The number of bounced cheques recorded by commercial banks across the Sultanate surged an alarming 32.20 per cent to 373,082 cases in 2016, up from 282,209 cases a year earlier, according to figures published by the Central Bank of Oman (CBO) on Monday.
No reasons were given for the upsurge in bad cheques, but market experts have attributed the spike partly to the constrained economic environment prevailing in the Sultanate triggered by the collapse in international oil prices in 2014. Delays in the payment cycle, which have resulted in scores of companies racking up substantial amounts in unpaid arrears, are also partly to blame, it is pointed out.
Topping the list of reasons for cheques being declined by banks is “insufficient funds”, said the apex bank in its newly published ‘Financial Stability Report: Issue 5 2017’. Around 75 per cent of bounced cheques fell in this category. A further 9.79 per cent were refused by banks citing ‘closed or legally blocked’ accounts, while 4 per cent were declined due to MICR encoding errors.
When compared with the total number of cheques entering the banking system during the year — aggregating 4.44 million in 2016 — dud cheques accounted for 8.40 per cent of this number, up from 6.91 per cent a year earlier. “Occasionally, a cheque can bounce due to a minor unintentional mishap. However, there are other more serious situations which can include criminal activity,” the CBO report warned.
The Omani Penal Code prescribes stiff penalties if the cheque issuer does not make good on the amount pledged for payment by cheque. Article 290 of the Oman Penal Code states that the bouncing of a cheque will be considered as a crime committed by issuer of the cheque. According to the law, anyone who issues a cheque without having sufficient funds in their account can be sentenced to a jail term of three months to two years and can also be fined between RO10 and RO 500.
On average, around 3,500 cases of dishonoured cheques are referred to Public Prosecution for criminal action against the issuers in question. In the vast majority of cases handled by the Public Prosecution, the issuer either did not have enough funds in their account or issued a ‘hold order’ with intent to block payment for deceitful ends. Most of these instruments typically are post-dated cheques issued as guarantee for payment against goods or services already received by the issuer or given against rent payments.