Westpac is refunding $65 million for discounts it failed to pass on to 200,000 accounts.

Westpac is providing refunds to affected customers holding “packaged” accounts which were deprived of the benefits to which they were entitled.

The issue affected Premier Advantage Packages with Westpac, as well as Advantage Packages with St George, BankSA, and Bank of Melbourne from 2010.

“Customers automatically received discounts on core products such as home loans, credit cards, or transaction accounts,” Westpac said in a statement.

“However, some customers did not receive discounts on ancillary products such as home and contents insurance and term deposits.

“The packages have since been simplified and all benefits are now automated.”

ASIC has been informed of the breach.

The blunder adds to calls for the Federal Government to set up a royal commission and establish the Bank Executive Accountability Regime.

Westpac's head of consumer banking, George Frazis, said the banks began rectifying the issue as soon as it was identified.

“Importantly, customers do not need to do anything,” Mr Frazis said.

“Over the coming months, we will provide refunds, including appropriate interest, to any customers who may have been entitled to a benefit but weren't aware they needed to opt in.

“Westpac apologises unreservedly for a process that did not suit customers.

“By automating the discounts, we have ensured that our customers will not be affected in this way again.”