More than 642,000 checks bounced in the fourth Iranian calendar month to August 22, up 9.5% in volume on the month before.
The checks were worth 395 trillion rials ($1.2 billion), indicating 14.5% decline in value on a monthly basis, the Central Bank of Iran reported.
Bad checks accounted for 9.1% of total drawn checks, and 11.4% of the volume of all drawn checks in the month, indicating improvement on the month before and the same period last year.
In the corresponding period last year 10.7% and 14.8% of the volume and value of all drawn checks were rejected. Bad checks accounted for 9.3% and 11.4% of the total drawn checks then.
A total of 191,000 checks worth 172 trillion rials ($546 million) bounced in Tehran Province accounting for 8.4% and 9.7% of the volume and value of drawn checks.
Lorestan Province topped the list of provinces with the highest ratio of bad checks to transacted checks at 12.5%, followed by Kurdestan 12.2% and Chaharmahal-Bakhtiari with 11.8%.
Provinces with the lowest ratio were Gilan at 6.3%, Ilam 7.7% and Khouzestan 8.2%.
Bushehr Province topped the list of provinces with the highest ratio of the value of bad checks to transacted checks at 27.7%.
Insufficient funds in the accounts of issuers were the main reason why the checks were rejected.
Drawn Checks
More than 7.1 million checks worth 3,469 trillion rials ($11.02 billion) were drawn in the month. The number of transacted checks increased 12% and the value was up 4.5% on the earlier month.
Of the total checks drawn, 2.3 million worth 1,770 trillion rials ($5.61 billion) were issued in Tehran Province.
Tehran Province accounted for 31.9% and 51% of all drawn checks in volume and value, respectively. Isfahan Province was second representing 10.7% of all drawn checks and 7.2% of the value of checks.
Bank customers cashed an estimated 6.4 million checks worth 3,074 ($9.75 billion) during the month, up 12.3% in volume and 3.3% in value on the month before.
Around 427,000 cashier checks worth 2,285 trillion rials were cleared by banks -- 0.3% less in volume but 12% higher in value. More than 139,000 checks worth 1,651 trillion rials were cashed in Tehran.
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 interbank checks processed by Chekavak, a CBI-affiliated electronic check processing system, and did not include those circulated within branches of any single bank.
Regulatory Measures
Measures against bad checks became law in 2018 as part of amendments to the Check Issuance Law.
The central bank says it is trying to come up with effective measures to maintain and improve the credibility of checks as a reliable financial instrument.
It has introduced digital checks after designing an integrated electronic check system and streamlined current electronic check-processing platforms, namely Sayyad and Chekavak.
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 improve the credibility of checks.
It recently unveiled a new platform ‘MahCheck’ that allows withdrawal of money from defaulters' accounts in other banks.
