KARACHI, Nov 10: The State Bank on Monday injected Rs11.3 billion into the banking system through reverse repos of treasury bills at an open market operation.

Banks are facing a temporary liquidity crunch after making a huge investment of Rs26.6 billion in long-term Pakistan bonds last week — and also due to pre-Eid withdrawals from bank deposits.

The central bank injected Rs5.1 billion for one week at 1.85 per cent and Rs6.2 billion for two weeks at 2 per cent. But the injection fell short of the market demand for extra cash. This demand that reflected in the offers for the reverse repos of T-bills totalled Rs21.7 billion against which the SBP accepted Rs11.3 billion offers and rejected the rest.

The central bank has been injecting extra cash into the banking system to keep it liquid during Ramazan so that they can finance withdrawals from bank accounts for pre-Eid buyings. The money withdrawn eventually flows back into the banking system but it takes several weeks.

This is the second injection of liquidity made by the SBP during Ramazan. Earlier on November 6 it had injected Rs7.35 billion — Rs5.85 billion for one week and Rs1.5 billion for two weeks. Thus the central bank has injected Rs18.65 billion into the banking system so far.

Senior bankers say it may have another one or two injections before the holy month is over on November 25 or 26 subject to sighting of the moon.