The effects of the Finance Act 2018 are being felt across board, and now depositors will have to feel the pinch as the banks will have now to cut interest earned on deposits following the deposit floor scrap.
The Act scrapped the floor that mandated lenders to pay at least 70 percent of Central Bank of Kenya (CBK) signal rate.
Already, several Financial institutions have signaled that they will cut interests earned on deposits.
For instance, the National Bank of Kenya (NBK) has introduced a tiered rate that will see only customers with more than Ksh2 million earn interest above the now scrapped minimum 6.3 per cent.
the Kenya Commercial Bank (KCB) has issued a notice that as from November 16, depositors will earn an interest of seven percent per annum on KCB goal savings account, down from 8.5 percent that it has been offering since launching the account in June last year.
Depositors will earn less than 6.3 per cent interest from other savings accounts.
Equity Bank has also hinted that it will reduce interest rates earned by its depositors.
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The proposal to scrap the deposit floor was arrived at by the National Assembly’s Finance Committee in the controversial Finance Bill 2018, that was passed amidst chaos in parliament and later assented into law by President Uhuru Kenyatta.
“Having discussed for a long time, we have proposed that we retain the status quo but we remove the lower cap so that the banks and the customer are left to discuss about interest rate to be given on the savings,” committee chairman Joseph Limo told MPs when he tabled the report in the House.
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