Punjab & Sind Bank Directors Report.

To

The Members of Punjab & Sind Bank

Report on Audit of the Standalone Financial Statements

Opinion

1. We have audited the standalone financial statements of Punjab & Sind Bank (the Bank), which comprise the Balance Sheet as at 31 March 2021, 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 returns for the year ended on that date of 20 branches and 1 treasury division audited by us and 775 branches and 25 Offices/ Processing Centers 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 736 branches of the bank which have not been subjected to audit. These unaudited branches account for 8.84 percent of advances, 24.07 percent of deposits, 6.73 percent of interest income and 22.41 percent 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 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, 2021;

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) 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 in India, 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 Matters

4. We draw your attention to Schedule No.18 (Note No.16) to the accompanying standalone financial results, which describes the uncertainties due to outbreak of Corona Virus (Covid-19) and the managements assessment of its impact on the business operations of the bank.

However, our opinion is not modified in respect of the matter stated above.

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:

Key Audit Matters How the matter was addressed in our audit
Classification of Advances, Income Recognition, Identification of and provisioning for non-performing Advances We obtained an understanding of the Banks Software, circulars, guidelines and directives of the RBI and the Banks internal instructions and procedures in respect of the assets classification and its provisioning. Our audit approach consisted of testing the design of system for identification of Non- Performing assets to ensure conformity with the guidelines of the RBI in the matter and test checking identification and valuation of Non-performing assets.
(Refer Schedule 9 to the financial statements)
The advances are classified as performing and nonperforming advances (NPA) which are governed by income recognition, asset classification and provisioning
(IRAC) norms and other circulars and directives issued by the Reserve Bank of India (RBI) from time to time. The classification and provisioning are carried out by the Banks IT Software integrated with its Core Banking Solution (CBS). We have reviewed the documentations, operations / performance and monitoring of the advance accounts, on test check basis of the large and stressed advances, to ascertain any overdue, unsatisfactory conduct or weakness in any advance account, to ensure that its classification is in accordance with
The provisioning for identified NPAs is based on ageing and classification of NPAs, recovery estimates, value of security and is subject to the provisioning norms specified by RBI. the prudential norms of RBI, in respect of the branches audited by us. In respect of the branches, audited by the other branch statutory auditors we have placed reliance on their reports and ensured that changes suggested by the Branch auditors were duly carried out wherever necessary.
In the event of any improper application of the prudential
norms/regulatory requirements or consideration of the incorrect value of the security, the carrying value of the advances could be materially misstated either individually or collectively and in view of the significance of the amount of advances in the financial statements, We have reviewed on test check basis the reports of the credit audit, inspection audit, internal audit, concurrent audit, regulatory audit to ascertain the advances having any adverse features / comments and reviewed the reports generated from the banks system.
the classification of the advances and provisioning thereon has been considered as Key Audit Matter in our audit. We reviewed advances including stressed advances on a sample basis with respect to compliance with the RBI Master Circulars / Guidelines/ Judicial pronouncements.
Necessary changes were carried out wherever required during the course of audit and the effect of same was duly accounted for in the Financial statements for the year ended 31st March, 2021.
Classification and valuation of Investments identification and provisioning for Non-Performing Investments. Our Audit approach towards Investments with reference to the RBI circulars/directives included the review and testing of the design, operating effectiveness of internal controls and substantive audit procedures in relation to valuation, classification, identification of Non-Performing Investments, provisioning / depreciation related to Investments. We evaluated and understood the system and internal control as laid down by the Bank to comply with relevant RBI guidelines. We assessed and evaluated the process of identification of NPIs, and corresponding reversal of unrealized income and creation of provision. We carried out substantive audit procedures to recompute independently the provision to be maintained and depreciation to be provided in accordance with the circulars and directives of the RBI. Accordingly, we selected samples from the investments of each category and tested for NPIs as per the RBI guidelines and recomputed the provision to be maintained in accordance with the RBI Circular for those selected sample of NPIs; Necessary changes were carried out wherever required during the course of audit and the effect of same was duly accounted for in the Financial statements for the year ended 31st March, 2021.
(Refer Schedule 8 to the financial statements)
Investment portfolio of the bank comprises of Investments in Government Securities, Bonds, Debentures, Shares, Security Receipts and other Approved Securities which are classified under three categories, Held to Maturity, Available for Sale and Held for trade.
Valuation of investments, identification of NonPerforming Investments (NPI) and the corresponding non-recognition of income and provision thereon, is carried out in accordance with the relevant circulars / guidelines / directions of RBI.
Considering judgement involved in the valuation, volume of transactions, investments on hand, regulatory requirements and significance of the amount of investments in the Financial statement, we have identified this as a key audit matter for the current year audit.
Assessment of Information Technology (IT) We evaluated and understood the CBS system adopted by the
The IT environment of the bank is complex and involves Bank.
a large number of independent and inter-dependent IT systems used in the operations of the Bank for processing and recording a large volume of transactions at various locations. We assessed the operative effectiveness of key automated controls within various business processes. This includes testing the integrity of system interfaces, the completeness and accuracy of data, system reconciliation controls and automated
As a result, there is high degree of reliance and dependency calculations.
on such IT systems for the financial reporting process of the bank. Appropriate IT general controls and application controls are required to ensure that such IT systems are We assessed the feeding of the data in the system and going through the extraction of the financial information and statements from the IT system existing in the bank.
able to process the data as required, completely accurately and consistently for reliable financial reporting. Reviewed the output and reports generated by the system on sample basis.
IT controls with respect to recording of transactions, generating various reports in compliance with RBI guidelines/directions is dependent on working of Core Banking System in the Bank. Therefore, any validation failures, incorrect input data and wrong extraction of data may result in wrong reporting of data to the management and regulators. Where deficiencies were identified, we tested compensating controls or performed alternate procedures. The system needs to be further strengthened for its efficacy to control deficiencies of input/output data from the system.
The Bank accounts for all the transactions related to Advances in its Information Technology System (IT System) viz. Core Banking Solution (CBS) which identifies whether the advances are performing or non-performing and calculation of provisions thereon.
Due to the importance of the impact of the IT systems and related control environment on the Banks financial reporting process, we have identified testing of such IT systems and related control environment as a key matter for the current year audit.
Contingent Liabilities and Claims
Contingent Liability is a possible obligation, outcome of which is contingent upon occurrence or non-occurrence of one or more uncertain future events. In the judgement of the management, such claims and litigations including tax demands against the bank would not eventually lead to a liability. We have relied upon the management note and legal opinions obtained by the bank regarding the claims and tax litigations and involved our internal team to review the nature of such litigations and claims, their current status, sustainability, examining recent orders and/or communication received from various tax authorities/judicial forums and follow up actions
However, unexpected adverse outcomes may significantly impact the Banks reported financial results which is uncertain/unascertainable at this stage. thereon and likelihood of claims/litigations materializing into eventual liability upon final resolution, from the available records and developments to date.
Considering the uncertainty relating to the outcome of these matters which requires application of judgment in interpretation of law this has been determined as a key Audit Matter
Modified Audit Procedures carried out in the light of continuing COVID-19 pandemic
Due to the continuing COVID-19 pandemic, lockdown declared by some of the State Governments and travel restrictions imposed by State Governments / 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/ ZOs/various departments at Head Wherever physical access was not possible, necessary records/ reports/ documents/ certificates were made available to us by the Bank through digital medium, electronic communications and remote access to CBS. To this extent, the audit process was carried out on the basis of 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.
Office of the Bank. Accordingly, we modified our audit procedures as follows:
As we could not gather audit evidence in person/ Physically and personal interaction with the officials at the Branch/ Zonal/ Head Office, either fully or partially, we have identified such modified audit procedures as Key Audit Matter. Conducted verification of necessary records, Documents electronically through remote access/ electronic communications in respect of some of the Branches/ ZO and Head Office Departments of the Bank wherever physical access was not possible.
Accordingly, our audit procedures were modified to carry out remotely. Carried out verification of scanned copies of the documents, certificates and the related records made available to us through electronic communications and CBS through remote access over secure network of the bank.
Making enquiries and gathering necessary audit evidence through Video Conferencing, dialogues and discussions over phone calls/conference calls, electronic communications and similar communication channels.
Discussions and resolution of audit observations telephonically/ through electronic communications instead of face-to-face interaction with the concerned/designated officials.

6. Information Other than the Financial Statements and Auditors Report thereon

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 III and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above 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 materially 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 that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

When we read the Directors Report, including annexure, if any, thereon, 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

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 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 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 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, but not for the purpose of expressing an opinion on the effectiveness of the Banks 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.

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 Matters

9. We did not audit the financial statements / information of 775 branches and 25 offices / Processing Centers included in the standalone financial statements of the Bank whose financial statements / financial information reflect total asset of Rs. 26,024.76 Crore as at 31st March 2021 and total revenue of Rs. 1,347.95 Crores for the year ended on that date, as considered in the standalone financial statements. The financial statements / information of these branches has been audited by the statutory 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 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 to 9 above and as required by the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, and subject also to the limitations of disclosure required therein, we report that:

a) We have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit and have found them to be satisfactory;

b) The transactions of the Bank, which have come to our notice, have been within the powers of the Bank; and

c) The returns received from the offices and branches of the Bank have been found adequate for the purposes of our audit.

12. As required by the RBIs letter no. DOS.ARG. No.6270/08.91.001/2019-20 dated March 17, 2020 (as amended), we report that:

(a) Our audit report on the adequacy and operating effectiveness of the Banks internal financial controls over financial reporting 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, 2021.

(b) As the bank is not registered under the Companies Act, 2013 the disqualifications from being a director of the bank under sub-section (2) of Section 164 of the Companies Act, 2013 do not apply to the bank.

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

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

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 Cash Flows dealt with by this report are in agreement with the books of account and with the returns received from the branches not visited by us;

c) the reports on the accounts of the branch offices audited by statutory 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 Statement of 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 M/S Suresh Chandra & Associates For M/s Raj Gupta & Co.
Chartered Accountants Chartered Accountants
FRN:001359N FRN: 000203N
UDIN:21090205AAAAAS8391 UDIN: 21530433AAAADD8743
CA Madhur Gupta CA Abhishek Gupta
Partner Partner
M.No. 090205 M. No. 530433
Place: New Delhi Place: Ludhiana
For M/S Ghiya & Co For M/s Shiv & Associates
Chartered Accountants Chartered Accountants
FRN:001088C FRN: 009989N
UDIN:21075000AAAAAL8150 UDIN: 21085084AAAACH8542
CA G.P Gupta CA Shiv Prakash Chaturvedi
Partner Partner
M.No. 075000 M. No. 085084
Place: Jaipur Place: New Delhi
Dated: 22 May, 2021
Place: New Delhi

ANNEXURE"A"TO THE INDEPENDENT AUDITORS REPORT

(Referred to in paragraph 12(a) 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 Punjab & Sind Bank ("the Bank") as of March 31,2021 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.

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 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.

Auditors 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 judgment, 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 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 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, adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were operating effectively as at March31,2021,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 in so far as it relates to the operating effectiveness of internal financial controls over financial reporting of 38 branches, testing the design of operating effectiveness of internal financial controls is based on the corresponding reports of the respective branch auditors of those branches.

Our opinion is not modified in respect of this matter.

For M/S Suresh Chandra & Associates For M/s Raj Gupta & Co.
Chartered Accountants Chartered Accountants
FRN:001359N FRN: 000203N
UDIN:21090205AAAAAS8391 UDIN: 21530433AAAADD8743
CA Madhur Gupta CA Abhishek Gupta
Partner Partner
M.No. 090205 M. No. 530433
Place: New Delhi Place: Ludhiana
For M/S Ghiya & Co For M/s Shiv & Associates
Chartered Accountants Chartered Accountants
FRN: 001088C FRN: 009989N
UDIN:21075000AAAAAL8150 UDIN: 21085084AAAACH8542
CA G.P Gupta CA Shiv Prakash Chaturvedi
Partner Partner
M.No. 075000 M. No. 085084
Place: Jaipur Place: New Delhi
Dated: 22 May, 2021
Place: New Delhi