To
The President of India / The Members of Bank of India
Report on Audit of the Standalone Financial Statements
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, 2023, 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 Domestic branches, Treasury Branch and Digital Banking department audited by us;
(ii) 3616 domestic branches and processing centres audited by respective Statutory Branch Auditors and
(iii) 21 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 1806 domestic branches and one foreign branch which have not been subjected to audit. These unaudited branches account for 4.70 % of advances, 13.43 % of deposits, 4.22 % of interest income and 12.38 % 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, 2023,
b) true balance of profit, 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 Matter
4) We draw attention to Note No. 9 of the standalone financial statements, regarding amortization of additional liability on account of revision in family pension. The Bank has charged an amount of Rs. 306.04 Crores to the profit and loss account for the year ended March 31, 2023 and balance unamortized expense of Rs. 183.63 Crores has been carried forward.
Our opinion is not modified in respect of this matter.
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. No. Key Audit Matters | 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 (IRAC Norms) | We have carried out the audit of the advances and investments based on the IRAC Norms/ Circulars and directives issued by Reserve Bank of India and the policy of the Bank. |
| Advances: Our audit procedure included: | |
| Advances | |
| Bank has to classify the accounts as performing advances or 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) Communication to the branch statutory auditors to verify the compliance of IRAC Norms and procedures and the policies adopted by the bank and reliance on the audit reports furnished by the branch statutory auditors. |
| 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. | |
| 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. | |
| c) Testing on sample basis whether the classification of advances as performing | |
| or non-performing and provisioning have been 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. | |
| The bank has implemented IRAC Automation software for identification and classifying of NPA accounts through the software. | d) Carrying out substantive test on major advances including Specially Mentioned Accounts (SMA) and also verification of security by checking the valuation reports in respect of the audit of branches conducted by us. |
| e) Reliance on the internal audit reports, concurrent audit reports, credit audit, system audit and special audits conducted by the bank. | |
| Investments: | |
| Bank has to classify the investments as performing or non performing based on the guidelines/circulars and directives issued by Reserve Bank of India. | |
| Investments: Our audit procedure included: | |
| Identification of performing and non performing investments is generally system driven. | 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 investments. |
| 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. | |
| 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. | b) Testing on sample basis whether the classification and valuation of investments is carried out as per the guidelines of Reserve Bank of India. |
| Advances and Investments constitute 59.58 % and 25.06 % respectively of TOTAL assets of the bank. | c) Verification on sample basis whether proper provision for depreciation in the value of investments is made as per RBI guidelines. |
| d) Reliance made 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 are involved, we have considered this aspect as Key Audit Matter. | |
| 2) Evaluation of uncertain tax litigations and contingent liabilities | Our audit approach involved: |
| a) Understanding the current status of the litigations/tax assessments; | |
| The Bank has various litigations including tax litigations. The Bank has also disputes regarding availability of input credits/applicability of Reverse Charge Mechanism on certain payments under Indirect Tax. | |
| b) Review of the latest orders, communication received from various tax authorities and the appeals filed; | |
| c) Reliance on the opinion of legal and tax consultants, where available. | |
| This is a key audit matter due to uncertainty of the outcome which involves significant judgment to determine the possible outcome of these disputes. | |
| 3) Assessment of Information Technology (IT): | Our audit procedure includes:- |
| a) Understanding and testing of operative effectiveness of the system. | |
| a. IT controls with respect to recording of transactions, generating various reports in compliance with RBI guidelines including IRAC norms, 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. | |
| 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) Checking 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 reviewing the reports generated. | |
| g) Reliance on the system audit report of the bank. | |
| 4) Recognition of Deferred Tax Assets: | Our audit procedure included evaluating management assessment on the sufficiency of the future taxable profits in support of the recognition of deferred tax assets such as assumptions and other parameters used for recognition of deferred tax asset. |
| As per Significant Accounting Policy of the Bank, which is in accordance with AS 22 Accounting for Taxes on Income issued by The Institute of Chartered Accountants of India 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. | |
| We identified the recognition of deferred tax assets as a key audit matter involves judgement by management as to the likelihood of the realization of these deferred tax assets, which is based on a number of factors including whether there will be sufficient taxable profits in future periods to support recognition. |
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.
Our opinion on the Standalone Financial Statements does not cover the other information and Pillar 3 disclosures under Basel III Disclosure 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.
In 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.
Auditor?s 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. •
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances.
• 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.
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) We did not audit the financial statements / financial information of 3637 branches and processing centres (including 21 foreign branches) included in the Standalone Financial Statements of the Bank whose financial statements/financial information reflects TOTAL assets of Rs.3,79,885.63 Crores at March 31, 2023 and TOTAL revenue of Rs 21,771.66 Crores for the year ended on that date, as considered in the Standalone Financial Statements. The financial statements/ financial information of these branches and processing centres have been audited by the branch 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 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
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 6 & 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) 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 and processing centres 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 and processing centres 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, 2023, none of the directors is disqualified as on March 31, 2023 from being appointed as a director in terms of subsection (2) of Section 164 of the Companies Act, 2013.
d) There are no qualifications, reservations or adverse remarks relating to the maintenance of accounts and other matters connected therewith.
14) Our audit report on the adequacy and operating effectiveness of the Banks internal financial controls over financial reporting as required by the RBI Letter DOS. ARG.No.6270/08.91.001/2019-20 dated March 17, 2020 (as amended) is given in Annexure A to this report. Our report expresses an unmodified opinion on the Banks internal financial controls over financial reporting as at 31st March 2023.
ANNEXURE "A" TO THE INDEPENDENT AUDITOR?S REPORT
(Referred to in paragraph 14 under ‘Report on Other Legal and Regulatory Requirements section of our report of even date)
Report on the Internal Financial Controls Over Financial Reporting as required by the Reserve Bank of India (the "RBI") Letter DOS.ARG.No.6270/08.91.001/2019-20 dated March 17, 2020 (as amended) (the "RBI communication")
We have audited the internal financial controls over financial reporting of Bank of India ("the Bank") as of March 31, 2023 in conjunction with our audit of the standalone financial statements of the Bank for the year ended on that date which includes internal financial controls over financial reporting of the Banks branches.
Management?s Responsibility for Internal Financial Controls
The Banks management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Bank considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to the Banks policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Banking Regulation Act, 1949 and the circulars and guidelines issued by the Reserve Bank of India.
Auditor?s Responsibility
Our responsibility is to express an opinion on the Banks internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note") issued by the Institute of Chartered Accountants of India (the "ICAI") and the Standards on Auditing (SAs) issued by the ICAI, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting were established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal financial controls based on the assessed risk. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained and the audit evidence obtained by the branch auditors, in terms of their reports referred to in the Other Matters paragraph below, is sufficient and appropriate to provide a basis for our audit opinion on the Banks internal financial controls over financial reporting.
Meaning of Internal Financial Controls Over Financial Reporting
A Banks internal financial controls over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Banks internal financial controls over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Bank; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Bank are being made only in accordance with authorisations of management and directors of the Bank; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the Banks assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial controls over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion, and to the best of our information and according to the explanations given to us and based on the consideration of the reports of the branch auditors referred to in the "Other Matters" paragraph below, the Bank has, in all material respects generally adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2023, based on the criteria for internal control over financial reporting established by the Bank considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.
Other Matters
Our aforesaid report, insofar as it relates to the operating effectiveness of internal financial controls over financial reporting of 3014 (number, specify scoped in / IFCoFR reporting branches) branches is based on the corresponding reports of the respective branch auditors of those branches.
Further the control over operations of inter office accounts need to be strengthened.
Our opinion is not modified in respect of this matter.
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