Canara Bank Directors Report.

To,

The Members of Canara Bank

Report on Audit of the Standalone Financial Statements

Opinion

1. We have audited the standalone financial statements of Canara Bank (the Bank), which comprise the Balance Sheet as at 31st March 2020, 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 the returns for the year ended on that date of 20 branches, Integrated Treasury Wing audited by us and 2784 branches (including 5 foreign branches) audited by statutory branch 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 3851 branches which have not been subjected to audit. These unaudited branches account for 9.40 percent of advances, 27.39 per cent of deposits, 11.66 per cent of interest income and 28.22 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 the 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 2020;

b. the Profit and Loss Account, read with notes thereon shows a true balance of 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 the Institute of Chartered Accountants of India ("ICAI"). Our responsibilities under those Standards are further described in the Auditors 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, 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 judgement, 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:

NO Key Audit Matter Response to Key Audit Matter
1 Adequacy of provisions in respect of Advances. Principal Audit Procedures:
We assessed the Banks system in place to identify and provide for nonperforming assets.
Advances are classified as performing and nonperforming assets in accordance with the prudential norms issued by RBI. The identification of non-performing assets and creation of provision on such advances involves key judgements relating to performance of borrowers, determination of security value, etc.
Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:
• Evaluated the design of internal controls relating to identification and making provision for nonperforming assets.
Accordingly, our audit was focused on income recognition, asset classification and provisioning pertaining to advances due to involvement of management judgement and considering the materiality of the balances.
• Tested the relevant information technology systems used in identification and making provision for such NPA as per the RBI Guidelines.
• Evaluated and tested the management estimates and judgements for the purpose of identification of NPA and adequacy of provision required as per RBIs Prudential norms.
• Considered branch audit reports for identification and provisioning for nonperforming assets
• Test checked the identification and provisioning of nonperforming assets in accordance with RBI Guidelines issued from time to time.
• Ensured exceptions noticed during our audit procedures are duly corrected.
2 Key Information Technology (IT) systems (Flex Cube - Oracle based) used in financial reporting process.

The Banks operational and financial processes are dependent on IT systems due to large volume of transactions that are processed on daily basis and hence considered as a key audit matter.

Principal Audit Procedures:

We conducted an assessment and identified key IT applications, databases and operating systems that are relevant to our audit and have identified CBS, BSPL Reporting Package and Treasury System primarily as relevant for financial reporting.

Our audit approach consisted testing of the design and operating effectiveness of the internal controls as follows:

• Obtained an understanding of the Banks IT control environment and IT policies during the audit period.
• Reviewed the design, implementation and operating effectiveness of the Banks basic IT controls including application, access controls that are critical to financial reporting on test check basis.
• Reviewed the IS Audit Reports and discussed with IS Wing on compliance to key IS Controls.
• Tested key automated and business cycle controls and logic for system generated reports relevant to the audit on test check basis.
3 Modified Audit Procedures carried out considering COVID-19 outbreak: Due to the outbreak of COVID-19 pandemic that caused Nation-wide 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/ Circle / Administrative / Corporate Offices and carry out the audit processes physically at the respective offices.
DuetoCOVID-19pandemic, 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 premises of certain Branches / Circle Offices / Wings in the Corporate Office of the bank.
Wherever physical access was not possible, necessary records / reports / documents / certificates were made available to us by the Bank through digital medium, emails and remote access to CBS, BSPL and other relevant application software. To this extent, the audit process was carried out based on such documents, reports and records made available to us 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:
As we could not gather audit evidence in person/ physically / through discussions and personal interactions with the officials at the Branches / Circle / Administrative / Corporate 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.
a.We, the Statutory Central Auditors and certain Statutory Branch Auditors conducted verification of necessary records / documents/ CBS / BSPL and other Application software electronically through remote access/ emails in respect of certain Branches / Circle Offices / Administrative 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 Video Conferencing, dialogues and discussions over phone calls/conference calls, emails and similar communication channels.
d. Resolution of our audit observations telephonically / through email instead of a face- to-face interaction with the designated officials.

Emphasis of Matter:

5. Attention is drawn to Clause 6.18 of Schedule No 18 to the accompanying Standalone financial statements, which describes the uncertainties due to outbreak of COVID-19 pandemic and the managements evaluation of its impact on the business operations of the Bank.

Our report is not modified in respect of this 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 Pillar III Disclosures under the New Capital Adequacy Framework (BASEL III Disclosures) (but does not include the financial statements and our auditors report thereon), Corporate Governance Report, which we obtained prior to the date of this Auditors Report, and the Directors Report, which is expected to be made available to us after the date of our auditors report.

Our opinion on the 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 identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be material misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditors report, we conclude there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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 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 Banking Regulation Act, 1949 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 financial statements, management is 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.

Auditors Responsibilities for the Audit of the Financial

Statements

8. 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 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 financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism 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 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 financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the 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 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 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 / information of 2784 branches included in the standalone financial statements of the Bank whose financial statements / financial information reflect total assets of 217180.32 Crs as at 31st March 2020 and total revenue of 22805.88 Crs 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 inso 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 5 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 sought and 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. As required by Letter No DOS.ARG.No. 6270/08.91.001/2019-20 dated 17th March, 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 19th May, 2020 issued by 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 31st March, 2020, none of the directors is disqualified as on 31st March, 2020 from being appointed as a director in terms of Section 164 (2) of the Companies Act, 2013.

d) There are no qualifications, reservations or adverse remarks relating to 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 2020-21 as permitted by RBI on May 19, 2020, we do not provide any opinion on this matter.

13. 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 CashFlows dealt with by this report are in agreement with the books of accounts 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 Dagliya & Co. For Komandoor & Co. LLP.
Chartered Accountants Chartered Accountants
FRN.000671S FRN.001420S/S200034
(P Manohara Gupta) (K Mohan Acharya)
Partner Partner
Membership Number 016444 Membership Number 029082
UDIN:20016444AAAACD9940 UDIN:20029082AAAABU8828
For D. K.Chhajer & Co. For S N K & Co.
Chartered Accountants Chartered Accountants
FRN.304138E FRN. 109176W
(Jagannath Prasad Mohapatro) (Ankit D Danawala)
Partner Partner
Membership Number 217012 Membership Number 119972
UDIN:20217012AAAADE7038 UDIN:20119972AAAADC5259

Place : Bengaluru

Date : June 24, 2020