Punjab & Sind Bank
Opinion
1. We have audited the financial statements of Punjab & Sind Bank, (the 'Bank'), which comprise the Balance Sheet as at 31st March, 2024, and the Profit and Loss Account and the Cash Flow Statement for the year then ended and notes to financial statements including a summary of significant accounting policies and other explanatory information, in which are included returns for year ended on that date of 20 branches and treasury division audited by us and 664 branches and 42 offices / processing centers audited by statutory branch 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 financial statements are the returns from 880 branches which have not been subjected to audit. These unaudited branches account for 13.02 percent of advances, 29.45 percent of deposits, 9.28 percent of interest income and 23.16 percent of interest expenses.
2. 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 Regulation Act, 1949 (the 'Act') in the manner so required for 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 31st March, 2024;
b) the Profit and Loss Account, read with the notes thereon shows a true balance of profit for the year ended on that date; 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 of Auditing ("SAs") issued by the Institute of Chartered Accountants of India ("the ICAI"). Our responsibilities under those Standards are further described in the Auditors' 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 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 Accounting Standards issued by the ICAI, and provisions of Section 29 of the Banking Regulation Act, 1949 and circulars, directions 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.
Key Audit Matters
4. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current year. 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 matter was addressed in the audit
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Advances - classification and provisioning
(Refer Schedule 9 to the financial statements, read with the Accounting Policy No. 3)
The advances are classified as performing and non-performing advances (NPA) and provisioning thereon is made in accordance with the Income Recognition, Assets Classification and Provisioning norms and other relevant directions / guidelines (Prudential Norms) as prescribed / issued by the Reserve Bank of India. The classification and provisioning is done by the Bank's IT software integrated with its Core Banking Solution (CBS). The extent of provisioning of NPA under the prudential norms are mainly based on its ageing and recoverability of the underlined security.
In the event of any improper application of the Prudential Norms or consideration of the incorrect value of the security, as the valuation of the security involves high degree of estimation and judgement, the carrying value of the advances could be materially misstated either individually or collectively, and in view of the significance of the amount of advances in the financial statements i.e. 58.22 % of total assets, the classification of the advances and provisioning thereon has been considered as Key Audit Matter in our audit.
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Our Audit Procedure:
We obtained an understanding of the Bank's software, circulars, guidelines and directives of the RBI, the Bank's internal instructions and procedures, and the guidelines of other concerned regulatory or other authority / bodies in respect of the assets classification and its provisioning and adopted the following audit procedures:
- Evaluation and testing of the effectiveness of the System controls and other key internal control mechanisms with respect to the advances monitoring, identification / classification, assessment of the loan impairment including testing of relevant data quality, and review of the real data entered / existing in the software.
- Verification / review of the documentations, operations / performance and monitoring of the advance accounts, on test check basis of the large and stressed advances, to ascertain any overdue, unsatisfactory conduct or weakness in any advance account, to ensure that its classification is in accordance with the prudential norms of RBI, in respect of the branches / verticals audited by us. In respect of the branches audited by the branch statutory auditors, we have placed reliance on their reports.
- Review of the reports of the credit audit, inspection audit, internal audit, concurrent audit, regulatory audit and any other audit / inspection mechanisms to ascertain the advances having any adverse indication / comments, and review of the control mechanisms of the bank to ensure the proper classification of such advances and provisioning thereof.
Necessary changes were carried out, wherever required, during the course of audit and the effect of the same was duly accounted for in the Financial Statements for the year under audit.
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Investments - valuation and identification and
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Our Audit Procedure:
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provisioning for Non-Performing Investments
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Our audit approach towards Investments with
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(Refer Schedule 8 to the financial statements, read
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reference to the RBI circulars / directives included
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with the Accounting Policy No. 2)
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the review and testing of the design, operating effectiveness of internal controls and substantive
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Investment portfolio of the bank comprises of
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audit procedures in relation to valuation,
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Investments in Government Securities, Bonds,
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classification, identification of Non Performing
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Debentures, Shares, Security Receipts and other
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Investments, provisioning / depreciation related
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Approved Securities which are classified under three categories, Held to Maturity, Available for
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to Investments. In particular,
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Sale and Held for Trade.
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- We evaluated and understood the system and internal control as laid down by the Bank to comply
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Valuation of Investments, identification of
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with relevant RBI guidelines regarding valuation,
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Non-Performing Investments (NPI) and the
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classification, identification of Non Performing
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corresponding non-recognition of income and
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Investments, Provisioning/ depreciation related
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provision thereon, is carried out in accordance with the relevant circulars / guidelines / directions
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to Investments.
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of RBI. The valuation of each category (type) of
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- We assessed and evaluated the process adopted
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aforesaid security is to be carried out as per the
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for collection of information from various sources
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methodology prescribed in circulars and directives
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for determining fair value of these investments.
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issued by the RBI which involves collection of
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- For selected sample of investments (covering
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data/ information from various sources such as
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all categories of investments based on nature
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FBIL rates, rates quoted on BSE/ NSE, financial
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of security) we tested accuracy and compliance
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statements of unlisted companies, NAV in case
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with the RBI Master circulars and directions by re-
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of security receipts etc. As per the RBI directions,
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performing valuation for each category of security
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there are certain investments that are valued at
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in accordance with the RBI Master Circular/
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market price however certain investments are based on the valuation methodologies that include
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directions.
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statistical models with inherent assumptions,
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- We assessed and evaluated the process of
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assessment of price for valuation based on financial
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identification of NPIs, and corresponding reversal
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statements etc. Hence, the price discovered for
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of income and creation of provision.
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the valuation of these Investments may not be the
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- We carried out substantive audit procedures to
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true representative but only a fair assessment of
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re-compute independently the provision to be
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the Investments as on date. Hence the valuation
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created.
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of Investments requires special attention and
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further in view of the significance of the amount of
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Necessary changes were carried out, wherever
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Investments in the financial statements i.e. 33.59
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required, during the course of audit and the
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% of total assets, the same has been considered as
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effect of the same was duly accounted for in the
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Key Audit Matter in our audit.
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Financial Statements for the year under audit.
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Information Technology (IT) and controls impacting financial Reporting
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Our Audit Procedure
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- Understanding the coding system adopted by the
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The Bank's financial accounting and reporting systems are highly dependent on the effective working of the Core Banking Solution (CBS) and other IT systems linked to the CBS or working independently.
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Bank for various categories of business process.
- Reviewing the design, implementation and operating effectiveness of the CBS controls including application, access controls that are critical to financial reporting on test check basis.
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Our areas of focus relate to the logic that is fed into the system, sanctity and reliability of the data, access management and segregation of duties. These underlying principles are important because they ensure that changes to applications and data are appropriate, authorized, cleansed and monitored, so that the system generates accurate
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- Understanding the feeding of the data in the system and going through the extraction of the financial information and statements from the IT system existing in the Bank.
- Checking of the requirements for any changes
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and reliable reports / returns and other financial
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in the regulations / policy of the Bank and
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and non-financial information that is used for
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configuration / impact of the same in IT.
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the preparation and presentation of the financial
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- Review of the reports generated by the system
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statements.
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on sample basis.
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Technology (IT) systems are used in financial reporting process. The Bank's operational and
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- Understanding of the upgraded IT system and review of the data migrated therein on a limited
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financial processes generate extensive volume on daily basis and process varied and complex
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test check basis.
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transactions which are highly dependent on IT
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- Reviewed the IS Audit Reports and discussed
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systems.
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with IT Department on compliance with key IT
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There is a risk that automated accounting procedures
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controls.
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and related internal controls may not be accurately
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- Discussions with and review of the reports of IT
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designed and operating effectively, and further the
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Experts regarding IT system / controls including
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Bank's CBS / IT system was upgraded and the new IT
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IT application / solution of Income Recognition,
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system / software of the Treasury functions during
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Assets Classification and Provisioning norms and
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the current year and financial / other data was
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investment valuation / classification etc.
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migrated in the upgraded system, and there was
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- The system needs to be further strengthened for
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additional risk that the data may have not been
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its efficacy to further control deficiencies of input
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correctly and completely migrated.
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/ output data from the system.
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Considering the above, the same has been considered as Key Audit Matter in our audit.
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Information Other than the Financial Statements and Auditor's Report thereon
5. The Bank's Board of Directors is responsible for the other information. The other information comprises the Corporate Governance Report, which we obtained at the time of issue of this Auditor's Report. The other information also includes the Directors' Report, including annexures, if any, thereon (but does not include the financial statements and our auditor's report thereon), which is expected to be made available to us after the date of this Auditor's Report.
Our opinion on the financial statements does not cover the Other Information and Pillar 3 disclosures under the Basel III and we do not and will not express any form of assurance conclusion thereon.
In connection with our audit of the 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 financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the Other Information that we obtained prior to the date of this Auditors' Report, we conclude that there is a material misstatement of this Other Information, we are required to report that fact. We have nothing to report in this regard. Further, when we read the Other Information, which is expected to be made available to us after the date of this Auditor's Report if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charge with governance.
Responsibilities of the Management and Those Charged with Governance for the Financial Statements
6. The Bank's Board of Directors is responsible 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 issued by 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.
In preparing the financial statements, management is 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.
Auditor's Responsibilities for the Audit of the Financial Statements
7. 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 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 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 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 controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances.
• 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 auditor's 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 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 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 the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the Standalone 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 period 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
8. We did not audit the financial statements / information of 664 branches and 42 offices / processing
centers included in the financial statements of the Bank whose financial statements / information reflect total assets of Rs. 19,605.88 crores as at 31st March, 2024 and total revenue of Rs. 1,003.61 crores for the year ended on that date, as considered in these financial statements. 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 these branches, is based solely on the report of such branch auditors.
9. We draw attention to the fact that corresponding figures for the year ended 31st March, 2023 are based on previously issued financial statements of the Bank, that were audited by two predecessor auditors along with two present auditors, who had expressed an unmodified opinion on those financial statements dated 2nd May, 2023.
Our opinion is not modified in respect of above matters.
Report on Other Legal and Regulatory Requirements
10. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with Section 29 of the Banking Regulation Act, 1949;
11. Subject to the limitations of the audit indicated in paragraphs 6 to 8 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, and 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 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.
12. As required by letter No. DOS.ARG. No.6270/08.91.001/2019-20 dated 17th March, 2020 on "Appointment of Statutory Central Auditors (SCAs) in Public Sector Banks - Reporting obligations for SCAs", we further report on the matters specified in paragraph 2 of the aforesaid letter as under:
a) In our opinion, the aforesaid financial statements comply with the applicable 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 dis-qualifications 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 report on the adequacy and operating effectiveness of the Bank's Internal Financial Controls over Financial Reporting is given in Annexure - A to this report expressing an unmodified opinion on the Bank's Internal Financial Control over Financial Reporting with reference to the financial statements as at 31st March, 2024.
13. 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 not visited by us;
b) the Balance Sheet, the Profit and Loss Account and the Cash Flows Statement dealt with by this report are in agreement with the books of account and with the returns received from the branches 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 Flows Statement comply with the applicable accounting standards, to the extent they are not inconsistent with the accounting policies prescribed by RBI.
For Chaturvedi & Co., For Manohar Chowdhry & Associates.,
Chartered Accountants Chartered Accountants
FRN:302137E FRN:001997S
(CA. Satish Chandra Chaturvedi) (CA. P. Venkatraju)
Partner Partner
M. No. 012705 M. No. 225084
UDIN: 24012705BKFYMS4516 UDIN: 24225084BKDZRV9128
For S. P. Chopra & Co. For Gupta Sharma & Associates
Chartered Accountants Chartered Accountants
FRN:000346N FRN:001466N
(CA. Pawan K. Gupta) (CA. Dhananjay Sharma)
Partner Partner
M. No. 092529 M. No. 531165
UDIN: 24092529BKCYOQ1695 UDIN: 24531165BKEFFZ5226
Date : 10th May, 2024 Place : New Delhi
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