Auditor Report of Lakshmi Vilas Bank Ltd.(Amalgmated)

Mar 31, 2018

Report on the Financial Statements

1. We have audited the accompanying financial statements of The Lakshmi Bank Limited (‘the Bank’), which comprise the Balance Sheet as at 31 March 2018, 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 for the year ended on that date of 21 branches/offices audited by us and 545 branches/offices audited by statutory branch auditors.

Management’s Responsibility for the 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 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 mis-statement, 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.

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

5. We conducted our audit of the financial statements in accordance with Standards on Auditing (‘the Standards’) specified under section 143(10) of the Companies 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 mis-statements.

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 qualified audit opinion.

Basis for Qualified Opinion

8. The financial statements of the bank include Advances (net of provisions) of Rs. 25,768 Crore after adjustment of third party deposits amounting to Rs. 794 Crore, duly supported by legal opinions. The said adjustment is being questioned by the deposit holder. Pending resolution of the same, we are unable to comment on the impact, if any on the financial statements and legal/ regulatory consequences.

9. The series of transactions leading to the above adjustment has resulted in shortfall in CRR maintenance. Penal consequences if any, thereon is not ascertainable.

Qualified Opinion

10. In our opinion and to the best of our information and according to the explanations given to us, except for the possible effects of the matter described in the ‘Basis for Qualified Opinion’ paragraph, the 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 2018 and its loss and its cash flows for the year then ended.

Emphasis of Matter

11. We draw attention to

(i) Note No. 3.3.6 of the financial statements, regarding deferment of provision for Mark to Market (MTM) losses on Investments of Rs. 98.29 Crore; and

(ii) Note No. 4.4.2 of the financial statements, regarding deferment of Gratuity provision of Rs. 11.27 Crore;

Our opinion is not qualified in respect of these matters.

Report on Other Legal and Regulatory Requirements

12. 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.

13. 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 except for the matter described in the ‘Basis for Qualified Opinion’ paragraph 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:

(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 except for the matter described in the ‘Basis for Qualified Opinion’ paragraph;

(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 and proper returns adequate for the purposes of our audit have been received from branches not visited by us;

(iii) the reports on the accounts of the branches 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 and with the returns received from the branches not visited by us;

(v) Except for the possible effects of matter described in the ‘Basis for Qualified Opinion’ paragraph, in our opinion, the 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 31^st March 2018 taken on record by the Board of Directors, none of the directors is disqualified as on 31^st 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 A”; and

(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 18 - Note No. 7 to the financial statements;

b. the Bank does not have any long term contracts including derivative contracts - Refer Schedule 18 - Note No. 3.3 to the financial statements; 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 the independent auditors’ report of even date on the financial statements of The Lakshmi Vilas Bank Limited

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

1. We have audited the internal financial controls over financial reporting of The Lakshmi Vilas Bank Limited (‘the Bank’) as at 31^st March 2018 in conjunction with our audit of the financial statements of the Bank for the year ended on that date.

Management’s Responsibility for Internal Financial Controls over Financial Reporting

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 Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (‘the Guidance Note’) issued by the Institute of Chartered Accountants of India (‘the ICAI’)”.

These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Bank’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013 (‘the 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 (‘the Guidance Note’) issued by the ICAI and the Standards on Auditing (‘the Standards’), prescribed under Section 143(10) of the Companies Act, 2013 to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

4. Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls with reference to financial statements 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 judgement, including the assessment of the risks of material mis-statement 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 with reference to financial Statements.

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:

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

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

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the bank’s assets that could have a material effect on the 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 mis-statements 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, adequate internal financial controls with reference to financial statements and such internal financial controls with reference to financial statements were operating effectively as at 31^st March 2018, based on the internal controls criteria established by the Bank considering the essential components of internal control stated in the Guidance Note issued by the ICAI.

For M/s. R. K. KUMAR & CO.

Chartered Accountants

FRN - 001595S

(G. NAGANATHAN)

Place: Chennai Partner

Date : 25^th May, 2018 M.No. 022456

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Mar 31, 2017

To

The Members of The Lakshmi Vilas Bank Limited

Report on the Standalone Financial Statements

1. We have audited the accompanying standalone financial statements of The Lakshmi Vilas Bank Limited (''the Bank''), which comprise the Balance Sheet as at 31 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 for the year ended on that date of 25 branches/offices audited by us and 474 branches audited by branch auditors.

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 there under.

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 31^st March 2017 and its profit and its cash flows for the year then ended.

Emphasis of Matter

9. We draw attention to

(i) Note No.2.4.4.C of the financial statements, regarding deferment of charging off to Profit and Loss account, the loss of Rs..31.29 Crore on sale of advances to Asset Reconstruction Companies;

(ii) Note No. 4.27 of the financial statements, regarding deferment of charging off to Profit and Loss account, the loss of Rs.19.15 Crore relating to advance accounts reported as fraud;

Our opinion is not qualified in respect of these matters.

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. 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 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 and proper returns adequate for the purposes of our audit have been received from branches not visited by us;

(iii) the reports on the accounts of the branches 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 and with the returns received from the branches not visited by us;

(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 31^st March 2017 taken on record by the Board of Directors, none of the directors is disqualified as on 31^st March 2017 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 A"; and

(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 18 - Note No. 6. (a) to the financial statements;

b. the Bank has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts - Refer Schedule 18 - Note No. 3.12 to the financial statements;

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

d. The disclosure requirement as envisaged in Notification G.S.R 308(E) dated 30^th March 2017 is not applicable to the Company - Refer Schedule 18 - Note No. 6 (b) to the financial statements;

Annexure A to the independent auditor''s report of even date on the standalone financial statements of

The Lakshmi Vilas Bank Limited

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

1. We have audited the internal financial controls over financial reporting of The Lakshmi Vilas Bank Limited (''the Bank'') as at 31^st 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 the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (''the Guidance Note'') issued by the Institute of Chartered Accountants of India (''the ICAI'')".

These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to Bank''s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013 (''the 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 (''the Guidance Note'') and the Standards on Auditing (''the Standards''), both 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. 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.

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:

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

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

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the bank''s assets that could have a material effect on the 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^st 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 M//s. R. K. KUMAR & CO.

Chartered Accountants FRN - 001595S

(G. NAGANATHAN)

Place: Chennai Partner

Date : 26^th April, 2017 M. No. 022456

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Mar 31, 2015

1. We have audited the accompanying financial statements of The Lakshmi Vilas Bank Limited (hereinafter referred to as "the Bank"), which comprise the Balance Sheet as at 31st March, 2015 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 21 branches/offices audited by us, 400 branches/offices audited by branch auditors.

Management's Responsibility for the 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 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. 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 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 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 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 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 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 Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of 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.

Opinion

8. In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements together with the accounting policies and notes thereon 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, in conformity with the accounting principles generally accepted in India:

(i) in the case of the Balance Sheet, of the state of affairs of the Bank as at 31st March, 2015;

(ii) in the case of the Profit and Loss Account of the profit for the year ended on that date; and

(iii) in the case of the Cash Flow Statement, of cash flows for the year ended on that date.

Emphasis of Matter

9. Without qualifying our opinion, we draw attention to:

(i) Note No.3.4.4.C of the financial statements, regarding deferment of loss to the extent of Rs.72.99 Crore on sale of advances to Asset Reconstruction Companies;

(ii) Note No.3.4.4.D of the financial statements, regarding deferment of loss to the extent of Rs.40.18 Crore in respect frauds in advances.

Report on Other Legal and Regulatory Matters

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

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 Companies Act, 2013, we 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 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 us in the Report are in agreement with the books of account.

(v) In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014.

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

(vii) 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 Company has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Clause (i) of Schedule 12 of the financial statements;

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

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

For R. K. KUMAR & CO. Chartered Accountants Firm's Registration No. 001595S

(G. NAGANATHAN) Place : Bangalore Partner Date : 29th April, 2015 Membership Number: 022456

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Mar 31, 2014

1. We have audited the accompanying financial statements of THE LAKSHMI VILAS BANK LTD, KARUR as at 31st March, 2014, which comprise the Balance Sheet as at March 31, 2014, and the Statement of Profit and Loss 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 17 Branches, 8 Regional Offices and other support service units audited by us as well as the remaining 344 Branches and 6 Service Branches audited by other branch auditors. The branches audited by us and those audited by other auditors have been selected by Bank in accordance with the guidelines issued 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 that give true and fair view of the financial position and financial performance of the Bank in accordance with Banking Regulation Act, 1949 and complying with Reserve Bank of India Guidelines issued from time to time. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation 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 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 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. The financial information as at and for the year ended 31st March 2014 of 344 Branches and 6 Service Branches have been audited by other auditors whose reports have been furnished to us and our opinion is based solely on the reports of such other auditors.

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

Opinion

7. Without qualifying our opinion, we draw attention to

(a) Note No. 3.10 of the Schedule 18 to the financial statements, regarding deferment of pension liability and gratuity liability of the Bank, pursuant to the exemption granted by the Reserve Bank of India to the Lakshmi Vilas Bank from application of the provisions of Accounting Standard (AS) 15, Employees Benefits vide circular no. DBOD.BP.BC/80/21.04.018/2010-11, dated 09-02-2011 on "Re-opening of Pension Option to the employees and Enhancement in Gratuity Limits- Prudential Regulatory Treatment." Accordingly, out of the unamortized amount of Rs. 37.24 crore as on 01/04/20l3, the Bank has amortized Rs. 15.56 crore for Pension and Rs. 3.06 crore for Gratuity being proportionate amount for the year ended March 31, 2014 and balance amount to be amortized in future periods for Pension is Rs. 15.56 crore and for Gratuity is Rs. 3.06 crore.

(b) Note No. 3.10 of the Schedule 18 to the financial statements, which states that, pending receipt of opinion from the Expert Advisory Committee of the Institute of Chartered Accountants of India, the provision for pension liability as on 31st March 2014 has been made based on the actuarial valuation.

(c) Note No. 7 of the Schedule 18 to the financial statements, which describes creation of Deferred Tax Liability (DTL) on Special Reserve under section 36 (1) (viii) of the Income Tax Act, 1961 pursuant to RBI''s Circular No. DBOD. No. BP.BC. 77 / 21.04.018 / 2013-14 dated December 20, 2013, whereby the DTL of f 7.87 crore pertaining to periods upto March 31, 2013 has been adjusted to the general reserve of the Bank and DTL of f 3.11 crore on the Special reserve created during the financial year ended March 31, 2014 has been charged to the profit and loss account in accordance with the accounting treatment prescribed by the Reserve Bank of India.

8. In our opinion and to the best of our information and according to the explanations 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 affairs of the Bank as at 31st March, 2014;

ii. in the case of the Profit and Loss Account, of the profit for the year ended on that date; and

iii. in the case of the Cash Flow Statement, of cash flows for the year ended on that date.

Report on Other Legal and Regulatory Matters

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 211 of the Companies Act, 1956.

10. Subject to the limitations of the audit indicated in paragraphs 1 to 6 above and as required by the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970 and subject also to the limitations of disclosure required therein, we report that;

(a) We have obtained all the information and explanations which to the best of our knowledge and belief, were necessary for the 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, as supplemented with the information furnished by the Management, have been found adequate for the purposes of our audit.

11. In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply with the applicable Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956.

12. 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 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 the written representation received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March 2014 from being appointed as a director in terms of clause (g) of sub-section (1) of section 274 of the Companies Act, 1956.

For SAGAR & ASSOCIATES Chartered Accountants FR No. 003510S

(V. VIDYASAGAR BABU) Place : Bangalore Partner Date : 14th May 2014 Membership No. 027357

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Mar 31, 2013

REPORT ON THE FINANCIAL STATEMENTS

1. We have audited the accompanying financial statements of THE LAKSHMI VILAS BANK LIMITED, KARUR as at 31st March, 2013, which comprise the Balance Sheet as at March 31, 2013, and Profit and Loss Account and 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 16 Branches, 8 Regional Offices, Technology Centre, RTGS Cell, DP Cell, Centralised Processing Cell and Integrated Treasury, audited by us, 275 Branches and 6 Service Branches audited by other branch auditors. The branches audited by us and those audited by other auditors have been selected by Bank in accordance with the guidelines issued 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 that give true and fair view of the financial position and financial performance of the Bank in accordance with Banking Regulation Act, 1949 and complying with Reserve Bank of India Guidelines issued from time to time. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation 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 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 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. The financial information as at and for the year ended 31st March, 2013 of 275 Branches and 6 Service Branches has been audited by other auditors whose reports have been furnished to us and our opinion is based solely on the reports of such other auditors.

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

OPINION

7. Without qualifying our opinion, we draw attention to Note No.3.10 of the Schedule 18 to the financial statements, regarding deferment of pension liability and gratuity liability of the Bank, pursuant to the exemption granted by the Reserve Bank of India to the Lakshmi Vilas Bank from application of the provisions of Accounting Standard (AS) 15, Employees Benefits vide circular no. DBOD.BP.BC/80/21.04.018/2010-11, dated 09.02.2011 on "Re-opening of Pension Option to the employees and Enhancement in Gratuity Limits - Prudential Regulatory Treatment." Accordingly, out of the unamortized amount of Rs.55.85 crore as on 01/04/2012, the Bank has amortized Rs.15.56 crore for Pension and Rs.3.06 crore for Gratuity being proportionate amount for the year ended March 31, 2013 and balance amount to be amortized in future period for Pension is Rs.31.12 crore and for Gratuity is Rs.6.13 crore.

8. In our opinion as shown by the books of the Bank, and to the best of our information and according to the explanations given to us, we report that:

i) the Balance Sheet read with the significant accounting policies and 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 state of affairs of the Bank as at 31st Match, 2013, in conformity with accounting principles generally accepted in India;

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

9. The Balance Sheet and the Profit and Loss Account have been drawn up in Forms ''A'' & ''B'', respectively, of the third Schedule to the Banking Regulation Act, 1949.

10. Subject to the limitations of the audit indicated in paragraphs 1 to 6 above and as required by the Banking Regulation Act 1949 and subject also to the limitations of disclosure required therein, we report that;

a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the 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, as supplemented with the information furnished by the Management, have been found adequate for the purposes of our audit.

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

For SAGAR & ASSOCIATES

Chartered Accountants

FR No. 003510S

(D. MANOHAR)

Place:Karur Partner

Date : 27th May 2013 Membership No. 029644

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Mar 31, 2012

1. We have audited the attached Balance Sheet of THE LAKSHMI VILAS BANK LIMITED, KARUR as at 31st March 2012, the annexed Profit and Loss Account and also the Cash Flow Statement of the bank for the year ended on that date in which are incorporated the financial statements of the Administrative Office, 8 Regional Offices, 10 Branches, Central Processing Cell, Integrated Treasury, Data Centre, RTGS Cell and DP Cell audited by us and 280 Branches, 1 Satellite Branch and 6 Service Branches audited by Branch Auditors appointed U/s 228 (4) of the Companies Act, 1956. There are no unaudited branches or other offices. These financial statements are the responsibility of the Bank's Management. Our responsibility is to express our opinion on these financial statements based on our Audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An Audit includes examining on a test basis, evidence supporting the amounts and disclosure in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. The Balance Sheet and the Profit & Loss account have been drawn up in accordance with the provisions of section 29 of Banking Regulation Act, 1949 read with section 211 of the Companies Act, 1956, in Form A & B respective of Third Schedule to the Banking Regulation Act, 1949.

4. The reports on the accounts of the Branches audited by Branch Auditors have been dealt with in preparing our report in the manner considered necessary by us.

5. 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) In our Opinion, proper books of accounts, 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 purpose of our audit have been received from the branches of the Bank.

(d) The Bank's Balance sheet and profit and loss account and cash flow statement dealt with by this report are in agreement with the books of account and audited returns from the branches of the bank.

(e) On the basis of written representations received from the directors and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March 2012 from being appointed as director in terms of clause (g) of sub - section (1) of section 274 of the Companies Act, 1956.

6. In our opinion, the balance sheet, profit and loss account and the cash flow statement dealt with by this report comply with the accounting standards referred to in sub- section(3c) of section 211 of the Companies Act, 1956 so far as they apply to banks.

7. In our opinion and to the best of our information and according to the explanation given to us, they said accounts read with the accounting policies followed by the bank together with the notes thereon and subject to Note No.1(a) & (b) of schedule 18 to the accounts regarding the effect of adjustments arising from reconciliation of inter - branch transactions and tallying of balances in the accounts as per general ledger with those of subsidiary ledgers, the quantum of which is not ascertained, give the information required by the Companies Act,1956 in the manner so required for banking Companies and on such basis, give a true and fair view.

i) In the case of said balance sheet, of the state of affairs of the bank as at 31st March 2012;

ii) In the case of profit & loss account, profit of the bank for the year ended on that date; and

iii) In case of cash flow statement, of the cash flow of the bank for the year then ended and are in conformity with the accounting principles generally accepted in India.

For SAGAR & ASSOCIATES

Charetered Accountants

FR No. 003510S

(D. MANOHAR)

Place : Karur Partner

Date : 30th May 2012 Membership No. 029644

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Mar 31, 2010

1) We have audited the attached Balance Sheet of THE LAKSHMI VILAS BANK LIMITED, KARUR as at 31st March 2010, the annexed Profit and Loss Account and also the Cash Flow Statement of the bank for the year ended on that date in which are incorporated the returns of 30 Branches, 4 Zonal Offices, Central Processing Cell, Integrated Treasury, Data Center audited by us and 240 Branches and 6 Service Branches audited by Branch auditors appointed u/s. 228(4) of the Companies Act, 1956. There are no unaudited branches or other offices. These financial statements are the responsibility of the Banks management. Our responsibility is to express our opinion on these financial statements based on our audit.

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

3) The Balance Sheet and the Profit & Loss account have been drawn up in accordance with the provisions of Section 29 of Banking Regulation Act, 1949 read with Section 211 of the Companies Act, 1956, in Form A&B respectively of Third Schedule to the Banking Regulation Act, 1949.

4) On the basis of our audit and having regard to the report as the accounts of branches/offices audited by Branch Auditors, which has been considered by us, 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) In our opinion, proper books of accounts as required by law have been kept by the Bank so far as appears from our examination of those books and proper returns adequate for the purpose of our audit have been received from the branches of the Bank.

(d) The Banks Balance Sheet and Profit and Loss Account and cash flow statement dealt with by this report are in agreement with the books of account and audited returns from the branches of the Bank.

(e) In our opinion, the Balance Sheet Profit and Loss Account and the cash flow statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of the Section 211 of the Companies Act, 1956 so far as they apply to banks.

(f) On the basis of written representations received from the Directors and taken on record by the Board of Directors, we report that none of the directors is disqualified 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.

(g) In our opinion and to the best of our information and according to the explanations given to us, the said accounts read with the accounting policies followed by the bank together with the notes thereon and subject to Note No. 1 (a) &(b) of Schedule 18 to the accounts regarding the effect of adjustments arising from reconciliation of inter-branch transactions and tallying of balances in the accounts as per General Ledger with those of subsidiary ledgers, the quantum of which is not ascertained, give the information required by the Companies Act, 1956 in the manner so required for Banking Companies and on such basis, give a true and fair view.

(i) In the case of said Balance Sheet of the State of Affairs of the Bank as at 31st March 2010;

(ii) In the case of Profit & Loss Account Profit of the bank for the year ended on that date; and

(iii) In the case of Cash Flow Statement of the cash flow of the bank for the year then ended and are in conformity with the Accounting Principles generally accepted in India.

For M/s. SUNDARAM & SRINIVASAN For M/s. ABARNA & ANANTHAN Chartered Accountants Chartered Accountants C. NARESH C.S. GOPALAKRISHNA Partner Partner Membership No. 28684 Membership No. 14706 Place : KARUR Date : 31st May 2010