Following the CBK directives about restructuring loans in March, banks have continued restructuring and according to current CBK reports, loan restructures have surpassed the 1 trillion shillings mark.
The loan restructures are meant to help give borrowers enough time to appropriately plan for their finances during these tough economic times of the pandemic. The Loan restructures include payment holidays and lengthened payment periods for borrowers.
The loan restructures took effect from March 18 and are expected to remain in place for a maximum period of one year pending the guidance of the CBK.
In a new CBK data report published on Tuesday, the loan restructures by banks hit 1.12 trillion shillings at the end of August. The total restructures represent 38 percent of the total banking sector loan book tabulated at Ksh.29 trillion.
The report indicates that personal and household loans account for 271 billion shillings of the restructures, while the majority 849.5 billion shillings account for restructures to other economic sectors including trade, manufacturing, and real estate.
Following the increasing money in loan restructures, the Central Bank of Kenya (CBK) through the Monetary Policy Committee (MPC) has now decided to retain the Central Bank Rate (CBR) at 7 percent as it continues to monitor the measures put in place in March during the advent of Covid-19.
The CBK Committee noted that the package of policy measures accompanied by the loan restructures implemented since March were having the intended effect on the economy.
About CBK Loan Restructuring In March
Lenders took heed to the request by CBK and their borrowers and started restructuring loans from March 18th, 2020, and up to date.
By the end of March, at least seven banks had restructured their loans worth 176 billion shillings and extended the loan holidays. The loans included borrowers with a personal account and business accounts.
CBK said business accounts for the most affected sectors had their loans restructured in March including Tourism which accounted for 31 percent, Real Estate (17.2 percent), Building and Construction (17.0 percent), and Trade (12.4 percent).
Personal loan accounts that were extended represented 1.2 percent of the total household loans worth 811.9 billion shillings as of March 2020.
In April, Treasury CS Ukur Yatani said the loan relief increased by 193 billion shillings from 273.1 billion shillings to include personal loans. This represented about 9 percent of the total loan book.