Banks have nevertheless been reluctant to lend especially to small firms since capping of lending rates in late 2016.
The Central Bank of Kenya (CBK) has lowered the cost of its distress lending facility for banks from 16 per cent to 15.50 per cent following the recent change in policy rate.
The banking regulator on March 19 cut the benchmark lending rate by 0.5 percentage point, signalling a drop in the cost of loans by a similar margin and offering some relief to millions of borrowers.
Banks have nevertheless been reluctant to lend especially to small firms since capping of lending rates in late 2016.
“Following the (CBR) rate adjustment, borrowing from the Central Bank window will be 15.50 per cent,” said Mr Mwenda Marete, the acting CBK director of banking services, in a letter to chief executives of all commercial banks.
Normally when the CBR is changed, the window rate is also changed since it is based on the former, plus a punitive mark-up.
The overnight lending at 16 per cent is ordinarily above the CBR, interbank, T-bill and repo rates as CBK moves to ensure any bank seeking cash from the facility is punished.
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