¥ VILLAGE FINANCIAL SERVICES PRIVATE LIMITED ANISO CERTIFIED MICROFINANCE INSTITUTION ANNUAL REPORT 2015-2016There is no tool for development of women « \ more effective than the HX TABLE OF Empowerment of Women. FINS \ CONTENTS aa at Table of Contents Message from the Chairman Mostage from the Managing Director Company Profile Mission, Core Values and Objectives Highlights from the Previous Financial Year Report Card Board: Jirectors & Senior Management Team Grievance Redressal Meck Corporate Gov. nt 1n Methodology ‘Awards and Accolades Listof Partner Organizations Case Studies (182) Independent Auditor’s Report: Balance Sheet Profit & Loss Statement 10 16 18. 20 23 26 28 30MESSAGE FROM THE CHAIRMAN Me. AK. Maity: Our core values and principles have always been our guiding force. Dear All, Last yeor, we joined hands in celebrating two decades of our existence. |e to think of every years report (50 benchmark for the Following year. With each succossive yoor, we take a fow stops towards roalizing imy origind goo! to start this orgorisation. | cannot but be eternally grateful for everyone has contributed towards helping us worktowards these goals, fulfill our vision and stand by our core values. This past year, we were able to successfully spread the word oF VFS to other ports of the country which hed nt witnessed our presence yet. Without the suppert, guidance and sacrifice of countless people, beit our customers, partners, or team members, we would not have been able to ochieve whatever we have done till this doy. While the world has changed alot in these past two decades, we remain true to our vision of strengthening the socio-economic fabric of the society by providing financial and other support services mainly to the poor and women on a sustainable manner. The main objective was to improve the quolity of life Of the poor and underprivileged rural and urban people ‘through secial action by promoting, supperting and developing voluntary groups engaged in the social and economic development, by providing a complete range of financial and non-financial services, and institution building support soas to facilitate their growth and develop them into financially sustainable entities Even though we continue to work with new customers, itis alvays a pleasure to see some of our frst time borrowers reap the benefits of the seeds they had sown eight or even ton years ago, and famiios frilly moving up the value chain, and rightfully claiming a place of their own in society. (Our core values and principles have always been ‘our guiding force. We have focused more onthe basic principle of creating income opportunity for the economically disadvantaged households, paving the path towards the journey of ack growth. We continue to deliver the services thatwe had promised, and have always maintained a transparent environment delivering our services towards our customers, (Ourfocus hes also been te expand ond reach out ta larger sections of the poor and underprivileged people cand to help them gain benefits of financial inclusion, We have specifically set our plans to reach out tothe Untopped districts and locations which have almost completely been deprived of ary form of barking ‘At VFS, we have always believed that our team mombors are our most valued ossots. Tho total umber of Credit Officers went up by almost 40% in 2015-16 due to the new territories we expanded into, Development of talent in the proper manners Of prime importance. We are continuously working on ce simplified structure ond opportunities to grow the orgonization at all levels, mostly done through intorna training and skill building Village Financial Services today is an established ‘name in facilitating and promoting fnancial inclusion. in the Eastem part of India. Ithas token commendable passion, determination and commitmert from our entire team towards echieving our mission and objectives, which along with the support and trust of our partners, stakeholders, well-wishers and customers, has helped us to overcome holders and sail through dark and diffcult times. For now, the stage is set to toke great loops in tho yoors choad We have taken great strides ot VFS this past year cond I lock forward to further advancing our goolof eradicating poverty by empowering every peor women, who wants a better life for herself and her Fomily Equipped with learnings from the past end wiser with over two decades of experience, we arenow ready to embrace the future with even greater vigour and ‘optimism for a more prosperots, sustainable ond profitable tomorrow. Jonce again thark our team members for their commitment, wisdom, guidance and vision ofall our Boord Members and the constant undeterred support cond trust of our investors, partners and staksholders for helping us come this for. With best wishes, \jit Kumar MaityMESSAGE FROM THE MANAGING DIRECTOR Dr. Kuldip Maity It has been my passion and pleasure to lead VFS in the past Ces Dear All, The Financial Year 2015-16 was an excellent yeor for VFS, and started a new phase of growth for our organization, as we spread our wings to reach operations across cight states in nde, compared to the three we were working in at the beginning of the yar. At the outset, | would lice to extend my deepest thanks for your continuous support to village Finarcial Services private limited, as these successes would not have been possible without the support ofall stakeholders and wall-wishers of VFS. ‘The Microfinance sector in India, over the past couple of yeors, has broken its shackles of slow growth, nd ismoving a fast trajectery of capturing new unchortered waters in new parts of the country. Inia has always been nation of entrepreneurs, and micro- entrepreneurs such as the ones who ore our customers ‘re a critical subset. In no woy tobe left behind the wave of economic growth and activity sweeping the country, all sections of society are involved in the process of nation building by generation of economic cctivity Recent emphasis by the Central Government on financial inclusion has enabled more of the unbanked and underserved section of the population to be part of the financial mainstream and reap its benefits. Itis aknown ond accepted the fact that micro finance provides one the most sustainable, scalable end fective ways towerds financial inclusion for the poor both in the rural and inthe urban economies. t ison ideal medum that fils up the most vital gap in the Form of financial mrkets by the primarily from real impoverished population was unable to unveil the benefits of the former banking sector and hence is. forced to four in the trap of unauthorized and dubious, financial sources. Micro finance plays the pivotal role in breaking this vicious cycle and provides asafe, secure nd asustainable on certain meeting the financial needs of the people, mainly in the rural areas. Village Financial Services has been playing an estential role towards addressing this demand-supply mismatch and has made substantial contributons towerd expanding the reach of fnarcial conclusion ‘This gap between the demand and proper supply gives ‘iso to unserupuleus olomonts to tako undue adventage cand create both short-term and long term imbalances in the lives of the poor. By targeting several untopped districts, VFS aims to provide ethical and efficient microfinance services for income genercting activities, which will enable the underprivileged and backward sections of these districts to become economically self-sufficient, allowing them to escape the clutch of the informal economy and the shockingly high interest rates and harassment that go along with it. tchas been my passion and pleasure to lead VFS. in the post few years, especially asit grows From strength to strength, and continues to firmly ‘stoblish itself as one of the top MFlsin the Eastern part of the country. ‘The performance of an organization reflects in the performance ofits people, and | om proud tesay that ‘our core values hove heen upheld by every single officar and mamber of the VFS team in the field At VFS we have olwaye tried to adopt technological advancements which are cost effective and telp in providing efficient services. Allthe branch operations care totally computerized. We have developed our ‘ownmicro finance software "V Smart” for security cond better MS Reports. Allthe branch offices send their Daily Collaction Report te the Head Office and the reports are then consolidated and summarized. Loan tracking ané reporting is also done through thisintemally developed software, We anticipate technology to move with great leaps and bounds in the coming years, and we strongly hope to play long with the times, and adopt technology tothe best possible use in the coming days. Usogo of mebile platform to for our microfinance candother support services willbe beneficial to our ‘existing customers and willalso help us to reach out to those who are currently deprived of such Facilities. The swift and hassle-free operational advartage offered by the mobile platform will not only make life easier for our existing customers but would ako help us to ‘expand and offer more products and services in the future. We are also planning to introduce new Microfinance Products in the near future to our portfolio that have been specifically shaped and created keeping in mind the exact needs, priorities and requirements of ol customers, These new products we provided the ideol support needed for offering financial assistance to the oor and the marginalized people to attain fancial self-reliance Looking back. when we had first storted our journey overtwo decades ago, wehad realized that to address theissue of equitable development of the unbanked sections of society, there was a need for providing financial assistance ina sustainable manner to the poor cand underprivileged sactions of the society through foir, ethical ond efficient services. It gives me immense pleasure and deepeontent that VFS has been able to grow and has touched the lives, of so mony in our society. While challenges, be it cyclical, regulatory or operational, will ways have to be encountered, the incredible human experiences we all face as port ofthis Fascinating journey has only strengthened our reselve and commitment towards expanding economic access ard porticipation among low income women entrepreneurs. We take. lot of pridain sharing our performance from the past year with all ourstaksholders, and I would once ogain like to thankall our partners, team ‘members, institutional supporters, and our valued customers for the enormous trust ond generous support that they have continued to give us all these years and I can only hope this support will continue in thefutue. With best wishes, Dr. Kuldip MaityCOMPANY PROFILE ‘Starting its microfinance operations from 2006, Vilage Financial Services Pvt. Ltd, (or VFS) today is recognized as one of the most reputed microfinance institutions of eastern india, now having expanding its services and operations to eight states in India. VFS. hhos the rare distinction of being the fist microfinance Se el ec Eee et under section 45-IA of the Reserve Bank of India. It Seen ey India. Ce crc ea Cee ee Een pee ere ey Se eee ee ee ee economically self-sufficient, sensitizing wemen about ‘empowerment issues and bringing about a qualitative Ce aa ae need goin agreater foothold ond sense of respect inthe oe VES has successfully manaced and further improved Cee ee Ey Cree ee eet ee ing sustainable way, VES's operating model includes the Joint Liabilty Group or JLG appraisals well Ce nan ea See ons This model has allowed VFS to build relationships with its most important em aceon ey Ree aa Caco macctuers Nee ee ee eee eee eee eee eee Se eee ea Pe ne ees See eg ee Rd Peer ea eet eee a See ee ey HOW WE GOT HERE 1982 Villoge Walfore Secioty (VWS) 0 a gront-based fat organization 2004 \VWS starte microfinanes activities Sotting up of Millage Micro Credit Services, a Set Not-For-Profit company 2013 VFS classifod by the Reserva Bank of India os"NBFC-MFIT 2006 Starts NBFC operations Das PILL LITT oo) Pen ec ee ASSAM Bee CC Cenc ry Cy Perens ROCIO U L CWO) eerie Cer pore ry Cece ie LY i; eC oie peeimemrnnemmrtn accu ae ae CROCCO Cocos fem rverermerereemeteerniritr a Bro) Q©0O00O0O00O09 0000000000 LKR RTO TOC) ©0000 BON Sy ED Breer BH eet Steet “fanatannnannonnnaneiaseateneis tities 5 iMISSION To strengthen the socio — economic condition of the society by providing financial and other support services mainly to the poor and women ona sustainable manner. rofinance service to people to the core valu poor i he range of xcluded from the ncial access. best in class in all aspects— customer service, innovation, efficiency, workplace and reliability in providing the IN ORDER TO CREATE SUCH VALUE, OUR OBJECTIVES ARE: To improve the quality of the life of the underprivileged rural and urban people through social action by promoting, supporting and developing voluntary groups engaged in the social and economic development Providing financial and non — financial services as loan funds. supports and institution building support so as to facilitate their growth and development into financially sustainable entitiesHIGHLIGHTS FROM OUR ACTIVITIES AND PERFORMANCE IN FINANCIAL YEAR 2015-16 PROGRAMS/INITIATIVES CONDUCTED UNDER "GROWTH & EMPOWERMENT” THEME: “Growth and Empowerment” To celebrate the special occasion of completing two decades with the theme “Growth and Empowerment”, we organized in a series of special events and initiatives during the course of the year. These events and initiatives include 10] Customer Awareness Training ‘These training sessions are conducted to bring ‘about awareness in customers on their rights os VFS customers, as well as best practices on product selection, utilization of loans, and financial literacy. Community Volunteers’ Training VFS deploys Community Volunteers at various instances during the year. These training sessions are geared towards properly training volunteers at best serving the community Leaderst Development Training Part of VES’ internal human resource development, Leadership Development Trcining is conducted to identify ond further build skils for those staff who show potentialin rising further up the ranks in the organization Delinquency Management Training Positive Attitude Generation Training Managing repayments is citicol to VFS operations (as is toany microfinance institution in Indic). VES spend: alot of time and resources training its credit and branch officers tomanaging these repayments as well €s proper borrower selection. Customer Relationship Management A credit office's job is quite often dificult and cdomotivating, given some of the extreme and depressing conditions they frequertly have to deal with. These training sessions keep the motivation levels Up, and bring ina sense of pride, along with a postive frome of mind and Training Several training ssesions during the course of the year are devoted to managing customer relationships Sessions tend to focus on subjects suchas distinguishing between the rurcl and urban borrower, os well as dealing with women entrepreneurs ina sensitive cond respectful monnes Risk Management Training There are mary lsssons to be loarnad in torms of best practices that borrowers may follow. Itis VES's sincere endeavor to train borrowers in following in best practices, which would only help them in the long run in becoming better ertrepreneurs cs well as managing dete Microfinance Operation and Training In addition to Delinquency Management training mentioned above, risk management training is given to branch and credit staff Forteaching them to manage fisks at the branch, regional and zonal levels This training module is at the heart of VFS's ‘operations, ond is what binds together people across all levels at the organization. From new area and client selection to enforcing internal policies. managing {an12 disbursements and repayments, these training sessions Focus on maintsining efficient and focused operations Cc Ff Conduct VFS hos set stringent guidelines on what Feld and credit officers are alowed to do or not to do when inleracting with existing or potential beneficiaries. These guidalines help create a benchmark for everyone to follow Customer Satisfaction Customers continue to remain the primary reason for fur existence, satis of primary importance that wo are able to capture customer satisfaction. VFS strives to continuous improve its preducts and services to ensure this Impact Assessment Popular the world over in the past decade, impact, cessessments are complex yet effective means of ‘assessing what can be simply termedas "what works” VFS has engaged top-level reseorch institutes to address specific issues which wllhelp improve not only its own products and services, but also improve industry standards Celebrating Women’s Day annually to encourage ‘women empowerment and felicitating the successful borrowers. OTHER DEVELOPMENTAL ACTIVITIES UNDERTAKEN DURING THE PREVIOUS YEAR INCLUDE: Village Model School Villags Medel School wos founded in 1992 at Pancharulvillage of Udaynarayanpur Block in Howrah District of Southern West Bengal. The inception of Vilage Group is alvoys to project an instrument of empowerment education and intellectual enlightenment for the society. We aim to preserve ‘ond enhance the highest standards of excallence and prepare generations for the 21st century not only that we also helped them tomaster the respiratory of ‘deep commitment to Indian ethos end Culture ina pristine form, Day Care Centre Based on theneed of the local order people. Village Welfare Society (Group organization of VFS} set up aDay Care Centre at Pancharul village of Udeynarayanpur Block in Howrah District of West Bengol. Irs for their recreation and pleasure at leisure time. They porticipate there in discussion of spiritual ‘and religous topies ina gatherng every afternoon. Averages of 85 persons participate daily with collective involvement and sharing n various activities. Finoncial Literacy Program ‘A campsign towards women empowerment With a view to building and developing positive cttitude of common marginalized people by changing their mind set to make them hebituated to practice management of finance at househdld level. Financial Literacy campaigns wars organized at various ploces of West Bengal. As we see that the women in a forily cre the prime actors to manage day to day expenses, they should have thorough knowledge over every expenditure. The aim is to make the women aware bout categorization of expenses and priortzation of needs, based on which they will spend money for family purpose. They are also encouroged to grow habit of savings in a family which will eventvolly supplement the famity income. More than 3000 people both male & female were actively participating in those 30 ‘campaigns organized so fer. We believe that Financial Literacy is 0 continuous process and creative process. By means of proper direction and explanation, good counsel, encouragement ond recognition of efforts of a woman potential can be brought to the fore. Blood Donation Camp Village Welfore Society encouraged & supported local ‘youth club for organizing blood donation camps in collaboration with West Bengol Voluntary Blood Donors Association This year 1 blood donation camp wes organized at Pancharul, Howrch where 102 youth, beth ‘men & women participated voluntarily. Women Empowerment Woman Empowormert is to us is encouraging and ‘empowering an entire society, who can confidently express themsehes. Every Year on Bth Merch we celebrate the day oF female empowerment "International Womeris Day’. The genesis of this event has no matter of Question that it has given a diamond effect to our Society. We also bear the vision of inculeatng in the under privileged women section of our society the moral values and sense of Independence sothat they can come out from their houses and can spend their life with economic. Independence. (1314] REPORT CARD AUDITS & PROJECTIONS We anticipate the beginning of a new phase of growth in terms of disbursements and branches in ‘the near future. Given below are our projections over the next 3 yoors 4-15 15-18 16-17 17-18 18-19 NO. OF BRANCH OFFICES 14-15 18-16 10-17 17-18 18-19 NO. OF STATES 1415 15-16 16-17 17-18 18-19 NO.OF DISTRICTS COVERED (in lakhs) ass 1415 15-16 1017. 17-18 18-19 NO.OF JLGS W415 18-10 16-17 17-18 18-19 TOTAL STAFF STRENGTH aeaeas 9640518 80,000 60,000 74930.96 ses10.42 40,000 1651276 20,000 6 14-15 15-16 16-17 17-18 18.19 tm LOANS DISBURSED DURING THE YEAR tm LOAN OUTSTANDING 115SENIOR MANAGEMENT MR. D.K. RAY MR. SYOTIRMOY DAS Manager-Finance Senior Executive- Insurance Worked as Depty General Mamager in. leading public Three decades of industry experience, induding over sector Bank, with over 38 years of experience n 20 years of experience in the Microfinance Sector vorious fields of banking & finance. MR. MOLLA MD. IMAMUDDIN MR. SUBHASIS GHOSH Executive-IT Manager! Accmunts: With overtwo decades of experience in the fidd of IT, 18 yoors of axporionce in the fields af Finance and hs heads aur technalagy initiatives Accounts. MR. JITENDRANATH MAHATO Manager-Audit 18 yeors of experience in Accountancy and Audit in the microfinance sector MR. ACHYUT KR. SAHA Manager-Training 24 years of experience, including time spent in internetional microfinance institutions, MR. DEBABRATA SUR Manager-HR Having 12 years of industry experience in the training & development of Human Resources MRS. ARUPA KANRAR Chi ronal Manag 14 yeors of experience in the Microfinance Sector MR. MANAS SARKAR Chief Zonal Manager-Operations LL years of experience in Rural Develepment and Merofnance. fei rrees tCSeor Soe BOARD OF DIRECTORS For maintaining the independence of the Board functions of governance and management, the Board of Directors of the company currently fectors. of whom three are tors and one is aN consists of si sates good governance practice «at VFS. The details of the directors follow. MR. AJIT KUMAR MAITY Choirmen + Visionary entrepreneur with 32 years of experiance inthe Feld of microfinance and development. + Ex-Executive Board Member of Sa-Dhan; + Exmember of the SIDBI Project Advisory Committee (Eastern region) DR. KULDIP MAITY Managing Director & CEO + 17 yecrs of experience in the microfinance and social development sectors + Stoored the Village Group and helped VFS become the frst MFl with NBFC status in West Bengal and obtain the honeur of being certified as the first 9001:2008 ISO MFI in hdia DR. SANKAR DATTA Independent Director + Wealth of experiance from zenior lovel management positions at PRADAN, IGS, BASIX, + Involved in several consulting and advsory roles for global institutions such os FAO, IFC + Academic stints at IIMA, IRMA-Anand, Arim Premji University + Member of several privete, state and central government task forces such as Planning Commission; Livelihood Advisory Group (ACCESS), Standing Committee on Poverty Alleviation of (Chhattisgarh Flanring Commission MR. A. RAMANATHAN Ind + Bx Chief General Manager of NABARD. Where he managed SHG-Bonk linkage program, the largest ‘microfinance pragram in the world + Joint Director of Banker's Institute of Rural development (BIRD) + 37 years of experience in various important pasitiens inresearch, training, consultation, etc. DR.T.K.MUKHOPADHYAY Independent Dirsctor + Ex Chiof General Manegor ond Country Hoad (Administration ond premises) of IDB| Bark, where he held senior positions across Corporate Finance, Project Management and SME Departments, as wll {5 holding zonal responsibilities MRS. ALPANA BHANDARI Nominee Director + Nominated by tho Board of Trustoos of tho VFS ‘Mutual Benefit Association-Howrah.GRIEVANCE REDRESSAL MECHANISM FAIR PRACTICE CODE FOR CUSTOMERS. grievance can bedefined as any sort of dissatisfaction, which needs to be redressed in order to mai ing of the ‘organization, Broadly, a grievance can be defined ‘as any discontent cr dissatisfaction withany aspect of the organization. in the smooth functi Customer's grievances initially find expression inthe form of a complaint. When a complai remains unattended to and the concerned person feels o sense of lack of justice and fair play, the isfaction grows and assumes the status i practice code ensures that jority, and that all grievances raised are addressed in a timely + Allthe dealings with customers willbe cpen, fair and ethical + VFS willtrect allits customers with respect and professionalism. + VES shell explain and disclose tho foaturos of its services in o transparent and understandable manner. Further, its applications and agreements shal clearly include: Interest rate on loans Processing fee ond insurance premium Allother terms and condtions + VES willmaka its best fferts to ensure that the loons it provides are within its customers’ capacity to repay. + VFS willnot engoge in ony cosrcive methods to collect repaymerts. + VES willprovide customers with a grievance redressal system to register their complaints and resolve it in a timely ond fair manner. + VFS rospocts ite customers’ privacy and will treat all information related to the customer as privete and confidential. There are three formal stages in which any grievance can be redressed. VFS is committed to make sure that al from them STEP: 1 STEP: 2 s customers get only the very best of the service STEP:3 VFS customer may contact her branch or write to the Branch If customer does not receive any response within 10 days from the Manager explaining the details of channels under STEP: 1, or, sha her issues. The Branch Manager will isnot satisfed with theresponse be glad to assist received. she can escalate her complaint to VFS's Help Desk Executive at our Corporate Orfice Toll Free No. 1800-345-9444 (From 10.00 AM to 05:00 PM except Saturday, Sunday and other Holidays) If she is still not satisfied with the response that she has received from the branch lovel or channels under Step 2, she may then contact the Office of the Nodal Officer fora speedy investigation cand fair resolution of her problem. IF the complainidispute is not redressed within a period of one month, she may appeal to the Reserve Bonk of Indi. IF the complainidispute is not redressed within a period of one month, she may appeal to the Reserve Bonk cf India. VFS has taken the following additional initiatives to ensure transparency in the process of grievance redrossal + Installation of complaints/ + VFS Head Office address with suggestion box at all our Telephone number printed in oll branches at prominent places to __passbooks receive written complaints + During the Group Training, discuss with our customers about the Grievance Redressal System candits bonefts inorder tomake them aware of the cacressal process,20] CORPORATE GOVERNANCE Village Financial Services Private Limited adopts tthe best corperate practices among Microfinance ions (MFIs). VES is committed to conduct its business in accordance with applicable laws, rule ond regulations and the highest standards of. business ethics and transparent conduct. Instit VFS is registered with the Reserve Bank of India as NBFC MFI under Section 45-1A of the RB1 Act, 1934 and adheres its operations in compliance with the Guidelines on Corporate Governance issued by the Reserve Bank of I from time-to-time. ‘The highest standards of integrity, transparency, fair practice, code of conduct and ethical behaviour are fundamentalto the VFS's business model, COMMITTEES OF THE BOARD AUDIT, RISK & ASSET-LIABILITY MANAGEMENT COMMITTEE With a view to comply with various requirements under the Companies Act, 1956, the Board has set up is ‘Aude, Risk & Asset-Linbility Management Committoe The committee has been constituted pursuant to relevant RBI regulations for menitoring the osset liability gap end to strategize action to mitigate risks csscciated with the company. ‘Scope of the Committee's Respons + Oversight ofthe company’s financial reporting process and the disclosure of ts francial information to ensure that the financial statement & correc, suficient and credible + Recommending to the Board the appointment, reappointment and if required, the replacement or removal of the statutory auditor and the fraticn of audit foes Approval of payment to statutory auditors for any thor services rendered by tho statutory auditors + Reviewing with the management the annual financial statements before submission to the Board for opproval + Reviewing with the management, the quarterly audited/unaudited francial statements before submission to the Board for approval + Reviewing with the management, performance of the statutory and internal auditors and adequacy of the internal control systems + Reviewing the edequacy of internal audit function, ifany, including the structure of the internal audit department, stafing and seniority ofthe offic heading the department, reporting structure coverage ond frequency of internal audit + Discussion with internal auditors, any significant findings and follow up there-on + Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or rregularty or a falure of internal contra systems of a moteriel nature and reporting the matter to the Board + Discussion with statutory auditors before the audit commonces about the nature and scope of audit 0: wall as post-audit discussion to ascertain any area of concern + To lock into reosons For substantial defouts in the poyment to the shareholders (in case of non- payment of declared dividends) and creditors + The scope of the Committee pertains to the review of operational risk, information technology risk, integrity risk, adherence to KYC guidelines + The role and functions of the Committee shall also include: NOMINATION AND REMUNERATION COMMITTEE: Like most other large orgenizations, The Nominction ‘and Remuneration Committeehas the overall responsibilty of approving and evaluating the compensation plans, polices, including Human Resource Development ‘Scope of the Committee's Responsibilities: + To ensure fit and proper credentials of proposed/ txisting Directors + Appointment and reappointment of Directors on the Board + Filing of a vacancy on the Board {2022| + Appointment of members to the Executive Committee of the Boord Otherresponsibilties are: + Determining on behalf of the Board and on behalf of the shareholders with agreed terms of reference, the company's policy on specific remuneration packages or Managing Director including pension rights and ary compensation payment + Determining the revenue matrix, salary and bonus to be paid to whole time Director(s) or Managing Director of the company + Determining the siting Feeto be paid to the members of the Board + Determining the policy for salary, incentives and bonus/excgratia to be paid + To identify, oppoint and review the performance of Key Management Personne!’ of the company + Making recommendation to the Board of Directors with respect to the compensation to be paid to the whole time Directors and Key Nonagement Personnel of the company + Determining the criteria for the grant of options or shares underthe Stock Option or Stock Purchase Scheme + Considering any other matter os may be required by under the Stock Option or Stock Purchase Scheme of the Company + Authority to do any matter in relation to the above functions/powers). To delegate any of the powers mentioned above to the Company Executives BORROWING COMMITTEE: To avail the borrowings from different banks/fnancial institutions, the company needs the Board of Directors to meat frequently. The Boad of Directors of the ‘company now constitute a separate throe members committee to borrow Funds , which at any point of time shall not exceed Rs. 1090.00 Crore [Rupaes one thousand crore only) on behalf of the company. Such policies are reviewed ona timely basis, depending on context and circumstances. CLIENT SELECTION METHODOLOGY FAIR PRACTICE CODE CLIENTSELECTION METHODOLOGY Tho customers of VFS ar who are enga generating octivit ling to stort IGA or up scaling their IGA but do not have any access to institution. the main stream finance! In our operation methodology we adopt a mechanism Of forming JUG (Joint Liability Group) ajoint group effort towards self-employment where person having similar socio-economis profile and living in the same neighborhood (one representing one farily), form a group of 5 whereby they work for the development of all and after taking the loan, are bound to the Corgenization individually and GroupWise for repayment of the loan, The processincludes- + Area Selection + Group Formations + Financial Transactions Timeliness is maintained ond given a high priority, in VFS andit is to be maintained and upgraded continuously. All the services are provided to the customers at their doorstep such as preliminary training, documentation for loan sanction, callection of lean repayment installments insurance claim settlement etc The Fe Code is based on the guid issued by the Reserve Bank of India and MFIN, SA-DHAN. 12324| AWARDS & ACCOLADES : VFS and its Management ha: + VFSis the fist ISO 9001:2008 certified Microfinance Company in india + VFS achieved the awerd of Commendation Certificate for Strong Commitment to Excel’ on the journey towards Business Excellence conducted by CI-EXIM Bank + VFShas been rarked 10th across Indian Srijan Business Plan Competition + VFS was adjudged the finalist in the Flame category of Microfinance Process Excellence Award conducted by ABN AMRO & MPEA + Dr. Kuldip Maity has been honoured by the Esonomic Development Forum with the Global Achiever's Aword for Business Leadership, 2013 + Dr. Kuldip Moity was awarded Rashtra Pratibha Puraskar in 2011 by the Integrated Council for Socio-economic Progress in recognition of his cutstonding achievements, excolloncs and experience inthe chosen field of microfinance + Dr.Kuldip Moity was honoured with the Gold Medal Award and a Certificate of Excellence from the International Institute of Education & the past been henoured with numerous awards and accolades: Management for his outstanding contribution in the development sector + The Indian Solidority Council has nominated Dr. Kuldip Maity’s name to receive Rajiv Gandhi Excollence Award for his excellent achiavernents cand contributions in his Feld of activities + Kuldip Moity was awarded the Dector of Henours which iso singuler honour being conferred on the basis of his ochievements in humaritarian services ‘and merits of excellence. The falicitation was crronged by Senate of University during proceedings of the World Congress of integrated Medicines held at Colombo, Sri Lanks. + Dr. Kuldip Moity iso Board Member at ‘Sa-Dhon, o national level asscciation of Community Development & Finance Institutions in India and is else the Board Member in AMFI West Bengal, which i. state level association of microfinance institutions + Dr. Kuldip Moity has been honoured by the Vision World Academy with the Global Visionary Award for his outstanding achievement in Microfinance industry “Rural womenentrepreneurs | felicitated | + Dr. Kuldip Maity has been honoured with the Global Achievers Foundation Outstanding Achievement ‘Award for social/public services. + Dr. Kuldip Moity has been felcitated with Europe's one of the most prestigious Awards- Manager of tthe Year Award and VES has won Best Erterprise ‘Avard by Europe Business Assembly and Socrotes Committee + VFS iscommittad as a responsible microfinance institution to their customers, stake holders, partners cond funders, tc. VFS potticipated in Transparent: Pricing Initiative in India where it was awarded an updated Official Seal of Transporency. This seal is internationally recognized which signifies its commtment to Transparent Pricing, 125,LIST OF PARTNER ORGANIZATIONS PUBLIC SECTOR BANKS Be 2X'S BANK ae AXIS BANG LTD. BANK OF BARODA BANK OF MAHARASHTRA anaes vor Acorn LE ID -oactas et a CANARA BANK CORPORATION BANK DENABANK OTE 6 st overseas aetane ibBl BANK LTO INDIAN OVERSEAS BANK STATEBANK OF INDIA et ofe dow Stat Bank of Patiala Bk of Trae at ae B) veo sank STATEBANK OF PATIALA STATE BANK OF TRAVANCORE UCO BANK (BI voion ent {Eesti nde UNION BANK OF INDIA \VUAYA BANK 28! PRIVATE SECTOR BANKS. BANDHAN BANK LTD BHARATIVA MAHILA BANK DCB BANK LTD. reer KARNATAKA BANK LTD SOUTH INDIAN BANK LTD. NBFCS: Ananya Financ CAPITAL FAMILY CREDIT ‘ort Grown Put FIRST LIMITED ANANYA FINANCE FOR CAPITAL FIRST LIMITED FAMILY CREDIT LIMITED. INCLUSIVE GROWTH PVT. LTD. ee GES, RELIANCE Fiance Prive Lined SLE Copital MAANAVEEYA DEVELOPMENT & — MAS FINANCIALSERVICES LTD. RELIANCE CAPITAL LTD. FINANCE PVT. LTD. SSRELIGARE caspian™ RELIGARE FINVEST LTD, CASPIAN IMPACT INVESTMENTS PVT. LTD, NEW ASSOCIATIONS DURING THE YEAR SBM soc oma IDFC BANK SBM BANK TATACAPITAL = STATE BANK SYNDICATE BANK OF LO (MAURITIUS) FINANCIAL = OF MYSORE. BANK BARODA, LD, SERVICES LD. \2728| a). Ihave come out from darkness with the help and support of VFS. Isalute the noble mission of this organization. yeficiary Norn GOP! RANI PAL Branch BIDDHANNAGAR Location DARJEELING DISTRICT, WEST BENGAL Runita Rey, an inhabitant of lslampore of Uttar Dinaipur, West Bengal, married at a very early age due to her Father's poor economic conditions. Her husband, ‘avan puller was the only earning memberin her family After few yeors, running the family, comprising her tusbond, father-in-law and two children, wos becoming cadificult task for her with the limited monthly income, Runita was worried about the Future of her chidren. To cate the dificult situation, the thought of pursuing {an income generating activity on her own crossed her mind. Through one of her neighbours, she heard of \VFS's JLG model, and visited the Islampore branch, following which shejoined a JLG named "Kajol, which was promoted by VFS and took e loan of Rs 30,000/- to start her own grocery selling businoss,hitially she faced space constraints, but with Focus and dedication was able to kick-stort her business smoothly. Over time, she started to draw designs on clay pots, which created strong local demand of her products in the market. With her experience of entrepreneurship, she has now started another business (photo binding). (Off -lote, Runita has buit a small yet nice tin-covered showroomto showcase her products. Both her Children ore now enrolled in school, She has managed to repair her house, bought a colour television, refrigerator, and finally she also has an LPG connection for cocking, She hasbeen able to teach herself the habit of regular soving (ultimately for her daughter's marriage and for the Future of the family). She is very thankfulto VFS for supporting her during her baddays. He confidence and happinessis, reflected in her eves. -y Na RUNITA ROY Branch ISLAMPORE Location UTTAR DINAJPUR, WEST BENGAL This would net be possible without thehelp of VFS andl am associated with such an organization where a borrower does not have to waste her time for giving loan instalments, as representatives of VFS come to her doorstep for the service. Gopi Reni Pel, hor husband and two of their chiléron used to ive in extreme poverty. The clay tiles of their house's roof hadbeen broken for © while. Gopi’ husband was a battery service technician of a ‘automobile battery shop. The only earring members in the Farily, his income was also quite irregular. The situation was difficult for Gopi and her family. and ‘making ends meet was an arduous task every month In 2010, Gopi Rani Pol decided to help her husbond by stortinga pineapale garden as she owned Six bichas land. Initially she faced Fund contraints problem to start her business. She was awore of SelF Hep Groups, but could never gather the strength to tokeo loan out. She once intsracied with a VFS field stoff, who used to vist her neighbour to collect repayments. After discussing with him, she wasniow awore of the risks associated with borrowing a sum of money, and decided to take the plunge. At frst, she borrowed Rs. 8000/- from \VFSP to fund her pineoppie gorden. The amount was smell but ukimately her patience prevailed. After repayment of the ist cycle, she then went to take another loan of Rs. 12000/- to expand her business further. With time, she hes grown to become a confident businesswoman and recently added one more new business of making clay flower vases with a 4th cycle loan Rs.18000/- from VFS. ‘She was finally able to repair her house, andher children have made their way to college. Her husband is now involved in her shop besides his original profession [2930] INDEPENDENT AUDITOR’S REPORT To the Members of Vi Private Limited REPORT ON THE FINANCIAL STATEMENTS. ive atrue and fair view and are free From material misstatement, whether due to froud or error. AUDITOR'S RESPONSIBILITY We hove audited the accompanying standalone financial statements of Village Financial Servicos Private Limited (the Company’), which comprise the Balance Sheet os on March 31, 2016 and the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information. MANAGEMENT RESPONSIBILITY FOR FINANCIAL STATEMENTS ‘The Company's Board of Directors is responsitle for the matters stated in Section 13416) of the Companies Act, 2013 (the Act) with respect toto tho preparation and prasantetion of thoso standalone: financial statements that give a true ond fair view of the financial position, nancial performence and cosh flows off the company in accordance with the ‘accounting principle is generally acceptedin India, including the accounting standards specified uncer section 133 of the act, that that was seven of the Companies (Accourts) Rules 2014. This responsibility ako includes maintenance of adequate accourting records in accordance with the provisions of the act for safeguarding the assets of the company ard for preventing ond detecting frauds and other irregularities; the selection and application of appropriate accounting policies; making judgments ond estimates that are reascnable and prudent; and design, implementation and maintenance of adequate intemal Financial controls, that were operating effectively fer encuring the accuracy and completeness of the accounting records, relevant for the preparation aad presentaticn off the financial statements that (Our responsibilty isto express an opinionen the stand clone financialstatsments based on our audit. We have token into account the provisiors of the act, the accounting and ausiting standards and matters which it acquired to be included in the audit report under the provisions of the oct and the rules made thereunder. We conducted our audit in accordance with the standards of auditing, issued by the institute of chortered accountants of india, as specified under section 143(10) of the Act. Those standards require that we complied with ethical requirements and plan and perform the audit to obtain a recsoneble ‘axcurance about whether the standalone fnancial statements of three from a material misstatement, ‘And audit involves performing proceduresto obtain ‘audit evidence about the amounts and disclosuras in the financial statements. The procedures selected deperd on the auditor’sjudgment, induding the cssessment of the risks of material misstatement Of the financial statements, whether due to froud or error. In making those risk a:sosemorts, the auditor considers internal financial control relevant to the Company's preparction of the financial statements that give o true and fair view in order to design audit procedures thet are appropriate in the circumstances, but not forthe purpose of expressing an epinion on whether the company has in place on adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit, dso includes evaluating the appropricteness of the ‘accounting polcies used and thereasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a bass for our ‘audit opinion on the standalone financial statements, OPINION In our opinion and as to the best of our information and according tothe explenations given to us, the aforesoid stondalone financial statements give the information required by the Act inthe manner so required and give true and farr view in conformity wth the accounting principles generally accepted in India, of the state of affars of the Compary as on March 31, 2016 and its profts and cosh flows for the year ended on that date, Ropert on ather legal and regulatory requirements ‘As required by the company's (Auditor's Report) Order, 2018 (the Order) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable. ‘As required by section 143 (3) of the act, wereport that: + We have sought and obtained all the information and explanations which the best of knowledge and belief were necessary for the purpese of our auclt; + Inour opinion, Looks of accounts as required by law have been kept by the Company so far as appears from cur examination of those books; + The bolance sheet, statement of profit andloss, and cash flow statement dealt with by this report are in ‘agreement with the books of accounts; + Inour opinion the aforesaid standalone financial statements comply with the Accounting Standards specified under section 133 of the Act, ready with Rule 7of the Company's (Accounts) Rules, 2014; + On the basis of written representations received from directors as on Merch 31, 2016, and taken on record by the Beard of Directors, none of the directors is disqualified as on March 31, 2016. from been appointed as a directorin terms of section 164 (2) of the Act; and + With respect to the other matters to be included in the Auditor’ Report in occordance with Rule Il of the Companies (Audit end Auditors) Rules, 2014, in Cour opinion and to the best of our information and according to the explanations given to us: + The company has disclosed the impact of pending tigation on its financial postion ints financial statemerts Refer Note 92 and 33 to the francial statements: + The companyhas mads provision, at required under the applicable law or accounting methods, for material foreseeable losses. iF any, on lang-tarm contracts including derivatives contracts - Refer Note 35 to the financial statements; There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Compary For Shankar Saraf & Associates Chartered Accountants Firm Membership Number 325896E Shanker Seraf (Partner) Membership No. 060878 Place: Kolkata Date: April 28, 2016 {3132] ANNEXURE REFERRED TO INOUR INDEPENDENT AUDITOR'S REPORT OF EVENT DATE RE: VILLAGE FINANCIAL SERVICES PRIVATE LIMITED ("THE COMPANY") i. a.The Company has maintained proper records showing ful particulars, including quantitative details and situation of fxed assets. b. The sixth assets have been physically verified by the maragement of these minor, designed to cobble all the items over 2 to 3 years, which in our ofinion, is reaconable and regards to the size of the company and major office business. Pursuant tothe program, a portion of the fixed asset has been physically verified by the monagement during the year and no material discreponcies between the books records and the physical fixed assets hove bsen noticed. . According tothe information and explanations given to usen the bosis of our examination of the records of the Company, the title deeds of immovable properties are headed in the nome of the company. ii. The company isa Non-Banking Financial ‘Company-Micro Finance Institution engaged inthe business of providing loans and hence net required to maintain any inventory. Accorcingly, provisions of Clause Sti of the aderare not applicable to tho company. ili According to the information and explanations given to us the company is nat granted any loons, secured or unsecured to companies, firms, LLPs or other parties covered in the register maintained under section 189 of Companies act, 2013, Accordingly the provisions of clause 3 (i) (a) to. (c) of the Order arenot applicable to the company In ouropirion and cccording to the information nd explanations given to us the company has not granted loans er provided any guarantee or security te parties covered under section 185 of the Companies Act, 2013, Since the company's a Non-banking Financial Compary- Micro Finance Institutions engaged in the business of providing loans, it is exempted under section 186(11) of the Compania: Act, 2013 and hones the provisions of section 186 are not applicable tothe company. ‘The company has rot accepted ony deposits from tthe public ‘As informed tous, the maintenance of cost records hes not been prescrived by the Central Govemment under section 148(1) of the Companies Act, 2013, in respect of the activities, carried onby the compony. In respect of Statutory Dues: According to the records of the company, ndieputed statutory duos including providont fund, income tax, cess and other statutory dues have generally been deposited with the ‘appropriate authorities. According to the information and explanetions given te us, no undisputed amounts payable in respect of the foresaid dues were outstanding as on Morch 31, 2016 for period of more than six months from the dete of becoming payable. b. According to the information ané exelanation Given tous, there are no dues of sales tax, income tax, wealth tax, service tox and cess which have not been deposited on account of any dispute. ‘According to the information and explanation Given to us, the company was not in default For repayment of duesto financial institutions and banks. The company does not have any loans or borrowings from government or debenture holders joined the year. Based upon the audit procedures performed and the nformation and explanations given by the management, the company has not raised money by way of initial public offeror further public offer including debt instruments and term Loans. Accordingly, the provisions of Clause 3 lix) oF the (Order are not applicable to the company. ‘According tothe information and explanations given to us, no material fraud by the company or Con the company by its officers or employees has been noticed or reported during the course of our oudt. ‘The company is o private limited company which is exompt from the provisions of section 197 read with Schedule V to the Companies Act ond hence the provisions of clause 3(xi) of the Order are not copplicable to the compary. In our opinion the compary is not a Nidki company. Therefore, the provisions of clause 3 (xi) of the (Order are not applicable to the company. In our opinion, or fun sections with the related parties are in compliance with section 177 and 188 of the Companies Act, 2013, and the details, have been disclosed inthe financial statements as required by the applicable accounting standords Based upon the audit procedures performed and the information and explanations given by the management, the company has nat mado any preferential dllotment or private placement of shares or fully or partly convertible debentures joined the year under review. Further, the company has issued 90,44,878 bonus shares of face value of Rs. 10/- each asper the provisions of section 23, 63 and other applicable provisions of the Companies Act, 2013. xv. According to the information end explanations given to.us and based on our examination of the records of the compary, the compeny has not entered into non-cash transactions with directors of persons connected with him. Accordingly, clause 3 (xv) of the Order's not agplicable. z The company isin Non-bonking Financial Company Micro Finance Institution which is duly registered under section 45-IAof the Reserve Bark of India Act, 1934. For Shankar Saraf & Associates Chartered Accountants Firm Membership Number: 325896E Shanker Soraf (Partner) Membership No. 060878 Place: Kolkata Date: April 28, 2016 13334] Shareholder Funds ShareCopral | 379517000 | 27,346,380 Reserves | §,343071800 —12,30,8779700 Supls 41523488200 39.4434,177.00 ‘Long-Term | 118155,¢5,902.00 | 28,0005,0¢2.00 Berowings Long-Term | 8.03562.00 16468100 Provsons 290060773.00 Garren Licbltes SroreTerm | 17550846.09 | 1772286800 Borrowings ther Current | 1.9852,7020000 | 64,9075,51800 Latte SroreTerm | 340,45350.00 | 128,16,19500 Provisions 1.41,7786,086.00 67,4513,521.00 Total | 2.98,9370.830.00 |sauani Balance Shoot Ason ‘3st Merch, 2016 Assets Non-Current Assats Fived Assets + Torgible | 7275,880,00 Agate + Intangible | 7.96100 Agate Non-Curent | §:00000.00 Investments Defered Tex | 2.00,098.00 Assets (Ned) Long-term Loans| 3276,00,27500 EAbences Othernon | 2208,28,886.00 '55,62,95,048.00 Current Assats Current Rs 46481200 Iivestments Coch nd Bank | 20556.15,40100, Balnves Shor-temloans | 218,6078,072.00 Loaner Other Curent | 2.00.1620700 Accate 241,2074,493.00 Total 2,96.8370.430.00 been so0azi100 95,858.00 $00,000.00 528,500.00 6906584100 ‘16027820000 37,3928,123.00 sapaaa.sse00 1104:3458302.00 2128730800 1148.50,8934800 135004747100 PROFIT & LOSS STATEMENT Eee Profit & Lore for theYoorEndad | 31st Morch,2016 lst March 2015 Revenue from 42310950000 25,3026.980.00 (Operations Other Income 1s9ason00 115 744138.00 TotalReverue | 44214457100 26550112400 Expenses EmployeeBenelt —9.41,80,06200 8,0, 0571700 Expenses Finance Costs 2875098400 117422,00000 Spero 724,954.00 73736100 panies Provisions ard 1,7709.673.00 z Wrte-ofs (Other Expenses 64.5145200 4,2520.840.00 24.4776 .023.00 “Total Expenses | /4038,20,075.00 Statement of Profit Loss for ‘the YeorEnded | 3lstMorch 2016 tet March, 2015 Pro bea seaerae" Romeand'tae —_3.89,24,408.00 2.07.25.101.00 Exceptional tems . Prt bore fensont tex | 9.83.24,406.00 2.0725301.00 fesgertnony . Profit Before Tor 3,8324.496.00 2.07.25101.00 Tox Expenses CureneTox 1720833100 682823400 DeferredTox 31545400 5112600 Tox for Eaior Year 3198,68700 Total Tax Expenses «1752378500 9775.796.00 Profit forthe yeer 2.0800711.00 1,99.4930600 EARNING PER EQUITY SHARE Basic o77 a0 Died o77 040 For Shankar Saraf & Associates Chartered Accountants Firm Membership Number: 325898E Shankar Saraf (Partner) 135,oa When learning is purposeful, oe ie fod ekexo) gam J When creativity blossoms, Yb Ife thinking emanates. 4 When thinking emanates, 4 ~~“ knowledge is fully lit. Peed da0) pale? [ Tis ro eNL1 Fae Eo VW ethene eeeVILLAGE FINANCIAL SERVICES PVT. LTD. ANISO CERTIFIED MICROFINANCE INSTITUTION "Vilage Toner’ F-15 Geetanjali Pork 3A Kumud Ghosal Road, Ariadaho, Kolkata - 700057, West Bengal, India P: +91 99 2564 6545/5786, F:+9193 25443240