We have audited the accompanying financial
statements of Equitas Small Finance Bank Limited
(the “Bank”), which comprise the Balance Sheet as
at March 31, 2026, the Profit and Loss Account and
the Cash Flow Statement for the year then ended,
and notes to the financial statements, including a
summary of significant accounting policies and other
explanatory information (hereinafter referred to as
the “financial statements”).
In our opinion and to the best of our information
and according to the explanations given to us, the
aforesaid financial statements give the information
required by Section 29 of the Banking Regulation Act,
1949 as well as the Companies Act, 2013, as amended
(the “Act”) in the manner so required for Banking
Companies and give a true and fair view in conformity
with the accounting principles generally accepted in
India, including the Accounting Standards prescribed
under section 133 of the Act, read with rules made
thereunder, of the state of affairs of the Bank as at
March 31, 2026, and its profit and its cash flows for the
year ended on that date.
BASIS FOR OPINION
We conducted our audit of the financial statements
in accordance with the Standards on Auditing (SAs),
as 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 under the provisions of the Act
and the Rules made there under, and we have fulfilled
our other ethical responsibilities in accordance with
these requirements and the ICAI 's Code of Ethics. We
believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our
audit opinion on the financial statements.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our
professional judgment, were of most significance in
our audit of the financial statements for the financial
year ended March 31, 2026. 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.
We have determined the matters described below to be the key audit matters to be communicated in our report.
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S.
No.
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Key Audit Matters
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How our Audit Addresses our Key Audit Matters
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Identification of non-performing advances and provisioning for advances
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1.
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Advances form a material portion of the
Bank's assets and the quality of the Bank's
loan portfolio is measured in terms of
the proportion of non-performing assets
(NPAs) to the total loans and advances.
Identification, classification and provisioning
of NPAs are governed by the prudential
norms on income Recognition and Asset
Classification (“IRAC”) issued by the Reserve
Bank of India (“RBI”) which include rule-
based and judgemental factors. Management
is also required to make estimates of stress,
recoverability issues, and security erosion in
respect of specific borrowers or groups of
borrowers, on account of specific factors that
may affect such borrowers/groups.
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We considered the Bank's accounting policies for NPA
identification, and provisioning and have assessed the
compliance with the IRAC norms prescribed by the RBI.
We tested the operating effectiveness of the controls
(including application and IT dependent controls) for
borrower wise classification of loans in the respective asset
classes viz., standard, sub-standard, doubtful and loss with
reference to their days-past-due (DPD) status.
We considered the special mention accounts (“SMA”)
reports submitted by the Bank to the RBI's central repository
of information on large credits (CRILC) and made inquiries
of personnel in the Bank's credit and risk departments
regarding indicators of stress, perceived risk and mitigating
steps taken and/or the occurrence of specific event(s) of
default or other factors affecting the loan portfolio/particular
loan product category, that may affect NPA identification
and/or provisioning.
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S.
No.
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Key Audit Matters
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How our Audit Addresses our Key Audit Matters
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In view of the significance of this area to the
overall audit of financial statements, it has
been considered as a key audit matter.
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Selected the borrowers based on quantitative and qualitative
risk factors for their assessment of appropriate classification
as NPA including computation of overdue ageing to assess
its correct classification and provision amount as per extant
IRAC norms and Bank policy.
We performed analytical procedures which considered
both financial and non-financial parameters, in relation to
identification of NPAs and provisioning there against.
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Information Technology (:IT:) Systems and Controls impacting Financial Reporting
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2.
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The IT environment of the Bank is complex
and involves a large number of independent
and interdependent IT systems used in the
operations of the Bank for processing and
recording a large volume of transactions at
numerous locations. As a result, there is a
high degree of reliance and dependency on
such IT systems for the financial reporting
process of the Bank.
The IT infrastructure is critical for smooth
functioning of the Bank's business operations
as well as for timely and accurate financial
accounting and reporting.
IT general controls include user access
management and change management
across applications, networks, database, and
operating systems.
Due to the pervasive nature and complexity of
the IT environment as well as its significance
in relation to accurate and timely financial
reporting we have identified this area as a key
audit matter.
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As part of our Audit, we have carried out testing of the IT
general controls, application controls and IT dependent
manual controls of the financially significant applications.
We have gained an understanding of IT controls framework
through Walkthrough of processes. We have referred to the
reports of Information Systems Audit.
We have also tested the design and operating effectiveness
of the Bank's IT general controls in the nature of controls over
logical access, change management, and other aspects of IT
controls over the key information systems that are critical to
financial reporting. These included testing that requests for
access to systems were reviewed and authorized.
Where deficiencies were identified, we tested compensating
controls or performed alternate procedures sufficient to
confirm that the control objectives are satisfied.
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INFORMATION OTHER THAN THE FINANCIAL
STATEMENTS AND AUDITORS’ REPORT THEREON
The Bank's Board of Directors is responsible for the
other information. The other information comprises
the information included in the Annual report, but
does not include the financial statements and our
auditor's report thereon. The Bank's annual report is
expected to be made available to us after the date of
this Auditors' Report.
Our opinion on the financial statements does not
cover the other information and Pillar 3 disclosure
under Basel III Capital Regulations, including
Leverage Ratio, Liquidity Coverage Ratio and Net
Stable Funding Ratio under Capital Adequacy and
Liquidity Standards issued by Reserve Bank of India'
(“RBI”) 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 such 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 Bank's annual report, if we conclude that there
is a material misstatement of this other information,
we are required to communicate the matter to those
charged with governance and take appropriate
actions as applicable under the relevant laws and
regulations.
RESPONSIBILITIES OF MANAGEMENT AND
THOSE CHARGED WITH GOVERNANCE FOR THE
FINANCIAL STATEMENTS
The Bank's Board of Directors is responsible for the
matters stated in section 134(5) of the Act with respect
to the preparation of these 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 the
Companies (Accounting Standards Rules, 2021), as
amended, in so far as they apply to the Bank and
provisions of Section 29 of the Banking Regulation
Act, 1949, and circulars, guidelines and directions
issued by Reserve Bank of India (“RBI”) from time to
time.
This responsibility also includes maintenance of
adequate accounting records in accordance with the
provisions of the Act for safeguarding of the assets
of the Bank and for preventing and detecting frauds
and other irregularities; selection and application of
appropriate accounting policies; making judgements
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, management
is responsible for assessing the Bank's ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going
concern basis of accounting unless the management
and Board of Directors either intends to liquidate
the Bank or to cease operations, or has no realistic
alternative but to do so.
The Board of Directors are also responsible for
overseeing the Bank's financial reporting process.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF
THE FINANCIAL STATEMENTS
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:
• I dentify 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.
• Obtain an understanding of internal control
relevant to the audit in order to design
audit procedures that are appropriate in the
circumstances. Under section 143(3)(i) of the
Act, we are also responsible for expressing our
opinion on whether the Bank has adequate
internal financial controls with reference to
financial statements in place and the operating
effectiveness of such controls.
• Evaluate the appropriateness of accounting
policies used and the reasonableness of
accounting estimates and related disclosures
made by management.
• 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.
• 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.
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, 2026
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.
REPORT ON OTHER LEGAL AND REGULATORY
REQUIREMENTS
1. The Balance Sheet and the Profit and Loss
Account have been drawn up in accordance
with the provisions of Section 29 of the Banking
Regulation Act, 1949 and section 133 of the Act
read the Companies (Accounting Standards
Rules, 2021), as amended.
2. As required by sub section (3) of section 30 of
the Banking Regulation Act, 1949 we report that:
a) We have sought and obtained all the
information and explanations which, to
the best of our knowledge and belief, were
necessary for the purpose of our audit and
have found them to be satisfactory;
b) The transactions of the Bank, which have
come to our notice, have been within the
powers of the Bank; and
c) The financial accounting systems of the Bank
are centralized and therefore, accounting
returns for the purpose of preparing financial
statements are not required to be submitted
by the branches. Our audit is carried out
centrally as all the necessary records and data
required for the purposes of our audit are
centrally available. However, we have visited
31 branches for the purpose of our audit, in
compliance with the extant RBI Circular
3. As required by Section 143(3) of the Act, we
report that:
(a) We have sought and obtained all the
information and explanations which to
the best of our knowledge and belief were
necessary for the purposes of our audit;
(b) I n our opinion, proper books of account as
required by law have been kept by the Bank
so far as it appears from our examination of
those books;
(c) The Balance Sheet, the Profit and Loss
Account, and the Cash Flow Statement dealt
with by this Report are in agreement with
the books of account;
(d) I n our opinion, the aforesaid financial
statements comply with the accounting
standards specified under section 133 of
the Act read the Companies (Accounting
Standards Rules, 2021), as amended, to the
extent they are not inconsistent with the
accounting policies prescribed by RBI;
(e) On the basis of the written representations
received from the directors as on March
31, 2026 taken on record by the Board of
Directors, none of the directors is disqualified
as on March 31, 2026 from being appointed as
a director in terms of Section 164(2) of the Act;
(f) With respect to the adequacy of the internal
financial controls over financial reporting of
the Bank with reference to these financial
statements and the operating effectiveness
of such controls, refer to our separate Report
in “Annexure-A” to this report;
(g) I n our opinion, the provisions of section 197
of the Act are not applicable to the bank by
virtue of Section 35B(2A) of the Banking
Regulation Act 1949; and
(h) With respect to the other matters to
be included in the Auditor's Report in
accordance with Rule 11 of the Companies
(Audit and Auditors) Rules, 2014, as
amended, in our opinion and to the best
of our information and according to the
explanations given to us:
i. The Bank has disclosed the impact of
pending litigations as at March 31, 2026
on its financial position in its financial
statements - Refer to Schedule 12 to the
financial statements;
ii. The Bank did not have any long-term
contracts including derivative contracts
for which there were any material
foreseeable losses;
iii. There were no amounts which were
required to be transferred to the
Investor Education and Protection Fund
by the Bank;
iv a) The Management of the Bank
has represented that, to the best
of its knowledge and belief, no
funds (which are material either
individually or in the aggregate)
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
persons / entities, 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 of the Bank
has represented that, to the best
of its knowledge and belief, no
funds (which are material either
individually or in the aggregate)
have been received by the Bank from
any persons / entities, 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 the audit procedures
which we have considered
reasonable and appropriate in the
circumstances and according to
the information and explanations
provided to us by the management
in this regard, nothing has come
to our notice that has caused us
to believe that the representations
made by the management under
sub- clause (a) and (b) above
contain any material misstatement.
v. 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.
vi. a) Based on our examination which
included test checks, the bank
has used 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.
b) Audit trail has been preserved by
the Company as per the statutory
requirements for record retention in
accordance with the requirements
of Rule 11(g) of the Companies
(Audit and Auditors) Rules, 2014.
For ASA & Associates LLP For Suri & Co.,
Chartered Accountants Chartered Accountants
ICAI FRN: 009571N/N500006 ICAI FRN: 004283S
G N Ramaswami Sanjeev Aditya M
Partner Partner
ICAI Membership No. 202363 ICAI Membership No. 229694
UDIN: 26202363AFDQEV5621
Place: Chennai Place: Mumbai
Date: 30-04-2026 Date: 30-04-2026
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