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29 March 2024

UAE Direct Debit System from October 5

Published
By Wam

Further to an earlier communication in April this year, the Central Bank of the UAE has announced that registration of banks and finance companies into the direct debit system has been completed, and all banks and finance companies are now ready to embark on to the first phase of using the system beginning on October 5, 2013.

A direct debit is a safe and convenient method of making payments and is ideally suited for making regular payments with fixed or variable amounts electronically. An individual or company can set up a direct debit instruction by submitting a signed Direct Debit Authority (DDA) to the service provider. Once a DDA has been successfully setup, payments are made automatically by the customer’s bank from the account designated by the customer in the DDA upon receiving a request through the UAEDDS from the creditor.

A senior official at the Central Bank said, "The introduction of the Direct Debit System is yet another strategic initiative from the Central Bank. DDS will save time and effort for both clients and banks. Given our focus as a regulator, we believe it is necessary to have a prudent, robust and solid economy. Our current intention is to establish a more convenient retail banking system that will create more efficient and progressive economic development. The introduction of the Direct Debit System is a step in the right direction towards increasing the efficiency of our banking system, and elevating it in line with global standards, thus strengthening the country’s status as a global financial hub."

In the near future, the adoption of the Direct Debit System will be mandated for all loans and finances being advanced by banks and finance companies. A gradual approach is envisaged to achieve this, starting by transferring all post-dated cheque backed loans and finances onto the Direct Debit System from October 5.

The facility is designed to eliminate the need to sign several post-dated cheques for installments, allowing banks and finance companies to reduce their reliance on post-dated cheques.  Monthly installments can be claimed by lending institutions by using a Direct Debit Request.

The Central Bank of the UAE has indicated that the next phase of the direct debit system will facilitate payments towards services such as electricity, water, telecom, credit card dues and insurance premiums. With the proper adoption of the direct debit system by service providers, a substantial reduction can be achieved on the need for paper based payment instructions for recurring payments.