UCO Bank seeks CBI help in Rs 820 crore money transfer mess

UCO Bank

State-run UCO bank has sought the intervention of the apex probe agency, the Central Bureau of Investigation (CBI), in the Rs 820 crore money transfer case, where valid transfers were erroneously rejected yet the money was credited to both the sender and the recipient, said a top official to Moneycontrol.

"We have approached the CBI, and very soon we will  hear from them on this matter,” the official said on condition of anonymity.

“We are seeking their help in the matter, where the bank erroneously  rejected valid transfers from customers of 6-7 other banks, and credited the money both to the sender and the recipient. The bank has not been able to recover the full amount," added the official.

An email sent to CBI seeking its response on the matter remained unanswered till the filing of this story.

At the heart of the matter is a technical glitch in the Immediate Payment Service (IMPS), an instant interbank electronic fund transfer service, on November 15, according to UCO Bank.

In a regulatory filing on November 16, the lender said that, ``The recipients’ accounts have been frozen, and it has recovered Rs 649 crore, or 79 percent of the amount."

The bank added that it has initiated steps to recover the balance Rs 171 crore.

RBI steps in

Ashwani Kumar, managing director and chief executive officer, UCO bank, told Moneycontrol that the bank has also sought help of the RBI and other banks to sort out the issue.

"We have written to several banks for their help on this matter. They are also helping us in the recovery process," said Kumar.

He added that they are also seeking the RBI’s help to address the technical glitches, along with the bank’s internal experts.

On November 15, UCO Bank took the IMPS money transfer option offline after a technical glitch caused valid transfers initiated by customers of other banks to be rejected. A senior official told Moneycontrol that errors occurred when customers of 6-7 banks initiated transfers to UCO Bank customers, due to which UCO Bank’s system sent a “transaction failed” message to the remitter banks and credited the money back to them, while also crediting the money to the intended recipient.

Kumar added that despite the festive season, the bank took immediate action, and the teams worked overnight to recover the monies.

The discrepancies were noticed during the period from November 10 to 13. "We are working closely with the stakeholders to resolve the issue and restore the IMPS services at the earliest. The matter has also been reported to the law enforcement agencies for necessary action," said the official.

Digital banking issues

In the last few months, banks have witnessed several technical issues amid the push for digital banking. In October 2023, the managing director and CEO of the Tamilnad Mercantile Bank (TMB), S Krishnan, quit days after it was reported that the bank had mistakenly transferred Rs 9,000 crore to the account of a cab driver in Chennai. In his resignation letter, Krishnan said he resigned due to "personal reasons.’’

The cab driver, Rajkumar, initially thought it was a scam, when he received an SMS notification stating that Rs 9,000 crore had been credited to his account. Prior to that, he had Rs 105 in his account, according to the Indian Express.

Last month, private sector lender Kotak Mahindra Bank said a customer in Chennai had received a notification that over Rs 753 crore had been deposited in his account due to a glitch in the SMS messaging system.

``An incorrect account balance was shown in the UPI reversal alert message that was sent to a small subset of customers due to the glitch,’’ Kotak Mahindra Bank said in a statement in response to Moneycontrol’s queries.

UPI, or the Unified Payments Interface, facilitates online fund transfers between bank accounts. “The incorrect account balance was reflected only in the message and not in the customer's account. We wish to confirm that the customer's account was not blocked. The team is working on rectifying the message and we regret the inconvenience caused," a Kotak Mahindra Bank spokesperson said.