XYZ bank, a scheduled commercial bank, is preparing its financial statements for the financial year ended on 31 st March, 2026. During the financial…

XYZ bank, a scheduled commercial bank, is preparing its financial statements for the financial year ended on 31 st March, 2026. During the financial year, the bank undertook various lending and investment transactions in the ordinary course of its banking operations. These transactions involved secured advances and bill discounting activities, giving rise to income recognition considerations at the year-end. In respect of its lending portfolio, the bank accounted for interest income amounting to 1.07 crores on advances secured by term deposits, National Savings Certificates (NSCs), and life insurance policies, even though the amounts had not been received as of the balance sheet date. Further, on 01/01/2026, the bank purchased six-month bills and earned a total discount of 2.4 crores. Since half of the bill period extended beyond 31 st March 2026, part of the discount is related to the subsequent accounting period. Additionally, rediscounting charges of 0.5 crores were netted off against the discount income in the books of account. These transactions require examination to determine whether income has been recognised in accordance with accrual principles and applicable banking guidelines. XYZ bank is also a co-lender in a consortium arrangement where several banks jointly advanced a term loan of 150 crore to a corporate borrower. ABC Bank Limited acts as the lead bank and is responsible for collecting and distributing borrower remittances among the consortium members. At the year-end, it was observed that XYZ bank had not received its share of repayment from the lead bank, although the borrower had been remitting payments to the lead bank. The auditor must evaluate the correct asset classification and income recognition in respect of XYZ Bank's share of the consortium advance. In addition, the bank monitors its loan portfolio in accordance with RBI prudential norms relating to asset classification. As of March 2026, certain borrowers had overdue instalments as follows: Borrower A - 20 daysBorrower B - 30 daysBorrower C - 85 days The bank follows Special Mention Account (SMA) framework to identify incipient stress before accounts become Non-Performing Assets (NPAs). Based on the above, answer the following: (10 to 12)