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Bandhan Bank Ltd.

BSE: 541153 Sector: Financials
NSE: BANDHANBNK ISIN Code: INE545U01014
BSE 00:00 | 06 Dec 562.35 -14.60
(-2.53%)
OPEN

584.00

HIGH

584.00

LOW

551.60

NSE 00:00 | 06 Dec 562.55 -14.85
(-2.57%)
OPEN

580.25

HIGH

581.25

LOW

551.40

OPEN 584.00
PREVIOUS CLOSE 576.95
VOLUME 691185
52-Week high 650.00
52-Week low 397.65
P/E 32.83
Mkt Cap.(Rs cr) 90,542
Buy Price 562.35
Buy Qty 495.00
Sell Price 565.10
Sell Qty 45.00
OPEN 584.00
CLOSE 576.95
VOLUME 691185
52-Week high 650.00
52-Week low 397.65
P/E 32.83
Mkt Cap.(Rs cr) 90,542
Buy Price 562.35
Buy Qty 495.00
Sell Price 565.10
Sell Qty 45.00

Bandhan Bank Ltd. (BANDHANBNK) - Auditors Report

Company auditors report

To

The Members of Bandhan Bank Limited

Report on the Audit of the Financial Statements Opinion

We have audited the accompanying financial statements of Bandhan BankLimited ("the Bank") which comprise the Balance sheet as at March 31 2019 theProfit and Loss Account the Cash Flow Statement for the year then ended and notes to thefinancial statements including a summary of significant accounting policies and otherexplanatory information.

In our opinion and to the best of our information and according to theexplanations given to us the aforesaid financial statements give the information requiredby the Banking Regulation Act 1949 and the Companies Act 2013 as amended ("theAct") in the manner so required for the banking companies and give a true and fairview in conformity with the accounting principles generally accepted in India of thestate of affairs of the Bank as at March 31 2019 its profit and its cash flows for theyear ended on that date.

Basis for Opinion

We conducted our audit of the financial statements in accordance withthe Standards on Auditing (SAs) as specified under section 143(10) of the Act. Ourresponsibilities under those Standards are further described in the 'Auditor'sResponsibilities for the Audit of the Financial Statements' section of our report. We areindependent of the Bank in accordance with the 'Code of Ethics' issued by the Institute ofChartered Accountants of India together

with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Act and the Rules thereunder and we havefulfilled our other ethical responsibilities in accordance with these requirements and theCode of Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the financial statements.

Key Audit Matters

Key audit matters are those matters that in our professional judgmentwere of most significance in our audit of the financial statements for the financial yearended March 31 2019. These matters were addressed in the context of our audit of thefinancial statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. For each matter below our description of how ouraudit addressed the matter is provided in that context.

We have determined the matters described below to be the key auditmatters to be communicated in our report. We have fulfilled the responsibilities describedin the Auditor's responsibilities for the audit of the financial statements section of ourreport including in relation to these matters. Accordingly our audit included theperformance of procedures designed to respond to our assessment of the risks of materialmisstatement of the financial statements. The results of our audit procedures includingthe procedures performed to address the matters below provide the basis for our auditopinion on the accompanying financial statements.

Key audit matters How our audit addressed the key audit matter
(a) Identification of Non Performing Advances and provisioning for Advances (Refer Schedule 17.4.3 to the financial statements)
Loans and advances constitute a major portion of the Bank's assets and the quality of the Bank's loan portfolio is measured in terms of the proportion of non-performing assets (NPAs) to • We considered the Bank's accounting policies for NPA identification and provisioning and assessing compliance with the prudential norms prescribed by the RBI (IRAC Norms).
the total loans and advances. As at March 31 2019 the Bank has reported total gross loans and advances of र4023463.28 lakhs (March 31 2018: र2991327.29 lakhs) gross nonperforming advances of र81955.65 lakhs (March 31 2018: र37314.06 lakhs) and a corresponding provision for nonperforming advances of र59123.91 lakhs (March 31 2018: र20 023.68 lakhs). • Tested the operating effectiveness of the controls (including application and IT dependent controls) for classification of loans in the respective asset classes viz. standard sub-standard doubtful and loss with reference to IRAC norms.
• Performed test of details to test whether the provisioning rates applied for respective asset classes were in accordance
Identification and provisioning of NPAs is governed by the prudential norms prescribed by the Reserve Bank of India (RBI). These norms prescribe several criteria for a loan to be classified as a NPA including overdue aging. with the Bank's accounting policies and assessed the rates used by the management wherever such rates were higher than the minimum rates prescribed by RBI.
• Performed inquiries with the credit and risk departments to ascertain if there were indicators of stress or an occurrence of an event of default in a particular loan account or any product category which need to be considered as NPA
Given the volume and variety of loans judgement is involved in the application of RBI norms for classification of loans as NPA and in view of the significance of this area to the overall audit of financial statements it has been considered as a key audit matter. • Considered the special mention accounts (SMA) reports submitted by the Bank to the RBI's central repository of information on large credits (CRILC) to assess whether any accounts from such reporting need to be considered as non-performing.
• Tested the Bank's controls to identify loan accounts of a common borrower to ensure all facilities availed by a delinquent customer are classified as NPA.
• Reviewed the fraud listing and the fraud returns submitted by the Bank during the year to Reserve Bank of India ( RBI ) and verified that provision are as per IRAC norms
• Performed analytical procedures on various financial and non-financial parameters to test accounts identified as NPA.
• Tested the arithmetical accuracy of computation of provision for Advances.
(b) IT systems and controls
As a Scheduled Commercial Bank that operates on core banking solution across its branches the reliability and security of IT systems plays a key role in the business operations. The Bank continued to be highly dependent on third party service providers for its core IT infrastructure. Since large volume of • For testing the IT general controls and application controls we included specialized IT auditors as part of our audit team. The specialized team also assisted in testing the accuracy of the information produced by the Bank's IT systems.
transactions are processed daily the IT controls are required to ensure that applications process data as expected and that changes are made in an appropriate manner. • We tested the design and operating effectiveness of the Bank's IT access controls over the information systems that are critical to financial reporting.
The IT infrastructure is critical for smooth functioning of the Bank's business operations as well as for timely and accurate financial accounting and reporting. • We tested IT general controls (logical access changes management and aspects of IT operational controls). This included testing that requests for access to systems were reviewed and authorized.
Due to the pervasive nature and complexity of the IT environment we have ascertained IT systems and controls as a key audit matter. • We inspected requests of changes to systems for approval and authorization. We considered the control environment relating to various interfaces configuration and other application controls identified as key to our audit.
• In addition to the above we tested the design and operating effectiveness of certain automated controls that were considered as key internal controls over financial reporting.
• If deficiencies were identified we tested compensating controls or performed alternate procedures.

Information Other than the Financial Statements and Auditor's ReportThereon

The Bank's Board of Directors is responsible for the other information.The other information comprises the information included in the Annual report but doesnot include the financial statements and our auditor's report thereon.

Our opinion on the financial statements does not cover the otherinformation and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements ourresponsibility is to read the other information and in doing so consider whether theother information is materially inconsistent with the financial statements or ourknowledge obtained in the audit or otherwise appears to be materially misstated. If basedon the work we have performed we conclude that there is a material misstatement of thisother information we are required to report that fact. We have nothing to report in thisregard.

Responsibilities of Management and the Board of Directors for theFinancial Statements

The Bank's Board of Directors is responsible for the matters stated insection 134(5) of the Act with respect to the preparation of these financial statementsthat give a true and fair view of the financial position financial performance cashflows of the Bank in accordance with the provisions of Section 29 of the BankingRegulation Act 1949 accounting principles generally accepted in India including theAccounting Standards specified under section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014 in so far as they apply to the Bank provision of section29 of the Banking Regulation Act 1949 and the circulars guidelines and directions issuedby Reserve Bank of India ("RBI") from time to time.

This responsibility also includes maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding of the assets of theBank and for preventing and detecting frauds and other irregularities; selection andapplication of appropriate accounting policies; making judgments and estimates that arereasonable and prudent; and the design implementation and maintenance of adequateinternal financial controls that were operating effectively for ensuring the accuracy andcompleteness of the accounting records relevant to the preparation and presentation ofthe financial statements that give a true and fair view and are free from materialmisstatement whether due to fraud or error.

In preparing the financial statements management is responsible forassessing the Bank's ability to continue as a going concern disclosing as applicablematters related to going concern and using the going concern basis of accounting unlessmanagement either intends to liquidate the Bank or to cease operations or has norealistic alternative but to do so.

Those Charged with Governance are also responsible for overseeing theBank's financial reporting process.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether thefinancial statements as a whole are free from material misstatement whether due to fraudor error and to issue an auditor's report that includes our opinion. Reasonable assuranceis a high level of assurance but is not a guarantee that an audit conducted in accordancewith SAs will always detect a material misstatement when it exists. Misstatements canarise from fraud or error and are considered material if individually or in theaggregate they could reasonably be expected to influence the economic decisions of userstaken on the basis of these financial statements.

As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of thefinancial statements whether due to fraud or error designp>

and perform audit procedures responsive to those risks and obtainaudit evidence that is sufficient and appropriate to provide a basis for our opinion. Therisk of not detecting a material misstatement resulting from fraud is higher than for oneresulting from error as fraud may involve collusion forgery intentional omissionsmisrepresentations or the override of internal control.

• Obtain an understanding of internal control relevant to theaudit in order to design audit procedures that are appropriate in the circumstances. Undersection 143(3)(i) of the Act we are also responsible for expressing our opinion onwhether the Bank has adequate internal financial controls system in place and theoperating effectiveness of such controls.

• Evaluate the appropriateness of accounting policies used and thereasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theBank's ability to continue as a going concern. If we conclude that a material uncertaintyexists we are required to draw attention in our auditor's report to the relateddisclosures in the financial statements or if such disclosures are inadequate to modifyour opinion. Our conclusions are based on the audit evidence obtained up to the date ofour auditor's report. However future events or conditions may cause the Bank to cease tocontinue as a going concern.

• Evaluate the overall presentation structure and content of thefinancial statements including the disclosures and whether the financial statementsrepresent the underlying transactions and events in a manner that achieves fairpresentation.

We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal control that we identify during ouraudit.

We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and tocommunicate with them all relationships and other matters that may reasonably be thoughtto bear on our independence and where applicable related safeguards.

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the financialstatements for the financial year ended March 31 2019 and are therefore the key auditmatters. We describe these matters in our auditor's report unless law or regulationprecludes public disclosure about the matter or when in extremely rare circumstances wedetermine that a matter should not be communicated in our report because the adverseconsequences of doing so would reasonably be expected to outweigh the public interestbenefits of such communication.

Report on Other Legal and Regulatory Requirements

1. The Balance Sheet and the Profit and Loss Account have been drawn upin accordance with the provisions of Section 29 of the Banking Regulation Act 1949 readwith the Companies (Accounting Standards) Rules 2006 (as amended) specified under section133 of the Act read with the Companies (Accounts) Rules 2014.

2. As required sub section (3) of section 30 of the Banking RegulationAct 1949 and the appointment letter dated August 8 2018 we report that:

a. We have obtained all the information and explanations which to thebest of our knowledge and belief were necessary for the purpose of our audit and havefound them to be satisfactory;

b. The transactions of the Bank which have come to our notice havebeen within the powers of the Bank; and

c. The financial accounting systems of the Bank are centralised andtherefore accounting returns for the purpose of preparing financial statements are notrequired to be submitted by the branches; we have visited 38 branches and 32 DoorstepService Centers (DSCs) associated with the Bank branches for the purpose of our audit.

3. As required by Section 143(3) of the Act we report that:

a. We have sought and obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit;

b. In our opinion proper books of account as required by law have beenkept by the Bank so far as it appears from our examination of those books;

c. The Balance Sheet the Profit and Loss Account the Cash FlowStatement dealt with by this Report are in agreement with the books of account;

d. In our opinion the aforesaid financial statements comply with theCompanies (Accounting Standards) Rules 2006 (as amended) specified under section 133 ofthe Act read with the Companies (Accounts) Rules 2014 to the extent they are notinconsistent with the accounting policies prescribed by RBI;

e. On the basis of the written representations received from thedirectors as on March 31 2019 taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2019 from being appointed as a director in termsof Section 164 (2) of the Act;

f. With respect to the adequacy of the internal financial controls overfinancial reporting of the Bank with reference to these financial statements and theoperating effectiveness of such controls refer to our separate Report in "Annexure1" to this report;

g. In our opinion the entity being a banking company the remunerationto the whole-time director during the year ended March 31 2019 has been paid by the Bankin accordance with the provisions of Section 35B (1) of the Banking Regulation Act 1949;and

h. With respect to the other matters to be included in the Auditor'sReport in accordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 asamended in our opinion and to the best of our information and according to theexplanations given to us:

i. The Bank has disclosed the impact of pending litigations on itsfinancial position in its financial statements - Refer Note 12 to the financialstatements;

ii. The Bank did not have any long-term contracts including derivativecontracts for which there were any material foreseeable losses;

iii. There were no amounts which were required to be transferred to theInvestor Education and Protection Fund by the Bank.

For S. R. Batliboi & Associates LLP

Chartered Accountants

Firm's Registration No.: 101049W/E300004

per Amit Kabra

Partner

Membership No.: 094533

Place: Mumbai Date: May 2 2019

Annexure 1 to the Independent Auditor's Report of Even Date on theFinancial Statements of Bandhan Bank Limted

Report on the Internal Financial Controls under Clause (i) ofSub-section 3 of Section 143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financialreporting of Bandhan Bank Limited ("the Bank") as of March 31 2019 inconjunction with our audit of the financial statements of the Bank for the year ended onthat date.

Management's Responsibility for Internal Financial Controls

The Bank's Management is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Bank considering the essential components of internal controlstated in the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India. 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.

Auditor's Responsibility

Our responsibility is to express an opinion on the Bank's internalfinancial controls over financial reporting with reference to these financial statementsbased on our audit. We conducted our audit in accordance with the Guidance Note on Auditof Internal Financial Controls Over Financial Reporting (the "Guidance Note")and the Standards on Auditing as specified under section 143(10) of the Companies Act2013 to the extent applicable to an audit of internal financial controls and both issuedby the 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 with reference to these financial statements was established and maintained andif such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the internal financial controls over financial reporting with reference tothese financial statements and their operating effectiveness. Our audit of internalfinancial controls over financial reporting included obtaining an understanding of

internal financial controls over financial reporting with reference tothese financial statements assessing the risk that a material weakness exists andtesting and evaluating the design and operating effectiveness of internal control based onthe assessed risk. The procedures selected depend on the auditor's judgement includingthe assessment of the risks of material misstatement of the financial statements whetherdue to fraud or error.

We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our audit opinion on the internal financial controlsover financial reporting with reference to these financial statements.

Meaning of Internal Financial Controls Over Financial Reporting withReference to these Financial Statements

A bank's internal financial control over financial reporting withreference to these financial statements is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally acceptedaccounting principles. A bank's internal financial control over financial reporting withreference to these financial statements includes those policies and procedures that (1)pertain to the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the bank; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accounting principles and thatreceipts and expenditures of the Bank are being made only in accordance withauthorisations of management and directors of the bank; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorised acquisition use ordisposition of the bank's assets that could have a material effect on the financialstatements.

Inherent Limitations of Internal Financial Controls Over FinancialReporting with Reference to these Financial Statements

Because of the inherent limitations of internal financial controls overfinancial reporting with reference to these financial statements including thepossibility of collusion or improper management override of controls materialmisstatements due to error or fraud may occur and not be detected. Also projections ofany evaluation of the internal financial controls over financial reporting with referenceto these financial statements to future periods are subject to the risk that the internalfinancial control over financial reporting with reference to these financial statementsmay become

inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Bank has in all material respects adequateinternal financial controls over financial reporting with reference to these financialstatements and such internal financial controls over financial reporting with reference tothese financial statements were operating effectively as at March 31 2019 based on theinternal control over financial reporting criteria established by the Bank considering theessential components of internal control stated in the Guidance Note on Audit of InternalFinancial Controls

For S. R. Batliboi & Associates LLP

Chartered Accountants

Firm's Registration No.: 101049W/E300004

per Amit Kabra

Partner

Membership No.: 094533 Place: Mumbai Date: May 2 2019