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State Bank of India.

BSE: 500112 Sector: Financials
NSE: SBIN ISIN Code: INE062A01020
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VOLUME 106994
52-Week high 578.65
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P/E 13.09
Mkt Cap.(Rs cr) 479,608
Buy Price 537.40
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Sell Price 537.50
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OPEN 533.05
CLOSE 532.70
VOLUME 106994
52-Week high 578.65
52-Week low 425.00
P/E 13.09
Mkt Cap.(Rs cr) 479,608
Buy Price 537.40
Buy Qty 29.00
Sell Price 537.50
Sell Qty 4.00

State Bank of India. (SBIN) - Auditors Report

Company auditors report

To

The President of India

REPORT ON AUDIT OF THE STANDALONE FINANCIAL STATEMENTS OF STATE BANK OFINDIA

Opinion

1. We have audited the accompanying Standalone Financial Statements ofState Bank of India ("the Bank") which comprise the Balance Sheet as at March31 2022 the Profit and Loss Account and the Cash Flow Statement for the year then endedand Notes to Standalone Financial Statements including Significant Accounting Policies andother explanatory information in which are included returns for the year ended on thatdate of:

i. The Central offices 17 Local Head offices Global Market UnitInternational Business Group Corporate Accounts Group (Central) Commercial Client Group(Central) Stressed Asset Resolution Group (Central) Central Accounts Offices and 20branches audited by us;

ii. 8557 Indian branches audited by respective Statutory BranchAuditors;

iii. 34 Foreign branches audited by respective Local Auditors;

The branches audited by us and those audited by other auditors havebeen selected by the Bank in accordance with the guidelines issued to the Bank by theReserve Bank of India (RBI). Also incorporated in the Balance Sheet the Profit and LossAccount and the Cash Flow Statement are the returns from 15977 Indian branches (includingother accounting units) which have not been subjected to audit. These unaudited branchesaccount for 17.62% of advances 33.76% of deposits 28.94% of interest income and 40.21%of interest expenses.

In our opinion and to the best of our information and according to theexplanations given to us the aforesaid Standalone Financial Statements give theinformation required by the Banking Regulation Act 1949 and State Bank of India Act 1955in the manner so required for the Bank and are in

conformity with accounting principles generally accepted in India and:

a) the Balance Sheet read with the notes thereon is a full and fairBalance Sheet containing all the necessary particulars is properly drawn up so as toexhibit a true and fair view of the state of affairs of the Bank as at 31stMarch 2022;

b) the Profit and Loss Account read with the notes thereon shows atrue balance of profit for the year ended on that date; and

c) the Cash Flow Statement gives a true and fair view of the cash flowsfor the year ended on that date.

Basis for Opinion

2. We conducted our audit in accordance with the Standards of Auditing("SAs") issued by the Institute of Chartered Accountants of India ("theICAI"). Our responsibilities under those Standards are further described in theAuditors' Responsibilities for the Audit of the Standalone Financial Statements section ofour report. We are independent of the Bank in accordance with the Code of Ethics issued bythe ICAI together with ethical requirements that are relevant to our audit of theStandalone Financial Statements prepared in accordance with the accounting principlesgenerally accepted in India including the Accounting Standards issued by the ICAI andprovisions of section 29 of the Banking Regulation Act 1949 and circulars and guidelinesissued by the Reserve Bank of India (‘RBI") from time to time 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.

Key Audit Matters

3. Key Audit Matters are those matters that in our professionaljudgment were of most significance in our audit of the Standalone Financial Statements forthe year ended March 31 2022. These matters were addressed in the context of our audit ofthe Standalone Financial Statements as a whole and in forming our opinion thereon and wedo not provide a separate opinion on these matters. We have determined the mattersdescribed below to be the Key Audit Matters to be communicated in our report:

f.r' Key Audit Matters No. How the matter was addressed in our audit
i. Classification of Advances Income Recognition Identification of and provisioning for non-performing Advances (Refer Schedule 9 read with Note 18.4 of Schedule 18 to the financial statements). Our audit approach towards advances with reference to the IRAC norms and other related circulars/directives issued by the RBI and also internal policies and procedures of the Bank includes the testing of the following:
Advances include Bills purchased and discounted Cash credits Overdrafts Loans repayable on demand and Term loans. These are further categorised as secured by Tangible assets (including advances against Book Debts) covered by Bank/Government Guarantees and Unsecured advances. a. The accuracy of the data input in the system for income recognition classification into performing and non performing Advances and provisioning in accordance with the IRAC norms in respect of the branches allotted to us;
Advances constitute 54.82 per cent of the Bank's total assets. They are inter-alia governed by income recognition asset classification and provisioning (IRAC) norms and other circulars and directives issued by the RBI from time to time which provides guidelines related to classification of Advances into performing and non- performing Advances (NPA) except in case of foreign offices classification of advances and provisioning thereof is made as per local regulations or RBI guidelines whichever is more stringent. The Bank classifies these Advances based on IRAC norms as per its accounting policy No. 3. b. Existence and effectiveness of monitoring mechanisms such as Internal Audit Systems Audit Credit Audit and Concurrent Audit as per the policies and procedures of the Bank;
Identification of performing and non-performing Advances involves establishment of proper mechanism. The Bank accounts for all the transactions related to Advances in its Information Technology System (IT System) viz. Core Banking Solution (CBS) which identifies whether the advances are performing or non- performing. Further c. Examination of advances including stressed advances on a sample basis with respect to compliance with the RBI Master Circulars / Guidelines/ Judicial pronouncements;
NPA classification and calculation of provision is done through another IT System viz. Centralised Credit Data Processing (CCDP) Application Software and other processes. d. We have also relied on the reports of External IT System Audit experts with respect to the business logics / parameters inbuilt in CBS and CCDP for tracking identification and stamping of NPAs and provisioning in respect thereof.
The carrying value of these advances (net of provisions) may be materially misstated if either individually or in aggregate the IRAC norms are not properly followed. e. We tested the mapping of advances in the CCDP application software and the financial statement preparation software to ensure compliance with the presentation and disclosure requirements as per the RBI Master Circulars / Guidelines.
Considering the nature of the transactions regulatory requirements existing business environment estimation/ judgement involved in valuation of securities and calculation of provisions it is a matter of high importance for the intended users of the Standalone Financial Statements. Considering these aspects we have determined this as a Key Audit Matter. f. We have examined the efficacy of various internal controls over advances to determine the nature timing and extent of the substantive procedures and compliance with the observations of the various audits conducted as per the monitoring mechanism of the Bank and RBI Inspection.
Accordingly our audit was focused on income recognition asset classification and provisioning pertaining to advances due to the materiality of the balances. g. In carrying out substantive procedures at the branches allotted to us we have examined all large advances/ stressed advances while other advances have been examined on a sample basis including review of valuation reports of independent valuers provided by the Bank's management.
h. We assessed and evaluated the process of identification of NPAs and corresponding reversal of income and creation of provision;
i. Reliance is also placed on Audit Reports of other Statutory Branch Auditors with whom we have also made specific communication.
ii. Classification and Valuation of Investments Identification of and provisioning for Non-Performing Investments (Schedule 8 read with Note 18.3 of Schedule 18 to the financial statements). Our audit approach towards Investments with reference to the RBI Circulars/directives included the understanding of internal controls and substantive audit procedures in relation to valuation classification identification of non performing investments (NPIs) provisioning/depreciation related to Investments. In particular:
Investments include investments made by the Bank in various Government Securities Bonds Debentures Shares Security receipts and other approved securities. a. We evaluated and understood the Bank's internal control system to comply with relevant RBI guidelines regarding valuation classification identification of NPIs provisioning/depreciation related to investments;
Investments constitute 29.70 per cent of the Bank's total assets. These are governed by the circulars and directives of the RBI. These directions of RBI inter-alia cover valuation of investments classification of investments identification of non-performing investments the corresponding nonrecognition of income and provision there against. b. We assessed and evaluated the process adopted for collection of information from various sources for determining fair value of these investments;
The valuation of each category (type) of the aforesaid securities is to be done as per the method prescribed in circulars and directives issued by the RBI which involves collection of data/information from various sources such as FIMMDA rates rates quoted on BSE/NSE financial statements of unlisted companies etc. Considering the complexities and extent of judgement involved in the valuation volume of transactions investments on hand and degree of regulatory focus this has been determined as a Key Audit Matter. c. For the selected sample of investments in hand we tested accuracy and compliance with the RBI Master Circulars and directions by re-performing valuation for each category of security. Samples were selected after ensuring that all the categories of investments (based on nature of security) were covered in the sample;
Accordingly our audit was focused on valuation of investments classification identification of non performing investments and provisioning related to investments. d. We assessed and evaluated the process of identification of NPIs and corresponding reversal of income and creation of provision;
e. We carried out substantive audit procedures to recompute independently the provision to be maintained and depreciation to be provided in accordance with the circulars and directives of the RBI. Accordingly we selected samples from the investments of each category and tested for NPIs as per the RBI guidelines and recomputed the provision to be maintained in accordance with the RBI Circular for those selected sample of NPIs;
f. We tested the mapping of investments between the Investment application software and the financial statement preparation software to ensure compliance with the presentation and disclosure requirements as per the aforesaid RBI Circular/directions.
iii. Assessment of Provisions and Contingent liabilities in respect of certain litigations including Direct and Indirect Taxes various claims filed by other parties not acknowledged as debt (Schedule 12 read with Note 18.12 (e) of Schedule 18 to the financial statements) : Our audit approach involved:
There is high level of judgement required in estimating the level of provisioning. The Bank's assessment is supported by the facts of matter their own judgment past experience and advice from legal and independent tax consultants wherever considered necessary. Accordingly unexpected adverse outcomes may significantly impact the Bank's reported profit and state of affairs presented in the Balance Sheet. a. Obtaining an understanding of internal controls relevant to the audit in order to design our audit procedures that are appropriate in the circumstances;
We determined the above area as a Key Audit Matter in view of associated uncertainty relating to the outcome of these matters which requires application of judgment in interpretation of law. Accordingly our audit was focused on analysing the facts of subject matter under consideration and judgments/ interpretation of law involved. b. Understanding the current status of the litigations/tax assessments;
c. Examining recent orders and/or communication received from various tax authorities/ judicial forums and follow up action thereon;
d. Evaluating the merit of the subject matter under consideration with reference to the grounds presented therein and available independent legal / tax advice including opinion of our internal tax experts;
e. Review and analysis of evaluation of the contentions of the Bank through discussions collection of details of the subject matter under consideration the likely outcome and consequent potential outflows on those issues; and
f. Verification of disclosures related to significant litigations and taxation matters.

Information Other than the Standalone Financial Statements andAuditors? Report thereon

4. The Bank's Board of Directors is responsible for preparation of theOther Information. The Other Information comprises the Corporate Governance Report whichwe obtained at the time of issue of this report. The Other Information also includesDirectors' Report including annexures in Annual Report but does not include theStandalone Financial Statements and our Auditors' Report thereon which is expected to bemade available to us after the date of this Auditors' Report.

Our opinion on the Standalone Financial Statements does not cover theOther Information and Pillar 3 disclosures under the Basel III Disclosure and we do notand will not express any form of assurance conclusion thereon.

In connection with our audit of the Standalone Financial Statementsour responsibility is to read the Other Information identified above and in doing soconsider whether the Other Information is materially inconsistent with the StandaloneFinancial Statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.

If based on the work we have performed on the Other Information thatwe obtained prior to the date of this Auditors' Report we conclude that there is amaterial misstatement of this Other Information we are required to report that fact. Wehave nothing to report in this regard.

When we read the Directors' Report including annexures in AnnualReport if any thereon if we conclude that there is a material misstatement therein weare required to communicate the matter to Those Charged with Governance.

Responsibilities of Management and Those Charged with Governance forthe Standalone Financial Statements

5. The Bank's Board of Directors is responsible with respect to thepreparation of these Standalone Financial Statements that give a true and fair view of thefinancial position financial performance and cash flows of the Bank in accordance withthe accounting principles generally accepted in India including the Accounting Standardsissued by ICAI to the extent applicable and provisions of Section 29 of the BankingRegulation Act 1949 the State Bank of India Act 1955 and circulars and guidelinesissued by RBI from time to time. This responsibility also includes maintenance of adequateaccounting records in accordance with the provisions of the above mentioned Acts forsafeguarding of the assets of the Bank and for preventing and detecting frauds and otherirregularities; 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 management isresponsible for assessing the Bank's ability to continue as a going concern disclosingas applicable matters related to going concern and using the going concern basis ofaccounting unless management either intends to liquidate the Bank or to cease operationsor has no realistic alternative but to do so.

Auditors? Responsibilities for the Audit of the StandaloneFinancial Statements

6. Our objectives are to obtain reasonable assurance about whether theStandalone Financial Statements as a whole are free from material misstatement whether dueto fraud or error and to issue an Auditors' Report that includes our opinion. Reasonableassurance is a high level of assurance but is not a guarantee that an audit conducted inaccordance with SAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if individuallyor in aggregate they could reasonably be expected to influence the economic decisions ofusers taken on the basis of these Standalone Financial Statements.

As part of an audit in accordance with SAs we exercise professionaljudgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of theStandalone Financial Statements whether due to fraud or error design and perform auditprocedures responsive to those risks and obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error as fraudmay involve collusion forgery intentional omissions misrepresentations or the overrideof internal control.

• Obtain an understanding of internal controls relevant to theaudit in order to design audit procedures that are appropriate in the circumstances.

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

• Conclude on the appropriateness of management's use of the goingconcern basis of accounting and based on the audit evidence obtained whether a materialuncertainty exists related to events or conditions that may cast significant doubt on theBank's ability to continue as a going concern. If we conclude that a material uncertaintyexists we are required to draw attention in our auditors' report to the relateddisclosures in the Standalone Financial Statements or if such disclosures are inadequateto modify our opinion. Our conclusions are based on the audit evidence obtained up to thedate of our auditors' report. However future events or conditions may cause the Bank tocease to continue as a going concern.

• Evaluate the overall presentation structure and content of theStandalone Financial Statements including the disclosures and whether the StandaloneFinancial

Statements represent the underlying transactions and events in a mannerthat achieves fair presentation.

Materiality is the magnitude of misstatements in the StandaloneFinancial Statements that individually or in aggregate makes it probable that theeconomic decisions of a reasonably knowledgeable user of the Standalone FinancialStatements may be influenced. We consider quantitative materiality and qualitative factorsin

(i) planning the scope of our audit work and in evaluating the resultsof our work; and

(ii) to evaluate the effect of any identified misstatements in theStandalone Financial Statements.

We communicate with those charged with governance regarding amongother matters the planned scope and timing of the audit and significant audit findingsincluding any significant deficiencies in internal controls that we identify during ouraudit.

We also provide those charged with governance with a statement that wehave complied with relevant ethical requirements regarding independence and to communicatewith them all relationships and other matters that may reasonably be thought to bear onour independence and where applicable related safeguards.

From the matters communicated with those charged with governance wedetermine those matters that were of most significance in the audit of the StandaloneFinancial Statements of the current period and are therefore the Key Audit Matters. Wedescribe these matters in our auditors' report unless law or regulation precludes publicdisclosure about the matter or when in extremely rare circumstances we determine that amatter should not be communicated in our report because the adverse consequences of doingso would reasonably be expected to outweigh the public interest benefits of suchcommunication.

Other Matters

7. We did not audit the financial statements / information of 8591branches included in the Standalone Financial Statements of the Bank whose financialstatements/ financial information reflects total assets of Rs. 2118949 crores at March31 2022 and total revenue of Rs. 117395 crores for the year ended on that date asconsidered in the Standalone Financial Statements. The financial statements/ informationof these branches have been audited by the branch auditors whose reports have beenfurnished to us and our opinion in so far as it relates to the amounts and disclosuresincluded in respect of these branches is based solely on the report of such branchauditors.

Our opinion is not modified in respect of the above matter.

Report on Other Legal and Regulatory Requirements

8. The Balance Sheet and the Profit and Loss Account have been drawn upin accordance with Section 29 of the Banking Regulation Act 1949; and these giveinformation as required to be given by virtue of the provisions of the State Bank of IndiaAct 1955 and regulations there under.

Subject to the limitations of the audit indicated in paragraphs 5 to 7above and as required by the State Bank of India Act 1955 and subject also to thelimitations of disclosure required therein and as required by sub-section (3) of section30 of the Banking Regulation Act 1949 we report that:

a) We have obtained all the information and explanations which to thebest of our knowledge and belief were necessary for the purposes of our audit and havefound them to be satisfactory;

b) The transactions of the Bank which have come to our notice havebeen within the powers of the Bank; and

c) The returns received from the offices and branches of the Bank havebeen found adequate for the purposes of our audit.

d) The profit and loss account shows the true balance of profit for theyear ended 31.3.2022.

9. We further report that:

a) In our opinion proper books of account as required by law have beenkept by the Bank so far as it appears from our examination of those books and properreturns adequate for the purposes of our audit have been received from branches notvisited by us;

b) the Balance Sheet the Profit and Loss Account and the Cash FlowStatement dealt with by this report are in agreement with the books of account and withthe returns received from the branches not visited by us;

c) the reports on the accounts of the branch offices audited by branchauditors of the Bank as per the provisions of the section 29 of the Banking RegulationAct 1949 and the State Bank of India Act 1955 have been sent to us and have beenproperly dealt with by us in preparing this report; and

d) in our opinion the Balance Sheet the Profit and Loss Account andthe Cash Flow Statement comply with the applicable accounting standards to the extentthey are not inconsistent with the accounting policies prescribed by the RBI.

10. As required by letter No. DOS.ARG.No.6270/08.91.001/2019- 20 datedMarch 17 2020 on "Appointment of Statutory Central Auditors (SCAs) in Public SectorBanks - Reporting obligations for SCAs from FY 2019-20" read with subsequentcommunication dated May 19 2020 issued by the RBI we further report on the mattersspecified in paragraph 2 of the aforesaid letter as under:

a) In our opinion the aforesaid Standalone Financial Statements complywith the applicable Accounting Standards issued by ICAI to the extent they are notinconsistent with the accounting policies prescribed by the RBI.

b) There are no observations or comments on financial transactions ormatters which have any adverse effect on the functioning of the Bank.

c) On the basis of the written representations received from thedirectors as on March 31 2022 and taken on record by the Board of Directors none of thedirectors is disqualified as on March 31 2022 from being appointed as a director in termsof sub-section (2) of Section 164 of the Companies Act 2013.

d) There are no qualifications reservations or adverse remarksrelating to the maintenance of accounts and other matters connected therewith.

e) Our Audit report on the adequacy and operating effectiveness of theBank's Internal Financial Controls over Financial Reporting is given in Annexure - A tothis report expressing an unmodified opinion on the Bank's Internal Financial Control overFinancial Reporting with reference to the Standalone Financial Statements as at 31stMarch 2022.

ANNEXURE "A" TO THE INDEPENDENT AUDITORS? REPORT

(Referred to in paragraph 11(e) under ‘Report on Other Legal andRegulatory Requirements? section of our report of even date)

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

We have audited the internal financial controls over financialreporting of State Bank of India ("the Bank") as of March 31 2022 inconjunction with our audit of the standalone financial statements of the Bank for the yearended on that date which includes internal financial controls over financial reporting ofthe Bank's branches.

Management?s Responsibility for Internal Financial Controls

The Bank's management 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 Guidance Note on Audit of Internal Financial Controls Over FinancialReporting issued by the Institute of Chartered Accountants of India. 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 Banking Regulation Act 1949 and the circulars andguidelines issued by the Reserve Bank of India.

Auditors? Responsibility

Our responsibility is to express an opinion on the Bank's internalfinancial controls over financial reporting based on our audit. We conducted our audit inaccordance with the Guidance Note on Audit of Internal Financial Controls Over FinancialReporting (the "Guidance Note") issued by the Institute of Chartered Accountantsof India (the "ICAI") and the Standards on Auditing (SAs) issued by the ICAI tothe extent applicable to an audit of internal financial controls. 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 were established and maintained and if such controls operatedeffectively in all material respects.

Our audit involves performing procedures to obtain audit evidence aboutthe adequacy of the Internal Financial Controls over financial reporting and theiroperating effectiveness. Our audit of internal financial controls over financial reportingincluded obtaining an understanding of internal financial controls over financialreporting assessing the risk that a material weakness exists and testing and evaluatingthe design and operating effectiveness of internal financial controls based on theassessed risk. The procedures selected depend on the auditor's judgement including theassessment of the risks of material misstatement of the financial statements whether dueto fraud or error.

We believe that the audit evidence we have obtained and the auditevidence obtained by the branch auditors in terms of their reports referred to in theOther Matters paragraph below is sufficient and appropriate to provide a basis for ouraudit opinion on the Bank's internal financial controls over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A Bank's internal financial controls over financial reporting is aprocess designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordancewith Generally Accepted Accounting Principles. A Bank's internal financial controls overfinancial reporting includes those policies and procedures that

(1) pertain to the maintenance of records that in reasonable detailaccurately and fairly reflect the transactions and dispositions of the assets of the Bank;

(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with GenerallyAccepted Accounting Principles and that receipts and expenditures of the Bank are beingmade only in accordance with authorizations of management and directors of the Bank; and

(3) provide reasonable assurance regarding prevention or timelydetection of unauthorized acquisition use or disposition of the Bank's assets that couldhave a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over FinancialReporting

Because of the inherent limitations of internal financial controls overfinancial reporting 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 overfinancial reporting to future periods are subject to the risk that the internal financialcontrols over financial reporting may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion and to the best of our information and according to theexplanations given to us and based on the consideration of the reports of the branchauditors referred to in the Other Matters paragraph below the Bank has in all materialrespects adequate internal financial controls over financial reporting and such internalfinancial controls over financial reporting were operating effectively as at March 312022 based on "the criteria for internal control over financial reportingestablished by the Bank considering the essential components of internal control stated inthe Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issuedby the ICAI".

Other Matters

Our aforesaid report in so far as it relates to the operatingeffectiveness of internal financial controls over financial reporting of 730 branches isbased on the corresponding reports of the respective branch auditors of those branches.

Our opinion is not modified in respect of this matter.

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