The UAE central bank said on Tuesday it was introducing a direct debit system for commercial banks, a step which could ease a major problem for foreign businessmen operating in the country.
The system, to start on June 15, will let customers make regular, automatic payments from their bank accounts towards mortgage loans, credit card payments and personal loan instalments, the central bank said.
In the absence of such a system, post-dated cheques are frequently used in the UAE as guarantees by businesses and individuals. For foreign nationals, bouncing the cheques is a criminal offence rather than a merely civil one, causing some foreigners to be jailed.
The UAE's tough penalties for defaulting on cheques were relaxed for local citizens last October after a royal decree was issued.