KARACHI, Nov 1: The State Bank injected Rs5 billion and banks borrowed a huge liquidity from the discount window, but the liquidity crunch kept a strong grip on the money market as the overnight rate reached at the highest level on Tuesday.

The SBP conducted an open market operation (OMO) to inject Rs5 billion through buyback of treasury bills. Banks wanted to get a liquidity of over Rs21 billion but the SBP remained stick to the Rs5 billion for 10 days. The liquidity was injected at 8.55 per cent return per annum.

This injection of the SBP was not sufficient for banks as they were compelled to get another Rs10 billion from the discount window. However, the market remained tight.

“The Eid withdrawals by retailers have caused a serious shortage that might prevail for another week,” said a banker.

However, the banks invested Rs13.45 billion in one year treasury bills in the auction held on October 26, though the market was facing a liquidity shortage. The banks borrowed Rs5 billion through the discount window on Monday to meet the liquidity requirement.

The overnight rate on Tuesday remained at 8.9 per cent, just below the discount rate at nine per cent, despite a total inflow of Rs15 billion.