KARACHI, Nov 12: The State Bank on Saturday injected Rs26.280 billion into the banking system which had been running short of liquidity for more than a month.
Banks had been using discount window of the State Bank since Ramazan to meet their short-term requirement.
Last week, the SBP sucked in Rs7 billion through sale of treasury bills and injected Rs11 billion the same day through reverse repo.
On November 1, the banks went for discounting of Rs10 billion while the SBP injected Rs5 billion the same day. The liquidity shortage and discounting became a regular feature as in the first week of October the banks borrowed Rs49 billion from the discount window.
On the other side, banks were investing in long-term treasury bills like one year T-bills. The investment in treasury bills by the banks reflected their fear that interest rates would come down in the wake of tight monetary policy being pursued by the central bank.
The SBP conducted an Open Market Operation (OMO) on Saturday while for banks Friday was more crucial day in terms of higher liquidity requirement as they had to maintain cash reserves requirement with the SBP. Analysts said that the banks were extremely short of liquidity and on Monday next they were likely to face crisis like situation because of heavy cash demand.
They said the cash outflows from banks used to be massive on Mondays. Bankers said that late OMO on Monday could have been a wrong decision while the OMO on Saturday should be appreciated.
The SBP which injected a huge amount received even larger offers of Rs35.580 billion showing the banks’ need of liquidity.
