I&M Bank will drop its lending rate by 1.5% to 18%. According to the privately-owned financial institution, the drop will take effect in February 2013. This comes shortly after I&M bank dropped its mortgage rate to 16.5% per annum from its previous 18%. The lender’s previous lending rates have been a roller-coaster for some of its clientele. As of October 15th, 2012, the bank’s lending rate stood at 19.5% while the tariff in late 2011 was 15.75%, up from the previous 13.5%.
I&M may be the first bank to drop its lending rate this year, following CFC Stanbic’s move late last year. On December 15th, 2012, CFC Stanbic Bank cut its lending rate to 17% from 19%, giving it one of the lowest rates available.
I&M’s move follows a verdict from the Central Bank of Kenya’s (CBK) Monetary Policy Committee (MPC) to reduce the Central Bank Rate (CBR) to 11%. The rate cut spells welcome news for borrowers as banks are expected to lower interest charges they charge on loans since commercial banks base their lending rates on the CBR.
This was discussed during a Monetary Policy Committee (MPC) meeting which was held on the 7th of November, 2012 to review market developments and evaluate the outcomes of its monetary policy stance. The Committee has since noted that this stance has continued to deliver the desired results of a decline in inflation and exchange rate stability.
The Central Bank reports that the Committee is scheduled to meet again next month to discuss fiscal measures being implemented by the Government for the Full Year 2012/2013. The MPC will then decide whether to raise, lower or maintain the current lending rate.
Meanwhile, I&M, which is owned by Proparco (a France-based development company), DEG (a German financial organisation) as well as a consortium of Kenyan investment companies and individuals, will join a host of other local lenders as it falls in line with the CBK’s decision.
Last year, the Treasury expressed concerns over the slow reaction by commercial banks to reduce the rates following the Central Bank’s initiative. However, some lenders like KCB, Consolidated Bank, CFC Stanbic and Prime Bank have been among the first to follow suit.