The value of checks rejected in the calendar month to March 20 shot up 8.9% on the earlier month to reach 511 trillion rials ($1.24 billion).
Volume of bad checks stood at 607,000 – down 1.4% in one month, according to data released by the Central Bank of Iran.
In terms of volume and value, the rejected checks accounted for 7% and 8.7% of all drawn checks, respectively.
It merits mention that during the same period last year 8.9% and 11% of the volume and value of all drawn checks bounced.
In the said period, about 181,000 checks worth 203 trillion rials ($452.22 million) were worthless in the capital Tehran alone, accounting for 6.2% and 6.9% of volume and value of drawn checks in the sprawling metropolis of more than ten million people.
In terms of the number, North Khorasan topped the list of provinces with the highest ratio of bad checks to transacted checks at 11.2%.
Kohgilouyeh-Boyerahmad Province was next at 11% and Chaharmahal-Bakhtiari third with a ratio of 10.4%.
Provinces with the lowest ratio were Gilan at 5.4%, Alborz 6.3% and Mazandaran 6.6%. Insufficient funds in the accounts of issuers were the main reason why the checks were rejected.
During the period under review, more than 587,000 checks worth 492 trillion rials bounced because of insufficient funds.
Checks that bounced due to the two reasons accounted for 96.6% and 96.7% of the total bad checks, respectively, in volume and value.
Drawn Checks
More than 8.6 million checks worth 5,879 trillion rials ($11.9 billion) were drawn in the month. The number of drawn checks rose 2.7% and the value increased 15.6% on the month earlier.
Of the total drawn checks in the month, 2.9 million worth 2,923 trillion rials ($5.61 billion) were issued in Tehran Province.
As usual, Tehran ranked first with the highest volume and value of drawn checks, accounting for 51.3% and 49.9% of all drawn checks, respectively.
Isfahan Province was next both in volume and value with 10.5% of all drawn checks and 7.2% of the value of checks.
Cleared Checks
An estimated 8 million checks were cleared by banks during the month, indicating 3% rise in volume compared to the earlier month. The total value of cleared checks was 5,367 trillion rials ($11.01 billion) -- 16.3% higher on the month.
In the month about 2.7 million checks valued at 2,729 trillion rials ($5.8 billion) were cashed in Tehran Province. Cleared checks in and around the capital accounted for 93% of the total volume and 91.3% of the total value of checks drawn in Tehran.
Cashier Checks
Around 575,000 cashier checks worth 2,831 trillion rials were cleared indicating 28.7% rise in volume and up 42.9% in value. More than 173,000 checks worth 1,504 trillion rials were cashed in Tehran alone.
A cashier's check is a check guaranteed by a bank, drawn on the bank's own funds and signed by a cashier. Cashier checks are treated as guaranteed funds because the bank, rather than the purchaser, is responsible for paying.
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 has been 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 is a form of payment via internet or another data network crafted to perform like any conventional paper check. Because the check is in 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, 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.
