Bounced cheques rise in Oman

Of an estimated 4.71 million cheques processed through the Payments and Settlements System of the Sultanate in 2019, about 10.7 per cent – equating to around 504K cheques – went unpaid, according to the Central Bank of Oman (CBO).

The figure represents a 7.64 per cent uptick in so-called dud cheques over the corresponding number for 2018, the banking and financial sector regulator noted in its Financial Stability 2020 Report issued on Tuesday.

Significantly, a significant 76.14 per cent of the dud cheques were rejected because of the “inability of the drawer to maintain sufficient balance” slightly down from 78.2 per cent in 2018, the apex bank said. Closed or ‘legally locked’ accounts were also a leading factor and accounted for 15.39 per cent of cheques being rejected, up from 12.6 per cent in 2018.

Other reasons cited for the bouncing of cheques included: MICR coding errors, drawer signature issues, account closed / frozen / transferred, and insufficient funds. The number of bounced cheques has been on the rise in trend with a strong uptick in the number of cheques entering the Payments and Settlements System operated by the CBO.

Although the number of cheques grew 0.4 per cent in 2019, aggregate transaction values processed through the system witnessed a dramatic 17 per cent increase to reach RO 236.5 billion up from RO 202.9 billion in 2018, the Central Bank said.

Commenting on the threats posed by dud cheques to the financial system, the regulator noted: “While the impediment to pay the beneficiary of the cheques caused by technical reasons may be decreased with advancement of technology and stronger operating environment, it is the lapse by the drawer of the cheque that is more serious as it may decrease the confidence of recipients regarding the sanctity of the cheques and hence needs attention.”

CONRAD PRABHU

@conradprabhu