Borrowers scored a legal win after the High Court dismissed a challenge by banks seeking to ease controls on interest rate increases, reaffirming the government’s authority to safeguard consumers in the credit market.
In its ruling, the court rejected a petition by the Kenya Bankers Association (KBA) seeking to nullify Section 44 of the Banking Act. The provision requires banks to obtain approval from the Cabinet Secretary for the National Treasury before raising lending rates or imposing additional charges.
The CFC Stanbic Bank branch along Kimathi Street in Nairobi.
Photo credit: File I Nation Media Group
The ruling follows a Supreme Court decision nine months earlier, which denied Stanbic Bank’s request to review a June 2024 directive mandating Treasury approval for interest rate adjustments. Together, the judgments reinforce regulatory protections for borrowers amid rising inflation, a weakening shilling, and tight global financial conditions.
KBA had argued that Section 44 infringed on the Central Bank of Kenya’s (CBK) constitutional independence in monetary policy. In its April 2025 petition, the lobby group sought declarations that the law was inconsistent with Article 231(2) and (3) of the Constitution and an order restraining its enforcement.
The Central Bank of Kenya (CBK) headquarters in Nairobi.
Photo credit: File | Nation Media Group
They contended that requiring executive approval undermined CBK’s autonomy, as interest rate adjustments are central to monetary policy. The court distinguished monetary policy from commercial lending practices, which remain subject to parliamentary regulation.
The court noted that the provision does not bind CBK’s constitutional functions or grant the Treasury supervisory powers over monetary operations. Its purpose is to regulate banking institutions’ commercial conduct toward customers, falling within consumer and market regulation.
“CBK may influence market rates through tools such as the Central Bank Rate and liquidity controls, but the actual pricing of loans by private banks is a commercial decision,” the court stated. The ruling comes at a time when borrowing costs have been rising, affecting households and businesses. Upholding Section 44 helps prevent exploitative lending practices and abrupt interest rate hikes, supporting market stability.
Justice Mulwa noted that the provision predates the 2010 Constitution and was enacted primarily for consumer protection. The court cited previous rulings affirming Parliament’s authority over banking conduct, emphasising that statutory oversight does not equate to unconstitutional interference.
For banks, the ruling limits flexibility in loan pricing amid rising funding costs. The court concluded that KBA had conflated monetary policy with commercial lending regulation.
