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Yes Bank Ltd.

BSE: 532648 Sector: Financials
NSE: YESBANK ISIN Code: INE528G01035
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VOLUME 15574565
52-Week high 20.83
52-Week low 11.85
P/E
Mkt Cap.(Rs cr) 31,669
Buy Price 12.63
Buy Qty 3020.00
Sell Price 12.64
Sell Qty 158900.00
OPEN 12.80
CLOSE 12.78
VOLUME 15574565
52-Week high 20.83
52-Week low 11.85
P/E
Mkt Cap.(Rs cr) 31,669
Buy Price 12.63
Buy Qty 3020.00
Sell Price 12.64
Sell Qty 158900.00

Yes Bank Ltd. (YESBANK) - Auditors Report

Company auditors report

To the Members of YES Bank Limited

REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS

Qualified Opinion

We have audited the standalone financial statements of YES Bank Limited (the Bank)which comprise the standalone balance sheet as at 31 March 2020 the standalone profit andloss account the standalone cash flow statement for the year then ended and notes to thestandalone financial statements including a summary of the significant accountingpolicies and other explanatory information.

In our opinion and to the best of our information and according to the explanationsgiven to us except for the effect of the matters described in the Basis of Qualifiedopinion section of our report the aforesaid standalone financial statements give theinformation required by the Banking Regulation Act 1949 as well as the Companies Act2013 (the Act) in the manner so required for banking companies and give a true and fairview in conformity with the accounting principles generally accepted in India of thestate of affairs of the Bank as at 31 March 2020 and its loss and its cash flows for theyear ended on that date.

Basis of Qualified opinion

We draw attention to Note 18.3 of the standalone Financial Statements which indicatesthat during the year ended 31 March 2020 the Bank has breached the regulatoryrequirements of the Reserve Bank of India (RBI) regarding maintaining the minimum CommonEquity Tier (CET) 1 and Tier 1 capital ratios which indicates the position of capitaladequacy of a bank. The breach is primarily on account of the increase in the provisionfor advances during the year ended 31 March 2020 as the Bank has decided on a prudentbasis to enhance its Provision Coverage Ratio on its Non-Performing Asset (NPA) loansover and above minimum RBI loan level provisioning. Further the write back of theAdditional Tier (AT) 1 bonds on 14 March 2020 also resulted in the breach of Tier 1capital ratio as at 31 March 2020. The CET1 ratio and the Tier 1 capital ratios for theBank as at 31 March 2020 stood at 6.3% and 6.5 % as compared to the minimum requirementsof 7.375% and 8.875% respectively. This implies that the Bank will have to take effectivesteps to augment its capital base in the year 202021. Further in view of the RBI normsrelating to the breach of the aforesaid ratios there is uncertainty around RBIs potentialaction for such a breach. We are unable to comment on the consequential impact of theabove regulatory breach on these standalone financial statements.

We draw attention to Note 18.6.69 to the Standalone financial statements whichdiscloses that the Bank became aware in September 2018 through communications from stockexchanges of an anonymous whistle-blower complaint alleging irregularities in the Bankoperations potential conflicts of interests in relation to the former MD and CEO andallegations of incorrect NPA classification. The Bank conducted an internal enquiry ofthese allegations which resulted in a report that was reviewed by the Board of Directorsin November 2018. Based on further inputs and deliberations in December 2018 the AuditCommittee of the Bank engaged an external firm to independently examine the matter. Duringthe year ended 31 March 2020 the Bank identified certain further matters which arose fromother independent investigations initiated by the lead banker of a lenders consortium onthe companies allegedly favoured by the former MD and CEO. In March 2020 the EnforcementDirectorate has launched an investigation into some aspects of dealings and transactionsby the former MD and CEO basis draft forensic reports from external agencies which furtherpointed out to conflict of interest between the former MD and CEO and certain companiesand arrested him. In view of the fact that these enquiries and investigations are stillongoing we are unable to comment on the consequential impact of the above matter on thesestandalone financial statements.

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 Auditors 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 qualified opinion on the standalone financial statements.

Material uncertainty related to going concern

We draw attention to Note 18.3 of the Standalone Financial Statements which indicatesthat the Bank has incurred a loss of Rs.16418 crores for the year ended 31 March 2020.Particularly during the last six months there has also been a significant decline in theBanks deposit base an increase in their NPA ratios resulting in breach of loan covenantson its foreign currency debt and credit rating downgrades resulting in partial prepaymentof foreign currency debt linked to external credit rating. The Bank has also breachedminimum Statutory Liquidity Ratio (SLR) and Liquidity Coverage Ratio requirements of RBIduring the year and has provided an amount of Rs.334 crores for the expected penalty onthe SLR breach. The Bank has also breached the RBI mandated CET1 ratio and Tier 1 capitalratio which stood at 6.3%.and 6.5% as compared to the minimum requirements of 7.375% and8.875% respectively. This requires the Bank to take effective steps to augment its capitalbase in the year 202021. The breach of the CET1 and Tier 1 requirements was also impactedby the decision of the Bank to enhance its Provision Coverage Ratio on a prudent basison its NPA loans over and above RBIs minimum loan provisioning norms. Further on 5 March2020 the Central Government based on the RBIs application imposed a moratorium undersection 45 of the Banking Regulation Act 1949 for a period of 30 days effective 5 March2020. The RBI in consultation with the Central Government and in exercise of the powersunder section 36ACA of the Banking Regulation Act 1949 superseded the Board of Directorsof the Bank on 5 March 2020. The above indicators of financial stress and actions taken bythe RBI resulted in a significant withdrawal of deposits.

On 13 March 2020 the Government of India notified the Yes Bank Limited ReconstructionScheme 2020 (the Scheme) [notified by the Central Government in exercise of the powersconferred by sub section (4) and subsection 7 of section 45 of the Banking Regulation Act1949]. Under this Scheme the authorized share capital of the Bank was increased toRs.6200 crores. The Bank has received capital from investors amounting to Rs.10000crores on 14 March 2020. The State Bank of India (SBI) and other banks and financialinstitutions invested in the Bank at a price of Rs.10 per equity share of the Bank (Rs.2face value with a Rs.8 premium). SBI is required to hold upto 49% with a minimum holdingof 26% by SBI in the Bank (which is subject to a 3 year lock in). Other investors aresubject to a 3 year lock in for 75% of the investments they make in the Bank under thisScheme. Existing investors (other than investors holding less than 100 shares) in the Bankare also subject to a lock in for 75% of their holding as per this

Scheme. A new Board of Directors CEO and MD and Non Executive Chairman have also beenappointed pursuant to the Scheme. In addition the moratorium imposed on the Bank on 5March 2020 was vacated on 18 March 2020 as per the Scheme. RBI has also granted short-termfunding to the Bank for the period of 90 days. The Bank has submitted a proposal seekingextension for a period of one year. The draft reconstruction scheme proposed on 6 March2020 had also envisaged that the Bank would be able to write back Additional Tier 1 (AT1)securities amounting to Rs.8695 crores to equity. However the final Scheme issued by theGovernment of India on 13 March 2020 does not contain any reference to the write back ofthe AT1 securities. Based on the legal advice on the contractual terms of the AT 1 bondsthe Bank has fully written back AT 1 bonds aggregating to Rs.8415 crores on 14 March2020. This action by the Bank has been legally challenged through a writ petition in theHonble Bombay High court.

In line with the RBIs COVID-19 Regulatory Package dated 27 March 2020 and 17 April2020 the Bank has granted a moratorium of three months on the payment of all instalmentsand/or interest as applicable falling due between 1 March 2020 and 31 May 2020 to alleligible borrowers classified as Standard even if overdue as on 29 February 2020.

In the opinion of the Bank based on the financial projections prepared by the Bank andapproved by the Board for the next 3 years the capital infusion lines of liquidityprovided by RBI and the reconstruction Scheme the Bank will be able to realize its assets(including its deferred tax asset) and discharge its liabilities in its normal course ofbusiness and hence the financial statements have been prepared on a going concern basis.The said assumption of going concern is inter-alia dependent on the Banks ability toachieve improvements in liquidity asset quality and solvency ratios and mitigate theimpact of Covid-19 and thus a material uncertainty exists that may cast a significantdoubt on the Banks ability to continue as a going concern. However as stated above asper management and the Board there are mitigating factors to such uncertainties includingthe amount of capital funds that have been raised in March 2020 the nature and financialresources of new investors who have infused funds in the Bank the new Board of DirectorsCEO and MD and part time Chairman appointed as per the Scheme and the extent of regulatorysupport provided to the Bank by the RBI.

Our conclusion on the Standalone Financial Statements is not modified in respect ofthis matter.

Emphasis of matter

We draw attention to Note 18.6.51 of the standalone financial statements which statesthat the Bank has a TOTAL deferred tax asset of Rs.8281 crores as at 31 March 2020. Asper the requirements of AS 22 - Income Taxes based on the financial projections preparedby the Bank and approved by the Board of Directors the Bank has assessed that there isreasonable certainty that sufficient future taxable income will be available against whichsuch deferred tax assets can be realized. The Bank expects to have a taxable profit forthe future years. Our conclusion is not modified in respect of this matter.

We draw attention to Note 18.4 of the standalone financial statements which states thatthe Bank had made an additional provision of Rs.15422 crores for the period ended 31December 2019 on a prudent evaluation of the status of NPAs based on discussion withregulator over and above the RBI norms relating to the minimum provision to be made bybanks on their loans and advances. The additional provision is judgmental based on thequality and status of specific loans identified by the Bank as at 31 March 2020. Webelieve that this judgment exercised by the Bank is appropriate. Our conclusion is notmodified 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. In addition to the matter described in the MaterialUncertainty Related to Going Concern section we have determined the matters describedbelow to be the key audit matters to be communicated in our report.

Key audit matter How the matter was addressed in our audit
Identification of Non-Performing Assets (NPAs) and Provisions on Advances
Charge: Rs.27806 crores for year ended 31 March 2020 Provision: Rs.24253 crores at 31 March 2020
Refer to the accounting policies in the standalone financial statements: "Significant Accounting Policies- use of estimates" and "Note18.5.3 to the standalone financial statements: Advances"
Significant estimates and judgment Our key audit procedures included:
Test of design / controls
Identification of NPAs and provisions in respect of NPAs and 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. In case of restructured accounts provision is made for erosion/ diminution in fair value of restructured loans in accordance with the RBI guidelines. - Assessed the design implementation and operating effectiveness of key internal controls over approval recording and monitoring of loans monitoring process of overdue loans 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.
- Obtained and reviewed the Banks policy and application of moratorium provided to customers in response to COVID 19.
Key audit matter How the matter was addressed in our audit
Identification of Non-Performing Assets (NPAs) and Provisions on Advances (continued)
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. - Involved information system specialists in the audit of this area to gain comfort over data integrity and calculations including system reconciliations.
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.
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.
- We tested computations of provisions established by the Bank in response to the RBIs guidance on customers for which COVID related moratoriums have been provided.
- We also selected a sample of high risk 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 and performed 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 in accordance with the Prudential Norms on Income Recognition Asset Classification and Provisioning issued by the RBI; and
• For a risk based 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
IT systems and controls Our key IT audit procedures included:
The Banks 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. Amongst its multiple IT systems seven systems are key for its overall financial reporting. - 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.
- 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 Banks 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.
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.
- 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.
- 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.
Key audit matter How the matter was addressed in our audit
Valuation of Investments
Refer to the accounting policies in the standalone financial statements: "Significant Accounting Policies- use of estimates" "Note 18.5.2 to the standalone financial statements: Investments"
Subjective estimates and judgment involved Our key audit procedures included:
Test of design / controls
Investments - Assessed the design implementation and operating effectiveness of managements key internal controls over classification and valuation.
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.
- 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 HTM are carried at amortised cost. Where in the opinion of management a diminution other than temporary in the value of investments has taken place appropriate provisions are required to be made.
Substantive tests
- For sample of instruments we reperformed valuations. For cases where no direct observable inputs were used we examined and challenged the assumptions used by the Bank in determination of Net assets and cashflows while using a discounted cashflow method.
Investments classified as AFS and HFT are marked- to-market on a periodic basis as per the relevant RBI guidelines.
We identified valuation of investments as a key audit matter because of the management judgement involved in determining the value of certain investments (Bonds and Debentures Commercial papers and Certificate of deposits security receipts) based on the policy and methodology developed by the Bank impairment assessment for HTM book and the overall significant investments to the financial statements of the Bank. - Assessed whether the financial statement disclosures appropriately reflect the Banks exposure to investments with reference to the requirements of the prevailing RBI guidelines.

Information other than the standalone financial statements and Auditors Report thereon

The Banks management and Board of Directors are responsible for the other information.The other information comprises the information included in the Banks Annual report butdoes not include the standalone financial statements and our auditors report thereon. TheAnnual report is expected to be made available to us after the date of this auditorsreport.

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. If based on the work we have performed we conclude that there is amaterial misstatement of this other information we are required to report that fact.

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

Managements and Board of Directors Responsibility for the Standalone Financialstatements

The Banks 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 loss and cash flows ofthe 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 BankRs.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 Banks financial reportingprocess.

Auditors 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 auditors 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 inaccordance with SAs we exercise professional judgment and maintain professionalskepticism 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 financial statements in place andthe 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 Banks ability to continue as a going concern. If we conclude that a materialuncertainty exists we are required to draw attention in our auditors 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 auditors 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 auditors 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

we report 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 24 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 Auditors 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 Note18.6.70 to thestandalone financial statements;

ii. the Bank has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on longterm contracts includingderivative contracts - Refer Note 18.6.67 to the standalone financial statements;

iii. there has been no delay in transferring amounts required to be transferred tothe Investor Education and Protection Fund by the Bank - Refer Note 18.6.59 to thestandalone financial statements; and

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
Firms Registration No: 101248W/W-100022
Venkataramanan Vishwanath
Partner
Membership No: 113156
Mumbai UDIN:20113156AAAABL2843
May 6 2020

Annexure A

to the Independent Auditors Report of even date on the standalone financial statementsof YES 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 YES 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").

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 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 BankRs.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 Companies Act 2013 ("the Act").

AUDITORS RESPONSIBILITY

Our responsibility is to express an opinion on the Banks 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 undersection 143(10) of the Act to the extent applicable to an audit of internal financialcontrols with reference to financial statements. Those Standards and the Guidance Noterequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether adequate internal financial controls with reference tofinancial statements were established and maintained and whether such controls operatedeffectively 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 auditorRs.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 BankRs.s internal financial controls withreference to standalone financial statements.

MEANING OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO FINANCIAL STATEMENTS

A companys 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.

A companys internal financial control with reference to financial statement includesthose policies and procedures that (1) pertain to the maintenance of records that inreasonable detail accurately and fairly reflect the transactions and dispositions of theassets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of standalone financial statements in accordance withgenerally accepted accounting principles and that receipts and expenditures of thecompany are being made only in accordance with authorisations of management and directorsof the company; and (3) provide reasonable assurance regarding prevention or timelydetection of unauthorised acquisition use or disposition of the companys assets thatcould have a material effect on the standalone 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 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
Firms Registration No: 101248W/W-100022
Venkataramanan Vishwanath
Partner
Membership No: 113156
Mumbai UDIN:20113156AAAABL2843
May 6 2020

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