Commercial banks in Kenya have begun lowering their lending rates following the Central Bank of Kenya’s (CBK) recent move to slash its base rate by 75 basis points, bringing it down to 10 percent. The regulator announced the cut as part of efforts to boost private sector activity and make credit more accessible amid a high-cost economic environment.
This latest reduction marks the fifth consecutive rate cut since August 2024, when the CBK’s benchmark rate stood at 12.75 percent. In total, the central bank has now cut the rate by 2.75 percent over the past nine months.
The policy shift has started to yield action on the ground. KCB Bank was among the first to respond, lowering its lending rate from 14.6 percent in February to 13.85 percent. The revised rate took effect on April 11 for new loan facilities and will extend to existing loans beginning May 11. KCB said it would tailor rate adjustments to individual customer risk profiles under its Risk-Based Credit Pricing Model (RBCPM), which ensures borrowers are charged fairly based on their creditworthiness.
This new rate reflects a 2.99 percent reduction from KCB’s previous peak rate of 16.84 percent. However, the bank clarified that the changes apply only to Kenya Shilling-denominated loans and exclude fixed-rate products.
Hot on KCB’s heels, NCBA Bank also lowered its base lending rate by 1 percent—from 15.34 percent to 14.34 percent. NCBA’s revised rate applies immediately to new loans and will kick in for variable-rate facilities starting May 1. Fixed-rate loans remain unaffected. The bank emphasized that the move aligns with its broader commitment to easing the cost of borrowing in line with CBK policy.
Meanwhile, CBK Governor Kamau Thugge confirmed that the regulator has already inspected 13 of the country’s 38 commercial banks to assess compliance with revised lending guidelines. The remaining 25 banks are set to undergo inspections by the end of June. Thugge added that CBK would engage bank boards following the inspections and could impose penalties where necessary.
These inspections stem from a February 5 Monetary Policy Committee (MPC) resolution, where CBK raised concerns about the slow adoption of the RBCPM among banks.
New amendments to the Banking Act have strengthened CBK’s enforcement power, enabling it to penalize institutions that fail to pass on the benefits of lower funding costs to consumers.
Despite the regulator’s actions, some stakeholders argue that lending rates remain high. The Kenya Bankers Association (KBA) noted that average lending rates have only declined by 3 percent since November 2024. KBA is now calling for a consistent, transparent framework to ensure all banks align with CBK’s policy direction and avoid uneven credit practices.
