April 22, 2020//-The stash of bank cash available for onward lending to businesses and households has topped Sh50 billion, latest regulatory statistics show, amid tighter borrowing conditions.
Central Bank of Kenya (CBK) data shows commercial banks held Sh50.3 billion in excess cash over statutory requirements last Thursday, a growth of Sh10 billion over a week earlier.
Banks are from March 23 required to maintain a daily average of 4.25 percent of their total deposits in their accounts at the CBK for the month starting on 15th through 14th.
The rule to maintain that proportion of the total deposits, technically known as Cash Reserve Ratio (CRR), took effect last week.
CBK’s top decision making organ, the Monetary Policy Committee (MPC), last month lowered the CRR by a percentage from 5.25 percent, marking the first cut since 2008 when the country’s businesses faced the twin shocks of global financial crisis and deadly post-election skirmishes.
The decision immediately freed up Sh35.2 billion for lending to households and businesses hit by contagious coronavirus outbreak. This has since grown to Sh50.3 billion from Sh41.3 billion on April 9, Sh39.7 billion (April 2) and Sh38.8 billion in the week ended March 26.
Sources in banks, however, said lenders have tightened credit stance by requiring borrowers to present documented evidence on how the Covid-19 containment measures have hit their incomes.
CBK Governor Patrick Njoroge has maintained that the excess cash reserves as a result of a lower CRR requirement will be provided to “banks based on their demonstrated requirement to directly support borrowers distressed as a result of Covid-19”.
Credit to the private sector, the CBK said late last month, grew by 7.7 percent in the year to February, compared to 7.1 percent in the year to December, which are both below the ideal growth level of between 12 and 15 percent to support economic growth.
“It needs to be appreciated that the reduction in the CBR alone cannot lead to increased uptake of credit if the operating environment is challenging,” Kenya Bankers Association (KBA) chief executive Habil Olaka said on March 24.
“It is worth acknowledging though that these measures need to be accompanied by interventions from non-lending agencies such as the suppliers and other service providers as well as the national and county governments.”
