News Column

Cheques Taking Long to Clear Despite New System

June 27, 2014

Lola Okulo

SOME banks have quietly reverted to the three-day cheque clearing period fearing that the one day clearance was short and prone to fraud, investigations by the Star reveal.

However, the Kenya Bankers Association maintains that banks have no control over the clearing system and hence cannot lengthen the period it takes for a cheque to clear after the introduction of T+1 system was introduced last August.

Under the latest system a cheque should take two days at most-- the transaction day and an additional day such that in total its cleared within 48 hours. "It is not the banks that determine when a cheque clears, it is the system (automated clearance house at Central Bank).

You cannot decide as a bank on your own whether you are going to use T+1 or T+2," argued Kenya Bankers Association CEO Habil Olaka. "I know it was in the news that cheques will take one day to clear but banks were losing alot of money and we reverted to the three working days system," an employee of one of the top tier banks in the country with regional operations told a customer.

Another senior bank official also told the Star that the system was being abused by some people who colluded with the drawer of the cheque and the drawee to defraud banks.

Other officials said the T+1 system was too short for the banks to conduct effective due diligence on the drawer and drawee as well as call-back among themselves to ascertain fund availability. Several people who have recently banked cheques told the Star that it took three days for their accounts to be credited.

However other banks are strictly observing the 48-hour clearance. Consumer Federation of Kenya's secretary general Stephen Mutoro accused some banks of "maintaining the status quo of three to four days," allegedly using that period to trade with customers money. "Some banks take a customer's money paid by another bank, fails to credit your account, puts it in a suspense account and use it to trade. That could be another reason why customers could be thinking that cheques are taking long to clear," said Mutoro.

Central Bank of Kenya had by yesterday not responded to Monday's email inquiries by the Star seeking to establish how much banks have lost, under the shorter clearance period as claimed by some of the bank workers.

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Source: AllAfrica

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