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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.
For each matter below, our description of how our audit addressed the matter is provided in that
context. We have fulfilled the responsibilities described in the “Auditor’s Responsibilities for the
Audit of the Financial Statements” section of our report, including in relation to these matters.
Accordingly, our audit included the performance of procedures designed to respond to our
assessment of the risks of material misstatement of the financial statements. The results of our audit
procedures, including the procedures performed to address the matters below, provide the basis
for our audit opinion on the accompanying financial statements.
Key Audit Matters Auditors Response
Identification of Non-performing advances and provisioning of advances:
Advances constitute a significant portion of the Bank’s Our audit approach towards advances with reference
assets and the quality of these advances is measured in to the IRAC norms and other related circulars /
terms of ratio of Non-Performing Advances (“NPA”) to directives issued by RBI and also internal policies
the gross advances of the Bank. The Bank’s net advances and procedures of the Bank includes the testing of the
constitute 92.01% (Previous year 90.66%) of the total following:
assets and the gross NPA ratio of the Bank is 2.92% • Understanding, evaluating and testing the design
(Previous year 2.25%) as at June 30, 2021. and operating effectiveness of key controls (including
The Reserve Bank of India’s (“RBI”) guidelines on application controls) around identification of
Income recognition and asset classification (“IRAC”) impaired accounts based on the extant guidelines on
prescribe the prudential norms for identification and IRAC.
classification of NPAs and the minimum provision • Performing other procedures including substantive
required for such assets. The Bank is also required to audit procedures covering the identification of NPAs
apply its judgment to determine the identification by the Bank. These procedures included:
and provision required against NPAs by applying
quantitative as well as qualitative factors. The risk of • Considering the accounts reported by the Bank and
identification of NPAs is affected by factors like stress other Banks as Special Mention Accounts (“SMA”)
and liquidity concerns in certain sectors. in RBI’s central repository of information on large
credits (CRILC) to identify stress.
The provisioning for identified NPAs is estimated • Performing inquiries with the credit and risk
based on ageing and classification of NPAs, recovery departments to ascertain if there were indicators
estimates, value of security and other qualitative factors of stress or an occurrence of an event of default in
and is subject to the minimum provisioning norms a particular loan account or any product category
specified by RBI. which need to be considered as NPA.
The Bank has detailed its accounting policy in this • Reviewing account statements and other related
regard in Schedule XV- Significant accounting policies information of the borrowers selected based on
under note 5 Loans/Advances and Provision thereon. quantitative and qualitative risk factors.
• Gained an understanding of the Bank’s process for
Since the identification of NPAs and provisioning for provisioning of advances.
advances require significant level of estimation and
given its significance to the overall audit, we have • Assessed compliance with RBI circular on COVID-19
ascertained identification and provisioning for NPAs as Regulatory Package.
a key audit matter.
Annual Report 2020-21 | 265
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.
For each matter below, our description of how our audit addressed the matter is provided in that
context. We have fulfilled the responsibilities described in the “Auditor’s Responsibilities for the
Audit of the Financial Statements” section of our report, including in relation to these matters.
Accordingly, our audit included the performance of procedures designed to respond to our
assessment of the risks of material misstatement of the financial statements. The results of our audit
procedures, including the procedures performed to address the matters below, provide the basis
for our audit opinion on the accompanying financial statements.
Key Audit Matters Auditors Response
Identification of Non-performing advances and provisioning of advances:
Advances constitute a significant portion of the Bank’s Our audit approach towards advances with reference
assets and the quality of these advances is measured in to the IRAC norms and other related circulars /
terms of ratio of Non-Performing Advances (“NPA”) to directives issued by RBI and also internal policies
the gross advances of the Bank. The Bank’s net advances and procedures of the Bank includes the testing of the
constitute 92.01% (Previous year 90.66%) of the total following:
assets and the gross NPA ratio of the Bank is 2.92% • Understanding, evaluating and testing the design
(Previous year 2.25%) as at June 30, 2021. and operating effectiveness of key controls (including
The Reserve Bank of India’s (“RBI”) guidelines on application controls) around identification of
Income recognition and asset classification (“IRAC”) impaired accounts based on the extant guidelines on
prescribe the prudential norms for identification and IRAC.
classification of NPAs and the minimum provision • Performing other procedures including substantive
required for such assets. The Bank is also required to audit procedures covering the identification of NPAs
apply its judgment to determine the identification by the Bank. These procedures included:
and provision required against NPAs by applying
quantitative as well as qualitative factors. The risk of • Considering the accounts reported by the Bank and
identification of NPAs is affected by factors like stress other Banks as Special Mention Accounts (“SMA”)
and liquidity concerns in certain sectors. in RBI’s central repository of information on large
credits (CRILC) to identify stress.
The provisioning for identified NPAs is estimated • Performing inquiries with the credit and risk
based on ageing and classification of NPAs, recovery departments to ascertain if there were indicators
estimates, value of security and other qualitative factors of stress or an occurrence of an event of default in
and is subject to the minimum provisioning norms a particular loan account or any product category
specified by RBI. which need to be considered as NPA.
The Bank has detailed its accounting policy in this • Reviewing account statements and other related
regard in Schedule XV- Significant accounting policies information of the borrowers selected based on
under note 5 Loans/Advances and Provision thereon. quantitative and qualitative risk factors.
• Gained an understanding of the Bank’s process for
Since the identification of NPAs and provisioning for provisioning of advances.
advances require significant level of estimation and
given its significance to the overall audit, we have • Assessed compliance with RBI circular on COVID-19
ascertained identification and provisioning for NPAs as Regulatory Package.
a key audit matter.
Annual Report 2020-21 | 265
