KCB Cuts Lending Rate on New, Existing Kenya Shilling Loans after CBK's Monetary Policy Adjustment
- The Central Bank of Kenya (CBK) lowered the Central Bank Rate (CBR) from 10.75% to 10% to stimulate economic growth
- Following the regulator's move, the Kenya Commercial Bank (KCB) adjusted its lending rate from 14.6% to 13.85% annually
- CBK governor Kamau Thugge pointed out that although average lending rates had been steadily declining since December 2024, private-sector credit growth had slowed
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Following the Central Bank of Kenya's adjustment of the Central Bank Rate (CBR) to 10%, the Kenya Commercial Bank (KCB) has announced a decrease in its lending rates.
Source: Twitter
On Wednesday, April 9, the lender released a statement declaring the drop in rates from 14.6% to 13.85% per annum.
When will KCB's new loan rates take effect?
The new rates for new loans will become effective on Friday, April 11, while those for existing loans will be implemented on Sunday, May 11, 2025.
The bank did clarify, though, that under its risk-based credit pricing approach, the ultimate lending rate will be decided by customer-specific credit profiles and will only apply to facilities denominated in Kenyan shilling.
"We have lowered our base lending rate from 14.6% to 13.85% annually in accordance with the Central Bank of Kenya's most recent Central Bank Rate (CBR) change. Our risk-based credit pricing model will use customer-specific credit profiles to establish the final lending rate, which will only apply to facilities denominated in Kenyan shilling," KCB stated.
Why CBK lowered CBR
After a meeting of the Monetary Policy Committee (MPC), CBK lowered the basic lending rate by from 10.75% to 10% on Tuesday, April 8.
Kamau Thugge, the governor of CBK and the chairman of the MPC declared that the action will boost bank lending and promote economic expansion.
Thugge disclosed that central banks in the main economies had reduced interest rates, although at different rates depending on Gross Domestic Product (GDP) forecasts and inflation.
The governor pointed out that although average lending rates had been steadily declining since December 2024, private-sector credit growth had slowed.
Source: Facebook
What was the average bank's lending rate in March?
The CBK reported that the average lending rate for commercial banks fell to 15.8% in March 2025 from 16.4% in February and 17.2% in November 2024.
Due to improving demand and falling lending interest rates, commercial bank lending to the private sector saw a marginal increase of 0.2% in March 2025 after contracting by 1.3% in February.
In contrast, the gross non-performing loan (NPL) to gross loan ratio rose from 16.4% in December 2024 to 17.2% in February 2025.
Banks continued to make adequate provisions for non-performing loans (NPLs), despite growth in the real estate, personal and home, trade, building and construction, and manufacturing sectors.
What was CBK's directive to banks?
Thugge issued a warning in March that banks found lending at higher costs despite lower rates will be subject to penalties, which may include fines equal to three times their unjust profits.
Under the risk-based credit pricing model, the CBK directed commercial banks to reduce interest rates per changes in monetary policy.
To verify compliance, the regulator stated that it had started conducting on-site inspections.
Proofreading by Asher Omondi, copy editor at TUKO.co.ke.
Source: TUKO.co.ke
