KARACHI, Dec 8: The State Bank of Pakistan (SBP) again failed to pick up the liquidity, it left a day earlier, as the banks continued to seek higher returns on the treasury bills on Thursday.

A tussle between the banks and the State Bank continued for the second consecutive day for return on security papers. The SBP wanted to lift the liquidity of over Rs19.6 billion through the Open Market Operation (OMO) but the banks again asked for higher returns.

The SBP could hardly get Rs2.5 billion from the market at the return rate of 8 per cent. However, despite high inflow of Rs35 billion, the market remained tight and most of the trading was made at over 8 per cent.

Market experts said that most of the liquidity, which came in the market, belonged to only two banks and they were in a sound position to dictate their demand for higher return.

They said that the situation about the market liquidity would be clearer on Friday when these two banks would have to use their excess liquidity. It might bring down the overnight rates to 4 to 5 per cent after a long time.

However, they also opined that the SBP would not allow the presence of huge liquidity as it was following a tight monetary policy and is extremely cautious about the high inflation.

“I believe that SBP would return with OMO and raise the left-over liquidity on Friday,” said an analyst adding that it was also the last day for banks to settle their weekly cash reserve requirement with the SBP.

Banks tried to get higher return on T-bills during the auction held on Wednesday. They intend to invest money for longer period on fears that interest rates would fall within a year.