KARACHI, Oct 4: The State Bank on Monday conducted an open market operation (OMO) to suck in Rs12.15 billion excess liquidity from the inter-bank money market up to two weeks.

The central bank sold Rs7.8 billion treasury bills for one week and Rs4.35bn bills for two weeks, under repurchase agreements, at 2pc. There was total demand for Rs13.5bn bills in the two tenors combined but the central bank rejected some of the bids to keep the rate of return at 2 per cent.

SBP had sucked in Rs3.9bn for two weeks also on September 30, the day when the market received Rs86bn through maturity of treasury bills sold earlier. This modest tightening of liquidity was in addition to much larger outflows from the system the same day.

The outflows included settlement of Rs17.45bn three-month bills auctioned a day earlier and the quarter-end transfer of government funds from commercial banks to the central bank.

The SBP move to drain out Rs12.15bn from the banking system on Monday was in line with its policy of tightening the excessive liquidity levels to check inflation and to stabilize the rupee. But senior bankers say despite this much outflow, the system still had excess liquidity of Rs15-20 billion adding that overnight call rates hovered around 0.3-0.4 per cent.