KARACHI, Aug 1: The State Bank has changed the definition of `time and demand liabilities’ to facilitate banks. According a circular, the SBP decided to revise the cash reserve requirement (CRR) and definition of `time and demand liabilities’ from Aug four, 2007.
As per new definition, time liabilities will include time deposits with a tenor of one year and above. Accordingly, time deposits with a tenor of less than one year will become part of demand liabilities.
The State Bank has also revised cash reserve requirement (CRR) and said the weekly average of 7pc (subject to daily minimum of 6pc) of total demand liabilities (including time deposits with tenor of less than one year); and time liabilities (including time deposits with tenor of one year and above) will not require any CRR.
The decision of CRR was taken to encourage banks to mobilise long-term deposits.
Banks have failed to attract long-term deposits which restrict them not to extend loans for a longer period.
Average banking spread is still above 7.3 per cent which means the depositors get negative return while banks keep most of the profits.
