KARACHI, Sept 28: The banking industry is facing a serious shortage of liquidity that has reached over Rs600 billion, making it more difficult for the private sector to find cash even for the working capital.

Bankers said that banks were out of cash while their dependence on State Bank money has been increasing.

The State Bank injected Rs611 billion on Friday into the banking system through Open Market Operation (OMO) to keep them able to invest in government papers.

“The injected liquidity of the State Bank has been rising. Only last week it had injected half a trillion rupees for four days but increasing cash crunch compelled the State Bank to inject Rs611 billion for seven days,” said a senior banker.

The State Bank in its annual report had indicated that banks are reluctant to make advances for the private sector and that private sector borrowings were restricted to working capital in 2011.

The pattern did not change in 2012. However, the current fiscal year 2013 could offer more difficulties to the private sector that needs cash for working capital.

“If liquidity crunch persists for a longer period, the private sector would have to search for working capital from sources other than banks,” said a senior banker.

The business community has been raising voice for cheaper liquidity since shortage of cash increased lending rates.

They said the banks are charging high interest rate in the name of risk factor.

“To promote entrepreneurship, banks investment is essential but is not available for growth of small and medium enterprises,” said Atiqur Rahman, advisor to Karachi Chamber of Commerce on banking and insurance.

The State Bank has been emphasising on growth of small and medium enterprises but could not move the financial institutions to fund the most important sector of economy.

Businessmen said the cost of doing business is already very high in Pakistan due to many factors, like high fuel and power charges.

“If working capital becomes more costly, manufacturing and trading would have to add more cost that would ultimately throw them out of market while smuggled goods from China and India would replace us,” said Aamir Aziz, a textile goods manufacture and exporter.

More than two months of the current fiscal year have passed without fresh lending to the private sector. Instead credit to the private sector is negative Rs65 billion.