Governance

CBK Directs Banks to List Loan Defaulters As Grace Period Lapses

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Central Bank of Kenya

The Central Bank of Kenya (CBK) has opted to not extend the six-month suspension for listing loan defaulters with credit reference bureaus (CRBs). This will to pave the way for lenders to blacklist borrowers who break the rules from today.

CBK governor Patrick Njoroge gave the banks a go-ahead on Wednesday to blacklist borrowers who have defaulted in the wake of the COVID-19 economic fallout. This was later followed by an official statement from the CBK reiterating the same.

The CBK had announced the suspension of CRB listing for loans that were defaulted after April 1st. The relief was meant to last for six months to September 30th.

“For those loans that went into arrears after that date (April 1), the period for determining their performance begins on October 1, 2020. If a loan is in arrears after 60 days from October 1, a financial institution will, in accordance with the existing procedures, give the borrowers notice of the intention to list them with the CRBs,” the statement dictates.

“If the loan has not been regularized after the 30-day notice period, the financial institution will then list the non-performing loan with the CRBs. Consequently, borrowers whose loans were performing before April 1 and subsequently went into arrears, will have three months (up to end December 2020)in accordance with existing procedures to regularise their loans before they are listed with CRBs.”

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The end of the CRB listing freeze comes at a time when the Kenyan banking sector has reported struggles with mounting unpaid loans whose share has risen to the highest level since August 2007.

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