Equity Bank Kenya has reduced its interest rates on all new and existing Kenya Shilling-denominated credit facilities. The revised rates will take effect on February 13, 2025, for new loans, while existing loan holders will benefit from the changes starting March 1, 2025.
This follows the Central Bank of Kenya’s (CBK) recent decision to lower the Central Bank Rate (CBR) by 50 basis points to 10.75% from 11.25%, alongside a reduction in the Cash Reserve Ratio (CRR) by 100 basis points to 3.25% from 4.25%. Equity Bank, by aligning with the CBK’s monetary policy changes, aims to enhance access to affordable credit and drive economic growth.
Read: CBK Cuts Lending Rate for Fourth Consecutive Time
Under the new framework, Equity Bank’s lending rates will now be based on a revised Equity Bank Reference Rate (EBRR) of 14.39%, with additional margins determined by customer risk profiles. The bank’s decision represents a 300-basis-point (3%) reduction across multiple credit products.
“We understand the financial pressures facing Kenyans today, and we’re committed to doing our part to ease that burden. This rate cut is about more than just lower interest rates; it’s about opening doors for Kenyans to invest in their businesses, support their families, and their livelihoods,” said Moses Nyabanda, Managing Director, Equity Bank (Kenya) Limited.
This marks the third time in six months that Equity Bank has lowered its lending rates, having previously done so in September and November 2024. The reduction is expected to provide significant economic relief by reducing the cost of borrowing for businesses and individuals alike. Lower interest rates will enable businesses to access more affordable credit, lowering operational costs, fostering growth, and creating job opportunities. For households, the reduced loan repayment obligations will increase disposable income, stimulating consumer spending.
Equity Bank is the third major financial institution in Kenya to reduce lending rates within the past week. KCB Bank Kenya recently lowered its base lending rate from 15.6% to 14.6% per annum, effective February 10, 2025. Similarly, Co-op Bank revised its base lending rate from 16.5% to 14.5% per annum, with the final rate depending on the borrower’s credit profile.
The CBK’s Monetary Policy Committee (MPC), in its meeting on February 5, 2025, highlighted that the reduction in CRR would inject additional liquidity into banks, lowering funding costs and subsequently leading to more affordable lending rates. To ensure that banks pass on the benefits of lower interest rates to customers, the CBK has intensified its regulatory oversight. The central bank has launched on-site inspections to monitor the implementation of the Risk-Based Credit Pricing Model (RBCPM).
Read: Banks that Fail to Lower Lending Rates will Face Penalties, CBK Announces
Furthermore, recent amendments to the Banking Act mandate strict compliance, with financial institutions facing potential penalties of up to Ksh 20 million or three times the financial gain for non-compliance. Additionally, banks that fail to adjust their lending rates accordingly could face daily fines of up to Ksh 100,000 per loan account in violation.