.
Interest rate risk:
Interest rate risk is measured through Interest rate sensitivity report where gaps are being monitored classifying all rate sensitive
assets and rate sensitive liabilities into various time period categories according to earliest of contracted/behavioural maturities
or anticipated re-pricing date. The Company monitors interest rate risk through traditional gap and duration gap approaches on a
monthly basis. The interest rate risk limits are approved by the ALCO.
Refer Note No 36 .C.i for summary on sensitivity to a change in interest rates as on March 31, 2026.
Currency Risk
The Company is exposed to currency risk arising due to external commercial borrowings. The foreign currency loan in form of
external commercial borrowing (ECB) raised by the Company are fully hedged basis.
The hedging policy as approved by the Asset Liability Committee (ALCO) prescribes the hedging of the risk associated with change
in the interest rates and fluctuation of foreign exchange rates. Counter party risk is reviewed periodically in terms of exposure to
various counter parties.
The Company's hedging policy guides effective hedging relationships to be considered as hedges as per the relevant IndAS. Hedge
effectiveness is determined at the inception of the hedge relationship and through periodic prospective effectiveness assessments
to ensure that an economic relationship exists between the hedged item and hedging instrument. The Company enters into hedge
relationships where the critical terms of the hedging instrument match with the terms of the hedged item, and so a qualitative and
quantitative assessment of effectiveness is performed. All hedges entered by the Company are cash flow hedges.
Refer Note No 36.C.ii for gist of foreign currency risk exposure as on March 31, 2026.
Equity price risk
The Company's investments in equity carry a risk of adverse price movement. To mitigate pricing risk emerging from investments
in equity, the Company intermittently observes the performance of sectors and measures MTM gains/losses as per applicable
accounting policy of the Company.
Liquidity risk
Liquidity Risk is the risk that a Company will encounter difficulties in meeting its short-term financial obligations due to an asset-
liability mismatch or interest rate fluctuations. The liquidity risk is being managed as per ALM policy which has following key
elements:
i) ALCO sets the strategy for managing liquidity risk commensurate with the business objectives;
ii) ALCO has set various gap limits for tracking liquidity risk.
iii) The ALM policy is being reviewed on annual basis, including the risk tolerance, process and control. ALCO monitors the
liquidity and interest rate gaps on regular basis.
iv) Company manages the liquidity position on a day-to-day basis and reviews daily reports covering the liquidity position. The
regulatory compliance to the liquidity risk related limits are being ensured.
v) The Company is fully complied to the Liquidity Coverage Ratio (LCR) framework as mandated by RBI.
Company's liquidity risk management strategy are as follows:
a. Maintaining a diversified funding through market and bank borrowings resources such as debentures, commercial papers,
subordinated debt, perpetual debt, Inter-corporate deposits (ICD's), overdraft and bank term loans. Unused bank lines as well
as High Quality Liquid Assets (HQLA) maintained under LCR framework constitute the main liquidity back up to meet the
contingency funding plan. Additionally, based on Market scenario, the Company also maintains a portfolio of highly liquid
mutual fund units.
b. The Company complies with the ALM guidelines and submits various returns and disclosures in accordance with the regulatory
guidelines.
c. The Company carries out liquidity stress testing based on the cash flows and results are reported to ALCO on periodic basis.
The Company has contingency funding plan in place which monitors the early warning signals arising out of company specific
and market wide liquidity stress scenarios.
The Company has honoured all its debt obligations on time. Based on liquidity risk assessment, cash-flows mismatches are within
the stipulated regulatory limits. The Company has been successful in maintaining the adequate liquidity by raising fresh/renewal
of bank lines, regular access to capital market and financial institution under the various schemes promulgated by RBI to raise
medium to long term funds. Owing to the above measures, the Company has not seen a rise in its liquidity risk.
Refer Note No 36.B for the summary of Maturity analysis for Company's financial liabilities and financial assets as on March 31,2026.
c) Operational Risk
Operational Risk has been defined as "The risk of loss resulting from inadequate or failed internal processes, people and systems or
from external events". The risk of direct or indirect potential loss arising from a wide variety of causes associated with the Company's
processes, personnel, systems, or from external factors other than strategic and reputation risk Management of operational risk
forms an integral part of Company's enterprise wide risk management systems. The organisation thrives towards incremental
improvements to its operational risk management framework to address the dynamic industry landscape. Clear strategies and
oversight by the Board of Directors and senior management, a strong operational risk management culture, effective internal
control and reporting and contingency planning are crucial elements of Company's operational risk management framework.
The operational risk team monitors and reports key risk indicators ("KRI") and KRI exceptions. Suitable risk mitigation actions are
taken wherever required to curtail the potential risk at the acceptable levels.
Company has a Business Continuity Planning "BCP" framework in place, to ensure uninterrupted business operations in case any
disruptive event occurs. Company also has an IT Disaster Recovery Planning "IT-DRP" which provides the technology framework
to continue day-to-day operations using secondary/back-up systems when primary system fails. It also protects the organisation
against loss of computer-based data and information.
ORMC meets periodically to review the operational risk profile of the organization and oversee the implementation of the risk
management framework and policies. There have been no reported Operational Risk incidents leading to significant losses.
d) Fraud Risk
We have adopted a Board approved Fraud Risk Management framework. It has an effective & very strong fraud risk governance
mechanism that encompasses controls covering below objectives:
1. Prevent (reduce the risk of fraud from occurring)
2. Detect (discover fraud when it occurs) and
3. Respond (take corrective action and remedy from the harm caused by fraud).
The changing business landscape and digitization has heightened the level of fraud risk in the environment arising due to new
methods, schemes and technology. We will continue to invest in our fraud prevention and detection capabilities to protect our
stakeholders.
e) Compliance Risk
We have a Compliance Risk Management framework in place, guided by a Board approved Compliance Policy, which lays down
the roles and responsibilities towards ensuring compliance with applicable laws and regulations and the role of the Compliance
Department in monitoring compliance.
f) Cyber Security Risk
The Information Security Policy has been designed to provide an overview of the information security requirements and describe the
controls that may be used to meet these requirements. It defines the overall framework for information security risk management.
It documents the expected behaviour of system, data and information users. The Cyber Security Policy contains the approach to
combatting cyber threats and cyber crisis management plan addressing detection, response, recovery and containment.
g) Reputation Risk
Reputational risk is defined as risk arising from negative perception on the part of customers, shareholders, investors, debt holders,
media reports that can adversely affect our ability to maintain existing or establish new business relationships and continued
access to sources of funding. Our governance culture supported by sound risk management is aimed at ensuring we remain
resilient during challenging periods and forge a sustainable future for the organization.
D Internal Control Systems :
Our internal control system is designed to ensure operational efficiency, protection and conservation of resources, accuracy and
promptness in financial reporting and compliance with applicable laws and regulations. The internal control system is supported by
an internal audit process for reviewing the design, adequacy and efficacy of our internal controls, including our systems and processes
and compliance with regulations and procedures. Our internal audit function is required to provide an independent assessment to the
Board on the effectiveness of implementation of our risk management framework, including the overall adequacy of the internal control
system and compliance with internal policies and procedures. The internal audit reports are then discussed with the management and
are reviewed by the Company's Audit Committee.
Further, our management has laid down internal financial control framework covering set of standards, processes and structure
across the organization with reference to financial and non-financial controls to ensure that controls are adequate and are operating
effectively. Internal finance control framework has been established in line with the Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organisations of the Treadway Commission and Guidance Note on Audit of Internal Financial
Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. Testing is performed for each control
through an independent firm, on behalf of our management, confirming the adequacy and effectiveness of controls and highlighting
material deficiencies or design ineffectiveness of controls, if any.
E Internal Capital Adequacy Assessment Process (ICAAP):
Tata Capital has put in place a Board approved ICAAP policy which is designed to identify, assess, and manage all risks that could
significantly affect our financial positions or capital adequacy. It makes a thorough internal assessment of the need for capital,
commensurate with the risks in our business on similar lines as prescribed for commercial banks under Pillar 2. ICAAP assessment
process address these risks to ensure the stability and soundness of our operations, protecting our business and capital adequacy from
potential threats and stressed scenarios.
Derivatives held for risk management purposes, not designated as hedging instruments:
The Company is exposed to foreign currency risk related to external commercial borrowings, medium term notes and letter of
credit and the primary risk of change in the floating interest rate and payment in foreign currency towards principal and interest at
future date is managed by entering into a interest rate swap and foreign exchange forward rate purchase agreement respectively.
The Corporation's risk management strategy and how it is applied to manage risk is explained in Note 35.
The cross currency interest rate swap and foreign exchange forward contracts and options are entered to fully hedge the risk on
account of change in interest rate and foreign exchange fluctuations on account of the external commercial borrowings, medium term
notes and letter of credit.
Interest rate swap and cross currency swap has been taken in respect of the same contract for which forward or option contract has
been entered, accordingly notional value of Interest rate swap and cross currency swap is not shown separately
ii Collateral and other credit enhancements
The amount and type of collateral required depends on an assessment of the credit risk of the counterparty.
The main types of collateral obtained are as follows:
For corporate and small business lending, first charge over real estate properties, plant and machineries, inventory and trade receivables,
equity and debt securities, floating charge over the corporate assets are obtained. For Construction equipment finance, the asset is
hypothecated to the Company.
For retail lending, loan against properties over residential/commercial properties is obtained. For vehicle and tractor loans, the respective
movable asset is hypothecated to the Company.
The table represents categories of collaterals available against the loan exposures:
Assets obtained by taking possession of collateral
The Companies collection policy is to pursue timely realisation of the collateral in an orderly manner. The Company upon a customer account
becoming delinquent, undertakes the process to physically repossess properties or other assets with the help of external agents to recover
funds, to settle outstanding debt. The Company allows the borrower to repays the overdue loan amount and take back the repossessed assets.
If the repossessed assets are sold, any surplus funds if any received are returned to the customers/obligors. As a result of this practice, the
residential properties, vehicles, construction equipments and tractors repossessed are not recorded on the balance sheet and not treated as
non-current assets held for sale; however assets received upon final settlement of the loan is recorded in the balance sheet.
Management monitors the market value of collateral as per the Credit monitoring process and will request additional collateral in accordance
with the underlying agreement as applicable.
As on March 31,2026, the Company has given loan against shares / equity oriented mutual funds / debt securities amounting to '18,441.96
crore (As on March 31,2025'13,979.98). The customer has the obligation to maintain Loan to Value (LTV) of 50% as per RBI norms for shares
and equity oriented mutual funds at any point in time, failing which the Company has right to make good the shortfall within 7 working
days.
The Company has written-off loans (net of recoveries) of ' 2,413.19 crore during the period ended March 31, 2026 (March 31, 2025 :
' 1,803.15 crore). The Company retains its contractual right against the obligor and may pursue all remedies to recover these dues.
The table represents categories of collaterals and corresponding valuation available against the Stage 3 assets :
iii Amounts arising from ECL
Accounting policy on Impairment allowance on financial asset is covered in note 2 (xi)
Inputs, assumptions and estimation techniques used for estimating ECL
1) Inputs:
When determining whether the risk of default on a financial instrument has increased significantly since initial recognition, the
Company considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes
both quantitative and qualitative information and analysis based on the Company's historical experience, expert credit assessment and
including forward looking information.
The Company allocates each exposure to a credit risk grade based on days past due, which is a quantitative factor that indicates the risk
of default. Additional qualitative factors are applied such as fraudulent customer and reschedulement of loans are also considered as
qualitative factor.
These factors are applied uniformly for each lending product. Upon review the committee may conclude that the account qualifies for
classification as stage 2 since there is increase in credit risk. The determination of the credit risk is for each product, considering the
unique risk and rewards associated with it. The Company has observed varied level of risk across various buckets within each stage
and a significant increase in risk in stage 2, based on assessment of qualitative parameters such as decline in net-worth, downgrade in
internal ratings and external ratings for Corporate, SME Finance and Cleantech Division.
The objective of the ECL assessment is to identify whether a significant increase in credit risk has occurred for an exposure by comparing
the remaining lifetime probability of default (PD) as at the reporting date; with the remaining lifetime PD for this point in time that was
estimated at the time of initial recognition of the exposure and adjusted for changes on account of prepayments.
In assessing the impairment of loan assets under expected credit loss (ECL) Model, the loans have been segmented into three stages
based on the risk profiles. The three stages reflect the general pattern of credit deterioration of a financial instrument.
Refer note 2(xi) in Significant accounting policies for definition of Stages of Asset
2) Assumptions:
The Company has applied following assumptions for determination of ECL.
a) "Loss given default" (LGD) is an estimate of loss from a transaction given that a default occurs.
b) "Probability of default" (PD) is defined as the probability of whether the borrowers will default on their obligations in the future. For
assets which are in Stage 1, a 12-month PD is required. For Stage 2 assets a lifetime PD is required while Stage 3 assets and POCI
are considered to have a 100% PD.
c) "Exposure at default" (EAD) represents the expected exposure in the event of a default and is the gross carrying amount in case of
the financial assets held by the Company including loan commitments.
d) Definition of default: A default on a financial asset is when the counterparty fails to make the contractual payments within 90
days of when they fall due. Accordingly, the financial assets shall be classified as Stage 3, if on the reporting date, it has been more
than 90 days past due. Further if the customer has requested forbearance in repayment terms, such restructured, rescheduled or
renegotiated accounts are also classified as Stage 3. Non-payment on another obligation of the same customer is also considered
as a stage 3. Defaulted accounts include customers reported as fraud in the Fraud Risk Management Committee (FRMC). Once an
account defaults as a result of the Days past due condition, it will be considered to be cured only when entire arrears of interest and
principal are paid by the borrower.
e) Forward looking information
The Company incorporates forward looking information into both assessments of whether the credit risk of an instrument has
increased significantly since its initial recognition and its measurement of ECL. Based on the consideration of a variety of external
actual and forecast information, the Company forms a 'base case' view of the future direction of relevant economic variables such
as real GDP, domestic credit growth, money market interest rate etc. as well as a representative range of other possible forecast
scenarios. This process involves developing two or more additional economic scenarios and considering the relative probabilities
of each outcome. The base case represents a most likely outcome in a normal distribution curve while the other scenarios represent
more optimistic and more pessimistic outcomes with equal weightage.
f) Assessment of significant increase in credit risk
The credit risk on a financial asset of the Company are assumed to have increased significantly since initial recognition when
contractual payments are more than 30 days past due. Additionally, accounts identified and reviewed by the Executive committee
for labelling as breaching pre-defined critical credit risk parameters will also be classified as stage 2. Accordingly, the financial
assets shall be classified as Stage 2, based on the quantitative as well as qualitative factors.
3) Estimation techniques:
The Company has applied the following estimation technique for ECL model:
a) The Company has used historic default rates for calculating the 12-month PD and Lifetime PDs
b) Loss given default is calculated after considering outstanding at the time of default and adjusting for actual recoveries basis time
value of money,
c) Credit risk monitoring techniques
Exposures are subject to ongoing monitoring, which may indicate that a significant increase in credit risk has occurred on an
exposure. The monitoring typically involves use of the following data for Corporate and Retail exposures:
Overdue status
Restructuring, reschedulement of loans and requests for granting of forbearance
Fraudulent customer
Accounts classified by SICR committee indicating significant increase in credit risk
d) Days past due are a primary input for the determination of the PD for exposures. The Company collects performance and default information
about its credit risk exposures analysed by product. For some portfolios, information published in Basel IRB norms is also used.
e) The Company employs statistical models to analyse the data collected and generate estimates of the remaining lifetime PD of
exposures and how these are expected to change as a result of the passage of time. Such statistical models are selected considering
the availability of information related to the probability of default for each product.
This analysis includes the identification and calibration of relationships between changes in default rates and changes in key
macro-economic factors. Key macro-economic indicators includes but are not limited to Private consumption, Real GDP, Consumer
prices, Long-term bond yield, Unemployment rate, Gross fixed investment rate, etc.
For the purpose of determination of impact of forward looking information, the Company applies various macro economic
(ME) variables as stated above to each product and assess the trend of the historical probability of defaults as compared to the
forecasted probability of default. Based on the directional trend of output, management applies an overlay if required. Overtime,
new ME variable may emerge to have a better correlation and may replace ME being used now.
f) Based on advice from the external risk management experts, the Company considered variety of external actual and forecast
information to formulate a 'base case' view of the future direction of relevant economic variables as well as a representative range
of other possible forecast scenarios. Such forecasts are adjusted to estimate the PDs.
g) Predicted relationships between the key indicators and default and loss rates on various portfolios of financial assets have been
developed based on analysing historical data over the past 5 years.
h) A maximum of a 12-month PD or actual contractual tenure is considered for financial assets for which credit risk has not significantly
increased. The Company measures ECL for stage 2, stage 3 and POCI assets considering the risk of default over the contractual
period over which it is exposed to credit risk.
i) The loans are segmented into homogenous product categories and further risk-based cohorts (for certain products) to determine
the historical PD/LGD. This segmentation is subject to regular review.
j) For portfolios in respect of which the Company has limited historical data, external benchmark information is used to supplement
the internally available data.
k) Techniques for determining LGD:
LGD is the magnitude of the likely loss if there is a default. The Company estimates LGD parameters based on the history of recovery
rates against defaulted counterparties. The LGD models consider the cash flow received and assets received in lieu of settlement of
loan. LGD estimates are calculated on a discounted cash flow basis using the contractual interest rate (approximation to expected EIR)
as the discounting factor. The Company has adopted collection curve method for computation of loss given defaults to determine
expected credit losses. In the Absence of observed history of default, LGD applied is based on Basel IRB norms for certain products.
l) Techniques for computation of EAD
EAD represents the expected exposure in the event of a default. The Company derives the EAD from the current exposure to the
counterparty. The EAD of a financial asset is its gross carrying amount. For lending commitments, the EAD includes the amount
drawn, as well as potential future amounts that may be drawn under the contract, which are estimated based on credit conversion
factor for various loan commitments.
When estimating ECL for undrawn loan commitments, the company estimates the expected portion of the loan commitment that
will be drawn down over its expected life. ECL is the present value of the difference between the contractual cash flows that are due
to the Company if the holder of the commitment draws down the loan and the cash flows that the Company expects to receive if
the loan is drawn down.
4) Modified financial assets:
The Company renegotiates loans to customers in financial difficulties (referred to as forbearance activities, restructuring or rescheduling) to
maximise collection opportunities and minimise the risk of default. Under the Companies forbearance policy, loan forbearance is granted
on a selective basis if the debtor is currently in default on its debt or if there is a high risk of default, there is evidence that the debtor made
all reasonable efforts to pay under the original contractual terms and the debtor is expected to be able to meet the revised terms.
The revised terms usually include extending the maturity, changing the timing of interest payments and amending the terms of loan
covenants. Both retail and corporate loans are subject to the forbearance policy. The Risk Management Committee regularly reviews
reports on forbearance activities.
Upon renegotiation, such accounts are classified as stage 3. Such accounts are upgraded to stage 1 only upon observation of satisfactory
repayments for at least one year from the commencement of the first payment of interest or principal (whichever is later) and atleast
10% recovery of amount outstanding as on date of restructuring.
Stage 3 accounts acquired under business combination are classified as Purchased or Originated Credit Impaired (POCI). As per IND AS
109, such accounts will continue to be classified as POCI till closure.
Pursuant to RBI Covid restructuring policy, accounts for which Covid restructuring facility were given have been reclassified from Stage
I to Stage II if DPD at invocation was between 0-30 and If the DPD was 30 then the accounts were further downgraded within Stage II
and corresponding staging wise ECL provision was done.
See accounting policy in Note 2(xviii)
In accordance with IndAS 108 on Segment Reporting, the Company has identified three business segments i.e. Financing Activity, Investment
Activity and Others, and one Geographical Segment viz. India, as secondary segment. These divisions offer different products and services,
and are managed separately based on the Company's management.
The Board of Directors along with Managing Director (Chief Operating Decision Maker - CODM) reviews the performance of each division.
a. Operating segment disclosures are consistent with the information reviewed by the CODM. The basis of measurement of segment
information is consistent with the basis of preparation of financial statements. The reconciling items are limited to items that are not
allocated to reportable segments, as opposed to a difference in the basis of preparation of the information.
b. When two or more operating segments are aggregated into a single operating segment, the judgements made in applying the
aggregation criteria are disclosed by the company. This includes a brief description of the operating segments that have been
aggregated in this way and the economic indicators that have been assessed in determining that the aggregated operating segments
share similar economic characteristics.
Information related to each reportable segment is set out below. Segment profit before tax, as included in internal management reports
reviewed by the CODM is used to measure performance because management believes that this information is the most relevant in
evaluating the results of the respective segments relative to other entities that operate within the same type of business.
As a lessee the Company classified property leases as operating leases under IndAS 116. These include office premises taken on lease. The
leases generally are with a periodicity of one to nine years. Leases include conditions such as non-cancellable period, notice period before
terminating the lease or escalation of rent upon completion of part tenure of the lease in line with inflation in prices.
Right-of-use assets and Lease liabilities are presented separately on the face of the balance sheet.
Information about leases for which the Company is a lessee is presented below.
1 As at March 31,2026, claims against the Company not acknowledged as debts in respect of income tax matters amounted to ' 260.18
crore (March 31, 2025: ' 243.31 crore). These claims against the Company are arising on account of multiple issues of disallowances
on completion of assessment proceedings under the Income-tax Act, 1961, such as disallowance of expenditure incurred in relation
to income not includible in total income u/s 14A of the Income Tax Act, 1961 and disallowance of interest expenditure on perpetual
NCDs.
2 As of March 31, 2026, claims against the Company not acknowledged as debts in respect of indirect tax (VAT and GST) matters
amounting to ' 84.19 crore (March 31, 2025: ' 138.38 crore). These claims against the Company are arising on account of multiple
issues such as disallowances on Input Tax Credit under the erstwhile VAT Laws and GST Act, 2017 and disallowance of transitional
credit to GST regime (TRAN-1). The numbers include amounts under business combination
3 The customs authorities have raised a demand due to an issue with the Harmonised System of Nomenclature (HSN) classification,
which has led to a shortfall in the payment of customs duty.
4 These matters are pending before various appellate authorities and the Management expect that its position will likely be upheld
on ultimate resolution and will not have a material adverse effect on the Company's financial position. Hence, the Company has not
recognised these uncertain tax positions in its books.
5 Corporate Guarantee includes guarantees issued to National Housing Bank on behalf of Tata Capital Housing Finance Limited ' 1,200
crore (As at March 31,2025 : ' 1200 Crore) against which the amount liable by Tata Capital Housing Finance Limited is ' 13.14 crore as
at March 31,2026 (As at March 31,2025 : ' 38.81 Crore). Pursuant to the terms of the Guarantee, the Company's liability on invocation
is capped at the outstanding amount.
Notes :
a) * less than '1 lakh
b) Expected credit loss provision on loans and Impairment on Investments for parties listed above have not been considered as provision for
doubtful debts, hence not disclosed
c) The remuneration of directors and key executives is determined by the remuneration committee having regard to the performance of
individuals and market trends. The above figures do not include provisions for encashable leave, gratuity and premium paid for group
health insurance, as separate actuarial valuation / premium paid are not available.
d) The above related party transactions are at Arm's length and in the ordinary course of business.
Notes :
i. The disclosure as above shall be based on the sector-wise and industry-wise bank credit (SIBC) return submitted by scheduled commercial
banks to the Reserve Bank and published by Reserve Bank as 'Sectoral Deployment of Bank Credit'
ii. In the disclosures as above, if within a sector, exposure to a specific sub-sector/industry is more than 10 per cent of Tier I Capital of a NBFC,
the same shall be disclosed separately within that sector. Further, within a sector, if exposure to specific sub-sector/industry is less than 10
per cent of Tier I Capital, such exposures shall be clubbed and disclosed as "Others" within that sector.
iii. a) "4.1. Consumer durables" amount with respect to Total exposure and Gross NPAs as on March 31, 2026 is less than ' 50,000/-
b) "4.7. Vehicle Loans" includes Auto New, Auto used, Two wheeler Loans, Corporate CV and vehicle products of Motor Finance (TMFL).
c) "4.9. Other Personal Loans" includes Micro finance loans, Personal Loans, Business Loans and Rural Individual Loans.
d) "4.10. Others" includes Loan against property."
(vi) The Company's Board of Directors has the overall responsibility for overseeing the risk management framework. The Company's risk
management policies are established to identify, analyse and mitigate the risks faced by the Company. The risk management policies
are established to set the appropriate limits, controls, and monitoring of risks and are regularly reviewed to reflect changing market
conditions and company activities. To manage the liquidity risk and Interest rate risk, the Board has delegated the responsibility to Asset
Liability Management committee (ALCO), a management level committee established in accordance with its charter. The company's
Asset Liability Management Policy (ALM Policy) is approved by the Board , as recommended by ALCO to ensure the effective risk
management practices.
Footnotes :
1 For the purpose of above disclosure, 'Public Funds' i.e. Commercial papers, Non Convertible Debenture and Cumulative Redeemable
preference shares are shown at Face Value whereas Total assets and total liabilities are shown at Carrying values.
2 Total Liabilities refer to Total outside liabilities i.e. Balance sheet total excluding Share Capital and Reserves.
3 Other Short term liabilities include Financial Liabilities and non financial liabilities payable within an year (Excluding CP maturity,
ICD maturity and NCD maturity of original tenor less than 1 year).
(xvi) Derivative Instruments Exposures:
Derivative positions open as at March 31,2026 and March 31,2025 in the form of foreign currency forward exchange contract, cross currency
swap, options and interest rate swap are disclosed below. These transactions were undertaken to act as economic hedges for the Company's
exposures to various risks in foreign exchange markets and qualify or can be designated as hedging instruments. The accounting for these
transactions is stated in note 2 (xiii).
The Company does not hold any derivative instrument which are intended for trading or speculation as on the reporting date.
Outstanding foreign exchange forward contracts, cross currency swap, options and interest rate swap entered into by the Company: -
(xviii) No fines or penalties has been levied on the Company for the year ended March 31, 2026
(xix) There is no breach of covenant of loan availed or debt securities issued.
(xx) There is no divergence in asset classification and provisioning, that requires additional provision in excess of five percent of the reported
profits before tax and impairment loss on financial instruments or that requires additional Gross NPAs in excess of five percent of reported
Gross NPAs.
(xxi) No Parent Company Products are financed during the year (Previous Year : Nil).
(xxii) The Exposure to a single borrower and group of borrower does not exceed the limit stipulated by the RBI Concentration norms applicable
to NBFCs.
(xxiii) The Exposure to Unsecured Advances is ' 54,550.05 crore (Year ended March, 31,2025 : ' 44,987.51 crore) constituting 28.86% of the Total
Loans and Advances. The Exposure to Secured Loans includes ' Nil towards a Loan given against security in the nature of intangible asset.
(xxiv) The Company has following Registrations effective as on March 31, 2026 :
Note :
1. The Company has assessed its obligations arising in the normal course of business, including pending litigations, proceedings
pending with tax authorities and other contracts including derivative and long term contracts. In accordance with the provisions of
IndAS 37 on 'Provisions, Contingent Liabilities and Contingent Assets', the Company recognises a provision for material foreseeable
losses when it has a present obligation as a result of a past event and it is probable that an outflow of resources will be required to
settle the obligation, in respect of which a reliable estimate can be made. In cases where the available information indicates that the
loss on the contingency is reasonably possible but the amount of loss cannot be reasonably estimated, a disclosure to this effect is
made separately as contingent liabilities in the notes to the accounts forming part of the financial statements (refer Note no 42(i)). The
Company does not expect the outcome of these proceedings to have a materially adverse effect on its financial statements.
2. The Company has not availed relief in the classification and provision for non-performing assets against the exposure to micro, small
and medium borrowers registered under Goods and Service Tax as provided by RBI through its circular no. RBI/2017-18/129 DBR.
No.BP.BC.100/21.04.048/2017-18 dated February 7, 2018.
As per the above requirement, Tata Capital Ltd has been maintaining 100% Minimum LCR from December 01, 2024. Therefore, for the
year ended March 31,2026, the Company has disclosed the LCR as a simple average of all days in 3 months within a quarter for all four
quarters of FY 2025-26.
LCR maintained: For the quarter ended March 2026, the simple average of all days in the past three months was observed at 116.04%
(HQLA- ' 4,855.82 crore) against the requirement of minimum 100% (HQLA - ' 4,184.57 crore). For the year FY 2025-26, the company has
been consistently compliant with LCR framework.
Main drivers to the LCR numbers: All significant outflows and inflows determined in accordance with RBI guidelines are included in the
prescribed LCR computation.
Intra-period changes and changes over time: As per RBI guidelines, the company has been monitoring the LCR on a daily basis for the
year of April 2025 to March 2026. For Q4 FY 2025-26, the maximum and minimum required HQLA observed for regulatory compliance
was ' 5,280.96 crore and ' 3,220.35 crore respectively.
Composition of HQLA: The HQLA maintained by TCL comprises Government securities (including SDL and Treasury bills) and cash balance
maintained in current account.
The details are given below for the year Q4 FY26 between January to March 2026, the average HQLA of (' 4,855.82 crore) comprised of
' 820.23 crore in cash and remaining ' 4,035.59 crore from Government securities and T bill.
Concentration of funding sources:
The company is maintaining a diversified funding mix through institutional funding such as Banks, FIs and market borrowings through
debentures, commercial papers, subordinated debt, perpetual debt, Inter-corporate deposits (ICD's) and External commercial borrowing.
The funding pattern is reviewed regularly by the ALCO.
Derivative exposures and potential collateral calls:
The foreign currency loan in form of external commercial borrowing (ECB) raised by the Company are hedged in accordance with Foreign
exchange risk policy. ECBs constitutes no more than 17% of the total borrowings as on March 31,2026.
Currency mismatch in LCR: There is NIL mismatch to be reported in LCR as on March 31, 2026 since FCY ECBs are fully hedged for the
corresponding interest and principal components. With respect to Letters of credits and buyers credit, the Company does a monthly
assessment to evaluate the net outflows or inflows and if material the same is considered in the LCR computation. For the month of
March 2026, the Company has assessed the impact to be immaterial.
Other inflows and outflows in the LCR calculation that are not captured in the LCR common template but which the institution considers
to be relevant for its liquidity profile. Nil as on March 31, 2026.
Note 50 : Business Combination:
A. Acquisition of Tata Motors Finance Limited (FY 2024-25)
The Board of Directors of the Company at its meeting held on June 4, 2024 had approved a Scheme of Arrangement for amalgamation
("Scheme"), inter alia, involving the amalgamation of Tata Motors Finance Limited (Formerly known as Tata Motors Finance Solutions
Limited) ("Amalgamating Company"), which is a public limited company, incorporated on 16th June 1992 with and into Tata Capital Limited
("Company/Amalgamated Company") and the consequent dissolution of the Amalgamating Company without being wound up, and the
issuance of the New Equity Shares (as defined hereinafter) to the equity shareholders of the Amalgamating Company in accordance with
the Share Exchange Ratio (37 equity shares of face value of ' 10/- each of Amalgamated Company shall be issued and allotted as fully
paid up for every 100 equity shares of the face value of ' 100/- each fully paid up held in Amalgamating Company), and various other
matters consequential, incidental, supplementary or otherwise integrally connected therewith, with effect from the Appointed Date under
the provisions of Sections 230 to 232 read with Section 52, Section 66 and other applicable provisions of the Companies Act (as defined
hereinafter) and the rules made thereunder, and in compliance with the provisions of the Income Tax Act.
The Amalgamating Company is a non-banking financial company operating as a non-banking financial company - Investment and Credit
Company ("NBFC-ICC"). The Amalgamating Company is also registered with the Insurance Regulatory and Development Authority of India
("IRDAI") as a corporate agent in terms of the Insurance Regulatory and Development Authority of India (Registration of Corporate Agents)
Regulations, 2015.
The Reserve Bank of India vide its letter dated October 3, 2024 conveyed its No-Objection to the Scheme. The Scheme was approved by the
Shareholders (Equity and Preference) and the Creditors (Secured and Unsecured) of the Company at the NCLT convened meetings of the
Shareholders and Creditors held on January 16, 2025 and January 17, 2025, respectively. The Hon'ble NCLT vide its Order dated May 1, 2025,
has sanctioned the Scheme. Upon receipt of all requisite approvals, the Amalgamating Company and the Company have filed the relevant
Form with the Registrar of Companies on May 8, 2025. Accordingly, the Scheme has become effective on May 8, 2025 ("Effective Date")
and the Amalgamating Company has amalgamated with the Company from the Effective Date. As per the Scheme, the Appointed Date is
April 1, 2024.
As per IndAS 103, the amalgamation has been accounted under "acquisition method". On Business Combination, purchase consideration
has been allocated on a provisional basis, pending final determination of the fair value of the acquired assets and liabilities. The difference
between the purchase consideration and provisional fair value has been accounted as goodwill/capital reserve on amalgamation, as
applicable.
The merger of the entities has been undertaken to achieve greater scale, creating a larger unified financial services entity with an expanded
geographical reach, strengthened capital and asset base. The consolidation is expected to generate significant synergies, enhancing value
for all stakeholders. By combining resources, the merged entity will be able to drive diversification and offer integrated solutions to a
broader customer base. Additionally, the merger will provide differentiated growth opportunities for employees. Both parties involved have
a proven track record in their respective credit businesses, and consolidating these strengths will facilitate the pooling of knowledge and
expertise, contributing to the long-term success and sustainability of the combined organisation.
The difference between the purchase consideration and amount attributable to identified intangible assets / assets and liabilities
represents residual goodwill in the business. As a result of the merger, the Company receives customer information such as names,
contact information, historical credit provided and repayment information, etc. of existing customers of TMFL and vice versa. This
information can further be divided into different customer profiles based on demography, zones, age groups, etc., which helps
businesses target products/services according to their target audience that will be used by the merged entity to gain synergies from
cross selling its products. Consequently, the Goodwill in the transaction subsumes the above synergy benefit, along with assembled
workforce, future potential of the new branches that are planned to open, new customers, new geographies etc. None of the goodwill
recognised is expected to be deductible for tax purposes.
In accordance with IndAS 103, TMFL and TCL had a "pre-existing relationship" prior to the business combination, which was contractual
in nature. This relationship involved a building leased by TMFL to TCL. This pre-existing relationship was effectively terminated when
the Tata Capital Limited acquired Tata Motors Finance Limited. As a result, the balances related to this pre-existing relationship as of
March 31, 2024, have been eliminated in the merged financial statements.
B The Scheme of Arrangement for amalgamation of Tata Motors Finance Limited (formerly known as Tata Motors Finance Solutions Limited)
("TMFL"), a subsidiary of TMF Holdings Limited, with and into Tata Capital Limited ("TCL") ("the Scheme") became effective on May 8, 2025
("Effective Date"). TMFL stands amalgamated with TCL from the Effective Date. As per the Scheme, the Appointed Date is April 1,2024.
In accordance with IndAS 103 - Business Combinations, the Company had initially recognised the identifiable assets acquired and liabilities
assumed of TMFL based on a provisional fair valuation as at March 31, 2025.
As permitted under IndAS 103, the Company utilised the measurement period to finalise the fair valuation of identifiable assets and
liabilities, considering additional information about facts and circumstances that existed as at the Appointed Date.
During this measurement period, the Company reassessed the provisional fair values and, based on additional information obtained,
identified that certain financial assets had lower recoverable values than previously estimated. These adjustments primarily relate to
inherent credit weaknesses and historical deficiencies that existed as at the Appointed Date and are not expected to be remediated.
Accordingly, an adjustment of ' 145.32 crore (net of tax amounting to ' 48.87 crore) has been recognised to the provisional fair values, with
a corresponding impact on goodwill. In line with IndAS 103, such adjustments have been recorded retrospectively within the measurement
period. Further, in accordance with the Scheme, the goodwill arising on amalgamation has been adjusted against the Securities Premium
Account as at March 31, 2026, based on the final fair valuation report.
Note 51 :
Pursuant to the Initial Public Offer ("IPO") of 47,58,24,280 equity shares of face value of ' 10/- each of the Company, comprising of fresh
issue of 21,00,00,000 equity shares and 26,58,24,280 equity shares offered for sale by the selling shareholders, the Company has allotted
21,00,00,000 equity shares on October 9, 2025. The equity shares were issued at a price of ' 326/- per equity share (including a Share
Premium of ' 316/- per equity share). Pursuant to the aforesaid allotment of equity shares, the issued, subscribed and paid-up equity
share capital of the Company stands increased by ' 210 crore (21,00,00,000 equity shares of ' 10/- each face value) and securities premium
stands increased by ' 6,636 crore. The Company's equity shares were listed on National Stock Exchange of India Limited and BSE Limited on
October 13, 2025.
* The Company has computed the LCR without giving effect of business combination up to May 7, 2025, and has incorporated the impact
of the business combination from May 8, 2025 (Effective date of scheme of amalgamation) onwards.
Note 54 :
The Company has not advanced or loaned or invested (either from borrowed funds or share premium or any other sources or other kind of
funds) to or in any other person or entity, including foreign entity ("Intermediaries"), with the understanding, whether recorded in writing or
otherwise, that the Intermediary shall, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by
or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
Note 55 :
The Company has not received any funds (which are material either individually or in the aggregate) from any person or entity, including
foreign entity ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Company shall, directly or
indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate
Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.
Note 56 :
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 Ministry of Labour & Employment has also published draft Central Rules and FAQs. The Company has assessed and disclosed
the incremental impact of these changes on the basis of currently ascertainable position (pending issuance of state-wise rules and other
clarifications), consistent with the guidance provided by the Institute of Chartered Accountants of India. Considering the materiality and
regulatory-driven, non-recurring nature of this impact, the Company has presented such incremental impact under "Exceptional Items" in
the standalone audited financial statements for the year ended March 31, 2026. The incremental impact resulting from these changes is
' 36.15 crore (Net of tax ' 27.05 crore). The Company continues to monitor the finalisation of Central / State Rules and clarifications from the
Governments on other aspects of the Labour Codes and would provide appropriate accounting effect on the basis of such developments
as needed.
Note 57 :
The Board of Directors have recommended a final dividend of ' 0.57 per equity share for the financial year 2025-26 resulting in a total
dividend of ' 241.96 crore, subject to approval of the shareholders in the forthcoming Annual General Meeting of the Company.
Note 58 :
The disclosure on the following matters required under Schedule III as amended not being relevant or applicable in case of the Company,
same are not covered:
a) The Company has not traded or invested in crypto currency or virtual currency during the period
b) No proceedings have been initiated or are pending against the Company for holding any benami property under the Benami
Transactions (Prohibition) Act, 1988 (45 of 1988) and rules made thereunder
c) The Company has not been declared willful defaulter by any bank or financial institution or government or any government authority
d) No satisfaction of charges are pending to be filed with ROC
e) There are no transactions which are not recorded in the books of account which have been surrendered or disclosed as income during
the period in the tax assessments under the Income Tax Act, 1961.
Note 59 :
Figures in the previous year have been reclassified/regrouped and correspondingly ratios are changed wherever necessary, in order to
make them comparable to the current year.
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