NCBA Bank has announced that it will increase its loan interest rates for the third time in six months, effective November 1, 2023. The lender cited the high level of non-performing loans (NPL) and the challenging macroeconomic environment as the main reasons for the decision.
According to a statement from the bank, the lending rates will rise to 14.5 percent and 11.0 percent for Kenya Shilling denominated loans and USD denominated loans, respectively. This is a 1.5 percentage point increase from the current rates of 13.0 percent and 9.5 percent.
The bank said that the increase in lending rates is meant to cut back on new loan issuance, as a strategy to reduce the NPL ratio, which reached a 16-year high of 15.0 percent in August, from 14.5 percent in July. The total NPL increased to KES 596.0 bn in August 2023, from KES 586.2 bn recorded in July.
The bank also attributed the increase in lending rates to the Central Bank of Kenya’s (CBK) decision to raise the base lending rate by 100 basis points to 10.5 percent on June 26, 2023, from 9.5 percent. The CBK said that the rate hike was necessary to curb inflationary pressures and stabilize the exchange rate.
NCBA Bank is the first bank to announce an increase in lending rates following the CBK’s move. The bank had previously raised its loan interest rates to 13.0 percent, from 12.0 percent effective August 7, 2023 and to 12.0 percent, from 11.0 percent effective May 29, 2023.
NCBA Bank is a subsidiary of NCBA Group, which was formed in October 2019 after the merger of NIC Group and Commercial Bank of Africa. The group has a network of over 100 branches across Kenya, Tanzania, Uganda and Rwanda.
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