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NCBA cuts lending rates as pressure mounts on banks
NCBA CEO John Gachora (right) with Finance Director David Abwoga at a media briefing to announce half-year financial results in Nairobi on August 24, 2023.
NCBA Bank Kenya has cut lending rates as lenders respond to the Central Bank of Kenya's (CBK) move to slash the benchmark interest rate by the biggest margin since 2020.
The lender said on Friday it would lower the lending rates on new shilling-denominated loans to 16.91 percent from 17.5 percent. However, the bank did not clarify whether the changes would take effect immediately.
"Dear customer, in view of the recent CBR downward revision, we wish to advice that NCBA Bank's Kenya base lending rates will be revised downwards to 16.91 percent for shilling- and 11.09 percent for dollar-denominated loans," the lender told customers on Friday.
The decision also comes days after the CBK summoned bank CEOs to address concerns that their lending rates had not responded to the cut in the benchmark rate, delaying relief for borrowers saddled with costly loans.
Banks have been reluctant to lower their lending rates amid accusations that they are profiting from high lending rates.
Lowering the lending rates is seen as a move to avoid action from the CBK in addition to easing credit access to businesses and individual borrowers in an economy where the tax burden has significantly eaten into the spending power of individuals and the performance of businesses.
A reduction in lending rates is key to curbing the mounting loan defaults, spurring the uptake of credit and in turn, rekindling orders for goods and services, besides putting money in the pockets of individuals.
Data from the CBK shows that non-performing loans surged to Sh674.9 billion in August this year from Sh657.6 billion a month earlier and Sh621.3 billion in January.
The NCBA Group's share of non-performing loans dropped to Sh40.9 billion in June this year compared to Sh42.6 billion last year.
The CBK had been raising the base lending rate from May 2022 to July this year in a bid to tame inflation. But, the banking regulator cut the rate in August this year, followed by the biggest slash this month as inflation eased.
