CBK gives borrowers 3 months to regularise bank loan repayments

Tuesday March 23 2021

Kenyan bank borrowers have up to June 3 to regularise their loan repayments following the expiry of a one-year window. PHOTO | FILE | NMG


Kenyan bank borrowers have three months (March 3 to June 3) to regularise their loan repayments following the expiry of a one-year window through which the lenders had extended and restructured the loan repayments for customers adversely impacted by Covid-19 pandemic.

Central Bank, in consultation with the banks, agreed on a one-year period (March 3, 2020 to March 3, 2021) to extend emergency measures to cushion borrowers from the adverse economic effects of the coronavirus.

These measures included restructuring loans that were performing as at March 2, 2020 and the provision of regulatory flexibility to banks by the banking regulator.

“The one-year period for the emergency measures on extension and restructuring of loans ended on March 2, 2021, following which the standard procedures for loan classification and provisioning would apply,” CBK said in a statement Tuesday.

“Specifically banks will from March 3, 2021, assess the performance of all restructured loans that were performing before March 2, 2020.The period for determining the performance of all the restructured loans will begin on March 3, 2021.”

According to CBK the loans to be reassessed include restructured loans that were performing as at March 2, 2020 but went into arrears after that date.


“Consequently, in accordance with standard procedures, borrowers whose loans were performing before March 2, 2020 but were restructured and subsequently went into arrears, will have three months up to June 3, 2021 to regularise their loans,” said CBK.

CBK assesses that the emergency measures were highly effective and that borrowers were provided with various restructuring options including extension of repayment period, moratorium on principal or interest and waivers on interest or fees.

“The measures have provided space to borrowers to ride through the pandemic, mitigate job losses and pivot their businesses models to the new normal. For banks, the measures provided time to build additional capital and liquidity buffers to take them through the pandemic period and beyond,” said CBK.

According to CBK, loans amounting to Ksh1.7 trillion ($15.59 billion) were restructured during the period from March 3, 2020 to February 2021, accounting for 57 percent of the banking sector’s gross loans.

Following the resumption of repayments and some pay-offs, the outstanding restructured loans at the end of February 2021 amounted to Ksh569.3 billion ($5.22 billion), accounting for 19 percent of the total industry’s gross loans.

“Over 95 percent of the outstanding restructured loans are being repaid in accordance with the restructured terms,” said CBK.

In January this year, the bank re-introduced charges on mobile money transactions of up to Ksh1, 000 ($9.17) by allowing Payment Service Providers (PSPs) to propose pricing structures for mobile money transactions save for person-to-person transfers of up to Ksh100 ($0.91) to any customer and network.

The bank, however, maintained that there will be no charges for transfers between mobile money wallets and bank accounts while the wallet and transactions limits will remain in force.

On March 16, 2020, CBK announced emergency measures to facilitate increased use of mobile money transactions instead of cash, in the context of the Covid-19 Pandemic which ran until June 30, 2020, and extended until December 31, 2020.

As part of these measures the bank increased the transaction limit for mobile money to Ksh150,000 ($1,376.14) from Ksh70,000 ($642.2) and increased the daily limit for mobile money transactions and mobile money wallet limit to Ksh300,000 ($2,752.29) from Ksh140,000 ($1,284.4).