All of us are affected by bank lockers, the savior of jewels, safely kept passports, prestigious documents or at least an outing for all of us to visit the branch of our bank and refresh our long last memories of decades. Yes, RBI revised its instructions on ‘Safe Deposit Locker/Safe Custody Article Facility provided by the banks’ vide its communication dated August 18, 2021 which is reproduced below for your ready reference now and also in future.
Safe Deposit Locker/Safe Custody Article Facility provided by banks – Revised Instructions
Let us understand in simple language what does this mean to all of us.
Let me emphasize at the outset that these coveted instructions are applicable to All Scheduled Commercial Banks (including RRBs)/All Co-operative Banks/All Small Finance Banks/All Payments Banks/All Local Area Banks who offer the above-mentioned facilities to their customers. It may be emphatically informed that these instructions are for all whose details have been above, not necessarily to some nationalized banks only.
We are further enlightened that this review of RBI also considers, the principles enumerated by the Hon’ble Supreme Court in ‘Amitabha Dasgupta vs United Bank of India’, (Judgment dated February 19, 2021 in CA No. 3966 of 2010) indicating the questions raised in the court case resulted this development.
The revised instructions shall come into force with effect from January 1, 2022 (except where otherwise specified) and be applicable to both new and existing safe deposit lockers and the safe custody of articles facility with the banks.
How does a bank open a locker for a customer?
“The existing customers of a bank who have made an application for locker facility and who are fully compliant with the CDD criteria under the Know Your Customer (KYC) Master Direction, 2016 (as updated from time to time) may be given the facilities of safe deposit lockers/ safe custody article subject to on-going compliance.
Customers who are not having any other banking relationship with the bank may be given the facilities of safe deposit locker / safe custody article after complying with the CDD criteria under the Know Your Customer (KYC) Master Direction, 2016 (as updated from time to time) and subject to on-going compliance. The due diligence shall be carried out for all the customers in whatever rights and capacities they may be hiring the locker.”
Interestingly, the next sentence of the instructions advises the banks that the locker-hirer/s shall not keep anything illegal or any hazardous substance in the Safe Deposit locker and the bank has the right to initiate suitable action if the bank suspects him/her otherwise. With terrorism in mind, this makes sense.
It is a common sense that the banks shall obtain recent passport size photographs of locker-hirer(s) and individual(s) authorized by locker hirer(s) to operate the locker and preserve in the records of customers like locker agreement, KYC documents etc.
Let us talk of locker agreement. Is it common for all banks or institutions mentioned earlier? The agreement will be as per the proforma to be prepared by Indian Banks Association on a paper duly stamped. A copy of the locker agreement in duplicate signed by both the parties shall be furnished to the locker-hirer to know his/her rights and responsibilities. Original Agreement shall be retained with the bank’s branch where the locker is situated.
Yes, you can a copy of the agreement for your knowledge and records. It is equally true that Banks shall renew their locker agreements with existing locker customers by January 1, 2023.
What does this mean? I who opened an agreement with the bank in 1979 for a locker agreement written in small letters with too many conditions will have a new one containing all the instructions contained in supreme court case referred above. It is a huge job for all of us who have lockers with banks, mostly after marriage or willing to keep documents will have to be available to enter into a new agreement.
To ensure prompt payment of locker rent, banks can obtain a Term Deposit, at the time of allotment, which would cover three years’ rent and the charges for breaking open the locker in case of such eventuality.
Why is this onerous responsibility for a bank?
Let me narrate an instant for you if you are a non- banker.
The excitement to open or get a locker exists in a customer till it is given to him/her. After the first visit, many forget the locker, never visit the branch, or abhor any locker rent. Yes, some of the richest customers refuse to pay the rents or pretend as if they have paid it.
I, an ex-banker, had an interesting story of the income tax department raiding an income payee with a court order to legally force open the locker and verify the contents. Yes, being one related to an ex-king, it had wonderful artefacts but neither the customer nor the bank ever bothered to collect the locker rent till the break open took place. Obviously, the customer was asked to pay the rent with past over dues of decades running into thousands of rupees.
Instance of above nature forced the bank to open locker with a fixed deposit of suitable value which would enable the bank to recover the locker rent. You are equally correct if it has been presumed that the interest on FDR was enabled to be credited to a savings fund account opened exclusively to get the interest on time to help the bank. Normally, the bank branch would request the customer to pay the rent immediately if not already done.
What about “Infrastructure and Security Standards” for lockers, particularly, in view of many break ins of lockers, that too in public sector banks who offer the maximum number of lockers all over the nation?
The following two paras form the most important from a customer point of view. Yes, your question on customer protection of the locker is answered here.
“Security of the Strong Room/Vault
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 risks of accessibility of an allotted locker from any side without involvement of the locker-hirer concerned may be assessed and kept on record. Banks shall have a single defined point of entry and exit to the locker room/vault.
The place where the lockers are housed must be secured enough to protect against hazard of rain / flood water entering and damaging the lockers in contingent situations. The fire hazard risks of the area should also be assessed and minimized.
The banks, as per their policy, shall conduct necessary engineering / safety verification regularly to identify the risks and carry out necessary rectification.
The area housing the lockers should remain adequately always guarded. The banks shall install Access Control System, if required as per their risk assessment, which would restrict any unauthorized entry and create digital record of access to locker room with time log.”
The banks normally cover the entry and exit of a customer by electronic means for usage at the time of any theft or breakage of lockers. The period of retention of CCTV recording is normally 180 days until any theft happens in between and police requires its verification. Enormous construction prescriptions for the locker rooms have been in existence since time immemorial.
What about electronically offered lockers and the safety standards to be observed?
The following procedure will apply:
- The bank shall take reasonable steps to ensure that the system is protected against hacking or any breach of security. The customers’ personal data, including their biometric data, shall not be shared with third parties without their consent.
- Further, banks shall ensure that the electronically operated lockers are compliant with the Cyber Security Framework prescribed by the Reserve Bank.
- The system should be capable of maintaining unalterable log of locker activities.
- The banks shall comply with the relevant statutory / regulatory guidelines/requirements applicable for IT / data protection.
- Further, the banks shall also devise a standard operating procedure for issue of new password in lieu of lost passwords to customers in a safe manner.
What about regular operations by the locker holder?
The purpose of codifying these instructions is due to the fact, none of us including bankers do not read the legal instructions written in agreements and as routine things have been moving on without any hindrance but recent theft events portray the darker side.
Banks maintain the date, time of entry/exit of the customer who wants to operate the locker, the bank official who operates the master key leaves the place after opening of the locker, the officials periodically go through locker premises to verify any left over of the customers regarding jewelry, document or even key to operate the locker. Only after authorization by a bank official the locker is operated. Verification of the signature, KYC details in case of suspicion and operation of only one customer at a time are normal features in a locker room.
Equally true is that banks 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 redressal mechanism available in case of unauthorized locker access. Why is it required?
In case of a theft, the banks do not reimburse any customer since it does not know what is contained within the locker. Banks do not offer any insurance product for securing the input items. Yes, many lockers remain empty for decades with paid rents. Equally it is sad that many lockers of even prestigious nationalized banks of same branches get robbed or break open happened in the recent past.
But the banks do have strong internal controls like:
- In case of broken lockers, the keys are changed. The duplicate master keys shall be deposited with another branch of the bank. There shall be proper record of joint custody of master keys.
- Banks shall conduct surprise periodic verification of surrendered/vacant lockers and their keys by an officer of the bank who is not connected with their custody and proper record shall be maintained as a proof of such verification.
- Internal auditors or external auditors do mention about these internal controls or absence of them in their regular reports. Invariably action is taken against the banks/erring officials.
- An official of the bank closing the locker invariably verifies at the end of the day whether all lockers are properly closed and in case of any opening intimates the concerned locker holder by telephone/SMS message or by letters.
- The locker will be closed, this information entered in the locker register, and brought to the notice of the branch manager. The banks are expected to have detailed instructions in this regard and suitably train its officials.
What about nomination facility for lockers?
Nomination Facility
The banks shall offer nomination facility in case of safe deposit lockers and safe custody of articles, in accordance with the provisions of section 45-ZC to 45-ZF of the Banking Regulation Act, 1949 and Banking Companies (Nomination) Rules, 1985/Co-operative Banks (Nomination) Rules, 1985.
In case the nominee is a minor, the same procedure as prescribed for the bank accounts shall be followed by the banks. A passport size photo of the nominee attested by the customer may be obtained from the customers, at his/her option and preserved in the records. At the time of operation of the locker by the nominee, the banking official may verify the photo with the nominee for verification.
We are further informed by RBI that for the various Forms (Forms SC1, SC2 and SC3 for Articles left in Safe Custody and Forms SL1, SL1A, SL2, SL3 and SL3A for Safety Lockers) prescribed under Banking Companies (Nomination) Rules, 1985/Co-operative Banks (Nomination) Rules, 1985, only Thumb-impression(s) shall be required to be attested by two witnesses. Signatures of the account holders need not be attested by witnesses.
What about death of an account holder in a locker?
The following procedural descriptions may help all of us. Very important instructions from RBI.
Banks shall have a Board approved policy for settlement of claims. The policy shall be in conformity with the regulatory instructions and the Model Operational Procedure (MOP) for settlement of claims of the deceased constituents formulated by the IBA and in case of State and Central Co-operative Banks, MOP formulated by NABARD.
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 in accordance with the provisions of Sections 45 ZC to 45 ZF of the Banking Regulation Act, 1949 and the Banking Companies (Nomination) Rules, 1985/Co-operative Banks (Nomination) Rules, 1985 and the relevant provisions of Indian Contract Act and Indian Succession Act.
To ensure that the articles left in safe custody and contents of lockers are returned to the genuine nominee, as also to verify the proof of death, banks shall devise their own claim formats, in terms of applicable laws and regulatory guidelines.
Law department of banks have historically done the needful.
Banks shall report to the Customer Service Committee of the Board, at appropriate intervals, on an ongoing basis, the details of the number of claims received pertaining to deceased locker-hirers / depositors of safe custody article accounts and those pending beyond the stipulated period, with reasons therefor. Periodical reports are sent to customer service committee in this regard.
What about handing over items to nominees in case of death of the customer?
Banks do take proper documentation to hand over the remains of lockers to proper nominees as per the prevalent norms without imposing onerous conditions on the nominees. The system of nomination was introduced in banks to obviate these harassments to nominees.
PART VI: Closure and Discharge of locker items is another important head with practical solutions to procedural issues.
Let me narrate head wise information for detailed study by any-one affected by factors indicated therein.
6.1 Discharge of locker contents at the request of customer
6.2 Attachment and recovery of contents in a Locker and the Articles in the safe custody of the bank by any Law Enforcement Authority
6.3 Discharge of locker contents by banks due to non-payment of locker rent
6.4 Discharge of locker contents if the locker remains inoperative for a long period of time
Chapter 7 contains the following details.
7. Liability of banks
7.1 Liability of banks arising from natural calamities like earthquake, flood, thunderstorm, lightning etc. or due to sole negligence of the customer
7.2 Liability of banks arising from events like fire, theft, burglary, dacoity, robbery, building collapse or in case of fraud committed by the employees of the bank.
Before we conclude the instructions of RBI, let us learn about Branch Insurance Policy, Insurance of locker contents by the customer etc.
The banks in their agreement with the customer will obviously inform that they owe no liability of the contents of the locker and do not offer any compensation for loss, if any. It is for the customer to verify thoroughly before leaving the branch premise that nothing is left over by mistake.
Conclusion
RBI informs that banks shall put in place a comprehensive revised Board approved policy and SOPs on safe deposit locker facility/safe custody article as per the revised instructions mentioned herein. Banks invariably inform its customers the rental charges in a prominent place.
But let us be frank that most of us do not read any instructions of locker and do believe in banks. Due to unavoidable and mistaken notion among the crooks that one can easily rob any locker for huge gains, it is very important to know our rights as a locker holder and our responsibilities.
I thank the supreme court ruling which has put the clock back on the court to ensure proper enunciation of rules of lockers by banks to educate its customers. Yes, every- one dealing with banks with locker/lockers must be careful in handling them, do not repeat with the same bank or branch in case of any mishap or take adequate precautions proactively to safeguard their interests.
Rarely, banks have failed to protect its locker holders since this facility dates to centuries of the existence of banks. Godrej or Steel age, the popular offerors of lockers have shown the versatility of their lockers, resistance to fire and strength of their steel periodically by actual fires or other unnatural happenings.
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