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Lenders set stringent guidelines for relief on personal loan

2 min read
The regulator said the move would release an extra Sh35.2 billion for lending.

A month after the Central Bank of Kenya (CBK) directed lenders to offer relief on personal loans for borrowers distressed by the Covid-19 global pandemic, banks have issued some conditions, catching borrowers on s surprise notice.

Borrowers were relieved from a three-month loan repayment, starting March 2, 2020 or rescheduled payments of up to one year.

However, some banks have started notifying borrowers seeking to defer repayment of their loans to provide valid documents that shows how they have been affected.

“You may visit any nearest branch to request for a loan relief through our loan officers. You will require a letter from your employer indicating a salary cut or job termination,” read a notice from one of the local banks.

According to the Kenya Bankers Association (KBA), the stringent relief conditions are in line with the CBK guidelines.

Central Bank had in March cut its benchmark rate by one percentage point to 7.25 percent, reducing the cash reserve ratio (CRR) for commercial banks to 4.25 percent from 5.25 percent,

The regulator said the move would release an extra Sh35.2 billion for lending.

CBK has maintained that the excess cash reserves resulting from lower CRR requirements would be provided to banks based on their demonstrated requirement to directly support borrowers distressed as a result of Covid-19.

The relief deal was to see banks and other financial institutions offer payments breaks or flexible arrangements on mortgages and other loans held by customers affected by economic fallout from Covid-19.

President Uhuru Kenyatta also directed the temporary suspension of the listing with credit reference bureaus (CRBs) of any person, Micro, Small and Medium Enterprises (MSMEs) and corporate entities whose loan accounts fall overdue or into arrears, effective April 1.

Lenders already implementing the deal includes Stanbic Bank Kenya, which announced a loan holiday for small and medium-sized enterprises (SMEs) and its personal banking customers, with effect from April 1.

Absa Bank Kenya, also announced that it has restructured customer loans amounting to over Sh8.3 billion as part of the relief programme.

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