Stanbic Bank has been issued with a direct order from the Court of Appeal to refund over Sh10 million to a former customer who sued the lender for overcharging interest loans advanced decades ago.
Justices Hannah Okwengu, Asike-Makhandia and Jamila Mohammed ruled that the lender charged an interest rate of 19.5 per cent without the approval of the Minister of Finance.
The court had earlier noted that the bank was aware that the rate of interest was capped and it required the approval of the Minister for any variation or interest adjustments from time to time and that the bank was supposed to obtain the approval from the Ministry of Finance before it could intensify the interest chargeable beyond what is stipulated by the law.
“The respondent was similarly governed by Section 44 of the Banking Act, which provided that no institution was allowed to increase its rate of banking or other charges except with the prior approval of the Minister,” the judges said.
The complainer took the matter to the court and it was taken up by a bench of three judges and accused the lender and said the amount charged to Santowels LTD, a manufacturer of sanitary towel, who was exceeding the amount that was set by the Central Bank of Kenya back then in 1997.
The company argued that the maximum rate that banks were entitled to charge its customers by law and as gazetted by CBK was 16.5 per cent per annum on a reducing balance.
However, the lender defended itself saying it executed its contractual duties with all due diligence and in accordance with the usual banking practices and customs and it honestly accounted for all the transactions in the manufacturer’s accounts.