Are customers lending to banks?

By Vision Reporter

EDITORâ€"I wish to voice my concern over the manner in which commercial banks are handling cheque transactions that pass through the clearing house.

EDITOR—I wish to voice my concern over the manner in which commercial banks are handling cheque transactions that pass through the clearing house.

I operate two company current accounts in Stanbic and Barclays and I am the sole signatory. The accounts have the same title. On December 21, 2009 at 9:00am I banked a Stanbic cheque in our Barclays account in Kampala. Our account balance on December 22 showed that the cheque had been paid.

On December 24 at about
1:00pm having failed to receive a cash payment from one of our customers whom we had relied on to clear salaries and allowances to our 20 members of staff, I went to Barclays to draw from the cheque earlier deposited and was informed that this was not possible as the cheque had not yet been “cleared”.

Helpless with desperate demanding workers prior to Christmas day, I went to Stanbic requesting the reversal of the payment only to be informed that the money had left our account! No amount of explanation to either bank yielded any solution! My understanding now was that though I had money which I could access! This is because it was neither with Stanbic nor with Barclays! So who had it? The explanation that cheques clear after four working days to protect the drawer from fraud did not hold water. The accounts belonged to the same company and same signatory! And given the fact that ours is a cash economy and there are very few places where one can utter a credit card and/
or a cheque to get goods and services, banks ought to shape up. Suffice to note too that the Bank of Uganda hosts two sessions of clearing per working day—morning and afternoon. So what is the big deal? Was someone somewhere being economical with the truth? Money represents value and wherever it is, the keeper benefits from its custody especially when we know that interest on overdrafts given out by financial institutions is changeable per day and not per month. Is this is one of the reasons why a penalty is levied if one draws more than sh15m in cash?

The cheque is associated with its “maturity date”. Going by this, are we not lending banks interest- free loans on a daily basis as their accounts with Bank of Uganda are always pregnant with funds awaiting “clearance” but reflected as daily credit balance on the same banks accounts?

Courtesy of the computer era, a bank in Uganda operates through a server in Johannesburg.
Money banked in Mbale in Uganda is first credited on the account in Johannesburg before the Budibugyo customer can access it. It takes less than five minutes! How easier should it be with banks/ branches in the same neighbourhood when it comes to cheque transactions? The other day our Parliament was awash with the Land Bill arguments.

The urgency to have it passed was fuelled by the necessity to save squatters from the exploitation by landlords. Can’t someone out there bear on the Bank of Uganda to reduce the “clearing” days to at least three? The middle class that forms a generous section of the populace (tax payers) too deserves protection.

George Kaahwa

Are customers lending to banks?