Efforts to rescue interest capping law resume in Parliament Wednesday morning as the Banking (Amendment) Bill, 2019 comes up for second reading.
The changes proposed in the Bill seek to address Section 33B (1) and (2) of the Banking Act 2016 that the High Court flagged to be “vague, imprecise, ambiguous and indefinite”.
According to the March ruling on a petition filed by a Mr Boniface Oduor, the interest capping law was to die a natural death if the contested aspects were not addressed by March 2020, six months from today.
The High Court had granted Parliament a year to redraft the law defining clearly terms like “credit facility” and the “Central Bank Rate” which it said were open to misinterpretations.
“The Second Reading of the Banking Act amendment Bill will commence Wednesday morning,” Jude Njomo, the Bill’s sponsor, told the Business Daily by a text message.
Just like the law it seeks to replace, the Banking (Amendment) Bill, 2019, retains interest charges at four percentage points above the central bank rate, now nine percent.
In the draft Bill “credit facility” has become “loan” and the “rate” is defined as the one captured under section 64 of the Central Bank Act. The new changes also seek to impose fines of up to Sh1 million or jail terms of up to one year on borrowers who accept loans offered above the statutory cap.
The amendments propose penalties on all persons in breach of the cap in lending rates as opposed to the current legal regime that punishes banks and their chief executives. “As it stands, the penal provision under subsection (3) is couched in discriminatory terms as it applies only to banks and financial institutions yet the legal obligation is aimed at both the financial institution and the borrower … amendment) is therefore necessary as it seeks to create a penal provision that is not discriminatory,” Mr Njomo says in the memo attached to the bill.