June 06 2008 Banking Circular No 4 of 2008 To All Chief Executives Commercial Banks

Revised Guidelines For Currency Transactions

The Central Bank of Kenya has over the years accepted deposits of unsorted banknotes from commercial banks. This has resulted into large backlogs in sorting and congestion at the Central Bank strong rooms. In an effort to improve our operations and service to all our customers, we have drawn up a set of guidelines to assist commercial banks to sort notes belore depositing at the Central Bank. The Central Bank shall therefore not sort any commercial bank deposits as fit or unfit from the date the guidelines take effect.

As from July 1* 2008, all commercial banks will be expected to deposit banknotes that have been sorted into either fit or unfit categories which should be clearly marked on the boxes delivered to the Central Bank.

Effective the same date, the Central Bank of Kenya shall cease to accept deposits of coins. It is expected that commercial banks shall carry out inter bank transactions for their coin needs. The Bank will however accept requests for withdrawal of coins in case of any shortfall in the market.

Daniel M. Chege Director, Currency Operations & Branch Administration Department

Banknotes Sorting Guidelines

1. Objective

The objective of banknote sorting is to:-

• Maintain a clean banknote policy at all times throughout the country and beyond wherever Kenya Banknotes are in use.

• To re-circulate fit banknotes within the Banking system in order to derive maximum usage before soiled and worn-out banknotes are returned to Central Bank for destruction.

• Enhance integrity and confidence in Kenya Currency through disposition of clean and positive currency management.

2. Affected Parties

In order that these objectives are met, all those involved in banknote sorting, while undertaking this process, need to clearly separate fit and unfit banknotes destined for recirculation and destruction respectively.

3. Standards Of Sorting Criteria

1	Banknote status	Sorting Criteria
SOILAGE	Treat as unserviceable if cleanliness is
(a) Dirt	less than 50% compared to a new banknote of the same denomination.
(b) Stained or discoloured	100%	-	all	to	be	treated	as
unserviceable
(c) Graffiti - written on	100%	-	all	to	be	treated	as
unserviceable 100% - all		to	be	treated	as
unserviceable
(d) Washed, bleached or stiff (Genuine and depicting UV bright properties)
2	100%	-	all	to	be	treated	as
unserviceable
TEARS (a) Missing corners or tears at the edges (b) Holes - 1mm or wider	100%	-	all	to	be	treated	as
unserviceable
(c)	Security	thread	loose	or	100%	-	all	to	be	treated	as
missing	unserviceable
3	MUTILATION	100%	-	all	to	be	treated	as
unserviceable (Ensure that banknote meets the minimum criteria for exchange of mutilated notes)
4	OTHERS	100%	-	all	to	be	treated	as
(a) Staple pins	unserviceable

A criterion is here below spelt out to assist all those involved in banknote sorting:-

(b) Cello tape or masking tape on	100%	-	all	to	be	treated	as
banknote	unserviceable
5	GENUINE	BUT	DEPICTS	100%	-	all	to	be	treated	as
DEFECTIVE PROPERTIES	unserviceable, but submit to CBK for technical analysis and replacement
6	COUNTERFEITS	100/% reject as counterfeits. Submit to CBK or law enforcement agent immediately with customer details where available.

4. Packaging And Labeling

Denomination	Colour	of	Label	and	Packaging
	material
50/=	Light green
100/=	Light red
200/=	Light yellow
500/=	Light blue
1000/=	White label & clear packaging material

Banknotes to be packaged into Sub-bundles and Bundles. A sub-bundle to contain 100(one hundred) banknotes and a bundle will comprise 10(Ten) sub-bundles. Complete bundles to be marked using a label showing details of the Bank and clearly marked ' FIT' in the case of serviceable notes and 'UNFIT' in case of unserviceable notes. Full bundles shall then be shrink-wrapped in translucent polythene bags. In order to standardize practice in the industry, the following labelling and packaging colours to be adopted for each denomination: CURRENCY OPERATIONS & BRANCH ADMINISTRATION DEPARTMENT