Banks are yet to adjust lending rates upward or downwards since the rate cap was repealed in November even after the CBK followed by cutting the benchmark rate from 9 percent to 8.5 percent.
Bankers expect the rates of government paper to determine the price of money.
Treasury is expected to significantly raise its borrowing in the domestic market.
Bankers have remained non-committal on their loans pricing plan, almost six weeks after scrapping of the interest rate capping law.
While some executives maintained that they will continue to rely on the Central Bank Rate (CBR) as the money market’s signal, quite a number of them expect the rates of government paper to determine the price of money.
“We expect (the Central Bank’s) Monetary Policy Committee to continue signalling a lower interest rates environment in 2020 but of course we have to watch out to see how liquidity in the market will present itself,” said Barclays Bank #ticker:BBK transition programme director Anthony Mulisa.
Banks are yet to adjust lending rates upward or downwards since the rate cap was repealed in November even after the CBK followed by cutting the benchmark rate from 9 percent to 8.5 percent.
In a perfect market, competition would guarantee fair pricing but oligopolistic nature of the banking sector implies 'consensus' interest rates.
Kenya Bankers Association chief executive Habil Olaka said bank loans can be priced by benchmarking the CBR, government borrowing or even internally generated mechanism.
The Business Daily has learnt that momentum is fast building among banks to use government T-bills as basis for increasing loan rates.
With the Kenya Revenue Authority behind its tax target and huge debt payouts obligations ahead, the Treasury is expected to significantly raise its borrowing in the domestic market.
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