An estimated 450,000 checks bounced in the eighth fiscal month ending January 22, down 9.7% on the previous month as banks cleared more checks compared to the recent past.
The total checks were worth 359 trillion rials ($747 ئillion), posting 6.3% growth on a monthly basis, the Central Bank of Iran reported.
Bad checks accounted for 6.8% of total drawn checks and 8.5% of the volume of all checks issued in the month.
In the corresponding period last year, 8.4% and 11.3% of the volume and value of all drawn checks, respectively, were rejected.
A total of 125,000 checks worth 152 trillion rials ($316.6 million) were rejected in Tehran Province accounting for 6.2% and 7.2% of the volume and value of all drawn checks, respectively.
Chaharmahal-Bakhtiari topped the list of provinces with the highest ratio of bad checks to transacted checks at 11.1%, followed by North Khorasan 9.9% and Chaharmahal-Bakhtiari 9.4%.
Provinces with the lowest ratio were Gilan at 5.1%, Khuzestan and Alborz 6.2% and Mazandaran 6.5%.
Khuzestan topped the list of provinces with the highest ratio of the value of bad checks to transacted checks at 16%. Insufficient funds in the account of issuers were the main reason for the rejection of checks.
Drawn Checks
More than 6.6 million checks worth 4,124 trillion rials ($8.59 billion) were drawn in the month. The number of transacted checks declined by 8.6% with the value down 5.9% on the earlier month.
Of the total checks drawn, 2 million worth 2,103 trillion rials ($4.38 billion) were issued in Tehran Province accounting for 30.9% and 49.9% of all drawn checks in volume and value, respectively. Isfahan Province was second with 10.6% of all drawn checks and 6.9% of the value of checks.
Bank customers cashed an estimated 6.1 million checks worth 3,855 trillion rials ($8.0 billion) during the month, down 8.5% in volume but up 5.9% in value on the earlier month.
Around 404,000 cashier checks worth 1,787 trillion rials were cleared by banks — 5.1% fewer in volume and 0.4% lower in value. Of these, 126,000 checks worth 969 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, which does not include those circulated within branches of any single bank.
Measures against bad checks became law in 2018 as part of amendments to the Check Issuance Law. The central bank says it is planning effective measures to maintain and improve the credibility of checks.
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 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 improving credibility.
The CBI recently unveiled a new platform “MahCheck” that allows the withdrawal of money from defaulters' accounts in other banks.
E-Checks
A new electronic check system was also unveiled. As per the new check law, the digital secure check system (aka Checkad) will operate with electronic checks.
An e-check is a new form of check subjected to the same regulations covering printed checks. E-checks are validated by a digital signature.
An electronic check, or e-check, is a form of payment via internet or another data network crafted to perform like any conventional paper check. Because the check is in an electronic format, it is processed faster for reducing bureaucratic hassles.
By using the platform, one can issue digital checks with an electronic signature. It also improves the oversight of CBI and commercial lenders over check transactions.
Generally, the cost of issuing electronic checks is less than paper checks, with the added benefit of stringent safeguards against fraud and theft.
According to the CBI, plans call for first providing e-checks to natural persons and later to legal persons. The procedure for the latter is rather more complex due to the multiple signatures required in legal checks.
The procedure of issuing an e-check is the same as that of a paper check, wherein permission is granted to issue a checkbook, the check information is recorded in the Sayyad system and the check status is controlled. If, for any reason, the check bounces, the system transmits the information of the check to all lenders.
