The State Bank on Friday injected Rs414 billion into the banking system to save the banks from a massive liquidity crunch.
The banks had been investing in long-term government papers and were short of cash as indicated by the liquidity gap which was over Rs400bn. Last year the gap was over Rs500bn.
Under the new scenario of interest rate and a possible decline in next two months, banks have accumulated high-yielding long-term government papers. It will earn more profits for banks and mostly it will increase the net interest margins.
