Report on Audit of the Standalone Financial Statements
1. We have audited the standalone financial statements of Indian Bank which comprise the Balance Sheet as at 31 March 2019, the Statement of Profit and Loss and the Statement of Cash Flows for the year then ended, and notes to financial statements including a summary of significant accounting policies and other explanatory information in which are included returns for the year ended on that date of 20 branches and the Integrated Treasury Branch audited by us and 1744 branches audited by statutory branch auditors and 3 foreign branches of which two have been audited and one branch for which audit is yet to be completed by the local foreign auditors. The branches audited by us and those audited by other auditors have been selected by the Bank in accordance with the guidelines issued to the Bank by the Reserve Bank of India. Also included in the Balance Sheet, the Statement of Profit and Loss and Statement of Cash Flows are the returns from 1107 branches which have not been subjected to audit. These unaudited branches account for 4.91 percent of advances, 14.76 per cent of deposits, 2.58 per cent of interest income and 8.37 per cent of interest expenses.
2. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Banking Regulation Act, 1949 in the manner so required for 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 fair Balance Sheet containing all the necessary particulars, is properly drawn up so as to exhibit a true and fair view of the state of affairs of the Bank as at 31st March, 2019;
b) the Profit and Loss Account, read with the notes thereon shows a true balance of profit/loss and
c) the Cash Flow Statement gives a true and fair view of the cash flows for the year ended on that date.
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditing (SAs) issued by ICAI. Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with the code of ethics issued by the Institute of Chartered Accountants of India together with ethical requirements that are relevant to our audit of the financial statements as in The Banking Regulations Act, 1949 and we have fulfilled our other ethical responsibilities in accordance with these requirements and the code of ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
4. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Valuation of securities:
- In respect of mortgage / Hypothecation of Fixed assets of the borrower, valuation is a key component. For arriving at the value of securities, we verify valuation report for fixed assets.
- The concern that arises in the above matter is that the valuation in case of fixed assets is adopted for the current year based on earlier years’ reports coupled with variations in valuations done by different valuers.
Resolution forthe matter:
The inherent deficiency in adopting an earlier year’s valuation for current year provisioning was brought to the attention of the management and discussed with those charged with governance. It was explained bythe management that RBI’sguidelines provide that a valuation made in respect of Fixed assets is valid for 3 years. As a prudent measure it was decided that updated valuation nearer to the date of the financials will be arranged. Further, as perthe Bank’s policy properties accepted as securities for advances of Rs.5 crores and above will be valued by two independent valuers and if the difference in valuation between the two valuers is more than 15%, such valuation exercise will be repeated with the new valuer till it reaches a consensus.
Based on this, the valuations furnished were adopted for the current year .
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
5. The Bank’s Board of Directors is responsible with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Bank in accordance with the accounting principles generally accepted in India, including the Accounting Standards issued by ICAI, and provisions of Section 29 of the Banking Regulation Act, 1949 and circulars and guidelines issued by the Reserve Bank of India (‘RBI’) from time to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Bank and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud orerror.
In preparing the financial statements, management is responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative buttodoso.
Auditor’s Responsibilities for the Audit of the Financial Statements
6. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, orthe override of internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whethera material uncertainty exists related to events or conditions that may cast significant doubt on the bank’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the bank to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
7. We did not audit the financial statements / information of 1107 branches included in the standalone financial statements of the Bank whose financial statements/financial information reflect total assets of Rs.9993.86 crore as at 31st March 2019 and total revenue of Rs. 768 crore for the year ended on that date, as considered in the standalone financial statements. The financial statements / information of these branches have been audited by the branch auditors whose reports have been furnished to us, and in our opinion in so far as it relates to the amounts and disclosures included in respect of branches, is based solely on the report of such branch auditors.
Our opinion is not modified in respect of this matter.
Report on Other Legal and Regulatory Requirements
8. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with Section 29 of the Banking Regulation Act, 1949;
9. Subject to the limitations of the audit indicated in paragraphs 5 to 7 above and as required by the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, and also subject to the limitations of disclosure required therein, we report that:
a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit and have found them to be satisfactory;
b) The transactions of the Bank, which have come to our notice, have been within the powers of the Bank; and
c) The returns received from the offices and branches of the Bank have been found adequate forthe purposes of our audit.
10. We further report that:
a) in our opinion, proper books of account as required by law have been kept by the Bank so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches not visited by us
b) the Balance Sheet, the Profit and Loss Account and the Statement of Cash Flows dealt with by this report are in agreement with the books of account and with the returns received from the branches not visited by us;
c) the reports on the accounts of the branch offices audited by branch auditors of the Bank under section 29 of the Banking Regulation Act, 1949 have been sent to us and have been properly dealt with by us in preparing this report; and
d) In our opinion, the Balance Sheet, the Profit and Loss Account and the Statement of Cash Flows comply with the applicable accounting standards, to the extent they are not inconsistent with the accounting policies prescribed by RBI.
For GANDHI MINOCHA& CO For PAM S & ASSOCIATES For PS SUBRAMANIA IYER & CO
Chartered Accountants Chartered Accountants Chartered Accountants
FR No.000458N FR No. 316079E FR No.004104S
BHUPINDER SINGH SATYAJIT MISHRA V SWAMINATHAN
Partner Partner Partner
(M. No 092867) (M. No.057293) (M No. 022276)
For M THOMAS & CO For K C Mehta and Co
Chartered Accountants Chartered Accountants
FRNo.004408S FR No: 106237W
R MURALI CHIRAG BAKSHI
Place : Chennai (M No. 080972) (M No. 047164)
Date : 14th May, 2019