Kenya’s Central Bank Extends Repo Tenor to 90 Days to Boost Liquidity

Central Bank of Kenya Eases Monetary Policy Further to 7.00 pct

CBK Governor Patrick Njoroge

Kenya’s central bank on Tuesday said it will extend the maximum tenor for repurchase agreements, or repo, to 90 days, as it looks to boost liquidity in the financial sector.

“From today (Tuesday) we will extend the tenor of our repos from 28 days all the way to 90 days,” CBK Governor Patrick Njoroge said.

A repo is a form of short-term borrowing for dealers in government securities.

Dr Njoroge said that this will enable banks to access longer-term liquidity secured on their holdings of government securities without having to discount them.

“Our expectations is that within 90 days the uncertainties around coronavirus pandemic begin to clear and things will begin to move to their normal points.”

On Monday, the regulator cut the policy rate by 100bps to 7.25% from 8.25% and reduced the CRR requirement to 4.25%.

As a result, it availed KSh35.2 billion available to commercial banks to support distressed borrowers.

The MPC also resolved to reduce the Cash Reserve Ratio (CRR) to 4.25% from 5.25%.

“Additionally, CBK will ensure that the interbank market and liquidity management across the sector continue to function smoothly,” the CBK said in a statement.

Extension and restructuring of the loans by Commercial Banks

Commercial Banks have announced several relief measures as a directive from the Central Bank of Kenya by making provisions to extend relief to borrowers on their personal
loans based on their individual circumstances arising from the pandemic and will review requests from borrowers for extension of their loans for a period of up to one year.

In the arrangement, SMEs and corporate borrowers can contact their banks for assessment and restructuring of their loans based on their respective circumstances arising from the pandemic. Banks will meet costs arising from the extension and restructuring of the loans.