Co-operative Bank on Friday became the first lender to direct its managers to comply with the .
The decision was taken even as banking stocks continued to fall by big margins for the second day running.
Managing director Gideon Muriuki said the second-largest lender by assets will apply the 10.5 per cent Central Bank Rate as base rate, pending issuance of guidelines by the Central Bank of Kenya.
"We advise that pending receipt of full guidelines from our regulator, the Central Bank of Kenya, particularly on the applicable rate, all new credit facilities shall be at a rate not exceeding 14.5 per cent," Muriuki said in a memo to branch managers on Friday.
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Banks, through the Kenya Bankers Association, on Thursday said that they will wait for guidelines from the regulator to comply with new law.
The law caps interest at four percentage points above the base rate to be determined by the Central Bank.
The amended Banking Act also requires banks to pay a minimum of 70 per cent of the base rate on fixed-term deposits.
Although it is generally believed the regulator will use the 10.5 per cent CBR, KBA chief executive Habil Olaka said, there was also a possibility of the regulator applying the 8.90 per cent Kenya Banks Reference Rate or any other rate.
The value of banking stocks continued falling by big margins on Friday as investors continued to sell them off following signing of the law that puts a ceiling on interest rates.
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Largest lender KCB had registered the biggest drop of 10 per cent per share to Sh27 a piece at the Nairobi Securities Exchange by around 1.20pm compared with Thursday's price. Equity Bank followed with 9.92 per cent reduction on its shares to Sh29.50 a piece.
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The fall was also felt by I&M Holdings, Housing Finance and Co-operative Bank which shed 9.84, 9.71 and 9.62 per cent, respectively, on their share prices.
Mid-tier NIC's shares fell by 9.43 per cent, Standard Chartered Bank's by 6.86 per cent while Barclays Bank shares traded 3.95 per cent lower than Thursday.
Diamond Trust Bank, which had traded at 11.95 per cent less than their value on Wednesday during the morning session, recovered to trade 0.70 per cent lower.
"It is a normal reaction by investors to the news but this will normalise going forward," Olaka said.
CfC Stanbic and National Bank showed some recovery to gain 2.04 and 0.71 per cent respectively on their stocks on the bourse.