KARACHI, Sept 26: The State Bank on Thursday swapped tens of millions of dollars for rupees to help the banks facing shortage of the US units to meet their daily requirements.

Senior bankers said the State Bank sold dollars in tomorrow value with the understanding to buy them after two/three months.

They gave different estimates of the swap volumes: Some said the amount of dollars swapped for rupees was between $10-$15 million and others put it at $15-$20 million. A banker close to SBP had an even higher estimate $30-$35 million.

No senior SBP official was available to verify any of these estimates.

Regardless of the volume of swaps the fact remains that such swaps wherein the SBP sells dollars in ready or spot and buys in forward decrease the level of rupee liquidity. This seems a bit more relevant nowadays as the inter-bank market has been through a liquidity crisis: On Thursday alone the market discounted by Rs9.3 billion. The cumulative discounting in three days came to Rs20.2 billion. But bankers said the current phase of liquidity crisis would be over by the close of this week as most of the discounting was done by the banks to average out their weekly cash reserves.

Central bankers say privately that the banks have themselves to be blamed for this liquidity crisis as they have made it a practice to over-invest surplus funds in treasury bills. Bankers say they do so in the absence of a strong private sector credit demand. They say the SBP should have cut discount rate and T-bills rate in this quarter which is drawing closer to its end on September 30 to help banks lower their lending rates and attract more credit demand by the private sector.

But the SBP officials have their reservations about the banks ability to respond to the changes in the monetary policy stance and this is why the SBP has been holding its discount rate and T-bills rate stable since mid of February.

“What is the use of lowering the discount rate again and again if the banks fail to make cheaper credit available to the private sector,” said a visibly annoyed senior central banker who refused to go on record.

“Banks keep telling us that the demand for the private sector credit is not there. But we get different feedback from the trade and industry.”

The trade and industry has been making protest over unusually high lending rates of the banks but to no avail. At end-July the weighted average lending rate of all banks stood at 12.08 per cent but for most of the borrowers the rate worked out to be no less than 14 per cent.

The irony is that against the weighted average lending rate of 12.08 per cent the weighted average deposit rate stands as low as 4.02 per cent. Bankers particularly those in the public sector cite a host of reasons including their big non-performing loan portfolio plus large workforce as main hurdles in the way of lowering this high spread of 8.06 per cent between the deposit and lending rates.

But of late the SBP has stopped buying such arguments from the bankers though its high-ups do not make public statements on how strong they feel about the failure of the banks to cut lending rates. Sources close to SBP say SBP Governor Dr Ishrat Husain has highlighted this at a meeting with top bankers at the forum of Pakistan Banks Association.