Supreme Court Rules On Requirement For CS Approval For Increase In Interest Rate

In an important Supreme Court of Kenya decision in the case of Stanbic Bank Kenya Limited v Santowels Limited, Petition No. E0005 of 2023, the court has held that interest rates on loans advanced by banks and financial institutions are subject to the provisions of Section 44 of the Banking Act, Cap 488 (the Banking Act) and as such, banks and financial institutions are required to seek the approval of the Cabinet Secretary responsible for matters relating to Finance (CS) , before increasing interest rates on loans advanced to their customers.

Prior to this decision, there had been two divergent views on the interpretation of Section 44 which prohibits banks and financial institutions from increasing their rates of banking or other charges except with the prior approval of the CS.