Bank locker owners required to renew agreements: Why fresh conditions, new charges are hassling customers

The central bank had asked banks to notify all their customers of the revised requirements by April 30, 2023 and ensure that at least 50 per cent and 75 per cent of their existing customers have executed the revised agreements by June 30 and September 30, 2023 respectively.

Banks should report the status of compliance with these instructions on the DAKSH supervisory portal of the Reserve Bank on a monthly basis. The deadline for banks is being extended in a phased manner to December 31, 2023.

What is the new procedure?

While banks were originally required to renew their locker agreements with existing locker customers by January 1, 2023, a large number of customers are yet to execute the revised agreement and are facing difficulties in doing the same. In many cases, the banks are yet to inform the customers about the need for renewal of agreements before January 1, 2023. Further, there is a need for revision in the Model Agreement drafted by the Indian Banks’ Association (IBA) to fully comply with the revised instructions.

The central bank has asked banks to facilitate execution of the fresh/supplementary stamped agreements with their customers by taking measures such as arranging stamp papers, franking, electronic execution of agreement, e-stamping, etc. and provide a copy of the executed agreement to the customer.

Where operations in lockers have been frozen for non-execution of agreement by January 1, 2023, the lockers are required to be unfrozen with immediate effect. At the time of allotment of the locker to a customer, the bank should enter into an agreement with the customer to whom the locker facility is provided, on a paper duly stamped.

A copy of the locker agreement in duplicate signed by both the parties should be furnished to the locker-hirer to know his/her rights and responsibilities. The original agreement should be retained with the bank’s branch where the locker is situated.

What are banks doing?

While some lenders are asking locker owners to submit stamped agreement on Rs 500 paper, others say a Rs 100 stamp paper is fine. It is also not clear who will bear the cost of the stamp paper. As a result, some banks were supplying stamp paper while others are asking customers to bring the stamp paper, which is already in short supply. There are also complaints from customers that banks have not informed them about the renewal of the locker agreement.

At the same time, banks have hiked locker charges across the board. State Bank of India (SBI) has hiked the rates to Rs 1,500-12,000 plus GST for various types of lockers, as against Rs 500-3,000 a year on the basis of the location of the branch. SBI charges Rs 3,000 plus GST for urban and metro customers to hire a medium size locker and Rs 2,000 plus GST for lockers in rural, semi urban customers. HDFC Bank levies a fee of Rs 1,350 to Rs 20,000 annually for lockers depending on the location and type.

What are the conditions?

According to the RBI, to ensure prompt payment of locker rent, banks are allowed to 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. Banks, however, should not insist on such term deposits from the existing locker holders or those who have satisfactory operative account. The packaging of allotment of locker facility with placement of term deposits beyond what is specifically permitted above will be considered as a restrictive practice.

Banks should have the discretion to break open any locker following due procedure if the rent has not been paid by the customer for three years in a row. The bank should ensure to notify the existing locker-hirer prior to any changes in the allotment and give him/her reasonable opportunity to withdraw the articles deposited by him/her.

HDFC Bank says 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, the Bank should be at liberty to transfer the contents of the locker to their nominees/legal heir or dispose of the articles in transparent manner, as the case may be.

What can’t be kept in the locker?

Bank lockers are only meant to be used for legal reasons, such as keeping valuables like jewellery and important papers safe. They are not meant to be used to keep money or cash. Weapons, explosives, drugs, or other illegal substances, or any perishable, radioactive, illegal, otherwise hazardous material or any substance that might endanger the bank or any of its clients or pose a hazard to them.

What’s the compensation for fraud?

According to the RBI, 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. It has the responsibility to ensure that incidents like fire, theft, burglary, robbery, dacoity and building collapse do not occur in the bank’s premises due to its own shortcomings, negligence and by any act of omission or commission.

As banks cannot claim that they bear no liability towards their customers for loss of contents of the locker, in instances where loss of contents of locker are due to incidents mentioned above or attributable to fraud committed by its employees, the banks’ liability should be for an amount equivalent to 100 times the prevailing annual rent of the safe deposit locker, the RBI said.

However, banks explicitly mention in the agreement that they are not responsible for any damage to or loss of the contents of the Locker if it is caused by a natural disaster or an Act of God like an earthquake or flood.