• The Financial Statements have been prepared in conformity with Forms A & B of the Schedule III to the Banking Regulation Act, 1949 read with Section 133 of the Companies Act, 2013 read together with paragraph 7 of the Companies (Accounts) Rules 2014 to the extent applicable and practices generally prevalent in the banking industry in India. During the year, all the 622 branches have been subjected to statutory audit.

• Reconciliation of inter branch / office adjustment accounts has been completed up to 31.03.2026.

b) Draw down from Reserve: During the year there has been no draw down from the reserves to the Profit & Loss account.

c) Basel III disclosures

In accordance with RBI Guidelines banks are required to make Pillar 3 disclosures under Basel III capital regulations. Accordingly, necessary disclosures have been made available on the Bank's website https://www.tmb.bank.in/pages/basel-disclosures .These disclosures have not been subjected to audit by the Statutory Central Auditors.

b) Liquidity coverage ratio (LCR):

Quantitative information on Liquidity Coverage Ratio (LCR) for the year ended March 31, 2026 is given below:

The Liquidity Coverage Ratio (LCR) is one of the key reforms of Basel Committee to develop a more resilient banking sector. The objective of the LCR is to promote the short-term resilience of the liquidity risk profile of banks by ensuring that banks have an adequate stock of unencumbered high-quality liquid assets (HQLA) that can be converted easily and immediately into cash to meet their liquidity needs for a 30 calendar days liquidity stress scenario. The LCR is expected to improve the banking sector's ability to absorb shocks arising from financial and economic stress, whatever the source, thus reducing the risk of spillover from the financial sector to the real economy. The LCR is calculated by dividing the bank's stock of HQLA by its total net cash outflows over a 30-days stress period. HQLA of the bank is in the form of Government Securities and highly marketable and liquid securities / bonds. The Bank has been maintaining HQLA mainly in the form of SLR investments over and above the mandatory requirements.

The guidelines for LCR were effective January 1, 2015, with the minimum requirement at 60%, which would rise in equal annual steps to reach 100% on January 1, 2019. In order to accommodate the burden on banks cash flows on account of the Covid19 pandemic, RBI had permitted the banks to maintain LCR as under: vide their circular Ref DOR.BP.BC.No.65/21.04.098/2019-20 dated 17.04.2020.

iii) Qualitative disclosure about LCR:

The main drivers of LCR: The bank is having adequate stock of unencumbered high-quality liquid assets (HQLA) that can be converted easily and immediately into cash to meet liquidity needs for a 30 calendar days under liquidity stress scenario.

The net cash outflows for the next 30 days has been calculated after deducting the cash inflows from the outflows for the period. The inflows and outflows have been calculated based on RBI prescribed haircuts and run-off factors.

The Bank's LCR is more than the minimum regulatory requirement for all the dates from April'25 to March'26. LCR of the bank for the Financial Year 2025-26 stood at 153.33%.

Composition of HQLA

The Level 1 Assets of our bank comprises of Cash in hand & Cash at ATM, Excess CRR and SLR, MSF & FALLCR are as per permitted extent. Level 1 asset is the main driver of HQLA of the Bank.

Level 2A and Level 2B assets are well within the regulatory cap of 40% and 15% of the stock of HQLA respectively after the required haircut.

Corporate Bonds not issued by a Bank/Financial/NBFC which have been rated AA- or above by an Eligible Credit Rating Agency have been classified under Level 2A assets. Similarly Bonds not issued by a Bank/Fl/NBFC which have been rated not lower than BBB- have been classified under level 2B Assets.

Outflows & Inflows:

Deposits are the main source of funds for the Bank.

Currency mismatch in LCR:

LCR is expected to be met and reported in a single currency. The bank is not having significant liabilities and HQLAs in any foreign currency.

Description of the degree of centralization of liquidity management and interaction between the group's units: The Bank does not belong to any group and does not have any associate, subsidiaries, joint venture, etc. c) Net Stable Funding Ratio

The RBI guidelines stipulated the implementation of NSFR effective from 1st October 2021 at a consolidated level with disclosure from quarter ended December 2021. Accordingly, the bank is computing the Consolidated NSFR. The NSFR is defined as the amount of Available Stable Funding relative to the amount of Required Stable Funding.

Net Stable Funding is a liquidity measure which is the indication of the long term liquidity health of the Bank is measured as under.

NSFR= (Available Stable Funding (ASF)) / (Required Stable Funding (RSF)) >=100%

Available stable funding (ASF) is measured based on the broad characteristics of relative stability of funding sources, including contractual maturity of its liabilities and the differences in the tendency of different types of funding providers to withdraw their funding. Required Stable Funding (RSF) is a function of the liquidity characteristics and residual maturities of the various assets held by the bank including Off-Balance Sheet (OBS) exposures. The result should minimum of 100% to ensure liquidity comfort.

The table given below sets out the un-weighted and weighted value of the NSFR components as on 31st March 2026 based on audited financials.

At a consolidated level, the NSFR of the bank is at 156.63% as on 31st March 2026 against the requirement of 100% as per RBI guidelines.

iv) Details of single borrower limit (SBL)/group borrower limit (GBL) exceeded by the Bank.

Single Borrower limit / Group Borrower limit has not been exceeded during the financial year (not exceeded the same for previous year) .

(e) Divergence in Asset Classification and provisioning:

Divergence in Asset classification and Provisioning for NPAs. The divergence observed by RBI for the financial year 2024-25 in respect of the Bank's asset classification and provisioning under the extant prudential norms on income recognition, asset classification and provisioning is within the prescribed limit for disclosure.

(f) Disclosure of transfer of Loan exposures:

i) There were no loans that are not in default or stressed, transferred and acquired to or from other entities - NIL (For Previous FY 2024-25 - NIL). Bank has received Rs.1000 crore under Inter Bank Participation Certificate (IBPC).

ii) Particulars of stressed loans transferred acquired - NIL (For Previous FY 2024-25 - NIL)

*As defined in Section 3(7) of the Insolvency and Bankruptcy Code, 2016. “corporate person” means a company as defined in clause (20) of section 2 of the Companies Act,2013, a limited liability partnership, as defined in clause (n) of sub-section (l) of section 2 of the Limited Liability Partnership Act, 2008, or any other person incorporated with limited liability under any law for the time being in force but shall not include any financial service provider

Personal Loan 'Personal loans', for the purpose of this circular shall have the same meaning as defined in the Circular DBR.No.BP.BC.99/08.13.100/2017-18 dated January 4, 2018 on “XBRL Returns - Harmonization of Banking Statistics”.

e) Factoring exposures - Nil (For Previous FY 2024-25 - NIL)

f) Intra-group exposures as on 31.03.2026

i) Total amount of intra-group exposures - NIL (For Previous FY 2024-25 - NIL)

ii) Total amount of top 20 intra-group exposures - NIL (For Previous FY 2024-25 - NIL)

iii) Percentage of intra-group exposures to total exposure of the bank on borrowers/customers - NIL (For Previous FY 2024-25 - NIL)

iv) Details of breach of limits on intra-group exposures and regulatory action thereon, if any - NIL (For Previous FY 2024-25 - NIL)

g) Unhedged foreign currency exposure (UFCE)

Bank has a laid down policy for hedging Foreign Currency Exposure, Bank shall insist on hedging the unhedged foreign currency risk of our Borrowers. In case of extreme resistance to hedge the Foreign Currency Exposure or bear the additional Interest Rate the Bank may stipulate, the Bank may on case to case merit, insist on the customer to place suitable term deposits with the bank under lien to the unhedged exposure to take care of the likely losses arising out of adverse currency movements.

UFCE shall exclude items which are effective hedge of each other natural hedges and financial hedges already made shall be excluded for arriving at the UFCE.

Bank shall make incremental provisioning and capital provisioning as under, as prescribed by RBI, and shall adopt the provisioning and capital provisioning requirements of RBI in respect of those entities on which total exposure of the Banking system is above g50 crore. Bank shall follow the RBI guidelines in respect of smaller entities (i.e. total exposure of the Banking system is at g50 crore or less) and shall make an incremental provisioning of 10 bps over and above the extant standard asset provisioning for the unhedged exposure.

The provisioning required for currency induced Credit Risk for the bank on account of the unhedged Foreign Currency Exposure of the borrowers was estimated at g1.60 Crore (Previous Year - g 2.06 Crore). Bank holds required provision towards the same. Bank holds additional capital of g NIL (previous year g16.54 Crore) towards the unhedged foreign currency exposure as per extant guidelines.

h) Disclosure on amortisation of expenditure on account of enhancement in family pension of employees of banks - Not Applicable. (Applicable for banks covered under the 11th Bipartite Settlement and Joint Note dated November 11, 2020)

i) Disclosure of Letters of Comfort (LoCs) issued by bank:-

The Bank has not issued any Letters of Comfort during the financial year 2025-2026.

j) Portfolio-level information on the use of funds raised from green deposits: -

The Bank has not raised any green deposit in the Financial year 2025-2026.

k) Pending Litigations with Directorate of Enforcement under FEMA on Transfer of certain shares and issue of Bonus shares thereon:-

The Bank had received a show-cause notice dated 17.12.2014 from the office of the Special Director, Directorate of Enforcement, Chennai, which was simultaneously issued to 26 persons/entities, including Standard Chartered Bank (scb) and SCB's Head of operations, in connection with the alleged violation in transfer of shares on 13.05.2007, 26.12.2011 and 11.06.2012.

Subsequently, after considering all our submissions / written replies / responses / personal hearing, the Directorate of Enforcement had levied a penalty of Rs.16.99 Crores on our bank, vide its order dated 14.08.2020.

In the meantime, on 27.01.2021, the Deputy legal advisor of the Directorate of Enforcement has filed an appeal before the appellate tribunal for foreign exchange, New Delhi with a prayer for confiscation of shares/de-nova proceedings. We understand from the other noticee (previous Directors/officials) that they have also gone for appeal against the order of DoE. Considering the situation, Bank has also filed an appeal before the Appellate Tribunal, New Delhi on 04.11.2022.

On 05.12.2022, the Appellate Tribunal was not inclined to hear the main issue in the absence of pre-deposit of the penalty amount before the Tribunal, as required under law. We have therefore agreed to deposit the amount of penalty and the penalty was deposited on 16.12.2022 and the bank is having necessary provision.

Pending disposal of the appeal before the Appellate Tribunal, the Bank has fully provided and pre-deposited the penalty of 51699 Lakhs on December 16, 2022, relating to alleged irregularity under FEMA in respect of transfer of

shares, during the years 2007, 2011 & 2012 levied by Directorate of Enforcement. The Bank has also fully provided the penalty of g 225 Lakhs levied by Directorate of Enforcement for alleged FEMA Violation against 11 persons who were Directors / Company Secretary of the Bank at the time of transfer of above shares and pre-deposited 20% thereof amounting to g45 Lakhs. Further, the bank has also provided a sum of g2 Lakhs on the basis of legal opinion towards leviable penalty in respect of show-cause notice from Directorate of Enforcement, for the issue of Bonus Shares to the above-said transferees.

.l) Transfer of Dividend and shares to IEPF:

Unclaimed Dividend and shares pertaining to the Financial Years 2015-16 (2nd Interim), 2016-17 (1st Interim), 2016-17 (2nd Interim), 2017-18 (1st Interim & 2nd Interim) have been transferred to IEPF during the FY 2025-26.

15) Disclosure Requirements as per Accounting Standards where RBI has issued guidelines in respect of disclosure items for Notes to Accounts:

15.1 Changes in Accounting Policies (AS-5):

There were no material pertaining to prior period Income /Expenditure requiring disclosure as per AS5.

The bank has applied its significant accounting policies in the preparation of these financial statements, consistent with those followed in the previous financial years except in relation to performance based incentive

15.2Revenue Recognition (AS-9):

The heads of income recognized on cash basis are neither material enough nor do they require disclosure under AS 9 on Revenue Recognition.

Performance Based Incentive:

The Board has formulated a policy for variable pay based on the performance linked scorecard methodology for achievement of targets of the employees and the same is provided on accrual basis as against the past practice of accounting the incentive in the year of payment. As a result of the above change profit for the current financial year is lower by Rs.49.80cr with corresponding increase in other liabilities.

ESOP:

In line with the policy of the Bank, duly approved by the shareholders, the Bank during the year granted 7879 equity shares under the scheme Tamilnad Mercantile Bank Ltd Employee Stock Option Plan, 2024 (TMB ESOP Plan 2024) which shall vest over the next three years. The ESOP expenses of Rs.8.67 Lakhs has been recognized in the Statement of Profit and Loss for the year based on fair value option estimated using Black-Scholes Merton formula.

Impact of the New Labour Code:

The management has taken into consideration the New Labour Codes notified by Government of India on November 21, 2025. Based on the assessment, the Bank is of the opinion that the incremental impact is not material for the year ended March 31,2026 and accordingly no provision is considered for the year. The Bank will continue to monitor the finalization of Central and State Rules and clarifications issued by the Government on the New Labour Codes and would provide for appropriate accounting effects on the basis of such developments, as needed.

1. Assets and Liabilities wherever directly related to segments have been accordingly allocated to segments and wherever not directly related have been allocated on the basis of segment revenue.

2. The Bank operates only in Domestic Segment.

3. Segment information is prepared on the basis of management estimates/ assumptions and is based on internal reporting systems. Methodology adopted in compiling the above information has been relied upon by the auditors

PART A: Operational Segments:

For the purpose of segment reporting, the reportable segments are identified into Treasury, Corporate/

Wholesale banking, Retail banking and other banking operations, in compliance with RBI guidelines. Brief

description of activities of each segment and revenue attributable thereto is as under:

1) Treasury portfolio comprises of investments in Central and State Government securities, debt instruments of Banks, FIs, Insurance companies, PSUs and corporates, certificate of deposits, equity shares, mutual funds etc. as well as forward contracts, derivatives and foreign exchange operations on proprietary account and for customers, including trading in these instruments as well as borrowing and lending operations. Treasury income is primarily earned through interest on investments, forex income as well as income from securities trading; expenditure includes interest on funds borrowed and other allocated overheads.

2) Corporate/ Wholesale banking includes all advances to trusts, partnership firms, companies, and statutory bodies, which are not included under Retail Banking. Revenue comprises of interest and fees / charges earned from such clients and expenses are those incurred on interest towards funds utilized and other allocated overheads.

3) Retail banking comprises of lending of funds and other banking services to any legal person including small business customers, on the basis of the borrower, nature of the product, granularity of the exposure and quantum thereof. Revenue comprises of interest and fees / charges earned from such clients and expenses are those incurred on interest towards funds utilized and other allocated overheads.

15.15. Issue of fresh shares:NIL

15.16. Dividend:

Final Dividend (paid during the year 2025-26)

The Board, in its meeting held on 23.04.2025, had approved/declared final dividend for the financial year 202425, at the rate of S11 /- (Rupees Eleven only) per share, i.e.110% on the fully paid up equity shares of S10/- each. The same was approved by shareholders in the Annual General Meeting held on August 08, 2025. The record date for the same was fixed as Friday, August 01, 2025. The payout (15,83,51,454 shares * S11 = ^174,18,65,994/-) process was completed by 20.08.2025.

Proposed dividend recommendation if any:

A final dividend for the financial year 2025-26, has been proposed at the rate of S12.50/- per share, i.e 125% on the fully paid up equity shares of S10/- each subject to the approval of the shareholders in the upcoming Annual General Meeting.

15.17. Corporate Social Responsibility:

The bank was required to spend Rs. 29.07 crore (Previous year Rs. 26.08 crore) during the financial year 2025-26 towards Corporate Social Responsibility (CSR) in accordance with companies Act, 2013. The bank has spent an amount of Rs. 29.07 crore (Previous year Rs. 26.08 crore) in respect of CSR activities across the country. None of the CSR expenditure incurred by the Bank is to entities controlled by related parties identified by the bank as per Accounting Standard 18, Related Party Disclosures. The amount spent as above is for the purpose other than for construction/acquisition of any asset in 2025-26/2024-2025.

16 Fixed assets (Land and Building) include property held in Chennai, land (UDS 753.117 sqft Rs.10.76 lakh) and building (Rs.11.10 lakh) purchased during January 1993. While the UDS of land was registered in Bank's name, the building was to be handed over to the Bank after construction, by the corporate debtor, who are in corporate insolvency resolution process, which they failed to do so and the bank had preferred a suit in Madras High Court against them for specific performance and damages which is pending due to moratorium imposed by NCLT. Further, the Bank has already filed necessary claims with the resolution professional/liquidator appointed by NCLT under IBC, 2016.

In addition to the above, our Bank has filed necessary petitions before NCLT, Chennai(lA.No.871/2025) seeking the following reliefs;

1) To direct the liquidator to hand over the possession of the property to our Bank.

2) To treat all the rents collected over the premises during the CIRP Period from the date of commencement to upto the date and treat the same as Interim Finance from our Bank and hold the same shall have priority as per Section 53 of the IBC, 2016

3) To direct the liquidator to amend the Asset Memorandum by excluding our Property and the same being not part of the Liquidation estate as per Section 36(4) of IBC.

At present the case before NCLT is posted to 04.06.2026 for hearing.

17 Pursuant to the statutory regulations outlined under the Reserve Bank of India guidelines on Compensation of Whole Time Directors/ Chief Executive Officers/ Material Risk Takers and Control Function staff (RBI/2019-20/89 DOR.Appt.BC.No.23/29.67.001/2019-20 dated November 4, 2019), the Bank has implemented ESOP Scheme known as Tamilnad Mercantile Bank Limited (TMB) Employee Stock Option Plan, 2024 ('TMB ESOP 2024'). The ESOP plan was approved by the Board in their meeting dated January 17, 2025 and subsequently it was approved by the Shareholders on March 12,2025.

18 In respect of certain branches/offices where additional information was required, the data available at Controlling/Head office was considered.

19 Previous year's figures have been regrouped wherever necessary to conform to this year's classification.

20 Figures have been rounded off to the nearest thousand rupees in the Financial Statements.