Dubai: Payments of house rents, utilities and repayment of loan instalments will become paperless (read: chequeless) from June 15 this year when the UAE Central Bank launches the Direct Debit System — a new means of payment.
The implementation of Direct Debit System will enable customers to make regular, automatic payments from their bank accounts towards mortgage loans or credit card payments or personal loan instalments, the UAE Central Bank said in a circular on Tuesday.
“The facility is designed to eliminate the need to sign several post-dated cheques for instalments upon obtaining a loan/finance, allowing banks to reduce their reliance on post-dated cheques,” said the circular. “The benefit for account holders is that they can plan their expenses more efficiently.”
Direct Debit System is a system that can create and manage instrument that will be capable of fulfilling a consumer’s commitment of periodic repayment of advances taken from providers where the amount payable towards services received will not vary. These could include payment of house rent, school fees, auto loan, mortgage, etc where the amount payable will not vary. This could also be applicable to the payment of utility bills, insurance premiums, credit card bills where the payable amount might vary.
The UAE Central Bank will host and run the system that will have a dedicated portal on UAE Intranet through which all payments will be executed. It will have a facility for information exchange using secured file transfer protocol, said a Central Bank manual on UAEDDS, obtained by Gulf News.
Banks have been gearing up for the implementation of the Direct Debit System — a process that has already been in effect in some banks.
“We have already began the process of implementation of the system as it requires a lot of back-end processes to be upgraded,” said a senior UAE banker, based in Sharjah. “However, we will be ready for the full implementation of the system before the deadline,” he said, requesting anonymity.
UAE Central Bank said the move is in line with establishing a more convenient retail banking system that will create more stable and progressive economic development.
“The introduction of the Direct Debit System is a step in the right direction towards increasing the efficiency of our banking system, and elevating it in line with the global best practices, thus strengthening the country’s status as a global financial hub,” the Central Bank said.