UCO Bank Auditor Reports

To

The Members of UCO Bank

Report on Audit of the Standalone Financial Statements Opinion

1. We have audited the accompanying Standalone Financial Statements of UCO Bank ("the Bank"), which comprises the Balance Sheet as at 31st March, 2024, and the Statement of Profit and Loss Account and 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 in which are incorporated the returns for the year ended on that date of:

i) the Head Office, 43 Zones, 21 branches inclusive of 1 treasury branch audited by us

ii) 798 branches (including Service branches) audited by statutory branch auditors

iii) 2 overseas branches audited by overseas local auditors.

The branches audited by us and those audited by other auditors have been selected by the Bank in accordance with the guidelines issued to the Bank by the Reserve Bank of India. Also incorporated in the Balance Sheet and the Profit and Loss Account and the Cash Flow Statement are the returns from 2411 branches which have not been subjected to audit. These unaudited branches account for 21.05% of advances, 50.64% of deposits, 11.27% of interest income and 42.23% of interest expenses.

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 the Banking Regulation Act, 1949 in the manner so required for bank and are in conformity with accounting principles generally accepted in India and give:

a. true and fair view in case of the Balance sheet, of the state of affairs of the Bank as at 31st March, 2024;

b. true balance of profit in case of the Profit and loss account for the year ended on that date; and

c. true and fair view of cash flows in case of statement of cash flows for the year ended on that date.

Basis for Opinion

2. We conducted our audit in accordance with the Standards on Auditing (SAs) issued by the Institute of Chartered Accountants of India(ICAI). Our responsibilities under those Standards are further described in the Auditors 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 ethical requirements that are relevant to our audit of the standalone financial statements 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.

3. 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 of the current period. These matters were addressed in the context of our audit of the standalone 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:

Key Audit Matters	Auditors Response to Key Audit Matters
Classification of Advances, Identification and Provisioning for non-performing advances	We obtained an understanding of the Banks Software, circulars, guidelines and directives of the RBI and the Banks internal instructions and procedures in respect of asset classification and its provisioning and adopted the following audit procedures: We evaluated and tested of the effectiveness of the IT software controls and other key internal control mechanisms with respect to the advances monitoring, identification/ classification, including testing of relevant data quality, and review of the data entered in the software. Review of the documentations, operations/ performance and monitoring of the advance accounts, on test check basis of the large and stressed advances, to ascertain any overdue unsatisfactory conduct or weakness in any advance account, to verify that its classification is in accordance with the prudential norms of RBI. Further, we have also referred many of the reports of the internal/regulatory inspection, concurrent auditors etc. and evaluated the consequent impact of the observations therein on the advance portfolio of the Bank.There is scope for further strengthening the automation process.
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.
The advances are classified as performing and non-performing advances (NPA) and provisioning thereon is made in accordance with the prudential norms as prescribed by the Reserve Bank of India (RBI). The classification and provisioning is done by Banks IT software under its Core Banking Solution (CBS).The extent of provisioning of NPA under the prudential norms are mainly based on its ageing and recoverability of the underlined security.
In the event of any improper application of the prudential norms or consideration of the incorrect value of the security, as the valuation of the security involves high degree of estimation and judgement, the carrying value of the advances could be materially misstated either individually or collectively, and in view of the significance of the amount of advances in financial statements, the classification of the advances and provisioning thereon has been considered as Key Audit Matter in our audit.

 

Classification and Valuation of Investments, Identification of and provisioning for Non-Performing Investments	Our audit approach towards Investments with reference to the
Investments include investments made by the Bank in various Government Securities, Bonds, Debentures, Shares, Security receipts and other approved securities.	RBI Circulars/directives included the understanding of internal controls and substantive audit procedures in relation to valuation, classification, identification of non-performing investments (NPIs), provisioning/depreciation related to Investments.
These are governed by the circulars and directives of the RBI. These directions of RBI, inter-alia, cover valuation of investments, classification of investments, identification of non-performing investments, the corresponding non-recognition of income and provision there against.	We evaluated and made an understanding of the Banks internal control mechanism to comply with relevant RBI directions regarding valuation, classification, identification of NPIs, provisioning/depreciation related to investments;
The valuation of each category (type) of the aforesaid securities is to be done as per the method prescribed in circulars and directives issued by the RBI which involves collection of data/ information from various sources such as FIMMDA rates, rates quoted on BSE/NSE, financial statements of unlisted companies etc. Considering the complexities and extent of judgement involved in the valuation, volume of transactions, investments on hand and degree of regulatory focus, this has been determined as a Key Audit Matter.	We also assessed and evaluated the process adopted for collection of information from various sources like FIMMDA rates, rates quoted on BSE/NSE etc., for determining fair value of these investments;
Accordingly, our audit was focused on valuation of investments, classification, identification of non-performing investments and provisioning related to investments.	For the selected sample of investments in hand, we tested accuracy and compliance with the RBI Master Circulars and directions by re-performing valuation for each category of the security.
Assessment of Provisions and Contingent liabilities in respect of certain litigations including Direct and Indirect Taxes, various claims filed by other parties not acknowledged as debt	We also assessed and evaluated the process of identification of NPIs and corresponding reversal of income and creation of provision thereagainst;
The Bank is involved in a number of taxation and other disputes for which final outcomes cannot be easily predicted and which could potentially result in significant liabilities. The assessment of the risks associated with the litigations is based on complex assumptions, which require the use of judgement and such judgement relates , primarily , to the assessment of the uncertainties connected to the prediction of the outcome of the proceedings and to the adequacy of the disclosures in the financial statements. Because of the judgement required, the materiality of such litigations and the complexity of the assessment process, the area was considered a key matter for our audit.	In addition to above, we also carried out substantive audit procedures to re-compute independently the provision to be maintained and depreciation to be provided in accordance with the circulars and directives of the RBI. We also evaluated the presentations of the various investment portfolio related disclosures in terms of RBI directions.There is scope for further strengthening the automation process.
	Our audit procedure in response to this key Audit Matter included
	• Assessment of the process and relevant controls implemented to identify legal and tax litigations, and pending administrative proceedings.
	• Assessment of assumptions used in the evaluation of potential legal and tax risks performed by the Bank considering the legal precedence and other rulings in similar cases.
	• Inquiry with the legal department regarding the status of the most significant disputes and inspection of the key relevant documentation.
	• Analysis of opinion received from the experts where ever available.
	• Review of the adequacy of the disclosures in the notes to the financial statements.

4. Other Matters

A) These standalone financial statements incorporate the relevant returns of 800 branches including 2 foreign branches audited by the other auditors specially appointed for this purpose. These branches audited by other auditors cover 44.18% of advances, 43.82% of deposits and 84.66% of non-performing assets as on 31st March 2024 and 24.30% / 27.79% of revenue for the quarter ended 31st March, 2024 / for the year ended 31st March 2024. The financial statements/ information of these branches have been audited by the Statutory Branch Auditors whose reports have been furnished to us, and in our opinion in so far as it relates to the amounts and disclosures included in respect of branches, are based solely on the report of such branch auditors.

B) In conduct of our audit, we have taken note of the unaudited returns in respect of 2411 branches cover 21.05% of advances, 50.64% of deposits and 12.90% of Non- Performing assets as on 31st March, 2024 and 15.52%/ 15.55% of revenue for the quarter ended 31st March, 2024 / for the year ended 31st March 2024.

Our opinion is not modified in respect of this matter.

Information other than the Standalone Financial Statements and Auditors Report thereon

5. The Banks Board of Directors is responsible for the other information. The other information primarily comprises the information included in the Management Discussion and Analysis, Directors Report, Pillar 3 Disclosures under Basel III, Leverage Ratio, Liquidity Coverage Ratio, Corporate Governance and Shareholders Information but does not include the financial statements and our auditors report thereon, which is expected to be made available to us after that date.

Our opinion on the standalone financial statements does not cover the other information and Pillar 3 disclosures under the Basel III disclosure 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 and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditors report, 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.

When we read the other information, including annexures in annual report, if any, thereon, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance.

Responsibilities of Management and Those Charged with Governance for the Standalone Financial Statements

6. The Banks Board of Directors is responsible with respect to the preparation of thisstandalone 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 issued by ICAI, and provisions of Section 29 of the Banking Regulation Act, 1949 and circulars and guidelines issued by the 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 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.

<p >In preparing the financial statements, management is responsible for assessing the Banks ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

Auditors Responsibilities for the Audit of the Financial Statements

7. Our objectives are to obtain reasonable assurance about whether thefinancial statements 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 thesefinancial 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 for expressing our opinion on whether the bank has adequate internal financial controls with reference to financial statements and the operating effectiveness of such control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of managements 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 banks 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 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 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 standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of standalone 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 standalone 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 of the current period 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.

Report on Other Legal and Regulatory Requirements

8. The Balance Sheet and the Profit and Loss Account have been drawn up in accordance with Section 29 of the Banking Regulation Act, 1949;

9. Subject to the limitations of the audit indicated in above paragraphs and as required by the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/1980, and subject also to the limitations of disclosure required therein as required by sub- section (3) of section 30 of the Banking Regulation, 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 purposes 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 returns received from the offices and branches of the Bank have been found adequate for the purposes of our audit.

10. We further report that:

a) 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 and proper returns adequate for the purpose of our audit have been received from branches/ offices not visited by us;

b) 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 and with the returns received from the branches not visited by us;

c) the reports on the accounts of the branch offices audited by branch auditors of the Bank as per the provisions under section 29 of the Banking Regulation Act, 1949 have been sent to us and have been properly dealt with by us in preparing this report; and

d) In our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement comply with the applicable accounting standards, to the extent they are not inconsistent with the accounting policies prescribed by RBI.

11. As required by letter No. DOS.ARG.No.6270/08.91.001/2019-20 dated March 17, 2020 on "Appointment of Statutory Central Auditors (SCAs) in Public Sector Banks - Reporting obligations for SCAs from FY 2019-20", read with subsequent communication dated May 19, 2020 issued by the RBI, we further report on the matters as specified in the aforesaid letter as under:

a) In our opinion, the aforesaid Financial Statements comply with the Accounting Standards issued by ICAI, to the extent they are not inconsistent with the accounting policies prescribed by the RBI.

b) There are no observations or comments on financial transactions or matters which have any adverse effect on the functioning of the bank.

c) On the basis of the written representations received from the directors as on March 31, 2024, none of the directors is disqualified as on March 31, 2024 from being appointed as a director in terms of sub-section (2) of Section 164 of the Companies Act, 2013.

d) There are no qualifications, reservations or adverse remarks relating to the maintenance of accounts and other matters connected therewith.

e) Our audit report on the operating effectiveness of the internal financial controls over financial reporting of the Bank is given in Annexure A to this report. Our report expresses an unmodified opinion on the operating effectiveness of internal financial controls over financial reporting of the Bank as at 31st March 2024.

Annexure A to the Independent Auditors Report

(Referred to in paragraph 11(e) under Report on Other Legal and Regulatory Requirements section of our report of even date)

Report on the Operating Effectiveness of Internal Financial Controls Over Financial Reporting as required by the

Reserve Bank of India (the "RBI") Letter DOS.ARG.No. 6270/08.91.001/2019o20 dated March 17, 2020 (as amended), (the "RBI communication")

1. We have audited the Operating Effectiveness of Internal Financial Controls over Financial Reporting of UCO Bank (the "Bank") as of 31st March 2024 in conjunction with our audit of the financial Statements of the Bank for the year ended on that date which includes Internal Financial Controls over Financial Reporting of the Banks branches.

Managements Responsibility for Internal Financial Controls over Financial Reporting

2. The Management of the Bank is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Bank considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business including adherence to Banks policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information, as required under the Banking Regulation Act, 1949 and the circulars and guidelines issued by the Reserve Bank of India.

Auditors Responsibility

3. Our responsibility is to express an opinion on the operating effectiveness of Internal Financial Controls over Financial Reporting of the Bank based on our audit. Our audit of Internal Financial Controls over Financial Reporting includes an evaluation of the adequacy of the design and implementation of such internal financial controls over financial reporting.

4. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the "Guidance Note) issued by the Institute of Chartered Accountants of India (the "ICAI") and the Standards on Auditing (SAs) issued by the ICAI, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting operated effectively in all material respects.

5. Our audit involves performing procedure to obtain audit evidence about the operating effectiveness of the internal financial control over financial reporting of the Bank. The procedures selected depend on the auditors judgement, including the assessment of the risk of material misstatement of the financial statements, whether due to fraud or error.

6. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the operating effectiveness of the Banks internal financial controls over financial reporting.

Meaning of internal Financial Controls over Financial Reporting

7 A Banks internal financial controls over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A Banks internal financial controls over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Bank, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Bank are being made only in accordance with authorizations of management and directors of the Bank, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Banks assets that could have a material effect on the financial statements

Inherent Limitations of Internal Financial Controls over Financial Reporting

8. Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial controls over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Other Matters

9 Bank had appointed consultant for internal financial controls over financial reporting for review and testing of compliance under internal financial controls over financial reporting for their departments & operational units and provided report/suggestion to mitigate the gap assessed during gap study. In this regard, report has been given by consultant for the year ended 31st March 2024. The report/suggestions given by consultant for internal financial controls over financial reporting has been reviewed by the management positively and necessary improvement has been implemented in the internal financial control system of the Bank. However, there is no impact on the financials of the Bank.

10. Our aforesaid report insofar related to the operating effectiveness of Internal Financial Control over Financial Reporting of 819 branches, in which 798 branches are audited by the branch auditors appointed for this purpose and 21 branches audited by us. While ascertaining the operating effectiveness of Internal Financial Control over Financial Reporting of 798 branches, we have relied on the corresponding reports of the respective branch auditors of those branches.

Our opinion is not modified in respect of this matter.

Opimon

In our opinion, and to the best of our information and according to the explanations given to us, the Bank has, in all material respects, adequate internal financial controls over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31,2024, based on the criteria for internal control over financial reporting established by the Bank considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.