The Central Bank of Nigeria (CBN) and Bankers’ Committee recently directed Deposit Money Banks and licensed processing companies to establish Banks Neutral Cash Hubs to reduce cash management costs in the financial system.
The policy shift is expected to through technology, reduce cash-induced spendings in the industry as cash management has for decades, constituted a large part of banks and other financial institutions’ operational costs. The cash withdrawal limit policy, now in operation may affect the operational output of the Banks Neutral Cash Hubs programme.
The Central Bank of Nigeria (CBN) in collaboration with the Bankers’ Committee has introduced cash collection centres called Bank Neutral cash hubs.
This is to enable it to reduce cost and improve operational efficiency in the country’s cash management value chain.
The policy implementation comes at time the CBN reviewed the weekly cash withdrawal limit to N500,000 and N5 million for individual and corporates respectively.
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The policy shift was announced on Wednesday by CBN Director, Banking Supervision Department, Haruna Mustafa.
This represents 400 per cent increase, from N100,000 and N1 million withdrawal limit for individual and corporates set by the apex bank in its December 6 circular.
In a letter to All Deposit Money Banks (DMBS) and Other Financial Institutions-Payment Service Banks (PSBs). Primary Mortgage Banks (PMBs), Microfinance Banks (MFBs), Mobile Money Operators (MMOs) and Agents, he he review followed feedback received from stakeholders.
He said: “The maximum weekly limit for cash withdrawal across all channels by Individuals and corporate organizations shall be N500,000.00 and N5 million respectively. In compelling circumstances where cash withdrawal above the limits in above is required for legitimate purposes, such requests shall be subject to a processing fee of three per cent and five per cent for individuals and corporate organizations respectively”.
Likewise, the inauguration of Banks Neutral Cash Hubs by the Central Bank of Nigeria (CBN) was meant to reduce cost and improve operational efficiency in the country’s cash management value chain.
The cash collection centers, codenamed Bank Neutral Cash Hubs (BNCH) is expected to run on technology deployed by all participating entities.
How this technology will run was captured in the guidelines for the registration and operation of Banks Neutral Cash Hubs (BNCH) in Nigeria released by the apex bank.
The regulator said the technology implemented by the BNCH shall comply with the industry standard technology in terms of hardware and software.
The BNCH, it said shall ensure that transaction information is transmitted in a secure manner, the technology deployed comprises a set of interoperable infrastructure modules that work seamlessly with the common platform provided by
Nigeria Interbank Settlement System (NIBSS) and that customers get immediate value for successful transactions.
The CBN also directed BNCH ensures that payment instructions are instantly executed, immediate reversal shall be mandatory, In the event of communication failure during a transaction, generation of receipts or durable acknowledgements for successful transactions.
Also, audit trail is maintained and made available on request while all settlement information details are preserved for a minimum period of five years, and are made available via the Cash Activity Reporting Portal (CARP).
The BNCHs are also required to put in place systems that specifically and at a minimum address availability of services, data confidentiality and integrity, encryption of electronic transactions.
Also to be addressed are customer accountability and non-repudiation of transactions, error messaging and exception handling, and need to secure integration to the Cash Activity Reporting Portal (CARP).
The apex bank said the scheme would reduce cost and improve operational efficiency in the country’s cash management value chain. “The financial requirements for an approval to operate as BNCH, which may be amended by the CBN as it deems necessary, include Non-refundable application fee of N100,000; and Non-refundable approval fee of N500,000,” the apex bank said.
“The BNCHs are cash collection centers to be established by registered (licensed) processing companies or Deposit Money Banks (DMBs) based on business needs. They will be located in areas with high volumes of commercial activities and cash transactions. The hubs will provide a platform for customers to make cash deposits and receive value irrespective of the bank with which their account is domiciled,” the guideline added.
Continuing, the CBN said that the key objective of setting up BNCH is to reduce the risks and cost borne by banks, merchants and huge cash handlers in the course of cash management activities; deepen financial inclusion; and leverage on shared services to enhance cash management efficiency.
The regulator also spelt out functions of a BNCH, saying it may receive naira denominated deposits on behalf of financial institutions from individuals and businesses with high volumes of cash.
According to the guidelines, the CBN shall have right of access to the BNCH facility for the purpose of compliance monitoring of activities and examination of records/books.
Also, the BNCH shall comply with the reporting requirements and timelines specified in the Cash Activity Reporting Portal (CARP) Industry Handbook by providing data and information not limited to:
Total number of customers and cumulative value and volume of transactions to their name;Volume and value of withdrawal and deposit transactions;Incidents of fraud, theft or robbery; Nature and number of customer complaints and remedial measures taken. Any other report as may be required by the CBN. The BNCH shall include in its annual reports and accounts, all activities of its operations.
More details on the cash withdrawal limit
The CBN also stated that: “Monthly returns on cash withdrawal transactions above the specified limits should be rendered to the Banking Supervision, Other Financial Institutions Supervision and Payments System Management Departments as applicable.
Compliance with extant AML/CFT regulations relating to KYC, on-going customer due diligence, currency and suspicious transaction reporting etc. is mandatory in all circumstances,” the report said.
It added that customers should be encouraged to use alternative channels (internet banking, mobile banking apps, USSD cards/POS, eNaira, etc.) to conduct their banking transactions.
“Bank and Mobile Money Agents are important participants in the financial system, enabling access to financial services in underserved and rural communities They will continue to perform these strategic functions, in line with existing regulations governing their activities”
“The CBN recognizes the vital role that cash plays in supporting underserved and rural communities and will ensure an inclusive approach as it implements the transition to a more cash-less society,” it said.
“All banks and OFIs are to note that aiding and abetting the circumvention of this policy will attract severe sanctions The above directives supersede that of December 6, 2022 and take effect nationwide”.
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