New banking system could ease 'bounced cheques' problem for foreign businessmen
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.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Many Banks already debit current accounts to make debt payments for loans and credit cards, and have done for many years, while at the same time maintaining the necessity for a security cheque, as it gives authority to the bank in the event of default to imprison the debtor.
The actual mechanism by which to reduce bank risk is a Credit Bureau whereby the necessity for (and leverage) of 'security cheque' is no longer needed as the bank assumes risk for their lending policies.
I can't see banks in the UAE removing the requirement for a security cheque on the basis of 'direct debit'.
No paper cheques, no cramped wrist signing them all the time.
Does anyone know, will the same rules apply on bounced post dated cheques as with direct debits unable to be processed?
Anyone explain what is going on here? Politely please!
It is banned, it is open, it is banned, it is open.....
Another day in telco land Dubai.
This is great news and will have a dramatic and positive impact on the retail banking sector for the UAE.
How a central bank decisions will ease a judicial problem ?
The bounced cheques problems is due to internal judicial decision to interpretate penal code and consider all cheques issued are given with bad intention unless it is cleared ., such evil act cannot be rectified without decision from high authority to cancel or clarify this article of the penal code , and all other initiation or statements whether from central bank or any other authority remain wishful thought without any value as long this Penal code are not modified .
Welcome to the 19th Century! Great to see you guys catching up with the rest of the world.