[caption id="attachment_7473" align="aligncenter" width="300" caption="Bank loans could soon be cheaper due to competition (Photo: dobanafrica.com)"][/caption]

The Central Bank of Kenya will soon have legal backing to publish rates offered by banks on loans and deposits. Amendments in the Finance Act, 2012, have authorised the regulator to publish the lending rates charged by different banks, their deposit rates and the spread between the two rates.

The statement in the Act reads: The Central Bank shall publish in the Gazette, the Central Bank Web site and two daily newspapers of national circulation; the weighted average lending and deposit rates for all banks and financial institutions, the interest spread and its composition.

This move will bring to the light rates which banks have been playing close to their chests with so little information going out to the borrowers. The new rules will encourage competition amongst the banks as each bank would strive to paint a customer friendly image to its clients. This will see banks dropping their rates by significant margins to encourage borrowers to take their loans.

The cost of credit shot up last year by almost 15% with loans averaging at 25% in March 2012. A bid to cap loans was thwarted by parliament when it failed to pass amendments in the Finance Bill 2011/2012 that had proposed to put a bar on loans at 22%, 4 percentage points above the current Central Bank Rate.

The move to publish the information could also see rates on deposits leave the single digit range as all banks would want to increase deposits and maintain their clientèle. The frequency of information publishing however has not been revealed and it would mean publishing the information could take longer intervals.