December 3, 2023

Investment Banking

Let Your Investment Banking Do The Walking

Safety to liability: What changes for bank locker customers from Jan 1

The Reserve Bank of India (RBI) has mandated banks to renew their locker agreements with customers by January 1, 2023.

“Although the rules were promulgated by the RBI in August 2021, their enforcement has been long overdue,” says Suvigya Awasthy, associate partner, PSL Advocates & Solicitors. Banks began implementing operational standards on January 1, 2022, but customers must sign a new bank agreement to be eligible for the updated regimen.

Chanda Paramesh, who works in a fintech company, says she has two lockers but “hasn’t heard from either bank regarding any such new agreement.” It’s best to contact your bank if you have not been informed about the new rules.

An agreement between a bank and a customer for a safe deposit locker facility must be written on stamped paper. “The new rules establish and enhance the obligations on banks for safety and security of lockers, with penalties in cases of negligence to promote accountability and transparency in the maintenance of bank lockers,” says Anushkaa Arora, principal & founder, ABA Law Office.

The new locker agreement has several benefits for customers. “It will help ensure that the customer is compensated of up to 100 times the locker rent resulting from shortcomings or negligence at the bank’s end, pro-rated rent reversal in case of surrender before the annual rent cycle, and increased duration of rent non-payment (from 1 year to 3 years) and non-operation (from 3 years to 7 years) before breaking open,” says Ravi Narayanan, group executive & head, branch banking, retail liabilities & Products, Axis Bank.

The rules

The new rules increase customer convenience and security. “For example, customers need to be notified through SMS or email after usage of the locker every time. This will increase the safety perception in the minds of the customers. Similarly, the entire locker operation has been put on a digital platform, including the wait list,” says Narendra Dixit, head, retail banking, CSB Bank. The rules standardise policies for rent, breaking open the locker in case of default or legal cases.

Customers should be mindful about some basis about maintaining their lockers. “For instance, avoid lower lockers to protect from floods,” says Adhil Shetty, chief executive officer (CEO) of People lost or suffered damage to important documents when water seeped into lower-placed lockers.

Before signing up, verify the locker size and confirm it can accommodate documents or any other item. To protect documents from moisture and humidity, use airtight zip-lock bags and desiccants. Don’t keep documents wrapped in old newspapers.

Keep one copy of the list of valuables in the locker and one with you.

Banks are required to secure the premises housing their safe deposit vaults. “As per the new RBI rules, banks cannot claim that they bear no liability towards their customers for loss of contents of the locker. However, this liability is capped at 100 times the annual locker rent. So, if your annual locker rent is Rs 5,000, you will be protected against loss of up to Rs 5 lakh due to incidents like fire, theft, burglary, robbery, dacoity, building collapse etc., in the bank’s premises due to any negligence or shortcomings by the bank,” says Shetty.

After operating the locker, check if you have closed it properly. The banking ombudsman (BO) has observed that a bank was deficient in service as it did not check whether the locker was closed before the customer left or at the end of the day, as stipulated in the bank’s manual of operations. “In the event of any loss of locker content for reasons attributable to the bank’s negligence, the bank will be liable to compensate the customer. The same, however, would not be the case if the loss is due to reasons beyond the control of the bank, such as an act of god or a natural calamity,” says Nikhil Varma, managing partner, MVAC

Consider insurance

Home insurance protects against loss of valuables due to fire, theft, robbery or other reasons. It usually covers home contents and not items in a bank locker. “But now there are some standalone policies that also offer coverage for jewellery in bank lockers as well. However, not every high-value item can be secured in a bank locker,” says Tarun Mathur, chief business officer -General Insurance,

“This is low-cost insurance because burglary in the locker is quite rare. It is a good idea to insure for this, but first you should insure jewellery in your home,” says Kapil Mehta, co-founder, SecureNow.

IFFCO-Tokio General Insurance has an exclusive policy for bank lockers, providing protection against theft and other risks. “The policy protects jewellery and other valuables against various risks like fire, burglary, the infidelity of bank employees, acts of god, and terrorism. Apart from jewellery one can also opt for insuring their important documents kept inside the locker against any loss or damage, wherein at the time of claim cost of replacement shall be borne by the insurance company up to the limit agreed,” says H O Suri, managing director (MD) and CEO-IFFCO Tokio General Insurance. The policy provides minimum coverage of Rs 3 lakh and can go up to Rs 40 lakh. Coverage beyond Rs 40 lakh is available at a higher rate.

A home safe will be convenient to have. “For a good safe, you will have to shell out Rs 10,000-15,000 on average, it is a one-time investment unlike the bank charges,” says M Barve, of MB Wealth Financial Solutions.

There are several options: single-walled, double-walled, fire-resistant safes, and even burglary-resistant safes. “Even the ones that can be anchored into the walls, which gives three-sided protection, or can be fitted into the flooring (it will camouflage with the floor and burglars wouldn’t even imagine it’s safe),” says Barve.

The new rules for lockers

SMS and email alerts about locker access and operation

Banks will need to pay in case of any loss of locker content resulting from the bank’s negligence

The bank will not be liable for any damage or loss of locker contents caused by natural calamities or acts of God such as earthquakes, floods etc

Banks, however, must take reasonable precautions with their locker systems in order to secure their facilities from such disasters

Banks can accept term deposits in order to collect locker rent. However, they can’t insist on such deposits from existing locker holders or those who have satisfactory operational accounts

Banks have to return the proportionate amount of advance rent collected from the customer if he surrenders the locker early

Banks are required to make sure that electronically operated locker systems adhere to the RBI-mandated Cyber Security Framework.