The story so far: In order to enhance the safety, transparency and effective management of safe deposit lockers provided by banks, apex banking regulator Reserve Bank of India (RBI) released a list of revised guidelines, which came into force from January 1, 2022. They are applicable to both new and existing safe deposit lockers and bank facilities for the safe custody of articles. In adherence with the same, banks were required to renew agreements with their existing locker users by January 1, 2023. The guidelines followed observations made by the Supreme Court in A mitabha Dasgupta vs United Bank of India (February 2021).
What changes for banks?
The provisions entail ensuring the safety of the locker, its management, rent collection and verification for transfer or revealing the contents.
Now, while allotting lockers, banks have to enter into an agreement with the customer on duly stamped paper, with a copy being provided to both parties. The terms of the contract must not be “more onerous than required in the ordinary course of business to safeguard the interests of the bank”.
Banks will now be allowed to obtain a ‘term deposit’ at the time of allotment to a consumer, covering three years’ rent and the charges for breaking open a locker if the hirer doesn’t operate it or pay rent. Banks cannot, however, demand ‘term deposits’ from existing locker holders or those who have “a satisfactory operative account”. The central idea here is to ensure the prompt payment of locker rent.
In the event of a merger, closure or shifting of a branch requiring physical relocation of lockers, banks are required to give notices in two newspapers and inform customers at least two months in advance, also offering the option to change or close the facility. Further, if locker rent is collected in advance, the proportionate amount would need to be refunded to the customer if the account is surrendered.
Locker agreements must clarify that the bank does not maintain any record of locker contents and that it is not under any liability to insure the contents of the locker against any risk whatsoever. Additionally, banks cannot offer insurance products to customers for insuring locker contents.
What happens when law enforcement agencies are involved?
Banks are required to put the entry, exit and premises of the locker-room under CCTV surveillance and retain recordings for at least 180 days. However, in the event of complaints such as the opening of the locker without knowledge (or authority), theft or security breach, the recordings must be maintained until the conclusion of the investigation and resolution of the dispute.
Once it verifies the orders and documents received for attachment and recovery of contents in its custody, the bank is required to inform the owner of the locker through SMS/email and a letterabout the same. The bank would also need to prepare an inventory of the contents in the presence of the authorities, two independent witnesses and an officer of the bank. The entire process needs to be video-graphed.
What are the important observations for customers?
Banks must institute security measures to safeguard lockers operated through electronic systems against any breach. They must also devise a standard operating procedure for issuing new passwords should customers lose or forget them.
Customers must inform the bank immediately if they lose the locker key and undertake to hand over the key to the bank if it is found in the future. All entailing expenses are to be borne by the customer.
As for regular management of the locker, the customer or an authorised entity’s identity would have to be verified and authorisation recorded by bank officials before giving access. Banks are required to send an email and SMS informing the customer about any locker-related activity.
The onus is on the bank’s custodianto check if lockers are properly closed after access and if the locker premises are empty at the end of the day.
Banks reserve the discretion to break open the locker if the rent remains pending for three years in a row. They must, however, inform the user through a letter, email and SMS, and accord him ‘reasonable opportunity’ to withdraw the deposited contents. The locker must be broken open in the presence of a bank officer and two independent witnesses, and the entire process needs to be taped. The idea is to collect evidence in case of any dispute or court case in future.
After this, the contents are to be kept in a sealed envelope with detailed inventory inside a fireproof safe in a tamper-proof way until the customer claims it, post signing an acknowledgement.
What about the transfer of lockers?
Banks must institute a policy for nomination and release of safety lockers and their contents to a nominee, within 15 days from the date of receipt of a claim.
Before giving access, banks must establish the identity of the survivor (or nominee) and the fact of death with appropriate documentary evidence. It must also examine if there are any orders or directions from courts or any other forum restraining access to the locker.
Banks must not insist on producing succession certificate, letter of administration or probate or any bond of indemnity or surety unless there is any discrepancy.
What happened in Amitabha Dasgupta vs United Bank of India?
Union Bank customer Amitabha Dasgupta submitted that the lender bankopened his locker illegally, incorrectly asserting that he had not paid dues between 1993-94. The Chief Manager of the bank admitted that there were no outstanding dues and apologised for breaking open the locker.
When Mr Dasgupta went to collect the contents of his locker later, he found only two of seven ornaments which had been deposited in the locker in a non-sealed envelope.
In its verdict the Supreme Court noted that “imposition of liability upon the bank with respect to the contents of the locker is dependent upon provision and appreciation of evidence in a civil suit for such purpose”. It added that this does not mean the appellant be left without any remedy.
Separately, it stated that previously existing regulations on locker management were “inadequate and muddled” with no uniformity in rules.
Additionally, it highlighted that there was increased reliance on banks for protection of assets, since technological advancement and emerging globalisation madepeople unwilling to keep liquid assets at home.. It hence urged the RBI to lay down comprehensive directions for locker facility and safe deposit management.