One in ten cheques issued in Sri Lanka bounces
and account holders are writing dud cheques with impunity
despite it being a criminal offense, a top central banker said.
Central Bank deputy governor Ranee Jayamaha says
nine percent of the 250,000 cheques, especially in the Colombo
area sent for clearing are returned each day.
"Fifty percent of that is due to lack of funds,"
Jayamaha told participants of the LawAsiaICT2008 conference in
Colombo which focusing on the application of laws governing
electronic commerce in the Asian region.
"Banks are plagued with this problem every
Jayamaha says account holders are writing
cheques without funds despite it being a criminal offense.
In Sri Lanka cheques are cleared electronically
mostly on the same day and is the most widely used payment
mechanism after cash. Banks in Sri Lanka are regulated by the
To counter the problem banks have themselves
decided to suspend the accounts of customers who write more than
three dud cheques.
However banks had then told the central bank
that it could not be implemented as customers then use it as an
excuse not to pay back loans.
"Then the banks themselves report to us saying
that they have difficulties because these customers who write
dud cheques also have been given various credit and loan
facilities," Jayamaha said.
"If their accounts are closed they get the upper
hand and they do not pay their dues to the banks.
"So that will increase the non performing
component of the banks and that causes lot of problems to the
regulator as well."
Sri Lanka’s non-performing loans have been
increasing in recent months with rising interest rates caused by
heavy government borrowing, and a slowing economy. (LBO)