69 per cent of banks hold interest rates steady, Central Bank survey reveals 

Sixty-nine per cent of Kenyan banks held their interest rates steady during the first quarter of the year, a survey from the Central Bank of Kenya (CBK) has revealed.

The Credit Officer Survey showed that only 23 per cent of banks decreased their interest rates, with 8 per cent increasing their rates.

“Those whose rates remained constant attributed their decision to a stable economic environment while those that increased faulted increased cost of funding,” read the survey in part.

The survey however excluded Charterhouse Bank Limited, Imperial Bank Limited and Chase Bank Limited, which were put under receivership last year.

The drive to carry out the survey was based on the fact that credit risk is the single largest factor affecting the soundness of financial institutions and the financial system as a whole.

During the period under review, there was also a significant increase in non-performing loans (NPLs) in the personal & household, as well as the building and construction sectors.

Personal/household loans grew at 35 per cent where CBK attributed the rise to self-employed borrowers’ inability to service debt due to low business activity.

“Increase in NPLs in the Building and Construction sector would be due to delays in payment of contractors mainly by the national and county government.”

Overall, the demand for credit remained constant in six economic sectors while it increased in four. CBK attributes the increase in the demand to favourable macroeconomic environment and reduced cost of inputs.

On the other hand, the growth in the building and construction sector was linked to the ongoing Standard Gauge Railway construction works and construction of roads.

The ratio for total loans to total assets for the quarter was 65.54 per cent which was a slight increase from 61.31 per cent reported in December 2015.

During the quarter under review, growth was generally registered in the sector where deposits increased by 2.81 per cent from Sh2.49 trillion in December 2015 to Sh2.56 trillion in March 2016 due to branch expansion, use of technological innovations for deposit mobilization and the agency banking model.

 

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