Performance Evaluation of Board of Directors

INTRODUCTION

The Board of Directors acknowledges its intention to establish and follow “best practices” in Board governance to fulfill its fiduciary obligation to the Company. Fundamental to sound governance is the practice of undertaking Board evaluation on an annual basis.

This Policy has been formulated to comply with various provisions under the Companies Act and the formal annual evaluation made by the Board of its own performance (self- appraisals) and that of its Committees and individual Directors as mentioned under Section 134(3)(p) of the Companies Act. The Committee shall evaluate the performance of each Director as per Section 178(2) of the Companies Act and based on the functions of the Independent Directors as indicated under Schedule IV (as per Section 149) annexed to the Act and the rules made thereunder.

APPLICABILITY

This Policy applies to the Board of Directors of Shivalik Small Finance Bank Limited.

The Policy shall become effective from 7th September 2024.

DEFINITIONS

Companies Act means the Companies Act, 2013, as amended from time to time and the rules made thereunder
Company means Shivalik Small Finance Bank Limited.
Director or Board Director or Board means the Director or the Board, in relation to the Company, and deemed to include the collective body of the Board of Directors of the Company including the chairman of the Company.
Independent Director shall mean an Independent Director as defined under section 2 (47) read with Section 149 (6) of the Act.
Policy shall mean Policy for performance evaluation of the Board of Directors.
Committee shall mean the Nomination and Remuneration Committee of the Board of Directors formed under the provisions of Section 178 of the Act.

OBJECTIVES

The objective of this Policy is to formulate the procedures and prescribe the criteria to evaluate the performance of the entire Board of the Company. Further, the Company shall adopt best practices to manage the affairs of the Company in a seamless manner and ensure sustained long-term value creation for stakeholders by achieving good corporate governance.

PROCESS FOR EVALUATION

The Nomination and Remuneration Committee (“NRC‟) shall carry out the evaluation of performance of every Director. Evaluation performance should be carried out at least once in a year.

While evaluating the performance of the Non-Executive Directors (“NEDs”), the following parameters shall be considered:

Attendance at meetings of the Board and Committees thereof,
Participation in Board Meetings or Committee thereof
Contribution to strategic decision making,
Review of risk assessment and risk mitigation,
Review of financial statements, business performance.
Contribution to the enhancement of brand image of the Company.

The evaluation form will consist of the following parts:

An Independent Director evaluation (Annexure 1),
Chairperson evaluation by Independent Directors (Annexure 2),
an overall Board evaluation (Annexure 3) along with the Committee Evaluation (Annexure 3A) and
Directors’ Evaluation by the Committee (Annexure 4)

a. Process for evaluation of Independent Directors

The performance evaluation of Independent Directors shall be carried out by the entire Board excluding the Independent Director being evaluated in the same manner as above in the form provided at Annexure 1

Based on the report on performance evaluation, it shall be determined whether to extend or continue

b. Process for evaluation of the Chairperson

The performance evaluation of the Chairperson shall be carried out by the Independent Directors in the same manner as above in the form provided at Annexure 2

Process for overall Board evaluation

I. In the overall Board and Committees Evaluation, each Board / Committee member will be asked to provide written input which will be submitted for evaluation in Annexure 3 and 3A.
II. Copies of the Board evaluation forms as mentioned at Annexure 1, 3 & 4 will be distributed to each Board Member approximately 2-3 weeks before the meeting scheduled for the purpose of evaluation. Board members shall complete the forms and return them to the Chairman or to the Company Secretary within 1 (one) week of receipt of the forms.
III. Results will be tabulated and analyzed prior to the meeting and presented in a summary report to include composite scoring.
IV. The individually completed forms will also be preserved and presented to the Board and the Committee for evaluation.
V. The Board will discuss areas that are working well, and those that need attention. The Board will then decide if changes in its governance practices and policies need to be made going forward.

d. Process for evaluation of the Directors by the Committee

Apartfromthe above, the Committee will also independently carry out an evaluation of every director’s performance in the form provided at Annexure 4. The Committee will provide feedback to the Board for its consideration.

Notwithstanding the criteria set out above, the Board, as applicable, shall also be guided by the criteria provided under the guidance note on Board evaluation issued by the Institute of Company Secretaries of India, as amended from time to time.

REVIEW

Any Changes to the policy will be approved internally through the relevant Board approved committee. The policy as a rule will be reviewed at the Board level once a year. If there is a major change made, it will be ratified by the Board in the next meeting.

PERFORMANCE EVALUATION FOR INDEPENDENT DIRECTORS TO BE EVALUATED BY THE BOARD ON BELOW PARAMETERS

Name of the Director being evaluated:

Evaluation criteria	Rating
Helps in bringing an independent judgment to bear on the Board’s deliberations
Brings an objective view in the evaluation of the performance of Board and management
Undertakes to regularly update and refresh hisskills, knowledge, and familiarity with the Company
Seeks appropriate clarification / information and, where necessary, takes appropriate professional advice and opinion of outside experts at the expense of the Company
Strives to attend all meetings of the Board of Directors / Board committees of which he is a member/general Meetings
Communicates governance and ethical problemsto the Chairman of the Board.
Pays sufficient attention and ensure that adequate deliberations are held before approving related party transactions.
Ensures that the Company has an adequate and functional vigil mechanism.
Satisfies himself on the integrity of financial information and that financial controls and the systems of risk management are robust and defensible.
Assists in determining appropriate Policy of remuneration of executive directors, key managerial personnel, and other employees.
Refrainsfrom any action that may lead to loss of hisindependence and immediately informs the Board where circumstances arise which makes him lose his independence.
Adheres to all other standards of the Code for Independent Directors as per the Schedule IV to the Companies Act, 2013
Assists the Company in implementing the best corporate governance practices.
Prepares for the Board meeting by reading the materials distributed before the Board meeting

(Please tick the appropriate column)

Signature with Date:

Name of Director:

PERFORMANCE EVALUATION FOR CHAIRPERSON TO BE EVALUATED BY THE INDEPENDENT DIRECTORS ON BELOW PARAMETERS:

Name of the Chairperson being evaluated:

Rating scale shall be 1 to 10 (1 being least effective and 10 being most effective)

EVALUATION CRITERIA - BOARD	Rating
Guides the Board in alignment with the Board Charter and regulatory requirements. Ensures compliance with the Companies Act, 2013.
Facilitates Board meetings in a respectful, efficient, and structured manner. Encourages open, inclusive, and productive discussions.
Is readily available and accessible to Directors for consultations. Engages with Directors between meetings when necessary.
Provides confidential and constructive feedback to Directors to enhance their contributions. Encourages continuous improvement in Board effectiveness.
Is receptive to feedback and suggestions from Directors. Strives to enhance the effectiveness of the Board and personal leadership.
Acts as an effective bridge between the Board, CEO, and Committee Chairpersons. Ensures seamless communication and alignment.

(Please tick the appropriate column)

Signature with Date:

Name of Director:

OVERALL BOARD EVALUATION:

Evaluate the following statements in relation to overall Board performance and provide a rating mechanism:

Rating scale shall be 1 to 10 (1 being least effective and 10 being most effective)

EVALUATION CRITERIA - BOARD	Rating
The Board knows and understands the Company’s mission and engages in long-range strategic thinking and planning.
The Board ensures that new Board members receive a prompt, thorough orientation.
Board meetings are conducted in a manner that ensures open communication, meaningful participation, and sound resolution of issues.
The Board meeting agendas are well-balanced, allowing appropriate time for the most critical issues and the Board receives timely, accurate, and useful information upon which to make decisions.
The Board recognizes its policy-making role, and reconsiders and revises policies, as necessary.
The Board as a whole (and Board members as individuals) evaluates its performance on an annual basis and in a meaningful way.
The Board reviews and adopts an operating budget / business plan that is followed and monitored throughout the year.
The Board brings discussions to a conclusion with clear direction to Management for implementation and is collegial and polite during meetings.
New Board members participate in an orientation program to educate them on the organization, their responsibilities, and the organization’s activities.

(Please tick the appropriate column)

Signature with Date:

Name of Director:

Rating scale shall be 1 to 10 (1 being least effective and 10 being most effective)

EVALUATION CRITERIA - COMMITTEE	Rating
The Committees are comprised of the right number and type of members and are effective.
The composition, terms of reference, roles, and responsibilities of the committees are in line with the applicable laws and are actively adhered to by the members.
The Committee meeting agendas are well-balanced, allowing appropriate time for the most critical issues, and the Board receives timely, accurate, and useful information upon which to make decisions.
Committee meetings are conducted in a manner that ensures open communication, meaningful participation, and sound resolution of issues.

(Please tick the appropriate column)

Signature with Date:

Name of Director:

EVALUATION OF EACH DIRECTOR BY THE COMMITTEE

Name of the Director being evaluated:

Rating scale shall be 1 to 10 (1 being least effective and 10 being most effective)

EVALUATION CRITERIA	Rating
The Director attends the Board and Committee meetings and contributes to the discussion in a meaningful and helpful way, listening to others and making his / her points concisely.
The Director understands his / her fiduciary duties and acts for the benefit of all members.
The Director makes efforts to be educated on the aspects of the business of the Company that he / she does not understand.
The Director is adequately well-versed on the Company’s business.
The Director works with the other Board members as a team, striving for consensus when it is called for.
The Director works with the other Directors in a way that creates an atmosphere of trust and cooperation.
The Director communicates governance and ethical problems to the Chairman of the Committee / Board.