The banking industry should undertake effective measures to reduce the cost of handling cash and cheques used for credit card and loan repayments which amounted to about RM2.4 billion annually.

Bank Negara Malaysia (BNM) Deputy Governor, Datuk Muhammad Ibrahim, said this was a sheer wastage when a cheaper alternative was readily available.

"Financial institutions must upgrade their management information systems to capture the cost of different payment methods and identify areas with potentials for greater operational efficiency.

"They should also foster better coordination between their respective revenue and cost centres to achieve optimal financial performance," he said in in his keynote address at the 'Payment System Forum and Exhibition 2015' here today.

Muhammad said in 2014, there were 101 million transactions involving both cash and cheques which resulted in higher costs of handling.

From 2011-2013, the handling of cheques declined at a marginal rate of two per cent on average, eased 10 per cent in 2014 and fell further by 16 per cent in the first nine months 2015, he said.

"We are projecting the number of cheques cleared to fall from about 207 million trasactions in 2010 to 149 million by year-end," he said.

He said by 2020, the target would be 100 million cheques which could save a minimum of RM300 million handling cost.

For cash, the industry needed to achieve an annual decline rate of 15 per cent per year similar to that of cheques, he said.

"Moving forward, the payment system infrastructure such as Malaysia Electronic Payment System and MyClear should jointly identify areas for strategic cooperation to avoid duplication and wastage besides to keep pace with innovation and meet user needs," he said.