Barclays sets pace by lowering its base rate

Barclays Bank has become the first to react to the lowering of Central Bank Rate (CBR) by dropping its base lending price, piling pressure on others to follow suit.

The bank last Friday announced a new base rate of 21 per cent down from the previous 22.5 per cent. CBK on Thursday eased its tight monetary stance by cutting the policy rate to 16.5 per cent.

“We have this morning taken an early step to cut our base lending rate to reflect a similar reduction by the Central Bank of Kenya,” said Adan Mohamed, the Barclays Bank, regional managing director. Others are likely to follow suit from today as they seek to grow their depressed loan books.

The average base lending rate as of now stands at 23.1 per cent, a fact that threatens loan default in a slow economy.

Some banks have, however, pointed out that a sudden drop may not be possible as they are still holding expensive wholesale fixed deposits. A recent survey among banks showed that 68 per cent of them expected the rates to drop in the second half of the year.