Auditor Report of Tamilnad Mercantile Bank Ltd.

Mar 31, 2025

1. We have audited the accompanying financial
statements of M/s. Tamilnad Mercantile Bank
Limited ("the Bank"), which comprise the Balance
Sheet as at March 31, 2025, the Profit and Loss
Account and the Statement of Cash Flows for the
year then ended, and notes to financial statements
including a summary of significant accounting
policies and other explanatory information (the
"financial statements")in which are included the
returns for the year ended on that date, of

i) Top 24 branches, Head Office, Integrated
Treasury and International Banking Division
audited by us and

ii) 554 branches audited by Statutory Branch
Auditors located across 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 the Statutory Branch Auditors as referred to
in paragraph 20 below, the aforesaid financial
statements, read with notes thereon, give the
information required by the Banking Regulation Act,
1949 as well as the Companies Act, 2013 ("the Act"),
as amended, and circulars and guidelines issued
by the Reserve Bank of India ("RBI"), in the manner
so required for banking companies, give a true and
fair view and are in conformity with the accounting
principles generally accepted in India including the
Accounting Standards prescribed under Section
133 of the Act read with Companies (Accounting
Standards) Rules, 2021, of the state of affairs of the
Bank as at March 31, 2025, its profit, and its cash
flows for the year ended on that date.

Basis for Opinion

3. We conducted our audit of the financial statements
in accordance with the Standards on Auditing
(SAs) specified under section 143(10) of the Act.
Our responsibilities under those Standards are
further described in the ''Auditor''s Responsibilities
for the Audit of the 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 ethical requirements that are relevant to our
audit of the financial statements in accordance
with the accounting principles generally accepted
in India, including the Accounting Standards
prescribed under Section 133 of the Act read with
Companies (Accounting Standards) Rules, 2021,
provisions of Section 29 of the Banking Regulation
Act, 1949, circulars and guidelines issued by RBI
from time to time 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 and that
obtained by the Statutory Branch Auditors, in terms
of their reports referred in paragraph 20 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, and based on the
consideration of the reports of the Statutory Branch
Auditors as referred to paragraph 20 below, were
of most significance in our audit of the financial
statements for the financial year ended March 31,
2025. These matters were addressed in the context
of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. For
each matter below, our description of how our audit
addressed the matter is provided in that context.

5. We have determined the matters described below
to be the key audit matters to be communicated
in our report. We have fulfilled the responsibilities
described in the Auditor''s responsibilities for the
audit of the financial statements section of our
report, including in relation to these matters.
Accordingly, our audit included the performance of
procedures designed to respond to our assessment
of the risks of material misstatement of the financial
statements. The results of our audit procedures,
including the procedures performed to address
the matters below, provide the basis for our audit
opinion on the accompanying financial statements.

Key Audit Matter	Auditors'' Response
A. Identification of Non-Performing Assets (''NPA'') and	Our approach included assessing the design,
Provisioning on Advances	implementation and operating effectiveness of key
Significant estimates and judgment involved	internal controls and substantive audit procedures over
Identification of Non-Performing Assets ("NPA") and provisioning in respect of NPAs and restructured advances are made based on management''s assessment in accordance with norms, circulars and directions issued by the RBI on Prudential Norms	approval, recording and monitoring of loans, assessing
	the reliability of documentation, measurement of provisions, identification of NPA accounts, and valuation of security for NPA accounts along with basis and rationale for various other management information''s.
on Income Recognition, Asset Classification and	We have examined the Bank''s policies for NPA
Provisioning pertaining to Advances ("IRACP norms")	identification and provisioning and assessing
from time to time.	compliance with the IRACP norms.
The provision for NPA is based on the valuation of the	We have conducted procedures including but not limited
security available and also requires management	to testing exceptional reports generated by the bank''s
estimates and significant degree of judgement by	system; review of reports of Statutory Branch Auditors,
applying both quantitative and qualitative factors	and review of minutes of meeting of Committees to
prescribed by the regulations. In case of restructured	identify indicators of stress or default events in loan
accounts, provision is made for diminution in fair	account or product.
value of restructured loans, in accordance with the	We have evaluated details for a sample of exposures
RBI guidelines. Ensuring completeness and timing of	for identification of NPA and calculation of Loan Loss
recognition of NPA, measurement of the provisions,	provisions including review of valuation of primary and
appropriate reversal of unrealized income on NPAs etc.,	collaterals as at March 31, 2025 involving estimation.
becomes critical requiring proper control mechanism.	We have evaluated the Bank''s internal control systems''
Accordingly, our audit focused on identification of	completeness, accuracy, and relevance of data to ensure
NPAs and provision on advances as a key audit matter	that the same is in compliance with the RBI guidelines,
because of the level of management estimates and	circulars and directions issued from time to time.
judgment involved in determining the provision and	We tested on a samples basis to ensure completeness
the valuation of the security of the NPA loans and the	of documentation, adherence of the approval process
resultant impact on the financial statements of the Bank.	to the Bank''s Policy, credit review of customers, review of Special Mention Accounts (SMA) reports in RBI''s Central Repository of Information on Large Credits (CRILC) and other related documents including evaluation of the past trends of management judgement, governance, and review of internal control. We held discussion with the management of the Bank on various aspects wherein there has been stress and the steps taken by the Bank to mitigate such sectorial risks We have also assessed disclosure requirements for classification and provisioning of NPAs in accordance with RBI circulars including those specifically issued for Covid-19 related matters.
B. Information Technology - IT Systems and Controls	We tested the technology control environment for key
The Bank''s operations utilise many independent and	IT applications (systems) used in processing significant
inter-dependent information technology systems for	transactions and recording balances in the general
processing and recording large volume of transactions	ledger. We also tested automated controls embedded
in numerous locations on a daily basis. As a result, there	within these systems which link the technology-enabled
is a high degree of reliance and dependency on such	business processes. Our further audit procedures
IT systems for financial reporting process of the Bank.	included:
Controls over access and changes to IT systems are	â¢ Assessing the governance and higher-level controls
critical to the recording of financial information and the	across the IT Environment, including those regarding
preparation of a financial statements which provides a	policy design, review and awareness, and IT Risk
true and fair view of the Bank''s financial position and performance. Appropriate automated general and	Management practices;

Key Audit Matter	Auditors'' Response
application controls are required to ensure that such	â¢ Testing of design and operating effectiveness of
IT systems and applications are able to process	controls across the User Access Management
the data, as required, completely, accurately and	Lifecycle, Change Management as well as
consistently, which directly impacts the completeness	effectiveness testing of automated business process
and accuracy of financial reporting.	controls including segregation of duties;
Considering the pervasive and intricate nature of the IT	â¢ Testing of design and operating effectiveness of
systems and its control environment, they may impact	controls to enable Change Management including
the financial recording and reporting of transactions	how changes are initiated, documented, approved,
and therefore is a key audit matter as our audit	tested and authorised prior to migration into the
approach could significantly differ depending on the	production environment of critical IT Applications. We
effective operation of the Bank''s IT controls.	assessed the appropriateness of users with access to release changes to IT application production environments in the Bank; We conducted review of effectiveness of mappings and flagging of financial transactions, and automated reconciliation controls (both between systems and intraÂ¬ system); and Data integrity of critical system reporting used by us in our audit to select samples and analyse data used by management to generate financial reporting.
C. Claims against the bank not acknowledged as debt	Our Audit Procedures to test uncertain tax litigations
including provision for taxes and other matters	included understanding processes, evaluation of design
Claims against the bank, including provisions for taxes	and implementation of controls and testing of operating
and other related matters, represent a significant	effectiveness of the bank''s controls over provisioning on
area of judgment and estimation by management.	various aspects.
These claims are not acknowledged as debt, yet they	Our audit focused on assessing management''s
require detailed evaluation to assess the adequacy of	processes and judgments in estimating the provisions
provisions and the disclosure of contingent liabilities	and disclosures. We examined relevant documentation,
in the financial statements. These matters have been	including legal opinions, correspondence with regulatory
identified as a key audit matter due to its inherent	authorities, and other supporting evidence. Our
uncertainty and its potential impact on the bank''s	procedures included understanding the key assumptions
financial position and performance as these items are	applied by management, evaluating their consistency
subject to complex regulatory and legal frameworks	with the underlying facts, and assessing the likelihood
and often depend on interpretations of statutes,	of future obligations arising from these claims. We
ongoing litigations, and expert opinions. The evaluation	considered the adequacy of disclosures made in the
of these claims requires detailed analysis to determine	financial statements, ensuring compliance with relevant
the adequacy of provisions and proper disclosure of	accounting standards.
contingent liabilities in the financial statements.	We have obtained details of completed tax assessments and demands from the management of the bank for reviewing the estimation of tax related claims, provisioning and the possible outcome of the disputed cases. We considered legal precedence and other rulings in evaluating management''s position on these provisions made and/or reversed. For those matters where management concluded that no provision should be recorded, we also considered the adequacy and completeness of the banks disclosures made in relation to contingent liabilities.

Information Other than the Financial
Statements and Auditors'' Report thereon

6. The Bank''s Board of Directors is responsible for the
other information. The other information comprises
the Corporate Overview, Directors'' Report including
annexures to Directors'' Report, Management
Discussion and Analysis, Basel III - Pillar 3 disclosures
and Corporate Governance report included in the
Annual Report but does not include the financial
statements and our auditor''s report thereon. The
other information is expected to be made available
to us after the date of this auditor''s report.

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

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

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

We have nothing to report in this regard.

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

10. The Bank''s Board of Directors is responsible for
the matters stated in Section 134(5) of the Act,
with respect to the preparation of these 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 prescribed under Section
133 of the Act read with Companies (Accounting
Standards) Rules, 2021 in so far as they apply to the
Bank and provisions of Section 29 of the Banking
Regulation Act, 1949 and circulars and guidelines
issued by the 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 the 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.

11. In preparing the financial statements, the Board
of Directors 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.

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

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

13. 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.

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

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

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

â¢ Obtain sufficient appropriate audit evidence
regarding the financial information of the
Bank to express an opinion on the financial
statements. We are responsible for the
direction, supervision and performance of the
audit of the financial information of the Bank
and such branches included in the financial
statements, of which we are the independent
auditors. For the other branches included in
the financial statements, which have been
audited by Statutory Branch Auditors, such
branch auditors remain responsible for the
direction, supervision and performance of the
audits carried out by them. We remain solely
responsible for our audit opinion.

15. Materiality is the magnitude of the misstatements
in the 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.

16. 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.

17. 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.

18. 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 for the financial year
ended March 31, 2025 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.

Emphasis of Matter

19. We draw attention to Note No. 14(j) of Schedule
18 - Pending disposal of the appeal before the
Appellate Tribunal, the Bank has pre-deposited
penalty of Rs. 16.99 Crores on December 16, 2022,
relating to alleged irregularity under FEMA in respect
of transfer of shares, during the years 2007, 2011
& 2012. The Bank has also pre-deposited Penalty
amount of Rs.45 Lakhs, on May 25, 2024, being 20%
of Rs.225 Lakhs, levied by Directorate of Enforcement
for alleged FEMA Violation against 11 persons who
were directors / Company Secretary of the Bank at
the time of transfer of above shares and is shown
as Contingent Liabilities. Further, the bank has also
provided a sum of Rs.2 lakhs on the basis of legal
opinion towards penalty in respect of show-cause
notice from Directorate of Enforcement, for the issue
of Bonus Shares to the above-said transferees.

Our opinion is not modified in respect of
the above matter.

Other Matters

20. The Statement incorporates the relevant Financial
Statements / information of 554 branches audited
by Statutory Branch Auditors of respective branch
appointed by the Bank for this purpose whose
Financial Statement / information reflect total assets
of Rs. 52,115 Crores as at March 31, 2025 and the total
revenue of Rs. 3,886 Crores for the year ended on that
date, as considered in the Financial Statements. These
branches cover 84.47% of Advances, 75.40% of Deposits
and 52.58% of Non-Performing assets as at March 31,
2025, and 63.27% of revenue for the year ended March
31, 2025. The Financial Statements / information of these
branches have been audited by the Statutory 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 solely
based on the report of such branch auditors.

21. Our opinion on the financial statements, and our
report on other legal and regulatory requirements
below, are not modified in respect of the above
matters with respect to our reliance on the work done
by and the reports of the statutory branch auditors.

22. The comparative figures for the financial year
ended March 31, 2024, provided in the Financial
Statements including the disclosures were audited
by predecessor, Joint Statutory Central Auditors
of the bank, who have expressed an unmodified
opinion on the Financial Statements on April 22, 2024.

Our opinion is not modified in respect of this matter.

Report on Other Legal and Regulatory
Requirements

23. The Balance Sheet and the Profit and Loss Account
have been drawn up in accordance with Section 29
of the Banking Regulation Act, 1949 and Accounting
Standards as per section 133 of the Act read with
Companies (Accounting Standards) Rules, 2021.

24. As required by sub-section (3) of section 30 of the
Banking Regulation Act, 1949 and communication
received by the Bank from Reserve Bank of India, and
on the consideration of the reports of the Statutory
Branch Auditors as referred in paragraph 20 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
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; and

c) the returns received from the offices and
branches of the Bank have been found to be
adequate for the purpose of our audit.

d) The Profit and Loss account shows a true
balance of profit for the year then ended.

With respect to the matter to be included in the
auditor''s report under section 197(16) of the Act, we

report that since the Bank is a banking company,
as defined under the Banking Regulation Act, 1949;
the reporting under section 197(16) in relation to
whether the remuneration paid by the Bank is in
accordance with the provisions of section 197 of the
Act and whether any excess remuneration has been
paid in accordance with the aforesaid section is
not applicable.

25. Being a Banking Company, the Companies (Auditor''s
Report) Order, 2020 issued by the Central Government
of India in terms of the powers conferred by subsection
(11) of Section 143 of the Act, is not applicable.

26. As required by Section 143(3) of the Act, based on
our audit and on the consideration of the reports
of the statutory branch auditors as referred to in
paragraph 20 above, we further report to the extent
applicable 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 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
purposes of our audit have been received from
the 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 the Statutory 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, 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 audited returns from the branches.

(e) In our opinion, the aforesaid financial statements
comply with the Accounting Standards
specified under Section 133 of the Act read with
Companies (Accounting Standards) Rules, 2021
to the extent they are not consistent with the
policies prescribed by the RBI.

(f) 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 March 31, 2025 from being appointed as a
director in terms of section 164(2) of the Act.

(g) With respect to the adequacy of Internal
Financial Controls with reference to the financial
statements of the Bank and the operating
effectiveness of such controls, our separate
report in Annexure A is attached.

(h) The entity being a banking company as
defined under Banking Regulation Act, 1949,
the remuneration to its directors during the
year ended March 31, 2025 has been paid /
provided by the Bank in accordance with the
provisions of Section 35B(1) of the Banking
Regulation Act, 1949.

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

i. The Bank has disclosed the impact of
pending litigations on its financial position
in Schedule 12, Note 14(j) of Schedule 18 of
the financial statements;

ii. The Bank has made provision as required
under the applicable law or accounting
standards, for material foreseeable losses,
if any, on long term contracts including
derivative contracts as detailed in
Schedule 12 and Note 7 of Schedule 18 to
the financial statements and;

iii. There has been delay in transferring
amounts, required to be transferred, to the
Investor Education and Protection Fund by
the Bank and the details are disclosed in its
financial statements - Refer Note No. 14(k)
of Schedule 18 to the financial statements.

iv. a) The management has represented

that, to the best of its knowledge
and belief, other than as disclosed
in the Note 15 of Schedule 18 to the
financial statements, no funds have
been advanced or loaned or invested
(either from borrowed funds or share
premium or any other sources or kind

of funds) by the Bank to or in any other
person(s) or entity(ies), including
foreign entities ("Intermediaries"), with
the understanding, whether recorded
in writing or otherwise, that the
Intermediary shall, whether, directly or
indirectly lend or invest in other persons
or entities identified in any manner
whatsoever by or on behalf of the Bank
("Ultimate Beneficiaries") or provide
any guarantee, security or the like on
behalf of the Ultimate Beneficiaries;

b) The management has represented
that, to the best of its knowledge
and belief, other than as disclosed
in the Note 15 of Schedule 18 to the
financial statements, no funds have
been received by the Bank from any
person(s) or entity(ies), including
foreign entities ("Funding Parties"), with
the understanding, whether recorded
in writing or otherwise, that the Bank
shall, whether, directly or indirectly, lend
or invest in other persons or entities
identified in any manner whatsoever
by or on behalf of the Funding Party
("Ultimate Beneficiaries") or provide
any guarantee, security or the like on
behalf of the Ultimate Beneficiaries; and

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

v. As stated in note 1.b of Schedule 18
and as disclosed in Profit and Loss
Account under ''Appropriations'' to the
Financial Statements:

(a) The final dividend proposed in the
previous year, declared, and paid
by the Bank during the year is in
accordance with Section 123 of the
Act, as applicable.

(b) The Bank did not pay any interim
dividend during the year.

(c) The Board of Directors of the Bank
have proposed final dividend for the
year which is subject to the approval
of the members at the ensuing Annual
General Meeting. The amount of
dividend proposed is in accordance
with section 123 of the Act, as applicable,
until the date of this report.

vi. Reporting under Rule 11(g) of the
Companies (Audit and Auditors) Rules, 2014
is applicable from 01 April 2023.

Based on our examination which included
test checks the Company has used multiple

accounting software for maintaining its
books of account, which has a feature
of recording audit trail (edit log) and the
same has operated throughout the year
for all relevant transactions recorded in
the respective software.

Further, for the periods where audit
trail (edit log) facility was enabled and
operated throughout the year for the
respective accounting software, we did not
come across any instance of the audit trail
feature being tampered with. Additionally,
the audit trail has been preserved
by the company as per the statutory
requirements for record retention.

For Sundaram & Srinivasan, For Chandran & Raman,

Chartered Accountants Chartered Accountants

FRN: 004207S FRN: 000571S

S Ramkumar S G Kalyanaraman

Partner Partner

M. No.: 238820 M. No.: 010652

UDIN: 25238820BMKNFP3556 UDIN:25010652BMIBLE9818

Place: Thoothukudi Place: Thoothukudi

Date: April 23, 2025 Date: April 23, 2025

Mar 31, 2024

1. We have audited the accompanying financial statements of M/s. TAMILNAD MERCANTILE BANK LIMITED ("the Bank"), which comprise the Balance Sheet as at March 31, 2024, 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. Incorporated in these financial statements are the returns of Head Office, 20 branches, Integrated Treasury & International Banking Division audited by us and 532 branches audited by statutory branch auditors located across India.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements read with notes thereon, give the information required by the Banking Regulation Act, 1949 as well as the Companies Act, 2013 (''the Act''), as amended and circulars and guidelines issued by the Reserve Bank of India (''RBI''), in the manner so required for the banking companies and are in conformity with the accounting principles generally accepted in India including the Accounting Standards prescribed under section 133 of the Act read with Companies (Accounting Standards) Rules, 2021, give a true and fair of the state of affairs of the Bank as at March 31, 2024, and its profit, and its cash flows for the year ended on that date.

BASIC FOR OPINION

requirements that are relevant to our audit of the financial statements in accordance with the accounting principles generally accepted in India, including the Accounting Standards prescribed under section 133 of the Act read with Companies (Accounting Standards) Rules, 2021, provisions of section 29 of the Banking Regulation Act, 1949, circulars and guidelines issued by RBI from time to time 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

3. Key audit matters are those matters that, in our professional judgement, and based on the consideration of the reports of the statutory branch auditors as referred to paragraph 4 below, were of most significance in our audit of the financial statements for the financial year ended March 31, 2024. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

4. We have determined the matters described below to be the key audit matters to be communicated in our report. We have fulfilled the responsibilities described in the Auditor''s responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.

Key Audit Matter	How to key audit matter was addressed
A. Identification of Non-performing advances (NPA) and provisioning on advances:	Our approach and procedures for auditing the classification of advances, identification of non-performing advances, income recognition, and provision on advances included the following steps:
Advances include Bills purchased and discounted, Cash credits, Overdrafts, Loans repayable on demand and Term loans. These are further categorised as secured by Tangible assets (including advances against Book Debts), covered by Bank/Government Guarantees and Unsecured advances. The Reserve Bank of India (''RBI'') has prescribed the ''Prudential Norms on Income Recognition, Asset Classification and Provisioning'' in respect of advances for banks (''IRACP Norms'').	1. We examined and assessed the bank''s accounting policies for identifying non-performing assets (NPAs) and making provisions, ensuring compliance with the IRACP norms prescribed by the Reserve Bank of India (RBI). 2. We reviewed and tested the design and effectiveness of key controls, including system-based automated controls, for identifying and provisioning NPA accounts, based on the extant guidelines on IRACP laid down by the RBI.
The identification of performing and non-performing advances (including advances restructured under applicable IRACP Norms) involves establishment of proper mechanism and the Bank is required to apply significant degree of judgement to identify and determine the amount of provision required against each advance applying both quantitative as well as qualitative factors prescribed by the regulations. Significant judgements and estimates for NPA identification and provisioning could give rise to material misstatements on: â¢ Completeness and timing of recognition of non-performing assets in accordance with criteria as per IRACP norms;	3. We conducted additional procedures to identify NPAs, which included: a) Testing exception reports generated by the bank''s application systems where advances are recorded. b) Analyzing accounts reported by the bank and other banks as Special Mention Accounts (SMA) in RBI''s central repository of information on large credits (CRILC) to identify potential stress. c) Reviewing borrower account statements, drawing power calculations, security details, and other relevant information based on quantitative and qualitative risk factors.
â¢ Measurement of the provision for non-performing assets based on loan exposure, ageing and classification of the loan, realizable value of security;	d) Examining minutes of management committee and credit committee meetings, and conducting inquiries with the credit and risk departments to identify indicators of stress or default events in loan accounts or products.
â¢ Appropriate reversal of unrealized income on the NPAs. Since the classification of advances, identification of NPAs and creation of provision on advances (including additional provisions on restructured advances under applicable IRACP Norms) and income recognition on advances:	e) Considering audit reports and memorandum of changes issued by statutory branch auditors. f) Reviewing internal audit, systems audit, credit audit, and concurrent audit reports in accordance with the bank''s policies
â¢ Requires proper control mechanism and significant level of estimation by the Bank; â¢Has significant impact on the overall financial statements of the Bank;	and procedures. g) Analyzing the RBI Annual Financial Inspection report on the bank, the bank''s responses to observations, and other communications with the RBI throughout the year.
we have ascertained this area as a Key Audit Matter.	h) Examining a sample of advances, including stressed or restructured advances, to assess compliance with the RBI''s Master Circulars/Guidelines.
	i) Conducting branch visits and examining documentation and records related to advances.
	For identified non-performing advances, we conducted sample-based testing of asset classification dates, reversal of unrealized interest, valuation of available security, and provisioning as per the IRACP norms. We recalculated the provision for NPAs on these samples, considering key factors,

	and compared our findings with the management''s measurements.
B. Information Technology ("IT")
Systems and Controls	As part of our audit procedures for reviewing the Bank''s IT systems and related controls for financial reporting, we undertook the following actions:
The Bank highly relies on information systems, including	â¢ We conducted testing to evaluate the design and
automated controls, for its key financial accounting and	effectiveness of the Bank''s IT access controls over critical
reporting processes. However, this dependence poses a risk that deficiencies in the IT control environment could lead to	information systems used for financial reporting.
significant misstatements in the financial accounting and	â¢ We performed sample testing of IT general controls, including
reporting records.	logical access, change management, and aspects of IT operational controls. This involved reviewing and authorizing
Given the Bank''s use of multiple systems for overall financial	access requests to systems and inspecting requests for
reporting and the high volume of daily transactions recorded	changes to systems for approval and authorization. We also
across various locations, protecting the integrity of the Bank''s	considered the control environment related to interfaces,
systems and data has become increasingly challenging.	configuration, and other application layer controls that were
Cybersecurity risks have emerged as a significant concern in recent periods.	identified as crucial for our audit. â¢ We examined the Bank''s controls pertaining to the prevention
Considering the pervasive and intricate nature of the IT	of unauthorized opening and operations in internal/office
environment, as well as its critical role in ensuring accurate and timely financial reporting, we have identified this area as	accounts.
a Key Audit Matter.	â¢ Furthermore, we tested the design and operating effectiveness of specific automated controls that were identified as key internal financial controls for financial reporting. Whenever deficiencies were identified, we sought explanations regarding compensating controls or performed alternative audit procedures. Additionally, we took into account any changes made to the IT landscape during the audit period that had a significant impact on financial reporting and conducted testing accordingly.

5. WE DRAW ATTENTION TO

a) Note No.14.k. of the accompanying financial statements where the Bank, as required under law, has pre-deposited the penalty before the Appellate Tribunal amounting to Rs.16.99 crores levied by Directorate of Enforcement, for recording share transfers during 2007, 2011 and 2012, in violation of the regulation 4 of Foreign Exchange Management (Transfer or Issue of security by a person resident outside India) Regulations, 2000.

Our opinion is not modified in respect of the above matters.

6. INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND THE AUDITOR''S REPORT THEREON

The Bank''s Board of Directors are responsible for other information. The other information comprises the Corporate Overview, Directors'' Report including annexures to Directors'' Report, Management Discussion and Analysis, Basel lll - Pillar 3 disclosures and Corporate Governance report included in the Annual Report, but does not include the financial statements and our auditor''s report thereon. The other information is expected to be made available to us after the date of this auditor''s report.

Our opinion on the Financial Statements does not cover

the other information and Pillar 3 disclosure under the Basel III Disclosure and we do not express any form of assurance/ conclusion thereon

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

When we read the other information identified above, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance as required under SA 720 ''The Auditor''s responsibilities Relating to Other Information''

We have nothing to report in this regard.

RESPONSIBILITIES OF MANAGEMENT & THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS

7. The Bank''s Board of Directors is responsible for the matters stated in Section 134(5) of the Act, with respect to the preparation and presentation of these financial statements that give a true and fair view of the financial position, financial performance 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 read with Companies (Accounting Standards) Rules, 2021 in so far as they apply to the Bank and provision of Sec.29 of the Banking Regulation Act 1949 and circulars and guidelines issued by the RBI from time to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Bank and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Board of Directors is responsible for assessing the Bank''s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

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

AUDITOR''S RESPONSIBILITY FOR THE AUDIT OF THE FINANCIAL STATEMENTS

8. 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 skepticism 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.

â¢ Obtain sufficient appropriate audit evidenceregarding the financial information of the Bank to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit of the financial information of the Bank and such branches included in the financial statements, of which we are the independent auditors. For the other branches included in the financial statements, which have been audited by statutory branch auditors, such branch auditors remain responsible for the direction, supervision and performance of the audits carried out by them. We remain solely responsible for our audit opinion.

Statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our Audit work and evaluating the results of our work; and (ii) to evaluate the effect of identified misstatements in the Financial Statements.

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

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements for the financial year ended March 31, 2024 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

9. We did not audit the financial statements / information of 532 branches included in the financial statements of the bank whose financial statements / financial information reflect total assets of Rs.35,543.78 Crores as at March 31, 2024 and the total revenue of Rs.3,446.43 Crores for the year ended on that date, as considered in the financial statements. These branches cover 83.70% of Advances, 81.13% of Deposits and 67.22% of Non-Performing assets as at March 31, 2024 and 62.74% of revenue for the year ended March 31, 2024. 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 solely based on the report of such branch auditors.

Our report is not modified 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 and Accounting Standards as per section 133 of the Act read with Companies (Accounting Standards) Rules, 2021.

Being a Banking Company, the Companies (Auditor''s Report) Order, 2020 ("the Order") issued by the Central Government of India in terms of the powers conferred by subsection (11) of section 143 of the Companies Act, 2013, is not applicable.

11. As required by Sub Section 3 of Section 30 of the Banking Regulation Act 1949, and on the consideration of the reports of the statutory branch auditors as referred in paragraph 9 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 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; and

(d) The Profit and Loss account shows a true balance of profit for the year then ended.

12. Further, as required by Section 143 (3) of the Act, we report to the extent applicable that:

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

(b) In our opinion, proper books of 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 branches not visited by us.

(c) 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.

(d) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of accounts and with the audited returns from the branches.

(e) In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with read with Companies (Accounting Standards) Rules, 2021 to the extent they are not inconsistent with the Accounting Policies prescribed by the Reserve Bank of India.

(f) On the basis of the written representations received from the directors and taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2024 from being appointed as a director in terms of Section 164 (2) of the Companies Act.

(g) With respect to adequacy of the Internal Financials controls over Financial Reporting of the Bank and the operating effectiveness of such controls, refer to our separate report in Annexure - I, and

(h) The entity being a banking company as defined under Banking Regulation Act, 1949, the remuneration to its directors during the year ended March 31, 2024 has been paid/provided by the Bank in accordance with the provisions of Section 35B(1) of the Banking Regulation Act, 1949

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

i. The Bank has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note No. 15.13 to the financial statements;

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

iii. There has been delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Bank and the details are disclosed in its financial statements - Refer Note No. 14.1. to the financial statements.

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 ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, whether, directly or indirectly lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Bank ("Ultimate Beneficiaries") or provide any guarantee, security or the like on behalf of the Ultimate Beneficiaries;

including foreign entity ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Bank shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") of provide any guarantee, security or the like on behalf of the Ultimate beneficiaries; and

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

v. The dividend paid by the Bank during the year is in compliance with section 123 of the Companies Act 2013.

vi. As stated in Note No. 15.16 to the financial statements, the Board of Directors of the Company have declared and paid dividend during the financial year and the same is in accordance with section 123 of the Act to the extent it applies to declaration of dividend.

vii. Based on our examination which included test checks, the bank has used an accounting software for maintaining its books of account which has a feature of recording audit trail (edit log) facility and the same has operated throughout the year for all relevant transactions recorded in the software. Further, during the course of our audit we did not come across any instance of audit trail feature being tampered with.

For Suri & Co For Abarna & Ananthan

Chartered Accountants Chartered Accountants

FRN-004283S ^FRN-000003S

Sd/- Sd/-

CA P Prasanna CA Mohan Rao

Partner Partner

M No 228180 M No. 203737

UDIN: 24228180BKEPNF4469 UDIN: 24203737BKHAGE7240

Place: Thoothukudi Date: April 22, 2024

Mar 31, 2023

tamilnad mercantile bank limited

REPORT ON AUDIT OF THE FINANCIAL STATEMENTS

OPINION

1. We have audited the accompanying financial statements of M/s. TAMILNAD MERCANTILE BANK LIMITED ("the Bank"), which comprise the Balance Sheet as at March 31, 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. Incorporated in these financial statements are the returns of Head Office, 21 branches, Integrated Treasury & International Banking Division audited by us and 509 branches audited by statutory branch auditors located across India.

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements read with notes thereon, give the information required by the Banking Regulation Act, 1949 as well as the Companies Act, 2013 (''the Act''), as amended and circulars and guidelines issued by the Reserve Bank of India (''RBI''), in the manner so required for the banking companies and are in conformity with the accounting principles generally accepted in India including the Accounting Standards prescribed under section 133 of the Act read with Companies (Accounting Standards) Rules, 2021, give a true and fair of the state of affairs of the Bank as at March 31, 2023, and its profit, and its cash flows for the year ended on that date.

BASIS FOR OPINION

2. We conducted our audit of the Bank including its branches in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act. Our responsibilities under those Standards are further described in the ''Auditor''s Responsibilities for the Audit of the Financial Statements'' section of our report. We are independent of the Bank in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the ethical requirements that are relevant to our audit of the financial statements in accordance with the accounting principles generally accepted in India, including the Accounting Standards prescribed under section 133 of the Act read with Companies (Accounting Standards) Rules, 2021, provisions of section 29 of the Banking Regulation Act,

1949, circulars and guidelines issued by RBI from time to time 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.

BASIS FOR OPINION

3. Key audit matters are those matters that, in our professional judgement, and based on the consideration of the reports of the statutory branch auditors as referred to paragraph xx below, were of most significance in our audit of the financial statements for the financial year ended March 31, 2023. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

	KEY AUDIT MATTER	HOW THE KEY AUDIT MATTER WAS
	KEY AUDIT MATTER	ADDRESSED
	Identification of Non-performing advances	Our approach and procedures for auditing
	(NPA) and provisioning on advances:	the classification of advances, identification
	Advances include Bills purchased and discounted, Cash credits, Overdrafts, Loans repayable on demand and Term loans.	of non-performing advances, income recognition, and provision on advances included the following steps:
	These are further categorised as secured	1. We examined and assessed the bank''s
	by Tangible assets (including advances	accounting policies for identifying non
	against Book Debts), covered by Bank/	performing assets (NPAs) and making
	Government Guarantees and Unsecured	provisions, ensuring compliance with
	advances.	the IRACP norms prescribed by the
A	The Reserve Bank of India (''RBI'') has	Reserve Bank of India (RBI).
	prescribed the ''Prudential Norms on	2. We reviewed and tested the design
	Income Recognition, Asset Classification	and effectiveness of key controls,
	and Provisioning'' in respect of advances for	including system-based automated
	banks (''IRACP Norms'').	controls, for identifying and
	The identification of performing and non-performing advances (including advances restructured under applicable	provisioning NPA accounts, based on the extant guidelines on IRACP laid down by the RBI.
	IRACP Norms) involves establishment of	3. We conducted additional procedures
	proper mechanism and the Bank is required to apply significant degree of judgement to	to identify NPAs, which included:

KEY AUDIT MATTER

HOW THE KEY AUDIT MATTER WAS ADDRESSED

identify and determine the amount of provision required against each advance applying both quantitative as well as qualitative factors prescribed by the regulations.

Significant judgements and estimates for NPA identification and provisioning could give rise to material misstatements on:

â¢ Completeness and timing of recognition of non-performing assets in accordance with criteria as per IRACP norms;

â¢ Measurement of the provision for non-performing assets based on loan exposure, ageing and classification of the loan, realizable value of security;

â¢ Appropriate reversal of unrealized income on the NPAs.

â¢ Since the classification of advances, identification of NPAs and creation of provision on advances (including additional provisions on restructured advances under applicable IRACP Norms) and income recognition on advances:

â¢ Requires proper control mechanism and significant level of estimation by the Bank;

â¢ Has significant impact on the overall financial statements of the Bank;

â¢ we have ascertained this area as a Key Audit Matter.

a. Testing exception reports generated by the bank''s application systems where advances are recorded.

b. Analyzing accounts reported by the bank and other banks as Special Mention Accounts (SMA) in RBI''s central repository of information on large credits (CRILC) to identify potential stress.

c. Reviewing borrower account statements, drawing power calculations, security details, and other relevant information based on quantitative and qualitative risk factors.

d. Examining minutes of management committee and credit committee meetings, and conducting inquiries with the credit and risk departments to identify indicators of stress or default events in loan accounts or products.

e. Considering audit reports and memorandum of changes issued by statutory branch auditors.

f. Reviewing internal audit, systems audit, credit audit, and concurrent audit reports in accordance with the bank''s policies and procedures.

g. Analyzing the RBI Annual Financial Inspection report on the bank, the bank''s responses to observations, and other communications with the RBI throughout the year.

h. Examining a sample of advances, including stressed or restructured advances, to assess compliance with the RBI''s Master Circulars/Guidelines.

i. Conducting branch visits and examining documentation and records related to advances.

KEY AUDIT MATTER

HOW THE KEY AUDIT MATTER WAS ADDRESSED

For identified non-performing advances, we conducted sample-based testing of asset classification dates, reversal of unrealized interest, valuation of available security, and provisioning as per the IRACP norms. We recalculated the provision for NPAs on these samples, considering key factors, and compared our findings with the management''s measurements.

Information Technology ("IT") Systems and Controls

The Bank highly relies on information systems, including automated controls, for its key financial accounting and reporting processes. However, this dependence poses a risk that deficiencies in the IT control environment could lead to significant misstatements in the financial accounting and reporting records.

Given the Bank''s use of multiple systems for overall financial reporting and the high volume of daily transactions recorded across various locations, protecting the integrity of the Bank''s systems and data has become increasingly challenging. Cybersecurity risks have emerged as a significant concern in recent periods.

Considering the pervasive and intricate nature of the IT environment, as well as its critical role in ensuring accurate and timely financial reporting, we have identified this area as a Key Audit Matter.

As part of our audit procedures for reviewing the Bank''s IT systems and related controls for financial reporting, we undertook the following actions:

- We conducted testing to evaluate the design and effectiveness of the Bank''s IT access controls over critical information systems used for financial reporting.

- We performed sample testing of IT general controls, including logical access, change management, and aspects of IT operational controls. This involved reviewing and authorizing access requests to systems and inspecting requests for changes to systems for approval and authorization. We also considered the control environment related to interfaces, configuration, and other application layer controls that were identified as crucial for our audit.

- We examined the Bank''s controls pertaining to the prevention of unauthorized opening and operations in internal/office accounts.

- Furthermore, we tested the design and operating effectiveness of specific automated controls that were identified as key internal financial controls for financial reporting. Whenever deficiencies were identified, we sought explanations regarding compensating controls or performed alternative audit procedures. Additionally, we took into account any changes made to the IT landscape during the audit period that had a significant impact on financial reporting and conducted testing accordingly.

	KEY AUDIT MATTER	HOW THE KEY AUDIT MATTER WAS ADDRESSED
	Evaluation of litigations included in	Our Audit procedures with respect to this
	Contingent Liabilities.	matter included:
	Significant judgements and estimates for	Testing the design and operating
	NPA identification and provisioning could	effectiveness of the Bank''s key controls over
	give rise to material misstatements on:	the estimation, monitoring and disclosure of
	Considerable management judgment	provisions and contingent liabilities.
	is necessary to determine the existence	Our substantive audit procedures included
	of obligations and whether provisions should be recognized on the reporting	and were not limited to the following:
	date, in accordance with the accounting	â¢ Obtaining an understanding of internal
	criteria specified in Accounting Standard	controls relevant to the identification
	29 - Provisions, Contingent Liabilities, and	of litigations and legal cases to be
	Contingent Assets (AS 29), or whether they should be disclosed as contingent liabilities.	reported; â¢ Obtained list of cases/matters in respect
	Additionally, significant judgments are involved in measuring such obligations, with	of which litigations were outstanding as
C	the following being the most significant:	at reporting date;
C	â¢ Assessment of liability: Determining	â¢ Examining recent orders and/or
	whether the likelihood of outflows	communication received from various
	related to identified material matters	tax authorities/judicial forums and follow
	is probable and can be reliably	up action thereon;
	estimated requires judgment.	â¢ Evaluating the merit of the subject matter
	â¢ Adequacy of provisions: The	under consideration with reference
	appropriateness of assumptions	to the grounds presented therein and
	and judgments utilized in estimating	available independent legal/tax advice
	significant provisions is a key	including opinion of the Bank''s tax
	consideration.	consultants;
	â¢ Adequacy of disclosures: Ensuring that	â¢ Review and analysis of evaluation of
	provisions for liabilities and charges,	the contentions of the Bank through
	as well as contingent liabilities, are appropriately disclosed.	discussions, collection of details of the subject matter under consideration, the
	The Bank''s assessment is informed by	likely outcome and consequent potential
	factual information, their own judgment, experience, and advice from legal and	outflows on those issues;
	independent tax consultants, as deemed	â¢ Verification of disclosures related to
	necessary. Given that the assessment of these ongoing litigations entails a significant level of judgment in interpreting the law, we have identified this as a key audit matter.	significant litigations, taxation matters and Employee benefits liabilities in the financial statements.

EMPHASIS OF MATTER

5. We draw attention to

a. Note No.4.i. of the accompanying financial statements which describes the uncertainties due to the outbreak of novel coronavirus (COVID 19). In view of these uncertainties, the impact on the Bank''s financial statements is significantly dependent on future developments.

b. Note No.14.i. of the accompanying financial statements where the Bank, as required under law, has pre-deposited the penalty before the Appellate Tribunal amounting to Rs.16.99 crores levied by Directorate of Enforcement, for recording share transfers during 2007, 2011 and 2012, in violation of the regulation 4 of Foreign Exchange Management (Transfer or Issue of security by a person resident outside India) Regulations,2000.,

Our opinion is not modified in respect of the above matters.

INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND THE AUDITOR''S REPORT THEREON

6. The Bank''s Board of Directors are responsible for other information. The other information comprises the Corporate Overview, Directors'' Report including annexures to Directors'' Report, Management Discussion and Analysis, Basel III - Pillar 3 disclosures and Corporate Governance report included in the Annual Report, but does not include the financial statements and our auditor''s report thereon. The other information is expected to be made available to us after the date of this auditor''s report.

Our opinion on the Financial Statements does not cover the other information and Pillar 3 disclosure under the Basel III Disclosure and we do not express any form of assurance/ conclusion thereon

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

We have nothing to report in this regard.

RESPONSIBILITIES OF MANAGEMENT & THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS

provision of Sec.29 of the Banking Regulation Act 1949 and circulars and guidelines issued by the RBI from time to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Bank and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the 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.

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

AUDITOR''S RESPONSIBILITY FOR THE AUDIT OF THE FINANCIAL STATEMENTS

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.

â¢ Obtain sufficient appropriate audit evidence regarding the financial information of the Bank to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit of the financial information of the Bank and such branches included in the financial statements, of which we are the independent auditors. For the other branches included in the financial statements, which have been audited by statutory branch auditors, such branch auditors remain responsible for the direction, supervision and performance of the audits carried out by them. We remain solely responsible for our audit opinion.

Materiality is the magnitude of misstatements in the Financial Statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of Financial Statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our Audit work and evaluating the results of our work; and (ii) to evaluate the effect of identified misstatements in the Financial Statements.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements for the financial year ended March 31, 2023 and are therefore the key audit matters. We describe these matters in our auditor''s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

OTHER MATTERS

9. We did not audit the financial statements/information of 509 branches included in the financial statements of the bank whose financial statements/financial information reflect total assets of ?44,387.62 Crores as at March 31, 2023 and the total revenue of ?2,894.77 Crores for the year ended on that date, as considered in the financial statements. These branches cover 80.88% of Advances, 77.22% of Deposits and 74.44% of Non-Performing assets as at March 31, 2023 and 61.46% of revenue for the year ended March 31, 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 solely based on the report of such branch auditors.

Our report is not modified in respect of these matters.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

Being a Banking Company, the Companies (Auditor''s Report) Order, 2016 ("the Order") issued by the Central Government of India in terms of the powers conferred by subsection (11) of section 143 of the Companies Act, 2013, is not applicable.

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; and

d. The Profit and Loss account shows a true balance of profit for the year then ended.

12. Further, as required by Section 143 (3) of the Act, we report to the extent applicable that:

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

b. In our opinion, proper books of 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 branches not visited by us.

c. 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.

d. The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of accounts and with the audited returns from the branches.

e. In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with read with Companies (Accounting Standards) Rules, 2021 to the extent they are not inconsistent with the Accounting Policies prescribed by the Reserve Bank of India.

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

g. With respect to adequacy of the Internal Financials controls over Financial Reporting of the Bank and the operating effectiveness of such controls, refer to our separate report in Annexure - I, and

h. The entity being a banking company as defined under Banking Regulation Act, 1949, the remuneration to its directors during the year ended March 31, 2023 has been paid/ provided by the Bank in accordance with the provisions of Section 35B(l) of the Banking Regulation Act, 1949

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

i. The Bank has disclosed the impact of pending litigations on its financial position in its financial statements - Refer Note No. 15.13 to the financial statements;

iii. There has been delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Bank and the details are disclosed in its financial statements - Refer Note No. 14.j. to the financial statements.

(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 entity ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Bank shall, whether, directly or indirectly, lend or invest in other persons or entities identified in any manner whatsoever by or on behalf of the Funding Party ("Ultimate Beneficiaries") of provide any guarantee, security or the like on behalf of the Ultimate beneficiaries; and

v. The dividend paid by the Bank during the year is in compliance with section 123 of the Companies Act 2013.

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

For Suri & Co For Abarna & Ananthan

Chartered Accountants Chartered Accountants

FRN No. 004283S FRN No. 000003S

CA M. Sivaram CA Mohan Rao

Partner Partner

M No 211916 M No. 203737

UDIN: 23211916BGWKFH1629 UDIN: 23203737BGZDDV2708

Place: Mumbai Date: 24-04-2023

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