The RBI has issued new instructions to Banks providing locker facilities to their customers.
In this article, we look at some of the significant changes introduced by these instructions pertaining to communication between banks and customers, the problems that they might create for banks, deadlines for compliance and how banks can comply with the instructions quickly and easily.
Didn’t we already have instructions from the RBI on this subject? Why did they issue revised instructions?
In 2021, the Supreme Court directed the RBI to issue “comprehensive directions mandating the steps to be taken by banks with respect to locker facility/safe deposit facility management”. The Supreme Court felt that the previous regulatory framework issued by the RBI on this subject was “inadequate and muddled”.
These observations and directions were made by the Supreme Court to address the increasing number of grievances from customers regarding locker facilities availed by them with banks. Over the years a number of customers have gone to Courts and and other judicial forums to resolve their disputes regarding locker facilities specifically - lost goods, closure of lockers and disposal of its contents without adequate notice etc.
In line with the directions of the Supreme Court and to enact a comprehensive regulatory framework, the RBI issued the Locker Facility Instructions. These instructions cover a wide range of topics regarding the operation of locker facilities by banks - security procedures to be followed, communications to/from customers, settlement of claims, discharge of the contents of the locker etc.
What are these new changes and how can I comply with them?
There are 4 broad changes:
Locker Agreements
Nomination Facility
Identity Verification for Opening Lockers
Customer Approval for Breaking Open the Locker
Below we describe the exact change, the operational and compliance issues this will create AND how Leegality can help.
1. Locker Agreements
The change
Your bank must now enter into a duly stamped locker agreement with your customers. A copy of the locker agreement signed by both the bank and the customer must be furnished to the customer, and the original agreement shall be retained with the bank’s branch where the locker is situated. (Clause 2.1.2)
The problem
Managing thousands of physical locker agreements is a logistical nightmare:
- Coordinating with stamp vendors to ensure you have an adequate inventory
- Manually filling in the details in the locker agreement - and verifying that there are no mistakes
- Calling customers to the branch just for signing OR sending one of your employees to the customer’s house
- Storing these physical documents is legally risky as they are prone to general wear and tear. Loss of even a single document can make life difficult for you during an RBI audit. You will also need to renew ALL your existing agreements - creating a massive backlog.
How Leegality can help
1. Populate and send out all your pending locker agreements in minutes through Leegality Excel Journey. Your branch managers can activate this workflow without IT/tech team intervention.
2. Agreements are automatically stamped through Leegality BharatStamp - India’s only 100% compliant digital stamping system - live in 26+ States/UTs.
3. Customers get the agreement signing link on their phones. After viewing them - they can eSign in seconds from the comfort of any location via a range of IT Act compliant signing options. With Leegality’s Smart Name Verification feature, you also ensure that the signer is using their own eSignature to sign.
4. The bank’s authorised signatory (e.g- branch manager) can sign the agreements individually using DSC tokens or Aadhaar eSign, or sign multiple agreements automatically with Automated and Bulk Sign.
5. Our CC feature will ensure that branch officials can monitor the journey of the agreement, and that a copy is saved with them.
6. Once your bank and the customer have signed, the completed locker agreement will be sent to your customer’s email/SMS instantly. It can be sent to your core banking system using SFTP or via webhook (if you have done an API integration).
2. Nomination Facility
The change
The various forms required for nomination facility (as listed in clause 5.1.2) must either be signed by the customer OR authenticated using thumb impression and attested by 2 witnesses.
Banks must also acknowledge the receipt of duly completed form of nomination, cancellation and/or variation of the nomination.
The problem
Physically executing nomination forms is a tedious task: 1. Asking customers to come to the branch to sign and provide their nomination forms significantly increases TAT and dilutes customer experience. 2. In case of physical thumb impressions on paper, the customers will also have to get 2 witnesses to attest. 3. You will then also have to create a proper system of acknowledging the nomination forms received.
How Leegality can help
1. Simply send the nomination forms to your customer’s email/SMS.
2. Your customers can sign the agreement remotely using Aadhaar OTP eSign. Your customers can also sign at the branch with their thumb impression using Aadhaar Biometric eSign. Thumb impressions via Aadhaar are eSigns under the IT Act and do not require witness attestation.
3. Once the bank and the customer have signed, the completed forms will be sent to the bank and the customer’s email/SMS. This shall act as an acknowledgement of the receipt of the forms.
3. Identity verification for opening lockers
The change
Only after conducting “proper identification of their identity” can banks let customers operate the locker. Banks must also maintain a record of all individuals, including the locker-hirers, who have accessed the lockers and the date and time (both check-in and check-out time) on which they have opened and closed the locker and obtain their signature.
The problem
You will have to set up a new system for verifying the identity of the customer who wishes to operate the locker.
How Leegality can help
1. With Aadhaar eSign, you can solve both requirements - verification of identity and customer signature - in one go. To perform an Aadhaar eSign your customers will have to validate their identity using OTP/Biometric which will serve both the aforementioned purposes.
2. With Leegality’s Smart Name Verficiation feature, you can ensure that the correct individual is eSigning.
4. Customer approval for breaking open the locker
A. At the request of the customer
The change
If the customer loses the key to the locker, she must notify the bank immediately. An undertaking may be obtained from the customer stating that the key lost, if found in the future, will be handed over to the bank. The locker can be opened by the bank only after “proper idenftification” of the customer, proper recording of the fact of loss and written authorisation by the customer for breaking open the locker.
The problem
You will have to set up a new system for verifying the identity of the customer who wishes to break open the locker and keep a proper trail and record of all authorisations and undertakings.
How Leegality can help
1. With Aadhaar eSign, you can verify the identity of the customer and let them sign the undertaking and authorisation.
2. With Leegality’s Smart Name Verification feature, you can ensure that the signer is eSigning with their own eSignature.
B. Due to non-payment of locker rent
The change
Banks have the discretion to break open any locker if the rent has not been paid by the customer for three years in a row. While returning the contents of the locker, the bank must obtain acknowledgement of the customer on the inventory list to avoid any dispute in the future.
The problem
Often customers would dispute the contents that were supposed to be in the locker when it was broken open by the bank. Hence, the RBI has now mandated that banks must share the list of inventory collected from the locker and record the acknowledgement of the customer regarding the list. Being a key document, storing 100s and 1000s of these in physical form is a serious regulatory risk. Furthermore, this inventory list will be created at the bank and will have to be delivered to the customer - which requires a lot of time and manpower.
How Leegality can help
1. Once the inventory list has been created, your branch official can easily send it to the customer’s email/SMS using Leegality.
2. Your customer can acknowledge the list by signing on it from the convenience of her home using Aadhaar eSign.
3. With Leegality’s Smart Name Verficiation feature, you can ensure that the correct individual is eSigning.
Is there a deadline by which we need to comply with these Instructions?
For existing locker customers, you have to renew their locker agreements in line with the requirements of Clause 2 of the Locker Facility Instructions by 31 December, 2023.
All the other changes that we have discussed, pertaining to nomination facility, identity verification and customer approvals have been in effect since 31 December, 2023. The time to comply with them is NOW.
Will copies of the signed documents be saved at the branch?
The signed completed documents can be saved in the core banking system. Additionally, before sending out the agreement for eSigning, you can mark branch officials using the CC feature. This will ensure that they receive a copy of every signed document relevant to their branch.
How exactly will this new digital journey work for my organisation?
Here’s the step-by-step visual representation of the new digital flow for executing new locker agreements AND renewing old locker agreements:
Without API integration:
With API integration:
Here’s what the new digital paperwork flow will look like for nomination facility, identity verification and customer approvals:
Why Leegality’s Document Infrastructure platform is the ideal solution for you
Leegality Document Infrastructure is currently being used by 250+ Indian BFSI orgs ((Federal Bank, Bank of Baroda, South Indian Bank, ICICI Bank, HDFC, SBI Cards and more) to digitally transform their paperwork processes in a secure, compliant way.
A snapshot of the advantages:
A compliance first approach with India’s only 100% legally compliant digital stamping system and IT Act and RBI recognised electronic signatures
Accelerate productivity by reducing TAT and letting bank employees focus on their core tasks
Slash direct costs of paperwork and stamp paper inventory costs
Enhanced customer experience - convert bank paperwork from being a painful process into a pleasant one for your customers aFraud proof - Leegality has in-built fraud mitigation measures
Tech team too busy to do an API integration? With Leegality’s dashboard even business teams can set up Workflows and GO-live in less than a day
Our API can be integrated and tested in less than 28 days
Your operations should never stop. That’s why we have 3 Aadhaar eSign connections so that you always have instant backups ready
More enforceable Leegality signed documents are easier to enforce in Court compared to physical documents since they enjoy presumptions of validity under the IT Act and Evidence Act.
Want a tailor-made demo to see how it will work out for you?
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