Banks unable to clear cheques due to upgrade of truncation platform

Indications emerged over the weekend that several Deposit Money Banks (DMBs) in Nigeria have been encountering difficulties clearing customers’ Cheques since Monday last week.

This was attributed to an upgrade of Cheque truncation platform by the Nigeria Interbank Settlement System (NIBSS) which acts as the central clearing house for all the banks in the country.

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, was activated in 2013, with the sole aim of ensuring that cheques are cleared in one day.

The system allows all branches of the Central Bank to capture all cheques in the respective branches and maintain them in a central server in Lagos. It then allows all captured cheques from the bank to be transmitted to the clearinghouse in Lagos.

Confirming the development to Nigerian Tribune, Head, Corporate Communications at NIBSS, Lilian Phido said the upgrade which was a directive from the CBN, was done the weekend before last and that most proactive banks that upgraded along with NIBSS did not have any problem in Cheque clearing.

She said the DMBs ought to have sent messages to their customers informing them about the upgrade early enough but observed that by Wednesday last week, about 70 per cent of the banks had keyed in, and by Friday, almost all the banks had upgraded to the new Cheque truncation platform.

Operators have applauded the system saying that 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 deadline for cheque clearing nationwide. Aside from that, the platform has also assisted the CBN to reduce cost, time and the stress involved in its cheque clearing operation.

The Nigeria Automated Clearing System (NACS) is used to describe the automated clearing system of the entire banking and financial industry for both electronic instruments (NEFT) and derivatives/images paper-based instruments (cheques).

Before the automation of Cheque clearing, the Nigerian Clearing System was manually operated and paper based, such that instruments took several days to clear and the beneficiary receive value. However, with the automation of the clearing system, this whole process takes less than 48hrs in its entirety.

NACS also made possible the Cheque Truncation System where physical clearing instruments are dematerialized into electronic format at a stage within the bank of first deposit (Presenting Bank) while only the electronic format (images/MICR data) is transmitted electronically to the Clearing House. The original physical instrument is subsequently warehoused by the Presenting bank.