KARACHI, May 16: Banks parked Rs143 billion in treasury bills on Wednesday with 80 per cent of this investment made in the shortest tenure of three months.

The auction result showed that the banks offered Rs184.89 billion for three-, six and 12-month Market Treasury Bills (MTBs), but the State Bank accepted bids for Rs143.57 billion.

Banks show surplus liquidity for these auctions while generally the banking industry faces shortage of liquidity for which the State Bank injects Rs150 to Rs300 billion each week. This shortage of liquidity impacted on advances to the private sector which remained limited for last four years forcing the economy to perform without financial sector support.

The central bank reported that the banks invested Rs118.5 billion in three-month bills at the cut-off yield of 11.87 per cent, Rs23 billion in six-month papers at 11.94 per cent and Rs2 billion in 12-month T-bills at 11.95 per cent.

The previous auction held on May 2, had the same trend as the banks invested most of their money (Rs126 billion) for three months and Rs29 billion for six months, while the bids for 12-month were rejected.

The government borrowing through scheduled banks was highest during the current fiscal year while it has also been borrowing through State Bank, Islamic banks and auction of Pakistan Investment Bonds.

Analysts said the banks would continue preferring lending to the government as it is risk-free and ensures high return.

The State Bank kept the policy rate unchanged at 12 per cent in the last two reviews fearing any cut in interest rates may fuel inflation.