The Central Bank of Kenya is keen to ensure commercial banks stop from charging unnecessary non-interest charges.
Speaking at a forum yesterday, CBK Governor Patrick Njoroge said that the regulator had received about 16 requests from lenders looking to adjust their fees since the interest rate cap law was effected in September 2016.
“We have had something like 16 requests for approval of fee adjustments and we have only approved three which have been for new products in the market,” Njoroge said.
A research by Ecobank released in February suggested that on average, banks take home about 0.9 per cent of loan value in fees and commissions.
The study showed that commercial banks made $215 million (Sh22.22 billion) in fees and commissions from loans and advances in 2015, with the non-interest charges expected to rise above 100 basis points following the interest rate cap as lenders sought to compensate funded income shortages.
The non-interest charges on loans largely comprise legal, insurance and consultation fees. Njoroge said that before banks adjust their fees or even resort to branch closures, they need the regulator’s approval adding that the technological innovations were rendering brick and mortar models significantly irrelevant.
“The point for us is that the banks need to review their charges and abolish nuisance fees relating to account closures and all the other little things. It isn’t even significant in terms of income for them,” Njoroge said.
CBK’s Monetary Policy Committee, which retained the key lending rate at 10 per cent on Monday, noted that in light of the interest rate cap, the ratio of gross non-performing loans to gross loans rose to 9.9 per cent in June from 9.6 per cent in April, partly reflecting a decline in gross loans.
He said that overall inflation was expected to drop within the government’s target bracket of 2.5 to 7.5 per cent over the next two months as a result of better weather conditions leading to a drop in food prices.
Inflation rose to a five-year high of 11.7 per cent in May following the prolonged drought dropping to 9.21 per cent last month after rains boosted supplies.