Capping of Interest Rates To Hurt Small Banks

If the Bill aimed at capping interest rates in the country signed into law, small banks are going to feel the heat and even some may close down business.

According to businessman and economic analyst in the securities market Mr. Amin Lalji, the capping of interest rates is needed but the decision to do so should be reached soberly. He said taking such a drastic decision without proper consideration will have some serious repercussions on the economy of the country.

The capping of interest rates is needed but the decision to do so should be reached soberly. -Economic Analyst, Amin Lalji.

“If the Bill is signed into law, the first casualty will be the smaller banks. These smaller banks make their money from the interest rates they impose on their customers and with that channel being cut off, they will certainly suffer,” he said.

Read: Commercial Banks Sign MOU to Lower Interest Rates

He acknowledged that banks have been exploiting their customers by giving them high interest rates but the decision to handle that should be taken in steps and not just at once as the Bill proposes. “The Bill seeks to cap interest rates at a rate 4% below that set by the Central Bank of Kenya. With this being implemented at once, we should expect ripple effects on the economy. The banking sector will suffer,” he added.

The Bill is yet to be signed. The President still has more than ten days to reach a decision on whether to sign the interest rates Bill into law or decline.

Mr. Amin, an expert in the stock market has called on those wishing to join the stock market to be careful and not to always believe whatever they read about companies. He said some companies are giving false information concerning their financial status in a bid to attract people to buy their shares only to make losses down the road.

“Some of the numbers given by these companies do not reflect the real results on the ground. Kenyans have to be really careful about it,” he said.