The law capping interest rate is only a short-term measure to help the banking sector move to a lower rate regime in future, Treasury secretary Henry Rotich claimed on Thursday.
The caps were pushed through a popular amendment in Parliament against the Treasury and Central Bank of Kenya counsel.
Introduced slightly over a year ago, they fixed the price of loans at four percentage points above the central bank rate (now at 10 per cent) and imposed a minimum deposit rate of 70 per cent of the benchmark rate.
“Caps are a short- term measure. They are not sustainable in the long-term,” Mr Rotich told a press briefing on Thursday. “They have been imposed now so that we can quickly move to a lower rate economy.”
Banks, through lobby Kenya Bankers Association, have called for a repeal of the rate law, saying it is responsible for a slowdown in credit growth over the last year.
Some lenders have blamed the caps for lower profits in the year.