The value of checks rejected in the calendar month to May 22 shot up 65.2% on the earlier month to reach 513 trillion rials ($1.04 billion) while their volume stood at 600,000 – down 33.2%, according to data released by the Central Bank of Iran.
More than 7.7 million checks worth 4,814 trillion rials ($9.82 billion) were drawn in the month rising 19% in volume and 46.6% in value from the earlier month.
In volume and value, the rejected checks accounted for 7.8% and 10.7% of all drawn checks, respectively.
It merits mention that during the same period last year 9.8% and 12.4% of the volume and value of all drawn checks bounced.
In the period about 182,000 checks worth 217 trillion rials ($442 million) were worthless in the capital Tehran alone, accounting for 7.3% 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, Kohgilouyeh-Boyerahmad topped the list of provinces with the highest ratio of bad checks to transacted checks at 11.1%.
North Khorasan Province and Lorestan Province were next at 10.7% and Kordestan third with a ratio of 10.41%.
Provinces with the lowest ratio were Gilan at 5.7%, Mazandaran 7.1% and Alborz and Qom 7.3%. Insufficient funds in the accounts of issuers were the main reason why the checks were rejected.
During the period under review, more than 582,000 checks worth 499 trillion rials bounced because of insufficient funds.
Checks that bounced due to insufficient funds accounted for 97% and 97.2% of the total bad checks, respectively, in volume and value.
Drawn Checks
Of the total drawn checks in the month to May, 2.5 million worth 2,289 trillion rials ($4.67 billion) were issued in Tehran Province.
As usual, Tehran ranked first with the highest volume and value of drawn checks, accounting for 32.3% and 47.5% of all drawn checks, respectively. Isfahan Province was next in volume and value with 10.6% of all drawn checks and 7.5% of their value.
An estimated 7.1 million checks were cleared by banks during the month, up 18% in volume compared to the earlier month. The total value of cleared checks was 4,300 trillion rials ($8.77 billion) – 44.7% higher on the month.
In the same month about 2.3 million checks valued at 2,071 trillion rials ($4.22 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 351,000 cashier checks worth 1,559 trillion rials were cleared indicating 43% rise in volume and up 59.5% in value. More than 104,000 checks worth 819 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 CBI 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 also announced a new platform “MahCheck” that allows the withdrawal of money from defaulters' accounts in other banks.
E-Checks
A new electronic check system was unveiled earlier. 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 subject 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.
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.
