Standard Chartered cuts lending rates as it moves to new pricing regime

Standard Chartered on Monday became the first bank to release lending rates under the new format reducing pricing on three of its products.

In what is seen as a test to the market — a week after Central Bank unveiled the Kenya Bankers’ Reference Rate (KBRR) based on which commercial banks would price loans — StanChart on Monday launched a 45-day sale on mortgages, personal unsecured and business loans. The inaugural KBRR was set at 9.13 per cent.

Its customers will access mortgages priced at KBRR + 1.77 per cent or 10.9 per cent with customers able to borrow up to Sh100 million to purchase homes. Standard Chartered normal home loan is currently priced at 12.9 per cent.

“Increased consumer appetite to borrow as well as an increasingly sophisticated consumer seeking more financial options prompted the bank to open up access to credit to people who wish to borrow but are otherwise restricted by the cost of credit,” said Mr Bhartesh Shah, StanChart head of retail clients, Kenya and East Africa.

Personal loans will be priced at 14.9 per cent, which is KBRR + 5.77 per cent, and business loans against property at 10.9 per cent (KBRR + 1.77 per cent). Customers transferring their loans from other providers will not pay legal and valuation fees. Currently, a personal loan is priced at 17.9 per cent while business credit stands at 21 per cent.

Under the new interest rate regime, all new loans issued after July 8, 2014 will be priced using the KBBR framework while transition period of one year from July 1, 2014 will be provided to allow banks to recalculate existing loans.

The move to switch computation of lending rate on KBRR plus margin is meant to enhance provision of cheaper credit to the private sector by facilitating a transparent and a competitive credit pricing system.

KBRR is an average of the Central Bank Rate currently standing at 8.5 per cent and the average 91-day Treasury Bill rate for the previous six months. It will be recalculated every six months. Banks are, however, allowed to add a premium to reflect an individual borrower’s risk profile and other costs.

“With the launch of our annual grand sale campaign, we believe that our clients will benefit not only from the lowest rates in the market but also from one of most consistently high service standards in the market,” Mr Shah added.