Bounced cheques jump 10 per cent to 469K in 2018: CBO Report

KEY REASON: 78 per cent of bounced cheques relate to insufficient funds

The Central Bank of Oman (CBO) has reported an alarming 9.9 per cent increase in the number of dishonoured cheques recorded across the Omani banking and financial system in 2018.

Announcing its findings in the 2019 Financial Stability Report (FSR) issued on Thursday, the apex bank said the number of bounced cheques totalled 469,187 in 2018, up from 426,977 in 2017.

“When people pay by cheque, there is an element of trust involved,” the Central Bank commented in its report. “Occasionally, cheques may bounce for a variety of reasons. Insufficient funds continue to lead the list of reasons of bounced cheques (78.2 per cent), followed by account closed or “legally blocked” account (12.6 per cent), and then MICR Encoding errors (1.9 per cent).”

Under Omani bounced cheques law, are issuers given of the opportunity to make amends within a stipulated timeframe, failing which they are liable to fines and even prison terms if their actions are found to be malafide.

The uptick in dishonoured cheques comes against a marginal one per cent increase in the number of cheques processed through the banking system, totalling 4.7 million cheques in 2018, according to the CBO, which strongly advocates for a speedy and efficient cheque processing system,

“The full duration of a cheque processing cycle is key element to improving the efficiency and lowering credit risk of the system,” the Central Bank said. “The shorter the time required processing the cheques, the more efficient the system is and the lower credit risk associated with nonavailability of required funds.”

It further added: “Less delay in processing the cheques can increase the velocity of money, which in turn positively impacts the GDP and contributes towards enriching the economy.”

According to the report, cheques are typically processed via two channels. Under the Regular Channel, cheques presented by participating banks before 12 noon are settled the same day, while those deposited after 12 noon are settled the following day — at no cost to the customer under either channel.

However, urgent and large value cheques may be processed under the Special Clearing channel which offers accelerated hourly settlements on a business day. Cheques presented for clearing under this channel have lately been subject to a processing fee of RO 3, which is equivalent to the transaction charges applicable to RTGS transactions, according to the CBO.