KARACHI: The State Bank of Pakistan announced a reduction in the cash reserve requirement (CRR) for banks, a move aimed at increasing lending capacity and supporting private sector credit growth.
Under the revised framework, the average CRR has been reduced by 100 basis points to 5%, while the daily minimum requirement has been cut to 3% from 4%. The changes will take effect from January 30, 2026, according to an SBP circular.
Addressing a press conference after the Monetary Policy Committee meeting, SBP Governor Jameel Ahmad said the central bank was taking steps to ease liquidity conditions for banks, including lowering reserve requirements.
The governor said the decision reflects improved macroeconomic conditions and is intended to enhance banks’ ability to extend credit to businesses and consumers. He added that easing liquidity constraints would help sustain the ongoing recovery in private sector borrowing.
Since the previous MPC meeting, broad money growth has accelerated to 16.3% as of January 9, driven mainly by an increase in private sector credit and higher government borrowing. Private sector credit expanded by Rs578 billion during FY26 up to January 9, with major borrowing coming from textiles, wholesale and retail trade, and chemicals, alongside continued growth in consumer financing.
The CRR, which requires banks to hold a portion of their time and demand liabilities as cash with the SBP, does not earn any return for banks. The requirement had been raised in November 2021 to absorb excess liquidity amid high inflation.
Analysts estimate that the latest reduction could release around Rs300–315 billion in additional liquidity, potentially supporting further growth in private sector lending.
