KCB Bank Reduces Base Lending Rate to 13.85%

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KCB Bank has announced a reduction in its base lending rate from 14.6% to 13.85% per annum, following the Central Bank of Kenya’s (CBK) latest move to ease borrowing costs in the country. The KCB revised rate will apply to new loans starting April 11, 2025, and to existing loans from May 11, 2025.

This is the second time in 2025 that KCB Bank has revised its base lending rate, with the first cut made in February when the bank lowered its rate from 15.6% to 14.6%. The latest reduction follows the CBK’s decision to slash its own base lending rate from 10.75% to 10%, marking a 75 basis point drop as the regulator continues to loosen monetary policy.

Read: CBK Reduces Base Lending Rate to 10%

The Central Bank’s Monetary Policy Committee (MPC) also narrowed the interest rate corridor around the base rate from 150 to 75 basis points. Additionally, the CBK revised the rate at the Discount Window to serve as the new upper limit of this corridor.

For borrowers, the change means cheaper loans, though the final rate offered by KCB will still depend on a borrower’s individual credit profile under the bank’s Risk-Based Credit Pricing Model. The new rate applies only to loans issued in Kenyan Shillings.

KCB’s move comes at a time when the CBK is stepping up efforts to make sure commercial banks are passing on the benefits of lower central rates to customers. Today, the regulator made headlines by announcing that it will begin imposing daily fines on banks that fail to reduce their lending rates in line with the CBK base lending rate, starting June 2025.

Read: Banks Face Daily Fines from June for Failing to Lower Lending Rates, CBK Says

Under the new enforcement measures, banks that don’t comply risk penalties of up to Sh20 million or three times the financial gain from non-compliance. There will also be daily fines of Sh100,000 until banks fully align with the central rate, and executives could be held personally accountable, facing fines of up to Sh1 million.

Since August 2024, the CBK has revised rates downward by a total of 2.75 percentage points, from a high of 12.75% to the current 10.00%, in a bid to encourage lending and support economic recovery.

Despite these efforts, many commercial banks have been slow to follow suit, leading to a mismatch between the CBK base lending rate and what customers are actually paying. As of December 2024, the average commercial lending rate remained high at 16.89%, even though the CBR had already dropped to 11.25%.

The CBK has voiced concern over what it calls “asymmetric behavior”, banks being quick to hike interest rates during periods of monetary tightening, but sluggish in adjusting them downward when conditions ease.

This delay has contributed to a slowdown in private sector credit growth, which shrank by 1.1% in the year to November 2024, far below the CBK’s target of 12 to 15%.

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