Bank relief on loan repayment rises as credit restructures hit Ksh.680 billion

The relief by commercial banks on loan repayments to customers has risen significantly as loan restructures hit Ksh.679.6 billion.

The new figure represents an equivalent 23.4 percent of the banking industry Ksh.2.8 trillion total loan book.

The updated loan relief data by the Central Bank of Kenya (CBK) reveals an extension to loan repayment periods on existing loans to Kenyans with loan restructures having stood at Ksh.360 billion on June 11.

The cushioning to Kenyans is in line with emergency measures announced on March 18 by the CBK to provide relief to borrowers’ under COVID-19 stresses for a period of up to one year.

Restructured personal loans hit Ksh.199.1 billion or 25 percent of gross loans to this sector as of May 31.

Loan restructures to other sectors meanwhile rose to Ksh.480.6 billion including an equivalent 23.7 percent of the trade total loan book and 20.6 percent of the real estate portfolio.

Other top sectors to mark the relief on loan repayments include tourism at 12.5 percent, transport and communication at 11.2 percent and manufacturing at 10.6 percent.

Moreover, the extended relief comes as the banking sector marks a change of fortune in worsening asset quality as the percentage of gross non-performing loans decelerates to 13 percent from 13.1 percent in April.

The change in NPL trend has been supported in large part by repayments and recoveries on the trade, manufacturing and real estate sectors.

The increased asset quality is amidst rising concerns in heightened loan defaults as customers struggle to meet scheduled payments.

The ease is further supported by the recorded loan restructures as banks put a pause on potential loan defaults.

Increased NPLs have raised fears on a collapse to borrowing with the Kenya Bankers Association (KBA) for instance projecting a gross NPL ratio of 14 percent by the end of the year.

Private sector credit growth has however continued to ease with the rate standing at 8.1 percent in May even as it eased from a higher 9 percent in April.