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KARACHI: The State Bank of Pakistan (SBP) Monday granted special relaxation to a few banks for Cash Reserve Ratio (CRR) requirements against FE-25 deposits on a temporarily basis aimed at improving liquidity.

As per previous directives, issued in April 2020, all conventional banks and DFIs were required to maintain 5 percent Cash Reserve Account (US$) and 10 percent Special Cash Reserve Account (US$) equivalent to their total FE-25 deposits on a daily basis with the SBP.

However, keeping in view the current situation of rising dollar demand, the State Bank has decided to relax CRR requirements against FE-25 deposits for some banks due to rising demand for the greenback in the interbank market.

“We have relaxed CRR requirements for a few banks (not for all) on a temporary basis,” an SBP high official confirmed Monday night. He said that it’s on a temporary basis and will be reversed later.

“The SBP is considering issuing details on Tuesday,” he added.

CRR, housing finance: SBP issues fresh directives to banks

Industry sources that this move would help inject foreign exchange in the market and the amount will help improve the liquidity in the forex market. Reportedly, the relaxation has been granted for three months. Bankers have also raised the question on the SBP move as to how the SBP can fix different CRR for a few banks.

In addition, according to industry sources, the SBP has asked the Authorized Dealers for prior permission from Foreign Exchange Operations Department (FEOD), SBP-BSC before initiating $0.1 million transactions for import of goods. However, the SBP official did not confirm this restriction. The country is facing a cash crisis and the exchange rate has been volatile for the last two months due to lower foreign inflows and massive external payments. The dollar rose to Rs210 in the interbank market on Monday.

The government is already making efforts to build the depleting foreign exchange reserves and Saudi Arabia has rolled over some $2 billion deposits. In addition, China has also agreed to redeposit some $2.5 billion with Pakistan.

Copyright Business Recorder, 2022

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