1. We have audited the accompanying Financial
Statements of Fedbank Financial Services Limited ('the
Company’), which comprise the Balance Sheet as at
31 March 2026, and the Statement of Profit And Loss
(including Other Comprehensive Income), Statement
of Changes in Equity and Statement of Cash Flows
for the year ended on that date, and notes to the
Financial Statements, including a summary of material
accounting policies and other explanatory information
('the Financial Statements’).
2. I n 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 the Companies Act, 2013 ('Act’) in the manner so
required and give a true and fair view in conformity
with the Indian Accounting Standards prescribed
under section 133 of the Act read with the Companies
(Indian Accounting Standards) Rules, 2015, as
amended, ('Ind AS’) and other accounting principles
generally accepted in India, of the State of Affairs of
the Company as at 31 March 2026, and its Profit and
Other Comprehensive Income, Changes in Equity and
its Cash Flows for the year ended on that date.
BASIS FOR OPINION
3. We conducted our audit in accordance with the
Standards on Auditing ('SAs’) specified under section
143(10) of the Act. Our responsibilities under those SAs
are further described in the Auditor’s Responsibilities
for the Audit of the Financial Statements section of
our report. We are independent of the Company 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 thereunder, and
we have fulfilled our other ethical responsibilities in
accordance with these requirements and the Code
of Ethics. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis
for our opinion on the Financial Statements.
KEY AUDIT MATTERS
4. Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
Financial Statements of the current year. 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
|
Sr.
No
|
Key Audit Matter
|
How the Key Audit Matter was addressed in our audit
|
|
1
|
Provisioning based on Expected Credit Loss model (ECL) under IND AS 109 - Financial Instruments.
|
|
Refer to the accounting policies in 'Note 2.5 to the Financial Statements: Expected Credit Loss’, 'Note 3.2 to the Financial
Statements: Revenue Recognition’ 'Note 3.6© to the Financial Statements: Impairment of Financial Assets and 'Note 44
to the Financial Statements: Risk Management’.
|
| |
Subjective estimates:
As at 31 March 2026, the Company has reported
gross loan assets of Rs. 14,505.48 crores against
which an impairment loss of Rs. 186.63 crores has
been recognised.
|
Our key audit procedures included:
Review of Policy/procedures & design/controls
> Reviewed the Board-approved ECL policy and
documentation supporting provisioning logic, default
assessment and staging methodology, with particular
focus on judgemental elements introduced (including
refresh activity conducted during the period under audit).
> Testing key controls relating to selection and
implementation of material macro-economic variables and
the controls over the scenario selection and application of
probability weights. Review of changes made to the macro
scenarios and board approved overlay notes.
|
|
Sr.
No
|
Key Audit Matter
|
How the Key Audit Matter was addressed in our audit
|
| |
Under Ind AS 109, "Financial Instruments",
|
>
|
Assessing the design, implementation and operating
|
| |
allowance for impairment on loans are determined
|
|
effectiveness of key internal financial controls along
|
| |
using expected credit loss ('ECL’) estimation model.
|
|
with the monitoring process of overdue loans (including
|
| |
The Company updated its ECL policy in the year
|
|
those which became overdue after the reporting date),
|
| |
under audit. The revised ECL Model framework
|
|
measurement of provision, stage-wise classification of
|
| |
integrates both model-based outcomes and
significant management judgement through
overlays and exceptions, particularly for those
falling under early warning signals. The estimation
of ECL on financial instruments involves significant
judgement and estimates and therefore increased
levels of audit focus in the Company’s estimation of
|
>
|
loans, identification of Non-Performing Assets ("NPA")
accounts, assessing the reliability of management
information.
Understanding management’s approach, interpretation,
systems and controls implemented in relation to
probability of default and stage-wise bifurcation of
|
| |
ECLs, which are as under:
|
|
product-wise portfolios for timely ascertainment of
stress and early warning signals.
|
| |
• Data inputs - The application of ECL model
requires multiple internal and external data
inputs. This increases the risk of completeness
|
>
|
Testing and review of controls over measurement of
provisions and disclosures in the Financial Statements.
|
| |
and accuracy of the data that has been used to
|
>
|
Involvement of Information technology experts in the
|
| |
create assumptions in the model.
|
|
audit to obtain comfort over data integrity and process of
|
| |
• Model estimations - Inherently judgmental
|
|
report generation through interface of various systems.
|
| |
models are used to estimate ECL which
|
Substantive verification
|
| |
involves determining Probabilities of Default
("PD"), Loss Given Default ("LGD"), and
|
>
|
Sample testing over key inputs, data and assumptions
impacting ECL calculations to assess the completeness,
|
| |
Exposures at Default ("EAD"). The PD and
|
|
accuracy and relevance of data and reasonableness of
|
| |
the LGD are the key drivers of estimation
|
|
economic forecasts, weights, and model assumptions
|
| |
complexity in the ECL and as a result are
considered the most significant judgmental
|
|
applied.
|
| |
aspect of the Company’s modelling approach.
|
>
|
Testing the model calculations through selective re-
|
| |
Management overlays were introduced on
|
|
performance.
|
| |
certain asset classes where historical data
|
>
|
Checking data for assessing reasonableness of
|
| |
limitations or forward-looking risk indicators
|
|
judgements made in respect of calculation methodologies,
|
| |
warranted additional provisions.
|
|
segmentation, economic factors, the period of historical
|
| |
• Economic scenarios - Ind AS 109 requires the
|
|
loss rates used and the valuation of recovery assets and
|
| |
Company to measure ECLs on an unbiased
|
|
collateral (including collateral in the form of gold.)
|
| |
forward-looking basis reflecting a range
|
>
|
Assessing disclosures - Assessed whether the
|
| |
of future economic indicators. Significant
|
|
disclosures on key judgements, assumptions and
|
| |
management judgement is applied in
|
|
quantitative data with respect to impairment of loans
|
| |
determining the economic scenarios used and
the probability weights applied to them.
|
|
(including restructuring related disclosures) in the
Financial Statements are appropriate and sufficient as
|
| |
Considering the significance of the above
matter to the overall financial statements
and extent of management’s estimates and
judgements involved, it requires significant
auditor attention. Accordingly, we have
identified this as a key audit matter.
|
|
also aligned to regulatory requirements.
|
|
Sr.
No
|
Key Audit Matter
|
How the Key Audit Matter was addressed in our audit
|
|
2
|
Information Technology
|
| |
IT systems and controls
The Company’s financial reporting processes are
dependent on technology considering significant
number of transactions that are processed
daily across multiple and discrete Information
Technology ('IT’) systems. The Financial accounting
system of the Company is interfaced with several
other IT systems including Loan Management &
Originating systems and several other systemic
workflows.
IT general and application controls are critical
to ensure that changes to applications and
underlying data are made in an appropriate manner.
Adequate controls contribute to mitigating the risk
of potential fraud or errors as a result of changes
to the applications and data. These includes
implementation of preventive and detective controls
across critical applications and infrastructure.
Due to the pervasive nature of role of information
technology systems in financial reporting, in our
preliminary risk assessment, we planned our audit
by assessing the risk of a material misstatement
arising from the technology as significant for the
audit, hence the Key Audit Matter.
|
In course of audit, we, inter alia, reviewed user access
management, change management, segregation of duties,
system reconciliation controls and key financial accounting
and reporting systems. We performed a range of audit
procedures, which included:
> Deployed our internal experts to carry out IT general
Controls testing and identifying gaps, if any.
> Our other processes include:
• Obtained an understanding of the Company’s
IT landscape, including core lending systems,
accounting systems, interfaces, and reports relevant
to financial reporting.
• Evaluating the design, implementation and
operating effectiveness of the significant accounts-
related IT automated controls which are relevant
to the accuracy of system calculation, and the
consistency of data transmission including access
management (user access provisioning, changes
and deactivation), program change controls, and
IT operations controls such as backups and job
monitoring.
• Evaluated segregation of duties within the IT
environment and reviewed privileged access
controls.
• Testing of the system generated reports and
accounting entries manually for core financial
reporting matters (i.e. verification around the
computer system)
• Performed substantive procedures where control
deficiencies or system limitations were noted, to
compensate for any identified risks.
• Evaluated the automated controls with reference to
system interface with key financial applications that
impact significant accounts and disclosures.
|
OTHER INFORMATION
5. The Company’s Board of Directors are responsible for
the other information. The other information comprises
the information included in the Company’s annual
report but does not include the Financial Statements
and our auditors’ report thereon. The Other Information
is expected to be made available to us after the date of
this auditor’s report
6. Our opinion on the Financial Statements does not cover
the other information and we do not express any form
of assurance conclusion thereon.
7. 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. If, based on the
work we have performed, we conclude that there is a
material misstatement of this other information, we are
required to report that fact.
8. When we read the Annual 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 THOSECHARGED WITH GOVERNANCE FOR THE FINANCIALSTATEMENTS
9. The Company’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 State of Affairs, profit
and Other Comprehensive Income, Changes in Equity
and Cash Flows of the Company in conformity with
the Indian Accounting Standards prescribed under
section 133 of the Act read with the Companies (Indian
Accounting Standards) Rules, 2015, as amended and
other accounting principles generally accepted in
India. This responsibility also includes maintenance of
adequate accounting records in accordance with the
provisions of the Act for safeguarding of the assets of
the Company and for preventing and detecting frauds
and other irregularities; selection of the appropriate
accounting software for ensuring compliance with
applicable laws and regulations including those related
to retention of audit logs; selection and application of
appropriate accounting policies; making judgments
and estimates that are reasonable and prudent; and
design, implementation and maintenance of adequate
internal financial controls, that were operating
effectively for ensuring the accuracy and completeness
of the accounting records, relevant to the preparation
and presentation of the Financial Statements that
give a true and fair view and are free from material
misstatement, whether due to fraud or error.
10. In preparing the Financial Statements, the Board of
Directors is responsible for assessing the Company’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 Company or
to cease operations, or has no realistic alternative but
to do so.
11. The Board of Directors is also responsible for overseeing
the Company’s financial reporting process.
AUDITOR'S RESPONSIBILITIES FOR THE AUDIT OF THEFINANCIAL STATEMENTS
12. 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:
12.1. 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.
12.2. 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) the Act, we are also responsible for expressing
our opinion on whether the Company has adequate
internal financial controls with reference to Financial
Statements in place and the operating effectiveness of
such controls.
12.3. Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting estimates
and related disclosures made by the Management.
12.4. Conclude on the appropriateness of the 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 Company’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 Company to cease
to continue as a going concern.
12.5. 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.
13. 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.
14. 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.
15. 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 year 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 REGULATORYREQUIREMENTS
16. As required by the Companies (Auditor’s Report) Order,
2020 ('the Order’), issued by the Central Government
of India in terms of sub-section (11) of section 143 of
the Act, we give in the 'Annexure A’ a statement on the
matters specified in paragraphs 3 and 4 of the Order, to
the extent applicable.
17. As required by Section 143(3) of the Act, we report that:
17.1. 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.
17.2. In our opinion, proper books of accounts as required by
law have been kept by the Company so far as it appears
from our examination of those books except for the
matters stated in paragraph 18.8 below on reporting
under Rule 11 (g) of the Companies (Audit and Auditors)
Rules, 2014 (as amended).
17.3. The balance sheet, the statement of profit and
loss (including Other Comprehensive Income), the
Statement of Changes in Equity and the Cash Flow
Statement dealt with by this Report are in agreement
with the books of account.
17.4. In our opinion, the aforesaid Financial Statements
comply with the Ind AS specified under Section 133 of
the Act read with the relevant rules thereunder.
17.5. On the basis of the written representations received
from the directors, none of the directors is disqualified
as on 31 March 2026 from being appointed as a director
in terms of Section 164(2) of the Act.
17.6. The modification relating to the maintenance of books
of accounts and other matters connected therewith
are as stated in the paragraph 17.2 above on reporting
under Section 143(3)(b) and paragraph 18.8 below on
reporting under Rule 11 (g) of the Companies (Audit and
Auditors) Rules, 2014 (as amended).
17.7. With respect to the adequacy of the internal financial
controls with reference to Financial Statements of
the Company and the operating effectiveness of such
controls, refer to our separate Report in 'Annexure B’.
17.8. I n our opinion and according to the information and
explanations given to us, the remuneration paid by the
Company to its directors during the current year is in
accordance with the provisions of Section 197 of the
Act. The remuneration paid to any director is not in
excess of the limit laid down under Section 197 of the
Act.
18. 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:
18.1. The Company has disclosed the impact of pending
litigations as at 31 March 2026 on its financial position
in its Financial Statements - Refer Note 53 to the
Financial Statements;
18.2. The Company did not have any long-term contracts
including derivative contracts for which there were any
material foreseeable losses.
18.3. There were no amounts which were required to be
transferred to the Investor Education and Protection
Fund by the Company.
18.4. The Management has represented, to best of their
knowledge and belief, that 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 Company 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 Company ('Ultimate Beneficiaries’) or provide any
guarantee, security or the like on behalf of the Ultimate
Beneficiaries.
18.5. The Management has represented, to best of their
knowledge and belief, that no funds have been received
by the Company from any person(s) or entity(ies),
including foreign entities ('Funding Parties’), with
the understanding, whether recorded in writing or
otherwise, that the Company 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.
18.6. Based on such audit procedures, that have been
considered reasonable and appropriate in the
circumstances, performed by us, nothing has come
to our notice that has caused us to believe that the
representation under sub clause (i) and (ii) of Rule 11 (e),
as provided under para 18.4 and 18.5 above, contain
any material misstatement.
18.7. In our opinion and according to information and
explanation given to us, the Company has not declared
or paid dividend during the year, accordingly compliance
with section 123 of the Act by the Company is not
applicable.
18.8. Based on our examination, the company, has used
accounting softwares for maintaining its books of
account which , along with access management
tools, as applicable, has a feature of recording audit
trail (edit log) facility. Further, the audit trail facility has
been operating throughout the year for all relevant
transactions recorded in the accounting software
except for the instances reported below -
1. For maintenance of Books of Accounts under
Ind AS (Accounting Framework applicable to the
Company), the feature of maintaining audit trail
(edit log) was not enabled, however same was
enabled effective April 2026.
Further, where audit trail (edit log) facility was enabled
and operated, we did not come across any instance
of audit trail feature being tampered with during the
course of our audit.
Additionally, other than for the softwares where audit
trail (edit log) facility was not enabled in the previous
year, the audit trail has been preserved by the Company
as per the statutory requirements for record retention.
For KKC & Associates LLP
Chartered Accountants
(formerly Khimji Kunverji & Co LLP)
Firm Registration Number: 105146W/W100621
Hasmukh B Dedhia
Partner
ICAI Membership No: 033494
UDIN: 26033494FGYDJC3158
Place: Mumbai
Date: 28 April 2026
|