KARACHI – The State Bank of Pakistan (SBP) continued injecting liquidity into the money market that, analysts believe, is faced with liquidity crunch due to the rupee blockade as non-performing loans (NPL) mount and excessive government borrowing from the scheduled banks takes a toll.
The state bank, in its fifth reverse repo open market operation of the month in the Government of Pakistan Market Treasury Bills and Pakistan Investment Bonds, injected some Rs 8.0 billion into the banking system on Saturday. The Saturday’s auction was preceded by four others conducted by the central bank on the 6th, 15th, 17th and 21st of this month to inject a sum of over Rs 92.35 billion into the inter-bank market in the short span of 16 days.
In the four auctions the SBP had injected Rs 32.600 billion, Rs 19.950 billion, Rs 33.85 billion and Rs 5.950 billion, respectively during the first month of this fiscal year. According to the State Bank, offers from the primary dealers for Saturday’s auction amounted to Rs 16.6 billion for the 6-day reverse repo. But, the central bank accepted papers worth Rs 8.0 billion at 12.87 percent rate of return.
The current 12.87 percent rate of return also witnessed an increase of 2 basis points against the previous four auctions in which the highest rate of return was 12.85 percent. The upward trend in the real inter-bank overnight rates was surprising and analysts believe that the trend is indicative of the fact that the inter-bank market rate was falling short of the rupee.
