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Cheque Account Operation Directive No. 190/2021

National Bank Of Ethiopia190/2021

Summary

This directive establishes rules for the operation of cheque accounts to ensure the safety and credibility of cheques as a payment instrument. It details procedures for banks when cheques are dishonored, including penalties and account closure for repeated offenses. It also outlines conditions for account reopening and reporting requirements.

Who's affected

Banks operating in Ethiopia and individuals or businesses holding cheque accounts.

Action required

Banks must verify customer information, inform customers about cheque usage, maintain registers for dishonored cheques, and adhere to the penalties and procedures outlined. Account holders must ensure sufficient funds for cheques and comply with TIN requirements.

Key points

7
  • Defines terms related to cheque accounts and dishonored cheques.
  • Outlines bank responsibilities in verifying customers and managing cheque accounts.
  • Establishes a tiered system for penalties and actions based on the number of dishonored cheques (first, second, third time).
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    • Specifies conditions for clearing names from the delinquent list and reopening accounts.
    • Prohibits using stop-payment orders to evade penalties.
    • Mandates reporting and information sharing between banks and the National Bank.
    • Repeals Directive No. SBB/31/2002.

Requirements

10
  • Banks must verify that new cheque account applicants are not on the delinquent list.
  • Banks must request taxpayer registration certificate/TIN from new account holders.
  • Banks must inform customers about the use, purpose, and consequences of cheque misuse.
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    • Cheque account opening agreements must include clauses on measures for cheque misuse.
    • Existing customers must provide TIN within six months; otherwise, new cheque books will not be issued.
    • Banks must maintain a Dishonored Cheque Register.
    • Banks must report customers whose cheque accounts are closed to the National Bank.
    • The National Bank must compile and circulate reports of closed accounts and names deleted from the delinquent list.
    • Banks must update their branch databases with monthly reports on dishonored cheques.
    • New cheque account applications must be checked against the delinquent list.

Rights and permissions

5
  • Account holders have the right to have their name deleted from the delinquent list under specified conditions.
  • Account holders whose accounts were closed may be allowed to open other types of accounts (savings, fixed deposits) if they fulfill certain conditions.
  • Banks may unblock accounts and make funds available if the payee fails to appear to collect payment after six months.
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    • Banks may debit charges like legal and insurance fees against a blocked account.
    • Banks may accrue interest against overdraft accounts.

Restrictions

5
  • Banks cannot accept stop-cheque-payment orders solely to evade punishments for dishonored cheques.
  • Accounts with dishonored cheques are subject to blocking of debit transactions.
  • Repeat dishonoring of cheques leads to fines and eventual account closure.
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    • Individuals whose names are on the delinquent list may be denied cheque account services.
    • Banks are prohibited from accepting stop-cheque-payment orders if the account lacks sufficient funds at the time of presentment, unless police evidence of loss or theft is provided within 15 days.

Penalties

3
  • Second dishonored cheque: 3% fine of the cheque amount, not exceeding Birr 25,000.
  • Third dishonored cheque: 5% fine of the cheque amount, not exceeding Birr 50,000, and closure of the account.
  • Account closure for third dishonored cheque.

Objectives

4
  • To ensure the safety and credibility of cheques as a payment instrument.
  • To establish a clear framework for cheque account operations.
  • To outline procedures for handling dishonored cheques and associated penalties.
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    • To maintain efficient and sound payment systems.

Organizations

2
  • National Bank of Ethiopia
  • Federal Police Commission

Legal references

2
  • National Bank of Ethiopia Establishment Proclamation (as amended) No. 591/2008
  • Ethiopian Commercial Code
Original sourcehttps://justice.gov.et/en/directives/cheque-account-operation-directives-no-190-2021/
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