Kenya's parliament has rejected a proposal to cap commercial banks' interest
rates, ending months of anxiety by bankers who feared the move would crimp their
earnings and lead to credit rationing.
The house voted 58-17 against introducing amendments, proposed by some
lawmakers, that would cap the interest rate at which banks can lend at no more
than 400 basis points above the central bank rate (CBR).
The proposed changes
also included setting the minimum deposit rate at 70 percent of the
CBR.
An impasse over the amendments to the government's Finance Bill had held up
the bill's passage through parliament, threatening to stall funding to the
government, which has to get authority from parliament to implement its fiscal
budget.
Legislators who made the proposals claim banks are charging borrowers too
much interest while commercial banks have raised their interest rates to about 25
percent from 15 percent since October.
The Kenya Bankers Association, which strongly opposed the move to cap rates,
was not available immediately for comment, following the vote in parliament late
on Thursday.
Businesses in the east African nation of 40 million perennially complain of
high credit costs with spreads between borrowing and lending rates averaging
around 10 percentage points.
Martin Ogindo, the legislator who first brought the proposal to cap rates,
vowed to fight on by refining his motion and submitting it again at a later
date.
Culled:Reuters
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