The State Bank of Pakistan (SBP) conducted a significant liquidity operation on Thursday, injecting more than Rs4.24 trillion into the banking system through its Open Market Operation (OMO) to ease short-term funding pressures. This move is part of the central bank’s ongoing efforts to maintain stability in the interbank money market and ensure sufficient liquidity across both conventional and Islamic banking segments.
According to details released by the central bank, the SBP carried out two simultaneous operations—one under the conventional reverse repo mechanism and another using a Shariah-compliant Modarabah-based OMO structure. Together, these interventions provided a cumulative liquidity injection of Rs4.24 trillion into the financial system.
Under the conventional segment, the SBP injected approximately Rs3.91 trillion through a reverse repo OMO. The auction summary showed that for the 7-day tenor, the central bank accepted Rs3.64 trillion at an accepted rate of 11.01 percent, while for the 14-day tenor, Rs272 billion were accepted at an 11.02 percent rate. The accepted bids reflected a narrow rate spread, with most banks opting for shorter-duration liquidity.
Meanwhile, the Shariah-compliant side of the operation saw an additional Rs331 billion injected via a Modarabah-based OMO, which caters specifically to Islamic banking institutions. The injection under this category was made entirely under the 7-day tenor at an accepted rate of 11.13 percent. The SBP did not accept any offers under the 14-day tenor, signaling that the liquidity demand from Islamic banks was concentrated in the shorter term.
This dual-mode injection, through both conventional and Islamic instruments, highlights the SBP’s ongoing commitment to maintaining balanced liquidity support across the financial ecosystem. By employing both reverse repo and Modarabah structures, the central bank ensures that liquidity management remains inclusive of Pakistan’s growing Islamic finance segment.
Open Market Operations (OMOs) are one of the key monetary policy tools used by the SBP to regulate short-term liquidity in the banking system. In the case of an OMO injection, the SBP lends funds to commercial banks and primary dealers against eligible collateral, such as Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs). These operations help address temporary liquidity shortages and stabilize short-term money market rates.
For Shariah-compliant OMOs, the central bank uses Bai-Muajjal or Modarabah arrangements involving Government of Pakistan Ijara Sukuk as the underlying collateral. These tools are essential for ensuring liquidity management within Islamic banking institutions, which operate under interest-free principles.
Market participants view the latest liquidity injection as a proactive move to smoothen money market operations amid tight liquidity conditions and upcoming government securities maturities. The operation is also seen as part of SBP’s regular liquidity management framework aimed at stabilizing short-term interest rates and ensuring banks can meet their funding obligations efficiently.
The scale of this injection underscores continued demand for liquidity support in Pakistan’s financial system, particularly as the country navigates economic adjustments, fiscal challenges, and monetary tightening. Market analysts suggest that such frequent OMOs indicate the central bank’s calibrated approach to keeping liquidity conditions stable while aligning with broader monetary policy objectives.
By maintaining consistent interventions, the SBP continues to reinforce confidence in the interbank market and promote financial stability. The inclusion of Shariah-compliant operations also highlights the regulator’s recognition of the growing importance of Islamic finance in Pakistan’s banking landscape.
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