The aim of the platform is to ensure that cheques are cleared in one day.
The Central Bank of Nigeria’s cheque truncation platform, an on-going effort to reduce the settlement cycle of a cheque to one day from three, has been activated in its Abuja and Lagos offices.
The cheque truncation system would allow all branches of the Central Bank to capture all cheques in the respective branches and maintain them in a central server in Lagos. The system then allows all captured cheques from the bank to be transmitted to the clearinghouse from Lagos.
The regulatory body is working with Precise Financial Systems (PFS), an indigenous software development company which implemented the cheque truncation lifecycle for the Central Bank and the Nigeria Inter-Bank Settlement Systems (NIBSS) to achieve this objective, which is to ensure that cheques presented for settlement are resolved within stipulated date across the country.
Yele Okeremi, Managing Director/CEO PFS, said the system is responsible for the processing of all inward cheques and NEFT transactions of banks. While it would address all required management reporting, its controls are guided “as the system implements all required maker-checker rules of the banks”.
“With the activation of cheque truncation regime through iTELLER platform in Nigeria, one important challenge the system has addressed is the ability of the CBN to meet the deadline for cheque truncation nationwide. Aside from that, the platform has also assisted the CBN to reduce cost, time and the stress involved in its cheque clearing operations as the system removes all logistics costs associated with clearing,” he said.
Further enumerating the benefits of cheque truncation system, he said before the new regime, Nigerian banks would have to send their outward cheques to respective central clearing departments by dispatch riders or bullion vans. However, there would not be any need for that again as cheques can be truncated directly at the branch of deposit.
“This removes time-wasting collation and photocopying exercises usually carried out at the bank branches. It also removes the need to post-encode cheques and this provides the platform to use more agile cheque scanners for image and MICR capture,” he added.
Other benefits of the new systems, according to Mr. Okeremi, include reduction of stress and human efforts in clearing, elimination of all cheques substitution tendencies, reduction of time of consummating manual transaction thereby enabling the cashier to focus on other customer requirements as well as reduction of the man-hours required to attend to other customer’s need among others.
NIBSS has a critical supervisory role in the cheque clearing systems. In that way, the system enables the cheque clearing system to run seamlessly for effective and efficient cheque payment processing.
“Championing the on-going cheque truncation system is one way NIBSS is enabling the cheque payment and processing system in the nation. The financial institutions in the country are fast switching their practices to comply with the new cheque truncation regime.
“One basic implication of the new system is that the cheque clearing system in the country is tending towards real time clearing practice. The system has to be well positioned to ensure reliability, availability, sustainability and recoverability in case of any disaster, both by individual financial institutions as players and NIBSS as the supervisor,” he said.
NIBSS’ role in the new regime, he said, includes the provision of alternative backup system whereby any financial institution that experiences failure in their in-house clearing system would fall back to ensure that they meet up with every clearing session’s activities.
The cheque truncation platform is expected to go live in other branches of the Central Bank by the end of March.