To the Members of The South Indian Bank Limited
Report on the Audit of the Standalone Financial Statements
Opinion
We have audited the standalone financial statements of The South Indian Bank Limited ('the Bank'), which comprise the Balance Sheet as at March 31, 2025, the Profit and Loss Account, the Cash Flow Statement for the year then ended, and notes to the standalone financial statements, including a summary of significant accounting policies and other explanatory information.
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 section 29 of the Banking Regulation Act, 1949 as well as the Companies Act, 2013 ('the Act') and the circulars, guidelines and directions issued by the Reserve Bank of India ("RBI"), in the manner so required for banking companies and give a true and fair view in conformity with accounting principles generally accepted in India, including the Accounting Standards prescribed under Section 133 of the Act, read with Companies (Accounting Standards) Rules, 2021 as amended to the extent applicable, of the state of affairs of the Bank as at March 31, 2025, and its profit and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial
statements 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 Standalone 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 the ethical requirements that are relevant to our audit of the Standalone 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 obtained by us, are sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.
Key Audit Matters
Key Audit Matters are those matters that, in our professional Judgement, were of most significance in our audit of the standalone financial statements for the financial year ended March 31, 2025. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and results of our audit procedures, including the procedures performed to address the matters below, provide the basis in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters prescribed below to be the key audit matters:
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Key Audit Matters
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How our audit addressed the Key Audit Matters
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(i) Classification of Advances, identification of
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non-performing advances, Income Recognition, and
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provisioning on Advances as per IRACP Norms of Reserve Bank of India (Refer Schedule 9, Note 3 of
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Schedule 17 and Note 4 of Schedule 18D to the standalone financial statements)
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Advances include Bills purchased and
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Our audit approach / procedures included the following:
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discounted, Cash credits, Overdrafts, Loans
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- Understanding and considering the Bank's accounting
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repayable on demand and Term loans. These
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policies for NPA identification and provisioning and
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are further categorized as secured by Tangible
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assessing compliance with the prudential norms
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assets (including advances against Book Debts),
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prescribed by the RBI (IRACP Norms) including the
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covered by Bank/Government Guarantees and
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additional provisions made on advances and asset
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Unsecured advances;
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classification benefits applicable to certain category
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RBI prescribes the prudential norms for
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of advances such as restructured accounts.
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Income Recognition, Asset Classification and
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- Understanding, evaluation and testing the design
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Provisioning of non-performing assets (IRACP
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and operating effectiveness of key controls
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Norms) and prescribes the minimum provision
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(including application controls and logic applied for
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required to be created for such assets in the
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system driven identification of NPAs) over approval
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Financial Statements.
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including internal credit rating, recording, monitoring
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The identification of performing and non-
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and recovery of loans, monitoring overdue / stressed
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performing advances (including advances
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accounts, identification of NPA, computation of
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restructured accounts under applicable IRACP
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provision for NPA, valuation of security and collateral
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Norms) involves establishment of proper systems,
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and identification and provisioning of impaired
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control mechanism, and the Bank is required to
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accounts based on the extant guidelines on IRACP laid
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apply significant degree of judgement to identify
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down by the RBI. Further, obtained an understanding
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and determine the amount of provision required
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of the contingency provision carried by the Bank
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against each Non-Performing Asset ('NPA')
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and verified the underlying assumptions used by the
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applying both quantitative as well as qualitative
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Bank for such estimate.
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factors prescribed by the regulations.
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- Testing of application controls on sample basis
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The provision on NPA is estimated based on
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including testing of automated and manual controls,
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ageing and classification of NPAs, recovery
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reports and system reconciliations, in relation to
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estimates, nature of loan product, value of
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income recognition, asset classification, provisioning
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security and other qualitative factors and is
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pertaining to advances and investments and
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subject to the minimum provisioning norms
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compliances of other regulatory guidelines issued by
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specified by RBI and approved policy of the Bank
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the RBI.
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in this regard.
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- Testing on sample basis the accuracy of the data input
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The Management of the Bank also makes
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in the system for income recognition, classification
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an assessment of the impact on borrowers'
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into performing and non-performing advances and
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accounts which were restructured as per RBI
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provisioning in accordance with the IRACP norms.
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Circulars.
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- Selection of the sample borrowers based on
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Significant judgements and estimates for NPA
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quantitative and qualitative risk factors of funded
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identification and provisioning could give rise to
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as well as non-funded exposure, for assessment
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material misstatements on:
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of appropriate classification as NPA including
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- Completeness and timing of recognition of
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computation of overdue including effect of non
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non-performing assets in accordance with
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fund based facilities ageing to assess its correct
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criteria as per IRACP norms.
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classification and provision amount as per extant
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- Measurement of the provision for non-
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IRACP norms and the Bank policy.
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performing assets based on loan exposure,
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- Performing other procedures including substantive
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ageing and classification of the loan,
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audit procedures covering the identification of NPAs
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realizable value of security;
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by the Bank. These procedures included:
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- Appropriate reversal of unrealized income on
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(a) Considering testing of the exception reports
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the NPAs
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generated from the application softwares and the systems where the advances have been recorded;
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Key Audit Matters
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How our audit addressed the Key Audit Matters
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Since the Bank has significant credit risk exposure
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(b) Considering the accounts reported by the Bank
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to a large number of borrowers across various
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and other banks as Special Mention Accounts
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sectors, products, industries and geographies,
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("SMA") in RBI's Central Repository of Information
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there is high degree of complexity, uncertainty
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on Large Credits (CRILC) to identify stress;
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and judgement involved in recoverability
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(c) Considering and reviewing the accounts reported
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of advances, nature of transactions along
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with Early Warning Signals by the Bank with
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with estimation of provisions thereon and
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reference to the documents related to such
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identification of accounts to be written off.
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advances.
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Given its significance to the overall audit of
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(d) Reviewing account statements, appraisal note,
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Financial Statements, we have ascertained
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the Identification, Classification, Disclosure,
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audited financial statements, stock and receivable
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Provisioning and Write off of Advances as a Key Audit Matter.
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audit report, credit audit report, drawing power calculation, security and other related documents
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including valuation report of the collaterals and information of the sample borrowers selected based on quantitative and qualitative risk factors including the advances selected from accounts appearing in exception reports;
(e) Reading of minutes of management committee and credit committee meetings and performing inquiries with the credit and risk departments to ascertain if there were indicators of stress or an occurrence of an event of default in a loan account or any product;
(f) Considering reports of Internal Audit, Systems Audit, Credit Audit, Concurrent Audit, Stock and Receivable audit and credit appraisal as per the policies and procedures of the Bank;
(g) Considering the Inspection report of RBI on the Bank pertaining to previous financial years, the bank's response to the observations and other communication with RBI during the year;
(h) Persual of Board approval / Management approval note for the advances written off including technical write-off. Further the Sale of NPA's to ARC is also reviewed by us.
(i) Assessed the appropriateness, accuracy and adequacy of the related presentation and disclosures in accordance with the applicable accounting standards and requirements of RBI with respect to NPAs.
- For NPAs identified, based on our sample factors including stressed sectors and account materiality, tested the asset classification dates, value of available security and computation of the provision as per IRACP norms. We recomputed the provision for NPA after considering the key input factors and compared our measurement outcome to that of system-generated reports and statements prepared by management.
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Key Audit Matters
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How our audit addressed the Key Audit Matters
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(ii) Information Technology ('IT') Systems and Internal Controls for financial reporting
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IT systems and controls followed by the
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- IT audit specialists are an integral part of our
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bank are material from a financial reporting
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engagement team. Our approach of testing IT General
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perspective, due to the pervasive nature and
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Controls (ITGC) and IT Application Controls(ITAC) is
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complexity of the IT environment, the large
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risk based and business centric.
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volume of transactions processed in numerous
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- Our audit approach/procedures included the
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locations daily and the reliance on automated
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following:
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and IT dependent manual controls. Therefore on account of these factors, there exists a risk that
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- Obtaining a comprehensive understanding of IT
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gaps in the IT control environment could result
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applications landscape implemented at the Bank,
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in the financial accounting and reporting records being materially misstated.
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followed by process understanding, mapping of applications to the processes related to financial reporting and understanding financial risks posed by
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Our areas of audit focus included user access
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people-process and technology.
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management, changes to the IT environment, existence and completness of an Audit Trail (Edit
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- In ITGC testing, on sample basis, we reviewed
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Log) of the Core Banking Solution (CBS) and the other IT systems and applications having financial impact linked to the CBS. Appropriate IT general controls and application controls are required to ensure that such IT systems are able
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control areas such as User Management, Change Management, interface testing, deployment of new applications, Incident management, Physical & Environmental Security, Backup and restoration, Business continuity and Disaster Recovery, Service Level Agreement and various submission made to the
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to process the data, as required, completely, accurately, and consistently for reliable financial reporting.
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regulators under risk based supervision.
- Testing the design and operating effectiveness of
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certain automated controls that were considered as
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In addition, there are increasing challenges to protect the integrity of the Bank's systems
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key internal system controls over financial reporting
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and data since cyber security has become a
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using various techniques such as inquiry, review of documentation / record / reports, observation, and
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more significant risk in recent periods. Hence it is necessary to ensure that IT dependent
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re-performance.
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and application-based controls are operating
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- Evaluating deficiencies and mismatches that were
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effectively.
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identified and, testing compensating controls or
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Due to the pervasive nature and complexity of
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performed alternate procedures.
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the IT environment as well as its importance
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- Discussed with top management the issues pertaining
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in relation to accurate and timely financial
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to core banking solutions and the incidents reported
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reporting, we have ascertained IT systems and
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to RBI and the corrective measures implemented by
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controls as a Key Audit Matter.
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the Bank.
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- Obtaining management representation which
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included IS audit, and also the testing of the automated system driven controls conducted by the Management including matching of the business logic with the system logic.
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Information other than the standalone Financial Statements and Auditors' Report thereon
The Bank's Management and Board of Directors are responsible for the other information. The other information comprises the information included in the Annual Report but does not include the standalone financial statements and our auditors' report thereon, the Pillar III Disclosures under Basel III Capital Regulation. The Annual Report is expected to be made available to us after the date of this auditor's report.
Our opinion on the standalone financial statements does not cover the other information and we do 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.
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 under SA 720 'The Auditor's responsibility relating to other information'.
Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements
The Bank's Board of Directors and Management are responsible for the matters stated in section 134(5) of the Act, with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Bank in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Act, read with Rule 7 of the Companies (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 RBI from time to time(the "RBI Guidelines"). 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 Judgement 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 standalone financial statements, Management and Board of Directors are 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 are also responsible for overseeing the Bank's financial reporting process.
Auditor's Responsibilities for the audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone financial statements of the Bank 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 standalone financial statements.
As part of an audit in accordance with SAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the standalone 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 internal controls with reference to the standalone 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 and board of directors;
• Conclude on the appropriateness of management's and board of directors' 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 standalone 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 standalone financial statements, including the disclosures, and whether the standalone 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 standalone 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.
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 Companies Act, 2013 read with Rule 7 of the Companies (Accounting Standards) Rules, 2021
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 key operations and functions of the Bank are administered, managed and controlled by regional offices and Head Office through centralised systems and processes with automation of critical applications integrated to core banking solution, and therefore the audit was also carried out centrally based on review of such centralised systems and processes with automation of major business processes, critical applications by review of the relevant records, documents and data required for the purposes of our audit available centrally through such applications/platform. Further, we visited 52 major branches, including central processing units, to examine the operations and functioning of the branch and review the records/registers/ documents maintained at such branches as part of our audit processes and procedures.
(d) The profit and loss account shows a true balance of profit for the year then ended.
3. Further, 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 purpose of our audit;
(b) 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;
(c) The Standalone Balance Sheet, the Standalone Profit and Loss Account, the Standalone Cash Flow Statement dealt with by this report are in agreement with the books of account;
(d) In our opinion, the aforesaid standalone financial statements comply with the Accounting
Standards specified under Section 133 of the Act, read with Rule 7 of Companies (Accounting Standards) Rules, 2021, to the extent they are not inconsistent with the guidelines prescribed by RBI;
(e) On the basis of written representations received from the directors as on March 31, 2025, 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;
(f) With respect to the adequacy of the internal financial controls over financial reporting of the Bank with reference to these standalone financial statements and the operating effectiveness of such controls, refer to our separate Report in "Annexure A" to this report;
(g) With respect to the matters to be included in the Auditor's Report under Section 197(16) of the Act:
The Bank is a banking company as defined under Banking Regulation Act, 1949. Accordingly, the requirements prescribed under Section 197 of the Companies Act, 2013 do not apply 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, 2021, 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 on its financial position in its standalone financial statements - as per details furnished in Schedule 12 and Sl.no 1 of Note 14 under Schedule 18B to the standalone financial statements;
ii. The Bank has made provision, as required under the applicable laws or accounting standards, for material foreseeable losses, if any, on long term contracts including derivative contracts - as per details furnished in Note 15 under Schedule 18B to the standalone financial statements; and
There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Bank as stated in Schedule 18B note 18.
iii. (a) The management has represented that, to
the best of its knowledge and belief, other than as disclosed in Note 20 of Schedule 18B of the notes to the standalone 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 persons or entities, including foreign entities ("Intermediaries"), with the understanding, whether recorded in writing or otherwise, that the Intermediary shall, 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) Further, the management has represented, that, to the best of its knowledge and belief, other than as disclosed in Note 20 of Schedule 18B of the notes to the standalone financial statements, no funds have been received by the Bank from any persons or entities, including foreign entities ("Funding Parties"), with the understanding, whether recorded in writing or otherwise, that the Bank shall, 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 performed, that were considered reasonable and appropriate by us 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 management representations made under subclause (a) and (b) contain any material misstatement.
iv. The final dividend paid by the company during the year in respect of the same declared for the previous year is in accordance with section 123 of the Companies Act, 2013 to the extent it applies to payment of dividend;
As stated in note 21 of Schedule 18B to the Standalone Financial Statements, the Board of Directors of the Company have proposed final dividend for the year which is subject to
the approval of the members at the ensuring Annual General Meeting. The dividend declared is in accordance with section 123 of the Companies Act, 2013, to the extent it applies to declaration of dividend;
v. Based on our examination which included test checks, the bank has used accounting software for maintaining its books of account for the year ended March 31, 2025 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, basis the data received and verified on test check basis, we did not come across any instance of audit trail feature being tampered with and also found that the preservation of the audit trail has been configured in the core banking solution, as per the statutory requirements.
For K Venkatachalam Aiyer & Co. For M.P. Chitale & Co.
Chartered Accountants Chartered Accountants
Firm Registration No. 004610S Firm Registration No.101851W
Sreevats Gopalakrishnan Anagha Thatte
Partner Partner
Membership No: 227654 Membership No: 105525
UDIN: 25227654BMNTJU2933 UDIN: 25105525BMOKOU5658
Place: Kochi Place: Kochi
Date: May 15, 2025 Date: May 15, 2025
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