Commercial banks are set to migrate to a single day cheque clearing cycle, starting from Monday (August 19th), marking a landmark achievement in the history of banking in the country.
Starting on Monday it will only take one day for a cheque to be cleared meaning that a customer who deposits a cheque on Monday will have the account credited by Wednesday.
Already same banks have notified their accountholders to ensure their deposits are healthy before issuing a cheque.
The new rule applies to all cheques drawn in Nairobi, upcountry and remote zones such as Moyale.
“Today, I am happy to announce that we have achieved T+1 clearing cycle, which takes effect on August 19, 2013. This means that banks will be moving to the one day cheque clearing cycle, which will shorten the time it takes for banks to process cheques,” said Central Bank Governor Prof Njuguna Ndung’u.
Modernisation
Cheque clearing process started in the year 1800, with cheques taking 30 days to clear. However, the clearing period reduced to 21 days in the 1990s and 14 days in early 2000.
But since 1998, Central Bank has worked towards modernising the National Payment Systems.
This journey started with the automation of the Clearing House, through the introduction of the Magnetic Ink Character Recognition (MICR) technology and the Electronic Funds Transfer (EFT) payments.
These initiatives resulted in the reduction of clearing time from 14 days to the current two.
The reduction of the cheque clearing cycle to a singe day (T+1) is expected to significantly save customers time and costs.
“By further reducing the clearing period banking customers will benefit by accessing their funds at a much shorter time to conduct economic activities,” explained Ndung’u.
Last year, Kenya Bankers Association (KBA) also waived commissions charged on cheques cleared from upcountry and remote bank branches thus reducing the cost of clearing cheques.
“The Cheque Truncation System and the T+2 Clearing Cycle were achieved within the agreed time in 2011 and 2012 respectively. These measures have contributed tremendously to reduction in cheque-related frauds, as well as increasing the efficiency of cheque payments,” said Ndung’u.
Higher standards
The continued systematic modernisation of the payments and settlement system is aimed at enabling the country’s payment system to attain international standards and in line with Kenya’s ambition to become the region’s financial hub.
According to data from CBK the reduction in the cheque clearing cycle from three days (T+3) to two days (T+2) has seen an upsurge in the volume of cheques being processed at the automated clearinghouse.
According to CBK the automated clearinghouse processed 1.5 million cheques valued at Sh175.1 billion in June 2013.
Ndung’u said the implementation of cheque truncation system has delivered on improving the efficiency of the clearing house, reducing the cost associated with handling physical cheques and reducing the clearing period.
By James Anyanzwa, The Standard
