To the Members of CSB Bank Limited
(Formerly The Catholic Syrian Bank Limited)
Report on audit of the Financial Statements Opinion
We have audited the financial statements of CSB Bank Limited (Formerly The CatholicSyrian Bank Limited) (the Bank') which comprise the Balance Sheet as at 31stMarch 2020 the Statement of Profit and Loss and the Statement of Cash Flows for the yearthen ended and notes to the financial statements including a summary of significantaccounting policies and other explanatory information in which are included the Returns of431 branches/departments for the year ended on that date audited by the branch auditorsof the Bank's branches/ departments located at various places in India.
In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid financial statements give the information required by theBanking Regulation Act 1949 as well as the Companies Act 2013 in the manner so requiredfor banking companies and are in conformity with accounting principles generally acceptedin India and give a true and fair view of the state of affairs of the Bank as at 31stMarch 2020 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) specifiedunder section 143(10) of the Companies Act 2013. Our responsibilities under thoseStandards are further described in the Auditor's Responsibilities for the Audit of theFinancial Statements section of our report. We are independent of the Bank in accordancewith the Code of Ethics issued by the Institute of Chartered Accountants of India togetherwith the ethical requirements that are relevant to our audit of the financial statementsunder the provisions of the Companies Act 2013 and the Rules there under 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 opinion.
Emphasis of Matter
We draw attention to Note 1.5 of Schedule 18 to the Financial Results on the Bankhaving3 recognized provision on certain loans that were though overdue but standard as at29th February 2020 for which moratorium benefit has been granted based on thedays past due status as on that date in accordance with the Reserve Bank of India COVID-19Regulatory Package and also the extent to which the COVID19 pandemic will have an impacton the Bank's financial performance which 3is dependent on future developments which arehighly uncertain.
Our opinion on the financial results is not modified in respect of the above matters.
Key Audit Matters
Key Audit Matters are those matters that in our professional judgment were of mostsignificant in our audit of the Financial Statements for the year ended 31st March2020. These matters were addressed in the context of our audit of the Financial Statementsas a whole and in forming our opinion thereon and we do not provide a separate opinion onthese matters. We have determined the matters described below to be the Key Audit Mattersto be communicated in our report:
|Sr. No. Key Audit Matters ||How the matter was addressed in our audit |
|i Classification of Advances Income Recognition ||Our audit approach towards advances with reference to the |
|Identification of and provisioning for non- performing Advances ||IRAC norms and other related circulars/directives issued by the |
| ||Reserve Bank of India and also internal policies and procedures of the Bank includes the testing of the following |
|Advances include Bills purchased and discounted Cash credits Overdrafts Loans repayable on demand and Term loans. These are further categorized as secured by Tangible assets (including advances against Book Debts) covered by Bank/Government || |
| ||a. The accuracy of the data input in the system for income recognition classification into performing and nonperforming |
| ||Advances and provisioning in accordance with the IRAC Norms in respect of the branches audited by us; |
|Guarantees and Unsecured advances. || |
|i Advances constitute 60 per cent of the Bank's total assets. They are inter-alia governed by income recognition asset classification and provisioning (IRAC) norms and other circulars and directives issued by the Reserve Bank of India from time to time relating to classification of Advances into performing and non-performing Advances (NPA) The Bank classifies the Advances based on IRAC norms as per its accounting policy ||b. Existence and effectiveness of monitoring mechanisms such as Internal Audit Systems Audit Credit Audit and Concurrent Audit as per the policies and procedures of the Bank; |
| ||c. Examination of advances including stressed advances on a sample basis with respect to compliance with the RBI Master Circulars / Guidelines; |
| ||d. We have also relied on the reports with respect to parameters inbuilt in CBS for tracking identification and stamping of NPAs and provisioning in respect thereof; |
|Identification of performing and non-performing Advances involves establishment of proper mechanism. The Bank accounts for all the transactions related to Advances in its Information || |
| ||e. We tested the mapping of advances in the workings for the financial statement preparation to ensure compliance with the presentation and disclosure requirements as per the RBI Circulars/directions; |
|Technology System (IT System) viz. Core Banking Solution (CBS) which also identifies whether the advances are performing or non-performing. || |
| ||f. We have examined the efficacy of various internal controls over advances to determine the nature timing and extent of the substantive procedures and compliance with the observations of the various audits conducted as per the monitoring mechanism of the Bank and annual review by Reserve Bank of India; |
|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. || |
|Considering the nature of the transactions regulatory requirements existing business environment estimation/ judgment involved in valuation of securities it is a matter of high importance for the intended users of the Financial Statements. ||g. In carrying out substantive procedures at the branches audited by us we have examined all large advances/stressed advances while other advances have been examined on a sample basis including review of valuation reports of independent valuer's provided by the Bank's management; |
|Considering these aspects we have determined this as a Key Audit Matter. || |
| ||h. We assessed and evaluated the process of identification of NPAs and corresponding reversal of income and creation of provision; |
|Accordingly our audit was focused on income recognition asset classification and provisioning pertaining to advances due to the materiality of the amount involved || |
| ||i. Reliance is also placed on Audit Reports of other Statutory Branch Auditors with whom we have also made specific communication where ever required. |
|ii Key Information Technology (IT Systems) used in financial reporting process ||We conducted an assessment and identified key IT applications databases and operating systems that are relevant to our audit and have identified CBS and Treasury System primarily as relevant for financial reporting. |
|The Bank's operational and financial processes are dependent on IT systems due to large volume of transactions that are processed on daily basis and hence considered as a Key Audit Matter || |
| ||Our audit approach consisted testing of the design and operating effectiveness of the internal controls as follows: |
| ||- Obtained an understanding of the Bank's IT control environment and IT policies during the audit period |
| ||- Reviewed the design implementation and operating effectiveness of the Bank's basic IT controls including application access control that are critical to financial reporting. |
| ||- Reviewed the IS Audit Reports and discussed with IT Department on compliance with key IT controls. |
| ||- Tested key automated and business cycle controls that are relevant to financial reporting on a test check basis. |
|iii Modified Audit Procedure carried out in light of COVID-19 outbreak: ||Due to the outbreak of COVID-19 pandemic that caused nationwide lockdown and other travel restrictions imposed by the Central and State Governments/local administration during the period of our audit we could not travel to all the Branches to be audited by us and carry out the audit processes physically at the respective offices. |
|Due to COVID-19 pandemic and consequent nation- wide lockdown and travel restrictions imposed by Central / State Government / Local Authorities during the period of our audit and the Reserve Bank of India directions to Bank to facilitate carrying out audit remotely wherever physical access was not possible audit could not be conducted by visiting the premises of certain Branches / departments. As we could not gather audit evidence physically or in person the same was carried through discussions and personal interactions with the officials at the identified such modified audit procedure as a Key Audit Matter.c || |
| ||Wherever physical access was not possible necessary records/ reports/ documents/ certificates were made available to us by the Bank through digital medium emails and remote access to CBS and other relevant application software. To this extent the audit process was carried out on the basis of such documents reports and records made available to us which were relied upon as audit evidence for conducting the audit and reporting for the current period. |
| ||Accordingly we modified our audit procedure as follows: |
| ||a. Carried out verification of necessary records/ documents/ CBS and other application software electronically through remote access/emails in respect of the Branches where physical access was not possible. |
|Accordingly our audit procedure was modified to || |
| ||c. Making enquiries and gathering necessary audit evidence through conferencing dialogues and discussions over phone calls/conference calls emails and similar communication channels. |
| ||d. Resolution of our audit observations telephonically/ through email instead of a face-to-face interaction with the designated officials. |
Information other than the Financial Statements and Auditors Report thereon
The Company's Board of Directors is responsible for the Information other than thefinancial statements and auditor's report thereon. The said information comprises theinformation included in the Directors Report and Managing Director & CEO communiqu(Other information) but does not include the financial statements and our audit reportthereon. The Other Information is expected to be made available to us after the date ofthis auditor's report.
Our opinion on the financial statements does not cover the other information and wewill not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements our responsibility is to readthe other information identified above when it becomes available and in doing soconsider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit otherwise appear to be materiallymisstated 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 withgovernance and Reserve Bank of India.
Responsibilities of Management and Those Charged with Governance for the FinancialStatements
The Bank's Board of Directors is responsible for the matters stated in section134(5) ofthe Companies Act
2013 (the Act') with respect to the preparation of these financial statementsthat give a true and fair view of the financial position financial performance and cashflows of the Bank in accordance with the accounting principles generally accepted inIndia including the Accounting Standards specified under section 133 of the Act andprovisions of Section 29 of the Banking Regulation Act 1949 and circulars and guidelinesissued by the Reserve Bank of India from time to time. 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 design implementation andmaintenance of adequate internal financial controls 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 Fairview andare free from material misstatement whether due 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 management eitherintends to liquidate the Bank or to cease operations or has no realistic alternative butto do so.
Auditor's Responsibilities for the audit of the Financial Statements
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 auditor's 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 financial statements.
As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional scepticism throughout the audit. 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 insufficient 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 inorder to design audit procedures that are appropriate in the circumstances. Under section143(3)(i) of the Companies Act 2013 we are also responsible for expressing our opinionon whether 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 going concernbasis 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 the financialstatements including the disclosures and whether the financial statements represent theunderlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding among other matters theplanned scope and timing of the audit and significant audit findings including anysignificant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have compliedwith relevant ethical requirements regarding independence and to communicate with themall relationships and other matters that may reasonably be thought to bear on ourindependence and where applicable related safeguards.
From the matters communicated with those charged with governance we determine thosematters that were of most significant in the audit of the financial statements of thecurrent period and are therefore the key audit matters. We describe these matters in ourauditor's report unless law or regulation precludes public disclosure about the matter orwhen in extremely rare circumstances we determine that a matter should not becommunicated in our report because the adverse consequences of doing so would reasonablybe expected to outweigh the public interest benefits of such communication.
We did not audit the financial statements / information of 431 branches/departmentsincluded in the financial statements of the Bank whose financial statements / financialinformation reflect total assets of Rs. 7626.13 Crores as at 31st March 2020and total revenue of Rs. 810.65 Crores for the year ended on that date as considered inthe financial statements.The financial statements / information of these branches havebeen audited by the branch auditors whose reports have been furnished to us and in ouropinion in so far as it relates to the amounts and disclosures included in respect ofbranches are based solely on the report of such branch auditors.
Our opinion is not modified in respect of this matter.
Report on Other Legal and Regulatory Requirements
The Balance Sheet and the Profit and Loss Account have been drawn up in accordance withthe provisions of Section 29 of the Banking Regulation Act 1949 and Section 133 of theCompanies Act 2013 read with Rule 7 of the Companies (Accounts) Rules 2014.
As required by sub-section (3) of section 30 of the Banking Regulation Act 1949 wereport that: (a) we have obtained all the information and explanations which to the bestof our knowledge and belief were necessary for the purpose of our audit and have foundthem to be satisfactory; (b) the transactions of the Bank which have come to our noticehave been within the powers of the Bank;
(c) the returns received from the offices and branches of the Bank have been foundadequate for the purposes of our audit.
Further as required by section 143(3) of the Act we report that: a) we have soughtand obtained all the information and explanations which to the best of our knowledge andbelief were necessary for the purpose of our audit; b) in our opinion proper books ofaccount as required by law have been kept by the Bank so far as it appears from ourexamination of those books and proper returns adequate for the purposes of our audit havebeen received from branches not visited by us. c) the reports on the accounts of thebranch offices of the bank audited under section 143(8) of the Act by branch auditors ofthe Bank have been sent to us and have been properly dealt with by us in preparing thisreport d) the Balance Sheet the Statement of Profit and Loss and the Statement of CashFlows dealt with by this report are in agreement with the books of account and with thereturns received from the branches not visited by us; e) in our opinion the aforesaidfinancial statements comply with the Accounting Standards specified under Section 133 ofthe Act read with Rule7 of the Companies (Accounts) Rules 2014 to the extent they arenot inconsistent with the accounting policies prescribed by Reserve Bank of India f) onthe basis of written representations received from the directors as on 31st March2020 and taken on record by the Board of Directors none of the directors is disqualifiedas on 31st March 2020 from being appointed as a director in terms of Section164(2) of the Act; g) with respect to the adequacy of the internal financial controls overfinancial reporting of the Bank and the operating effectiveness of such controls refer toour separate Report in "Annexure A"; h) with respect to the other matters to beincluded in the Auditor's Report in accordance with Rule 11 of the Companies (Audit andAuditors) Rules2014 in our opinion and to the best of our information and according tothe explanations given to us: i. the Bank has disclosed the impact of pending litigationson its financial position in its financial statements - Refer Note No 4.6.1of Schedule 18- Notes on Accounts ii. the Bank has made provision as required under the applicable lawor accounting standards for material foreseeable losses if any on long term contractsincluding derivative contracts - Refer Note No. 9 of Schedule 18- Notes on Accounts andiii. there has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Bank
For R.G.N.Price & Co. Chartered Accountants FR No. 002785 S
Partner M No. 022693 UDIN: 20022693AAAAED9204
Annexure A to the independent auditor's report of even date on the financial statementsof CSB Bank Limited (Formerly The Catholic Syrian Bank Limited) Report on the InternalFinancial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013
We have audited the internal financial controls over financial reporting of CSB BankLimited (Formerly The Catholic Syrian Bank Limited) (the Bank') as at 31 March 2020in conjunction with our audit of the financial statements of the Bank for the year endedon that date.
Management's Responsibility for Internal Financial Controls over Financial Reporting
The Bank's Board of Directors 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(the Guidance Note') issued by the Institute of Chartered Accountants of India(the ICAI')".These responsibilities include the design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the orderly and efficient conduct of its business including adherence to Bank'spolicies the safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timelypreparation of reliable financial information as required under the Companies Act2013(the Act').
Our responsibility is to express an opinion on the Bank's internal financial controlsover financial reporting based on our audit. We conducted our auditing accordance with theGuidance Note on Audit of Internal Financial Controls Over Financial Reporting (theGuidance Note') and the Standards on Auditing (the Standards') issued by the ICAIand deemed to be prescribed under section 143(10) of the Act to the extent applicable toan audit of internal financial controls both issued by the ICAI. Those Standards and theGuidance Note require that we comply with ethical requirements and plan and perform theaudit to obtain reasonable assurance about whether adequate internal financial controlsover financial reporting was 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 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 judgement 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 Bank's internal financial controls systemover financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A bank's internal financial control 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. Bank's internal financial control over financial reportingincludes those policies and procedures that (1) pertain to the maintenance of recordsthat 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 expenditure of the bankare being made only in accordance with authorizations of management and directors of thebank; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized 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 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 31st March 2020 based onthe internal control over financial reporting criteria established by the Bank consideringthe essential components of internal control stated in the Guidance Note issued by theICAI.
For R.G.N.Price & Co. Chartered Accountants FR No. 002785 S
Partner M No. 022693 UDIN: 20022693AAAAED9204