Five banks defy CBK, raise lending rates in March despite expectations of cuts

In a move that could escalate tensions with the Central Bank of Kenya (CBK), five commercial banks increased their lending rates in March 2025, despite expectations of rate cuts. This is as the CBK intensifies pressure on lenders to align their loan pricing with recent monetary policy adjustments.

According to new CBK data, Access Bank Kenya, ABC Bank, DIB Bank Kenya, Kingdom Bank and Guardian Bank all raised their overall weighted average lending rates in March, going against the industry trend of rate reductions.

  • Access Bank Kenya’s rate is now 20.5% from 20.39% in February.

  • ABC Bank’s rate is 17.54% from 17.42%.

  • DIB Bank’s rate is 17.07% from 16.58%.

  • Kingdom Bank’s rate is 14.42% from 14.28%.

  • Guardian Bank’s rate is 13.94% from 13.68%.

Almost all other commercial banks either reduced their rates or kept them steady, with Consolidated Bank of Kenya maintaining a flat rate of 13.31%.

CBK Cracks Down on Non-Compliant Lenders

The CBK is taking a tough stance on banks that fail to implement rate cuts as per monetary policy. Physical inspections of banks began in February to assess compliance with a directive to align lending rates with risk-based pricing models.

CBK Governor Dr. Kamau Thugge said 13 banks had been inspected so far and the full review of all 38 banks will be completed by end of June. Non-compliant banks will face penalties.

“Once we are done with the inspections, we will engage boards of the respective banks to determine the penalties,” said Dr. Thugge.

Penalties: Daily Fines and Personal Liability

Banks that continue to defy the CBK directive will face daily fines of up to KSh 100,000 per case and lump sum penalties of KSh 20 million or three times the financial gain made from overcharging borrowers. Individual bank executives will also face personal fines of KSh 1 million. These penalties are under Section 55 of the Banking Act. This follows after it was discovered that some banks had not reduced loan rates as the CBR has been reducing since August 2024 — from 10.75% to 10% in April 2025.

CBK vs. Banks: The Benchmark Battle

At the heart of the matter is how lending rates should be benchmarked. The CBK wants a model based on CBR + K (a regulatory approved premium) while commercial banks are pushing for a framework based on the interbank rate which they argue reflects market dynamics better.

But the CBK has rejected the interbank rate as a benchmark, citing its volatility and limited participation of banks in the interbank market.

The Kenya Bankers Association (KBA) has criticized the CBK’s proposed capping model, saying it will hurt credit access for high-risk borrowers like SMEs and low-income individuals.

“CBK’s approach to setting both the base rate and the premium K is interest rate capping which is not supported by law,” KBA said. “It will replicate the credit squeeze we experienced between 2016 and 2019.”

What This Means for Borrowers and the Market

The CBK vs banks impasse highlights the fine line between consumer protection and credit market flexibility. While the CBK wants to make borrowing cheaper, banks argue that rigid controls will strangle lending especially to vulnerable sectors like micro and small enterprises (MSMEs).

As the June deadline approaches, all eyes will be on the CBK’s actions and how banks will respond.