The High Court has temporarily permitted commercial banks and financial institutions to adjust loan interest rates without seeking prior approval from the National Treasury.
In a ruling delivered on Thursday, August 13, the court suspended Section 44 of the Banking Act, which obligates lenders to obtain sign-off from the Treasury Cabinet Secretary before raising rates.
Through a conservatory order, the judge stayed the operation of the statutory restriction. The directive responds to a challenge from the Kenya Bankers Association (KBA), opening the door for lenders to alter interest rates at their own discretion pending the final outcome of the case.
The order remains effective while the Court of Appeal considers a suit challenging an earlier High Court ruling from December 11, 2025. That earlier decision upheld Section 44, rejecting the banking sector’s claim that the approval requirement breaches the constitutional independence of the Central Bank of Kenya (CBK).
The CBK has repeatedly maintained that commercial lenders do not need Treasury permission to adjust lending rates in response to monetary policy changes.
Speaking at the East Africa Banking School Conference (EABSC) 2026 on Tuesday, July 14, CBK Governor Kamau Thugge stressed that central bank decisions operate independently and should filter directly into bank lending rates without cabinet-level interference.
“From the Central Bank’s point of view, the decisions from the courts have been that monetary policy is independent. Therefore, when we change the interest rate, that should translate immediately to lending rates. We don’t have to go through the minister,” Thugge said.
Section 44 of the Banking Act explicitly bars financial institutions from increasing their rates or administrative fees without prior approval from the National Treasury CS. KBA’s appeal argues that forcing banks to run interest rate changes through the Treasury undermines CBK’s regulatory mandate.
This temporary ruling does not strike down Section 44 permanently, nor does it mandate rate hikes. Instead, it gives banks the operational leeway to adjust rates up or down independently until the legal dispute resolves.
The decision arrives shortly after the CBK held its benchmark lending rate at 8.75 percent to stabilize inflation expectations against global economic volatility and elevated oil prices.
