Cheque returns: Big problem for business

The deliberate practice to defraud the payee by numerous fraudulent persons has prevailed over the years. The banks however now take stringent measures confidentially before opening of current accounts for new customers to assess their suitability. Before deciding to open current accounts they are screened in order to find their credibility and if it is for a business the viability of the business to decide whether the current account should be opened or not. The proposed new account holder has to be introduced by another recognized constituent who has had a good rapport, preferably in the same branch of the bank or any other branch of the same bank.

In the modern era with the opening of more and more new banks, in order to increase the clientele of the newly opened banks, a lot of canvassing is done to attract people to open individual and joint, partnership, business and limited liability company accounts. The new banks show a little bit of leniency initially in deciding to open accounts for new customers. However subsequently when they find when the new clients too resort to the practice of issuing ‘dud’ cheques they too become more vigilant and tactful when deciding to open accounts for new clients. They place the proposed new clients on ‘serious enquiry’.

The authorities of the banks can use their discretion to warn those who are in the habit of issuing ‘dud’ cheques often and then send them a notice under registered cover that his personal or the business account would be closed in seven days time and to return all unused cheque leaves in their possession. This could be possible only to those unscrupulous customers who do not enjoy any credit facilities. But for the customers who enjoy permanent overdraft and credit facilities obtained against the security of mortgage of movable and immovable properties or on the security of two income tax payers, the accounts that they maintain cannot be closed, until the facilities are fully settled. However if they continue to issue ‘dud’ cheques without making any prior arrangements with the bank officials, they have to be severely warned. The bank can even decide to refrain from issuing them with new cheque books.

In the context of the above the only solution to prevent the issue of ‘dud’ cheques is to initially warn such errant account holders and then send notice to close their accounts for bad conduct. Otherwise naturally it directly creates instability and havoc with the credit operations in business and disturbs the entire economy. The end result of these unscrupulous acts of cheating the retail, wholesale dealers and entrepreneurs is that to the legitimate business community this would to a great extent make way to disrupt the economy and retard the growth of the country’s economy.

At the Credit Information Bureau of Sri Lanka, it is learnt, the names of those account holders whose accounts have been closed for unsatisfactory conduct are not reported to them to notify the banks if such information is requested for by banks. This should be implemented. At present only the names of individuals and organizations who figure in the bad books of the banks as defaulters of credit facilities are reported to the CRIB. That too it is learnt if the amounts outstanding are only large in magnitude. The officials of the Central Bank of Sri Lanka’s Bank Supervision Department must at least now commence an expeditious exercise to collect data from all banks of these unscrupulous debtors and make available to all banks for scrutiny before accounts are opened. This subject has now reached to unprecedented heights and serious proportions and requires instant action to bring in correct discipline among the banks’ large clientele to prevent ‘the bane of the economy’because of willful debtors.