We are in the dark on new law, bankers say

Banks are unsure about the contents of the law on interest rates that President Uhuru Kenyatta assented to.

Kenya Bankers Association (KBA) Chief Executive Officer Habil Olaka yesterday said yesterday that they are as well unsure of how the amendments will be implemented.

Mr Olaka told a packed press briefing that while banks have welcomed the President’s decision to cap interest rates, they still need to study the law and consult the regulator over its implementation.

“Our reservations on some particulars of the Act notwithstanding, we will comply with it once it is operationalised. KBA will engage with the Central Bank of Kenya (CBK) on how the industry will best apply the law,” he said.

Olaka said banks will have to wait for a directions from CBK on whether or not the four per cent cap will be based on the regulator’s rate or Kenya Bankers Reference Rate (KBRR).

blend two rates

He said there is still a possibility for CBK to come up with a rate to blend the two rates since the bill only says the rate will be based on the one determined by the regulator.

Following Mr Kenyatta’s decision, the Attorney General will be required to gazette the new law within seven days. It could take another 14 days before the law comes into force.

However, the KBA boss says it is not clear yet if banks will be required to reprice old loans in line with the new law. “You should appreciate that we do not know yet how the law will be operationalised. Until it comes into effect, the existing terms and conditions of loan contracts with customers still apply,” said Olaka.

Banks will also seek to know if the law will extend to foreign loans.