Rs.20 Crore Payment Blunder: Kotak Mahindra Bank Deposits SMC Funds into Wrong Contractor Accounts

Surat | Gujarat —A major financial lapse has put the spotlight on banking and civic accountability after crores of rupees belonging to the Surat Municipal Corporation were mistakenly transferred to the wrong contractor accounts by Kotak Mahindra Bank during the financial year-end rush.

The incident, which briefly left more than 50 contractors with excess funds in their accounts, has triggered internal transfers of 17 municipal finance staff and sparked serious questions about verification processes.

How the ₹20 Crore Error Happened

Every year, the civic body clears pending payments to contractors executing development projects before March 31. This year, officials submitted five cheques covering payments for 240 contractors to the bank along with detailed allocation lists.

However, during the last-minute rush of financial closing, a major mistake occurred. Bank officials allegedly entered the amounts of two cheques into a single payment list, leading to an incorrect transfer of nearly ₹20 crore into the accounts of over 50 contractors.

For a brief period, contractors were surprised to find higher-than-expected payments credited to their accounts, while civic officials were left stunned after discovering the discrepancy.

A senior civic official said, “The error came to light during internal checks. Immediate action was taken to prevent financial loss.”

Emergency Action and Fund Reversal

Once alerted, municipal authorities issued an urgent 24-hour ultimatum to the bank to correct the mistake.

Bank officials quickly coordinated with multiple banks holding contractor accounts and placed stop payments before reversing the transactions. The entire ₹20 crore was recovered through reverse entries within a day.

Despite the swift recovery, the episode has raised concerns about how the bank’s automated reconciliation and account mapping systems failed to detect the error earlier.

Civic Staff Transferred Despite Bank Error

In a surprising move, the civic administration transferred seven deputy accountants and 10 assistant accountants from the accounts department.

Officials stated the reshuffle was part of an internal corrective exercise to strengthen financial checks.

A senior source said, “Cross-verification is critical when handling payments worth crores. Systems must ensure such errors never occur again.”