Kenyan banks have slashed interest for customer savings to 4.71 percent, which is the lowest since September 2016, showing the continuing impact of removal of the floor interest rate last year.
Economic indicators from Central Bank of Kenya (CBK) show that interest banks paid on customer savings continues to trend downwards even as lending rates on loans fell marginally.
The savings interest is down from the average of 6.52 percent in August last year when Parliament voted to tweak the Banking (Amendment) Act, 2016 and removed a clause compelling banks to pay depositors at least 70 percent of base lending rate.
With the CBK base lending rate currently at nine percent, banks would be paying at least 6.3 percent. This means customers have lost 1.6 percentage points on their savings accounts since the law was changed.
During this period banks have kept their lending rates relatively stable, only closing May at 12.47 percent compared with August last year’s 12.78 percent. This means banks are now enjoying more than 2.6 times gain on the interest-earning savings from customers.
The CBK data shows that at the close of May 2019, banks were holding on Sh3.4 trillion deposits, being Sh160.6 billion jump from the Sh3.24 trillion at the time the clause on interest rate was removed.
Banks pre-tax profits hit Sh70 billion in the five months to May 2019, up 12 percent from Sh62.5 billion that was posted in a similar period last year.