YES BANK Limited
Report on the Audit of the Standalone Financial Statements
Opinion
We have audited the standalone financial statements of YES BANK Limited ('the Bank'), which comprise the Balance Sheet as at March 31, 2024, the Profit and Loss Account and the Cash Flow Statement for the year then ended, and notes to the standalone financial statements, including a summary of the significant accounting policies and other explanatory information (hereinafter referred to as "Standalone Financial Statements").
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financialstatements give the information required by the 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 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 ('the 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 on the standalone financial statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in the 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. We have determined the matters described below to be the key audit matters to be communicated in our report:
|
Key Audit Matters
|
Auditor's Response
|
|
Asset Classification of Advances and Investments (IRAC) and Provisioning
|
|
Refer to schedule 8 and schedule 9, read with relevant
|
Our audit approach included testing the design, operating
|
|
Notes relating to provisions and contingencies, disclosures
|
effectiveness of internal controls and substantive audit
|
|
with regard to Non Performing Investments (NPI) and
|
procedures in respect of asset classification and provisioning
|
|
Asset Quality in respect of movement of Non-Performing
|
pertaining to investments and advances. In particular:
|
|
Assets (NPAs) and related provisions respectively.
|
Ý Evaluated the Bank's internalcontrolsystem in
|
|
As required under prudential norms issued by the Reserve Bank of India (RBI) in respect of asset classification and provisioning pertaining to investments as well as those pertaining to advances, and relevant circulars, notifications
|
adhering to the relevant RBI guidelines regarding income recognition, asset classification and provisioning pertaining to investments and advances;
• Tested key IT systems/ applications used and their
|
|
and directives issued by the RBI which were collectively considered by the Bank tillMarch 31, 2024, classifies
|
design and implementation as well as operational effectiveness of relevant controls, in relation to asset
|
|
advances into performing and non-performing advances
|
classification viz., standard, sub-standard, doubtful
|
|
(NPA) which consists of Standard, Sub-standard, Doubtful
|
and loss with reference to their days-past-due (DPD)
|
|
and Loss and makes appropriate provisions.
|
status (including consideration of non-financial parameters of NPA, including sufficiency of credits in working capital loans, restructuring guidelines, the Regulatory Package and Resolution framework) and provisioning pertaining to investments and advances;
|
|
Key Audit Matters
|
Auditor's Response
|
|
The Bank, as per its governing framework, made the
|
•
|
Test checked advances to examine the validity of the
|
|
performing and non-performing advances provisions
|
|
recorded amounts, loan documentation, examined
|
|
based on Management's assessment of the degree
|
|
the statement of accounts, indicators of impairment,
|
|
of impairment of the advances subject to and guided
|
|
impairment provision for non-performing assets,
|
|
by minimum provisioning levels prescribed under
|
|
and compliance with income recognition, asset
|
|
RBI guidelines.
|
|
classification and provisioning pertaining to advances in terms of applicable RBI guidelines;
|
|
The Classification, Provisioning and Write off of Advances including Investments is a Key Audit Matter as the Bank has significant credit risk exposure to a large number of
|
•
|
Tested, selected restructured accounts on sample
|
|
basis and their compliance with relevant RBI guidelines;
|
|
borrowers across various sectors, products, industries
|
•
|
For the selected non-performing advances, we
|
|
and geographies and there is a high degree of complexity,
|
|
assessed Management's forecast and inputs of
|
|
uncertainty and judgment involved in recoverability
|
|
recoverable cash flows, borrower's audited financial
|
|
of advances, nature of transactions and estimation of
|
|
statements, valuation of underlying security and
|
|
provisions thereon and identification of accounts to
|
|
collaterals, estimation of recoverable amounts on
|
|
be written off.
|
|
default and other sources of repayment;
|
| |
•
|
Tested the Bank's processes for making provision on advances for compliance with RBI regulations and internally laid down policies for provisioning;
|
| |
•
|
Undertaken the walkthrough for the automated E-NPA system and tested the core functionality for selected samples considering the audit universe.
|
| |
•
|
Validated the parameters used to calculate collective provisions with reference to IRAC norms, and Regulatory Package;
|
| |
•
|
Tested provision created for fraud accounts as at March 31, 2024 as per the RBI circular;
|
| |
•
|
Re-performed, for a sample of retail and corporate portfolios, as part of our substantive audit procedures the calculation of provisions, to determine the accuracy of the same; (Collective for standard portfolio and case specific for non performing portfolio)
|
| |
•
|
Assessed the adequacy of disclosures against the RBI Guidelines
|
|
IT Systems and Controls over financial reporting
|
|
The Bank's key financialaccounting and reporting
|
•
|
We have planned, designed and carried out the desired
|
|
processes are highly dependent on Core Banking and
|
|
audit procedures and sample checks, taking into
|
|
Treasury Solutions and other supporting software and
|
|
consideration the IT systems of the Bank. As part of our
|
|
hardware controls. The volume of transactions processed
|
|
IT controls testing, we have tested ITGC as well as ITAC
|
|
and recorded is huge and hence the IT controls are
|
|
for selected critical applications. The focus of testing
|
|
required to ensure that applications process data as
|
|
of ITGCs was based on the various parameters such as
|
|
expected and that changes are made in an appropriate
|
|
Completeness, Validity, Identification/ Authentication,
|
|
manner. The Bank's IT controlframework includes
|
|
Authorization, Integrity and Accountability. On the
|
|
automated, semi-automated and manual controls
|
|
other hand, focus of testing automated controls from
|
|
designed to address identified risks. IT controls are
|
|
applications was whether the controls prevent
|
|
stated in Entity Level Controls (ELC), IT General Controls
|
|
or detect unauthorized transactions and support
|
|
(ITGC) and IT Application Controls (ITAC). Such controls
|
|
financial objectives including completeness,
|
|
contribute to risk mitigation of erroneous output data.
|
|
accuracy, authorization and validity of transactions.
|
|
Key Audit Matters
|
Auditor's Response
|
|
We have identified IT Controls Framework as a Key Audit Matter as the Bank's business is highly dependent on technology. The IT environment is complex and the design and operating effectiveness of IT controls have a direct impact on its financial reporting process. Such controls provide assurance on the integrity and completeness of data processed through various IT applications which are used for the preparation of financial reports.
|
The procedures adopted by us are, in our opinion, adequate to provide reasonable assurance on the adequacy of IT controls in place. The areas for improvement as and when noticed are communicated for suitable actions to the Bank as part of our audit. The corrective steps / alternate controls deployed by the Bank are tested on sample basis.
• In ITGC testing, on sample basis, we reviewed control areas such as User Management, Change Management, Systems Security, Cyber Security, Interface Testing, deployment of new applications, Incident Management, Physical& Environmental Security, Creation and maintenance of edit logs, Backup and Restoration, Business Continuity and Disaster Recovery, Service Level Agreement.
|
| |
• For ITAC, we carried out on sample basis, compliance tests of system functionality in order to assess the accuracy of system calculations. We also carried out procedures such as validations and limit checks on data entered into applications, approvals, process dependencies, restriction on time period in which transactions may be recorded and GL mapping for financial accounting.
|
| |
• Tested the controlenvironment using various techniques such as inquiry, walkthroughs in live environment, testing in UAT environment, review of documentation / record / reports, observation and re-performance.
|
| |
• Wherever deviations were noted either the same were explained to our satisfaction or we tested compensating controls and performed alternate procedures, where necessary, to draw comfort.
|
| |
• In addition, we have also relied on IS audit conducted by internal audit department, and also the testing of InternalFinancialControl conducted by the Operational Risk Management department of the Bank.
|
Information other than the standalone financial statements and Auditor's Report thereon
The Bank's management and Board of Directors are responsible for the Other Information. The other information comprises the Management Discussion and Analysis, Business Responsibility and Sustainability Report, Directors' Report forming part of the Annual Report, but does not include the Standalone Financial Statements, Consolidated FinancialStatements and our auditor's report thereon and the Pillar III Disclosures under Basel
III Capital Regulation, Leverage Ratio, Liquidity Coverage Ratio and Net Stable Funding Ratio. 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 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 materialmisstatement therein, we are required to communicate the matter to those charged with governance.
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, 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, as applicable to the Bank. 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 financialcontrols 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.
In preparing the standalone financialstatements, 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.
Auditor's 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 Auditor's Report that includes our opinion. Reasonable assurance is a high levelof assurance, but is not a guarantee that an audit conducted in accordance with SAs willalways 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 financialstatements, 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 materialmisstatement 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 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 in the standalone financial statements made by the Management and Board of Directors.
• Conclude on the appropriateness of the Management and Board of Director'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 financialstatements, including the disclosures, and whether the standalone financialstatements 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 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.
Other Matter
The Standalone Financial Statements for the year ended March 31, 2023, have been audited by one of the predecessor auditors M.P. Chitale & Co. and continuing joint statutory auditors Chokshi & Chokshi LLP, whose report dated April 22, 2023 had expressed an unmodified opinion. The above report has been furnished to us
by the management and has been relied upon by
us for the purpose of our audit of the Standalone
Financial Statements.
Our opinion is not modified in respect of this matter.
Report on other legal and regulatory requirements
1) 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 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 obtained allthe 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 Bank considers its key operations, with the key applications largely integrated to the Core Banking System, it does not require its branches to submit any financial returns. Accordingly, our audit is carried out centrally based on the records and data made available to us at Head Office. During the course of our audit, we have visited and performed select relevant procedures at 56 branches;
(d) The profit and loss account shows a true balance of profit for the year then ended
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 knowle dge 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 standalone profit and loss account, and the standalone 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 accounting policies 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 is disqualified as on March 31, 2024 from being appointed as a director in terms of Section 164 (2) of the Act; and
(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'.
4) 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 knowledge and belief and according to the information and explanations given to us:
(a) the Bank has disclosed the impact of pending litigations as at March 31, 2024 on its financial position in its standalone financial statements - Refer Note No. 17.5.11 and 17.5.80 to the standalone financial statements;
(b) 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 No. 17.5.74 read with Note No. 17.5.19 to the standalone financial statements;
(c) 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 March 31, 2024
- Refer Note No. 17.5.64 to the standalone financial statements.
(d) (i) The management of the Bank has
represented that, to the best of its knowledge and belief, other than as disclosed in the notes to accounts (Refer Note No. 17.5.36), 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 of the Ultimate Beneficiaries;
(ii) The management of the Bank has represented that, to the best of its knowledge and belief, other than as disclosed in the notes to accounts (Refer Note No. 17.5.36) 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, 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
(iii) Based on such audit procedures that were considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) above contain any material misstatement.
(e) No dividend has been declared or paid during the year by the Bank.
(f) Based on our examination which included test checks, the Bank has used accounting software for maintaining its books of account which, along with access management tools, as applicable, have a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the respective software. Further, during the course of our audit we did not come across any instance of audit trail feature being tampered with.
5) With respect to the matter to be included in the Auditors' Report under section 197(16) of the Act; the Bank is a banking company as defined under Banking
Regulation Act, 1949. Accordingly, the requirements prescribed under Section 197 of the Companies Act, 2013 (the 'act') do not apply by virtue of Section 35B(2A) of the Banking Regulation Act, 1949.
For G.M. Kapadia & Co. For Chokshi & Chokshi LLP
Chartered Accountants Chartered Accountants
(Registration No. 104767W) (Regn. No. 101872W / W100045)
Atul Shah Vineet Saxena
Partner Partner
(Membership No. 039569) (Membership No. 100770)
UDIN: 24039569BKAUIJ3549 UDIN: 24100770BKCORF3935
Place: Mumbai Place: Mumbai
Date: April 27, 2024 Date: April 27, 2024
|