Bank of India
Report on Audit of the Standalone Financial Statements Opinion
1. We have audited the accompanying Standalone Financial Statements of Bank of India (‘the Bank'), which comprise the Balance Sheet as at March 31, 2024, the Profit and Loss Account and the Cash Flow Statement for the year then ended, and notes to Standalone Financial Statements including Significant Accounting Policies and other explanatory information in which are included returns for the year ended on that date of:
(i) 20 Domestic branches, Treasury Branch, Digital Banking department and 14 other offices (Head-office and NBG Offices) audited by us;
(ii) 2860 domestic branches and 84 processing centres audited by respective Statutory Branch Auditors and
(iii) 22 Foreign branches audited by respective local Auditors.
The branches audited by us and those audited by other auditors have been selected by the Bank in accordance with the guidelines issued to the Bank by the Reserve Bank of India. Also included in the Balance Sheet, the Profit and Loss Account and Cash Flow Statement are the returns from 2267 domestic branches and one foreign branch which have not been subjected to audit. These unaudited branches account for 7.24% of advances, 17.68% of deposits, 5.95% of interest income and 14.29% of interest expenses.
2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone Financial Statements give the information required by the Banking Regulation Act, 1949 in the manner so required for the bank and are in conformity with accounting principles generally accepted in India and:
a) the Balance Sheet, read with the notes thereon is a full and fair Balance Sheet containing all the necessary particulars, is properly drawn up so as to exhibit a true and fair view of the state of affairs of the Bank as at March 31,2024;
b) the Profit and Loss Account, read with the notes thereon shows a true balance of profit; and
c) the Cash Flow Statement gives a true and fair view of the cash flows for the year ended on that date.
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditing (SAs) issued by the Institute of Chartered
Accountants of India (the “ICAI”). Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Bank in accordance with the Code of Ethics issued by the ICAI together with ethical requirements that are relevant to our audit of the financial statements prepared in accordance with the accounting principles generally accepted in India, including the ICAI Accounting Standards, as amended from time to time subject to Directions/Guidelines issued by the Reserve Bank of India, and provisions of section 29 of the Banking Regulation Act, 1949 and circulars and guidelines issued by the Reserve Bank of India (‘RBI”) from time to time and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Emphasis of Matter
4. We draw attention to:
(i) Note No. 14 (i) of Schedule-18 of the accompanying Standalone Financial Statements, regarding amortization of additional liability on account of revision in family pension amounting to Rs. 612.09 Crores. The Bank has charged an amount of Rs. 142.40 Crores to the Profit and Loss Account for the year ended March 31, 2024, and balance unamortized expense of Rs. 41.22 Crores has been carried forward.
(ii) Note No. 6.8.2 of Schedule-18 of the accompanying Standalone Financial Statements, regarding Bank's exercising the irreversible option to shift to the new tax regime under section 115BAA of the Income-tax Act, 1961, effective for the financial year ended March 31, 2023, and onwards and resultant additional onetime charge of Rs. 1,459.89 Crores in the Profit and Loss Account for the year ended March 31, 2024 on account of remeasurement of deferred tax assets (net).
Our opinion is not modified in respect of this matter.
Key Audit Matters
5. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Standalone Financial Statements for the year ended March 31, 2024. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the Key Audit Matters to be communicated in our report.
|
S.
No.
|
Key Audit Matters
|
Audit Procedure followed to address the Key Audit Matters
|
|
1
|
Compliance of Income Recognition, Asset Classification and
|
We have carried out the audit of the advances and investments
based on the IRAC Norms/Circulars and directives issued by
Reserve Bank of India and the policy of the Bank.
Advances: Our audit procedure included:
a) Understanding the IT system and controls put in place and logic and validations built in the system by the bank for identification, classification and provisioning in case of advances.
b) Testing on sample basis whether the classification of advances as performing or non-performing and provisioning have been carried out as per the guidelines of Reserve Bank of India.
c) Communication to the Statutory Branch Auditors (SBAs) to verify the compliance of IRAC Norms and procedures and the policies adopted by the bank and reliance on the audit reports furnished by the SBAs.
d) Carrying out substantive test on major advances including Specially Mentioned Accounts (SMA) and also verification of security by checking the valuation reports in respect of the audit of branches conducted by us.
e) Reliance on the internal audit reports, concurrent audit reports, credit audit, system audit and special audits conducted by the bank.
Investments: Our audit procedure included:
a) Understanding the IT system and controls put in place and logic and validations built in the system by the bank for identification, classification and provisioning in case of investments.
b) Testing on sample basis whether the classification and valuation of investments is carried out as per the guidelines of Reserve Bank of India.
c) Verification on sample basis whether proper provision for depreciation in the value of investments is made as per RBI guidelines.
d) Reliance made on the internal audit reports, concurrent audit reports and system audit conducted by the bank.
|
|
Provisioning Norms on advances and investments as per
|
|
guidelines issued bv Reserve Bank of India (IRAC Norms)
Advances: Bank has to classify the accounts as Derforming advances or non-performing advances based on the guidelines/ circulars and directives issued by Reserve Bank of India. The guidelines issued by Reserve Bank of India is for all credit facilities given by the bank and is to be mandatorily followed for the purpose of Income Recognition, Asset Classification and Provisioning.
Identification of performing and non-performing advances is system driven. The software used by the bank identifies the accounts for classification and provisioning as per the guidelines issued by Reserve Bank of India.
The Income recognition, asset classification and provisioning if not done properly as per the IRAC norms issued by Reserve Bank of India may materially impact the financial statements of the bank.
The bank has implemented IRAC Automation software for identification and classifying of NPA accounts through the software.
Investments: Bank has to classify the investments as performing or non-performing based on the guidelines/circulars and directives issued by Reserve Bank of India.
Identification of performing and non-performing investments is generally system driven.
The valuation is done as per the guidelines issued by Reserve Bank of India and the valuations are done based on the price quoted on BSE/NSE, FIMDA /FBIL rates etc.
The Income recognition, asset classification and provisioning if not done properly as per the IRAC norms issued by Reserve Bank of India may materially impact the financial statements of the bank.
Advances and Investments constitute 61.71% and 24.89% respectively of total assets of the bank. As advances and investments form part of a major portion of the business of the bank and the regulatory compliances are involved, we have considered this aspect as Key Audit Matter.
|
|
2
|
Evaluation of uncertain tax litigations and contingent liabilities
The Bank has various litigations including Income-tax litigations, involving disputed claims against those litigations, which are pending at various courts / forums and are at various stages in the judicial process. Bank has also disputes regarding availability of input credits / applicability of Reverse Charge Mechanism on certain payments under Indirect Tax.
|
Our audit procedure included:
a) Understanding the current status of the litigations / tax assessments. Also obtained details of completed tax assessments and latest orders, communication received from various tax authorities and the appeals filed till the year ended March 31,2024, from the management.
b) Evaluating the management's underlying assumptions in estimating the tax provision and the possible outcome of the disputes. This includes considering the legal precedence and other rulings in evaluating management's position on these uncertain tax positions.
|
|
S.
No.
|
Key Audit Matters
|
Audit Procedure followed to address the Key Audit Matters
|
| |
This is a key audit matter due to uncertainty of the outcome which involves significant judgment to determine the possible outcome of these disputes. There is high level of judgement required in estimating the level of provisioning and any unexpected adverse outcomes may significantly impact the Bank's reported profit and state of affairs presented in the Balance Sheet.
|
c) Discussed with management's tax team to understand the status of all significant provisions, and any changes to management's judgements in the year. Also read the correspondence with tax authorities and Company's external tax advisors / lawyers to evaluate our assessment of recorded estimates and evaluate the completeness of the provisions recorded and whether any change was required to management's position on these uncertainties.
|
|
3
|
Assessment of Information Technology (IT):
a. IT controls with respect to recording of transactions, generating various reports in compliance with RBI guidelines including IRAC norms, preparing financial statements and reporting of compliances to regulators etc. is an important part of the process. Such reporting is highly dependent on the effective working of Core Banking Software and other allied systems.
We have considered this as key audit matter as any control lapses, validation failures, incorrect input data and wrong extraction of data may result in wrong reporting of data to the management and regulators.
|
Our audit procedure included:
a) Obtained an understanding of the Bank's IT control environment and key changes during the audit period that may be relevant to the audit.
b) Reviewed the Reports of various IS Auditors / Consultants appointed by the Bank and discussed with IT Department on compliance with key IT controls, including IRAC Automation Controls.
c) Reviewed the design, implementation and operating effectiveness of the Bank's IT controls including application, access controls that are critical to financial reporting on test check basis.
d) Where we identified the need to perform additional procedures, we placed reliance on manual compensating controls; such as reconciliations between systems and other information sources or performing additional testing; extended our sample sizes, to obtain adequate and appropriate audit evidence.
|
Information Other than the Financial Statements and Auditors Report thereon
6. The Bank's Board of Directors is responsible for the preparation of the Other Information. The other information comprises the information included in the Management report and Chairman's Statement (including annexures in the Annual Report) but does not include the Standalone Financial Statements and our Auditor's report thereon, which is expected to be made available for us after the date of this Auditors' Report.
Our opinion on the Standalone Financial Statements does not cover the Other Information and Pillar 3 disclosures under Basel III Disclosure and we do not express any form of assurance conclusion thereon.
In connection with our audit of the Standalone Financial Statements, our responsibility is to read the Other Information identified above and, in doing so, consider whether the Other Information is materially inconsistent with the Standalone Financial Statements. or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
When we read the other information, if we conclude that there is material misstatement therein, we are required to communicate the matter to those charged with governance and determine the actions under the applicable laws and regulations.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
7. The Bank's Board of Directors is responsible with respect
to the preparation of these Standalone Financial Statements that give a true and fair view of the financial position, financial performance and cash flows of the Bank in accordance with the accounting principles generally accepted in India, including the Accounting Standards issued by the ICAI, and provisions of Section 29 of the Banking Regulation Act, 1949 and circulars and guidelines issued by the Reserve Bank of India (‘RBI') from time to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Bank and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
8. In preparing the Standalone Financial Statements, the Board of Directors are responsible for assessing the Bank's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.
9. The Board of Directors is also responsible for overseeing the Bank's financial reporting process.
Auditor’s Responsibilities for the Audit of the Standalone
Financial Statements
10. Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Standalone Financial Statements.
11. As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. As required by the RBI letter DOS.ARG.No.6270/08.91.001/2019-20 dated March 17, 2020 (as amended), we are also responsible for expressing our opinion on whether the Bank has adequate internal financial controls with reference to the Standalone Financial Statements in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors.
• Conclude on the appropriateness of the Board of Directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the Standalone Financial Statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Bank to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the Standalone Financial Statements, including the disclosures, and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of the misstatements in the financial statements that, individually or aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning of the scope of our audit work and evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatement in the financial statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the Standalone Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Other Matter
12. We did not audit the financial statements / financial information of 2860 branches and 84 processing centres including 22 foreign branches included in the Standalone Financial Statements of the Bank whose financial statements/financial information reflects total assets of Rs.4,17,244.17 Crore at March 31,2024 and total revenue of Rs. 29,148.86 Crore for the year ended on that date as considered in the Standalone Financial Statements. These branches and processing centres cover 55.66% of advances, 80.78 % of deposits and 52.11% of Non-performing assets as on March 31 2024 and 44.42 % of revenue for the period April 1, 2023 to March 31, 2024.The Financial statements/financial information of these branches and processing centres have been audited by the branch auditors whose reports have been furnished to us, and in our opinion, in so far as it relates to the amounts and disclosures included in respect of these branches and processing centres, are solely based on the report of such branch auditors.
13. In conduct of our audit, we have taken note of the unaudited returns in respect of 2267 domestic branches and one foreign branch certified by the respective branch's management. These unaudited branches cover 7.24% % of advances, 17.68 % of deposits and 6.74 % of non-performing assets as on March 31 2024 and 6.72% of revenue for the period April 1,2023 to March 31 2024.
14. The accompanying Standalone Financial Statements includes comparative figures for the year ended March 31, 2023, which have been audited by an earlier set of three audit firms as joint auditors, who have expressed unmodified opinion vide their audit report dated May 6, 2023, and one of those three audit firms is a continuing audit firm.
Our opinion is not modified in respect of these matters.
Report on Other Legal and Regulatory Requirements
15. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with Section 29 of the Banking Regulation Act, 1949;
16. Subject to the limitations of the audit indicated in paragraphs on Auditor's Responsibilities (para 10, 11), Management Responsibilities (para 7,8,9) and Other matters (para 12,13,14) above and as required by the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, and subject also to the limitations of disclosure required therein, we report that:
a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit and have found them to be satisfactory;
b) The transactions of the Bank, which have come to our notice, have been within the powers of the Bank; and
c) The returns received from the offices and branches of the Bank have been found adequate for the purposes of our audit.
17. As required by letter No. DOS.ARG.No.6270/08.91.001/2019-20 dated March 17, 2020 on “Appointment of Statutory Central Auditors (SCAs) in Public Sector Banks-Reporting obligations for SCAs from FY: 2019-20”, read with subsequent communication dated May 19, 2020 issued by the RBI, we further report on the matters specified in paragraph 2 of the aforesaid letter as under:
a) In our opinion, the aforesaid Standalone Financial Statements comply with the Accounting Standards issued by ICAI, to the extent they are not inconsistent with the accounting policies prescribed by the RBI.
b) There are no observations or comments on financial transactions or matters which have any adverse effect on the functioning of the bank.
c) As the bank is not registered under the Companies Act, 2013 the disqualifications from being a director of the bank under sub-section (2) of Section 164 of the Companies Act, 2013 do not apply to the bank.
d) There are no qualifications, reservations or adverse remarks relating to the maintenance of accounts and other matters connected therewith.
e) Our audit report on the adequacy and operating effectiveness of the Bank's internal financial controls over financial reporting as required by the RBI Letter DOS.ARG.No.6270/08.91.001/2019-20 dated March 17, 2020 (as amended) is given in Annexure-A to this report. Our report expresses an unmodified opinion on the Bank's internal financial controls over financial reporting as at March 31,2024.
18. We further report that:
a) in our opinion, proper books of account as required by law have been kept by the Bank so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches and processing centres not visited by us;
b) the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account and with the returns received from the branches and processing centres not visited by us;
c) the reports on the accounts of the branch offices audited by branch auditors of the Bank under section 29 of the Banking Regulation Act, 1949 have been sent to us and have been properly dealt with by us in preparing this report; and
d) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement comply with the applicable accounting standards, to the extent they are not inconsistent with the accounting policies prescribed by Reserve Bank of India.
|
For Mukund M Chitale & Co.
|
For S. Jaykishan
|
|
Chartered Accountants
|
Chartered Accountants
|
|
(FRN: 106655W)
|
(FRN: 309005E)
|
|
Nilesh RS Joshi
|
Ritesh Agarwal
|
|
Partner // ICAI M. No. 114749
|
Partner // ICAI M. No. 062410
|
|
UDIN: 24114749BKCBYI6008
|
UDIN: 24062410BKCYMT3957
|
|
For A. Bafna & Co.
|
For SCV & Co. LLP
|
|
Chartered Accountants
|
Chartered Accountants
|
|
(FRN: 003660C )
|
(FRN:000235N / N500089)
|
|
Mukesh Kumar Gupta
|
Anuj Dhingra
|
|
Partner // ICAI M. No. 073515
|
Partner // ICAI M. No. 512535
|
|
UDIN: 24073515BKGQGV2357
|
UDIN: 24512535BKCXDV4697
|
|
Place: Mumbai Date: May 10, 2024
|
|