By: BRIAN NGUGI
Pressure continues to mount on commercial banks to lower interest rates on loans, a day after the Central Bank of Kenya Monetary Policy Committee retained its basic lending rate at 11.5 per cent.
National Treasury Principal Secretary Kamau Thugge said yesterday that lenders have no excuse in retaining their prevailing high rates in the wake of the lowering of Treasury Bill rates to 9.3 per cent as at last week.
“All banks that have not lowered their interest rates should do so as we have seen the T-Bill rates have significantly come down. We are awaiting the next auction and we feel the rates can only go lower,” said Dr Thugge in Nairobi, on the sidelines of the 2016/2017 national budget public sector hearings at the Kenya Institute of Curriculum Development yesterday.
On Monday, several banks began withdrawing notices of an intended increase in interest rates on loans in response to lower Treasury Bill returns.
Many had last month given borrowers 30-day notices indicating their intention to increase the rates.
Some borrowers would have had to pay as much as 30 per cent, largely on account of the high cost of money driven by increasing government borrowing.
The Central Bank advisory committee on Tuesday voted to retain the benchmark lending rate at 11.5 per cent, backing the regulator’s position that commercial banks should not increase theirs.
The move to keep the rate flat brought certainty to a market currently going through turmoil, a fact admitted by the Monetary Policy Committee in its briefing.
Meanwhile, Dr Thugge said the second tranche of a Sh80 billion syndicated loan that was expected to unlock the cash crunch currently affecting government business, is expected next week.
Treasury received the first part of Sh60 billion on November 4.
“We expect the funds next week and they will go a long way to ensure government moves away from borrowing in the domestic market,” he said.
Treasury had said the money would go to undisclosed infrastructure projects in the roads, energy, agriculture and water sectors.
Treasury entered into an agreement for the loan with Citi Bank, Standard Bank and Standard Chartered Bank.
SOURCE: DAILY NATION