The State Bank of Pakistan (SBP) carried out a large-scale Open Market Operation (OMO) on Thursday, injecting a total of Rs1.44 trillion into the banking system to address liquidity needs. The operation was conducted through both conventional reverse repo transactions and Shariah-compliant Modarabah-based instruments, reflecting SBP’s dual approach in managing liquidity across both conventional and Islamic banking sectors.
According to the official results, the bulk of the injection came from conventional reverse repo operations, where SBP injected Rs1.08 trillion. This included Rs78 billion through a 7-day tenor at a cut-off rate of 11.06 percent, and Rs1 trillion through a 13-day tenor at a cut-off rate of 11.04 percent. A total of 15 quotes were received and fully accepted, highlighting strong market demand for liquidity support.
Alongside this, SBP also carried out Shariah-compliant Modarabah-based operations, injecting Rs363 billion into the system. Under this framework, Rs241 billion was provided through a 7-day tenor at 11.14 percent, while Rs122 billion was accepted for a 13-day tenor at 11.13 percent. All offers made by Islamic banks and windows were accepted, signaling the regulator’s commitment to ensuring liquidity access for Shariah-compliant institutions as well.
The OMO results underline SBP’s active role in maintaining liquidity stability amid a shifting monetary environment. Open Market Operations are one of the central bank’s primary tools to manage short-term liquidity in the financial system, either by injecting funds when shortages occur or mopping up excess liquidity when needed. For conventional operations, eligible collateral includes Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs), while for Islamic operations, GOP Ijara Sukuk serve as collateral instruments.
By injecting such a substantial amount, the central bank aimed to ensure smooth functioning of money markets and stable credit availability for the broader economy. Market analysts note that the large injection reflects tight liquidity conditions in the banking system, possibly driven by settlement pressures, fiscal borrowing requirements, or seasonal cash outflows.
The move also demonstrates SBP’s continued balance between conventional and Islamic banking segments. While reverse repo remains the dominant tool, Shariah-compliant instruments like Modarabah and Bai-Muajjal are increasingly used to provide equal access to liquidity facilities. This not only strengthens the financial ecosystem but also supports the rapid growth of Islamic banking in Pakistan.
For the banking sector, OMOs are vital in ensuring funding stability and maintaining interbank rates within SBP’s policy corridor. A sustained injection of this magnitude indicates that liquidity demand remains elevated, which could also influence credit conditions, deposit rates, and lending margins in the weeks ahead.
As Pakistan’s financial system navigates an evolving interest rate environment and fiscal challenges, SBP’s proactive liquidity management will remain central to ensuring market stability. The Rs1.44 trillion OMO marks one of the largest injections in recent months, reflecting both the scale of liquidity needs and the regulator’s readiness to respond decisively.