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Malaysia Introduces New Cheque Clearing System
    2008-04-09 12:11:36     Xinhua
Malaysia will implement a speedier and more efficient new cheque clearing system -- the cheque truncation and conversion system (CTCS), which would benefit customers and businesses, local media reported on Wednesday.

At a media briefing on the CTCS on Tuesday, Zamani Abdul Ghani, deputy governor of Bank Negara Malaysia, the central bank, said that Cheque truncation will be implemented on May 23, followed by cheque conversion in August in the Klang Valley.

"The roll-out to the rest of the country will be carried out in phases, with Penang (northern state) and Johor (southern state) by October and the east coast and Sabah (eastern state) and Sarawak (eastern state) by January 2009," the New Straits Times quoted Zamani as saying.

Also present at the briefing were Bank Negara assistant governor Nor Shamsiah Mohd Yunus and Association of Bank Malaysia chairman Abdul Hamidy Hafiz.

Under the CTCS, outstation and local cheques will be cleared on the same day and funds made available as early as the next business day compared with the present five to eight business days to clear outstation cheques.

With cheque truncation, the image and data on the cheque will be transmitted electronically throughout the clearing process, thus putting an end to the physical movement of cheques from the collecting bank to the clearing house within Bank Negara and the paying/drawee bank.

The cheque conversion facility, meanwhile, allows organizations that receive large volumes of cheques like utility companies, telcos, insurance firms and stockbrokers to convert the data in magnetic-ink character recognition (MICR) code in the cheques into payment instructions to debit the drawers' accounts.

It is estimated that 2 million cheques are processed every day, with some bigger banks processing 200,000 cheques per hour.

Cheque conversion is a prelude to transform the paper-based payment mode into e-payment, Zamani said.

"While there has been a shift in the payment mode from cheques to more electronic payments in the recent years, cheques continue to be the dominant payment instrument, accounting for 93 percent of the non-cash payment value in 2007," he added.

For the central bank, the cost-savings will be in the form of reduced manpower to handle cheques at the clearing house.

For banks, the cost-savings will come from fraud reduction, transport cost, storage cost and insurance, said Abdul Hamidy, who is also Affin Bank managing director.

For the CTCS, banks will have to invest between 60,000 ringgit (18,808 U.S. dollars) and 80,000 ringgit (25,078 U.S. dollars) in the scanner and software for each branch.

Cheques are most vulnerable to fraud such as hijacking, during the physical transfers, Nor Shamsiah said.

"With the new system, this risk will be eliminated," she said.

There were 447 cases of cheque frauds last year, involving forgeries or stolen cheques.
 
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