Activist Okiya Omtatah (pictured) has moved to court to have the new bank interest rates capped based on the Kenya Banks’ Reference Rate, not the Central Bank Rate. In his petition, he says on July 25, 2016, the Central Bank’s Monetary Policy Committee met and retained the CBR at 10.5 per cent and lowered the KBRR from 9.87 per cent to 8.90 per cent, effective from July 25. Omtatah said commercial banks are violating Section 33B of the Banking (Amendment) Act by releasing statements saying they have complied with the new law.
“Whereas the law requires them to charge a maximum of 12.9 per cent (being the KBRR at 8.9 per cent +4 per cent), the banks have clearly stated they will charge interests rates of 14 .5 per cent (being the CBR at 10.5 per cent +4 per cent),” reads part of the court documents.
Omtatah said the difference between the interest rates prescribed by law and what the banks are charging is a “whopping” 1.6 per cent. He says it is binding for the court to end any doubt about the interest rates law by authoritatively interpreting Section 33B (1) (a) and (b) of the Banking (Amendment) Act to ensure that the KBRR, not the CBR, is the applicable base rate for capping interest rates.
Omtatah urged the court to intervene and deal with the deliberate threat before it materialises by ordering the Central Bank and the Kenya Bankers Association to ensure interest rates are capped based on the KBRR.