Why Banks In Kenya Still Operate As If Under Rate Cap

CBK Governor Dr Patrick Njoroge 

Commercial Banks in Kenya have reported that they still operate as if still under the interest rate cap regime.

This is because, the Central Bank have not yet approved their new formulas after submissions on how each bank will price new loans after rate cap was lifted.

“Getting approval is a nightmare. CBK has taken a more customer protection approach as opposed to the industry needs,” a bank CEO told Business Daily, seeking anonymity for fear of CBK reprisals.

Interest rate cap was removed last year November after it proved a big barrier to lending market profitability , a move support6by the International Monetary Fund (IMF) .

In june 2020, the average interest rate charged on loans was 11.89 percent. This is after the Monetary Policy Committee (MPC) kept the Central Bank Rate (CBR) at 7 percent.

Even without a rate cap lenders continued to charge loans at 4 percentage points above the CBR. This is to avoid collisions with the CBK as the bank's regulator.

CBK have been behaving customer biased since the COVID-19 pandemic was declared,  a move most probably thought to be for the benefit of the consumers.

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