× Business BUSINESS MOTORING SHIPPING & LOGISTICS DR PESA FINANCIAL STANDARD Digital News Videos Health & Science Lifestyle Opinion Education Columnists Moi Cabinets Arts & Culture Fact Check Podcasts E-Paper Lifestyle & Entertainment Nairobian Entertainment Eve Woman Travelog TV Stations KTN Home KTN News BTV KTN Farmers TV Radio Stations Radio Maisha Spice FM Vybez Radio Enterprise VAS E-Learning Digger Classified Jobs Games Crosswords Sudoku The Standard Group Corporate Contact Us Rate Card Vacancies DCX O.M Portal Corporate Email RMS

Government payments, support from CBK lift lenders’ liquidity

By Dominic Omondi | May 27th 2020

Government payments and market intervention by the Central Bank of Kenya (CBK) has left banks with excess funds.

As a result, the interbank rate - interest at which banks lend to each other - fell to 3.92 per cent last week, the lowest since Kenya reported its first case of Covid-19 on March 13.

This is a boost for banks which are grappling with increased bad loans, a situation that has seen many lenders set aside billions as insurance against possible defaults by borrowers negatively impacted by the pandemic.

In its weekly bulletin, CBK said the liquidity in the money market was supported by State payments even as the financial regulator remained active in the market.

“Commercial  banks’  excess  reserves  stood  at  Sh38.9  billion  in  relation  to  the  4.25  per cent  cash  reserves  requirement (CRR). Open market operations remained active,” said CBK.

Active in market

The interbank money market had begun to experience tight liquidity, with the rate rising to six per cent by April 20.

It was the highest interbank rate since December 11 last year, but much lower than a record high of 30 per cent seen in 2011.

However, CBK has remained active in the market by buying short-term securities from banks through repurchase agreements, thus increasing reserves for commercial banks.

The government has also been paying its pending bills as well as interest on short-term debt securities, boosting liquidity.

Banks with insufficient cash reserves to, for example, meet a depositor’s need, can now borrow overnight cheaply from those with surplus funds.

Covid 19 Time Series


Share this story
Banks withdraw 2019 dividend amid uncertainty
Surge in bad loans forces Equity, StanChart and NCBA to hold onto shareholders’ cash
Dog walking becomes the newest hustle in town
Dog walking is now a status symbol. Owning a pet is cool. I nowadays meet lots of Kenyans and foreigners walking their dogs and some running.