SBP issues rules to ensure banks comply with CRR

KARACHI: The State Bank of Pakistan on Thursday published regulations for the maintenance of statutory cash reserve requirement (CRR) by banks to ensure that banks are well-placed to comply with CRR.

“Every scheduled bank shall maintain CRR in the form of balances in its current account maintained with SBP,” the SBP said in a master circular after consolidating all the previous instructions on the subject.

Currently, the reserve maintenance period is of two weeks starting from Friday and ending on Thursday of the subsequent week.

“At present cash reserves are required to be maintained at an average of five percent of total of demand liabilities and time deposits with tenor of less than one year, during the reserve maintenance period; however it is subject to a daily minimum requirement of three percent,” the central banks said.

Time liabilities, excluding time deposits with tenor of less than one year, have been exempted from maintenance of cash reserves.

Tenor means original fixed term of the time deposits at the time of booking and does not indicate remaining maturity period of the time deposits.

“The financing provided by the banks, under Microfinance Credit Guarantee Facility (MCGF) to eligible microfinance banks/microfinance institutions, shall be deductible from liabilities (subject to CRR) of the lending institutions for the purpose of CRR calculation,” the SBP circular said.

“For levy of penalty on default in maintaining average balance, the minimum balance required to be maintained during the reserve maintenance period shall be the product of CRR rate (average ie currently five percent), liabilities (subject to CRR) and number of days in the reserve maintenance period.”

Minimum balance that must be maintained, as calculated above, would be compared with the aggregate of the balances maintained during the reserve maintenance period with SBP.

The SBP notification also said, “If the aggregate balance maintained, during the reserve maintenance period, is below the minimum balance required to be maintained, the bank shall render itself liable to pay the penalty.”

The penalty would be levied on the shortfall between the aggregate balance maintained and the aggregate minimum balance required to be maintained during the reserve maintenance period.

The SBP said if any bank maintains the required average balance (currently five percent) during the reserve maintenance period, but fails to maintain a daily minimum balance (currently three percent) at the close of business on any day, such bank would also render itself liable to pay the penalty.

“While calculating the CRR, the balances maintained as per books of SBP shall be taken into account,” it added.