The Central Bank of Kenya (CBK) has shelved the request by major banks to increase the cost of loans for borrowers.

The banking authority had asked lenders to submit their new loan pricing formulas, which will set the interest rates when the government stops controlling loan costs.

So far, the banking regulator has yet to issue an approval to six of the nine tier-1 banks that submitted their applications, according to Business Daily newspaper. The six banks account for more than half of all loans in the country.

They said the central bank freeze has forced them to continue operating as if they’re still under lending rate controls.

In November 2019, the government removed the interest rate cap that had been in place in Kenya since 2016. However, the CBK stepped in as the de facto controller of credit costs.

Without the CBK’s approval, the banks have been forced to increase investments in government securities and limit borrowing to high-quality customers that have a lower risk of default.

However, the freeze has protected most borrowers, particularly small traders and workers in the informal sector.

(Editing by Cleofe Maceda;