AIB is to provide redress and compensation to more than 1,000 tracker mortgage customers, after it emerged they had been charged the wrong rate of interest, in some cases for more than a decade.
The issue impacts 1,100 customers of its EBS and Haven subsidiaries and dates back to the drawdown of certain tracker mortgages from 2006 onwards.
It is understood that the average payment being made to each borrower will be around €6,000.
The bank is contacting the customers concerned and their accounts will be adjusted in August, with the compensation and redress expected to be paid between October and December.
"The error arose at the point of drawdown when the customer was placed on a tracker mortgage at the wrong margin," the bank said in a statement.
"A number of customers were placed on a higher margin and others on a lower margin."
"Those on the lower margin will continue on this rate while those who were on the higher margin will be put on the correct margin, and receive redress and compensation while the balance on their account will also be corrected."
Those who were on the lower rate will not be asked to return the under paid money.
The bank has apologised for the error.
However, the development, which was first reported by the Irish Independent, is a further embarrassment to the State's largest mortgage lender, which along with the other main banks here has been embroiled in controversy around their treatment of tracker mortgage customers.
Tracker mortgages are seen as an attractive method of borrowing to buy a home, as the interest rate tracks the main ECB lending rate as it goes up and down.
With interest rates currently at record lows, this means the cost of borrowing is also minimal.
In recent years it emerged that thousands of borrowers had been charged the wrong interest rates on their trackers, or been wrongly denied tracker mortgages by their lenders.
In total more than 40,000 borrowers were caught up in the controversy across the country's main lenders and nearly €700m in redress and compensation has been paid out so far.
The Central Bank is currently conducting enforcement investigations into the banks and is expected to issue further fines.
Last year Permanent TSB was fined €21m by the regulator for its involvement.
To date AIB has set aside €610m to deal with the fallout from its involvement in the tracker controversy and to date has provided compensation and redress to 12,200 customers.
As the bank is in a closed period ahead of the publication of its financial results, a spokesman declined to say what the additional cost of the EBS and Haven issue would be.
It is understood the bank discovered the latest problem itself during a review process.
Customers with queries can call the EBS Mortgage Review Helpline on 1800-235-461 or the Haven Tracker Mortgage Review helpline on 1850-565-500.