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Pressure on rival banks as UBA cuts base rate to 11.78pc
UBA is banking on the price cut to revamp its loan book which is one of the lowest in the industry having shrunk to Sh937 million in September 2025 from Sh3 billion in 2024.
United Bank of Africa (UBA) has cut its lending rates by three percentage points putting pressure on other commercial banks as they roll out the new pricing model beginning Monday.
The Nigerian based lender said it would lower its base lending rate to 11.78 percent from 14.79 percent on both its new and existing loans.
The announcement comes at a time when banks are shifting to a new loan pricing model from Monday December 1 which was put in place to ensure borrowers benefit from Central Bank of Kenya’s policy cuts which were not being transmitted fully by commercial banks.
KCB Bank, Absa Bank and DTB Bank have already issued notices to their customers and the public that they will be implementing a new pricing model beginning Monday even as others remained quiet.
“We are pleased to announce a reduction in our base lending rate from 14.79 percent to 11.78 percent per annum effective November 1, 2025 for both new and existing Kenya Shilling denominated credit facilities,” said UBA in a public notice.
“This is our commitment to making credit more affordable and accessible to all,” added the bank.
UBA is banking on the price cut to revamp its loan book which is one of the lowest in the industry having shrunk to Sh937 million in September 2025 from Sh3 billion a year earlier. This is compared to a Sh13.6 billion deposit base bulk of which was deployed in government securities.
The bank was cleaning up its loan book as the industry struggled with rising debt defaults.
The bank has been cautious in issuing loans resulting to its liquidity ratio rising to 107.9 percent as it held on to cash awaiting an improved economic environment.
Credit growth in the country has been slow with banks taking a cautious lending approach due to huge defaults while businesses and customers shelved borrowing plans due to high interest rates.
The Central Bank has been pressuring banks to reduce lending rates with consecutive cuts of its indicative rate as a signal to forward the same to the borrowers.
However banks were slow to transmit the rate cuts to the public arguing the Central Bank Rate (CBR) did not capture all the market factors.
The new model will use the interbank rate as the common reference rate for determining lending rates to all customers. Banks will be allowed to load a premium (K) on the reference rate now referred to as the Kenya Shilling Overnight Interbank Average (Kesonia).
Use of the overnight interbank rate – Kesonia– as the common reference rate was decided since it is market based and it closely aligns with the CBR allowing it to transmit monetary policy.
Introduction of the new pricing model is also expected to allow customers to easily compare prices offered by different banks and vote with their feet.
The cost of credit, which will be disclosed directly to customers, will be the total of the reference rate (Kesonia) plus the premium (K), plus any fees charged on the loan.
