1. We have audited the accompanying standalone financial statements of Kotak Mahindra Bank Limited ('the Bank'), which comprise the Standalone
Balance Sheet as at 31 March 2024, the Standalone Profit and Loss Account, and the Standalone Cash Flow Statement for the year then ended,
and notes to the standalone financial statements including a summary of the significant accounting policies and other explanatory information ('the
Standalone Financial Statements').
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 as well as the Companies Act, 2013 ('the Act') and circulars and guidelines issued by
the Reserve Bank of India ('the RBI'), 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, 2021 and other accounting principles
generally accepted in India, of the state of affairs of the Bank as at 31 March 2024 and its profit and its 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') 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 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 we have obtained is sufficient and appropriate to provide a basis for our opinion.
KEY AUDIT MATTERS
4. Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Standalone Financial Statements
of the current year. 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.
5. We have determined the matters described below to be the key audit matters to be communicated in our report.
Identification of and Provisioning against Non-performing Assets (‘NPAs'):
Total Loans and Advances (Net of Provision) as at 31 March 2024: ' 376,075.27 Crores
Provision for NPAs as at 31 March 2024: ' 4,004.21 Crores
Refer Schedule 9, Schedule 17(C)(2) and Schedule 18(A) - Note 9 and Note 11
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Key Audit Matter
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How our audit addressed the key audit matter
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The Bank is required to comply with the Master Circular issued by
the Reserve Bank of India ('RBI') on 'Prudential Norms for Income
Recognition, Asset Classification and Provisioning pertaining to
Advances' (the' IRAC norms') and amendments thereto which prescribes
the guidelines for identification and classification of Non-performing
Assets ('NPAs') and the minimum provision required for such assets.
The Bank is also required to apply its judgement to determine the
identification and provision required against NPAs considering various
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Our audit procedures included the following:
• Understood the process and controls, and tested the design and
operating effectiveness of key controls, including Information
Technology based controls, and focused on the following:
Ý Approval of new lending facilities in accordance with the
Bank's credit policies.
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quantitative as well as qualitative factors.
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Ý Performance of annual review/renewal of loan accounts.
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The identification of NPAs is also affected by factors like stress and
liquidity concerns in certain sectors.
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Ý Monitoring of credit quality which amongst other things
includes the monitoring of overdue loan accounts, drawing
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The provision for identified NPAs is estimated based on ageing and
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power limit and pending security creation; and
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classification of NPAs, value of security, recovery estimates etc. and
is also subject to the minimum provisioning norms specified by RBI.
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Ý Identification and classification of NPAs in accordance with
IRAC norms, other regulatory guidelines issued by the RBI
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and consideration of qualitative aspects.
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Key Audit Matter
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How our audit addressed the key audit matter
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As the identification of and provisioning against NPAs requires
considerable level of management estimation, application of various
regulatory requirements and its significance to the overall audit, we
have identified this as a key audit matter.
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• Tested the Bank's process for identification of loans with default
events and/ or breach of other qualitative factors, and for a
sample of performing loans, independently assessed as to
whether there was a need to classify such loans as NPAs.
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• On a test check basis, verified the accounts classified by the Bank
as Special Mention Accounts ('SMA') in RBI's Central Repository
of Information on Large Credits ('CRILC').
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• With respect to provisions recognised towards NPAs, we
reperformed the provision calculations on a sample basis
taking into consideration the value of security, where applicable,
the IRAC norms and NPA policy of the Bank, and compared
our outcome to that prepared by the management and tested
relevant assumptions and judgements which were used by the
management.
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Information Technology (‘IT') Systems and Controls impacting Financial Reporting
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Key Audit Matter
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How our audit addressed the key audit matter
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The IT environment of the Bank is complex and involves many
independent and interdependent IT systems used in the operations
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Our audit procedures with respect to this matter included the following:
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of the Bank for processing and recording a large volume of
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In assessing the controls over the IT systems of the Bank, we involved
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transactions. As a result, there is a high degree of reliance and
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our technology specialists to understand the IT environment, IT
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dependency on such IT systems for the financial reporting process of
the Bank.
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infrastructure and IT systems.
We evaluated and tested relevant IT general controls and IT application
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Appropriate IT general controls and IT application controls are required
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controls of the 'in-scope' IT systems identified as relevant for our audit
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to ensure that such IT systems can process the data as required,
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of the standalone financial statements and financial reporting process
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completely, accurately, and consistently for reliable financial reporting.
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of the Bank.
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We identified certain key IT systems ('in-scope' IT systems) which have
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On such 'in-scope' IT systems, we have tested key IT general controls
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an impact on the financial reporting process, and the related control
testing as a key audit matter because of the high level of automation,
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and evaluated the same with respect to the following domains:
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significant number of systems being used by the Bank for processing
financial transactions, and the complexity of the IT architecture.
As described in Note 21 of Schedule 18B to the standalone financial
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• Program change management, which includes that program
changes are moved to the production environment as per defined
approvals and relevant segregation of environment is ensured.
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statements, a supervisory action was undertaken against the Bank
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• User access management, which includes user access
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under Section 35A of the Banking Regulation Act, 1949 by the Reserve
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provisioning, de-provisioning, access review, password
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Bank of India ('RBI') subsequent to the year end on 24 April 2024 arising
from an IT examination conducted by the RBI, and the related reports
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management, sensitive access rights and segregation of duties
to ensure that privilege access to applications and its related
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containing its observations was issued by the RBI.
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operating system and databases in the production environment
were granted only to authorized personnel.
• Other areas under the IT control environment which includes
backup management, business continuity, disaster recovery
drillin-line with the bank's disaster recovery plan, incident
management, batch processing and monitoring.
We also evaluated the design and tested the operating effectiveness
of key IT application controls within key business processes, which
included testing automated calculations, automated accounting
processes, system interfaces, system reconciliation controls and key
system generated reports, as applicable.
Where control deficiencies were identified related to internal controls
over financial reporting, we tested compensating controls or performed
alternative audit procedures, where necessary.
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Key Audit Matter
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How our audit addressed the key audit matter
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We evaluated the management's assessment of the observations noted
by the RBI arising in their IT examination report and the impact of those
observations on the standalone financial statements and on internal
controls with reference to financial statements and also communicated
with those charged with governance and sought their assessment of
the impact of the observations.
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INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITOR'S REPORT THEREON
6. The Bank's Board of Directors are responsible for the other information. The other information comprises the information included in the Annual
Report but does not include the standalone financial statements and our auditor's report thereon. The Annual Report is expected to be made available
to us after the date of this auditor's report.
Our opinion on the Standalone Financial Statements does not cover the other information and we will 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
knowledge obtained in the audit or otherwise appears to be materially misstated.
When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those
charged with governance and take appropriate action as applicable under the relevant laws and regulations.
RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE STANDALONE FINANCIAL STATEMENTS
7. The accompanying Standalone Financial Statements have been approved by the Bank's Board of Directors. The Bank's 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
Standards specified under section 133 of the Act, read with the Companies (Accounting Standards) Rules, 2021, and other accounting principles
generally accepted in India, and provisions of section 29 of the Banking Regulation Act, 1949 and circulars and guidelines issued by the RBI from
time to time ('RBI Guidelines'). 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 judgements 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 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 the Board of Directors
either intend to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.
9. The Board of Directors are 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 judgement 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 adequate 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
the management;
• Conclude on the appropriateness of the 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 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.
12. 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.
13. 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.
14. 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 year 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.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
15. In our opinion, 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 and section 133 of the Act and the relevant rules issued thereunder.
16. As required by 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;
c) Since the key operations of the Bank are automated with the key applications integrated to the core banking system, the audit is carried out
centrally as all the necessary records and data required for the purposes of our audit are available therein. We have visited 128 branches to
examine the records maintained at the branches for the purpose of our audit.
17. In our opinion and to the best of our information and according to the explanations given to us, the provisions of Section 197 of the Act are not
applicable to the Bank by virtue of Section 35B(2A) of the Banking Regulation Act, 1949. Accordingly, the reporting under Section 197(16) of the Act
regarding payment/ provision for managerial remuneration in accordance with the requisite approvals mandated by the provisions of Section 197
read with Schedule V to the Act, is not applicable.
18. 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
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;
except for the matters stated in paragraph 18(h)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014 (as
amended);
c) 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;
d) In our opinion, the aforesaid Standalone Financial Statements comply with the Accounting Standards specified under section 133 of the Act
read with relevant Rules issued thereunder, to the extent they are not inconsistent with the accounting policies prescribed by the RBI;
e) On the basis of the written representations received from the directors as on 31 March 2024 and taken on record by the Board of Directors, none
of the directors is disqualified as on 31 March 2024 from being appointed as a director in terms of Section 164(2) of the Act;
f) With respect to the maintenance of accounts and other matters connected therewith, reference is made to our remarks in paragraph 18(b)
above on reporting under Section 143(3)(b) and paragraph 18(h)(vi) below on reporting under Rule 11(g) of the Companies (Audit and Auditors)
Rules, 2014 (as amended);
g) 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 wherein we have expressed an unmodified opinion; and
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 (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 Standalone Financial Statements - Refer Schedule
12 (I), Schedule 17C - Note 13 and Schedule 18B - Note 15 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 12 (II), 12 (Va) and 12 (Vb), Schedule 17C - Note 10, Note 11 and
Note 13 and Schedule 18B - Note 10 and Note 15 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 year ended 31 March 2024;
iv. a. The management has represented that, to the best of its knowledge and belief, as disclosed in Schedule 18B - Note 17 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 person(s) or entity(ies), including foreign entities
('Intermediaries'), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, 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 the Ultimate Beneficiaries;
b. The management has represented that, to the best of its knowledge and belief, as disclosed in Schedule 18B - Note 17 to the
Standalone Financial Statements, no funds have been received by the Bank from any person(s) or entity(ies), including foreign
entities ('Funding Parties'), with the understanding, whether recorded in writing or otherwise, that the Bank shall, whether 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; and
c. Based on such audit procedures performed, as considered reasonable and appropriate in the circumstances, nothing has come
to our attention that causes us to believe that the management representations under sub-clauses (a) and (b) above contain any
material misstatement.
v. The dividend declared and paid during the year ended 31 March 2024 by the Bank is in compliance with Section 123 of the Act.
vi. Based on our examination, which included test checks, the Bank has used accounting software for maintaining its books of account
that have a feature of recording audit trail (edit log) facility and the audit trail feature has operated throughout the year for all relevant
transactions recorded in the software, except for six accounting software having Oracle or MySQL or SQL database, where the audit trail
has not been enabled at the database level to log any direct data changes. Further, the Bank has used an accounting software hosted by
third-party service providers for maintaining its books of account and in the absence of service organization controls auditors' report for
the financial year, we are unable to comment whether the audit trail feature of the aforesaid software at the database level was enabled
and operated throughout the year. Based on our procedures performed, for the accounting software other than the aforesaid databases
where the question of our commenting does not arise, we did not notice any instance of the audit trail feature being tampered with.
For Price Waterhouse LLP For KKC & Associates LLP
Chartered Accountants Chartered Accountants
(formerly Khimji Kunverji & Co LLP)
Firm Registration Number: 301112E/ E300264 Firm Registration Number: 105146W/W100621
Russell I Parera Gautam Shah
Partner Partner
Membership Number: 042190 Membership Number: 117348
UDIN: 24042190BKFFOQ2541 UDIN: 24117348BKBZWK9832
Place : Mumbai Place : Mumbai
Date : 04 May 2024 Date : 04 May 2024
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