3634313 - HANA Update Failed with Error "Local directory not found: '/usr/sap/<SID>/lss/local', rc=13 (Permission denied)"

During the HANA DB upgrade, the process fails, and the hdbinst_lss.log contains the following error messages:

23:20:28.921 - INFO:         Command line is: useradd -u 1000 -o -p *** -g 80 -s /bin/sh -m -d /usr/sap/<SID>/lss/home sidcrypt
...
23:20:29.540 - INFO:     -------------------------------------------------------
23:20:29.540 - INFO:     Setting backup passphrase...
23:20:29.540 - INFO:     -------------------------------------------------------
23:20:29.540 - INFO:       Switching to user id 1000 and group id 80.
23:20:29.541 - INFO:       Starting external program /hana/lss/shared/<SID>/exe/lsscfg
23:20:29.541 - INFO:         Command line is: /hana/lss/shared/SID/exe/lsscfg setBackupPassphrase
23:20:29.581 - INFO:         Output line 1: Local directory not found: '/usr/sap/<SID>/lss/local', rc=13 (Permission denied)
23:20:29.587 - INFO:         Program terminated with exit code 12
23:20:29.587 - INFO:       Switching back to root user.
23:20:29.587 - INFO:     -------------------------------------------------------
23:20:29.587 - INFO:     END: Setting backup passphrase (start: 23:20:29.540 duration: 00:00:00)
23:20:29.587 - INFO:     -------------------------------------------------------
23:20:29.587 - ERR :     Custom event postInstall failed

Further investigation shows that the <sid>crypt user cannot access its own home directory:

login as: sidcrypt
Pre-authentication banner message from server:
| Authorized uses only. All activity may be monitored and reported.
End of banner message from server
sidcrypt@xx.xx.xx.xx's password:
Authorized uses only. All activity may be monitored and reported.
Could not chdir to home directory /usr/sap/<SID>/lss/home: Permission denied
-sh: /usr/sap/<SID>/lss/home/.profile: Permission denied
sidcrypt@hostname:/> cd /usr/sap/<SID>/lss/local/private
-sh: cd: /usr/sap/<SID>/lss/local/private: Not a directory
sidcrypt@hostname:/> cd /usr/sap/<SID>/lss/local
-sh: cd: /usr/sap/<SID>/lss/local: Not a directory
sidcrypt@hostname:/> cd /usr/sap/<SID>/lss
-sh: cd: /usr/sap/<SID>/lss: Not a directory
sidcrypt@hostname:/> cd /usr/sap/<SID?
-sh: cd: /usr/sap/<SID>: Permission denied
sidcrypt@hostname:/> cd /usr/sap/<SID>/lss
-sh: cd: /usr/sap/<SID>/lss: Not a directory 

 "Image/data in this KBA is from SAP internal systems, sample data, or demo systems. Any resemblance to real data is purely coincidental."

SAP HANA, platform edition 2.0

HANA, update, LSS, Local directory not found, rc=13, Permission denied, crypt, sidcrypt, <sid>crypt, Not a directory , KBA , HAN-DB-SEC , SAP HANA Security & User Management , BC-OP-LNX , Linux , Problem