- A High Court order has temporarily suspended Treasury approval requirements for increases in bank loan interest rates.
- The decision does not automatically raise repayments but could affect borrowers with variable-rate credit facilities.
- The dispute follows a landmark Supreme Court decision requiring lenders to obtain approval before increasing rates.
Thousands of Kenyan borrowers have been placed at the centre of a fresh legal and financial dispute after the High Court temporarily suspended a requirement compelling banks and other financial institutions to obtain approval from the Cabinet Secretary for the National Treasury before increasing loan interest rates.
The order, issued on Thursday, August 13, 2026, follows a legal challenge by the Kenya Bankers Association (KBA), which has argued that the approval requirement contained in Section 44 of the Banking Act interferes with the constitutional independence of the Central Bank of Kenya (CBK) in formulating and implementing monetary policy.
The immediate implication is significant for Kenya’s banking sector: lenders have temporarily been given room to adjust loan interest rates upwards without first obtaining approval from the Treasury Cabinet Secretary, within the scope of the conservatory order and pending further proceedings.
However, the development should not be interpreted as a blanket directive for banks to increase the cost of borrowing.
The High Court has not permanently invalidated Section 44, nor has it made a final determination that the provision is unconstitutional. Instead, it has issued a conservatory order suspending its application to the extent that it requires prior Treasury approval before an institution increases interest rates on loans.
For ordinary borrowers, interest rates determine the total cost of credit across mortgages, personal loans, business facilities, school-fee loans and other forms of financing.
An increase in lending rates can translate into higher monthly repayments, particularly for borrowers whose loans are priced on variable or adjustable-rate terms.
The latest court order therefore comes at a sensitive moment for households and businesses already grappling with the cost of living, elevated credit costs and broader economic uncertainty.
It also revives a long-running debate over which institution should have the final authority in determining changes to lending rates: the National Treasury, the Central Bank of Kenya (CBK), or individual financial institutions.
At the centre of the dispute is Section 44 of the Banking Act, whose application to loan interest rates was conclusively interpreted by the Supreme Court in the Stanbic Bank Kenya Limited v Santowels Limited case in 2024.
How the dispute started
The controversy stems from a prolonged legal battle involving banks and borrowers over the interpretation and application of Section 44.
In June 2024, the Supreme Court ruled in the Stanbic Bank Kenya Limited v Santowels Limited case that banks could not increase loan interest rates without the approval contemplated under Section 44. The judgment reinforced the requirement for Treasury approval where lenders sought to adjust applicable rates upwards.
The Supreme Court expressly found that interest rates on loans and facilities were subject to the regulatory process under Section 44 and that financial institutions had to obtain approval from the Cabinet Secretary responsible for finance before increasing them.
The ruling subsequently became a major point of contention within the banking industry.
The Kenya Bankers Association challenged this interpretation, arguing that interest-rate adjustments are closely linked to monetary policy, a function constitutionally assigned to the Central Bank of Kenya.
The association further contended that requiring Treasury approval could, in effect, introduce Executive influence into monetary-policy implementation.
The High Court dismissed KBA’s constitutional challenge in December 2025, declining to declare Section 44 unconstitutional. The latest conservatory order has now temporarily altered the practical position as the legal dispute continues.
What does this mean for borrowers?
The most important point for borrowers is that the High Court order does not automatically mean that banks will increase their loan interest rates.
Banks continue to price loans based on multiple factors, including prevailing monetary conditions, the cost of funds, credit risk, market competition and the specific terms of individual loan agreements.
The order simply removes, for the time being, the requirement for prior Treasury approval within the scope covered by the court’s conservatory order.
Borrowers should therefore avoid assuming that their monthly repayments will immediately increase.
At the same time, customers with variable-rate facilities should closely monitor communications from their lenders, as any future adjustments may affect repayment obligations depending on contractual terms.
CBK rate remains at 8.75 per cent
The court development comes shortly after the CBK maintained its Central Bank Rate at 8.75 per cent. Recent reporting confirms the rate remained at that level.
This means the court order and the CBK’s monetary-policy decision should not be conflated.
The CBR is a monetary-policy instrument, while the court dispute concerns the legal framework governing how banks adjust lending rates.
A case with far-reaching implications
The legal dispute extends beyond a disagreement between banks and government institutions.
It could determine the speed at which monetary-policy changes are transmitted to borrowers and define the regulatory framework governing loan pricing in Kenya.
The Supreme Court’s earlier interpretation of Section 44 has already had significant implications for both banks and borrowers. In the Stanbic–Santowels dispute, the court affirmed that increases in loan interest rates fell within the regulatory process established under Section 44.
The ongoing litigation therefore carries potentially far-reaching consequences for Kenya’s financial sector.
The big question now
The latest High Court order has temporarily shifted the regulatory position, but the underlying legal dispute remains unresolved.
The eventual determination will be important in clarifying the relationship between Section 44 of the Banking Act, Treasury authority and the constitutional independence of the CBK.
For borrowers, the immediate message is clear: the court has not directed banks to increase interest rates, but it has temporarily suspended a key procedural requirement that mandated Treasury approval before such increases could be implemented.
The cost of borrowing will therefore remain under close scrutiny as the legal process continues.
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For millions of Kenyans relying on bank credit to finance homes, businesses, education and household needs, the eventual outcome could shape not only who regulates loan pricing, but also how quickly changes in monetary policy are transmitted to the economy and ultimately to consumers.
By Hillary Muhalya
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