The Central Bank of Kenya (CBK) has reverted to using the interbank rate as the main reference point for pricing bank loans, abandoning its earlier plan to anchor lending rates on the Central Bank Rate (CBR).
In a notice to commercial banks, CBK stated that going forward, loan interest rates will be determined using a new formula, using the Interbank Rate + Premium (K) issued.
The move marks a return to a more market-driven pricing model that reflects real-time liquidity conditions among banks.
CBK explained that the interbank rate closely tracks the CBR under current monetary policy operations and is better suited for flexible and transparent pricing.
