Water is leaking from a hole by the handle of my wall hydrant is it defective?

Water is leaking from a hole by the handle of my wall hydrant is it defective?

No. The small hole behind the hand wheel on your non freeze wall hydrant is called a weep hole.

This weep hole allows back-pressure relief when water is trying to siphon back into your homes water supply. The non-freeze wall hydrant is equipped with a vacuum breaker and one way check valve which together are an anti-siphon device. This prevents back-pressure from siphoning the water in the garden hose and in the wall hydrant’s tube from entering into and contaminating your household water supply. When back-pressure or backflow occurs, the siphoning water will drain (weep) from this small hole by the handle rather than into your potable water supply.