DUBAI- The United Arab Emirates' central bank said on Monday it has told lenders to carry out credit checks with the credit bureau on customers before issuing them with cheque books.
The central bank said it had told lenders in a circular to issue new customers with a cheque book containing a maximum of 10 individual cheques. If after six months no cheques have been bounced by the customer, the lender can issue them with further cheques, the regulator said in a statement.
Under UAE law, criminal penalties, including detention or fines, can be imposed on individuals who send bounced cheques.
Cheques with a combined value of 26.2 billion dirhams ($7.1 billion) bounced during the first five months of the year, according to central bank data, representing 4.3 percent of the total value of cheques cleared during the period.
The central bank told lenders they should advise customers that cheques that bounce due to insufficient funds will be recorded with the Al Etihad Credit Bureau and can hurt their creditworthiness.
It also said banks should encourage customers to minimise the use of cheques and, where possible, use other payment methods, such as direct debits and bank transfers.
The credit bureau, which began operations in 2014, was set-up by the government to allow banks to check a customer's financial health before extending new debt.
($1 = 3.6728 UAE dirham)
(Reporting by Tom Arnold; Editing by Mark Potter and Susan Fenton) ((Tom.Arnold@thomsonreuters.com; +97144536265; Reuters Messaging: email@example.com))