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EghtesadOnline: Banks and credit institutions rejected 560,000 checks worth 229 trillion rials ($848 million) in the calendar month ending July 22.

The figure shows a sharp decline compared to the preceding month. Bad checks dropped 18.2% in value and fell 27.5% in volume on monthly basis, according to data released by the Central Bank of Iran.

The ratio of bad checks to drawn checks was 9.2% and 11.9% in terms of volume and value, respectively. The ratio, however, was relatively higher on the corresponding period last year. In the same month a year ago, 9.6% and 9.5% of the volume and value of all drawn checks were invalidated.

Sharp fall in rubber checks seemingly came in part amid the impact of the new check law, which according to the CBI  cut the number of bad checks.

Last month, Ameneh Nadali-Zadeh, the CBI deputy for  Payment Systems Department, said that the percentage of bounced checks issued under new rules reached 4.6% since the beginning of the fiscal year (March) until July 21. This is while 9% of checks issued by owners of old checkbooks were rejected in the period.  

The new check law came into force on March 25 to help foster transparency and curb bad and forged checks.

In the reviewed period, almost 139,000 checks worth 94 trillion rials ($348.14 million) bounced in Tehran, accounting for 8% and 9.9% of volume and value of all drawn checks in the capital. In terms of numbers, Kohgilouyeh-Boyerahmad Province topped the list of provinces with the highest ratio of bad checks to transacted checks at 17.1%.

North Khorasan Province was next at 13.6% and Lorestan Province third with a ratio of 13.5%. Provinces with the lowest ratio were Gilan at 6.9%, Alborz 8.2% and Yazd 8.4%.

Insufficient funds in the accounts of issuers were the main reason why the checks were rejected.

Drawn Checks

Decline in bad checks can be partially ascribed to a general decline in check transactions in the month. More than 6.1 million checks worth 1,931 trillion rials ($7.15 billion) were drawn in the 30 days ending July 22, down 23.4% in number and less 13.2% in value compared to the month earlier.

Out of all checks drawn in the month, 1.7 million valued at 955 trillion rials ($3.53b) were issued in Tehran Province.

Tehran ranked first as the province with the highest volume and value of drawn checks, accounting for 28.5% and 49.5% of all drawn checks, respectively.

In the month-long period, 479,000 cashier checks worth 1,005 trillion rials were cleared by banks -- down 12.1% and 10.8%, respectively, in volume and value.

More than 155,000 checks worth 531 trillion rials were cashed in Tehran.

A cashier's check is a check guaranteed by a bank, drawn on the bank's own funds and signed by a cashier. Cashier's checks are treated as guaranteed funds because the bank, rather than the purchaser, is responsible for paying the amount.

The CBI report covered only interbank checks processed by Chekavak, a CBI-affiliated electronic check processing system, and did not include checks circulated within branches of one bank.


CBI Checks