Kenyan banks lash out at draft bill

A NEW row is brewing between Kenyan banks and parliament after a legislator proposed placing restrictions on deposits by state-owned companies, months after the state imposed a cap on lending rates.

Kimani Ichung’wah, vice-chairman of the public investments committee, drafted a bill seeking to bar state-owned companies from investing or depositing public funds with banks in which the government has less than a 20 percent stake.

Ichung’wah declined to specify when the bill would be presented to legislators yesterday.

“The bill seeks to provide that a public body may only deposit funds and invest surplus funds in government-owned banks,” he said by phone on Monday. “The bill defines a government-owned bank as a bank in which the government owns or holds at least 20 percent of the shares.”

Shares in Kenya’s biggest banks have fallen as much as 27 percent since the government introduced a law in August capping commercial lending rates at 400 basis points above the official benchmark rate.

The ceiling was likely to curb growth in east Africa’s biggest economy this year, the International Monetary Fund warned in November.

The new law would result in government funds being channelled to various ministries, departments, agencies and counties through either the central bank or the five banks in which the government owns at least 20 percent. – Bloomberg