EghtesadOnline: The number of bad checks shot up in the month to Dec.20 reaching 893,000 or 31.1% higher compared with a month earlier.
In value terms it was 233 trillion rials ($970.8 million) indicating 5.6% hike on a monthly basis, the Central Bank of Iran reported. Bounced checks accounted for 9.4% of the total number of checks and 12.5% of the value of checks drawn during the period.
The unprecedented increase, among other things, could be explained by the large-scale business closures to contain the Covid-19 pandemic that has ruined livelihoods and economies across continents.
Given that insufficient funds in the accounts of issuers was the main reason the checks were rejected, it appears that retail businesses are having difficulty securing funds both to keep functioning and meet their financial commitments.
To help protect businesses hammered by the deadly infection, , the CBI relaxed rules exempting checkbook holders from some rules governing bad checks.
In a directive to banks, the regulator allowed those who had issued checks with non-sufficient funds and whose checks matured from Nov. 21 till Jan. 19 to be exempt from penalties including the suspension of banking services and getting new checkbooks.
In the reviewed period, 261,000 checks valued at 99 trillion rials ($412.5 million) bounced in Tehran Province, accounting for 9% and 11% in volume and value of drawn checks in the capital, respectively.
The ratio of bad checks to transacted checks in Kohgilouyeh-Boyerahmad Province was 17.6%, the highest among all provinces. Kurdistan was next with a ratio of 13.5%.
Lorestan came in third with the highest ratio of bad checks to transacted checks with 13.1%. Provinces with the lowest ratio were Gilan 6.6%, Mazandaran 7.8% and Golestan 8.2%.
According to the CBI, during the reviewed month the number of issued checks rose 18% to reach 9.5 million.The overall value of drawn checks reached 1,859 trillion rials ($7.74b) indicating 2.2% monthly decline.
More than 2.9 million checks valued at 893 trillion rials ($3.72 billion) changed hands in Tehran Province during the month.
Tehran ranked first with the highest share of exchanged checks in volume and value accounting for 30.5% and 48% of all drawn checks.
Isfahan Province was next both in volume and value, representing 10.9% of all drawn checks and 7% of the value of checks issued in the month.
More than 487,000 cashier checks worth 941 trillion rials ($3.92 b) were processed by banks down 8.5% and 17.8% in volume and value, respectively. A total of 154,000 checks worth 575 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 is planning to unveil electronic checks to substitute the conventional paper checks as part of the amendment to the Check Issuance Law.
The new framework is expected to increase transparency in the check system and curb rubber and forged checks. Abdolnasser Hemmati, the CBI boss, on Wednesday unveiled checkbooks designed to comply with new rules.
Caption: The number of bad checks rose 31.1% in the month to Dec.20 compared with a month before.