RBI’s new guidelines for bank lockers
RBI instructions is divided into eight parts covering everything from customer due diligence to locker allotment to operations, compensation policy / liability for banks, risk management and transparency
The Reserve Bank of India (RBI) has announced instructions to the banks regarding the safe deposit lockers and safe custody of articles facility. The new guidelines will be operative from January 1, 2022. The new rules were unveiled by the RBI after taking into consideration feedback received from banks and Indian Banks’ Association (IBA), consumer grievances and also the principles enumerated by the Supreme Court in its judgement on February 1, 2021. The apex court directed the central bank to come up with comprehensive guidelines to protect customers' interest which should be binding upon the banks. RBI instructions is divided into eight parts covering everything from customer due diligence to locker allotment to operations, compensation policy / liability for banks, risk management and transparency. (See charts below)
Safe Deposit Locker / Safe Custody Article Facility revised instructions by RBI
Part 1: Customer Due Diligence (CDD) – Safe deposit locker facility and safe custody article facility will be given to existing customers and even those who do not have any banking relationship with the banks only if they comply with the Know your customer (KYC) directions. The due diligence shall be carried out for all the customers in whatever rights and capacities they may be hiring the locker Individuals cannot keep any anything illegal or any hazardous substance in the Safe Deposit locker.
Part 2 Locker allotment – Banks need to maintain list of vacant lockers as well as a wait-list in Core Banking System (CBS) or any other computerized system compliant with Cyber Security Framework issued by RBI, for the purpose of allotment of lockers and ensure transparency in allotment of lockers. Banks need to give acknowledgment receipt and also waiting list number to customers if the lockers are not available for allotment.
- Locker agreement – Banks need to adopt the model locker agreement to be framed by IBA which will be in line with the directions of the Supreme Court. This agreement will have the boards’ approval and shall not have unfair terms or conditions. The locker agreements with existing locker customers should be renewed by 2023. Duplicate copy of the locker agreement paper signed by both the parties must be provided to the customer to inform them of their rights and responsibilities while the original agreement is retained with the bank.
- Locker rent – Banks often lands in a difficult situation when a locker user doesn’t pay the rent and does not use the locker. To ensure timely payment of locker rent, banks can obtain a term deposit which will cover three years of rent and charges. For those existing customers or who have satisfactory operative account banks should not insist upon such term deposit. The proportionate amount of rent collected in advance must be refunded to the customer when they surrender the locker key. Whenever there is bank merger, shifting or closure, bank need to give notice in the two-newspaper including one local daily in vernacular language and customers need to intimated two months in advance with an option to change or close the facility.
Part 3: Locker security – The area in which bank and the locker facility is situated it should be well guarded to protect against any theft, flood or fire hazard. There should be single defined point of entry and exit to the locker room/vault. 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. As per their internal security policy, banks may cover the entry and exit of the 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 event of any customer complains the bank shall preserve the CCTV recording till the police investigation is completed and the dispute is settled.
- Locker standards – The new mechanical lockers need to comply with safety and security norms prescribed by the Bureau of Indian Standards (BIS) and electronically accessed lockers should be protected against hacking or any breach of security. Identification code should be embossed on the locker keys which can help to identify lockers / locker ownership by law enforcement agencies in case of need.
Part 4 Locker operations – Locker can be open by the customer only after proper verification of the identity and recording of the authorization by the bank officials. The bank needs to keep all the records of the locker accessed along with details of date and time and obtain customer’s signature. 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 and the redressal mechanism available in case of unauthorized locker access. The bank custodian shall check whether the lockers are properly closed post locker operation and must do a physical check of the locker room at the end of the day to ensure that lockers are properly closed.
Part 5 Nomination facility and settlement of claims in event of death of a customer - The banks will offer nomination facility in case of safe deposit lockers and safe custody of articles. In the event of the death of the customer, bank will return the content of the locker to the nominee subject to the verification of the proof of the customer death. Banks need to settle the claims and release the content to the nominee within 15 days from receipt of claim and submission of requisite documents. The details of the number of claims received pertaining to deceased locker-hirers should be reported to the Customer Service Committee which shall review the claims. If there is no nomination made by the deceased locker-hirers then banks shall adopt a Board approved policy to facilitate access to the legal heir(s) / legal representative of the deceased customer.
Part 6 Closure and Discharge of locker items – The locker can be broken in event of loss of keys and it can be seized if government agencies approach the bank with orders from court or any other authority or the customer is not meeting the terms and conditions. Bank can break open the locker if the customer did not pay the rent for more than three years. Before breaking open the locker, the bank shall give due notice to the locker-hirer through a letter and through email and SMS alert to the registered email id and mobile phone number.
In event of loss of locker keys, the customer needs to immediately inform the bank. All charges for opening the locker, changing the lock and replacing the lost key may be recovered from the hirer. The opening of the locker has to be carried out by the bank or its authorized technician only after proper identification of the hirer.
In case if the locker is inoperative for period of seven years and the locker hirer cannot be located even though the rent is paid regularly the bank shall be at liberty to transfer the contents of the locker to their nominees/legal heir or dispose of the articles in a transparent manner, as the case may be.
Part 7 Liability of banks – This is most important part as the banks need to put in place a detailed bank approved policy and ensure proper functioning of the locker system, guarding against unauthorized access to the lockers and providing appropriate safeguards against theft and robbery. Further, banks shall adhere to the Master Directions on Frauds for reporting requirements about the instances of robberies, dacoities, thefts and burglaries.
Banks will not be liable for any damage and/or 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. Banks shall, however, exercise appropriate care to their locker systems to protect their premises from such catastrophes. Banks’ liability has been limited to 100 times its annual rent in case of fire, theft, frauds by employees, or building collapse.
Part 8 Risk Management, Transparency and Customer Guidance – Banks with the approval of the board need to have branch insurance policy to minimize the loss due to incidents like robbery, fire, natural calamities, loss during shifting/merger of branch, etc., affecting contents of lockers. However, banks under no circumstances offer directly or indirectly, any insurance product to its locker hirers for insurance of locker contents. Banks will not be under any liability to insure the contents of the locker against any risk whatsoever. Banks shall display the model locker agreement with all the Terms & Conditions and the Standard Operating Procedures (SOPs) on various aspects on their websites and/or at branches (if official website is not available) where locker facility is being provided by them.
RBI’s new locker rulers aims to standardization, transparency as individuals often find it difficult to get the locker. However, the rule states that banks will not be liable in case of natural calamity, there will be no insurance on the content in the locker and liability in event of theft or fire or fraud of employees will be 100 times its annual rent. A large size locker of the India’s largest state-owned bank cost has the annual rent of Rs 6000+GST. In case the individual keeps large number of valuables in the account then it will risky as banks would not insure the contents of the locker. One must keep a track, do regular updates and ensure timely payment of the rent for the safekeeping of the items in the bank locker.