We have audited the financial statements of
Suryoday Small Finance Bank Limited ("the Bank”), which
comprise the Balance Sheet as at March 31, 2025, Profit and
Loss account, and the Statement of Cash Flow for the year
then ended, and notes to the financial statements, including
a summary of significant accounting policies and other
explanatory information ("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 the Banking Regulations
Act, 1949 as well as the Companies Act, 2013 ("the Act”) and
circulars and guidelines issued by the Reserve Bank of India ('the
RBI’) in the manner so required for Banking Companies and give
a true and fair view in conformity with the Accounting Standards
prescribed under section 133 of the Act read with Companies
(Accounting Standard) Rules, 2021 as amended and other
accounting principles generally accepted in India, of the state of
affairs of the Bank as at March 31, 2025, its profits and its cash
flows for the year ended on that date.
Basis for Opinion
We conducted our audit in accordance with the Standards on
Auditing (SAs) 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
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.
Emphasis of Matter:
We draw attention to Note No 20 (z) of the Financial Statements
on provision on advance covered by Credit Guarantee Fund
for Micro Units (CGFMU) where upto last year , The Bank was
making provisions on full value of Loan as per its Internal policy
and from current year has made provision as permitted by RBI
Guidelines, which has resulted in lesser provision for the year
ended by an amount H 17,602, in respect of loans that became
NPA during the Year. CRAR of the Bank as at March 31,2025
is 25.83% instead of 22.03%, on account of application of
Risk Weights as per NCAF issued by RBI guidelines, only on
unguaranteed portion of advances under CGFMU scheme. Our
opinion is not modified in this aspect
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 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.
We have determined the matters described below to be the key
audit matters to be communicated in our report
Identification of Non-Performing Assets ('NPA') and Provisioning and write off for Loans and Advances
Total Loans and Advances (Net of NPA Provision, floating provision, securitization and IBPC) as on March 31, 2025: H 9,97,43,499 ('000)
Gross NPA as on March 31, 2025: H 73,38,370 ('000)
Provision for NPA as on March 31, 2025 (Excluding floating provision): H 23,97,549 ('000)
(Refer Schedule 9 and Schedule 18 (4.1) to the financial statement)
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Key Audit Matter
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How our audit addressed the key audit matter
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The Reserve Bank of India’s ("RBI”) guidelines on Income
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Tested the design and operating effectiveness of key controls
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recognition and asset classification ("IRAC”) prescribe the
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(including application controls) over identification of NPAs,
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prudential norms for identification and classification of non-
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provisions thereof and the valuation of securities.
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performing assets ("NPA”) and the minimum provision required
for such assets.
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Testing of Application controls included testing of reports and
system reconciliations as at the year end.
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The Bank is required to have Board approved policy as per IRAC
guidelines for NPA identification and provision.
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Review of controls over calculations of provision of non-performing
advances, basis of provisioning in accordance with the Board
approved policy.
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Key Audit Matter
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How our audit addressed the key audit matter
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The Bank is also required to apply its judgement to determine
the identification and provision required against NPAs by
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Performed substantive procedures as listed below:
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applying quantitative as well as qualitative factors. The risk
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• For sample borrowers, assessed the appropriateness of
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of identification of NPAs is affected by factors like stress and
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asset classification and adequacy of related provisioning
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liquidity concerns in certain sectors.
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by performing procedures such as computation of overdue
ageing, assessment of borrower level NPA identification and
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The provision against advances is based on criteria such as past
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verification of applicable provision rates as per IRAC norms
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due status, out of order status etc. The provisions in respect
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and Bank's Policy;
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of such NPAs are made based on ageing and classification of
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• Selected samples of performing loan accounts to assess,
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NPAs, recovery estimates, value of security and other qualitative
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independently, whether such loan accounts should be
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factors and is subject to minimum provisioning levels prescribed
by the RBI and approved policy of the bank in this regard. In
addition to this, for restructured accounts, provision is made
for erosion/ diminution in fair value of restructured loans, in
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classified as NPA;
• For selected samples, reviewed the securities valuation
performed by the Bank;
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accordance with the RBI guidelines. Further, NPA classification
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• Considered the data shared by Bank regarding accounts
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is made borrower wise whereby if one facility of the borrower
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reported as Special Mention Accounts ("SMA”) in RBI's
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becomes an NPA then all facilities of such a borrower will be
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central repository of information on large credits (CRILC) to
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treated as an NPA.
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identify stress.
• Selected samples for standard and overdue accounts to
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Additionally, the Bank makes provisions on exposures that are
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assess compliance with the RBI Circulars on 'COVID-19 -
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not classified as NPAs including identified advances or group
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Regulatory Package' and 'COVID-19 Regulatory Package -
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advances that can potentially slip into NPA. These are part of
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Asset Classification and Provisioning';
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standard asset provision.
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• Selected sample of accounts restructured under RBI Circulars
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The Management of the Bank also made an assessment of the
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on 'Micro, Small and Medium Enterprises (MSME) sector
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impact on borrowers account due to Covid -19 pandemic and in
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- Restructuring of Advances' and 'Resolution Framework
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line with the COVID 19 Regulatory Package announced by the
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for Covid-19-related Stress' to assess compliance with the
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RBI in respect of moratorium and restructuring of advances as
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RBI directions;
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relief measures to the borrowers.
Since the identification of NPAs and provisioning for advances
require significant level of estimation and given its significance
to the overall audit, we have ascertained identification and
provisioning for NPAs as a key audit matter.
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• Assessed the adequacy of disclosures against the relevant
accounting standards and RBI requirements relating to NPAs.
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Information Technology ('IT') systems and controls impacting
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Our Audit procedures with respect to this matter included: We
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financial reporting
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used our internal IT team to perform audit procedures to assess
IT systems and controls over financial reporting which included
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The Bank's IT architecture to process key financial accounting
and reporting is complex involving number of independent and
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the following:
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interdependent IT systems used in the operations of the Bank,
and IT controls to process significant transactions volumes at
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1) General IT controls design, observation and operation:
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numerous locations.
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• Obtain an understanding of the IT
infrastructure and IT systems
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As such there is high reliability on IT systems, appropriate IT
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• Testing the sample of key controls operating over the
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general controls and application controls are required to ensure
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information technology in relation to financial accounting
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that such IT systems are able to process the data, as required,
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and reporting systems, including system access, system
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completely, accurately and consistently for reliable financial
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change management and computer operations.
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reporting.
The IT systems and controls, as they impact the financial
recording and reporting of transactions, is a key audit matter.
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2) User access controls operation:
• Reviewed processes followed by the management in
respect of access rights granted to applicants relevant to
financial accounting and reporting systems.
• Assessing the operating effectiveness of controls over
granting, removal and appropriateness of access rights.
Other areas that were assessed under the IT control
environment, included password and security related
policies were also part of our audit procedures
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Information Other than the Financial Statements and
Auditor's Report Thereon
The Bank’s Board of Directors is responsible for the other
information. The other information comprises the information
in the Director’s Report including annexures to the Director’s
report and the Annual Report but does not include the financial
statements and our Auditor’s report thereon. The Director’s
Report and Annual Report is expected to be made available to
us after the date of this auditor’s report.
Our opinion on the financial statements does not cover the other
information and we will 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
the 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 Director’s Report and Annual Report, 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 responsibilities Relating
to Other Information’.
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 and other accounting principles generally accepted in
India and provisions of the Banking Regulation Act, 1949 and the
circulars, guidelines and directions issued by the Reserve Bank
of India from time to time (RBI Guidelines) as applicable to the
Bank. This responsibility also includes maintenance of adequate
accounting records in accordance with the provisions of the Act
and RBI Guidelines 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 financial statement 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 and the
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 the Board of Directors either intends
to liquidate the Bank or to cease operations, or has no realistic
alternative but to do so.
Those 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:
• 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.
• 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 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 of the Bank.
• 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.
Materiality is the magnitude of misstatements in the financial
statements that, individually or in aggregate, makes it probable
that the economic decisions of a reasonably knowledgeable
user of the financial statements may be influenced. We consider
quantitative materiality and qualitative factors in (i) planning the
scope of our audit work and in evaluating the results of our work;
and (ii) to evaluate the effect of any identified misstatements in
the financial statements.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant
deficiencies in internal 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, 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.
Other Matter
The Financial Statements of the Bank for the year ended March
31, 2024, were audited by previous statutory auditor whose
report dated May 09, 2024 expressed an unmodified opinion on
those statements.
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 Act and relevant rules issued thereunder.
2. As required by sub-section (3) of section 30 of the Banking
Regulation Act, 1949, we report that:
a. We have 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 during the course of our audit, have been
within the powers of the Bank.
c. Since the key operations of the Bank are automated
with the key applications integrated to the core
banking system, the audit is carried out centrally as
all the necessary records and data required for the
purpose of our audit are available therein. During
the course of our audit we have visited 34 branches
to examine the books of account and other records
maintained at the branches and performed relevant
audit procedures.
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. 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 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. In our opinion, the aforesaid financial statements
comply with the Accounting Standards specified
under Section 133 of the Act read with the
Companies (Accounting Standards) Rules, 2021 and
relevant rules made thereunder 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, 2025 taken on
record by the Board of Directors, none of the directors
are 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 with reference to financial statements of
the Bank and the operating effectiveness of such
controls, refer to our separate Report in "Annexure
A”. Our report expresses an unmodified opinion on
the adequacy and operating effectiveness of the
Bank’s internal financial controls with reference to
financial statements.
g. With respect to the other matter to be included in the
Auditor’s Report in accordance with the requirements of
section 197(16) of the Act, as amended, in our opinion
and to the best of our information and according
to the explanations given to us, the entity being a
Banking company, section 197 of the Act related to the
managerial remuneration is not applicable by virtue of
Section 35B(2A) of the Banking Regulation Act, 1949.
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, 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 financial
statements - Refer Schedule 12 and Schedule
18 (20.b) to the financial statements;
ii. The Bank has not entered into any long-term
contracts nor entered into any derivative
contracts as at March 31, 2025 and accordingly
no provision is required to be made;
iii. There were no amounts which were required
to be transferred to the Investor Education and
Protection Fund by the Bank;
iv. a) Based on the information and explanation
provided and as represented to us by the
management to the best of its knowledge
and belief, other than as disclosed in note
20(w)(i) to the 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 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
Bank ("Ultimate Beneficiaries”) or provide
any guarantee, security or the like on behalf
of the Ultimate Beneficiaries.
b) Based on the information and explanation
provided and as represented to us by the
management to the best of its knowledge
and belief, other than as disclosed in note
20(w)(ii) to the financial statements, no
funds have been received by the Bank
from any person(s) or entity(ies), 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 that
have been considered reasonable and
appropriate in the circumstances, nothing
has come to our notice that has caused us
to believe that the representations under
sub-clause (i) and (ii) of Rule 11(e), as
provided under (a) and (b) above, contain
any material misstatement.
v) The Bank has not declared or paid any dividend
during the year ended 31 March 2025.
vi) Based on our examination which included test
checks, the Bank has used various accounting
software systems for maintaining its books
of account which have 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 the audit trail feature
being tampered with. Additionally, the audit trail
feature of prior year(s) has been preserved by
the Bank as per the statutory requirements for
record retention to the extent it was enabled and
recorded in respective years.
For Mukund M. Chitale & Co.
Chartered Accountants
FRN:106655W
Nilesh RS Joshi
Partner
Place: Mumbai Membership No.
Date: May 08,2025 UDIN: 25114749BMILSU6215
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