SAFE DEPOSIT VAULTS/SAFE DEPOSIT LOCKERS

SAFE DEPOSIT VAULTS/SAFE DEPOSIT LOCKERS

Safe Deposit Vault or Safe Deposit Lockers are the facilities provided by banks to their customers to keep their valuables.

This facility is not offered through all bank branches and wherever the facility is offered, allotment of safe deposit vault will be subject to availability and compliance with other terms and conditions related to this service. Safe deposit lockers may be hired by an individual (a non-minor) singly or jointly with another individual(s), HUFs, firms, limited companies, associates, societies, trusts etc. Nomination facility is available to individual(s) holding the lockers singly or jointly. In respect of lockers held in joint names, up to two nominees can be appointed. Joint locker holders can give mandate for access to the lockers in the event of death of one of the holders which is in similar lines to those for deposit accounts. In the absence of nomination or mandate for disposal of contents of lockers, with a view to avoid hardship to common persons, the bank will release the contents of locker to the legal heirs against indemnity on the lines as applicable to deposit accounts.

Lockers / Return of Safe Custody Articles by banks.

The Committee on Procedures and Performance Audit on Public Services (CPPAPS) had made some recommendations for easy operation of lockers. Banks have been advised by RBI to adhere to the following guidelines with respect to issue and maintenance of Safe Deposit Lockers.

Linking of Allotment of Lockers to placement of Fixed Deposits

RBI has advised banks to refrain from such restrictive practices such as linking the lockers facility with keeping fixed or any other deposit beyond what is specifically permitted.

Fixed Deposit as Security for Lockers

Banks may face situations where the locker-hirer neither operates the locker nor pays rent. To ensure prompt payment of locker rent, banks may at the time of allotment, obtain a Fixed Deposit, which would cover 3 years rent and the charges for breaking open, the locker in case of an eventuality. However, banks should not insist on such Fixed Deposit from the existing locker-hirers.

Wait List of Lockers

Branches should maintain a wait list for the purpose of allotment of lockers and ensure transparency in allotment of lockers. All applications received for allotment of locker should be acknowledged and given a wait list number.  Banks are also advised to give a copy of the agreement regarding operation of the locker to the locker-hirer at the time of allotment of the locker.

Security aspects relating to Safe Deposit Lockers

Banks should exercise due care and necessary precaution for the protection of the lockers provided to the customer. Banks should review the systems in force for operation of safe deposit vaults / locker at their branches on an on-going basis and take necessary steps. The security procedures should be well documented and the concerned staff should be properly trained in the procedure. The internal auditors should ensure that the procedures are strictly adhered to. Customer due diligence for allotment of lockers / Measures relating to lockers which have remained inoperative.   After experiencing explosives and weapons found in a locker in a bank branch, banks should be aware of the risks involved in renting safe deposit lockers. In this connection, banks should take following measures:

  1. Banks should carry out customer due diligence for both new and existing customers at least to the levels prescribed for customers classified as medium risk. If the customer is classified in a higher risk category, customer due diligence as per KYC norms applicable to such higher risk category should be carried out.
  2. Where the lockers have remained un-operated for more than three years for medium risk category or one year for a higher risk category, banks should immediately contact the locker-hirer and advise him to either operate the locker or surrender it. This exercise should be carried out even if the locker hirer is paying the rent regularly. Further, banks should ask the locker hirer to give in writing, the reasons why he / she did not operate the locker. In case the locker-hirer has some genuine reasons as in the case of NRIs or persons who are out of town due to a transferable job etc., banks may allow the locker hirer to continue with the locker. In case the locker-hirer does not respond nor operate the locker, banks should consider opening the lockers after giving due notice to him. In this context, banks should incorporate a clause in the locker agreement that in case the locker remains unoperated for more than one year, the bank would have the right to cancel the allotment of the locker and open the locker, even if the rent is paid regularly.
  3. Banks should have clear procedure drawn up in consultation with their legal advisers for breaking open the lockers and taking stock of inventory.
  4. If the sole locker hirer nominates a person banks should give to such nominee access of the locker and liberty to remove the contents of the locker in the event of the death of the sole locker hirer. In case the locker was hired jointly with the instructions to operate it under joint signatures, and the locker hirer(s) nominates person(s), in the event of death of any of the locker hirers, the bank should give access of the locker and the liberty to remove the contents jointly to the survivor(s) and the nominee(s).
  5. In case the locker was hired jointly with survivorship clause and the hirers instructed that the access of the locker should be given over to ‘either or survivor’, ‘anyone or survivor’ or ‘former or survivor’ or according to any other survivorship clause, banks should follow the mandate in the event of the death of one or more of the locker-hirers.

However, banks should take the following precautions before handing over the contents:

  1. Bank should exercise due care and caution in establishing the identity of the survivor(s) / nominee(s) and the fact of death of the locker hirer by obtaining appropriate documentary evidence;
  2. Banks should make diligent effort to find out if there is any order from a competent court restraining the bank from giving access to the locker of the deceased; and
  3. Banks should make it clear to the survivor(s) / nominee(s) that access to locker/ safe custody articles is given to them only as a trustee of the legal heirs of the deceased locker hirer i.e., such access given to him shall not affect the right or claim which any person may have against the survivor(s) / nominee(s) to whom the access is given.
  1. Similar procedure should be followed for return of articles placed in the safe custody of the bank. Banks should note that the facility of nomination is not available in case of deposit of safe custody articles by more than one person.
  2. Banks should prepare an inventory before returning articles left in safe custody / before permitting removal of the contents of a safe deposit. The inventory shall be in the appropriate Forms prescribed by RBI from time to time.

Further, in case the nominee(s)/survivor(s)/legal heir(s) wishes to continue with the locker, banks may enter into a fresh contract with nominee(s) / survivor(s) / legal heir(s) and also adhere to KYC norms in respect of the nominee(s) / legal heir(s). Banks are not required to open sealed/closed packets left with them for safe custody or found in locker while releasing them to the nominee(s) and surviving locker hirers / depositor of safe custody article.

Simplified operational systems / procedures

Banks have to undertake a comprehensive review of their extant systems and procedures relating to settlement of claims of their deceased constituents (locker-hirers / depositors of safe-custody articles) with a view to evolving a simplified policy / procedures for the purpose. The review should be made with the approval of their Board and take into account the applicable statutory provisions.

Customer Guidance and Publicity

Banks should give wide publicity and provide guidance to locker-hirers / depositors of safe custody articles on the benefits of the nomination facility and the survivorship clause. Illustratively, it should be highlighted in the publicity material that in the event of the death of one of the joint account holders, the right to the contents of the locker or the articles under safe custody does not automatically devolve on the surviving joint deposit account holder, unless there is a survivorship clause.

Banks should place on their websites the instructions along with the policies / procedures put in place for giving access of the locker / safe custody articles to the nominee(s) / survivor(s) / legal heir(s) of the deceased locker hirer / depositor of the safe custody articles. Further, a printed copy of the same should also be given to the nominee(s) / survivor(s) / legal heir(s) whenever a claim is received from them.

Banks should ensure that identification code of the bank / branch is embossed on all the locker keys with a view to facilitate Authorities in identifying the ownership of the locker keys.

Comments ( 8 )

  • Harinarayan Singh

    Question: what is the legal ownership position of bank vis-a-vis locker-holder ?

    • Admin Bankedge

      GENERAL GUIDELINES

      • The notification issued by the Reserve Bank of India or RBI on bank lockers clarifies that bank locker hirer in India is that of a lessee (tenant for that space he hired) while the bank acts in the position of a lessor (landlord-the owner of the bank locker which is let out for hiring).
      • The RBI guidelines on Bank Lockers thus states that in case of a locker theft where the contents were removed without the connivance of the bank officials, the bank is under NO LIABILITY FOR LOSS OF VALUABLES IN LOCKERS.
      • This fact was disclosed in an RTI response on RBI on bank lockers and 19 PSU banks. They said that while the bank will exercise all such normal precautions, it does not accept any liability or responsibility for any loss or damage whatsoever sustained to items deposited with it.
      • Accordingly, hirers are advised in their own interest to insure any item of value deposited in a safe deposit locker in the bank.

      OTHER GUIDELINES ON LOCKERS:

      • 1. In case the locker remains un-operated for more than one year, the bank would have the right to cancel the allotment of the locker and open the locker, even if the rent is paid regularly which is the guideline issued by RBI in the wake of an incident in which explosives and weapons were found in a locker.
      • Before opening the locker, the bank will have to give a notice to the customer asking the reason for not operating the locker. RBI has advised the banks to insert a clause to this effect in the locker agreement.
      • Also the Regulator has asked the banks to follow the Know Your Customer (KYC) guidelines strictly before allotting lockers viz:
        • Contact high-risk customers if they have not operated the lockers for one year and medium-risk customers if they haven’t done so for three years.
        • The customers would be asked to either operate the locker or surrender it.
        • Bankers are not to ask for any type of succession certificate or indemnity bond from the survivor or the nominees in case of the death of a locker-hirer for giving them access to the lockers.
        • In cases where the deceased locker hirer had not made any nomination, banks should adopt a customer-friendly approach and give legal heirs access to the deceased’s locker.
        • The guideline also specifies that a similar procedure should be adopted for the articles under safe custody of the bank.
      • RBI has advised the Indian Banks’ Association to formulate a simple model operational procedure for settlement of claims of the deceased locker-hirer.

      Recourse to the articles in the Locker when there is no operation or there is fraudulent activities observed in the account.

      • 1. A notice is issued to the Locker holder who is not operating the account.
      • The notice issued to the public reads that interested person/s shall approach the Branch on or before 31.03.20…. during business hours for making alternate arrangements, failing which the Bank will be constrained to break open the locker on or after 31.03.202…. and the contents of the locker will be sold in public auction without any further notice and the expenses incurred thereby and arrears of rent and other costs will be recovered out of the auction proceeds

      Conclusion:

      • In case of a Joint account, with E or S clause, if the survivor is able to satisfy the bank with the proof the contents will be handed over to him/her.
      • If there is a nominee the contents will be handed over to the nominee if there is no further dispute.
      • If there is a claim by the legal heir, he/she will have a priority over the Nominee and bank will obtain the necessary documents from the Legal heir and hand over the contents to him/her.
      • If there is no response from the legal heir or the Nominee to the Registered Notice sent to the party, then the bank will have liberty to dispose off the contents and credit the customer’s Savings or other operative account, with the amount available after the auction. However, out of this, the charges due from the customer will be recovered by the bank, out of the Auction proceeds.
      • F.N. De Alwis 140/5 gemunu Mawatha Nawala Rd Nugegoda

        ADDITIONAL SECURITY MEASURES MUST ME TAKEN

        (1) In terms of having more specific IDENTIFICATION OF THE DEPOSITOR AND THE BANK EMPLOYEE ( WHOSE BACK GROUND INVESTIGATION HAS BEEN DONE ACCURATELY ) AS THERE ARE BANKS FRAUDS TAKING PLACE WITH THE CONNIVANCE OF BANK EMPLOYEES ALL OVER THE WORLD.

        (2) WHEN DEPOSITORS AND BANK EMPLOYEE ENTER THE VAULT REGION WHICH IS A VERY SENSITIVE AREA THEY MUST BE PROPERLY SCREENED BY AN X RAY AND BODY CHECK with a THUMB IDENTIFICATION SYSTEM OR RETINA IDENTIFICATION ALONG WITH A THIRD PERSON A SENIOR SECURITY OFFICER OR A SENIOR OFFICER OF THE BANK AND ALL THREE MUST SIGN A DOCUMENT WHEN REMOVING OR BRINGING AND LOCKING IT

        (3) BANK SHOULD HAVE A SPECIAL PASS BOOK GIVEN TO THE DEPOSITOR WITH THEIR PARTICULARS AND ROOM TO INDICATE THE DATE B& TIME THEY ARRIVE OR LEAVE

        • Admin Bankedge

          RBI reviews the guidelines related to Locker operations from time to time and they take into account the security aspects and issues referred while doing so. Moreso, as pointed out herein, at busy branches, where there are more Locker operations, lengthy procedure being followed for each individual would only consume time and the branch is providing Locker Services only as an ancillary service, and officers will also be attached with other duties. There are so many formalities and guidelines to be followed as suggested, which RBI should only implement. Possibly with the recent developments on Digital Banking, COVID19 is expected to bring lot of changes in the banking. Let us wait and see.

  • Swati saha

    My manager of erstwhile Allahabad bank b.garden branch is denying access to locker service showing covid 19 reference I do have emergency of taking loan against gold for my daughters education can she do that

    • Admin Bankedge

      This is how banks will work during a nationwide coronavirus lockdown:

      • Clearing of cheques, remittance facilities and government transactions are also listed as essential services.
      • Bank branches will offer merely a few essential financial services such as cash deposit and withdrawal from Monday as India goes into lockdown to combat the spread of coronavirus.
      • Clearing of cheques, remittance facilities and government transactions are also listed as essential services.
      • An appeal to the customers by Indian Banks’ Association reads, that they bear with them as other non-essential services during this period may be suspended. ATMs will be operating across the country.
      • The central government and state governments have decided to lock down in several districts across the country till June 30 where Covid-19 cases have been reported.
        Several banks have decided to stagger their work force under business continuity plans based on government guidelines and a standard operating procedure. Accordingly, they have asked about 50% of the workforce or the minimum strength of staff required to run the critical branch jobs to attend their workplace. The remaining staff will be working from home.
      • The rotation of staff attending office and those advised to work from home will be made once in two days.
      • IBA adds that most banking services are today available online. Banks claim that they are working round-the-clock to ensure all digital channels are up-to-date and have all the information that customers may need during this period.

      Hence I personally feel that customers must wait till June end, and then take a call. Things are being normalized in a slow manner. However, with a personal request the Locker can be operated explaining the present circumstances and urgency.

  • Vaibhavi

    QUESTION: Explain the need of letter of credit?
    please try to give answer its very important for me?

    • Admin Bankedge

      In Banking there are two types of advances viz Fund Based Advanced and Non-Fund Based advance. Advances like a Term Loan, Demand Loan, Cash Credit or overdraft are all termed as Fund Based since the bank’s money is lent to the borrowers where the risk involved is more. Similarly a Bank issues a Bank Guarantee or a Letter of Credit which are termed as Non-Fund Advances. These are non-fund based since bank will not directly lend money to the borrowers, but will provide only a guarantee or assurance, on behalf of the borrowers or their customers, for any contract or work that is taken up by the customer.

      Need for a Letter of Credit

      Ram is exporting goods to Shyam. Shyam has no money to pay immediately. He arranges a Letter of Credit from his Banker, which is an assurance that if Shyam fails to pay the amount on a specified date, the Bank will make payment. This assurance encourages Ram to send goods to Shyam, who receives the money on an agreed date from Shyam through his banker and if Shyam fails to make payment, his Banker is committed to pay. Here alternatively Ram also can avail facilities or loan from his banker if he does not have money, by producing this Letter of Credit opened by Shyam in his favour through his banker. Thus, a letter of credit serves the purpose of both the buyer and the seller who can avail facilities from their bankers.

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