CBK statement on Issuance of a Revised Risk-Based Credit Pricing Model for Banks

The Central Bank of Kenya (CBK) announces the issuance of a revised Risk-Based Credit Pricing Model (RBCPM) for the banking sector. The final revised RBCPM follows a consultation period announced on April 23, 2025.

Comments were received from diverse stakeholders including banks, development partners, industry associations, non-bank financial institutions, consultancy firms, academia, corporate firms and individuals. These comments were duly reviewed and considered in finalising the revised RBCPM.

The objective of the revised RBCPM is to strengthen monetary policy transmission, enhance transparency in lending, and promote responsible lending by aligning credit pricing with the borrowers’ risk profiles.

The final revised RBCPM is anchored on the overnight interbank average rate, now renamed the Kenya Shilling Overnight Interbank Average (KESONIA), to align it to the international best practices. The overnight interbank average rate (KESONIA) closely aligns with the policy rate (Central Bank Rate) under the current monetary policy implementation framework. Under the revised RBCPM:

• The total lending rate = KESONIA + Premium (“K”), where the premium includes the costs related to lending, return to shareholders, and the risk profile of the borrower.

• The total cost of credit = KESONIA + K + Fees and Charges.

KESONIA will be applicable to all variable rate loans except for foreign currency denominated loans and fixed rate loans. Where KESONIA is not practical, customers may be availed the use of the Central Bank Rate (CBR) as the alternative reference rate.

The revised RBCPM will take effect from September 1, 2025, for all new variable rate loans. As for existing variable rate loans, the revised RBCPM will take effect from February 28, 2026, at the end of a 6-month transition period for finalisation of the necessary arrangements.

To ensure transparency, the banks will publish on their websites and on the Total Cost of Credit (TCC) website, their weighted average lending rates, weighted average premium (K), and fees and charges for each of their lending products.

CENTRAL BANK OF KENYA AUGUST 26, 2025