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Jammu and Kashmir Bank Ltd.

BSE: 532209 Sector: Financials
NSE: J&KBANK ISIN Code: INE168A01041
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VOLUME 987454
52-Week high 62.75
52-Week low 23.80
P/E 4.73
Mkt Cap.(Rs cr) 5,067
Buy Price 0.00
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OPEN 52.55
CLOSE 52.90
VOLUME 987454
52-Week high 62.75
52-Week low 23.80
P/E 4.73
Mkt Cap.(Rs cr) 5,067
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Jammu and Kashmir Bank Ltd. (J&KBANK) - Auditors Report

Company auditors report

To

The Members of The Jammu & Kashmir Bank Limited

Report on Audit of the Standalone Financial Statements

Opinion

1. We have audited the accompanying standalone financial statements of The Jammu &Kashmir Bank Limited ('the Bank') which comprise the Balance Sheet as at 31stMarch 2021 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 Returnsof 57 branches/offices audited by us and 928 branches audited by Statutory Branch Auditorsfor the year ended on that date. The Branches/offices audited by us and those audited byother auditors have been selected by the Comptroller & Auditor General of India inaccordance with the guidelines issued to the Bank by the Reserve Bank of India.

2. 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 other auditors on separateaudited financial statements/ financial information of the branches as referred to inparagraphs 12 below the aforesaid financial statements give the information required bythe Banking Regulation Act 1949 (the 'Act') in the manner so required for bank and are inconformity with accounting principles generally accepted in India and:

a) the Balance Sheet read with the notes thereon is a full and fair Balance Sheetcontaining all the necessary particulars is properly drawn up so as to exhibit a true andfair view of the state of affairs of the Bank as at 31st March 2021;

b) the Profit and Loss Account read with the notes thereon shows a true balance ofprofit and

c) the Cash Flow Statement gives a true and fair view of the cash flows for the yearended on that date.

Basis for Opinion

3. 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 theStandalone Financial Statements section of our report. We are independent of the Bank inaccordance with the Code of Ethics issued by the Institute of Chartered Accountants ofIndia together with the ethical requirements that are relevant to our audit of thefinancial statements under the provisions of the Companies Act 2013 and the Rules thereunder and we have fulfilled our other ethical responsibilities in accordance with theserequirements and the Code of Ethics. We believe that the audit evidence we have obtainedis sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

4. Key audit matters are those matters that in our professional judgment are of mostsignificance in our audit of the financial statements of the current period. Thesematters were addressed in the context of our audit of the financial statements of thebranches and in forming our opinion thereon and we do not provide a separate opinion onthese matters.

We have determined the matter described below to be the key audit matter to becommunicated in our report:

Key audit matters How our audit addressed the key audit matter
Modified Audit Procedures carried out in the light of continuing COVID-19 pandemic: 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 the Branches/Zonal Offices/Business Units of the Corporate Office and carry out the audit processes physically at the respective offices.
Due to the continuing COVID-19 pandemic lockdown declared by some of the State Governments and travel restrictions imposed by State Governments / Local Authorities during the period of our audit and the RBI 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 / Zonal Offices/ Business Units of the Corporate Office As we could not gather audit evidence in person/ physically/ through discussions and personal interactions with the officials at the Branches/Zones/ Business Units of the Corporate Office either fully or partially we have identified such modified audit Procedures as a Key Audit Matter.
Accordingly our audit procedures were modified to carry out the audit remotely. Wherever physical access was not possible necessary records/ reports/ documents/ certificates were made available to us by the Bank through digital medium emails.
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 procedures for control testing and substantive testing which included the following:
a. Conducted verification of necessary records/ documents/ through remote access/emails in respect of some of the Branches / Zonal Offices/Business Units and other offices of the Bank wherever physical access was not possible.
b. Carried out verification of scanned copies of the documents deeds certificates and the related records made available to us through emails and remote access over secure network of the Bank.
c. Making enquiries and gathering necessary audit evidence through Video 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 of a face-to-face interaction with the designated officials.

Emphasis of Matter

5. We draw attention to relevant note of Schedule 18 to the Financial Results whichexplains the uncertainties due to outbreak of novel corona virus (COVID 19) and themanagement assessment of its impact on the business operation of the Bank.

Our opinion is not modified in respect of this matter.

Information Other than the Financial Statements and Auditor's Report thereon

6. The Bank's Board of Directors is responsible for the other information. The otherinformation comprises the Corporate Governance Report (but does not include the financialstatements and our auditor's report thereon) which we obtained prior to the date of thisauditor's report and Directors' Report including annexures if any thereon which isexpected to be made available to us after that date.

Our opinion on the financial statements does not cover the other information and Pillar3 disclosure under Basel Ill and we do not and will not express any form of assuranceconclusion thereon.

Responsibilities of Management and Those Charged with

Governance for the Standalone Financial Results

7. These standalone Financial Results have been prepared on the basis of the standaloneannual financial statements and reviewed quarterly standalone Financial Results up to theend of the third quarter. The Bank's Management and Board of Directors are responsible forthe matters stated in section 134(5) of the Companies Act 2013 ('the Act') with respectto the preparation of these standalone Financial Results that give a true and fair view ofthe net profit and other financial information in accordance with the recognition andmeasurement principles laid down in the Accounting Standards specified under Section 133of the Act the relevant provisions of the Banking Regulation Act 1949 the circularsguidelines and directions issued by the Reserve Bank of India (RBI) from time to time("RBI Guidelines") and other accounting principles generally accepted in Indiaand in compliance with Regulation 33 of the Listing Regulations. This responsibility alsoincludes maintenance of adequate accounting records in accordance with the provisions ofthe Act for safeguarding of the assets of the Bank and for preventing and detecting fraudsand other irregularities; selection and application of appropriate accounting policies;making judgments and estimates that are reasonable and prudent; and design implementationand maintenance of adequate internal financial controls that were operating effectivelyfor ensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the standalone Financial Results that give a true and fairview and are free from material misstatement whether due to fraud or error.

In preparing the standalone Financial Results Management is responsible for assessingthe Bank's ability to continue as a going concern disclosing as applicable mattersrelated to going concern and using the going concern basis of accounting unless managementeither intends to liquidate the Bank or to cease operations or has no realisticalternative but to do so.

The Board of Directors is also responsible for overseeing the Bank's financialreporting process.

Auditor's Responsibilities for the Audit of the Standalone

Financial Results

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

As part of an audit in accordance with SAs we exercise professional judgment andmaintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the standaloneFinancial Results whether due to fraud or error design and perform audit proceduresresponsive to those risks and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion. The risk of not detecting a material misstatementresulting from fraud is higher than for one resulting from error as fraud may involvecollusion forgery intentional omissions misrepresentations or the override of internalcontrol.

• 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)(Dof the Companies Act 2013 we are also responsible for expressing our opinion on whetherthe Bank has adequate internal financial controls system in place and the operatingeffectiveness of such controls.

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

• 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 standaloneFinancial Results including the disclosures and whether the standalone Financial Resultsrepresent the underlying transactions and events in a manner that achieves fairpresentation.

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 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.

Other Matters

9. We did not audit the financial statements/information of 928 branches/officesincluded in the standalone Financial Results of the Bank whose Financial Results reflecttotal advances of Rs.68368.84 Crores and total revenue of Rs.5657.51 Crores as at 31stMarch 2021 as considered in the standalone Financial Results. The financial statements/information of these branches has been audited by the branch auditors whose reports havebeen furnished to us and in our opinion in so far as it relates to the amounts anddisclosures included in respect of branches is based solely on the report of such branchauditors. Our opinion on the standalone financial statements does not cover the otherinformation and the Basel-III disclosure and we do not express any form of assuranceconclusion thereon.

10. The annual financial results include the results for the quarter ended 31st March2021 being the balancing figure between the audited figures in respect of the fullfinancial year and the published unaudited year to date figures up to the third quarter ofthe current financial year which were subjected to limited review by us.

Report on Other Legal and Regulatory Requirements

11. The Balance Sheet and the Profit and Loss Account have been drawn up in accordancewith the provisions of Section 29 of the Banking Regulation Act 1949 and Section 133 ofthe Companies Act 2013 read with Rule 7 of the Companies (Accounts) Rules 2014.

12. The Comptroller and Auditor General of India has issued directions indicating theareas to be examined in terms of sub-section (5) of section 143 of the Companies Act2013 the compliance of which is set out in "Annexure-A" to this Report.

13. Subject to the limitations of the audit indicated in paragraphs 4 to 10 above andas required by subsection (3) of section 30 of the Banking Regulation Act 1949 we reportthat:

a) we have obtained all the information and explanations which to the best of ourknowledge and belief were necessary for the purpose of our audit and have found them tobe satisfactory;

b) the transactions of the Bank which have come to our notice have been within thepowers of the Bank;

c) the returns received from the offices; and branches of the Bank have been foundadequate for the purposes of our audit.

14. 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 it appears from our examination of those books;

c) the reports on the accounts of the branch offices of the bank audited under section143(8) of the Act by branch auditors of the Bank have been sent to us and have beenproperly dealt with by us in preparing this report;

d) the Balance Sheet the Statement of Profit and Loss and the Statement of Cash Flowsdealt with by this report are in agreement with the books of account;

e) in our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014 to the extent they are not inconsistent with theaccounting policies prescribed by RBI;

f) on the basis of written representations received from the directors as on 31March2021 and taken on record by the Board of Directors none of the directors is disqualifiedas on 31 March 2021 from being appointed as a director in terms of Section 164(2) of theAct;

g) with respect to the adequacy of the internal financial controls over financialreporting of the Bank and the operating effectiveness of such controls refer to ourseparate Report in "Annexure B";

h) as per the Notification No.GSR 463(E) dated 05.06.2015 Section 197 of Companies Act2013 is not applicable to The Jammu & Kashmir Bank Limited being a GovernmentCompany;

i) with respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules2014 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 in Schedule 18-Notes on Accounts attached;

ii. The Bank did not have any long-term contracts including derivative contracts forwhich there were any material foreseeable losses) and

iii. there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Bank

For O P Garg & Co. For Verma Associates For P C Bindal & Co. For K. K. Goel & Associates
Chartered Accountants Chartered Accountants Chartered Accountants Chartered Accountants
FRN:01194N FRN:02717N FRN:03824N FRN:05299N
(CA. Vikram Garg) (CA. Madan Verma) (CA. Shailza Wazir) (CA. Amit Kumar Gupta)
Partner Partner Partner Partner
M.No.097038 M.No.081631 M.No.502279 M.No.501373
UDIN:21097038AAAAEV8621 UDIN:21081631AAAACO9032 UDIN:21502279AAAAEC1865 UDIN:21501373AAAABW5989
Place : Srinagar
Date: 17th June 2021

Annexure-A to Para 12 of independent auditor's report of even date on the standalonefinancial statements of Jammu & Kashmir Bank Limited.

Directions/sub-directions of Comptroller and Auditor General of India under Section143(5) of Companies Act 2013 for the Financial Year 2020-21

Sn Directions/Sub directions Auditor's comments including action taken wherever required Impact on accounts and financial statements
1 If the Company has been selected for disinvestment a complete status report in terms of valuation of Assets (including intangible assets and land) and Liabilities (including Committed & General Reserves) may be examined including the mode and present stage of disinvestment process Since the Company has not been selected for dis investment directions are not applicable. Nil
2 Please report whether there are any cases of waiver/ write off of debts/ loans/interest etc. if yes the reasons there for and the amount involved. There are 1367 cases of waiver/write off of debts/ loans/ interest etc. amounting to Rs. 4.50 Crores in addition to the waiver of unapplied interest of Rs.103.69 Crores on account of negotiated settlement with the borrowers defaulting in payment due to the circumstances beyond their control such as death/disappearance of the borrower recession in economy no enforceable security natural calamities such as earthquake flood drought change in Govt. policy genuine business failure in-spite of sincere efforts made by borrower etc. and where the recovery chances through normal business operations are bleak. Waiver/Write off resulted in loss of Rs.108.19 Crores.
During the financial year NO account (NPA) was sold to Asset Construction Companies (ARC NIL.
3 Whether proper records are maintained for inventories lying with third parties & assets received as gift from Govt. or other authorities As per explanations given to us the company has not received any assets as gift/grant(s) from government or other authorities. The company has no inventories lying with third parties. NIL
4 A report on age-wise analysis of pending legal/arbitration cases including the reasons of pendency and existence/ effectiveness of a monitoring mechanism for expenditure on all legal cases (foreign and local) may be given. There are 459 Cases involving Rs. 586.32 Crores pending legal/arbitration cases being claims against the bank not acknowledged as debts. Bank hold a provision of Rs.11.70 Crores in cases which have been decided against the bank but Bank has filed appeals against the orders.
5 Whether the restructuring of loan was done as per the provisions of the Reserve Bank of India and Bank's own Restructuring of loan Policy. Yes the restructuring of loan was done as per the provisions of the Reserve Bank of India and Bank's own Restructuring of loan Policy. NIL
6 Whether the Bank is maintaining/ developing various assets of the State Govt. The treatment of the assets and expenditure incurred and revenue earned may be examined and comment may be offered. As per information and explanations given to us the bank is maintaining/ developing Parks and Gardens including Golf Course which are not owned by the bank. The bank has incurred Rs.0.60 Crores for maintaining and development of these parks. The expenditure amounting to Rs. 0.60 Crores has been incurred and revenue of Rs. 0.02 Crores has been earned for maintaining/ developing parks/gardens and amounts have been debited/ credited to the Profit and Loss Account.
7 Whether the branches were doing window dressing and its impact/ materiality on the overall deposit portfolio. The Branch Auditor has reported window dressing whereby advances have been inflated by Rs.2.13 Crores by corresponding increase in deposits. Advances and Deposits have been overstated by Rs.2.13 Crores.
8 Whether the Bank has been able to achieve the targets under Priority sector lending if not impact on the financial health of the Bank by lending the shortfall amount in Rural infrastructure Development Fund Small industrial Development Bank of India etc. may please be brought out. As per information and explanations given to us the Bank has not been able to achieve the targets under priority sector lending. As a result of shortfall the bank has to make deposits of low yield interest with the following designated agencies as on 31-03-2021: The impact on the financial health is lower rate of return of interest ranging from 2.25% p.a. to 2.65% p.a. received from the agencies with which deposits were made for shortfall.
Particulars Rs.in Crores
NABARD 1056.71
RIDF(NABARD) 1193.23
SIDBI 1361.99
NHB 408.90
MUDRA 217.80
Total 4238.63
9 Whether there were cases of greening of advances up gradation of loan account at the fag end of the Financial Year or delay/non- declaration of Nonperforming Assets as per RBI guidelines. Its impact on the profitability and Asset Classification. Advances amounting to Rs.81.12 Crores were not declared as NPA as per RBI guidelines which were downgraded after those were identified by the Statutory Auditors and additional provision of Rs.26.42 Crores and reversal of unrealized interest Rs. 2.08 Crores was suggested. Auditors identified the said NPAs where by advances of Rs.81.12 Crores have been downgraded from the bank's standard assets classification. The impact thereof on decrease of profit is as follows:
1. Interest Reversal: Rs.2.08 Crores
2.Increase in NPA provision Rs. 26.42 Crores
10 Whether Co. has complied with the direction issued by RBI for a. NBFCs b. Capital adequacy norms for NBFCs. As per information and explanation given to us the bank has complied with the directions issued by RBI. Nil
c. Classification of NPA
11 Whether introduction of any scheme for settlement of dues and extensions thereto complied with the policy/ guidelines of Company/ Govt. As per information and explanation given to us the bank is complied with the instructions/guidelines issued from time to time by RBI and comply with the Policy framed for the same. Nil
12 Whether the Co. has a system to ensure that loans were secured by adequate security free from encumbrances and have first charge on the mortgaged assets. Further instances of undue delay in disposal of seized units may be reported. As per information and explanation given to us the bank has a system to ensure that loans are secured by adequate security free from encumbrances and have charge on mortgaged assets and bank has framed policy for the same. Nil
13 Whether the bank guarantees have been revalidated in time? As on 31.03.2021 2101 BG's amounting to Rs.436.84 Crores with a margin of Rs.99.10 Crores had expired. Furthermore 323 LC's amounting to Rs.378.69 Crores with a margin of Rs.48.94 Crores has expired on 31.03.2021. Majority of the expired BG's have been issued in favour of Custom Authorities and other Govt. Departments without claim period and as such cannot be reversed till the BG Bonds are received by the Branches in original as these BG's are exposed to period of limitation under the Limitation Act 1963 which period is 30 years when the Government is the guarantee beneficiary and 3 years when any other party is the guarantee beneficiary. Furthermore most of the expired LCs' have been issued on behalf of Govt. Departments and in majority of the cases part payments have already been made to the beneficiaries. However pending formalities like successful installation of machinery certificates from the Govt. Departments the Branches are not able to pass on the payments to the beneficiaries fully. As such part amount of such LC's remains unpaid for want of installation certificates by the Govt. Departments which results in accumulation of expired LC's. Credit Monitoring Department is continuously following up the Branches for reversal of LCs' and guidelines in this regard are being circulated to the operative levels on frequent intervals. However as per regulatory requirements the Bank is duly providing capital for these expired BG's and LC's. This may add to the liability of the bank.
14 Comment on the confirmation of balances of trade receivable trade payable term deposits bank account and cash obtained Being banking company there are no trade payable/receivable. However confirmation for term deposit is not required Nil
15 Whether the company has system in place to process all the accounting transactions through IT system? If yes the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implication if any may be stated. As per information and explanation given to us the bank has system in place to process all the accounting transactions through IT. Nil
16 Whether the company has cleared title/ lease deeds for freehold and leasehold land respectively? If not please state the area of freehold and leasehold land for which title/lease deeds are not available. As per information and explanation given to us the bank does not have clear title/ lease deeds for freehold and leasehold lands for the following properties: - The acquisition value of the said lands/properties has been capitalized and the value as on 31.03.2021 is Rs. 59.47 Crores.
Area Sn Land
5400 Sft 1. Vashi (Ist Floor)
4 Kanals 2. Budgam
17925 Sft 3. Ansal Plaza Khelgaon
1 Kanal 4 Marla 4. Kargil
It is advised to complete the documentation for clear title at the earliest.
17 Examine the system of effective utilization of loans/Grant-in-Aid/ Subsidy. List of cases diversion of fund The loans received are utilized for the intended purpose. However there were no Grant-in-Aid/Subsidy received during the financial year Nil
18 Examine the cost benefit analysis of major capital expenditure/Expansion including IRR and payback period. As per information and explanation given to us the major expenditure is being incurred on opening of new business units and as per historical data majority of new business units within J&K States attain breakeven within one year of its operation Nil
19 If the audited entity has computerized its operation or part of it asses and report how much of the data in the company is in electronic format which of the area such as accounting sale personnel information payroll inventory etc. has been computerized and the company has evolved proper security policy for data/software/ hardware. As per information and explanation given to us all the operation of the bank including accounting payroll in HRMS inventory in FAM system are computerized and the bank have evolved proper security policy for data/software/ hardware. Nil
20 Other Matter Other Assets include Rs. 4383.02 Crores due form UT of J&K comprising agency account commission due & pension payments. The advance is interest free & is in the nature of clean overdraft to the Government. Not Available
For O P Garg & Co. For Verma Associates For P C Bindal & Co. For K. K. Goel & Associates
Chartered Accountants Chartered Accountants Chartered Accountants Chartered Accountants
FRN:01194N FRN:02717N FRN:03824N FRN:05299N
(CA. Vikram Garg) (CA. Madan Verma) (CA. Shailza Wazir) (CA. Amit Kumar Gupta)
Partner Partner Partner Partner
M.No.097038 M.No.081631 M.No.502279 M.No.501373
UDIN:21097038AAAAEV8621 UDIN:21081631AAAACO9032 UDIN:21502279AAAAEC1865 UDIN:21501373AAAABW5989
Place : Srinagar
Date: 17th June 2021

Annexure-B to Independent Auditor's report of even date on the standalone financialstatements of Jammu and Kashmir Bank Limited.

Report on the Internal Financial Controls under Clause(i) of Sub-section 3 of Section143 of the Companies Act 2013

1. We have audited the internal financial controls over financial reporting of Jammuand Kashmir Bank Limited ('the Bank') as at 31st March 2021 in conjunction with our auditof the standalone financial statements of the Bank for the year ended on that date.

Management's Responsibility for Internal Financial

Controls

2. The Bank's Board of Directors is responsible for establishing and maintaininginternal financial controls based on the internal control over financial reportingcriteria established by the Bank considering the essential components of internal controlstated in the "Assessment of Adequacy of Internal Financial Controls Over FinancialReporting" in line with the Guidance Note on Audit of Internal Financial Controlsover Financial Reporting("Guidance Note") issued by the Institute of CharteredAccountants of India('the ICAI'). These responsibilities include the designimplementation and maintenance of adequate internal financial controls that were operatingeffectively for ensuring the orderly and efficient conduct of its business includingadherence to Bank's policies the safeguarding of its assets the prevention and detectionof frauds and errors the accuracy and completeness of the accounting records and thetimely preparation of reliable financial information as required under theCompaniesAct2013('the Act').

Auditor's Responsibility

3. Our responsibility is to express an opinion on the Bank's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting('the Guidance Note') and the Standards on Auditing('the Standards') issued by the ICAIand deemed to be prescribed undersection 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.

4. Our audit involves performing procedures to obtain audit evidence about the adequacyof the internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining and 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.

5. 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

6. A Bank's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A Bank's internal financial control over financialreporting includes those policies and procedures that:

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

(b) 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

(c) 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

7. 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 in adequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

8. (a) The Bank's finance department require professionals like Chartered Accountantsto strengthen internal financial controls over financial reporting.

(b) In our opinion the Bank has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31st March 2021based on the internal control over financial reporting criteria established by the Bankconsidering the essential components of internal control stated in the Guidance Noteissued by the ICAI.

For O P Garg & Co. For Verma Associates For P C Bindal & Co. For K. K. Goel & Associates
Chartered Accountants Chartered Accountants Chartered Accountants Chartered Accountants
FRN:01194N FRN:02717N FRN:03824N FRN:05299N
(CA. Vikram Garg) (CA. Madan Verma) (CA. Shailza Wazir) (CA. Amit Kumar Gupta)
Partner Partner Partner Partner
M.No.097038 M.No.081631 M.No.502279 M.No.501373
UDIN:21097038AAAAEV8621 UDIN:21081631AAAACO9032 UDIN:21502279AAAAEC1865 UDIN:21501373AAAABW5989
Place : Srinagar
Date: 17th June 2021

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