The State Bank of Pakistan (SBP) conducted a reverse repo and Shariah-compliant Modarabah-based Open Market Operation (OMO) on Friday, injecting a cumulative Rs1.59 trillion into the banking system to manage liquidity conditions.
According to details released by the central bank, Rs1.296 trillion was injected through conventional reverse repo OMOs, while the remaining Rs294 billion was provided through Shariah-compliant OMOs structured under Modarabah arrangements. The operations reflect SBP’s continued efforts to ensure adequate liquidity in the financial system amid evolving monetary conditions.
Under the conventional OMO, the SBP conducted injections for two tenors. For the seven-day reverse repo, banks offered Rs545.6 billion, all of which was accepted at a cut-off rate of 10.52 percent. The auction received three quotes, all of which were accepted. For the 14-day tenor, the central bank accepted Rs750.5 billion against the same amount offered. The cut-off rate for the 14-day reverse repo was set at 10.53 percent, with quotes ranging between 10.56 percent and 10.53 percent. A total of six quotes were offered and accepted in this tenor.
In addition to the conventional operations, the SBP injected Rs294 billion through Shariah-compliant OMOs to meet the liquidity needs of Islamic banks and Islamic windows of conventional banks. Of this amount, Rs284 billion was injected through a seven-day Modarabah-based reverse repo at an accepted rate of 10.55 percent, with quotes ranging from 10.56 percent to 10.55 percent. The operation received two quotes, both of which were accepted.
The remaining Rs10 billion was injected through a 14-day Shariah-compliant OMO at a rate of 10.54 percent. This tranche attracted a single quote, which was accepted in full.
Open Market Operations are a key monetary policy tool used by the SBP to inject or mop up liquidity from the banking system depending on prevailing market conditions. In the case of OMO injections, the central bank lends funds to banks and primary dealers against eligible collateral to address liquidity shortages.
For conventional OMOs, eligible collateral includes marketable government securities such as Market Treasury Bills and Pakistan Investment Bonds. In contrast, Shariah-compliant liquidity management tools rely on instruments such as government Ijara Sukuk, which are used under Bai-Muajjal or Modarabah structures to ensure compliance with Islamic finance principles.
Banks and primary dealers are eligible counterparties for conventional OMOs, while Islamic banks and dedicated Islamic windows of conventional banks participate in Shariah-compliant OMOs. The latest liquidity injection indicates the SBP’s active role in managing short-term liquidity conditions to support the smooth functioning of Pakistan’s banking system.
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