According to sources from within the banking industry, a new federal direct debiting system has been introduced by the UAE Central Bank. Last week, the Central Bank and the National Commercial lenders participated in a broad discussion. The new system is expected to reduce bank reliance on cheques and easy the path to national credit bureau.
Various segments of the market would perform better if they utilize direct debits instead of cheques. For instance, if you have to pay your electricity and water bill to Abu Dhabi Water and Electric Authority, you can do it by direct debiting into account. There is no need to worry, because bank transfers within UAE-based banks are pretty very much secure.
The new service is expected to support the financial system across the UAE. Other financial instruments that favor customers are the prepaid cards connected to direct debits. You won’t need a bank account to own a card like this. Direct debits will allow you to cover credits, long term loans, mortgages etc.
Direct debits are automatically -performed payments by accounts on regular basis with agreed intervals. Though there are some similar private and government programmes in Dubai and Abu Dhabi, the new programme will start nationally.
According to Suvo Sarkar – the general manager of retail banking at Emirates NBD – banks would benefit from the system with less reliance on future payment cheques.
The modern system is already developed and it will be put in action next year, he adds.
That will shrink down the amount of cheques although they won’t disappear totally. The system will increase the usage of everything which comes natural.
A banker from The Central Bank said that there are plans of loosing up the financial system of the Emirates. This will eliminate some unnecessary laws and would make common banking more convenient for the customers. The matters of regulation and sluggish laws are too old and need reconsideration.
In addition, changes in financial system laws will help to quicken up the federal credit bureau development. The bureau itself will give clearer view upon the transaction being made in national perspective.
In a report from the last month, the National banks clams that 1.5 million payment cheques turned out to be invalid. The cost of the cheques summed up to AED55.3 billion ($15.05bn).
The statistic doesn’t show how many cheques were invalid for being damage or lacked of detail. Cheques by expatriates are also considered invalid and are taken as criminal offence.
This quickly brought bankers’ criticism. The cheque alternative system was endorsed by the chief executive of Noor Islamic Bank’s. Politicians such as Ali Al Nuaimi – member of the Federal National Council also approved the direct debiting programme. Al Nuaimi asked the Central Bank to review the rate of check failure.
The Central Bank reported on Sunday that will not comment the direct debit programme. Though during the board meeting the current banking policy was discussed, especially the draft of property loan regulation.