Almost half of Kenyan banks have tried to increase loan fees

 

Central Bank of Kenya Governor Patrick Njoroge briefs journalists in his office in Nairobi yesterday. [Maxwell Agwanda, Standard]

Banks have been plotting to increase charges on loans in the wake of the interest rate cap law amid dwindling profits.

Central Bank of Kenya (CBK) revealed yesterday it had denied more than 10 requests to sneak in additional fees since last September, when the law capping commercial bank lending rates at four percentage points above the Central Bank benchmark rate came into force.

“We have received 16 requests for fees imposition or adjustments, but have only approved three, which were on new products,” said CBK Governor Patrick Njoroge during a press briefing in Nairobi yesterday. He also announced that the regulator had thrown out timelines within which it was expected to sell off Chase Bank to a prospective investor.

He said the regulator would not rubber stamp additional fees as a new avenue for profits by lenders.

Dr Njoroge said a review must be in line with inflation changes and should strengthen the banking system besides being beneficial to clients.

“Banks need to be customer-focused and their relationship with management should be central instead of pushing fees that are cruel and cause unusual punishment,” he said.

His remarks came as it emerged that Commercial Bank of Africa (CBA) had notified its customers that it would start charging a one per cent per month fee on loan facilities that were in arrears, as well as credit cards and overdrafts that were in excess of approved limits.

Defaulting loans

Stanbic Bank has also slapped a penalty equivalent to the facility lending rate, prevailing from time to time, plus six percentage points for amounts drawn down in Kenya shillings.

The bank will also charge defaulting dollar, sterling pounds and euro loans, mostly issued to corporates at the bank’s applicable base rate, plus 10 percentage points. Banks have been keen on side-stepping the law capping interest rates, defying the CBK requirement to keep lending at 14 per cent.

Equity Bank reportedly introduced an appraisal fee of between one and three per cent for its mobile phone-based loans dubbed Eazzy Loan and Eazzy Plus.

KCB has also introduced a negotiation fee of 2.5 per cent for all loans. It is not clear whether the changes received CBK approval.

And CBA has maintained its M-Shwari product is not developed on an interest model and is, therefore, exempted from the new banking law. The lender argues that its model levies facilitation fees, not interest charges.

On the sale of Chase Bank, the governor said the deal could extend past the September 30 deadline.

He said talks with a preferred bidder began last month after they asked for more time to submit proposals to take over the bank.

“The deadline for submissions was June 9, but we gave them till June 19. We are not going to tell the negotiator we have a day. That will be like holding a gun to their head and telling them to seal a deal. That way, we will not get a solid outcome,” said Njoroge.

The Standard had revealed that some of the bidders had opted to withdraw their bids while others had developed cold feet.