The State Bank of Pakistan (SBP) Friday injected over Rs 1 trillion into the banking system, a move bankers said aimed at covering the widening liquidity gap. They said banks are facing some liquidity shortage due to massive cash demand in the wake of Ramazan and Eid for shopping and other purposes. Therefore in order to cover the widening liquidity gap, State Bank has injected over Rs 1 trillion into the banking system to support the banks.

On July 10, 2015, SBP conducted the Open Market Operation (OMO) and received some 30 offers amounting to Rs 1.058 trillion ranging from 6.37 percent to 6.75 percent for 14-day (injection). Out of 30 bids, SBP accepted 29 bids amounting to Rs 1.048 trillion at 6.50 percent rate of return for 14 days. This is the second massive injection during last one week as on July 2, SBP injected Rs 821.75 billion into the banking system for one week at 6.5 percent to reduce the liquidity gap.

Analysts said banks have heavily invested in the government securities for long-term, therefore they are facing some liquidity shortage on a temporary basis. However, the situation will be improved after Eid, when the markets' Eid sales amounts will be deposited in banks. "Expected further cash withdrawal in coming days has forced banks to borrow huge amount from the central bank to avoid another injection," they added.

Copyright Business Recorder, 2015