- Kenyan banks can temporarily increase loan interest rates without seeking prior approval from the National Treasury Cabinet Secretary.
- The High Court issued conservatory orders on August 13, 2026, after a legal challenge by the Kenya Bankers Association.
- The dispute concerns the powers of Treasury and the constitutional role of the Central Bank of Kenya in monetary policy.
- The latest order does not permanently remove the approval requirement because the wider case is still before the courts.
- The Supreme Court had previously ruled that banks must obtain approval before increasing interest rates under Section 44 of the Banking Act.
Kenyan commercial banks have received temporary relief from a rule that has required them to obtain approval before increasing interest rates on loans. The High Court issued conservatory orders on August 13, 2026, suspending enforcement of Section 44 of the Banking Act in relation to the requirement for prior Treasury approval. The order applies while the legal dispute surrounding the provision continues through the appellate process.
The development gives banks and other institutions regulated under the Banking Act more room to adjust their lending rates for the time being. However, it does not mean every lender will immediately increase the cost of borrowing. Individual banks will still determine how they price their loans and whether they want to make changes under the temporary court protection.
The case was brought by the Kenya Bankers Association, which has challenged the legal requirement on constitutional and regulatory grounds. KBA has argued that decisions affecting interest rates are closely connected to monetary policy. The association says that giving Treasury a role in approving lending rate increases could interfere with the independence of the Central Bank of Kenya.
The dispute largely revolves around the balance of power between Treasury and the CBK. KBA’s argument is that monetary policy decisions should remain within the mandate of the central bank. The association believes that changes in the Central Bank Rate should be transmitted through the financial system without requiring a separate approval from the Treasury Cabinet Secretary.
CBK Governor Kamau Thugge has also weighed in on the issue. In remarks made in July, he said changes to the policy rate should be reflected in commercial lending rates without requiring intervention by the Treasury Cabinet Secretary. He linked the position to the CBK’s constitutional responsibility for monetary policy and its independence in carrying out that mandate.
The argument has become particularly important as banks respond to changes in the country’s monetary environment. When the CBK changes its policy rate, lenders normally review their own lending and deposit rates. The question before the courts is whether that process should also require approval from another arm of government.
The High Court’s latest decision should not be interpreted as a final declaration that banks no longer need Treasury approval. The order is temporary and is connected to KBA’s appeal against an earlier High Court decision. The wider constitutional and legal questions will therefore continue to be considered by the appellate courts.
The High Court had previously declined to declare Section 44 unconstitutional in a judgment delivered on December 11, 2025. KBA then filed a notice of appeal and sought temporary protection against enforcement of the provision while its challenge proceeded. The August 13 orders provide that temporary protection as the matter moves forward.
The eventual outcome could therefore change the position once again. If KBA succeeds, banks could have greater freedom to adjust lending rates within the CBK’s monetary policy framework. If the challenge fails, the Treasury approval requirement upheld in earlier proceedings could return to force.
The current dispute is complicated by an earlier Supreme Court ruling involving Stanbic Bank Kenya Limited and Santowels Limited. In its June 28, 2024 judgment, the Supreme Court held that interest rates charged on loans and other facilities fall within the regulatory framework established under Section 44 of the Banking Act. The court specifically ruled that banks and financial institutions must obtain approval from the Cabinet Secretary responsible for finance before increasing interest rates.
The Supreme Court also rejected the argument that the liberalisation of interest rates had completely removed regulatory oversight. Its interpretation was that banks could negotiate interest rates with customers, but their ability to vary those rates was still subject to the Banking Act. The court further found that a bank’s contractual power to change interest rates could not be treated as unlimited.
The position was reinforced in a subsequent Supreme Court ruling delivered in March 2025. The court declined an application seeking to review or clarify its earlier decision and maintained that the Cabinet Secretary remained responsible for the statutory authority under Section 44.
For borrowers, the immediate effect of the High Court order is uncertainty rather than an automatic increase in monthly loan repayments. Banks now have temporary legal room to adjust lending rates without first seeking Treasury approval. Whether they actually make such changes will depend on their individual pricing decisions and wider market conditions.
Customers with existing loans will therefore need to pay attention to communication from their lenders. A court order allowing banks to adjust rates does not itself change the interest rate attached to every existing loan. Any changes will still depend on the terms of individual facilities and decisions made by each financial institution.
The dispute could become even more important if lending rates begin responding more directly to monetary policy decisions. Borrowers could benefit from faster transmission when rates fall, but they could also face quicker increases when monetary conditions tighten. The final court decision will help determine how much influence Treasury and the CBK each have over that process.
The case raises a broader question about how Kenya manages monetary policy and financial regulation. The CBK has a constitutional mandate over monetary policy, while the Banking Act gives the Treasury Cabinet Secretary specific powers over banking charges. The courts are now being asked to determine how those responsibilities should operate without undermining either institution’s legal mandate.
The issue also has implications beyond commercial banks. Other financial institutions regulated under the Banking Act are affected by the interpretation of Section 44. The outcome could therefore shape how lending rates are adjusted across a wider part of Kenya’s financial sector.
For now, the August 13 High Court order gives lenders temporary relief from the Treasury approval requirement. It does not overturn the Supreme Court’s earlier interpretation of Section 44 on a permanent basis. The final direction will depend on the ongoing appellate proceedings and any further orders issued by the courts.
