Banks experience no unusual withdrawals: SBP injects Rs10.8bn
KARACHI, May 22: Both local as well as foreign banks operating in Pakistan say they have not witnessed any unusual withdrawal of money from banks in more than a week despite all the tension on Pak-India borders.
“In fact our branches in Azad Jammu and Kashmir have recorded some growth in deposits,” said president of state-run Habib Bank Ltd. “We have not witnessed any unusual withdrawals from rupee or foreign currency deposits in the past one week or so,” he added.
The country head of a big foreign bank also said he too had not seen any unusual withdrawals taking place that could be related to the rising tension on Pak-India borders, but he refused to go on record.
President of local private Bolan Bank Syed Ijaz Hussain Shah also told Dawn no panic withdrawals had taken place during past one week or so. Head of a partly privatized bank said he had not received reports of any large deposit withdrawals that could be linked to the war-like situation prevailing at Pak-India borders, but like many other bankers he also refused to make an official statement.
Dawn inquiries made at more than half a dozen other banks also showed that the banking system has been working smoothly, showing a disregard for a “real possibility” of war between India and Pakistan as Britain’s Foreign Secretary Jack Straw has put it.
SBP INJECTION: In the mean time the State Bank on Wednesday pumped in Rs10.8 billion into banking system to ease off the ongoing liquidity crisis, but senior bankers listed several reasons for this crisis minus withdrawals from bank deposits.
“It is not any unusual withdrawals that has landed the banks in the present liquidity crisis,” said Nasim Akbar, president of Financial Market Association that groups bankers and inter-bank brokers. He said it was the backlog of a normal want of liquidity that the banks first experienced a couple of days ago after the SBP had mopped up more than Rs38.7 billion through auction of T-bills.
That the liquidity crisis is still far from over is evident from the fact that banks resorted to Rs8.3 billion discounting on Wednesday even after the State Bank had injected Rs10.8 billion into the system. Most bankers say in addition to the liquidity gap created after the May 15 mopping up of Rs38.7 billion by the SBP some other factors had also deepened the ongoing liquidity crisis. “Some banks that were short in cash reserves have started squaring their positions before Friday,” said treasurer of a large local bank. Banks short of cash reserves normally make them up on Friday, but this time around they are making this exercise a bit earlier.
The purpose is to minimize the opportunity cost that they would have to bear if they put in more of additional reserves than required and leave the same unemployed for three working days (Friday through Sunday) because Saturday is a holiday.
Though most bankers say their banks have not witnessed any panic-withdrawals so far they do not rule out the possibility of such withdrawals starting if the war threat becomes a bit more clearer. Some of them even say whereas rupee deposits are intact, limited withdrawals are taking place from foreign currency deposits. Treasurer of a foreign bank says: “If a few hundred thousand dollars are withdrawn from the foreign currency accounts it is the foreigners who may be withdrawing money from their accounts — or maybe those who want to invest these dollars in gold — the traditional safe heaven for money in war times.”
There is no official word from the State Bank on the issue of withdrawal from bank deposits, but a senior central banker, who refused to be named, said the SBP had not received reports of any unusual withdrawal taking place. “We are monitoring the situation closely and will continue to pump in liquidity when necessary,” he said.