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Rotich says rate caps only ‘a short-term’ measure

Treasury secretary Henry Rotich. FILE PHOTO | NMG
Treasury secretary Henry Rotich. FILE PHOTO | NMG 

The law capping interest rate is only a short-term measure to help the banking sector move to a lower rate regime in future, Treasury secretary Henry Rotich claimed on Thursday.

The caps were pushed through a popular amendment in Parliament against the Treasury and Central Bank of Kenya counsel.

Introduced slightly over a year ago, they fixed the price of loans at four percentage points above the central bank rate (now at 10 per cent) and imposed a minimum deposit rate of 70 per cent of the benchmark rate.

“Caps are a short- term measure. They are not sustainable in the long-term,” Mr Rotich told a press briefing on Thursday. “They have been imposed now so that we can quickly move to a lower rate economy.”

Banks, through lobby Kenya Bankers Association, have called for a repeal of the rate law, saying it is responsible for a slowdown in credit growth over the last year.

Some lenders have blamed the caps for lower profits in the year.