Banks are facing a severe liquidity crunch. The State Bank of Pakistan eased its tight monetary policy and announced a plan to inject Rs270 billion into the banking system.

The Cash Reserves Require-ment (CRR), which banks keep with the SBP as reserve money) has been reduced by two to 6 per cent, and would be further reduced by 100 bps to five per cent from November 15.

The SBP exempted time deposits of on-year tenure and above from the Statutory Liquidity Requirements (SLR).

The inter-bank money rate which was over 30 per cent on October 4, fell to 16 per cent on October 16 because of the central bank’s decision on liquidity generation. According to the weekly statement of position of all scheduled banks for the week ended October 4, 2008, deposits and other accounts of the scheduled banks stood at Rs3,776.758 billion, lower by Rs4.766 billion over preceding week’s figure of Rs3,781.524 billion. Compared with last year’s corresponding figure of Rs3,445.496 billion, the current week’s figure is higher by Rs331.262 billion.

During the current week commercial banks deposits showed a decline of Rs5.094 billion over the week to Rs3,764.586 billion, against preceding week’s Rs3,769.680 billion. Specialised banks deposits stood at Rs12.173 billion, against preceding week’s Rs11.844 billion, a rise of Rs0.329 billion.

Borrowings by all scheduled banks increased during the week over preceding week’s figure. It rose to Rs443.658 billion over preceding week’s figure of Rs434.061 billion, a rise of Rs9.597 billion. Compared to last year’s corresponding figure of Rs398.155 billion, current week’s figure is larger by Rs45.503 billion.

Current week’s increase was due to an increase in the borrowings by commercial banks, which rose to Rs362.292 billion against previous week’s Rs352.714 billion, or by Rs9.578 billion. Borrowings by specialised banks stood at Rs81.366 billion, against preceding week’s figure of Rs81.347 billion, higher by Rs0.019 billion.

Gross advances stood at Rs3,035.160 billion in the week under review, a rise of Rs8.038 billion over preceding week’s figure of Rs3,027.122 billion. Compared to last year’s corresponding figure of Rs2,451.226 billion, current week’s figure is larger by Rs583.934 billion.

In the week under review, advances by commercial banks increased to Rs2,936.246 billion against earlier week’s figure of Rs2,927.198 billion, or by Rs9.048 billion. Advances of specialised banks stood at Rs98.914 billion, smaller by Rs1.01 billion over earlier week’s figure of Rs99.924 billion. Investments of all scheduled banks increased in the week by Rs12.75 billion to Rs943.625 billion against preceding week’s figure of Rs930.875 billion. Compared to last year’s corresponding figure of Rs1,250.571 billion, current week’s figure is smaller by Rs306.946 billion. In

In the current week, commercial banks investment rose to Rs931.245 billion, from earlier week’s Rs918.369 billion, or by Rs12.876 billion. Specialiszed banks investment stood at Rs12.380 billion, against preceding week’s Rs12.506 billion, smaller by Rs0.126 billion.

Cash and balances with treasury banks of all scheduled banks increased by Rs7.515 billion during the week to stand at Rs474.408 billion against earlier week’s Rs466.893 billion. Current week’s figure was higher by Rs130.232 billion compared to last year’s corresponding figure of Rs344.176 billion.

In the current week, the figure for commercial banks stood at Rs471.029 billion against preceding week’s figure of Rs463.763 billion, a rise of Rs7.266 billion, while of specialized banks it stood at Rs3.380 billion over previous week’s Rs3.129 billion.

Total assets of scheduled banks stood at Rs5,123.004 billion, larger by Rs14.688 billion, over preceding week’s figure of Rs5,108.316 billion. Current week’s figure was higher by Rs492.311 billion compared to last year’s corresponding figure of Rs4,630.693 billion. Meanwhile, commercial banks assets, in the current week, stood at Rs5,000.349 billion, larger by Rs13.717 billion over previous week’s figure of Rs4,986.632 billion. Specialized banks assets rose to Rs122.655 billion, or by Rs0.971 billion over previous week’s Rs121.684 billion.