Bank lockers have always remained the first choice of people to safeguard their valuables. Even as it is believed that bank lockers are the safest places to keep valuables, incidents of damage to the lockers in any untoward incident at the bank branch have been a source of strain in the relationship between a customer and the bank. This has led to innumerable legal battles between the banks and the locker holders, where the banks have been pitching that they are in no way responsible/ liable for the contents kept in the locker by the hirer.
Even as I have discussed this issue in some of my previous columns, today it again merits a mention as the Reserve Bank of India (RBI) in its latest guidelines on August 18, 2021 among other things has explicitly explained the responsibility of banks in case articles kept in a locker are damaged.
According to the RBI, the guidelines have been revised while taking into consideration the various developments in the area of banking and technology, nature of consumer grievances and also the feedback received from banks and Indian Banks’ Association (IBA). The revised instructions will be applicable to both new and existing safe deposit lockers and the safe custody of articles facility with the banks.
Actually, the RBI has removed the ambiguity in the subject matter after the Supreme Court pronounced its judgment on February 19, 2021 in a locker dispute case titled ‘Amitabha Dasgupta vs United Bank of India’ and directed the Reserve Bank to revisit the guidelines in the interest of customers (lock holders). The bank had broken the locker without knowledge of the lock holder.
Let me reproduce a part of the Supreme Court judgment stating that the Respondent Bank inadvertently broke the Appellant’s locker, without any just or reasonable cause, even though he had already cleared his pending dues. Moreover, the Appellant was not given any notice prior to such tampering with the locker. He remained in the dark for almost a year before he visited the bank to withdraw his valuables and enquired about the status of the locker. Irrespective of the valuation of the ornaments deposited by the Appellant, he had not committed any fault so far as operation of the locker was concerned. Thus, the breaking open of the locker was in blatant disregard to the responsibilities that the bank owed to the customer as a service provider.
The judgment further states that “the alleged loss of goods did not result from any force majeure conditions, or acts of third parties, but from the gross negligence of the bank itself. It is a case of gross deficiency in service on the part of the bank.”
Notably, the apex court imposed costs of Rs. 5 lakh on the Bank to be paid to the Appellant as compensation. Further, the bank was asked to pay Rs. One lakh as litigation expense to the litigant.
The apex court while listing the importance of the subject matter made some observations. “With the advent of globalization, banking institutions have acquired a very significant role in the life of the common man. Both domestic and international economic transactions within the country have increased multiple folds. Given that we are steadily moving towards a cashless economy, people are hesitant to keep their liquid assets at home as was the case earlier. Thus, as is evident from the rising demand for such services, lockers have become an essential service provided by every banking institution. Moreover, due to rapid gains in technology, we are now transitioning from dual key-operated lockers to electronically operated lockers. In the latter system, though the customer may have partial access to the locker through passwords or ATM pins, etc., they are unlikely to possess the technological know-how to control the operation of such lockers. On the other hand, there is the possibility that miscreants may manipulate the technologies used in these systems to gain access to the lockers without the customers’ knowledge or consent. Thus the customer is completely at the mercy of the bank, which is the more resourceful party, for the protection of their assets.”
In such a situation, the banks cannot wash off their hands and claim that they bear no liability towards their customers for the operation of the locker. The very purpose for which the customer avails of the locker hiring facility is so that they may rest assured that their assets are being properly taken care of. Such actions of the banks would not only violate the relevant provisions of the Consumer Protection Act, but also damage investor confidence and harm our reputation as an emerging economy, reads the Supreme Court judgment.
Who will compensate the customer if his/her valuables kept in the locker are lost or damaged?
The revised guidelines explicitly mention two situations which can be the cause of damage to the locker, leading to the loss of valuables to the lock holder. In this first situation, if the content of the locker is lost due to mishaps like fire, theft, burglary, dacoity, robbery, building collapse, it’s the liability of the bank to compensate the customer. Even the bank is liable to pay compensation in case there is loss of valuable owing to fraud committed by the employees of the bank. Remarkably, the RBI guidelines state that in instances where loss of contents of the locker are due to incidents mentioned above, the banks’ liability shall be for an amount equivalent to one hundred times the prevailing annual rent of the safe deposit locker.
In the second situation, if the content of the locker is lost or damaged due to natural calamities or “Act of God” events like earthquakes, floods, lightning, and thunderstorm or any act that is attributable to the sole fault or negligence of the customer, the bank would not be liable for the loss. However, the RBI guidelines direct the banks to exercise appropriate care to their locker systems to protect their premises from such catastrophes.
Banks have been asking customers to deposit a certain amount in the fixed deposit instrument of the bank. What are the RBI guidelines in this regard?
The RBI guidelines allow the banks 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, shall not insist on such Term Deposits from the existing locker holders or those who have satisfactory operative accounts. 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 under the new guidelines.
It is worth mentioning, if the customer fails to pay locker rent for three consecutive years, banks will be free to break open any locker following due procedure.
Meanwhile, if locker rent is collected in advance, in the event of surrender of a locker by a customer, the proportionate amount of advance rent collected shall be refunded to the customer.
What is the responsibility of the lock holder?
The first and foremost thing is to satisfy yourself about the safety measures taken by the bank from where you are going to hire a locker. Don’t shy from asking questions to the bank officials about the steps taken for the safety of the lockers. Make an inventory of all the items that you place in the locker. Keep receipts of all jewellery items stored in the locker. Don’t store these receipts in the same locker where you store the jewellery. Keep a record of your visits to the locker and make a note of what is taken out and put back. Always ensure that you have complete privacy when you operate the locker. Normally a bank employee doesn’t remain there when you operate your locker, but if you find the employee still there watching your operations ask him to leave the spot. Don't even allow a bank employee to open or close the locker for you.