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IDBI Bank Ltd.

BSE: 500116 Sector: Financials
NSE: IDBI ISIN Code: INE008A01015
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VOLUME 68559
52-Week high 55.75
52-Week low 17.50
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Mkt Cap.(Rs cr) 39,239
Buy Price 37.80
Buy Qty 351.00
Sell Price 37.90
Sell Qty 1332.00
OPEN 38.00
CLOSE 37.80
VOLUME 68559
52-Week high 55.75
52-Week low 17.50
P/E
Mkt Cap.(Rs cr) 39,239
Buy Price 37.80
Buy Qty 351.00
Sell Price 37.90
Sell Qty 1332.00

IDBI Bank Ltd. (IDBI) - Auditors Report

Company auditors report

To

The Members of IDBI Bank Limited

Report on the Audit of the Standalone Financial Statements

Opinion

We have audited the accompanying standalone financial statements of IDBI Bank Limited(‘the Bank') which comprise the Balance Sheet as at 31 March 2020 the Profit andLoss Account and the Cash Flow Statement for the year then ended and a summary of thesignificant accounting policies and other explanatory information. Incorporated in thesestandalone financial statements are the returns of the foreign branch at Dubai for theyear ended 31 March 2020 which has been audited by a local audit firm.

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 section 29 of the Banking Regulation Act 1949 as well as the Companies Act 2013(‘Act') and circulars and guidelines issued by the Reserve Bank of India in themanner so required for banking companies and give a true and fair view in conformity withthe accounting principles generally accepted in India including the Accounting Standardsprescribed under section 133 of the Act read with rules made thereunder of the state ofaffairs of the Bank as at 31 March 2020 and its loss and its cash flows for the yearended 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 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 opinion.

Emphasis of Matter

We draw attention to Note 18 (A)(X)(14) which describes the business uncertainties dueto the outbreak of SARS-CoV-2 virus (COVID-19). In view of these uncertainties the impacton the Bank's results is significantly dependent on future developments.

Our opinion is not modified in respect of this matter

Key Audit Matters

Key audit matters are those matters that in our professional judgment were of mostsignificance in the audit of the Standalone Financial Statements of the current period.These matters were addressed in the context of our audit of the Standalone FinancialStatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report:

Key Audit Matters Auditor's Response
Recognition and Measurement of Deferred Tax Asset
The Bank has recognised a net deferred tax asset of Rs.15749.58 Crores as on March 31 2020 including net reversal of Rs.3919.90 Crores during the year. Our audit procedures involved gaining an understanding of the applicable tax laws and relevant regulations applicable to the Bank. We performed the following audit procedures as part of our controls testing including:
Besides objective estimation recognition and measurement of deferred tax asset is based on the judgment and numerous estimates regarding the availability and visibility of profits in the future and also considering probable impact of Covid-19 pandemic. • evaluation of the policies used for recognition and measurement of deferred tax assets in accordance with AS 22 Accounting for Taxes on Income;
The amount of deferred tax assets recognised presumes availability and forecasting of profits over an extended period of time thus increasing uncertainty and the inherent risk of inappropriate recognition of the said asset. • assessed the probability of the availability of profits based on assumptions and other parameters used by the Management including the probable impact of Covid-19 pandemic against which the Bank will be able to use this deferred tax asset in the future with reference to forecast as noted by the Board of Directors while adopting the standalone financial statements.
• assessed the method for determining the Deferred Tax Asset with reference to applicable tax rates and tested the arithmetical accuracy.
Income Recognition and Asset Classification of Advances i (IRAC) and Provisioning as per regulatory norms
Please refer to Note nos. 18(A)(X)(I) and 18(A)(V)(2) relating to Asset Quality in respect of movement of NonPerforming Assets (NPAs) and related provisions and disclosures with regard to Non Performing Investments (NPI) respectively as also Note no. 18(A)(X)(14) regarding the provisions made due to the probable impact of Covid-19 pandemic. Our audit approach included testing the design operating effectiveness of internal controls and substantive audit procedures in respect of income recognition asset classification and provisioning pertaining to advances and investments. In particular:
Compliance of relevant prudential norms issued by the Reserve Bank of India (RBI) in respect of income recognition asset classification and provisioning pertaining to advances as well as those pertaining to investments is a key audit matter due to materiality involved and the current processes at the Bank which requires manual interventions management estimates and judgement. • we have evaluated j and understood the Bank's internal control i system in adhering to the relevant RBI guidelines regarding income recognition asset classification and provisioning pertaining i to advances and investments;
• we have tested key IT i systems/ applications j used and their design and implementation as well as operational effectiveness of relevant i controls including involvement of manual process and manual controls in relation to income recognition asset classification and provisioning pertaining to advances and investments;
• we have test checked advances to examine the validity of the recorded amounts loan documentation examined the statement of accounts indicators of impairment impairment provision for i non-performing assets and compliance with j income recognition asset classification and provisioning pertaining to advances in terms of applicable RBI guidelines;
• we have evaluated the past trends of management judgement i governance process and review controls over impairment provision calculations and discussed the provisions made with the top and senior management of the Bank.
IT Systems and controls over financial reporting
The Bank's key financial accounting and reporting processes are highly dependent on Core Banking and Treasury Solutions and other supporting software and hardware controls such that there exists a risk that gaps in the IT control environment could result in the financial accounting and reporting records being materially misstated. Appropriate IT controls are required to ensure that the IT applications perform as planned and the changes made including the migration of the Core Banking Solution Finacle to its higher version are properly controlled. Such controls contribute to risk mitigation of erroneous output data. The audit outcome is dependent on the extent of IT controls and systems. • We have planned designed and carried out the desired audit procedures and sample checks taking into consideration the IT systems of the i Bank. The procedures adopted by us are in our opinion adequate j to provide reasonable i assurance on the adequacy of IT controls in place. Towards j this end we obtained i an understanding of i Bank's IT environment. i
• In addition we have i also relied on IS audit 1 conducted by internal audit department interim final review report on data migration by an external consultant and also the audit of Internal Financial Control over i Financial Reporting i conducted by an independent firm of Chartered Accountants. i
• We also tested key automated and manual business cycle controls and logic for system generated reports relevant to the audit; 1 including testing of compensating controls j or performed alternate procedures to assess whether there were any unaddressed IT risks that would materially j impact the financial statements.
Placing reliance on electronic evidence and performing of j audit procedures during the mandatory national lockdown due to the Covid-19 pandemic
The Bank's procedures of recording and storing information necessary for preparation of financial statements and having them audited is combination of electronic and manual processes. We have carried out the j validation of the electronic evidence provided by the management by performing the following procedures:
These processes were required to be audited by us remotely without visiting the Bank's premises due to the mandatory national lockdown. Consequently we have placed reliance on the completeness and accuracy of the data and records made available to us electronically through e-mail. • Inquiring with the management of the controls they have implemented to convert physical documents into electronic versions and understanding them
The Bank was not in a position to provide the same through a secure virtual private network connection. These processes have been conducted since March 20 2020 to the date of this report. Had we been physically present at the Company premises we would have otherwise verified the physical copies of critical documents and we would have collected the audit evidence in physical copies. • Inquiring with the management the method and controls used to extract information from its various softwares including Core Banking Solution Treasury Software IRAC software and the CRAR computation software and understanding how the management ensures completeness and accuracy
• Correlating various i attributes of the electronic evidence obtained to ensure consistency and integrity.
• Obtaining representa-1 tions from the management wherever necessary.

Information Other Than Financial Statements and Auditors' Report Thereon

The Bank's Board of Directors is responsible for the preparation of information otherthan the Standalone Financial Statements and Auditor's Report thereon. The OtherInformation comprises the Management Discussion and Analysis Directors' Report includingAnnexures to Directors' Report (collectively called as "Other Information") butdoes not include the Standalone Financial Statements and our auditor's report thereon andthe Pillar III Disclosures under the New Capital Adequacy Framework (Basel IIIdisclosures).

Our opinion on the financial statements does not cover the Other Information and we donot express any form of assurance conclusion thereon.

In connection with our audit of the financial statements our responsibility is to readthe Other Information and in doing so consider whether the Other Information ismaterially inconsistent with the Standalone Financial Statements or our knowledge obtainedin the audit or otherwise appears to be materially misstated.

If based on the work we have performed we conclude that there is a materialmisstatement of this other information we are required to report that fact. We havenothing to report in this regard.

Responsibilities of Management and Those Charged with Governance for the FinancialStatements

The Bank's Management and Board of Directors is responsible for the matters stated insection 134(5) of the Companies Act 2013 (‘the Act') with respect to the preparationof these financial statements that give a true and fair view of the financial positionfinancial performance and cashflows of the Bank in accordance with the accountingprinciples generally accepted in India including the Accounting Standards specified undersection 133 of the Act and provisions of Section 29 of the Banking Regulation Act 1949and circulars 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 management eitherintends to liquidate the Bank or to cease operations or has no realistic alternative butto do so.

The Bank's Management is also responsible for overseeing the Bank's financial reportingprocess.

Auditors' Responsibilities for the audit of the Standalone 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 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. Under section 143(3)

(i) of the Companies Act 2013 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 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 auditor's 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 auditor'sreport. 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.

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 significance in the audit of the Standalone Financial Statementsof the current period and are therefore the key audit matters. We describe these mattersin our auditor's report unless law or regulation precludes public disclosure about thematter or when 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.

Other Matters

We did not audit the financial statements of the foreign branch in Dubai included inthe standalone financial statements of the Bank whose financial statements reflect totalassets of '1905.30 Crores as at March 31 2020 and the total revenue of Rs.447.02 Croresfor the year ended on that date as considered in the standalone financial statements.This branch has been audited by a local branch auditor whose report has been furnished tous and our opinion in so far as it relates to the amounts and disclosures included inrespect of this branch is based solely on the report of such branch auditors.

Report on Other Legal and Regulatory Requirements

1. The Balance Sheet and the Profit and Loss Account have been drawn up in accordancewith the provision of Section 29 of the Banking Regulation Act 1949 read with Section 133of the Act and Rules made thereunder.

2. 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 best of ourknowledge and belief were necessary for the purpose of our audit and have found them to besatisfactory.

b. The transactions of the Bank which have come to our notice have been within thepowers of the Bank.

c. During the course of our audit we have visited 30 branches to examine the recordsmaintained at such branches for the purpose of our audit. As mentioned in our paragraph onKey Audit Matters above subsequent to the commencement of national lockdown the remainderaudit procedures were conducted remotely. The returns received from the offices andbranches of the Bank as supplemented with the information furnished by the Management havebeen found adequate for the purpose of our audit.

3. In our opinion and to the best of our information and according to the explanationsgiven to us the remuneration paid by the Bank to its directors during the year is inaccordance with the provisions of Section 197 and Schedule V of the Companies Act 2013read with Section 35B (2A) of the Banking Regulation Act 1949;

4. Further as required by section 143(3) of the Act we report that:

a) we have sought and obtained all the information and explanations which to the 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 appears from our examination of those books and proper returns adequate forthe purpose of our

audit have been received from the branches not visited by us;

c) the report on the accounts of one branch of the Bank audited by other auditors hasbeen forwarded to us and the same have been appropriately dealt with;

d) the Balance Sheet and the Statement of Profit and Loss dealt with by this reportare 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 and Rules made thereunder to the extentthey are not inconsistent with the accounting policies prescribed by RBI;

f) on the basis of written representation received from the directors as on March 312020 and taken on record by the Board of Directors none of the directors are disqualifiedas on March 31 2020 from being appointed as director in terms of Section 164 (2) of theCompanies Act 2013;

g) with respect to the adequacy of the internal financial controls with reference tofinancial statements of the Bank and the operating effectiveness of such controls referto our separate Report in "Annexure A";

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 to the extent determinable/ascertainable. - Refer Schedule18(B)(10)(C) to the standalone financial statements.

ii) The Bank has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long term contracts includingderivative contracts. Refer Schedule 18(B)(10)(B) to the standalone financial statements.

iii) There has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Bank. Refer Schedule 18(C)(XIII) to thestandalone financial statements.

For K. S. Aiyar & Co. For JLN US & Co. For M. P. Chitale & Co.
Chartered Accountants Chartered Accountants Chartered Accountants
ICAI FRN : 100186W ICAI FRN : 101543W ICAI FRN : 101851W
Satish Kelkar Ramaprasanna Agarwal Ashutosh Pednekar
Partner ICAI (M.No. 038934) Partner ICAI (M.No. 119693) Partner ICAI (M.No. 041037)
UDIN: 20038934AAAAAQ5546 UDIN: 20119693AAAAAO6658 UDIN: 20041037AAAABC6550
Place: Mumbai
Date: May 30 2020

Independent Auditor's Report

Annexure A to the Independent Auditor's Report of even date on the financial statementsof IDBI Bank Limited

Report on the Internal Financial Controls with reference to financial statements underClause (i) of Sub-section 3 of Section 143 of the Companies Act 2013

We have audited the internal financial controls with reference to financial statementsof IDBI Bank Limited (‘the Bank') as at March 31 2020 in conjunction with our auditof the 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(‘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 Act 2013(‘the Act').

Auditors' Responsibility

Our responsibility is to express an opinion on the Bank's internal financial controlswith reference to financial statements based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (‘the Guidance Note') and the Standards on Auditing (‘the Standards')issued by the ICAI and deemed to be prescribed under section 143(10) of the Act to theextent applicable to an audit of internal financial controls over financial reportingboth issued by the ICAI. Those Standards and the Guidance Note require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether adequate internal financial controls with reference to financial statements wasestablished and maintained and if such controls operated effectively in all materialrespects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system with reference to financial statements and theiroperating effectiveness. Our audit of internal financial controls with reference tofinancial statements included obtaining an understanding of internal financial controlswith reference to financial statements assessing the risk that a material weaknessexists and testing and evaluating the design and operating effectiveness of internalcontrol based on the assessed risk. The procedures selected depend on the auditor'sjudgement including the assessment of the risks of material misstatement of the financialstatements 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 systemwith reference to financial statements.

Meaning of Internal Financial Controls with reference to Financial Statements

A Bank's internal financial control with reference to financial statements is a processdesigned to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles. Bank's internal financial control with referenceto financial statements includes those policies and procedures that

(1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the Bank;

(2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the Bank are being made only inaccordance with authorizations of management and directors of the bank; 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 with reference to FinancialStatements

Because of the inherent limitations of internal financial controls with reference tofinancial statements including the possibility of collusion or improper managementoverride of controls material misstatements due to error or fraud may occur and not bedetected. Also projections of any evaluation of the internal financial controls withreference to financial statements to future periods are subject to the risk that theinternal financial control with reference to financial statements may become inadequatebecause of changes in conditions or that the degree of compliance with the policies orprocedures may deteriorate.

Opinion

In our opinion the Bank needs to strengthen its review process and management testingof scrutiny and reconciliations of intermediary/control accounts implementation of thestandard operating procedures in respect of accounting of fixed assets and expensesintegration of the standalone systems in the areas of Treasury Payroll NPA Provisioningand Fixed Assets. In our opinion the Bank has in all material respects an adequateinternal financial controls system with reference to financial statements and suchinternal financial controls with reference to financial statements were operatingeffectively as at March 31 2020 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.

Other Matters

Our aforesaid report under section 143(3)(i) of the Act on the adequacy and operatingeffectiveness of the Internal Financial Controls with reference to Financial Statementsinsofar as it relates to the overseas branch audited by the branch auditors is based onthe report of the branch auditor which has been sent to us and has been properly dealtwith by us in preparing this report.

For K. S. Aiyar & Co. For JLN US & Co. For M. P. Chitale & Co.
Chartered Accountants Chartered Accountants Chartered Accountants
ICAI FRN : 100186W ICAI FRN : 101543W ICAI FRN : 101851W
Satish Kelkar Ramaprasanna Agarwal Ashutosh Pednekar
Partner ICAI (M.No. 038934) Partner ICAI (M.No. 119693) Partner ICAI (M.No. 041037)
UDIN: 20038934AAAAAQ5546 UDIN: 20119693AAAAAO6658 UDIN: 20041037AAAABC6550
Place: Mumbai
Date: May 30 2020

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