Man sues to have law cap­ping rates stopped

Boni­face Oduor says the amended law was not con­sid­ered by speak­ers of the Na­tional As­sem­bly and the Se­nate

The Star (Kenya) - - News - JILLO KADIDA @jka­dida

A man has filed a case in court seek­ing to stop the im­ple­men­ta­tion of the Bank­ing (Amend­ment) Act 2016 which started on Septem­ber 14, say­ing it is void.

Boni­face Oduor has sued the AG, the CBK and the Kenya Bankers As­so­ci­a­tion.

He says the amended law, which caps in­ter­est charged on loans and re­turns payable on de­posits, was not jointly con­sid­ered by speak­ers of the Na­tional As­sem­bly and the Se­nate.

In his view, this flies in the face of the pro­vi­sions of sec­tion 110 of the Con­sti­tu­tion, which re­quires such law to be passed by the Se­nate.

The amended law, as­sented to by Pres­i­dent Uhuru Keny­atta on August 24 and gazetted on August 31, has capped in­ter­est the banks charge on loans at four per­cent­age points above the 10 per cent Cen­tral Bank Rate. The law has raised in­ter­est on term de­posits to at least 70 per cent of base rate, loosely trans­lat­ing to 7.35 per cent.

The Cen­tral Bank of Kenya, the reg­u­la­tor, on Oc­to­ber 3 warned com­mer­cial banks against vi­o­lat­ing the pro­vi­sions of the Act by in­creas­ing charges or al­ter­ing prod­uct fea­tures with­out ap­proval.

Oduor, how­ever, ar­gues the new law goes against the pro­vi­sions of the Con­sti­tu­tion, which gives the CBK sole re­spon­si­bil­ity of for­mu­lat­ing and im­ple­ment­ing mone­tary pol­icy with­out any di­rect con­trol of any one or in­sti­tu­tion.

He says the court should not al­low such open breach of the Con­sti­tu­tion, es­pe­cially if its ef­fect may cause in­sta­bil­ity in fi­nan­cial in­sti­tu­tions. The Na­tional As­sem­bly, he ar­gues, has no power to di­rect or con­trol the CBK in for­mu­lat­ing or im­ple­ment­ing a mone­tary pol­icy.

“The Act de­prives banks and fi­nan­cial in­sti­tu­tions of their prop­erty, the in­ter­est in, and, or right to deal with their as­sets in a free, open and demo­cratic so­ci­ety,” he says.

The amended Act, he says, is vague be­cause its pro­vi­sions are un­de­fined and open to var­i­ous con­tra­dic­tory in­ter­pre­ta­tions

Oduor wants the High Court to is­sue an or­der sus­pend­ing the im­ple­men­ta­tion of the Act, say­ing Kenyans will con­tinue suf­fer­ing ir­repara­ble dam­age.

/ FILE

Cen­tral Bank gov­er­nor Pa­trick Njoroge at the quar­terly re­view brief­ing in Nairobi on Septem­ber21

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