The Central Bank of Kenya has eliminated preferential borrowing terms for bank employees under its revised Risk-Based Credit Pricing Model, which took effect on September 1, 2025.

In a press release dated August 26, 2025, CBK stated that the updated RBCPM aims to strengthen the transmission of monetary policy, enhance transparency in lending practices, and encourage responsible borrowing by tying credit pricing to the risk profiles of borrowers.

“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,” CBK said in the statement.

Lending rate structure

According to the regulatory body, the new lending framework is anchored on the overnight interbank average rate, now formally renamed the Kenya Shilling Overnight Interbank Average (KESONIA).

Under the revised RBCM system, the total lending rate will be calculated as KESONIA plus a premium that accounts for lending costs, shareholder returns, and the borrower’s risk profile.

“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 cost of credit = KESONIA + K (premium) + Fees and Charges,” CBK explained.

It further noted that KESONIA will apply to all variable-rate loans, except foreign currency and fixed-rate loans, with the Central Bank Rate serving as a fallback where necessary.

“Where KESONIA is not practical, customers may be availed the use of the Central Bank Rate (CBR) as the alternative reference rate,” the statement added.

Implementation timeline

CBK has disclosed that the RBCPM will apply to all new variable-rate loans starting September 1, 2025, with existing variable-rate loans having to transition to the new system by February 28, 2026, after a six-month adjustment period.

“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,” CBK detailed.

“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,” CBK added.