The Members of
Dhanlaxmi Bank Limited
Report on the Financial Statements
We have audited the accompanying financial statements of Dhanlaxmi Bank Limited("the Bank") which comprise the Balance Sheet as at 31 March 2016 the Profitand Loss Account and the Cash Flow statement for the year then ended and a summary ofsignificant accounting policies and notes to the financial statements. Incorporated inthese financial statements are the returns of ten branches/offices and Treasury divisionaudited by us 269 branches/ offices audited by branch auditors.
Management's Responsibility for the Financial Statements
The Bank's Board of Directors is responsible for the matters stated in section 134(5)of the Companies Act 2013 (the "Act") with respect to the preparation of thesefinancial statements that give a true and fair view of the financial position financialperformance and cash flows of the Bank in accordance with the provisions of Section 29 ofthe Banking Regulation Act 1949 and accounting principles generally accepted in Indiaincluding the Accounting Standards specified under section 133 of the Act read with Rule 7of the Companies (Accounts) Rules 2014 in so far as they apply to the Bank and theguidelines issued by the Reserve Bank of India. This responsibility also includesmaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding of the assets of the Bank and for preventing and detecting frauds andother irregularities; selection and application of appropriate accounting policies makingjudgments and estimates that are reasonable and prudent; and the design implementationand maintenance of adequate internal financial control that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatement whether due to fraud or error.
Our responsibility is to express an opinion on these financial statements based on ouraudit. We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made there under. We have conducted our audit inaccordance with the Standards on Auditing issued by the Institute of Chartered Accountantsof India as specified under section 143(10) of the Act. Those Standards require that wecomply with ethical requirements and plan and perform the audit to obtain reasonableassurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgment including the assessment of the risks of material misstatement of the financialstatements whether due to fraud or error. In making those risk assessments the auditorconsiders internal financial control relevant to the Bank's preparation of the financialstatements that give a true and fair view in order to design audit procedures that areappropriate in the circumstances. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of the accounting estimates made by theBank's Directors as well as evaluating the overall presentation of the financialstatements. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the financial statements.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements together with the Principal AccountingPolicies and Notes appended thereto give the information required by the BankingRegulation Act 1949 as well as the Companies Act 2013 in the manner so required for thebanking companies and give a true and fair view of the state of affairs of the Bank as at31 March 2016 its loss and its cash flows for the year ended on that date.
Emphasis of Matter:
We draw attention to the following matters in the Notes to the financial statements:
(i) Note No. 6 (iv) of the financial statements regarding deferment of shortfallarising from the sale of certain Non Performing Assets during the year ended March 312016 in terms of RBI Master Circular DBR.No. BPBC 2/21.04.048/2015-16 on prudential normson Income Recognition Asset Classification and Provisioning pertaining to advances dated1st July 2015 and the unamortized balance as at 31st March 2016 amounting to ' 10.97Crores.
(ii) Note no. 23 of the financial statements regarding retention of Deferred Tax Assetamounting to '37.06 Crores.
Our opinion is not modified in respect of these matters.
Report on Other Legal and Regulatory Requirements
1. The Balance Sheet and the Profit and Loss Account have been drawn up in accordancewith the provisions of Section 29 of the Banking Regulation Act 1949 read with Section133 of the Companies Act 2013 read with Rule 7 of the Companies (Accounts) Rules 2014.
2. As required sub section (3) of section 30 of the Banking Regulation Act 1949 andthe appointment letter dated October 6 2015 we report that:
(a) We have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose of our audit and have found them tobe satisfactory;
(b) The transactions of the Bank which have come to our notice have been within thepowers of the Bank; and
(c) The returns received from the Offices and branches of the Bank have been foundadequate for the purpose of our audit. We have conducted audit of ten branches/offices andTreasury division in connection with our Central Statutory audit.
3. Further as required by section 143(3) of the Companies Act 2013 we report that:
(a) We have sought and obtained all the information and explanations which to the bestof 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 theBank so far as it appears from our examination of those books;
(c) The reports on the accounts of the branch offices audited by branch auditors of theBank under section 143(8) of the Companies Act 2013 have been sent to us and have beenproperly dealt with by us in preparing this report;
(d) The Balance Sheet the Profit and Loss Account and the Cash Flow Statement dealtwith by this Report are in agreement with the books of account;
(e) In our opinion the aforesaid financial statements comply with the AccountingStandards specified under Section 133 of the Act read with Rule 7 of the Companies(Accounts) Rules 2014;
(f) On the basis of written representations received from the directors as on 31 March2016 taken on record by the Board of Directors none of the directors are disqualified ason 31 March 2016 from being appointed as a director in terms of Section 164 (2) of theAct;
(g) With respect to the adequacy of the internal financial controls over financialreporting of the Bank and the operating effectiveness of such controls refer to ourseparate Report in "Annexurer to this report; and
(h) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand 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 positionin its financial statements-Refer Note 36 to the financial statements;
ii. The Bank has made provision as required under the applicable law or accountingstandards for material foreseeable losses on long-term contracts including derivativecontracts-Refer Note 37 to the financial statements; and
iii. There has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Bank.
For K. Venkatachalam Aiyer & Co.
Firm Registration Number: 004610S
Membership Number: 7024
Place : Thrissur
Date : 30 May 2016
Annexure 1 to The Independent Auditor's Report of even date on the Financial Statementsof Dhanlaxmi Bank Limited
Report on the Internal Financial Controls under Clause (i) of Subsection 3 of Section143 of the Companies Act 2013 ("the Act")
To the Members of Dhanlaxmi Bank Limited
We have audited the internal financial controls over financial reporting of DhanlaxmiBank Limited ("the Bank") as of 31 March 2016 in conjunction with our audit ofthe financial statements of the Bank for the year ended on that date.
Management's Responsibility for Internal Financial Controls
The Bank's Management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Bank considering the essential components of internal control stated inthe Guidance Note on Audit of Internal Financial Controls over Financial Reporting issuedby the Institute of Chartered Accountants of India (the "Guidance Note"). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to the Bank's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.
Our responsibility is to express an opinion on the Bank's internal financial controlsover financial reporting based on our audit. We have conducted our audit in accordancewith the Guidance Note and the Standards on Auditing as specified under section 143(10) ofthe Companies Act 2013 to the extent applicable to an audit of internal financialcontrols both applicable to an audit of Internal Financial Controls and both issued bythe Institute of Chartered Accountants of India. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls over financialreporting was established and maintained and if such controls operated effectively in allmaterial respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the internal financial controls system overfinancial reporting.
Concept of Internal Financial Controls Over Financial Reporting
A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorisations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorised acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the Bank has in all material respects an adequate internal financialcontrols system over financial reporting and such internal financial controls overfinancial reporting were operating effectively as at 31 March 2016 based on the internalcontrol over financial reporting criteria established by the Bank considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.
For K. Venkatachalam Aiyer & Co.
Firm Registration Number: 004610S
Membership Number: 7024
Place : Thrissur
Date : May 30 2016.