We have audited the accompanying financial statements
of Equitas Small Finance Bank Limited (the "Bank"), which
comprise the Balance Sheet as at March 31, 2025, the
Profit and Loss Account and the Cash Flow Statement for
the year then ended, and notes to the financial statements,
including a summary of significant accounting policies and
other explanatory information (hereinafter referred to as the
"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 Section 29 of
the Banking Regulation Act, 1949 as well as the Companies
Act, 2013, as amended (the "Act") in the manner so required
for Banking Companies and give a true and fair view in
conformity with the accounting principles generally accepted
in India, including the Accounting Standards prescribed under
section 133 of the Act, read with rules made thereunder, 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 financial statements in
accordance with the Standards on Auditing (SAs), as 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 made there under, 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 we
have obtained 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 for the financial year ended March 31,
2025. 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 determined the matters described below to be the key audit matters to be communicated in our report.
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S.
No.
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Key Audit Matters
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How our Audit Addresses our Key Audit Matters
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Identification of non-performing advances and provisioning for advances
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1
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Advances form a material portion of
the Bank's assets and the quality of the
Bank's loan portfolio is measured in terms
of the proportion of non-performing
assets (NPAs) to the total loans and
advances. Identification, classification and
provisioning of NPAs are governed by the
prudential norms on income Recognition
and Asset Classification ("IRAC") issued
by the Reserve Bank of India ("RBI")
which include rule-based and judgemental
factors. Management is also required to
make estimates of stress, recoverability
issues, and security erosion in respect of
specific borrowers or groups of borrowers,
on account of specific factors that may
affect such borrowers/groups.
In view of the significance of this area to
the overall audit of financial statements, it
has been considered as a key audit matter.
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We considered the Bank's accounting policies for NPA identification, and
provisioning and have assessed the compliance with the IRAC norms prescribed
by the RBI.
We tested the operating effectiveness of the controls (including application
and IT dependent controls) for borrower wise classification of loans in the
respective asset classes viz., standard, sub-standard, doubtful and loss with
reference to their days-past-due (DPD) status.
We considered the special mention accounts ("SMA") reports submitted by
the Bank to the RBI's central repository of information on large credits (CRILC)
and made inquiries of personnel in the Bank's credit and risk departments
regarding indicators of stress, perceived risk and mitigating steps taken and/ or
the occurrence of specific event(s) of default or other factors affecting the loan
portfolio/particular loan product category, that may affect NPA identification
and/or provisioning.
Selected the borrowers based on quantitative and qualitative risk factors for
their assessment of appropriate classification as NPA including computation of
overdue ageing to assess its correct classification and provision amount as per
extant IRAC norms and Bank policy.
We performed analytical procedures which considered both financial and non¬
financial parameters, in relation to identification of NPAs and provisioning
there against.
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Information Technology ("IT") Systems and Controls impacting Financial Reporting
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2
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The IT environment of the Bank is complex
and involves a large number of independent
and interdependent IT systems used in the
operations of the Bank for processing and
recording a large volume of transactions at
numerous locations. As a result, there is a
high degree of reliance and dependency on
such IT systems for the financial reporting
process of the Bank.
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.
IT general controls include user access
management and change management
across applications, networks, database,
and operating systems.
Due to the pervasive nature and complexity
of the IT environment as well as its
significance in relation to accurate and
timely financial reporting we have identified
this area as a key audit matter.
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As part of our Audit, we have carried out testing of the IT general controls,
application controls and IT dependent manual controls of the financially
significant applications.
We have gained an understanding of IT controls framework through
Walkthrough of processes. We have referred to the reports of Information
Systems Audit.
We have also tested the design and operating effectiveness of the Bank's
IT general controls in the nature of controls over logical access, change
management, and other aspects of IT controls over the key information
systems that are critical to financial reporting. These included testing that
requests for access to systems were reviewed and authorized.
Where deficiencies were identified, we tested compensating controls or
performed alternate procedures sufficient to confirm that the control objectives
are satisfied.
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Other Matter
The financial statements of the bank for the year ended
March 31, 2024 were jointly audited by M/s Varma & Varma
and ASA & Associates LLP, who, vide their report dated April
24, 2024, expressed an unmodified opinion on those financial
statements.
Information other than the Financial Statements and
Auditors' Report thereon
The Bank's Board of Directors is responsible for the other
information. The other information comprises the information
included in the Annual report, but does not include the
financial statements and our auditor's report thereon. The
Bank's annual report is expected to be made available to us
after the date of this Auditors' Report.
Our opinion on the financial statements does not cover
the other information and Pillar 3 disclosure under Basel
III Capital Regulations, including Leverage Ratio, Liquidity
Coverage Ratio and Net Stable Funding Ratio under Capital
Adequacy and Liquidity Standards issued by Reserve Bank of
India' ("RBI") 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 identified
above when it becomes available and, in doing so, consider
whether such 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 Bank's annual report, if we conclude that there
is a material misstatement of this other information, we are
required to communicate the matter to those charged with
governance and take appropriate actions.
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, as amended,
in so far as they apply to the Bank and provisions of Section 29
of the Banking Regulation Act, 1949, and circulars, guidelines
and directions issued by Reserve Bank of India ("RBI") from
time to time.
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 judgements and estimates that are reasonable and
prudent; and the 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 is
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 management and 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 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:
• I dentify 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 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 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.
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.
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 read the Companies (Accounting
Standards) Rules, 2021, as amended.
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 financial accounting systems of the Bank are
centralized and therefore, accounting returns for
the purpose of preparing financial statements are
not required to be submitted by the branches. Our
audit is carried out centrally as all the necessary
records and data required for the purposes of our
audit are centrally available. However, we have
visited 36 branches for the purpose of our audit, in
compliance with the extant RBI Circular.
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) I n our opinion, the aforesaid financial statements
comply with the accounting standards specified
under section 133 of the Act read the Companies
(Accounting Standards) Rules, 2021, as amended,
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 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 financial statements and the
operating effectiveness of such controls, refer to our
separate Report in "Annexure-A" to this report;
(g) In our opinion, the provisions of section 197 of
the Act are not applicable to the bank 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, 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 to
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 were no amounts which were required
to be transferred to the Investor Education
and Protection Fund by the Bank;
iv. a) The Management of the Bank has
represented that, to the best of its
knowledge and belief, no funds (which
are material either individually or in
the aggregate) 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/entities, 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) The Management of the Bank has
represented that, to the best of its
knowledge and belief, no funds (which
are material either individually or in the
aggregate) have been received by the
Bank from any persons/entities, 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 which
we have considered reasonable and
appropriate 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 representations made
by the management under sub- clause
(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. a) Based on our examination which
included test checks, the bank has used
accounting software for maintaining its
books of account 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 we did not come
across any instance of audit trail feature
being tampered with.
b) Audit trail has been preserved by
the Company as per the statutory
requirements for record retention in
accordance with the requirements of
Rule 11(g) of the Companies (Audit and
Auditors) Rules, 2014.
For ASA & Associates LLP For Suri & Co.,
Chartered Accountants Chartered Accountants
ICAI FRN: 009571N/N500006 ICAI FRN: 004283S
G N Ramaswami Sanjeev Aditya M
Partner Partner
ICAI Membership No. 202363 ICAI Membership No. 229694
UDIN: 25202363BMOQGY7155 UDIN: 25229694BMIIIL8430
Place: Chennai Place: Mumbai
Date: 30-04-2025 Date: 30-04-2025
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