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Bank of Maharashtra.

BSE: 532525 Sector: Financials
NSE: MAHABANK ISIN Code: INE457A01014
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VOLUME 275576
52-Week high 31.95
52-Week low 15.40
P/E 9.27
Mkt Cap.(Rs cr) 10,668
Buy Price 15.80
Buy Qty 52109.00
Sell Price 15.85
Sell Qty 9232.00
OPEN 15.85
CLOSE 15.80
VOLUME 275576
52-Week high 31.95
52-Week low 15.40
P/E 9.27
Mkt Cap.(Rs cr) 10,668
Buy Price 15.80
Buy Qty 52109.00
Sell Price 15.85
Sell Qty 9232.00

Bank of Maharashtra. (MAHABANK) - Auditors Report

Company auditors report

To

The President of India and Members of

"BANK OF MAHARASHTRA"

Report on Audit of the Standalone Financial Statements Opinion

1. We have audited the accompanying Standalone Financial Statements of Bank ofMaharashtra (‘the Bank') which comprise the Balance Sheet as at March 31 2021 theProfit and Loss Account and the Statement of Cash Flow for the year then ended and notesto Standalone Financial Statements including a summary of significant accounting policiesand other explanatory information in which are included returns for the year ended onthat date of head office 37 Zone offices for the year ended on that date of 20 branchesand Treasury and International Banking Division audited by us and 1007 branches auditedby statutory branch auditors of the Bank. The branches audited by us and those audited byother auditors have been selected by the Bank in accordance with the guidelines issued tothe Bank by the Reserve Bank of India (RBI) vide notification issued by RBI dated March 15th2021. Also included in the Balance Sheet Profitand Loss Account and Statement of CashFlows are the returns from 903 branches which have not been subjected to audit. Theseunaudited branches account for 8.99% of advances 22.84% of deposits 4.6% of interestincome and 17.74% of interest expenses.

2. In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid Standalone Financial Statements give the information requiredby the Banking Regulation Act 1949 ("the Act") the requirements of the ReserveBank of India in the manner so required and are in conformity with accounting principlesgenerally accepted in India and give:

a) in case of Balance Sheet read with the notes thereon gives true and fair view ofthe state of affairs of the Bank as at March 31 2021;

b) the Profit and Loss Account read with the notes shows a true balance of profit forthe year ended 2021 and

c) the Cash Flow Statement gives a true and fair view of the cash flows for the yearended March 31 2021.

Basis for Opinion

3. We conducted our audit in accordance with the Standards on Auditing (SAs) issued byInstitute of Chartered Accountants of India (ICAI). Our responsibilities under thoseStandards are further described in the Auditors' Responsibilities for the Audit of theStandalone Financial Statements section of our report. We are independent of the Bank inaccordance with the code of ethics issued by the ICAI together with ethical requirementsthat are relevant to our audit of the Standalone Financial Statements 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 andopinion on the Standalone Financial Statements.

Emphasis of Matter

4. We draw attention to Note no. 15 In Schedule 18 of the Financial Statements whichexplains the extent to which COVID-19 pandemic will impact the Bank's operations andfinancial results are dependent on future developments which are highly uncertain. TheBank is continuously monitoring the economic conditions and any impact on the Bank'sOperations and financial results is uncertain.

Our Opinion is not modified in respect of this matter.

Key Audit Matters

5. Key audit matters are those matters that in our professional judgment were of mostsignificance in our audit of the Standalone Financial Statements of the year ended March31 2021. These matters were addressed in the context of our audit of the StandaloneFinancial Statements as a whole and in forming our opinion thereon and we do not providea separate opinion on these matters. We have determined the matters described below as KeyAudit Matters to be communicated in our report:

 

S. No Key Audit Matters How our Audit procedures addressed the Key Audit Matters
1. Classification of Advances Provisioning and other relevant compliance of RBI Guidelines: We have tested the design and operating effectiveness of the Key controls of the system application process over approval recording monitoring and recovery of loans overdue identification of NPA Provision for NPA including verification of valuation reports of experts for primary and collateral securities based on the understanding of the prudential guidelines and overall organisational IT framework of the Bank and its communication through various circulars and reports.
(Refer Note No. 4 of Schedule 17 of Significant Accounting and stressed accounts Policies to the Standalone Financial Statements) We have evaluated the Internal Controls over sanctioning monitoring the process and account for system overrides or bypasses to controls of advances supervisory framework such as Internal Audit Credit Audit Concurrent Audit Systems Audit as well as Internal Check effectiveness of such framework as per the policies and procedures of the bank and in compliance with prudential guidelines.
The Banks portfolio comprises of Net Advances of ` 102405 Crores as at 31st March 2021 comprising of wholesale and retail banking. As required by IRAC Norms guidelines issued by RBI and other circulars notification and directives issued by RBI the Bank has classified Advances and has made appropriate provisions in accordance with such guidelines. We have tested samples of Performing Assets and assessed the application of IRAC Norms as prescribed by RBI individually to ensure compliance of the same. Also reviewed approval of sanctions against Bank's credit Policy and performance of Credit Assessments and controls.
Income from Advances constitutes 49.36% of Total Income. The provision in respect of Non-performing Asset 2213.79 Crores is ` which constitutes 15.88% of the total expenditure.
The carrying value of these advances (net of provisions) may be materially misstated if either individually or in aggregate the IRAC Norms are not properly followed.
The Bank has significant Credit Risk Exposure to a large number of borrowers across a wide range of borrowers. products industries and there is a high degree of complexity. uncertainty judgement involved in recoverability of Advances. estimation of provisions thereon and identification of accounts to be written off. If such prudential guidelines are not followed by the Bank the profit for the year and the net advances position will be materially mis-stated. Hence we consider this as a Key Audit Matter. Examined early warning signal reports other exceptional reports generated by the Bank for the purpose of identifying potential NPA and steps taken for monitoring of such accounts including red flagged accounts to overcome assessed risks and ensure effective implementation of risk management and related controls.
We have adopted a framework the Bank the profit for the year of carrying out detailed and the net advances position verification of corporate will be materially mis-stated. wholesale (including Hence we consider this as a Consortium Pool Buyout and other large borrowers)
We have adopted a framework the Bank the profit for the year of carrying out detailed and the net advances position verification of corporate will be materially mis-stated. wholesale (including Hence we consider this as a Consortium Pool Buyout and other large borrowers) by way of review of collateral documents including valuation reports due diligence report servicing Agreement deed of assignment JLA and External Credit rating reports to assess and focus on larger exposures of the Bank and mitigating the areas of emerging risk. We have discussed with the Senior Management and performed our own assessment including internal and external macroeconomic factors and testing the timelines and the accuracy of risk assessment and risk grading against the Bank's lending policies IRAC Norms and in accordance with Government Policies.
We have examined the Retail advances portfolio of the Bank on sampling basis to ensure effective monitoring and implementation of IRAC norms including income recognition provisioning forf such loans. The Bank has adopted Loan Life Cycle Management System for retail loans which effectively monitors controls the retail portfolio of the Bank and is tested for its effective implementation and performance. We have also tested the completeness and accuracy of the data from the underlying source systems tested the automated calculation and evaluated the bank's oversight of the portfolio.
We have reviewed the Bank's process for granting moratorium and restructuring to borrowers as per the Regulatory Package announced by RBI. We tested the completeness and accuracy of data used for computing general provisions in line with regulatory package issued by RBI. With respect to
additional provision made by the Bank on account of the impact of COVID 19 pandemic we broadly reviewed the underlying assumptions and estimates used by the management for the same but as the extent of impact is dependent on future developments which are highly uncertain we primarily relied on those assumptions and estimates which are subject matter of periodic review by the Bank.
We have examined the adequacy and appropriateness of disclosures against the relevant RBI requirements relating to NPA and applicable Accounting Standards required to be made in accordance with Banking Regulation Act and RBI Circulars.
We have also placed reliance on the Audit reports of the other Statutory Branch Auditors with whom we have made specific communications.
2. Classification and Valuation of Investments:
(Refer Note No. 3 of Schedule 17 of Significant Accounting policies to the Standalone Financial Statements) Investments are classified into Held for Trading (HFT) Available for Sale (AFS) and Held to Maturity (HTM) categories at the time of purchase. Investments intended to be held till maturity are classified as HTM Investments. Classification of Investments valuation and provisioning thereof are based on RBI guidelines. Compliance of Investment Portfolio as per guidelines issued by RBI is mandatory and involves management judgement in determining the value of bonds debentures and other securities based on the policy and the model adopted by the Bank. Impact of Impairment assessment is having a overall significance to the financial results of the Bank. Interest Income from Investment of the Bank comprises 28.66% of the total income in view of these significant points including assessment of non performing Investments and provisions we have identified this aspect as a Key Audit Matter. We have tested the design implementation and operating effectiveness of management's key internal controls of the Bank towards classification valuation process independent price verification including the Bank's review and approval of the estimates and assumptions used for the valuation including key authorisation and data input controls.
We have examined the investment agreement / term sheet entered into during the current year on a sample basis to understand the relevant investment terms and identify any conditions that were relevant to the valuation of financial instruments.
Our Audit approach towards Investment Portfolio of the bank is based on compliance and requirements of RBI circulars and directives in relation to valuation classification identification of
Non Performing Investments Provision for Investments and relevant policies and procedures adopted by the Bank including effective implementation of Internal control system and related process.
We tested accuracy and completeness of adoption of RBI guidelines and directions by reperforming valuations for each category of the securities. Various sampling techniques were adopted to ensure coverage of risk weighted Investments based on the nature of security and were tested for its carrying value in the Financial Statements of the Bank.
We have verified the non performing investments of the bank by the method of independent verification of provisions and depreciation in accordance with RBI guidelines and confirmed the compliance of such guidelines. We have reviewed the application / conversion of interest / principal towards a separate List of Investments and checking whether these Investments are classified as NPI. The samples selected for the same covers the majority categories of Investments to cover the material impact on the income of the Bank.
We have verified Investment portfolio of AFS and HFT on sample basis and performed various substantive analytical procedures in determination of Income gain / loss on sale and tracked the controls implemented by the Bank through credit / debit in the profit and loss account.
We have tested the portfolio of HTM and made detailed verification of transaction of purchase / sale of such HTM and controls implemented by the TIBD in recognizing the profit / loss to profit and loss account and subsequent appropriation to Capital Reserve Account.
We have examined the adequacy and appropriateness of depreciation and Impairment of each category of Investment and recomputed the provision to be maintained in accordance with the RBI Guidelines and ensured that adequate disclosures have been made in Notes to Accounts.
3. Information Technology Systems and Control Framework:
The Bank's key business objective is determined evaluated controlled monitored implemented through complex IT architecture to support high volume of business operation by automation and application which are significant towards Banking business and plays a major role as a backbone in achieving the Business Objective. The Bank's financial accounting process in respect of recognition of Income classification of Assets through IRAC Norms and evaluating the performance of the Bank and producing the desired output through various application and other IT general controls to ensure the required business Output and helps us to arrive at the Audit conclusion to ensure quality performance Financial & Accounting Processes. We have identified various application and control framework in implementing various products and schemes which covers majority of Bank's business and hence we consider Information Technology Systems and Control as a Key Audit Matter. Information Technology forms an integral part of operating requirements of the Bank by way of various applications general software controls and requires understanding of various systems and procedures in evaluating the Risk based and business centric requirements of the Bank.
We have reviewed the various IT policies and procedures including user management change management system security incident management physical and environment security standard operating procedures Segregation of duty BCP DRP service level agreements security policies to ensure these are in line with business requirements of the Bank and to comply with government and RBI regulations.
We have adopted various techniques such as enquiry review of documentation record reports observation and re performance of various application controls by taking adequate samples of instances for our test. We have also tested validation checks using negative testing technique.
We have tested various compensating controls and performed alternate procedures which were necessary and gathered a comprehensive understanding of IT applications landscape implemented by the Bank. It was followed by process understanding mapping of application to the same and understanding financial risk posed by people process and technology.
We have also assessed areas including password policies security configuration system interface controls over changes to applications and databases and that business users and controls to ensure that developers and production support did not have access to change applications the operating systems or databases in the production environment to ensure proper segregation of duties is in place as per the SOP.
We have tested certain critical aspects of cyber security on network security management mechanism operational security of key information infrastructure data and client information management monitoring and emergency management. through certain data drill conducted by the Management and scrutinused by us and comparing the required results.
We have also assessed the requirement of the implementation of Business Continuity Plan initiated by the Bank due to impact of COVID -19 pandemic and ensured sustainability and growth under COVID -19 circumstances.
We have verified the testing report carried out by the Management on risk of implementation of security control in a more holistic comprehensive way ensuring that all business decisions are based on proper Risk assessment and management considering the overall effect of uncertainties on the Bank's Objective.
4. Provisions and Contingent Liability:
Assessment of Provisions and Contingent Liability in respect of certain litigations on various claims filed by other parties not acknowledged as debt (Note No. 10 of Schedule 17 and Note No. 10.15 of Schedule 18) There is high level of judgement required in estimating the level of provisioning. The Bank's assessment is supported by the facts of matter their own judgement past experience and advice from legal and independent experts wherever considered necessary. Accordingly unexpected adverse outcomes may significantly impact the Bank's reported profit and state of affairs presented in Balance Sheet. We determined the above area as a Key Audit Matter in view of associated uncertainty relating to outcome of these matters which requires application of judgement in interpretation of Law. We have obtained an understanding of Internal Controls relevant to the audit in order to design our audit procedures that are appropriate in the circumstances.
Understanding the current status of the litigations / tax assessments. Examining recent orders and communications received from various tax authorities / judicial forums and follow up actions thereon;
Evaluated the merit of the subject matter under consideration with reference to the grounds presented therein and available independent legal / tax advice including opinion of experts. Review and analysis of evaluation of the contentions of the Bank through discussions collection of details of the subject matter under consideration the likely outcome and consequent potential outflows on those issues.
Verified the disclosures related to significant litigations and taxation matters.
Accordingly our audit was focused on analysing the facts of subject matter under consideration and judgements / interpretation of law involved.
Modified Audit Procedures carried out in light of COVID-19 outbreak:
5. In view of the COVID-19 pandemic lockdown and travel restrictions imposed by Central / State Government / Local Authorities during the period of our audit the Bank to facilitated carrying out audit remotely as physical access was prohibited therefore audit could not be conducted by visiting the premises of many Branches / Zones / HO of the bank. As we could not obtain audit evidence in person / physically and personal interactions with the officials at the Branches / Zone / Head Office accordingly our Audit procedures were modified to carry out the Audit remotely. We have identified such modified Audit Procedure as Key Audit Matter. Due to the COVID-19 Pandemic we carried out modified audit procedures to obtain reasonable assurance to form an audit opinion. To carry out modified audit procedure the Bank has made available to us a customized intranet portals hosted on Bank's network enabling us to access reports and documents we sought necessary for the purpose of Audit.
Our modified audit procedure included;
1. Conducted verification of necessary records / documents / CBS and other application software electronically through remote access / emails in respect of some of the Branches / zones of the Bank wherever physical access was prohibited due to COVID-19.
2. Obtained and carried out verification of scanned copies of documents deeds certificates and other related records.
3. Made enquiries to obtain necessary audit evidence through video conferencing dialogues and discussions over phone calls / conference calls emails and similar communication channels.
4. Resolved our audit observations telephonically / through email instead of a face-to-face interaction with the designated officials.

Other Matter

6. We did not audit the financial statements / information of 1007 branches included inthe Standalone Financial Statements of the Bank whose Financial Statements / FinancialInformation reflect total advances of Rs. 58487.62 crores as at March 31 2021 and totalrevenue of Rs. 4284.18 crores for the year ended on that date as considered in theStandalone Financial Statements. The Financial Statements / Information of these brancheshave been audited by the Statutory Branch Auditors whose reports have been furnished tous and in our opinion in so far as it relates to the amounts and disclosures included inrespect of branches is based solely on the report of such Statutory Branch Auditors.Further we did not audit the Financial Statements of 903 branches included in theStandalone Financial Statements of the Bank whose Financial Statements reflect totalassets of Rs. 16138.78 Crores as at March 31 2021 and total revenue of ` 970.19 Croresfor the year ended on that date as considered in the Standalone Financial Statements havebeen drawn by the management.

Our opinion is not modified in respect of this matter.

Information other than the Standalone Financial Statements and Auditors' Report thereon

7. The Bank's Board of Directors are responsible for other information. The otherinformation comprises the information other than Standalone Financial Statements and ourAuditors' Report thereon and the Pillar III disclosure under the Basel III disclosure.

Our opinion on the Standalone Financial Statements does not cover the other informationand Pillar 3 disclosure under the Basel III Disclosure we do not express any form ofassurance / conclusion thereon In connection with our Audit of the Standalone FinancialStatements our responsibility is to read the other information and in doing so considerwhether the other information is materially inconsistent with the Standalone FinancialStatements or our knowledge obtained in the audit or otherwise appears to be materiallymisstated. When we read the Other Information if we conclude that there is materialmisstatement therein we are required to communicate the matters to 'Those charged withGovernance'.

Responsibilities of Management and Those Charged with Governance for the StandaloneFinancial Statements

8. The Bank's Board of Directors is responsible with respect to the preparation ofthese Standalone Financial Statements that give a true and fair view of the financialposition financial performance and cash flows of the Bank in accordance with theaccounting principles generally accepted in India including the Accounting Standardsissued by ICAI and provisions of Section 29 of the Banking Regulation Act 1949 andcirculars and guidelines issued by the Reserve Bank of India (‘RBI') from time totime. This responsibility also includes maintenance of adequate accounting records inaccordance with the provisions of the Act for safeguarding of the assets of the Bank andfor preventing and detecting frauds and other irregularities; selection and application ofappropriate accounting policies; making judgments and estimates that are reasonable andprudent; and design implementation and maintenance of adequate internal financialcontrols that were operating effectively for ensuring the accuracy and completeness ofthe accounting records relevant to the preparation and presentation of the financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.

In preparing the financial statements management is responsible for assessing theBank's ability to continue as a going concern disclosing as applicable matters relatedto going concern and using the going concern basis of accounting unless the Board ofDirectors either intends to liquidate the Bank or to cease operations or has no realisticalternative but to do so. The respective Board of Directors are also responsible foroverseeing the Bank's Financial Reporting process.

Auditors' Responsibilities for the Audit of the Standalone Financial Statements

9. Our objectives are to obtain reasonable assurance about whether the financialstatements as a whole are free from material misstatement whether due to fraud or errorand to issue an auditors' report that includes our opinion. Reasonable assurance is a highlevel of assurance but is not a guarantee that an audit conducted in accordance with SAswill always detect a material misstatement when it exists. Misstatements can arise fromfraud or error and are considered material if individually or in the aggregate theycould reasonably be expected to influence the economic decisions of users taken on thebasis of these Standalone Financial Statements. As part of an audit in accordance withSAs we exercise professional judgment and maintain professional skepticism throughout theaudit. We also:

• Identify and assess the risks of material misstatement of the FinancialStatements whether due to fraud or error design and perform audit procedures responsiveto those risks and obtain audit evidence that is sufficient and appropriate to provide abasis for our opinion. The risk of not detecting a material misstatement resulting fromfraud is higher than for one resulting from error as fraud may involve collusionforgery intentional omissions misrepresentations or the override of internal control.

• Obtain an understanding of Internal Control relevant to the Audit in order todesign Audit procedures that are appropriate in the circumstances.

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

• Conclude on the appropriateness of management's use of the going concern basisof accounting and based on the audit evidence obtained whether a material uncertaintyexists related to events or conditions that may cast significant doubt on the bank'sability to continue as a going concern. If we conclude that a material uncertainty existswe are required to draw attention in our auditors' report to the related disclosures inthe 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 auditors'report. However future events or conditions may cause the bank to cease to continue as agoing concern.

• Evaluate the overall presentation structure and content of the FinancialStatements including the disclosures and whether the Financial Statements represent theunderlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the Standalone Financial Statementsthat individually or in aggregate makes it probable that the economic decisions of areasonably knowledgeable user of Standalone Financial Statements may be influenced. Weconsider quantitative materiality and qualitative factors in

(i) planning the scope of our Audit work and evaluating the results of our work; and

(ii) to evaluate the effect of identified misstatements in the Standalone FinancialStatements. We communicate with those charged with governance regarding among othermatters 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 we havecomplied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards. From the matters communicatedwith those charged with governance we determine those matters that were of mostsignificance in the audit of the Financial Statements of the current period and aretherefore the key audit matters. We describe these matters in our auditors' report unlesslaw or regulation precludes public disclosure about the matter or when in extremely rarecircumstances we determine that a matter should not be communicated in our report becausethe adverse consequences of doing so would reasonably be expected to outweigh the publicinterest benefits of such communication.

Report on Other Legal and Regulatory Requirements

10. The Balance Sheet and the Profit and Loss Account have been drawn up in accordancewith Section 29 of the Banking Regulation Act 1949;

11. Subject to the limitations of the audit indicated in paragraphs 6 to 9 above and asrequired by sub section 3 of section 30 of the Banking Regulation Act 1949 and subjectalso to the limitations of disclosure required therein we report that:

a) We have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purposes 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 have been found adequate for the purposes ofour audit.

12. As required by letter no. DOS.ARG.No.6270/08.91.001/2019- 20 dated March 17 2020on "Appointment of Statutory Central Auditors (SCAs) in Public Sector Banks Reportingobligations for SCAs from FY 2019-20" read with subsequent communication dated May19 2020 issued by the RBI we further report on the matters specified in paragraph 2 ofthe aforesaid letter as under:

a) In our opinion the aforesaid Standalone Financial Statements comply with theAccounting Standards issued by ICAI to the extent they are not inconsistent with theaccounting policies prescribed by the RBI.

b) There are no observations or comments on financial transactions or matters whichhave any adverse effect on the functioning of the bank.

c) On the basis of the written representations received from the directors as on March31 2021 none of the directors is disqualified as on March 31 2021 from being appointedas a director in terms of sub-section (2) of Section 164 of the Companies Act 2013.

d) There are no qualifications reservations or adverse remarks relating to themaintenance of accounts and other matters connected therewith.

e) Our audit report on the adequacy and operating effectiveness of the Bank's internalfinancial controls over financial reporting is given in Annexure A to this report. Ourreport expresses an unmodified opinion on the Bank's internal financial controls overfinancial reporting as at March 312021.

13. We further report that:

a) 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 and proper returns adequatefor the purposes of our audit have been received from branches not visited by us;

b) the Balance Sheet the Profit and Statement of Cash Flows dealt with by this reportare in agreement with the books of accounts and with the returns received from thebranches not visited by us;

c) the reports on the accounts of the branch offices audited by branch auditors of theBank under section 29 of the Banking Regulation Act 1949 have been sent to us and havebeen properly dealt with by us in preparing this report; and

d) in our opinion the Balance Sheet the Profit and Loss Account and the Statement ofCash Flows comply with the applicable accounting standards to the extent they are notinconsistent with the accounting policies prescribed by RBI.

ANNEXURE "A" TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in paragraph 12 under ‘Report on Other Legal and RegulatoryRequirements' section of our report of even date)

Report on the Internal Financial Controls Over Financial Reporting as required by theReserve Bank of India (the "RBI") Letter DOS.ARG. No.6270/08.91.001/2019-20dated March 17 2020 (as amended) (the "RBI communication")

We have audited the internal financial controls over financial reporting of Bank ofMaharashtra ("the Bank") as of March 31 2021 in conjunction with our audit ofthe standalone financial statements of the Bank for the year ended on that date whichincludes internal financial controls over financial reporting of the Bank's branches.

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. These responsibilities include thedesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the orderly and efficient conduct of its businessincluding adherence to the Bank's policies the safeguarding of its assets the preventionand detection of frauds and errors the accuracy and completeness of the accountingrecords and the timely preparation of reliable financial information as required underthe Banking Regulation Act 1949 and the circulars and guidelines issued by the ReserveBank of India.

Auditor's Responsibility

Our responsibility is to express an opinion on the Bank's internal financial controlsover financial reporting based on our audit. We conducted our audit in accordance with theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting (the"Guidance Note") issued by the Institute of Chartered Accountants of India (the"ICAI") and the Standards on Auditing (SAs) issued by the ICAI to the extentapplicable to an audit of internal financial controls. Those Standards and the GuidanceNote require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether adequate internal financial controls overfinancial reporting were established and maintained and if such controls operatedeffectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls 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 financial controls based on the assessed risk. Theprocedures selected depend on the auditor's judgement including the assessment of therisks of material misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained and the audit evidence obtained bythe branch auditors in terms of their reports referred to in the Other Matters paragraphbelow is appropriate to provide a basis for our audit opinion on the Bank's internalfinancial controls over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A Bank's internal financial controls over financial reporting is a process designed toprovide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A Bank's internal financial controls 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 Bank; (2) provide reasonable assurance that transactionsare recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles and that receipts and expenditures of the Bankare being made only in accordance with authorisations of management and directors of theBank; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the Bank's assets that could have amaterial 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 controlsover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us and based on the consideration of the reports of the branch auditors referredto in the Other Matters paragraph below the Bank has in all material respects adequateinternal financial controls over financial reporting and such internal financial controlsover financial reporting were operating effectively as at March 31 2021 based on thecriteria for internal control over financial reporting established by the Bank consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

Other Matters

Our aforesaid report insofar as it relates to the operating effectiveness of internalfinancial controls over financial reporting of 104 branches is based on the correspondingreports of the respective branch auditors of those branches.

During our testing of the internal financial controls over financial reporting andbased on the report of the branch auditors certain deficiencies were noticed by us. Bankneeds to further strengthen the process including alteration of the existing Risk ControlMatrix (RCM) and designing a few more RCMs. Our detailed report in this regard has beensubmitted to the Management to further strengthen the internal financial controls overfinancial reporting of the Bank. Our opinion is not modified in respect of this matter.

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