Are the Bank Safe Deposit Lockers Worth Paying the High Charge?

January 12, 2022 Mutual Fund

All of us want to keep our valuables like jewellery, important documents, share certificates, etc. safe and secure. Many bank branches offer their customers safe deposit lockers of different sizes in return for the annual rent. It is a general belief that bank safe deposit lockers are the safest place to keep our valuables. But, are they worth the high charges we have to pay? Let’s find out in this article.

What is a Safe Deposit Locker?

• A Bank Safe Deposit Locker or Safe Deposit Box is one of the Value Added Services offered by the banks to differentiate themselves from their competitors.

• The bank offers a Safe Deposit Locker to a hirer to keep valuables like jewellery, documents, share certificates, or other precious items.

• The Safe Deposit Locker is a strong metal box, and many such boxes are together kept in a specially built strong room, called a vault, in a bank branch.

• The bank vault is an iron-gated room with an electronic surveillance system and a well-equipped alarm system.

• Many bank branches offer different sizes of lockers, such as Extra Small, Small, Medium, Large, Extra Large, etc. for an annual rent based on the locker size and location of the branch (metro, urban, semi-urban, rural).

• A customer can choose the size of the Safe Deposit Locker as per his/ her requirements and budget.

• Any individual (either jointly or singly), partnership firm, company, association, or club can hire a Bank Safe Deposit Locker.

• A customer/ hirer is required to pay the annual rent in advance.

• The Safe Deposit Locker can be opened with two keys, out of which one remain with the customer and the other in the safe custody of the bank.

• Many times the banks face situations where the customers neither operate the lockers nor pay the rents. Hence, to ensure prompt payment of locker rents, most banks insist on a security deposit (fixed deposit), which is three times the amount of annual locker rent plus locker break-open charges.

How do Bank Safe Deposit Lockers work?

• You can apply for a Safe Deposit Locket at any bank branch that offers the facility by submitting the duly signed application form and Know You Customer (KYC) documents.

• If the locker is available, you will have to sign the locker agreement, which is called as a 'memorandum of letting'. Signing the locker agreement means you agree to the terms and conditions of the bank mentioned in the agreement. Hence, you should thoroughly read the locker agreement before signing it.

• However, if all the lockers of the branch are fully occupied, your name will be registered in the 'wait list,' and the bank will get in touch with you once it is available. This ensures transparency in the allotment of lockers.

• Once you sign the locker agreement, you will have to pay an annual rent in advance. Besides, most banks insist on a fixed deposit as collateral.

• You can also give a debit mandate so that your future locker rents will get automatically debited from your registered bank account every year.

• The bank representative will hand over one locker key to you, and one will be kept with the bank branch.

• For the operation of the locker, both keys are required.

• Whenever you want to use the locker, you are required to make an entry in the locker register, and the bank representative will mention the 'in' and 'out' time in the register. Many banks have started online locker entry registration, and a biometric device is used to keep track of the entry and exit.

• The bank representative will accompany you to the locker room, and once the locker is unlocked using both the keys, they will come out of the locker room, and you can access your locker without any interference.

• After using the locker, you can lock it with your key, and you do not need both keys to lock the locker.

Are Bank Safe Deposit Lockers Safe?

Since the bank vaults and lockers are well built, have multiple layers of security systems, they are generally considered the safest place to keep all your valuables. However, although a Bank Safe Deposit Locker can be safer than your home, it is certainly not the safest place.

There have been many incidents of loss of contents of the Safe Deposit Lockers due to bank lockers robbery, theft, burglary, natural calamities, etc.

Are banks liable for the damage or loss of contents of the Safe Deposit Lockers?

• The Reserve Bank of India (RBI) issued a notification on 18th August 2021 that banks cannot disown liability for loss of locker contents due to theft or fraud by its employees. However, the bank's liability in case of such loss is limited to 100 times the prevailing annual rent of the hired locker. This amount could be very small compared to the precious items that most people keep in the locker.

• In case of damage or loss to the locker's contents due to natural calamities like earthquake, lightning, flood, thunderstorm, etc., or customer negligence, the bank will not be liable for it. The RBI has asked all the banks to clearly inform the hirers in advance that the bank is not responsible for insuring the contents of the locker. Moreover, to prevent coercive insurance selling, the RBI has prohibited banks from selling locker contents' insurance to their locker customers. However, banks shall exercise appropriate care to their locker systems to prevent their premises from any catastrophe.

• The RBI also said, "It is the responsibility of the banks to take all the steps for the safety and security of the premises in which the safe deposit vaults are housed. It has the responsibility to ensure that incidents like fire, theft/ burglary/ robbery, dacoity, building collapse do not occur in the bank's premises due to its shortcomings, negligence and by any act of omission/commission."

• Although these guidelines will be implemented by banks from 1st January 20222, the hirers will have to sign a new Locker agreement with the bank to be eligible for the new compensation. The banks are asked to renew the locker agreements with the existing hirers by 1st January 2023. The central bank said, "The banks shall ensure that any unfair terms and conditions are not incorporated in their locker agreements.".

Are there any other charges apart from the Bank Safe Deposit Locker rent?

• In addition to the annual rent, a hirer has to pay the applicable GST.

• If you do not operate the locker and pay the rent for a period, the bank can break-open your locker as per existing laws and procedures. The break-open charges are recovered from the hirer.

• The bank also charges you for the lost locker key.

To Conclude:

The Bank Safe Deposit Lockers are safer than our homes as the valuables stored at home can easily be stolen. Even if you use safe lockers and have a security system at your home, it cannot be as strong as the banks. However, considering the regular frauds and burglaries at banks, choosing the bank that offers maximum security for locker contents is crucial. It is advisable to buy a separate Bank Locker Protection Policy offered by many general insurance companies to protect the valuables kept in a Bank Safe Deposit Locker.

This article first appeared on PersonalFN here