Banks have been also encouraged to advise their customers to minimize the use of cheques.
The UAE Central Bank on Monday said it had asked banks to carry out credit checks with the Al Etihad Credit Bureau before issuing cheque books to customers. This move is to ensure customers’ credit worthiness and improve responsible lending practices by banks.
For new customers, the apex bank has asked local banks to issue a cheque book containing a maximum of 10 individual cheques. But the banks can issue, as per the approved procedures, more cheque books after 6 months, provided no cheques have bounced during this period.
“Banks should advise their customers that returned [bounced] cheques due to insufficient funds on the account will be recorded with the Etihad Credit Bureau and will negatively affect the creditworthiness of customers. Banks have been also encouraged to advise their customers to minimise the use of cheques and consider other payment methods – such as direct debits and bank transfers – where possible,” the Central Bank said in a statement on Monday.
According to Central Bank data, cheques worth Dh26.2 billion bounced during the first 5 months of 2018, representing 4.3 per cent of the total value of cheques cleared during the period. Under the UAE law, criminal penalties such as detention and fine can be imposed on individuals in case of bounced cheques.
Yogesh Khairajani, investment research analyst at Century Financial, said this initiative is a simple and effective approach to further strengthen the UAE’s financial system.
Source: Khaleej Times.