The central bank Friday implemented certain measures through making various changes in its regulatory framework. The steps are aimed at strengthening the liquidity management and other regulatory frameworks, the bank said. Firstly, the State Bank made certain changes in maintenance of the Cash Reserve Requirement (CRR) to facilitate the banks in context of their liquidity management. The central bank said the reserve maintenance period for the banks would now be of two weeks, starting from Friday and ending on Thursday of subsequent week. The Time and Demand Liabilities (TDL) as of close of business on Friday, first day of reserve maintenance period, would be taken into account for determination of required CRR. If Friday is a holiday then TDL as of close of business on preceding working day would be taken into account.
All banks, including Islamic Banks/branches, have to maintain CRR at an average of 5.0% of total demand liabilities, including time deposits with tenor of less than 1 year, during the reserve maintenance period. “However, daily minimum requirement is being decreased to 3.0%,” the SBP said.
The Time liabilities including time deposits with tenor of 1 year and above would continue to be exempt from cash reserves. The DFIs would continue to maintain CRR at 1.0% of their time and demand liabilities during the reserve maintenance period. The above instructions would be effective from October 12. The TDL to be used for CRR maintenance period starting from October 12 and ending on October 25 would be as of October 12.
Through another circular, the State Bank revised downward its Overnight Reverse Repo (ceiling) rate from 10.50 percent to 10 percent per annum. The circular said the SBP overnight repo facility would be available at 7 percent. This would serve as the ‘floor’ for the interest rate corridor as announced by the above referenced circular. Hence, the floor and ceiling levels for the interest rate corridor are 7 percent and 10 percent, respectively. (i.e. width of 300bps). To dissuade frequent accesses to the SBP overnight reverse repo and repo facilities, following amendments have been introduced: In case an eligible institution accesses either of the above facilities more than 7 times during a given quarter, a spread of plus/minus 50bps will be applied over & above the applicable SBP Overnight Reverse Repo and Repo rates, respectively, for the remainder of the same quarter. For the current quarter, the seven instances as mentioned above would be recorded from October 8. A third circular issued by the central bank said for the purpose of maintaining Statutory Liquidity Requirements (SLR) during the fortnight, starting from Friday and ending Thursday of the subsequent week, the Time and Demand Liabilities (TDL) as of close of business on Friday (first day of the fortnight) would be taken into account for determination of the required SLR. It said if Friday is a holiday then TDL as of close of business on preceding working day would be taken into account. The TDL to be used for SLR maintenance during fortnight starting from October 12 and ending on October 25 would be as of October 12, said the bank. The above instructions would be effective from October 12.
