Borrowers should expect cheaper loans from August after the Central Bank of Kenya (CBK) cut the lending reference rate by nearly one per cent yesterday.
The rate cut came after depressed loans appetite from the private sector since the start of the year, with commercial banks finding themselves stuck with huge cash amounts. CBK Governor Patrick Njoroge last evening announced that the Kenya Bankers Reference Rate had been slashed to 8.9 per cent in the first step to cut lending rates, after a policy-driven hike last year. Banks price loans using the reference rate as a base, plus an allowance that covers for risk and profit margin.
“In line with the framework, the CBK has revised the KBRR to 8.90 per cent from 9.87 per cent, effective from July 25, 2016,” Dr Njoroge said in a statement, after chairing a meeting of the Monetary Policy Committee. His committee, however, agreed to retain the Central Bank Rate (CBR) at 10.5 per cent.
CBR is the price that CBK levy on loans granted to commercial banks. Njoroge’s decision now requires commercial banks to inform their customers of the impeding rate cut which takes effect on August 24 – after the expiry of the 30-day notice.