Eyes on banks to cut loan rates as Equity leads the way
Financial Standard
By
Brian Ngugi
| Sep 10, 2024
Pressure is mounting on commercial banks to reduce loan rates following ="https://www.standardmedia.co.ke/business/business/article/2001501904/borrowers-spoilt-for-choice-as-cbk-report-shows-lending-rates"> a recent cut Historically, Kenyan banks have been quick to raise rates whenever the CBK increases the benchmark rate, often citing rising costs of funds as justification.
This pattern has raised expectations that they would be equally responsive in lowering rates following the recent cut. Digital riders seek legal protections, fair treatment Petition calls for decriminalising suicide attempts Farmers urge Ruto to assent to Sugar Bill, review prices Iran executes 29 day after protester's hanging Nakuru businessman in custody over death of student Ex-advertising agency boss Chebitwey off the hook in Sh122m graft case Starehe residents benefit from free medical camp Duale clears General Ogolla's name from Bomas intrigues Ruto: How I settled on General Francis Ogolla as CDF Azimio coalition appoints trio to join panel to audit 2022 elections Equity Bank said it has reduced its reference rate from 18.24 per cent to 17.83 per cent, a move aimed at stimulating credit uptake amid a challenging economic landscape.
“We wish to inform our customers and the general public that we have reduced Equity Bank's Reference Rate (EBRR) to 17.83 per cent effective September 9, 2024,” the bank said in a notice to customers. The new Equity interest rate will be EBRR plus a maximum margin of 8.5 per cent per annum for all ="https://www.standardmedia.co.ke/testbed/sports/business/2001501407/www.digger.co.ke">new Kenya shilling<-denominated credit facilities.
As Equity Bank sets the pace, other banks are under pressure to follow suit in reducing loan rates to enhance credit accessibility and stimulate economic activity in the face of rising default risks.
The ratio of gross NPLs to gross loans increased to 16.3 per cent in June, up from 16.1 per cent in April, highlighting the growing challenges borrowers face in repaying loans.
The banking sector’s reluctance to lend has contributed to a slowdown in private sector credit growth, which fell to 4.0 per cent in June from 4.5 per cent in May. This cautious approach comes as banks grapple with the implications of a deteriorating economic environment, compounded by a 1.5 per cent decrease in gross loans.
CBK attributed the increase in bad loans to both the decline in lending and exchange rate valuation effects on foreign currency-denominated loans, following the appreciation of the Kenyan shilling.
The Monetary Policy Committee’s decision to lower the CBR aimed to spur credit growth and support the economy, which is projected to grow by 5.4 per cent in 2024, down from 5.6 per cent in 2023.
However, the outlook remains uncertain, influenced by various risks including geopolitical tensions.
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