What you need to know about new cheque transactions

by Morris Aron

A decision by Central Bank to limit the amount and time for clearing commercial bank cheques will probably affect your finances starting next month.

But, analysts say, the effect will be positive. This is because cheques will be cleared within two hours instead of the traditional four days. This means that any time you an individual will be have money circulating faster than before.

The other move — putting a lid on the amount of money that can be transacted using cheques would be beneficial to retail customers especially in the small and medium enterprises.

Signing a cheque. The CBK is planning to use the centres to withdraw excess cash for exchange and carry out open market operations.

Besides increasing the level of liquidity among banks, the move is also expected to significantly reduce the high rate of fraud associated with cheques.

"This process will make payment secure, efficient, reliable and safe," said Stephen Mwaura, head of payments systems at the Central Bank of Kenya (CBK).

"We want to reduce risks and make it convenient for customers to access value service faster," said Mr John Wanyela, chief executive of the Kenya Bankers Association.

Electronic funds transfer

Customers dealing with large sums of money would only be required to instruct their banks to make payments to receiving banks and the transaction would be effected electronically, within four hours. CBK would not only be reviewing all transactions to guarantee smooth usage. Although the directive seems new, a total of Sh60 billion passes through the system among commercial banks. The CBK’s statistics show 20,000 transfer transactions take place in Kenya’s financial infrastructure daily.

The bank also announced it will be establishing cash centres across the country—to ease transportation charges. Officials say the rollout is still in the initial stages and the plan is to have cash centres countrywide. The project is being carried out in association with Swedish oldest bank — Sveriges Riksbank The cash centres are meant to supplement the CBK branches in Kisumu, Mombasa and Eldoret.

Prof Njuguna Ndung’u, the CBK Governor said the Swedes will also train the staff after setting up of the centres to ensure efficiency and smoothness of the operations of the establishments. "We want to reduce the cost of distribution with the support of the right infrastructure," said Ndung’u.

The centres will also process currency and distribute reissues to self and other commercial banks and repatriate unfit—coins and notes — to the CBK, he said. In addition the monetary regulator is also planning to use the centres to withdraw excess cash for exchange and carry out open market operations to streamline liquidity in the market.

Besides the Swedish, Canadian—through their central banks — will enter into agreements with specific banks to run the centres. Analysts say such a development is good for the economy.

"We applaud CBK’s order that will open up overall market efficiency," said Mr Robert Bunyi an investment analyst.

Stakeholders say the financial market regulator has finally woken up and is responding to the needs of the market.