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RBL Bank Ltd.

BSE: 540065 Sector: Financials
NSE: RBLBANK ISIN Code: INE976G01028
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VOLUME 477504
52-Week high 391.05
52-Week low 101.60
P/E 28.46
Mkt Cap.(Rs cr) 13,372
Buy Price 222.85
Buy Qty 1000.00
Sell Price 223.70
Sell Qty 486.00
OPEN 224.00
CLOSE 222.35
VOLUME 477504
52-Week high 391.05
52-Week low 101.60
P/E 28.46
Mkt Cap.(Rs cr) 13,372
Buy Price 222.85
Buy Qty 1000.00
Sell Price 223.70
Sell Qty 486.00

RBL Bank Ltd. (RBLBANK) - Auditors Report

Company auditors report

Independent Auditor's Report

Opinion

We have audited the accompanying standalone financial statements of RBL Bank Limited(the 'Bank') which comprise the standalone balance sheet as at 31 March 2020 thestandalone profit and loss account the standalone cash flow statement for the year thenended and notes to the standalone financial statements including a summary of thesignificant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanationsgiven to us the aforesaid standalone financial statements give the information requiredby the Banking Regulation Act 1949 as well as the Companies Act 2013 (the 'Act') in themanner so required for banking companies and give a true and fair view in conformity withthe accounting principles generally accepted in India of the state of affairs of the Bankas at 31 March 2020 and its profit and its cash flows for the year ended on that date.

Basis of opinion

We conducted our audit in accordance with the Standards on Auditing ('SAs') specifiedunder Section 143 (10) of the Act. Our responsibilities under those SAs are furtherdescribed in the Auditor's Responsibilities for the Audit of the Standalone FinancialStatements section of our report. We are independent of the Bank in accordance with theCode of Ethics issued by the Institute of Chartered Accountants of India together with theethical requirements that are relevant to our audit of the standalone financial statementsunder the provisions of the Act and the Rules thereunder and we have fulfilled our otherethical responsibilities in accordance with these requirements and the Code of Ethics. Webelieve that the audit evidence we have obtained is sufficient and appropriate to providea basis for our opinion on the standalone financial statements.

Emphasis of matter

As more fully described in Note 11.9 to the standalone financial statements the extentto which the COVID-19 pandemic will have an impact on the Bank's financial performance isdependent on future developments which are highly uncertain.

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 our 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.

Key audit matter How the matter was addressed in our audit
Identification of Non-Performing Assets (‘NPAs') and Provisions on Advances P&L charge (including write-off): INR 1862.29 crores for year ended 31 march 2020 Provision on advances: INR 947.15 crores at 31 march 2020
Refer to the accounting policies in "Note 17(1) to the Standalone Financial Statements: Significant Accounting Policies - Advances" and "Note 11.1 to the Standalone Financial Statements: Asset Quality"
Significant estimates and judgment involved Our key audit procedures included:
Identification of NPAs and provisions in respect of NPAs and Test of design / controls
restructured advances are made based on managements assessment of the degree of impairment of the advances subject to and guided by the minimum provisioning levels prescribed under the RBI guidelines with regard to the Prudential Norms on Income Recognition Asset Classification & Provisioning prescribed from time to time. The provision on NPA are also based on the valuation of the security available. • Assessed the design implementation and operating effectiveness of key internal controls over approval recording and monitoring of loans monitoring process of overdue loans (including those which became overdue subsequent to the reporting date) measurement of provisions identification of NPA accounts and assessing the reliability of management information (including overdue reports). In addition for corporate loans we tested controls over the internal ratings process monitoring of stressed accounts including credit file review processes and review controls over the approval of significant individual impairment provisions.
We identified identification of NPAs and provision on advances as a key audit matter because of the level of management judgement involved in determining the provision (including the provisions on assets which are not classified as NPAs) and the valuation of the security of the NPA loans and on account of the significance to these estimates to the financial statements of the Bank.
• Evaluated the design implementation and operating effectiveness of key internal controls over the valuation of security for NPAs.
• Tested management review controls over measurement of provisions including documentation of the relevant approvals along with basis and rationale of the provision and disclosures in financial statements.
On 11 March 2020 the World Health Organisation declared the Novel Coronavirus (COVID-19) outbreak to be a pandemic.
Key audit matter How the matter was addressed in our audit
We have identified the impact of and uncertainty related to the COVID-19 pandemic as a key event and consideration for recognition and measurement of NPAs on account of application of regulatory package and relaxations announced by the Reserve Bank of India on asset classification regulatory reporting and provisioning. • Obtained and reviewed the Bank's policy and application of moratorium provided to customers in response to COVID-19.
• Involved information system specialists in the audit of this area to gain comfort over data integrity and calculations including system reconciliations.
Management has conducted an assessment of the loan portfolio which may be impacted on account of COVID-19 with respect to moratorium benefit and provision computation to borrowers prescribed by the regulatory package. Substantive tests
• Test of details for a selection of exposures over calculation of NPA provisions including valuation of collaterals for NPAs as at 31 March 2020; the borrower-wise NPA identification and provisioning determined by the Bank and also tested related disclosures by assessing the completeness accuracy and relevance of data and to ensure that the same is in compliance with the RBI guidelines with regard to the Prudential Norms on Income Recognition Asset Classification & Provisioning.
• We tested computations of provisions established by the Bank in response to the RBI's guidance on customers for which COVID related moratoriums have been provided
We also sample selected borrowers to test potential cases of loans repaid during the period from fresh disbursement(s) made to these borrowers.
• We selected a sample (based on quantitative and qualitative thresholds) of large corporate clients where impairment indicators had been identified by management. We obtained management's assessment of the recoverability of these exposures (including individual provisions calculations) and challenged whether individual impairment provisions or lack of were appropriate.
This included the following procedures:
• Reviewed the statement of accounts approval process board minutes credit review of customer review of Special Mention Accounts reports and other related documents to assess recoverability and the classification of the facility; and
• For sample of corporate loans not identified as displaying indicators of impairment by management challenged this assessment by reviewing the historical performance of the customer and assessing whether any impairment indicators were present.
information technology Our key IT audit procedures included:
iT systems and controls • We focused on user access management change management segregation of duties system reconciliation controls and system application controls over key financial accounting and reporting systems.
The Bank's key financial accounting and reporting processes are highly dependent on information systems including automated controls in systems such that there exists a risk that gaps in the IT control environment could result in the financial accounting and reporting records being misstated. The Bank uses several systems for its overall financial reporting.
• We tested a sample of key controls operating over the information technology in relation to financial accounting and reporting systems including system access and system change management program development and computer operations.
In addition large transaction volumes and the increasing challenges to protect the integrity of the Bank's systems and data cyber security has become a more significant risk in recent periods.
• We tested the design and operating effectiveness of key controls over user access management which includes granting access right new user creation removal of user rights and preventive controls designed to enforce segregation of duties.
Further the prevailing COVID-19 situation has caused the required IT applications to be made accessible on a remote basis.
• For a selected group of key controls over financial and reporting systems we independently performed procedures to determine that these controls remained unchanged during the year or were changed following the standard change management process.
We have identified 'IT systems and controls' as key audit matter because of the high level automation significant number of systems being used by the management and the complexity of the IT architecture.
Key audit matter How the matter was addressed in our audit
• Other areas that were assessed included password policies security configurations system interface controls controls over changes to applications and databases and that business users and controls to ensure that developers and production support did not have access to change applications the operating system or databases in the production environment.
• Security configuration review and related tests on certain critical aspects of cyber security on network security management mechanism operational security of key information infrastructure data and client information management monitoring and emergency management.
• Assessment of data security controls in the context of a large population of staff working from remote location at the year end.
Valuation of Investments (Investments - Bonds and Debentures Commercial papers Certificate of deposits and Pass through certificates) Net value of Investments: INR 2150.78 crores as at 31 March 2020
Refer to the accounting policies in "Note 17(2) to the Standalone Financial Statements: Significant Accounting Policies - Investments" and "Schedule 8 to the Standalone Financial Statements: Investments"
Subjective estimates and judgment involved Our key audit procedures included:
Investments Test of design / controls
Investments are classified into 'Held for Trading' ('HFT') 'Available for Sale' ('AFS') and 'Held to Maturity' ('HTM') categories at the time of purchase. Investments which the Bank intends to hold till maturity are classified as HTM investments. • Assessed the design implementation and operating effectiveness of management's key internal controls over classification and valuation of investments .
• Read investment agreements / term sheets entered into during the current year on a sample basis to understand the relevant investment terms and identify any conditions that were relevant to the valuation of financial instruments.
Investments classified as AFS and HFT are marked- to-market on a periodic basis as per the relevant RBI guidelines.
We identified fair valuation of investments such as Bonds and Debentures Commercial papers Certificate of deposits and Pass through certificates classified into HFT and AFS as a key audit matter because of the significant management judgement involved in determining its valuation and the overall significance of these investments to the financial statements of the Bank. Substantive tests
• We independently verified the fair valuation of investments on a sample basis with direct observable inputs and external input data such as market value from 'Financial Benchmarks India Private Limited ('FBIL)' spreads from 'The Fixed Income Money Market and Derivatives Association of India ('FIMMDA')' etc after considering the requirements of RBI guidelines.
• Assessed whether the financial statement disclosures appropriately reflect the Bank's exposure to investments with reference to the requirements of the prevailing RBI guidelines.

INFORMATION OTHER THAN THE STANDALONE FINANCIAL STATEMENTS AND AUDITOR'S REPORT THEREON

The Bank's management and Board of Directors are responsible for the other information.The other information comprises the information included in the Bank's Annual report butdoes not include the standalone financial statements and our auditor's report thereon. TheBank's Annual report is expected to be made available to us after the date of thisauditor's report.

Our opinion on the standalone financial statements does not cover the other informationand we will not express any form of assurance conclusion thereon.

In connection with our audit of the standalone financial statements our responsibilityis to read the other information identified above when it becomes available and in doingso consider whether the other information is materially inconsistent with the standalonefinancial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.

When we read the Bank's Annual Report if we conclude that there is a materialmisstatement therein we are required to communicate the matter to those charged withgovernance.

MANAGEMENT'S AND BOARD OF DIRECTOR'S RESPONSIBILITY FOR THE STANDALONE FINANCIALSTATEMENTS

The Bank's management and Board of Directors are responsible for the matters stated inSection 134(5) of the Act with respect to the preparation of these standalone financialstatements that give a true and fair view of the state of affairs profit and cash flowsof the Bank in accordance with the accounting principles generally accepted in Indiaincluding the Accounting Standards specified under Section 133 of the Act provisions ofSection 29 of the Banking Regulation Act 1949 and the circulars and guidelines issued byReserve Bank of India ('RBI') 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 standalone financial statements that give a true andfair view and are free from material misstatement whether due to fraud or error.

In preparing the standalone financial statements the Management and Board of Directorsare responsible for assessing the Bank's ability to continue as a going concerndisclosing as applicable matters related to going concern and using the going concernbasis of accounting unless the Management and Board of Directors either intends toliquidate the Bank or to cease operations or has no realistic alternative 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 STATEMENTS

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

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 statements 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)(i) of the Act we are also responsible for expressing our opinion on whether the Bank hasadequate internal financial controls with reference to standalone financial statements inplace and the operating effectiveness of such controls.

• evaluate the appropriateness of accounting policies used and the reasonablenessof accounting estimates and related disclosures in the standalone financial statementsmade by the Management and Board of Directors.

• conclude on the appropriateness of the Management and Board of Directors use ofthe going concern basis of accounting and based on the audit evidence obtained whether amaterial uncertainty exists related to events or conditions that may cast significantdoubt on the Bank's ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditor's report to therelated disclosures in the standalone financial statements or if such disclosures areinadequate to modify our opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor's report. However future events or conditions maycause a Bank to cease to continue as a going concern.

• evaluate the overall presentation structure and content of the standalonefinancial statements including the disclosures and whether the standalone financialstatements represent 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 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.

REPORT ON OTHER LEGAL AND REGULATORY REQUiREMENTS

The standalone balance sheet and the standalone profit and loss account have been drawnup in accordance with the provisions of Section 29 of the Banking Regulation Act 1949 andSection 133 of the Act.

A. 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 tobe satisfactory;

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

(c) since the key operations of the Bank are automated with the key applicationsintegrated to the core banking systems the audit is carried out centrally as all thenecessary records and data required for the purposes of our audit are available therein.However during the course of our audit we have visited 19 branches.

B. 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 purposes 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 standalone balance sheet the standalone profit and loss account and thestandalone cash flow statement dealt with by this Report are in agreement with the booksof account;

(d) in our opinion the aforesaid standalone financial statements comply with theAccounting Standards specified under Section 133 of the Act to the extent they are notinconsistent with the accounting policies prescribed by RBI;

(e) on the basis of the written representations received from the directors as on 31March 2020 taken on record by the Board of Directors none of the directors isdisqualified as on 31 March 2020 from being appointed as a director in terms of Section164 (2) of the Act; and

(f) with respect to the adequacy of the internal financial controls with reference tostandalone financial statements of the Bank and the operating effectiveness of suchcontrols refer to our separate Report in 'Annexure A'.

C. 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 as at 31 March 2020 on itsfinancial position in its standalone financial statements - Refer Note 12 and Note 37 tothe 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 Note 48 to the standalone financial statements; and

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

iv. The disclosures required on holdings as well as dealing in Specified bank notesduring the period from 8 November 2016 to 30 December 2016 as envisaged in notificationG.S.R. 308(E) dated 30 March 2017 issued by the Ministry of Corporate Affairs is notapplicable to the Bank.

D. With respect to the matter to be included in the Auditors' Report under section197(16) of the Act:

The Bank is a banking company as defined under Banking Regulation Act 1949.Accordingly the requirements prescribed under Section 197 of the Companies Act 2013 donot apply.

For B S R & Co. LLP
Chartered Accountants
Firm's Registration No: 101248W/W-100022
Manoj Kumar Vijai
Partner
Membership No: 046882
UDIN: 20046882AAAAAZ4354
Mumbai
7 May 2020

   

Annexure A to the Independent Auditor's Report

ANNEXURE A TO THE INDEPENDENT AUDITOR'S REPORT OF EVEN DATE ON THE STANDALONE FINANCIALSTATEMENTS OF RBL BANK LIMITED FOR THE YEAR ENDED 31 MARCH 2020

Report on the internal Financial controls with reference to the aforesaid standalonefinancial statements under clause (i) of Sub-section 3 of Section 143 of the companiesAct 2013 (“the Act”)

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

Opinion

We have audited the internal financial controls with reference to standalone financialstatements of RBL Bank Limited (“the Bank”) as of 31 March 2020 in conjunctionwith our audit of the standalone financial statements of the Bank for the year ended onthat date.

In our opinion the Bank has in all material respects adequate internal financialcontrols with reference to standalone financial statements and such internal financialcontrols were operating effectively as at 31 March 2020 based on the internal financialcontrols with reference to standalone financial statements criteria established by theBank considering the essential components of internal control stated in the Guidance Noteon Audit of Internal Financial Controls Over Financial Reporting issued by the Instituteof Chartered Accountants of India (the “Guidance Note”).

Management's responsibility for internal Financial controls

The Bank's management and Board of Directors are responsible for establishing andmaintaining internal financial controls based on the internal financial control withreference to financial statement criteria established by the Bank considering theessential components of internal control stated in the Guidance Note. Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to the Bank's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Act.

Auditor's responsibility

Our responsibility is to express an opinion on the Bank's internal financial controlswith reference to standalone financial statements based on our audit. We conducted ouraudit in accordance with the Guidance Note and the Standards on

Auditing prescribed under section 143(10) of the Act to the extent applicable to anaudit of internal financial controls with reference to financial statements. ThoseStandards and the Guidance Note require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether adequate internalfinancial controls with reference to financial statements were established and maintainedand whether such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls with reference to financial statements and their operatingeffectiveness. Our audit of internal financial controls with reference to standalonefinancial statements included obtaining an understanding of internal financial controlsassessing 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 judgment including the assessment of the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror.

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 withreference to standalone financial statements.

Meaning of internal Financial controls with reference to Financial Statements

A bank's internal financial controls with reference to standalone financial statementsis a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of standalone financial statements for externalpurposes in accordance with generally accepted accounting principles. A bank's internalfinancial control with reference to financial statement includes those policies andprocedures that (1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect dispositions of the assets of the bank; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation ofstandalone financial statements in accordance with generally accepted accountingprinciples and that receipts and expenditures of the bank are being made only inaccordance with authorisations of management and directors of the bank; and (3) providereasonable assurance regarding prevention or timely detection of unauthorised acquisitionuse or disposition of the bank's assets that could have a material effect on thestandalone financial statements.

Inherent Limitations of internal Financial controls with reference to FinancialStatements

Because of the inherent limitations of internal financial controls with reference tostandalone financial statements including the possibility of collusion or impropermanagement override of controls material misstatements due to error or fraud may occurand not be detected. Also projections of any evaluation of the internal financialcontrols with reference to standalone financial statements to future periods are subjectto the risk that the internal financial control with reference to standalone financialstatement may become inadequate because of changes in conditions or that the degree ofcompliance with the policies or procedures may deteriorate.

For B S r & co. LLP

Chartered Accountants

Firm's Registration No: 101248W/W-100022

Manoj Kumar Vijai

Partner

Membership No: 046882

UDIN: 20046882AAAAAZ4354

Mumbai 7 May 2020

.