Four more commercial banks have given notice they will lower loan interest by up to a percentage point as control of lending and deposit rates looms.
National Bank of Kenya, Family Bank, Bank of Baroda and Bank of Africa put out notices last Friday saying the reduction in the rates will apply from later this month or early next month.
In the previous week, Commercial Bank of Africa, StanChart and I&M said they would lower their lending rates.
The banks said they were slashing the lending rates following the reduction of the benchmark Kenya Banks Reference Rate (KBRR) to 8.90 per cent from 9.87 per cent – a 0.97 percentage fall.
For National Bank, the fall in the rate will apply from the beginning of September. “Effective September 1 National Bank will lower its interest rates by one per cent on all Kenya shilling loans,” the lender said.
Family, Bank of Baroda and Bank of Africa will adjust their rates downwards from August 25, which will be exactly one month since the monetary policy committee (MPC) lowered the benchmark.
“Effective August 25, Family Bank will lower its interest rates in line with the 0.97 per cent reduction of the KBRR by the Central Bank of Kenya (CBK),” said Family Bank in its notice.
“[The] drop in interest rates: we will be lowering our interest rates effective August 25 in line with the 0.97 per cent reduction in of the KBRR...,” said Bank of Africa in a notice that had nearly the same wording as that of Bank Baroda.
Besides lowering lending rates, commercial banks have offered Sh30 billion in soft loans for small and medium enterprises and will also eliminate charges for closing accounts to assuage MPs.
One analyst though noted MPs are themselves not suffering from the high interest rates regime since they obtain loans at preferential rates. “I think banks are willing to negotiate, but I don’t think MPs themselves care about interest rates, because they get preferential interest rates,” said the analyst who is not authorised to speak on the matter.
The KBRR is adjusted every six months, but was not changed in January as the CBK argued it was not being taken seriously by banks. The CBK governor Patrick Njoroge argued that it had become a poor tool for directing monetary policy since banks were ignoring it.
Real lending rates
Dr Njoroge had said the regulator would seek to develop a more effective tool so as to transmit its decisions through the financial system and into the real lending rates.
However, in its July 25 meeting, the MPC cut the KBRR by 0.97 percentage points in what was interpreted as a chance to guide banks to cut lending costs as legislators intensified pressure on them to bring down the price of money.
“The CBK has revised the KBRR to 8.90 per cent from 9.87 per cent, effective from July 25,” said Dr Njoroge in a statement following last month’s meeting.
On Friday the CBK said its policy-making committee will meet next on September 20 to determine the benchmark interest rates for the next two months.