Windhoek — The central bank said this week that a a new domestic cheque item limit of N$ 500,000 will be introduced with effect from 10 June 2010.

The bank said after consultations with the banking industry and the Payment Clearing House (PCH), a determination on "reduction of the item limit for cheque payments within the National Payment System was agreed.

"This determination sets a new domestic cheque item limit of N$ 500,000 with effect from 10 June 2010. Any cheque payment made in excess of N$500,000 will no longer be accepted by banking institutions nor will it be processed by the PCH after this date. However, cheques issued before the implementation date, that is, 10 June 2010, will be processed on exceptional basis," the central bank said.

The bank said there are immense benefits associated with the reduction of the cheque item limit. The bank said the measure will mitigate incidents of fraud carried out through the use of cheques and will enhance the safety, speed and efficiency of the Payment System in Namibia, because all high value payments in excess of N$500,000 will be directed through electronic funds transfers (EFT), Real Time Gross Settlement System (RTGS) known as the Namibia Inter-bank Settlement System (NISS), for timely, guaranteed and final settlement. The bank said this will lead to quicker availability of funds in payees' accounts.

The central bank has been mandated by the Payment System Management Act, 2003 to ensure safety and efficiency in the National Payment System. More recently, the bank has taken a position aimed at phasing out cheques in the National Payment System, through cheque capping, because of risks of fraud, high probability of default by the payer and declining volume. The reduction in the use of cheques is expected to encourage the public to conduct transactions through electronic means such as debit cards, credit cards and electronic fund transfer mechanisms.