Banks governing body, the Kenya Bankers Association (KBA) has resulted to obey the Banking Act 2015, which controls interest rates at not more than 14.5 per cent.
As it awaits the gazettement of the legislation and operationalisation by the Central Bank of Kenya (CBK), KBA said all new loans will now be at not more than four percent over the base rate set and published by the CBK
“The voice of Kenyans has come out strongly that banks need to better serve their customers and pass on the benefit of enhanced efficiencies to borrowers and depositors,” said KBA.
All banks, members to the Association have been asked to review their operations so as to adjust to the new minimum rate requirements for interest earning accounts.
In a statement, KBA indicated that it has listened to opinions expressed by different stakeholders in the Banking Act debate, adding that its members have agreed to prospectively reprice existing loans, which will see existing customers enjoy the benefits of the new law once it is operationalised.
Each KBA member bank will notify their customers on the process and new terms as the industry engages with CBK on the implementation of the law.
“Member banks will review their operations so as to adjust to the new minimum rate requirements for interest earning accounts. The public and the government have made it clear that they expect banks to as soon as possible provide people and businesses with access to lower cost finance and more competitive deposit rates.”
In complying with the law, the banks governing body stated that it will work to minimise any unintended negative consequences on the broader economy, such as a reversal of the positive strides made towards financial inclusion through certain groups of people and SMEs being excluded from access to banking services.
“Our member banks will also work to enhance their lending practices and customer service standards to ensure that customers are better served and informed about their financial options,” the Association