The Central Bank of Kenya (CBK) has said commercial banks do not require the National Treasury's approval to adjust lending rates following changes in the country's monetary policy, in remarks that could reignite debate over the interpretation of Section 44 of the Banking Act.

🇰🇪 Breaking It Down

Speaking during the East Africa Banking School Conference (EABSC) 2026 on Tuesday, July 14, CBK Governor Kamau Thugge said the central bank's position is that monetary policy decisions are independent and should be implemented by banks without seeking the approval of the Cabinet Secretary for the National Treasury.

According to Thugge, commercial banks are expected to immediately adjust their lending rates whenever the Monetary Policy Committee (MPC) changes the Central Bank Rate (CBR), whether the benchmark rate is increased or reduced.

"I just want to emphasize again that from the central bank point of view, the decisions from the courts have been that monetary policy is independent, and therefore when we change the interest rate, that should translate immediately to lending rates. We don't have to go through the minister," Thugge said.

📌 What You Need to Know

"I know when we change the policy rate up, you will react immediately. That is guaranteed. But should the time come when we lower the interest rate, we would be expecting the banks also to lower their interest rates immediately."

The governor's remarks indicate that, in the CBK's view, lenders should transmit monetary policy changes directly to borrowers without first seeking approval from the Treasury, particularly when the MPC lowers the benchmark rate.

However, the position is likely to reignite legal debate over Section 44 of the Banking Act, which has been the subject of court battles over the extent of the Treasury's role in approving changes to bank lending rates.

Section 44 of the Banking Act provides that no institution shall increase its rate of banking or other charges except with the prior approval of the Cabinet Secretary for the National Treasury.

In a landmark judgment delivered in 2024 in the case of a local bank and another firm, the Supreme Court held that the phrase "rate of banking" under Section 44 includes interest charged on loans.

The court therefore ruled that banks cannot increase lending rates without the Treasury Cabinet Secretary's prior approval.

📰 Source: Kenyans.co.ke