CBK Ends Preferential Loan Rates for Bank Staff Under New Pricing Model
The new model took effect with new variable-rate loans from September 1, 2025. Existing loans are provided until February 28, 2026, to migrate
CBK has directed all the banks to disclose their credit products. These will include average lending rates, premiums, and fees that apply, both on their websites and on the gazetted Total Cost of Credit (TCC) website. PHOTO/@CBKKenya/X
By Juliet Jerotich
The Central Bank of Kenya (CBK) has removed the special terms of lending to bank employees in its new Risk-Based Credit Pricing Model (RBCPM) revised version. The regulations took effect on September 1, 2025.
In a statement issued on August 26, CBK explained the new framework is intended to increase the transmission of monetary policy, improve lending transparency, and promote prudent borrowing. Loan pricing will reflect each borrower’s risk profile directly.
“The new RBCPM enhances policy transmission, improves transparency, and aligns cost of lending with borrower risk,” CBK explained. The new system was developed on the basis of a consultation process launched in April 2025.
Among the key aspects of the reforms is the inclusion of the Kenya Shilling Overnight Interbank Average (KESONIA) as the reference rate. It replaces the former interbank rate and seeks to reflect global best practice. CBK noted that KESONIA is closely related to the Central Bank Rate (CBR) and hence well-suited for the current monetary policy regime.
How the New Lending Works
The aggregate lending rate will now be calculated as KESONIA plus premium (K). Premium encompasses lending expenses, returns to the owners, and the risk profile of the individual borrowers. The total cost of credit will therefore be KESONIA, the premium, and other fees and charges.
All variable-rate loans will now be referred to KESONIA. Foreign currency loans and fixed-rate loans are exceptions however. In the absence of KESONIA, the Central Bank Rate will serve as a fallback.
Implementation Timeline
The new model took effect with new variable-rate loans from September 1, 2025. Existing loans are provided until February 28, 2026, to migrate, to allow for a six-month adjustment period.
To enhance transparency, CBK has directed all the banks to disclose their credit products. These will include average lending rates, premiums, and fees that apply, both on their websites and on the gazette Total Cost of Credit (TCC) website.
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