• Privacy Policy
  • Contact Us
Wednesday, September 27, 2023
  • Login
News Poa
  • Home
  • Education
  • Politics
  • Business
No Result
View All Result
  • Home
  • Education
  • Politics
  • Business
No Result
View All Result
News Poa
No Result
View All Result

Home » Business » BAD NEWS TO KENYANS WITH FIXED BANK ACCOUNTS

BAD NEWS TO KENYANS WITH FIXED BANK ACCOUNTS

BAD NEWS TO KENYANS WITH FIXED BANK ACCOUNTS

News Poa Team by News Poa Team
April 7, 2023
in Business
0
Share on FacebookShare on Twitter

Fund managers and large institutions holding bank deposits are set for better returns after the lenders raised payout for customer deposits in fixed accounts to a 30-month high, matching the trend of investor returns from other asset classes.

New data from the Central Bank of Kenya (CBK) shows the average commercial bank deposit rate hit a high of 7.01 percent in October last year, the highest rate of return from fixed deposits since April 2020.

The higher return on fixed deposits is set to be a windfall, particularly for fund managers and large institutions who are the majority investors in fixed deposits in sharp contrast to retail investors who largely hold short-term deposits.

Kenyan banks offer two types of fixed deposit accounts; call deposits and time deposits with each type differing from bank to bank.

Related articles

CBK issues license to 12 new digital lenders; List of the lenders

CBK issues license to 12 new digital lenders; List of the lenders

March 17, 2023
Rowdy crowd stormed Nyong’o’s office, not traders – City Manager

Rowdy crowd stormed Nyong’o’s office, not traders – City Manager

March 17, 2023
Job Openings at Kabete National Polytechnic in 14 Different Sections are Announced.

HOW TO START A CHIPS & CHICKEN CAFE BUSINESS

March 17, 2023
Exposed: Shame of Failed Cooking gas state Project .

Exposed: Shame of Failed Cooking gas state Project .

March 15, 2023

Most banks, nevertheless, require a high minimum balance on the fixed deposit accounts, locking out a significant number of retail investors.

Diamond Trust Bank (DTB) offered a 10 percent return on fixed deposits for three months last year while requiring Sh50 million as the minimum amount.

The growth in the fixed deposit return is mainly premised on guidelines issued by the CBK and adjustments made for inflation and changes in the risk-free rate/Central Bank Rate (CBR).

Last year, however, analysts reckon that pressure on banks to remain competitive, not only among themselves but also with other asset classes, propped up the return on fixed deposits.

“There is an aspect of banks trying to remain competitive and retain customers by offering higher interest rates now that there is a rise in interest earnings.

This is on the back of surging yields in bond auctions coupled with increased earnings from loans and advances to customers,” said Genghis Capital Research Analyst Wesley Manambo.

Across 2022, yields on the 91-day, 182-day and 364-day T-bills were higher by between 1.24 and 1.33 percent to close the year at 8.2, nine and 9.9 percent respectively.

Comparatively, banks have seen an increase in earnings from lending to customers as reflected in the rise of the average lending rate which stood at 12.39 percent at the end of October from 12.12 percent a year earlier.

The 364-day T-bill return was among the top earning asset class of 2022, beating both the average yield from real estate and the Nairobi Securities Exchange (NSE) that returned mean losses of 23.7 percent for the year.

Besides topping the return from other asset classes, banks through fixed deposit accounts have been under pressure to return a real yield to account holders with inflation having soared in the last 12 months.

Year-over-year inflation, for instance, set a new five-year high rate of 9.2 and 9.6 percent in September and October and remains above the government’s target spread of 2.5 to 7.5 percent.

Additional data from the CBK do not distinguish between deposits held in fixed and current accounts.

The data shows the total value of customer deposits held by banks stood at Sh4.56 trillion at the end of 2021 with deposit accounts at 66.32 percent.

KCB & Equity, which are the two largest banks in the country by asset base, held the largest share of customer deposits in the period at 13.9 and 14.3 percent.

Combined, Tier 1 banks hold the bulk of customer deposits at Sh3.39 trillion or an equivalent 74.24 percent of all commercial bank deposits.

Fixed deposit accounts earn a fixed return which does not rise or fall irrespective of fluctuations in other interest rate.

The return on fixed deposits is largely tied to the risk-free rate which is represented by both the CBR and interest rates on T-bills.

Fixed deposits typically have maturities of between one week and five years during which the deposits cannot be redeemed early.

Early withdrawals from fixed deposit accounts usually attract penalties or charges.

SendShare76Tweet47

Related Posts

CBK issues license to 12 new digital lenders; List of the lenders
Business

CBK issues license to 12 new digital lenders; List of the lenders

by News Poa Team
March 17, 2023
Rowdy crowd stormed Nyong’o’s office, not traders – City Manager
Business

Rowdy crowd stormed Nyong’o’s office, not traders – City Manager

by News Poa Team
March 17, 2023
Job Openings at Kabete National Polytechnic in 14 Different Sections are Announced.
Business

HOW TO START A CHIPS & CHICKEN CAFE BUSINESS

by News Poa Team
March 17, 2023
Exposed: Shame of Failed Cooking gas state Project .
Business

Exposed: Shame of Failed Cooking gas state Project .

by News Poa Team
March 15, 2023
UPDATED LIST OF BUSINESS GUIDE BOOKS. GRAB A COPY
Business

UPDATED LIST OF BUSINESS GUIDE BOOKS. GRAB A COPY

by News Poa Team
October 26, 2022

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Popular News

  • UHURU RESIGNS AS AZIMIO CHAIRPERSON.

    UHURU RESIGNS AS AZIMIO CHAIRPERSON.

    225 shares
    Share 90 Tweet 56
  • 250 Schools gazetted as tallying centres to break for half term on Monday 

    337 shares
    Share 135 Tweet 84
  • Mitei takes over as TSC Boss, former TSC Boss Out 

    320 shares
    Share 128 Tweet 80
  • TSC Promises teachers A Salary Payrise Of 60% Starting This Date 

    242 shares
    Share 97 Tweet 61

  • Home
  • Privacy Policy
  • Contact Us

© 2022 News Poa - Crafted with love by Website Hosting Kenya.

  • Login
  • Home
  • Education
  • Politics
  • Business
  • Contact Us

© 2022 News Poa by Website Hosting Kenya.

Welcome Back!

Login to your account below

Forgotten Password?

Retrieve your password

Please enter your username or email address to reset your password.

Log In
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.