The Central Bank of Kenya (CBK) lowered its base lending rate from 10.75% to 10% on April 8, 2025, to stimulate bank lending and support economic growth. In response, several top Kenyan banks, including KCB, Equity, Cooperative, Absa, NCBA, DTB, and I&M, have announced reductions in their lending rates.
Co-operative Bank, which had its base lending rate cut from 16.5% to 14.5% in February 2025, is one of the banks benefiting from the CBK’s intervention. With this adjustment, Cooperative Bank’s interest rates remain competitive, making it an attractive option for borrowers in the current financial environment.
Other Banks Reducing Their Rates
KCB Bank: Reduced its base lending rate from 14.6% to 13.85%, effective from April 11, 2025, for new loans and May 11, 2025, for existing loans.
Equity Bank: Lowered its Equity Bank Reference Rate (EBRR) to 14.39% in February 2025.
Absa Bank: Cut its base rate from 16.5% to 13.5%, with risk-based lending rates also reduced by 1%, effective immediately for new loans and from March 13, 2025, for existing loans.
NCBA Bank: Adjusted its base lending rate from 15.34% to 14.34%, effective May 1, 2025.
DTB (Diamond Trust Bank): Reduced its rates by a total of 0.87% in January and February 2025.
I&M Bank: Announced a reduction of 2% in its Kenya Shillings lending interest rates.
CBK’s Caution to Banks
Despite the base lending rate cuts, CBK Governor Kamau Thugge pointed out that many commercial banks have been slow to lower their lending rates in line with CBK’s adjustments.
He warned that banks not complying with the new rate guidelines may face penalties.
CBK has been keen to ensure that the lower rates stimulate lending to the private sector, which had been sluggish, despite a steady decline in average lending rates since December 2024.
Importance of Rate Adjustments
The lowering of the base lending rate is part of the CBK’s broader strategy to revive economic growth, which had been hindered by high interest rates.
The Monetary Policy Committee (MPC) had noted that high lending rates were stagnating credit growth, especially for private-sector players and businesses.
This move aims to make loans more affordable for both individuals and businesses, potentially offering much-needed relief in an environment where access to credit has been restricted due to high interest rates.
In addition to the base rate adjustments, CBK has also issued final guidelines on Basel III Liquidity Standards and Leverage Ratio, aimed at improving the resilience of Kenya’s banking sector.
These guidelines require banks to maintain adequate high-quality liquid assets (HQLA) to meet liquidity needs for at least 30 days in case of stress and comply with the Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) at 100%.
Banks must also maintain a Leverage Ratio of at least 3% to control excessive borrowing. Non-compliant banks will face regulatory actions after the deadline of October 1, 2025.
As Kenya’s banks adjust their lending rates and adhere to new regulatory guidelines, borrowers are expected to see more accessible financing options but it remains to be seen how swiftly other institutions will follow the lead of Cooperative Bank and other early adopters in reducing loan costs.
