Kenyan lenders Equity Bank and Diamond Trust Bank (DTB) have advised customers with existing variable‑rate Kenya Shilling loans to prepare for changes to how interest on their facilities is calculated, with the full transition expected to take effect by February 28, 2026.
The shift is part of the implementation of the Central Bank of Kenya’s (CBK) Revised Risk‑Based Credit Pricing Model (RBCPM), which was announced on August 26, 2025.
New RBCPM Pricing Model
Under the new framework, banks are replacing internal reference rates with a more transparent pricing structure that combines a common benchmark rate with a customer‑specific premium, known as “K”.
The premium reflects factors such as individual risk profiles, funding costs, and other considerations. In its official communication, the CBK stated that it prefers the Kenya Shilling Overnight Interbank Average (KESONIA) as the benchmark rate. KESONIA is currently hovering around 8.98–8.99%.
“Following this transition, the applicable rate on all local-currency variable rate loan facilities will adjust to reflect the changes in the prevailing CBR, as published by the Central Bank of Kenya (CBK) from time to time.”
Also Read: 74 Women in Kwale County Graduate Through Equity Fanikisha Program
Equity and DTB Banks have opted to use the Central Bank Rate (CBR) as their benchmark. The CBR currently stands at 9.00%, following a reduction by the Monetary Policy Committee on December 9, 2025. Equity Bank, in a customer notice issued after the CBR cut, explained its approach to adopting the new pricing model.
DTB’s Compliance Timeline
DTB has taken a similar position, confirming compliance with the CBK directive and applying the CBR plus a customer‑specific premium to new loans since mid‑December 2025.
The bank said existing variable‑rate facilities will complete the transition to the new framework by the February 28 deadline, and affected customers will receive appropriate notifications.
The differing benchmark choices reflect varying strategies among lenders. Co‑operative Bank has adopted a KESONIA + K structure, while Equity Bank, DTB, KCB, and others have chosen the CBR, citing its predictability and direct link to Monetary Policy Committee decisions.
Also Read: KCB Bank Issues Notice to Customers on New Loan Interest Pricing
Borrower Impacts and Transition
Borrowers are expected to benefit from improved transparency and quicker transmission of interest‑rate changes, although they will also face more direct exposure to movements in the selected benchmark.
Existing variable-rate Kenyan Shilling-denominated loans issued on or before November 30, 2025, have a transition period, with the new pricing framework applying to outstanding balances effective February 28, 2026, and repricing typically commencing on March 1, 2026.
Affected customers are urged to review recent bank communications, statements, or contact their lender directly to understand their specific premium and any upcoming changes starting late February.
Follow our WhatsApp Channel and X Account for real-time news updates.
