Standard Chartered Bank of Kenya #ticker:SCBK has cut the interest charge on old loans and overdrafts by 0.5 percentage points and committed to leaving new loans at a maximum of 13 percent as it fine-tunes the risk-based pricing model.
The bank wrote to customers advising that it had revised downwards the interest rates on existing facilities effective January 2 in line with the reduced Central Bank Rate (CBR).
StanChart Chief Executive Kariuki Ngari said the monthly payments would, however, remain the same, effectively leading to a reduced repayment period.
“When you reduce rates, it means customers will take a shorter period to pay. Clients had committed paying those amounts per month so it should be no problem. We are only looking at faster repayments,” Mr Ngari told the Business Daily in a phone interview.
The Central Bank of Kenya (CBK) last November lowered the benchmark pricing to 8.5 percent from nine percent. This sent mixed opinion from sector players on if this should have any implications on loan prices.
Banks are not under any obligation to lower the rates in line with CBR since the interest rate cap law was repealed last year.
The lenders were, however, directed by the CBK that rates on existing loans are to remain fixed until maturity unless if being revised downwards.
Mr Ngari was non-committal on whether the lender’s move signals further CBR cuts in future — or even a rise — would automatically be transmitted to customer loans in equal measure. The next Monetary Policy Committee meeting (MPC) takes place on January 27.
“If MPC increases or reduces the rate, we will see how to manage that. We have always used that as the anchor rate during the interest cap era,” said Mr Ngari.
StanChart kept its loan book flat at Sh119 billion in the nine months to September partly to avoid piling fresh non-performing loans.
Despite the relief for its old borrowers, customers using credit cards will see their rates vary between 1.08 percent and 2.5 percent per month as the bank switches to risk-based pricing next month.
The lender has told customers that starting February 2, the current flat rate of 1.08 percent will not be in place.