August 14, 2009

A banker has defended the seeming reluctance by commercial banks to reduce their lending rates despite efforts by the Central Bank of Kenya (CBK) to cut a key rate and improve liquidity in the market. CfC Stanbic Bank Managing Director Mike du Toit said on Wednesday that although the Central Bank Rate (CBR) and the Cash Reserve Ratio (CRR) have been lowered, the costs banks incur in their businesses haven’t changed.

“We have over the last few years seen a significant increase in the cost of funds to the banking industry particularly on the shilling side. The truth of it is that until you see the cost of deposits starting to go down as an institution or an industry, it is going to be very difficult to see the cost of lending going down.