Last week, The Kenya Bankers Association announced that upcountry banks will stop charging clearing fees on cheques issued outside Nairobi starting this July. Cheques drawn on upcountry and remote towns attracted a commission charge to cater for the costs of transportation and other services associated with the clearing of the cheque. The charge was 0.25% of the value of the cheque, subject to a minimum Kshs 100 and maximum Kshs 10,000.

Prior to the implementation of the Cheque Truncation Project, Kenya was having three cheque clearing zones. These were;

1.  Local clearing zone for cheques drawn on branches within Nairobi and surrounding towns within a radius of 40 km, and Mombasa.

2. Upcountry zone for cheques drawn on all other towns except areas designated as remote towns.

3. Remote Towns which were Garissa, Lamu and Mandera

The clearing cycle for local zone and upcountry zone was 3 days, while remote was 10 days. When the cheque truncation system was implemented all the clearing Zones were collapsed  into one zone countrywide. Later after the live date the duration further reduced this cycle to  2  days. However, upcountry and remote cheques still were subject to the commission charges.

Kenya Bankers Association made the announcement that effective 1^st july, the commission charge would not be applicable, thereby fully ensuring the country is one clearing zone, and passing to the customer the savings on the charges. The decision, according to KBA was in line with the project milestones and a benefit to the upcountry banking customers.

Banks will not only be expected to make the necessary amendments to their systems for this July change, but will be expected to purchase truncation equipment for all their upcountry branches by the end of the year. The introduction of truncation system will change the process from the physical presentation of cheques to electronic transmission between banks.