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Monday, January 4, 2021 – The Central Bank of Kenya (CBK) has issued the green light to banks to resume listing loan defaulters with the Credit Reference Bureaus (CRB).
This is after a three month grace period for blacklisting borrowers of unpaid credit expired.
On October 1, 2020, CBK lifted the six-month freeze for listing defaulters who were cushioned during the Covid-19 pandemic.
However, it directed banks to assess the performance of all loans that were active before April 1, 2020.
Defaulters with loans that were performing before April 1, 2020, but went into arrears were asked to regularise loans by the end of December 2020 before being listed with CRB.
Banks were asked to notify defaulters before listing them with CRB for loans owing arrears after December 2020.
Earlier in 2020, the CBK banned hundreds of mobile loan app companies from listing defaulters with CRB.
More than 337 unregulated digital mobile lenders and micro financiers were banned as part of the CBK’s efforts to reform the emerging digital lending market.
In October 2019, commercial banks in Kenya began the process of pushing for payment of interest accrued on loans during the pandemic.
The banks and lenders also hinted at conducting auctions for collaterals as they seek to recover the funds issued through loans.
Defaulting also affected interests for loans as banks sought CBK’s permission to reprice the cost of loans based on borrowers’ risk and increase risk premium.
The move will see an increase in interest rate spread – what remains after banks deduct what they pay for deposits from what they earn from loans.
The Kenyan DAILY POST