SBP Injects Rs. 2 Trillion In Banking System Ahead of Eid-ul-Azha

State Bank of Pakistan (SBP) has injected a whopping sum of Rs. 2 trillion in the banking system to meet the requirement of cash for banks and their customers ahead of Eid-ul-Azha.

According to the official statistics, the central bank provided a total of Rs. 2.025 trillion amount to banking system or money market, which is said to be the highest ever injection by SBP in the history.

The demand of cash was immense ahead of the Eid-ul-Azha, mainly because of the purchasing of sacrificial animals by the masses and shopping of cloths, footwear and more during the festive.

Due to increased demand, there are investors and traders who needed billions in cash to make margins in the seasonal business.

Resultantly, banks witnessed withdrawal of huge money ahead of Eid-ul-Azha which usually takes a month to come back in the banking system after a gap of holidays and recovery of the funds. Hence, this could potentially affect the liquidity and cash flows of the banks.

Besides, there are banks that have invested an amount of Rs. 40 billion in the government papers mainly in T-Bills, which also saw an outflow of the reserves for the period of three months.

This situation created a pressure on the banking system that demanded intervention of the central bank through a systemic tool of liquidity management, that is, open market operation.

According to the official data, the SBP provided Rs. 2.025 trillion of seven-day reverse repo, a short-term lending facility to commercial banks, in its open market operation (OMO) against 7.55 percent rate of return.

The central bank also provided Rs. 185 billion fresh currency notes to the banks on the occasion of Eid-ul-Azha besides this money injection.

The injection of Rs. 2 trillion will not only maintain the liquidity of the banks but it will also ensure the money supply to the banking system and the general public.

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