A Tech Glitch At HDFC Bank Led To A Windfall For Some Customers

In May, a number of HDFC Bank Ltd.'s customers in Tamil Nadu received a windfall, as a technical glitch in the bank's IT systems led to an erroneous transfer of funds. While most customers have returned the funds, some have not.

According to two people in the know, who spoke on the condition of anonymity, a routine system upgradation turned faulty due to a mistake in the code. This led to a few thousand bank accounts reflecting large inflated balances in Chennai and a few other locations in Tamil Nadu.

The cumulative amount involved in these inflated balances stood at Rs 900-1,000 crore, the first of the two people quoted above said.

Though HDFC Bank quickly placed a debit freeze across many of these bank accounts, not everyone could be stopped from transferring the amounts further.

In certain cases, customers had set up an automatic sweep mandate, which meant that whenever their account balances crossed a certain threshold, the excess funds would be automatically transferred to another bank account or the customer, the second person quoted above said. This has complicated the recovery process.

A month later while the bank has managed to recover most of these erroneous transfers, about Rs 35-40 crore worth funds continue to remain with customers, the first person said.

The recovery process has even led to some non-cooperative customers claiming that they are being harassed by the bank, the second person said. The bank is still attempting to recover these funds and may have to resort to legal measures against the non-cooperative customers, this person said.

Mint newspaper first reported on Friday that the bank is yet to fully recover the funds erroneously transferred to customer accounts in May.

"The issue of the said money transfer has been almost completely resolved. To put matters in context, a display error was noticed in balances of a few customer accounts post a system patch upgrade on the night of May 28/ early morning of May 29, 2022," HDFC Bank said in a statement to BQ Prime.

"Post the proactive detection by the bank, the issue was remediated for all these accounts. These customers can now operate their accounts for which they are intended," the bank said.

Tech glitches at India's largest private bank have been a cause of concern since 2018. Multiple service outages at the bank over the years had led to the Reserve Bank of India placing stringent business restrictions against the bank in December 2020.

The regulator had then barred HDFC Bank from onboarding new credit card customers and launching any digital initiatives until the IT architecture had been fully repaired. It had also ordered a third party IT audit of the bank.

After it was satisfied that appropriate steps had been taken, the RBI partially lifted restrictions in August 2021 and then fully in March 2022.