Apart from the increased fuel prices that were occasioned by the Finance Act 2018, bank depositors are in line to feel the pinch of the new act of parliament after several banks indicated that they would soon cut interests earned on deposits.
The Finance Act 2018 that was passed by parliament after chaotic voting and later signed into law by President Uhuru Kenyatta, scrapped the deposit floor that mandated lenders to pay at least 70 percent of the Central Bank of Kenya (CBK) signal rate.
“Having discussed for a long time, we have proposed that we retain the status quo but we remove the lower cap so that the banks and the customer are left to discuss about interest rate to be given on the savings,” Finance Committee chairperson Joseph Limo had revealed when he tabled the report in parliament for debate.
The National Bank of Kenya (NBK) has, for instance, indicated that it will introduce a tiered rate that will ensure only depositors with over Sh2 million deposits gain an interest above the now slashed 6.3 percent.
The Kenya Commercial Bank (KCB) has followed in the trail, issuing a notice that depositors will as from November 2016, earn an interest of 7 percent per year on KCB goal savings account. This has fallen from the 8.5 percent that depositors have been earning since the bank; launched the account in June last year. In the same notice, depositors with other saving accounts will receive less than 6.3 percent interest.
Majority bankers with Equity Bank will not escape the purge either after the lender also indicated that it would soon reduce interest rates earned on deposits.
Data from the regulator shows that interest expense by lenders had dropped by Sh7 billion last year despite customer deposits growing by Sh300 billion to Sh2.9 trillion. This negated the fear that amended banking laws could earn customers higher interests on deposits.
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