No post-dated cheques from May next year--QCB

Web posted at: 12/21/2009 5:15:42
Source ::: THE PENINSULA/ By MOHAMED SAEED

DOHA: A law to be implemented from May 2010 would make post-dated cheques risky instruments for the issuer as they could be en-cashed right after being issued.

The law (No. 26) was passed in 2006 and will be enforced from May 2010, according to a report that appeared yesterday.

“The move,” said Professor Hassan Al Sayed of the Faculty of Law at Qatar University, “would create a lot of confusion as property rentals, car loan markets, and trade and industry depend heavily on the system of post-dated cheques.”

Cheques, according to the law (No. 26 of 2006), are Bills of Exchange and not debt instruments.

Property owners and even banks giving away car and personal loans insist on tenants and customers issuing post-dated cheques. Lawyers wonder what happen to those cheques which have already been issued by people.

While property owners usually ask for 12 post-dated cheques for the monthly rent, banks giving away car loans, for instance, insist on their customers depositing as many as 60 post-dated cheques.

It is a common practice for property owners to deposit these cheques with their banks and seek credit facilities against them for a nominal fee. This practice, according to experts, is being discouraged by the banking regulator, the Qatar Central Bank (QCB).

“We definitely have to look for some other means of guaranteeing regular payments like property rents and equated monthly instalments (EMIs) for car and personal loans,” says lawyer Mohsin Thiyab Al Suwaidi. “A written undertaking can instead be taken from a tenant or bank- loan seeker.”

But banking industry sources say scrapping the system of post-dated cheques would wreak havoc as that would hamper

cash flows.

“Post-dated cheques give a bit of comfort. They are a necessity in the current context at least,” said a source.

Instead of scrapping the whole system, it should be well-regulated and if a cheque is honoured or dishonoured, it should be automatically recorded.

The list of defaulters should be maintained and steps should be taken to instill a strong sense of discipline in the whole system. “Scrapping the practice is not the answer,” argued the source.

The situation right now is that people issue post-dated cheques like tissue papers. “That shouldn’t be the case anymore, so what we need is strict regulatory norms,” the source added.

THE PENINSULA