Savers Lose Ksh22B as Banks Cut Returns on Deposits 

Hello and welcome to the Money News Roundup, where we are covering banks’ cuts on returns for deposits. We also cover CBK’s plan to downgrade some banks.

CBK Pressure Cuts Bank Returns as Investors Shift to Bonds

As in the Business Daily, Kenyan banks have slashed deposit rates following pressure from the Central Bank of Kenya (CBK) to lower lending costs. 

As a result, returns to depositors dropped by Ksh22 billion in the year to June, with top banks like NCBA and Equity cutting payouts and rejecting costly deposits.

Regulatory data shows the nine largest banks, including KCB, Equity, and NCBA, paid Ksh89.9 billion in deposit interest compared to Ksh111.9 billion a year earlier (a difference of Ksh22 billion), even as deposits rose 2.8% to Kshh4.24 trillion. 

The average fixed deposit rate fell to 8.37% from 11.48%, far below the 12–14% available in government bonds.

 As a result, investors are shifting funds to government bonds and private sector lending. Though lending rates declined gradually, banks still posted profit growth due to wider interest margins.

New Plan: Kenyans to Get Up to Ksh1M If Banks Collapse

Depositors may soon receive up to Ksh1 million in payouts if banks collapse, as proposed in a study commissioned by the Kenya Deposit Insurance Corporation (KDIC) and currently under Treasury review.

Conducted by Zamara Actuarial Services, the study recommends raising the current protection limit of Ksh500,000 to boost depositor confidence and ensure financial stability. 

According to the Business Daily, the move follows past failures of Dubai Bank, Imperial Bank, and Chase Bank, which left customers exposed. 

The Treasury is weighing the risks and benefits before approval. If accepted, it would mark the second increase in four years, following the 2020 revision from Ksh100,000 to Ksh500,000.

CBK Mulls Downgrading Banks Over Ksh3B Capital Requirement

The Central Bank of Kenya (CBK) is closely monitoring 11 commercial banks that must raise Ksh14.7 billion by December to meet a new Ksh3 billion minimum core capital threshold. Failing to comply could see them downgraded to microfinance institutions.

These banks, including Paramount Bank, ABC Bank, and Development Bank of Kenya, are under pressure to shore up their capital following a recent stress test.

CBK has proposed three options: downgrade status, extend the compliance period, or amend the law to allow tiered capital requirements. The 2024 Business Laws Amendment Act mandates banks to gradually raise core capital to Ksh10 billion by 2029, starting with Ksh3 billion this year. Read more here.

Blow to Kenya Power as Rural Homes Spend Ksh7 Daily for Electricity

Kenya Power’s rural customers connected under the Last Mile Connectivity Project spend only about Ksh7.20 daily on electricity, slowing economic gains despite billions invested in connections. 

Rural households consume an average of 11.44 kilowatt-hours per month, primarily for phone charging and lighting, rather than heavy appliances. Expected microenterprises in these areas have not grown as anticipated, according to the African Development Bank (AfDB), a key project financier

As a result, AfDB is recommending that the government provide start-up capital for rural businesses to boost electricity use and employment.

The daily rural consumption is just a quarter of the national average. Kenya Power relies more on industrial and wealthy urban consumers for revenue. 

Since its 2015 launch, the Last Mile project has connected millions, but mostly in low-use areas like slums and remote zones. Many homes struggle to pay connection fees, with some reverting to solar or Kerosene. 

Despite challenges, the project has expanded access and stimulated rural economies, supported by over Ksh85 billion in funding. Read more coverage by the Business Daily here.

Firm Opens Engine Restoration Company in Nairobi

Cummins C&G has launched a Ksh30 million engine rebuild centre in Nairobi to meet the rising demand for certified high-horsepower engine services across East Africa.

As reported by the Standard, the facility aims to become a regional hub for engine restoration, addressing a gap in a market dominated by uncertified repair shops.

The company’s CEO Vijay Gidoomal highlighted the need for reliable solutions in sectors like mining, power generation, and rail. The centre, equipped to handle two engine rebuilds monthly, features advanced tools like a dynamometer to test engine performance.

 With Kenya’s automotive ecosystem shifting toward aftermarket services, the facility offers a cost-effective alternative to new engines.

KeNHA to Change Road Project Pricing Formula

The Kenya National Highways Authority (KeNHA) plans to revise its variation of price (VOP) formula used to adjust for inflation in road contracts, following massive cost overruns and delayed projects. 

As reported in the Business Daily, VOP, which adjusts prices based on changes in fuel, labour, and material costs, has led to runaway budgets due to poor formula design, unbalanced indices, and weak documentation. 

An audit will assess seven major projects, including the Kenol-Sagana-Marua and Mombasa-Mariakani roads.

A 2025 audit revealed the Sagana-Marua section's cost rose 49.6% due to overlooked land acquisition and feasibility issues. The overhaul aims to limit inflation-linked cost hikes, protect project delivery, and ensure fair risk-sharing between contractors and the government.