CBN to Impose Penalties on Banks for Cheque Rejections Starting November 1, 2023

Effective November 1, 2023, the Central Bank of Nigeria (CBN) is set to introduce sanctions against deposit money banks (DMBs) that reject customers’ cheques. This decisive action aims to address the rising issue of Magnetic Ink Character Recognition (MICR) rejects and enhance the efficiency of the Nigerian Clearing System.

The CBN’s announcement came through a recent circular issued by the Director of the Banking Services Department, Sam Okojere. In the circular, the apex bank expressed concerns over the increasing occurrence of MICR rejects, which are encoded numbers located at the bottom left of cheques, essential for streamlining the cheque processing and clearance process.

The CBN directive emphasizes the importance of DMBs contacting their cheque personalizers to ensure the correctness of MICR code-line details according to the Nigerian Cheque Standards (NCS) and Nigeria Cheque Printers Accreditation Scheme (NICPAS) version 2.0. It further states that the CBN will closely monitor compliance with this directive and penalize any bank experiencing MICR rejects from November 1, 2023, following the established Sanction Grid.

To tackle this issue comprehensively, both presenting and receiving banks are instructed to meticulously assess their in-house cheque processing equipment. This assessment aims to confirm proper calibration and supervision, eliminating any distortion of image and data during the cheque truncation process.

Notably, the CBN introduced the NCS and NICPAS version 2.0 on September 18, 2018, with the goal of enhancing efficiency and security within the Nigeria Clearing System. In line with this objective, the CBN has recently provided banks and stakeholders with an updated list of accredited cheque printers and personalizers.

The CBN’s commitment to maintaining high standards and ensuring an efficient payment and settlement system is evident through its regular updates of accredited personalizers and cheque printers. To meet the MICR Technical Implementation Committee standards, firms are granted applications, ensuring they meet the required criteria.

The most recent update of accredited cheque printers and personalizers was released in May 2023. Notably, only four printers and personalizers received accreditation in that round, compared to six in the previous July update. However, the institutions accredited as cheque printers remained consistent across both updates.

The CBN’s proactive measures in addressing cheque processing issues demonstrate its unwavering dedication to maintaining the integrity and efficiency of Nigeria’s financial systems. These efforts are pivotal in ensuring a seamless experience for both banks and their customers in the handling of cheques.