KARACHI, Aug 1: The State Bank will pay 1.32 per cent return to the banks and non-bank financial institutions in August on their 20 per cent special foreign currency reserves, according to a SBP press release.

In July banks and NBFIs were getting 1.34 per cent return.

The banks are supposed to keep 5 per cent of their new foreign currency deposits with the State Bank as mandatory cash reserves and 20 per cent as special reserves. Whereas there is no return on mandatory reserves the SBP pays a monthly return on special reserves. The rate of return is linked with LIBOR (London Inter-bank offered rates).

The two basis points cut in the return announced for August is thus attributable to falling LIBOR.