The safe deposit locker facility extended by banks has been in the limelight in recent months, with the Hon’ble Supreme Court delivering its landmark judgment in February 2021. The verdict has far-reaching consequences as it settled certain legal issues regarding the applicability of various laws in relation to this service and principles governing the bank’s facility. It directed the Reserve Bank of India (RBI) to prescribe comprehensive steps, within a period of six months, for banks in respect of the safe deposit locker facility provided by them. The court decree also lay down that the banks should not have the liberty to impose unilateral and unfair terms on the consumers. Accordingly, the RBI has reviewed its past instructions and now come out with detailed guidelines superseding its earlier instructions on the subject. These instructions have to be complied with by all the banks in respect of their safe deposit function. The article examines important issues settled by the highest court and the implications of various aspects of the RBI instructions.

1. Safe deposit locker facility - Bank’s business

The safe deposit locker facility provided by banks owes its origin to the relationship of banks with wealthy customers who wanted to have safe storage for their valuables. Banks, being an institution dealing with storage of their own valuable cash and other items, were the most suited to provide this facility. Initially, the individuals used to place their own sealed containers with valuables in the bank’s vault, and the banks provided access to those containers. Though there are institutions other than banks providing this facility, the banks have remained the most popular choice for the safe keeping of valuables.
With the enactment of the Banking Companies Act, 1949 (now Banking Regulation Act, 1949), the provision of safe deposit vaults was permitted as a legitimate business for banks in the country. As a regulator of the banking system in the country, the RBI has also issued guidelines to the banks prescribing instructions to be followed by them in the provision of such facilities.

2. The focus of instructions – Early years

In the early years, there was more focus on ensuring the availability of lockers in residential areas having commercial viability. With the amendment of the Banking Regulation Act (effective from 29 March 1985) providing for nomination facility in respect of safe deposit lockers (Section 45ZC), the banks were required to follow the procedure prescribed by law in dealing with accounts of the deceased locker hirer. The locker facility has always been an important aspect of customer service provided by the banks. The RBI has always accorded priority to customer service in banks, and a landmark step was announced during the Mid Term Review of Monetary and Credit Policy for the year 2003-04 (November 2003). As a part of its policy, each commercial bank was advised to set up an Adhoc Committee to undertake a review of procedures and performance audit on public service rendered by them so as to ensure simplification and rationalisation of procedures so as to improve their performance. These measures were supplemented by the constitution of a Standing Committee on Procedures and Performance Audit on Public Services at the RBI. The Adhoc Committee at banks was also advised to interact with the Committee at the RBI so that improvements could be secured in the banking system as a whole. As an outcome of these efforts, the RBI Committee made certain recommendations for the easy operation of lockers, which were examined by the RBI. As a result, the RBI superseded all its earlier instructions on locker facilities provided by the banks, and a comprehensive set of guidelines specific to this facility was issued in the year 2007. The instructions covered various aspects such as allotment of lockers, security aspects in their operations, access to survivor / nominee / legal heirs, and guidance to be provided to the customer regarding nomination/ survivorship. The guidelines advised banks to refrain from the practice of linking fixed deposits with the allotment of locker beyond the permitted level of covering payment of rent for three years. The banks were also cautioned about the risks involved in renting the lockers and were advised to carry out Customer Due Diligence (CDD) at least to the level in vogue for the ‘Medium Risk’ category. The guidelines on locker facility were also covered as a part of the RBI Master Circular on Customer Service issued in the year 2015.

3. Bank’s duty of care and liability

  1. Banks’ stand
The bank’s duty of care in respect of the locker facility has been a bone of contention and even litigation for quite some time. Though there have been the RBI guidelines emphasising the duties and responsibilities of banks in relation to this service, it has been very difficult for a customer to secure adequate relief from the banks or the regulator in case of deficiency in service. A related question has been the relief available to the customer in respect of a dispute regarding the contents of the locker in case of loss of articles. The dominant reason for such a situation has been the absence of any clear understanding or pronouncement by the courts in respect of laws governing the banker customer relationship in respect of locker facility. Further, irrespective of the banks’ stand on the nature of the relationship with the customers, Right to Information (RTI) responses made a few years ago by the RBI and various public sector banks had a common thread of denial of any liability of the banks for loss or damage of articles placed inside the bank lockers. This uniform stand of banks was also challenged before the Competition Commission of India, being in the nature of anti-competitive practice and cartelisation of banks. However, this did not find favour with the adjudicating authority.

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