MPs debate Bill seeking to cap bank interest rates

Parliament on Wednesday began debating on the Banking (Amendment) Bill, 2015 that seeks to regulate banks’ interest rates at not more than four per cent of the base lending rate set and published by the Central Bank of Kenya.

The Bill sponsored by Kiambu MP Jude Njomo, proposes to peg the minimum interest granted on a deposit held in interest earning account to at least 70 per cent of the base rate set and published by CBK.

During the second reading of the Banking Amendment Bill, MPs said it was time the law controlled banks to cushion customers who they claim have been impoverished by high interest rates on loans that do not improve their lives.

MP’s led by Westlands MP Timothy Wanyonyi and his Kikuyu counterpart Kimani Ichungwa have accused CBK of failing to rein in on runaway interest rates charged by banks on borrowers.

If enacted into law, banks’ lending rates would be capped at 15 per cent based on the current benchmark rate of 11 per cent.

Currently, those borrowing personal unsecured loans are paying up to 25 per cent interest.

The debate comes at a time when the country is reeling from the effects of the closure of a third bank in just nine months.

Last week, Central Bank placed mid-tier lender Chase Bank under receivership following a spate of panic withdrawals.

In 2015, the regulator placed Dubai Bank and Imperial Bank under receivership in the space of two months citing unsafe banking conditions.

Dubai Bank is currently undergoing liquidation, while in the case of Imperial Bank the CBK has delayed making a decision on the bank as it carries out further forensic audits and investigation.