Is a place were many financial transactions are conducted through the use of cheques. Cheques are used to pay annual rentals, bi annual, quarterly, monthly etc. Cheques are a medium of exchange used hand in hand with cash here in Dubai / UAE. All banks who issue loans also require a set of signed security cheques, which are post-dated (no date) and also which are blank on the amount section. These set of cheques should carry the borrower’s signature, addressed to the bank, and the rest left blank. This way banks in Dubai use the cheques as a security measure to avoid deliberate default by clients.
When one client fails intentionally or unintentionally to honour their financial obligations i.e personal loans emi installment, or credit card, the bank will be forced to use the security cheque by writing an amount of huge value beyond the client’s available balance and bounce it. Once a cheque is bounced in Dubai/UAE, it becomes a criminal case and police take it from there.
So since banks in Dubai do not demand collateral for example RAK Bank,First Gulf Bank,Commercial Bank of Dubai,Noor Islamic Bank, they then request that all loans issued or credit cards, be secured by a security cheque. A bounced security cheque will automatically tarnish the image of the client, and damage their financial reputation and their ability to meet future loan repayments. Once banks realise that a client once bounced a cheque, they may either hike the interest rate or simply decline the loan application
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