14 Kenyan Banks Ignore CBK's Order to Cut Loan Rates

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A report has revealed that 14 Kenyan banks have ignored the Central Bank of Kenya’s (CBK) directive to lower bank loan rates, despite multiple reductions in the Central Bank Rate (CBR).

This defiance comes as CBK Governor Kamau Thugge continues efforts to push commercial banks to pass on the benefits of lower borrowing costs to businesses and households. The CBK has been actively reducing the CBR to make credit more affordable, but resistance from some banks has fueled tensions between the regulator and the financial sector.

Since August 2024, the CBK has cut the CBR by a total of 2.25 percentage points, bringing it down to 10.75% as of early February 2025.

Read: CBK Cuts Lending Rate for Fourth Consecutive Time

The goal of these monetary policy measures is to encourage banks to lower their lending rates, stimulating private sector credit growth and supporting economic recovery.

In response, some major banks, such as Equity Bank, KCB Bank, Co-operative Bank, DTB Bank, Equity Bank, NCBA Bank, and Absa Bank, have adjusted their base lending rates downward. For example, Equity Bank reduced its loan rates by 3 percentage points, while KCB and Co-operative Bank revised their rates to 14.6% and 14.5%, respectively.

However, despite these adjustments, overall bank loan rates in Kenya have remained high, prompting the CBK to intensify its regulatory efforts.

Governor Kamau Thugge has openly criticized commercial banks for their slow response in reflecting lower borrowing costs. In early 2025, the CBK launched on-site inspections to ensure compliance with the Risk-Based Credit Pricing Model (RBCPM), a framework requiring banks to align their lending rates with reduced funding costs.

Thugge warned that banks failing to comply with the directive risk penalties under the Banking Act, which grants the CBK authority to enforce regulatory measures.

Read: Bank Lending Rates in Kenya 2025

The refusal by these 14 banks to cut loan rates suggests that some lenders are prioritizing profitability or citing concerns such as high credit risk, operational expenses, and the cost of funds as justification for maintaining elevated rates.

The Kenya Bankers Association (KBA), which represents the banking sector, has defended the position of commercial banks, arguing that lending rates are influenced by multiple factors beyond the CBR. Banks assess credit risk, market conditions, and operational costs when determining loan pricing, making it difficult for them to lower rates in line with CBK’s expectations.

This ongoing standoff has intensified the debate on balancing affordable credit with the financial stability of banks, particularly as Kenya grapples with rising non-performing loans (NPLs). This ongoing standoff has intensified the debate on balancing affordable credit with the financial stability of banks, particularly as Kenya grapples with rising loan defaults.

Kenyans had defaulted on more than Sh 630 billion loans in April 2024, the highest level in 18 years, as borrowers reacted to a high-interest rate regime.

The issue has also drawn the attention of policymakers, including President William Ruto, who has urged banks to reduce loan rates to support economic growth.

Jefferson Wachira is a writer at Africa Digest News, specializing in banking and finance trends, and their impact on African economies.