KCB agrees to waive Sh430m penalties on NCPB loan default

KCB Group #ticker:KCB has agreed to waive Sh430 million in interest penalties the lender slapped the National Cereals and Produce Board (NCPB) for defaulting on a loan.

The National Assembly’s Agriculture Committee heard that the bank had also committed to temporarily freeze interest chargeable on the Sh3.6 billion loan with effect from July 1, 2021.

The cash-strapped NCPB used its assets as collateral to secure a Sh3.6 billion loan to finance part of the fertiliser subsidy in the year to June 2017 but failed to repay.

“Following several discussions, the bank wrote and confirmed that they were willing to grant the following concessions on ex-gratia basis; waiver of Sh400 million that had been charged as penalties and during the period,” said NCPB managing director Joseph Kimote.

The KCB has also agreed to grant a waiver of Sh30 million on negotiations fees and utilisation of Sh2.65 billion in the NCPB fertiliser accounts to partially offset the loan.

“Based on the above position by the bank, the total loan exposure is now Sh3,671,710,234. This has been communicated to the Ministry of Agriculture and the National Treasury and is awaiting a directive on the payment terms and approval,” the board said.

NCPB used the cash to buy fertiliser that was sold to farmers under a subsidy programme.

It bought a bag of fertiliser at Sh3,400 and sold the same at between Sh1,500 and Sh1,800, with the government supposed to cater for the difference.

However, the government failed to pay the subsidy difference leaving the debt to accumulate.

The board said it has other pending bills on the fertiliser subsidy programme including Sh1.52 billion owed to ETG, Sh1.68 billion being NCPB reimbursable amount and Sh800 million that is due from the State Department for Devolution.

Mr Kimote who was accompanied by NCPB chairman Mutea Iringo said the board is currently owed Sh12.7 billion by government agencies, due to years of grain handling services.