Kenyan banks have won temporary freedom to adjust loan rates without seeking the Treasury’s consent, reopening a long-running dispute over who has the final say on the cost of credit.
The High Court on Thursday, August 13, suspended enforcement of Section 44 of the Banking Act, which requires financial institutions to obtain prior approval from the Cabinet Secretary for the National Treasury before increasing banking rates or charges.
The conservatory order, secured following a challenge by the Kenya Bankers Association (KBA), allows lenders to raise or lower loan rates without Treasury approval while the legal battle continues.
The reprieve is, however, not a permanent scrapping of the law. The order will remain in force pending further directions from the Court of Appeal, where KBA is challenging a December 11, 2025 High Court ruling that declined to declare Section 44 unconstitutional.
The bankers have argued that the approval requirement undermines the constitutional independence of the Central Bank of Kenya (CBK), particularly in implementing monetary policy.
CBK Governor Kamau Thugge has previously taken a similar position, saying changes in the policy rate should flow through to lending rates without political approval.
“From the Central Bank’s point of view, the decisions from the courts have been that monetary policy is independent. Therefore, when we change the interest rate, that should translate immediately to lending rates. We don’t have to go through the minister,” Thugge said at the East Africa Banking School Conference in July.
The latest order therefore places the court dispute at the centre of how Kenya’s monetary policy is transmitted to borrowers. While CBK sets the policy direction, Section 44 had placed an additional approval layer over banks’ ability to adjust rates and charges.
The timing is significant for borrowers. The court order comes days after CBK held its Central Bank Rate at 8.75 per cent, citing the need to keep inflation expectations anchored amid global uncertainty and risks from higher oil prices.
CBK has maintained that commercial banks do not need Treasury approval to adjust lending rates following monetary policy changes.
Email your news TIPS to Editor@nairobilawmonthly.com, and to advertise with us, call +254715061658 anytime of the day
