The State Bank of Pakistan (SBP) conducted a large-scale liquidity injection on Thursday through a combination of conventional and Shariah-compliant Open Market Operations (OMO), cumulatively injecting Rs13.12 trillion into the banking system to meet short-term liquidity requirements.
According to details released by the central bank, the bulk of the liquidity, amounting to Rs12.7 trillion, was injected through reverse repo OMO under the conventional framework. The remaining Rs410 billion was provided through a Shariah-compliant Modarabah-based OMO to cater to the liquidity needs of Islamic banks and Islamic banking windows.
Under the conventional OMO, the SBP accepted bids totaling Rs12.715 trillion against an equivalent amount offered by market participants. The seven-day reverse repo injection saw Rs745 billion accepted at a weighted average accepted rate of 10.53%, with quoted rates ranging between 10.55% and 10.53%. A total of five quotes were offered and accepted for this tenor.
The larger portion of the conventional injection was carried out through the 14-day reverse repo, where Rs11.97 trillion was both offered and accepted. The accepted rate for the 14-day tenor stood at 10.51%, with quoted rates ranging from 10.57% to 10.51%. The SBP accepted all 20 quotes submitted for this maturity, indicating strong participation from banks and primary dealers.
In parallel, the SBP conducted a Shariah-compliant Modarabah-based OMO, injecting Rs410 billion into the Islamic banking segment. For the seven-day tenor, Rs390 billion was accepted at a rate of 10.53%, with quoted rates ranging between 10.55% and 10.53%. Two quotes were both offered and accepted for this tranche.
Additionally, the central bank accepted Rs20 billion under the 14-day Shariah-compliant OMO at a fixed rate of 10.53%. One quote was offered and accepted for this tenor, bringing the total Shariah-compliant liquidity injection to Rs410 billion.
Open Market Operations are a key monetary policy tool used by the State Bank of Pakistan to manage short-term liquidity conditions in the banking system. Through OMOs, the central bank injects funds into the market or mops up excess liquidity, depending on prevailing system requirements, to ensure smooth functioning of money markets and effective transmission of monetary policy.
In the case of OMO injections, the SBP lends funds to banks and primary dealers against eligible collateral to address liquidity shortages. Marketable government securities, including Market Treasury Bills and Pakistan Investment Bonds, are used as eligible collateral for conventional OMO injections. These transactions are typically conducted through reverse repo arrangements, where the SBP provides funds with an agreement to reverse the transaction at a later date.
For liquidity absorption, or mop-up operations, the SBP sells Market Treasury Bills to banks on a repo or outright basis to remove surplus liquidity from the system. Such operations help maintain stability in short-term interest rates and prevent excessive volatility in money markets.
In the Islamic banking segment, the SBP uses Shariah-compliant tools such as Bai-Muajjal and Modarabah-based OMOs to manage liquidity. Under Bai-Muajjal arrangements, Government of Pakistan Ijara Sukuk serve as eligible securities, ensuring compliance with Shariah principles while providing effective liquidity management mechanisms.
Banks and primary dealers are eligible counterparties for conventional OMO transactions, while Islamic banks and specialized Islamic windows of conventional banks participate in Shariah-compliant OMOs. The strong participation in the latest operations reflects continued demand for central bank liquidity support amid prevailing market conditions.
The sizeable injection underscores the SBP’s active role in maintaining liquidity balance within the financial system, ensuring that banks have adequate funds to meet their obligations while supporting overall monetary and financial stability.
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