Activist Okiya Omtatah now wants banks compelled to cap their interest rates using the Kenya Bankers' Reference Rate (KBBR) and not the regulator’s Central Bank Rate (CBR) as is the case currently.
Omtatah has moved to court to challenge the decision by banks for using the CBR saying it is unconstitutional. Currently, KBBR stands at 8.9% while the Central Bank Rate is 10.5%.
“The law requires the respondent to charge a maximum of 12.9%,” argues Omtatah in the court papers Monday.
The Banking (Amendment) Act 2016 that came into effect over a week ago, regulates interest rates at which banks can charge on loans and deposits.
Omtatah in his petition at the Milimani Law Courts, says banks have been purporting to comply with the law, and even released statements on the same, states the Star.
He now wants the court to intervene by ensuring that the Central Bank of Kenya and the Kenya Bankers Association (both respondents), ensure the loan rates are capped based on the KBBR and not on the CBR.
By basing the caps on the CBR to charge a maximum of 14.5 % interest rates, instead of the KBRR that allows a maximum of 12.9% interest, the activist says the difference between the interest rates prescribed by law and what is charged by the banks is 1.6%.
“Unless the application is urgently heard and determined, the applicant and the people of Kenya will suffer great loss as the constitution continues to be violated,” he claims.
The case will be mentioned on October 14.