Direct Debit is a new solution introduced in Oman under the guidance of the Central Bank of Oman (CBO). Direct debit acts as a payment order issued to debit the bank account of the payer for the benefit of the beneficiary upon request by the latter. It is initiated with a mandate that acts as the basis for initiating the debit which must be validated by the debtor's bank (payer's bank) prior to initiating the payment transaction. A mandate can be defined as a debit instruction that originates from a creditor (beneficiary) to collect a payment from the debtor (Payer).
Direct Debit is an ideal solution that replaces physical cheques as it provides a convenient platform for clients and beneficiaries to receive and pay payments for various purposes as per their pre-defined frequency (One time/Daily/weekly/monthly/quarterly/yearly).
This solution provides participants with multiple benefits as listed below:
Improved operational efficiency and reducing required manpower through a shift from managing inventory of physical cheques
Simpler and more convenient for the clients as the approval is only needed once when first registering for Direct Debit (automated debit/credit process) hence avoiding frequent visits to branches
Auto credits to the beneficiary's account as per the mandate details
Predictable planned payments that can be easily tracked, managed and controlled
A suitable tool for both long and short-term payments as well as fixed and flexible payments
A celling limit can be specified for flexible payments in the mandate (Feature to be announced shortly).
NBO has fully trained officers across the branches to assist clients and provide information on the process and available products. The solution can be handled using our CIB (Corporate Internet Banking) platform.
NBO makes it easy to apply for, amend and cancel direct debit payments using its channels which further uses a platform hosted by CBO.
All mandate information including the mandate form is available in two languages English and Arabic.
Frequently asked questions (FAQ):
1. What is Direct Debit?
It is a legal payment order issued to process payments similar to cheques wherein the payer's account is debited for the payment amount and the beneficiary's account is credited as specified in the mandate form. Beneficiary needs to register the mandate with the bank one time and they receive payment as per pre-defined frequency (One time/Daily/weekly/monthly/quarterly/yearly) mentioned in the mandate form.
2. What is a mandate?
A mandate is a form that specifies the payment details. It is a debit instruction that is originated from a creditor (beneficiary) to collect a payment from the debtor (Payer). The form must be signed by both parties the beneficiary and the payer.
3. What are the different categories of a mandate?
Revocable Mandate: A mandate that can be revoked or cancelled by a single party. Could be the beneficiary or the payer
Irrevocable Mandate: A mandate that cannot be revoked or cancelled without prior approval form both parties (Payer & Beneficiary)
4. What are the different request types of a mandate?
New Mandate Request: A participant can apply for a new mandate with its bank.
Amend Mandate Request: A participant can amend its bank details and other related information regarding beneficiary details.
Cancel Mandate Request: A participant can cancel the mandate within the validity of the mandate.
5. What are the options available for the payment frequency for direct debit payments?
The mandate offers flexibility to customer to choose various frequency such as one time/Daily/weekly/monthly/quarterly/yearly.
6. Does direct debit allow payer to provide any local bank's account to debit from Oman?
Yes, direct debit allows the payer to provide any bank account from Oman in its home currency i.e OMR.
7. How can a client register/apply for direct debit?
The client must contact assigned RM or visit the branch to get a direct debit mandate form
The client must fill out the form with all the necessary payment details
Both the payer and beneficiary must sign the form
The beneficiary must submit the original signed mandate form to any NBO branch or to the RM for processing
8. How is direct debit managed under the law?
It is a legal payment instrument governed by the National Payment system law (Royal Decree 08/2018), wherein the direct debit customers are provided the same degree of protection and rights as given for cheques. Defaults/bounced payments are reported to M'aala (credit bureau authority).
9. Can NBO provide an example of the direct debit solution?
Mr. Surya is buyer of a car from TRG Trading at the total price of OMR 20,000 under 15 month installments. Since it's not a one-time payment, TRG Trading (beneficiary) offers Mr. Surya (payer) to pay OMR 5,000 down payment and rest 15 postdated cheques for next 15 months, each with the amount OMR 1,000. Hence, to fulfil the payment Mr. Surya gives 15 cheques of OMR 1,000 each to Oman Trading in the span of 15 months.
A simpler more efficient alternative is the direct debit solution. With Direct debit, TRG trading (beneficiary) uses one pre-approved mandate form with filled-in details of the payments and Mr. Surya (payer) signs it. TRG trading submits the mandate form to NBO. NBO registers it in their system and sends the details to Mr. Surya's bank for acceptance. Within 5 working days NBO receives the approval or rejection and accordingly informs TRG Trading.
Therefore, TRG trading doesn't need to maintain inventory of 15 postdated cheques and deposits at required dates instead a onetime direct debit registration solves the issue, saves time and eases the beneficiary's life.
10. What is the maximum value for a single direct debit transaction?
The ceiling limit for an individual transaction is 100,000 RO
11. What types of payments can be made using direct debit?
Direct debit is a solution available for all types of payments. Fixed payments such as loan instalments, rental payments, automobile payments, transport & courier payments etc. and Variables payments such as utility bills, insurance premiums etc.
12. How long does it take for the mandate to be accepted or rejected?
The confirmation response will be sent to the client within 3 to 5 business days after mandate submission at NBO.
13. What type of information can be amended in the direct debit mandate?
The mandate amendment is only permitted for the creditor/ beneficiary information wherein the beneficiary can edit their account number, contact details and other related information.
14. What is the process for mandate amendment?
To amend the mandate the beneficiary would need to fill out the mandate form with the new beneficiary bank details, check the "Amend mandate" box and submit the form to the bank for processing. This amendment will not require the payer's signature. However, amendment of the payer's account details will not be allowed through mandate amendment and for any such change the existing mandate must be terminated and a new mandate must be initiated with the new payer details.
15. How can a direct debit instruction be canceled/ terminated?
Terminating the direct debit instruction required a different process depending on the mandate type.
Revocable mandate: The payer can request for mandate termination through the payer bank at least 3 business days prior to the payment due date or the beneficiary can request for mandate termination by initiating a mandate canceling request at least 3 business days prior to the payment due date. As the name suggests the revocable direct debit can be terminated with the approver of a single party (beneficiary or payer).
Irrevocable mandate: The payer can request mandate termination through beneficiary or payer's own bank at least 3 business days prior to the payment due date. However, with the irrevocable direct debit a written request from the payer is required as well as a written consent from the beneficiary.
16. What is the process for temporary stopping the direct debit payments?
The payer can request to stop payment through the beneficiary at least 5 business days prior to the payment due date and the beneficiary bank will stop the mandate payment in the system. No approval is required from the payer's bank. The payer can request to stop the mandate through their own bank and the payer bank can reject such particular payment. However, any case of payment default by the payer will be seen as failure to fulfil payment obligation and the appropriate legal provision under the law shall apply in this case which are equivalent to stopping a cheque payment.
17. What are the circumstances in which a stop mandate request can be initiated?
A consent by the beneficiary customer based on a request made by the payer at least 5 business days prior to the payment due date
Directives of Central Bank of Oman or any other competitive authority to provide a payment moratorium
18. Can I send a copy of the mandate to the RM or do I have to provide the original form?
The original mandate form must be provided to the branch (any NBO branch) or to the RM in order to process the direct debit payment.
19. What happens in the case where the payer does not have enough funds in their account?
In this case, the payment will be rejected on the payment due date and it will be re-represented by the beneficiary customer or the credit bank up to a maximum of three attempts during the span of three days. The beneficiary will also receive a rejection report from the payer containing the reason for the payment rejection
20. What happens if the payer defaults on the payments?
If the payer defaults on the payment and it is rejected three times post re-presentation by the bank then the bank will report the default/bounced payment to M'aala (CBO unit to monitor defaults). Failure to fulfil the payments is a punishable offence under the law as follows: imprisonment for a period not less than (one) month, not more than (2) years, and a fine not less than 100 RO and not more than 500 RO, any intentional issuance of an irrevocable direct debit order that does not have equivalent fulfillment to pay, or the consideration was insufficient, or prevent the bank from fulfilling its value for issuing an order for it not to Payment to the beneficiary without a legitimate reason.
For more information about Direct Debit and how to apply for the service:
Visit your nearest branc, email us at CIBSalesExec@nbo.om or contact your relationship manger.