Banks buy time to re price existing loans

Borrowers will have to wait a little longer before having their existing loans recalculated in line with the new interest rate capping laws.

This comes as banks align their systems to capture data of their customers before giving an effective date for re pricing the loans.

Players in the banking sector say this is being done to weed out the teething problems that may occur by re pricing new loans en mass.

KCB Group Chief Executive Officer Joshua Oigara said the new law had already been applied to all loans but existing loans will be re calculated to 14.5 percent from September 29.

“For us we have engaged our customers to say we need to revise our letters of offer. But we have already applied the rate. Now it’s more about the process to be resolved,” Mr Oigara said on an interview on Citizen Business Centre.

Under the Bank Amendment Act all loans will attract an interest rate not more than four percent of the central bank rate (CBR).

All banks were expected to apply the new rates from September 14.

While the law covers those taking new loans, industry players agreed to extend the rate to existing loans, with most expected to be fully compliant by October.

NIC Bank has also given itself until October 1 to migrate existing loans to the new rate.

The new law also sets a cap on interest rates on deposits at 70 percent of the CBR.