Bank of India Directors Report.

Report on Audit of the Standalone Financial Statements To the president of India / the Members of Bank of India Opinion

1) We have audited the accompanying Standalone Financial Statements of Bank of India (‘the Bank), which comprise the Balance Sheet as at March 31, 2020, the Statement of Profit and Loss and the Statement of Cash Flows for the year then ended, and notes to Standalone Financial Statements including Significant Accounting Policies and other explanatory information in which are included returns for the year ended on that date of:

(i) 20 branches and Treasury branch audited by us;

(ii) 2387 domestic branches audited by respective Statutory Branch Auditors; and

(iii) 23 Foreign branches audited by respective local 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 2675 branches which have not been subjected to audit. These unaudited branches account for 7.01% of advances, 21.95% of deposits, 5.94% of interest income and 20.68% 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 ("the Act") in the manner so required and are in conformity with the accounting principles generally accepted in India and give true and fair view:

a) In case of Balance Sheet, of the state of affairs of the Bank as at March 31,2020,

b) true balance of loss, in case of Profit & Loss account for the year ended on that date; and

c) true and fair view of the cash flows, in the case of Cash Flow Statement 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 The Institute of Chartered Accountants of India. Our responsibilities under those Standards are further described in the Auditors Responsibilities for the Audit of the Standalone 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

Standalone Financial Statements under provision of the Act, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the code of ethics. We believe that the audit evidence obtained by us and audit evidences obtained by other auditors in terms of their reports referred to in "Other Matter" paragraph below, is sufficient and appropriate to provide a basis for our opinion.

Emphasis of Matters

4) a) Note No.7.18 of Schedule-18 of the accompanying

Standalone Financial Statements regarding impact of COVID-19 pandemic. The situation continues to be uncertain and the management of the Bank is evaluating the situation and impact on its Domestic & International business operations of the Bank on an ongoing basis; and

b) Note No.9 (g) & (h) of Schedule-18 regarding provision made in NPA accounts

Our opinion is not modified in respect of these matters.

Key Audit Matters

5) 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. We have determined the matters described below to be the Key Audit Matters to be communicated in our report.

Sl. Key Audit Matters No. Audit procedure followed to address the Key Audit Matters
1) Compliance of Income Recognition, Asset Classification and provisioning norms on advances and investments as per guidelines issued by Reserve Bank of India We have carried out the audit of the advances and investments based on the IRAC Norms/Cir- culars and directives issued by Reserve Bank of India and the policy of the Bank.
Advances Advances: Our audit procedure includes:
Bank has to classify the accounts under performing advances and non performing advances based on the guidelines/ circulars and directives issued by Reserve Bank of India. The guidelines issued by Reserve Bank of India is for all credit facilities given by the bank and is to be mandatorily followed for the purpose of Income Recognition, Asset Classification and Provisioning.
a) We have communicated to the branch statutory auditors to verify the compliance of IRAC Norms and procedures and the policies adopted by the bank and we have relied on the audit reports given by the branch statutory auditors.
Identification of performing and non performing advances is system driven. The software used by the bank identifies the accounts for classification and provisioning as per the guidelines issued by Reserve Bank of India. b) Understanding the IT system and controls put in place and logic and validations built in the system by the bank for identification, classification and provisioning in case of advances.
The Income recognition, asset classification and provisioning if not done properly as per the IRAC norms issued by Reserve Bank of India may materially impact the financial statements of the bank. c) On sample basis tested whether the classification of advances underperforming and non-performing and provisioning is carried out as per the guidelines of Reserve Bank of India.
d) During audit of branches allotted to us we have carried out substantive test on major advances including Specially Mentioned Accounts (SMA) and also verified the security aspect by checking the valuation reports.
e) Reliance is also placed on the internal audit reports, concurrent audit reports, credit audit, system audit and special audits conducted by the bank.
f) Verification and implementations of MOCs suggested by statutory branch auditors and statutory central auditors during consolidation of financial statements.
Investments : Investments :
Bank has to classify the investments underperforming and non-performing based on the guidelines/circulars and directives issued by Reserve Bank of India. Our audit procedure includes:
a) Understanding the IT system and controls put in place and logic and validations built in the system by the bank for identification, classification and provisioning in case of invest- ments.
Identification of performing and non performing investments is generally system driven.
The valuation is done as per the guidelines issued by Reserve Bank of India and the valuations are done based on the price quoted on BSE/NSE, FIMDA /FBIL rates etc. b) On sample basis tested whether the classification and valuation of investments is carried out as per the guidelines of Reserve Bank of India.
The Income recognition, asset classification and provisioning if not done properly as per the IRAC norms issued by Reserve Bank of India may materially impact the financial statements of the bank. c) On sample basis also verified whether proper provision for depreciation in the value of investments and ensured that provision for depreciation is done as per RBI guidelines.
Advances and Investments constitute 56.15% and 24.14% respectively of total assets of the bank. d) Reliance is also placed on the internal audit reports, concurrent audit reports and system audit conducted by the bank.
As advances and investments form part of a major portion of the business of the bank and the regulatory compliances involved, we have considered this aspect as Key Audit Matter.
2) Evaluation of uncertain tax litiaations and continaent liabilities Our audit approach involved:
a) Understanding the current status of the litigations/tax assessments; We went through the current status of the tax litigations and contingent liabilities.
Claims against the bank not acknowledged as debt including tax litigations as on March 31, 2020 is disclosed in Schedule 12 and Note No.9(a) (i) of Schedule 18 to Standalone Financial Statements. b) We obtained the details of latest orders, communica-
Under Indirect Taxes, there are ongoing disputes regarding availability of input credits/ applicability of Reverse Charge Mechanism on certain payments under Service tax act/ Goods and Service Tax Act. tion received from various tax authorities and follow up action thereon;
c) We gathered recent information received on the tax and other litigations for assessing the liabilities.
This is a key audit matter due to uncertainty of the outcome which involves significant judgment to determine the possible outcome of these disputes.
d) Wherever required reliance is placed on the opinion of legal and tax consultants.
3 Assessment of Information Technoloav (IT): Our audit procedure includes:-
a) Understanding and testing
IT controls with respect to recording of transactions, generating various reports in compliance with RBI guidelines including IRAC, preparing financial statements and reporting of compliances to regulators etc. is an important part of the process. Such reporting is highly dependent on the effective working of Core Banking Software and other allied systems. of operative effectiveness of the system.
b) Understanding the coding system adopted by the bank for various categories of customers.
c) Understanding and testing of different validations available in the system
d) Checked the user requirements for any changes in the regulations/policy of the bank
We have considered this as key audit matter as any control lapses, validation failures, incorrect input data and wrong extraction of data may result in wrong reporting of data to the management and regulators
e) Testing of logic used for extracting the data.
f) On sample basis reviewed the reports generated.
g) Reliance is placed on system audit report of the bank.
4) Modified Audit Procedures carried out in liaht of COVID-19 outbreak: Due to the outbreak of COVID-19 pandemic that caused nationwide lockdown and other travel restrictions imposed by the Central and State Governments/local administration during the period of our audit, we could not travel to the Branches /NBG offices and carry out the audit processes physically at the respective offices. Wherever physical access was not possible, necessary records/ reports/ documents/ certificates
Due to COVID-19 pandemic, Nation-wide lockdown and travel restrictions imposed by Central / State Government / Local Authorities during the period of our audit and the RBI directions to Bank to facilitate carrying out audit remotely wherever physical access was not possible, audit could not be conducted by visiting the Branch premises, NBG offices of the Bank.
As we could not gather audit evidence in person/ physically/ through discussions and personal interactions with the officials at the Branches/NBG offices, we have identified such modified audit procedures as a Key Audit Matter. Accordingly, our audit procedures were modified to carry out the audit remotely. were made available to us by the Bank through digital medium, emails and remote access to CBS and other relevant application software. To this extent, the audit process was carried out on the basis of such documents, reports and records made available to us on which were relied upon as audit evidence for conducting the audit and reporting for the current period.
Accordingly, we modified our audit procedures as follows:
a) Conducted verification of necessary records/ docu- ments/ CBS/ and other Application software electronically through remote access/emails in respect of some of the Branches / offices and other offices of the Bank wherever physical access was not possible.
b) Carried out verification of scanned copies of the documents, deeds, certificates and the related records made available to us through emails and remote access over secure network of the Bank.
c) Making enquiries and gathering necessary audit evidence through Document Management System (DMS), telephonic communication/confer- ence calls and e-mails.
d) Resolution of our audit observations telephonically/ through email instead of a face-to-face interaction with the designated officials.
5) Recognition of Deferred Tax Assets: Our audit procedure includes:-
a) We have verified that recognition criteria for Deferred Tax Asset as per Accounting Standard 22 Accounting for Taxes on Income issued by The Institute of Chartered Accountants of India have been complied with.
As on March 31, 2020 the Bank has recognised a net deferred tax asset of Rs.13,708.72 Crore. (For Year 2019-2020 recognised DTA Rs.1,823.12 Crore)

Deferred tax assets should be recognised and carried forward only to the extent that
there is a reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. b) Assessed the assumptions and other parameters used by the bank management for recognition of the deferred tax asset.
Due to the huge amount of deferred tax assets recognised over a period based on the profit forecasted over future period of time increases the uncertainty and risk of recognition of such asset.
Hence we have considered this as a Key Audit Matter.

Information Other than the Financial Statements and Auditors

Report thereon

6) The Banks Board of Directors is responsible for the other information. The other information comprises the information included in the Management report and Chairmans Statement but does not include the Standalone Financial Statements and our Auditors report thereon, which is expected to be made available to us after that date.

Our opinion on the Standalone Financial Statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the Standalone Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Standalone Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

When we read the other information, if we conclude that there is material misstatement therein, we are required to communicate the matter to those charged with governance and determine the actions under the applicable laws and regulations.

Responsibilities of Management and Those Charged with

Governance for the Standalone Financial Statements

7) The Banks 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 The Institute of Chartered Accountants of India, 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 or error.

I n preparing the Standalone Financial Statements, the Board of Directors are responsible for assessing the Banks 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 but to do so. The Board of Directors is also responsible for overseeing the Banks financial reporting process.

Auditors Responsibilities for the Audit of the Financial

Statements

8) Our objectives are to obtain reasonable assurance about whether the Standalone Financial Statements as a whole are free from material misstatement, whether due to fraud 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 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 Standalone 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, or the 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 managements use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the banks ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors 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 auditors 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 standalone financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the Standalone Financial Statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the Standalone Financial Statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the Standalone Financial Statements.

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 Standalone Financial Statements of the current period and are therefore the key audit matters. We describe these matters in our auditors 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.

Other Matter

9) These Standalone Financial Statements incorporate the relevant returns of 2410 branches (including 23 foreign branches) audited by the other auditors specially appointed for this purpose. These branches audited by other auditors cover total assets of Rs.1,85,126 Crore at 31st March 2020 and total revenue of Rs.17,130 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 other auditors whose reports have been furnished to us, and our opinion, in so far as it relates to the amounts and disclosures included in respect of these branches, is based solely on the report of such other auditors.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

10) The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with Section 29 of the Banking Regulation Act, 1949;

11) Subject to the limitations of the audit indicated in paragraphs 7 to 9 above and as required by the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, and subject also 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 for the purposes of our audit.

12) We further report that:

a) i n 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 Reserve Bank of India.

13) As required by letter No. DOS.ARG.No.6270/08.91.001/2019- 20 dated March 17, 2020 on "Appointment of Statutory Central Auditors (SCAs) in Public Sector Banks-Reporting obligations for SCAs from FY: 2019-20", read with subsequent communication dated May 19, 2020 issued by the RBI, we further report on the matters specified in paragraph 2 of the aforesaid letter as under:

a) In our opinion, the aforesaid Standalone Financial Statements comply with the Accounting Standards issued by ICAI, to the extent they are not inconsistent with the accounting policies prescribed by the RBI.

b) There are no observations or comments on financial transactions or matters which have any adverse effect on the functioning of the bank.

c) On the basis of the written representations received from the directors as on March 31, 2020, none of the directors is disqualified as on March 31, 2020 from being appointed as a director in terms of sub-section (2) of Section 164 of the Companies Act, 2013.

d) There are no qualifications, reservations or adverse remarksrelating to the maintenance of accounts and other matters connected therewith.

e) As the Bank has exercised the option to implement "Internal Financial Controls with reference to the Financial Statements" from the financial year 202021 as permitted by RBI on May 19, 2020, we do not provide any comment in this regard.

- For Banshi Jain & Associates For Chaturvedi &Co.
Chartered Accountants Chartered Accountants

   

QuickLinks for Bank Of India.

News

Information

Financials

Documents