KARACHI, Oct 13: The State Bank injected on Thursday Rs4.6 billion into the banking system through reverse repo to ease the liquidity crunch.    The SBP conducted an open market operation (reverse repo) and bought back treasury bills just for two days at the rate of 8.2 per cent, which was slightly lower than the prevailing overnight rate of 8.5 per cent on Thursday and discount rate of 9 per cent. This was the second injection in this week. On Monday Rs19.2 billion had been pumped into the banking system.

The market still short of liquidity as it offered to sell papers worth Rs11.6 billion but the central bank only bought back papers worth Rs4.6 billion, which was almost the same amount of Rs4.5 billion it sucked in on Wednesday.    Bankers said that the injection would ease the liquidity shortage to some extent but it would not be sufficient to meet their cash requirement for weekly settlement with the SBP on Friday. They might have to look for discounting as they did last week. Banks borrowed Rs35 billion from the SBP discount window on Friday.

They said that banks had been facing acute shortage of liquidity for last couple of weeks owing to massive Ramazan related withdrawals that put their liquidity position in difficult situation. Billions of rupees were withdrawn from the banks a day before Ramazan to avoid deduction of Zakat.

Bankers said either more reverse repo would be conducted or banks would have to go for sizeable discounting by the beginning of next week.