What comes to mind when you hear the word- Safety (in investments)? FD, Treasury bills, government bonds, or BANK LOCKERS. Safe deposit vaults or bank lockers, a regular safety medium in Indian households, were introduced in the Indian market in the 1960-70’s. It was one of the initiatives to protect the common man’s valuables and documents from theft and other damages. As India steadily manoeuvres towards a cashless economy, it is impeding that people will move their liquid assets from home to banks, primarily using lockers as an ideal medium of security.
However, the bank's approach remained complacent regarding the safety of the assets and fairness of the agreement. Additionally, individual banks tend to have their own policies causing a lack of uniformity in the policy structure for the bank lockers. In continuation to the flaws, there have been instances of a lack of proper communication between the banks and the locker holders regarding the breaking up of bank lockers.
In light of recent developments of such shortcomings, the honourable Supreme Court has pointed out that the current rules and regulations of bank locker agreements are confounding to the customers. Hence, RBI was directed to relook into the bank lockers' agreement to ensure fairness and transparency in the contract. Following close on the heels, RBI issued guidelines on the new bank locker agreement where it directed banks to facilitate the execution of fresh/supplementary stamped agreements with their customers.
The recent regulation incorporated by RBI is an attempt to ensure customer’s assets are taken care of. Since customers are at the mercy of the banks and hence banks should ensure ample security of the same.
But does all of this make bank lockers safe? Let’s find out.
Firstly, the banker’s liability is always limited. The bank shall not be responsible for keeping records of the locker's contents, and it does not provide insurance coverage for the contents against any risks. To protect the bank’s interest, in the following cases, the banks will not be entitled to compensation.
In case, the bank is found guilty, the customer shall be compensated for an amount equalling to one hundred (100) times the prevailing annual locker fee.
Lockers do not guarantee safety because banks are entitled to open your lockers only if you fail to pay the locker fee for three years or if the locker is inoperative for more than 7 years. However, the bank must first provide three months' notice to the customer's last known address via letter, email, SMS or advertisement (If he/she remains untraceable). In case of no response from the customer, the bank may open the locker, list its contents, and store them securely in a different location or choose to sell/ auction the contents to cover unpaid fees and expenses.
Also, if you imagine not surrendering the locker, then also, the bank has the authority to break open the locker at the end of the three-month notice period.
As the financial industry progresses, both banks and customers need to collaborate in fostering a secure environment for the safekeeping of valuables. A harmonious relationship built on clear communication and adherence to guidelines can contribute to a more robust and trustworthy system for safeguarding assets in the banking sector.