Lower interest rates in the offing, as MPs pass Banking Act amendments

Kenyans could soon enjoy favorable lending rates from commercial banks, if President Uhuru Kenyatta assents to amendments to the Banking Act to cap interest rates.

Parliament on Wednesday passed a bill to have interest t rates capped at not more than four percent of the central bank rate (CBR).

The bill sponsored by Kiambu Member of Parliament Jude Njomo seeks to cushion borrowers from the high lending rate regime

With the CBR currently at 10.5 percent, the move could see interest rates set at a maximum of 14.5 percent down from the industry average of 19 percent.

The bill further guarantees a minimum interest rate of at least 70 percent of the base rate set by CBK for customer deposits.

“These proposed provisions shall go a long way in safeguarding interests on loans intake, while protecting clients’ deposits,” Mr Njomo said.

Treasury Cabinet Secretary Henry Rotich has been opposed to the move to cap interest rates arguing banks would be forced to lock out borrowers with low credit scores, further locking out the masses.

“Banks will lend to blue chip companies. If you control prices then you will lock out people from accessing credit,” Mr Rotich said in March.

This is not the first time parliament has sought to cap interest rates with former Gem Joe Donde being the first to attempt to have banks forced to cap interest rates.

The Central Bank of Kenya’s Monetary Policy Committee on Monday retained the CBR at 10.5 percent but slashed the Kenya Banks Reference Rate (KBRR) to 8.9 percent in an effort of getting banks to lower interest rates.

CBK is also working on a new interest pricing tool which it expects will help bring down the cost of borrowing in the country.

Tags:

Interest Rates CBR Central Bank of Kenya Jude Njomo Borrowers commercial banks kbrr

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