In a country where cheques are used in a wide variety of scenarios, from paying residential rent to closing business deals, decriminalising the issue of bounced cheques is forecasted to boost confidence in the financial sector.
Earlier this week, the UAE Central Bank (CBUAE) said that new amendments to the Commercial Transactions Law regarding decriminalisation of cheques will come into force on January 2 next year.
“It’s another important step in the evolution of just and fair commercial practices that will increase business confidence in the UAE for both current and potential investors,” Aidan Healy, owner of Dubai-based Healy Consultants Group, told Arabian Business.
“The authorities in the Emirates have continued to improve and update regulations in developing a strong and flexible business environment,” he continued.
Aidan Healy, owner of Dubai-based Healy Consultants Group.
Khaled Mohamed Balama, governor of CBUAE, confirmed that the amendments are in line with plans to upgrade banking laws and regulations and “to fill any legal gaps and shortcomings”, in a statement carried by state news agency WAM.
“The road to decriminalising many types of bounced cheques is an effort by the central bank to boost consumer confidence in the financial sector. The UAE, which still heavily relies on what some see as an antiquated system of physical cheques, has had a stigma of fear attached to the use of cheques,” said Scott Cairns, managing director of Dubai-based Creation Business Consultants.
“Drawers can now breathe a small sigh of relief if the unfortunate situation arises where a cheque bounces. In August 2021, 11 percent of the total funds cleared by banks were via cheques. This demonstrates a somewhat heavy reliance on the form of monetary exchange. With a 4.3 percent bounced cheque rate back in 2018, this new change will most certainly alleviate a lost of cost and administrative burden on the legal and judiciary systems,” he continued.
Scott Cairns, managing director of Dubai-based Creation Business Consultants.
Cairns added: “However, with the aforementioned in mind, those businesses and people dealing with larger cheque-values can take some comfort that for higher-value cheques, there are still stiff penalties in place for any wrong doing.”
Under the amendments, the scope for criminalisation of returned cheques due to insufficient funds has been narrowed, and confined to cases of bad faith and other cheque crimes such as fraud.
According to these amendments, partial payment of the cheque has also become mandatory. If the amount available for payment is less than the cheque value, the drawee bank must pay the amount partially unless the bearer rejects partial payment.
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