IDBI Bank Ltd Directors Report.

To,

The Members of IDBI Bank Limited

Report on the Audit of the Standalone Financial Statements Opinion

We have audited the accompanying Standalone Financial Statements of IDBI Bank Limited ("the Bank"), which comprise the Balance Sheet as at March 31,2021, the Profit and Loss Account and the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information. Incorporated in these Standalone Financial Statements are the returns of the foreign branch at Dubai for the year ended March 31, 2021, which has been audited by a local audit firm.

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, as well as the Companies Act, 2013 ("the Act") and circulars and guidelines issued by the Reserve Bank of India, in the manner so required for banking companies and give a true and fair view in conformity with the accounting principles generally accepted in India, including the Accounting Standards prescribed under section 133 of the Act, read with rules made thereunder, of the state of affairs of the Bank as at March 31,2021, and its profit and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit in accordance with the Standards on Auditing ("SAs") specified under section 143(10) of the Companies Act, 2013. 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 the ethical requirements that are relevant to our audit of the Standalone Financial Statements under the provisions of the Companies Act, 2013 and the Rules thereunder, 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.

Emphasis of Matter

We draw attention to Note 18 (A)(X)(15) which describes the business uncertainties due to the outbreak of SARS-CoV-2 virus (COVID-19). In view of these uncertainties, the impact on the Banks Standalone Financial Statements is significantly dependent on future developments.

Our opinion is not modified in respect of this matter.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the Standalone Financial Statements of the current period. These matters were addressed in the context of our audit of the Standalone 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:

Key Audit Matters Auditors Response
Recognition and Measurement of Deferred Tax Asset
The Bank has recognised a net deferred tax asset of 14,440.91 Crores as on March 31, 2021, including net reversal of 1,308.68 Crores during the year. Our audit procedures involved gaining an understanding of the applicable tax laws and relevant regulations applicable to the Bank. We performed the following audit procedures as part of our controls testing including:
Besides objective estimation, recognition and measurement of deferred tax asset is based on the judgment and numerous estimates regarding the availability and visibility of profits in the future and also considering probable impact of Covid-19 pandemic. • evaluation of the policies used for recognition and measurement of deferred tax assets in accordance with AS 22 Accounting for Taxes on Income;
The amount of deferred tax assets recognised presumes availability and forecasting of profits over an extended period of time thus increasing uncertainty and the inherent risk of inappropriate recognition of the said asset. • assessed the probability of the availability of profits based on assumptions and other parameters used by the Management including the probable impact of Covid-19 pandemic against which the Bank will be able to use this deferred tax asset in the future with reference to forecast as noted by the Board of Directors while adopting the Standalone Financial Statements.
• assessed the method for determining the Deferred Tax Asset with reference to applicable tax rates and tested the arithmetical accuracy.
Income Recognition and Asset Classification of Advances (IRAC) and Provisioning as per regulatory norms
Please refer to Note nos. 18(A) (X)(1) and 18(A)(V)(2) relating to Asset Quality in respect of movement of Non-Performing Assets (NPAs) and related provisions and disclosures with regard to Non Performing Investments (NPI) respectively as also Note no. 18(A)(X)(15) regarding the provisions made due to the probable impact of Covid-19 pandemic. Our audit approach included testing the design, operating effectiveness of internal controls and substantive audit procedures in respect of income recognition, asset classification and provisioning pertaining to advances and investments. In particular:
Compliance of relevant prudential norms issued by the Reserve Bank of India (RBI) in respect of income recognition, asset classification and provisioning pertaining to advances as well as those pertaining to investments is a key audit matter due to materiality involved and the current processes at the Bank which requires manual interventions, management estimates and judgement. • we have evaluated and understood the Banks internal control system in adhering to the relevant
RBI guidelines regarding income recognition, asset classification and provisioning pertaining to advances and investments;
• we have tested key IT systems/ applications used and their design and implementation as well as operational effectiveness of relevant controls, including involvement of manual process and manual controls in relation to income recognition, asset classification and provisioning pertaining to advances and investments;
• we have test checked advances to examine the validity of the recorded amounts, loan documentation, examined the statement of accounts, indicators of impairment, impairment provision for non-performing assets, and compliance with income recognition, asset classification and provisioning pertaining to advances in terms of applicable RBI guidelines;
• we have evaluated the past trends of management judgement, governance process and review controls over impairment provision calculations and discussed the provisions made with the top and senior Management of the Bank.
IT Systems and controls over financial reporting
The Banks key financial accounting and reporting processes are highly dependent on Core Banking and Treasury Solutions and other supporting software and hardware controls such that there exists a risk that gaps in the IT control environment could result in the financial accounting and reporting records being materially misstated. Appropriate IT controls are required to ensure that the IT applications perform as planned and the changes made are properly controlled. Such controls contribute to risk mitigation of erroneous output data. The audit outcome is dependent on the extent of IT controls and systems. • We have planned, designed and carried out the desired audit procedures and sample checks, taking into consideration the IT
Placing reliance on electronic evidence and performing of audit procedures during the mandatory national lockdown due to the Covid-19 pandemic systems of the Bank. The procedures adopted by us are, in our opinion, adequate to provide reasonable assurance on the adequacy of IT controls in place. Towards this end, we obtained an understanding of Banks IT environment.
The Banks procedures of recording and storing information necessary for preparation of Standalone Financial Statements and having them audited is combination of electronic and manual processes. These processes were required to be audited by us remotely without visiting the Banks premises due to the mandatory national lockdown and thereafter. Consequently, we have placed reliance on the completeness and accuracy of the data and records made available to us electronically through e-mail. During the year the Bank provided us a secure virtual private network connection through which we could access the core banking solution and other softwares and the electronic data / information / documents shared on common drives. Had we been physically present at the Company premises, we would have otherwise verified the physical copies of critical documents and we would have collected the audit evidence in physical copies. • We discussed with Management regarding integration of systems in the areas of treasury and IRAC to evaluate their adequacy.
• In addition, we have also relied on IS audit conducted by internal audit department, and also the audit of Internal Financial Control over Financial Reporting conducted by an independent firm of Chartered Accountants.
• We also tested key automated and manual business cycle controls and logic for system generated reports relevant to the audit; including testing of compensating controls or performed alternate procedures to assess whether there were any unaddressed IT risks that would materially impact the Standalone Financial Statements.
We have carried out the validation of the electronic evidence provided by the Management by performing the following procedures:
• Inquiring with the Management of the controls they have implemented to convert physical documents into electronic versions and understanding them
• Inquiring with the Management the method and controls used to extract information from its various softwares including Core Banking Solution, Treasury, IRAC, , fixed assets & operating expenses, financial reporting and the CRAR computation softwares and understanding how the Management ensures completeness and accuracy
• Correlating various attributes of the electronic evidence obtained to ensure consistency and integrity.
• Obtaining representations from the Management wherever necessary.

Information Other Than Standalone Financial Statements and Auditors Report Thereon

The Banks Board of Directors is responsible for the preparation of information other than the Standalone Financial Statements and Auditors Report thereon. The Other Information comprises the Management Discussion and Analysis, Directors Report including Annexures to Directors Report (collectively called as "Other Information") but does not include the Standalone Financial Statements and our auditors report thereon and the Pillar III Disclosures under the New Capital Adequacy Framework (Basel III disclosures). The Other information as above is expected to be made available to us after the date of this Auditors report.

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 identified above when it becomes available 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 a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements

The Banks Management and Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these Standalone Financial Statements that give a true and fair view of the financial position, financial performance and cashflows of the Bank in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act 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 Standalone 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, 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.

The Banks Management is also responsible for overseeing the Banks financial reporting process.

Auditors Responsibilities for the audit of the Standalone Financial Statements

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 scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the Standalone 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. Under section 143(3)(i) of the Companies Act, 2013, we are also responsible for expressing our opinion on whether the Bank has adequate internal financial controls system in place and the operating effectiveness of such controls.

• 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 Standalone 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 Standalone 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 Matters

We did not audit the financial statements of the foreign branch in Dubai included in the Standalone Financial Statements of the Bank whose financial statements reflect total assets of 1,066.21 Crores as at March 31,2021 and total revenue of 74.73 Crores for the year ended on that date. This branch has been audited by a local branch

y auditor whose report has been furnished to us, and our opinion in so - far as it relates to the amounts and disclosures included in respect of this branch, is based solely on the report of such branch auditor.

Report on Other Legal and Regulatory Requirements

1. The Balance Sheet and the Profit and Loss Account have

T been drawn up in accordance with the provision of Section 29

y of the Banking Regulation Act, 1949 read with Section 133 of

the Act and Rules made thereunder.

^ 2. As required by sub-section (3) of section 30 of the Banking

Regulation Act, 1949, we report that:

y a. We have obtained all the information and explanations,

which to the best of our knowledge and belief were necessary for the purpose of our audit and have found them to be satisfactory.

r b. The transactions of the Bank, which have come to our

notice, have been within the powers of the Bank. c. During the course of our audit we have visited 27 3 branches to examine the records maintained at such

r branches for the purpose of our audit. As mentioned

 T in our paragraph on Key Audit Matters above, due to

the local lockdowns, the remainder audit procedures ^ were conducted remotely. The returns received from

T the offices and branches of the Bank as supplemented

^ with the information furnished by the Management

^ have been found adequate for the purpose of our

audit.

3. With respect to the matter to be included in the Auditors T Report under section 197(16) of the Act:

The Bank is a banking company as defined under Banking i Regulation Act, 1949. Accordingly, the requirements

y prescribed under Section 197 of the Companies Act, 2013

i. do not apply by virtue of Section 35B(2A) of the Banking

Regulation Act, 1949.

v 4. Further, as required by section 143(3) of the Act, we report that:

a) we have sought and obtained all the information and

 1 explanations which to the best of our knowledge and

belief were necessary for the purpose of our audit;

b) in our opinion, proper books of account as required

^ by law have been kept by the Bank so far as appears

). from our examination of those books and proper

returns adequate for the purpose of our audit have ^ been received from the branches not visited by us;

c) the report on the accounts of the Dubai branch of the

T Bank audited by other auditor has been forwarded to

y us and the same has been appropriately dealt with;

d) the Balance Sheet, and the Profit and Loss Account, dealt with by this report are in agreement with the

 1 books of account;

e) in our opinion, the aforesaid Standalone Financial

T Statements comply with the Accounting Standards

y specified under Section 133 of the Act and Rules made

thereunder, to the extent they are not inconsistent with the accounting policies prescribed by RBI;

f) on the basis of written representation received from the directors as on March 31, 2021 and taken on record by the Board of Directors, none of the directors are disqualified as on March 31, 2021 from being appointed as director in terms of Section 164 (2) of the Companies Act, 2013;

g) with respect to the adequacy of the internal financial controls with reference to Standalone Financial Statements of the Bank and the operating effectiveness of such controls, refer to our separate Report in "Annexure A";

h) with respect to the other matters to be included in the Auditors Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us;

i) The Bank has disclosed the impact of pending litigations on its financial position in its Standalone Financial Statements to the extent determinable/ascertainable. - Refer Schedule 18(B)(11)(C) to the Standalone Financial Statements.

ii) The Bank has made provision, as required, under the applicable law or accounting standards, for material foreseeable losses, if any, on long term contracts including derivative contracts. Refer Schedule 18(B)(11)(B) to the Standalone Financial Statements.

iii) There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Bank. Refer Schedule 18(C)(VII) to the Standalone Financial Statements.

Annexure A to the Independent Auditors Report of even date on the Standalone Financial Statements of IDBI Bank Limited

Report on the Internal Financial Controls with reference to financial statements under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013

We have audited the internal financial controls with reference to financial statements of IDBI Bank Limited ("the Bank") as at March 31,2021 in conjunction with our audit of the financial statements of the Bank for the year ended on that date.

Managements 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 ("the Guidance Note") issued by the Institute of Chartered Accountants of India ("the ICAI"). 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 Companies Act, 2013 ("the Act").

Auditors Responsibility

Our responsibility is to express an opinion on the Banks internal financial controls with reference to financial statements 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") and the Standards on Auditing ("the SAs"), issued by the ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls over financial reporting, both issued by the ICAI. 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 with reference to financial statements was 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 system with reference to financial statements and their operating effectiveness. Our audit of internal financial controls with reference to financial statements included obtaining an understanding of internal financial controls with reference to financial statements, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control 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 is sufficient and appropriate to provide a basis for our audit opinion on the Banks internal financial controls system with reference to financial statements.

Meaning of Internal Financial Controls with reference to Financial Statements

A Banks internal financial control with reference to financial statements 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. Banks internal financial control with reference to financial statements 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 authorizations of Management and Directors of the Bank; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Banks assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls with reference to Financial Statements

Because of the inherent limitations of internal financial controls with reference to financial statements, 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 with reference to financial statements to future periods are subject to the risk that the internal financial control with reference to financial statements 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, the Bank needs to strengthen its review process and management testing of scrutiny and reconciliations of intermediary/ control accounts. In our opinion, the Bank has in all material respects, an adequate internal financial controls system with reference to financial statements and such internal financial controls with reference to financial statements were operating effectively as at March 31, 2021, 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.

Other Matters

Our aforesaid report under section 143(3)(i) of the Act on the adequacy and operating effectiveness of the Internal Financial Controls with reference to Financial Statements insofar as it relates to the overseas branch audited by the branch auditors is based on the report of the branch auditor which has been sent to us and has been properly dealt with by us in preparing this report.

For M P Chitale & Co.
Chartered Accountants
101851W
Ashutosh Pednekar
Partner
(Membership No. 041037)
UDIN: 21041037AAAACJ2843