1. We have audited the attached Balance Sheet of Rural Electrification Corporation Limited  as at 31st March
2011 and also the Profit & Loss
 Account and the Cash Flow Statement for the year ended on that date
 annexed thereto.  These financial statements are the responsibility of
 the Company''s management. Our responsibility is to express an opinion
 on these financial statements based on our audit.
 
 2.  We conducted our audit in accordance with the auditing standards
 generally accepted in India. Those standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatement. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and Significant estimates made
 by the management, as well as evaluating the overall financial
 statements presentation. We believe that our audit provides a
 reasonable basis for our opinion.
 
 3.  As required by the Companies (Auditors'' Report) Order, 2003 (as
 amended) issued by the Central Government of India in terms of
 sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose
 in the Annexure a statement on the matters specified in paragraphs 4 and
 5 of the said order to the extent applicable to the Corporation.
 
 4.  Further to our comments in the Annexure referred in paragraph 3
 above, we report that:
 
 i) We have obtained all the information and explanations which to be
 best of our knowledge and belief were necessary for the purposes of our
 audit;
 
 ii) In our opinion, proper books of accounts as required by law have
 been kept by the company so far as appears from our examination of such
 books;
 
 iii) The Balance Sheet, Profit & Loss account and cash flow
 
 statement dealt with by this report are in agreement with the books of
 accounts;
 
 iv) In our opinion, the Balance Sheet, Profit & Loss account and Cash
 Flow statement dealt with by this report comply with the Accounting
 Standards referred to in sub-section (3C) of Section 211 of the
 Companies Act, 1956 to the extent possible.
 
 v) Vide notification No. 2/5/2001-CL.V dated 22.03.2002 of the
 Department of Company Aaffairs, Government of India, Government Companies
 have been exempted from applicability of the provisions of Section
 274(1)(g) of the Companies Act, 1956.
 
 vi) In our opinion and to the best of our information and according to
 explanations given to us, the said statements of accounts read together
 with notes and accounting policies thereon, give the information
 required by the Companies Act 1956, in the manner so required and give
 a true and affair view in conformity with the accounting principles
 generally accepted in India:
 
 a) In the case of the Balance Sheet of the State of affairs of the
 Company as at 31st March 2011.
 
 b) In the case of Profit & Loss Account, of the Profit of the Company for
 the year ended on that date; and
 
 c) In the case of the Cash Flow Statement, of the Cash flows for the
 year ended on that date.
 
 Annexure to the Auditors'' Report
 
 Referred to in paragraph (3) of our report of even date on the accounts
 Of rural electrification corporation limited for the year ended on 31st
 March, 2011
 
 (i) (a) The Corporation has maintained fixed assets records to show full
 particulars including quantitative details and situation of its fixed
 assets.
 
 (b) The fixed assets of the corporation were physically verified by the
 management during the year ended on 31st March,2011;as certified by
 management, no material discrepancies has been found out on such
 physical verification.
 
 (c) In our opinion and according to the explanations given to us,
 during the year, the Corporation has not disposed of substantial part
 of fixed assets therefore going concern is not affected . Hence this
 clause of the order is not applicable.
 
 (ii) The Corporation being Non Banking Financial Company, does not has
 any inventory; as such this clause is not applicable.
 
 (iii) (a) According to the information and explanations given to us,
 the Corporation has not granted any loans secured or unsecured to any
 company, frm or other parties covered in register maintained under
 section 301 of Companies Act, 1956. Accordingly clauses 4(iii)(a),
 4(iii)(b), 4(iii)(c) and 4(iii)(d) of the order are not applicable.
 
 (e) According to the information and explanations given to us, the
 Corporation has not taken any loans, secured or unsecured, from any
 company, frm, or other parties covered in the register maintained under
 section 301 of the Companies Act 1956. Accordingly clause 4(iii)(e),
 the clause 4(iii)(f) and 4(iii)(g) of the order are not applicable.
 
 (iv) In our opinion and according to information & explanations given
 to us, internal controls for purchase of fixed assets and for the
 financial services are generally commensurate with the size of the
 Corporation and the nature of its business. However in certain areas
 internal control needs further strengthening like Utilization of
 grants/subsidies disbursed under various schemes; Monitoring and
 supervision of loans given to various SEBs/ DISCOMS/TRANSCOS/GENCOS
 including obtaining search reports for charges created against the
 loans given, ascertainment of viability of revised project at the time
 of re-schedulement of loan assets; Generation of various reports from
 loan module in ERP to have better control over loan assets. During the
 course of audit we have not come across any major failure in internal
 control system.
 
 (v) According to information and explanations given to us, the
 Corporation has not entered into any contract with the Companies or
 Entities covered u/s 301 of the Companies Act, 1956. Accordingly this
 clause of the order is not applicable.
 
 (vi) According to the information and explanations given to us, the
 Corporation has not accepted any deposit from public to which the
 provisions of Sections 58A and 58AA or any other relevant provisions of
 the Companies Act, 1956 and the Rules framed there under, apply.
 
 (vii) In our opinion the Corporation has an internal audit system
 generally commensurate with its size and nature of its business
 
 (viii) To the best of our knowledge and as explained, the Central
 Government has not prescribed the maintenance of cost records under
 clause (d) of sub section (1) of section 209 of the Companies Act,
 1956, for the products/services of the Corporation. Accordingly, this
 clause of the order is not applicable to the Corporation.
 
 (ix) (a) The Corporation is generally regular in depositing with the
 appropriate authorities undisputed statutory dues including provident
 fund, investor''s education protection fund, employees state insurance,
 income tax, sales tax, wealth tax, service tax, custom duty, excise
 duty, cess and any other statutory dues applicable to it.
 
 (b) According to the information and explanations given to us, no
 undisputed amounts payable in respect of income tax, service tax,
 wealth tax were in arrears as at 31st March 2011 for a period of more
 than six months from the date they became payable.
 
 (c) According to the information and explanations given to us, there
 are no dues of income tax, sales tax, wealth tax, service tax, custom
 duty, excise duty and cess which have not been deposited on account of
 dispute.
 
 (x) The Corporation does not have any accumulated losses as at 31st
 March 2011. The Corporation has also not incurred cash losses during
 the year covered by our audit and in the immediate preceding financial
 year. Accordingly, this clause of the order is not applicable.
 
 (xi) In our opinion and according to the information and explanations
 given to us, the Corporation has not defaulted in repayment of dues to
 a financial institution, bank or bond holders as at the Balance Sheet
 date.
 
 (xii) In our opinion and according to the information and explanations
 given to us, the Corporation has maintained records and documents in
 respect of loan granted by it to various State Electricity Board,
 Transmission, Distribution and Generation Companies including
 independent power producers on the basis of security by way of pledge
 of shares and other securities.
 
 (xiii) In our opinion and according to the information and explanations
 given to us, the Corporation is not a chit fund or a nidhi or mutual
 benefit fund or society, therefore, this clause of
 the order is not applicable to the corporation
 
 (xiv) In our opinion and according to the information and explanations
 given to us, the Corporation is not dealing or trading in shares,
 securities, debenture and other investment, therefore this clause of
 the order is not applicable to the corporation.
 
 (xv) In our opinion and according to the information and explanations
 given to us, the Corporation has not given any guarantee for loans
 taken by others from banks or financial institutions during the year.
 Accordingly this clause of the order is not applicable to the
 Corporation.
 
 (xvi) In our opinion and according to the information and explanations
 given to us the term loans were applied for the purpose for which they
 were raised.
 
 (xvii) According to the information and explanations given to us and on
 the overall examination of the balance sheet of the Corporation, we
 report that funds raised on short term basis have not been used for
 long term investment.
 
 (xviii) According to the information and explanations given to us,
 during the year the Corporation has not made any preferential allotment
 of shares to companies, firms or other parties needs to be listed in the
 register maintained u/s 301 of the Companies Act.
 
 (xix) According to the information and explanations given to us, the
 Corporation has created security in respect of Institutional
 
 Loans, Taxable Secured Bonds and Capital Gain Bonds in the form of
 charge on receivables and Registered Mortgage on the immovable
 properties of the Corporation at Maharashtra & Delhi.
 
 (xx) The Corporation has not raised monies by public issue during the
 year. Accordingly this clause for disclosure of end use of money raised
 is not applicable. As explained to us, the money raised by way of
 Taxable Secured Bonds and Capital Gain Bonds is not a public issue.
 
 (xxi) During the course of our examination of the books of account
 carried out in accordance with the generally accepted auditing
 practices in India, and according to the information and explanations
 given to us, we have neither come across any instance of fraud on or by
 the Corporation, noticed or reported during the year, nor have we been
 informed of such case by the management.
 
 For Bansal & Co.                             for K.G Somani & Co.
 Chartered Accountants                       Chartered Accountants
 R.C. Pandey                                   Bhuvnesh maheshwari
 Partner                                                   Partner
 
 M. No.070811                                        M. No. 088155
 
 Firm Regn No.001113N                         Firm Regn No.006591N
 
 Place: New Delhi
 
 Date : 24th May, 2011