Sr.

No.

Key Audit Matters

How our Audit procedures addressed
the Key Audit Matters

1.

Classification of advances and compliance with

Our audit approach towards the advances portfolio of

RBI IRACP guidelines:

the bank included a combination of both - testing of

(Refer Schedule 9 to the Balance sheet and Note No.

the design and operating effectiveness of the internal

4 of Schedule 17 - Significant Accounting Policies

controls, related processes and substantive

annexed to and forming part of the standalone

procedures in relation to classification of advances

financial statements for the year ended March 31,

and compliance with RBI's IRACP guidelines. Our

2026)

audit procedures included:

As of March 31, 2026, Advances constitute a

a) Reviewing the logic and assumptions used in the

significant portion @ 67.41% of the total assets of the

CBS and other related IT systems for compliance

Bank. Advances include Bills purchased and

of the IRACP norms for identification, classification

discounted, Cash credits, Overdrafts, Loans repayable
on demand and Term loans. These are further

and provisioning of the non-performing advances.

categorised on the basis of security, guarantee and

b) Obtained information in respect of manual

sectors.

interventions required in system-based
identification and classification of NPAs, evaluated

The Bank classifies advances into performing

the compensating controls for such manual

advances or non-performing advances (NPA) based

interventions including authorisation, review and

on the master circulars / directions issued by Reserve
Bank of India (RBI) contained in “Prudential Norms for

reporting mechanism thereof.

Income Recognition, Asset Classification and

c) Obtained and reviewed the Risk Control Matrix

Provisioning for Advances” (IRACP), as applicable for

(RCM) pertaining to the advances and tested the

the financial year. The instructions / guidelines issued

design and operating effectiveness of key internal

by RBI are applicable for all the credit facilities

financial controls with respect to classification of

sanctioned by the Bank and are to be mandatorily
followed for the purpose of Income Recognition, Asset

advances and provisioning thereof.

Classification and Provisioning.

d) Involved our internal IT expert for testing IT
general controls over Income Recognition, Asset

The IT environment of the Bank is complex and
involves a number of independent and interdependent

Classification and Provisioning process in CBS.

IT systems (including Core Banking Systems CBS)

e) Recomputed on sample basis the overdues, days

used in the operations of the Bank for processing and

past due and tested whether the accounts are

recording a large volume of transactions. As a result,

classified as performing / SMA / NPA accordingly,

there is a high degree of reliance and dependency on

verified the reporting to RBI's Central Repository of

such IT systems for the financial reporting process of

Information on Large Credits ('CRILC'), the dates

the Bank.

of NPA (in case of NPA accounts) and ensured that
applicable provisioning are made as per the RBI

The Bank relies on its CBS for identification of NPA,
further categorisation thereof, provisioning and for

guidelines and policy of the Bank.

compliance with the applicable regulatory guidelines.

f) Performed various analytical procedures to

Further, the Bank also avails the services from various

ascertain the trends in the movement of total

experts such as independent valuers, legal experts

advances, NPA and stressed portfolio.

etc. to determine the valuations and enforceability of

g) Obtained and perused, on test basis, the reports of

security taken against such advances.

the concurrent audits, internal inspections,
management audits, revenue audits, audit of

Considering the high degree of complexity, the

IRACP logic at product level, Regulatory audits,

classification of advances, provisioning and

etc. in order to assess the existence and

compliance with RBI IRACP guidelines requires

effectiveness of controls, monitoring and

considerable level of management judgment,

supervision, adherence to the policies, procedures,

estimates and application both quantitative as well as

delegation of powers, instructions from the

Sr.

No.

Key Audit Matters

How our Audit procedures addressed
the Key Audit Matters

1.

qualitative factors prescribed by the regulations.

There is a significant risk of material misstatement if
the RBI' IRACP guidelines with respect to
classification of advances and provisioning are not
followed properly. Accordingly, in terms of guidelines
contained in Standard on Auditing - SA 701
“Communicating Key Audit Matters in the Independent
Auditor's Report”, we have identified this aspect as a
key audit matter.

controlling offices, compliance and governance
mechanism etc.

h) In respect of branches audited by us, carried out
substantive audit procedures by way of
examination of large, stressed, restructured and
other advances on test check basis covering the
overall portfolio at respective branches including
review & perusal of reports of independent valuers,
agencies for special monitoring of large advances,
reports issued by credit / stock auditors, lenders
independent engineers etc., tested the operating
effectiveness key internal financial controls at the
branch level.

i) In accordance with SA - 600 - using the work of
another auditors, communicated with the Statutory
Branch Auditors (SBAs) for advising them to verify
the compliance with the applicable norms
regarding classification and provisioning as per
IRACP guidelines and policies and procedures
followed by the bank. Perused and relied on the
reports submitted by the SBAs.

j) Obtained and understood the process of
consolidation of advances and NPA at zonal offices
and at central office. On sample basis checked the
consolidation process to ensure correctness and
completeness.

k) As a part of our substantive audit procedures
recalculated the provisions on sample basis for
retail and corporate portfolios both for advances
under standard category on collective portfolio
basis and case to case basis in respect of NPA for
ensuring the correctness and completeness of
provisions worked out by the Bank.

l) Examined the adequacy and appropriateness of
the related presentation & disclosures as per
applicable accounting standards and regulatory
guidelines.

2.

Classification and Valuation of Investments:

(Refer Schedule 8 to the Balance sheet Note No. 3 of
Schedule 17 of Significant Accounting policies to the
Standalone Financial Statements)

Investment portfolio of the bank comprises of
Investments in Government Securities, Bonds,
Debentures, Shares, Security Receipts and other
Approved Securities which are classified under three
categories, Held to Maturity (HTM), Available for Sale
(AFS) and Fair Value through Profit or Loss (FVTPL)
with subcategory of Held for trading (HFT).

Investments constitute 23.75% of the Bank's total
assets as at March 31, 2026 and Interest on
Investments comprises 19.86% of the Bank's total
income for the year ended March 31, 2026.

Our audit approach towards classification and
valuation of investment portfolio is with reference to
the RBI Circulars / directives which includes a
combination of test of the design, implementation, and
operating effectiveness of internal controls, related
process and substantive procedures in relation to
classification, valuation, identification of non¬
performing investments (NPIs), provisioning /
depreciation related to Investments.

Our audit procedures with respect to audit of
classification and valuation of investment portfolio
includes:

a) We understood and reviewed the methodology and
internal control system adopted by the Bank to
comply with relevant RBI guidelines regarding

Sr.

No.

Key Audit Matters

How our Audit procedures addressed
the Key Audit Matters

2.

These are governed by the circulars and directives of
the Reserve Bank of India (RBI), which inter-alia,
cover valuation of investments, classification of
investments, recognition of income on investments,
identification of non-performing investments, the
corresponding non-recognition of income and
provision there against.

The valuation of each category (type) of the aforesaid
securities is to be done as per the valuation hierarchy
prescribed in circulars and directives issued by the
RBI which involves collection of data/information from
various sources such as FIMMDA/ FBIL rates, rates
quoted on BSE/NSE, financial statements of unlisted
companies, NAVs of mutual funds, AIFs, VCFs,
Security Receipts etc.

Considering the complexity and significant judgement
involved in investment valuation, the volume of
transactions, the size of the investment portfolio, and
the heightened regulatory focus, our audit
concentrated on the valuation of investments, their
classification, identification of non performing
investments, and the related provisioning. Accordingly,
this area has been determined to be a Key Audit
Matter.

valuation, classification, income recognition,
identification of Non-Performing Investments
(NPIs) and provisioning / depreciation related to
investments;

b) We have performed a review, on a sample basis,
of investment agreements, term sheets, deal
tickets and broker contract notes executed during
the year to obtain an understanding of the key
terms and conditions of investments which had an
impact on the valuation of the investment portfolio.

c) For the selected sample of investments, tested the
existence, accuracy, completeness and
compliance with the RBI guidelines and directives
for each category of the security. Samples were
selected in such a way that all the categories of
investments (based on nature of security) were
covered.

d) Verified Investment portfolio on sample basis and
performed various substantive analytical
procedures in determination of Income, gain / loss
on sale and tested the controls implemented by
the Bank in recognizing the profit / loss to profit
and loss account.

e) We have performed an assessment of the design
and implementation of controls and evaluated the
process adopted by management for collection
and aggregation of information from various
sources for determination of fair value of
investments. In addition, we have carried out
independent valuation procedures, on a test check
basis, in respect of unquoted investments using
valuation methodologies prescribed under the
applicable RBI guidelines, and compared the
results with the values determined by
management.

f) We have assessed the process for identification of
NPIs, including the related reversal of income and
creation of provisions, with reference to applicable
guidelines issued by the RBI. On a sample basis,
tested investments across categories to evaluate
compliance with the RBI norms for NPI
classification. Further, performed substantive
procedures, including independent re-computation
of provisions and depreciation required to be
maintained, in accordance with the relevant RBI
circulars and directives.

g) Reviewed the reports of the internal audits,
concurrent audits etc. conducted by the bank.

h) We have ensured that adequate disclosures have
been made by way of Notes to the financial
statements as mandated by the RBI guidelines.

Sr.

No.

Key Audit Matters

How our Audit procedures addressed
the Key Audit Matters

3.

Information Technology Systems and Control
Framework:

The Bank is having complex Information Technology
environment which comprises of various
interdependent IT systems and applications used in
the day-to-day operations of the Bank for processing
and recording large volume of transactions across
various locations. Further the Bank's key financial
accounting and reporting processes are highly
dependent on the Core Banking Solution (CBS),
Treasury Solutions, IRAC and and other allied
systems, software, network and hardware controls.

Considering the high-level of automation, complexity
of the IT architecture, simultaneous and significant
use of IT systems, appropriate IT general controls and
application controls are required to ensure that such
IT systems are able to process the data, as expected,
completely, accurately and consistently for reliable
financial reporting.

Hence, IT system controls have been considered as a
Key Audit Matter as any control lapses, validation
failures, incorrect input data and wrong extraction of
data may result in wrong reporting to the management
and regulators.

Our significant audit procedures included the

following:

a) We involved our internal IS Audit team and
obtained an understanding of the Bank's IT related
control environment, IT applications relevant for
the purpose of our audit of the financial
statements.

b) For this purpose, we had discussions with the
process owners with respect to various IT policies,
processes and procedures put in place by the
Bank. Reviewed these IT policies and procedures
including user management, change manage¬
ment, backup and recovery procedures, system &
cyber security, incident management, physical and
environment security, standard operating
procedures, Segregation of duties, BCP, DRP,
service level agreements, security policies to
ensure that these are in line with business
requirements of the Bank and comply with the
relevant regulatory guidelines in this regard.

c) Tested the design and operating effectiveness of
the Bank's IT controls over the IT applications.
Tested IT general controls particularly, logical
access, change management and aspects of IT
operational controls.

d) Tested that requests for access to systems were
appropriately reviewed and authorized; tested
controls around Bank's periodic review of access
rights; inspected requests of changes to systems
for appropriate approvals and authorizations.

e) Reviewed and placed reliance on the reports of
various specialised audits by internal / external IS
Auditors, consultants appointed by the Bank and
discussed with IT Department on compliance with
key IT controls, including IRAC Automation
Controls.

f) In addition to the above, we tested the design and
operating effectiveness of certain automated
controls that were considered as key internal
controls over -financial reporting.

g) On sample basis, verified the results obtained from
the systems with the other information sources;
and tested logic used for extracting the data.

h) Tested combination of compensating controls or
remediated controls such as reconciliations
between systems and other information sources
and / or performed alternative audit procedures,
where necessary.

Sr.

No.

Key Audit Matters

How our Audit procedures addressed
the Key Audit Matters

4.

Provisions and Contingent Liability:

Our audit procedures with respect to audit of

Assessment of Provisions and Contingent Liability in
respect of certain litigations on various claims filed by

provisions and contingent liability includes:

other parties not acknowledged as debt (Note No. 10

a) We have obtained an understanding of Internal

of Schedule 17 and Note No. 16 of Schedule 18)

Controls relevant to the audit in order to design our
audit procedures that are appropriate in the

There is high level of judgement required in estimating
the level of provisioning. The Bank's assessment is

circumstances.

supported by the facts of matter, their own judgement,

b) Understanding the current status of the litigations /

past experience, and advice from legal and

tax assessments. Examining recent orders and

independent experts wherever considered necessary.

communications received from various tax

Accordingly, unexpected adverse outcomes may

authorities / judicial forums and follow up actions

significantly impact the Bank's reported profit and
state of affairs presented in Balance Sheet.

thereon;

c) Evaluated the merit of the subject matter under

We determined the above area as a Key Audit Matter

consideration with reference to the grounds

in view of associated uncertainty relating to outcome

presented therein and available independent legal

of these matters which requires application of
judgement in interpretation of Law.

/ tax advice including opinion of experts.

d) We reviewed the management's underlying
assumptions in estimating the possible outflow and
the possible outcome of the disputes. The legal
precedence and other rulings were considered in
evaluating management's position on these
uncertain tax/non tax positions. Further we have
relied upon the management judgements, industry
level deliberations and estimates for possible
outflow and opinion of internal experts of the Bank
in relations to such disputed tax positions.

e) Verified the disclosures related to significant
litigations and taxation matters.

f) Our audit was focused on analysing the facts of
subject matter under consideration and
judgements / interpretation of law involved.

g) Reliance on the work performed by the statutory
branch auditors and the rectification entries
passed based on branch audits/additional
information to the extent available at Head office.

For M/s. G D Apte & Co.

For M/s. Manubhai &
Shah LLP

For M/s. Sagar & Associates

For M/s. S. Singhal & Co.

Chartered Accountants

Chartered Accountants

Chartered Accountants

Chartered Accountants

FRN - 100515W

FRN - 106041W/ W100136

FRN - 003510S

FRN - 001526C

CA C M Dixit
Partner

CA Vitesh D. Gandhi
Partner

CA D. Manohar
Partner

CA Mukesh Kumar
Khandelwal
Partner

M No 017532

M No 110248

M No 029644

M No 074661

UDIN: 26017532CZPHSA4265

UDIN: 26110248AS J P HX4461

UDIN:26029644IVILKV8957

UDIN:26074661 FPGZFT2758

M/s. G D Apte & Co.

Chartered Accountants,

D-509, Neelkanth Business Park, Nathani Rd,
Vidhya Vihar West, Mumbai - 400086.

M/s. Manubhai & Shah LLP

Chartered Accountants,

4th Floor, Capital One, Opp. Ashok Vatika BRTS Stop,
Ambli Bopal Road, Ahmedabad 380058

M/s. Sagar & Associates

M/s. S. Singhal & Co.

Chartered Accountants,

Chartered Accountants,

H. No. 6-3-244/5 Saradadevi Street, Premnagar,

S-4, Gordhan Enclave, 4B, Yudhister Marg,

Hyderabad - 500004

C-Scheme, Jaipur - 302005