Customers at an NIC bank branch in Nairobi. [ Photo / Business Today. ]
The NIC bank profits dropped by 1.3 per cent in the first nine months of the year to record sh 3.32 billion, says the financial report.
According to the report, the paltry drop in profit had been caused by the interest rate capping law that was introduced a year ago as it has cut its income from loans by 16.7 per cent to Sh9.86 billion.
The bank's investments in the government's securities helped to cushion NIC from a slump in interest income from loans as the earnings rose by 29.4 per cent to record Sh3.59 billion from Sh2.77 billion obtained previously.
The mid-lender has now joined the leagues of Stanbic bank and Standard chartered bank that have recently been focusing on the government sercurities as the main source of income after being hit hard by the newly introduced rate cap law.
Government introduced limited interest rates on loans to fourteen per cent just four points above the Central Bank Rate as a plan to prevent overexploitation of the common borrower.
The NIC Bank's loan book however managed to grow by 7.3 per cent to Sh118.5 billion despite the challenges they are currently facing.The Kenya Bankers Association and the International Monetary Fund have showed hopes for the reversal of interest rate capping law come 2018 after a close study on the effects of the law.