To the Members of YES BANK Limited
Report on the audit of the standalone financial statements
We have audited the standalone financial statements of YES BANK Limited (theBank) which comprise the Balance Sheet as at March312021theProfitand LossAccount and the Cash Flow Statement for the year then ended and significant accountingpolicies and other explanatory summary of the information.
In our opinion and to the best of our information and according to the explanationsgiven to us statements give the information the afore said standalone financial requiredby the section 29 of the Banking Regulation Act 1949 as well as the Companies Act 2013(the Act) and circulars and guidelines issued by the Reserve Bank of India inthe manner so required for banking companies and give a true and fair view in conformitywith the accounting principles generally accepted in India including the AccountingStandards prescribed under section 133 of the Act read with rules made there under ofthe state of affairs of the Bank as at March 31 2021 and its loss and its cash the yearended on that date.
Basis of opinion
We conducted our audit in accordance with the Standards on Auditing (SAs)specified under Section 143 (10) of the Act. Our responsibilities under those SAs arefurther described in the Auditors Responsibilities for the Audit of the StandaloneFinancial Statements section of our report. We are independent of the Bank in accordancewith the Code of Ethics issued by the Institute of Chartered Accountants of India togetherwith the ethical requirements that are relevant to our audit of the standalone financialstatements under the provisions of the Act and the Rules thereunder and we havefulfilled our other ethical responsibilities in accordance with these requirements and theCode of Ethics. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion on the standalone financial statements.
Emphasis of matter
a) We draw attention to Note 18.6.69 which describes the state of affairs pertaining tothe blower complaints received in prior years and the subsequent actions including thecorrective steps initiated by the Bank. The Management has made provisions in accordancewith the relevant prudential norms issued by the Reserve Bank of India in respect ofincome recognition asset classification and provisioning and does not expect any furthersubstantial impact on the financial position of the Bank. Our opinion is not modified ofthis matter. b) We draw attention to Note 18.5.1 and 18.6.24 which describes the businessuncertainties due to the outbreak of SARS-CoV-2 virus (COVID-19). In view of theseuncertainties the impact on the Banks financial statements is significantlydependent on future developments. Our opinion is not modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that in our professional judgment were of mostsignificance in the audit of the Standalone Financial Statements of the current period.These matters were addressed in the context of our audit of the Standalone FinancialStatements as a whole and in forming our opinion thereon and we do not provide aseparate opinion on these matters. We have determined the matters described below to bethe key audit matters to be communicated in our report:
|Key Audit Matters ||Auditors Response |
|for Recognition and Measurement of Deferred Tax Asset || |
|The Bank has recognised a net deferred tax asset of Rs.95538433 (in 000) as on March 31 2021 including net increase of Rs.12728473 (in 000) during the year. ||Our audit procedures involved gaining an understanding of the applicable tax laws and relevant regulations applicable to the Bank. We performed the following audit procedures as part of our controls testing including: |
|Besides objective estimation recognition and measurement of deferred tax asset is based on the judgment and numerous estimates regarding the availability and visibility of profits in the future and also considering probable impact of Covid-19 pandemic. || evaluation of the policies used for recognition and measurement of deferred tax assets in accordance with AS 22 Accounting for Taxes on Income; |
| || assessed the probability of the availability of future |
|The amount of deferred tax assets recognised presumes availability and forecasting of profits over an extended period of time thus increasing uncertainty and the inherent risk of inappropriate whistle recognition of the said asset. ||taxable profits based on assumptions and parameters used by the Management including the probable impact of Covid-19 pandemic against which the Bank will be able to use this deferred tax asset in the future with reference to forecast as noted by the Board of Directors while adopting the standalone financial statements. |
| || assessed the method for determining the Deferred Tax Asset with reference to applicable tax rates and tested the arithmetical accuracy. |
|Income Recognition and Asset Classification of Advances (IRAC) and Provisioning as per regulatory norms || |
|Please refer to Note nos. 18.6.16 and 18.6.10(ii) relating to Asset Quality in respect of movement of Non- Performing Assets (NPAs) and related provisions and disclosures with regard to Non Performing Investments (NPI) respectively. ||Our audit approach included testing the design operating effectiveness of internal controls and substantive audit procedures in respect of income recognition asset classification and provisioning pertaining to advances and investments. In particular: |
|Compliance of relevant prudential norms issued by the Reserve Bank of India (RBI) in respect of income recognition asset classification and provisioning pertaining to advances as well as those pertaining to investments is a key audit matter due to materiality involved and the current processes at the Bank which are not fully automated management estimates and judgement. || we have evaluated and understood the Banks internal control system in adhering to the relevant RBI guidelines regarding income recognition asset classification and provisioning pertaining to advances and investments; |
| || we have tested key IT systems/ applications used and their design and implementation as well as operational effectiveness of relevant controls including involvement of manual process and manual controls in relation to income recognition asset classification and provisioning pertaining to advances and investments; |
| || we have test checked advances to examine the validity of the recorded amounts loan documentation examined the statement of accounts indicators of impairment impairment provision for non-performing assets and compliance with income recognition asset classification and provisioning pertaining to advances in terms of applicable RBI guidelines; |
| || we have evaluated the past trends of management judgement governance process and review controls over impairment provision calculations and discussed the provisions made with the top and senior management of the Bank. |
|IT Systems and Controls over financial reporting || |
|The Banks key financial accounting and reporting processes are highly dependent on Core Banking and Treasury Solutions and other supporting software and hardware controls such that there exists a risk that gaps in the IT control environment could result in the financial accounting and reporting records being materially misstated. Appropriate IT controls are required to ensure that the IT applications perform as planned and the changes made are properly controlled. Such controls contribute to risk mitigation of erroneous output data. The audit outcome is dependent on the extent of IT controls and systems. || We have planned designed and carried out the desired audit procedures and sample checks taking into consideration the IT systems of the Bank. The procedures adopted by us are in our opinion adequate to provide reasonable assurance on the adequacy of IT controls in place. Towards this end we obtained an understanding of Banks IT environment. |
| || In addition we have also relied on IS audit conducted by internal audit department and also the audit of Internal Financial Control over Financial Reporting conducted by the Operational Risk Management department of the Bank. We also tested key automated and manual business cycle controls and logic for system generated reports relevant to the audit; including testing of compensating controls or performed alternate procedures to assess whether there were any unaddressed IT risks that would materially impact the financial statements. |
Information other than the standalone financial Auditors statements and
The Banks management and Board of Directors are responsible for the OtherInformation. The other information comprises the Management Discussion and AnalysisDirectors Report including Annexures to Directors Report (collectively calledas "Other Information") but does not include the standalone financial statementsand our auditors report thereon and the Pillar III Disclosures under the New CapitalAdequacy Framework (Basel III disclosures). The other information is expected to be madeavailable to us after the date of this auditors report.
Our opinion on the standalone financial statements does not cover the other informationand we do 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 other information if we conclude that there is amaterial misstatement therein we are required to communicate the matter to those chargedwith governance.
Managements and Board of Directors Responsibility for the StandaloneFinancial Statements
The Banks management and Board of Directors are responsible for the mattersstated in Section 134(5) of the Act with respect to the preparation of these standalonefinancial statements that give a true and fair view of the state of affairs loss and cashflows of the Bank in accordance with the accounting principles generally accepted inIndia including the Accounting Standards specified under Section 133 of the Actprovisions of Section 29 of the Banking Regulation Act 1949 and the circulars andguidelines issued by Reserve Bank of India (RBI) from time to time. Thisresponsibility also includes maintenance of adequate accounting records in accordance withthe provisions of the Act for safeguarding of the assets of the Bank and for preventingand detecting frauds and other irregularities; selection and application of appropriateaccounting policies; making judgments and estimates that are reasonable and prudent; anddesign implementation and maintenance of adequate internal financial controls that wereoperating effectively for ensuring the accuracy and completeness of the accountingrecords relevant to the preparation and presentation of the standalone financialstatements that give a true and fair view and are free from material misstatement whetherdue to fraud or error.
In preparing the standalone financial statements the Management and Board of Directorsare responsible for assessing the Banks 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 Banks financialreporting process.
Auditors Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalonefinancial statements audit as a whole are free from material misstatement whether due tofraud or error and to issue an auditors report that includes our opinion.Reasonable assurance is a high level of assurance but is not a guarantee that an auditconducted in accordance with SAs will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material ifindividually or in the aggregate they could reasonably be expected to influence theeconomic decisions of users taken on the basis of these standalone financial statements.As part of an audit in accordance with SAs we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also: Identify and assess the risks ofmaterial misstatement of the standalone financial statements whether due to fraud orerror design and perform audit procedures responsive to those risks and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The riskof not detecting a material misstatement resulting from fraud is higher than for oneresulting from error as fraud may involve collusion forgery intentional omissionsmisrepresentations or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to designaudit procedures that are appropriate in the circumstances. Under section 143(3)(i) of theAct we are also responsible for expressing our opinion on whether the bank has adequateinternal financial controls with reference to financial statements in place and theoperating effectiveness of such controls.
Evaluate the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures in the standalone financial statements madeby the Management and Board of Directors.
Conclude on the appropriateness of the Management and Board of Directors use of thegoing 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 Banks ability to continue as a going concern. If we conclude that amaterial uncertainty exists we are required to draw attention in our auditorsreport to the related disclosures in the standalone financial statements or if suchdisclosures are inadequate to modify our opinion. Our conclusions are based on the auditevidence obtained up to the date of our auditors report. However future events orconditions may cause a Bank to cease to continue as a going concern.
Evaluate the overall presentation structure and content of the standalone financialstatements including the disclosures and whether the standalone financial statementsrepresent 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 including any significantdeficiencies 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 auditors report unless law or regulation precludes public disclosure aboutthe matter or when in extremely rare circumstances we determine that a matter should notbe communicated in our report because the adverse consequences of doing so wouldreasonably be expected to outweigh the public interest benefits of such communication.
The Standalone Financial Statements of the Bank for the previous year ended March 312020 were audited by the predecessor auditors. The auditors have expressed Qualifiedopinion vide their report dated May 6 2020 on such financial statements.
Report on other legal and regulatory requirements
The standalone balance sheet and the standalone profit accordance with the provisionsof Section 29 of the Banking Regulation Act 1949 and Section 133 of the Act.
A. As required by sub-section (3) of Section 30 of the Banking Regulation Act 1949 wereport
(a) we have obtained all the information and explanations which to the best of our andbelief were necessary for the purpose of our audit and have found them to besatisfactory;
(b) the transactions of the Bank which have come to our notice have been within theof the Bank; and
(c) since the key operations of the Bank are automated with the key applications to thecore banking systems the audit is carried out centrally as all the necessary records anddata required for the purposes of our audit are available therein. However during thecourse of our audit we have visited 2 branches to examine the records maintained at suchbranches for the purpose of our audit. Subsequently due to the ongoing Covid-19 pandemicand the lockdowns the audit processes were conducted remotely without visiting thebranches.
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 bestknowledge 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 thefar as it appears from our examination of those books;
(c) the standalone balance sheet the standalone profit and loss account and the cashflow statement dealt with with the books of account; by this Report arein agreement
(d) in our opinion the aforesaid standalone financial statements comply with theStandards specified under Section 133 of the Act to the extent they are not inconsistentwith the accounting policies prescribed by RBI;
(e) on the basis of the written representations received from the directors as on March31 2021 taken on record by the Board of Directors none of the directors is disqualifiedas on March 31 2021 from being appointed as a director in terms of Section 164 (2) of theAct; and
(f) with financial controls respect to the adequacy of the internal with reference tostandalone financial statements of the Bank and the operating effectiveness of suchcontrols refer to loss account have been drawn up in our separate Report inAnnexure A.
C. With respect to the other matters to be included in the Auditors Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our that: information and according to the explanations given to us:
(a) the Bank has disclosed the impact of pending litigations as at March 31 2021 onits financial statements - Refer Note 18.6.70 to the standalone position in its standalonefinancial statements; powers
(b) 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 statements; -ReferNote18.6.67tothestandalonefinancial
(c) there has been no delay in transferring amounts required to be transferred to theInvestor Education and Protection Fund by the Bank - Refer Note 18.6.59 to the standalonefinancial statements.
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 Act1949. Accordingly the requirements prescribed under Section 197 of the Companies Act2013 do not apply by virtue our of Section 35B(2A) of the Banking Regulation Act 1949.
| ||For M. P. Chitale & Co. |
| ||Chartered Accountants |
| ||ICAI Firm Registration. No.: 101851W |
| ||Ashutosh Pednekar |
| ||Partner |
|Place : Mumbai ||ICAI Membership No.: 041037 |
|Date : April 30 2021 ||UDIN : 21041037AAAACF7681 |
to the Independent Auditors Report of even date on the standalone financialstatements of YES BANK Limited for the year ended March 31 2021
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")
We have audited the internal financial controls with reference to standalone financialstatements of YES BANK Limited ("the Bank") as of March 31 2021 in conjunctionwith our audit of the standalone financial statements of the date Bank for the year endedon that .
Managements responsibility for internal financial controls
The Banks management and Board of Directors are responsible for establishing andmaintaining internal financial controls based on the internal control over financialreporting criteria established by the Bank considering the essential components ofinternal control stated in the Guidance Note on Audit of Internal Financial Controls OverFinancial Reporting (the 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 the Banks policies the safeguarding of its assets the prevention anddetection of frauds and errors the accuracy and completeness of the accounting recordsand the timely preparation of reliable information as required under the Companies Act2013 ("the Act").
Our responsibility is to express an opinion on the Banks internal financialcontrols with reference to standalone financial statements based on our audit. Weconducted our audit in accordance with the Guidance Note on Audit of Internal FinancialControls Over Financial Reporting (the Guidance Note) and the Standards onAuditing (the Standards) issued by the ICAI and deemed to be prescribedunder section 143(10) of the Act to the extent applicable to an audit of internalfinancial controls over financial reporting both issued by the ICAI. Those Standards andthe Guidance Note require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether adequate internal financialcontrols with reference to financial established and maintained and whether such controlsoperated 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 of internal financial controls with reference to standalone financialstatements included an understanding of internal financial controls assessing the riskthat a material and testing and evaluating the design and operating effectiveness ofinternal control based on the assessed risk. The procedures selected depend on theauditors judgment including the assessment of the risks of material misstatement ofthe standalone financial statements whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Banks internal financial controls withreference to standalone financial statements.
Meaning of internal financial controls with reference to financial statements
A Banks internal financial controls with reference to standalone financialstatements is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of standalone financial statements for externalpurposes in accordance with generally accepted accounting principles. Banks internalfinancial control with reference to financial statement includes those policies andprocedures that
1) pertain to the maintenance of records that in reasonable detail accurately andfairly reflect the transactions and dispositions of the assets of the company;
2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of standalone financial statements in accordance with generally acceptedaccounting principles and that receipts and expenditures of the company are being madeonly in accordance with authorisations of management and directors of the company; and
3) provide reasonable assurance regarding prevention or timely detection ofunauthorised acquisition use or disposition of the companys assets that could havea material effect standalone financial statements.
Inherent limitations of internal financial were reference controls with ce tofinancial statements
Because of the inherent limitations of internal financial controls with reference tostandalone financial . Our audit statements including the possibility of collusion orimproper management override of controls obtaining material misstatements due to error orfraud may occur and not be detected. Also projections of any evaluation of the internalfinancial controls with reference to standalone financial statements to exists futureperiods are subject to the risk that the internal financial control with reference tostandalone financial statement become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.
In our opinion the bank has maintained in all respects an adequate internal financialcontrol system with reference to financial statements and such internal financial controlswith reference to the at March 31 2021 based on internal control over financialstatements were operating effectively financial reporting criteria established by the bankconsidering the essential components of internal control stated in the Guidance Note.
| ||For M. P. Chitale & Co. |
| ||Chartered Accountants |
| ||ICAI FRN: 101851W |
| ||Ashutosh Pednekar |
| ||Partner |
|Place : Mumbai ||ICAI M. No.: 041037 |
|Date : April 30 2021 ||UDIN : 21041037AAAACF7681 |