A consumer lobby group has opposed Central Bank's push for a repeal of the interest rates capping law effected last year after an amendment of the Banking Act.
The Consumer Federation of Kenya (Cofek) secretary-general Stephen Mutoro on Thursday faulted Central Bank of Kenya (CBK) Governor Dr Patrick Njoroge, saying he has no powers to reverse the law.
“CBK has no power to purport to repeal the Banking Act, 2016. On the contrary, only Parliament can reverse the law with reasons or alternative mitigation,” said Mr Mutoro.
He was reacting to the governor's remarks that CBK intends to push for the repeal of the law citing negative effects to the economy.
Mr Mutoro observed that only Parliament can reverse the law with reasons or offer alternative mitigations on costs of loans.
“In the scramble for reversal of the law, both CBK and the National Treasury have never stated if the fears which necessitated a regulated bank interest regime have since been mitigated upon,” he argued.
He added that the consumers will not continue to ‘finance corruption and inefficiencies’ within banks via inflated interest rates.
The CBK governor Wednesday said preliminary findings of a joint study with the Treasury had confirmed a negative impact on growth of credit.
Dr Njoroge had said that it was likely banks would likely be handed back a free hand in pricing the cost of loans in the country.
Cofek urged Parliament to undertake a public participation and mitigation exercise before contemplating amending the Banking Act.
“Cofek will do everything possible to keep the rate caps until such a time CBK and National Treasury will address the non-transparent pricing of loans and reduction of the cost of credit in Kenya,” he stated.
The amendment was passed by Parliament in August last year putting the maximum interest rate on loans at four per cent above the CBK rate, which currently stands at 10 per cent.