Co-operative Bank of Kenya has upstaged its rivals in banking to announce that it had complied with the new law that limits interest rates to start offering new credit at the maximum rate of rate of 14.5% annually.
The bank became the first financial institution to announce compliance with the new Banking (Amendment) Act, which was signed into law by President Uhuru Kenyatta on Wednesday.
“Cooperative Bank will now offer all new credit facilities at a rate not exceeding 14.5 per cent per annum.” The Group Managing Director Gideon Muriuki said on Friday.
The announcement came only two days after President Uhuru Kenyatta signed into law, paving way for cheaper credit from the banks which have been prohibitive. In his statement, Mr Muriuki added that the Banking (Amendment) Act sets the maximum interest rate chargeable for credit facility at 400 basis points above the Base Rate published by the Central Bank of Kenya.
The act provides that a person shall not enter into a new arrangement that exceeds the prescribed rate.
The new interest capping laws have been hailed by many Kenyans who have been paying prohibitive costs with some up to 26 per cent. Opposition leader Raila Odinga congratulated President Uhuru for assenting to the law, arguing that the move was in the best interests of majority of Kenyans and should have been implemented by previous regimes.
Other banks are expected to follow even though the Kenya Bankers Association says it is waiting for guidance from the Attorney General Githu Muigai on implementation schedules. The capping of rates has re-introduced controls in the banking sector which analysts see blowing bank revenues and leading to job losses in the short term.
Some say it will stimulate innovations as banks strike to maintain their revenue streams. The full impact will be seen once all banks become compliant.
[crp]
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