Banks will adapt. I believe banks shot themselves in the foot but they have been around [worldwide] for 100s of years...
1) By reducing lending to deadbeats [at higher interest rates] they will concentrate on stronger firms/borrowers. NPLs will drop. Staff numbers will drop.
*Better borrowers need less hand-holding, following up, letters, phone calls, etc. Then no need to involve lawyers, collection agents, etc*
2) Larger borrowers have more complex requirements BUT they also borrow larger amounts. The amount of work required to lend Shs 100mn is not that much more than Shs 1mn. The real margin can be maintained at a fair spread.
3) Technology: This will help bank reduce the rate of defaults by flagging bad borrowers. Or help avoid them altogether.
4) Often, T-Bills and T-Bonds yield more than CBR+4%. So banks have an outlet for their funds.
5) Assuming "current" accounts aren't affected by the 70% of T-Bill rate interest then banks will make Savings Accounts unattractive esp for smaller savers. Raise the minimum to 100,000/- and you (sadly) wipe out many small savers.
6) Lower NPLs = lower capital requirements as Basel 3 moves to Capital Requirements based on RISK of the loan book.

Finally, new products and fees. They will charge higher commitment fees, ATM charges, RTGS charges, custody fees, cheque cashing fees, etc.

Equity leads the rest of the banks in growing these other sources of income.

For an example of a tightly controlled banking sector look at Ethiopia.

The Ethiopian banks [no foreign ownership is allowed] are hide-bound. Some [the newer or private] use newer technology, etc or offer more services BUT overall their lending is limited to a few borrowers. In Kenya, the banks lend to a diverse group of Kenyans. Yes, not all the deals work out as the NPLs show but private banks lending to the private sector allows for an increasing share of the GDP in private hands. No need for bailouts. If private firms collapse = they collapse.

Banks need to IMPROVE their lending systems/processes to identify high risk borrowers before the banks loan out the funds. They should NOT pass on the premium of poor borrowers onto good borrowers. That's what pisses off many borrowers.

If the Bill becomes Law as it is... there will be consolidation since the niches served by some banks will disappear or shrink.

@Obiero
This was coming.
Lack of strategy.You can't grow a bank by cost cutting measures

B-U-L-L-S-H-I-T

Lol 300billion capital?....no bank even has half that.