Diamond Trust Bank (DTB) has announced a reduction in its lending rates, a move aimed at supporting businesses, particularly Micro, Small, and Medium Enterprises (MSMEs). Effective January 1, 2025, DTB reduced its lending rates by up to 50 basis points, translating to a 0.50% decrease in interest rates on loans. A further reduction of 37 basis points will take effect on February 15, 2025, lowering lending rates by an additional 0.37%. These reductions apply to all Kenya Shilling-denominated loans.
DTB emphasized that multiple factors influence lending rates, including market conditions, economic trends, loan account conduct, and the specific nature of loan facilities. Borrowers will be informed individually about the changes to their loan interest rates in due course.
Read: CBK Cuts Lending Rate for Fourth Consecutive Time
DTB is among several banks that have reduced lending rates in response to CBK’s recent monetary policy adjustments. Equity Bank Kenya has lowered interest rates on all new and existing Kenya Shilling-denominated credit facilities. The revised rates take effect on February 13, 2025, for new loans, while existing borrowers will benefit from the lower rates starting March 1, 2025. Under the new framework, Equity Bank’s lending rates will be based on a revised Equity Bank Reference Rate (EBRR) of 14.39%, with additional margins depending on customer risk profiles. This move represents a 300-basis-point (3%) reduction across multiple credit products.
KCB Bank Kenya has also reduced its base lending rate from 15.6% to 14.6% per annum, effective February 10, 2025. The final lending rate for customers will depend on an individual risk-based margin applied to the base rate. This change applies to all new and existing Kenya Shilling-denominated credit facilities, excluding fixed-rate loans, which remain unchanged.
Additionally, Co-operative Bank of Kenya has lowered its Base Lending Rate from 16.5% per annum to 14.5% per annum. The adjustment, which took effect immediately upon announcement, is expected to boost access to credit and stimulate economic growth. Coop Bank’s revised lending structure now includes a base rate of 14.5% per annum plus a margin ranging from 0% to 4%, depending on the borrower’s credit profile.
CBK’s Monetary Policy Adjustments and Regulatory Oversight
The Central Bank of Kenya recently lowered its benchmark lending rate by 50 basis points, reducing it from 11.25% to 10.75%. The Cash Reserve Ratio (CRR) was also lowered by 100 basis points to 3.25% from 4.25%, a move designed to enhance liquidity and encourage lending.
Read: Banks that Fail to Lower Lending Rates will Face Penalties, CBK Announces
To ensure compliance with these monetary policy adjustments, CBK has introduced strict penalties for banks that fail to pass on the rate reductions to borrowers. The regulator has imposed daily fines of up to Ksh 100,000 per non-compliant loan account and penalties of up to Ksh 20 million or three times the financial gain for institutions that do not align their lending rates with the reduced funding costs. Additionally, CBK has begun on-site inspections to monitor the implementation of the Risk-Based Credit Pricing Model (RBCPM).