The State Bank of Pakistan (SBP) conducted a reverse repo and Shariah-compliant Modarabah-based Open Market Operation (OMO) on December 18, 2025, injecting a total of Rs983 billion into the banking system. Of this amount, Rs661 billion was injected through conventional reverse repo OMO, while Rs322 billion was provided via Shariah-compliant Modarabah-based OMO.
In the conventional segment, Rs661 billion was offered and fully accepted at an 8-day tenor, with accepted rates ranging from 10.54% to 10.62%. The weighted accepted rate settled at 10.54%, demonstrating strong market absorption amid prevailing liquidity requirements.
Meanwhile, the Shariah-compliant Modarabah-based OMO saw Rs322 billion injected at a 7-day tenor, with accepted rates ranging between 10.56% and 11.56%. The accepted weighted rate for this operation was 10.56%, reflecting active participation from Islamic banks and eligible Islamic windows of conventional banks.
Open Market Operations are a primary monetary tool employed by SBP to manage liquidity in the banking system. In injection operations, the central bank lends funds to banks and Primary Dealers (PDs) against eligible collateral, such as Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs), to address liquidity shortages. In mop-up operations, SBP sells MTBs to absorb excess liquidity from the market.
For Shariah-compliant liquidity management, instruments such as Bai-Muajjal, where GOP Ijara Sukuk are used as collateral, enable Islamic banks to access short-term funds while adhering to Shariah principles. Eligible counterparties for conventional OMOs include banks and PDs, whereas Islamic banks and specialized Islamic windows participate in Modarabah and Bai-Muajjal operations.
The latest injection demonstrates SBP’s active role in maintaining market stability and ensuring smooth functioning of the banking sector. By balancing conventional and Islamic liquidity tools, the central bank supports both traditional and Shariah-compliant banking operations, facilitating efficient money market activity and supporting short-term funding requirements of financial institutions.
These interventions are particularly important amid fluctuating liquidity conditions, helping banks manage day-to-day operational funding needs while maintaining broader financial stability. The use of Shariah-compliant instruments also reflects SBP’s commitment to promoting inclusive monetary operations that cater to the diverse structure of Pakistan’s banking system.
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