sbi cards payment services ltd Auditors report

To the Members of

SBI Cards and Payment Services Limited

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

OPINION

We have audited the accompanying financial statements of SBI Cards and Payment Services Limited (the "Company"), which comprise the Balance Sheet as at March 31, 2023, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity, the Cash Flow Statement for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information (hereinafter referred to as the "financial statements").

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Companies Act, 2013 (the "Act") in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, ("Ind AS") and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2023, and its profit and total comprehensive income, changes in equity and its cash flows for the year ended on that date.

BASIS FOR OPINION

We conducted our audit of the financial statements 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 Financial Statements section of our report. We are independent of the Company in accordance with the ‘Code of Ethics issued by the Institute of Chartered accountants of India ("ICAI") together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAIs Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.

Sr. Key Audit Matters No.	Auditors Response
1 Assessment of impairment loss allowance based on expected credit loss (ECL) on Loans (Refer Note 38 of the financial statements)	Our audit procedures relating to the allowance for credit losses include the following, among others:
In accordance with Ind AS 109, the company applies expected credit loss (ECL) model for measurement and recognition of impairment loss on the financial assets.	Compliance of the Companys accounting policies in relation to impairment allowance with Ind AS 109 was assessed.
For recognition of impairment loss on Loans to customers, where no significant increase in credit risk [SICR] has been observed, such assets are classified in "Stage 1" and a 12 months ECL is recognized. Loans that are categorised into have a significant increase in credit risk are considered to "Stage 2" and those which are in default or there exists objective evidence of impairment are considered to be in "Stage 3". Lifetime ECL is recognized for stage 2 and stage 3 Loans.	We understood and evaluated the design and tested the operating effectiveness of the key controls put in place by the management over:
Further, in the current year company has revised the estimation model for Expected Credit Loss [ECL] on account of change in estimation, instigating forward looking macroeconomic factors in probability of default of the credit card portfolio to ensure that adverse future economic conditions are covered in the ECL.	(a) the assumptions used in the calculation of ECL and its various aspects such as determination of Probability of Default, Loss Given Default, Exposure at Default, Staging of Loans, etc.;
Quantitative factors like days past due, behaviour of the customer, historical losses incurred on defaults and macroeconomic data points identified by the Managements expert and qualitative factors like nature of the underlying loan, correlation of macro- economic variables to determine expected losses, revision in the management overlay and related Reserve Bank of India (RBI) guidelines, to the extent applicable, etc. have been taken into account in the ECL computation.	(b) the completeness and accuracy of source data used by the Management for ECL computation; and,
Considering the change in ECL policy, degree of estimate involved in the model and computation of impairment loss allowance along with the significance of the amount and its impact on the financial statements of the company, this area has been considered as key audit matter.	(c) ECL computations for their reasonableness.
	Portfolio categorization into appropriate stages (Stage 1, Stage 2 and Stage 3) for purposes of measurement of ECL was analysed on the basis of their past-due status.
	We test-checked the completeness and accuracy of source data used.
	We have also evaluated the adequacy of presentation and disclosure in the financial statements with respect to expected credit losses including the specific disclosure made with regards to revision in ECL model.

 

2 Performing an audit in an Automated environment that is driven by IT systems & applications.	Our audit procedures with respect to this matter included the following:
The business operates in an automated environment and has a complex IT structure as significant number of transactions are processed through its inter-dependent IT systems.	Having obtained a comprehensive understanding of the IT systems and the automated environment of the Company, we have considered our scope for audit based on the purpose and financial relevance to the audit.
Appropriate IT general controls and IT application controls are required to ensure that such IT systems process operations in an accurate, complete, effective, efficient, and consistent way for reliable financial reporting.	With respect to IT system, our focus includes User access and security, network operations, automated calculations, and database management. In detail:
Due to pervasive use of IT systems, high level of automation and its impact on the financial reporting of the business we have considered ‘IT Systems and Controls to be a key audit matter.	• Ensured that systems are developed, configured and implemented to meet financial reporting objectives.
	• Assessed User Access Management i.e., process of identifying, tracking, controlling and managing a specified users access to an IT system.
	• Covered logics & controls over reports used in business which are system driven.
	Where control deficiencies have been identified, we have tested compensating controls or performed alternative audit procedures, wherever necessary.

INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITORS REPORT THEREON

The Companys Board of Directors is responsible for the other information. The other information comprises the information included in the Management Discussion and Analysis, Boards Report including Annexures to Boards Report and Business Responsibility Report, Corporate Governance and Shareholders Information, but does not include the financial statements and our auditors report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

If, based on the work we have performed, 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.

MANAGEMENTS RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The Companys Board of Directors is responsible for the matters stated in Section 134(5) of the Act with respect to the preparation and presentation of these financial statements that give a true and fair view of the financial position, financial performance, including total comprehensive income, changes in equity and cash flows of the Company in accordance with the Indian Accounting Standards prescribed under Section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company 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 Companys ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The Board of Directors are responsible for overseeing the Companys financial reporting process.

AUDITORS RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the financial statements, as a whole, are free from material misstatements, 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 it is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatement 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 exercised professional judgment and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls with reference to financial statements 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 Companys 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 Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of misstatements in the financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider

quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As required by the Companies (Auditors Report) Order, 2020 (the "Order"), issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the "Annexure 1", a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. On the basis of such checks of the books and records of the Company, as we consider appropriate and according to the information and explanations given to us, we are enclosing our report in terms of Section 143(5) of the Act, on the directions and sub directions issued by Comptroller and Auditor General of India in "Annexure 2".

3. As required by section 143(3) of the Act based on our audit, we report that:

(a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

(c) The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, the Statement of Changes in Equity and the Cash Flow Statement dealt with by this Report are in agreement with the books of account;

(d) In our opinion, the aforesaid financial statements comply with the Indian Accounting Standards specified under Section 133 of the Act, read with the Companies (Indian Accounting Standards) Rules, 2015, as amended;

(e) On the basis of the written representations received from the directors as on March 31, 2023 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2023 from being appointed as director in terms section 164(2) of the Act;

(f) With respect to the adequacy of the internal financial controls with reference to financial statements of the Company and the operating effectiveness of such controls, refer to our separate Report in "Annexure 3". Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Companys internal financial controls with reference to financial statements;

(g) With respect to the other matters to be included in the Auditors Report in accordance with the requirements of section 197(16) of the Act, as amended:

I n our opinion and to the best of our information and according to the explanations given to us, the remuneration paid/provided by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act;

(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 Company has disclosed the impact of pending litigations on its financial position in its Financial Statements - Refer Note No. 45 to the Financial Statements;

(ii) There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company;

(iii) (a) Management has represented that, to the

best of its knowledge and belief, no funds (which are material either individually or in the aggregate) have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Company to or in any other person or entity, including foreign entity ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Company ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(b) The Management has represented, that, to the best of its knowledge and belief, no funds (which are material either individually or in aggregate) have been received by the Company from any person or entity, including foreign entity ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that

the Company shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(c) Based on the audit procedures that have been considered reasonable and appropriate in the circumstances, nothing has come to our notice that has caused us to believe that the representations under sub-clause (i) and (ii) of Rule 11(e) as provided under (a) and (b) above, contain any material misstatement.

(v) The Company has declared interim dividend during the year which is in accordance with Section 123 of the Act.

(vi) Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books of account using accounting software which has a feature of recording audit trail (edit log) facility is applicable to the Company with effect from April 1, 2023, and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31, 2023.

Annexure "1" to Independent Auditors Report

(Referred to in Paragraph 1 under ‘Report on other Legal and Regulatory Requirement of our report to the Members of SBI Cards and Payment Services Limited of even date)

To the best of our information and according to the explanations provided to us by the Company and the books of accounts and records examined by us in the normal course of audit, we state that:

i) In respect of Companys property, plant and equipment,

right-of-use assets and intangible assets:

(a) A. The Company has maintained proper records

showing full particulars, including quantitative details and situation of property, plant and equipment and relevant details of right-of- use assets;

B. The Company has maintained proper details records showing full particulars of intangible assets;

(b) The Company has a regular programme of physical verification of Property, Plant and Equipment by which all fixed assets are verified, over the period of two year In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. According to the information and explanations given to us, no material discrepancies were noticed on such verification;

(c) The Company is not having any immovable property. Hence, reporting under Clause 3(i)(c) of the Order is not applicable to the Company;

(d) The Company has not revalued any of its property, plant and equipment (including right-of-use assets) and intangible assets during the year;

(e) No proceedings have been initiated during the year or are pending against the Company as at March 31, 2023 for holding any Benami property under the Benami Transactions (Prohibition) Act, 1988 (as amended in 2016) and rules made thereunder.

ii) (a) The Company does not have any inventory and

hence reporting under clause 3(ii)(a) of the Order is not applicable;

(b) The Company has been sanctioned working capital limits in excess of 5 Crores, in aggregate, from banks or financial institutions on the basis of security of current assets. As per the information and explanations given to us, the quarterly returns or statements filed by the Company with the banks or financial institutions are in agreement with the books of account of the Company;

iii) The Company has made investments in, provided any guarantee or security or granted any loans or advances in the nature of loans, secured or unsecured, to companies, firms, Limited Liability Partnerships or any other parties during the year, in respect of which:

(a) The Company is a NBFC and in the business of credit card services, in the nature of credit to the customers, which are treated as loans in the financial statements. Hence, reporting under clause 3(iii)(a) of the Order is not applicable;

(b) During the year, the investment made and the terms and conditions of the grant of loans, during the year are, prima facie, not prejudicial to the Companys interest;

(c) In respect of loans and advances in the nature of loans, the schedule of repayment of principal and payments of interest has been stipulated and the repayments of principal amounts and receipts of interest are generally been regular as per stipulation;

(d) As per the information and explanations provided to us, there are over dues amount (as stipulated below) for more than ninety days, and reasonable steps have been taken by the Company for the recovery of the principal and interest. [Refer Note no. 58.7]

( in Crores)

Number of	Principal	Interest	Other	Total
Cases (Borrowers)	Balance	Balance	Fees
1,42,532	730.88	138.56	88.09	957.53

(e) The Company is a NBFC and in the business of

credit card services, in the nature of credit to the customers, which are treated as loans in the financial statements. Hence, reporting under clause 3(iii)(e) of the Order is not applicable;

(f) The Company has not granted any loans or advances in the nature of loans either repayable on demand or without specifying any terms or period of repayment during the year. Hence, reporting under clause 3(iii)

(f) of the Order is not applicable.

iv) I n our opinion and according to the information and explanations given to us, the Company has complied with the provisions of section 185 and 186 of the Companies Act in respect of loans granted, investment made. The Company has given credit card advances of 0.03 Crores to ten Directors and 0.61 Crores to fifteen related parties in the ordinary course of business. [Refer Note no. 8].

Annexure "1" to Independent Auditors Report

v) The Company has not accepted any deposits or amounts which are deemed to be deposits. Hence, reporting under clause 3(v) of the Order is not applicable.

vi) The maintenance of cost records has not been specified by the Central Government under section 148(1) of the Companies Act for the business activities carried out by the Company. Hence, reporting under clause 3(vi) of the Order is not applicable to the Company.

vii) In respect of statutory dues:

(a) In our opinion, the Company has generally been regular in depositing undisputed statutory dues including Goods and Service Tax, Provident Fund, Employees State Insurance, Income tax, Sales Tax, Service Tax, duty of custom, duty of Excise, Value Added Tax, Cess and other material statutory dues applicable to it with the appropriate authorities;

(b) Details of statutory dues referred to in sub-clause (a) above which have not been deposited as on March 31, 2023 on account of disputes are given below:

Nature of the Statue	Nature of the Dues	Amount ( Crores)	Period to which the amount relates	Forum where dispute is pending
Income Tax Act, 1961	Redemption of VISA share and Advertisement Expenses	1.98	AY 2008 - 2009	High Court Delhi and CIT (A)
Service Tax	1. Demand of service tax on unbilled revenue in case of associated enterprises 2. Demand of Service tax on difference between the gross amounts appearing in income tax return vs the service tax return	10.82	FY 2007-08 - FY 2011-12	Custom Excise and Service Tax Appellate Tribunal, Chandigarh
Service Tax	1. Service tax liability on reverse charge basis for payments made to service providers situated outside India. 2. On alleged wrongful availment of CENVAT credit in respect of call center services.	1.40*	FY 2003-04 - FY 2007-08	Custom Excise and Service Tax Appellate Tribunal, Chandigarh
Service Tax	Service tax demand on incentive income	0.62	FY 2007-08 - FY 2008-09	Custom Excise and Service Tax Appellate Tribunal, Chandigarh
Service Tax	Service tax demand on incentive income	0.32	FY 2009 - 2010	Custom Excise and Service Tax Appellate Tribunal, Chandigarh
Service Tax	Demand of CENVAT Credit of Service tax availed on group medical insurance and group life insurance services of employees and family members	0.22*	FY 2008-09 - FY 2010-11	Custom Excise and Service Tax Appellate Tribunal, Chandigarh
Service Tax	Demand of Service tax in respect of Master card charges due to Service tax not deposited on grossed up basis	13.83*	FY 2012-13 - FY 2017-18	Custom Excise and Service Tax Appellate Tribunal, Chandigarh
Goods and Service Tax	Excess credit availed : Mismatch between GSTR-3B and 2A	0.61*	FY 2019 - 20	Commissioner (A), Gujarat
Service Tax	Taxability of Interchange Income during the period and taxability of foreign currency markup earned by SBI Cards	7.06**	FY 2001 to 2006	Honble Supreme Court **
Employees State Insurance Act, 1948	Failure to pay ESI Contribution on payment made to various contractors	2.53*	FY 2014-15	E.S.I. Court, Gurgaon
Employees Provident Fund Act,1952	Differential of PF amount on account of statutory limit	4.55	FY 2014 -15 - FY 2018 - 19	EPF Organisation, Gurgaon

Footnotes:

1. AY = Assessment Year

2. FY = Financial Year

3. *against the above liability amount (includes Interest and Penalty), 2.04 Crores has been deposited.

4. ** CESTAT has serviced favourable order in favour of the Company, however department has preferred an appeal against the CESTAT order in Honble Supreme Court, which is yet to be listed.

viii) There were no transactions relating to previously unrecorded income that have been surrendered or disclosed as income during the year in the tax assessments under the Income Tax Act, 1961 (43 of 1961).

ix) (a) The Company has not defaulted in repayment of loans

or other borrowings or in the payment of interest thereon to any lender;

(b) The Company has not been declared wilful defaulter by any bank or financial institution or Other lender;

(c) The term loans were applied for the purpose for which the loans were obtained;

(d) On an overall examination of the financial statement of the company, the funds raised on short term basis have, prima facie, not been used during the year for long term purposes by the Company;

(e) On an overall examination of the financial statement of the company, the Company has not taken any funds from any entity or person on account of or to meet the obligations of its subsidiaries, associates or joint ventures.

(f) The Company has not raised loans during the year on the pledge of securities held in its subsidiaries, joint ventures or associate companies.

x) (a) The Company has not raised moneys by way of initial public offer or further public offer (including debt instruments) during the year. Hence, reporting under clause 3(x)(a) of the Order is not applicable.

(b) During the year, the Company has not made any preferential allotment or private placement of shares or convertible debentures (fully or partly or optionally). Hence, reporting under clause 3 (x)(b) of the Order is not applicable.

xi) (a) No fraud by the Company and no material fraud on the Company has been noticed or reported during the year. However, certain instances of customer frauds on the Company have been reported during the year. As informed, these primarily relate to fraudulent usage of credit cards issued by the Company. During the financial year 2022-23, the total amount involved in such frauds was 0.69 Crores and the recovery against this amount (pertaining to current year as well as the previous years) is 0.52 Crore.

During the year, no employee fraud has been committed.

(b) No report under section (12) of section 143 of the Companies Act has been filed in Form ADT4 as prescribed under rule 13 of the Companies (Audit and Auditors) Rules, 2014 with the Central Government, during the year and upto the date of this report.

(c) Whistle blower complaints have been considered by us during the year (and up to the date of this report), while determining the nature, timing and extent of our audit procedures.

xii) The Company is not a Nidhi company and hence reporting under clause 3(xii) of the Order is not applicable.

xiii) In our opinion, the company is in compliance with sections 177 and 188 of Companies Act, with respect to applicable transactions with the related parties and the details of related party transactions have been disclosed in the financial statements as required by the applicable Indian Accounting Standards.

xiv) (a) In our opinion, the Company has an adequate internal

audit system commensurate with the size and the nature of its business.

(b) We have considered, the internal audit reports for the year under audit, issued to the Company during the year and till date, in determining the nature, timing and extent of our audit procedures.

xv) In our opinion during the year the Company has not entered into non-cash transactions with Directors or persons connected with its directors and hence provisions of section 192 of the Companies Act, 2013 are not applicable to the company.

xvi) (a) The Company is a Non-Deposit accepting Systemically

Important Non-Banking Financial Company (NBFC- ND-SI) registered with Reserve Bank of India (RBI) vide Registration Number 14.01328 under section 45 IA of the RBI Act, 1934.

(b) The Company has not conducted any Non-Banking Financial activities without a valid Certificate of Registration (COR) from the Reserve Bank of India as per the Reserve Bank of India Act, 1934.

(c) The Company is not a Core Investment Company (CIC) as defined in the regulations made by the Reserve Bank of India. Hence, reporting under clause 3(xvi)(c) and (d) of the Order is not applicable.

xvii) The Company has not incurred cash losses during the financial year covered by our audit and the immediately preceding financial year.

xviii) There has been no resignation of the statutory auditors of the Company during the year.

xix) On the basis of the financial ratios, ageing and expected dates of realization of financial assets and payment of financial liabilities, other information accompanying the financial statements and our knowledge of the Board of Directors and Management plans and based on our examination of the evidence supporting the assumptions, nothing has come to our attention, which causes us to believe that any material uncertainty exists as on date of audit report indicating that company is not capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the Balance Sheet date. We, however, state that this is not an assurance as to the future viability of the Company. We further state that our reporting is based on the facts up to the date of the audit report and we neither give any guarantee nor any assurance that all liabilities falling due

within a period of one year from the Balance Sheet date, will get discharged by the Company as and when they fall due.

xx) (a) There are no unspent amounts towards Corporate

Social Responsibilities (CSR) on other than ongoing projects requiring a transfer to a Fund specified in Schedule VII to the Companies Act in compliance with second proviso to sub-section (5) of Section 135 of the said Act. Hence, reporting under clause 3(xx)(a) of the Order is not applicable.

(b) I n respect of ongoing projects, the Company has transferred unspent Corporate Social Responsibility (CSR) amount to a Special account within a period of 30 days from the end of the financial year in compliance with the provision of sub-section (6) of section 135 of the Companies Act, 2013.

xxi) The reporting under clause (xxi) is not applicable in respect of audit of standalone financial statements of a Company. Hence, reporting under clause 3(xxi) of the Order is not applicable.

Annexure "2" to Independent Auditors Report

(Referred to in Paragraph 2 under ‘Report on Other Legal and Regulatory Requirement of our Report to the Members of SBI Cards and Payment Services Limited of even date)

Report on Directions and Sub-directions issued by the Comptroller and Auditor General of India under section 143(5) of Companies Act, 2013 on accounts of SBI Cards and Payment Services Limited for the year ended March 31, 2023.

Directions for the year 2022-23

Sl. No.	Particulars	Compliance of Directors
I	Whether the Company has system in place to process all the accounting transactions through IT systems? If yes, the implications of processing of accounting transactions outside IT system on the integrity of the accounts along with the financial implications, if any, may be stated.	The Company has an integrated system in place to process all the accounting transactions through its implemented IT systems. Based on the audit procedures carried out by us and based on the information and explanations given to us, we have not come across any instance having significant implications on the integrity of accounts or any significant financial impact.
II	Whether there is any restructuring of an existing loan or cases of waiver/ write off of debts/loans/interest etc. made by a lender to the company due to the companys inability to repay the loan? If yes, the financial impact may be stated. Whether such cases are properly accounted for? (In case, lender is a government company, then this direction is also applicable for statutory auditor of lender company)	There are no such cases in the current financial year.
III	Whether funds (grants/subsidy etc.) received/receivable for specific schemes from central/ state Government of its agencies were properly accounted for/ utilized as per its term and conditions? List the cases of deviation.	Based on our examination of relevant records of the Company and the information and explanations received from the Management, the Company did not receive any funds (grants/subsidy etc.) for specific schemes from central/ state Government or its agencies.

Sub-Directions under section 143(5) of Companies Act, 2013 for the year ended March 31, 2023

1.	Investments
	Whether the titles of ownership in respect of CGS/ SGS/ Bonds/ Debentures etc. Are available in physical/dmat form and these, in aggregate, agree with the respective amounts shown in the Companys books of accounts? If not, details may be stated.		The Investments of the Company as on March 31, 2023 are as under:
			1. 1001 Shares Invested in SBI Foundation, allotted on January, 2017. These shares are in dmat form and the amount of investment is in agreement with amount shown in Companys books of accounts.
			2. 112,996 shares invested in Online PSB Loans Limited (formerly known as Capita World Platform Pvt. Ltd.) in July, 2018. These shares are in dmat form and the investment is in agreement with Companys books of accounts.
			3. During the year, the Company has invested in Government Securities and T-Bills. These securities are in dmat form with Bank of Baroda. As on March 31, 2023, Government Securities having face value of 1,530 Crores and T-Bills having face value of 780 Crores have been invested and are in agreement with Companys books of accounts.
			4. The company had investments in liquid/overnight schemes of Mutual Funds for short duration, which were redeemed during the year. These transactions are supported by statements.
2.	Loans
	In respect of provisioning requirement of all restructured, rescheduled, renegotiated loan whether a system of periodical assessment of realizable value of securities available against all such loans is in place and adequate provision has been created during the year? Any deficiencies in this regard, if any, may be suitably commented upon along with financial impact.		The Company offers restructuring of the outstanding advances in equitable monthly instalments to customers, who have shown willingness to pay; but are unable to make the required payment on account of financial stress. All such advances are classified as Stage 3 assets. As per the Companys policy, adequate provision is created on such assets as per ECL computation against the total outstanding of such advances. As on March 31,2023, total outstanding of such restructured advances stands at 0.48 Crores against which a provision of 0.30 Crores has been made in the books of accounts.
3. Whether the security control for digital payment products and services are in compliance with the directions of RBI for Digital Payment Security Control dated 18th February 2021.		The RBI Master Direction on Digital Payment Security Controls dated February 18, 2021, has provided necessary guidelines (69 General Controls as defined in Para 4 to Para 73 of the said Master Direction) for the Regulated Entities (REs) to set up a robust governance structure and implement common minimum standards of security controls for digital payment products and services.
		The Company is compliant in respect of directions (General Controls) contained at Paragraphs 4 to 73 except for Paragraphs 8, 15, 24, 25, 26, 42, 62 and 67 as below:
		1. In respect of General Control specified in Paragraph 8, the Company has represented that their core digital payment applications, namely the transaction authorization system (Vision+), transaction fraud monitoring system (Falcon), multifactor authentication system (WIBMO) are PCI-DSS compliant and certified. Furthermore, they are working towards attaining PCI-DSS compliance certification for the remaining auxiliary/ supplementary systems which is expected to be completed by June 2023.
		2. In respect of General Control specified in Paragraph 15, regarding implementation of Web Application Firewalls (WAF) solution and DDoS mitigation technique. It is noted that WAF has been on- boarded. However, DDOS mitigation technique for SBIC mobile app is expected to be implemented by October 2023.
		3. In respect of General Control specified in Paragraph 24, regarding security testing including review of source code, vulnerability assessment (VA) and penetration testing (PT) of digital payment application. The company is expecting to implement this control by July 2023.
		4. In respect of General Control specified in Paragraph 25, regarding running automated VA scanning tools. The company is expected to implement this control by July 2023.
		5. In respect of General Control specified in Paragraph 26, regarding identified vulnerabilities to be fixed in a time bound manner. The company is expecting to remediate the same by June 2023.
		6. In respect of General Control specified in Paragraph 42, regarding usage guidelines & training materials for end users within digital payment applications at the time of on-boarding. The company is working towards updating usage guidelines being added in 8 vernacular languages on the pre-login section of website by April 2023.
		7. In respect of General Control specified in Paragraph 62, regarding mobile application requiring re- authentication whenever device and application remains unused and able to identify new network connections or connection on unsecured networks. The company has already implemented controls regarding session timeout for mobile application and is expected to implement controls regarding connections from unsecured network by May 2023.
		8. In respect of General Control specified in Paragraph 67, regarding payment card standards (over and above PCI-DSS and PA-DSS6) as per payment card industry (PCI) prescriptions. The company is expected to implement these controls by June 2023.
		Further General Controls specified in Paragraphs 54, 68, 69 and 71 are not applicable to the Company.

Annexure "3" to Independent Auditors Report

(Referred to in paragraph 3(f) under ‘Report on Other Legal and Regulatory Requirements section of our report to the members of SBI Cards and Payment Services Limited of even date)

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

We have audited the internal financial controls with reference to financial statements of SBI Cards and Payment Services Limited (the "Company") as of March 31, 2023 in conjunction with our audit of the financial statements of the Company for the year ended on that date.

MANAGEMENTS RESPONSIBILITY FOR INTERNAL FINANCIAL CONTROLS

The Companys management is responsible for establishing and maintaining internal financial controls with reference to financial statements based on the internal control over financial reporting criteria established by the Company 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 companys 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 Act.

AUDITORS RESPONSIBILITY

Our responsibility is to express an opinion on the Companys internal financial controls with reference to financial statements based on our audit. We conducted our audit in accordance with the Guidance Note and the Standards on Auditing, issued by the ICAI and deemed to be prescribed under section 143 (10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. 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 Companys internal financial controls system with reference to financial statements.

MEANING OF INTERNAL FINANCIAL CONTROLS OVER FINANCIAL REPORTING

A companys 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. A companys 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 company; (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 company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys 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, to the best of our information and according to the explanations given to us, the Company 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 31,2023, based on the internal control with reference to financial statements criteria established by the Company considering the essential components of internal control stated in the Guidance Note issued by the ICAI.