Cash hubs get new guidelines, set to reduce cash handling costs for financial institutions

LATEST guidelines for the registration and operation of Bank Neutral Cash Hubs (BNCH) aimed at cost reduction in cash handling in Nigeria, have been released by the Central Bank of Nigeria to receive Naira denominated deposits on behalf of financial institutions from individuals and businesses with high volumes of cash.

The key objective of setting up BNCH is to reduce the risks and cost borne by banks, merchants and huge cash handlers in the course of cash management activities; deepen financial inclusion and leverage on shared services to enhance cash management efficiency. 

The CBN, in furtherance of its mandate to promote a sound financial system in Nigeria, in collaboration with the Banker’s Committee, initiated the Nigerian Cash Management System (NCMS) which seeks to reduce cost and improve operational efficiency in the country’s cash management value chain. 

One initiative towards the above stated goal is the introduction of Bank Neutral Cash Hubs (BNCH). They are cash collection centers to be established by registered (licensed) processing companies or Deposit Money Banks (DMBs) based on business needs.

The apex bank noted that the BNCHs would be located in areas with high volumes of commercial activities and cash transactions. The hubs would provide a platform for customers to make cash deposits and receive value irrespective of the bank with which their account is domiciled.

“This guideline aims to provide minimum standards and requirements for BNCH registration and operations for effective supervision,” it stated.

A BNCH may carry out the following: receipt of Naira denominated deposits on behalf of financial institutions from individuals and businesses with high volumes of cash; disbursement of Naira denominated withdrawals on behalf of financial institutions to individuals and businesses with high volumes of cash; any other activities that may be permitted by the CBN. 

A BNCH shall not: carry out investing or lending activities; receive, disburse, or engage in any transaction involving foreign currency; sub-contract another entity to carry out its operations; any other activities that may be prohibited by the CBN. 

The CBN’s guideline further noted that the technology deployed comprises a set of interoperable infrastructure modules that work seamlessly with the common platform provided by Nigeria Interbank Settlement System (NIBSS).

“The CBN shall have powers to order any BNCH to meet its outstanding obligations before shutting down its operations.

“The Bank shall retain the sole privilege and discretion to license and revoke licenses for BNCH. Other eligible entities where necessary may seek redress through the Bank, which may incidentally lead to the revocation of license,” the CBN stated.

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