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New cheque system to take effect August

NAIROBI, Kenya, Jun 2 – The Central Bank of Kenya (CBK) has postponed the commencement date for the new Cheque Truncation System (CTS) to August 15 from the initial June 1 timeline.

CBK Governor Prof Njuguna Ndung\’u said that as of May 31, 25 percent of cheques were going through the clearinghouse attributing the low compliance rate due to cheque printing constraints.

"Following consultation between the CBK and KBA (Kenya Bankers Association) and the printing industry, it has been agreed that adequate stocks of CTS compliant cheques will be available by mid July. Consequently the go-live date has been pushed to August 15," Prof Ndung\’u said.

The new system will enable a cheque image to be transmitted electronically to the clearinghouse 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 then to the clearinghouse in Nairobi.

This has seen a number of cheques issued in remote parts of the country take up to 10 days to clear, making issuance of cheques unpopular to many people in an era where mobile money transfer is taking root.

CTS is also expected to be one of the tools the banking sector uses to fight banking fraud by standardising the issuance of cheques.

Safety features on the new cheques will include standard watermarks, holograms, use of ultra violet paper and micro text features to reduce the threat of fake cheques.

From January 2 next year, the clearing cycle for cheques will be two days with the industry working towards bringing it down to one day.  Prof Ndung\’u 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.

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