SBP to begin electronic cheque clearing pilot from Oct 15

• SBP issues rules, procedures, and operational instructions for PECS.
• Cheques to be cleared using captured images under new system. 
• Pilot will run in three phases; first, from Oct 15 to Nov 15.

KARACHI: The State Bank of Pakistan (SBP) announced on Monday that it will begin a pilot project for cheque clearing through electronic images from October 15, replacing the use of physical cheques, with the system expected to cover the country by April 30, 2027.

The Pakistan Express Clearing System (PECS) is based on the concept of cheque truncation defined in the Payment Systems and Electronic Fund Transfers Act, 2007, according to a circular issued by the central bank.

Under the new system, cheques will be cleared using captured images instead of physical instruments, aiming to strengthen the country’s digital payments ecosystem and make clearing and settlement more efficient. 

The presenting or collecting bank will capture the images and send them to the clearing house, National Institutional Facilitation Technologies Limited (NIFT), which will pass them to the paying or drawing bank for processing.

The SBP has also issued the rules, procedures, and operational instructions for the system and an implementation plan for the rollout.

The pilot will run in three phases. In the first, from October 15 to November 15, the system will operate at a limited number of clearinghouse participating institutions selected by the SBP in consultation with the NIFT. The clearinghouse and participating institutions will then review the results and address any issues, and the clearinghouse will submit a consolidated readiness report to the central bank.

In the second phase, from November 16 to December 31, the system will be extended to all remaining participating institutions, which will progressively roll out cheque truncation across their branch networks.All participating institutions must develop the required infrastructure and achieve nationwide implementation by April 30, 2027, the central bank said.

Under PECS, a cheque will be truncated at the branch of the presenting institution, and every later step in the clearing process will use the electronic image and its associated clearing data. The presenting institution will send the image to the clearinghouse, which will forward it to the paying institution.

The paying institution will decide whether to pay or reject the cheque based on the image. The physical instrument or cheque will stay with the presenting institution until the clearinghouse collects it. If the paying institution doubts the authenticity of the instrument or the contents of the image, it can mark the instrument ‘Defer for Physical’, the central bank said.

Cheques can be captured in two ways. Under the primary mode, branch capture, the presenting institution’s branch will scan the cheque, either on its own premises or at a nearby designated branch, using a compliant scanner and send the image through the clearing house’s system. If a branch cannot use that mode, it can fall back on bureau capture, under which NIFT will collect the cheque, scan it, and transmit the image to the paying institution.