CBN issues exposure draft guidelines for direct debit scheme, bill payments

Central Bank of Nigeria (CBN) on Thursday issued exposure draft guidelines for direct debit scheme and bill payments in the country.

Direct debit is a cashless form of financial settlement that facilitates recurring payments. It permits the originator of the instruction, known as ‘Biller,’ to collect amounts due from a payer through the payer’s bank by leveraging an instruction or mandate provided by the payer.

Direct debit has been operated in Nigeria in paper form in the form of ‘Debit Notes’ originated by payer’s bank using the Nigeria Clearing House infrastructure.

Before now, there were no general rules specific to Direct Debit as a payment mechanism in the Nigerian market. What existed were corporate rules developed to guide the participants in the relevant switch on the various products that run off the switch, and the general rules for the clearing house. This underlies its relative low acceptability in the market, as there were no clearly articulated and documented rules that guide and bind market participants, and thus grow the confidence of the user to accept and use the product.

At the same time, apart from using Open Market Operation (OMO) to control liquidity in the market, the CBN has pegged the maximum limit for each eligible financial instrument to be presented for clearing purposes at N10 million per face value.

Eligible financial instruments for clearing purposes shall include paper instruments such as cheques, managers’ cheques, drafts, dividend/interest warrants, debit/credit notes, and bankers’ payments. These instruments, the apex bank said, will be converted to images for clearing purposes.

This was contained in the revised exposure draft of “The Guideline For Nigerian Clearing System Rules,” released by the CBN on Thursday.

After consultations with banks duly established in the country, the CBN issued rules for the guidance of Nigeria Bankers Clearing System (NBCS).

The objectives of the NBCS rules include among others to provide a forum for the speedy and efficient collection of cheques, Automated Clearing House (ACH), bills and other payment instruments payable or deliverable at or through offices of member banks of the NBCS by a system or systems of clearing.

The draft stated that the Nigerian Banker’s Clearing System Rules shall be binding on all member banks of the NBCS with effect from the day the approved rules are released.