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Banks' liability for deficiency in locker services

April - June 2022

Is it safe to store your valuables in a bank locker? This is a question that many of us have when thinking about renting bank lockers. People could spend an annual sum of anywhere between INR 1,000 to 16,000 (depending on the size of the locker) to rent out a bank locker facility; the inevitable question then is whether bank lockers offer the safety that we’re spending on?  Experts like Pulkit Punj, “Director, Security solutions firm AnG India” and Sanjay Rajawat, “Head, Liabilities Business, AU Small Finance Bank” have said that it is better to rent out a locker in order to store valuable items instead of keeping them at home regardless of how high-tech the safe in our houses may be.

Banks strive to maintain and provide suitable security to its premises so that the bank is guarded against any misfortune. The locker location is installed with several security cameras and other measures to ensure maximum safety.  This includes measures such as CCTV cameras at the entries and exits, burglar alarms, strong rooms, safety lockers, and security guards on their premises. A few private banks also make use of state-of-the-art technological innovations such as pressure sensors and fire sensors. The main reason people spend on safety lockers is because as individuals, we cannot afford to provide such security measures in our own homes. We, therefore, have the right to ask a bank about the level of security they offer such as when the cameras were installed and where all the cameras are placed so that we can make informed decisions about how safe the system is.

In order to rent a bank locker, the banks will typically ask the customer to open a Fixed/ Term Deposit (FD) account. The reasoning behind this is that banks might face some issues like non-payment of rent from customers.  According to the Reserve Bank of India (RBI) guidelines, the bank can ask a customer to open an FD account for the amount that is three times the amount of the locker rent i.e., rent for three years, plus the charge of breaking the lock. The RBI guidelines also leave it to the discretion of the bank managers to decide not  to charge for a locker if the customer has a satisfactory operative account. Once this process is done the bank will allot the locker. In case all the lockers are being used the bank will put the customer's name on the waitlist. The RBI guidelines also briefly talk about what exactly the banks can be held liable for and what are measures the banks have to take in case of mishaps.

Although the bank locker is the best way to store one’s valuable items safely, customers still face problems due to unforeseen circumstances or negligence on the part of the banks or even customers. Some events due to natural calamities like earthquakes, thunderstorm tsunamis, and floods are hard to prevent;  whereas others could be caused due to deficiency in the service provided by the banks.   

The question about the extent of liability the banks have in regard to the deficiency in locker service came up in the case of Amitabha Dasgupta (appellant) vs. United Bank of India & Ors. (respondent). In this case, the appellant’s mother had taken a locker on rent in the 1950s from the Kolkata branch of the United Bank of India and in 1970 the appellant had become a joint owner of the locker along with his mother. On 27th May 1995, the appellant visited the bank to operate the locker and deposit the locker rent. However, the appellant was informed that the bank had broken open his locker on 22nd September 1994 because of non-payment of the rent for the period of 1993-1994 and no warning or notice was given to the appellant prior to breaking the locker. The appellant told the respondent that such breaking of his locker by the Bank was illegal as he had cleared dues for 1994-1995 on 30th July 1994, i.e., prior to the breaking of the locker. After this, the respondent Bank said that they had broken the locker accidentally without any outstanding dues on the part of the appellant and apologized for the same. When the appellant later went to collect the items that were kept in the locker, he found that only two out of the seven gold ornaments were remaining, but the respondent Bank claimed that when the locker was broken open only two items were present. The appellant later filed a case in the District Consumer Forum and asked the Bank to return the missing gold items or pay compensation for the damages he suffered. Eventually, on February 19th, 2021, the Apex Court held that the bank is liable for their deficiency in the locker service, and a compensation of Rs. 5 lakhs was paid to the appellant.

Following the judgment, the Supreme Court directed the RBI to issue proper guidelines for banks to follow with respect to the locker service and its deficiencies. The RBI was given a period of 6 months to make and issue the rules for banks to follow from the date of the judgment and the banks were supposed to follow these guidelines within 90 days from its release. The guidelines came into force from January 1st, 2022.

The guidelines set out by RBI on the liability of banks include:

  • The Bank must put out a Board approved blueprint that talks about the level of responsibility upon the bank in the case of negligence and where there was no duty of care when necessary.
  • The Banks shall not be held liable for any items that are missing or damaged due to any natural calamities like earthquakes, floods, tsunamis, etc.
  • When the customer is negligent and their valuables go missing or are damaged in any way, the Bank will not be held liable.
  • If the items in the locker are lost or damaged due to any fire, theft, burglary, dacoity, robbery, building collapse, or in any case of fraud committed by the employees of the bank, the bank will be held liable as it is their duty to safeguard the lockers. 

The release of the RBI guidelines that describe and explain liability along with the compensation owed by banks, is another step in increasing the level of safety that a customer expects from bank lockers. 

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