It was kind of a rumor/myth.
Here’s what they officially said in 2015:
“The original WoW developers decided that there would be an array to hold your inventory. The first several entries are things that end up on the paper doll, your head and leg slots and such. After that comes your inventory. At some point they wanted to add a bank to the game, so they added that to the end of the array. Players shouldn’t be able to access their bank anywhere in the world, as it would break the code. This was handled by adding lots of statements in different places in the code, defining what the array position was where the inventory ended and where the bank begins. This value was hardcoded all over the place, but it isn’t just a simple search to find them all. Some math logic may rely on it being constant. If you want to add slots to the backpack, who knows what you are going to break? It becomes very buggy and error prone, and likely that you are going to make a mistake. This mistake would break the game in a way you don’t like. As a result, they would have to put amazing engineers that could be working on new features on a task to look through thousands of lines of code to find all of those cases, as well as the QA department testing every edge case in the world to ensure the change doesn’t break anything. This is how we ended up with a fixed size backpack.”
However, a year later at a Q&A Matt Goss stated that he brought it up at a meeting and one of their Gameplay Engineers refuted the myth, stating that it was actually an easy change for them to make and that the idea it was some kind of monumentally difficult task wasn’t true at all. Goss then stated that it was something they were “looking into”.
The following year the Authenticator bag space bonus was announced.