south indian bank ltd share price Auditors report

To the Members of The South Indian Bank Limited

REPORT ON THE AUDIT OF THE STANDALONE FINANCIAL STATEMENTS

Opinion

We have audited the standalone financial statements of The South Indian Bank Limited (the Bank), which comprise the Balance Sheet as at March 31, 2023, the Profit and Loss Account, the Cash Flow Statement for the year then ended, and notes to the standalone financial statements, including a summary of significant accounting policies and other explanatory information.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Banking Regulation Act, 1949 as well as the Companies Act, 2013 (the Act) and the circulars and guidelines issued by the Reserve Bank of India ("RBI"), in the manner so required for banking companies and give a true and fair view in conformity with accounting principles generally accepted in India, including the Accounting Standards prescribed under Section 133 of the Act, read with rules thereunder, of the state of affairs of the Bank as at March 31, 2023, and its profit and its cash flows for the year ended on that date.

Basis for Opinion

We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the

Act. Our responsibilities under those SAs are further described in the Auditors Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Bank in accordance with the "Code of Ethics" issued by the Institute of Chartered Accountants of India together with the ethical requirements that are relevant to our audit of the Standalone Financial Statements under the provisions of the Act, 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 audit opinion on the standalone financial statements.

Key Audit Matters

Key Audit Matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements for the financial year ended March 31, 2023. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the standalone financial statements. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and results of our audit procedures, including the procedures performed to address the matters below, provide the basis in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters prescribed below to be the key audit matters:

	Key Audit Matters	How our audit addressed the Key Audit Matters
(i)	Classification of Advances, identification of non-performing advances, Income Recognition, and provisioning on Advances (Refer Schedule 9, Note 3 of Schedule 17 and Note 4 of Schedule 18A to the standalone financial statements)
	Advances include Bills purchased and discounted, Cash credits, Overdrafts, Loans repayable on demand and Term loans. These are further categorized as secured by Tangible assets (including advances against Book Debts), covered by Bank/Government Guarantees and Unsecured advances;	Our audit approach / procedures included the following:
	RBI prescribes the prudential norms for Income Recognition, Asset Classification and Provisioning of non-performing assets (including circulars in relation to COVID-19 Regulatory Package - Asset Classification and Provisioning) (IRACP Norms) and prescribes the minimum provision required for such assets.	- Understanding and considering the Banks accounting policies for NPA identification and provisioning and assessing compliance with the prudential norms prescribed by the RBI (IRACP Norms) including the additional provisions made on advances and additional provisions and asset classification benefit extended on restructured advances under RBIs COVID-19 Regulatory Package.
	The identification of performing and non-performing advances (including advances restructured accounts under applicable IRACP Norms) involves establishment of proper systems, controls mechanism, and the bank is required to apply significant degree of judgement to identify and determine the amount of provision required against each Non-Performing Asset (NPA) applying both quantitative as well as qualitative factors prescribed by the regulations. The risk of identification of NPAs is affected by factors like stress and liquidity concerns in certain sectors.	- Understanding, evaluation and testing the design and operating effectiveness of key controls (including application controls for system driven identification of NPAs) over approval, recording, monitoring and recovery of loans, monitoring overdue / stressed accounts, identification of NPA, provision for NPA, valuation of security and collateral and identification and provisioning of impaired accounts based on the extant guidelines on IRACP laid down by the RBI. Further obtained an understanding of the contingency provision carried by the Bank and verified the underlying assumptions used by the Bank for such estimate.
	The provision on NPA is estimated based on ageing and classification of NPAs, recovery estimates, nature of loan product, value of security and other qualitative factors and is subject to the minimum provisioning norms specified by RBI and approved policy of the Bank in this regard.	- Testing of application controls on sample basis including testing of automated and manual controls, reports and system reconciliations, in relation to income recognition, asset classification, provisioning pertaining to advances and investments and compliances of other regulatory guidelines issued by the RBI.
	The Management of the Bank also makes an assessment of the impact on borrowers accounts which were restructured as per RBI Circulars issued to provide relief to the borrowers.	- Testing on sample basis the accuracy of the data input in the system for income recognition, classification into performing and nonperforming Advances and provisioning in accordance with the IRACP norms.
	Significant judgements and estimates for NPA identification and provisioning could give rise to material misstatements on:	- Selected the sample borrowers based on quantitative and qualitative risk factors for their assessment of appropriate classification as NPA including computation of overdue ageing to assess its correct classification and provision amount as per extant IRACP norms and the Bank policy.
	- Completeness and timing of recognition of nonperforming assets in accordance with criteria as per IRACP norms.	- Performed other procedures including substantive audit procedures covering the identification of NPAs by the Bank. These procedures included:
	- Measurement of the provision for nonperforming assets based on loan exposure, ageing and classification of the loan, realizable value of security;	(a) Considering testing of the exception reports generated from the application software and the systems where the advances have been recorded;
	- Appropriate reversal of unrealized income on the NPAs	(b) Considering the accounts reported by the Bank and other banks as Special Mention Accounts ("SMA") in RBIs central repository of information on large credits (CRILC) to identify stress;
	Since the identification of NPAs and provisioning of advances (including additional provisions arising out of COVID-19 pandemic) requires proper mechanism and significant level of estimation and given its significance to the overall audit, including possible observation by RBI which could result into disclosure in the financial statements, we have ascertained identification of NPAs and provisioning against such NPAs as a key audit matter.	(c) Reviewing account statements, appraisal note, audited financial statements, drawing power calculation, security and other related documents and information of the sample borrowers selected based on quantitative and qualitative risk factors;
		(d) Reading of minutes of management committee and credit committee meetings and performing inquiries with the credit and risk departments to ascertain if there were indicators of stress or an occurrence of an event of default in a loan account or any product;
		(e) Considering Internal Audit, Systems Audit, Credit Audit, Concurrent Audit, stock and receivable audit and credit appraisal as per the policies and procedures of the Bank;
		(f) Considering the RBI Annual Financial Inspection report on the Bank, the banks response to the observations and other communication with RBI during the year;
		(g) Examination of advances including stressed advances on a sample basis with respect to compliance with the RBI Master Circulars / Guidelines.
		- For NPAs identified, we, based on our sample factors including stressed sectors and account materiality, tested the asset classification dates, value of available security and provisioning as per IRACP norms. We recomputed the provision for NPA after considering the key input factors and compared our measurement outcome to that of system-generated reports and statements prepared by management.

 

	Key Audit Matters	How our audit addressed the Key Audit Matters
(ii)	Classification and Valuation of Investments, Identification of and provisioning for Non-Performing Investments (Refer Schedule 8, Note 2 of Schedule 17 and Note 3 of Schedule 18A to the standalone financial statements)
	Investments include investments made by the Bank in various Government Securities, Bonds, Debentures, Shares, Security receipts and other approved securities. These are governed by the circulars and directives of the RBI. These directions of RBI, inter-alia, cover valuation of investments, classification of investments, identification of non-performing investments (NPI), nonrecognition of income and provisioning against NPI.	Our audit approach/procedures included the following:
	Investments are classified into Held for Trading (HFT), Available for Sale (AFS) and Held to Maturity (HTM) categories at the time of purchase. Investments, which the Bank intends to hold till maturity are classified as HTM investments.	- We evaluated and understood the Banks internal control system to comply with relevant RBI guidelines regarding valuation, classification, identification of NPIs and provisioning/depreciation related to investments;
	Investments classified as HTM are carried at amortised cost. Where in the opinion of management, a diminution, other than temporary, in the value of investments has taken place, appropriate provisions are made.	- We assessed and evaluated the process adopted for collection of information from various sources for determining market value of these investments;
	Investments classified as AFS and HFT are marked- to-market on a periodic basis as per the relevant RBI guidelines.	- For the selected sample of investments in hand, we tested accuracy and compliance with the RBI Master Circulars and directions by re-performing valuation for each category of the security. Samples were selected after ensuring that all the categories of investments (based on nature of security) were covered in the sample;
	The valuation of each category (type) of the aforesaid securities is to be done as per the method prescribed in circulars and directives issued by the RBI which involves collection of data/information from various sources such as FBIL /FIMMDA rates, rates quoted on BSE/NSE, financial statements of unlisted companies etc.	- We assessed and evaluated the process of identification of NPIs and corresponding reversal of income and creation of provision;
	Considering the complexities and extent of judgement involved in the valuation, volume of transactions, investments on hand and degree of regulatory focus, this has been determined as a Key Audit Matter.	- We carried out substantive audit procedures to recompute independently the provision to be maintained 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;
	Accordingly, our audit was focused on valuation of investments, classification, identification of NPI and provisioning related to investments.	- We tested the mapping of investments between the Investment application software and the financial statement preparation software to ensure compliance with the presentation and disclosure requirements as per the aforesaid RBI Circular/directions.

 

(iii)	Key Audit Matters Assessment of Provision for Taxation (including Defer 3 of Schedule 18B to the standalone financial stateme	How our audit addressed the Key Audit Matters red Tax Assets) (Refer Note 14 of Schedule 17 and Note nts)
	This matter has been identified as a Key Audit Matter due to the significant level of management judgement required in the estimation of provision for income taxes including any write back of provisions, due to the following factors	Our key audit procedures includes:
	a. The Banks assessment of provision is based on facts of matter, existence of multiple uncertain tax positions leading to multiple disputes / litigations	a. Obtaining an understanding of the Banks process and respective internal controls for determining tax liabilities, tax provisions, deferred tax assets and contingent liabilities in respect of the major litigations in order to design our audit procedures that are appropriate in the circumstances;
	b. Provision for tax involves interpretation of various rules and law. It also involves consideration of the complex issues in on-going disputes and disclosures of related contingencies.	b. Analyzing the facts of subject matter of each dispute, issue and matter under consideration and judgements/ interpretation of law involved.
	Further, significant judgements are also involved in Assessment of Liability, Adequacy of provisions and Adequacy of disclosures for measuring such obligations.	c. Understanding the current status of the litigations/ tax assessments in respect of each matter for different years;
	Recognition of deferred tax assets involves the assessment of its recoverability within the allowed time frame requiring significant estimate of the financial projections which are approved by the Banks Board of Directors, availability of sufficient taxable income in the future and also involving significant judgements in the interpretation of tax regulations and tax positions adopted by the Bank. Considering the judgement involved in determining the recovery of deferred tax assets, the matter is considered a Key Audit Matter	d. Discussion with appropriate senior management personnel, independently assessed managements estimate of the possible outcome of the disputed cases; and evaluated the Managements underlying key assumptions in estimating the tax provisions.
		e. Considering legal precedence and other rulings in evaluating managements position on these uncertain tax positions, the provisions made, and/ or write back of the provisions
		f. Review of the reconciliation of the underlying tax balances to supporting documentation, including correspondence with tax authorities.
		g. Obtaining the components of deferred tax assets and estimates of taxable incomes for future periods as approved by the Board of Directors.
		h. Evaluating management assessment for estimating availability of future taxable profits for recognition of deferred tax assets.
		i. Assessing the period over which the deferred tax assets would be recovered against future taxable income.
		j. Verifying the disclosures related to significant litigations and taxation matters in the standalone financial statements

 

	Key Audit Matters	How our audit addressed the Key Audit Matters
(iv)	Litigation, Claims and Contingent Liabilities (Refer Schedule 12, Note 15 of Schedule 17 and note 14 of Schedule 18B to the standalone financial statements)
	Assessment of provisions and Contingent liabilities in respect of certain litigations including Indirect Taxes, various claims filed by other parties not acknowledged as debt and other matters under dispute which involve significant judgement to determine the possible outcome of these disputes.	Our audit approach/procedures included the following:
	There is a high level of judgement required in estimating the level of provisioning for the above. The Banks assessment is supported by the facts of matter, their own judgement, interpretation and analysis of the complex issues under dispute, past experience and orders of the judicial authorities on identical issues, and advice from legal and independent tax consultants wherever necessary. Accordingly, unexpected adverse outcomes may significantly impact the Banks reported profit and state of affairs presented in the Balance Sheet.	- Testing the design and operating effectiveness of the Banks key controls over the estimation, monitoring and disclosure of provisions and contingent liabilities
	We determined the above area as a Key Audit Matter in view of associated uncertainty relating to the outcome of these matters which requires application of judgement in interpretation of law. Accordingly, our audit was focused on analyzing the facts of subject matter of each dispute, issue and matter under consideration and judgements/ interpretation of law involved.	- Obtaining an understanding of internal controls in relation to creation of provisions and Contingent liabilities in respect of the major litigations before various judicial forums including Indirect Taxes, various claims filed by other parties not acknowledged as debts relevant to audit in order to design our audit procedures that are appropriate in the circumstances;
		- Understanding the current status of the litigations/ tax assessments in respect of each matter for different years;
		- Examining recent orders/ communications received from various tax authorities/ judicial forums, judicial pronouncements and follow up action thereon;
		- Evaluating the merit of the issues and subject matter under consideration with reference to the grounds presented therein and available independent legal/ tax advice including opinion of our internal legal/tax experts;
		- Review and analysis of evaluation of the contentions of the Bank through discussions, collections of details of the subject matter under consideration, the likely outcome and consequent potential outflows on those issues; and
		- Verification of disclosures related to significant litigations and indirect taxation matters.

 

	Key Audit Matters	How our audit addressed the Key Audit Matters
(v)	Information Technology (IT) Systems and Internal Controls for financial reporting
	IT systems and controls followed by the bank are material from a financial reporting perspective, due to the pervasive nature and complexity of the IT environment, the large volume of transactions processed in numerous locations daily and the reliance on automated and IT dependent manual controls. Therefore on account of these factors, there exists a risk that gaps in the IT control environment could result in the financial accounting and reporting records being materially misstated.	- Obtaining a comprehensive understanding of IT applications landscape implemented at the Bank, followed by process understanding, mapping of applications to the processes related to financial reporting and understanding financial risks posed by people-process and technology.
	Our areas of audit focus included user access management, developer access to the production environment and changes to the IT environment. Appropriate IT general controls and application controls are required to ensure that such IT systems are able to process the data, as required, completely, accurately, and consistently for reliable financial reporting.	- We tested the design and operating effectiveness of the Banks IT access controls over the information systems that are critical to financial reporting. We tested IT general controls (logical access, changes management and aspects of IT operational controls).
	In addition, there are increasing challenges to protect the integrity of the Banks systems and data since cyber security has become a more significant risk in recent periods. These are key to ensure that IT dependent and application-based controls are operating effectively.	- This included testing that requests for access to systems were appropriately logged, reviewed and authorized. We tested the Banks periodic review of access rights. We inspected requests of changes to systems for approval and authorization. We considered the control environment relating to various interfaces, configuration and other application layer controls identified as key to our audit.
	Due to the pervasive nature and complexity of the IT environment as well as its importance in relation to accurate and timely financial reporting, we have ascertained IT systems and controls as a Key Audit Matter.	- In addition to the above, we tested the design and operating effectiveness of certain automated controls that were considered as key internal system controls over financial reporting using various techniques such as inquiry, review of documentation / record / reports, observation, and re-performance.
		- Where deficiencies and mismatches were identified, we tested compensating controls or performed alternate procedures.
		- In addition, we understood where relevant, changes were made to the IT landscape during the audit period and tested those changes that had a significant impact on financial reporting.
		- In addition, we relied on management representation which included IS audit, and also the testing of the automated system driven controls conducted by the Management.

Information other than the standalone Financial Statements and Auditors Report Thereon

The Banks Management and Board of Directors are responsible for the other information. The other information comprises the information included in the Management Discussion and Analysis, Boards report including Annexures to that Boards Report, Business Responsibility and Sustainability Report, Corporate Governance and Shareholders Information, but does not include the standalone financial statements, consolidated financial statements and our auditors report thereon, the Pillar III disclosures under Basel III Capital Regulation, Leverage Ratio, Liquidity Coverage Ratio and Net Stable Funding Ratio. The other information is expected to be made available to us after the date of this auditors report.

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

In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements, or our knowledge obtained in the audit or otherwise appears to be materially misstated.

When we read the other information, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

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

The Banks Board of Directors and management are responsible for the matters stated in section 134(5) of the Act, with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Bank in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 in so far as they apply to the Bank and provisions of Section 29 of the Banking Regulation Act, 1949 and circulars and guidelines issued by RBI from time to time(the "RBI Guidelines"). This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding of the assets of the Bank and for preventing and detecting frauds and other

irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, Management and Board of Directors are 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 and board of directors either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

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

Auditors Responsibilities for the audit of the Standalone Financial Statements

Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

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

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Bank has adequate internal financial controls system in place and the operating effectiveness of such controls;

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management and board of directors;

• Conclude on the appropriateness of managements and board of directors use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Banks ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors report. However, future events or conditions may cause the Bank to cease to continue as a going concern;

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

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

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements for the financial year ended March 31, 2023 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. 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.

2. As required by sub-section (3) of section 30 of the Banking Regulation Act, 1949, 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 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; and

(c) The key operations and functions of the Bank are administered, managed and controlled by regional offices and Head Office through centralised systems and processes with automation of critical applications integrated to the software of Core Banking System, and therefore the audit was also carried out centrally based on such centralised systems and processes with automation of critical applications by review of the relevant records, documents and data required for the purposes of our audit available centrally through such applications/ platform. Further, we visited 41 major branches to examine the operations and functioning of the branch and review the records/registers/ documents maintained at such branches as part of our audit processes and procedures.

(d) the profit and loss account shows a true balance profit for the year then ended.

3. 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 to the best of our

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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 Standalone Balance Sheet, the Standalone Profit and Loss Account, the Standalone Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014, to the extent they are not inconsistent with the accounting policies prescribed by RBI;

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

(f) With respect to the adequacy of the internal financial controls over financial reporting of the Bank with reference to these standalone financial statements and the operating effectiveness of such controls, refer to our separate Report in "Annexure A" to this report;

(g) With respect to the matters to be included in the Auditors Report under Section 197(16) of the Act:

The Bank is a banking company as defined under Banking Regulation Act, 1949. Accordingly, the requirements prescribed under Section 197 of the Companies Act, 2013 do not apply by virtue of Section 35B(2A) of the Banking Regulation Act, 1949, and;

(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, as amended, in our opinion and to the best of our information and according to the explanations given to us

i. The Bank has disclosed the impact of pending litigations on its financial position in its standalone financial statements - as

per details furnished in Schedule 12 and Sl.no 1 of Note 14 under Schedule 18B to the standalone financial statements;

ii. The Bank has made provision, as required under the applicable laws or accounting standards, for material foreseeable losses, if any, on long term contracts including derivative contracts - as per details furnished in Note 15 under Schedule 18B to the standalone financial statements; and

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

v. (a) The management has represented that, to the best of its knowledge and belief, other than as disclosed in Note 20 of Schedule 18B of the notes to the standalone financial statements, no funds have been advanced or loaned or invested (either from borrowed funds or share premium or any other sources or kind of funds) by the Bank to or in any other persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Bank ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

(b) Further, the management has represented, that, to the best of its knowledge and belief, other than as disclosed in in Note 20 of Schedule 18B of the notes to the standalone financial statements, no funds have been received by the Bank from any persons or entities, including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Bank shall, 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 and

(c) Based on such audit procedures performed, that were considered reasonable and appropriate by us in the circumstances and according to

the information and explanations provided to us by the Management in this regard, nothing has come to our notice that has caused us to believe that the management representations made under subclause (a) and (b) contain any material misstatement.

v. The Board of Directors, in their meeting held on May 11, 2023 have proposed final dividend of Rs. 0.30 per equity share (30%) for the year ended March 31, 2023 amounting to 62.78 Crores. The proposal is subject to the approval of shareholders at the Annual General Meeting as stated in note 21 of Schedule 18B to the Standalone Financial Statements.

vi. Provisions of the Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books of accounts using accounting software which has features of recording audit trail (Edit log) facility are applicable to the Bank with effect from April 1, 2023,

and accordingly, the requirement of reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31, 2023.

Other Matter

The audit of standalone financial statements of the Bank for the year ended March 31, 2022 was conducted by CNK & Associates LLP, Chartered Accountants and Varma and Varma, Chartered Accountants, the joint statutory auditors of the Bank, who have expressed an unmodified opinion on those financial statements. Accordingly, we, K Venkatachalam Aiyer & Co. Chartered Accountants, do not express any opinion on the figures reported in the standalone financial statements for the year ended / as at March 31, 2022.

Our opinion on the standalone financial statement is not modified in respect of the above matter.

ANNEXURE A TO THE INDEPENDENT AUDITORS REPORT OF EVEN DATE ON THE STANDALONE FINANCIAL STATEMENTS OF THE SOUTH INDIAN BANK LIMITED FOR THE YEAR ENDED MARCH 31, 2023

[Referred to paragraph 3(f) under Report on Other Legal Regulatory requirements in the Independent Auditors Report on the Internal Financial Controls Over Financial Reporting with reference to standalone financial statements under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 ("the Act")

We have audited the Internal Financial Controls over Financial Reporting with reference to standalone financial statements of The South Indian Bank Limited (the Bank) as at March 31, 2023, 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 over Financial Reporting

The Banks Management and Board of Directors are 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 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 Act.

Auditors Responsibility

Our responsibility is to express an opinion on the Banks internal financial controls with reference to Standalone financial statements based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the Guidance Note) and the Standards on Auditing as specified 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 over Financial Reporting were established

and maintained and whether 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 with reference to the financial statements and their operating effectiveness.

Our audit of internal financial controls with reference to Standalone financial statements 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 control based on the assessed risk. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Banks internal financial controls with reference to Standalone financial statements.

Meaning of Internal Financial Controls Over Financial Reporting

A banks internal financial control with reference to Standalone financial statements is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of standalone financial statements for external purposes in accordance with generally accepted accounting principles. The Banks internal financial control with reference to Standalone financial statements includes those policies and procedures that:

1. pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the bank;

2. provide reasonable assurance that transactions are recorded as necessary to permit preparation of standalone 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 Standalone financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Because of the inherent limitations of internal financial controls with reference to Standalone 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 Standalone financial statements

to future periods are subject to the risk that the internal financial control with reference to Standalone financial statements become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion, the Bank has maintained, in all material respects, an adequate internal financial controls system with reference to the Standalone financial statements and such internal financial controls with reference to the financial statements were operating effectively as at March 31, 2023, 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.