We have audited the accompanying standalone financial
statements of The South Indian Bank Limited ('the
Bank'), which comprise the Balance Sheet as at March
31, 2026, 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 (the 'standalone financial statements').
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 (the 'RBI') from time to time (the
'RBI Guidelines'), 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 applicable, 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 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 is 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 judgment, were of most significance in
our audit of the standalone financial statements for the
financial year ended March 31, 2026. 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 described below to be the key
audit matters to be communicated in our report.
|
Key Audit Matters
|
How our audit addressed the Key Audit Matters
|
|
(i) Classification of Advances, identification of
|
Non-Performing Advances, Income Recognition and
|
|
provisioning on Advances as per IRACP Norms of Reserve Bank of India (Refer Schedule 9, Note 3 of
Schedule 17 and Note 4 of Schedule 18A to the standalone financial statements)
|
|
Advances include Bills purchased and
discounted, Cash credits, Overdrafts, Loans
repayable on demand and Term loans. These
are further categorized as secured by Tangible
assets (including advances against Book Debts),
covered by Bank/Government Guarantees and
Unsecured advances;
|
Our audit approach / procedures in respect of this area
included the following:
- Understanding and considering the Bank's accounting
policies for NPA identification and provisioning and
assessing compliance with the prudential norms
prescribed by the RBI (IRACP Norms), including the
additional provisions made on advances.
- Understanding, evaluation and testing the design
and operating effectiveness of key controls over
the approval, recording, monitoring and recovery
of loans; monitoring overdue / stressed accounts;
identification of NPA (including the logic applied for
system driven identification of NPAs); computation of
provision for NPA and restructured advances based
on the extant guidelines on IRACP laid down by the
RBI and the Bank's policy.
- Testing on sample basis the accuracy of input data
|
|
RBI prescribes the prudential norms for
Income Recognition, Asset Classification and
Provisioning of non-performing assets ('IRACP
Norms') and prescribes the minimum provision
required to be created for such assets in the
Financial Statements.
|
|
The identification of performing and non¬
performing advances (including advances
restructured under applicable IRACP Norms)
involves establishment of proper systems,
control mechanism, and the bank is required to
apply significant degree of judgement to identify
and determine the amount of provision required
against each Non-Performing Asset ('NPA')
applying both quantitative as well as qualitative
factors prescribed by the regulations.
The provision on NPA is estimated based on
ageing and classification of NPAs, recovery
estimates, nature of loan product, value of
security and other qualitative factors and is
subject to the minimum provisioning norms
specified by RBI and approved policy of the Bank
in this regard.
The Management of the Bank also makes an on¬
going assessment of the borrowers' accounts
which were restructured as per applicable RBI
Circulars, for appropriate classification and
provisioning.
|
|
flowing into the Bank's NPA automation system for
classification into performing and non-performing
advances, income de-recognition and provisioning in
accordance with the IRACP norms.
|
|
- Performing other procedures including substantive
audit procedures covering the identification and
provisioning of NPAs qua loan book by the Bank,
including:
|
|
(a) Review of exception reports generated from the
application softwares and the systems where the
advances have been recorded;
(b) Considering the accounts reported by the Bank
and other banks as Special Mention Accounts
("SMA") in RBI's Central Repository of Information
on Large Credits (CRILC) to identify stress;
(c) Considering and reviewing the accounts reported
with Early Warning Signals by the Bank with
reference to the documents related to such
advances;
(d) Reviewing account statements, appraisal note,
|
|
The significant judgements and estimates
involved in NPA identification and provisioning
could give rise to material misstatements on:
|
|
- Completeness and timing of recognition
|
audited financial statements, stock and receivable
|
|
of non-performing assets qua loan book in
accordance with criteria as per IRACP norms;
- Measurement of the provision for non¬
performing assets based on loan exposure,
ageing and classification of the loan,
realizable value of security;
|
audit report, credit audit report, drawing power
calculation, security and other related documents
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;
|
|
Key Audit Matters
|
How our audit addressed the Key Audit Matters
|
|
- Appropriate reversal of unrealized income on
|
(e)
|
Reading of minutes of management committee
|
|
the NPAs.
|
|
and credit committee meetings and performing
|
|
Since the Bank has significant credit risk
exposure to a large number of borrowers
across various sectors, products, industries
and geographies, there is high degree of
|
|
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;
|
|
complexity, uncertainty and judgment involved
|
(f)
|
Considering reports of Internal Audit, Systems
|
|
in recoverability of advances, nature of
|
|
Audit, Credit Audit, Concurrent Audit, Stock and
|
|
transactions along with estimation of provisions
|
|
Receivable audit and credit appraisal as per the
|
|
thereon and identification of accounts to be
|
|
policies and procedures of the Bank;
|
|
written off. Given its significance to the overall
audit of the standalone financial statements, we
have ascertained the Classification (including
identification of NPAs), Disclosure, Provisioning
and Write-offs in respect of Advances, as a Key
Audit Matter.
|
(g)
|
Considering relevant observations in 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)
|
Perusal of Board approval / Management approval
note for the advances written off including
technical write-off.
|
| |
(i)
|
Selection of sample NPA borrowers based on
quantitative and qualitative risk factors of funded
as well as non-funded exposure and testing the
appropriate classification and provisioning as per
extant IRACP norms and the Bank's policy.
|
| |
(j)
|
Review of any transfer of loan exposures (including
NPAs) and Co-lending arrangements by the Bank
during the year, for compliance with applicable
RBI norms regarding classification, provisioning
and disclosures.
|
| |
(k)
|
Assessing the appropriateness, accuracy and
adequacy of the presentation and disclosures
relating to Advances and NPAs in the financial
statements, in-line with the applicable Accounting
Standards and requirements of RBI.
|
|
Key Audit Matters
|
How our audit addressed the Key Audit Matters
|
|
(ii) Information Technology ('IT') Systems and Internal Controls for financial reporting
|
|
IT systems and controls implemented by the
Bank are material from a financial reporting
perspective, due to the pervasive nature and
complexity of the IT environment, the large
volume of transactions processed in numerous
locations daily and the reliance on automated
and IT dependent manual controls. Therefore on
account of these factors, there exists a risk that
gaps in the IT control environment could result
in the financial accounting and reporting records
being materially misstated.
In addition, there are increasing challenges to
protect the integrity of the Bank's systems and
data since cyber security has become a more
significant risk in recent periods.
As part of our audit reporting, we are also required
to assess the existence and completeness of
an Audit Trail (Edit Log) of transactions in the
Core Banking Solution (CBS) and other core 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 to process the data as required,
|
- IT audit specialists are an integral part of our
engagement team. Our approach of testing IT General
Controls (ITGC) and IT Application Controls (ITAC) is
risk based and business centric.
- Our audit approach/procedures included the
following:
|
|
(a) Obtaining a comprehensive understanding of
IT applications landscape implemented at the
Bank, followed by process flow understanding,
identifying applications linked to the financial
reporting processes and understanding the
critical inherent risks in relation to these systems.
(b) As part of ITGC testing, on sample basis,
we reviewed 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 policies, Service Level
Agreements with IT solution providers, IS audit
observations and various relevant submissions
made to the Regulators.
(c) Testing the design and operating effectiveness of
certain automated application controls that were
considered as key internal system controls over
financial reporting using various techniques such
as inquiry, review of documentation / record /
reports, observation, and re-performance.
(d) Evaluating deficiencies and mismatches that were
|
|
completely, accurately, and consistently for
reliable financial reporting.
Due to the pervasive nature and complexity of
the IT environment as well as its importance
in relation to accurate and timely financial
reporting, we have ascertained IT systems and
controls as a Key Audit Matter.
|
| |
identified and testing compensating controls
where relevant.
|
| |
(e) Sample testing of the audit trail functionality for
|
| |
transactions/ system changes both at transaction
and database level and back-up procedures for
the CBS and few key systems relevant from a
financial reporting perspective.
|
| |
(f) Obtaining relevant management representations,
|
| |
which included results from testing of the
automated system driven controls conducted by
the Management.
|
Information other than the standalone financial
statements and Auditor's 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 auditors' 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 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 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 standalone financial statements
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 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 judgment 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
adequate 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 auditors' 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 auditors' 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, 2026 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
The standalone financial statements of the Bank for
the year ended March 31, 2025, were jointly audited
by M.P. Chitale & Co and K Venkatachalam Aiyer & Co
under the Act and the Banking Regulation Act, 1949,
who, vide their report dated May 15, 2025, expressed
an unmodified opinion on those standalone financial
statements. Accordingly, Borkar & Muzumdar do not
express any opinion on the figures reported in the
standalone financial statements for the year ended
March 31, 2025.
Our opinion is not modified in respect of this matter.
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;
(c) The key operations and functions of the Bank
are automated and managed and controlled by
regional offices and the Head Office through
centralised systems and processes, with critical
applications integrated to the core banking
solution; therefore the audit was also carried out
centrally based on review of relevant records,
documents and data through centralised systems
and applications linked to financial reporting
processes. However, during the course of our
audit we visited 52 major branches (including
2 central units), to examine the operations
and functioning of the branch/ unit, review
sample records/ registers/ deposits/ retail loan
documents maintained at such locations and
conduct sample physical verification of cash/
bullion/ fixed assets.
(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 RBI Guidelines;
(e) On the basis of written representations received
from the directors as on March 31, 2026, and
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 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;
iii. 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 Note 18 under Schedule
18B.
iv. (a) The management has represented
that, to the best of its knowledge and
belief, other than as disclosed in Note
20 under 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 under 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)
v. 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 under 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.
vi. 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, 2026 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 softwares. Further, during the course
of our audit, basis the data and explanations
received and verified on test check basis, we
did not come across any instance of audit trail
feature being tampered with and found that
the audit trail of the core banking solution
has been preserved as per the statutory
requirements for record retention.
For M. P. Chitale & Co. For Borkar & Muzumdar
Chartered Accountants Chartered Accountants
Firm Registration No. 101851W Firm Registration No.101569W
Anagha Thatte Kaushal Muzumdar
Partner Partner
Membership No: 105525 Membership No: 100938
UDIN: 26105525HTXURY2284 UDIN: 26100938MGBBLN3159
Place: Kochi Place: Kochi
Date: May 06, 2026 Date: May 06, 2026
|
