The State Bank of Pakistan (SBP) injected a combined Rs13.061 trillion into the banking system through conventional and Shariah-compliant open market operations on Friday, October 23, providing short-term liquidity to financial institutions through seven-day and 14-day arrangements. The latest operations included conventional reverse repo transactions worth Rs12.601 trillion and Islamic liquidity injections of Rs460.40 billion through Mudarabah-based arrangements.
According to the central bank’s auction results, participating banks submitted bids worth Rs13.081 trillion in the conventional operation, against which the SBP accepted Rs12.601 trillion. The funds were allocated across two maturities, with most of the accepted amount placed under the 14-day tenor. These operations allow the central bank to manage short-term liquidity conditions in the banking system while providing funds to institutions through specified maturity periods and return rates.
For the seven-day conventional reverse repo operation, the SBP accepted Rs276 billion at a rate of return of 11.55%. All five bids submitted for this tenor were accepted. The allocation provided short-term funding to participating institutions, with the maturity period requiring the funds to remain within the arrangement for one week.
The larger share of conventional liquidity was allocated through the 14-day operation. The central bank accepted Rs12.325 trillion against offers amounting to Rs12.805 trillion, with the accepted rate of return set at 11.53%. Of the 33 bids submitted for this tenor, 32 were accepted. The auction results also showed that bids worth Rs4.179 trillion were submitted at the 11.53% rate, of which Rs3.707 trillion was accepted on a pro-rata basis.
The conventional operations accounted for the bulk of the total liquidity injection, reflecting the scale of funding requested by participating banks. The difference between the total bids received and the amount accepted indicates that the central bank did not accommodate the entire volume offered by institutions in the conventional auction. The allocation was divided between the two maturities, although the 14-day tenor received substantially more funding than the seven-day arrangement.
Alongside the conventional transactions, the SBP injected Rs460.40 billion through Shariah-compliant Mudarabah-based open market operations. The central bank accepted the entire amount offered by participating institutions, with allocations divided between seven-day and 14-day maturities. These operations provide a liquidity management option for institutions seeking arrangements structured in accordance with Shariah principles.
Under the seven-day Islamic operation, the SBP accepted Rs32 billion at a rate of return of 11.56%. For the 14-day tenor, it accepted Rs428.40 billion at 11.55%. All 11 bids submitted under the Shariah-compliant operations were accepted, meaning the full amount offered through these arrangements was accommodated. As with the conventional transactions, the larger share of Islamic liquidity was allocated to the longer maturity period.
The combined accepted face value of the conventional and Shariah-compliant operations reached Rs13.061 trillion. However, the combined realised value of the injections stood at Rs12.733 trillion, according to the auction results. The difference between the accepted face value and realised value reflects the distinction between the stated accepted amounts and the value realised through the transactions.
The use of both conventional and Shariah-compliant operations allows the SBP to provide short-term liquidity through different financing structures. Conventional reverse repo operations and Mudarabah-based arrangements serve participating institutions through separate frameworks, while offering funding across similar maturity periods. The latest auction included seven-day and 14-day tenors, with the 14-day period accounting for most of the accepted amount in both categories.
The results also show that the central bank accepted all bids in the seven-day conventional operation and all bids submitted through the Islamic operations, while applying selective acceptance to the larger conventional 14-day auction. The 11.53% rate applied to the accepted conventional 14-day funds, compared with 11.55% for the seven-day conventional tenor. In the Islamic operations, the accepted rates of return were 11.56% for seven days and 11.55% for 14 days.
These transactions form part of the SBP’s liquidity management activity in the banking system. By conducting open market operations at different maturities, the central bank can respond to short-term funding requirements and manage liquidity conditions through the instruments available under its conventional and Shariah-compliant frameworks. The October 23 operation provided more than Rs13 trillion in accepted funding across the two structures, with the majority allocated to conventional transactions and the longer 14-day maturity.
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