Oman records fewer bounced cheques as e-payments gain popularity

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MUSCAT: The phenomenon of bounced cheques – a serious legal offence in the Sultanate of Oman – continues to track downward in significant part because of the increasing popularity of digital payment systems for effecting transactions.

According to the Central Bank of Oman (CBO), around 362,000 cheques fell in the category of ‘bad’ or ‘dud’ cheques in 2023, primarily because of insufficient funds in the customer’s bank account. This compares with around 387,000 cheques that bounced in 2022, representing a 9.8 per cent decline year-on-year.

“It’s important to note that a bounced cheque or having an unpaid cheque is considered a serious offense in Oman and may result in legal consequences, including fines and imprisonment,” the Central Bank cautioned in its 2024 Financial Stability Report issued here on Tuesday.

Of the total number of bounced cheques recorded during 2023, 291,444 cheques – representing 80.5 per cent of this figure – were dishonoured by banks due to ‘insufficient funds’ in the issuer’s account. Further, in 8.73 per cent of the cases (equivalent to 31,614 cheques), the account in question was either ‘Closed, Frozen or Transferred’. ‘MICR Encoding Errors’ were to blame in a small number of other cases.

With a view to mitigating the impact of the bounced cheque phenomenon on the different parties concerned in the transaction – drawer, drawee and payee alike – the Central Bank says it is keenly studying the possible enablement of partial fulfilment of cheques for the first time in Oman.

It explained: “In some countries, partial fulfillment of cheques has been introduced as an alternative measure. Under this system, if the full amount specified on the cheque is not available in the writer’s account, banks are required to cash a partial amount equal to the available funds, unless the cheque bearer rejects the option for partial payment.”

The apex bank noted in this regard that it is currently working with a number of government entities on introducing regulations to allow for the partial fulfillment of cheques in Oman. The measure, it said, will allow more flexibility for both businesses and individuals when managing their cash flow and account balances.

“Previously, cheques in Oman had to be paid in full upon presentment. The new rules will permit banks to accept and process cheques even if the payer’s account does not have sufficient funds to cover the full amount. The bank will then debit the available balance from the account and the payee can choose whether to accept the partial payment or reject the cheque entirely.”

The partial fulfillment option will reduce the number of cheque defaults and provide a more efficient payment system overall, it added.

Going forward, the Central Bank foresees a progressive decline in the trend pertaining to bad cheques particularly as electronic payment options begin to trump cheque-based payments. The use of cheques for payments has been on the downtrend since 2018, plummeting from approximately 4.7 million in 2018 to 3.7 million in 2023.

“This decrease clearly indicates the ongoing transition from paper-based payments to digital payment methods,” it added in its report.