Bank ordered to recalculate Sh300m loan in cap row

A judge has ordered I&M Bank #ticker:I&M to recalculate a Sh300 million loan advanced to a Nairobi-based manufacturer of banned plastic bags amid claims the lender charged interest rates above the caps.

Justice Waringa Muigai stopped the bank from auctioning the properties of Hi-Plast Limited until the loan is calculated afresh and new valuation of the assets done.

Hi-Plast lawyer Eddy Orinda accused the bank of inflating interest payment to Sh53 million, claiming the loan was priced above the legal cap of four percentage points above the central bank rate.

The cap on interest rates was put in place in 2016 by MPs concerned about high rates charged by banks. Bankers in breach face a fine of more Sh1 million or jail term in excess of one year.

Justice Muigai directed Hi-Plast to undertake valuation of the two suit properties within 21 days and serve the second creditor before the properties can be sold.

Hi-Plast ran into financial trouble after the government banned the use, manufacture and importation of plastic bags for household and commercial packaging from August 28, 2017.