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CBN to Penalize DMBs Over Cheque Processing Failures


By Grace Chigbu

LAGOS, Nigeria – In a decisive move to enhance the efficiency and security of the Nigerian cheque clearing system, the Central Bank of Nigeria (CBN) has announced plans to begin penalizing Deposit Money Banks (DMBs) that experience failures in their cheque truncation processes due to equipment malfunction. This directive takes effect from the 1st of November, 2023.

This recent directive was communicated to all DMBs through a circular titled: “Circular on the revised Nigeria Cheque Standards (NCS) and Nigeria Cheque Printers Accreditation Scheme (NICPAS): Magnetic Ink Character Recognition (MICR) reject.” In the circular, the CBN laid emphasis on its intention to significantly reduce the surge in MICR failures that has plagued banks of late.

Specifically, the apex bank has advised DMBs to give critical attention to their in-house cheque processing equipment. The CBN’s recommendation is for banks to ensure these pieces of equipment are not only properly calibrated but also under regular supervision to prevent any distortion in images and data during the cheque truncation process.

Diving deeper into the details of the circular, it highlighted the need for DMBs to engage with their personalizers urgently. The primary goal of this engagement is to reiterate the importance of revalidating the MICR codeline details. This revalidation must align with the standards set out in the NCS and NICPAS version 2.0.

Mr. Sam Okojere, the Director of the Banking Services Department at CBN, penned the circular. He reminded DMBs of the NCS and NICPAS, version 2.0 which was issued on the 18th of September, 2018. The main objective of these standards was to upscale the efficiency and security of the Nigerian cheque clearing system.

“It has come to our notice that MICR rejects have been on the increase,” Mr. Okojere pointed out in the circular. In light of this concerning trend, the bank is intensifying its efforts to drive down these numbers.

Okojere further elaborated on the responsibilities of both presenting and receiving banks. He insisted that these banks must go the extra mile in scrutinizing their in-house cheque processing equipment. This thorough examination is expected to ensure the equipment is in perfect condition and any chances of distortions, during the cheque truncation process, are mitigated.

One of the standout points of the circular was the clear warning issued by the CBN on its intention to actively monitor the compliance of banks with this directive. DMBs that record MICR reject from the stipulated start date of 1st November, 2023, will face penalties as specified by the Sanctions Grid.

The circular concluded with a stern note, advising all banks to be duly guided by this directive and take all necessary steps to ensure full compliance.

This move by the CBN is indicative of its commitment to ensuring the Nigerian banking system operates at the highest standard. The directive serves as a call to action for all DMBs to align with best practices and ensure customer transactions, particularly those involving cheques, are seamless and error-free. As the November 1 deadline approaches, all eyes will be on DMBs to see how they adapt and enhance their systems in line with the CBN’s directive.

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