In Stanbic Bank Kenya Ltd v. Santowels Ltd, the Supreme Court finally resolved a long-standing question in banking law: does Section 44 of the Banking Act apply to interestrates? The answer is yes.
Between 1993 and 1997, Stanbic granted loan facilities to Santowels and unilaterally variedinterest rates, notifying the borrower post-facto. Years later, an audit revealed that Stanbichad overcharged interest—both against contractual terms and the prevailing CBKrate—leading to litigation.
The High Court ruled that the rate increases were unlawful. The Court of Appeal upheld thisposition, correcting the computation of the award. On appeal to the Supreme Court, Stanbicsought to argue that interest rates were deregulated following the repeal of Section 39 ofthe CBK Act.
The Supreme Court held that:
- The term “rate of banking” in Section 44 of the Banking Act includes interest rates on loans
and facilities; - Even after the repeal of capping laws, Section 44 remains intact and mandates regulatory
oversight; - The Central Bank Governor, delegated by the Cabinet Secretary, retains authority to
approve rate increases; - Freedom of contract remains valid—but within the framework of statutory oversight.
The court awarded KShs. 10.4 million to Santowels, marking a pivotal moment in consumer protection within the financial sector. Moving forward, financial institutions must secure regulatory clearance before modifying lending terms. This ruling is binding and represents good precedent for fair banking practices.