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Auditor Report of IDFC First Bank Ltd.

Mar 31, 2023

To the Members of IDFC FIRST Bank Limited Report on the Audit of the Standalone Financial Statements Opinion

We have audited the accompanying standalone financial statements of IDFC FIRST Bank Limited (the âBank''), 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, the circulars and guidelines issued by the Reserve Bank of India (âRBI'') from time to time, as applicable (âRBI Guidelines'') and the Companies Act, 2013 (âthe Act'') in the manner so required for banking companies and give a true and fair view in conformity with the Accounting Standards prescribed under section 133 of the Act read with Companies (Accounting Standards) Rules, 2021 and other accounting principles generally accepted in India, 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 in accordance with the Standards on Auditing (âSAs'') specified under section 143(10) of the Act. Our responsibilities under those SAs are further described in the Auditor''s 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 (âICAI'') 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 obtained by us, is sufficient and appropriate to provide a basis for our opinion.

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 year ended March 31, 2023. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

We have determined the matters described below to be the key audit matters to be communicated in our report.

Key audit matters	How the key audit matters were addressed in our audit
Identification of non-performing advances (NPA) and provisions on advances Total Advances (net of provisions) as at March 31, 2023: '' 1,51,795 crore Provision for NPA, Provision for specific assets and Restructuring provision: '' 3,035.17 crore as at March 31, 2023 (Refer to Schedule 9 - Advances, Accounting Policy 17.02 - Advances, Note 18.12 - Assets Quality).
The Reserve Bank of India (âRBIâ) guidelines on Prudential Norms on Income recognition, asset classification and provisioning pertaining to Advances (âIRACâ) and other circulars and directives issued by the RBI from time to time pertaining to Advances, prescribes the norms for identification and classification of performing and non-performing advances (âNPAâ) and the minimum provisions required for such advances. The Bank is required to have a Board approved policy in place for NPA identification and classification of advances and provisioning thereon. The Bank is also expected to apply its judgement to determine the identification and provisioning required against NPA by applying quantitative as well as qualitative factors. The risk of identification of NPAs is affected by factors like stress and liquidity concerns in certain sectors. The provision on NPA is estimated based on its 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 as per IRAC and Board approved policy in this regard. Additionally, the Bank also makes provisions on standard accounts where it estimates a possibility of eventual economic loss or prolonged delay in recovery which may lead to eventual economic loss i.e. Identified Standard Advances (ISA). Such advances are stated net of such provisions. Provisions in respect of restructured advances are	Our audit procedures in respect of this area included, but not limited to: Process understanding and control testing- â¢ Obtained an understanding of management''s process, systems/ applications and controls implemented in relation to advances, identification of NPA, restructured advances, identified standard advances (ISA) and provisions thereon. â¢ Tested system/application controls including automated process, controls and system-based reconciliations pertains to the advances, NPA identification and provision on advances. â¢ Evaluated and validated the design, implementation and operating effectiveness of key internal financial controls pertaining to the identification of NPA accounts and identified standard advances, borrower''s classification of NPA, computation of provisions on advances (including restructured and ISA) as per IRAC norms and Board approved policy. â¢ Verified the governance process pertaining to the reporting of NPA and provisioning thereon, to the Audit Committee and Board of Directors. â¢ Verified controls over the adequacy of disclosures made in the financial statements. Performed other substantive procedures including the following, but not limited to: â¢ Selected samples for testing, based on quantitative and qualitative risk factors. For the selected samples, tested accuracy of days past due computation, assets classification at borrower level and provisioning as per IRAC norms and Board approved policy.
	â¢ Verified selected samples based on quantitative and qualitative factors pertaining to the large sized corporate borrowers to test their conduct, security evaluation and its value, impairment indicators basis their financial strength or external factors if any.
made based on management''s assessment of the degree of impairment of the advances subject to
the minimum provisioning levels as per IRAC and
other relevant RBI Guidelines.	â¢ Obtained and verified the accounts identified by management
	i.e. accounts forming a part of credit watchlist, by obtaining
Since the identification of NPAs and provisioning for advances require a significant level of estimation and given its significance to the overall	management''s assessment on recoverability of these exposures and evaluating the appropriateness of provisions.
audit including possible observation by RBI	â¢ Considered the accounts reported by the Bank and other Banks as
which could result into disclosure in the financial	Special Mention Accounts (âSMAâ) in RBI''s Central Repository of
statements, we have ascertained identification and provisioning for NPAs as a key audit matter.	Information on Large Credits (CRILC) to identify stressed accounts.

Key audit matters How the key audit matters were addressed in our audit
_â¢	Verified on sample basis, the accuracy of the days past due (DPD) computation of corporate advances and assessed independently as to whether those should be classified as NPA based on IRAC and Board Approved Policy.
_â¢	Inquired with the credit and risk departments to ascertain if there were indicators of stress or an occurrence of an event of default in a particular loan account or any product category which needs to be factored in classification of account as NPA.
_â¢	Discussed with the management of the Bank on sectors where there is perceived credit risk and the steps taken by management to mitigate the risks pertaining to identified stress sectors.
_â¢	Selected and tested samples for accounts which are restructured as per RBI Master Circular - Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances; and
_â¢	Assessed the appropriateness, accuracy and adequacy of related presentation and disclosures in accordance with the applicable accounting standards, IRAC and other requirements of RBI.
Information technology
Information Technology (IT) systems and Key IT audit procedures performed included the following, but not controls limited to:
The Bank''s key financial accounting and reporting â¢	For testing the IT general controls, application controls and IT
processes are highly dependent on information	dependent manual controls, we involved IT specialists as part of
systems including automated controls in systems,	our audit. The team also assisted in testing the completeness and
such that there exists a risk that gaps in the IT	accuracy of the information produced by the Bank''s IT systems
control environment could result in the financial	where applicable.
accounting and reporting records being misstated. â¢	Obtained an understanding of IT applications implemented in the
Amongst its multiple IT systems, we scoped in	Bank and verified design and operating effectiveness of controls
systems that are key for overall financial reporting.	over user access management, change management, segregation
The Bank has also undertaken few data migration projects in the current financial year.	of duties, system interface controls, system application controls and Information Produced by entity (IPE) controls over key financial accounting and reporting systems.
Appropriate IT general controls and application
controls are required to ensure that such IT â¢	Verified key controls, on a sample basis, for data migration operating
systems are able to process the data, as required,	over the information technology in relation to financial accounting
completely, accurately and consistently for reliable	and reporting systems, user acceptance test (UAT) sign offs,
financial reporting.	incidents monitoring.
Further, IT applications have been made accessible â¢ on a remote basis.	For a selected group of key controls over financial reporting systems, performed procedures to independently determine that these controls remained unchanged during the year or were changed by
We have identified âIT systems and controls'' as a key audit matter considering the high level of	following the change management process.
automation, significant number of systems being â¢	Evaluated other areas including password policies, security
used by management and the complexity of the	configurations, controls over changes to applications and databases
IT architecture and its impact on overall financial	and controls to ensure that developers and production support did
reporting process and regulatory expectation on	not have access to change applications, the operating system or
automation.	databases in the production environment.
_â¢	Inquired for data security controls in the context of staff working from remote locations during the year.
_â¢	Verified compensating controls and performed alternate procedures, where necessary.

Information other than the Standalone Financial Statements and Auditorâs Report thereon

The Board of Directors are responsible for the other information. The other information comprises of the Bank''s Annual Report but does not include the standalone financial statements and our auditor''s report thereon. The other information is expected to be made available to us after the date of this auditor''s report.

Our opinion on the standalone financial statements does not cover the other information and we will 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 under SA 720 âThe Auditor''s responsibilities Relating to Other Information''.

Responsibilities of Management and those charged with governance for the Standalone Financial Statements

The Bank''s Board of Directors is 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, and provisions of Section 29 of the Banking Regulation Act, 1949 and the circulars and guidelines issued by the Reserve Bank of India (âRBI'') from time to time (âRBI Guidelines''). This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act, Banking Regulation Act, 1949 and RBI Guidelines 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 statement 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, the Board of Directors of the Bank is responsible for assessing the Bank''s 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 Bank or to cease operations, or has no realistic alternative but to do so.

The Board of Directors are also responsible for overseeing the Bank''s financial reporting process.

Auditorâs 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 auditor''s 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 judgement and maintain professional skepticism throughout the audit. We also:

â¢ 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.

â¢ 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 internal financial controls with reference to standalone financial statements in place and the operating effectiveness of such controls.

â¢ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

â¢ Conclude on the appropriateness of management''s 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 Bank''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s 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 auditor''s report. However, future events or conditions may cause the Bank to cease to continue as a going concern.

â¢ 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 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 year ended March 31, 2023 and are therefore, the key audit matters. We describe these matters in our auditor''s 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 matter

The standalone financial statements of the Bank for the year ended March 31, 2022, were audited by B S R & Co. LLP and M S K A & Associates, the joint statutory auditors of the Bank whose report dated April 30, 2022 expressed an unmodified opinion on those statements.

Our opinion is not modified in respect of this matter.

Report on other legal and regulatory requirements

1. The Balance Sheet and the Statement of Profit and Loss have been drawn up in accordance with the provisions of Section 29 of the Banking Regulation Act, 1949 and Section 133 of the Act and relevant rules issued thereunder.

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. since the key operations of the Bank are automated with the key applications integrated to the core banking systems, the audit is carried out centrally as all the necessary records and data required for the purposes of our audit are available therein. However, during the course of our audit we have visited 24 branches / asset centres.

3. 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 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 Bank so far as it appears from our examination of those books.

c. The Balance Sheet, the Profit and Loss Account and the 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, to the extent they are not inconsistent with the guidelines prescribed by the RBI.

e. On the basis of the written representations received from the directors of the Bank as on March 31, 2023 taken on record by the Board of Directors, none of the directors of the Bank are 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 with reference to standalone financial statements of the Bank and the operating effectiveness of such controls, refer to our separate Report in âAnnexure A''.

g. With respect to the other matters to be included in the Auditor''s Report in accordance with the requirements of Section 197(16) of the Act, as amended, the Bank is a banking company as defined under Banking Regulation Act, 1949. Accordingly, the requirements prescribed under Section 197 of the Act do not apply.

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

i. The Bank has disclosed the impact of pending litigations on its financial position in its standalone financial statements - Refer Schedule 12 and Note 18.53 to the standalone financial statements.

ii. The Bank has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts - Refer Schedule 12 and Note 18.53 to the standalone financial statements.

iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Bank -Refer Note 18.52 to the standalone financial statements.

iv. a. The Management has represented that,

to the best of its knowledge and belief, other than as disclosed in the Note 18.55 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 person(s) or entity(ies), including foreign entities (âIntermediariesâ), 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 (âUltimate Beneficiariesâ) 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, other than as disclosed in the Note 18.55 to the standalone financial statements, no funds have been received by the Bank from any person(s) or entity(ies), including foreign entities (âFunding Partiesâ), 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 (âUltimate Beneficiariesâ) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries.

c. Based on the audit procedures performed that have been considered reasonable and appropriate 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 representations under subclause (i) and (ii) of Rule 11(e) as provided under (a) and (b) above, contain any material mis-statement.

v. The Bank has neither declared nor paid any dividend during the year ended March 31, 2023.

vi. As proviso to rule 3(1) of the Companies (Accounts) Rules, 2014 is applicable for the Bank only w.e.f. April 1, 2023, reporting under this clause is not applicable during the year.

Mar 31, 2022

To the Members of IDFC FIRST Bank Limited

Report on the audit of the Standalone Financial Statements

Opinion

We have audited the standalone financial statements of IDFC FIRST Bank Limited (the âBank''), which comprise the Standalone Balance Sheet as at 31 March 2022, the Standalone Profit and Loss Account, the Standalone Cash Flow Statement for the year then ended, and notes to the standalone financial statements, including a summary of the 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'') in the manner so required for banking companies and give a true and fair view in conformity with Accounting Standards prescribed under section 133 of the Act read with Companies (Accounts) Rules, 2014 as amended and other accounting principles generally accepted in India, of the state of affairs of the Bank as at 31 March 2022, and its profit, and its cash flows for the year ended on that date.

Basis of opinion

We conducted our audit in accordance with the Standards on Auditing (âSAs'') specified under Section 143 (10) of the Act. Our responsibilities under those Standards are further described in the Auditorâs 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 (âICAIâ) 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 opinion.

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 of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter

How the matter was addressed in our audit

Provisions on advances

P/L Charge (Including provision on Non-Performing Advances (NPA), Identified Standard Advances, restructured advances, COVID provisions and Write-off): Rs. 3,635 crore for year ended 31 March 2022

Provision on Advances (Including provision on Non-Performing Advances, Identified Standard Advances and Restructured Advances): Rs. 3,087 crore as at 31 March 2022

Refer to the accounting policies in âNote 17.02 to the Standalone Financial Statements: Significant Accounting Policies -Advances", âSchedule 9 to the Standalone Financial Statements: Advances", âNote 18.12(f) to the Standalone Financial Statements: COVID-19" and âNote 18.25 to the Standalone Financial Statements: Provisions and Contingencies"

The Reserve Bank of India''s (âRBI") guidelines on Prudential Norms on Income recognition and asset classification and provisioning pertaining to Advances (âIRAC") prescribe the norms for identification and classification of non-performing advances (âNPA") and the minimum provisions required for such advances.

The Bank is required to have a Board approved policy as per IRAC guidelines for NPA identification and provisioning. The Bank is also expected to apply its judgement to determine the identification and provision required against NPA by applying quantitative as well as qualitative factors.

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. This also includes an assessment of impact of COVID-19.

Additionally, the Bank makes provisions on exposures that are not classified as NPAs, these are identified standard advances that can slip into NPAs. Advances are stated net of such provisions.

Provisions in respect of restructured advances are made based on management''s assessment of the degree of impairment of the advances subject to the minimum provisioning levels prescribed under IRAC norms.

We identified provision on non-performing advances as a key audit matter because of-

1) the management judgement involved (with respect to corporate advances) in determining the provision;

2) the dependency on the valuation of the security available on NPAs; and

3) its significance to the financial statement of the Bank.

Our key audit procedures in respect of these areas

included:

Design / controls

- Verified the design, implementation and operating effectiveness of key internal financial controls over monitoring of overdue loans (and those which became overdue subsequent to the reporting date), identification of NPA accounts, measurement of provision (including on restructured accounts), collateral valuation and assessing the reliability of management information, which includes overdue reports including management''s assessment of impact of COVID-19 on its loan portfolio.

- Evaluated the governance process and review controls over calculations of provision of non-performing advances (including restructured advances) and basis of provisioning in accordance with the Board approved policy.

- Obtained an understanding of management''s approach, systems and controls implemented in relation to NPA.

- Verified review controls over monitoring and determination of adequate level of specific provisions made in case of corporate loans.

- Verified key controls operating over the information technology in relation to NPA systems, including system change management, user access management and computer operations.

- Verified review controls over disclosures made in the financial statements.

Performed other substantive procedures including the following:

- Selected borrowers, based on quantitative and qualitative risk factors, verified their asset classification as NPA including computation of overdue ageing to assess its correct classification and provision amount (including restructured advances) as per extant IRAC norms and Bank''s policy.

- Verified a sample (based on quantitative and qualitative thresholds) of large sized corporate borrowers where impairment indicators had been identified by management by obtaining management''s assessment on recoverability of these exposures (including individual provisions calculations) and evaluating the appropriateness of impairment provisions.

Key audit matter

How the matter was addressed in our audit

- For samples selected reviewed the external collateral valuer''s report and compared the values used in management''s assessment.

- Considered the accounts reported by the Bank and other Banks as Special Mention Accounts (âSMA") in RBI''s Central Repository of Information on Large Credits (CRILC) to identify stress.

- Obtained samples of performing loans and assessed independently as to whether those should be classified as NPA.

- Performed 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 particular loan account or any product category which needed to be considered as NPA.

- Held specific discussions with the management of the Bank on sectors where there is perceived credit risk and the steps taken by management to mitigate the risks pertaining to identified sectors.

- Evaluating management''s rationale for provision on account of COVID-19.

- Assessed the appropriateness, accuracy and adequacy of related presentation and disclosures in accordance with the applicable accounting standards and requirements of RBI with respect to NPAs and restructured advances.

Assessment of the realizability of deferred tax assets Deferred tax asset (net): Rs. 1,923 crore as at 31 March 2022

Refer to the accounting policies in âNote 17.08 to the Standalone Financial Statements: Significant Accounting Policies -Income Tax" and âNote 18.24 to the Standalone Financial Statements: Deferred Tax"

Significant estimate and judgement involved

Recognition of deferred tax assets requires determination of future taxable income based on the Bank''s expectations. The assessment of realizability of deferred tax assets is based on a virtual or reasonable certainty test, depending on the composition of the deferred tax assets.

Given Bank''s past financial performance, we identified recognition of deferred tax assets as a key audit matter because of the significant management judgement and assumptions involved in estimating the future taxable income based on the income forecasts which are approved by the Bank''s Board of Directors.

Our key audit procedures included:

- Assessing the design, implementation and operating effectiveness of management''s key internal financial controls over the recognition of deferred tax assets.

- Obtained details of different components of deferred tax assets and details of estimates of taxable incomes for future periods as approved by the Board of Directors.

- Obtained confirmation whether the future forecasts were approved in the meetings of the Board of Directors.

- Evaluating management assessment for estimating availability of future taxable profits for determination of recognition of deferred tax assets.

- Evaluated management''s considerations involved in forecasting future taxable profits with a backdrop of COVID-19.

- Assessed the period over which the deferred tax assets would be recovered against future taxable income.

- Evaluated the Bank''s actual performance vis-a-vis the budgets for the current and past years and discussed with management their basis and assumptions in respect of evidence to support that there will be sufficient taxable income to absorb the deferred tax asset.

- Performed sensitivity analysis over the Bank''s expectations of the future taxable income.

Key audit matter

How the matter was addressed in our audit

Information technology

Information Technology (IT) systems and controls

The Bank''s key financial accounting and reporting processes are highly dependent on information systems including automated controls in systems, such that there exists a risk that gaps in the IT control environment could result in the financial accounting and reporting records being misstated. Amongst its multiple IT systems, we scoped in systems that are key for the overall financial reporting.

The Bank has also undertaken few data migration projects in the last financial year.

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.

Further, the prevailing COVID-19 situation has caused the required IT applications to be made accessible on a remote basis.

We have identified âIT systems and controls'' as a key audit matter because of the high level of automation, significant number of systems being used by management and the complexity of the IT architecture and its impact on financial reporting and regulatory expectation on automation.

Key IT audit procedures performed included the

following:

- For testing the IT general controls, application controls and IT dependent manual controls, we involved IT specialists as part of our audit. The team also assisted in testing the completeness and accuracy of the information produced by the Bank''s IT systems where applicable.

- Obtained an understanding of IT applications implemented in the Bank and verified design and operating effectiveness of controls over user access management, change management, segregation of duties, system interface controls, system application controls and Information Produced by entity (IPE) controls over key financial accounting and reporting systems.

- Verified key controls, on a sample basis, for data migration operating over the information technology in relation to financial accounting and reporting systems, user acceptance test (UAT) sign offs, incidents monitoring.

- For a selected group of key controls over financial and reporting systems, we independently performed procedures to determine that these controls remained unchanged during the year or were changed following the standard change management process.

- Evaluated other areas including password policies, security configurations, controls over changes to applications and databases and controls to ensure that developers and production support did not have access to change applications, the operating system or databases in the production environment.

- Performed inquiry for data security controls in the context of staff working from remote location during the year.

- Verified compensating controls and performed alternate procedures, where necessary.

Information Other than the Standalone Financial Statements and Auditors'' Report Thereon

The Bank''s management and Board of Directors are responsible for the other information. The other information comprises the information included in the Bank''s Annual Report but does not include the standalone financial statements and our Auditor''s Report thereon. The Bank''s Annual Report is expected to be made available to us after the date of this Auditor''s Report.

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

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When we read the Bank''s Annual Report, 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 Bank''s management and Board of Directors 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, and provisions of Section 29 of the Banking Regulation Act, 1949 and the circulars and guidelines issued by Reserve Bank of India (âRBI'') from time to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Bank and for preventing and detecting frauds and

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

In preparing the standalone financial statements, the Management and Board of Directors are responsible for assessing the Bank''s 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 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 Bank''s financial reporting process.

Auditor''s Responsibilities for the Audit of the Standalone Financial Statements

â¢ 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 with reference to financial statements in place and the operating effectiveness of such controls.

â¢ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures in the standalone financial

statements made by the Management and Board of Directors.

â¢ Conclude on the appropriateness of the Management 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 Bank''s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor''s 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 auditor''s report. However, future events or conditions may cause the Bank to cease to continue as a going concern.

Materiality is the magnitude of the misstatements in the standalone financial statements that, individually or 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 of the scope of our audit work and evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatement in the financial statements.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor''s 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 Matter

The standalone financial statements of the Bank for the year ended 31 March 2021, were audited by B S R & Co. LLP, Chartered Accountants, the statutory auditor of the Bank,

whose report dated 08 May 2021, expressed an unmodified opinion on those standalone financial statements. Accordingly, M S K A & Associates, Chartered Accountants, do not express any opinion on the figures reported in the standalone financial statements for the year ended 31 March 2021.

Report on Other Legal and Regulatory Requirements

The Standalone Balance Sheet and the Standalone 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 Act and relevant rules issued thereunder.

A. As required by sub-section (3) of section 30 of the

Banking Regulation Act, 1949, we report that:

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

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

(c) since the key operations of the Bank are automated with the key applications integrated to the core banking systems, the audit is carried out centrally as all the necessary records and data required for the purposes of our audit are available therein. However, during the course of our audit we have visited 42 branches/ asset centers.

B. 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 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 Bank so far as it appears from our examination of those books;

(c) the Standalone Balance Sheet, the Standalone Profit and Loss Account, and 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 the written representations received from the directors as on 31 March 2022 taken on record by the Board of Directors, none of the directors are disqualified as on 31 March 2022 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 with reference to standalone financial statements of the Bank and the operating effectiveness of such controls, refer to our separate Report in âAnnexure A'';

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

i. the Bank has disclosed the impact of pending litigations as at 31 March 2022 on its financial position in its standalone financial statements - Refer Schedule 12 and Note 18.55 to the standalone financial statements;

ii. the Bank has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts - Refer Schedule 12 and Note 18.55 to the standalone financial statements;

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

iv. (a) The management has represented that,

to the best of its knowledge and belief, other than as disclosed in Note 18.58 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 person(s) or entity(ies), including foreign entities (âIntermediaries"), 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 Bank (âUltimate 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, other than as disclosed in the Note 18.58 to the standalone financial statements, no funds have been received by the Bank from any person(s) or entity(ies), including foreign entities (âFunding Parties") with the understanding, whether recorded in writing or otherwise, that the Bank 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 (âUltimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

(c) Based on such audit procedures that were considered reasonable and appropriate by us in the circumstances, nothing has come to our notice that has caused us to believe that the representations made by the management of the Bank under subclause (a) and (b) contain any material misstatement.

v. The Bank has neither declared nor paid any

dividend during the year ended 31 March 2022.

(h) With respect to the other matters to be included in the Auditor''s Report in accordance with the requirements of Section 197(16) of the Act, as amended:

In our opinion and to the best of our information and according to the explanations given to us, being a banking company, Section 35B (2A) of the Banking Regulation Act, 1949 regarding managerial remuneration applies to the Bank and Section 197 (16) of the Act is not applicable.

For B S R & Co. LLP For M S K A & Associates

Chartered Accountants Chartered Accountants

ICAI Firm Registration No: ICAI Firm Registration No:

101248W/W-100022 105047W

Ashwin Suvarna Swapnil Kale

Partner Partner

Membership No: 109503 Membership No: 117812

UDIN: 22109503AIDYYS5836 UDIN: 22117812AIDWVK5944

Mumbai Mumbai

30 April 2022 30 April 2022

Mar 31, 2021

To the Members of IDFC FIRST Bank Limited

Report on the audit of the Standalone Financial

Statements

Opinion

We have audited the standalone financial statements of IDFC FIRST Bank Limited (the âBankâ), which comprise the standalone balance sheet as at 31 March 2021, the standalone profit and loss account, the standalone cash flow statement for the year then ended, and notes to the standalone financial statements, including a summary of the 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 âActâ) in the manner so required for banking companies and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Bank as at 31 March 2021, and its profit, and its cash flows for the year ended on that date.

Basis of opinion

We conducted our audit in accordance with the Standards on Auditing (âSAsâ) specified under Section 143 (10) of the Act. Our responsibilities under those SAs are further described in the Auditorâs 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 opinion on the standalone financial statements.

Key audit matters

Key audit matter How the matter was addressed in our audit

Provisions on advances

P/L Charge (Including provision on Non Performing Advances (NPA), Identified Standard Advances, restructured advances, COVID provisions and Write-off): Rs. 3,888 crore for year ended 31 March 2021

Provision on Advances (Including provision on Non Performing Advances, Identified Standard Advances and Restructured Advances): Rs. 3,173 crore as at 31 March 2021

Refer to the accounting policies in âNote 17.02 to the Standalone Financial Statements: Significant Accounting Policies -Advances", âSchedule 9 to the Standalone Financial Statements: Advances", âNote 18.12(d) to the Standalone Financial Statements: COVID-19 Regulatory Package - Asset Classification and Provisioning" and âNote 18.29 to the Standalone Financial Statements: Provisions and Contingencies"

Subjective estimate	Our key audit procedures included:
Provisions in respect of non-performing and restructured	Design / controls
advances are made based on managementâs assessment	- Assessing the design, implementation and operating
of the degree of impairment of the advances subject to the	effectiveness of key internal financial controls over
minimum provisioning levels prescribed under the Prudential	monitoring of watch list loans, including monitoring
Norms on Income Recognition, Asset Classification &	process of overdue loans (and those which became
Provisioning, prescribed by the RBI from time to time.	overdue subsequent to the reporting date), measurement
The provision on non-performing assets (NPAs) are also	of provision, identification of NPA accounts, assessing
based on the valuation of the security available. In case of	the reliability of management information, which included
restructured accounts, provision is made in accordance with	overdue reports. Also, assessing how management
the RBI guidelines.	has evaluated the impact of stress in the overall
We identified provision on non-performing advances as a key audit matter because of-	economic environment arising from COVID-19 in its NPA assessment.
1) the management judgement involved in determining the provision;	- Understanding managementâs approach, interpretation, systems and controls implemented in relation to NPA computation.
2) any regulator mandated provision that may be needed for the portfolio of loans;	- For corporate loans, testing controls over the monitoring of the credit watch list, credit file review processes,
3) the dependency on the valuation of the security available	approval of external collateral valuation vendors and
on NPAs; and	review controls over the approval of significant individual
4) because of its significance to the financial results of the	impairments.
Bank.	- Evaluating the design, implementation and operating
	effectiveness of key internal controls over the valuation of the securities for the NPAs and watch list cases.
	- Testing of review controls over measurement of provisions
	and disclosures in financial statements.
	- Involving information system specialist to gain comfort
	over data integrity and calculations, including system reconciliations.
	- Testing key controls operating over the information
	technology in relation to NPA systems, including system access and system change management, program development and computer operations.
	- Testing Bankâs controls relating to implementing
	and actioning any RBI mandated specific provision requirement.

Key audit matter

How the matter was addressed in our audit

Further, we have identified the impact of, and uncertainty related to the COVID-19 pandemic as a key event and consideration for recognition and measurement of NPAs on account of greater levels of management judgement and therefore increased levels of audit focus in the Bankâs estimation of provision for NPAs.

Management has assessed the impact of COVID-19 on the loan portfolio in evaluating the need for recording additional provisions on loans at 31 March 2021.

Substantive tests

- Test of details over of calculation of NPA provisions, including provisions on restructured loans, as at the year-end for assessing the completeness, accuracy and relevance of data and to ensure that the same is in compliance with the Prudential Norms on Income Recognition, Asset Classification & Provisioning, Bankâs policy and the Resolution Framework for COVID-19 related stress announced by the RBI.

- Select a sample of corporate loans to test potential cases of loans repaid and disbursed to the same customer during the period and fresh disbursement(s) to stressed customers.

- Testing a sample (based on quantitative and qualitative thresholds) of large sized corporate clients where impairment indicators had been identified by management. Obtaining managementâs assessment of the recoverability of these exposures (including individual provisions calculations) and challenging whether individual impairment provisions, or lack of, were appropriate.

This included the following procedures:

â¢ evaluating the statement of accounts, approval process, committee meeting minutes, credit review of customers, review of SMA reports and other related documents to assess recoverability and the classification of the facility; and

â¢ assessing external collateral valuerâs work and the results and comparing external valuations to values used in managementâs assessment.

- For a selection of corporate loans not identified as displaying indicators of impairment by management, independently challenging their assessment by reviewing the historical performance of the customer and formed our own view whether any impairment indicators were present.

- Evaluating managementâs rationale for making additional provision on account of COVID-19 and testing the computation.

- Assessing the factual accuracy and appropriateness of the financial statements disclosures made by the Bank in context of impact of COVID-19 and restructured loans.

Key audit matter How the matter was addressed in our audit

Assessment of the realizability of deferred tax assets Deferred tax asset (net): Rs. 1,999 crore as at 31 March 2021

Refer to the accounting policies in âNote 17.08 to the Standalone Financial Statements: Significant Accounting Policies -Income Tax" and âNote 18.28 to the Standalone Financial Statements: Deferred Tax"

Significant estimate and judgement involved

Recognition of deferred tax assets require a determination of future taxable income based on the Bankâs expectations. The assessment of realizability of deferred tax assets is based on a virtual or reasonable certainty test, depending on the composition of the deferred tax assets.

Given the Bankâs recent financial performance and uncertainty in business growth on account of COVID-19, we identified recognition of deferred tax assets as a key audit matter because of the significant management judgement and assumptions involved in estimating the future taxable income based on the income forecasts approved by the Bankâs Board of Directors.

Our key audit procedures included:

â¢ Assessing the design, implementation and operating effectiveness of managementâs key internal financial controls over the recognition of deferred tax assets.

â¢ Obtained details of different components of deferred tax assets and details of estimates of taxable incomes for future periods as approved by the Board of Directors.

â¢ Obtained confirmation where the future forecasts were approved in the meetings of the Board of Directors.

â¢ Evaluating management assessment relating to the amendment in Income Tax Act and its consequential impact on items that qualify for recognition of deferred tax assets.

â¢ Evaluating management assessment for estimating availability of future taxable profits for determination of recognition of deferred tax assets.

â¢ Evaluated managementâs considerations involved in forecasting future taxable profits due to the uncertainty on account of COVID-19.

â¢ Assessed the period over which the deferred tax assets would be recovered against future taxable income.

â¢ Evaluated the Bankâs actual performance vis-a-vis the budgets for the current and past years and discussed with management their basis and assumptions in respect of evidence to support that there will be sufficient taxable income to absorb the deferred tax asset.

â¢ Performed sensitivity analysis over the Bankâs expectations of the future taxable income.

Key audit matter	How the matter was addressed in our audit
Valuation of Investments
Net Value of Investments: Rs. 45,412 crore as at 31 March 2021
Provision on depreciation on investments (including the		amount related to standard identified investments):
Rs. (820) crore for year ended 31 March 2021
Refer to the accounting policies in âNote 17.01 to the Standalone Financial Statements: Significant Accounting Policies-Investments Classification", âSchedule 8 to the Standalone Financial Statements: Investments" and âSchedule 18.29 to the
Standalone Financial Statements: Provision and Contingencies"
Subjective estimates and judgment involved	Our key audit procedures included:
Investments	Test of design / controls
Investments are classified into âHeld for Tradingâ (âHFTâ),	-	Assessed the design, implementation and operating
âAvailable for Saleâ (âAFSâ) and âHeld to Maturityâ (âHTMâ)		effectiveness of managementâs key internal financial
categories at the time of purchase. Investments, which		controls over specific provisions on certain investments.
the Bank intends to hold till maturity are classified as HTM investments.	-	Evaluated controls relating to creation and reversal of provisions
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 required to be made.	Substantive tests - For a selection of investments, we re-performed the valuation computation. For cases where no directly observable inputs were used, we examined and re-
Investments classified as AFS and HFT are marked- to-		performed the calculation basis the cashflows by using a
market on a periodic basis as per the relevant RBI guidelines.		discounted cashflow method to compare the results with
We identified valuation of investments as a key audit matter because of the:		that of the Bankâs which was computed in accordance with the relevant RBI guidelines.
- management judgement and external data involved in-	-	We verified the management assessment of specific provisions against certain investments and evaluated the
â¢ determining the value of certain investments like		appropriateness of the provisions made and rationale
security receipts, venture capital units, pass through		put forward by the Bank for reversal of such specific
certificates and unquoted equity securities,		provision.
â¢ creation and reversal of specific provisions on certain	-	Assessed whether the financial statement disclosures
identified investments; and		appropriately reflect the Bankâs exposure to investments
â¢ the overall significance of investments to the financial statements of the Bank.		with reference to the requirements of the prevailing RBI guidelines.
		We verified that the specific provision are netted off from the carrying value of such investments in line with the accounting policy of the Bank.

Key audit matter

How the matter was addressed in our audit

Information technology

Information Technology (IT) systems and controls

The Bankâs key financial accounting and reporting processes are highly dependent on information systems including automated controls in systems, such that there exists a risk that gaps in the IT control environment could result in the financial accounting and reporting records being misstated. Amongst its multiple IT systems, we scoped in systems that are key for the overall financial reporting.

The Bank has also undertaken few data migration projects post the merger in the last financial year.

Further, the prevailing COVID-19 situation has caused the required IT applications to be made accessible on a remote basis.

We have identified âIT systems and controlsâ as a key audit matter because of the high level of automation, significant number of systems being used by management and the complexity of the IT architecture.

Our key IT audit procedures included:

- We focused on user access management, change management, segregation of duties, system interface controls, system application controls and Information Produced by entity (IPE) controls over key financial accounting and reporting systems.

- We tested a sample of key controls for data migration operating over the information technology in relation to financial accounting and reporting systems, including analysis of strategy documents, review of data mapping sheets and reconciliation confirmations from operations team, user acceptance test (UAT) sign offs, incidents monitoring and approvals for pre and post migration.

- We tested the design and operating effectiveness of key controls over user access management which include new user creation and granting access rights, removal of user rights, user access review and preventive controls designed to enforce segregation of duties.

- Other areas that were assessed included password policies, security configurations, controls over changes to applications and databases and controls to ensure that developers and production support did not have access to change applications, the operating system or databases in the production environment.

- Performed inquiry for data security controls in the context of a large population of staff working from remote location at the year end.

Information Other than the Standalone Financial Statements and Auditorsâ Report Thereon

The Bankâs management and Board of Directors are responsible for the other information. The other information comprises the information included in the Bankâs Annual report, but does not include the standalone financial statements and our auditorâs report thereon. The Bankâs Annual report is expected to be made available to us after the date of this auditorâs report.

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

When we read the Bankâs Annual Report, if we conclude that there is a material misstatement therein, we are required to

communicate the matter to those charged with governance.

Managementâs and Board of Directorâs Responsibility for the Standalone Financial Statements

The Bankâs management and Board of Directors 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 state of affairs, profit 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, provisions of Section 29 of the Banking Regulation Act, 1949 and the circulars and guidelines issued by Reserve Bank of India (âRBIâ) 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

obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bankâs ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditorâs 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 auditorâs report. However, future events or conditions may cause a Bank to cease to continue as a going concern.

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

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditorâs 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

The standalone balance sheet and the standalone 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 Act.

A. As required by sub-section (3) of Section 30 of the Banking Regulation Act, 1949, we report that:

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

(b) read with the matter discussed in Note 18.01 of standalone financial statements, transactions of the Bank, which have come to our notice, have been within the powers of the Bank; and

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, the Management and Board of Directors are responsible for assessing the Bankâs 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 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 Bankâs financial reporting process.

Auditorâs 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 auditorâs 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:

â¢ 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.

â¢ 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 with reference to financial statements in place and the operating effectiveness of such controls.

â¢ evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures in the standalone financial statements made by the Management and Board of Directors.

â¢ conclude on the appropriateness of the Management and Board of Directors use of the going concern basis of accounting and, based on the audit evidence

for the purposes of our audit are available therein. However, during the course of our audit we have visited 27 branches.

B. 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 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 Bank so far as it appears from our examination of those books;

(c) the standalone balance sheet, the standalone profit and loss account, and 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, to the extent they are not inconsistent with the accounting policies prescribed by RBI;

(e) on the basis of the written representations received from the directors as on 31 March 2021 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2021 from being appointed as a director in terms of Section 164 (2) of the Act; and

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

i. the Bank has disclosed the impact of pending

litigations as at 31 March 2021 on its financial position in its standalone financial statements - Refer Schedule 12 and Note 18.58 to the standalone financial statements;

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

iv. The disclosures required on holdings as well as dealing in Specified bank notes during the period from 8 November 2016 to 30 December 2016 as envisaged in notification G.S.R. 308(E) dated 30 March 2017 issued by the Ministry of Corporate Affairs is not applicable to the Bank.

D. With respect to the other matters to be included in the Auditorsâ Report in accordance with the requirements of Section 197(16) of the Act, as amended:

For B S R & Co. LLP

Chartered Accountants ICAI Firm Registration No: 101248W/W-100022

Manoj Kumar Vijai

Partner

Membership No:046882

UDIN: 21046882AAAAAG4376

Place: Mumbai

Date: 8 May 2021

Mar 31, 2019

Independent Auditorâs Report

TO THE MEMBERS OF IDFC FIRST BANK LIMITED (FORMERLY, IDFC BANK LIMITED)

Report on the Audit of the Standalone Financial Statements opinion

We have audited the accompanying standalone financial statements of IDFC FIRST Bank Limited (formerly, IDFC Bank Limited) (âthe Bankâ), which comprise the Balance Sheet as at 31 March 2019, the Profit and Loss Account, the Cash Flow Statement for the year then ended and 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, Companies Act, 2013 (âthe Actâ) in the manner so required and give a true and fair view in conformity with the Accounting Standards prescribed under section 133 of the Act read with the Companies (Accounting Standards) Rules, 2006, as amended (âAccounting Standardsâ) and other accounting principles generally accepted in India, of the state of affairs of the Bank as at 31 March 2019, and its loss, 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 specified under section 143(10) of the Act (SAs). Our responsibilities under those Standards are further described in the Auditorâs Responsibility 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 (ICAI) 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 made there under, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAIâs 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 standalone financial statements.

key audit Matters

Sr.

No.

Key Audit Matter

Auditorâs Response

Identification of and provisioning for non-performing advances in accordance with the Reserve Bank of India (RBI) guidelines and Bankâs Board approved policy.

(Refer Schedule 9 read with Note 17.2)

The Bank has net advances amounting to '' 86,30,22,859 thousands as at 31 March 2019. Identification of and provisioning for non-performing advances in accordance with relevant prudential norms issued by the RBI in respect of income recognition, asset classification and provisioning pertaining to advances (herein after referred as âRelevant RBI guidelinesâ) and as per the Bankâs Board approved policy is a key audit matter due to materiality of balances involved, which requires management estimates, judgement, manual interventions and level of regulatory and other stakeholders focus.

Accordingly, our audit was focused on income recognition, asset classification and provisioning pertaining to advances.

Our audit approach included testing the design, operating effectiveness of internal controls and substantive audit procedures in respect of income recognition, asset classification and provisioning pertaining to advances. In particular:

- we have evaluated the Bankâs internal control system in adhering to the Relevant RBI guidelines and regulations;

- we have evaluated key IT systems/ applications used and tested the design and implementation as well as operational effectiveness of relevant controls, including manual controls in relation to income recognition, asset classification and provisioning pertaining to advances;

- we tested a selection of advances to examine the validity of the recorded amounts, loan documentation, examined the statement of accounts, indicators of impairment, provision for non-performing advances, and compliance with Relevant RBI guidelines; and

- we evaluated the governance process and review controls over calculations of provision of non-performing advances, basis of provisioning approved in accordance with the Board approved policy by the Chief Risk Officer and Chief Finance Officer.

We discussed the provisions made with senior management including the Chief Executive Officer, Chief Finance Officer, Chief Risk Officer and with those charged with governance.

Accounting for Amalgamation

As set out in note 17A and 18.01, the Bank completed its Amalgamation with Capital First Limited, Capital First Home Finance Limited and Capital First Securities Limited (together referred to as âthe CFL Groupâ) with appointed date as October 1, 2018 and effective date as December 18, 2018.

The Bank has accounted for the amalgamation by Purchase method as per AS 14 - Accounting for Amalgamations.

The amalgamation resulted in recognition of Intangible assets - (Brand and Goodwill) aggregating to Rs, 2,599.35 crore which have been subjected to accelerated amortization through Profit and Loss Account during the year ended 31 March 2019.

Our audit approach for testing of accounting of

amalgamation included in particular :

- we evaluated the Scheme of Amalgamation approved by the National Company Law Tribunal (NCLT);

- we evaluated appropriateness of the Bankâs selection of amalgamation accounting by Purchase method against the compliance with each of the conditions stipulated in AS 14 - Accounting for Amalgamation;

- we tested internal controls over financial reporting of the merged entity;

Sr.

No.

Key Audit Matter

Auditorâs Response

The aforesaid intangible assets have been considered to be eligible for tax depreciation, consequently deferred tax asset has been recognized on timing difference.

The Bank was also required to integrate internal controls over financial reporting of the merged entity.

Due to the complexity of the transaction and the associated significant risk of misstatement involved in

- integration of internal controls over financial reporting of the merged entity;

- assumptions and estimates required to be made by the Management to determine the value of Intangible Assets which is based on independent valuerâs report engaged by the management;

- subsequent accelerated amortization of these Intangible assets; and

- significant management judgments involved regarding the future profit forecasts and application of tax laws for the recognition and measurement of deferred tax asset on amortized intangible assets

The Accounting for Amalgamation is considered as key audit matter.

- we obtained managementâs workings for the accounting of the amalgamation and evaluated managementâs determination of the fair value of the net assets acquired, focusing on the valuation of intangible asset which is based on independent valuerâs report engaged by the Management;

- we evaluated the fair value of the acquired assets, focusing on the valuation methodologies and key assumptions applied;

- we evaluated the competence of independent valuer engaged by management and involved our valuation specialists to assist in our assessment of the fair value of the acquired assets;

- we evaluated the reasonableness of key assumptions based on our knowledge of the business and industry;

- we evaluated the basis determined by the Management for accelerated amortization of Intangible Assets through Profit and Loss Account during the year ended 31 March 2019;

- with the support of our taxation specialists we performed evaluation of tax laws applicable to the Bank and verification of the managementâs assessment with respect to eligibility of intangible assets for tax depreciation;

- we evaluated managementâs assessment of future revenues and operating margins by comparing actual results and with the help our internal valuation specialists we assessed the reasonableness of the revenue forecast by performing sensitivity analysis of the growth rates compared to peer banks.

Evaluation of General Information Technology (IT) Controls for Key IT systems used in financial reporting process along with the integration of IT systems acquired on Amalgamation

The Bankâs operational and financial processes are highly dependent on IT systems due to large volume of transactions that are processed daily.

The Bank has also acquired IT systems of CFL Group on amalgamation which were integrated with the financial reporting application of the Bank.

The Bank has constituted an IT Strategy Committee at the Board level to oversee implementation of IT strategy.

We involved our IT specialists to obtain an understanding of the Bankâs IT related control environment including the systems acquired during the course of amalgamation.

Furthermore, we conducted an assessment and identified key IT applications, databases and operating systems, applications used in accounting for and recording of Advances, Treasury transactions and the systems used in financial reporting process, that are relevant to our audit.

For the key IT systems, applications and databases that are relevant to our audit and used in preparation of accounting and financial information, our areas of audit focus included Access Security (including controls over privileged access), Program Change controls, database management and Network Operations. In particular:

Sr.

No.

Key Audit Matter

Auditorâs Response

Accordingly, our audit was focused on key IT systems and controls along with the integration of IT systems acquired on amalgamation, due to the pervasive nature and complexity of the IT environment.

- we obtained an understanding of the Bankâs IT control environment and key changes if any during the audit period that may be relevant to the audit and reviewed the minutes of IT strategy committee meetings;

- we tested the design, implementation and operating effectiveness of the Bankâs General IT controls over the key IT systems. This included evaluation of bankâs controls to evaluate segregation of duties and access rights being provisioned / modified based on duly approved requests, access for exit cases being revoked in a timely manner and access of all users being re-certified during the period of audit;

- we also tested key automated and manual business cycle controls, integration of IT systems of the CFL Group with the financial reporting application of the Bank and report logic for system generated reports relevant to the audit; including testing of alternate procedures to assess whether there were any unaddressed IT risks that would materially impact the financial statements.

INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITORâS REPORT THEREON

The Bankâs Board of Directors is responsible for preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Boardâs Report, Corporate Governance Report, Chairpersonâs Statement and Managing Director & Chief Executive Officerâs Statement, but does not include the standalone financial statements, the Pillar III Disclosure under the New Capital Adequacy Framework (Basel III disclosures) and our auditorâs report thereon, which is expected to be made available to us after that date.

- Our opinion on the standalone financial statements does not cover the other information and the Basel III disclosure and accordingly, we do not and will 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 and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.

- When we read the Management Discussion and Analysis, Boardâs Report, Corporate Governance Report, Chairpersonâs Statement and Managing Director & Chief Executive Officerâs Statement, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance as required under SA 720 âThe Auditorâs responsibilities Relating to Other Informationâ.

MANAGEMENTâS RESPONSIBILITY FOR THE STANDALONE FINANCIAL STATEMENTS

The Bankâs Board of Directors is 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 Standards 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 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 statement that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, management is responsible for assessing the Bankâs 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. Those Board of Directors are also responsible for overseeing the Bankâs financial reporting process.

AUDITORâS RESPONSIBILITY 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 auditorâs 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 financial 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 the management.

- Conclude on the appropriateness of managementâs 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 Bankâs ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditorâs 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 auditorâs 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.

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

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditorâs 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

The audit of special purpose financial information of Capital First Limited and its subsidiaries Capital First Home Finance Limited and Capital First Securities Limited (together referred to as âthe CFL Groupâ) as at and for the period ended 30 September 2018, as considered for the merger accounting as on the appointed date, was carried out by the statutory auditors of the CFL Group.

Our Opinion is not modified in respect of this matter.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

1. As required by Section 143(3) of the Act, and section 30 of the Banking Regulation Act, 1949 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 Bank.

c) In our opinion, the transactions of the Bank which have come to our notice have been within the powers of the Bank.

d) As explained in paragraph 2 below, the financial accounting systems of the Bank are centralised and, therefore, accounting returns are not required to be submitted by the Branches.

e) The Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

f) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act.

g) On the basis of the written representations received from the directors as on 31 March 2019 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2019 from being appointed as a director in terms of Section 164(2) of the Act.

h) With respect to the adequacy of the internal financial controls over financial reporting of the Bank and the operating effectiveness of such controls, refer to our separate Report in âAnnexure Aâ. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Bankâs internal financial controls over financial reporting.

i) With respect to the other matters to be included in the Auditorâs Report in accordance with the requirements of section 197(16) of the Act, as amended, in our opinion and to the best of our information and according to the explanations given to us the entity being a banking company, section 197 of the Act related to the managerial remuneration is not applicable by virtue of section 35B (2A) of the Banking Regulation Act, 1949.

j) With respect to the other matters to be included in the Auditorâs 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;

ii. The Bank has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;

iii. there were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Bank.

2. We report that during the course of our audit we have visited and performed select relevant procedures at 17 branches. Since the Bank considers its key operations to be automated, with the key applications largely integrated to the core banking systems, it does not require its branches to submit any financial returns. Accordingly, our audit is carried out centrally at the Head Office and Central Processing Units based on the necessary records and data required for the purposes of the audit being made available to us.

Report on The Internal Financial Controls Over Financial Reporting Under Clause (I) of subSection 3 of Section 143 of The Companies Act, 2013 (âThe Actâ)

We have audited the internal financial controls over financial reporting of IDFC FIRST Bank Ltd. (âthe Bankâ) as of 31 March 2019 in conjunction with our audit of the standalone financial statements of the Bank for the year ended on that date.

Managementâs Responsibility for Internal Financial Controls

The Bankâs 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 respective Bankâs policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013, the Banking Regulation Act, 1949 and the guidelines issued by the Reserve Bank of India.

Auditorâs Responsibility

Our responsibility is to express an opinion on the Bankâs internal financial controls over financial reporting of the Bank based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the âGuidance Noteâ) issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under Section 143(10) of the Companies Act, 2013, 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 system 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 control based on the assessed risk. The procedures selected depend on the auditorâs 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 is sufficient and appropriate to provide a basis for our audit opinion on the Bankâs internal financial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A Bankâs internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Bankâs internal financial control 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 Bankâs 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 control 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, to the best of our information and according to the explanations given to us, the Bank has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31 March 2019, based on the criteria for internal financial 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.

For DELOITTE HASKINS & SELLS

Chartered Accountants

(Firmâs Registration No. 117365W)

Kalpesh J. Mehta

(Partner)

(Membership No. 48791)

Place: Mumbai

Date: 10 May 2019

Mar 31, 2018

INDEPENDENT AUDITORSâ REPORT

TO THE MEMBERS OF IDFC BANK LIMITED

Report on the Standalone Financial Statements

We have audited the accompanying Standalone Financial Statements of IDFC BANK LIMITED (âthe Bankâ), which comprise the Balance Sheet as at 31 March, 2018, the Profit and Loss Account and the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Managementâs Responsibility for the Standalone Financial Statements

The Bank''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (âthe Actâ) 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 provisions of Section 29 of the Banking Regulation Act, 1949, the Accounting Standards prescribed under Section 133 of the Act read with the Companies (Accounting Standards) Rules, 2006 as amended, in so far as applicable to banks (âAccounting Standardsâ), accounting principles generally accepted in India, and the guidelines issued by the Reserve Bank of India.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding 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

Auditorsâ Responsibility

Our responsibility is to express an opinion on these Standalone Financial Statements based on our audit.

In conducting our audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit of the Standalone Financial Statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Standalone Financial Statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the Standalone Financial Statements. The procedures selected depend on the auditors'' judgment, including the assessment of the risks of material misstatement of the Standalone Financial Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial controls relevant to the Bank''s preparation of the Standalone Financial Statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Bank''s Directors, as well as evaluating the overall presentation of the Standalone Financial Statements.

We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the Standalone Financial Statements.

Opinion

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 and the Act in the manner so required and give a true and fair view in conformity with the Accounting Standards and other accounting principles generally accepted in India, of the state of affairs of the Bank as at 31 March, 2018, and its profit and its cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143 (3) of the Act and Section 30 of the Banking Regulation Act, 1949, 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 and found them to be satisfactory

b) In our opinion, the transactions of the Bank which have come to our notice have been within the powers of the Bank.

c) As explained in paragraph 2 below, the financial accounting systems of the Bank are centralized and, therefore, accounting returns are not required to be submitted by the Branches.

d) 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.

e) The Balance Sheet, the Profit and Loss Account, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

f) In our opinion, the aforesaid Standalone Financial Statements comply with the Accounting Standards specified under Section 133 of the Act, as applicable to banks.

g) On the basis of the written representations received from the directors as at 31 March 2018 taken on record by the Board of Directors, none of the directors is disqualified as at 31 March 2018 from being appointed as a director in terms of Section 164

(2) of the Act.

h) With respect to the adequacy of the internal financial controls over financial reporting of the Bank and the operating effectiveness of such controls, refer to our Report in âAnnexure Aâ. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Bank''s internal financial controls over financial reporting.

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

i. The Bank has disclosed the impact of pending litigations on its financial position in its Standalone Financial Statements;

ii. The Bank has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;

iii. There were no amounts which were required to be transferred, by the Bank to the Investor Education and Protection Fund.

2. We report that during the course of our audit we have visited and performed select relevant procedures at 20 branches. Since the Bank considers its key operations to be automated, with the key applications largely integrated to the core banking systems, it does not require its branches to submit any financial returns. Accordingly, our audit is carried out centrally at the Head Office and Central Processing Units based on the necessary records and data required for the purposes of the audit being made available to us.

(Referred to in paragraph 1 (h) under âReport on Other Legal and Regulatory Requirementsâ section of the auditorsâ report of even date)

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

We have audited the internal financial controls over financial reporting of IDFC BANK LIMITED (the âBankâ) as at 31 March, 2018 in conjunction with our audit of the Standalone Financial Statements of the Bank for the year ended on that date.

Managementâs Responsibility for Internal Financial Controls

The Bank''s Management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Bank considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the âGuidance Noteâ) 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 Bank''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013, the Banking Regulation Act, 1949 and the guidelines issued by the Reserve Bank of India.

Auditorsâ Responsibility

Our responsibility is to express an opinion on the Bank''s internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under Section 143(10) of the Companies Act, 2013, 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 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 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 controls based on the assessed risk. The procedures selected depend on the auditors'' judgement, including the assessment of the risks of material misstatement of the Standalone 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 Bank''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A Bank''s internal financial control over financial reporting 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 and other applicable regulations. A Bank''s internal financial control 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 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 Bank''s 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 over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become 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 Bank has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31 March, 2018, based on the internal control over financial reporting criteria established by the Bank considering the essential components of internal control stated in the Guidance Note issued by the Institute of Chartered Accountants of India.

For DELOITTE HASKINS & SELLS

Chartered Accountants

(Firm''s Registration No.117365W)

Kalpesh J. Mehta

Partner

(Membership No. 48791)

Place : Mumbai

Date : April 24, 2018

Mar 31, 2017

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of IDFC BANK LIMITED (âthe Bankâ), which comprise the Balance Sheet as at March 31, 2017, the Profit and Loss Account, the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Managementâs Responsibility for the Standalone Financial Statements

The Bankâs Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (âthe Actâ) 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 provisions of Section 29 of the Banking Regulation Act, 1949, accounting principles generally accepted in India, including the Accounting Standards prescribed under Section 133 of the Act, in so far as applicable to banks, and the guidelines issued by the Reserve Bank of India.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Bank and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgements and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that are 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

Auditorsâ Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit.

We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the standalone financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the standalone financial statements. The procedures selected depend on the auditorâs judgement, including the assessment of the risks of material misstatement of the standalone financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial controls relevant to the Bankâs preparation of the standalone financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Bankâs Directors, and evaluating the overall presentation of the standalone financial statements.

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.

Opinion

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 and the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Bank as at March 31, 2017 and its profit and its cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to Note 1 of Schedule 18 of the standalone financial statements, the Bank commenced its Banking operations on October 1, 2015, post receipt of final banking license by the RBI. Accordingly, figures for the previous year/period is not comparable since Banking operations were carried only for the period October 2015 to March 2016. Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by Section 143 (3) of the Act and Section 30 of the Banking Regulation Act, 1949, 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 and found them to be satisfactory

b) In our opinion, the transactions of the Bank which have come to our notice have been within the powers of the Bank.

c) As explained in paragraph 2 below, the financial accounting systems of the Bank are centralised and, therefore, accounting returns are not required to be submitted by the Branches.

d) 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.

e) The Balance Sheet, the Profit and Loss Account, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

f) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, as applicable to banks.

g) On the basis of the written representations received from the directors as at March 31, 2017 taken on record by the Board of Directors, none of the directors is disqualified as at March 31, 2017 from being appointed as a director in terms of Section 164 (2) of the Act.

h) With respect to the adequacy of the internal financial controls over financial reporting of the Bank and the operating effectiveness of such controls, refer to our Report in âAnnexure Aâ. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Bankâs internal financial controls over financial reporting.

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

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

ii. The Bank has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts;

iii. There were no amounts which were required to be transferred, by the Bank to the Investor Education and Protection Fund.

iv. The disclosure with respect to the holdings or dealings in Specified Bank Notes, as defined in the Notification S.O. 3407(E) dated November 8, 2016 of the Ministry of Finance, during the period from November 8, 2016 to December 30, 2016 as required under amendment to Schedule III to the Companies Act, 2013, is not applicable as the financial statements of the Bank are prepared under section 29 and third schedule of the Banking Regulation Act, 1949.

2. We report that during the course of our audit we have visited and performed select relevant procedures at 16 branches. Since the Bankâs key operations are automated, with the key applications largely integrated to the core banking systems, it does not require its branches to submit any financial returns. Accordingly, our audit is carried out centrally at the Head Office based on the necessary records and data required for the purposes of the audit being made available to us.

For DELOITTE HASKINS & SELLS

Chartered Accountants

(Firmâs Registration No.117365W)

Kalpesh J. Mehta

Partner

(Membership No. 48791)

Place : Mumbai

Date : April 25, 2017

Mar 31, 2016

We have audited the accompanying financial statements of IDFC BANK LIMITED (âthe Bankâ), which comprise the Balance Sheet as at March 31, 2016, the Statement of Profit and Loss and the Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.

Managementâs Responsibility for the Financial Statements

The Bank''s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (âthe Actâ) with respect to the preparation of these 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 provisions of Section 29 of the Banking Regulation Act, 1949, accounting principles generally accepted in India, including the Accounting Standards prescribed under section 133 of the Act, in so far as applicable to banks, and the Guidelines issued by the Reserve Bank of India.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding 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

Auditorâs Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under.

We conducted our audit of the financial statements in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Bank''s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Bank''s Directors, and evaluating the overall presentation of the financial statements.

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

Opinion

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 Banking Regulation Act, 1949 and the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Bank as at March 31, 2016, and its profit and its cash flows for the year ended on that date.

Emphasis of Matter

We draw attention to Note 1 of Schedule 18 to the financial statements which describes the demerger of financial undertaking of IDFC Limited in to the Bank in accordance with the Scheme of Arrangement under section 391-394 of the Companies Act, 1956 approved by Hon''ble Madras High Court vide its order dated June 25, 2015.

Our Opinion is not modified in respect of this matter Report on Other Legal and Regulatory Requirements

1. As required by Section 143 (3) of the Act and 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 purposes of our audit.

b) In our opinion, the transactions of the Bank which have come to our notice have been within the powers of the Bank.

c) As explained in paragraph 2 below, the financial accounting systems of the Bank are centralized and, therefore, accounting returns are not required to be submitted by the Branches.

d) 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.

e) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.

f) In our opinion, the aforesaid financial statements comply with the Accounting Standards prescribed under section 133 of the Act, as applicable.

g) On the basis of the written representations received from the directors as on 31^st March, 2016 taken on record by the Board of Directors, none of the directors is disqualified as at 31^st March, 2016 from being appointed as a director in terms of Section 164 (2) of the Act.

i) With respect to the other matters to be included in the Auditor''s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us:

i. The Bank has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Schedule 17/D-11 and Schedule 18- Note 51 to the financial statements;

ii. The Bank has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts - Refer Schedule 17/D-11 and Schedule 18- Note 51 to the financial statements;

iii. There were no amounts which were required to be transferred, to the Investor Education and Protection Fund by the Bank.

2. We report that during the course of our audit we have performed select relevant procedures at 19 branches. Since the Bank considers its key operations to be automated, with the key applications largely integrated to the core banking systems, it does not require its branches, to submit any financial returns. Accordingly our audit is carried out centrally at the Head Office and Central Processing Units based on the necessary records and data required for the purposes of the audit and made available to us.

ANNEXURE âAâ TO THE INDEPENDENT AUDITORSâ REPORT

(Referred to in paragraph 1.h under âReport on Other Legal and Regulatory Requirementsâ of our report of even date)

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

We have audited the internal financial controls over financial reporting of IDFC BANK LIMITED (âthe Bankâ) as at 31^st March, 2016 in conjunction with our audit of the financial statements of the Bank for the year ended on that date.

Managementâs Responsibility for Internal Financial Controls

The Bank''s 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 (âthe Guidance Noteâ). 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 Bank''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013, the Banking Regulation Act, 1949 and the Guidelines issued by the Reserve Bank of India.

Auditorâs Responsibility

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining 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 auditor''s 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 is sufficient and appropriate to provide a basis for our audit opinion on the Bank''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls Over Financial Reporting

A company''s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and other applicable regulations. A company''s internal financial control 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 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 company''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial Reporting

Opinion

In our opinion, to the best of our information and according to the explanations given to us, the Bank has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31^st March, 2016, 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.

For DELOITTE HASKINS & SELLS

Chartered Accountants

(Firm''s Registration No.117365W)

Kalpesh J. Mehta

Partner

(Membership No. 48791)

Place : Mumbai

Date : April 26, 2016

Mar 31, 2015

We have audited the accompanying financial statements of IDFC BANK LIMITED ("the Company"), which comprise the Balance Sheet as at March 31,2015, the Statement of Profit and Loss, the Cash Flow Statement for the period from October 21,2014 (date of incorporation) to March 31,2015, and a summary of the significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 ("the Act") with respect to the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company 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. 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.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit.

We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements.

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

Opinion

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 Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2015, and its loss and its cash flows for the period from October 21,2014 (date of incorporation) to March 31,2015.

Emphasis of Matter

We draw attention to the Note 15 to the financial statement which indicates that its net worth has been fully eroded, the Company has incurred a net loss during the current period and the Company's current liability exceeded its current assets as at balance sheet date. However, for the reasons indicated in the said note the accounts are prepared on a going concern basis.

Our opinion is not qualified in respect of this matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order, 2015 ("the Order") issued by the Central Government in terms of Section 143(11) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 3 and 4 of the Order.

2. 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 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 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 Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

(e) On the basis of the written representations received from the directors as on March 31, 2015 taken on record by the Board of Directors, none of the directors are disqualified as on March 31,2015 from being appointed as a director in terms of Section 164(2) of the Act.

(f) 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 does not have any pending litigations which would impact its financial position.

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

iii. There were no amounts which were required to be transferred to the Investor Education and Protection Fund by the Company.

Annexure to the Independent Auditors' Report

(Referred to in paragraph 1 under 'Report on Other Legal and Regulatory Requirements' section of our report of even date)

(i) According to the information and explanations given to us, the Company does not have any fixed assets. Therefore, the provisions paragraph 3(i) of the Order are not applicable to the Company.

(ii) According to the information and explanations given to us, the nature of the Company's business is such that it is not required to hold any inventories. Therefore, the provisions of paragraph 3(ii) of the Order are not applicable to the Company.

(iii) The Company has not granted any loans, secured or unsecured, to companies, firms or other parties covered in the Register maintained under Section 189 of the Companies Act, 2013.

(iv) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business for the purchase of fixed assets and for the sale of services and during the course of our audit we have not observed any continuing failure to correct major weaknesses in such internal control system. According to the information and explanations given to us, the Company does not hold inventories nor is it engaged in the sale of goods.

(v) According to the information and explanations given to us, the Company has not accepted any deposit from the public during the year and no order in this respect has been passed by the Company Law Board or National Company Law Tribunal or the Reserve Bank of India or any Court or any other Tribunals.

(vi) To the best of our knowledge and according to the information and explanations given to us, the Central Government has not prescribed the maintenance of cost records under sub-section (1) of section 148 of the Companies Act, 2013, in respect of the services rendered by the Company.

(vii) According to the information and explanations given to us, in respect of statutory dues:

(a) The Company has been regular in depositing undisputed statutory dues, including income tax, service tax and other material statutory dues applicable to it with the appropriate authorities. According to the information and explanation given to us, there were no amounts payable on account of provident fund, employees' state insurance, sales tax, wealth tax, duty of customs, duty of excise, value added tax and cess during the year.

(b) There were no undisputed amounts payable in respect of provident fund, employees' state insurance, income tax, sales tax, wealth tax, service tax, duty of customs, duty of excise, value added tax, cess and other material statutory dues in arrears as at March 31,2015 for a period of more than six months from the date they became payable.

(c) There are no dues of Income-tax, Service Tax and Cess which have not been deposited as on March 31, 2015 on account of disputes.

(d) There are no amounts that are due to be transferred to the Investor Education and Protection Fund in accordance with the relevant provisions of the Companies Act, 1956 (1 of 1956) and Rules made thereunder.

(viii) The Company is not registered for more than 5 years as on the Balance Sheet date. Therefore, the provisions of paragraph 3(viii) of the Order are not applicable to the Company.

(ix) According to information and explanations given to us, there were no dues payable by the Company to financial institutions or banks or debenture holders during the year. Therefore, the provisions of paragraph 3(ix) of the Order are not applicable to the Company.

(x) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from banks or financial institutions. Therefore, the provisions of paragraph 3(x) of the Order are not applicable to the Company.

(xi) According to the information and explanations given to us, during the year, the Company has not availed of any term loan from financial institutions. Therefore, the provisions of paragraph 3(xi) of the Order are not applicable to the Company.

(xii) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no material fraud on the Company has been noticed or reported during the year.

FOR DELOITTE HASKINS & SELLS Chartered Accountants Registration No. 117365W)

ZUBIN SHEKARY Partner (Membership No. 48814)

Mumbai, April 29, 2015

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