Commercial banks and other institutions regulated under Kenya’s Banking Act can, for now, raise interest rates on loans without first seeking approval from the Cabinet Secretary for the National Treasury, following a fresh High Court order.
The conservatory order, issued on August 13, suspends the enforcement of Section 44 of the Banking Act to the extent that it requires lenders to obtain Treasury approval before increasing loan rates. The order came after a petition by the Kenya Bankers Association (KBA), which has long challenged the provision in court, and will remain in force pending further directions from the Court of Appeal.
Section 44 of the Banking Act bars institutions from raising their rate of banking or other charges without prior approval from the Treasury Cabinet Secretary. The dispute over its scope has centred on whether decisions on lending rates fall under monetary policy, an area where the Central Bank of Kenya (CBK) enjoys constitutional independence.
KBA has argued that requiring Treasury clearance before banks adjust loan rates interferes with that independence and undermines the CBK’s ability to implement monetary policy effectively. The association took the matter to court after a December 11, 2025 High Court judgment declined to declare Section 44 unconstitutional, ruling instead that while the CBK shapes interest rates through monetary policy, loan pricing remains a business matter that Parliament can regulate. KBA then filed a notice of appeal and sought to suspend the provision while the Court of Appeal considers the case.
The latest order echoes concerns raised by CBK Governor Kamau Thugge, who in July argued that changes to the Central Bank Rate should be reflected in lending rates without ministerial involvement.
“When we change the interest rate, that should translate immediately to lending rates; we don’t have to go through the minister,” Thugge said, adding that the position aligns with the CBK’s constitutional independence in monetary policy matters.
However, the ruling sits against an earlier Supreme Court decision in Stanbic Bank Kenya Limited v Santowels Limited, which held that the phrase “rate of banking” in Section 44 covers interest charged on loans, and that removing oversight over such rates would undermine the objectives of the Banking Act.
The High Court’s order does not settle the matter permanently. It offers temporary relief to lenders as the wider legal battle over Section 44’s constitutionality moves to the Court of Appeal, where the final outcome could reshape how quickly banks can adjust the cost of borrowing for millions of Kenyans.
