The Court of Appeal has ordered Stanbic Bank to refund over KSh 10 million to a former customer.
Santowels Ltd, a sanitary towels manufacturer sued the financial institution for overcharging interest loans to loans advanced years ago.
In their ruling, a three-judge bench argued that interests charged to Santowels was above what had been set by its regulator, the Central Bank of Kenya (CBK) in 1997.
Justices Hannah Okwengu, Asike-Makhandia and Jamila Mohammed ruled that Stanbic bank adjusted interest rates without the approval of the Minister of Finance.
The bank charged the interest rates at 19.5 percent.
In this case, the bank was required to seek approval from the Minister due to the variation or interest adjustments from time to time.
“The respondent was similarly governed by Section 44 of the Banking Act, which provided that no institution was allowed to increase its rate of banking or other charges except with the prior approval of the Minister,” the judges ruled.
Stanbic bank defended itself saying it executed its contractual duties with all due diligence and in accordance with the usual banking practices and customs.
Stanbic Bank Kenya Limited (SBK) was established in 1958 when Ottoman Bank incorporated its first subsidiary in the region.
This was after acquiring Torr’s Hotel from Ewart Grogan and converting it to its head office.
In 1969, Ottoman Bank sold its Kenyan operations to National and Grindlays Bank (NGB Kenya) making its exit from the East African market.
In 1970, the Kenya government and NGB entered into an agreement that saw the government takeover full control of NGB Kenya with the exception of the two branches inherited from Ottoman Bank, one in Nairobi while the other in Mombasa.
NGB Kenya was then rebranded to Kenya Commercial Bank while the two separated branches became Grindlays Bank International (Kenya) Limited (GBI).
Shareholding in GBI was 60 per cent by NGB London and 40 per cent by the government of Kenya.
Later in November 2007, the shareholders of Credit Finance Corporation (CFC) at an Extraordinary General Meeting approved the merger of CFC Bank and Stanbic Bank.
This was the largest banking merger in Kenya’s history.
