Utkarsh Small Finance Bank Ltd.की ऑडीटर रिपोर्ट

Mar 31, 2025

We have jointly audited the accompanying financial statements
of UTKARSH SMALL FINANCE BANK LIMITED (the Bank"),
which comprise the Balance Sheet as at March 31, 2025, Profit
and Loss Account, the Cash Flow Statement for the year then
ended, and a summary of significant accounting policies and
other explanatory information.

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 the Bank, the relevant
circulars, guidelines and directions issued by the Reserve Bank
of India (“RBI”) from time to time and other accounting principles
generally accepted in India, 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 (“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.

Sr. No.	Key Audit Matter	Auditor’s Response
1. Identification of and Provisioning against Non-performing Assets (“NPAs”): Total Loans and Advances (Net of Provision) as at March 31, 2025: Rs. 18,71,648 Lakhs Provision for NPAs as at March 31, 2025: Rs. 94,910 Lakhs Refer Schedule 9, Schedule 17(B)(c) and Schedule 18.4.1
Advances constitute a significant portion of the Bank’s assets and the quality of these advances is measured in terms of ratio of NPA to the gross advances of the Bank. The Bank is required to comply with the Master Circular issued by the Reserve Bank of India (''RBI’) on ''Prudential Norms for Income Recognition, Asset Classification and Provisioning pertaining to Advances’ (the’ IRAC norms’) and amendments thereto (“RBI guidelines”) which prescribes the norms for identification and classification of Non-performing Assets (''NPAs’) and the minimum provision required for such assets. The Bank is also required to apply its judgement to determine the identification and provision required against NPAs considering various quantitative as well as qualitative factors. As the identification of and provisioning against NPAs requires considerable level of management estimation, application of various regulatory requirements and its significance to the overall audit due to stakeholder and regulatory focus, we have identified this as a key audit matter.		Our audit approach included testing the design, operating effectiveness of internal controls and substantive audit procedures in respect of income recognition, asset classification and provisioning. In particular: • We have evaluated and understood the Bank’s internal control system in adhering to the RBI guidelines; • We have analysed and understood key IT systems/ applications used and tested the design and implementation as well as operational effectiveness of relevant controls in relation to income recognition, asset classification, viz., standard, sub-standard, doubtful and loss with reference to RBI guidelines and provisioning pertaining to advances; • We test checked advances to examine the validity and accuracy of the recorded amounts, impairment provision for NPAs, recognition of floating asset provision based on board approved policy and its utilisation based on RBI’s approval, in compliance with IRAC norms and other RBI Guidelines.

Sr. No.	Key Audit Matter	Auditor’s Response
Information Technology (‘IT’) Systems and Controls impacting Financial Reporting
As a Scheduled Commercial Bank that operates on core banking solution (“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.		In assessing the controls over the IT systems of the Bank, we involved our technology specialists to understand the IT control environment, IT infrastructure and IT systems. We conducted an assessment and identified key IT systems that are critical for accounting and financial reporting process and are relevant for our audit and tested their internal controls. In particular: • 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 tested key automated and manual business cycle controls and logic for system generated reports relevant to the audit; and • We also tested compensating controls and performed alternate procedures to assess whether there were any unaddressed IT risks that would materially impact the financial statements.

Information Other than the Financial Statements
and Auditor’s Report Thereon

¦ The Bank’s Board of Directors is responsible for the
preparation of the other information. The other information
comprises the Chairman’s Statement, the Directors Report
including annexures to the Directors report included in the
Annual Report but does not include the financial statements
and our auditors report thereon and the Basel II Disclosures
under New Capital Adequacy Framework (Basel II
Disclosures).

¦ Our opinion on the financial statements does not cover the
other information and Basel II Disclosures 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.

¦ If, based on the work we have performed on the other
information that we obtained prior to the date of this auditor’s
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.

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 provisions of Section 29 of
the Banking Regulation Act, 1949, Accounting Standards and
other accounting principles generally accepted in India and the
circulars, guidelines and the directions issued by RBI, from time to
time. This responsibility also includes maintenance of adequate
accounting records in accordance with the provisions of the
Act 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 circumstance. 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.

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.

e) The Balance Sheet, Profit and Loss Account and the
Cash Flow Statement dealt with by this Report are in
agreement with the relevant 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 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.

h) With respect to the maintenance of accounts and other
matters connected therewith, reference is made to our
remarks in paragraph 1(b) above on reporting under
Section 143(3)(b) and paragraph 1(k)(vi) below on
reporting under Rule 11(g) of the Rules;

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 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 were no amounts which were 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, as disclosed in
the Schedule 18.28 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, as
disclosed in the Schedule 18.28 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 financial 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
systems. 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 40

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 Kirtane & Pandit LLP

Chartered Accountants Chartered Accountants

(Firm Registration No. 117365W) (Firm Registration No.105215W/W100057)

G. K. Subramaniam Sandeep Welling

Partner Partner

Membership No. 109839 Membership No. 044576

UDIN: 25109839BMOFVH3118 UDIN: 25044576BMKQXS3892

Place: Mumbai Place: Mumbai

Date: May 03, 2025 Date: May 03, 2025

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Mar 31, 2024

UTKARSH SMALL FINANCE BANK LIMITED

Report on the Audit of the Financial Statements

Opinion

We have audited the accompanying financial statements of UTKARSH SMALL FINANCE BANK LIMITED (the "Bank”), which comprise the Balance Sheet as at March 31,2024, Profit and Loss Account, the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

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 , the relevant circulars, guidelines and directions issued by the Reserve Bank of India ("RBI”) from time to time and other accounting principles generally accepted in India, of the state of affairs of the Bank as at March 31,2024, 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) 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.

Sl. . Key Audit Matter No.	Auditor''s Response
1 Identification of Non-Performing Advances and	Our audit approach included testing the design, operating
Provisioning for Advances	effectiveness of internal controls and substantive audit
(Refer Schedule 9 read with Note 18.4 to the financial statements)	procedures in respect of income recognition, asset classification and provisioning. In particular:
Advances constitute a significant portion of the Bank''s	• We have evaluated and understood the Bank''s internal
assets and the quality of these advances is measured	control system in adhering to the RBI guidelines;
in terms of ratio of Non-Performing Advances ("NPA”) to the gross advances of the Bank. The Bank has net advances amounting to H 16,36,481 Lakh as at March 31,2024.	• We have analysed and understood key IT systems/ applications used and tested the design and implementation as well as operational effectiveness
	of relevant controls in relation to income recognition,
Advances constitute a significant portion of the Bank''s	asset classification, viz., standard, sub-standard,
assets, and the quality of these advances is measured	doubtful and loss with reference to RBI guidelines
in terms of ratio of Non-Performing Advances ("NPA”) to the gross advances of the Bank. The Bank has gross advances amounting to H 16,62,928 Lakh (Previous Year H 13,35,711 Lakh) and the gross NPA ratio of Bank is 2.51 % (Previous Year 3.23%) as at March 31,2024.	and provisioning pertaining to advances;

Sl. No.	Key Audit Matter	Auditor’s Response
	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.	•	We test checked advances to examine the validity and accuracy of the recorded amounts, impairment provision for NPAs, and compliance with IRAC norms and other RBI Guidelines.
	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.
2	Key Information technology (IT) systems used in financial reporting process: As a Scheduled Commercial Bank that operates on core banking solution ("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.	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.

Information Other than the Financial Statements and Auditor''s Report Thereon

• The Bank''s Board of Directors Is responsible for the preparation of the other information. The other information comprises the Chairman''s Statement, the Directors Report including annexures to the Directors report included in the Annual Report but does not include the financial statements and our auditors report thereon and the Basel II Disclosures under New Capital Adequacy Framework (Basel II Disclosures).

• Our opinion on the financial statements does not cover the other information and Basel II Disclosures 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.

• if, based on the work we have performed on the other information that we obtained prior to the date of this auditor''s 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.

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 provisions of Section 29 of the Banking Regulation Act, 1949, Accounting Standards and other accounting principles generally accepted in india and the circulars, guidelines and the directions issued by RBI, from time to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act 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 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 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 Board of Directors either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

The Bank''s Board of Directors are 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 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 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 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 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. 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.

e) The Balance Sheet, Profit and Loss Account and 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 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2024 from being appointed as a director in terms of Section 164(2) of the Act.

h) 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.

i) 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.

J) 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 on its financial position as at the year-end in its financial statements - Refer Schedule 12 to the financial statements;

II. The Bank did not have any long-term contracts including derivative contracts as at the year-end 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 has represented that, to the best of It''s knowledge and belief, as disclosed In the note 18.28 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 It''s knowledge and belief, as disclosed In the note 18.28 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. As stated In note 18.1.1 to the financial statements, the Board of Directors of the Bank has proposed final dividend for the year which Is subject to the approval of the members at the ensuing Annual General Meeting. The dividend proposed 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 softwares for maintaining Its books of account for the financial year ended March 31, 2024 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 softwares. Further, during the course of our audit we did not come across any instance of the audit trail feature being tampered with.

vii. As proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 Is applicable from April 1,2023, however, reporting under Rule 11 (g) of the Companies (Audit and Auditors) Rules, 2014 on preservation of audit trail as per the statutory requirements for record retention is not applicable for the financial year ended March 31,2024.

2. We report that during the course of our audit we have visited and performed select relevant procedures at 43 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 Kirtane & Pandit LLP

Chartered Accountants Chartered Accountants

(Firm Registration No. 117365W) (Firm Registration No.105215W/W100057)

G. K. Subramaniam Sandeep Welling

Partner Partner

Membership No. 109839 Membership No. 044576

UDIN: 24109839BKFTFO6672 UDIN: 24044576BKAUBD1711

Place: Mumbai Place: Mumbai

Date: April 26, 2024 Date: April 26, 2024

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Mar 31, 2023

UTKARSH SMALL FINANCE BANK LIMITED Report on the Audit of the Financial Statements

OPINION

We have audited the accompanying financial statements of UTKARSH SMALL FINANCE BANK LIMITED (the Bank), which comprise the Balance Sheet as at March 31, 2023, Profit and Loss Account, the Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

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, 2023, 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) 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.

Sl. No.	Key Audit Matter	Auditor''s Response
1	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 net advances amounting to '' 13,06,877 Lakh as at 31 March, 2023. 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 '' 13,35,711 Lakh (Previous Year '' 10,63,072 Lakh) and the gross NPA ratio of Bank is 3.23 % (Previous Year 6.10%) as at March 31, 2023.	Our audit approach 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, our procedures include : • We have evaluated and understood the Bank''s internal control system in adhering to the Relevant RBI guidelines; • We have analysed and understood key IT systems/ applications used and tested the design and implementation as well as operational effectiveness of relevant 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;

Sl. No.	Key Audit Matter	Auditor''s Response
	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 "Relevant 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.	• We test checked advances to examine the validity of the recorded amounts, underlying loan documentation and statement of accounts, indicators of impairment, impairment provision for NPAs, and compliance with IRAC norms and other RBI Guidelines. • We had performed the walkthrough of the NPA automation process in the current financial year and tested the core functionality for selected sample and tested the identification of NPA and computation of provisions. • With respect to contingency and floating provision held as at March 31, 2023 towards unforeseen risk and stress emanating from certain portfolio of advances, we have tested key inputs, assumptions and methodology used by the management in estimating the provision amount (including utilization thereof).
2	Key Information technology (IT) systems used in financial reporting process: As a Scheduled Commercial Bank that operates on core banking solution (CBS) and other loan 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 identified and tested access controls, segregating of duties and change management of relevant Information technology applications, databases and operating systems (IT) used in financial reporting process as a key audit matter.	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 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 to assess whether there were any unaddressed IT risks that would materially impact the financial statements.

INFORMATION OTHER THAN THE FINANCIAL STATEMENTS AND AUDITOR''S REPORTTHEREON

• The Bank''s Board of Directors is responsible for the preparation of the other information. The other information comprises the Chairman''s Statement, the Directors Report including annexures to the Directors report included in the Annual Report but does not include the financial statements and our auditors report thereon and the Basel II Disclosures under New Capital Adequacy Framework (Basel II Disclosures).

• Our opinion on the financial statements does not cover the other information and Basel II Disclosures 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.

• If, 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 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 provisions of Section 29 of the Banking Regulation Act, 1949, Accounting Standards and other accounting principles generally accepted in India and the circulars, guidelines and the directions issued by the Reserve Bank of India, from time to time. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act 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 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 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 Board of Directors either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.

The Bank''s Board of Directors are 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 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 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 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 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 comparative financial information of the Bank for the previous reporting periods included in the Financial Statements have been audited by the predecessor auditor. The report of the predecessor auditor dated April 25,2022, on this comparative financial information expressed an un-modified opinion.

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 and found them to be satisfactory.

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.

e) The Balance Sheet, Profit and Loss Account and 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 and taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2023 from being appointed as a director in terms of Section 164(2) of the Act.

h) 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.

i) 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.

j) 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 on its financial position as at the year-end in its financial statements - Refer Schedule 12 to the financial statements;

ii. The Bank did not have any long-term contracts including derivative contracts as at the year-end 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 has represented that, to the best of it''s knowledge and belief, as disclosed in

the note 18.28 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 it''s knowledge and belief, as disclosed in the note 18.28 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 Bank has not declared or paid any dividend during the year and has not proposed final dividend for the year.

vi. Proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 for maintaining books of account using accounting software which has a feature of recording audit trail (edit log) facility is applicable to the Bank w.e.f. April 1, 2023, and accordingly, reporting under Rule 11(g) of Companies (Audit and Auditors) Rules, 2014 is not applicable for the financial year ended March 31, 2023.

2. We report that during the course of our audit we have visited and performed select relevant procedures at 43 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 Kirtane & Pandit LLP

Chartered Accountants Chartered Accountants

(Firm Registration No. 117365W) (Firm Registration No.105215W/W100057)

G. K. Subramaniam Sandeep Welling

Partner Partner

Membership No. 109839 Membership No. 044576

UDIN: 23109839BGXPXI7832 UDIN: 23044576BGXPSD7569

Place: Mumbai Place: Mumbai

Date: April 28, 2023 Date: April 28, 2023