- Banks will not charge interest rates of more than 4% over and above the base rate set by CBK on loans given to customers.
Banks will pay an interest rate equivalent to 70% of the base rate set by CBK to any saving account that customers are holding with them.
If , e.g, the base rate set by the CBK is 10%, interest rates on loans will not exceed 14%. If you borrow a 100k loan, you will not pay more than 14k in interest in one year.
Additionally, if the base rate is 10%, banks will pay not less than 7%,interest on any saving account. If you have 100k in your saving account, you will receive not less than 7k in interest payment for one year.This means that that the base rate will be the stabilizing factor. If they raise it, they pay more money to those holding savings accounts and charge high rates to those taking loans. If they reduce it, they charge less interest rates to consumers and pay less to those holding saving accounts.Banks will have to find a balancing rate.