The Central Bank of Kenya (CBK) has adjusted the applicable interest rate on the discount window from the previous 300 basis points to 75 basis points, which is the upper bound of the interest rate corridor.

The discount window is a central bank lending facility meant to help commercial banks manage short-term liquidity needs. Banks that are unable to borrow from other banks in the federal funds market may borrow directly from the central bank’s discount window, paying the federal discount rate.

In a statement on Tuesday, May 13, 2025, CBK said it would continue working with various stakeholders towards a transparent, accessible and efficient credit market to spur the growth of credit to the private sector and support economic growth.

This comes a month after the regulator issued a consultative paper on the review of the risk-based credit pricing model that sought public views on the review of the Risk-Based Credit Pricing Model by May 2, 2025.

“The Paper elicited over 40 responses from a diverse range of individuals, commercial banks, non-bank financial institutions, industry associations, international financial institutions, consultancy firms, academia and corporate firms. CBK appreciates the responses and will take them into consideration,” CBK stated.

CBK says the paper does not propose the re-introduction of interest rate caps and does not indicate that CBK will cease its monetary policy implementation framework anchored on the interbank rate as the operational target.

“CBK continues to enhance the effectiveness of the monetary policy implementation framework. Following the recent changes announced to the framework, CBK has operationalized the narrowing of the width of the interest rate corridor around the Central Bank Rate (CBR) from ±150 basis points to ±75 basis points. This has continued to enhance the stability of the interbank rate and aligned it closer to the CBR,” CBK added.