KARACHI, Oct 10: The State Bank on Monday injected over Rs19 billion into the banking system that witnessed heavy discounting last week due to severe liquidity crunch.

The SBP conducted reverse Open Market Operation (OMO) and injected Rs19.2 billion to save the market from shortage of liquidity. Due to heavy withdrawal from banks, primarily to avoid Zakat deduction, the banking system witnessed a serious scarcity of liquidity.

The shortage pushed the inter-bank money rates very high and the overnight rate touched 8.9 per cent per annum, just below the discount rate of nine per cent.

However, the banks were still unable to meet their liquidity requirement as they had to go for discounting of Rs35 billion last Friday. On Monday, the overnight rate remained at 8.9 per cent, which forced the SBP to inject liquidity into the system.

However, the SBP injected this liquidity just for three days in the wake of maturity of about Rs20 billion scheduled for Thursday.

Bankers said the liquidity shortage would persist despite inflow of Rs20 billion, as the outflow of reverse Repo would again push the banks to the same position of last Friday.

Meanwhile, the State Bank announced the auction of treasury bills and set a target of Rs5 billion. The SBP would sell three-month, six-month and 12-month treasury bills on Thursday.

Experts believe that cut-off yield on these T-bills will not be changed. However, some analysts see some minor adjustments in the six-month paper.