KARACHI: The State Bank injected Rs1.4 trillion into the banking system on Monday.

The liquidity gap in the interbank market has remained for more than a year, but the situation looks acute with the outset of this fiscal year as massive investment by banks in government papers has aggravated the situation, bankers said.

The outflow of cash was also noted this month due to withdrawal for buying sacrificial animals.

The State Bank reported that it injected Rs1.374tr for two days at the rate of return of 6 per cent. These huge injections enabled banks to invest more in government papers. Meanwhile, the government is setting new records of borrowing from scheduled banks.

The strategy, termed ‘anti-growth’, has been criticised by independent economists and analysts who consider it a deviation from the core purpose of the banking institution: directing idle cash (savings lodged in deposits) to the most productive sectors of the economy.

Published in Dawn, September 29th , 2015

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