By MARUBU MUNYAKAIn September 2016, the government capped the lending rate by banks at the Central Bank Rate plus a four per cent mark-up. If the CBR moves up to 12 per cent, the lending by banks would move up to 16 per cent. The interest rate on savings should be over and above the Treasury Bill (T Bill) Rate because of default risk. This implies that the savings rate should be at 9.75 per cent as opposed to 7.0 per cent. What has been happening since the capping of interest rates is that the government, through its mispricing of Treasuries, has been killing the economy systematically and blaming it on banks.

Source: Daily Nation October 27, 2017 22:18 UTC