Cheques will now be cleared in two following the reduction of transaction days by banks from three effective August 19.

The Kenya Bankers Association and the Central Bank of Kenya yesterday announced a new cheque clearing cycle of T+1 from the current T+2 that was introduced in 2011 following the automation of the country's clearing house.

In layman terms, T+1 means transaction day plus one more day meaning that if a cheque is presented on a Monday, the money will be accessible to the beneficiary on Wednesday.

"The shorter clearing cycle will enable customers to know the fate of their cheques faster thus speeding up cheque based transactions and ultimately increasing the flow of funds in the economy," said KBA chairman Jeremy Awori.

Latest statistics by CBK show that in June, the automated clearing house processed 1.5 million cheques whose total value stood at Sh175.1 billion.

"The continued systematic modernisation of the payments and settlements systems is aimed at enabling the country's payment system to attain international standards and ensure that Kenya becomes a financial hub in the region as well as the preferred investment destination," said CBK governor Njuguna Ndung'u.

Unlike previously when cheques had to be physically moved from various bank branches to the clearing house, with automation, the images are transferred electronically after being scanned.

CBK said that with modernisation, cheque fraud has reduced because as cheques are presented and details captured at a bank counter, it takes minutes to identify and verify all important details and features on the cheques and anomalies are detected even before the customer leaves the banking hall.

This, Ndung'u said, has been helped by banks' access to a national data system.