KARACHI, March 25: The State Bank on Thursday drained out Rs11.5 billion from the banking system through repo sale of treasury bills for up to two weeks to keep liquidity levels within the desired limits.

The central bank did this at an open market operation conducted specially for this purpose. It sucked in excess liquidity from banks to meet some end-March monetary targets as part of a broader strategy to dampen inflationary expectations.

Senior bankers said the central bank sucked in Rs11.5 billion through one-week and two-week repo sale of treasury bills at a maximum rate of two per cent. They said that it sucked in Rs2 billion from the banking system through one-week repo of TBs against the demand of Rs3 billion and another Rs9.5 billion through two-week repo against the demand of Rs11.5 billion. The central bank offered a cut-off yield of two per cent in both tenures.

Since the SBP has sucked in Rs11.5 billion in one-week and two-week repos both of which would mature after the close of this month, this action would help the central bank meet its end-March monetary targets relating to liquidity levels. It would also contribute towards a broader strategy of keeping inflation in check.

Senior bankers said Allied Bank, Citibank, Habib Bank and Muslim Commercial Bank were the top four buyers of TBs in Thursday's OMO. This indicates that these banks had surplus funds with them and were also willing to employ them at two per cent or below.

Bankers said the fact that the central bank allowed the cut-off rate to touch two per cent shows that lowering the liquidity levels had become inevitable. In the last OMO conducted earlier this week, the central bank had offered 1.09 per cent cut-off yield on two-week repo of TBs and 1.15 per cent on four-week.