Borrowers have something to smile about after commercial banks dropped the bid to increase the cost of loans. This move has offered relief for many bank borrowers who would have been faced with tough times ahead had the interests remained high. This move also signals the resurrection of investments that had stalled due to steep interest rates in the past few months.
This move by the commercial banks comes after a gradual fall in the Treasury bill yield to 9.7 percent last week as compared to 22.5 percent on October 21st. banks like Standard Chartered Bank as well as Barclays Bank already informed their customers that they had shelved the plans to raise the lending interest rates. Equity Bank also followed suit by cancelling all the notices sent out to their customers informing them of a possible increase in lending rates.
Many big investors had already suspended their projects with the impending increase in interest rates. This had actually cast a looming dark shadow over the economy of the country as most investors had shelved their expansion plans. The move, therefore, comes as a relief for many investors and developmental plans will soon come back on track. In the past few months, interest rates had soared as high as above 20 percent, leaving many borrowers at pains. High interests were partly contributed by the fluctuating stability of the shilling against the dollar.
The reversals of the interest rates by the commercial banks comes one day ahead of the Central Bank of Kenya’s monetary policy committee meeting that is to take place today Wednesday. Patrick Njoroge, the Central Bank of Kenya Governor, had last week told parliament that he was looking forward to commercial banks lowering their cost of loans. He cited the drop in the cost of funds that had come with the decline in the cost of short term government debt instruments.