The Supreme Court has dismissed an appeal by Stanbic Bank Kenya Ltd seeking to reverse rulings by the High Court and Court of Appeal holding that commercial banks must seek approval from the Treasury before raising interest rates.
According to the ruling delivered by the supreme court on Friday, interest rate changes on loans and facilities must be approved by the Treasury Cabinet Secretary, reinforcing the regulatory oversight mandated by Section 44 of the Banking Act.
Therefore, the judgement ensures that while banks can negotiate interest rates, any subsequent increase is subject to government approval.
Additionally, the ruling protects Kenyans who borrow loans from unilateral interest rate hikes by banks and ensures a stabilized borrowing cost.
“A declaration do hereby issue that interest rates on loans and facilities advanced by banks/financial institutions are subject to the regulatory process under Section 44 of the Banking Act.
“In that, such banks/financial institutions are required to seek the approval of the Cabinet Secretary responsible for matters relating to Finance prior to increasing interest rates on loans and facilities advanced,’ the ruling read.
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Issues Considered and the Supreme Court Findings
The dispute between Stanbic Bank Kenya Ltd (the appellant) and Santowels Limited (the respondent) revolved around the terms and conditions of loan provided between 1993 and 1997.
Santowels Limited disputed the interest rates of the loan applied by Stanbic Bank, which was 3% per annum above its base lending rate. Stanbic also had the right to use different rates.
According to Santowels, the interest rates were unreasonably high and any changes to these rates should have been regulated under the Central Bank of Kenya and the Banking Act, specifically Section 44.
Section 44 of the Act mandates that any increase in interest rates by financial institutions must be approved by the Cabinet Secretary responsible for Finance.
Both the High Court and Court of Appeal ruled in favor of Santowels Limited, agreeing that Stanbic Bank should have gotten the Cabinet Secretary’s approval before increasing the interest rates.
However, Stanbic Bank escalated the case to the Supreme Court Both, which dismissed both appeals, asking each party to bear their own costs for the appeal and cross appeal before the Supreme Court.
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CBK Licenses 7 Digital Credit Providers
On June 27, the Central Bank of Kenya (CBK) issued licenses to an additional 7 Digital Credit Providers (DCPs), raising the number of authorized digital lenders in the country to 58.
Also, CBK said it has received more than 550 applications since March 2022 and has worked closely with the applicants in reviewing their applications.
“This is pursuant to Section 59(2) of the Central Bank of Kenya Act (CBK Act). This brings the number of licensed DCPs to 58 following the licensing of 19 DCPS announced in March 2024,
“CBK has engaged other regulators and agencies pertinent to the licensing process, including the Office of the Data Protection Commissioner,” read part of the statement.
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