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