SBP raises Cash Reserve Requirement limit to contain monetary expansion

In a major move, the State Bank of Pakistan (SBP) on Saturday increased the Cash Reserve Requirement (CRR) by one percentage point to 6pc for scheduled banks in order to contain monetary expansion.

“In recent months, real money supply growth has drifted above its trend,” said the central bank in a circular, adding that the latest measure will moderate this growth as well as domestic demand, thereby helping to sustain the current economic recovery, achieve the government’s medium-term inflation target, and reduce pressures on the rupee.

The SBP said it has decided to increase the average CRR to be maintained during a period of two weeks by scheduled banks, from 5pc to 6pc and minimum CRR to be maintained each day from 3pc to 4pc.

The CRR is the amount of money that banks are required to keep with the central bank and is applicable on demand liabilities and time liabilities with tenor of less than a year.