Karachi: The State Bank of Pakistan (SBP) has announced a reduction in the Cash Reserve Requirement (CRR) for banks, aiming to enhance liquidity within the banking sector. This move decreases the CRR by 100 basis points, setting it at 5% on a weekly average basis and 3% on a daily basis, a change that is anticipated to provide banks with additional financial flexibility.
According to JS Global, the adjustment in the CRR, which was increased in November 2021 to curb market liquidity amid rising inflation, signals the central bank's confidence in the current inflation outlook. The CRR represents the percentage of banks' time and demand liabilities that must be held as cash with the SBP, and these deposits do not accrue interest.
The revised CRR is expected to inject approximately Rs300-315 billion into the banking sector. Assuming a yield of 10% on these funds, banks could see an annual bottom-line improvement of around 2%, as per preliminary calculations.
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