We have audited the accompanying financial statements of Ujjivan Small Finance Bank Limited (the "Bank”), which comprise the Balance Sheet as
at March 31,2025, Profit and Loss account and the Cash Flow Statement for the year ended on that date, and notes to the financial statements,
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 Regulation Act, 1949 and the Companies Act, 2013 (the "Act”) in the manner so required and
give a true and fair view in conformity with the Accounting Standards prescribed under section 133 of the Act ("Accounting Standards”)
as applicable to bank and other accounting principles generally accepted in India, of the state of affairs of the Bank as at March 31,2025,
and its profit, its cash flows for the year ended on that date.
BASIS FOR OPINION
We conducted our audit of the financial statements in accordance with the Standards on Auditing ("SA”s) specified under section 143(10)
of the Act. Our responsibilities under those Standards are further described in the Auditor's Responsibility for the Audit of the Financial
Statements section of our report. We are independent of the Bank in accordance with the Code of Ethics issued by the Institute of
Chartered Accountants of India ("ICAI”) together with the ethical requirements that are relevant to our audit of the financial statements
under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance
with these requirements and the ICAI's Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to
provide a basis for our audit opinion on the financial statements.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements
of the current period. 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.
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Key Audit Matter
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Auditor's Response
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1
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Identification of Non-PerForming Advances and Provisioning
For Advances
(Refer Schedule 9 read with Note 18.4 to the financial
statements)
Advances constitute a significant portion of the Bank's assets,
and the quality of these advances is measured in terms of ratio
of Non-Performing Advances ("NPA”) to the gross advances of
the Bank. The Bank has gross advances amounting to ' 3,193,346
Lakhs (Previous Year ' 2,741,915 Lakhs) and the gross NPA ratio
of Bank is 2.18% (Previous Year 2.23%) as at March 31,2025.
The Reserve Bank of India's ('RBI') guidelines on income
recognition, asset classification and provisioning ('IRAC
norms') and other RBI guidelines (herein after referred as
"RBI guidelines”) prescribes the norms for identification and
classification of NPAs and the minimum provision required for
such assets.
The Bank is also required to apply its judgement to determine
the identification and provisioning for NPAs by applying
quantitative as well as qualitative factors.
Since the identification of NPAs and provisioning for advances
is significant to the overall audit, we have ascertained this as a
key audit matter.
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Our audit approach in relation to the key audit matter, included
testing the design, operating effectiveness of internal controls
and substantive audit procedures in respect of income
recognition, asset classification and provisioning pertaining to
advances. In particular:
• We have evaluated the Bank's policies and internal control
system in adhering to the relevant RBI guidelines and
understood the provisioning as per Bank's policy;
• We have analysed and understood key IT systems/
applications used and tested the design and implementation
as well as operational effectiveness of relevant controls,
including manual process and controls in relation to
income recognition, asset classification, viz., standard, sub¬
standard, doubtful and loss with reference to relevant RBI
guidelines and provisioning pertaining to advances;
• We have performed walkthrough of the NPA automation
process and tested the core functionality for selected
sample and tested the identification of NPA and
computation of provisions.
• We test checked advances to examine the validity and
accuracy of the recorded amounts with the underlying
documents, impairment provision for NPAs, and compliance
with IRAC norms and other RBI Guidelines.
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Key Audit Matter
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Auditor's Response
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2
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Key Information technology (IT) systems used in financial re¬
porting process
As a Scheduled Commercial Bank that operates on core banking
solutions ("CBS") and other applications across its branches,
the reliability and security of IT systems plays a key role in the
business operations. Since large volume of transactions are
processed daily, the IT controls are required to ensure that
applications process data as expected and that changes are
made in an appropriate manner.
The IT infrastructure is critical for smooth functioning of the
Bank's business operations as well as for timely and accurate
financial accounting and reporting.
Due to the pervasive nature and complexity of the IT environment
we have ascertained Key Information technology ("IT") systems
used in financial reporting process as a key audit matter.
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We involved our IT specialists to obtain an understanding of
the Bank's IT related control environment. Furthermore, we
conducted an assessment and identified key IT applications,
databases and operating systems that are relevant for our audit.
For the key IT systems used to prepare accounting and financial
information, our areas of audit focus included access security
(including controls over privileged access), program change
controls, database management and network operations. In
particular, our procedures include:
• We obtained an understanding of the Bank's IT control
environment and key changes during the audit period that
may be relevant to the audit;
• We tested the design, implementation and operating
effectiveness of the Bank's General IT controls over the
key IT systems that are critical to financial reporting.
This included evaluation of Bank's controls to evaluate
segregation of duties and access rights being provisioned /
modified based on duly approved requests, access for exit
cases being revoked in a timely manner and access of all
users being recertified during the period of audit;
• We also tested key automated and manual business cycle
controls and logic for system generated reports relevant
to the audit; including testing of compensating controls or
performed alternate 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 Director's Report
including annexures to the Director's report and the Basel ll Disclosures under New Capital Adequacy Framework (Basel ll Disclosures)
included in the Annual report but does not include the financial statements and our auditor's report thereon.
• Our opinion on the financial statements does not cover the other information and Basel ll Disclosures available in the website of the
Bank and we do not express any form of assurance conclusion thereon.
• In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements, or our knowledge obtained during the course
of our audit or otherwise appears to be materially misstated.
• I f, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
RESPONSIBILITIES OF MANAGEMENT AND BOARD OF DIRECTORS 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 Accounting Standards specified under section 133 of the Act 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 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 statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management 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 the
Board of Directors either intend to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.
The Bank's Board of Directors is also responsible for overseeing the Bank's financial reporting process.
AUDITOR'S RESPONSIBILITY 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 financial controls relevant to the audit in order to design audit procedures that are appropriate
in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Bank has
adequate internal financial controls with reference to financial statements in place and the operating effectiveness of such controls.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures
made by the management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Bank's ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's
report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions
may cause the Bank to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the
financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
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 financial controls 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 of the current period 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.
REPORTING ON COMPARATIVES IN CASE THE PREVIOUS YEAR WAS AUDITED BY THE PREDECESSOR AUDITOR
The financial statements of the Bank for the year ended March 31, 2024, were audited by another auditor who expressed an unmodified
opinion on those statements on May 18, 2024.
Our opinion on the financial statements is not modified in respect of this matter.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
1. As required by Section 143(3) of the Act and Section 30(3) of the Banking regulation Act, 1949, based on our audit, 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, the transactions of the Bank which have come to our notice have been within the powers of the bank.
c) As explained in the paragraph 2 below, the financial accounting system of the Bank are centralised and, therefore, accounting
returns are not required to be submitted by branches.
d) 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, except for not complying with requirement of audit trail as stated in (k)(vi) below.
e) The Balance Sheet, Profit and Loss account, the Cash Flow Statement dealt with by this Report are in agreement with the books
of account.
f) In our opinion, the aforesaid financial statements comply with the Accounting Standards specified under Section 133 of the Act
as applicable to the Banks.
g) On the basis of the written representations received from the directors 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.
h) The modification relating to the maintenance of accounts and other matters connected therewith, is as stated in paragraph (d) above.
i) 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.
j) With respect to the other matters 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.
k) With respect to the other matters to be included in the Auditor's Report in accordance with Rule 11 of the Companies (Audit
and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations
given to us:
i. The Bank has disclosed the impact of pending litigations, as at March 31, 2025 on its financial position in its financial
statements - Refer Schedule 12 to the financial statements;
ii. The Bank did not have any long-term contracts including derivative contracts for which there were any material
foreseeable losses.
iii. There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection
Fund by the Bank.
iv. (a) The Management has represented that, to the best of its knowledge and belief, other than as disclosed in the note
18(31) 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, directly or indirectly lend or invest in other persons or entities identified in any manner
whatsoever by or on behalf of the Bank ("Ultimate Beneficiaries") or provide any guarantee, security or the like on
behalf of the Ultimate Beneficiaries.
(b) The Management has represented, that, to the best of its knowledge and belief, other than as disclosed in the
note 18(31) 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, 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.
(c) Based on the audit procedures performed 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 final dividend proposed in the previous year, declared and paid by the Bank during the year is in accordance with
section 123 of the Act, as applicable.
vi. Based on our examination, which included test checks, the Bank has used accounting software systems for maintaining its
books of account for the year ended March 31,2025 which have the feature of recording audit trail (edit log) facility and
the same has operated throughout the year for all relevant transactions recorded in the software (Refer note 18(26.11) of
the financial statements) except that the audit trail feature was not enabled for certain master records in one application
system relating to accounts payable, fixed assets, chart of accounts for the period April 1, 2024 till February 24, 2025.
Further, during the course of our audit we did not come across any instance of the audit trail feature being tampered with
and the audit trail has been preserved by the Bank as per the statutory requirements for record retention.
2. We report that during the course of our audit we have visited and performed select relevant procedures at 33 branches. Since the Bank
considers its key operations to be automated, with the key applications largely integrated to the Core Banking System, it does not
require its branches to submit any financial returns. Accordingly, our audit is carried out centrally at Head Office based on the records
and data required for the purpose of Audit being made available to us.
For Deloitte Haskins & Sells For Abarna & Ananthan
Chartered Accountants Chartered Accountants
(Firm Registration No. 117365W) (Firm Registration No. 000003S)
G. K. Subramaniam Mohan Rao G
Partner Partner
Membership No. 109839 Membership No. 203737
UDIN: 25109839BMOFUX1486 UDIN: 25203737BMKSIQ1298
Place: Mumbai Place: Bengaluru
Date: 30 April 2025 Date: 30 April 2025
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