NO DANCING MATTER: President Uhuru Kenyatta with UNCTAD Secretary General Dr Mukhisa Kituyi and CS Ms Amina Mohamed.
MP’s have finally passed a Bill that seeks to cap bank interest rates at not more than four per cent of the Central Bank Rate.
Depositors will equally enjoy the minimum interest granted on a deposit held in interest earning account to at least 70 per cent of the base rate offered by CBK.
The Bill will only become law if President Kenyatta, whose family has vast interest in Commercial Bank of Africa and other banks, assents it into the law.
The move comes in the wake of surging cost of credit and stiff resistance to a similar law, for the past 10 years. Both the National Treasury and Central Bank have opposed previous moves to curb interest rates by commercial instead opting for market competitiveness, which has failed to spark.
The umbrella banks body, Kenya Bankers Association, has been on the offensive against moves to bring induplum rule in Kenya.
Its the common law rule that provides that arrear interest ceases to accrue once the sum of the unpaid (accrued) interest equals the amount of capital outstanding at the time (and not the amount of capital originally advanced).
The President will be hard pressed on one hand from the pressure of banks and on the other hand squeezing banks to realize his government’s unfulfilled pledge on cutting the cost of living.
Bank executives will face a Sh1 million fine or imprisonment for a term of not less than one year or both if convicted of flouting the law.
The move comes hot on the heels of CBK proposal to cap tenure of CEOs of banks as well as audit firms reviewing books of banking and financial institutions.