Bank lockers
REUTERS/Vivek Prakash

Your bank can now lock up responsibility and throw the key away without being questioned about it. The Reserve Bank of India made it official this week sans a notification to the effect. Never mind the Rs 2,500 or so maintenance fees which a bank slaps you with as locker charge. If your valuable laptop or diamond necklace goes missing, they will have no liability, whatsoever. That's right. You lose your valuables kept in trust with the bank as part of a paid service and the bank has the right to not believe that it bears responsibility for your losses.

The likelihood of dubious contents being stashed away inside a locker never really posed ethical issues for banks. Now, it appears that losing them through negligence doesn't either. One private sector bank even advertises locker services on its website with the picture of an open locker brimming with cash and jewellery.

Lockers rarely come cheap in the metros. Smaller lockers of private sector banks charge hiring fees as high as Rs 2,500 or above per annum in a metro city, while the larger lockers can be hired for upto Rs 10,000 per annum – provided you can break the long waiting list and get to them.

When banks absolve all liability for customer losses for goods expected to be safe in their custody, the question of safekeeping ethics and professional probity will justifiably arise. The services and humanitarian angle to levying a charge on safekeeping is to ensure peace of mind and quick access to highly valuable goods, the safety of which otherwise, would not be guaranteed with any degree of probability. The fact that customers routinely hoard cash and valuables within bank lockers to escape the taxman's scanner is a diverting sub-text.

Regardless of the origin or sanctity of the lockered goods, the bank's liability does not end with charging the locker fee – a fact that banking regulator RBI is aware of, and its customer-friendly moves on the Ombudsman Scheme this week, would amply attest to. Burglary or discovery by the wrong people is a key risk posed to valuables -- which would not find their way to safe deposit boxes of public sector banks if they were as invulnerable as RBI's repudium implies.

No liability? [Representational image]Creative Commons

Lots of gold in there

The RBI feels that customers must not expect compensation for theft or burglary of their valuables within safe deposit boxes of public sector banks as locker hiring agreements typically absolve banks of all liabilities under almost any eventuality.

Yellow may not be the colour of hope at the moment, unless you have earned your gold the wrong way, and can afford to lose large quantities of it in the event of a locker burglary or fire. As a master stash, gold leads the list, often in the form of jewellery – of the 22,000 tonnes of gold in the public domain in India, at least 15,000 tonnes languish within the murky confines of scores of bank lockers.

Yes, that's a lot of gold idling in there. But back to the RBI's diktat. The regulator's guideline which absolves banks of all liability in cases of theft of valuables in their custody is only a variation of the theme. For some time, the locker hiring agreements of banks have hinted at no less, though absolution of liability was sought by the bank only when certain conditions imposed by it were violated by the locker hirer.

The locker hiring agreement of a leading private sector bank postulates thus: "The Hirer shall not assign, transfer or sublet the Locker or any part of it, nor permit it to be used for any purpose other than for the deposit of documents, jewellery or other valuables and shall not use the same for deposit of any property of any explosive or destructive or offensive nature or of a type which in the opinion of the Bank be/become a nuisance. The Hirer shall indemnify the Bank against any demand, claim, loss, damages, costs and expenses made against, sustained or incurred by the Bank by reason of the use of the Locker by the Hirer in contravention of this provision."

The central bank's carte blanche now gives banks the wherewithal to strike out inconvenient conditional clauses which would even remotely pin liability or responsibility on their backs in the event of customers losing their valuable documents, jewellery or other valuables. But a virtual writeoff from responsibility already exists in bank locker agreements.

Another section from the same private sector bank's locker hiring agreement reads, "While the Bank will exercise all such normal precautions as it may in its absolute discretion deem fit, does not accept liability or responsibility of any loss or damage whatever sustained to items deposited in the Locker. Accordingly, the Hirer are advised in his/her own interest to insure any items of value deposited in the Locker with the Bank.

The demand cartel

The demand for lockers often outstrips supply, and altering the legitimate torts within an agreement (with RBI's graces) could, in future, help banks cater to an incredibly subservient cohort of well-heeled hirers who wouldn't mind glossing over the loss of their cash/valuables after all. A drastic alternation of hirer profiles will have its impact, but banks stand to gain by way of the higher asset quality of goods coming into their custody. So, would future hirer profiles feature only mega rich clientele with pockets deep enough to absorb losses?

That said, bank agreements do convey rather subtly that their relationship with a locker hirer is on the lines of a landlord-tenant accord, where residency is paid for, but not liability for losses or destruction of a stored good. But what is deliberately ignored is the bigger picture, which is that, unlike a conventional rental agreement, banks release their lockers to hirers after undertaking to ensure the security of the inventory in their custody – and without offering specific insurance cover for the locker's contents.

Allegations of a locker cartelisation plan being plotted by a coterie of public sector banks are rending the air. These may or may not be without basis at the moment. Indeed, there is a case for the Competition Act to be called into operation at this instant, when a blatantly anti-competitive nee anti-customer practice being promoted by the banking regulator threatens to rend the customer-banker relationship apart.

The question of these public sector banks coming out of their self-serving mindset and becoming remotely customer-facing will be a tall order, for now best left to hope. Let the Competition Commission, RBI and the Union Finance Ministry start with mandating our lossmaking public sector banks to prescribe parameters which assess possible losses to locker hirers and assign accountability across their hierarchies in anticipation of an adverse event – instead of insuring themselves against future incompetence.