Banks are headed for a rough time after restructuring loans worth Sh844.4 billion, nearly a third of the loans in their books by the end of June, according to the Central Bank of Kenya (CBK).
This will eat into their profitability, with most lenders putting aside money as insurance in case of defaults. Already, a number of banks such as Equity and NCBA have recalled their dividends as they shored up their arsenal in case of a jump in bad loans.
As part of emergency measures, CBK struck a deal with banks which saw the latter restructure loans for borrowers distressed by Covid-19.
CBK in a statement on Wednesday, following a review of the state of the economy said the total banking sector loans were valued at Sh2.9 trillion.
SEE ALSO: Central bank holds key lending rate at seven per cent
Of the total loans restructured, individuals and households rescheduled Sh240 billion, said CBK Governor Patrick Njoroge.
The Monetary Policy Committee (MPC), CBK’s highest decision-making organ has for the fifth consecutive month retained the Central Bank Rate (CBR) - the benchmark lending rate at seven per cent.
“The committee noted that the package of policy measures implemented since March were having the intended effect on the economy, and will be augmented by the implementation of the measures in the financial year 2020/21 Budget,” said Dr Njoroge, who is also the MPC chair. At seven per cent, CBR is the lowest in nine years.