This research study investigates the impact of interest rate capping policies on the stability and profitability of commercial banks in Kenya. The study aims to provide insights into the effects of these policies on crucial variables such as interest rate spread, financial institution profitability (Return on Assets - ROA), and regulatory factors (capital adequacy). The quantitative research design uses secondary data from reliable sources like the Central Bank of Kenya. The objectives of the study are to assess the effects of interest rate capping policies on interest rate spread, analyze the relationship between interest rate capping and financial institution profitability, examine the influence of regulatory variables on the effectiveness of these policies, and control for macroeconomic and bank-specific factors in the analysis. The research methodology involves a quantitative approach, utilizing secondary data collected from the CBK website. The study period covers the years before and after implementing interest rate capping policies, allowing for a comprehensive analysis of their impact. Multiple regression analysis evaluates the relationships between interest rate capping policies, interest rate spread, and financial institution profitability. The study's findings indicate that interest rate capping policies have decreased banks' profitability, making them more susceptible to financial instability. The study suggests the importance of alternative policy solutions, such as fostering competition, improving financial literacy, and strengthening consumer protection laws. The study emphasizes the need for a balanced approach to interest rate regulation, considering the broader macroeconomic context, specific banking sector characteristics, and the role of regulatory variables.