NAIROBI, Kenya, Sep 5 – Activist Okiya Omtatah has sued the Central Bank of Kenya (CBK) and Kenya Bankers Association (KBA) over the new interest rates cap.
Omtatah argues that the law requires them to charge a maximum of 12.9 percent and not 14.5 percent, adding that the difference between the interest rates prescribed by law and what is charged by the banks is 1.6 percent.
“The current state of affairs is unconstitutional and unacceptable as it unfairly enriches lenders while it arbitrarily deprives borrowers of their property contrary to Article 40 of the constitution,” he states.
Omtatah wants the court to intervene and ensure the rates are capped based on the Kenya Banks’ Reference Rate (KBBR) and not on the Central Bank Rate (CBR).
According to the new Banking (Amendment) law, 2015, interest rates are to be capped at 400 basis points above the CBR rate which is currently at 10.5 percent.
However it is yet to be made clear how the KBRR will continue playing a role in determining the cost of interest rates since.
So far the Kenya Bankers Association has already declared that all the banks will comply with the new law both on new and existing loans at 14.5 percent.
“The voice of Kenyans has come out strongly that banks need to better serve their customers and pass on the benefit of enhanced efficiencies to borrowers and depositors. We appreciate this sentiment and are committed to win back the trust of the banking public by meeting their expectations,” the association stated earlier.
But according to Omtatah, this is not the right capping adding that the banks are still “immorally giving loans at interest rates that unfairly enrich them.”