The State Bank of Pakistan has officially notified the rate of remuneration for the Special Cash Reserve Account at 2.66 percent for the month of April 2026. This updated rate represents a marginal decrease from the 2.67 percent maintained during February and March of the same year. The remuneration is specifically applicable to the US dollar deposits raised by authorized dealers and financial institutions under the FE-Circular 25 of 1998 framework. This monthly adjustment is part of the central bank’s routine oversight of foreign currency liquidity and is intended to align local returns with shifting international financial benchmarks.
Under the prevailing regulatory requirements, all banks and Non-Bank Financial Institutions operating in Pakistan are mandated to maintain specific cash reserves against their total foreign currency deposits. Currently, the reserve requirement stands at 25 percent of the total FE-25 deposits held with the State Bank. This total reserve is split into two distinct categories: a 5 percent Cash Reserve Account and a 20 percent Special Cash Reserve Account. While the 5 percent component remains non-remunerative, the larger 20 percent portion earns a monthly return based on the figures published by the central bank at the start of each month.
The methodology for determining this rate is governed by the DMMD Circular Letter No. 03 of 2023. According to these guidelines, the remuneration rate is calculated using the CME one-month Term Secured Overnight Financing Rate as its base. Specifically, the SBP utilizes the SOFR rate published on the last working day of the preceding month and subtracts a fixed service charge of 1 percent. For April 2026, the final rate of 2.66 percent reflects the international lending environment as of late March, ensuring that the returns provided to local banks for their dollar reserves stay consistent with global market trends.
This mechanism is crucial for the banking sector as it directly affects the cost of holding foreign currency and the overall profitability of FE-25 deposit schemes. By pegging the rate to the SOFR—the successor to the LIBOR—the State Bank provides a transparent and market-driven return to financial institutions. This ensures that banks are fairly compensated for the liquidity they park with the regulator, which in turn helps stabilize the foreign exchange market by discouraging the flight of dollar deposits to overseas accounts where rates might otherwise be more attractive.
The consistent application of this formula also aids banks in their financial planning and risk management. As international interest rates fluctuate due to shifts in U.S. Federal Reserve policy or global economic conditions, the SBP’s monthly circular serves as the primary reference point for the local industry. While the slight dip in the April rate indicates a minor softening in global overnight financing costs, the 2.66 percent yield remains a significant component of the income generated by foreign currency accounts for Pakistani banks. As the 2026 fiscal year progresses, the SBP will continue to monitor these benchmarks to maintain a balanced and competitive foreign exchange regime.
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