The Central Bank of Kenya (CBK) increased penalties imposed on non-compliant banks from Ksh2 million to Ksh20 million.
Speaking during the first Monetary Policy Committee (MPC) meeting of the year on Thursday afternoon, Thugge revealed that Central Bank officials had been dispatched to inspect banks that did not comply with the regulations.
In particular, Thugge warned about commercial banks that imposed high interest rates on loans despite the Central Bank’s recent successive rate cuts.
According to Thugge, the team from the Central Bank had already inspected five banks countrywide, with the inspection set to end in the next two weeks.
He noted that the decision to hike penalties was in line with the enactment of the Business Laws Amendment Act which was signed into law by President William Ruto in December last year.
“We have started with the onsite inspection, we have staff now working on five banks. That should be completed within the next two weeks. So far, nobody has been fined yet. We have to wait and see the results,” Thugge said.
“In the Business Laws Amendment Act enacted by Parliament, we have provided for penalties for noncompliance. The penalties have been increased from Ksh2 million to Ksh20 million,” he added.
Thugge, while addressing the issue, revealed that some banks across the country continued charging exorbitant interests on loans to Kenyans despite several warnings by the regulator.
It is not the first time the Central Bank has cautioned commercial banks against imposing high interest rates. In December last year, the CBK governor made the same sentiments, warning of dire economic consequences should the banks fail to adhere to its demand.
Speaking during the previous MPC meeting, Thugge warned that banks' failure to lower their lending rates could stagnate economic performance.
Thugge accused banks of being sluggish in lowering their lending rates adding that despite having a meeting with them, some of the banks had declined to lower their interest rates.
"Banks have been sluggish in lowering their lending rates. Two weeks ago I had a meeting with bankers, and I do believe they now understand the reason why they need to start lowering their rates progressively," Thugge commented.
Meanwhile, the central bank on Wednesday, February 5, lowered the base lending rate for the fourth successive time by 50 basis points from 11.25 per cent to 10.75 per cent.
The decision to lower the base lending rate was mainly pegged on the drop in inflation rates, the stable local currency and favourable monetary and fiscal policies.
