The State Bank of Pakistan (SBP) conducted a large-scale liquidity injection through its Open Market Operation (OMO) on September 4, 2025, reinforcing its role in stabilizing the country’s banking system. A combined Rs554 billion was injected into the market through both conventional and Shariah-compliant operations, marking a significant move to support short-term liquidity requirements of banks and financial institutions.
According to the central bank, Rs544 billion of the total injection was provided under a conventional reverse repo arrangement, while an additional Rs10 billion was introduced through a Shariah-compliant Modarabah-based OMO. The transaction tenors were set for four days, targeting immediate liquidity concerns within the interbank market.
In the conventional segment, the SBP accepted Rs544 billion against offers amounting to Rs545.4 billion. The accepted rate settled at 11.06 percent, within a range of 11.00 to 11.10 percent. The operation attracted ten quotes, of which eight were accepted. This reflected both the strong demand for liquidity in the market and the SBP’s calibrated approach to ensuring stability without overextending funds.
Parallel to the reverse repo, the SBP also extended Rs10 billion through Shariah-compliant Modarabah-based injections, catering specifically to the Islamic banking sector. This operation was accepted in full, at a fixed rate of 11.14 percent. Only one quote was submitted and accepted, highlighting the targeted yet crucial role of Shariah-compliant tools in Pakistan’s evolving financial ecosystem.
Open Market Operations are one of the central bank’s primary monetary policy instruments to manage liquidity conditions in the banking system. Injections provide banks with short-term funding against government securities, ensuring smooth functioning of payment systems and credit flows to the economy. For conventional operations, Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs) serve as eligible collateral, while Islamic operations use GOP Ijara Sukuk under Shariah-compliant structures like Bai-Muajjal and Modarabah.
The move underscores SBP’s active stance in monitoring liquidity trends and addressing shortages to maintain financial stability. At a time when banking institutions are navigating both global financial pressures and local economic adjustments, such interventions help mitigate volatility in interbank rates and strengthen market confidence.
The central bank also emphasized the dual role of OMOs in managing liquidity — injections are employed when shortages threaten smooth operations, while mop-ups are carried out to absorb surplus liquidity that could otherwise destabilize monetary conditions. This dual mechanism ensures a balanced approach to liquidity management in both conventional and Islamic banking streams.
With the inclusion of Shariah-compliant mechanisms alongside conventional reverse repo tools, SBP continues to demonstrate its commitment to an inclusive financial system that caters to the needs of both traditional and Islamic banking institutions. The operation reflects not only liquidity management but also the central bank’s broader objective of sustaining resilience across Pakistan’s diverse banking landscape.
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