The Supreme Court has ruled that banks and financial institutions must seek approval from the National Treasury Cabinet Secretary before increasing interest rates on loans and facilities.

The declaration follows a legal battle between Stanbic Bank and Santowels Limited, which clarified the regulatory scope of lenders’ discretion on rates.

The dispute was centered on whether banks could unilaterally vary interest rates based on their contractual terms with clients or if such changes were subject to regulatory oversight.

“A declaration do hereby issue that interest rates on loans and facilities advanced by banks/financial institutions are subject to the regulatory process under Section 44 of the Banking Act. In that, such banks/financial institutions are required to seek the approval of the Cabinet Secretary responsible for matters relating to Finance prior to increasing interest rates on loans and facilities advanced.”

Stanbic Bank had advanced loan and overdraft facilities to Santowels Limited between 1993 and 1997, with terms allowing for interest rate variations.

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However, the lawsuit resulted from a dispute over the applied interest rates. Section 44 of the Banking Act requires banks to get permission from the Cabinet Secretary for Finance before increasing interest rates.

This was decided by both the High Court and the Court of Appeal.

Stanbic Bank attempted to take the case to the Supreme Court after being dissatisfied with the Court of Appeal's decision.

They claimed that the interpretation of Sections 44 and 52 of the Banking Act was significant to the public.

However, the Supreme Court rejected Santowels Limited's cross-appeal, which disputed the overcharged interest the Court of Appeal granted and Stanbic Bank's appeal.