The Central Bank of Kenya(CBK) says in April, it granted approvals to 11 commercial banks and one microfinance institution to access KSh 17.59 Billion in cash and deposits held in its reserves.
This follows its March announcement to extend the maximum tenor for repurchase agreements, or repo, to 90 days, to enable banks to access longer-term liquidity secured on their holdings of government securities without having to discount them.
The CBK then, availed KSh 35 billion in additional liquidity to banks by reducing the Cash Reserve Requirement by 100bps to 4.25 percent in March.
The KSh 17.6 Billion, which accounts for 50 percent of the KSh 35.2 billion, was used up in the month of April according to Dr Patrick Njoroge, Governor CBK. This is equivalent to 6.2 percent of the industry’s total gross loan book of KSh2.8 trillion.
“With 50 percent having been used in just one-month, this depicts the increased demand for funding from the banking sector,” Dr Njoroge said on Thursday while making a presentation before the Senate Ad Hoc Committee on the COVID-19 situation.
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The regulator indicated that the tourism industry leads most of the sectors that renegotiated a total of KSh81.5 billion worth of loans.
Tourism accounted for the largest portion of funds provided by banks at 45.58 percent followed by agriculture 16.7 percent, real estate 11.94 percent, and trade 10.37 percent.
“In general, the banking sector has started to feel the adverse impact of COVID-19 as a result of the slowdown in most economic sectors. Requests for extension of personal loans and restructuring of other sectors loans are expected to ramp up in the coming months if the pandemic continues to penetrate,” said the regulator.