KARACHI, April 24: Bank Alfalah Ltd. had to invest more than Rs17 billion in treasury bills and Pakistan Investment Bonds last year because of higher liquidity within the bank as well as in the banking system.

At end-December 2002 the bank was holding Rs9.6 billion worth of T-bills and Rs8 billion worth of PIBs: At end-December 2001 this local private bank was holding Rs3 billion in T-bills and less than a billion rupees in PIBs.

A senior bank official said the bank had to invest four times more in the government securities to avoid booking opportunity cost on the money that would have remained unemployed — if not invested in T-bills and PIBs. But this does not mean that the bank made no effort to give more credit to the private sector.

The advances of the bank shot up to Rs28 billion plus at the end-December 2002 from Rs19 billion at end-December 2001 — recording more than 47 per cent increase. The quadrupling of investment in T-bills and PIBs despite such a big increase in advances indicate that the liquidity level of the bank remained unusually high. The increase of the deposit base of the bank to Rs51.6 billion at end-December 2002 from Rs30.2 billion at end-December 2001 does explain this.

Bank officials say Alfalah being one of the banks that handle home remittances of overseas Pakistanis is naturally positioned to get a share of the market liquidity. The inter-bank market remained excessively liquid last year — and continues to be so — on the back of increased inflow of home remittances.