The Central Bank has introduced a new automated clearing system that will convert physical cheques into a substitute electronic format in order to make cheque transactions more convenient. This is aimed at among others bring down the period of clearing cheques from three days to a single day.
The new system known as cheque truncation will become operational in the next one week, on April 20 and will provide a fully Automated Clearing House with cheque truncation capability.
Cheque truncation eliminates the physical movement of cheques and reduces the time and cost of processing the cheque clearance system. It also offers the potential reduction in settlement periods with the electronic processing of the cheque payment system.
In an April 10 statemement by the Bank of Uganda, the Governor, Tumusiime Mutebile said that under the new Automated Clearing System, cheques presented for payment will be scanned by the collecting banks and the resulting high definition images, together with relevant electronic data, will be transmitted electronically to the paying banks through the Clearing House.
“This will eliminate the physical movement of cheques between banks and across bank branches, thus speed up the process of cheque clearance, settlement among banks and realization of funds by the beneficiaries,” the Governor said in the statement.
Once operational, the new system will eventually reduce the tedious process of clearing a cheque to a single day. This, the Central Bank says will enable beneficiaries of cheques receive their funds more rapidly.
Other benefits include reduction in risks involved in cheque clearing since the automated system is less vulnerable to fraud than manual cheque clearing.
The entire country will have access to a single centralised cheque clearing platform as opposed to the current decentralised and unaligned platforms.
Currenlty, the process of clearing a cheque in Uganda takes a minimum of three working days. Bank of Uganda clearing house clears and settles cheque transactions on a daily basis with 23 financial institutions participating in the process.