Tamilnad Mercantile Bank Rebuilds Technology Systems After ₹9,000-Crore Transfer Error

Tamilnad Mercantile Bank (TMB) has significantly strengthened its technology and transaction-processing systems following a major operational error in 2023, when ₹9,000 crore was mistakenly credited to the account of an auto-rickshaw driver. The incident, which was linked to a manual processing mistake, became a major test of the bank’s technology controls and risk-management framework.

Nearly three years later, the Thoothukudi-based private sector lender has redesigned several parts of its technology infrastructure, with a focus on reducing manual intervention, improving real-time transaction monitoring and using artificial intelligence to strengthen fraud and anti-money-laundering controls.

From a manual process to straight-through processing

The 2023 incident originated during the processing of a file for the National Automated Clearing House (NACH). According to TMB’s technology leadership, an account-number mismatch occurred after an additional digit was introduced as a prefix during the file-upload process.

The file was subsequently moved into the bank’s core banking system through a process that involved manual intervention. That weakness ultimately contributed to the erroneous credit.

Although the transaction was identified and reversed within roughly 30 minutes, the episode raised questions about how large-value banking transactions were being processed and the safeguards available to detect unusual activity before completion.

TMB has since redesigned the workflow to remove the human link between incoming files and its core banking platform.

Previously, files received from the Reserve Bank of India or clearing systems, including NACH and the cheque truncation system, could be downloaded and manually processed before being uploaded into the core banking system. Under the new arrangement, these files move directly into the core banking environment.

The objective is straightforward: reduce the possibility of a manual mistake occurring between the clearing system and the bank’s core platform.

New systems aim to detect unusual transactions

Technology changes at TMB have also extended beyond transaction processing.

The bank has introduced real-time fraud-monitoring capabilities designed to identify transactions that differ substantially from a customer’s normal behaviour. Multiple scenario-based triggers have been configured to monitor transactions as they occur.

For instance, if a customer's transaction is significantly larger than their usual activity, the system can generate an alert for the bank’s Fraud Risk Management team. The bank can then contact the customer to verify the transaction before releasing the funds.

This approach gives the lender an additional checkpoint for potentially risky high-value transactions instead of relying solely on post-transaction reviews.

AI enters anti-money-laundering operations

TMB is also using artificial intelligence in its anti-money-laundering (AML) operations.

AML systems can generate a large number of alerts, many of which may ultimately turn out to be false positives. TMB has introduced an AI-based solution to help separate such alerts from cases that warrant closer investigation.

The bank expects this filtering process to allow its teams to spend more time examining potentially genuine risks instead of manually reviewing a large volume of alerts that do not require further action.

Finacle and digital banking upgrades

The lender has additionally upgraded its core and digital banking technology.

TMB’s core banking platform is now based on Infosys Finacle. Its internet banking infrastructure was also upgraded in 2026 to Infosys’ Digital Engagement Hub, a platform designed to bring together customer interactions across channels and connect them with backend systems, including core banking, payments and trade finance.

The technology overhaul therefore goes beyond fixing the specific weakness exposed by the 2023 incident. The bank is attempting to create a more integrated digital architecture in which customer-facing services and backend banking operations can work together more efficiently.

TMB plans a bigger role for data and AI

The next stage of the transformation is expected to involve greater use of data analytics.

TMB plans to develop a data lake that can bring together different types of customer information, including interactions, call-centre records, emails and other structured and unstructured data.

The bank also intends to establish a dedicated AI and analytics function within its technology operations. It expects these capabilities to support areas such as targeted marketing, customer-retention analysis and forecasting potential non-performing assets.

Cybersecurity is another priority. TMB expects spending on cybersecurity to represent about one-fifth of its IT budget during the current financial year.

A costly lesson in banking technology

The scale of the 2023 error made it particularly significant. At the time, the ₹9,000-crore erroneous credit represented a substantial portion of TMB’s roughly ₹53,000-crore balance sheet. The bank later confirmed that the amount was recovered.

By the first quarter of FY27, TMB’s balance sheet had expanded to about ₹75,300 crore. As the bank grows, the potential consequences of technology and operational failures also become larger.

The changes introduced since 2023 show how the incident has influenced TMB’s technology strategy. Instead of relying on manual controls, the bank is moving towards automated transaction flows, real-time risk detection, AI-supported monitoring and greater use of centralised data.

For TMB, the ₹9,000-crore mistake has therefore become more than an isolated technology failure. It has served as a catalyst for rebuilding the systems that underpin the bank’s operations and strengthening safeguards as its business expands.