The Central Bank of Kenya (CBK) on Wednesday lowered its benchmark interest rate by by 50 basis points from 11.25% to 10.75% at its Monetary Committee Policy meeting on February 5th 2025.
The MPC noted the rate cuts was necessary to support the economy and ensure exchange rate stability.
In addition to slashing the interest rate, the Committee reduced the Cash Reserve Ratio (CPR) by 100 bps from 4.25% to 3.25%, citing the policy would support lowering of lending rates.
In its statement on Wednesday, CBK raised concerns over the commercial banks’ reluctance to lower their lending rate despite the substantial lowering of CBR since August 2025.
Only a few banks including Stanbic, Citibank, and Standard Chartered has passed on the benefits of rate cuts to borrowers,
“With these measures, banks are expected to take the necessary steps to lower their lending rates further, to stimulate growth in credit to the private sector and support economic activity,” the Committee noted.
In response to the situation, CBK announce it will conduct on-site inspection of commercial in a bid to compel banks to cut interest rates.
To ensure that banks are implementing the Risk-Based Credit Pricing Model, CBK has embarked on on-site inspection of banks to ascertain that they are reducing their interest rates in line with the RBCPM,” the apex bank noted.
The regulator warned that banks that do not comply will face hefty penalties in accordance with the law.
