NAIROBI, Kenya Aug 15- The new cheque truncation system went into effect on Monday, ending the manual process of clearing cheques in the country.
The cheque truncation system replaces physical exchange of cheques between banks with the electronic process, hence reducing the transaction period.
Kenya will now be a one clearing zone with issued cheques expected to be cleared within three days.
The new system entails a cheque image being 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 clearinghouse in Nairobi.
The Kenya Bankers Association has written to commercial banks telling them to ensure that their customers cease using the old design cheques books.
Customers risk being charged Sh500 for old cheques that are deposited into their accounts.
The new system was meant to go live in June but only 25 percent of account holders had obtained the new cheques, prompting the Central Bank of Kenya (CBK) and the KBA to delay the plan.
The new cheques have standard security features, with the only distinction being identification marks or logos of respective banks. The move to entrench cheque truncation is aimed at minimising the risk of cheque substitution and improving the speed of cheque-based payments.
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.
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 to the clearinghouse in Nairobi.
This has seen a number of cheques issued in remote parts of the country take up to ten days to clear making their use unpopular to many people in an era where mobile money transfer is taking root.
The system is also set to reduce bankers’ operational costs by cutting down on physical transportation of cheques and hours spent by staff handling them.
The CBK expects to bring down the clearing cycle to two days from January 2, with the industry working towards brining it down to one day.