Recently, the Central Bank of Kenya (CBK) has exerted pressure on commercial banks to lower their lending rates by threatening daily fines for non-compliance. This move has prompted banks to adjust their rates swiftly, aligning with the CBK’s directives after a period of resistance.
To avoid penalties, banks such as KCB, Equity, Cooperative Bank, I&M, and DTB have already reduced their rates by one to four percentage points. Equity Bank, in particular, has demonstrated responsiveness by implementing three rate cuts within six months.
While these adjustments may lead to more affordable loans for borrowers, the average lending rate in Kenya remains relatively high at 17.22%, posing a challenge for credit accessibility. Additionally, the high rate of non-performing loans (NPLs) might make banks cautious during the lending process, potentially limiting borrowing activities.
Despite the forced compliance, the banks’ willingness to cooperate with the regulator indicates a unified effort to achieve common goals and improve the overall lending landscape.