Equity to Shift Existing Variable-Rate Loans to Central Bank Rate Model

Equity Bank has announced a major change that will affect customers with existing variable-rate loan facilities, aligning its pricing structure with new guidelines issued by the Central Bank of Kenya (CBK).

In a public notice to customers, the lender confirmed it has adopted the Revised Risk-Based Credit Pricing Model issued by the CBK, which takes effect on 1 December 2025. As a result, thousands of borrowers will see their loan reference rates change early next year.

Under the new framework, Equity Bank will replace its internal benchmark, the Equity Bank Reference Rate (EBRR), with the Central Bank Rate (CBR) for all existing Kenya shilling variable-rate loans. The transition is scheduled to take effect on 28 February 2026.

“The reference rate for all existing KES variable-rate loan facilities will transition from the Equity Bank Reference Rate (EBRR) to the Central Bank Rate (CBR),” the notice reads.

The bank clarified that the change will apply to customers whose loans were taken out on or before 30 November 2025. Going forward, the interest charged on such facilities will be calculated using a new formula:

Loan Interest Rate = Central Bank Rate (CBR) + Customer-Specific Premium (K).
According to the notice, this means loan repayments will now fluctuate in line with movements in the CBR, which is periodically reviewed and published by the CBK. “The applicable rate on all local-currency variable rate loan facilities will adjust to reflect changes in the prevailing CBR,” Equity stated.

While the move is intended to enhance transparency and standardization in credit pricing across the banking sector, it also exposes borrowers more directly to changes in monetary policy, particularly when the CBK adjusts interest rates to manage inflation or economic growth.
Equity Bank urged affected customers to seek clarification where necessary, advising them to contact their relationship managers, visit branches, or call its contact centre. The bank reassured customers that it remains “committed to supporting you through this transition period.”

The shift places Equity among banks implementing CBK-led reforms aimed at creating a more risk-sensitive and predictable lending environment, even as borrowers prepare to adjust to a more dynamic interest rate regime.