(Bloomberg) -- A Kenyan parliamentary committee rejected the National Treasury’s proposal to repeal a contentious law that caps interest rates, despite the central bank governor opposing it and a High Court ruling against it.

The National Assembly will schedule a vote on the finance committee’s recommendation to keep the law capping what commercial banks can charge for loans at 4 percentage points above the central bank benchmark interest rate. In defense of the law, the Finance Committee said “the banking industry continued to be profitable,” according to a report authored by the lawmakers.

Governor Patrick Njoroge, who criticized the law partly because it infringes on the central bank’s role of monetary-policy formulation, said it’s a “temporary deviation,” from markets determining rates. It will be removed as soon as possible, ” Njoroge said Wednesday at a conference in the capital, Nairobi.

Lawmakers approved the law in 2016 to fulfill an election-campaign pledge by President Uhuru Kenyatta to improve lending terms for borrowers, against the advice of the central bank and the National Treasury. Private-sector credit growth instead slowed as banks preferred lending to the government.

A Nairobi High Court in March annulled the law but suspended enforcement of the ruling for a year to give lawmakers time to review the legislation. While the Treasury recommended nullification of the law in its Finance Bill 2019, Kenyan lawmaker Jude Njomo proposed changes that only clarify the extent to which the banks can price loans.

To contact the reporters on this story: David Herbling in Nairobi at dherbling@bloomberg.net;Eric Ombok in Nairobi at eombok@bloomberg.net

To contact the editors responsible for this story: David Malingha at dmalingha@bloomberg.net, Helen Nyambura

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