CENTRAL BANK OF KENYA
REMARKS
By
PROF. NJUGUNA NDUNG'U,
GOVERNOR,
CENTRAL BANK OF KENYA,
THE ANNOUNCEMENT OF THE T+1 CHEQUE CLEARING CYCLE
July 31, 2013

Mr. Jeremy Awori, Chairman, KBA
The Deputy Governor, Central Bank of Kenya
Ladies and Gentlemen;
It is my great pleasure to welcome you all to the Central bank of Kenya.
Ladies and Gentlemen,
Today marks another important milestone in the enhancement of the Cheque Clearing
Process in the Automated Clearing House.
Since 1998, the Central Bank of Kenya has worked towards modernizing the National
Payment Systems. This journey started with the automation of the Clearing House, through
the introduction of the Magnetic Ink Character Recognition (MICR) technology and the
Electronic Funds Transfer (EFT) payments. These initiatives resulted in the reduction of
clearing time from fourteen (14) days to the current two (2) days.
Other milestones in the modernization process include the successful launch of the Kenya
National Payments System Framework and Strategy Document in September 2004, the
Kenya Electronic Payments and Settlement System (KEPSS), in July 2005 and
authorization of the mobile payments platforms to enhance financial inclusion, in 2007.
Ladies and Gentlemen,
KEPSS implementation helped phase out the previous paper-based inter-bank settlement
system and completely transformed the management of liquidity in the banking industry.
Currently, KEPPS processes, real time, a daily average of over 7000 transactions valued at
KES 86 billion.
In 2008, the Central Bank of Kenya in conjunction with Kenya Bankers Association (KBA),
initiated the modernization of the cheque clearing payments system, which was aimed at
mitigating various risks as well as enhancing efficiency, with three key deliverables two of
which are the Cheque Truncation system and the Reduction of Cheque clearing cycle to T
+2
The Cheque Truncation System and the T+2 Clearing Cycle were achieved within the agreed
time, in 2011 and 2012 respectively. These measures have contributed tremendously to the
significant reduction in cheque-related frauds as well as increasing the efficiency of cheque
payments.
Ladies and Gentlemen,
The introduction of Cheque Truncation enabled the whole of Kenya to become a ‘One
Clearing Zone’. This meant that cheques drawn in Nairobi, upcountry and remote zones e.g.
Moyale, would be processed within the T+2 clearing cycle, thus saving customers time and
transport costs.

Thus, the implementation of cheque truncation system has delivered on improving the
efficiency of the clearing process, reducing the cost associated with handling physical
cheques and reducing the clearing period.
More recently, we have witnessed additional initiatives to enhance efficiency in the cheque
clearing process. For example, with effect from 1st July, 2012,KBA waived commissions
charged on cheques cleared from upcountry and remote bank branches thus reducing the
cost of clearing cheques. Prior to cheque truncation, bank branches in the country were
divided into local, upcountry and remote zones.
On 16th January 2012, (KBA) issued a circular effectively reducing the clearing period to 2
clearing days (T+2). In so doing the Association passed on the benefits of cheque
truncation to banking customers and the public in general. In June 2013, the automated
clearing house processed 1.5 million cheques valued at Kes 175.1 billion. Due to the reduced
clearing period, beneficiaries received their funds a day earlier to finance their economic
activities.
Ladies and Gentlemen,
The final deliverable initiative of the cheque truncation project is to reduce the clearing
period to 1 clearing day (T+1). Today, I am happy to announce that we have achieved this
deliverable that is T+1 clearing cycle, which takes effect on 19th August, 2013. This means
that banks will be moving to the one day cheque clearing cycle, which will shorten the time
it takes for banks to process cheques.
By further reducing the clearing period, banking customers will benefit by accessing their
funds at a much shorter time to conduct economic activities.
Ladies and Gentlemen,
The continued systematic modernization of the payments and settlements systems is aimed
at enabling the country’s payment system to attain international standards and ensure that
Kenya becomes a financial hub in the region as well as the preferred investment
destination.
Furthermore, a fundamental policy objective for payments modernization remains the
achievement of safety, efficiency and effectiveness of the payment system as well as
promoting access and inclusion to financial services. To achieve these objectives, the Bank
works in close liaison with the Government, the Kenya Bankers Association (KBA), the
financial sector in general and other stakeholders.
Ladies and Gentlemen,
As we make this important announcement, may I take this opportunity to sincerely thank
the KBA, who has been an instrumental player and partner in the modernization of the
National Payment System as a key stakeholder in Kenya’s banking industry. We are
thankful for their role in facilitating and supporting the success of the automation and

improvement of the National Payment System. Indeed, the Central Bank remains
committed to creating, nurturing and strengthening partnerships with all stakeholders in
the banking industry.
Finally, I would like to assure you all that the Central Bank will continue to provide a
supportive regulatory environment for banks and other financial institutions to do business
and to improve the payment systems.
Thank you all for your attention