The State Bank of Pakistan (SBP) has increased the remuneration rate applicable to the Special Cash Reserve Account (US$) to 2.91% for October 2026, up from 2.71% in September and 2.66% in August, according to the latest notification issued by the central bank.
The revised rate applies to deposits maintained under FE-Circular 25 of 1998. The monthly adjustment forms part of the SBP’s existing framework for remunerating a portion of the foreign currency cash reserves maintained by banks and non-bank financial institutions (NBFIs) with the central bank.
Under the prevailing reserve requirement framework, banks and NBFIs are required to maintain cash reserves equivalent to 25% of their total FE-25 deposits with the SBP. This reserve requirement is divided between two accounts, with 5% maintained in a Cash Reserve Account and the remaining 20% placed in a Special Cash Reserve Account.
The Cash Reserve Account does not earn remuneration, while the Special Cash Reserve Account carries a monthly return determined by the SBP. The arrangement provides a defined remuneration mechanism for the portion of foreign currency reserves placed in the special account while maintaining the required reserve structure for FE-25 deposits.
The remuneration rate is calculated under the mechanism outlined in DMMD Circular Letter No. 03 of 2023. Under this framework, the SBP uses the CME 1-month Term Secured Overnight Financing Rate (SOFR) published on the last working day of the preceding month as the benchmark and deducts a 1% service charge to determine the applicable rate.
For October 2026, the resulting rate has been set at 2.91%, marking an increase of 20 basis points from the 2.71% rate applicable in September. The rate was also higher than the 2.66% notified for August, reflecting the movement in the underlying international benchmark used in the calculation.
The monthly revision means that the remuneration on the special reserve portion of FE-25 deposits continues to adjust in line with the SBP’s established formula rather than remaining at a fixed level. The October notification therefore reflects the latest movement in the relevant international interest rate benchmark and the application of the prescribed service charge.
The SBP’s framework links the remuneration of these foreign currency reserves to international market conditions through the SOFR-based formula. Changes in the benchmark consequently feed into the monthly remuneration rate applicable to the Special Cash Reserve Account, providing a structured basis for periodic adjustments.
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