Canara Bank
Report on Audit of the Standalone Financial Statements. Opinion
1. We have jointly audited the accompanying standalone financial statements of Canara Bank ('the Bank'), which comprises of the Balance Sheet as at March 31, 2026, the Profit and Loss Account and the Statement of Cash Flow for the year then ended, and notes to standalone financial statements including a summary of significant accounting policies and other explanatory information ('Standalone Financial Statement') in which are included the returns for the year ended on that date of:
i) The Head Office, 20 Branches, 1 Integrated Treasury Wing audited by us.
ii) 2886 domestic branches audited by statutory branch auditors.
iii) 4 Foreign branches audited by respective local auditors.
The branches audited by us and those audited by other auditors have been selected by the Bank in accordance with the guidelines issued to the Bank by the Reserve Bank of India. Also incorporated in the Balance Sheet, the Profit and Loss Account and Statement of Cash Flows are the returns from 7519 domestic branches which have not been subjected to audit. These unaudited branches account for 24.30% of advances, 48.60% of deposits, 24.84% of interest income and 46.90% of interest expenses.
2. 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 in the manner so required for Bank and are in conformity with the accounting principles generally accepted in India and:
a) the Balance Sheet, read with the notes thereon is a full and fair Balance Sheet containing all the necessary particulars, is properly drawn up so as to exhibit a true and fair view of the state of affairs of the Bank as at March 31, 2026;
b) the Profit and Loss Account, read with notes thereon shows a true balance of Profit for the year ended as on that date; and
c) the statement of Cash Flows gives a true and fair view of the cash flows for the year ended on that date.
Basis for Opinion
3. We conducted our audit in accordance with the Standards on Auditing (SAs) issued by the Institute of Chartered Accountants of India ("ICAI"). Our responsibilities under those Standards are further described in the Auditors' Responsibilities for the Audit of the standalone financial statements section of our report. We are independent of the Bank in accordance with the code of ethics issued by the ICAI together with ethical requirements that are relevant to our audit of the standalone financial statements, prepared in accordance with the Accounting Principles generally accepted in India including the Accounting Standards issued by the ICAI, and the provisions of the Section 29 of Banking Regulations Act, 1949 and circulars and guidelines issued by Reserve Bank of India 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
4. Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report:
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Key Audit Matter
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Response to Key Audit Matter
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1
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Income Recognition, Asset Classification, Adequacy of provisions thereon. (Refer Schedule 9 of the financial statements)
Advances constitute the largest class of assets of the Bank. Classification, income recognition and provisioning thereon have been in conformity with the guidelines and various norms prescribed by Reserve Bank of India ("RBI"). The management of the Bank relies on the CBS (Core Banking Solutions) along with other allied IT systems accompanied by various estimates, prudent judgement relating to performance of borrowers, determination of security value, manual interventions including services of experts & professionals for asset classification, Income recognition and provisioning thereon.
Considering the nature of the transactions, regulatory requirements, existing business environment, estimation / judgement involved in valuation of securities, computation of provisions, computation of drawing power with reliance placed of data submitted by borrowers as well as lead Bank, computation of diminution in value for restructured advances and recognition of interest income, it is a matter of high importance for the intended users of the Standalone financial statements.
Considering these aspects, we have determined this as a Key Audit Matter.
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Principal Audit Procedures:
Our audit was focused on process of income recognition, asset classification and provisioning pertaining to advances, in accordance with the guidelines issued by the Reserve Bank of India, considering the materiality of the balances.
We assessed the efficacy of Bank's system and the processes in place to identify the non-performing assets and create provision against such non - performing assets.
Our audit approach consisted of testing of the design and operating effectiveness of the internal controls with respect to the following:
• Accuracy of the data input in the system for income recognition, classification into performing and non-performing Advances and provisioning in accordance with the IRAC norms in respect of the branches audited by us.
• Assessing the controls with respect to approval, documentation, disbursement and monitoring of advances.
• Review of the CBS and other related & allied systems for compliance with the prudential norms issued by Reserve Bank of India.
• Evaluation of the design of internal controls relating to identification and recognizing provision for non-performing assets.
• Review of the relevant information technology systems used in identification and making provision for such NPA as per the RBI Guidelines.
• Evaluated and tested the management estimates and judgements for the purpose of identification of NPA and adequacy of provision required as per RBI's Prudential norms.
• Reviewed the reliability, effectiveness and accuracy of the manual interventions, wherever it has come to our knowledge on test check basis.
• Relied on the reports / returns / judgements of the Statutory Branch Auditors (SBA) in case of branches not audited by us for identification and provisioning for non-performing assets and for overall compliance with the regulatory requirement in accordance with the Standards on Auditing 600 issued by ICAI.
• Test checked the process and logic of identification and creation of provision against non-performing assets in accordance with RBI Guidelines issued from time to time and also the mechanism for identification of stressed accounts.
• Relied on the opinions and reports of various experts, which includes independent valuers, lawyers, legal experts and such other professionals, who have rendered services to the Bank in various capacities in conformity with Standards on Auditing 620 issued by ICAI.
• Reviewed the internal audit / inspection reports / Concurrent audit reports, wherever available.
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Key Audit Matter
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Response to Key Audit Matter
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2.
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Classification and Valuation of Investments, Identification of and provisioning for Non-Performing Investments (Schedule 8 of the financial statements):
Investments include investments made by the Bank in various Government Securities, Bonds, Debentures, Shares, Security receipts and other approved securities.
These are governed by the circulars and directions of the RBI.
These directions of RBI cover the classification of investments, valuation of investments, identification of Non-Performing Investments, the corresponding nonrecognition of income and provision thereon. The valuation of each category (type) of the aforesaid securities is to be done as per the method prescribed in circulars and directives issued by the RBI which involves collection of data / information from various sources such as FIMMDA rates, rates quoted on BSE / NSE, financial statements of unlisted companies, etc.
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Principal Audit Procedures:
Our audit was focused on valuation, classification, identification
of non-performing investments (NPIs), provisioning/
depreciation related to Investments.
• We understood and evaluated the Bank's system in place to comply with the relevant RBI Guidelines regarding classification, valuation, identification of NPIs provision/ depreciation related to investments.
• We assessed and evaluated the process adopted for collection of information from various sources for determining fair value of these investments.
• For the selected sample of investments in hand, we tested accuracy and compliance with the RBI Master Circulars and directions by re-performing classification and valuation for each category of security.
• We carried out substantive tests including arithmetical accuracy, data accuracy and control over the financial reporting system to recompute independently the provision to be maintained and depreciation to be provided in accordance with the circulars and directives of the RBI.
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Key Information Technology (IT) systems used in financial reporting process.
The Bank's operational and financial processes are predominantly dependent on IT systems due to large volume of transactions that are processed on daily basis and hence, considered as a key audit matter, correctness & effectiveness of which are mainly dependent on the Core Baking Solution (CBS) and other allied systems.
We have relied upon the consistent functioning of CBS & other allied application software with respect to transactions in Investments, Income Recognition, Classification of Assets and provisioning against advances in conformity with the RBI guidelines, reconciliation & ageing of various items under Sundry Assets and Sundry Liabilities along with such other accounts.
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Principal Audit Procedures:
We conducted an assessment of key IT applications, databases and operating systems that are relevant to our audit and have identified application software for CBS, Financial Statement Reporting Package, Treasury operations, IRAC Classification and CRAR calculation, which are primarily used for financial reporting.
Our audit approach consisted testing of the design and operating effectiveness of the internal controls as follows:
• Obtained an understanding of the Bank's IT control environment and IT policies during the audit period.
• Reviewed the design, implementation and operating effectiveness of the Bank's basic IT controls including application, access controls that are critical to financial reporting on test check basis.
• Reviewed the IS Audit Reports and discussed with Inspection Wing on compliance with key IS Controls.
• Tested the mapping of business logic with system logic adopted in the IT application software.
• Tested key automated and business cycle controls and logic for system generated reports relevant to the audit on test check basis.
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Key Audit Matter
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Response to Key Audit Matter
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4
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Deferred Tax Asset (Schedule 11 of the financial statements)
The Bank has recognized a net deferred tax asset of '2,966.59 Crores as on March 31, 2026. Objective estimation, recognition and measurement of Deferred Tax Asset are based on the expert opinion, judicial pronouncements and precedents, management judgements and estimates regarding the availability of profits in future in conformity with AS-22 issued by the ICAI. Deferred Tax Asset has been carried forward only to the extent there is a reasonable certainty that sufficient future taxable income will be available against which such Deferred Tax Assets can be realized.
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Principal Audit Procedures:
We have performed the following procedures as part of our
control testing:
• Review of the policies used for recognition and measurement of Deferred Tax Assets to ensure compliance with AS-22- Accounting for Taxes on Income issued by ICAI.
• Reviewed the management judgement and estimates regarding the realisability of the Deferred Tax Assets, w.r.t. expert opinion, judicial pronouncements and precedents.
• Assessed the probability of the availability and certainty of profits against which the Bank will be able to realise the Deferred Tax Asset in future.
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5
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Various Litigations & Contingent Liability
Assessment of Contingent liabilities in respect of certain litigations in relation to taxes and various other claims filed by other parties upon Bank, not acknowledged as debts.
The Bank's assessment is supported by facts of matter under consideration, their own judgement, past experience, advises from independent experts and legal opinion, wherever necessary.
Therefore, unexpected adverse outcomes in the litigation may impact the Bank's profit and state of affairs as reflected in the balance sheet.
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Principal Audit Procedures:
We have performed the following procedures as part of our
control testing.
• Obtained an understanding of internal controls relevant to the audit in order to design our audit procedures that are appropriate in the circumstances.
• Reviewed the current status of the various credit and noncredit litigations and contingent liabilities, including tax related disputes.
• Examined the communications received from various authorities and follow-up actions thereon.
• Evaluated the merits of the subject matter under consideration with reference to the background and relied on the expert opinion, legal advice, judicial pronouncements and precedents thereon.
• Verification of disclosures related to significant litigations and taxation matters.
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Information other than the Standalone Financial Statements and Auditors’ Report thereon:
5. The Bank's Board of Directors is responsible for the preparation of other information. The other information comprises Corporate Governance report, which we obtained at the time of issuance of this Auditors' Report. The other information includes Directors' Report with annexures (but does not include the Standalone Financial Statements and our auditors' report thereon), Key Financial Indicators and Shareholder's Information, which is expected to be made available to us after the date of our auditors' report.
Our opinion on the Standalone Financial Statements does not cover the other information and Pillar 3 disclosure under Basel III Disclosure and we do not and will not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditors' report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
When we read the other information which is expected to be made available to us after the date of our auditors' report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those Charged with Governance and take appropriate action as applicable under the relevant laws and regulations.
Responsibilities of Management and those Charged with Governance for the Standalone Financial Statements:
6. The Bank's Board of Directors is responsible with respect to the preparation of these standalone financial statements that give a true and fair view of the financialposition, financial performanceand cash flows of the Bank in accordance with the accounting principles generally accepted in India, including the Applicable Accounting Standards issued by ICAI, 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; makingjudgements and estimates that are reasonable and prudent;
and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, 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 board of directors either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.
The Board of Directors is also responsible for overseeing the Bank's financial reporting process.
Auditors’ Responsibilities for the Audit of the Standalone
Financial Statements:
7. Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
a) Identify and assess the risk 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 the one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
b) Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances.
c) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
d) 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 auditors' 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 auditors' report. However, future events or conditions may cause the Bank to cease to continue as a going concern.
e) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the Standalone Financial Statements represent the underlying transactions and events in a manner that achieves fair presentation.
Materiality is the magnitude of misstatements in the Standalone Financial Statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the 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 controls that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Other Matter:
8. We did not audit the financial statements / information of 2886 domestic branches and 4 foreign branches included in the Standalone Financial Statements of the Bank whose financial statements / financial information reflect total advances of '6,59,852.96 Crores as at March 31, 2026 and total revenue of '48,820.33 Crores for the year ended on that date, as considered in the Standalone Financial Statements. These branches and processing centres cover 43.42% of advances, 46.34% of deposits, 53.02% of non-performing assets, 44.43% of interest income, 46.97% of interest expense and 43.34% of revenue. The financial statements / information of these branches has been audited by the Bank's Statutory Branch Auditors whose reports have been furnished to us and in our opinion in so far as it relates to the amounts and disclosures included in respect of branches, is based solely on the reports of such Branch auditors.
Our opinion is not modified in respect of this matter.
Report on Other Legal and Regulatory Requirements:
9. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with Section 29 of the Banking Regulation Act, 1949;
10. Subject to the limitations of the audit indicated in above paragraphs and as required by the sub-section (3) of Section 30 of the Banking Regulation Act, 1949 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 / 1980, and subject also to the limitations of disclosure required therein, we report that:
a) We have sought and obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit and 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 adequate for the purposes of our audit.
d) The profit and loss account shows a true balance of profit for the then ended.
11. As required by RBI Letter No DOS.ARG. No. 6270/ 08.91.001 / 2019-20 dated March 17, 2020 on "Appointment of Statutory Central Auditors (SCAs) in Public Sector Banks - Reporting obligations for SCA's from FY 2019-20", read with subsequent communication dated May 19, 2020 issued by RBI, we further report on the matters specified in paragraph 2 of the aforesaid letter as under:
a) In our opinion, the aforesaid Standalone Financial Statements comply with the Accounting Standards issued by ICAI, to the extent they are not inconsistent with the accounting policies prescribed by the RBI.
b) There are no observations or comments on financial transactions or matters which have any adverse effect on the functioning of the Bank.
c) On the basis of the written representations received from the directors as on March 31, 2026, none of the director is disqualified as on March 31, 2026 from being appointed as a director in terms of Section 164 (2) of the Companies Act, 2013.
d) There are no qualifications, reservations or adverse remarks relating to maintenance of accounts and other matters connected therewith.
e) Our audit report on the adequacy and operating effectiveness of the Bank's Internal Financial Controls over Financial Reporting as required by the RBI Letter OS.ARG.No.6270/08.91.001/ 2019-20 dated March 17, 2020 (as amended) is given in Annexure A to this report. Our report expresses an unmodified opinion on the Bank's Internal Financial Controls over Financial Reporting as at March 31, 2026.
12. We further report that
a) 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;
b) The Balance Sheet, the Profit and Loss Account and the Statement of Cash Flows dealt with by this report are in agreement with the books of accounts and with the returns received from the branches not visited by us;
c) The reports on the accounts of the branch offices audited by branch auditors of the Bank under section 29 of the Banking Regulation Act, 1949 have been sent to us and have been properly dealt with by us in preparing this report; and
d) In our opinion, the Balance Sheet, Profit and Loss Account and the Statement of Cash Flows comply with the applicable accounting standards, to the extent they are not inconsistent with the accounting policies prescribed by RBI.
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