High liquidity cuts inter-bank lending rate to 47-day low
Increased liquidity in the money markets pushed the interbank lending rate to a 47-day low of 4.39 percent on Monday, data by the Central Bank of Kenya (CBK) shows.
The rate, which signifies the interest commercial banks charge on short-term lending to each other to meet basic operational requirements, has fallen to the lowest level since September 21, 2022, when it stood at 4.06 percent.
The dropped rate is attributable to improved liquidity going into the second quarter that ended in June this year.
Liquidity in the money market increased during the week ended November 3, as government payments more than offset tax remittances, the Central Bank of Kenya said. Commercial banks’ excess reserves stood at Sh 25 billion concerning the 4.25 percent cash reserves requirement (CRR).
The average interbank rate was 4.54 percent on November 3 compared to 5.02 percent on October 27.
During the week, the average number of interbank deals remained relatively stable at 33 compared to 34 in the previous week, while the average value traded declined to Sh20.4 billion from Sh32.2 billion in the previous week.
Market liquidity has remained stable since the second quarter of this year buoyed by deposit and cash retention by banks.
Data shows that household deposits increased in the second quarter of 2022, largely reflecting increases in all categories of deposits, while cash outside banks also increased marginally.
This was further supported by the fact that commercial banks’ retained profits increased by Sh.49.6 billion in three months to June as the majority of lenders skipped paying interim dividends to shareholders.
Retained profits for the banking industry closed the quarter at Sh91.3 billion, according to CBK data—helping to lift the industry’s total capital by 1.3 percent to Sh906.7 billion at the end of June from Sh894.7 billion in the quarter ended March. BY DAILY NATION


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