| Photo Credit: RAJESH N

Tamilnad Mercantile Bank, a mid-sized old private bank listed a year ago, is working hard to change its image and perception in the fraternity. Its balance sheet was about ₹58,000 crore as of June 30, 2023, and was recently in the news for a ‘mistaken’ deposit.

A few days ago, a cab driver in Chennai was shocked when he got an SMS from the bank that ₹9,000 crore was deposited in his account. He was left with ₹105 in his account after transferring ₹21,000 to his friend and could have done more after the message.

According to reports, , within 30 minutes, the bank reversed the wrong deposit and reached a compromise with the cabbie. While some of us, including me, may be wondering why such jackpots don’t hit us, if this incident should be seen through the lens of the regulator and depositor, it’s far from funny — it’s scary.

For a bank of TMB’s scale, ₹9,000 crore is over 15 per cent of its balance sheet. The bank’s liquid assets or cash equivalent were a little over ₹3,200 crore in Q1 FY24.

What if the cab driver was not ready to easily agree to a compromise or pulled a few crores out of the bank before the credit was reversed? According to the bank, a mismatch in account numbers triggered the mistaken deposit. “When the file was processed in NACH application, the amount field got prefixed with one digit (9) and the file was uploaded in CBS,” according to the bank’s official statement. The NACH, or National Automatic Clearing House, is a payment enabler for electronic fund transfers between banks. With details on the nature of the fund transfer not known, the benefit of the doubt should be given to TMB, and also be appreciated for reversing the transaction in 30 minutes. It can be quite a task to trace these transactions and rectify them.

Yet, what is unsettling is that an amount as huge as ₹9,000 crore can be wired without adequate layers of checks. This is a sizeable transaction not just for TMB but for any bank. The NACH has been around for over seven years, and CBS or core banking system, has been in existence for much longer and TMB is older than NACH and CBS. But are its risk management practices, controls and system reflecting its legacy of over 100 years?

A few months ago, TMB’s headquarters was raided by the Income Tax department. Adopting electronic modes of transfer is becoming the order of the day, so much so that walking into branches for high-value remittances is becoming history. The TMB mishap is a wake-up call for the regulator to get to the genesis of the ‘mistaken’ deposit. It’s equally so for us, as customers, to educate ourselves on how these electronic transfers happen. Better safe than sorry!

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