In order to provide liquidity comfort to banks, the State Bank of Pakistan (SBP) Friday cut the Special Cash Reserve Requirement by 5 percent against deposits raised under foreign exchange circular (FE-25).

According a circular issued to all conventional banks/DFIs, the SBP has decided to reduce the Special Cash Reserve Requirement from 15 percent to 10 percent of total FE-25 deposits effective April 20, 2020. Accordingly, all conventional banks/DFIs will be required to maintain some 5 percent Cash Reserve Account and 10 percent Special Cash Reserve Account on a daily basis with the SBP in USD equivalent of their total FE-25 deposits. Bankers said that this reduction will help provide more liquidity to banks. "The new Special Cash Reserve Requirement will provide some 5 percent liquidity comfort to banks," they added.

The SBP has made changes in SCRR after a gap of some 11 years as previously SCRR was increased from 5 percent to 15 percent in June 2008.

However, now the SBP has decided to reduce the SCRR aimed at facilitating banks with some cushion for more foreign exchange financing.

Reduction in special cash reserve to free up banks around $ 300 million.