Both new and existing loans issued by KCB will be affected by the hiked interest rates announced by the institution on May 27th.
- KCB’s new base lending rate stands at 15.6% per annum, rising from the 14.7% per annum rate that has been in place since January 15th.
- Those who intend to borrow new loans will be instantly charged the new lending rate, while those with existing loans will be given a grace period until July 1st.
- Commercial banks have adjusted their base lending rates to align with the CBK’s monetary rate which sits at 13% since February this year.
“We wish to advise you that the bank has reviewed its base lending rate for Kenya Shillings denominated facilities to a variable base rate of 15.6% p.a effective 27th May 2024 for new facilities, and 1st July 2024 for existing facilities,” KCB said in a public announcement.
Last month, NCBA bank’s lending rate for shilling-denominated loans surged to 17.5% from the previous 16.5%. In February, Equity Bank’s lending rate rose from 17.5% to 18.2%, in response to the hiked CBR. In some instances, high risk borrowers have been charged as high as 26% in monthly interest rates.
As lending rates continue to rise, the cost of servicing loans becomes higher for businesses. This further leads to reduced profit margins and sinking revenues.
For banks, however, high lending rates could lead to record profits by the end of Q2. This is because even borrowers who sought for loans when the interest rates were lower are affected. The only disadvantage is that banks would face a higher percentage of defaults and declining numbers of borrowers.
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