By Nicholas Nduati
The Central Bank is investigating reports that some banks are appraising loans afresh with a view of slapping borrowers with additional charges.
Though economical with those details, central bank Governor Dr. Patrick Njoroge encouraged borrowers to vote with their feet by only taking loans from banks that implement the new banking law without additional fees or appraisals.
He however warned that with the capping of interest rates, riskier borrowers might be locked out which may lead to a low uptake of loans.
There have been complains from various borrowers that banks have been introducing new levies that effectively deny them any meaningful benefit from the reduction in the cost of loans as envisioned after the enactment of the Banking Amendment Act.
The confusion mainly arises from the fact that the central bank has not clarified many aspects in the new law. Governor Njoroge noted that the central bank plans to investigate these claims.
He says the central bank will use instruments at its disposal to sustainably reduce the cost of credit though he warned that riskier borrowers might be denied loans.
With a slow credit growth in the private sector experienced in recent months, Dr. Njoroge says businesses might be getting capital from outside the country though the central bank plans to investigate this.
The ratio of non-performing loans to gross loans have nearly doubled to 9.8 percent as at last month, up from 5.7 percent in December last year.
Noting that a forensic audit on Imperial Bank is now ready, the CBK governor says investigations and prosecution are ongoing to recover funds at the bank that was last year placed under receivership.