Overview
The Central Bank is the banker for the government, encompassing the national government, government ministries, departments & agencies (MDA’S) and county governments. These institutions hold a variety of accounts with the Central Bank, depending on their needs, which allow them to receive deposits and make payments. The Central Bank monitors these accounts to ensure that the institutions aren’t at risk of overdraft, and also advises the institutions on financial matters.
The Central Bank of Kenya was established in 1966 to, amongst other functions, act as banker to the Government as stipulated under Section 4(a) of the Central Bank of Kenya Act Cap 491.
CBK Act CAP 491 states as follows:
4A. (1) Without prejudice to the generality of section 4 the Bank shall:
(a) formulate and implement foreign exchange policy;
(b) hold and manage its foreign exchange reserves;
(c) license and supervise authorised dealers;
(d) formulate and implement such policies as best promote the establishment, regulation and supervision of efficient and effective payment, clearing and settlement systems;
(e) Act as banker and adviser to, and as fiscal agent of the Government; and
(f) Issue currency notes and coins
In subsection (1) (d), “clearing” means the process of transmitting, reconciling and confirming payments prior to settlement, including the netting of payments and the establishment of net positions for settlement; “payment system” means a system of instruments, procedures and rules for the transfer of funds among system participants; “settlement” means an act that discharges financial obligations between two or more parties.
Banking Services To The
Government
The Central Bank is the banker for the government, encompassing the national government, government ministries, parastatals and county governments. These institutions hold a variety of accounts with the Central Bank, depending on their needs, which allow them to receive deposits and make payments. The Central Bank monitors these accounts to ensure that the institutions aren’t at risk of overdraft, and also advises the institutions on financial matters.
The Central Bank of Kenya maintains various accounts for Government Ministries, which include:
- Recurrent Accounts
- Development Accounts
- Deposit Accounts
- Treasury Accounts
- Projects Accounts
- Donor funded Accounts
- Public Entities accounts i.e., Parastatals
Government Departments that hold accounts in the Central Bank for purposes of funding by the Exchequer Accounts include :
- The Judiciary
- Public Prosecution
- Kenya Anti-Corruption Commission (KACC)
- Independent Electoral and Boundaries Commission (IEBC)
- Teachers Service Commission (TSC)
- Public Service Commission of Kenya
- Commission on Revenue Allocation (CRA)
- Truth, Justice and Reconciliation Commission (TJRC)
- Parliamentary Service Commission (PSC)
Kenya Revenue Authority
As a parastatal, the Kenya Revenue Authority (KRA) houses its main tax collection account at the Central Bank. While select commercial banks are authorised to hold collection accounts on behalf of KRA, allowing the general public to conveniently make tax payments, money collected in those accounts is deposited into the main account at the Central Bank.
Because the tax collection account is held at the Central Bank, funds deposited into the account cannot be interfered with. Once payments are deposited into the KRA account, they can only be transferred with permission from the Ministry of Finance.
Management of Kenya Revenue Authority Accounts
As a government agency, the Kenya Revenue Authority (KRA) houses its main tax collection accounts at the Central Bank. While select commercial banks are authorised to hold collection accounts on behalf of KRA, allowing the general public to conveniently make tax payments, money collected in those accounts is deposited into the main accounts at the Central Bank.
Because the tax collection accounts are held at the Central Bank, funds deposited into the accounts cannot be interfered with. Once payments are deposited into the KRA accounts, they can only be transferred with permission from The National Treasury.
The Central Bank holds the following categories of accounts for Kenya Revenue Authority:
- Tax Refunds Accounts – These accounts are used by KRA to make refunds to tax payers who either have overpaid tax, or have paid while they are exempted from paying.
- Tax Collection Accounts – These accounts contain all main tax collection acounts.
- Tax Refunds Accounts – These accounts are used by KRA to make refunds to tax payers who either have overpaid tax, or have paid while they are exempted from paying.
- Agency Collection Accounts – the KRA Act allows the Authority to act as an agent for body corporates, including to collect revenues on their behalf for the purpose of achieving economies of scale.
For this reason a number of government agencies have appointed KRA their agent for collecting revenue due to them.
On a daily basis, balances in the tax collection accounts are given to the National Treasury to enable them make timely decisions on revenue allocations for voted expenditure.
Banking Services to the County
Governments
These accounts are used to facilitate receipt and payment of funds in accordance with the Public Finance Management Act.
The County Governments, which comprise the County Executives and County Assemblies also maintain various accounts at the Central Bank of Kenya which include:
- Recurrent Accounts
- Development Accounts
- Deposit Accounts
- County Projects Accounts
- County Assembly Accounts
Banking Services to Commercial Banks
and Microfinance Banks
The Central Bank provides the following services to Commercial Banks:
- Maintains accounts to enable commercial banks to effect and receive payments from other commercial banks, the government and other external financial institutions in Kenya shillings and foreign currency.
- Provides a Real Time Gross Settlement (RTGS) system to enable commercial banks settle their interbank obligations on a real time basis.
- Provision of the Daily Interbank Money Market Report, this is a summary of daily borrowings among commercial banks in the interbank market and guides the industry in pricing interbank loans.
- Hosts the Kenya Bankers Association’s Automated Clearing House (ACH).
- Provides liquidity through the Intra-day Liquidity Facility (ILF) and the Overnight Loan Facility. These loans are secured by government securities.
- Facilitates completion of commercial banks and microfinance banks external audits by providing confirmation of balances in their clearing accounts and cash reserve ratio accounts in our books to their external auditors.
Banking Services to the East African Community
The Central Bank also provides some services for the East African Community currently comprising of Kenya, Uganda, Tanzania, Rwanda and Burundi, facilitating payments, including the exchange of currencies, between countries.
Services to East Africa
The East African Community (EAC) is the regional inter-governmental organisation grouping the Republics of Burundi, Kenya, Rwanda, Tanzania, and Uganda with its headquarters in Arusha, Tanzania. The Treaty for Establishment of the East African Community was signed on Nov. 30, 1999, and entered into force on July 7, 2000, following its ratification by the original three partner states – Kenya, Tanzania and Uganda.
The Republics of Rwanda and Burundi acceded to the EAC Treaty on June 18, 2007, and became full Members of the Community with effect from July 1, 2007.
The Central Bank of Kenya provides the following services for the EAC Central banks:
- Maintenance of EAC Central Banks’ A/Cs
- Facilitating of payment instructions
- Confirmation of balances in their accounts held at The Central Bank of Kenya
- Provision of Specimen Signature Mandate cards for nomination and authorisation of A/C
CBK Online Banking
The Central Bank offers Online Banking services to government ministries, departments & agencies, County Executives & County Assemblies, as well as Commercial & Micro-Finance Banksallowing them to monitor and manage their accounts online.
