Revised rules for safe deposit lockers, new KYC norms to buy insurance: 6 money changes in January to watch out for

The RBI complied with the order in August, issuing a circular that required banks to have a board-approved agreement in place for lockers. “Banks may adopt the model locker agreement to be framed by Indian Banks’ Association (IBA). This agreement shall be in conformity with these revised instructions and the directions of the Hon’ble Supreme Court in this regard,” the RBI notification said.

The new rule came into force on January 1, 2022 for new locker facilities, but for existing customers, banks have to complete the process by January 1, 2023. Banks such as SBI and Central Bank of India, among others, have been exhorting their customers to get these agreements in place by December 31, 2022.

The objective is to protect the locker-holders’ interests, though visits to bank branches to draft agreements on stamp papers have resulted in major inconvenience for many customers, especially senior citizens. While some banks are facilitating the process by providing the agreement documents in the requisite format, others have asked their customers to procure stamp papers for the purpose.

According to RBI rules, the agreement will have to be drafted on a stamp paper. “At the time of allotment of the locker to a customer, the bank shall enter into an agreement with the customer to whom the locker facility is provided, on a paper duly stamped. A copy of the locker agreement in duplicate signed by both the parties shall be furnished to the locker-hirer to know his/her rights and responsibilities. The original agreement shall be retained with the bank’s branch where the locker is situated,” it said.

While some banks have been sending text messages to their customers regarding locker agreement renewal, many haven’t issued any such instructions, leaving a question mark on the repercussions for such locker-holders and their locker facilities.

“Part of the mandate is that the banks will renew their locker agreements with existing locker customers by January 1, 2023. However, there is no clarity yet on whether this date has been extended or not. Customers are advised to reach out to their bank and update the locker agreement, if required,” says Adhil Shetty, CEO, Bankbazaar.com.

You should also ensure that you access your locker at least once a year to avoid penal action. “Banks are permitted to break them open using the protocols laid in the locker agreement. To avoid such troubles, it is best to operate the account at regular intervals,” he adds.

The RBI has permitted banks to obtain fixed deposits (FDs) capable of covering three years’ rent and charges of breaking open the locker, if needed, at the time of locker allotment. This is to cover the risk of situations where the locker-holder neither operates the locker nor pays the rent. However, banks cannot do so in the case of customers with a good track record.

“Banks, however, shall not insist on such term deposits from existing locker-holders or those who have satisfactory operative account. The packaging of allotment of locker facility with placement of term deposits beyond what is specifically permitted above will be considered as a restrictive practice,” the notification said.

If the bank collects locker rent in advance, but the locker-holder surrenders the locker mid-term, the bank will have to refund the proportionate amount of advance rent collected.

The central bank has also directed banks to ensure that no “unfair terms or conditions” are incorporated in their locker agreements. “Further, the terms of the contract shall not be more onerous than required in the ordinary course of business to safeguard the interests of the bank,” it said.

On your part, you would do well to enquire with your bank at the earliest about the requirements and process as also the consequences of not entering into this revised agreement by January 1, 2023.

On the ground, some bank branches are asking their customers to put these agreements in place "at the earliest", without specifying any deadline.

And if your bank has given you an agreement to sign on, read the agreement carefully. If you disagree with the clauses your bank has put down, talk to your bank to agree upon the terms laid down on how you’ll operate your locker.

Also read: Mis-selling: Is your bank asking you to pledge gold to save on locker rent?

Time to file investment declarations for claiming tax deductions
Most employers require their employees to submit investment declarations in the month of January.

While at times employers do extend the deadline to February or even March, it is best to complete the process as soon as possible. You need to file proof of investments made, insurance policies purchased, or home loans taken out to claim deductions under sections 80C, 80D, 24 and so on.

Failure to meet the deadline set by your employer will mean excess tax deduction from your salary. While you can claim a refund from the income tax department for this excess deduction, submitting your investment proof on time will eliminate this hassle.

Also read: Simply Save | How to make wise tax-saving moves

KYC mandatory for buying insurance policies
If you wish to buy a health, travel or motor insurance policy post January 1, you will have to mandatorily complete the know-your-customer (KYC) process, as per the Insurance Regulatory and Development Authority of India’s (IRDAI) new rules.

“Earlier, customers were required to submit their PAN and Aadhar only if the claim value was greater than Rs 1 lakh. Now, new customers buying health, travel and motor insurance policies need to submit their ID and address proof documents such as PAN card, Aadhaar, Voter’s ID, driving licence and passport. This new rule will apply to all types of insurance — life, general, travel, motor and health insurance, from January 1, 2023 onwards,” says Sarbvir Singh, CEO, Policybazaar.com.

Passbook copies no longer valid proof for investing in mutual funds
Effective January 1, 2023, bank statement or passbook copy will not be accepted as proof of address for completing the KYC process for individual mutual fund investors. For Hindu-undivided family (HUF) entities, bank statements, however, can be accepted for completing the KYC process.

Investors can continue to use passport, voter ID, driving licence, NREGA job card, National Population Register letter and proof of possession of Aadhar for completion of their KYC along with other permissible documents.

Reduction in face value of debt securities
From January 1, SEBI has reduced the face value of debt security and non-convertible redeemable preference shares issued on private placement basis to Rs 1 lakh from Rs 10 lakh. The move will help enhance liquidity in the corporate bond market.

Under the current rules, the face value of each debt security or non-convertible redeemable preference share issued on private placement basis is Rs 10 lakh and the trading lot is equal to the face value. The new guidelines will be applicable to all issues of debt securities and non-convertible redeemable preference shares on private placement basis through new ISINs, on or after January 1, 2023.

Authorisation must for partial withdrawal for NPS government subscribers
On January 14, 2021, during the COVID-19 phase, the Pension Funds Regulatory and Development Authority (PFRDA) had decided to allow all National Pension System (NPS) subscribers to make partial withdrawals without verification and authorisation by the nodal officers or points of presence.

Noting that the pandemic-related challenges have abated, the pension regulator has, from January 1, 2023, made it mandatory for government sector subscribers to submit their requests through their associated nodal offices. For other customers, there is no change in the process.