Banks expected to lower interest rates

Commercial banks have started lowering their lending rates following a directive by the Central Bank of Kenya to freeze all rate hikes.

On Monday Equity Bank reversed a decision to spike interest rates by 3 basis points.

Last week Central Bank Governor Dr. Patrick Njoroge directed commercial banks to lower their lending rates to reflect the market conditions. The Kenya Bankers Association is also engaging with banks to come up with a way of easing the rates.

The last two months have been a pain to borrowers after commercial banks moved to increase the cost of loans in the face of rising inter-bank rates and treasury bills.

This has raised fears of a serious economic slow-down as borrowers shy away from approaching lenders.

CBK Governor Dr. Njoroge told the National Assembly the regulator has written to all banks to freeze hikes on interests’ rate until the market stabilizes.

Equity Bank Chief Executive James Mwangi told a news conference the bank had wanted to raise rates to 24 percent from 17 percent this month, but had withdrawn the notice that was sent to borrowers.

Equity is the largest bank in Kenya by number of depositors and its decision may influence other lenders.

Mwangi said that the decision is also in support of the directive by the regulator and a price recovery on the cost of treasury bills.

The Monetary Policy Committee met Tuesday to review the Kenya banker’s reference rates.

Through KBRR, lenders are required to disclose the exact cost on their loans, including the processing fees and insurance costs.

Last week the national Treasury reduced interest rates for both the Treasury instruments and the interbank rates.