Central Bank of Kenya governor Patrick Njoroge when he appeared before the Senate Finance Committee in Nairobi on November 10, 2015.
BY THOMAS KARIUKI
Central Bank of Kenya (CBK) will in the course of this month (April) make public a new list of lending rates which will apply to all commercial banks across the country, CBK Governor Patrick Njoroge has announced.
The Governor said the rates will factor in the different interbank lending charges to ensure that their tariffs are maintained within a close range of CBK rates.
Addressing journalists today at his office in Nairobi, Dr Njoroge said CBK was working on a formula that will in the near future bring down lending rates administered to borrowers by commercial banks.
He said the rates had up scaled to 17.9 percent in February this year down from 16 percent in September last year due to a need for more income by commercial banks to pay for losses incurred by the institutions.
“Banks will introduce additional fees or modify the terms of the loans to increase the effective loan rates, leading to more transparency in lending,” the CBK Chief added.
Dr Njoroge however acknowledged that imposing interest rate controls would be harmful and ineffective as it could encourage over borrowing and thus increasing the problem of non-performing loans.
He said the non-banking sector will also be adversely affected as profitability of micro-finance institutions will decline thus prompting commercial houses to increase sales through credit encouraging them to offer financing to consumers under more stringent terms.
The Governor also advised commercial banks to avoid over banking by putting in place diversified lending which will help them strengthen their business models and sustain shocks.
At the same time the CBK Chief said the institution has put in place a monetary policy system whose aim is to stabilize the exchange rate and thus bring down the inflation rate below the current 6.5 percent in the coming Months.
He announced that the inflation rate has gone down to 6.5 percent up from 6.8 percent in February this year due to favorable oil and food prices.
Dr Njoroge has also tasked banking institutions to embrace annual account auditing and submit their accounts to the regulator by March every year.
He warned that banks violating the CBK regulations will face stiff penalties. The regulations include credit policy, risk management, internal financial audit, compliance with existing requirements and licensing.
