To the Members of IndusInd Bank Limited
Report on the Audit of the Standalone Financial StatementsOpinion
We have audited the accompanying standalone financial statements of IndusInd Bank Limited ('the Bank'), which comprise the Balance Sheet as at March 31, 2024, and the Profit and Loss Account, and Cash Flow Statement for the year then ended, and notes to the standalone financial statements, including a summary of significant accounting policies and other explanatory information.
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 Section 29 of the Banking Regulation Act, 1949 as well as the Companies Act, 2013 (the 'Act') and circulars and guidelines issued by the Reserve Bank of India, in the manner so required for banking companies ('RBI Guidelines') and give a true and fair view in conformity with the accounting principles generally accepted in India, including the Accounting Standards prescribed under section 133 of the Act, read with Companies (Accounting Standards) Rules, 2021 as amended to the extent applicable, of the state of affairs of the Bank as at March 31, 2024, and its profit, and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing ('SAs') specified under section 143(10) of the Act. Our responsibilities under those SAs 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 Institute of Chartered Accountants of India ('ICAI') together with the ethical requirements that are relevant to our audit of the standalone 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 Code of Ethics. We believe that the audit evidence obtained by us, are sufficient and appropriate to provide a basis for our opinion on the standalone financial statements.
Key Audit Matters
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 standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
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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 (Risk)
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How Was the Key Audit Matter Addressed in the Audit
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Identification, Classification, Provisioning and Write off of Advances
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Total Loans and Advances (Net of Provision) as at 31 March 2024 - ?3,43,29,82,740 (Amount in 000')
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Provision for NPA as at 31 March 2024 - ?4,72,44,841.04 (Amount in 000')
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(Refer Schedule 9, Schedule 17(6) and Schedule 18 (4.1), (14.5) to the standalone financial statements)
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The Reserve Bank of India's ('RBI') guidelines on Income
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Our audit procedures included, but were not limited to the following:
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recognition and asset classification and provisioning
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• Obtained an understanding of, evaluated and tested the design and operating
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pertaining to advances ('IRAC norms') prescribe the
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effectiveness of key controls (including application controls) around identification of
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prudential guidelines for identification and classification of Non performing Assets (NPA) and the minimum
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NPA based on the extant IRAC norms on a test check basis;
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provision required for such assets from time to time
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• Verified loans on sample basis to form our own assessment as to whether impact
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and other relevant circulars, notifications and directives
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of days past due have been recognised in a timely manner by the Bank as per RBI
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issued by the RBI which were collectively considered by
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Guidelines;
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the Bank till March 31, 2024 to classify its advances into
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• Made inquiries of management regarding any effects considered on the NPA
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performing and non performing advances and make
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identification and / or provisioning, resulting from observations raised by the RBI
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appropriate provisions thereon.
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during their annual inspection of the Bank's operations;
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The Bank, as per its governing framework, made the
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• For the selected non-performing advances, we assessed Management's forecast and
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performing and NPA provisions based on Management's
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inputs of recoverable cash flows, impact of auditor's (of borrowers) comments on the
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assessment of the degree of impairment of the advances
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financial statements, valuation of underlying security and collaterals, as obtained
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subject to and guided by minimum provisioning
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by the Bank for estimation of recoverable amounts on default and other sources of
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levels prescribed under the relevant RBI guidelines.
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repayment;
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Additionally, the Bank makes provisions on exposures
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• Obtained the Board approved note for advances written off during the year and
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that are not classified as NPA including advances
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perused the write off policy duly approved by the Board.
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to certain sectors and identified advances or group
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• Obtained understanding of Credit monitoring process including the governing
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advances. These are classified as contingency provisions.
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framework and policy guidelines on "Loan Frauds & Red Flagged Accounts”
• Held specific discussions with the Credit and Risk departments to ascertain how various Early Warning Signal (EWS) and potential defaults have been identified and assessed in identification of NPA;
• Performed credit assessments of samples for both corporate and retail loans including larger exposures assessed by Bank showing signs of deterioration, or in areas of emerging risk (assessed against external market conditions). Reviewed the Bank's risk grading of the loan, and assessment of loan recoverability and the impact on the credit provision using the information on the Borrowers loan file, discussed the case with the concerned officials and senior management to verify the assessment and provisioning done by the Bank
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Key audit Matters (Risk)
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How Was the Key Audit Matter Addressed in the Audit
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Since; the Bank has significant credit risk exposure to
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Provisions for advances:
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a large number of borrowers across various sectors,
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• Understood the Bank's processes and perused the policies for determining provisions
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products, industries and geographies and there is a
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on advances in compliance with IRAC norms including provisioning for advances
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high degree of complexity, uncertainty and judgment
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covered under Resolution Framework, stressed sectors, date of commencement of
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involved in recoverability of advances, nature of transactions and estimation of provisions thereon
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commercial operations (DCCO), etc.
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and identification of accounts to be written off and
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• Verified provision for fraud accounts as at March 31, 2024 as per the RBI circular;
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given its significance to the overall audit of Financial
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• Reperformed, on sample basis for both corporate and retail loans, the Days Past Due
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Statements we have ascertained the Identification,
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for loan accounts including their classification and provisioning, to determine the
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Classification, Provisioning and Write off of Advances is
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accuracy of the same (Collective for standard portfolio and case specific for non-
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a Key Audit Matter.
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performing portfolio);
• Perused the submissions to the Board of Directors for the NPA Provisioning made as at March 31, 2024; and
• Assessed the appropriateness, accuracy and adequacy of the related presentation and disclosures in accordance with the applicable accounting standards and requirements of RBI with respect to NPAs.
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Information Technology (IT) Systems and Controls
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The Bank has a complex IT architecture to support
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Our Audit procedures with respect to this matter included:
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its day - to - day business operations. The volume of
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IT audit specialists are an integral part of our engagement team. Our approach of testing
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transactions processed and recorded is huge. Moreover,
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IT General Controls (ITGC) and IT Application Controls (ITAC) is risk based and business
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a transaction may be required to be recorded across
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centric.
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multiple applications depending upon the process and each application has different rules and a different set of
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As part of our IT controls testing, we have tested ITGC as well as ITAC. The focus of
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user access and authority matrix.
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testing of ITGCs was based on the various parameters such as Completeness, Validity, Identification / Authentication Authorization, Integrity and accountability. On the other
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All these applications are not fully customized to take
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hand, focus of testing automated controls from applications was whether the controls
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care off all user's requirement. These applications are
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prevent or detect unauthorized transactions and support financial objectives including
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interlinked using different technologies so that data transfer happens in real time or at a particular time of
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completeness, accuracy, authorization, and validity of transactions.
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the day; in batches or at a transaction level and in an
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We gathered an understanding of IT applications landscape implemented at the Bank
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automated manner or manually. The Core Banking
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during the year. It was followed by process understanding, mapping of applications to
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Solution (CBS) itself has many interfaces. All these data
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the same and understanding financial risks posed by people, process and technology.
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streams directly affect the financial accounting and
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In ITGC testing, on sample basis, we reviewed control areas such as User Management,
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reporting process of the Bank.
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Change Management, Systems Security, cyber security, interface testing, deployment of
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The Bank has a process for identifying the applications
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new applications, Incident Management, Physical & Environmental Security, Backup and
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where the controls are embedded. The Bank's IT control
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Restoration, Business Continuity and Disaster Recovery, Service Level Agreement, end of
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framework includes automated, semi-automated and
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day operations, various submission made to the regulators under risk based supervision.
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manual controls designed to address identified risks.
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For ITAC, we carried out on sample basis, compliance tests of system functionality in
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IT controls are stated in Entity Level Controls (ELC), IT
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order to assess the accuracy of system functionality. We also carried out procedures such
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General Controls (ITGC) and IT Application Controls
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as validations and limit checks on data entered into applications, approvals, process
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(ITAC). Further the Bank has identified critical softwares
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dependencies and restriction on time period in which transactions may be recorded.
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impacting the Financial accounting and its reporting
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We verified audit trail (edit log) on test check basis for applications which are used for
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from the exitance and completeness of Audit Trail
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financial accounting and reporting. Further we reviewed the existence and efficacy of
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(edit log).
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the audit trail done by the management.
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We have identified IT systems and controls Framework
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We tested the control environment using various techniques such as inquiry,
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as a Key Audit Matter as the Bank's business is highly
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walkthroughs in live environment, review of documentation / record / reports,
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dependent on technology, high level of automation,
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observation and reperformance. We also tested few controls using negative testing
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significant number of systems being used, the IT
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technique.
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environment is complex, and the design and operating
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Verified compensating controls and performed alternate procedures, where necessary.
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effectiveness of IT controls have a direct impact on its
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In addition, understood where relevant, changes made to the IT landscape during the
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financial reporting process. Review of these systems and controls allows us to provide assurance on the integrity and completeness of data processed through various IT applications which are used for financial accounting & reporting.
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audit period.
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Information Other than the Standalone Financial Statements and Auditors' Report Thereon
The Bank's Management and Board of Directors are responsible for the other information. The other information comprises the Pillar 3 Disclosures under the New Capital Adequacy Framework (Basel III disclosures), which we obtained prior to the date of this auditors' report, and Director's Report including Annexures to Director's Report which is part of the Annual report (collectively called as 'Other Information') but does not include the standalone financial statements and our auditors' report thereon. The Annual Report is expected to be made available to us after the date of this auditors' report.
Our opinion on the standalone financial statements does not cover the other information 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 when it becomes available 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 a material misstatement therein, we are required to communicate the matter to those charged with governance under SA 720 'The Auditor's responsibilities Relating to Other Information'.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
The Bank's Management and Board of Directors are responsible for the matters stated in section 134(5) of the Act with respect to the preparation and presentation 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 specified under section 133 of the Act, read with Companies (Accounting Standards) Rules, 2021 as amended to the extent applicable, and RBI Guidelines. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act, Banking Regulation Act, 1949 and 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 standalone financial statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone 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 the Board of Directors either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.
Those Board of Directors are also responsible for overseeing the Bank's financial reporting process.
Auditors' Responsibilities for the Audit of the Standalone Financial Statements
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 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 standalone financial statements. 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 standalone 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)(i) of the Act, we are also responsible for expressing our opinion on whether the Bank has internal financial controls with reference to 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 management in the standalone financial statements.
• 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 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 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 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.
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 for the year ended March 31, 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.
Report on Other Legal and Regulatory Requirements
1. The Balance Sheet and the Statement of Profit and Loss
have been drawn up in accordance with the provisions of
Section 29 of the Banking Regulation Act, 1949 and Section
133 of the Act and relevant rules issued thereunder.
2. As required by sub-section (3) of section 30 of the Banking
Regulation Act, 1949, 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 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;
c. since the key operations of the Bank are automated with the key applications integrated to the core banking systems, the audit is carried out centrally as all the necessary records and data required for the purposes of our audit are available therein. However, during the course of our audit we have visited 75 branches to examine the records maintained at such branches for the purpose of our Audit.
3. As required by Section 143(3) of the Act, 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 purposes 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 Standalone 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;
d. In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act read with Companies Accounting Standard Rules, 2021 as amended, to the extent they are not inconsistent with the guidelines prescribed by RBI.
e. On the basis of the written representations received from the directors as on March 31,2024 taken on record by the Board of Directors, none of the directors are disqualified as on March 31, 2024 from being appointed as a director in terms of Section 164 (2) of the Act.
f. With respect to the adequacy of the internal financial controls with reference to standalone financial statements of the Bank and the operating effectiveness of such controls, refer to our separate Report in "Annexure A".
g. With respect to the other matters to be included in the Auditor's Report in accordance with the requirements of Section 197(16) of the Act, as amended, the Bank is a
banking Company as defined under Banking Regulation Act, 1949. Accordingly, the requirements prescribed under Section 197 of the Act do not apply by virtue of Section 35B(2A) of the Banking Regulation Act, 1949.
h. With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, 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 standalone financial statements - Refer Schedule 12, 17(17) and 18(15.3) to the standalone 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 Schedule 17(5), 17(17) and notes 18(3), 18(4.1) and 18 (15.3) to the standalone financial statements;
(iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Bank during the financial year ended March 31,2024- Refer Schedule 18 (15.5);
(iv) (a) The Management has represented that, to the
best of it's knowledge and belief, other than as disclosed in the Note 18 (15.15)(1) to the standalone financial statements, 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 or entities, including foreign entities ('Intermediaries'), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, 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.
(b) The Management has represented, that, to the best of it's knowledge and belief, other than as disclosed in the Note 18 (15.15)(2) to the standalone financial statements, no funds have been received by the Bank from any persons or entities, including foreign entities ('Funding Parties'), with the understanding, whether recorded in writing or otherwise, that the Bank shall, 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.
(c) Based on the audit procedures performed that have been 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 under sub-clause (a) and (b) of Rule 11(e) as provided under (a) and (b) above, contain any material mis-statement.
(v) As stated in Schedule 18(15.12) to the standalone financial statements:
(a) The final dividend proposed in the Previous year, declared and paid by the Bank during the year is in compliance with section 123 of the Act, as applicable.
(b) The Board of Directors of the Bank have proposed final dividend for the year which is subject to the approval of the members at the ensuing Annual General meeting. The amount of dividend proposed is in compliance with section 123 of the Act, as applicable.
(vi) Based on our examination, which included test checks, the Bank has used the accounting softwares for maintaining its books of account, which have a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all relevant transactions recorded in the accounting softwares.
Further, during the course of our audit, we did not come across any instance of audit trail feature being tampered with.
For M.P. Chitale & Co. For M S K A & Associates
Chartered Accountants Chartered Accountants
ICAI Firm Registration No.101851W ICAI Firm Registration No. 105047W
Anagha Thatte Tushar Kurani
Partner Partner
Membership No. 105525 Membership No. 118580
UDIN: 24105525BKFUBC2031 UDIN: 24118580BKFLXT1817
Place: Mumbai Place: Mumbai
Date: April 25, 2024 Date: April 25, 2024
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