Off Topic | What If You Transfer Funds To A Wrong Account Number, And The Receiver Account Holder Does Not Exist

I would like to share an incident with you guys that, at some point in time, might be useful for some of you. It's about the funds getting credited into a wrong bank account or simply put, a stranger's bank account. Most banks across the country offer instant money transfer facilities such as National Electronic Funds Transfer (NEFT), Real-time Gross Settlement (RTGS), Immediate Payment Service (IMPS), and the new UPI. Using these services, one can transfer funds from one account to another. Users are required to add the payee's name while making an online fund transfer. To register the beneficiary, customers need to enter the account holder name, account number, and Indian Financial System Code (IFSC). As per RBI guidelines, banks give customers two fields for entering the account number, which means the customer will have to punch in the account number twice. One field is encrypted, meaning the customer cannot see the account number entered in this field. In the second field, the account number entered is visible. Only when the details in both the field matches, the transfer get initiated. This reduces the chances of entering a wrong account number, but to err is human, and mistakes are an inevitable part of mankind.

In my case, the person to whom I had to transfer the funds himself provided me an incorrect bank account number. Just a wrong digit that consumed 40000 bucks. Although the liability was not mine because I was not the one who made the error, I wanted to participate in the ordeal to find out the resolution in the practical field.

Let's understand in details what usually happens in 4 different scenarios:

Note: My case relates to Scenario 4, the most peculiar case I have come across.

• Scenario 1: What happens if somebody enters the wrong IFSC (different branch of the same bank)

The likelihood of such a mistake is low as most of the banks ask customers to choose the name of the bank and the name of the branch from a dropdown list, to get the IFSC. But some lenders may allow customers to write the IFSC.

Now, if in this case transfer takes place, banks will generally reverse the money automatically to the account provided the account number is correct, and the wrong IFSC mentioned belongs to the same bank.

If the RTGS/NEFT credit does not reflect by the usual turnaround time, then the beneficiary and/or the remitter should contact their respective banks to resolve the issue.

• Scenario 2: What happens if somebody selects the IFSC of a different bank?

In this case, if the latter bank has an account with a matching account number, the fund transfer may take place. However, this is extremely rare that such a scenario may take place as banks usually have their own set of strategic alphanumeric IFSC that resembles the bank name. For example, SBI's IFSC starts with SBINXXXX, HDFC's IFSC starts with HDFCXXXX, and so on.

• Scenario 3: What happens if somebody enters the wrong account number?

If a wrong account number provided by the remitter does not exist, then the payee bank will return the transferred amount, and the remitter will get back the money.

But if the wrong account number provided by the remitter actually exists, then that account number will receive the transferred amount.

In that case, the remitter has to contact his bank and make an application to resolve the issue.

Upon receiving the application, the transferor bank will contact the payee bank to block the wrongly transferred credit. If the customer receiving the wrong credit acknowledges the same, then the payee bank will deduct the transferred amount from his account and return it to the transferor bank to re-credit the remitter.

If the customer receiving the wrong credit refuses to acknowledge it, then the sender will have to resort to legal action against the person who received the money by mistake.

• Scenario 4: What happens if somebody transfers funds to a wrong account number, and the receiver account holder does not exist?

Sounds strange, isn't it? But this can happen to you if you might be going through one of those bad days of your life. As said earlier, just a wrong digit that consumed 40000 bucks. The receiver who was anticipating the funds kept waiting for two days but had to come to visit me the third day for the funds he never received. On the other hand, my transaction history confirmed that the said fund transfer was successful and that the funds were already credited to the receiver account. It was only then that we tallied the account number and found out that a single-digit was the main culprit. We wasted no time and headed toward the Bank of Baroda.

The manager at the bank dropped his knowledge about the procedure (Scenario 3) and told us to relax. He took out his mobile and dialed the mobile number as updated in the bank records of the account holder (Say, Mr. X). The IVR responded that "The mobile number was invalid or does not exist." We learned that Mr. X's bank account was in a dormant state and that the account was last used back in 2016. Tensed, we asked for the address of Mr. X, post which we could clearly see those anxiety waves on the manager's forehead. Basically, what happens is, when a bank opens its branch in a new location, they have an account opening target to meet. This is the time when sales executives of the bank move around tirelessly to convince acquainted commoners to open a bank account with them. This particular account dated back to the period when Bank of Baroda broadened its network and opened one of its branches in our small city. This specific account didn't house a proper address updated in the bank records. All we had is just an area's name, say Area XYZ and the City Name. Now, Area XYZ is quite a considerable area in size, and would for sure host numerous Mr. X.

The hunt for the physical 'Account Opening Form' had to be initiated to fetch any missed out details that might not have been updated digitally into the bank's system. The manager called two of his staff and advised them to begin the witch-hunt. On the other hand, we were encouraged to pay another visit two days later.

On our next visit, the manager showed us the physical 'Account Opening Form' with only one additional information, that is, Mr. X's nominee's name (Say, Mrs. Y). No other phone number or anything that could help us track down Mr. X. You might be thinking, why can't the manager just debit Mr. X's account and credit my friend's account. Of course, he could, but that was not the legal standard operating procedure. The manager didn't want to do this as he was worrisome if Mr. X or Mrs. Y may pay him a visit someday, inquiring about the deducted funds. In simple words, no one can legally debit your account without your consent, no matter what.

We understood that there was very little that the manager could do. We headed toward 'Area XYZ' to find Mr. X and Mrs. Y. Whenever we inquired anyone, we would say both the names, that is, Mr. X and Mrs. Y, so that somebody could relate the duo and tell us about their whereabouts. Because this was a considerable area in a small city, someone finally confirmed to have known Mrs. Y and his son Mr. X. 

We paid a visit to Mrs. Y who was mentally unwell, and lived alone in a somewhat isolated small cottage. We showed her the picture of Mr. X for confirmation (we snapped that passport size photograph of Mr. X from the application form). She recognized Mr. X, who we learned had passed away back in 2017. However, Mrs. Y didn't understand anything further or didn't want to understand, we do not know.

Helpless, we returned to the bank manager who, in return, dispatched two of his staff to the address of Mrs. Y to verify our tribulation and collect Mr. X's death certificate and a written application from Mrs. Y requesting the bank to rectify the chaos that the said transaction created. The staff came back in an hour or so and informed the manager that Mrs. Y is mentally unstable, and she was furious to see the bank staffs. Mrs. Y had also threatened the bank staffs with police action if they knocked on her door the next time. The team also confirmed that Mr. X has left behind nothing except Mrs. Y, and that they have no other relatives alive.

The bank manager told us to leave, and that the fund would be credited into my friend's account the following day. The next day, the bank manager went out of the way and had to violate the SOP to get the funds credited into my friend's account.

To summarize, if Scenario 4 ever happens to you, you are at the bank manager's mercy. When entering a bank account number, cross-check ten times, if needed, you do not know to whose account the funds will get credited to if you input the wrong bank account number.

Disclaimer: The above incident hosts numerous unpredictable coincidences that might portray the event as fictitious, but it did happen for real. Had this been a big city or if the manager didn't co-operate, this incident would have taken a very long time to get resolved as it would involve tremendous legal involvements.

Comments are appreciated. Thanks for reading!