Kenyans’ savings in current accounts cross Sh1.7 trillion
Savings in current accounts grew by Sh98.1 billion in the first seven months of the year despite relatively low returns offered by banks on demand deposits.
Data from the Central Bank of Kenya (CBK) reveal that cash in easily accessible savings accounts stood at Sh1.7 trillion in July representing a Sh38.9 billion growth compared to June.
Demand deposits — cash in current accounts — have grown faster compared to time deposits indicating the increasing spending needs by Kenyans, who prefer having their money in easy-to-access accounts.
The savings attract a lower interest compared to time deposits. Official data reveals that commercial banks paid an average 3.97 percent on demand deposits compared to 8.1 percent return offered on term or fixed deposits.
All forms of deposits recorded a significant growth with fixed deposits rising to Sh1.76 trillion on the back of increased interest offered by banks rivaling other investment classes.
Lenders offered an average return of 8.1 percent for long-term deposits in July being the highest since April 2018 when the returns averaged 8.17 percent.
The interest offered by banks beat inflation that stood at 7.3 percent for the first time in 15 months, signifying lenders’ intentions to attract cash-rich individuals.
The difference between the two, which is the real interest rate, stood at 0.8 percent in the month from a negative return in the past 15 months.
The returns on deposits are a result of the banks incentivising depositors to attract huge amounts of money for onward lending and also to government lending as rates for government securities hit new highs.
Return on the one-year treasury bill hit 15 percent last week, marking the highest return in almost eight years.
The high rates on government papers are despite the downward revision of the domestic borrowing target to Sh415.3 billion from the initial Sh587.4 billion.
Foreign currency savings in banks recorded a 35 percent jump in the January to July period to close at Sh1.2 trillion.
The growth has largely been attributed to the weakening of the shilling which has shed 19.6 percent of its value since the year began. BY BUSINESS DAILY
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