The Central Bank of Kenya (CBK) has fined 33 commercial banks for defying the regulator's calls to cut their loan rates in line with the reduced benchmark rate. This move denied borrowers cheaper credit. The penalties followed on-site inspections of all 38 commercial banks. The CBK cracked the whip to force lenders to match their lending rates to the reduced Central Bank Rate (CBR).
The CBK did not disclose the identity of the banks in breach of the Banking Act provisions or the fines slapped on the 33 lenders. These lenders represent 86.8 percent of the industry. The apex bank said it took unspecified administrative actions on two other banks. Only three banks were fully compliant with the risk-based credit pricing model (RBCPM).
Between August 2024 and August 2025, the CBK cut the benchmark rate or CBR seven times by 3.5 percentage points to 9.5 percent. This was from a 22-year high of 13 percent that lasted for about seven months. Only six lenders - Citibank N.A Kenya, Absa Bank Kenya, Credit Bank, Standard Chartered Bank Kenya, Stanbic Bank Kenya, and Victoria Commercial Bank - cut their overall lending rates to match or exceed the benchmark.
The banking regulator had repeatedly put pressure on banks to lower borrowing costs and match cuts in the benchmark rate. The CBK had threatened daily fines. "CBK conducted target inspections in 2025 on the implementation of the RBCPM rolled out in 2019 by all commercial banks," the CBK said in its latest annual banking supervision report.
The penalties on credit pricing breaches raised the number of commercial banks in violation of the Banking Act and CBK Prudential Guidelines in the year ended December 31, 2025, to 35. This was compared to 11 previously. CBK Governor Kamau Thugge accused banks of failing to cut loan rates even after the CBR was trimmed from 13 percent in August 2024 to 10.75 percent in February 2026.
Banks faced fines of Sh20 million or three times the monetary gain made from 'overcharging' borrowers. The regulator leaned on the punitive penalty. The banks also risked additional daily penalties of up to Sh100,000 for every case or implication for each loan account. Executives were liable for a Sh1 million fine.
The banking sector regulator hinged its actions on Section 55 of the CBK Act. Improvements in the monetary policy framework have seen the reunification of both the CBR and Kesonia at 8.75 percent presently. This resulted in a single rate from which banks price their loans.
Key points
- CBK fines 33 commercial banks for loan rate breaches
- Only six lenders cut their overall lending rates to match or exceed the benchmark
- The CBK has been unable to fully implement the new risk-based credit pricing framework following the fallout from the Middle East conflict
