Contact the bank if you have not signed the new locker agreement

While new rules enhance banks' accountability, buying locker insurance is added protection

The Reserve Bank of India (RBI) has mandated banks to renew their locker agreements with customers by January 1, 2023. Banks began implementing new operational standards from January 1, 2022, but customers must sign a new agreement to be eligible for the updated regimen.

“Although the rules were promulgated by the RBI in August 2021, their enforcement has been long overdue,” says Suvigya Awasthy, associate partner, PSL Advocates & Solicitors.

While many customers have signed the new agreement, many haven’t. Chanda Paramesh (name changed), who works with a fintech company, says: “I have two lockers but haven’t heard from either bank regarding any such new agreement.”

It’s best to contact your bank if you have not been informed about the new rules.

The new rules

An agreement must be written on stamp paper between the bank and the customer and signed by the latter for availing of a safe deposit locker facility.

“The new rules establish and enhance banks’ obligations for safety and security of lockers, with penalties in case of negligence. This will promote accountability and transparency in the maintenance of bank lockers,” says Anushkaa Arora, principal & founder, ABA Law Office.

The new agreement offers many benefits to customers. “It will ensure that the customer is compensated up to 100 times the locker rent resulting from shortcomings or negligence at the bank’s end. There will also be pro-rated reversal of rent if the locker is surrendered before the annual rent cycle. Also, the duration of rent non-payment and of non-operation has been increased from one year to three years and from three years to seven years respectively before the bank breaks open the locker,” says

Ravi Narayanan, group executive & head, branch banking, retail liabilities & Products, Axis Bank.

Sometimes, customers neither operate the locker nor pay the rent. To ensure prompt payment of rent, the new rules allow banks to obtain a term deposit at the time of allotment that covers three years’ rent and the charges for breaking open the locker. However, banks can’t insist on a term deposit from existing customers or those who have satisfactory operative accounts.

They also can’t insist on a term deposit of a size beyond the permissible limit from new customers at the time of allotment. This will prevent any arbitrariness regarding the size of the term deposit they ask for at the time of allotting a locker facility.

Banks must also ensure that electronically operated locker systems adhere to the RBI-mandated cyber security framework.

Implications for you

Experts say the new rules will increase customer convenience and security. “Customers will be notified via SMS or email each time the locker is used, thereby leading to improved perception of safety in customers’ minds. Similarly, the entire locker operation has been put on a digital platform, including the wait list,” says Narendra Dixit, head, retail banking, CSB Bank.

Banks are also required to secure the premises housing their safe deposit vaults. “In the event of any loss of locker content for reasons attributable to the bank’s negligence, the latter will be liable to compensate the customer,” says Nikhil Varma, managing partner, Miglani Varma & Co–Advocates, Solicitors and Consultants.

Adds Adhil Shetty, chief executive officer (CEO), BankBazaar: “Banks’ liability has been capped at 100 times the annual locker rent in case of incidents like fire, theft, burglary, robbery, dacoity, building collapse, etc. in the bank’s premises due to any negligence or shortcoming on its part.”

Varma adds that banks will, however, not be held liable if the loss occurs due to reasons beyond its control, such as an act of God or a natural calamity.

Buy insurance

Home insurance offers protection against loss of valuables due to fire, theft, robbery or other reasons. It usually covers home contents but not items stored in a bank locker.

“However, a few standalone policies nowadays offer coverage for jewellery kept in bank lockers,” says Tarun Mathur, chief business officer-general insurance, PolicyBazaar.

Adds Kapil Mehta, co-founder, SecureNow: “Insurance for the locker is low-cost  because cases of lockers getting burgled are quite rare. While you should buy locker insurance, you must also insure any jewellery stored in your house.”

IFFCO-Tokio General Insurance offers insurance cover for bank lockers. “The policy protects jewellery and other valuables against various risks like fire, burglary, the infidelity of bankemployees, acts of God, and terrorism. Apart from jewellery, one can also insure important documents kept inside the locker against loss or damage. At the time of claim, the insurance company will bear the cost of replacement up to the agreed limit,” says H O Suri, managing director and CEO, IFFCO-Tokio General Insurance.

The policy offers coverage ranging from Rs 3 lakh to Rs 40 lakh. Coverage beyond Rs 40 lakh is available at a higher rate.

Consider purchasing a safe

With safes of increasing sophistication becoming available, they offer a convenient alternative. “You will have to shell out Rs 10,000 to 15,000 for a good safe. Unlike bank charges, it is a one-time investment,” says M Barve, founder, MB Wealth Financial Solutions.

Several types of safes are available: single-walled, double-walled, fire-resistant, and so on. “You even have options that can be anchored into walls, those that give three-sided protection, or can be fitted into the flooring. The floor provides camouflage in such a way that burglars won’t even imagine there is a safe in there,” says Barve.