32% rise in bounced cheque cases: CBO

August 12, 2017

The Central Bank of Oman (CBO) has said that the number of bounced cheque cases rose 32 per cent in 2016 over the previous year. Additionally, the central bank found that insufficient funds being the major cause for unpaid cheques followed by accounts closed or ‘legally blocked’ accounts.

CBO stated that in general, the total number of cheques, which were subject to the clearing process in 2016, increased by 8.81 per cent compared to 2015, amounting to 4.44mn. “In 2016, bounced cheques increased as well and reached 373,082 from 282,209 in 2015, an increase of 32.2 per cent. In addition to that, as a percentage of total cheques, bounced ones witnessed an increase from 6.91 per cent in 2015 to 8.40 per cent in 2016 ,” CBO stated in its Financial Stability Report 2017.

According to an estimate by the Public Prosecution, an average of 3,500 cases of bounced cheques are reported annually to it for legal recourse.

CBO explained that occasionally a cheque can bounce due to a minor unintentional mishap. “However, there are other more serious situations which can include criminal activity. Insufficient funds continue to lead the list of reasons of bounced cheques (74.88 per cent), followed by accounts closed or ‘legally blocked’ accounts (9.79 per cent), and then MICR encoding errors (4.05 per cent).”

The report said that there has been a decline in the number of cheques using the special clearing facility from 1,747 in 2015 to 1,432 in 2016, while increasing the number of cheques using the regular channels from 4.08mn in 2015 to 4.44mn in 2016 as it may be deemed a better option due to its increased efficiency in processing time.

According to Article 290 of the Oman Penal Code, bouncing of a cheque is considered as a crime committed by the issuer. According to the law, anyone who issues a cheque without having sufficient funds in the account can be sentenced to a jail term of three months to two years and can also be fined RO10-RO500.