UAE Central Bank kicks off Direct Debit System

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Further to the earlier communication in April 2013, the Central Bank of UAE announced that the registration of the Banks & Finance companies into the ‘Direct Debit System’ has been completed and all banks & finance companies are now ready to embark on to the first phase of using the UAE Direct Debit System starting October 5, 2013.

A Direct Debit is a safe and convenient method of making payments and is ideally suited for regular payments with fixed or variable amounts electronically. An individual or corporate can set up a direct debit instruction by submitting a signed Direct Debit Authority (DDA) to the service provider. A direct debit instruction can be setup by submitting a signed Direct Debit Authority (DDA) to the service provider. Once a DDA has been successfully setup then the payments are made automatically by the customer’s bank from the account designated by the customer in the DDA upon receiving a request through the UAEDDS from the creditor.

A senior official Central Bank of UAE said, “Introduction of the Direct Debit System is yet another strategic initiative from the Central Bank. “DDS will save time and effort for both clients and banks. Given our focus as a regulator we believe it is necessary to have a prudent, robust and solid economy. Our current intention is to establish a more convenient retail banking system that will create more efficient and progressive economic development. The introduction of the Direct Debit System is a step in the right direction towards increasing the efficiency of our banking system, and elevating it in line with the global best practices, thus strengthening the country’s status as a global financial hub.”

The official further added, “The Federal Government Strategy requires adopting technology to enhance electronic systems and improve services to banking customers in the UAE. In this regard, Central Bank of the UAE (CBUAE) continually strives to improve the efficiency of the payment systems in the UAE.”
In the near future, the adoption of the ‘Direct Debit System’ will be mandated for all loans and finances being advanced by banks and finance companies. A gradual implementation approach is envisaged to achieve this, commencing with all Post Dated Cheque backed loans & finances to individuals moving onto the Direct Debit System starting 5th October 2013. The facility is designed to eliminate the need to sign several post-dated cheques for installments upon obtaining a loan/finance, allowing banks and finance companies to reduce their reliance on post-dated cheques. Monthly installments can be claimed by the lending institutions by using the Direct Debit Request.

The Central Bank of UAE indicated that the next phase of the ‘Direct Debit System’ will facilitate payments towards services such as electricity, water, telecom, credit card dues and insurance premiums. With the proper adoption of the ‘Direct Debit System’ by service providers a substantial reduction can be achieved on the need for paper based payment instructions for recurring payments.

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