The Central Bank of Kenya yesterday warned commercial banks against introducing new or increasing existing transaction fees without its approval even as it refused to bring clarity to grey areas of the law capping interest rates, whose interpretation continues to roil the market.
atrick Njoroge, the Central Bank of Kenya (CBK) governor, said no bank has the authority to introduce new products in the lending market without the regulator’s approval and warned those doing so of dire consequences.
“You cannot just introduce a new product without approval from CBK – we will follow on that. We are the regulator and I don’t think banks would want to attract the wrath of the regulator,” Dr Njoroge said at a Press briefing.
He did not, however, indicate whether the CBK had approved any new banking products since the coming into force of the interest rate capping law on Wednesday last week, even as he promised to investigate if such increments have occurred.
Dr Njoroge said there had not been a sudden increase in the number of approval requests for new banking products, signalling that commercial banks that have taken such action are in breach of the law.
Commercial banks have recently introduced new transaction fees and redefined interest earning deposit accounts in a bid to protect their revenues under the new legal regime, catching many consumers by surprise.
Equity Bank has, for instance, introduced an appraisal fee for its mobile phone-based loans dubbed Eazzy Loan and Eazzy Plus — charging its customers a flat fee of between one and three per cent, depending on the period of repayment.
Other lenders have introduced new fees or increased existing ones such as insurance premiums charged on loans, taking away any relief that the new law offered borrowers.
Dr Njoroge refused to offer any clarity on mobile loans pricing, leaving the ongoing confusion to continue.
Commercial banks have offered own interpretations of the law, leaving in its wake confusion that has seen some like Commercial Bank of Africa charge a flat fee for its M-Shwari loans, a product it offers in partnership with Safaricom’s M-Pesa.
Dr Njoroge said the public had the option of moving to cheaper lenders in the event they are dissatisfied with one, meaning that the confusion will persist.
The CBA is charging 7.5 per cent facilitation fee for its mobile loans that are repayable in a month, meaning the annualized effective rate for the credit facility stands at a whopping 90 per cent.
It has, however, argued that such extrapolation is not possible because M-Shwari loans must be paid within a month.
The CBK also declined to pronounce itself on the banks’ reclassification of customer savings accounts to non-interest earning current accounts to avoid rewarding interest to savers.
Kimani Ichung’wa, Member of Parliament for Kikuyu, said the National Assembly will consider further amendments to the Banking Act to close the loopholes that are being used to escape the new law and to regulate deposits from government agencies held by banks.
Credit: Business Daily