July 23, 2006	Sunday	Jumadi-ul-Sani 26, 1427

KARACHI, July 22: The State Bank has raised the Cash Reserve Requirement (CRR) for Islamic banks but kept the Statutory Liquidity Requirement (SLR) unchanged.

According to a circular issued here on Saturday, the SBP had decided to revise the CRR for Islamic banks (IBs) and Islamic banking branches (IBBs), with effect from July 22, 2006.

The IBs and IBBs will maintain the weekly average of seven per cent CRR (subject to daily minimum of four per cent) of total demand liabilities (including time deposits with tenor of less than six months) and weekly average of three per cent (subject to daily minimum of one per cent) of total time liabilities (including time deposits with tenor of six months and above).

However, the IBs and IBBs will continue to meet the SLR of eight per cent (excluding CRR) of their time and demand liabilities.

The SBP on July 18 issued a circular and increased both the CRR and SLR of banks and DFIs by two per cent and three per cent, respectively. This decision compelled the banks and DFIs to engage 25 per cent of their money with the SBP. The move was to keep a tight control over monetary growth which creates inflation and make it difficult for the SBP to keep inflation up to 6.5 per cent during 2006-07, especially in the wake of expansionary budget of the government.