Banks to start lowering benchmark rates ahead of Presidential approval

A number of financial institutions have announced plans to start complying with a Bill seeking to lower lending rates even before the President signs the proposal into law.

Already, three banks including Commercial Bank of Africa (CBA), I & M, as well as StanChart have announced that they will be cutting their lending rates. However, the lenders have not clarified the specific types of loans that would be slashed.

“We are pleased to advise you that the interest rate charged on your credit facilities with Commercial Bank of Africa Limited that are denominated in Kenya shillings and benchmarked against the KBRR will be adjusted accordingly in line with the change,” said the CBA in a statement.

Other lending institutions, including Family Bank, have supported the move but urged the Treasury Cabinet Secretary to lower the rates in a systematic manner so that the move does not interfere with the market share.

The Banking (Amendment) Bill 2015, sponsored by Kiambu Member of Parliament Jude Njomo, which received 100 per cent support from National Assembly, met different reactions from stakeholders in the banking sector as well as politicians.

CORD leader Raila Odinga, Mombasa Senator Hassan Omar, Gem Member of Parliament Jakoyo Midiwo and Nyali MP Hezron Awiti have supported the move calling upon the Head of State to sign the Bill without a further delay.

However, the Kenya Bankers Association has criticised the move saying it would only benefit bigger borrowers thus locking out smaller borrowers from accessing loans.

Should the Bill become law, bank lending rates would be capped at 14.5 per cent based on the current CBR of 10.5 per cent, which is just 4 per cent above the current CBR.

The Bill, which is expected to be effected on August 24, 2016 further proposes that any CEO who will be found not complying with the new legislation will be imprisoned for over one year.

 

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