UAE banks told to carry out checks before issuing chequebooks, discourage use
Now Reading
UAE banks told to carry out checks before issuing chequebooks, discourage use

UAE banks told to carry out checks before issuing chequebooks, discourage use

The central bank has told lenders to encourage customers to use other payment methods

Avatar

The UAE Central Bank has issued a circular to financial institutions in the country instructing them to carry out credit checks on customers before issuing chequebooks.

Under the changes, banks must carry out checks with the Al Etihad Credit Bureau, which was established in 2014, to ensure the creditworthiness of customers.

In addition, they are only permitted to grant new customers a chequebook with a maximum of 10 individual cheques.

“After a period of six months and providing no cheques are returned (unpaid), further cheque books may be issued to customers, as per the approved procedures,” the central bank said.

Banks are further directed to advise customers to minimise their use of cheques and encourage them to use other payment methods like direct debit and bank transfers where possible.

“Banks should advise their customers that returned cheques due to insufficient funds on the account will be recorded with the AECB and will negatively affect the creditworthiness of customers,” according to the announcement.

Cheques are still used as guarantees for many transactions in the country including rental payments.

Read: Dubai property database will allow tenants to rent without cheques

Under UAE law, a bounced cheque can land the issuer in jail if payment is not made in sufficient time.

Cheques worth Dhs26.2bn ($7.1bn) bounced in the first five months of the year representing 4.3 per cent of those issued, according to central bank data.


© 2021 MOTIVATE MEDIA GROUP. ALL RIGHTS RESERVED.

Scroll To Top