KARACHI, Sept 13: The inter-bank market that had run short of cash last week has become liquid again as Abu Dhabi Group that purchased United Bank Ltd last week has made 50 per cent payment.

This and a couple of other inflows received earlier left the market surplus by Rs6-8 billion on Friday — and overnight lending rate fell to just one per cent. Until last week the rate was close to nine per cent or almost equal to the State Bank discount rate.

Senior bankers said Abu Dhabi Group has paid Rs6.175 billion in foreign currency to the Privatization Commission as 50 per cent price of state-run UBL. The group is bound to pay the remaining 50 per cent within next 45 days.

The Privatization Commission has converted the foreign currency amount into rupees and invested this money into NIDA or National Income Deposit Account of state-run National Bank. NIDA is basically a current account but NBP pays daily interest on the money put in this account if the balance exceeds a certain level that is set periodically.

The investment of Rs6.175 billion in this account of National Bank has raised the liquidity level of NBP and that of the inter- bank market that had been through a liquidity crunch last week.

Senior bankers said another factor that pulled the market out of the liquidity crisis was that the State Bank purchased some $40 million from banks on Thursday.

This $40 million buying means an inflow of a little less than Rs2.4 billion into the system.

Since the start of this fiscal year in June the central bank is purchasing dollars only from the inter-bank market after it discontinued foreign currency buying from the open market. Till June last the SBP was making buying dollars from both inter-bank as well as open currency market.

The central bank has stopped its outright purchases from the open market in line with an understanding reached with the IMF. The IMF wanted the State Bank to stop purchasing dollars from the open market as its experts believed that this market was still being used for money laundering.

Bankers said the third factor that helped the banks come over the liquidity crisis was that the State Bank had released earlier this week the money stuck up in export refinance. They said the SBP renewed the export refinance limits of hundreds of exporters in instalments, thereby allowing some liquidity to trickle into the system on daily basis. “The process started early this week and has now completed,” said treasurer of a local bank. He said renewal of export refinance limits had brought in no less than Rs6-8 billion into the system.