Market News

Interest rates cap shaves Sh26bn off banks’ income

The Central Bank of Kenya (CBK) building in Nairobi. FILE PHOTO | NMG
The Central Bank of Kenya (CBK) building in Nairobi. FILE PHOTO | NMG 

Last year’s capping of interest rates has shaved Sh26.3 billion off commercial banks’ lending  income in the first six months of the year, setting the lenders up for lower profitability this year.

The 38 lenders earned Sh140 billion from interest charged on loans to customers, a 15.8 per cent drop from the Sh166.3 billion they earned in a similar period last year, according to data compiled by the Business Daily.

The rate capping law came into effect in September last year, limiting interest charges to a maximum of four percentage points above the prevailing Central Bank Rate, currently standing at 10 per cent.

Interest income plunged even as the industry’s loan book grew by 4.9 per cent to Sh2.38 trillion.