CITY UNIDN BANK LIMITED
Report on the Audit of the Financial Statements Opinion
We have audited the financial statements of City Union Bank Limited ('the Bank'),which comprise the Balance Sheet as at 31st March 2024, the Profit & Loss Account, and the Cash Flow Statement for the year ended, and Notes to the Financial Statements, including a summary of Significant Accounting Policies and other Explanatory Information, and incorporated in these Financial Statements are the returns of 26 Branches / Offices audited by us and 779 Branches / Offices audited by other Branch Statutory Auditors. The Branches audited by us and those audited by other Auditors have been selected by the Bank in accordance with guidelines issued to the Bank by the Reserve Bank of India.
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Financial Statements give the information required by the Banking Regulations Act, 1949 as well as Companies Act, 2013 (the 'Act') in the manner so required for Banking Companies and give a true and fair view in conformity with the Accounting Standards prescribed under Section 133 of the Act read with the Companies (Accounting Standards) Rules, 2006, as amended ("Accounting Standards") as applicable to banks and other accounting principles generally accepted in India, of the state of affairs of the Bank as at 31st March, 2024, and its Profit and its Cash Flows for the year ended on that date.
Basis of Opinion
We conducted our audit of the Financial Statements in accordance with the Standards on Auditing ('SAs') specified under Section 143(10) of the Act. Our responsibilities under those Standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements Section of our report. We are independent of the Bank in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the Financial Statements under the provisions of the Act and the rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on the Financial Statements.
Key Audit Matters
Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Statements of the current year ending 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.
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Key Audit Matters
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How our Audit procedures addressed the Key Audit Matters
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A. Income Recognition, Asset Classification and Provisioning (IRACP) on Loans & Advances
(Reference to Schedule 9 read with Statement of Accounting Policies Note C.3 of Schedule 17 to the Financial Statements)
Loans and Advances constitute the largest class of Assets forming 64.28% of the total assets of the Bank as on the year ended 31st March, 2024. The income recognition, asset classification and provisioning on advances done by the Bank is governed by the directives / regulations issued by
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We have assessed the design, implementation and operating effectiveness of key internal controls and compliance with IRACP and other RBI guidelines, and assessed the Bank's loan policies for sanctioning of loans, documentation, review of credit, identification and provisioning of non-performing loans & advances, and planned our audit accordingly.
We have performed substantive audit procedures relating to income recognition, classification of advances into performing and non performing advances, restructured advances, provisioning and security valuation. We have considered the accounts
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Key Audit Matters
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How our Audit procedures addressed the Key Audit Matters
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the Reserve Bank of India (RBI). The loans and
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reported as Special Mention Accounts ("SMA") in
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advances are accounted in the Core Banking
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RBI's Central Repository of Information on Large
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Solution (CBS) and the identification of non
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Credits (CRILC).
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performing loans and advances is system driven and in accordance with IRACP norms. The management also relies on independent external
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Performed other procedures including but not limited to the following:
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valuations, legal advice, other professional inputs
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Selected samples of performing loans and
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and makes estimates and judgments to determine
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assessed independently as to whether those
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the income recognition, asset classification and
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should be classified as NPA, security valuation,
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provisioning for losses on loans and advances.
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Financial Statements and other qualitative information of the borrowers.
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Performed inquiries with the management of the Bank to ascertain if there were indicators of stress or an occurrence of an event of default in a particular loan account or any product category which needed to be considered as NPA and the steps taken to mitigate the risks involved.
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For NPAs identified, tested on a sample basis the asset classification dates, value of available security, income reversal and provisioning as per IRACP norms and recomputed the provision for NPA wherever required.
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We have also relied on the work performed by the Branch Auditors, reports of Internal Audit, Systems Audit, Concurrent Audit, Other Audits, work done by lawyers, legal experts, independent valuers and other professionals, in accordance with SA 600 "Using the Work of Another Auditor and SA 620 "Using the Work of an Auditor's Expert".
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Assessed the appropriateness and adequacy of disclosures in the Financial Statements against RBI guidelines / circulars.
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Key Audit Matters
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How our Audit procedures addressed the Key Audit Matters
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B.
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Information Technology ('IT') Systems and
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We have reviewed the Bank's Information
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Controls for Financial Reporting
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Technology, Information Security, Cyber Security,
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The IT environment of the Bank involves a large number of, independent and interdependent IT systems used in the business operations of the Bank for processing and recording a large volume of
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and the IT Outsourcing Policies. We have also reviewed the IT Governance, BCP/ DRP of the Bank, adequacy of the IT Policy, and effective implementation of the same.
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transactions at multiple locations.
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We have reviewed the design and operating
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There is a high degree of reliance and dependency on the IT systems for the financial reporting process of the Bank. We have identified IT systems and controls as a key audit matter because of the high
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effectiveness of controls across the User Access Management, Change Management as well as effectiveness testing of automated business process controls.
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level of process automation, complexity of the IT
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We have tested the application controls and
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architecture of the Bank and its relevance and
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changes to applications and database, segregation
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impact on the financial reporting process.
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of duties as per SOP, and also reviewed the mapping of interfaces between systems for generating financial information for reporting.
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We have tested the controls in the Core Banking Solutions and Treasury Systems. This included testing the integrity of system interfaces, the completeness and accuracy of data feeds, system reconciliation controls and automated calculations.
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Information Other than the Financial Statements and Auditors' Report Thereon
The Bank's Board of Directors is responsible for the other information. The other information comprises the Chairman's Statement, CSR initiatives, Director's Report, Annexures to Director's Report, Shareholder’s Information, Business Responsibility Report, Corporate Governance Report, Management Discussions & Analysis Report, List of Branches, Basel III Disclosures, Decade of Progress included in the Bank's Annual Report, but does not include the Financial Statements and our Auditors' Report thereon.
Our opinion on the Financial Statements does not cover the other information and the Pillar 3 Disclosure and the Basel III Disclosures, and accordingly, we do not express any form of assurance and conclusion thereon.
In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. When we read the other information, including Annexures in the Annual Report thereon, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
The Bank's Board of Directors is responsible for the matters stated in Section 134 (5) of the Act with respect to the preparation of these 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 specified under Section 133 of the Act, in so far as they apply to the Bank
and provisions of Section 29 of the Banking Regulation Act,1949 and the circulars and guidelines issued by 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 and the RBI Guidelines 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.
In preparing the Financial Statements, the Management and 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.
The Board of Directors are also responsible for overseeing the Bank's financial reporting process.
Auditors' Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors' 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 Financial Statements.
As part of an audit in accordance with Standards, we exercise professional judgement 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. Under Section 143(3)(1) of the Act, we are also responsible for expressing our opinion on whether the Bank has adequate internal financial controls with reference to the Financial Statements 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 management.
• Conclude on the appropriateness of management's 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 Auditors' Report to the related disclosures in the 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 Auditors' 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 Financial Statements, including the disclosures, and whether the Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the Financial Statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of Financial Statements may be influenced. We consider quantitative materiality and qualitative factors in (i] planning the scope of our Audit work and evaluating the results of our work; and (ii) to evaluate the effect of identified misstatements 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 Financial Statements of the current year ending 31st March, 2024, and are therefore the key audit matters.
We describe these matters in our Auditors' 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 Matters:
We did not audit the Financial Statements / information of 779 Branches / Offices included in the Financial Statements of the Bank whose Financial Statements / financial information reflect total Assets of '46,046.18 crore as at 31st March, 2024 and total revenue of '3,619.05 crore for the year ended on that date as considered in the Financial Statements. These Branches and Offices cover 78.92% of advances, 81.79% of deposits and 77.57% of non-performing assets as at 31st March, 2024 and 60.19% of revenue for the year ended 31st March, 2024.
The Financial Statements / Information of these branches have been audited by the Branch Auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of Branches, is based solely on the report of such Branch Auditors.
Our opinion is not modified in respect of this matter.
Report on Other Legal and Regulatory Requirements
The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of Section 29 of the Banking Regulation Act, 1949 read with Section 133 of the Companies Act, 2013.
1. As required Sub Section (3) of Section 30 of the Banking Regulation Act,1949, 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 purpose 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 purpose of our audit.
2. With respect to the matters to be included in the Auditor's Report under Section 197(16) of the Act, we report that since the Bank is a Banking Company as defined under Banking Regulation Act, 1949, the reporting under Section 197(16) in relation to whether the remuneration paid by the Bank is in accordance with the provisions of Section 197 of the Act do not apply by virtue of Section 35B(2A) of the Banking Regulation Act, 1949.
3. Further, as required by Section 143(3) of the Companies Act, 2013, we report that;
(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit.
(b) 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.
(c) The reports on the accounts of the Branch Offices of the Bank audited under Section 143(8) of the Act by Branch Auditors of the Bank have been sent to us and have been properly dealt with by us in preparing this report.
(d) 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.
(e) In our opinion, the aforesaid Financial Statements comply with the Accounting Standards specified under Section 133 of the Act, to the extent they are not inconsistent with the guidelines prescribed by Reserve Bank of India.
(f) On the basis of the written representations received from the Directors as on 31st March, 2024 taken on record by the Board of Directors, none of the Directors is disqualified as on 31st March, 2024 from being appointed as a Director in terms of Section 164(2) of the Act;
(g) with respect to the adequacy of the Internal Financial Controls Over Financial Reporting of the Bank with reference to these Financial Statement and the operating effectiveness of such controls, refer to our separate Report in "Annexure A " to this report; and
(h) In our opinion, as the entity is a Banking Company, the remuneration to its Directors during the year ended 31st March, 2024, has been paid / provided by the Bank in accordance with the provisions of Section 35B(1) of the Banking Regulation Act, 1949, and
(i) With respect to the other matters to be included in the Auditors' Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us;
(i) The Bank has disclosed the impact of pending litigations on its financial position in its Financial Statements - Refer Note XIII(11) of Schedule 18 to the Financial Statements;
(ii) The Bank has made provision, as required under the applicable law or accounting standards, for material foreseeable losses if any, on long-term contracts including derivative contracts - Refer Note 15(V) of Schedule 18 to the financial statements; and
(iii) There has been no delay in transferring the funds to the Investor Education and Protection Fund Account by the Bank.
(iv) 1. The Management has represented that, to the
best of its knowledge and belief, other than as disclosed in the Notes to Accounts, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Bank to or in any other persons / entities, including foreign entities ('Intermediaries'), with the understanding, whether recorded in writing or otherwise, that the Intermediary has, whether directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever
by or on behalf of the Bank ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
2. The Management has represented that, to the best of its knowledge and belief, other than as disclosed in the Notes to Accounts, no funds have been received by the Bank from any persons / entities, including foreign entities, that the company has directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;
3. Based on the audit procedures which we have considered reasonable and appropriate in the circumstances and according to the information and explanations provided to us by the Management in this regard, nothing has come to our notice that has caused us to believe that the representations made by the Management under Sub-Clause (1) and (2) contain any material misstatement; and
(v) The Bank has paid dividend during the year which is in compliance with Section 123 of the Act.
(vi) Based on our examination which included test checks, the Bank has used an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit we did not come across any instance of audit trail feature being tampered with.
For Jagannathan & Sarabeswaran For K. Gopal Rao & Co.,
Chartered Accountants C h art ered Accountants
Firm Registration No : 001204S Firm Registration No : 000956S
CA G.R. Ravi CA. Madan Gopal Narayanan
Partner Partner
Date : 20 May, 2024 Membership No : 025669 Membership No : 211784
Place : Chennai UDIN -24025669BKEDDW3163 UDIN -24211784BKFJ002806
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