The Central Bank of Kenya (CBK) has defended the quality of new currency notes which have now been in circulation for about two years.
The defense by the reserve bank comes amidst concerns on the life-span of the new notes particularly the low denominational Ksh.100 and Ksh.50 notes.
While the low denominational notes especially the Ksh.50 note has shown its vulnerability, CBK Governor Patrick Njoroge said the new notes are comparatively better than their predecessor during an appearance before the National Assembly Finance and National Planning Committee on Tuesday.
“Its no question the new bank notes are technically superior to Kenya’s old notes,” he said.
The CBK boss has based his appraisal of the new version notes on advanced security features, varnish to reduce tear and wear and features to support identification by visually impaired persons.
However, Dr. Njoroge has acknowledged the lower denominational Ksh.50 and Ksh.100 notes face a greater battering and ultimately a higher rate of quality deterioration blaming the matter on the notes high circulation and significant mishandling including ‘destructive tests’.
The notes are further popular among matatu and market businesses but have a significantly lower rate of circulation back into the Central Bank from where dirty and worn out notes are replaced with new ones.
“If the notes are in poor state, we remove them from circulation and destroy them, exchanging the notes for new ones. However, it may take time before notes return to the CBK from circulation,” added Dr. Njoroge.
Njoroge says the CBK holds ist clean banknote policy to high regard and uses it to facilitate the smooth flow and withdrawal of bank notes from the public.
The reserve bank uses a fitness indicator measuring the recovery rate- the proportion of clean bank notes delivered by commercial banks.
According to the bank, the recovery rate has been relatively greater since the roll out of new currency notes with the average rate settling at between 10 and 15 per cent.
At the same time, the CBK has expeditiously gotten rid of dirty notes with none of the Ksh.50 notes issued between June and December 2019 remaining in circulation today.
Moreover, the reserve bank says it is considering new measures to sustain its clean banknote policy including encouraging Kenyans to directly seek out replacements for ‘run-down’ notes.
“If you have a dirty note, you can actually present this to your bank and exchange it for new notes or deposit the dirty notes. You can also directly exchange your dirty notes at the CBK,” said Dr. Njoroge.
The CBK estimates the life-span of new notes at a mean one year in contrast to 6-9 months for the older banknotes.
The new bank notes were introduced in June 2019 with the older Ksh.1000 note being replaced entirely through demonetization.