KARACHI, Feb 12: Most banks overcame their liquidity problems on Tuesday as the State Bank pumped in Rs18.3 billion in inter- bank market.

The central bank made the injection through two-week and four-week reverse repo of treasury bills at an open market operation.

The SBP said it injected Rs8.5 billion for two weeks at 6.25 per cent and Rs9.8 billion for four weeks also at the same rate. The injection is expected to keep banks liquid enough to finance withdrawals from deposits ahead of Eidul Azha likely on February 23.

Bankers said the market that had discounted by Rs17.4 billion on Monday managed to square after the OMO and no discounting took place on Tuesday: Overnight call rate crashed to 5.5 per cent as most banks had overcome their liquidity problem by the end of the day.

Till Monday, call rate remained pegged at 8.95 per cent against the discount rate of 9 per cent. Even on Tuesday morning the rate stood firm at 8.5 per cent and after touching an intra-day low of 5.5 per cent it shot up again to the same level.

Bankers said though the market had become pretty square after the injection of Rs18.3 billion some banks were still short of liquidity in terms of reserves averaging needs.

Banks are supposed to keep 5 per cent of their deposits as statutory cash reserves with the SBP on weekly basis. But on any given day their reserves could fall up to 4 per cent of total deposits. That is why some banks may remain short of liquidity even when the market as such has squared itself.

Bankers said Tuesday injection of Rs18.3 billion was larger than what they were expecting even though the OMO had attracted total offers worth Rs21.8 billion by the banks.

“This time again the SBP has surprised the market by making a larger than expected injection,” said treasurer of a major local bank.

“We were expecting a maximum injection of Rs8-10 billion. But the SBP surprised us by injecting Rs18.3 billion,” the banker said.

Central bankers attributed a larger than expected injection to the fact that the OMO had attracted Rs21.85 billion worth of offers. “If the market was not that tight why on earth the banks would be ready for bidding in May 2002.

It was stated that due diligence process by four pre- qualified parties for National Investment Trust (NIT) was in its final stage. The transaction was being targeted for bidding in April 2002.

The PC board also gave approval to the Privatization Commission Employees (Appointment & Terms & Conditions of Service) Regulations, 2001.

The Board members Firozuddin A. Cassim, Mahmood Faruque, Moin M. Fudda, S.M. Naseem, Ahmad Waqar member/secretary PC, acting governor State Bank of Pakistan, federal secretaries and senior officials were also present in the meeting.