CBN Harmonises Cheque Clearing Cycles
Effective from May 5, 2008, the banking public that have had to wait for four working days to get their “up-country” cheques cleared can now heave a sigh of relief.
The Central Bank of Nigeria (CBN) has harmonised both up-country and local payment instruments to three working days. Specifically, this means that the dichotomy between up-country (cheques emanating from one state to the other) and local payment instruments would cease to exist as value would be given to both up-country and local payments within three working days.
Already, the banking watchdog has commenced meetings with officials of the operations department of all the 24 banks in the country with a view to putting them through and ensuring that the May 5, 2008 date becomes a reality.
Following the automation of Nigeria’s payment system some years ago, the clearing cycle for local instruments, which used to be five days was reduced to three working days, while that of up-country payment instruments, which used to be nine days was reduced to six working days.
In July 2, 2007, the CBN, in collaboration with the Bankers’ Committee, further reduced up-country payment instruments clearing cycle to four working days, while that of the local (payment instruments emanating from Lagos) remained unchanged at three working days.
A memo announcing the new development by the banking watchdog addressed to all the 24 banks in the country was exclusively obtained by THISDAY. Titled “Harmonisation of Clearing Cycles to Three Working Days,” and dated April 22, 2008, the memo noted that “the new development was based on the positive outcomes of recent reforms in the banking system, especially the consolidation exercise and observed widespread adoption of automation in the banking system.”
In applying the three days clearing cycle, the CBN advised customers “to ensure that payment instruments are lodged early enough for them to get value on the third day. For example, under the new arrangement, proceeds of a cheque lodged on Monday by a customer of Bank A in Kano but which has to be sent for Bank B in Lagos, would clear on Wednesday. Value would be given on Thursday if the cheque was lodged after the clearing session on Monday.”
The banking watchdog explained that “ the need to take account of the time of lodgement is to ensure that such instruments are scheduled for clearing on the same date of lodgement.”
Before the banking consolidation, banks had several accounts (virtually in all states where the apex bank had branches) with the CBN, which had not fully automated its system. This had delayed the clearing days as payments made outside Lagos were not on-line real-time (are not instantly captured in banks’ main account with the CBN in Lagos).
But with the implementation of CBN’s Real Time Gross Settlement (RTGS) - an on-line real-time system that consolidates all banks’ accounts, the latter has been able to reduce the clearing days. Essentially, this means that if a bank pays a cheque into CBN’s account in Ondo State, it will be instantly reflected in bank’s main account with the CBN.
Up till about 10 years ago, cheques processing and computations of the net settlement position of banks were done manually. The implementation of the new procedures and rules based on MICR technology however, revolutionised the cheque clearing system. Consequently, a Centralized Automated Clearing process was established in Lagos clearing zone, whereby with MICR Reader Sorters, necessary information on cheques are captured, built into clearing files and electronically transmitted to the clearing house, from where the net settlement position of participating banks are automatically computed and also electronically transmitted to the Central bank for final settlement. It was not until about 10 years ago that the apex bank in collaboration with the Bankers’ Committee launched the first major initiative to modernise the payments system. The starting point was to automate the cheque clearing system and making it a veritable platform for development of electronic payment channels.
The objectives of the reforms of the payment are to promote efficiency, safety, migration to cash-less mode of payment and to boost public confidence.
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