Standard Chartered Bank of Kenya has slashed its base lending rates by 3 percentage points to have it at 18.5% down from 21.5%. This is currently the lowest base rate on the market in the wake of a market rate cut following Central Bank of Kenya‘s decision to lower base rates earlier this month. CBK cut the Central Bank Rate (CBR) by 350 base points (3.5 percentage points) to 13% last week, down from 16.5%, a rate set in July when the Monetary Policy Committee last met.
Standard Chartered Bank’s move follows in the steps of Barclays Bank, KCB Bank and CFC Stanbic who all have their new base rates at 19%. Most of the banks have put the date for effecting the rate cut at between 1st and 15th of October. A source at KCB Bank Group said that the new rates may affect existing loans depending on their nature. Flexible loans will take up new rates while fixed loans will be recovered at agreed rates.
Other banks who have announced reduction in their base lending rates are Ecobank who have cut their rates to 21.5% down from 25% and Diamond Trust Bank slashing base rates to19% from 22.5%. Commercial Bank of Africa (CBA) has cut its rates by 3.5 percentage points to 19% effective October 15th. Victoria Commercial Bank has also announced that it would lower it base rates effective 1st of October to 20.5%.
During the MPC meeting, Central Bank Governor Njuguna Ndung’u expressed concerns that commercial banks were not transferring the overall effect of low base rates to borrowers.
“The Committee noted that interest rate spreads remained high suggesting that these cost reductions had yet to be fully transferred to bank customers and the economy at large through declining cost of credit,” Ndung’u noted.
With the low base lending rate, commercial banks are expected to lower their rates to give borrowers affordable loans. Interest rates on loans sky rocketed to an average of 25% in October 2011 up from an average of 15% a year earlier making borrowers shun taking new loans.