NCBA Bank has announced that it will increase its lending rate from 10.5 per cent to 13 per cent from August 7, after the Central Bank of Kenya (CBK) hiked the base rate to contain inflation last month.

This means customers will have to pay more for loans when most are slowly recovering from the impacts of the election and Covid-19 lockdown measures.

After Equity Bank raised its lending rate, NCBA is the second financial institution to do the same.

CBK's Monetary Policy Committee (MPC) raised the base lending rate last month from 9.5 per cent to 10.5 per cent.

The decision was made amid strong inflation, which the Kenya National Bureau of Statistics (KNBS) reports increased to 8% in May from 7.9% in April.

A 10.2 per cent increase in the price of food and non-alcoholic beverages and a 9 per cent increase in the price of housing, water, electricity, gas, and other fuels all contributed to high inflationary pressure.

“The Committee noted the sustained inflationary pressure, the increased risks to the inflation outlook, the elevated global risks, and their potential impact on the domestic economy,” CBK Governor Kamau Thugge said in a statement.