Locker Agreement Renewal: RBI Extends Deadline and Issues Revised Guidelines

The Reserve Bank of India (RBI) has recently announced an extension for banks to renew their locker agreements with existing customers. This is to provide enough time for customers who have not yet executed the new agreement to comply with the regulations. In this article, we will take a closer look at the new RBI guidelines and instructions on bank lockers.

Revised Guidelines and Instructions

The RBI has reviewed its existing guidelines and instructions regarding safe deposit lockers and safe custody article facilities offered by banks. The revised guidelines and instructions have taken into account various developments in banking and technology, customer grievances, and feedback received from banks and the Indian Banks’ Association (IBA). The principles enumerated by the Supreme Court in the case of ‘Amitabha Dasgupta vs United Bank of India’ have also been considered.

The revised guidelines and instructions are effective as of January 1, 2022, and apply to both new and existing safe deposit lockers as well as banks’ safe custody of articles facilities. Banks are advised to develop their own board-approved policy and operational guidelines to comply with the revised instructions.

RBI Circular dt. 18/08/2021: RBI’s Revised Guidelines/ Instructions on Bank Lockers

Extension of Deadline for Renewal of Bank Locker Agreements

The RBI had originally instructed banks to renew their locker agreements with existing clients before January 1, 2023. However, the RBI found that a significant number of clients had not yet executed the new agreement and banks had not informed their customers of the new requirement. Therefore, the RBI has extended the deadline for compliance in phases.

Banks are required to ensure that at least 50% or 75% of their existing customers execute the revised agreements no later than June 30, 2023 or September 30, 2023, respectively. For full compliance, 100% of cases should be covered by December 31, 2023.

RBI Circular dt. 23/01/2023: Timeline for Renewal of Bank Locker Agreements extended upto 31/12/2023 in a phased manner

Disclosure of Compliance Status

Banks are required to disclose their compliance status with the RBI’s directives on a monthly basis via the DAKSH supervisory portal. This is to ensure that banks comply with the new instructions and guidelines.

Changes to the Model Agreement by the IBA

The Indian Banks’ Association (IBA) is required to review and revise the Model Agreement to ensure compliance with the RBI’s circular dated August 18, 2021. A revised version of the Model Agreement should be distributed to all banks by February 28, 2023.

In cases where banks have already executed revised locker agreements that differ from the revised IBA Model Agreement, all provisions of the RBI’s circular, particularly Part VII on compensation policy/liability of banks, still apply. Banks may bear the cost of stamp paper in such cases.

Making it Easier for Customers to Execute Agreements

To make it easier for customers to execute fresh/supplementary stamped agreements, banks are advised to take the following steps:

i) Arrange stamp papers;

ii) Franking;

iii) Electronic execution of agreements;

iv) E-stamping; and

v) Provide a copy of the executed agreement to the customer.

Unfreezing of Operations in Lockers

In cases where operations in lockers have been frozen due to non-execution of locker agreements by January 1, 2023, as per revised instructions, the same should be allowed/unfrozen with immediate effect in accordance with the extended timeline.

Conclusion

The extension of the deadline for banks to renew locker agreements with existing customers is a welcome relief for those who have not yet complied with the regulations. Banks are required to ensure that they comply with the new instructions and guidelines by the deadlines set by the RBI. Customers are advised to contact their banks for further information on the renewal of their locker agreements.