Equity Bank announces new pricing for loans following CBK’s rate cut
By Kenneth Mwenda, December 11, 2025Equity Bank has revised its loan pricing following the Central Bank of Kenya’s (CBK) decision to cut the Central Bank Rate (CBR) from 9.25 per cent to 9 per cent.
The move, made by the Monetary Policy Committee on December 9, 2025, aims to stimulate economic growth and encourage banks to increase lending to businesses and households.
The bank announced on Thursday, December 11, that all new local currency variable-rate loans taken from December 10 will now be priced at the revised CBR of 9 per cent, plus a customer-specific premium. The adjustment also applies to loans issued after December 1, 2025, which will be recalculated to reflect the reduction.
“ALL NEW local currency variable-rate loans, effective 10th December 2025, will be priced under the revised CBR of 9%, plus the applicable customer premium (K),” the notice reads.
“This change will also affect facilities issued after 1st December 2025, where such facilities pricing will accordingly be adjusted by the reduction in CBR from 9.25% to 9% effective immediately.”
For existing loans still priced under the Equity Bank Reference Rate (EBRR), the transition to the CBR will take effect by 28th February 2026. Customers with loans scheduled for transition will receive a 30-day notice and, where applicable, a variation letter explaining the move from EBRR to the CBR, alongside the relevant customer premium.
“FOR EXISTING local currency variable-rate loans whose pricing is still based on the Equity Bank Reference Rate (EBRR), the transition to CBR will take effect by 28th February 2026. Customers whose facilities are scheduled for transition will be issued with a 30-Day notice and variation letter(s) (where applicable) advising them on the change from the Equity Bank Reference Rate (EBRR) to the CBR, plus the applicable customer premium (K).”
Equity Bank assured its customers of full compliance with CBK regulations and pledged continued support throughout the transition. The bank encouraged borrowers to contact their relationship managers, visit branches, or call the contact centre for any clarifications regarding the changes.
The CBR cut and the bank’s new pricing approach come amid wider reforms in Kenya’s banking sector. The Central Bank has introduced a new Risk-Based Credit Pricing Model (RBCPM), which uses the Kenya Shilling Overnight Interbank Average (KESONIA) as a market-driven benchmark. The model aims to make loan pricing more transparent and ensure rates reflect the actual cost of funds and the borrower’s risk profile.
Under this framework, banks calculate lending rates by adding a customer-specific premium to KESONIA. Borrowers with strong credit histories and steady incomes may qualify for lower premiums, while those with higher risk profiles face higher rates. The approach encourages responsible borrowing and allows banks to price loans based on the true cost of lending rather than fixed benchmarks.
Banks gradually adopt KESONIA
While Equity Bank is now applying the revised CBR for new loans, nearly half of all banks in Kenya still rely on the CBR to determine rates. Only 18 per cent have fully adopted KESONIA, while 34 per cent use a combination of CBR and KESONIA. CBK expects all banks to transition to the new framework by March 2026 to ensure consistency and transparency across the sector.
“All the commercial banks have submitted their risk-based loan pricing formula that they will be implementing, as we have said in the past, and we expect this to be a very transparent process,” the CBK Governor noted during the Monetary Policy Meeting on Wednesday, December 11, 2025.
“Some of the banks have chosen to use the Central Bank Rate (CBR) as the reference rate, while others have chosen to use the KESONIA as the reference rate and yet others have chosen to use both.”
KCB Bank Kenya has also adjusted its lending rates following the CBK rate cut. The bank now applies a 9 per cent base rate for new loans under its RBCPM framework, which started on 1st December 2025. Existing loans remain under the old terms until the February 28, 2026 transition deadline. KCB emphasised full disclosure of all fees and total loan costs, reflecting a wider industry shift towards transparency.