Kiambu Township Member of Parliament Jude Njomo now accuses the Central Bank of Kenya of colluding with banks to have the interest rate cap law removed.
This is after CBK Governor Patrick Njoroge Thursday pleaded with the National Assembly Finance, Planning and Trade Committee to have controls on interest paid on bank loans and deposit scrapped.
Njoroge argued before the parliamentary committee that the cap law was hurting lending and economic growth as it had introduced inefficiencies in the banking sector.
“Our estimate is that there is already a negative impact on credit growth and also on the economy as a result of this. We need to ask ourselves, does the lowering of rate lead to increase in credit uptake? We are not sure about it,” said Njoroge.
But Njomo told off the CBK boss saying he had been opposed to the law since it was introduced in Parliament two years ago.
“This law has barely been put to the test. It has only been in place for one year, but we know that the governor...has been opposed to the capping and we want him to tell us what he has done to ensure banks comply with the law,” the MP said.
Njomo introduced Interest Caps Bill in 2016 following a public outcry over high interest charges by banks that burdened borrowers.
Committee vice-chairman Waihenya Ndirangu accused CBK of working with International Monetary Fund (IMF) and World Bank to push for repealing of the law under the guise that it has stifled the economy and lending to SME, a claim that Njoroge rubbished.
"The issue of conspiracy is a serious charge. There was a narrative of banks colluding in the past to increase interest rates. That is something we cannot condone. CBK can't be on the same side with banks because we are the regulator," the governor said.