In the calendar month ending Oct.21 a total of 734,000 checks bounced – down 15% compared to a month before.
In value terms, bad checks increased 4.5% worth 214 trillion rials ($856 million), according to data released by the Central Bank of Iran.
Bad checks accounted for 8.3% and 9.9% of all written checks in the mentioned month, in volume and value, respectively.
In the reviewed period, 194,000 checks worth 99 trillion rials ($396m) bounced in Tehran Province -- 7.2% of the volume and 9.3% value of all checks issued in the capital.
Kohgilouyeh-Boyerahmad Province topped the list of provinces with the highest ratio of bad checks to transacted checks at 14%. Ilam Province was next at 13.1% and North Khorasan third with 12.9%. Provinces with the lowest ratio were Gilan 5.6%, Alborz 7% and Mazandaran 7.4%.
Insufficient funds in the accounts of issuers were the main reason why the checks did not pass. More than 706,000 checks worth 203 trillion rials bounced because of insufficient funds (NSFs).
Check Transactions
More than 8.9 million checks worth 2,170 trillion rials ($8.6 billion) were drawn in the month to Oct. 21. Total check transactions rose 6.9% in value and the declined 5.8% in number compared to the previous month.
Out of the total checks drawn, 2.7 million valued at 1,062 trillion rials ($4.2b) were issued in Tehran Province. Tehran ranked first with the highest volume and value of drawn checks, accounting for 30.5% and 48.9% of the total, respectively.
Isfahan Province was second both in volume and value, representing 10.5% of all drawn checks and 6.4% of the value of checks.
Around 637,000 cashier checks worth 1,373 trillion rials were cleared indicating 1.9% decline and 4.5% rise, respectively in volume and value. Of this figure, close to 190,000 checks worth 778 trillion rials were cashed in Tehran, accounting for 46.9% of the total.
A cashier's check is a check guaranteed by a bank, drawn on the bank's own funds and signed by a cashier. Cashier's checks are treated as guaranteed funds because the bank, rather than the purchaser, is responsible for paying the amount.
The CBI report covered only interbank checks processed by Chekavak, a CBI-affiliated electronic check processing system, and did not include checks circulated within branches of a single bank.
New Check Law
The CBI plans to unveil electronic checks later this month to substitute the conventional paper checks as part of the amendment to the Check Issuance Law. The new framework is expected to increase transparency in the check system and curb rubber and forged checks.
Rules stipulate tougher measures against defaulters. If a check bounces due to insufficient funds, courts are authorized to seize the amount from other assets of the signatory of the check. The law penalizes those who acquire a checkbook through fraudulent means and bank staff who violate the law.
The law also bans checkbook holders from issuing "bearer checks". As the name suggests, bearer checks are payable to the person who brings the check to bank.
The CBI has designed an integrated electronic check system and streamlined electronic check-processing platforms, namely Sayyad and Chekavak, for issuing digital checks.
Sayyad is a system designed to run a credibility check on account holders wanting to write a check. Chekavak is an electronic check processing system for eliminating the physical circulation of checks and at the same time helps improve credibility of checks.
