‘Greedy’ lenders to blame for feared hike on bank loan rates

In Summary Economist Tony Watima reckons banks are yet to embrace transparency in new loan pricing arguing high risks clients have only gotten riskier in the aftermath of the entry of caps as the downturn in economic growth weighs hard on both individuals and firms.

However, in weeks since the rate cap repeal, several commercial banks have come forward to assure of a stay to old rates on new loans even as the pricing of credit going forward remains shrouded in doubt.

The Central Bank of Kenya (CBK) attempts to tame the discrepancy in loan pricing through the introduction of the Kenya Banker’s Reference Rate (KBRR) in July 2014 failed to gather steam throwing Kenyans back into the dark.

The interest rate charged on your new loan is inevitably set to rise in the aftermath of the interest rate cap repeal in spite of assurances from the banking sector.

The expected hike in rates could be highly blamed on greed by commercial banks with the effective market lending rate by the lenders tied to the State’s fiscal management behavior.

However, in weeks since the rate cap repeal, several commercial banks have come forward to assure of a stay to old rates on new loans even as the pricing of credit going forward remains shrouded in doubt.

“The fear that banks will become unreasonable is unfounded. They don’t have that chance because pricing for banks is not something you wake up and throw a dice on,” Kenya Bankers Association (KBA) Chairman Joshua Oigara told a news conference on November 6.

KCB has already tipped its new interest rates to stay within a two to three percent band saying they have found a ‘new equilibrium’ to their operating model.

Betrayal?

Last weekend, Sidian Bank was the subject of online bashing as a copy of new and higher interest rates surfaced on the inter-webs.

Effectively tagged as the Kenya’s greediest bank, the lender would later renounce the new rates and pronounce a hold to interest charges in a board notice issued on November 10.Even so, the leak may have reflected honesty by the bank in its mirroring of the pricing in of the previously locked out client base.Economist Tony Watima reckons banks are yet to embrace transparency in new loan pricing arguing high risks clients have only gotten riskier in the aftermath of the entry of caps as the downturn in economic growth weighs hard on both […]

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