The Central Bank of Kenya (CBK) had mopped up a daily average of Sh62.85 billion until Monday since the year began amid excess liquidity from banks which are grappling with rising deposits from customers in an environment of slow growth in lending activities.
The liquid money market has also seen higher volumes offered in recent Treasury bills auctions—a segment dominated by banks— and an increase in the lenders’ excess cash holding above the 3.5 percent cash reserve ratio to Sh57 billion.
Fund managers have also contributed to the growing deposits as they place part of their Sh680 billion assets under management (AUM) in fixed deposit accounts as at September 2025.
The unit trusts are required by law to invest their money market funds in short-term government securities and deposit accounts. Their bank deposits and government paper holdings amounted to Sh588 billion in the period, equivalent to 86 percent of the total AUM.
The pile of bank deposits and cash in circulation grew by 9.8 percent to a record Sh6.03 trillion in the 12-months to December 2025.
Demand deposits jumped by the highest margin of Sh255.5 billion to Sh1.97 trillion in the period, compared to an increase of Sh50.6 billion in 2024.
Term or fixed deposits rose by Sh166.8 billion to Sh2.277 trillion, while cash outside banks was up by Sh30.4 billion to Sh323.2 billion. Foreign currency deposits grew by Sh89.3 billion to Sh1.347 trillion.
Meanwhile, credit to the private sector rose 5.9 percent to Sh4.085 trillion in the period, trailing lending by banks to the government which expanded by 15.4 percent to Sh2.29 trillion on a net basis.
The banks have thus been competing to place cash in government securities due to the slow uptake of new loans by customers, despite the recent cuts in interest rates.
In last week’s T-bills auction, investors offered a record Sh100.4 billion against a target of Sh24 billion, although the CBK took up less than half of this amount at Sh41.4 billion.
The previous five auctions had raised total Sh315.1 billion bids, or Sh63 billion on average weekly. The February Treasury bond that saw the government reopen a pair of reopened 15-year and 25-year papers raised bids of Sh213.74 billion against a target of Sh50 billion, the highest volume of offers on a non-infrastructure bond.
“In addition to the deposits, the CBK has also injected shillings through its dollar buying activity, and it therefore needs to mop up in order to keep the foreign exchange market stable,” said a forex trader in a commercial bank.
Market data from the CBK shows that it has mopped up a cumulative Sh2.765 trillion from the banking sector this year, through repurchase agreements and term auction deposits (TADS). In the whole of 2025, the cumulative mop-ups stood at Sh9.18 trillion.
The CBK utilises several open market operation tools to regulate the liquidity in the market, including the repos and reverse repos, and term auction deposits.
Repos entail a sale of government securities held by the CBK to banks, which effectively reduces the level of deposits the lenders hold with the regulator, thus cutting their ability to lend new loans onto the economy. The CBK then repurchases the securities after three to seven days.
Reverse repos work the other way, injecting liquidity into the banking system by allowing banks to borrow from the CBK using their holdings of bonds as collateral. Reverse repos run for periods of between seven and 14 days.
Term auction deposits work in the same way as repos, but without the use of a collateral, and are typically available for longer durations of between 14 and 28 days.
