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Auditor Report of Jammu & Kashmir Bank Ltd.

Mar 31, 2023

Jammu & Kashmir Bank Limited,

Report on Audit of the Standalone Financial StatementsQualified Opinion

1. We have audited the accompanying standalone financial statements of Jammu & Kashmir Bank Limited (''the Bank''), which comprise the Balance Sheet as at 31st March 2023, the Statement of Profit and Loss and the Statement of Cash Flows for the year then ended, and notes to the financial statements including a summary of significant accounting policies and other explanatory information. In which are included the Returns of 47 branches/offices audited by us and 972 branches audited by Statutory Branch Auditors for the year ended on that date. The Branches/offices audited by us and those audited by other auditors have been selected by the Comptroller & Auditor General of India in accordance with the guidelines issued to the Bank by the Reserve Bank of India.

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matter described in the Basis for Qualified Opinion in section of our report, 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 are in conformity with accounting principles generally accepted in India and give a true and fair view of the state of affairs of the Bank as at 31^stMarch 2023, and its profit and its cash flows for the year ended on that date.

Basis for Qualified Opinion

2. We draw attention to the matter described below, the possible effects of undetected misstatements on the financial statements due to the inability to obtain sufficient and appropriate audit evidence which is material but, not pervasive either individually or in aggregate.

a) Refer to Note No. 15 of Schedule 18 of the financial statements regarding the allotment of 7 Crore Equity Shares aggregating Rs. 274.75 Crore for Rs. 39.25 per share (at a face value of Rs. 1) to 9834 employees by the Bank on 21st March 2023 under the J&K Bank Employee Stock Purchase Scheme, 2023 (JKBESPS 2023).

The Compensation Committee of the Board approved the ESPS issue open date as 15th March 2023 and the issue close date as 21^st March 2023. During the process of issue of certificate for listing purpose, we came across from the sample data of employees(who have applied for issue) that the employees availed their existing/ freshly enhanced facilities of general-purpose cash credit limit and personal loan accounts and transferred amounts from such loan accounts to their saving bank accounts from where the amount

for share issue was debited/ ( money was given). These transfers from credit facility to saving bank account were made during the period of opening of ESPS or just before that to allotment of shares under ESPS. This use of credit facility is not in line with RBI Directions. It has also been noticed that Allotment was made on 21.03.2023 and payment was realized on

22.03.2023 and 23.03.2023. Further to substantiate the facts, we requested the management to provide us the information regarding the number of shares allotted to employees where amount was transferred from general purpose Cash Credit Limits and Personal Loan Accounts of the employees to saving bank accounts during the period of opening to allotment of ESPS but management vide its letters dated

25.04.2023 & 02.05.2023 submitted that "The funds have been purely debited from the saving accounts of the respective employees under their mandateâ. We also escalated the issue to Audit Committee Board on17.04.2023 vide our detailed queries along with supporting documents but a reply from ACB is still awaited.

Based on the documents & information provided to us by the management, it seems that there is violation of:

â¢ Clause 21 of J&K Bank Employee Stock Purchase Scheme, 2023 (JKBESPS 2023) as there was a restriction that the Eligible Employee under the scheme shall not be entitled to any loan facility specifically for the purchase of Shares of the Bank under the Scheme;

â¢ Para No. 2.3.1.7 of RBI Master Circular- Loans and Advances - Statutory and Other Restrictions (RBI/2015-16 /95 DBR.No.Dir.BC.10/13.03.00/2015-16) dated July 1, 2015 which strictly prohibited the Banks to extend advances to their employees to purchase their own bank''s shares;

â¢ Section 39(1) & 42 of the Companies Act, 2013 as the allotment of the shares shall be made after receipt of funds under the said scheme in a separate Bank Account. However, the shares have been allotted on 21st March 2023 and payment was realised on

22.03.2023 and 23.03.2023 i.e. before receipt of the entire fund in the ESPS Scheme Account of the Bank;

b) Refer to Note no. 4.4 of Schedule 18 of the previous year''s financial statement i.e. of the FY 2021-22, the Bank has allotted 5,17,62,954 equity shares aggregating for Rs 28.97 per share (at a face value of Rs. 1), aggregating Rs. 149,95,72,777.38. We have not issued any certificate for the purpose of listing during the financial year 2021-22 so if any similar set of transactions were occurred, we can not comment on those transactions.

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.

Information Other than the Standalone Financial

Statements and Auditor''s Report Thereon

3. The Bank''s Board of Directors is responsible for the other information. The other information comprises the Corporate Governance Report, but does not include the standalone financial statements and our auditor''s report thereon

Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance or 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 in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of Management and Those Charged with

Governance for the Standalone Financial Statements

4. The Bank''s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 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 circulars and guidelines issued by the Reserve Bank of India (''RBI'') from time to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Bank and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the standalone financial statements, management 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 management either intends to liquidate the Bank or to

c) The possible impact of such misstatement referred to in Points ''a'' & ''b'' above are as follows If the Regulating Authority declare this issue as illegal & irregular allotment of shares in violation of various statutory provisions aforementioned,:

(1) Refer to Note No. 1 of the financial statement, the Paid-up Share capital of the Bank is Rs. 103,14,79,861/- which includes Share Capital of Rs. 12,17,62,954/- raised through the ESPS Scheme at a face value of Rs. 1 each (i.e. Rs. 5,17,62,954/- of FY 202122 & Rs. 7,00,00,000/- of FY 2022-23). the Share Capital will be overstated by Rs. 12,17,62,954/- i.e. 11.80% of the total paid-up share capital of the bank.

(2) Refer to Note No.2 .of the financial statement, the Share premium balance under the head ''Reserve & Surplus'' in the Balance Sheet is Rs. 218.41 Crore which includes Share Premium on the said allotted ESPS shares of Rs. 412,53,09,823/- (i.e. Rs. 144,78,09,823 of FY 2021-22 & Rs. 267,75,00,000/- of FY 2022-23). the Share Premium is overstated by Rs. 412,53,09,823/- i.e. 18.22% of the total share premium/securities premium of the bank.

(3) Refer to Note No. 1 of Schedule 18 of the financial statement regarding the composition of Regulatory Capital, the Capital Adequacy ratio (Common Equity Tier I & Capital conservation buffer), the financial ratios/prudent limits concerning net worth/capital funds have been adjusted due to observations made above at Sno. 1 and 2 in regard to such overstated Share capital 7-00 crores , Share Premium 331.31 crore due to prohibited advances to the employees for the purchase of shares.

(4) Refer to Note No.9 of the financial statement regarding Advances, a factual position of the Loan and Advances availed by the employees for the purchase of shares is not properly & separately disclosed. In the absence of complete information provided by the management, we are unable to quantify.

We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the 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 together with the ethical requirements that are relevant to our audit of the financial statements

cease operations, or has no realistic alternative but to do so.

Auditor''s Responsibilities for the audit of the Financial

Statements

5. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an 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 financial statements.

As part of an audit in accordance with SAs, we exercise

professional judgment and maintain professional scepticism

throughout the audit.

We also:

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

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 Companies Act, 2013, we are also responsible for expressing our opinion on whether the Bank has adequate internal financial controls system in place and the operating effectiveness of such controls.

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 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 financial statements, including the disclosures, and whether the financial statements represent the

underlying transactions and events in a manner that achieves fair presentation.

Materiality is the magnitude of 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.

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

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

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

6. We did not audit the financial statements / information of 972 branches and processing centres included in the standalone financial statements of the Bank whose financial statements / financial information reflect total assets of Rs 66031.33 crores as at 31st March 2023 and total revenue of Rs. 6503. for the year ended on that date, as considered in the standalone financial statements. These branches and processing centers cover 91.03 % of advances, 93.51 % of deposits and 93.84 % of Nonperforming assets as at 31st March 2023 and 64.31 % of revenue for the year ended 31st March 2023. The financial statements / information of these branches have been audited by the branch auditors whose reports have been furnished to us, and our opinion in so far as it relates to the amounts and disclosures included in respect of branches, is based solely on the report of such branch auditors.

7. The annual financial results include the results for the quarter ended 31st March 2023 being the balancing figure between the audited figures in respect of the full financial year and the published unaudited year to date figures up to the third quarter of the current financial year which were subjected to limited review by us.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

8. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of Section 29 of the Banking Regulation Act, 1949 and Section 133 of the Companies Act, 2013 .

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

10. 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 except for the matter described in the Basis for Qualified Opinion 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 except for the matter described in the Basis for Qualified Opinion, which have come to our notice, have been within the powers of the Bank;

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

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

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

a) we have sought and except for the matter described in the Basis for Qualified Opinion obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b) except for the matter described in the Basis for Qualified Opinion, in our opinion, proper books of account as required by law have been kept by the Bank so far as it appears from our examination of those books and proper returns adequate for the purposes of our audit have been received from branches not visited by us;

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

d) the Balance Sheet, the Statement of Profit and Loss and the Statement of Cash Flows dealt with in this report are in agreement with the books of account and with the returns received from the branches not visited by us

e) except for the matter described in the Basis for Qualified Opinion 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;

f) As per Notification No. GSR 463(E) sated

05.06.2015 Section 164(2) of Companies Act, 2013 is not applicable to Jammu & Kashmir Bank Limited being a Government Company.

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

h) as per the Notification No.GSR 463(E) dated

05.06.2015 Section 197 of Companies Act, 2013 is not applicable to The Jammu & Kashmir Bank Limited, being a Government Company;

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 12., to the financial statements;

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

iv. (a) The management has represented that, to the best of its knowledge and belief, other than as disclosed in the notes to the accounts, 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 ("Intermediariesâ), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the company ("Ultimate 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 notes to the accounts, no funds have been received by the Bank from any person(s) or entity(ies), including foreign entities ("Funding Partiesâ), 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 ("Ultimate Beneficiariesâ) or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries; and

has come to our notice that has caused us to believe that the representations under sub clause (a) and (b) contain any material misstatement.

v. The Bank has not declared or paid any dividend during the year 2022-23.

vi. The Bank has used such accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has been operated throughout the year for all transactions recorded in the software and the audit trail feature has not been tampered with and the audit trail has been preserved by the company as per the statutory requirements for record retention. (This Clause is applicable from the financial 2023-2024).

Mar 31, 2021

The Jammu & Kashmir Bank Limited

Report on Audit of the Standalone Financial StatementsOpinion

1. We have audited the accompanying standalone financial statements of The Jammu & Kashmir Bank Limited (''the Bank''), which comprise the Balance Sheet as at 31^st March 2021, the Statement of Profit and Loss and the Statement of Cash Flows for the year then ended, and notes to the financial statements including a summary of significant accounting policies and other explanatory information. In which are included the Returns of 57 branches/offices audited by us and 928 branches audited by Statutory Branch Auditors for the year ended on that date. The Branches/offices audited by us and those audited by other auditors have been selected by the Comptroller & Auditor General of India in accordance with the guidelines issued to the Bank by the Reserve Bank of India.

2. In our opinion and to the best of our information and according to the explanations given to us and based on the consideration of the reports of other auditors on separate audited financial statements/ financial information of the branches, as referred to in paragraphs 12 below, the aforesaid financial statements give the information required by the Banking Regulation Act, 1949 (the ''Act'') in the manner so required for bank and are in conformity with accounting principles generally accepted in India and:

a) the Balance Sheet, read with the notes thereon is a full and fair Balance Sheet containing all the necessary particulars, is properly drawn up so as to exhibit a true and fair view of the state of affairs of the Bank as at 31^st March, 2021;

b) the Profit and Loss Account, read with the notes thereon shows a true balance of profit and

c) the Cash Flow Statement gives a true and fair view of the cash flows for the year ended on that date.

Basis for Opinion

3. We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Companies Act, 2013. Our responsibilities under those Standards are further described in the 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 together with the ethical requirements that are relevant to our audit of the financial statements under the provisions of the Companies Act, 2013 and the Rules there under, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters

4. Key audit matters are those matters that in our professional judgment are of most significance, in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements of the branches, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

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

Key audit matters

How our audit addressed the key audit matter

Modified Audit Procedures carried out in the light of continuing COVID-19 pandemic:

Due to the continuing COVID-19 pandemic, lockdown declared by some of the State Governments and travel restrictions imposed by State Governments / Local Authorities during the period of our audit and the RBI directions to Bank to facilitate carrying out audit remotely wherever physical access was not possible, audit could not be conducted by visiting the premises of certain Branches / Zonal Offices/ Business Units of the Corporate Office

As we could not gather audit evidence in person/ physically/ through discussions and personal interactions with the officials at the Branches/Zones/ Business Units of the Corporate Office either fully or partially, we have identified such modified audit Procedures as a Key Audit Matter.

Accordingly, our audit procedures were modified to carry out the audit remotely.

Due to the outbreak of COVID-19 pandemic that caused nationwide lockdown and other travel restrictions imposed by the Central and State Governments/local administration during the period of our audit, we could not travel to the Branches/Zonal Offices/Business Units of the Corporate Office and carry out the audit processes physically at the respective offices.

Wherever physical access was not possible, necessary records/ reports/ documents/ certificates were made available to us by the Bank through digital medium, emails. To this extent, the audit process was carried out on the basis of such documents, reports and records made available to us which were relied upon as audit evidence for conducting the audit and reporting for the current period.

Accordingly, we modified our audit procedures for control testing and substantive testing which included the following:

a. Conducted verification of necessary records/ documents/ through remote access/emails in respect of some of the Branches / Zonal Offices/Business Units and other offices of the Bank wherever physical access was not possible.

b. Carried out verification of scanned copies of the documents, deeds, certificates and the related records made available to us through emails and remote access over secure network of the Bank.

c. Making enquiries and gathering necessary audit evidence through Video Conferencing, dialogues and discussions over phone calls/conference calls, emails and similar communication channels.

d. Resolution of our audit observations telephonically/ through email instead of of a face-to-face interaction with the designated officials.

Emphasis of Matter

5. We draw attention to relevant note of Schedule 18 to the Financial Results which explains the uncertainties due to outbreak of novel corona virus (COVID 19) and the management assessment of its impact on the business operation of the Bank.

Our opinion is not modified in respect of this matter.

Information Other than the Financial Statements and

Auditor''s Report thereon

6. The Bank''s Board of Directors is responsible for the other information. The other information comprises the Corporate Governance Report (but does not include the financial statements and our auditor''s report thereon), which we obtained prior to the date of this auditor''s report, and Directors'' Report, including annexures, if any, thereon, which is expected to be made available to us after that date.

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

Responsibilities of Management and Those Charged with

Governance for the Standalone Financial Results

7. These standalone Financial Results have been prepared on the basis of the standalone annual financial statements and reviewed quarterly standalone Financial Results up to the end of the third quarter. The Bank''s Management and Board of Directors are responsible for the matters stated in section 134(5) of the Companies Act, 2013 (''the Act'') with respect to the preparation of these standalone Financial Results that give a true and fair view of the net profit and other financial information in accordance with the recognition and measurement principles laid down in the Accounting Standards specified under Section 133 of the Act, the relevant provisions of the Banking Regulation Act, 1949, the circulars, guidelines and directions issued by the Reserve Bank of India (RBI) from time to time ("RBI Guidelinesâ) and other accounting principles generally accepted in India and in compliance with Regulation 33 of the Listing Regulations. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Bank and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting

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

In preparing the standalone Financial Results, Management is responsible for assessing the 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 management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

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

Auditor''s Responsibilities for the Audit of the Standalone

Financial Results

8. Our objectives are to obtain reasonable assurance about whether the standalone Financial Results as a whole are free from material misstatement, whether due to fraud or error, and to issue an 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 Results.

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

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)(D of the Companies Act, 2013, we are also responsible for expressing our opinion on whether the Bank has adequate internal financial controls system in place and the operating effectiveness of such controls.

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

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

Other Matters

9. We did not audit the financial statements/information of 928 branches/offices included in the standalone Financial Results of the Bank whose Financial Results reflect total advances of Rs.68368.84 Crores and total revenue of Rs.5657.51 Crores as at 31^st March 2021, as considered in the standalone Financial Results. The financial statements/ information of these branches has been audited by the branch auditors whose reports have been furnished to us, and in our opinion in so far as it relates to the amounts and disclosures included in respect of branches, is based solely on the report of such branch auditors. Our opinion on the standalone financial statements does not cover the other information and the Basel-III disclosure and we do not express any form of assurance conclusion thereon.

10. The annual financial results include the results for the quarter ended 31st March 2021 being the balancing figure between the audited figures in respect of the full financial year and the published unaudited year to date figures up to the third quarter of the current financial year which were subjected to limited review by us.

Report on Other Legal and Regulatory Requirements

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

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

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

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

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

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

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

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

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

c) the reports on the accounts of the branch offices of the bank audited under section 143(8) of the

Act by branch auditors of the Bank have been sent to us and have been properly dealt with by us in preparing this report;

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

e) 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;

f) on the basis of written representations received from the directors as on 31March 2021 and 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;

h) as per the Notification No.GSR 463(E) dated 05.06.2015 Section 197 of Companies Act, 2013 is not applicable to The Jammu & Kashmir Bank Limited, being a Government Company;

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 in Schedule 18-Notes on Accounts attached;

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

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

For O P Garg & Co. For Verma Associates For P C Bindal & Co. For K. K. Goel & Associates

Chartered Accountants Chartered Accountants Chartered Accountants Chartered Accountants

FRN:01194N FRN:02717N FRN:03824N FRN:05299N

(CA. Vikram Garg) (CA. Madan Verma) (CA. Shailza Wazir) (CA. Amit Kumar Gupta)

Partner Partner Partner Partner

M.No.097038 M.No.081631 M.No.502279 M.No.501373

UDIN:21097038AAAAEV8621 UDIN:21081631AAAACO9032 UDIN:21502279AAAAEC1865 UDIN:21501373AAAABW5989

Place : Srinagar Date: 17^th June 2021

Mar 31, 2018

Independent Auditors Report

The Members of

The Jammu & Kashmir Bank Limited

Report on Standalone Financial Statements

1. We have audited the accompanying standalone financial statements of THE JAMMU AND KASHMIR BANK LIMITED

(the "Bank") as at March 31, 2018 which comprise the Balance Sheet as at March 31, 2018 and the Profit and Loss Account and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information. Incorporated in these financial statements are the returns of 61 branches/offices audited by us and 880 branches audited by Statutory Branch Auditors. The Branches/offices audited by us and those audited by other auditors have been selected by the Comptroller & Auditor General of India in accordance with the guidelines issued to the Bank by the Reserve Bank of India.

Management''s Responsibility for the Standalone Financial

Statements

2. The Bank''s Board of Directors is responsible for the matters stated in section 134(5) of the Companies Act, 2013 (âthe Act'') with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Bank in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and provisions of Section 29 of the Banking Regulation Act, 1949 and circulars and guidelines issued by the 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 financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

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

4. 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.

5. We conducted our audit of the Bank including its branches in accordance with Standards on Auditing (âthe Standards'') 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 of material misstatements.

6. 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 judgement, 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 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 financial statements.

7. 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

8. 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 in the manner so required for banking companies and give a true and fair view in conformity with accounting principles generally accepted in India of the state of affairs of the Bank as at 31st March, 2018, and its profit and its cash flows for the year then ended.

9. Emphasis of Matter

(i) We draw attention to matter set out in Note No.4, that the Bank recognized Deferred Tax Asset (DTA) as per AS-22 on the difference in the provision for NPA as per books of accounts and Income Tax Act, 1961, amounting to '' 238.18 crores by including the same in tax expenses with a corresponding credit to extraordinary income. Our opinion is not modified in respect of this matter.

(ii) We also draw attention matter set out in Note No. 9 regarding deferment of additional provision requirement on account of the enhancement in gratuity limits as per the amendment dated 29 March, 2018 in Payment of Gratuity Act, 1972 in terms of RBI approval vide letter no. DHR.BP.9730/21.04.018/2017- 18 dated 27th April, 2018, and the unamortized balance as at 31st March, 2018 of Rs, 37.42 crores. Our opinion is not modified in respect of this matter.

(iii) We also draw attention matter set out in Note No.12 regarding Rehabilitated/Restructured advances in view of flood during 2014 and disturbance during 2016, Bank rehabilitated affected borrowal accounts. The total amount of Rehabilitated/Restructured advances stood at Rs, 4117.59 crores (Previous year Rs, 3265.83 crores). The rehabilitation included funding of loss suffered by the borrowers, deferment of instalments of term loans and funding of interest on these accounts. The Bank has recognized funded interest aggregating Rs, 796.02 crores as interest income up to 31st December, 2017. The Bank has capitalized funded interest (net of recoveries) of Rs, 510.10 crores by staggering in five quarters beginning with 1st quarter ended 31st March, 2018 in compliance of dispensation to the Bank by Reserve Bank of India. Accordingly, the Bank has created Interest Capitalization of Rs, 102.62 Crores by corresponding debit to interest income in Profit and Loss account. Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory Requirements

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

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

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

i. 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;

ii. the transactions of the Bank, which have come to our notice, have been within the powers of the Bank;

iii. the returns received from the offices; and branches of the Bank have been found adequate for the purposes of our audit.

13. Further, as required by section 143(3) of the Act, we further

report that:

i. 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;

ii. 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;

iii. the reports on the accounts of the branch offices audited by branch auditors of the Bank under section 143(8) of the Companies Act 2013 have been sent to us and have been properly dealt with by us in preparing this report;

iv. 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;

v. 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;

vi. on the basis of written representations received from the directors as on 31st March, 2018 taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2018 from being appointed as a director in terms of Section 164(2) of the Act;

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

viii. 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:

a) the Bank has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Schedule 12 - Note 26.12 to the financial statements;

b) the Bank did not have any, on long term contracts including derivative contracts for which there were any material foreseeable losses;

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

Annexure-A to para 13 of independent auditor''s report of even date on the standalone financial statements of Jammu and Kashmir Bank Limited.

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

Companies Act 2013 for F.Y. 2017-18

Sl. No.	Directions/Sub directions	Auditor''s comments including action taken wherever required	Impact on accounts and financial statements
1.	Whether the company has clear title/lease deeds for free-hold and leasehold land respectively? If not please state the area of freehold and leasehold land for which title/lease deeds are not available.	As per information and explanations given to us, the Bank does not have clear title/lease deeds for freehold and leasehold lands for the following properties:-S.No Land Area 1) Vashi, Mumbai (1st Floor) 5400 Sq.ft 2) Budgam 4 Kanals 3) Ansal Plaza, Khelgaon, Delhi 17787 Sq.Ft. 4) Kargil 1 Kanal 4 Marla 5) Currency Chest Kulgam 2 Kanals It is advised to complete the documentation for clear title at the earliest.	The acquisition value of the said lands/ properties has been capitalized and the value as on 31.03.2018 is '' 26.73 crores.
2.	Please report whether there are any cases of waiver/ write off of debts/loans/interest etc., if yes, the reasons there for and the amount involved.	There are cases of waiver/write off of debts/ loans/ interest etc. amounting to Rs, 15.17 crores in addition to the waiver of unapplied interest of Rs, 199.99 crores on account of negotiated settlement with the borrowers defaulting in payment due to the circumstances beyond their control such as death/disappearance of the borrower, recession in economy, no enforceable security, natural calamities such as earthquake, flood, drought, change in Govt. policy, genuine business failure in-spite of sincere efforts made by borrower etc. and where the recovery chances through normal business operations are bleak. During the financial year six accounts (NPA) were sold to Asset Construction Companies (ARC) having total principal NPA balance of Rs, 1606.35 Crores, and unapplied interest of Rs, 468.40 Crores against sale proceeds of Rs, 948.45 Crores resulting in sacrifice of Rs, 1126.30 Crores.	Waiver/Write off resulted in loss of Rs, 215.16. Sale of NPAs to ARC resulted in release of Provision held by Rs, 389.15 Crores and increase of profits by equivalent amount. This has also resulted in reduction in NPAs by 1606.35 Crores.
3.	Whether proper records are maintained for inventories lying with third parties & assets received as gift from Govt. or other authorities	As per explanations given to us, the company has not received any assets as gift/grant(s) from government or other authorities. The company has no inventories lying with third parties.	NIL
4.	Whether the restructuring of loan was done as per the provisions of the Reserve Bank of India and BankRs,s own Restructuring of loan Policy.	As per information and explanations given to us, the bank has restructured loans. Restructuring of loans done during the year was as per the provisions of the Reserve Bank of India and Bank''s own Restructuring of loan Policy.	There was no material impact on Financial Statements.
5.	Whether the Bank is maintaining/developing various assets of the State Govt. The treatment of the assets and expenditure incurred and revenue earned may be examined and comment may be offered.	As per information and explanations given to us, the bank is maintaining/developing Parks and Gardens including Golf Course which are not owned by the bank. The bank has incurred 31.99 Crores in addition to opportunity cost of deployment of Staff for maintaining and development. The expenditure has been incurred as part of CSR expenditure.	The expenditure amounting to Rs, 31.99 crores have been incurred and revenue of Rs, 1.76 crores has been earned for maintaining/ developing parks/gardens and amounts have been debited/ credited to the Profit and Loss Account under CSR.

Sl. No. Directions/Sub directions	Auditor''s comments including action taken wherever required	Impact on accounts and financial statements
6. Whether the branches were doing window dressing and its impact/materiality on the overall deposit portfolio.	As per the reports of the Branch Auditors, some branches attempted window dressing by inflating deposits aggregating Rs, 3.84 Crores at the reporting date which were repaid immediately after close of the year.	There has resulted in overstatement of Deposits and Advances by Rs, 3.84 crores. However impact was not material on the overall deposit portfolio.
7. Whether the Bank has been able to achieve the targets under Priority sector lending, if not, impact on the financial health of the Bank by lending the shortfall amount in Rural infrastructure Development Fund, Small industrial Development Bank of India, etc. may please be brought out.	As per information and explanations given to us, the Bank has not been able to achieve the targets under priority sector lending. As a result of shortfall, the bank has to made deposits of low yield interest with the following designated agencies as on 31-03-2018: Particulars (Rs, in Crores) NABARD/RIDF 1873.82 SIDBI 375.96 NHB 257.78 Total 2507.56	The impact on the financial health is lower rate of return of interest ranging from 3.25% p.a. to 5% p.a. received from the agencies with which deposits were made for shortfall.
8. Whether there were cases of greening of advances, up-gradation of loan account at the fag end of the Financial Year or delay/ non- declaration of Nonperforming Assets as per RBI guidelines. Its impact on the profitability and Asset Classification.	Advances amounting to Rs, 305.19 crores were not declared as NPA as per RBI guidelines which were downgraded after those were identified by the Statutory Auditors and additional provision of Rs, 64.67 Crores and reversal of unrealised interest Rs, 22.94 Crores was suggested.	Had the Auditors not identified the said NPAs, the advances of '' 305.19 Crores would have been shown as standard assets. The impact thereof on increase of profit is as follows: 1. Interest Reversal '' 22.94 Crores 2. Increase in NPA Provision '' 64.97 Crores
9. A report on age-wise analysis of pending legal/ arbitration cases including the reasons of pendency and existence/ effectiveness of a monitoring mechanism for expenditure on all legal cases (foreign and local) may be given.	There are 469 Cases involving '' 385.24 Crores pending legal/arbitration cases being claims against the bank not acknowledged as debts.	There was no such item in pending legal/arbitration cases which required provisioning.

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

1. We have audited the internal financial controls over financial reporting of Jammu and Kashmir Bank Limited (âthe Bank'') as at 31st March, 2018 in conjunction with our audit of the standalone financial statements of the Bank for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

2. The Bank''s Board of Directors is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Bank considering the essential components of internal control stated in the "Assessment of Adequacy of Internal Financial Controls Over Financial Reporting" in line with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting ("Guidance Note") issued by the Institute of Chartered Accountants of India (âthe ICAI''). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to 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 (âthe Act'').

Auditor''s Responsibility

3. 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 on Audit of Internal Financial Controls Over Financial Reporting (âthe Guidance Note'')and the Standards on Auditing (âthe Standards''), issued by the ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls, both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining and understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor''s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

5. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Bank''s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

6. 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 financial statements for external purposes in accordance with generally accepted accounting principles. A Bank''s internal financial control over financial reporting includes those policies and procedures that:

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

(b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Bank are being made only in accordance with authorizations of management and directors of the bank; and

(c) Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Bank''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial

Reporting

7. Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become in adequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

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

For O P Garg & Co. For Verma Associates.

Chartered Accountants Chartered Accountants

FRN:01194N FRN:02717N

(CA.Vikram Garg) (CA.MadanVerma)

Partner Partner

M.No.097038 M.No.081631

For P C Bindal & Co. For K.K.Goel & Associates.

Chartered Accountants Chartered Accountants

FRN:03824N FRN:05299N

(CA.Rajan Gupta) (CA. Amit Goel)

Partner Partner

M.No.090330 M.No.098913

Place : Srinagar

Dated : 30^th May, 2018

Mar 31, 2017

The Members of

The Jammu & Kashmir Bank Limited

Report on the Standalone Financial Statements

1. We have audited the accompanying standalone financial statements of The Jammu and Kashmir Bank Limited (âthe Bank''), which comprise the Balance Sheet as at 31^st March 2017, 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 incorporated in these financial statements are the returns of 52 Branches/offices audited by us, 848 branches/offices audited by statutory branch Auditors. The branches/offices audited by us and those audited by other Auditors have been selected by the Comptroller and Auditor General of India in accordance with the Guidelines issued to the bank by the Reserve Bank of India.

Management''s Responsibility for the Standalone Financial

Statements

Auditor''s Responsibility

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

6. 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 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 financial statements.

7. 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

8. 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 in the manner so required for banking companies and give a true and fair view in conformity with accounting principles generally accepted in India of the state of affairs of the Bank as at 31^st March, 2017, and its loss and its cash flows for the year then ended.

Emphasis of Matter

9. We draw the attention to the following matters in the notes to the financial statements:

i. Note No.43 (b) on account of relaxation in asset classification, allowed by RBI for all borrowal accounts of J & K State except those which are âoverdue'' as on July 07, 2016, in term of RBI master directions issued for Relief measures by banks in areas affected by natural calamities. Accordingly the bank has rehabilitated/ restructured borrowal accounts including the accounts overdue as on July 07, 2016 after recovering the overdue amount as of July 07, 2016. A total amount of ?3265.83 crore represents the rehabilitated amount for which a provision of Rs. 163.29 crore and Rs. 134.98 crore on account of DIFV has been kept as on 31.03.2017.

Our opinion is not qualified on the matter

Report on Other Legal and Regulatory Requirements

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

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

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

i. 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;

ii. the transactions of the Bank, which have come to our notice, have been within the powers of the Bank.

iii. the returns received from the offices; and branches of the Bank have been found adequate for the purposes of our audit.

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

i. 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;

ii. 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 .

iv. 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;

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

a) the Bank has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Schedule 12 - Note 23.12 to the financial statements;

b) the Bank did not have any, on long term contracts including derivative contracts for which there were any material forseeable losses;

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

Annexure-A to para 10 of Independent Auditors Report of even date on the Standalone Financial Statements of the Jammu and Kashmir Bank Limited.

Directions/sub-directions of Comptroller and Auditor General of India under Section 143(5) of the Companies Act, 2013 for F.Y. 2016-17

Sl. No.	Directions/Sub directions	Auditor''s comments including action taken wherever required	Impact on accounts and financial statements
1	Whether the company has clear title/lease deeds for free-hold and leasehold land respectively? If not please state the area of freehold and leasehold land for which title/lease deeds are not available.	As per information and explanations given to us, the company does not have clear title/lease deeds for freehold and leasehold lands for the following properties:- S. No. Land Area 1) Vashi, Mumbai (1st Floor) 5400 Sq.ft 2) Budgam 4 Kanals 3) Ansal Plaza, Khelgaon, Delhi 17787 Sq.Ft. 4) Ram Kishore Road, Delhi 3411.28 sq.mt 5) Kargil 1 Kanal 4 Marla 6) Currency Chest Kulgam 2 Kanals It is advised to complete the documentation for clear title at the earliest.	The acquisition value of the said lands/ properties has been capitalized and the value as on 31-03-2017 is Rs. 137.33 crores.
2	Please report whether there are any cases of waiver/write off of debts/ loans/interest etc., if yes, the reasons there for and the amount involved	There are cases of waiver/write off of debts/ loans/ interest etc. amounting to Rs. 30.54 crores in addition to the waiver of unapplied interest of Rs. 96.11 crores on account of negotiated settlement with the borrowers defaulting in payment due to the circumstances beyond their control such as death/disappearance of the borrower, recession in economy, no enforceable security, natural calamities such as earthquake, flood, drought, change in Govt. policy, genuine business failure inspite of sincere efforts made by borrower etc. and where the recovery chances through normal business operations are bleak.	Profit for the current year is reduced by Rs. 30.54 crores and unrealized income of Rs. 96.11 crores has been forgone.
3	Whether proper records are maintained for inventories lying with third parties & assets received as gift/ grant(s) from Govt. or other authorities.	As per explanations given to us, the company has not received any assets as gift/grant(s) from government or other authorities. The company has no inventories lying with third parties.	NIL
4	Whether the restructuring of loan was done as per the provisions of the Reserve Bank of India and Bank''s own Restructuring of loan Policy.	As per information and explanations given to us, the restructuring of loans done during the year was as per the provisions of the Reserve Bank of India and Bank''s own Restructuring of loan Policy.	Profit of the current year is reduced by Rs. 188.06 crores on account of provision made on the fresh restructured accounts.
5	Whether the Bank is maintaining/developing various assets of the State Govt. The treatment of the assets and expenditure incurred and revenue earned may be examined and comment may be offered.	As per information and explanations given to us, the bank is maintaining/developing various assets of the State Govt. which are not on the charge of the company. The expenditure amounting to Rs. 16.62 crores has been incurred & revenue of Rs. 0.69 crore has been earned for maintaining/developing of those assets and amounts have been debited/credited to the Profit & Loss Account.	Profit of the current year is reduced by net Rs. 15.93 crores.

Whether the branches were doing window dressing and its impact/materiality on the overall deposit portfolio.

As per the reports of the Branch Auditors, some branches were involved in doing window dressing by which there is an impact of Rs. 0.17 crore increase on the overall deposit portfolio.

There is an impact of Rs. 0.17 crore increase in the deposits by similar increase in the advances which has now been reversed.

Whether the Bank has been able to achieve the targets under Priority sector lending, if not, impact on the financial health of the Bank by lending the shortfall amount in Rural Infrastructure Development Fund, Small Industrial Development Bank of India, etc. may please be brought out.

As per information and explanations given to us, the bank has not been able to achieve the targets under priority sector lending. As a result of shortfall, the bank has made deposits of low yield interest with the following designated agencies as on 31-03-17 : PARTICULARS (Rs. In Crores) NABARD 446.53 RIDF (NABARD) 923.52 SIDBI 134.90 NHB (RHDF) 260.29 TOTAL 1765.24

The impact on the financial health of the bank is lower rate of return of interest ranging from 3.75% p.a. to 6.50% p.a. received from the agencies with which deposits were made for shortfall.

Whether there were cases of greening of advances, upgradation of loan account at the fag end of the Financial Year or delay/ non-declaration of Nonperforming Assets as per RBI guidelines. Its impact on the profitability and Asset Classification.

Advances amounting to Rs. 936.56 crores were not declared by the bank as NPAs as per RBI guidelines which were downgraded after those were identified by the statutory auditors.

Had the Auditors not identified the said NPAs, the advances of Rs. 936.56 crores would have been shown as standard assets. The impact thereof on increase of loss is as follows:

1. Interest Reversal : Rs. 72.34 Crores

2. Increase in NPA Provision : Rs. 145.78 Crores

"Annexure-B" to the Independent Auditors Report of even date on the Standalone Financial Statements of

The Jammu and Kashmir Bank Limited

Report on the Internal Financial Controls under Clause (i) of

Subsection 3 of Section 143 of the Companies Act, 2013.

1. We have audited the internal financial controls over financial reporting of The Jammu & Kashmir Bank Limited (âthe Bank'') as at 31 March 2017 in conjunction with our audit of the standalone financial statements of the Bank for the year ended on that date.

Management''s Responsibility for Internal Financial Controls

2. The Bank''s Board of Directors is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Bank considering the essential components of internal control stated in "Assessment of Adequacy of Internal Financial controls over Financial Reporting "in line with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(âthe Guidance Note") issued by the Institute of Chartered Accountants of India (âthe ICAI"). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to 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 (âthe Act'').

Auditor''s Responsibility

3. 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 on Audit of Internal Financial Controls Over Financial Reporting (âthe Guidance Note'') and the Standards on Auditing (âthe Standards''), issued by the ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls, both issued by the ICAI. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

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

Meaning of Internal Financial Controls Over Financial Reporting

6. 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 financial statements for external purposes in accordance with generally accepted accounting principles. A bank''s internal financial control over financial reporting includes those policies and procedures that :

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

b. provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the bank are being made only in accordance with authorizations of management and directors of the bank; and

c. provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the bank''s assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls Over Financial

Reporting

7. Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Opinion

8. In our opinion, the Bank has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial

reporting were operating effectively as at 31 March 2017, based on "the internal control over financial reporting criteria established by the Bank considering the essential components of internal control stated in the Guidance Note issued by the ICAI".

For Dhar Tiku & Co. For Arora Vohra & Co. For Dharam Raj & Co.

Chartered Accountants Chartered Accountants Chartered Accountants

FRN 003423N FRN 009487N FRN 014461N

CA. Madhusudan Meher CA. Hardeep Aggarwal CA. Dharam Raj

Partner Partner Partner

(M. No. 097409) (M. No. 088243) (M. No. 094108)

Mar 31, 2016

1. We have audited the accompanying standalone financial statements of The Jammu and Kashmir Bank Limited (''the Bank''), which comprise the Balance Sheet as at 31st March 2016, 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 and notes forming part of the accounts. Also incorporated in these financial statements are the returns of 55 Branches/Offices audited by us and 837 Branches/Offices audited by Statutory Branch Auditors. The Branches/ Offices audited by us and those audited by the other auditors have been selected by the Comptroller & Auditor General of India in accordance with the guidelines issued to the Bank by the Reserve Bank of India.

Management''s Responsibility for the Standalone Financial Statements

2. The Bank''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 standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Bank in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 and provisions of Section 29 of the Banking Regulation Act, 1949 and circulars and guidelines issued by the Reserve Bank of India (''RBI'') from time to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Bank and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

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

4. 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.

5. We conducted our audit of the Bank including its branches in accordance with Standards on Auditing (''the Standards'') 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 of material misstatements.

6. 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 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 financial statements.

7. 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

8. 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 in the manner so required for banking companies and give a true and fair view in conformity with accounting principles generally accepted in India of the state of affairs of the Bank as at 31st March, 2016, and its profit/loss and its cash flows for the year then ended.

Report on Other Legal and Regulatory Requirements

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

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

11. 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.

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

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

i) 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;

ii) 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;

iii) the reports on the accounts of the branch offices audited by branch auditors of the Bank under section 143(8) of the Companies Act 2013 have been sent to us and have been properly dealt with by us in preparing this report;

iv) 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;

v) 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;

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

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

viii) 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:

a) the Bank has disclosed the impact of pending litigations on its financial position in its financial statements;

b) the Bank did not have any long-term contracts including derivative contracts for which there were any material foreseeable losses; and

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

Annexure-A to para 10 of Independent Auditors Report of even date on the Standalone Financial Statements of the Jammu and Kashmir Bank Limited.

Directions/sub-directions of Comptroller and Auditor General of India under Section 143(5) of the Companies Act, 2013

SI. No. Directions/Sub directions Auditor''s comments including Impact on accounts and financial action taken wherever required statements

1 Whether the company has clear As per information and explanations The acquisition value of the said title/lease deeds for freehold and given to us, the company has clear lands/properties has been capitalized leasehold land respectively? If not title/lease deeds for freehold and and the value as on 31-03-2016 is please state the area of freehold leasehold lands except the following Rs.16.78 crores. and leasehold land for which title/ Land Area lease deeds are not available. Vashi, Mumbai 5400 Sq.ft (1st Floor) Budgam 4 Kanals Ansal Plaza, 17787 Sq.Ft. Khelgaon, Delhi (2nd and 3Rd floor)

It is advised to complete the documentation for clear title at the earliest.

2 Please report whether there are There are cases of waiver /write Profit for the current year is reduced any cases of waiver/write off of off of debts/ loans/ interest etc. by Rs.2.11 crores and unrealized income debts/ loans/ interest etc., if yes, the amounting toRs.2.11 crores in addition of Rs.18.03 crores has been forgone, reasons there for and the amount to the waiver of unaplied interest of involved Rs. 18.03 crores on account of negotiated settlement with the borrowers defaulting in payment due to the circumstances beyond their control such as death/ disappearance of the borrower, recession in economy, no enforceable security, natural calamities such as earthquake, flood, drought, change in govt, policy, genuine business failure in spite of sincere efforts made by borrower etc. and where the recovery chances through normal business operations are bleak.

3 Whether proper records are As per explanations given to us, NIL maintained for inventories lying the company has not received with third parties & assets received any assets as gift/grant(s) from as gift/ grant(s) from Govt, or other government or other authorities, authorities. The company has no inventories.

4 Whether the restructuring of loan As per information and explanations Profit of the current year is reduced by was done as per the provisions given to us, the restructuring of Rs.12.60 crores on account of provision of the Reserve Bank of India and loans done during the year was as made on the restructured accounts. Bank''s own Restructuring of loan per the provisions of the Reserve Policy. Bank of India and Bank''s own Restructuring of loan Policy.

SI. No. Directions/Sub directions Auditor''s comments including Impact on accounts and financial action taken wherever required statements

5 Whether the Bank is maintaining/ As per information and explanations Profit of the current year is reduced developing various assets of the given to us, the bank is maintaining/ by net Rs.12.70 crores. State Govt. The treatment of the developing various assets of assets and expenditure incurred and the State Govt, which are not on revenue earned may be examined the charge of the company. The and comment may be offered. expenditure amounting to Rs.13.86 crores has been incurred & revenue of Rs.1.16 crores has been earned for maintaining/ developing of those assets and amounts have been debited/credited to the Profit & Loss Account.

6 Whether the branches were doing As per information and explanations There is an impact of Rs.2.48 crores window dressing and its impact/ given to us and as per the reports increase in the deposits by similar materiality on the overall deposit of the Branch Auditors, some increase in the advances which has portfolio. branches were involved in doing now been reversed. window dressing by which there is an impact of Rs.2.48 crores increase on the overall deposit portfolio.

7 Whether the Bank has been able to As per information and explanations The impact on the financial health achieve the targets under Priority given to us, the bank has not been of the bank is lower rate of return sector lending, if not, impact on able to achieve the targets under of interest ranging from 3.75% p.a. the financial health of the Bank priority sector lending. As a result to 6.50% p.a. received from the by lending the shortfall amount in of shortfall, the bank has deposits of agencies with which deposits were Rural infrastructure Development low yield interest with the following made for shortfall. Fund, Small industrial Development as on 31-03-16 : Bank of India, etc. may please be PARICULARS (Rs.In Crores) br0Ught0Ut NABARD 823.44

RIDF(NABARD) 1065.30

SIDBI 165.27

NHB(RHDF) 297.07

TOTAL 2348.08

8 Whether there were cases of One account amounting to Rs.142.50 NIL greening of advances, up gradation crores identified by RBI in AQR (BOS of loan account at the fag end of as on 31.03.2016- Rs.113.65 crores) the Financial Year or delay /non- has not been downgraded as NPAs declaration of Non-performing in view of dispensation given by RBI Assets as per RBI guidelines. Its on the basis of representation made impact on the profitability and by the banks. Asset Classification. Further advances amounting to interest amounting to Rs.33.76 crores Rs.246.89 crores were not declared has been reversed on said NPAs and by the bank as NPAs as per RBI Provision of Rs.60.10 crores has been guidelines which were downgraded pr0vided resulting in decrease in after those were identified by the profit of Rs.93 86 crores statutory auditors.

For Gupta Sharma & Associates For Dhar Tiku & Co. For Arora Vohra & Co

Chartered Accountants Chartered Accountants Chartered Accountants

FRN:001466N FRN:003423N FRN:009487N

CA Gurneet Singh Bhan CA Madhusudan Meher CA Prem C. Bansal

Partner Partner Partner

(M. No. 532675) (M No.097409) (M. No. 083597)

For Darshan Nagpal & Associates For Dharam Raj & Co

Chartered Accountants Chartered Accountants

FRN:011022N FRN:014461N

CA Vishal Rometra CA Dharam Raj

Partner Partner

(M. No. 501333) (M No.094108)

Place: Srinagar

Dated: 24th May 2016

Mar 31, 2015

1. We have audited the accompanying standalone financial statements of The Jammu and Kashmir Bank Limited (here-in-after called the "Bank") which comprise the Balance Sheet as at 31st March, 2015, Profit and Loss account and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies, other explanatory information and notes forming part of accounts. Also incorporated in these financial statements are the returns of 59 Branches/Offices audited by us and 784 Branches/Offices audited by Statutory Branch Auditors. The Branches/Offices audited by us and those audited by the other auditors have been selected by the Comptroller & Auditor General of India in accordance with the guidelines issued to the Bank by the Reserve Bank of India.

Management's responsibility for the standalone Financial statements

2. The Bank's Management is responsible for the matters stated in section 134(5) of the Companies Act, 2013 ("the Act") with respect to 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 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 and in accordance with the Banking Regulation Act, complying with Reserve Bank of India Guidelines from time to time. This responsibility also includes maintenance of adequate accounting records in accordance with 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 internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation 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

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

4. We have taken in to 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.

5. 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.

6. An audit involves performing procedures to obtain audit evidence about the amounts and 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 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, but not for the purpose of expressing an opinion on whether the Bank 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 accounting policies used and the reasonableness of the accounting estimates made by Bank management, as well as evaluating the overall presentation of the financial statements.

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

opinion

8. In our opinion, and to the best of our information and according to their explanations given to us, the aforesaid standalone financial statements together with the notes there on give the information required by the Banking Regulation Act,1949 as well as the Companies Act, 2013, in the manner so required for the banking companies and give a true and fair view of the state of affairs of the Bank as at 31st March 2015 and its profit and its cash flows for the year then ended.

Emphasis of matter

9. We draw attention to the following matters in the notes to the financial statement:

a) Note no. 24.1 regarding change in accounting policy of charging depreciation on fixed assets effective 1st April, 2014 from WDV method under the provisions of Income Tax Act, 1961 to Straight Line Method based on remaining useful life of assets as per provisions of the Companies Act, 2013. The Bank has as per new method charged depreciation of Rs.94.50 crores on fixed assets during the financial year 2014-15. Had the bank followed earlier method of providing depreciation, the charge for the year would have been less by Rs.11.49 crores and resultant profit would have increased to that extent.

b) Note no. 24.3 regarding change in method of depreciation and accordingly re-computation of depreciation pertaining to earlier years resulted in excess charge of depreciation amounting to Rs.135.67 crores (Rs.89.55 crores net of deferred tax liability) which has been credited to profit and loss account for the year ended 31st March, 2015.

c) Note no. 26 regarding utilization of floating provisions to the extent of Rs.35.17 crores for making specific provisions for NPAs.

Our opinion is not qualified in respect of above matters.

Report on Other Legal and Regulatory Matters

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

11. As required subsection (3) of section 30 of the Banking Regulation Act, 1949, we report that:

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

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

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

12. Further, as required by section 143(3) of the Companies

Act, 2013, we further report that:

(i) we have sought and obtained all the information and explanation which to the best of our knowledge and belief were necessary for the purpose of our audit;

(ii) in our opinion, proper books of account as required by law have been kept by the Bank so far as appears from our examination of those books.

(iii) the reports on the accounts of the branches/offices audited by branch auditors of the Bank under section 143(8) of the Companies Act, 2013 and RBI Act have been sent to us and have been properly dealt with by us in preparing this report.

(iv) the Balance Sheet, the statement of Profit and Loss and the Cash Flow Statement dealt with by us in the Report are in agreement with the books of account and returns.

(v) 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.

(vi) with respect to other matters to be included in the Auditor's Report in accordance with Rule II 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,

a) The Bank has disclosed the impact of pending litigations on its financial position in its financial statements.

For gupta sharma & associates ca Neeraj Nagpal chartered accountants partner FrN:001466N m.No.503881

For dharTiku& co For arora vohra & co chartered accountants chartered accountants FrN:003423N FrN:009487N

For darshan Nagpal & associates For dharam raj & co chartered accountants chartered accountants FrN:011022N FrN:014461N

ca vinay saraf ca madhusudan meher partner partner m.No.087262 m.No.097409

ca Karanbir s sethi ca dharam raj partner partner m.no.091188 m.No.094108

place : srinagar dated : 16th may 2015

Mar 31, 2014

Report on the Financial Statements

1. We have audited the accompanying Financial Statements of the "Jammu & Kashmir Bank Limited" which comprise the Balance Sheet as at March 31, 2014, and Proft and Loss Account and the Cash Flow Statement for the year then ended, and a summary of signifcant accounting policies and other explanatory information. Incorporated in these fnancial statements are the returns of 60 Branches/offces audited by us and 749 Branches/Offces audited by Statutory Branch auditoRs. The branches audited by us and those audited by the other auditors have been selected by the Comptroller & Auditor General of India in accordance with the guidelines issued to the Bank by the Reserve Bank of India.

Management''s Responsibility for the Financial Statements

2. Management of the Bank is responsible for the preparation of these Financial Statements in accordance with the requirements of the Reserve Bank of India, the provisions of Section 29 of the Banking Regulation Act, 1949 read with Section 211 of the Companies Act, 1956 and recognized accounting policies and practices including the Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation of the fnancial statements that are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

3. Our responsibility is to express an opinion on these fnancial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fnancial statements are free from material misstatement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fnancial statements. The Procedures selected depend on the auditors'' judgement, including the assessment of the risks of material misstatement of the fnancial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity''s preparation and

fair presentation of the fnancial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the fnancial statements.

5. We believe that the audit evidence we have obtained is suffcient and appropriate to provide a basis for our audit opinion.

Opinion

6. In our opinion, as shown by books of Bank, and to the best of our information and according to the explanation given to us :

(i) the Balance Sheet, read with the notes thereon is a full and fair Balance Sheet containing all the necessary particulars, is properly drawn up so as to exhibit a true and fair view of the state of affairs of the Bank as at March 31, 2014 in conformity with the accounting principles generally accepted in India;

(ii) the Proft and Loss Account, read with the notes thereon shows a true balance of proft, in conformity with accounting principles generally accepted in India, for the year covered by the account; and

(iii) the Cash Flow Statement gives a true and fair view of the cash fows for the year ended on that date.

Report on Other Legal and Regulatory Matters

7. The Balance Sheet and the Proft and Loss Account have been drawn up in accordance with Section 29 of the Banking Regulation Act, 1949 read with Section 211 of the Companies Act, 1956;

8. Subject to the limitations of the audit as indicated in Paragraphs 1 to 5 above, 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 the audit and have found them to be satisfactory.

(b) The transactions of the Bank which have come to our notice have been within the powers of the Bank.

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

9. In our opinion, the Balance Sheet, Proft and Loss Account and Cash Flow Statement comply with the applicable Accounting Standards. signifcant accounting policies and notes on accounts

By order of the Board of Directors

Place: Srinagar Abdul Majid Bhat

Dated: 12th June, 2014 Company Secretary

Mar 31, 2013

1. We have audited the accompanying Financial Statements of the "Jammu & Kashmir Bank Limited" which comprise the Balance Sheet as at 31st March, 2013, and Profit and Loss Account and the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information. Incorporated in these financial statements are the returns of 65 Branches/offices audited by us and 654 Branches/Offices audited by Statutory Branch auditors. The branches audited by us and those audited by the other auditors have been selected by the Comptroller & Auditor General of India in accordance with the guidelines issued to the Bank by the Reserve Bank of India.

Management''s Responsibility for the Financial Statements

2. Management of the Bank is responsible for the preparation of these Financial Statements in accordance with the requirements of the Reserve Bank of India, the provisions of Section 29 of the Banking Regulation Act, 1949 read with Section 211 of the Companies Act, 1956 and recognized accounting policies and practices including the Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

3. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. 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.

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

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

Opinion

6. In our opinion, as shown by books of Bank, and to the best of our information and according to the explanation given to us :

(i) the Balance Sheet, read with the notes thereon is a full and fair Balance Sheet containing all the necessary particulars, is properly drawn up so as to exhibit a true and fair view of the state of affairs of the Bank as at 31st March, 2013 in conformity with the accounting principles generally accepted in India;

(ii) the Profit and Loss Account, read with the notes thereon shows a true balance of profit, in conformity with accounting principles generally accepted in India, for the year covered by the account; and

(iii) the Cash Flow Statement gives a true and fair view of the cash flows for the year ended on that date.

Report on Other Legal and Regulatory Matters

7. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with Section 29 of the Banking Regulation Act, 1949 read with Section 211 of the Companies Act, 1956;

8. Subject to the limitations of the audit as indicated in Paragraphs 1 to 5 above, 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 the audit and have found them to be satisfactory.

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

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

9. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply with the applicable Accounting Standards.

For O P Garg & Co. For K B Sharma & Co. For Darshan Nagpal & Associates

Chartered Accountants Chartered Accountants Chartered Accountants

FRN: 01194N FRN: 02318N FRN: 011022N

CA. Vikram Garg CA. Rajan Sachdeva CA. D.L .Nagpal

Partner Partner Partner

(M. No. 097038) (M. No. 525115) (M. No.011378)

Place: Srinagar

Dated : 15th May, 2013

For P C Bindal & Co. For K K Goel & Associates

Chartered Accountants Chartered Accountants

FRN: 03824N FRN: 05299N

CA. Samit Gupta CA. K. K. Goel

Partner Partner

(M. No. 093783) (M. No. 015002)

Mar 31, 2012

1. We have audited the accompanying financial statements of the Jammu & Kashmir Bank LimiThed, which comprise the Balance Sheet as at 31st March, 2012 and the StaThement of Profit & Loss and the Cash Flow StaThement for the year then ended and a summary of signifi cant Accounting Policies and other explanatory information. IncorporaThed in these fi nancial staThements are the returns of 65 Branches/offi ces audiThed by us and 572 Branches/Offi ces audiThed by Statutory Branch Auditors.

2. T e Management is responsible for the preparation of these fi nancial staThements in accordance with the requirement of the Reserve Bank of India, the provisions of Section 29 of the Banking Regulation Act, 1949 read with Section 211 of the Companies Act, 1956 and recognised accounting policies and practices including the Accounting Standards issued by the InstituThe of CharThered Accountants of India (ICAI). T is responsibility includes the design, implementation and mainThenance of inThernal control relevant to the preparation of the fi nancial staThements that are free from maTherial misstaThement whether due to fraud or error.

3. Our responsibility is to express an opinion on these fi nancial staThements based on our audit. We conducThed our audit in accordance with the Standards on Auditing issued by the InstituThe of CharThered Accountants of India. T ose standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the fi nancial staThements are free from maTherial misstaThement.

4. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial staThements. T e procedures selecThed depend on the Auditor's judgment, including the assessment of the risk of maTherial misstaThement of the fi nancial staThements, whether due to fraud or error. In making those risk assessments, the Auditor considers inThernal control relevant to the Company's preparation and fair presentation of the fi nancial staThements in order to design the audit procedures that are appropriaThe in the circumstances. An audit also includes evaluating the appropriaTheness of accounting policies used and the reasonableness of the accounting estimaThes made by the management, as well as evaluating the overall presentation of the fi nancial staThements.

5. We believe that the audit evidence we have obtained is suffi cient and appropriaThe to provide a basis for our audit opinion.

6. In our opinion and to the best of our information and according to the explanations given to us, the said accounts together with the noThes thereon give information required by the Banking Regulation Act, 1949 as well as the Companies Act, 1956, in the manner so required for the banking companies and give true and fair view in conformity with the accounting principles generally accepThed in India:

(i) In the case of the Balance Sheet, of the StaThe of Aff airs of the Bank as at 31st March, 2012;

(ii) In the case of the Profit and Loss Account, of the Profit for the year ended on that daThe; and

(iii) In the case of the Cash Flow StaThement, of the cash fl ows for the year ended on that daThe.

7. T e Balance Sheet and the Profit and Loss Account have been drawn up in accordance with the provisions of Section 29 of the Banking Regulation Act, 1949 read with Section 211 of the Companies Act, 1956.

8. 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. T e transactions of the Bank, which have come to our notice, have been within the powers of the Bank.

c. T e returns received from the offi ces and branches of the Bank have been found adequaThe for the purpose of our audit.

9. In our opinion, the Balance Sheet, Profit & Loss Account and Cash Flow StaThement comply with the Accounting Standards referred to in Sub- Section (3C) of Section 211 of the Companies Act, 1956.

10. We further report that:

(i) the Balance Sheet and Profit and Loss Account dealt with by this report, are in agreement with the books of account and the returns.

(ii) in our opinion, proper books of account as required by law have been kept by the bank so far as appears from our examination of those books.

(iii) the reports on the accounts of the branches audiThed by the branch Auditors have been dealt with in preparing our report in the manner considered necessary by us.

(iv) as per information and explanation given to us, the Central Government has, till daThe, not prescribed any cess payable under section 441A of the Companies Act, 1956.

(v) on the basis of writThen representation received from the Directors and taken on record by the Board of Directors, none of the Directors is disqualifi ed as on 31st March, 2012 from being appoinThed as a Director in Therms of Clause (g) of Sub-Section (1) of Section 274 of the Companies Act, 1956.

For O P Garg & Co. For K B Sharma & Co. For Verma AssociaThes

CharThered Accountants CharThered Accountants CharThered Accountant

FRN: 01194N FRN: 02318N FRN: 02717N

CA. Manish Kumar Gupta CA. Abhay Kumar CA. Madan Verma

Partner Partner Partner

(M. No. 097191) (M. No. 500681) (M. No. 081631)

For P C Bindal & Co. For K K Goel & AssociaThes CharThered Accountants CharThered Accountants FRN: 03824N FRN: 05299N Partner Partner

CA. P. C. Bindal CA. K. K. Goel

(M. No. 082683) (M. No. 015002)

Place: Srinagar

DaThed : 12th May, 2012

Mar 31, 2010

1. We have audited the attached Balance Sheet of The Jammu & Kashmir Bank Limited as at 31.03.2010 and also the profi t and Loss Account of the bank and the cash fl ow statement annexed thereto for the year ended on that date in which are incorporated the returns of 37 branches/offi ces audited by us and 526 Branches/Offi ces audited by other auditors. These fi nancial statements are the responsibility of the BankÃs Management. Our responsibility is to express an opinion on these fi nancial statements, based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement(s). An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the fi nancial statements. An audit also includes assessing the accounting principles used and signifi cant estimates made by management, as well as evaluating the overall fi nancial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. The Balance sheet and the Profi t and Loss Account have been drawn up in accordance with the Provisions of Section 29 of the Banking Regulation Act, 1949 read with Section 211 of the Companies Act, 1956.

4. 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 the audit and have found them to be satisfactory.

b. The transactions of the Bank which have come to our notice have been within the powers of the Bank.

c. The returns received from the offi ces and branches of the bank have been found adequate for the purpose of our audit.

5. In our opinion the Balance Sheet, Profi t & Loss Account and Cash Flow Statement comply with the accounting standards referred to in Sub-section (3C) of Section 211 of the Companies Act, 1956.

6. We further report that:

(i) Balance Sheet and Profi t and Loss Account dealt with by this report are in agreement with the books of account and the re- turns.

(ii) In our opinion, proper books of account as required by law have been kept by the bank so far as appears from our examination of those books.

(iii) The reports on the accounts of the branches audited by the branch auditors have been dealt with in preparing our report in the manner considered necessary by us.

(iv) As per information and explanation given to us the Central Government has, till date, not prescribed any cess payable under Section 441A of the Companies Act, 1956.

(v) On the basis of written representation received from the directors and taken on record by the Board of Directors none of the Directors is disqualifi ed as on 31st March, 2010 from being appointed as a director in terms of clause (g) of Sub-Section (1) of Section 274 of the Companies Act, 1956.

7. In our opinion and to the best of our information and according to the explanation given to us, the said accounts together with the notes thereon give the information required by the Banking Regulation Act, 1949 as well as the Companies Act, 1956 in the manner so required for the Banking Companies and give a true and fair view in conformity with the accounting principles generally accepted in India..

(i) In the case of the Balance Sheet, of the State of aff airs of the Bank as at 31st March, 2010. (ii) In the case of the Profi t and Loss Account of the profi t for the year ended on that date; and (iii) In the case of the Cash Flow statement, of the cash fl ows for the year ended on that date.

For K B Sharma & Co. For Verma Associates

Chartered Accountants Chartered Accountants

CA. Munish Jain CA. Madan Verma

Partner Partner

M.No. 094750 M.No. 081631

FRN: 002318N FRN: 002717N Place : Srinagar

Dated : 15th May, 2010

For O P Garg & Co. For K K Goel & Associates

Chartered Accountants Chartered Accountants

CA. Vikram Garg CA. A. K. Kakkar

Partner Partner

M.No. 097038 M. No. 14493

FRN 001194N FRN: 005299N

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