The Kenya Bankers Association (KBA) has confirmed the implementation of a Ksh2 million ($15,000) withdrawal limit, aligning with the Anti-Money Laundering Act.
Speaking before the Departmental Committee on Finance and National Planning on Tuesday, March 25, KBA assured legislators that local banks were fully compliant with the regulation.
KBA Chief Executive Officer Raimond Molenje, who led the delegation, highlighted that additional due diligence procedures had been put in place, particularly for new customers, to curb illicit financial activities.
During the session, KBA also urged lawmakers to resolve the issue of unpaid government bills, emphasizing their effect on entrepreneurs’ ability to service loans and the overall liquidity of banks.
Impact of Central Bank Rate Adjustments
Additionally, KBA reported that commercial bank interest rates had dropped by 2.2 percent between November 2024 and March 2025, following adjustments to the Central Bank Rate (CBR).
However, committee members raised concerns over banks’ tendency to raise interest rates quickly when the CBR increases but delay reducing them when the rate is lowered. In response, KBA committed to working closely with the Central Bank of Kenya (CBK) to ensure a fair and transparent rate adjustment process.
CBK Governor Kamau Thugge also weighed in, stating that the reduction in the CBR was aimed at improving liquidity in the banking sector. He explained that while the lower rate was expected to reduce borrowing costs, some banks had yet to fully adjust their lending rates.
He further noted that recent amendments to the Banking Act introduced penalties for banks that fail to comply with interest rate adjustments.
Outlook on Future Rate Adjustments
Meanwhile, Absa Bank Kenya has projected that the CBR will decline further to 9 percent by the third quarter of 2025, with no further changes expected for the remainder of the year.
According to Absa Bank Senior Economist Phumelele Mbiyo, the anticipated rate cut is expected to improve access to credit and lower borrowing costs for businesses and individuals.
