 "How to rent a safe deposit locker")
Traditionally, people went to their neighbourhood bank if they wanted to rent a safe deposit locker. But, now non-banking finance companies (NBFCs) have also received permission to offer this facility. While now you will have more choices, you also need to do proper due diligence before deciding which institution's locker facilities to use.
Wider range of choices
In the past, an individual's interaction with an NBFC was mostly limited to taking loans: personal loans, gold loans and consumer durable loans. Sometimes, these NBFCs came out with non-convertible debentures and other types of bonds, which investors subscribed to if they found them attractive. Now, if customers can open a safe deposit locker with an NBFC in which they will keep their valuables, then the dynamics of the relationship will have to undergo a change. NBFCs will have to earn the high level of trust that banks enjoy. Since customers interact with their bank regularly, a bond exists. Hence, they find it easier to entrust their lifetime's savings and valuables with a bank. NBFCs will have to work harder to gain a similar high level of trust.
Acquiring a locker
In the first place, for you to be able to acquire a safe deposit locker at a bank, spare lockers must be available at the neighbourhood branch where you conduct most of your banking transactions. Lockers are not easily available. Not every bank branch offers this facility. In those branches where the facility is available, all the available lockers may be already taken by the older customers. Banks find it difficult to increase the number of lockers in response to rising demand, because this facility must meet certain specifications regarding space and security. These requirements often render it physically impossible for the bank to provide more lockers.
Lockers are available in various sizes ranging from very small ones to large ones. Public sector banks have codes like A, B, C, and so on to denote lockers of different sizes and types. Choose a size that meets your requirement instead of going for the biggest that is available.
You will have to sign a locker rent agreement on a stamp paper for the specific locker that you have chosen. You will also have to meet the Know Your Client (KYC) requirements so that the bank is satisfied with the details that you have presented. In all likelihood, the process will be similar for renting a locker with an NBFC, though the exact details will be known only once they start offering their services.
Prepare to pay rent in advance
The rent that you have to pay for a locker depends upon its size. For a small-sized locker the rent is a little over a thousand rupees per year, while for larger-sized ones you may have to shell out a few thousand. The rent also depends on the type of bank and the location of its branch.
One point to remember about locker rent is that it has to be paid in advance. This is not a service that you can avail of and then pay for at the end of the year. In some cases, banks collect three years' rent in advance. Usually, the locker facility is linked to your savings bank account. So it is easy for the bank to debit the rent directly from your savings account. Be prepared for this cost to appear once every year in your bank statement and maintain the requisite minimum deposit (in the month when it is debited) to meet this cost. If you don't pay the rent despite repeated reminders, the bank could seal your locker and not allow you to operate it until you make the payment.
Make a security deposit
Banks also ask for additional security in the form of a fixed deposit from customers who wish to rent a locker. The amount of fixed deposit varies from one bank to another and could range from Rs 5,000 to Rs 10,000. This deposit will, of course, earn you a rate of interest as offered by the bank. However, the customer has to be prepared to have a certain amount of his money locked up with the bank, which he can't use elsewhere. There is an opportunity cost involved here, since you can't deploy the money in higher-return instruments or put it to use for any other purpose.
Factor in the risks
Since your valuables are going to be kept in the locker, you must ensure that they will be utterly safe. There is a difference on this count between a safe deposit locker and other banking products. In case a bank goes under, your savings with the bank are insured up to Rs 1 lakh. No such guarantees are available for a safe deposit locker. The bank also does not take responsibility for the contents of the locker. If they are damaged, the loss has to be borne by the customer. You may get the valuables kept in the locker insured on your own to safeguard yourself against losses. NBFCs have been asked to inform customers that their locker service is not regulated by the Reserve Bank of India. Thus, NBFCs are also not likely to take any responsibility for the contents of the locker. This makes it all the more essential for customers to do the due diligence before they select the entity with which they would like to entrust all their valuables. Besides cost and ease of operation, safety should be your paramount consideration when choosing the right entity.
Wider range of choices
In the past, an individual's interaction with an NBFC was mostly limited to taking loans: personal loans, gold loans and consumer durable loans. Sometimes, these NBFCs came out with non-convertible debentures and other types of bonds, which investors subscribed to if they found them attractive. Now, if customers can open a safe deposit locker with an NBFC in which they will keep their valuables, then the dynamics of the relationship will have to undergo a change. NBFCs will have to earn the high level of trust that banks enjoy. Since customers interact with their bank regularly, a bond exists. Hence, they find it easier to entrust their lifetime's savings and valuables with a bank. NBFCs will have to work harder to gain a similar high level of trust.
Acquiring a locker
In the first place, for you to be able to acquire a safe deposit locker at a bank, spare lockers must be available at the neighbourhood branch where you conduct most of your banking transactions. Lockers are not easily available. Not every bank branch offers this facility. In those branches where the facility is available, all the available lockers may be already taken by the older customers. Banks find it difficult to increase the number of lockers in response to rising demand, because this facility must meet certain specifications regarding space and security. These requirements often render it physically impossible for the bank to provide more lockers.
Lockers are available in various sizes ranging from very small ones to large ones. Public sector banks have codes like A, B, C, and so on to denote lockers of different sizes and types. Choose a size that meets your requirement instead of going for the biggest that is available.
You will have to sign a locker rent agreement on a stamp paper for the specific locker that you have chosen. You will also have to meet the Know Your Client (KYC) requirements so that the bank is satisfied with the details that you have presented. In all likelihood, the process will be similar for renting a locker with an NBFC, though the exact details will be known only once they start offering their services.
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Prepare to pay rent in advance
The rent that you have to pay for a locker depends upon its size. For a small-sized locker the rent is a little over a thousand rupees per year, while for larger-sized ones you may have to shell out a few thousand. The rent also depends on the type of bank and the location of its branch.
One point to remember about locker rent is that it has to be paid in advance. This is not a service that you can avail of and then pay for at the end of the year. In some cases, banks collect three years' rent in advance. Usually, the locker facility is linked to your savings bank account. So it is easy for the bank to debit the rent directly from your savings account. Be prepared for this cost to appear once every year in your bank statement and maintain the requisite minimum deposit (in the month when it is debited) to meet this cost. If you don't pay the rent despite repeated reminders, the bank could seal your locker and not allow you to operate it until you make the payment.
Make a security deposit
Banks also ask for additional security in the form of a fixed deposit from customers who wish to rent a locker. The amount of fixed deposit varies from one bank to another and could range from Rs 5,000 to Rs 10,000. This deposit will, of course, earn you a rate of interest as offered by the bank. However, the customer has to be prepared to have a certain amount of his money locked up with the bank, which he can't use elsewhere. There is an opportunity cost involved here, since you can't deploy the money in higher-return instruments or put it to use for any other purpose.
Factor in the risks
Since your valuables are going to be kept in the locker, you must ensure that they will be utterly safe. There is a difference on this count between a safe deposit locker and other banking products. In case a bank goes under, your savings with the bank are insured up to Rs 1 lakh. No such guarantees are available for a safe deposit locker. The bank also does not take responsibility for the contents of the locker. If they are damaged, the loss has to be borne by the customer. You may get the valuables kept in the locker insured on your own to safeguard yourself against losses. NBFCs have been asked to inform customers that their locker service is not regulated by the Reserve Bank of India. Thus, NBFCs are also not likely to take any responsibility for the contents of the locker. This makes it all the more essential for customers to do the due diligence before they select the entity with which they would like to entrust all their valuables. Besides cost and ease of operation, safety should be your paramount consideration when choosing the right entity.
The writer is a certified financial planner