NCBA Group plans to increase its cost of loans for the second time in four months amid growing struggles on the ability of borrowers to service their credit facilities.
The lender said that it will increase the interest rates of shilling-denominated loans to 14.5 percent from 13 percent effective November 1. The rates for dollar loans will also increase to 11 percent from 10.5 percent.
The move— the second in under four months— comes at a time when the share of defaulted loans peaked to a 16-year high of 15 percent in August, fueling anxiety in banks’ lending to customers stung by inflation.
NCBA Group had reviewed the cost of loans to 13 percent from August 1, a decision that it had attributed to the increase in the base lending rate by the Central Bank of Kenya (CBK).
“Due to the current macroeconomic environment and rising interest rates, we wish to advise that our base lending rate will increase to 14.5 percent for shilling-denominated loans and to 11 percent for dollar facilities effective November 8, 2023,” NCBA Bank said in a notice to customers.
The decision comes despite NCBA Group's ratio of Non-Performing Loans dropping to 13.2 percent as at June, from 13.4 percent a year earlier according to the lender’s disclosures.
NCBA Group’s gross loan book in all markets stood at Sh324 billion as at June this year, reflecting a 17 percent rise from Sh278 billion in similar period last year. The Kenyan market accounted for Sh249.8 billion of the loans as at December last year.
The CBK has meanwhile kept the base lending rate unchanged since the end of June at 10.5 percent on easing inflation.
Rising interest rates by commercial banks have hurt borrowers and pushed them to default on over Sh596 billion in loans as at the end of August from 14.5 percent a month before.
