Activist moves to court seeking lower bank interest rates

Activist Okiya Okoiti Omtata has moved to court challenging the new bank interest rates assented to by President Uhuru Kenyatta capping interest rate on all loans at 14.5% saying that they are still high and unconstitutional.

Omtata argues that the banks are wrong to cap interest’s rates using the Central Bank Rates (CBR) and not the Kenya Banks Reference Rate (KBBR).

“The law requires the respondent to charge a maximum of 12.9% (being the KBBR at 8.9 %+4 %),” argues Omtata.

He further says that the difference between the interest rates prescribed by law and what is charged by the banks is 1.6%.

In his petition filed at the Milimani Law Courts, Omtata says that the usurious state of affairs is unconstitutional and, therefore, unacceptable claiming that it unfairly enriches the lenders adding that it arbitrarily deprives borrowers of their property contrary to article 40 of the Constitution.

He now wants the court to intervene by ensuring that Central Bank of Kenya (CBK) and Kenya Bankers Association (KBA)  ensure that the interest rates are capped based on the KBBR and not on the CBR.

He says that the Central Bank of Kenya, the industry regulator, has not taken any action to stop the Kenyan Bankers Association and its members from violating Section 33 (10) of the Banking Amendment Act 2016.

“Unless the application is urgently heard and determined, the applicant and the people of Kenya will suffer great loss as the constitution continues to be violated,” he claims.

Central Bank of Kenya and the Kenya Bankers Association have been named as respondents in the case.

The new law regulates applicable rates to bank loans and deposits, thereby, capping the interest that banks can charge on loans and deposits.

Most major banks have now adjusted to the new loan interest rates following the President Uhuru Kenyatta signing into law the Banking Amendment Bill, 2016.