Central bank Friday pumped around 175 billion into the banking system to avoid what the market players believe a potential liquidity crunch. Banking system is said to have been under immense pressure due to ever increasing budgetary borrowings of the cash-strapped central and provincial governments which, according to State Bank data, have broken all the previous borrowing records.
Central bank figures show that during July-Dec 16 (FY2012) the funds-starved government raised over Rs846 billion from the banks leaving little or no liquidity for the growth-oriented private sector. Of the total Rs846.459 billion, government borrowed Rs222.360 billion from State Bank and a huge sum of Rs624.098 billion from the scheduled banks that, in view of the prevailing recessionary climate and the resultant upsurge in their bad debts, are prioritising the risk-free government securities for investment. This pressing demand from public sector borrowers, however, is sucking much of the liquidity available in the banking system, a problem that is dealt with by State Bank in the face of weekly money injections. Friday saw the regulator injecting Rs174.950 billion into the rupee-scarce banking system through reverse repo open market operations in the Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs) of 7-day maturity at 11.62 per cent annual rate of return. Quotation range for the current injection was also increased to 11.81 and 11.50 per cent. Total amount offered by the banks was Rs223.200 billion, but SBP accepted bids valuing Rs174.950 billion. “Total Amount offered at 11.62 per cent was Rs33,500.00 million, out of which SBP accepted Rs24,650.00 million on pro-rata basis,” State Bank reported.
