NAIROBI, Kenya, Apr 4- The banking industry has implemented the Cheque Truncation System (CTS) that standardises issued cheques to improve the efficiency of clearing cheques in the country.
The Kenya Bankers Association (KBA) together with the Central Bank have automated the clearing cycle to replace the current manual process that has been slow and prone to abuse by fraudsters.
With its implementation, an automated clearing house will be established.
According to CBK Governor Prof Njuguna Ndung\’u once CTS is implemented on June 1, the country will be on one clearing zone with cheques expected to be cleared within three days.
He said this is expected to gradually reduce to one day as financial institutions look to make financial services more accessible to customers.
"More importantly, it is another way of reducing cost of doing business and we are quite happy about it because we have done so much in reducing that cost with currency bureaus and the credit reference bureaus," Prof Ndung\’u said.
The new system will enable a cheque image to be transmitted electronically to the clearing house and subsequently the bank where the account is held. This eliminates the physical collection of cheques at bank branches then transporting them to headquarters and to the clearing house in Nairobi.
This has seen a number of cheques issued in remote parts of the country take up to 10 days to clear. This made the use of cheques unpopular to many people in an era where mobile money transfer is taking root.
KBA Chairman Paul Etemesi said Sh650 million had been invested in implementing the electronic system. Banks will now be required to install systems that can image and transmit cheques to the automated clearing house.
"The security features on the cheque will make it difficult for forging and most importantly it will reduce the period for clearing cheques for those especially outside Nairobi," Mr Etemesi said.
He said CTS would improve the turnaround time in which money is available in the market to carry out economic activities.
The CBK and KBA expect the new system will reduce handling costs, improve payment systems efficiency, and provide an efficient and streamlined system of processing cheques.
It will also provide an avenue for banks to improve their risk management while improving the customer service.
With its introduction, customers will be required to replace their chequebooks with CTS compliant ones as no old cheques will be processed after May 31.
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