KARACHI, May 9: The State Bank issued on Friday a master circular which spells out guidelines for the maintenance of statutory cash reserve by the banks and the financial institutions with the SBP.

Announcing that this circular supersedes all previous instructions, the State Bank has fixed a penalty of Rs69 per one lakh default in maintenance of cash reserve requirement or part thereof per day on the amount by which the balance with the SBP falls short of the required balance. If the shortfall continues in the subsequent week or thereafter, the penalty shall be increased to Rs86 per lakh default or part thereof per day.

The banks and the DFIs, in accordance with SBP instructions, issued on December 16, 2000 have been asked to maintain a weekly balance of 5 per cent of their total Time and Deposit liabilities subject to daily minimum of 4 per cent.

Under the fresh guidelines issued on Friday, the banks and DFIs have been advised that while calculating the average weekly balance of 5 per cent and the daily minimum balance of 4 per cent, the demand and liabilities at the close of business every Saturday (and if Saturday is a closed holiday, on the previous working day) shall continue to be taken into account.

A week shall invariably be of seven days from Saturday to Friday irrespective of the holiday or holidays. In case any of the days from Saturday to Friday happens to be a holiday the balance maintained at the close of preceding working day shall continue to be taken into account for the purpose of calculating the average weekly balance. Further, total demand and time liabilities will be strictly applied from Saturday to next Friday.

In calculation of the cash reserve requirement, the balances maintained as per books of State Bank shall be taken into account.

For levy of penalty on default in maintaining average weekly balance of 5 per cent, the minimum balance required to be maintained during a week shall be determined by multiplying 5 per cent of the time and demand liabilities with total seven week days and compared with the aggregate of the balances maintained during the week with the SBP. If the aggregate balance maintained during a week is below the minimum balance required to be maintained, the bank shall render itself liable to pay the penalty. The penalty shall be levied on the shortfall between the aggregate balance maintained during a week and the aggregate minimum balance required to be maintained over the seven days.

Banks have been warned that if anyone of them maintains the weekly average balance of 5 per cent but fails to maintain a daily minimum balance of 4 per cent of the total time and demand liabilities at the close of business on any day, such bank shall also render itself liable to pay the penalty.