Equity Bank reduces interest rate on credit facilities to 14.5% p.a
In line with the new regulation, Equity Bank has today announced that it has adjusted its interest rates to 14.5% p.a. The new rate is the current base rate set and published by the Central Bank of Kenya vide Banking Circular No 4 of 2016 dated 13th September 2016 of 10.5% p.a + 4%.
At the same time, the bank has also announced that interest on deposits held in local currency interest earning accounts will earn interest at a minimum of 7.35% being 70% of the current base rate as set by CBK at 10.5% p.a.
“As a law abiding institution, Equity Bank has adopted the base rate as set and published by CBK currently at 10.5% and marking up with a 4% cap as provided for by the Law to arrive at 14.5%. The new interest rate will be applied on a reducing balance basis. It will apply to all local currency new credit facilities and existing ones whose performance is on schedule. We invite our customers to visit their respective branches in case they require more information or clarification on their credit facilities.” Dr,James Mwangi, Equity CEO said.
According to section 33(1) (a) of the Banking (Amendment) Act 2016, the maximum interest rate chargeable for a credit facility in Kenya at should not be more than four percent, the base rate set and published by the Central Bank of Kenya.Equity Bank has interpreted “credit facility” to mean any form of financial accommodation extended to a customer through institutions licensed by the Central Bank under the Banking Act irrespective of the various channels. The desire to provide ceilings is a clearly discernible intent of the law as evidenced by the Memorandum of Objects and Reasons to The Banking Act (Amendment) Bill, 2015. The Act further prohibits any person from entering into an agreement/arrangement to borrow or lend directly or indirectly at an
Equity Bank says it has interpreted “credit facility” to mean any form of financial accommodation extended to a customer through institutions licensed by the Central Bank under the Banking Act irrespective of the various channels. It adds that the desire to provide ceilings is a clearly discernible intent of the law as evidenced by the Memorandum of Objects and Reasons to The Banking Act (Amendment) Bill, 2015. The Act further prohibits any person from entering into an agreement/arrangement to borrow or lend directly or indirectly at an interest not accordance thereof
In this regard, Equity Bank has interpreted this to include all credit facilities extended to customers by such institutions. This includes loans through mobile phones or through other third party platforms or collaborations with Mobile Network Operators (MNOs), credit card facilities as well as micro finance loans. The Act in section 33(B) (2) further says “A person shall not enter into an agreement to borrow or lend directly or indirectly at an interest rate in excess of that prescribed by law”. The fact that this prohibition extends to all categories of persons including lenders and borrowers clearly makes out a case for wide interpretation.
Dr. Mwangi said, Equity’s suite of deposit accounts will now attract a minimum interest rate of 7.35%p.a, and invited customers to make full use of these products to build their savings and investments.
