CBK warns: Hoard Sh1,000 notes at your risk

What you need to know:

  • Governor says giving an extension would defeat the purpose of doing away with old currency
  • He stressed that the old Sh1,000 shilling note will not be exchangeable in Tanzania, Uganda or other countries.

  • The older notes of denominations of Sh500, Sh200, Sh100 and Sh50 will circulate alongside the new notes until they are phased out through natural attrition.

Kenyans still holding on to the old Sh1,000 banknotes will not be given an extension to the October 1 deadline to exchange them for the new currency.

Central Bank of Kenya Governor Patrick Njoroge said in a briefing yesterday that extending the deadline will water down the purpose of doing away with old currency, which is meant to combat illicit funds in the economy.

NATURAL ATTRITION

He stressed that the old Sh1,000 shilling note will not be exchangeable in Tanzania, Uganda or other countries.

The older notes of denominations of Sh500, Sh200, Sh100 and Sh50 will circulate alongside the new notes until they are phased out through natural attrition.

“Kenyans love extensions, but if we have an extension to this process it defeats the purpose of the demonetisation. So, come midnight of the last day of September, that’s it,” Dr Njoroge said.

“We have three-and-a-half months to do the conversion, so there is no contemplation of an extension,” he added. Anyone converting between Sh1 million and Sh5 million will do so at the bank where they hold accounts, where they will make proper declarations on the source of their cash.

Persons exchanging more than Sh5 million will need to get an endorsement from CBK, as will those exchanging more than Sh1 million but do not have bank accounts.

The CBK said that the decision to have the conversion of the Sh1,000 note done over four months instead of an overnight switch was informed by lessons from India, where sudden change of 1,000 and 500 Rupee notes disrupted the economy.

SECURITY FEATURES

The same deadline applies to holders of Kenyan currency abroad, who will have to return their notes home to have them exchanged with the new notes.

The Bank of Uganda and the Bank of Tanzania both issued notices earlier this month freezing the conversion of the old Kenyan banknotes in their countries. They have also advised their countries’ banks to subject all flows to enhanced due diligence.

The Kenya shilling is commonly used to transact goods and services in neighbouring countries, especially now that East African Community rules allow free movement of people and goods across regional borders.

CBK had explored the possibility of making the new notes out of polymer (a plastic) but opted, eventually, to keep making them out of cotton paper, which is able to accommodate commonly known security features in Kenya such as a security thread.