Do You Operate a Bank Locker? Here’s The Rules You Must Know

September 16, 2021 Mutual Fund

One of the ancillary services banks provide to its customers is Bank Locker facility, which are safe deposit lockers that allow the bank’s customers to store their important and valuable items. Many individuals prefer to store their valuables such as jewellery, important documents, etc. in bank lockers rather than at home.

To utilise the facility of safe deposit lockers, one has to submit an application to the bank for it. Once you apply and if the locker is available, you have to sign a locker rental agreement with bank. You can choose the size of the bank locker from what’s available as per your need and pay the rent applicable on it. The locker rental agreement includes all the terms and conditions, locker rates that vary based on location of branch and size of the lockers, and the responsibilities of the bank and customer.

To maintain your bank locker, the bank charges an annual rent, and the locker rent is payable in advance. The customer is required to maintain sufficient balance in their accounts for a direct debt instruction towards the locker rent or pay manually.

In addition, more than one person can hold a bank locker; note that it is mandatory to register a nomination for your locker. In case of unfortunate death of the locker holder, the nominee and other holders (if any) will be permitted access to the contents of the locker after submission of required documents, such as death certificate and identity proof.

The bank locker has two keys, one that the customer holds and the other one remains with the bank. Whenever you plan to close the locker, you can apply to surrender it. At that time, you will have to empty the locker’s contents, return the key to the bank, and the agreement will be terminated.

However, do note that the Reserve Bank of India (RBI) has mentioned earlier that banks will not be liable to compensate the customer if the contents in your bank locker are damaged due to any natural calamity.

On August 18, 2021, RBI announced revised norms for bank lockers, safe custody, and article facility in the banks. The new RBI guidelines for bank lockers will be applicable to both new and existing safe deposit lockers. It states that the banks cannot disown their liability for the loss of locker content of any customer due to theft or fraud by the bank employees. However, banks will not be liable for loss/damage to the locker due to natural calamities or customer negligence.

For instance, there was an appeal filed by Kolkata native Mr Amitabha Dasgupta against United Bank of India for which judgement came on February 19, 2021. The Supreme Court (SC) observed that the banks cannot wash off their hands off their responsibility to customers for the operations of bank lockers. The SC directed RBI to come up with revised norms for bank lockers to protect the customers’ interest that shall be binding upon the banks.

Taking into consideration the Supreme Court’s judgement and the various developments in the area of banking and technology, nature of consumer grievances and also the feedback received from banks and Indian Banks’ Association (IBA), RBI has revised the guidelines/instructions.

If you are planning to get a bank locker or currently have one, here are the revised bank locker rules you must be aware:

1. Customer Due Diligence

Revised guidelines by RBI states that existing customers of a bank who have made an application for locker facility and who are fully compliant with the CDD criteria under Know Your Customer, Directions 2016 will be provided with safe deposit lockers subject to on-going compliance.

The customers who do not have any other banking relationship with the bank may be given the facilities of safe deposit locker after complying with the CDD criteria under Know Your Customer, Directions 2016 subject to ongoing compliance.

Banks shall incorporate a clause in the locker agreement that the locker-hirer/s shall not keep anything illegal or any hazardous substance in the Safe Deposit locker. If bank suspects any illegal content, bank has the right to take required action against the customer.

The due diligence shall be carried out for all the customers in whatever rights and capacities they may be hiring the locker. The RBI has also made it mandatory for banks to settle the claims of deceased locker-holders as soon as possible, i.e. within a period of 15 days from the date of receipt of the claim with suitable documentation and proof of death of depositor with reference to nomination.

2. Transparency in locker allotment

Due to lack of transparency in the new locker allotment, customers have been facing inconvenience to store their valuables. The new guidelines urge that banks shall acknowledge the receipt of all applications for allotment of locker and provide a wait list number to the customers, if the lockers are not available for allotment.

Banks are required to maintain a branch-wise list of vacant lockers as well as wait-list in core banking system (CBS) or any other computerized system compliant with Cyber Security Framework issued by the RBI for the purpose of allotment of lockers and to ensure transparency in allotment of lockers.

3. Bank locker rent

Banks usually charge an annual locker rent to its customers and the new guidelines shines more clarity on this. To prevent situations where the locker-hirer neither operates the locker nor pays the rent and to ensure prompt payment of locker rent, banks are allowed to obtain a term deposit, at the time of locker allotment.

The term deposit would cover three years’ rent and the charges for breaking open the locker in case of such eventuality. Existing locker holders do not need to pay such term deposits nor shall the bank should insist on such term deposits from them.

If the locker rent has been collected in advance, then at the time of surrender of the locker, the bank will refund a proportionate amount of the advance rent collected to the customer.

4. Security standards of bank locker

Banks shall take necessary steps to ensure that the area in which the locker facility is housed is properly secured to prevent criminal break-ins. The area housing the lockers should be adequately guarded with maximum security at all times. The place where the lockers are housed must be secured enough to protect against hazard of fire, rain/flood water entering and damaging the lockers in contingent situations.

The banks shall install Access Control System, if required, as per their risk assessment, which would restrict any unauthorized entry and create digital records of access to the locker room with time logs. Banks may cover the entry and exit of the strong room and the common areas of operation under CCTV camera and preserve its recording for a period of not less than 180 days.

In the case of a customer’s complaint that their locker was accessed without their knowledge and authority, or if any theft or security breach is observed, the bank is required to preserve this CCTV recording as proof for the police investigation and to settle disputes arising from such incidents.

• Safe to access electronic locker – In case the lockers are being operated through an electronic system, the bank shall take reasonable steps to ensure that the system is protected against hacking or any breach of security. The customer’s sensitive financial data should be secured and not shared with any third party without the consent of the locker holder. Banks should ensure that the electronically operated lockers are compliant with the Cyber Security Framework prescribed by the RBI.
• Bank locker keys – There shall be a system of inter-change of locks whenever the locker is surrendered by the hirer to avoid any duplication of keys or theft. The keys of vacant lockers shall be kept in sealed envelopes. The duplicate master keys shall be deposited with another branch of the bank. The Bank shall ensure that the bank/branch identification code is marked on the locker keys to facilitate locker ownership in case of need.

5. Nomination Facility

The banks shall offer nomination facility in case of safe-deposit lockers and have appropriate systems and procedures in place to register the nomination, cancellation, and/or variation of the nomination, in their books, made by the locker hirers.

As per new rules, banks shall have a board approved policy for nomination and release of contents of safety lockers / safe custody article to the nominee and protection against notice of claims of other persons.

6. Locker operations

Bank shall maintain a record of all individuals, including the locker-hirers, who have accessed the lockers and the date and time (both check-in and check-out time) on which they have opened and closed the locker and obtain their signature. This will help in smooth functioning of the lockers and store the data of its access.

RBI states that banks shall send an email and SMS alert to the registered email ID and mobile number of the customer before the end of the day as a positive confirmation intimating the date and time of the locker operation and the redressed mechanism available in case of unauthorized locker access.

7. Discharge of locker contents

The possibility of locker content discharged such as if the customer decides to surrender the locker or in case of death of the sole locker hirer, the contents will be transferred to the nominee. If the locker was opened jointly by two holders and in the case of the demise of either holder with another individual as nominee, the bank will provide locker access to the survivor and the nominee.

However, if the locker remains inoperative for a period of seven years and the locker-hirer cannot be located, even if the rent is being paid regularly, do note that the bank shall be at liberty to transfer the contents of the locker to their nominees/legal heir/s or dispose of the articles in a transparent manner, as the case may be.

What is the bank’s liability towards the customers’ safe deposit lockers?

According to the new RBI guidelines, the notification says, “The banks duty of care includes ensuring proper functioning of the locker system, guarding against unauthorized access to the lockers and providing appropriate safeguards against theft and robbery. It is the responsibility of banks to take all steps for the safety and security of the premises in which the safe deposit vaults are housed.”

As mentioned earlier banks cannot claim that it’s not their liability towards you for the loss of contents from your lockers. The liability of banks in case of theft, building collapse, or fraud by its employees will be for an amount equivalent to one hundred times the prevailing annual rent of the bank locker.

Banks should ensure that incidents like fire, theft/ burglary/ robbery, dacoity, building collapse do not occur in the bank’s premises due to its own shortcomings, negligence, and by any act of omission/commission.

As mentioned earlier, remember that the bank shall not be liable for any damage/loss of contents of locker arising from natural calamities or acts of God like earthquake, floods, lightning and thunderstorm or any act that is attributable to the sole fault or negligence of the customer.

To prevent any coercive insurance selling from banks for the contents of the locker, RBI has mentioned in the revised norms, that banks shall under no circumstances offer, directly or indirectly, any insurance product to its locker hirers for insurance of locker contents.

This article first appeared on PersonalFN here