The State Bank of Pakistan (SBP) on Monday announced a reduction in banks’ cash reserve requirement (CRR), a move aimed at easing liquidity conditions and supporting private sector credit growth.
Under the revised framework, the average CRR has been reduced by 100 basis points to 5%, while the daily minimum requirement has been lowered to 3% from 4%. The changes will take effect from January 30, 2026, according to an official SBP circular.
Speaking at a press conference following the Monetary Policy Committee (MPC) meeting, SBP Governor Jameel Ahmad said the decision was part of broader measures to improve liquidity in the banking system. He noted that the move reflects improved macroeconomic conditions and is expected to enhance banks’ capacity to extend loans to businesses and consumers.
The governor added that easing liquidity constraints would help sustain the ongoing recovery in private sector borrowing. Since the previous MPC meeting, broad money growth has accelerated to 16.3% as of January 9, driven largely by an increase in private sector credit and higher government borrowing.
Private sector credit expanded by Rs578 billion during FY2026 up to January 9, with major borrowing coming from the textile sector, wholesale and retail trade, and chemicals. Consumer financing also continued to show steady growth during the period.
The CRR requires banks to hold a portion of their demand and time liabilities as cash with the central bank, on which no return is earned. The requirement had previously been increased in November 2021 as part of efforts to absorb excess liquidity during a period of high inflation.
Market analysts estimate that the latest reduction in CRR could release approximately Rs300–315 billion in additional liquidity into the banking system, potentially providing further momentum to private sector lending and overall economic activity.
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