A string of income-tax department raids on private lockers and safety vaults across Delhi and Kolkata has sent the ‘business of safekeeping’ into a tizzy. While top vault providers have intensified the know-your-customer process, several smaller ones have downed shutters permanently.
“The recent I-T raids have taken away whatever little business we had,” said the proprietor of a Mumbai-based vault firm which plans to wind up over the next six months. “Private locker business collapsed immediately after demonetisation… There’re not many businessmen holding cash anymore. I-T raids have only added to our list of problems,” he added.
Earlier this year, the I-T department raided a vault space (with over 600 lockers) in Vardaan Market, Kolkata, and seized cash and jewellery worth over crores of rupees. The raid at vaults in Delhi’s Chandni Chowk area happened six months ago, where unaccounted cash worth Rs 25 crore was recovered. Both the vaults lacked proper KYCdocumentation, making it difficult for taxmen to identify the lessees.
‘Need Stricter KYC Rules for Industry’
“There are a few vaults in Mumbai too, that do not keep proper KYC records of their clients,” said Piyush K Dak, director, Navkettan Lockers, which provides locker facilities in multiple states including Maharashtra, Telangana and Gujarat.
“I am not concerned about the content kept inside our lockers as long as it is legal. But I should be able to reach the customer when the agencies come knocking. That apart, if we’re suspicious about the stored content in our lockers, we’ll approach the police to get it checked,” Dak added.
Private safekeeping, according to vault operators, was a thriving business till note ban happened in 2016. Their services were mostly utilised by small businessmen and traders — mostly jewellery shop owners and diamond traders. This trend, however, has come off sharply post-demonetisation, vault operators opine. Rich families still use private lockers to store jewellery, documents and sometimes even cash.
“KYC rules for industry have to be tightened,” said VK Gupta of Delhi Safe Deposit Company, one of the oldest private vault providers in the country, established in 1937.
“There are lot unorganised players in this industry; some of them do not keep records of their clients. These firms give the whole industry a bad name,” he added.
Increasingly, prominent service providers like Navkettan and Delhi Safe Deposit Company are taking in more corporates as clients. This, in a way, insures these players from “embarrassments” such as raids or police seizures.
“Corporates use lockers to keep documents or memory drives… They’re quite KYC-compliant as well. We’re getting a lot of corporate clients these days,” Gupta said.
LURE OF PRIVATE LOCKERS
Clients prefer private lockers to bank vaults as they are readily available at marginally higher cost (when compared with private sector bank vaults).
“The business of private safekeeping started much before bank lockers… People come to us because we provide better service,” says Dharma Rajan of Kothari Safe Deposits, which operates six vaults across Chennai.
“We work on most bank holidays and have relatively longer working hours. But then, private locker services is a slow business. It’s not very lucrative financially,” he admits.
Private locker services rout banks on four counts.
They are readily available on hire, have longer working hours, lesser number of holidays and quicker service than banks. In terms of cost, private lockers are a wee bit more expensive than private bank safes. Public sector undertaking (PSU) bank safes are cheaper than private banks and private locker providers, but are rarely available for hire. Yearly rentals for private lockers start roughly at Rs 5,000 and go all the way up to Rs 46,000 — depending on the size of lockers. Most private locker providers have “boxes” in 8-10 sizes to choose from.
“Banks give vault services as they’ve been mandated by RBI to do so. They’re doing it out of compulsion, so their service is not always good. Many banks only give lockers to customers who have signed up for other products like deposits or insurance,” says Dak of Navkettan, which claims to have close to 5,000 lockers.
“For us, safekeeping is the core business… So our service is much better. We’re open for 15 hours a day, throughout the year,” he adds.
In terms of security, private lockers are comparable with bank safes — but the latter may not be a benchmark for security as there have been instances of heists where burglars have dug underground tunnels to break into safety vaults. Newly established ones like Navkettan have an array of security alarms (occupancy seekers, vibration sensors, human sensors et al) and gadgets to ward off undesired incursions.