EXPLANATORY NOTES 30 SEPTEMBER 2023 4 FINANCIAL RISK MANAGEMENT Continued 4.1 Financial risk factors Continued (d) Credit risk Continued The Group and Company maintain a credit risk rating based on the days past due and qualitative factor as explained above. The obligor is categorized as follows: Risk rating Description Performing None of the facilities of the obligor have been due for more than 30 days. Watchlist Any one of the facilities granted to the obligor has been in arrears for more than 30 days but is not considered to be credit-impaired. Non-performing Any one of the facilities granted to the obligor has been in arrears for more than 90 days or the obligor is unlikely to pay its credit obligations in full, without recourse to actions such as realising security. For financial assets within stage 2, these can only be transferred to stage 1 when they no longer considered to have experienced a significant increase in credit risk. Where significant increase in credit risk was determined using quantitative measures, the instruments will automatically transfer back to stage 1 when the criteria is no longer met. Where instruments were transferred to stage 2 due to assessment of qualitative factors, the issues that led to the reclassification must be cured before the instruments can be reclassified to stage 1. For financial assets within the Non-Peforming category, it is the Group’s and Company’s policy to consider a financial instrument as ‘cured’ and therefore re-classified out of Stage 3 when none of the default criteria have been present for at least six consecutive months. The decision whether to classify an asset as Stage 2 or Stage 1 once cured depends on the updated credit score, reliable information on the client on the outlook for the client at the time of the cure, and whether this indicates there has been a significant increase in credit risk compared to initial recognition. Once an account has been classified as forborne, it will remain forborne for a minimum probation period of 6 months. In order for the accounts to be reclassified out of the forborne category, the customer has to meet all of the following criteria: • All of its facilities has to be considered performing; • The minimum probation of period of 6 months has passed; and • Regular payments have been made in accordance with the terms and conditions agreed If modifications are substantial either quantitatively or qualitatively, the loan is derecognised as explained under write-offs (note 2.8 (p) g). The Group’s and Company’s maximum exposure to credit risk at the reporting date was as follows: GROUP COMPANY 2023 2022 2023 2022 MUR m MUR m MUR m MUR m Cash at bank and in hand 397.8 681.8 304.7 593.3 Deposits with banks 490.7 482.9 490.7 482.9 Net investment in leases and other credit agreements 10,056.6 8,909.9 10,056.6 7,951.5 Loans and advances 8,524.8 7,079.8 7,928.7 8,114.4 Other assets* 502.8 374.7 504.7 350.8 19,972.7 17,529.1 19,285.4 17,492.9 (*) Other assets exclude prepayments 134 CIM FINANCE ANNUAL REPORT
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