Islamabad – The State Bank of Pakistan (SBP) conducted a reverse repo Open Market Operation (OMO) today, injecting Rs50.5 billion into the financial system to manage liquidity requirements. The operation, carried out with a tenor of three days, was fully accepted at a rate ranging between 10.51% and 10.60%, with the accepted rate recorded at 10.51%.
Reverse repo operations are a key monetary tool used by the SBP to supply liquidity to banks and primary dealers against eligible collateral, including Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs). By lending funds against these securities, the central bank addresses short-term liquidity shortages and helps stabilize the banking system.
In conventional OMOs, the central bank either injects liquidity through reverse repo transactions or absorbs excess funds via repo sales of government securities. The choice of injection or mop-up depends on prevailing market conditions and the liquidity stance of the banking sector. For mop-up operations, the SBP sells MTBs to banks in exchange for cash to remove surplus liquidity.
For Shariah-compliant Islamic banking operations, the SBP employs Bai-Muajjal as a liquidity management instrument. Under this framework, the Government of Pakistan Ijara Sukuk serve as eligible collateral, with Islamic banks and specialized Islamic banking windows of conventional banks participating as counterparties.
Today’s reverse repo OMO underscores the central bank’s proactive approach to ensuring adequate liquidity in the banking system and supporting smooth functioning of financial markets. By offering funds against secure government instruments, the SBP not only facilitates short-term cash flow management for banks but also maintains stability in money market rates.
Experts note that such operations are crucial in aligning liquidity with the monetary policy stance, preventing funding pressures on commercial banks, and promoting a predictable interest rate environment. The full acceptance of the Rs50.5 billion injection indicates healthy demand from banks, reflecting ongoing operational needs in the financial system.
SBP continues to use OMOs as part of its broader monetary toolkit to manage liquidity efficiently, support banking sector stability, and enhance the effectiveness of monetary policy transmission in Pakistan. These operations are a routine but vital mechanism to ensure that commercial banks have access to funds, thereby sustaining credit flows and overall financial stability.
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