Equity Bank pulls out on plan to increase interest rates
Equity Bank (Kenya) on Monday withdrew its plans to increase interest rates on loans, thanks to the slump in the treasury bills lending rates, saving its customers, especially the Small and Medium Enterprises (SMEs), thousands of shillings on servicing expensive loans.
The notice to increase interest rates had been issued to Equity Bank customers on October 20th, 2015 after treasury bills rates increased. It was meant to take effect by November 19th, 2015. The revoke of the notice now means that customers will continue paying the old interest rates and maintain the existing loan repayment installments.
The Central Bank had increased treasury bills rates to 20 per cent but have since dropped to below 10 per cent. A treasury bill is a paperless short-term borrowing instrument issued by the Government through the Central Bank of Kenya as a fiscal agent to raise money on short term basis for a period of up to one year. Central Bank has in effect issued notice to commercial banks to lower their rates in line with the slump in the treasury bills lending rates.
“We are pleasantly impressed with the speed at which the government has been able to reduce the treasury bills rates,” said Equity Bank Group CEO Dr. James Mwangi. “We had anticipated the increase in treasury bills to be a short term measure but it has been shorter than we thought, hence the withdrawal of interest rates increase,” added Mwangi.
Equity, the largest bank in Kenya by number of depositors, is confident that the reprieve will make its loan book grow, urging other commercial banks to join the bandwagon.
Mwangi observed that the underlying macro –economic conditions faced in the market did not justify high interest rates and the bank believes it is a temporary condition.
“Inflation had remained within targets and a month of import cover has remained firmly above four months minimum requirement while current account deficit has been narrowing as a result of improved balance of trade,” he added.
