The Central Bank of Kenya (CBK) has ordered all commercial banks to revert all customer deposit accounts to what they were before converting them into transactional accounts.
In a circular to commercial bank chief executives, CBK said the conversions came without its approval.
The banking regulator said it had was acting on complaints from customers whose accounts were switched to transaction accounts or had new charges levied.
Customers have lost out on the accrued interest on their deposits since the banks converted the accounts following the enactment of the Bank Amendment Act which capped the interest on deposits at 70 percent of the central bank rate (CBR).
The memo read, “Approval by CBK of a product means of the features of the product as described by an institution to the CBK. Any change in the features of the product changes the products as earlier approved and therefore the changed product with less, more or otherwise varied features must be approved by CBK prior to roll out.”
Following the implementation of the Bank Amendment Act, banks swiftly moved to reclassify deposit accounts to avoid paying interests that would have accrued with the change in the law.
The banks have tried to exploit any loophole arguing that the new law is vague and subject to interpretation.
CBK has however clarified that savings, seven day, call and fixed deposit accounts should not attract any charges. The regulator added that the accounts cannot be converted into transaction accounts without the consent of the customer and approval from the CBK.
In the statement issued by CBK Director of Bank Supervision Gerald Nyaoma, CBK said it would be following up the customer complaints with the banks and appropriate action taken against the affected institutions.