Commercial Banks in the country are all smiles after the High Court in Nairobi on Thursday declared the Banking (Amendment) Act 2016, which capped interest rates, as unconstitutional.
A three-judge bench made the ruling following a petition filed by a Nairobi resident Boniface Oduor, who moved to court in 2016 to challenge the law which capped interest rates at four percent above the Central Bank Rate (CBR), which is currently at 9%.
“The court has found provisions of sections 33 B (1) and (2) of the Banking Act to be vague, imprecise, ambigous and indefinite… The court therefore declares the sections 33B(1) and (2) of the Banking Act to be null and void,” ruled the court.
However, the court has delayed the revert-back to the old interest rate regime for 12 months taking into account, the existing commitments between banks and their clients under prevailing rates.
“However, mindful of the possible ramifications and disruption on existing contractual relationships between banks and their customers, the court has suspended the effect of the declaration for 12 months from the date of this decision so as to give the National Assembly opportunity to reconsider the provisions,” added the court.
The National Assembly passed the Bill on July 28, 2016 and the Act came into operation on September 14, 2016 after approval by President Kenyatta.