Boost for bank customers as cheques to be cleared in a day

You will now access your money a day after depositing a cheque, thanks to a new clearing system adopted by commercial banks.

This means if you deposit a cheque on Monday, you will get the money by Wednesday and not on Thursday as was the case previously.

“The move will benefit bank customers by speeding up their cheque payment transactions, ultimately enhancing the flow of funds in the economy,” said Kenya Bankers Association chairman Jeremy Awori during the unveiling of the system Wednesday.

The new cycle of payment takes effect from August 19.

The launch of the new system marks the culmination of a process that started more than 15 years ago when cheques were cleared in two weeks.

The system also comes at a time when commercial banks are preparing to compete with mobile money transfer services, which are becoming a preferred mode of conducting transactions.

Addressing the media yesterday, Central Bank of Kenya (CBK) governor Prof Njuguna Ndung’u termed the development “a milestone in terms of our efficiency in the clearing system and a major step toward reducing the cost of doing business”.

Instead of transporting cheques in hard copy (paper) format from one point to the other, the new system allows the receiving bank to scan and send images to the paying bank.

The paying bank will have 24 hours to respond whether the receiving bank should pay or return the cheque as unpaid.

KBA expects the move to trigger an upsurge in the volumes of cheques being cleared as they become more acceptable as a mode of payment.

“The volumes (of cheques) would now increase because it would be easier, more efficient and cost effective to clear cheques,” Mr Awori said.

In 2008 the CBK and the bankers’ association started a process to modernise the cheque clearing system to enhance efficiency.

The process led to the Cheque Truncation System and the current system where a customer takes at least three days to access funds.

The Cheque Truncation System – a process of clearing cheques using the image of the cheques and associated electronic information – was adopted in 2011, with the T+2 (clearing of cheques in two days) being used from 2012.

In 2009, banks stopped accepting cheques valued at more than Sh1 million and instead adopted the Real Time Gross Settlement System (RTGS), an electronic system that enhances security and efficiency of the transaction.

With the RTGS, clients dealing in huge amounts of funds would only give instructions to their banks to carry out transactions.

Limiting the amount of cheques to be cleared at Sh1 million would also allow for the faster settlement of transactions for the small and medium enterprises as well as retail clients.

Before such initiatives, banks in the country were categorised into local, upcountry and remote zones and commissions were levied on cheques cleared from upcountry and remote bank branches. The process has led to the new system.