Highlights
- Planning to get a cheque book in UAE? Your bank will need to do some checks on your credit history or background first, before issuing some blank cheques.
- This is pursuant to a new policy that seeks to promote responsible lending practices in the country.
- Banks told to encourage customers to minimise use of cheques and use other payment methods instead.
Dubai: UAE authorities are tightening their grip on irresponsible lending and borrowing in the country, with the issuance of a new circular by the Central Bank.
The banking authority on Monday said that banks are now mandated to do some checks on the customer's credit history or background before releasing cheque books. This is to ensure that users of cheques won't default on any debt obligations or payments.
Financial institutions are also encouraged to advise consumers to minimise the use of cheques and use other payment methods instead.
“Before issuing customers with cheque books, banks are now required to carry out checks with the Al Etihad Credit Bureau to ensure the creditworthiness of their customers,” the central bank said in a statement.
Cheques remain a popular mode of payment for consumers in the UAE. They’re primarily used for huge value transactions, such as paying the rent or purchasing big-ticket items.
From January to April this year, more than 7.16 million cheques worth Dh351.1 billion were processed by the UAE Clearing Cheque System, up by 29.7 per cent from the same period last year.
The value of bounced cheques, however, has declined to Dh15.7 billion. Early this year, an Indian businessman was arrested for racking up a total of Dh624 million in bounced cheques.
The authority also advised that new customers can secure a cheque book containing a maximum of 10 individual cheques and only after a period of six months – when no cheques are returned (unpaid) -- can new cheque books be issued.
Cheques that are also returned due to insufficient funds will also negatively affect the creditworthiness of customers.
