Jammu and Kashmir Bank Ltd Directors Report.

To

The Members of

The Jammu & Kashmir Bank Limited

Report on Audit of the Standalone Financial Statements

Opinion

1. We have audited the accompanying standalone financial statements of The Jammu & Kashmir Bank Limited (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 the financial statements including a summary of significant accounting policies and other explanatory information. In which are included the Returns of 64 branches/offices audited by us and 923 branches audited by Statutory Branch Auditors for the year ended on that date. The Branches/offices audited by us and those audited by other auditors have been selected by the Comptroller & Auditor General of India in accordance with the guidelines issued to the Bank by the Reserve Bank of India.

2. 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 other auditors on separate audited financial statements/financial information of the branches, as referred to in paragraphs 12 below, the aforesaid financial statements give the information required by the Banking Regulation Act, 1949 (the Act) in the manner so required for bank and are in conformity with 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 the 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) 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 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.

Key Audit Matters

4. Key audit matters are those matters that in our professional judgment are 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 of the Branch, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have determined the matter described below to be the key audit matter to be communicated in our report:

Key audit matters How our audit addressed the key audit matter
Identification of Non-performing advances (NPA):
Advances constitute a significant portion 59% of the Banks assets and the quality of these advances is measured in terms of ratio of Non-Performing Advances. Due to imposition of restrictions in J&K w.e.f. August 5, 2019 on account of re-organization of J&K State, all the business activities came to a halt thereby adversely impacting the cash flows in all sectors as a result of which a large number of accounts came under stress. The Reserve Bank of Indias ("RBI") guidelines on Income recognition and asset classification ("IRAC") prescribe the prudential norms for identification and classification of NPA and the minimum provision required for such assets from time to time. The Bank is also required to apply its judgment to determine the identification and provision required against NPA by applying quantitative as well as qualitative factors. The audit procedures performed remotely and, among others, included:
- Considering the Banks policies for NPA identification and provisioning and assessing compliance with the IRAC norms.
- Performing other procedures including substantive audit procedures covering the identification of NPA by the Banks Branch. These procedures included:
• Testing of the reports generated from the application systems where the advances have been recorded.
• Testing of the available SLAC generated for immediate earlier date(s).
The bank runs System Level Asset Classification (SLAC) application for identification of NPA. The Bank did not run SLAC on March 31, 2020 to maintain the status quo of asset classification as on 29.02.2020 to implement COVID-19 Regulatory Package. Identification of NPA, ascertaining realizable value of securities and provisioning for credit losses require significant level of estimation and given its significance to the overall audit including possible observations by RBI which could result in disclosures in the financial statements, we have ascertained identification and provisioning for NPA as a key audit matter. • Reading the accounts reported Special Mention Accounts ("SMA") to identify stress.
• Reading account statements and other related information of the borrowers selected based on quantitative and qualitative risk factors.
• Performing inquiries with the Banks Branch to ascertain if there were indicators of stress or an occurrence of an event of default in a particular loan account or any product category which need to be considered as NPA.

Emphasis of Matter

5. We draw attention to relevant note of Schedule 18 to the Financial Results which explains that the extent to which COVID-19 pandemic will impact the Banks operations and financial results is dependent on future developments, which are highly uncertain.

Our opinion 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 Corporate Governance Report (but does not include the financial statements and our auditors report thereon), which we obtained prior to the date of this auditors report, and Directors Report, including annexures, if any, thereon, which is expected to be made available to us after that date.

Our opinion on the financial statements does not cover the other information and Pillar 3 disclosure under Basel Ill and we do not and will not express any form of assurance conclusion thereon.

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

7. These standalone Financial Results have been prepared on the basis of the standalone annual financial statements and reviewed quarterly standalone Financial Results up to the end of the third quarter. The Banks Management and Board of Directors are 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 Results that give a true and fair view of the net loss and other financial information in accordance with the recognition and measurement principles laid down in the Accounting Standards specified under Section 133 of the Act, the relevant provisions of the Banking Regulation Act, 1949, the circulars, guidelines and directions issued by the Reserve Bank of India (RBI) from time to time ("RBI Guidelines") and other accounting principles generally accepted in India and in compliance with Regulation 33 of the Listing Regulations. 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 Results that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone Financial Results, 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 Board of Directors is also responsible for overseeing the Banks financial reporting process.

Auditors Responsibilities for the Audit of the Standalone

Financial Results

8. Our objectives are to obtain reasonable assurance about whether the standalone Financial Results 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 Results.

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 standalone Financial Results, 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 the Board of Directors.

• Conclude on the appropriateness of managements use of the goin gconcern 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 FinancialResults, including the disclosures, and whether the standalone Financial Results represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among othermatters, 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 Matters

9. We did not audit the financial statements/information of 923 branches/offices included in the standalone Financial Results of the Bank whose Financial Results

reflect total advances of Rs. 65259.51 Crores and total revenue of Rs.6128.04 Crores as at 31st March 2020, as considered in the standalone Financial Results. The financial statements/ information of these branches has been audited by the branch auditors whose reports have been furnished to us, and in 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 on the standalone financial statements does not cover the other information and the Basel-III disclosure and we do not express any form of assurance conclusion thereon.

10. The annual financial results include the results for the quarter ended 31st March 2020 being the balancing figure between the audited figures in respect of the full financial year and the published unaudited year to date figures up to the third quarter of the current financial year which were subjected to limited review by us.

Report on Other Legal and Regulatory Requirements

11. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of Section 29 of the Banking Regulation Act, 1949 and Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014.

12. The Comptroller and Auditor General of India has issued directions indicating the areas to be examined in terms of sub-section (5) of section 143 of the Companies Act, 2013, the compliance of which is set out in "Annexure-A" to this Report.

13. Subject to the limitations of the audit indicated in paragraphs 4 to 10 above and as required by subsection (3) of section 30 of the Banking Regulation Act, 1949, 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 purpose 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;

c) the returns received from the offices; and branches of the Bank have beenfound adequate for the purposes ofour audit.

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

a) we have sought and obtained all the information and explanations which tothe 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 it appears from our examination of those books;

c) the reports on the accounts of the branch offices of the bank audited undersection 143(8) of the Act by branch auditors of the Bank have been sent to us and have been properly dealt with by us in preparing this report;

d) the Balance Sheet, the Statement of Profit and Loss and the Statement ofCash Flows dealt with by this report are in agreement with the books ofaccount;

e) in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule7 of the Companies (Accounts) Rules, 2014, to the extent they are not inconsistent with the accounting policies prescribed by RBI;

f) on the basis of written representations received from the directors as on 31st March 2020 and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2020 from

being appointed as adirector in terms of Section 164(2) of the Act;

g) with respect to the adequacy of the internal financial controls over financial reporting of the Bank and the operating effectiveness of such controls, refer to our separate Report in "Annexure B";

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 financial statements in Schedule 18-Notes on Accounts attached;

ii. The Bank did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses and

iii. there has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Bank.

Annexure-A to Para 12 of independent auditors report of even date on the standalone financial statements of Jammu & Kashmir Bank Limited.

Directions/sub-directions of Comptroller and Auditor General of India under Section 143(5) of Companies

Act 2013 for the Financial Year 2019-20

Sn Directions/Sub directions Auditors comments including action taken wherever required Impact on accounts and financial statements
i If the Company has been selected for disinvestment, a complete status report in terms of valuation of Assets (including intangible assets and land) and Liabilities (including Committed & General Reserves) may be examined including the mode and present stage of disinvestment process Since the Company has not been selected for disinvestment, directions are not applicable. Nil
2 Please report whether there are any cases of waiver/ write off of debts/ loans/interest etc., if yes, the reasons there for and the amount involved. There are 1493 cases of waiver/write off of debts/ loans/ interest etc. amounting to Rs. 13.15 Crores in addition to the waiver of unapplied interest of Rs.369.80 Crores on account of negotiated settlement with the borrowers defaulting in payment due to the circumstances beyond their control such as death/disappearance of the borrower, recession in economy, no enforceable security, natural calamities such as earthquake, flood, drought, change in Govt. policy, genuine business failure in-spite of sincere efforts made by borrower etc. and where the recovery chances through normal business operations are bleak. Waiver/Write off resulted in loss of Rs.382.95 Crores.
During the financial year one account (NPA) was sold to Asset Construction Companies (ARC) having total principal NPA balance of Rs. 102.19 Crores, and unapplied interest of Rs. 69.94 Crores against sale proceeds of Rs. 65.29 Crores resulting in sacrifice of Rs. 106.84 Crores Sale of NPAs to ARC resulted in release of Provision held by Rs.45.96 Crores and increase of profits by Rs.9.06 Crores. This has also resulted in reduction in NPAs by Rs. 102.19 Crores.
3 Whether proper records are maintained for inventories lying with third parties & assets received as gift from Govt. or other authorities As per explanations given to us, the company has not received any assets as gift/grant(s) from government or other authorities. The company has no inventories lying with third parties. NIL
4 A report on age-wise analysis of pending legal/arbitration cases including the reasons of pendency and existence/ effectiveness of a monitoring mechanism for expenditure on all legal cases (foreign and local) may be given. There are 466 Cases involving Rs. 588.39 Crores pending legal/arbitration cases being claims against the bank not acknowledged as debts. Bank hold a provision of Rs.12.58 Croresin cases which have been decided against the bank but Bank has filed appeals against the orders.
5 Whether the restructuring of loan was done as per the provisions of the Reserve Bank of India and Banks own Restructuring of loan Policy. RBI under superv down gradation standard accounts of Rs. 63.34 Crore not in compliance Additional provisi was provided by th isory process directed of 2 restructured with total outstanding s as restructuring was of extant guidelines. n for Rs. 6.43 Crores e bank as on 31.03.2020 Total provision for Rs. 15.88 Crores was required and bank having provided Rs. 9.45 Crores only and as such additional provision for Rs. 6.43 Crores was created as per RBI directions. This resulted in reduction of Profits by Rs. 6.43 Crores
6 Whether the Bank is maintaining/ developing various assets of the State Govt. The treatment of the assets and expenditure incurred and revenue earned may be examined and comment may be offered. As per informat given to us, the developing Parks Golf Course which bank. The bank Crores for mainta of these parks. ion and explanations bank is maintaining/ and Gardens including are not owned by the has incurred Rs. 3.56 ining and development The expenditure amounting to Rs. 3.56 Crores has been incurred and revenue of Rs.1.56 Crores has been earned for maintaining/ developing parks/gardens and amounts have been debited/ credited to the Profit and Loss Account.
7 Whether the branches were doing window dressing and its impact/ materiality on the overall deposit portfolio. As per information to us, no branch a case of window dr and explanation given ditor has reported any essing. Nil
8 Whether the Bank has been able to achieve the targets under Priority sector lending, if not, impact on the financial health of the Bank by lending the shortfall amount in Rural infrastructure Development Fund, Small industrial Development Bank of India, etc. may please be brought out. As per informat given to us, the Ba achieve the target lending. As a resu has to make depos with the following on 31-03-2020: ion and explanations nk has not been able to s under priority sector t of shortfall, the bank its of low yield interest designated agencies as The impact on the financial health is lower rate of return of interest ranging from 3.40% p.a. to 4.50% p.a. received from the agencies with which deposits were made for shortfall.

 

Particulars Rs.in Crores
NABARD 1327.52
RIDF(NABARD) 1088.90
SIDBI 1184.24
NHB 292.64
MUDRA 149.15
Total 4042.45

 

9 Whether there were cases of greening of advances, up gradation of loan account at the fag end of the Financial Year or delay/non-declaration of Nonperforming Assets as per RBI guidelines. Its impact on the profitability and Asset Classification. Advances amounti were not declare guidelines which w those were identi Auditors and addi 140.03 Crores and interest Rs.6.34 C ng to Rs. 525.99 Crores d as NPA as per RBI ere downgraded after fied by the Statutory tional provision of Rs. reversal of unrealized ores was suggested. Auditors identified the said NPAs, where by advances of Rs. 525.99 Crores have been downgraded from the banks standard assets classification. The impact thereof on increase of profit is as follows: 1.Interest Reversal: Rs.6.34 Crores 2.Increase in NPA provision Rs. 140.03 Crores

 

10 Whether Co. has complied with the direction issued by RBI for a. NBFCs b. Capital adequacy norms for NBFCs. c. Classification of NPA As per information and explanation given to us the bank has complied with all the directions issued by RBI. Nil
11 Whether introduction of any scheme for settlement of dues and extensions thereto complied with the policy/ guidelines of Company/ Govt. As per information and explanation given to us, the bank is complied with the instructions/guidelines issued from time to time by RBI and comply with the Policy framed for the same. Nil
12 Whether the Co. has a system to ensure that loans were secured by adequate security free from encumbrances and have first charge on the mortgaged assets. Further instances of undue delay in disposal of seized units may be reported. As per information and explanation given to us the bank has a system to ensure that loans are secured by adequate security free from encumbrances and have charge on mortgaged assets and bank has framed policy for the same. Nil
13 Whether the bank guarantees have been revalidated in time? As per information and explanation given to us the Guarantees are revalidated within the time period at the request of borrower. However, 1179 expired guarantees amounting to Rs. 197.10 Crores (Net of Margin) are outstanding in the books of bank This may add to the liability of the bank.
14 Comment on the confirmation of balances of trade receivable, trade payable, term deposits, bank account and cash obtained Being banking company there are no trade payable/receivable. However, confirmation for term deposit is not required Nil
15 Whether the company has system in place to process all the accounting transactions through IT system? If yes, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implication, if any may be stated. As per information and explanation given to us the bank has system in place to process all the accounting transactions through IT. Nil
16 Whether the company has cleared title/ lease deeds for freehold and leasehold land respectively? If not please state the area of freehold and leasehold land for which title/lease deeds are not available. As per information and explanation given to us, the bank does not have clear title/ lease deeds for freehold and leasehold lands for the following properties: - The acquisition value of the said lands/properties has been capitalized and the value as on 31.03.2020 is Rs. 60.76 Crores.

 

Sn Land Area
i. Vashi (1st Floor) 5400 Sft
2. Budgam 4 Kanals
3. Ansal Plaza, Khelgaon 17925Sft
4. Kargil 1 Kanal 4 Marla
5. Land at Kulgam 2 Kanals

 

It is advised to complete the documentation for clear title at the earliest. During the current financial year, the Bank has revalued Immovable properties based on the reports obtained from external independent valuers. The revaluation surplus amounting to 406.80 Crore is credited to Revaluation Reserve.
17 Examine the system of effective utilization of loans/Grant-in-Aid/ Subsidy. List of cases diversion of fund The loans received are utilized for the intended purpose. However, there were no Grant-in-Aid/Subsidy received during the financial year Nil
18 Examine the cost benefit analysis of major capital expenditure/Expansion including IRR and payback period. As per information and explanation given to us, the major expenditure is being incurred on opening of new business units and as per historical data majority of new business units within J&K States attain breakeven within one year of its operation Nil
19 If the audited entity has computerized its operation or part of it, assess and report how much of the data in the company is in electronic format, which of the area such as accounting, sale personnel information, payroll, inventory etc. has been computerized and the company has evolved proper security policy for data/software/ hardware. As per information and explanation given to us, all the operation of the bank including accounting, payroll in HRMS, inventory in FAM system are computerized and the bank have evolved proper security policy for data/software/ hardware. Nil
20 Other Matter Other Assets include 3955.23 Crores due form UT of J&K comprising agency account, commission due & pension payments. The advance is interest free & is in the nature of clean overdraft to the Government. Not Available

Annexure-B to Independent Auditors report of even date on the standalone financial statements of

Jammu and Kashmir Bank Limited.

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

1. We have audited the internal financial controls over financial reporting of Jammu and Kashmir Bank Limited (the Bank) as at 31st March 2020 in conjunction with our audit of the standalone financial statements of the Bank for the year ended on that date.

Managements Responsibility for Internal Financial Controls

2. The Banks Board of Directors 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 ofinternal control stated in the "Assessment of Adequacy of Internal Financial Controls Over Financial Reporting"in line with the Guidance Note on Audit of Internal Financial Controlsover Financial Reporting ("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 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

3. 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) and the Standards on Auditing (the Standards), 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, 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 over financial reporting was established and maintained and if such controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining and 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 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.

5. 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 over financial reporting.

Meaning of Internal Financial Controls over Financial

Reporting

6. A Banks internal financial control 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 control over financial reporting includes those policies and procedures that:

(a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Bank;

(b) 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

(c) 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 over Opinion Financial Reporting

7. 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 control over financial reporting may become in adequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

8. (a) The Banks finance department require

professionals like Chartered Accountants to strengthen internal financial controls over financial reporting.

(b) In our opinion, the Bank has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31st March 2020, 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 issued by the ICAI.