KCB Reduces Interest Rates on Loans

Kenya Commercial Bank (KCB) on Tuesday, February 11 announced reduction of interest rate charged on loans. 

KCB’s announcement came days after the Central Bank of Kenya Governor Dr. Kamau Thugge put commercial banks on notice for not reducing interest on credit facilities. 

“In view of the recent adjustments of Central Bank Rate (CBR) and Cash Reserve Ratio (CRR) by the Central Bank of Kenya, KCB bank wishes to notify our customers and the public that we have reduced our base lending rate from 15.6% to 14.6% per annum. This reduction takes effect from February 10, 2025,” the notice read in part.

Dr. Thugge has threatened to impose hefty fines on banks for failure to cut interest rates in the latest effort by the regulator to unlock cheaper credit for business.

KCB move to spur economic growth 

At the same time, KCB explained how it will apply the new lending rate.

“The final lending rate is based on a customer-specific margin, adjusted to the base rate, in line with the approved Risk Based Credit Pricing Model,” stated the bank. 

The notice added, “This applies to all existing and new Kenya Shilling-denominated facilities and excludes fixed-rate credit facilities.”

Furthermore, the top tier lender in the country noted that the move to review the lending rate downwards would trigger economic growth.

“The reduction is expected to enhance credit to the private sector and effectively spur economic growth,” the bank said.

“We thank you for your continued support and trust in KCB as your preferred financial partner.”

Elsewhere, Co-operative bank reduced its interest lending rates from 16.5% p.a to 14.5% p.a on Monday, February 11 with immediate effect. 

Also Read: Co-operative Bank Slashes Interest on Loans with Immediate Effect

CBK Directs Bank to Reduce Interest Rate on Loans

The average lending rate remained relatively high in December, despite multiple rounds of cuts, exacerbating the cash crunch and hindering business activities and consumer spending.

According to CBK, the banking sector has contended that various factors, including the cost of funds and credit risk assessments, influence their lending rates.

However, CBK is keen on enhancing compliance, and it has initiated on-site inspections of five major lenders and warned of penalties for non-compliance.

Also Read: CBK Lowers Interest Rates on Loans Again, Puts Exploitative Banks on Notice

Amendments to the Banking Act now allow for fines of up to Ksh20 million or three times the value of any undue benefits accrued due to a bank’s failure to comply.

“Under the amendments to the Banking Act recently enacted by Parliament, any bank that has not passed on the benefits of reduced cost of funds to reduce lending rates, will be penalised in accordance with the law,” Dr. Thugge warned. 

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