By Peter OBIORA InvestAdvocate

Lagos (INVESTADVOCATE)-The Central Bank of Nigeria Wednesday released guidelines approving Cheque clearing system to T+1.

Under the guidelines titled, “Guidelines on Cheque Truncation in Nigeria” approved by the CBN March 14 2012, Clearing Period – Under the Cheque Truncation regime, cheques shall clear on a T+1 basis such that customers receive value in the morning of T+2.

According to the CBN, on transaction day 1 (T), fresh cheques are deposited at the Bank branch, on transaction day 2 (T+1) Cheques are presented at the Clearing House, paying Bank to return unpaid instruments same day and Beneficiary Bank gets value.

While on transaction day 3 (T+2) at the beginning of the day, Bank Customer receives value for cheques not returned.

According to the CBN, Settlements for 1st and 2nd clearing sessions shall be same day, while Return Instruments (3rd session) shall be settled next day.

Also, all unpaid clearing cheques shall be returned same day and the Nigerian Interbank Settlement System (NIBSS) shall ensure that all inward files and reports are available to Banks for download within 1 hour of session closure.

In the Guidelines on Cheque Truncation in Nigeria, the CBN said by virtue of S. 47 of the CBN Act No. 7 of 2007 is charged with the duty of facilitating the clearing of cheques, credit instruments for Banks and for this purpose to organise in conjunction with other Banks, Clearing Houses in such places as the Bank may consider necessary.

 The CBN affirmed that objectives of the Cheque Truncation Guidelines include providing for the regulation and management of cheque truncation in Nigeria with the view to reducing cost and days of clearing instruments.

 To articulate the rights and responsibilities of presenting and paying Banks in the Cheque Truncation System.

 Also, the CBN says this process will provide for minimum technical and operational standards for cheque truncation; and to facilitate the implementation of an effective and efficient payment system in the Nigerian Banking Industry.

Cheque Truncation— a process that involves stopping the physical movement of the cheque and replacing the physical instrument with the image of the instrument and the corresponding data contained in MICR line.

The cheque details are captured, typically by the bank presenting the cheque or it’s clearing agent and electronically presented in an agreed format to the Clearing House for onward delivery to the paying bank for payment.

Unlike the more common form of presentment where a cheque is physically presented to the paying bank, a truncated cheque is typically stored by the presenting Bank.

Click here to download full Guideline