Existing borrowers to wait longer for drop interest rate

Kenyans will have to wait for a while longer before reaping the benefits of lower interest rates as intended by the newly signed Banking Amendment Act.

Despite indicating that banks will uphold that law the Kenya Bankers Association (KBA) points that there are still a number of grey areas that will be clarified once the law is gazetted.

President Uhuru Kenyatta on Wednesday shocked many when he put pen to paper and introduced a cap to the amount banks can charge borrowers for credit.

Not wanting to jump the gun, the banking lobby group said existing borrowers will continue servicing their loans on the current rates until the new law is gazetted.

“In the interim the existing terms on loans and deposit accounts will continue to apply,” Mr Olaka said

this means borrowers with existing loan facilities shouldn’t expect lower interest rates as yet, neither should applicants of new credit.

Mr Olaka reiterated that banks would comply with the act, but stressed that banks were eagerly waiting to see and interpret the new regulations as it is a number of areas in the law remain unclear.

A case in point is which indicative rate that the Central Bank of Kenya will use as the indicative lending rate to guide pricing of loans.

“The assumption has been that rate is the CBR (central bank rate) but we have a number of possibilities central bank may opt to use the KBRR (Kenya Banks Reference rate) it may use the CBR it may also opt to determine another rate for purposes of applying the law so that is still left to the guideline that will be given by the central bank in terms of operationalizing the law,” Mr Olaka said.

The CBR is currently pegged at 10.5 percent with many expecting interest rates to drop to a maximum of 14.5 percent. At the last monetary policy committee meeting, the central bank lowered the KBRR to 8.90 percent from 9.87 percent.

Banks had over the last two weeks been announcing repricing of loans in line with the 0.97 percent cut in the KBRR, in an effort of showing commitment to lower interest rates to avert the signing of the bill into law.

With the President having made his decision eyes have now shifted to the attorney general who within the next seven days is expected to gazette the new law for it to be implemented.