By: BRIAN NGUGI
Equity Bank on Monday withdrew a notice for an intended increase in interest rates on loans that was to be effected on Thursday this week.
The bank said it would no longer effect a raise in interest rates “in response to the market situation”.
Equity Group Chief Executive James Mwangi said in Nairobi on Monday that the lowering of Treasury Bill rates by the Central Bank had given the bank room to pass on the benefits to its customers.
“We are pleasantry impressed by the speed with which the government has been able to reduce the Treasury Bill rates,” Mr Mwangi said.
The interbank rate — which banks use to lend to each other — has dropped to a single digit in weeks and is now 9.3 per cent.
On October 22, the 91-day Treasury Bill peaked at 22.5 per cent, with the rate at which banks were borrowing from each other hitting 25.84 per cent.
Mr Mwangi had last month advised borrowers to shelve long-term projects that were not urgent in view of the then prevailing interest rates.
GAVE RAISE NOTICE
During the period, many other banks also gave borrowers 30-day notices indicating their intention to increase lending rates.
Some borrowers would have had to pay loan interest rates of as much as 30 per cent largely on account of the high cost of money driven by increasing government borrowing.
But on Monday, Mr Mwangi said Equity Bank customers will now continue to service their loans based on the old interest rates on loans and also maintain the existing loan repayment installments.
“We would have gone all the way up to 30 per cent, but we will not,” said Mr Mwangi, adding that Equity’s weighted average for interest rates on loans is 16 per cent.
This comes barely a week after the Central Bank of Kenya directed banks to freeze all the planned interest rate increases.
Central Bank Governor Patrick Njoroge on Thursday last week told banks to reduce their interest rates on loans in line with the current market situation.
Appearing before the National Assembly Finance Committee, Dr Njoroge said he had directed banks to withdraw the notices they sent to their customers informing them of plans to raise their lending rates that were to go up this month.
He said the move was no longer warranted.
“This week we have been in touch with commercial banks and they understand that interest rates have gone down,” he told the MPs.
“The government securities markets have turned the corner and they are signaling a time of lower rates,” added Dr Njoroge.
SOURCE: DAILY NATION