Central Bank of the UAE (CBUAE) has issued a new circular to the domestic lenders to assess the credit worthiness of the customers before issuing cheque books.
The move is aimed at improving responsible lending practices at banks.
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The new circular: Details
As per the new requirement, all the banks will have to conduct credit checks of the customers with the Al Etihad Credit Bureau (AECB).
Additionally, the banks can issue a cheque book with a maximum number of ten individual cheques. After six months, if no cheques have been bounced by the customer, the respective bank can issue an additional cheque book.
The central bank also told the banks to advise their customers that all returned and bounced cheques will be recorded with the AECB, subsequently affecting their creditworthiness. AECB evaluates the financial well being of the customers who have applied for a loan.
Furthermore, the customers are urged through the banks to minimise cheque usage and avail digital payment methods.
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By GlobalDataWhy CBUAE took the decision?
The new move is primarily driven to bring down the number of bounced cheques issued by the customers.
During the first five months of the year, cheques with a combined value of AED26.2bn ($7.1bn) bounced in the UAE, Reuters reported quoting central bank data.
In the UAE, people found to be sending bounced cheques can be awarded criminal penalties including arrest or fines.
