Below is what you might have missed in the previous "my 15 min chat with a bank CEO" interest rate chat session Rates hosted by Richard Etemesi, CEO, Standard Chartered Bank 

Q) Setwin: Will the decision by banks to reduce lending rates have any effect on inflation?

A) Richard: It’s possible that lowering lending rates may spike inflation as it will spur demands and demand tends to drive up inflation. For inflation to be contained there needs to be correspondent growth in production. This means that a lot of the lending should be targeted towards improving productivity capacity of manufacturers rather  

Q) Zephie: Taking it from your comments on Deposits. why is it that customer deposits dont attract a better interest?

A) Richard: Zephie thanks…in my view customer deposits do attract a good rate because they are subject to competition. there are 43 banks competing for your deposits. there are also other investment opportunities you can consider such as t-bills

Q) RPG254: Why don't Kenyan banks show their lending rates using APR. This was highlighted in a recent media article

A) Richard: (APR) will be rolled out in the next three months…APR will enable consumers of financial services to make informed comparisons. 

Q) Raegis: What's stopping banks from making more drastic cuts to their lending rates?

A) Richard: lets talk about spreads…the misconception amongst the population is that spreads = profit…in actual fact spreads = revenue... (after generating income/revenue) banks have then got to account for the cost of operations, provisions, and other costs to come up with the profit. the challenge in Kenya is that it is very expensive to maintain and manage a bank. For instance legal fees, challenges with the backlog in the judiciary… it takes long to register titles…banks employ the highest number of security personel in the country…and so all this contributes to the cost of banking. In actual fact...bank spreads have actually been coming down. 

Q) Tygona: When interest rates go up, why are existing loan holders also subjected to the new rates as opposed to this being applicable for new loan applicants?

A) Richard: Tygona thanks...loans are granted based on deposits generated by banks. when interest rates go up both lending and deposit rates increase and therefore even for existing loans, when the deposit rates go up, the loan rates have to match.