The minimum rate at which a bank pays on a deposit or a loan. This rate factors in the banks cost of operations, target income, credit risk and external influences which are mainly macroeconomic factors (such as inflation).
Not all banks use the base rate pricing method, therefore in 2014 the National Treasury and Central Bank introduced the Kenya Bankers Reference Rate (or KBRR) to provide a standard calculation across the industry.Back to top
Money that a bank will pay for your deposit (cash) or a fee that a bank will charge to loan you money. In Islamic banking, however, interest rates do not apply.
In terms of deposits, Interest is income an account holder would generate from the bank; fixed deposit accounts generate higher interest because the bank would negotiate a tenure (term) with you and onward lend the funds based on the term they are guaranteed to hold your funds.
In terms of loans, Interest can be charged at a fixed or flexible/variable rate. Banks have various methods to calculate how much loan interest they would charge you for the loan. This charge takes into account the bank’s cost of Funds (deposits), operational costs, income requirements and the risk associated with both the customer and the economic environment.Back to top